[Title 26 CFR ]
[Code of Federal Regulations (annual edition) - April 1, 1998 Edition]
[From the U.S. Government Publishing Office]
[[Page i]]
26
Internal Revenue
PARTS 300 TO 499
Revised as of April 1, 1998
CONTAINING
A CODIFICATION OF DOCUMENTS
OF GENERAL APPLICABILITY
AND FUTURE EFFECT
AS OF APRIL 1, 1998
With Ancillaries
Published by
the Office of the Federal Register
National Archives and Records
Administration
as a Special Edition of
the Federal Register
[[Page ii]]
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1998
For sale by U.S. Government Printing Office
Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328
[[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.......................... 683
Alphabetical List of Agencies Appearing in the CFR........ 699
Table of OMB Control Numbers.............................. 709
List of CFR Sections Affected............................. 725
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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.
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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
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of provisions in effect on a given date in the past by using the
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A subject index to the Code of Federal Regulations is contained in a
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[[Page vii]]
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Raymond A. Mosley,
Director,
Office of the Federal Register.
April 1, 1998.
[[Page ix]]
THIS TITLE
Title 26--Internal Revenue is composed of nineteen volumes. The
contents of these volumes represent all current regulations issued by
the Internal Revenue Service, Department of the Treasury, as of April 1,
1998. The first twelve 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 and
Sec. 1.1401 to end. The thirteenth 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.
For this volume, Melanie L. Marcec was Chief Editor. The Code of
Federal Regulations publication program is under the direction of
Frances D. McDonald, assisted by Alomha S. Morris.
[[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)
----------------------------------------------------------------------
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.................................... 641
303 Taxes under the Trading With the Enemy Act.. 648
304
[Reserved]
305 Temporary procedural and administrative tax
regulations under the Indian Tribal
Governmental Tax Status Act of 1982..... 654
306-399
[Reserved]
400 Temporary regulations under the Federal Tax
Lien Act of 1966........................ 656
401 Temporary procedures and administration
regulations under the Tax Equity and
Fiscal Responsibility Act of 1982 (Pub.
L. 97-248).............................. 668
402
[Reserved]
403 Disposition of seized personal property..... 669
404 Temporary regulations on procedure and
administration under the Tax Reform Act
of 1976................................. 676
405-419
[Reserved]
420 Temporary regulations on procedure and
administration under the Employee
Retirement Income Security Act of 1974.. 678
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.
301.6011-2 T Required use of magnetic media (temporary).
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
301.6031-1 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.
[[Page 6]]
301.6036-1 Notice required of executor or of receiver or other like
fiduciary.
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)-1 Disclosure of returns and return information (including
taxpayer 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.
[[Page 7]]
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.
301.6103 (j)(1)-1 Disclosures of return information to officers and
employees of the Department of Commerce 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 (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 certain returns and return
information by other Federal 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)-1 Public inspection of private foundations' annual
returns.
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.
Sec. 301.6109-1T Identifying numbers (temporary).
301.6109-2 Authority of the Secretary of Agriculture to collect
employer identification numbers for purposes of the Food Stamp
Act of 1977.
Sec. 301.6109-3T IRS adoption taxpayer identification numbers
(temporary).
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.
301.6111-1 T Questions and answers relating to tax shelter
registration.
301.6112-1 T Questions and answers relating to the requirement to
maintain a list of investors in potentially abusive tax
shelters (temporary).
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.
301.6166-1 Extension of time for payment of estate tax where estate
consists largely of interest in closely held business.
[[Page 8]]
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.
301.6213-1 Restrictions applicable to deficiencies; petition to Tax
Court.
301.6215-1 Assessment of deficiency found by Tax Court.
301.6221-1 T Tax treatment determined at partnership level
(temporary).
301.6222 (a)-1T Consistent treatment of partnership items (temporary).
301.6222 (a)-2T Application of consistency and notification rules to
indirect partners (temporary).
301.6222 (b)-1T Notification to Service when partnership items are
treated inconsistently (temporary).
301.6222 (b)-2T Effect of notification of inconsistent treatment
(temporary).
301.6222 (b)-3T Partner receiving incorrect schedule (temporary).
301.6223 (a)-1T Notice sent to tax matters partner (temporary).
301.6223 (a)-2T Withdrawal of notice of the beginning of an
administrative proceeding (temporary).
301.6223 (b)-1T Notice group (temporary).
301.6223 (c)-1T Additional information regarding partners furnished to
the Service (temporary).
301.6223 (e)-1T Effect of Service's failure to provide notice
(temporary).
301.6223 (e)-2T Elections if Service fails to provide timely notice
(temporary).
301.6223 (f)-1T Duplicate copy of final partnership administrative
adjustment (temporary).
301.6223 (g)-1T Responsibilities of the tax matters partner
(temporary).
301.6223 (h)-1T Responsibilities of pass-thru partner (temporary).
301.6224 (a)-1T Participation in administrative proceedings
(temporary).
301.6224 (b)-1T Partner may waive rights (temporary).
301.6224 (c)-1T Tax matters partner may bind nonnotice partners
(temporary).
301.6224 (c)-2T Pass-thru partner binds indirect partners (temporary).
301.6224 (c)-3T Consistent settlements (temporary).
301.6226 (a)-1T Principal place of business of partnership
(temporary).
301.6226 (b)-1T 5-percent group (temporary).
301.6226 (e)-1T Jurisdictional requirement for bringing an action in
District Court or Claims Court (temporary).
301.6226 (f)-1T Scope of judicial review (temporary).
301.6227 (b)-1T Administrative adjustment request by the tax matters
partner on behalf of the partnership (temporary).
301.6227 (c)-1T Administrative adjustment request filed on behalf of a
partner (temporary).
301.6229 (b)-1T Extension by agreement (temporary).
301.6229 (e)-1T Information with respect to unidentified partner
(temporary).
301.6230 (b)-1T Request that correction not be made (temporary).
301.6230 (c)-1T Claim arising out of erroneous computation, etc.
(temporary).
301.6230 (e)-1T Tax matters partner required to furnish names
(temporary).
301.6231 (a)(1)-1T Exception for small partnerships (temporary).
301.6231 (a)(2)-1T Persons whose tax liability is determined
indirectly by partnership items (temporary).
301.6231 (a)(3)-1 Partnership items.
301.6231 (a)(5)-1T Definition of affected item (temporary).
301.6231 (a)(6)-1T Computational adjustments (temporary).
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)-1T Special rules relating to spouses (temporary).
301.6231 (c)-1T Special rules for certain applications for tentative
carryback and refund adjustments based on partnership losses,
deductions, or credits (temporary).
301.6231 (c)-2T Special rules for certain refund claims based on
losses, deductions, or credits from abusive tax shelter
partnerships (temporary).
301.6231 (c)-3T Limitation on applicability of Secs. 301.6231(c)-4T
through 301.6231(c)-8T (temporary).
301.6231 (c)-4T Termination and jeopardy assessment (temporary).
301.6231 (c)-5T Criminal investigations (temporary).
301.6231 (c)-6T Indirect method of proof of income (temporary).
301.6231 (c)-7T Bankruptcy and receivership (temporary).
301.6231 (c)-8T Prompt assessment (temporary).
301.6231 (d)-1T Time for determining profits interest of partners for
purposes of sections 6223(b) and 6231(a)(11) (temporary).
301.6231 (e)-1T Effect of a determination with respect to a
nonpartnership item on the determination of a partnership item
(temporary).
301.6231 (e)-2T Judicial decision not a bar
[[Page 9]]
to certain adjustments (temporary).
301.6231 (f)-1T Disallowance of losses and credits in certain cases
(temporary).
301.6233-1 T Extension to entities filing partnership returns, etc.
(temporary).
301.6241-1 T Tax treatment determined at corporate level.
301.6245-1 T Subchapter S items.
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.
301.6312-1 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
301.6321-1 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.
301.6324-1 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
301.6331-1 Levy and distraint.
301.6331-2 Procedures and restrictions on levies.
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.
301.6362-4 Rules for adjustments relating to qualified resident taxes.
301.6362-5 Qualified nonresident tax.
301.6362-6 Requirements relating to residence.
[[Page 10]]
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 T Definition of ministerial act (temporary).
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
[[Page 11]]
carryback.
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.
301.6621-2 T 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 Penalty for underpayment of deposits.
301.6656-2 Penalty for overstated deposit claims.
301.6656-3 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.
301.6689-1 T 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.
301.6707-1 T Questions and answers relating to penalties for failure
to furnish information regarding tax shelters.
[[Page 12]]
301.6708-1 T 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.
301.6723-1 Failure to comply with other information reporting
requirements.
301.6724-1 Reasonable cause.
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
301.6723-1 A 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.
301.7122-1 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.
[[Page 13]]
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.
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.
301.7429-1 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 date.
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.
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 treated as timely filing.
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.
301.7510-1 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.
301.7515-1 Special statistical studies and compilations on request.
301.7516-1 Training and training aids on request.
[[Page 14]]
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.
301.7603-1 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.
301.7623-1T Rewards for information relating to violations of internal
revenue laws (temporary).
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.
301.7701-3T Classification of certain business entities (temporary).
301.7701-4 Trusts.
301.7701-5 Domestic, foreign, resident, and nonresident persons.
301.7701-6 Definitions; person, fiduciary.
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.
301.7701-13 A Post-1969 domestic building and loan association.
301.7701-14 Cooperative bank.
301.7701-15 Income tax return preparer.
301.7701-16 Other terms.
301.7701-17 T 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.
301.9100-4T Time and manner of making certain elections under the
Economic Recovery Tax Act of 1981.
[[Page 15]]
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.
301.9100-13T Elections relating to reduction of basis.
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, unless otherwise noted.
Section 301.6011-2 also issued under 26 U.S.C. 6011(e);
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(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 301.6109-1 also issued under 26 U.S.C. 6109 (a), (c), and
(d);
Section 301.6109-1T also issued under 26 U.S.C. 6109;
Section 301.6109-3T also issued under 26 U.S.C. 6109;
Section 301.6111-1T also issued under 26 U.S.C. 6111;
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);
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)-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);
[[Page 16]]
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 301.6323(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 301.6404-3 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 301.7507-1 also issued under 26 U.S.C. 597;
Section 301.7507-9 also issued under 26 U.S.C. 597;
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).
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--Table of Contents
Returns and Records
records, statements, and special returns
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.
For provisions requiring returns, statements, or lists, see the
regulations relating to the particular tax.
[[Page 17]]
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 magnetic
media permitted under applicable regulations, revenue procedures, or, in
the case of returns filed with the Social Security Administration,
Social Security Administration publications. These generally include
magnetic tape, diskette, cassette, and mini-disk, as well as other media
specifically permitted under the applicable regulations or procedures.
Use of diskette and cassette may be subject to certain limitations or
special rules in the case of returns required on Form W-2 or W-2P.
(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
1042S, 1098, 1099 series, 5498, 6248, 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 a
return, the information required by such form shall, except as otherwise
provided in paragraph (c) of this section, be submitted on magnetic
media. Returns on magnetic media shall be made in accordance with
applicable revenue procedures. 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 shall be
obtained prior to submitting a return on such magnetic medium. An
application for such consent shall be in writing and must be filed at
least 90 days before the filing of the first return for which consent is
requested.
(2) If the use of Form W-2, W-2P, or other form treated as a form
specified in this paragraph (b)(2) is required by the regulations or
revenue procedures for the purpose of making a return (not including the
copy of Form W-2 or W-2P that is required to be attached to an
Individual Income Tax Return), the information required by such form
shall, except as otherwise provided in paragraph (c) of this section, be
submitted on magnetic media. Returns on magnetic media shall be made in
accordance with applicable Social Security Administration procedures.
Thus, the consent of the Secretary of Health and Human Services (or
other authorized officer or employee of the Department of Health and
Human Services) to a magnetic medium shall be obtained prior to
submitting a return on such magnetic medium. An application for such
consent shall be in writing and must be filed--
(i) On or before July 31, 1986, in the case of returns filed in
1987;
(ii) On or before June 30, 1987, in the case of returns filed in
1988; and
(iii) At least 90 days before the filing of the first return for
which consent is requested in all other cases.
(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--(i) In general. A person
required to make returns on a particular type of form specified in
paragraph (b) of this section (other than Form 1099-DIV, 1099-PATR,
1099-INT, or 1099-OID) may make such returns on the prescribed paper
form for a calendar year or other applicable annual period (whether such
returns are filed during the calendar year or annual period or during
the subsequent calendar year or annual period) if--
[[Page 18]]
(A) In the case of a calendar year or annual period beginning before
January 1, 1987--
(1) On the first day of such calendar year or annual period the
person reasonably expects to file fewer than 500 returns on such form
for the calendar year or annual period; and
(2) The person was not required to file 500 or more returns on such
form for the preceding calendar year or annual period; or
(B) In the case of a calendar year or annual period beginning on or
after January 1, 1987--
(1) On the first day of such calendar year or annual period the
person reasonably expects to file fewer than 250 returns on such form
for the calendar year or annual period; and
(2) The person was not required to file 250 or more returns on such
form for the preceding calendar year or annual period.
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) Form 1099 series. Each form within the Form 1099 series is
considered a separate type of form for purposes of this paragraph
(c)(1). Thus, for example, in the case of a calendar year beginning on
or after January 1, 1987, if on the first day of such calendar year a
person reasonably expects to file 200 returns on Form 1099-A and 150
returns on Form 1099-MISC and for the preceding calendar year the person
was required to file 200 returns on Form 1099-A and 150 returns on Form
1099-MISC, the person may make such returns on the prescribed paper form
for such calendar year.
(2) Special rule for Form 1099-DIV, 1099-PATR, 1099-INT, 1099-OID--
(i) 50 or fewer returns. A person required to make returns on Form 1099-
DIV, 1099-PATR, 1099-INT, or 1099-OID may make such returns on a
machine-readable paper form for a calendar year if--
(A) On the first day of such calendar year the person reasonably
expects to file 50 or fewer returns on such forms for the calendar year;
and
(B) The person was not required to file more than 50 returns on such
forms for the preceding calendar year. Alternatively, such persons may
make returns on magnetic media in accordance with paragraph (b) of this
section
(ii) Aggregation of returns. For purposes of determining the number
of returns that a person was required to file or reasonably expects to
file on Form 1099-DIV, 1099-PATR, 1099-INT, or 1099-OID, all such
returns shall be aggregated. Thus, for example, if a person filed 30
returns on Form 1099-INT and 30 returns on Form 1099-DIV for a calendar
year, or reasonably expects to do so for the succeeding calendar year,
all returns made by such person on Form 1099-DIV, 1099-PATR, 1099-INT
and 1099-OID for the succeeding calendar year must be on magnetic media.
(3) Provided by regulations--(i) In general. This section does not
apply to a return if the regulations relating to such return require
reporting on magnetic media.
(ii) Example. The following example illustrates the application of
the rule in paragraph (c)(3)(i) of this section:
Example. Section 1.6045-1(l), relating to returns of information of
brokers and barter exchanges, requires the use of magnetic media as the
method of reporting. Thus, this section does not apply to returns
required to be filed under section 6045.
(4) 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)(4)(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 forgoing, if an
employer is required to make a final return on Form 941, or a variation
thereof, and expedited filing of Forms W-2 is required, the
unavailability of specifications for magnetic media filing will be
treated as creating a hardship. See Sec. 31.6071(a)-1(a)(3)(ii). 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
[[Page 19]]
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 by revenue procedure prescribe rules that
supplement the provisions of paragraph (c)(4)(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 made in accordance with applicable revenue 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. In addition, consent to the use of a
magnetic medium obtained in accordance with such regulations, revenue
procedures and Social Security Administration publications (regardless
of when obtained) will be considered consent to the use of such medium
for purposes of paragraph (b) of this section.
(f) Failure to file. If a person fails to file a return on magnetic
media when required to do so by section 6011(e) and this section, such
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 for a calendar year (or annual filing period) beginning after
December 31, 1986, fails to file a return on a machine-readable paper
form when required to do so by this section, such person is deemed to
have failed to file the return. See sections 6652, 6693, and 6721 for
penalties for failure to file certain returns.
(g) Effective date. (1) Except as otherwise provided in paragraph
(g)(2) of this section, this section applies to returns filed after
December 31, 1986.
(2) Returns required on Form 1099-DIV, 1099-PATR, 1099-INT, or 1099-
OID for payments made after December 31, 1983, must be filed on magnetic
media except as otherwise provided in paragraph (c) of this section.
[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]
Sec. 301.6011-2T Required use of magnetic media (temporary).
This section applies to 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)
of the Internal Revenue Code and Sec. 301.6011-2.
(a) 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, 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)-(3) [Reserved] For further guidance, see Sec. 301.6011-2(a) (2)
and (3).
(b) Returns required on magnetic media. (1) If the use of Form 1042-
S, 1098, 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
[[Page 20]]
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), 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) [Reserved] For further guidance, see Sec. 301.6011-2(b)(3).
(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) [Reserved] For further guidance, see Sec. 301.6011-2(c)(1)(ii).
(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, 1996, 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, 1996,
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, 1996, 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). 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.
(3)-(4) [Reserved] For further guidance, see Sec. 301.6011-2(c) (3)
and (4).
[[Page 21]]
(d)-(e) [Reserved] For further guidance, see Sec. 301.6011-2 (d) and
(e).
(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 date. (1) [Reserved] For further guidance, see
Sec. 301.6011-2(g)(1).
(2) Paragraphs (a)(1), (b) (1) and (2), (c)(1) (i), (iii), and (iv),
(c)(2), 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) of the Internal Revenue Code and
Sec. 301.6011-2.
[T.D. 8683, 61 FR 53060, Oct. 10, 1996]
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 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
[[Page 22]]
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 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. 301.6031-1 Return of partnership income.
For provisions relating to the requirement of returns of partnership
income, see Sec. 1.6031-1 of this chapter (Income Tax Regulations).
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).
[[Page 23]]
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.
(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.
[[Page 24]]
(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.
(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).
[[Page 25]]
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.)
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]
[[Page 26]]
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 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
[[Page 27]]
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.
(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
[[Page 28]]
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
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
[[Page 29]]
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 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]
[[Page 30]]
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 charge 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]
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
[[Page 31]]
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 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.
[[Page 32]]
(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, 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
[[Page 33]]
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
(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).
[[Page 34]]
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).
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
[[Page 35]]
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 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,
[[Page 36]]
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
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
[[Page 37]]
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, 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
[[Page 38]]
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 (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)-1 Disclosure of returns and return information (including taxpayer return information) to designee of taxpayer.
(a) Disclosure of returns and return information (including taxpayer
return information) to person or persons designated in a written request
or consent. Section 6103 (c) of the Internal Revenue Code applies to
disclosures of a return or return information (including taxpayer return
information) to a person designated in a written request for or consent
to disclosure. A request for or consent to disclosure must be in the
form of a written document pertaining solely to the authorized
disclosure. The written document must be signed 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--
(1) The taxpayer's taxpayer identity information described in
section 6103(b)(6);
(2) The identity of the person to whom disclosure is to be made;
(3) The type of return (or specified portion of the return) or
return information (and the particular data) that is to be disclosed;
and
(4) The taxable year covered by the return or return information.
Thus, for example, a provision included in a taxpayer's application for
a loan or other benefit authorizing the Internal Revenue Service to
disclose to the grantor of the loan or other benefit such returns or
return information as the grantor may request for purposes of verifying
information supplied on the application does not meet the requirements
of this paragraph. The disclosure of a return or return information
authorized by a request for or consent to the disclosure shall not be
[[Page 39]]
made unless the request or consent is received by the Service within 60
days following the date upon which the request or consent was signed and
dated by the taxpayer.
(b) Disclosure of returns and return information (including taxpayer
return information) to designee of taxpayer to comply with request for
information or assistance. Section 6103(c) of the Code applies to
requests made by the taxpayer to other persons (for example, members of
Congress, friends or relatives of the taxpayer, and, when not acting as
a taxpayer's representative, income tax return preparers) for
information or assistance relating to the taxpayer's return or a
transaction or other contact between the taxpayer and the Service.
The taxpayer's request for information or assistance must be in the form
of a letter or other written document signed and dated by the taxpayer.
The taxpayer must also indicate in the written request--
(1) The taxpayer's taxpayer identity information described in
section 6103(b)(6);
(2) The identity of the person to whom disclosure is to be made; and
(3) Sufficient facts underlying the request for information or
assistance to enable the 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.
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 Service to comply with the taxpayer's request for
information or assistance. This paragraph does not apply to disclosures
to a taxpayer's representative in connection with practice before the
Service (as defined in Treasury Department Circular No. 230). For
disclosures in these cases, see Sec. 601.502(c) of this chapter.
(c) Exceptions. A disclosure of return information shall not be made
under this section if the Service determines that the disclosure would
seriously impair Federal tax administration (as defined in section
6103(b)(4) of the Code).
(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 65567, Oct. 3, 1980]
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
[[Page 40]]
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, 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
[[Page 41]]
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]
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--
[[Page 42]]
(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 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 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)) 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 so provided by paragraphs (b) and (c), the tax period
or accounting period to which such return information relates will also
be disclosed.
(b) Disclosure of return information to officers and employees of
the Bureau of the Census.--(1) Officers or employees of the Service will
disclose the following return information reflected on returns of an
individual taxpayer 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 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) District office and 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 8814, Schedules A, C, D,
E, F, and SE;
(xiv) Posting cycle date relative to filing; and
(xv) Social Security benefits.
(2) Officers or employees of the 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, United States
[[Page 43]]
Code, demographic, economic, and agricultural statistics programs and
censuses and related program evaluation--
(i) From the business master files of the 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
service center and district and area office codes, and monthly
corrections of, and additions to, such entity records;
(ii) From Form SS-4, all return information reflected on such
return;
(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;
and
(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.
(3) Officers or employees of the Service will disclose the following
business related return information reflected on the return of a
taxpayer 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, economic, and agricultural statistics programs, censuses,
and surveys. The ``return of a taxpayer'' includes, but is not limited
to, Form 941; Form 990 series; Form 1040 series and Schedules C, F, 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 Service may
issue--
(i) Taxpayer identity information (as defined in section 6103(b)(6)
of the Code) including shareholder, partner, and employer identity
information;
(ii) Gross income, profits, or receipts;
(iii) Net farm profits;
(iv) Sales of livestock and produce raised;
(v) Returns and allowances;
(vi) Cost of labor, salaries, and wages;
(vii) Total assets;
(viii) Royalty income;
(ix) Interest income, including portfolio interest;
(x) Rental income, including gross rents;
(xi) Tax-exempt interest income;
(xii) Percentage of stock owned by each shareholder;
(xiii) Percentage of capital ownership of each partner;
(xiv) Agricultural activity code;
(xv) Answers to material participation questions;
(xvi) End-of-year code;
(xvii) Months actively operated;
(xviii) Principal industrial activity code, including the business
description;
(xix) All information on Schedule E filed with Form 1120 series;
(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 Schedule C; and
(xxii) Consolidated return indicator.
(4) Officers or employees of the Service will disclose return
information relating to a taxpayer contained in the exempt organization
master files of the 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
[[Page 44]]
return information 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 return 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 has been
disclosed as provided by section 6103(l) (1)(A) or (5) may disclose such
return 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 return; and
(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.
(6)(i) Officers or employees of the Service will disclose the
following return information (but not including return information
described in section 6103(o)(2)) reflected on the return of a
corporation 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 Service--
(1) Taxpayer identity information (as defined in section
6103(b)(6)),
(2) Consolidated return and final return indicators,
(3) Principal industrial activity code,
(4) Partial year indicator,
(5) Annual accounting period,
(6) Gross receipts less returns and allowances,
(7) Net income or loss, and
(8) Total assets; and
(B) From Form SS-4--
(1) Month and year in which such return was executed,
(2) Taxpayer identity information,
(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 described in
paragraph (b)(6)(i)(B) of this section with respect to a corporation has
been disclosed as provided by section 6103(l)(1)(A) may disclose such
return information to officers and employees of the Bureau of the Census
for a purpose described in this paragraph (b)(6).
(c) Disclosure of return information to officers and employees of
the Bureau of Economic Analysis. (1) Officers or employees of the
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 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 of
designated classes or categories of corporations has been disclosed as
provided by section 6103(l)(1)(A)(5) may disclose such return
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; and
(ii) From an employment tax return--
(A) Total compensation reported, and
[[Page 45]]
(B) Taxable wages paid for purposes of chapter 21 to each employee.
(d) Procedures and restrictions. Disclosure of return information by
officers or employees of the 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 to be disclosed,
(2) The taxable period or date to which such return information
relates, and
(3) The particular purpose for which the return information 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. No such officer or employee to whom return
information is disclosed pursuant to the provisions of paragraph (b) or
(c) shall disclose such return information to any person, other than the
taxpayer to whom such return information relates or other officers or
employees of such bureau whose duties or responsibilities requires such
disclosure for a purpose described in paragraph (b) or (c), except in a
form which cannot be associated with, or otherwise identify, directly or
indirectly, a particular taxpayer. If the 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 Code or regulations or
published procedures thereunder, the 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
otherwise authorized by section 6103 (j)(1) and paragraph (b) or (c) of
this section, until the Service determines that such requirements have
been or will be satisfied.
(Secs. 6103(j)(1) and (g) and 7805 of the Internal Revenue Code of 1954
(90 Stat. 1678, and 1685, 68A Stat. 917; 26 U.S.C. 6103(j)(1) and (g);
7805))
[T.D. 7724, 45 FR 65562, Oct. 3, 1980, as amended by T.D. 7824, 47 FR
33477, Aug. 2, 1982; T.D. 8118, 51 FR 47017, Dec. 30, 1986; T.D. 8296,
55 FR 11368, Mar. 28, 1990; T.D. 8377, 56 FR 65187, Dec. 16, 1991]
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
[[Page 46]]
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 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
[[Page 47]]
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 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(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
[[Page 48]]
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 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
[[Page 49]]
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;
(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);
[[Page 50]]
(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,
(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
[[Page 51]]
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 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
[[Page 52]]
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.
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--
[[Page 53]]
(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 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.
[[Page 54]]
(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
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
[[Page 55]]
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 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. Each officer or employee of any
person to whom returns or return information is or may be disclosed as
authorized by paragraph (a) of this section shall be notified in writing
by such person 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 and that further disclosure
of any such returns or return information for a purpose or to an extent
unauthorized by such paragraph 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. Such person
shall also so notify each such officer and employee that any such
unauthorized further disclosure of returns or return information may
also result in an award of civil damages against the officer or employee
in an amount not less than $1,000 with respect to each instance of
unauthorized disclosure.
(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 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
[[Page 56]]
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.
[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]
Sec. 301.6103(p)(2)(B)-1 Disclosure of certain returns and return information by other Federal agencies.
(a) General rule. Subject to the requirements of this section,
returns and return information disclosed by the Internal Revenue Service
to officers and employees of another Federal agency (as defined in
section 6103(b)(9) of the Internal Revenue Code) as provided by section
6103 may, if the Commissioner of Internal Revenue determines that such
returns or return information is more readily available from such
Federal agency, be disclosed by such officers and employees to officers
and employees of another Federal agency, the General Accounting Office,
an agency, body, or commission described in section 6103(d) or (l)(6),
or to a person described in section 6103 (c) or (e) for a purpose or use
authorized or required by, but subject to any requirements imposed by,
any other provision of section 6103 and the regulations thereunder. Any
such disclosure may be made only as, to the extent, and to such persons
as may be authorized in writing by the Commissioner pursuant to a
written request for such disclosure by such person, and containing such
information, as may be designated or provided by the applicable
provisions of section 6103 and the regulations thereunder pursuant to
which the disclosure is sought. Such disclosure authorization by the
Commissioner shall be directed to the head of the Federal agency from
which disclosure is sought and may contain such conditions or
restrictions as the Commissioner may prescribe.
(b) Records and reports of disclosure. The Federal agency making a
disclosure authorized by paragraph (a) of this section shall maintain to
the satisfaction of the Service a permanent system of standardized
records with respect to any disclosure authorization by the Commissioner
described in paragraph (a) and any disclosure of returns or return
information made pursuant to such authorization. In order to enable the
Service to make a timely submission of the public report on disclosures
to the Joint Committee on Taxation as required by section 6103(p)(3)(C)
of the Code, the Federal agency shall, within 30 days after the close of
each calendar year, furnish to the Commissioner a report with respect to
such records which provides the number of--
(1) Disclosure authorizations by the Commissioner,
(2) Instances in which returns or return information was disclosed
pursuant to such disclosure authorizations and to disclosure
authorizations executed in prior calendar years, and
(3) Taxpayers whose returns or return information with respect to
whom was disclosed pursuant to the disclosure authorization described in
subparagraph (2).
In addition, in order to enable the Service to make a timely submission
of
[[Page 57]]
the report to the Joint Committee on Taxation required by section
6103(p)(3)(B), the Federal agency shall furnish to the Commissioner a
report with respect to, or summary of, the records at such time or
times, in such form, and containing such information as the Commissioner
may prescribe in a written request directed to the head of such Federal
agency. The requirements of this paragraph do not apply to disclosures
of taxpayer identity information described in section 6103(m) or to
disclosures of returns and return information as provided by paragraph
(a) which, had such disclosures been made directly by the Service, would
not have been subject to the recordkeeping requirements imposed by
section 6103(p)(3)(A).
(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 65574, Oct. 3, 1980, as amended by T.D. 7824, 47 FR
33477, Aug. 2, 1982]
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]
[[Page 58]]
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 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.
[[Page 59]]
(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
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
[[Page 60]]
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 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]
[[Page 61]]
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 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
[[Page 62]]
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 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
[[Page 63]]
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, 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 that 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
[[Page 64]]
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 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
[[Page 65]]
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
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
[[Page 66]]
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 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
[[Page 67]]
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 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
sectin 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
[[Page 68]]
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 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
[[Page 69]]
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 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)-1 Public inspection of private foundations' annual returns.
(a) In general. The annual return which a private foundation must
file under section 6056 shall be made available by its foundation
managers for inspection at its principal office during regular business
hours by any citizen on request made within 180 days after the
publication of notice of the availability of such return. Such notice
shall be published not later than the day prescribed for filing such
return (determined with regard to any extension of time for filing) in a
newspaper having general circulation in the county in which the
foundation's principal office is located. The notice shall state that
the annual return is available at the foundation's principal office for
inspection during regular business hours by any citizen who requests
inspection within 180 days after the date of such publication, and shall
state the address of the foundation's principal office and the name of
its principal manager.
(b) Definitions and special rules--(1) Private foundation. For
purposes of this section, the term ``private foundation'' includes both
exempt and nonexempt private foundations and also includes trusts
described in section 4947(a)(1) that are treated as private foundations
for purposes of section 6033.
(2) Manner of making annual return available for public inspection.
The foundation managers of a private foundation which has no principal
office, or whose principal office is in a personal residence, may
satisfy the requirement that the annual return be made available for
public inspection at the foundation's principal office by having the
return available for public inspection at an appropriate substitute
location or by furnishing a copy free of charge (including postage and
copying) to persons who request inspection in the manner and at the time
prescribed therefor in section 6104(d) and the regulations thereunder.
In addition to its principal office, a private foundation may designate
an additional location at which its annual return shall be made
available in the manner and at the time prescribed therefor in section
6104(d).
(3) Newspaper having general circulation. The term ``newspaper
having general circulation'' in section 6104(d) shall include any
newspaper or journal which is permitted to publish statements in
satisfaction of State statutory requirements relating to transfers of
title to real estate or other similar legal notices.
(4) Principal manager. A private foundation may furnish the name of
its ``principal manager'' in the notice required by section 6104(d) by
furnishing the name of the individual foundation manager who is
responsible for publishing such notice or for making the annual return
available for inspection under section 6104(d).
(c) Cross-reference. For additional rules with respect to private
foundations' annual returns and their public inspection, see section
6033 and the regulations thereunder.
(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 11032, June 8, 1971. Redesignated by T.D. 7845, 47 FR
50490, Nov. 8, 1982, and amended by T.D. 8026, 50 FR 20757, May 20,
1985]
[[Page 70]]
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.
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) Types. There
are generally three types of taxpayer identifying numbers: social
security numbers, Internal Revenue Service (IRS) individual taxpayer
identification numbers, and employer identification numbers. Social
security numbers take the form 000-00-0000, IRS individual taxpayer
identification numbers take the form 000-00-0000 but begin with a
specific number designated by the IRS, and employer identification
numbers take the form 00-0000000. Both social security numbers and IRS
individual taxpayer identification numbers identify individual persons.
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.
(ii) Uses. Except as otherwise provided in applicable regulations
under this title 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 paragraphs (a)(1)(ii) (B) and
(D) of this section, 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, 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.
[[Page 71]]
(ii) Obligations of persons who make payments to certain trusts. Any
payor 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.
(iii) Persons treated as payors. For purposes of this paragraph
(a)(2), the term payor means a person described in Sec. 1.671-4(b)(4) of
this chapter.
(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
[[Page 72]]
to the Internal Revenue Service, so stating. A person required to file a
taxpayer identifying number shall correct 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) Special rule for entities electing to change their federal tax
classification under Sec. 301.7701-3(c). Any entity that has an employer
identification number and then elects under Sec. 301.7701-3(c) to change
its federal tax classification will retain that employer identification
number.
(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
[[Page 73]]
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 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.
[[Page 74]]
(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 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
[[Page 75]]
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.
(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 and change of foreign
status.
(h) Effective date--(1) General rule. Except as otherwise provided
in this paragraph (h), 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 do not apply after
November 24, 1997. For further guidance after November 24, 1997, see
Sec. 301.6109-1T(a)(1)(i), (a)(1)(ii) introductory text, (a)(1)(ii)(A)
and (a)(1)(ii)(B).
[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]
Effective Date Note: By T.D. 8734, at 62 FR 53494, Oct. 14, 1997,
Sec. 301.6109-1 was amended by revising paragraphs (b)(2)(iv),
(b)(2)(v), and (c), and by adding paragraph (b)(2)(vi), effective Jan.
1, 1999. For the convenience of the user, the superseded text is set
forth as follows:
Sec. 301.6109-1 Identifying numbers.
* * * * *
(b) * * *
(2) * * *
[[Page 76]]
(iv) Any other foreign person who, with respect to taxes imposed
under this title (including income, estate, and gift taxes), makes a
return of tax, an amended return, or a refund claim, but excluding
information returns, statements, or documents; and
(v) A foreign person that makes an election under Sec. 301.7701-
3(c).
* * * * *
(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), or
(iii) of this section as required by the forms and the accompanying
instructions. If the person making the return, statement, or other
document does not know the taxpayer identifying number of the other
person, such person must request the other person's number. A 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, 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 any errors in such filing when such person's attention has been
drawn to them.
* * * * *
Sec. 301.6109-1T Identifying numbers (temporary).
(a) In general--(1) Taxpayer identifying numbers--(i) Principal
types. There are four principal types of taxpayer identifying numbers:
social security numbers, Internal Revenue Service (IRS) individual
taxpayer identification numbers, employer identification numbers, and
IRS adoption taxpayer 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 specific 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. 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 Sec. 301.6109-1(d)(3). For the
definition of IRS adoption taxpayer identification number, see
Sec. 301.6109-3T. Except as otherwise provided in applicable regulations
under this title 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 Sec. 301.6109-1(a)(1)(ii)(D),
paragraph (a)(1)(ii)(B) of this section, and Sec. 301.6109-3T, an
individual required to furnish a taxpayer identifying number must use a
social security number.
(B) Except as otherwise provided in Sec. 301.6109-1(a)(1)(ii)(D) and
Sec. 301.6109-3T, 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.
(a)(1)(ii)(C) through (g) [Reserved]. For further guidance, see
Sec. 301.6109-1(a)(1)(ii)(C) through (g).
(h) Effective date. Paragraphs (a)(1)(i), (a)(1)(ii) introductory
text, (a)(1)(ii)(A), and (a)(1)(ii)(B) of this section are applicable
after November 24, 1997. For guidance applicable prior to November 25,
1997, see Sec. 301.6109-1(a)(1)(i), (a)(1)(ii) introductory text,
(a)(1)(ii)(A) and (a)(1)(ii)(B).
[T.D. 8739, 62 FR 62521, Nov. 24, 1997, as amended by T.D. 8739, 63 FR
13124, Mar. 18, 1998]
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
[[Page 77]]
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 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
[[Page 78]]
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. 301.6109-3T IRS adoption taxpayer identification numbers (temporary).
(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 this title. 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 this title.
(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. The following definitions apply 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 refers to 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 refers to 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
birth 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
[[Page 79]]
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 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. 8739, 62 FR 62521, Nov. 24, 1997]
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, 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
[[Page 80]]
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).
(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
[[Page 81]]
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 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
[[Page 82]]
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.
(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
[[Page 83]]
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) 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
[[Page 84]]
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 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
[[Page 85]]
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 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
[[Page 86]]
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.
(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.
(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]
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
[[Page 87]]
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 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
[[Page 88]]
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.
(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) 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
[[Page 89]]
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 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
[[Page 90]]
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 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]
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
[[Page 91]]
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).
(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
[[Page 92]]
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
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
[[Page 93]]
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 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.
(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
[[Page 94]]
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 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]
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
[[Page 95]]
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
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
[[Page 96]]
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
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
[[Page 97]]
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 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
[[Page 98]]
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.
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
[[Page 99]]
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 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.
[[Page 100]]
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 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.
[[Page 101]]
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 the tax 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 shelte 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.
[[Page 102]]
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)),
(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.
[[Page 103]]
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 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
[[Page 104]]
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 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
[[Page 105]]
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, 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 desbribed 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
[[Page 106]]
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) 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.
[[Page 107]]
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.
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
[[Page 108]]
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.
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,
[[Page 109]]
(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?
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
[[Page 110]]
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 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.
[[Page 111]]
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.
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.
[[Page 112]]
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 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.
[[Page 113]]
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 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.
[[Page 114]]
(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.
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
[[Page 115]]
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 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).
[[Page 116]]
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 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,
[[Page 117]]
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 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. 301.6112-1T Questions and answers relating to the requirement to maintain a list of investors in potentially abusive tax shelters (temporary).
The following questions and answers relate to the requirement to
maintain a list of investors in potentially abusive tax shelters that is
imposed by section 6112 of the Internal Revenue Code of 1954, as added
by section 142 of the Tax Reform Act of 1984 (Pub. L. 98-369; 98 Stat.
681):
[[Page 118]]
In General
Q-1: What requirements are imposed by section 6112 on persons who
organize potentially abusive tax shelters (``organizers'') and persons
who sell interests in such tax shelters (``sellers'')?
A-1: Any organizer of a potentially abusive tax shelter generally
must prepare and maintain for a specified period a list identifying
certain persons who acquire interests in the tax shelter. Any seller of
an interest in such a tax shelter generally must maintain a list
identifying each person who acquires an interest in the tax shelter from
the seller. The lists also must contain the other information required
by this section. The organizer or seller also is required to make the
list available for inspection upon request by the Internal Revenue
Service. For the definition of a potentially abusive tax shelter, see A-
3 of this section. For the definition of an organizer of a potentially
abusive tax shelter, see A-5 of this section. For the definition of a
seller of an interest in a potentially abusive tax shelter, see A-6 of
this section. For rules relating to the designation of one organizer to
maintain a list in cases in which two or more organizers or sellers
would be required to maintain the same list or portion of a list, see A-
11 through A-13 of this section. For the information that must be
included on a list, see A-17 of this section. For the requirements
relating to the retention of lists and making lists available for
inspection, see A-19 through A-21 of this section.
Q-2: What sanctions apply to an organizer or seller who fails
properly to comply with the requirements of section 6112 and this
section?
A-2: Any organizer or seller who fails to comply with the applicable
requirements shall be subject to the penalty imposed by section 6708.
For rules relating to section 6708, see Sec. 301.6708-1T.
Definition of Potentially Abusive Tax Shelter
Q-3: What is the meaning of the term ``potentially abusive tax
shelter''?
A-3: A potentially abusive tax shelter (``tax shelter'') means (a)
any investment that is a tax shelter required to be registered with the
Internal Revenue Service under section 6111, and (b) any other entity,
plan, or arrangement that is treated by regulations as a tax shelter for
purposes of the list requirement. An investment that is required to be
registered under section 6111 is a tax shelter even if the investment
has not been properly registered with the Internal Revenue Service. See
Sec. 301.6111-1T for rules relating to tax shelter registration.
Q-4: Are any entities, plans, or arrangements other than those
required to be registered with the Internal Revenue Service under
section 6111 treated as tax shelters for purposes of the list
requirement?
A-4: Yes. For purposes of the list requirement, a tax shelter
includes any tax shelter that is a projected income investment, as
defined in A-57A of Sec. 301.6111-1T. The extent, if any, to which any
other entity, plan or arrangement will be treated as a potentially
abusive tax shelter for purposes of the list requirement will be
prescribed in future regulations.
Persons Required To Maintain Lists of Investors
Q-5: Who is an organizer of a tax shelter?
A-5: An organizer is any person who is a principal organizer of a
tax shelter under A-27 of Sec. 301.6111-1T. Thus, an organizer, for
purposes of the list requirement, means any person who discovers,
creates, investigates, or initiates the tax shelter investment, devises
the business or financial plans for the tax shelter, or carries out
those plans through negotiations or transactions with others.
Q-6: Who is a seller of an interest in a tax shelter?
A-6: For purposes of the list requirement, a seller is--
(a) Any organizer, underwriter, broker, or dealer (or other similar
person) who transfers any interest in a tax shelter;
(b) Any agent who negotiates the transfer of any interest in a tax
shelter for the tax shelter, an organizer, or other person described in
paragraph (a) of this A-6; and
(c) Any investor (i.e., a person not described in paragraph (a) of
this A-6)
[[Page 119]]
who transfers any interest in a tax shelter.
For example, if a broker or underwriter purchases a block of interests
in a tax shelter from an organizer and in turn sells those interests to
individual investors, the broker or underwriter, under paragraph (a) of
this A-6, is a seller for purposes of the list requirement. Moreover, if
a broker or underwriter who purchases a block of interests in a tax
shelter engages other brokers or agents to negotiate sales of interests,
such other brokers or agents, under paragraph (b) of this A-6, are
sellers for purposes of the list requirement. Similarly, if an organizer
engages a broker or other agent to negotiate sales of interests in a tax
shelter to investors, the broker or other agent, under paragraph (b) of
this A-6, is a seller for purposes of the list requirement. If, on the
other hand, an individual investor engages a broker or other agent to
negotiate a sale of the investor's interest to another investor, the
broker or other agent is not a seller for purposes of the list
requirement. The individual investor who transfers the interest,
however, would be a seller for purposes of the list requirement under
paragraph (c) of this A-6.
Q-7: What is the meaning of the term ``an interest'' in a tax
shelter?
A-7: An interest in a tax shelter includes any right to participate
in the tax shelter by reason of (a) a partnership interest, a
shareholder interest, or a beneficial interest in a trust, (b) any
interest in property (including a leasehold interest), or (c) the entry
into a leasing arrangement or a consulting, management, or other
agreement for the performance of services.
Persons Required To Be Included on a List
Q-8: What persons are required to be included on a list maintained
by an organizer?
A-8: An organizer of a tax shelter must include on a list all
persons who acquire interests in the tax shelter by reason of--
(a) Any transfer of an interest made by the organizer (i.e., a
transfer with respect to which the organizer, under paragraph (a) of A-6
of this section, is also a seller) or through an agent of the organizer
described in paragraph (b) of A-6 of this section;
(b) Any transfer of an interest made by the tax shelter or through
an agent of the tax shelter described in paragraph (b) of A-6 of this
section (provided the organizer is involved in the tax shelter on the
date of the transfer);
(c) Any transfer of an interest made by or through a person related
(within the meaning of section 168 (e)(4)) to the organizer or the tax
shelter (provided the organizer is involved in the tax shelter on the
date of the transfer);
(d) Any transfer of an interest of which the organizer is informed
(regardless of whether the organizer is so informed under A-15 of this
section for the specific purpose of maintaining a list); and
(e) Any other transfer of which the organizer knows or has reason to
know whether on account of the duty of inquiry described in A-9 of this
section or for any other reason.
Example 1. Assume that A, an organizer, offers partnership interests
in a tax shelter for sale through Y, a broker. In 1985, ten individual
investors purchase partnership interests from A through Broker Y. A must
include on A's list the ten individual investors, because organizers
must include on their lists persons who acquire interests by reason of
transfers with respect to which the organizers also are sellers within
the meaning of paragraph (a) of A-6 of this section. Broker Y, who is a
seller within the meaning of paragraph (b) A-6 of this section, also
would be required to maintain a list containing the names of the ten
individual investors (see A-10 of this section). See A-17 of this
section for the other information required to be included on a list. See
A-11 through A-13 of this section for rules relating to the designation
of a single organizer to maintain a list for multiple organizers and
sellers.
Example 2. Assume the same facts as in example 1 and that, in
addition, A is the tax matters partner (within the meaning of section
6231) for the partnership. In 1986, A, as tax matters partner, is
instructed to prepare a Form K-1 for partner Z, a corporation that
acquired its interest from one of the ten investors. A would be required
to include Z on A's list under paragraph (d) of this A-8 because A has
been informed of the acquisition of an interest by Z.
Q-9: When does an organizer have a duty to inquire with respect to
transfers of interests in the tax shelter?
A-9: An organizer has a duty to make a reasonable inquiry only with
respect
[[Page 120]]
to transfers of interests in the tax shelter made by a seller described
in paragraph (a) of A-6 of this section who acquired the interests from
(a) the organizer or a person related (within the meaning of section
168(e)(4)) to the organizer, or (b) the tax shelter or a person related
(within the meaning of section 168(e)(4)) to the tax shelter (provided
the organizer is involved in the tax shelter on the date the interest is
transferred to the seller). For example, if a broker or underwriter
purchases a block of interests in a tax shelter from an organizer and in
turn sells those interests to individual investors, the organizer has a
duty to inquire with respect to such sales. If, as a result of the
inquiry, the organizer knows the investors who acquired interests in the
tax shelter from the broker or underwriter, the organizer would be
required to include those persons on the list. (See paragraph (e) of A-8
of this section.) If the organizer fails reasonably to inquire with
respect to transfers by a seller described in paragraph (a) of A-6 of
this section, the organizer will have reason to know for purposes of
paragraph (e) of A-8 of this section of those investors who acquired
interests in the tax shelter from such a seller by reason of any
transfer that the organizer would have discovered through a reasonable
inquiry.
Q-10: What persons are required to be included on a list maintained
by a seller?
A-10: Any list required to be maintained by a seller must identify
each person who acquired an interest in the tax shelter from the seller,
or, if the seller is an agent described in paragraph (b) of A-6 of this
section, each person who acquired an interest through the seller. Any
list required to be maintained by a seller described in paragraph (a) of
A-6 of this section must also identify each person who acquired an
interest of which the seller is informed under A-15 of this section.
Designation of One Organizer To Maintain the List
Q-11: If more than one person is required to maintain a list for the
same tax shelter (i.e., multiple organizers, or organizers and sellers),
may a single person be designated to maintain the list or a portion of
the list for the tax shelter?
A-11: Yes. Organizers and sellers who are required to maintain a
list (or a portion of such a list) of persons who have acquired
interests in the same tax shelter may designate one of the organizers
(but not a seller who is not also an organizer) to maintain the required
list or portion of the list (``designated person''). Organizers and
sellers may not designate one person to maintain a list for the tax
shelter, however, unless the tax shelter is timely and properly
registered under section 6111 or unless the tax shelter is a projected
income investment (as defined in A-57A of Sec. 301.6111-1T). If the tax
shelter is registered with the Internal Revenue Service under section
6111, the organizer who registered the tax shelter ordinarily should be
the designated person, although any other organizer who meets the
requirements of this A-11 may be the designated person. An organizer may
not be a designated person, however, unless--
(a) It is reasonably expected that the organizer will actively
participate in the management of the tax shelter as (i) a general
partner of the tax shelter, (ii) an officer or director of the tax
shelter, (iii) an officer or director of a corporate general partner of
the tax shelter, or (iv) a trustee of the tax shelter; and
(b) The organizer is not a resident of, and does not maintain its
principal place of business in, a foreign country.
Q-12: What must organizers and sellers do to designate one organizer
to maintain a list under A-11 of this section?
A-12: The organizers and sellers must enter into a written agreement
that identifies the designated person and that is signed by all the
parties to the agreement, including the designated person.
Q-13: What are the consequences of an agreement under A-12 of this
section?
A-13: (a) If the tax shelter is not a projected income investment
(as defined in A-57A of Sec. 301.6111-1T) at the time an agreement under
A-12 of this section is signed, a seller or organizer who signs the
agreement shall not be subject to penalty under section 6708
[[Page 121]]
for failing to maintain a list provided that the seller or organizer--
(1) Submits to the designated person all of the information that the
organizer or seller otherwise would be required to maintain on a list
(as described in A-8, A-10, and A-17 of this section), and
(2) Provides to each investor (within the meaning of paragraph (c)
of A-6 of this section) otherwise required to be included on a list
maintained by such organizer or seller a notice in the form prescribed
in paragraph (c) of this A-13.
(b) If the tax shelter is a projected income investment (as defined
in A-57A of Sec. 301.6111-1T) at the time an agreement under A-12 of
this section is signed, a seller or organizer who signs the agreement
shall not be subject to penalty under section 6708 for failing to
maintain a list provided that the seller or organizer submits to the
designated person all of the information that the organizer or seller
otherwise would be required to maintain on a list (as described in A-8,
A-10, and A-17 of this section). If the tax shelter ceases to be a
projected income investment under A-57G of Sec. 301.6111-1T, the
designated person must provide to each investor (within the meaning of
paragraph (c) of A-6 of this section) required to be included on the
list an explanation that the tax shelter has ceased to be projected
income investment and a notice substantially in the form prescribed in
paragraph (c) of this A-13.
(c) Any notice required to be provided to an investor (within the
meaning of paragraph (c) of A-6 of this section) under paragraph (a) or
(b) of this A-13 must be substantially in the form set forth below:
You have acquired an interest in [name and address of tax shelter].
If you transfer your interest in this tax shelter to another person, you
are required by the Internal Revenue Service to keep a list containing
that person's name, address, taxpayer identification number, the date on
which you transferred the interest, and the name, address, and tax
shelter registration number of this tax shelter. If you do not want to
keep such a list, you must (1) send the information specified above to
[name and address of designated person], who will keep the list for this
tax shelter, and (2) give a copy of this notice to the person to whom
you transfer your interest.
This notice may be incorporated into the notice required by A-53 or A-54
of Sec. 301.6111-1T (relating to tax shelter registration).
(d) A designated person who fails to maintain a list shall be
subject to penalty under section 6708. For special rules for determining
the amount of the penalty imposed on a designated person under section
6708, see A-6 of Sec. 301.6708.-1T.
Additional Requirement Imposed on Sellers Who Do Not Sign Designation
Agreements
Q-14: Is any additional requirement imposed on a seller who does not
sign an agreement under A-12 of this section to designate one organizer
to maintain a list for a tax shelter?
A-14: Yes. Any seller described in paragraph (a) of A-6 of this
section who does not sign a designation agreement under A-12 of this
section (including organizers who are such sellers) with respect to a
tax shelter that is not a projected income investment must provide a
notice to all investors (within the meaning of paragraph (c) of A-6 of
this section) who acquire interests in the tax shelter from the seller.
The notice must be substantially in the form prescribed in paragraph (c)
of A-13 of this section except that the notice must include the name and
address of the seller in place of the name and address of the designated
person. In the case of a tax shelter that is a projected income
investment (as defined in A-57A of Sec. 301.6111-1T), a notice to
investors need not be provided until such time, if any, as the shelter
ceases to be a projected income investment under A-57G of Sec. 301.6111-
1T. In such a case, the seller shall provide, with the notice, an
explanation that the tax shelter has ceased to be a projected income
investment.
Special Rules Applicable to Investors
Q-15: Under what circumstances is an investor described in paragraph
(c) of A-6 of this section who retransfers an interest in a tax shelter
not required to maintain a list disclosing the transferee's name and the
other information required by A-17 of this section?
[[Page 122]]
A-15: An investor who retransfers an interest in a tax shelter that
is projected income investment (as defined in A-57A of Sec. 301.6111-1T)
is not required to maintain a list with respect to the retransfer unless
the tax shelter ceases to be a projected income investment under A-57G
of Sec. 301.6111-1T prior to the retransfer. In addition, any investor
who is required to maintain a list for a tax shelter (including a tax
shelter that has ceased to be a projected income investment) may require
a designated person or a seller identified in a notice provided under
either A-13 or A-14 of this section to maintain the investor's list (and
the investor will thus not be subject to any penalty under section 6708
for failing to maintain the list) by--
(a) Submitting to the designated person or seller so identified all
of the information that the investor otherwise would be required to
maintain on a list for that tax shelter, and
(b) Providing a copy of the notice furnished to the investor under
either A-13 or A-14 of this section to the person or persons to whom the
investor retransfers an interest in the tax shelter.
Example. Assume that X, an organizer, retains brokers A and B to
sell interests in a tax shelter that is not a projected income
investment. In 1985, A and B each negotiate sales of interests in the
tax shelter to investors. Assume that X timely and properly registered
the tax shelter under section 6111. A, B, and X enter into an agreement
to designate X to maintain the list of investors who acquired interests
in the tax shelter through A and B. Pursuant to the agreement, A and B
submit the required information to X and provide the required notice to
the investors who acquired interests through A and B. On January 1,
1986, C, an investor who acquired an interest through A, sells the
interest to D. Since C was provided with the notice required by A-13 of
this section, C may require X to maintain C's list with respect to the
sale to D by submitting to X all of the required information regarding
the sale and by providing a copy of the notice to D. If A, B, and X had
not signed an agreement, X, a seller described in paragraph (a) of A-6
of this section, would nevertheless have been required to provide a
notice to C (under A-14 of this section) and C would have been able to
require X to keep the list by complying with the two requirements of
this A-15. In the absence of an agreement, however, A and B, who are
sellers described in paragraph (b) of A-6 of this section, would have
been required to keep lists of investors with whom they negotiated
sales.
Manner in Which List Shall Be Maintained
Q-16: In what manner must an organizer or a seller maintain a list?
A-16: 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 Internal Revenue Service to determine without undue delay or
difficulty the information required by A-17 of this section.
Q-17: What information must be included on a list?
A-17: A list must contain the following information:
(1) The name of the tax shelter and the registration number, if any,
obtained under section 6111;
(2) The TIN (as defined in section 7701(a)(41)), if any, of the tax
shelter;
(3) The name, address, and TIN (as defined in section 7701(a)(41))
of each person who is required to be included on the list under A-8 or
A-10 of this section;
(4) The number of units (i.e., percentage of profits, number of
shares, etc.) acquired by each person who is required to be included on
the list;
(5) The date on which each interest was acquired;
(6) If the interest was not acquired from the person maintaining the
list, the name of the person from whom the interest was acquired; and
(7) The name and address of each agent of the person maintaining the
list who is described in paragraph (b) of A-6 of this section.
If the person maintaining the list is an investor described in paragraph
(c) of A-6 of this section, the list is required to include only the
information specified in items (1), (3) and (5).
Q-18: If a person is required to maintain lists for more than one
tax shelter, how should the lists be arranged?
A-18: A separate list, identified by the registration number
obtained under section 6111 (or if there is no registration number, the
name of the tax shelter), must be maintained for each tax shelter.
[[Page 123]]
Retention of Lists
Q-19: How long must organizers and sellers retain a list?
A-19: A list generally must be retained for 7 years following the
date on which the last acquisition of an interest required to be
included on the list is made (not including any acquisition for which an
organizer or seller is required to maintain a list under A-15 or
paragraph (d) or paragraph (e) of A-8 of this section). In the case of
any acquisition of an interest for which an organizer or seller is
required to maintain a list under A-15 or paragraph (d) or paragraph (e)
of A-8 of this section, the list with respect to the acquisition must be
retained for the longer of the 7-year period determined under the
preceding sentence, or the 3-year period following the date on which the
interest is acquired.
Q-20: Who must retain the list if the person required to maintain
the list is a corporation or a partnership that is dissolved or
liquidated before completion of the period determined under A-19 of this
section?
A-20: If a list is required to be maintained by a corporation or
partnership that is dissolved or liquidated before completion of the
period determined under A-19 of this section, the list shall be retained
by the person or persons who under state law are responsible for winding
up the affairs of the corporation or partnership. If state law does not
specify any person or persons as responsible for winding up, then,
collectively, the directors of the corporation or general partners of
the partnership shall be responsible for retaining the list.
Availability for Inspection
Q-21: When must a person required to maintain a list make the list
available for inspection?
A-21: Any person required to maintain a list must, upon request by
the Internal Revenue Service, make the list available for inspection as
soon as practicable, but in no event later than 10 calendar days after
such request. The request need not be in the form of an administrative
summons.
Effective Date
Q-22: With respect to what interests must an organizer or a seller
maintain a list?
A-22: An organizer or seller must maintain a list with respect to
any interest in the tax shelter other than an interest that was acquired
before September 1, 1984, by an investor (within the meaning of
paragraph (c) of A-6 of this section). Thus, if an organizer sells
interests in a tax shelter to investors both before September 1, 1984,
and after August 31, 1984, the organizer must maintain a list
identifying only those inventors to whom the organizer sells an interest
after August 31, 1984. The organizer is not required to include on the
list investors who acquire interests in the tax shelter after August 31,
1984, from other individual investors who acquired the interests before
September 1, 1984.
Example. Assume that on August 21, 1984, A, an organizer, sells a
block of interests in a tax shelter to B, an underwriter, and an
interest in the tax shelter to C, an investor. Assume also, that, on
September 12, 1984, B sells to D, an investor, one of the interests that
B acquired on August 21, 1984. A is not required to maintain a list with
respect to the interest sold to C because that interest was acquired by
an investor before September 1, 1984. B, who is a seller described in
paragraph (a) of A-6 of this section, is required to maintain a list
with respect to the interest sold to D because that interest was not
sold to an investor before September 1, 1984. In addition, A is required
to maintain a list with respect to the interest sold to D if A knows or
has reason to know of the sale to D. (See paragraph (e) of A-8 and A-9
of this section.)
(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. 7969, 49 FR 34201, Aug. 29, 1984, as amended by T.D. 7990, 49 FR
43646, Oct. 31, 1984; 50 FR 13020, Apr. 2, 1985]
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
[[Page 124]]
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 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
[[Page 125]]
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, 1998, 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, 1998, with respect to a
treaty that imposes any other conditions for 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
[[Page 126]]
(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 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
[[Page 127]]
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 preformed 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 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
[[Page 128]]
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]
Effective Date Note: By T.D. 8734, at 62 FR 53495, Oct. 14, 1997,
Sec. 301.6114-1 was amended by revising paragraphs (a)(1)(ii),
(b)(4)(ii) introductory text, and (c)(1)(i); by removing the period at
the end of paragraph (b)(4)(ii)(B)(7) and adding ``; or'' in its place;
and by adding paragraphs (b)(4)(ii)(C), (b)(4)(ii)(D), and (c)(6),
effective Jan. 1, 1999. For the convenience of the user, the superseded
text is set forth as follows:
Sec. 301.6114-1 Treaty-based return positions.
(a) * * *
(1) * * *
(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 Identification
Number (if any), and be signed under the 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).
* * * * *
(b) * * *
(4) * * *
(ii) A treaty exempts from tax, or reduces the rate of tax on, fixed
or determinable annual or periodical income subject to withholding under
sections 1441 or 1442 that a foreign person receives from a U.S. person,
but only if--
* * * * *
(c) * * *
(1) * * *
(i) Except as provided in 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;
* * * * *
Time and Place for Paying Tax--Table of Contents
Place and Due Date for Payment of Tax
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.
[[Page 129]]
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 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
[[Page 130]]
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 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--Table of Contents
In General
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
[[Page 131]]
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
(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
[[Page 132]]
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 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.
[[Page 133]]
(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 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
assessment) as a deficiency.......................... None
---------
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
assessment) as a deficiency.......................... None
---------
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
[[Page 134]]
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 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. 301.6213-1 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
[[Page 135]]
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 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
[[Page 136]]
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.
(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, 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
[[Page 137]]
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]
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. 301.6221-1T Tax treatment determined at partnership level (temporary).
(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 of the Code 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 Internal Revenue Service 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 in 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) Cross reference. See Secs. 301.6231(c)-1T and 301.6231(c)-2T
for special rules relating to certain applications and claims for refund
based on losses, deductions, or credits from abusive tax shelter
partnerships.
[T.D. 8128, 52 FR 6781, Mar. 5, 1987]
Sec. 301.6222(a)-1T Consistent treatment of partnership items (temporary).
(a) In general. The treatment of a partnership item on the partner's
return shall be consistent with the treatment of that item by the
partnership 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 shall 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)-3T.
(c) Examples. The following examples illustrate the principles set
forth in 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 1983, P receives an
advance payment for services to be performed in 1984 and reports this
amount as income for calendar year 1983. However, B reports B's
distributive share of this amount on B's income tax return for 1984 and
not on B's return for 1983. 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 which 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
[[Page 138]]
the consistency requirement. See, however, Sec. 301.6222 (b)-3 for an
election to be treated as having reported the inconsistency.
[T.D. 8128, 52 FR 6781, Mar. 5, 1987]
Sec. 301.6222(a)-2T Application of consistency and notification rules to indirect partners (temporary).
(a) In general. The consistency requirement of Sec. 301.6222(a)-1T
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 which is consistent with the treatment of that item on the return
of the source partnership satisfies the consistency requirement of
section 6222(a) regardless of whether the indirect partner treats that
item in a manner which is consistent with the treatment of that item by
the pass-thru partner through which the indirect partner holds the
interest in the source partnerhip. Under these circumstances, therefore,
the 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 Service of inconsistency. An indirect
partner who--
(i) Treats an item from a source partnership in a manner which is
inconsistent with the treatment of that item on the return of the source
partnership, and
(ii) Files a statement identifying the inconsistency with the source
partnership in accordance with Sec. 301.6222(b)-1T,
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 Service of inconsistency.
Except as provided in paragraph (c)(3) of this section, an indirect
partner who--
(i) Treats an item from a source partnership in a manner which is
inconsistent with the treatment of that item on the return of the source
partnership, and
(ii) Fails to file a statement identifying the inconsistency with
the source partnership in accordance with Sec. 301.6222(b)-1T,
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 Service of the inconsistency. If an indirect partner
treats an item from a source partnership in a manner which is 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 that is inconsistent with the
treatment of that item on the return of the source partnership, and
(ii) Files a statement identifying the inconsistency with the source
partnership in accordance with Sec. 301.6222(b)-1T,
The indirect partner is not 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.
(d) Examples. The following examples illustrate the principles set
forth in 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 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 the return of A.
Example 2. Assume the same facts as in example 1 except that B
notified the 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
[[Page 139]]
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 the return of
A. F is not subject to a computational adjsutment.
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 the return of A.
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.
[T.D. 8128, 52 FR 6781, Mar. 5, 1987]
Sec. 301.6222(b)-1T Notification to Service when partnership items are treated inconsistently (temporary).
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.
[T.D. 8128, 52 FR 6782, Mar. 5, 1987]
Sec. 301.6222(b)-2T Effect of notification of inconsistent treatment (temporary).
(a) In general. Generally, if a partner treats a partnership item on
the partner's return in a manner which is inconsistent with the
treatment of that item on the partnership return the 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 Service of the inconsistent treatment of a
partnership item in the manner prescribed in Sec. 301.6222(b)-1T, the
Service generally may not make an adjustment with respect to that
partnership item unless the 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)-1T and 301.6231(c)-2T 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. 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 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 latter item.
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. If the Service conducts a separate proceeding with a
partner whose partnership items are treated as nonpartnership items
under section 6231 (b), the Service is not limited to making adjustments
that merely conform the partner's return to the partnership return.
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 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 Service may issue a
deficiency notice which could include reducing the loss to $3,000.
[T.D. 8128, 52 FR 6782, Mar. 5, 1987]
[[Page 140]]
Sec. 301.6222(b)-3T Partner receiving incorrect schedule (temporary).
(a) In general. A partner shall be treated as having complied with
section 6222(b)(1)(B) and Sec. 301.6222(b)-1T 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 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.
(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.
[T.D. 8128, 52 FR 6782, Mar. 5, 1987]
Sec. 301.6223(a)-1T Notice sent to tax matters partner (temporary).
(a) In general. For purposes of subchapter C of chapter 63 of the
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)-1T), 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)-1T) or the
partnership. See Sec. 301.6223(c)-1T for rules relating to the
information to be used by the 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)-1T(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.
[T.D. 8128, 52 FR 6783, Mar. 5, 1987; 52 FR 9296, Mar. 24, 1987]
Sec. 301.6223(a)-2T Withdrawal of notice of the beginning of an administrative proceeding (temporary).
(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 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. If the
Service withdraws the notice, neither the service nor the tax matters
partner is required to furnish any notice with respect to that
proceeding to any other partner. Except as
[[Page 141]]
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 Code as if that notice had never been
mailed to the tax matters partner.
(b) 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 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 a clearly defined substantial
error with respect to an established Service position existing at the
time of the previous examination; or
(3) Other circumstances exist which indicate that failure to reissue
the notice would be a serious administrative omission.
[T.D. 8128, 52 FR 6783, Mar. 5, 1987]
Sec. 301.6223(b)-1T Notice group (temporary).
(a) In general. If a group of partners having in the aggregate a 5
percent or more interest in the profits of a partnership so 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 Service receives the request from the group.
(b) Request for notice--(1) In general. The 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 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 shall be filed with the service center with which 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 shall 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 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 notice. See section 6231(d) and
[[Page 142]]
Sec. 301.6231(d)-1T 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 with which 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
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 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 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)-1T 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)-1T 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 paragraph (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)-1T. Thus, a member of a
notice group may choose not to join a 5-percent group formed by other
members of the notice group.
[T.D. 8128, 52 FR 6783, Mar. 5, 1987]
[[Page 143]]
Sec. 301.6223(c)-1T Additional information regarding partners furnished to the Service (temporary).
(a) In general. In addition to the names, addresses, and profits
interests as shown on the partnership return, the Service will use
additional information as provided in this section for purposes of
administering subchapter C of chapter 63 of the 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 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 Service receives the statement at least 30 days before the date on
which the 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 Service until 30 days after
the statement is received.
(2) Where statement must be filed. A statement furnished under this
section shall generally be filed with the service center with which 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.
(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 sections 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.
(d) Information supplied by a person other than the tax matters
partner. The 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 Code (``chapter 63C'') that begin on or after the date
which is 90 days after the date final regulations under this section are
published in the Federal Register.
(2) Specifically for purposes of chapter 63C. A power of attorney
specifically for purposes of chapter 63C 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 chapter 63C unless the partner specifically
requests that the power be given such effect in a statement furnished to
the Service in accordance with paragraph (b) of this section.
(f) Service may use other information. In addition to the
information on the partnership return and that supplied on statements
filed under this section, the 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 Code.
However, the Service is not obligated to search its records for
information not expressly furnished under this section.
[T.D. 8128, 52 FR 6784, Mar. 5, 1987; 52 FR 9296, Mar. 24, 1987]
[[Page 144]]
Sec. 301.6223(e)-1T Effect of Service's failure to provide notice (temporary).
(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)-1T is received by the 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 Service's failure to provide notice to a pass-thru partner
that is entitled to notice under section 6223(b) is deemed 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 Service,
(ii) Is identified as provided in section 6223(c)(3) and
Sec. 301.6223(c)-1T 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)-1T on May 1, 1985. The Service mailed notice to the
tax matters partner of ABC on July 1, 1985, but failed to provide notice
to partnership A. Notwithstanding the Service's notice to the tax
matters partner, the Service is deemed to have failed to provide notice
to X and Y. The 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
Service provided notice to partnership A but did not provide separate
notice to Z. Notwithstanding the Service's notice to partnership A, the
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, 1985, and the Service mailed notice to the
designated member of that notice group. The Service also mailed a
separate notice to Z. The Service's failure to provide notice to
partnership A only affects Y, who is deemed not to have been provided
notice by the Service.
[T.D. 8128, 52 FR 6784, Mar. 5, 1987]
Sec. 301.6223(e)-2T Elections if Service fails to provide timely notice (temporary).
(a) Proceeding finished. If at the time the Internal Revenue Service
mails the partner notice of the proceeding--
(1) The period within which a petition for review of a final
partnership administrative adjustment 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 (c)
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 (c) 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
Service mails the partner notice of the proceeding.
(b) Proceeding still going on. If paragraph (a) of this section does
not apply, the partner shall be a party to the proceeding unless the
partner elects, in accordance with paragraph (c) 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 Service mails the
partner notice of the proceeding.
(c) Election--(1) In general. The election described in paragraph
(a) or (b) of this section shall be made in the manner prescribed in
this paragraph (c). The election shall apply to all partnership items
for the partnership taxable year to which the election relates.
[[Page 145]]
(2) Time and manner of making election. The election shall be made
by filing a statement with the Internal Revenue Service office mailing
the notice regarding the proceeding within 45 days after the date on
which that notice was mailed.
(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.
[T.D. 8128, 52 FR 6785, Mar. 5, 1987]
Sec. 301.6223(f)-1T Duplicate copy of final partnership administrative adjustment (temporary).
Section 6223(f) does not prohibit the Service from issuing a
duplicate copy of the notice of final partnership administrative
adjustment (for example, in the event the original notice is lost).
[T.D. 8128, 52 FR 6785, Mar. 5, 1987]
Sec. 301.6223(g)-1T Responsibilities of the tax matters partner (temporary).
(a) Notices described in section 6223 (a)--(1) Notice of beginning
of proceeding. Except as otherwise provided in Sec. 301.6223(a)-2T, the
tax matters partner shall, within 75 days after the mailing by the
Service of the notice specified in section 6223(a)(1), forward a copy of
that notice to each partner that is not entitled to notice from the
Service under section 6223. See Sec. 301.6230(e)-1T for information to
be furnished to the Service.
(2) Notice of final partnership administrative adjustment. The tax
matters partner shall, within 60 days after the mailing by the Service
of the notice specified in section 6223(a)(2), forward a copy of that
notice to each partner that is not entitled to notice from the 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)-1T,
(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)-1T(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 Service under Sec. 301.6223(a)-
2T.
(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 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(b)-2T) 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
[[Page 146]]
(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)-1T,
(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)-1T(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 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.
[T.D. 8128, 52 FR 6785, Mar. 5, 1987]
Sec. 301.6223(h)-1T Responsibilities of pass-thru partner (temporary).
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
which is a partnership within the meaning of section 6231(a)(1), the tax
matters partner of such partnership shall forward copies of such notice
or information to the partners of such partnership.
[T.D. 8128, 52 FR 6786, Mar. 5, 1987]
Sec. 301.6224(a)-1T Participation in administrative proceedings (temporary).
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 Service nor the tax matters partner is required
to provide notice of any proceeding to 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 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.
[T.D. 8128, 52 FR 6786, Mar. 5, 1987]
Sec. 301.6224(b)-1T Partner may waive rights (temporary).
(a) In general. A partner may at any time waive any right that that
partner has or any restriction on action by the Service under subchapter
C of chapter 63 of the 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 Service furnishes a form to be used for this purpose, the partner
may make the waiver by completing the form in accordance with the
instructions accompanying that form. 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
[[Page 147]]
(5) Be filed with the service center with which 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.
[T.D. 8128, 52 FR 6786, Mar. 5, 1987]
Sec. 301.6224(c)-1T Tax matters partner may bind nonnotice partners (temporary).
(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 Service and expressly states that that
agreement shall be binding on the other partners, 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)-1T(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 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 set
forth in 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,
1985, 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, 1985, the tax matters
partner of partnership P enters into a settlement agreement with the
Service and states that the agreement is binding on other partners as
provided in section 6224(c)(3). Since 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 he was a member of a
notice group on the day the agreement was entered into and B is not
bound because she 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
service center with which 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.
[T.D. 8128, 52 FR 6786, Mar. 5, 1987]
[[Page 148]]
Sec. 301.6224(c)-2T Pass-thru partner binds indirect partners (temporary).
(a) Pass-thru partner binds unidentified indirect partners--(1) In
general. If a pass-thru partner enters into a settlement ageement with
the 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)-1T at
least 30 days before the date on which the agreement is entered into.
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, 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)-1T. The only interest that C holds in P is through J.
The tax matters partner of J enters into a settlement agreement with the
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 subject to the provisions of subchapter D of
chapter 63 of the Code, the tax matters person of that S corporation;
(4) An S corporation other than an S corporation described in
paragraph (b)(3) of this section, any officer of that S corporation; or
(5) 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 Service on behalf of its
respective entity that would bind the unidentified indirect partners
that hold a partnership interest through the pass-thru partner.
[T.D. 8128, 52 FR 6787, Mar. 5, 1987]
Sec. 301.6224(c)-3T Consistent settlements (temporary).
(a) In general. If the Service enters into a settlement agreement
with any partner with respect to partnership items, the Service shall
offer to any other partner who so requests in accordance with paragraph
(c) of this section settlement terms which are consistent with those
contained in the settlement agreement entered into.
(b) Requirements for consistent settlements. ``Consistent''
settlement terms are those based on the same determinations with respect
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 the other party
with respect to a nonpartnership item. Settlements shall be
comprehensive, that is, a settlement may not be limited to selected
items. The requirement for consistent settlement terms applies only if--
(1) The items were partnership items for the partner entering into
the original settlement immediately before the original settlement, and
(2) The items are partnership items for the partner requesting the
consistent settlement at the time the partner files the request.
(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 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 Service, the
[[Page 149]]
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 was entered
into.
(d) Examples. The following examples illustrate the principles set
out in this section.
Example 1. The Service seeks to disallow a $100,000 loss reported by
Partnership P. The Service agrees to a settlement with X, a partner in
P, in which the Service allows 60 percent of the loss and accepts the
treatment of all other partnership items on the partnership return.
Partner Y, which owns a 10 percent interest in the partnership, requests
settlement terms which are consistent with the settlement made between X
and the Service. The items are partnership items for X immediately
before X enters into the settlement agreement and partnership items for
Y at the time of the request. The Service must offer Y a settlement
agreement allowing a $6,000 loss 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 Service notifies F that it will treat all partnership
items arising from P as nonpartnership items with respect to F. Later,
the Service enters into a settlement with F on these items. The Service
is not required to offer the other partners of P settlement terms
consistent with the settlement reached between F and the Service because
at the time of the settlement the items arising from P are no longer
partnership items with respect to F.
Example 3. G, a partner in Partnership P, filed suit under section
6228(b) after the 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 the
suit was filed. After G filed suit, another partner and the 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
the items arising from P are no longer partnership items with respect to
G.
[T.D. 8128, 52 FR 6787, Mar. 5, 1987]
Sec. 301.6226(a)-1T Principal place of business of partnership (temporary).
(a) In general. The principal place of business of a partnership 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 business of partnership A on the day
that the notice of the final partnership administrative adjustment was
mailed to the tax matters partner of A 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.
[T.D. 8128, 52 FR 6788, Mar. 5, 1987]
Sec. 301.6226(b)-1T 5-percent group (temporary).
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.
[T.D. 8128, 52 FR 6788, Mar. 5, 1987]
Sec. 301.6226(e)-1T Jurisdictional requirement for bringing an action in District Court or Claims Court (temporary).
(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) shall deposit is the amount
by which the tax
[[Page 150]]
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 Claims Court. A's tax liability would be increased by $4,000 if
partnership items on his 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 only $4,000 in order to
satisfy the jurisdictional requirement.
(b) Deposit taken into account in computing interest. The amount
deposited is treated as a payment of tax for purposes of chapter 67
(relating to interest). Thus, the period of deposit will be treated as a
period of payment for purposes of determining the interest due on any
overpayment or underpayment and computing any penalty under section 6653
(a)(2) or (b)(2).
(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 payment of tax. Thus, the
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
Service may apply the amount deposited against any such deficiency that
is assessed.
[T.D. 8128, 52 FR 6788, Mar. 5, 1987]
Sec. 301.6226(f)-1T Scope of judicial review (temporary).
(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.
(b) Example. The provisions of paragraph (a) of this section may be
illustrated by the following example.
Example. The 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
as well as the depreciation issue.
[T.D. 8128, 52 FR 6788, Mar. 5, 1987]
Sec. 301.6227(b)-1T Administrative adjustment request by the tax matters partner on behalf of the partnership (temporary).
(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 Service for that purpose in accordance with
the instructions accompanying that form. Except as otherwise provided in
the instructions accompanying that form, the request shall be--
(1) Filed with the service center where the original partnership
return was filed,
(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 remains an
administrative adjustment request. Thus, for example, the tax
[[Page 151]]
matters partner may file suit under section 6228(a) if the Service fails
to take timely action on the request.
[T.D. 8128, 52 FR 6788, Mar. 5, 1987]
Sec. 301.6227(c)-1T Administrative adjustment request filed on behalf of a partner (temporary).
A request for an administrative adjustment on behalf of a partner
shall be filed on the form prescribed by the Service for that purpose in
accordance with the instructions accompanying that form. Except as
otherwise provided in the instructions accompanying that form, the
request shall--
(a) 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,
(b) Identify the partner and the partnership by name, address, and
taxpayer identification number,
(c) Specify the partnership taxable year to which the administrative
adjustment request applies,
(d) Relate only to partnership items, and
(e) Relate only to one partnership and one partnership taxable year.
[T.D. 8128, 52 FR 6788, Mar. 5, 1987; 52 FR 9296, Mar. 24, 1987]
Sec. 301.6229(b)-1T Extension by agreement (temporary).
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 with which the
partnership return is filed. The statement shall--
(a) 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,
(b) Identify the partnership and the person being authorized by
name, address, and taxpayer identification number,
(c) Specify the partnership taxable year or years for which the
authorization is effective, and
(d) Be signed by all persons who were general partners at any time
during the year or years for which the authorization is effective.
[T.D. 8128, 52 FR 6789, Mar. 5, 1987]
Sec. 301.6229(e)-1T Information with respect to unidentified partner (temporary).
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)-1T.
[T.D. 8128, 52 FR 6789, Mar. 5, 1987]
Sec. 301.6230(b)-1T Request that correction not be made (temporary).
The request that a correction not be made under section 6230(b)(2)
shall be in writing and shall--
(a) State that it is a request that a correction not be made under
section 6230(b),
(b) Identify the partnership and the partner filing the request by
name, address, and taxpayer identification number,
(c) Be signed by the partner filing the request, and
(d) Be filed with the Internal Revenue Service office that provided
the notice of the correction of the error.
[T.D. 8128, 52 FR 6789, Mar. 5, 1987]
Sec. 301.6230(c)-1T Claim arising out of erroneous computation, etc. (temporary).
A claim for refund under section 6230 (c) shall state the grounds
for the claim and shall be filed with the service center with which the
partner's return is filed.
[T.D. 8128, 52 FR 6789, Mar. 5, 1987]
Sec. 301.6230(e)-1T Tax matters partner required to furnish names (temporary).
(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
[[Page 152]]
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 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 Service within 15 days of discovering that
the information furnished to the 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.
[T.D. 8128, 52 FR 6789, Mar. 5, 1987]
Sec. 301.6231(a)(1)-1T Exception for small partnerships (temporary).
(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)(I) is applied to the number of natural persons
(other than nonresident aliens) and estates 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 or
estates owned interests in the partnership for some portion of the
taxable year. 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. For purposes of this paragraph (a)(2), an estate shall not be
treated as a pass-thru partner.
(3) ``Same share.'' The requirement of section 6231(a)(1)(B)(i)(II)
is satisfied for a taxable year if during all periods within that
taxable year each partner's share of each of the partnership items
specified in Sec. 301.6231(a)(3)-1(a)(1) (i) through (iv) is the same as
that partner's share of each of the other partnership items specified in
that section during that period (even though the partner's share of all
such specified partnership items changes from period to period within
that taxable year). Thus, a partner whose share of all such specified
partnership items changes as a result of a sale or redemption of a
partnership interest (or portion thereof) or a contribution of cash or
property to the partnership during the partnership taxable year shall
satisfy the same share requirement if during the period before the sale,
redemption, or contribution the partner's share of each specified
partnership item is the same as all other specified partnership items
and during the period after the sale, redemption, or contribution the
partner's share of each specified partnership item is the same as all
other specified partnership items. For purposes of section
6231(a)(1)(B)(i)(II) and this section, if each partner's share of each
partnership item would be the same as his or her share of every other
item but for allocations made under section 704 (c) or allocations made
under similar principles in accordance with applicable regulations the
requirement of section 6231(a)(1)(B)(i)(II) shall be considered
satisfied. Similarly, special basis adjustments pursuant to sections
754, 743, and 734 shall not be taken into account in determining whether
the ``same share'' requirement is met.
(4) 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 for the exception under section 6231(a)(1)(B) and this
paragraph (a) are
[[Page 153]]
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) of the Code 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 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 partnership
taxable years for which a partnership return is to be filed before 90
days after the date final regulations under this section are published
in the Federal Register 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.
[T.D. 8128, 52 FR 6789, Mar. 5, 1987; 52 FR 9296, Mar. 24, 1987]
Sec. 301.6231(a)(2)-1T Persons whose tax liability is determined indirectly by partnership items (temporary).
(a) Spouse filing joint return with individual holding 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 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 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) Cross-reference. See Sec. 301.6231(a)(12)-1T 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.
[T.D. 8128, 52 FR 6790, Mar. 5, 1987]
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:
[[Page 154]]
(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 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
[[Page 155]]
(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 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)-1T Definition of affected item (temporary).
(a) In general. The term ``affected item'' 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) Partner's basis in his partnership interest. A partner's basis
in his interest in the partnership 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
[[Page 156]]
flowing from a partnership is an affected item to the extent it is not a
partnership item.
(d) Addition to tax or additional amount--(1) In general. The term
``affected item'' includes any addition to tax or additional amount
provided by subchapter A of chapter 68 of the Internal Revenue Code of
1954 to the extent provided in this paragraph (d).
(2) Addition to tax or additional amount without floor. In the case
where an 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 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 addition
to tax or additional amount computed with reference to the entire
underpayment or understatement.
(3) Addition to tax or additional amount containing floor--(i) Floor
exceeded prior to adjustment. In the case where a partner would have
been subject to an 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 addition to tax or additional amount computed
with reference to the partnership item (or affected item).
(ii) Floor not exceeded prior to adjustment. In the case of an
addition 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 addition to tax
or additional amount computed with reference to the entire underpayment
or understatement.
(4) Examples. The provisions of this paragraph (d) may be
illustrated by the following examples:
Example 1. A, a partner of P, had an aggregate underpayment of $1000
of which $100 is attributable to an adjustment to partnership items. A
is negligent in reporting the partnership items. The addition to tax for
negligence computed with reference to the entire $1000 underpayment is
an affected item.
Example 2. B, a partner in partnership P, understated his 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 addition to tax under section 6661 with respect
to the $6,000 understatement. The addition to tax under section 6661
computed with reference to the $2,000 increase is an affected item. The
addition to tax computed with reference to the $6,000 pre-existing
understatement is not an affected item.
Example 3. C, a partner in partnership P, understated his income tax
liability attributable to nonpartnership items by $4,000. As result of
adjustment to partnership items, that understatement is increased to
$10,000. Prior to the adjustment, C would not have been subject to any
addition to tax under section 6661. The section 6661 addition to tax
computed with reference to the entire $10,000 underpayment is an
affected item.
[T.D. 8128, 52 FR 6790, Mar. 5, 1987]
Sec. 301.6231(a)(6)-1T Computational adjustments (temporary).
(a) 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 Code is made through a computational adjustment. A
computational adjustment may include 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. 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 provisions of subchapter B of chapter 63 of the Code (relating
to deficiency procedures). Thus, 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 included in a computational adjustment. However,
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
[[Page 157]]
that depends upon the source from which the partner obtained the funds
that the partner contributed to the partnership) are not included in a
computational adjustment.
(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) Addition to tax or additional amount. A computational adjustment
shall not include an addition to tax or additional amount. Regardless of
whether an addition to tax or additional amount is an affected item
within the meaning of section 6231(a)(5) and Sec. 301.6231(a)(5)-1T, the
addition to tax or additional amount shall be subject to the provisions
of subchapter B of chapter 63 of the Code (relating to deficiency
procedures). See section 6229(a) for the period of limitations for
making assessments with respect to affected items.
[T.D. 8128, 52 FR 6790, Mar. 5, 1987]
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, 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
[[Page 158]]
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.
(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
[[Page 159]]
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. 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
[[Page 160]]
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 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
[[Page 161]]
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.
(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.
(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 (3)(i) 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.
(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
[[Page 162]]
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.
[T.D. 8698, 61 FR 67459, Dec. 23, 1996]
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 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)-1T Special rules relating to spouses (temporary).
(a) In general. For purposes of subchapter C of chapter 63 of the
Code, spouses holding a joint interest in a partnership are treated as
partners. Thus, both spouses are permitted to participate in
administrative and judicial proceedings. The term ``joint interest''
includes tenancies in common, joint tenancies, tenancies by the
entirety, and community property.
(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 person. Except as provided in paragraph (b)(2) of this section, the
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 his or her 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)-1T (b).
[[Page 163]]
(c) Cross-reference. See Sec. 301.6231(a)(2)-1T(a) for special rules
relating to spouses who file joint returns with individuals holding a
separate interest in a partnership.
[T.D. 8128, 52 FR 6793, Mar. 5, 1987]
Sec. 301.6231(c)-1T Special rules for certain applications for tentative carryback and refund adjustments based on partnership losses, deductions, or credits
(temporary).
(a) Applications 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 his 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 carry back 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
Commissioner 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 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 Service mails notice of an
assessment 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 assessment. 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 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 that last day.
[[Page 164]]
(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 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 and 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
application described in paragraph (a) of this section that is filed
after December 10, 1984.
(Secs. 6231 (c) (1) and (3), Internal Revenue Code of 1954 (96 Stat.
665; 26 U.S.C. 6231 (c) (1) and (3)))
[T.D. 7996, 49 FR 48537, Dec. 13, 1984]
Sec. 301.6231(c)-2T Special rules for certain refund claims based on losses, deductions, or credits from abusive tax shelter partnerships (temporary).
(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 his 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 due more difficult. Consequently, the
Commissioner 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 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 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 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 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.
[[Page 165]]
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 that last day.
(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 after December
10, 1984.
(Secs. 6231(c)(1) and (3), Internal Revenue Code of 1954 (96 Stat. 665;
26 U.S.C. 6231(c)(1) and (3)))
[T.D. 7996, 49 FR 48538, Dec. 13, 1984]
Sec. 301.6231(c)-3T Limitation on applicability of Secs. 301.6231(c)-4T through 301.6231(c)-8T (temporary).
A provision of Secs. 301.6231(c)-4T through 301.6231(c)-8T 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--
(a) A notice of final partnership administrative adjustment with
respect to those items has been mailed to the tax matters partner, and
(b) Either--
(1) 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
(2) The decision of the court in an action brought under section
6226 with respect to that final partnership administrative adjustment
has become final.
[T.D. 8128, 52 FR 6793, Mar. 5, 1987]
Sec. 301.6231(c)-4T Termination and jeopardy assessment (temporary).
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 section 6861 is made shall be treated as nonpartnership
items as of the moment before such assessment is made.
[T.D. 8128, 52 FR 6793, Mar. 5, 1987]
Sec. 301.6231(c)-5T Criminal investigations (temporary).
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 he or she is the subject of a criminal investigation and receives
written notification from the Service that his or her partnership items
shall be treated as nonpartnership items. The partnership items of a
partner who is notified that he or she is the subject of a criminal
investigation shall not be treated as nonpartnership items under this
section unless and until such partner receives written notification from
the Service of such treatment.
[T.D. 8128, 52 FR 6793, Mar. 5, 1987]
[[Page 166]]
Sec. 301.6231(c)-6T Indirect method of proof of income (temporary).
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.
[T.D. 8128, 52 FR 6793, Mar. 5, 1987]
Sec. 301.6231(c)-7T Bankruptcy and receivership (temporary).
(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.
[T.D. 8128, 52 FR 6793, Mar. 5, 1987]
Sec. 301.6231(c)-8T Prompt assessment (temporary).
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.
[T.D. 8128, 52 FR 6794, Mar. 5, 1987]
Sec. 301.6231(d)-1T Time for determining profits interest of partners for purposes of sections 6223(b) and 6231(a)(11) (temporary).
(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 ``audit partnership'') to which subchapter C of
chapter 63 of the Code applies shall be determined at the close of the
audit 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 an audit 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 audit 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
[[Page 167]]
audit partnership's taxable year the partner acquires a direct or
indirect interest in the audit 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 an audit partnership during a taxable year of the audit
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 audit 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,
that partner has no profits interest in the partnership for that taxable
year. For example, if a partner dies before the close of the taxable
year of the partnership, generally no items of the partnership for that
taxable year are required to be taken into account on the final return
of the deceased partner under Sec. 1.706-1(c)(3); consequently, the
deceased 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
re-acquisitions prior to the close of the audit partnership's taxable
year.
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, 1985, 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, 1985.
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, 1984. The
profits interest held by B in P through T for P's taxable year ending
June 30, 1985, is determined as of the moment before the sale on
November 5, 1984.
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, 1985. The profits interest
held by C in P through T for 1985 is determined as of the moment before
the disposition on June 5, 1985.
Example 4. Assume the same facts as in example 3, except that C sold
her entire interest in T (and, therefore, her entire interest that she
held in P through T) on March 15, 1985. The profits interest held by C
in P through T for 1985 is determined as of the moment before the sale
on March 15, 1985.
Example 5. On January 1, 1985, 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, 1985, D transfers three-fourths of D's profits
interest in P to E. On September 1, 1985, D sells his remaining .5
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 1985.
Example 6. Assume the same facts as in example 5, except that on
January 1, 1985, 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, 1985, D sold
a portion of his interest in T on December 1, 1985, 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
1985.
[T.D. 8128, 52 FR 6794, Mar. 5, 1987]
Sec. 301.6231(e)-1T Effect of a determination with respect to a nonpartnership item on the determination of a partnership item (temporary).
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 Service or the other partners in a later partnership or other
proceeding.
Sec. 301.6231(e)-2T Judicial decision not a bar to certain adjustments (temporary).
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
[[Page 168]]
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 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.
[T.D. 8128, 52 FR 6794, Mar. 5, 1987]
Sec. 301.6231(f)-1T Disallowance of losses and credits in certain cases (temporary).
(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 Service mails a 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 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). 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 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 establishes
to the satisfaction of the 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 Service may allow the losses and credits in whole or in part.
[T.D. 8128, 52 FR 6794, Mar. 5, 1987]
Sec. 301.6233-1T Extension to entities filing partnership returns, etc. (temporary).
(a) Entities filing a partnership return. Except as provided in
paragraph (d)(1) of this section, the provisions of subchapter C of
chapter 63 of the 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 which would be partnership items, as
[[Page 169]]
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). Thus, 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) Entities filing an S corporation return. Except as provided in
paragraph (d)(2) of this section, the provisions of subchapter D of
chapter 63 of the Code (``subchapter D'') and the regulations thereunder
shall apply with respect to any taxable year of an entity for which such
entity files a return as an S corporation 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 S
corporation administrative adjustment or judicial determination
resulting from a proceeding under subchapter D with respect to such
taxable year may include a determination that the entity is not an S
corporation for such taxable year as well as determinations with respect
to all items of the entity which would be subchapter S items, as defined
in section 6245 and the regulations thereunder, if such entity had been
an S corporation for such taxable year (including, for example, any
amounts taxable to an entity determined to be taxable as a C
corporation).
(c) Partnership or S corporation return filed but no entity found to
exist--(1) Partnership return filed. 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 was 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.
(2) S corporation return filed. Paragraph (b) of this section shall
apply where an S corporation 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 (b) of this section, the S corporation
return shall be treated as if it was filed by an entity. However, any
final S corporation administrative adjustment or judicial determination
resulting from a proceeding under subchapter D with respect to such
taxable year may also include a determination that there is no entity
for such taxable year.
(d) Exceptions--(1) Partnership proceedings. Paragraph (a) of this
section shall not apply to:
(i) Entities for any taxable year in which such entity would be
excepted from the provisions of subchapter C 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
(ii) 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).
(2) S corporation proceedings. [Reserved]
(e) Effective dates. Paragraphs (a), (c)(1), and (d)(1) of this
section shall apply with respect to any taxable year beginning after
September 3, 1982, and with respect to any taxable year beginning on or
before and ending after September 3, 1982, if with respect to that
taxable year there is an agreement entered into pursuant to section
407(a)(3) of the Tax Equity and Fiscal Responsibility Act of 1982.
Paragraphs (b) and (c)(2) of this section shall apply with respect to
any taxable year beginning after December 31, 1982.
[T.D. 8128, 52 FR 6795, Mar. 5, 1987]
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 in Sec. 301.6245-1T) on the shareholder's return may
not be changed except as provided in sections 6241-6245 of the Code
[[Page 170]]
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 effective. The statement shall be identified as an election under
Sec. 301.6241-1T(c)(2)(v)(A), shall be signed by all
[[Page 171]]
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, and
inventory method; whether an election was made by the corporation;
[[Page 172]]
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--Table of Contents
General Provisions
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 provisions of the
Tariff Act of 1930 (19 U.S.C. ch. 4).
[[Page 173]]
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 Federal Reserve banks and authorized commercial banks 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 Federal
Reserve banks or authorized commercial banks 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 Federal Reserve banks or
authorized commercial banks 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.
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.
(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.
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 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
[[Page 174]]
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;
(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 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
[[Page 175]]
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 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
[[Page 176]]
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]
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 Internal Revenue Service. 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 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
[[Page 177]]
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]
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,
[[Page 178]]
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 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
[[Page 179]]
(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 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
[[Page 180]]
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.
(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
currency...................................................... $8,000
Dividends received by Mr. Jones entitled to dividends-received
credit........................................................ 500
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
[[Page 181]]
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
foreign currency to entire
adjusted gross income ($8,000
$14,000) (percent).. 57.14
Portion of tax attributable to
nonconvertible foreign
currency ($2,148 x 57.14
percent)..................... $1,227.37
Less:
Credit for foreign taxes
paid on Fulbright grant.... $300.00
Payment in foreign currency of
estimated tax................ 893.88 1,193.88
-----------------------------------------
Portion of tax attributable to amounts received
in nonconvertible foreign currency............ 83.49
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).
(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
[[Page 182]]
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 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
[[Page 183]]
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
foreign currency.............................................. $8,000
Dividends to be received by Mr. Jones entitled to dividends-
received credit............................................... 875
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
Fulbright grant................................... $300.00
Credit for income tax expected to be withheld upon
compensation of Mrs. Jones........................ 304.80
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 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 nonconvertible foreign currency to
entire estimated adjusted gross income ($8,000
$13,000) (percent)..................... 61.54
Portion of above tax attributable to
nonconvertible foreign currency ($1,940 x
61.54 percent).................................. 1,193.88
Less: Credit for foreign taxes expected to be
paid on Fulbright grant......................... 300.00
----------------------
Portion of estimated tax which is
attributable to amounts to be received during
the taxable year in nonconvertible foreign
currency...................................... 893.88
(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
[[Page 184]]
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.
(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
[[Page 185]]
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 deemed also to refer to the interest, additions to the
tax, additional amounts, and penalties attributable to the tax.
Lien for Taxes
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 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
[[Page 186]]
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 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
[[Page 187]]
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 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
[[Page 188]]
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 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
[[Page 189]]
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 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
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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 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
[[Page 191]]
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 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
[[Page 192]]
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 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
[[Page 193]]
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'' 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
[[Page 194]]
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. 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
[[Page 195]]
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 taken appropriate steps under local
law so that the December 6, 1971, purchase is protected against a
judgment lien arising November 1, 1971 (the date of tax lien filing) out
of an unsecured obligation. Because the purchaser of commercial
financing security, other than inventory, is treated as having acquired
a security interest in commercial financing security, and because Y
otherwise meets the requirements of this section, the tax lien is not
valid with respect to Y's December 6, 1971, purchase of N's accounts
receivable.
[T.D. 7429, 41 FR 35503, Aug. 23, 1976]
Sec. 301.6323(c)-2 Protection for real property construction or improvement 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 real property
construction or improvement 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 tax lien filing, out of an unsecured obligation.
For purposes of this section, it is immaterial that the holder of the
security interest had actual notice or knowledge of the lien at the time
disbursements are made pursuant to such an agreement. See paragraphs (a)
and (e) of Sec. 301.6323(h)-1 for general definitions of the terms
``security interest'' and ``tax lien filing.'' 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) Real property construction or improvement financing agreement.
For purposes of this section, the term ``real property construction or
improvement financing agreement'' means any written agreement to make
cash disbursements (whether or not at the option of the party agreeing
to make such disbursements):
(1) To finance the construction, improvement, or demolition of real
property if the agreement provides for a security interest in the real
property with respect to which the construction, improvement, or
demolition has been or is to be made;
(2) To finance a contract to construct or improve, or demolish real
property if the agreement provides for a security interest in the
proceeds of the contract; or
(3) To finance the raising or harvesting of a farm crop or the
raising of livestock or other animals if the agreement provides for a
security interest in any property subject to the lien imposed by section
6321 at the time of tax lien filing, in the crop raised or harvested, or
in the livestock or other animals raised.
For purposes of subparagraphs (1) and (2) of this paragraph (b),
construction or improvement may include demolition. For purposes of any
agreement described in subparagraph (3) of this paragraph (b), the
furnishing of goods and services is treated as the disbursement of cash.
(c) Qualified property. For purposes of this section, the term
``qualified property'' includes only--
(1) In the case of an agreement described in paragraph (b)(1) of
this section, the real property with respect to which the construction
or improvement has been or is to be made;
(2) In the case of an agreement described in paragraph (b)(2) of
this section, the proceeds of the contract to construct or improve real
property; or
(3) In the case of an agreement described in paragraph (b)(3) of
this section, property subject to the lien imposed by section 6321 at
the time of tax lien filing, the farm crop raised or harvested, or the
livestock or other animals raised.
[[Page 196]]
(d) Examples. The provisions of this paragraph may be illustrated by
the following examples:
Example 1. A, in order to finance the construction of a dwelling on
a lot owned by him, mortgages the property to B. The mortgage, executed
January 4, 1971, includes an agreement that B will make cash
disbursements to A as the construction progresses. On February 1, 1971,
in accordance with Sec. 301.6323(f)-1, a notice of lien is filed with
respect to A's delinquent tax liability. A continues the construction,
and B makes cash disbursements on June 10, 1971, and December 10, 1971.
Under local law B's security interest arising by virtue of the
disbursements is protected against a judgment lien arising February 1,
1971 (the date of tax lien filing) out of an unsecured obligation.
Because B is the holder of a security interest coming into existence by
reason of cash disbursements made pursuant to a written agreement,
entered into before tax lien filing, to make cash disbursements to
finance the construction of real property, and because B's security
interest is protected, under local law, against a judgment lien arising
as of the time of tax lien filing out of an unsecured obligation, B's
security interest has priority over the tax lien.
Example 2. (i) C is awarded a contract for the demolition of several
buildings. On March 3, 1969, C enters into a written agreement with D
which provides that D will make cash disbursements to finance the
demolition and also provides that repayment of the disbursements is
secured by any sums due C under the contract. On April 1, 1969, in
accordance with Sec. 301.6323(f)-1, a notice of lien is filed with
respect to C's delinquent tax liability. With actual notice of the tax
lien, D makes cash disbursements to C on August 1, September 1, and
October 1, 1969. Under local law D's security interest in the proceeds
of the contract with respect to the disbursements is entitled to
priority over a judgment lien arising on April 1, 1969 (the date of tax
lien filing) out of an unsecured obligation.
(ii) Because D's security interest arose by reason of disbursements
made pursuant to a written agreement, entered into before tax lien
filing, to make cash disbursements to finance a contract to demolish
real property, and because D's security interest is valid under local
law against a judgment lien arising as of the time of tax lien filing
out of an unsecured obligation, the tax lien is not valid with respect
to D's security interest in the proceeds of the demolition contract.
Example 3. Assume the same facts as in example 2 and, in addition,
assume that, as further security for the cash disbursements, the March
3, 1969 agreement also provides for a security interest in all of C's
demolition equipment. Because the protection of the security interest
arising from the disbursements made after tax lien filing under the
agreement is limited under section 6323(c)(3) to the proceeds of the
demolition contract and because, under the circumstances, the security
interest in the equipment is not otherwise protected under section 6323,
the tax lien will have priority over D's security interest in the
equipment.
Example 4. (i) On January 2, 1969, F and G enter into a written
agreement, whereby F agrees to provide G with cash disbursements, seed,
fertilizer, and insecticides as needed by G, in order to finance the
raising and harvesting of a crop on a farm owned by G. Under the terms
of the agreement F is to have a security interest in the crop, the farm,
and all other property then owned or thereafter acquired by G. In
accordance with Sec. 301.6323(f)-1, on January 10, 1969, a notice of
lien is filed with respect to G's delinquent tax liability. On March 3,
1969, with actual notice of the tax lien, F makes a cash disbursement of
$5,000 to G and furnishes him seed, fertilizer, and insecticides having
a value of $10,000. Under local law F's security interest, coming into
existence by reason of the cash disbursement and the furnishing of
goods, has priority over a judgment lien arising January 10, 1969 (the
date of tax lien filing) out of an unsecured obligation.
(ii) Because F's security interest arose by reason of a disbursement
(including the furnishing of goods) made under a written agreement which
was entered into before tax lien filing and which constitutes an
agreement to finance the raising or harvesting of a farm crop, and
because F's security interest is valid under local law against a
judgment lien arising as of the time of tax lien filing out of an
unsecured obligation, the tax lien is not valid with respect to F's
security interest in the crop even though a notice of lien was filed
before the security interest arose. Furthermore, because the farm is
property subject to the tax lien at the time of tax lien filing, F's
security interest with respect to the farm also has priority over the
tax lien.
Example 5. Assume the same facts as in example 4 and in addition
that on October 1, 1969, G acquires several tractors to which F's
security interest attaches under the terms of the agreement. Because the
tractors are not property subject to the tax lien at the time of tax
lien filing, the tax lien has priority over F's security interest in the
tractors.
[T.D. 7429, 41 FR 35503, Aug. 23, 1976]
Sec. 301.6323(c)-3 Protection for obligatory disbursement 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
[[Page 197]]
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 an obligatory
disbursement 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 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.'' 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) Obligatory disbursement agreement. For purposes of this section
the term ``obligatory disbursement agreement'' means a written
agreement, entered into by a person in the course of his trade or
business, to make disbursements. An agreement is treated as an
obligatory disbursement agreement only with respect to disbursements
which are required to be made by reason of the intervention of the
rights of a person other than the taxpayer. The obligation to pay must
be conditioned upon an event beyond the control of the obligor. For
example, the provisions of this section are applicable where an issuing
bank obligates itself to honor drafts or other demands for payment on a
letter of credit and a bank, in good faith, relies upon that letter of
credit in making advances. The provisions of this section are also
applicable, for example, where a bonding company obligates itself to
make payments to indemnify against loss or liability and, under the
terms of the bond, makes a payment with respect to a loss. The priority
described in this section is not applicable, for example, in the case of
an accommodation endorsement by an endorser who assumes his obligation
other than in the course of his trade or business.
(c) Qualified property. Except as provided under paragraph (d) of
this section, the term ``qualified property,'' for purposes of this
section, means property subject to the lien imposed by section 6321 at
the time of tax lien filing and, to the extent that the acquisition is
directly traceable to the obligatory disbursement, property acquired by
the taxpayer after tax lien filing.
(d) Special rule for surety agreements. Where the obligatory
disbursement agreement is an agreement insuring the performance of a
contract of the taxpayer and another person, the term ``qualified
property'' shall be treated as also including--
(1) The proceeds of the contract the performance of which was
insured, and
(2) If the contract the performance of which was insured is a
contract to construct or improve real property, to produce goods, or to
furnish services, any tangible personal property used by the taxpayer in
the performance of the insured contract.
For example, a surety company which holds a security interest, arising
from cash disbursements made after tax lien filing under a payment or
performance bond on a real estate construction project, has priority
over the tax lien with respect to the proceeds of the construction
contract and, in addition, with respect to any tangible personal
property used by the taxpayer in the construction project if its
security interest in the tangible personal property is protected under
local law against a judgment lien arising, as of the time the tax lien
was filed, out of an unsecured obligation.
(3) Examples. This section may be illustrated by the following
examples:
Example 1. (i) On January 2, 1969, H, an appliance dealer, in order
to finance the acquisition from O of a large inventory of appliances,
enters into a written agreement with Z, a bank. Under the terms of the
agreement, in return for a security interest in all of H's inventory,
presently owned and subsequently acquired, Z issues an irrevocable
letter of credit to allow H to make the purchase. On December 31, 1968
and January 10, 1969, in accordance with Sec. 301.6323(f)-1, separate
notices of lien are filed with respect to H's delinquent tax
liabilities. On March 31, 1969, Z honors the letter of credit. Under
local law, Z's security interest in both existing and after-acquired
inventory is protected against a judgment lien arising on or after
January 10, 1969, out of an unsecured obligation. Under local law, Z's
security interest in the inventory purchased under the letter of credit
qualifies as a purchase money security interest and is valid against
persons acquiring security interests in or liens upon such inventory at
any time.
[[Page 198]]
(ii) Because Z's security interest in H's inventory did not arise
under a written agreement entered into before the filing of notice of
the first tax lien on December 31, 1968, that lien is superior to Z's
security interest except to the extent of Z's purchase money security
interest. Because Z's interest qualifies as a purchase money security
interest with respect to the inventory purchased under the letter of
credit, the tax liens attach under section 6321 only to the equity
acquired by H, and the rights of Z in the inventory so purchased as
superior even to the lien filed on December 31, 1968, without regard to
this section.
(iii) Because Z's security interest arose by reason of disbursements
made under a written agreement which was entered into before the filing
of notice of the second tax lien on January 10, 1969, and which
constitutes an agreement to make disbursements required to be made by
reason of the intervention of the rights of O, a person other than the
taxpayer, and because Z's security interest is valid under local law
against a judgment lien arising as of the time of such tax lien filing
on January 10, 1969, out of an unsecured obligation, the second tax lien
is, under this section, not valid with respect to Z's security interest
in inventory owned by H on January 10, 1969, as well as any after-
acquired inventory directly traceable to Z's disbursements (apart from
such greater protection as Z enjoys, with respect to the latter, under
its purchase money security interest). No protection against the second
tax lien is provided under this section with respect to a security
interest in any other inventory acquired by H after January 10, 1969,
because such other inventory is neither subject to the tax lien at the
time of tax lien filing nor directly traceable to Z's disbursements.
Example 2. On June 1, 1971, K is awarded a contract to construct an
office building. At the same time, S, a surety company, agrees in
writing to insure the performance of the contract. The agreement
provides that in the event S must complete the job as the result of a
default by K, S will be entitled to the proceeds of the contract. In
addition, the agreement provides that S is to have a security interest
in all property belonging to K. On December 1, 1971, prior to the
completion of the building, K defaults. On the same date, under
Sec. 301.6323(f)-1, a notice of lien is filed with respect to K's
delinquent tax liability. S completes the building on June 1, 1972.
Under local law S's security interest in the proceeds of the contract
and S's security interest in the property of K are entitled to priority
over a judgment lien arising December 1, 1971 (the date of tax lien
filing) out of an unsecured obligation. Because, for purposes of an
obligatory disbursement agreement which is a surety agreement, the
security interest may be in the proceeds of the insured contract, S's
security interest in the proceeds of the contract has priority over the
tax lien even though a notice of lien was filed before S's security
interest arose. Furthermore, because the insured contract was a contract
to construct real property, S's security interest in any of K's tangible
personal property used in the performance of the contract also has
priority over the tax lien.
Example 3. (i) On February 2, 1970, L enters into an agreement with
M, a contractor, to construct an apartment building on land owned by L.
Under a separate agreement, N bank agrees to furnish funds on a short-
term basis to L for the payment of amounts due to M during the course of
construction. Simultaneously, X, a financial institution, makes a
binding commitment to N bank and L to provide long-term financing for
the project after its completion. Under its commitment, X is obligated
to pay off the balance of the construction loan held by N bank upon the
execution by L of a new promissory note secured by a mortgage deed of
trust upon the improved property. On September 4, 1970, in accordance
with Sec. 301.6323(f)-1, notice of lien is properly filed with respect
to L's delinquent tax liability. On September 8, 1970. X obtains actual
notice of the tax lien filing. On September 14, 1970, the documents
creating X's security interest are executed and recorded, N bank's lien
for its construction loan is released, and X makes the required
disbursements to N bank. Under local law, X's security interest is
protected against a judgment lien arising on September 4, 1970 (the time
of tax lien filing) out of an unsecured obligation.
(ii) Because X's security interest arose by reason of a disbursement
made under a written agreement entered into before tax lien filing,
which constitutes an agreement to make disbursements required to be made
by reason of the intervention of the rights of N bank, a person other
than the taxpayer, and because X's security interest is valid under
local law against a judgment lien arising as of the time of the tax lien
filing out of an unsecured obligation, the tax lien is not valid with
respect to X's security interest to the extent of the disbursement to N
bank. The obligatory disbursement is protected under section 6323(c)(4)
even if X is not subrogated to N bank's rights or X's agreement is not
itself a real property construction financing agreement.
[T.D. 7429, 41 FR 35504, Aug. 23, 1976]
Sec. 301.6323(d)-1 45-day period for making disbursements.
(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
[[Page 199]]
lien is not valid with respect to a security interest which comes into
existence, after tax lien filing, by reason of disbursements made before
the 46th day after the date of tax lien filing, or if earlier, before
the person making the disbursements has actual notice or knowledge of
the tax lien filing, but only if the security interest is--
(1) In property which is subject, at the time of tax lien filing, to
the lien imposed by section 6321 and which is covered by the terms of a
written agreement entered into before tax lien filing, and
(2) Protected under local law against a judgment lien arising, as of
the time of tax lien filing, out of an unsecured obligation.
For purposes of subparagraph (1) of this paragraph (a), a contract right
(as defined in paragraph (c)(2)(i) of Sec. 301.6323(c)-1) is subject, at
the time of tax lien filing, to the lien imposed by section 6321 if the
contract has been made by such time. An account receivable (as defined
in paragraph (c)(2)(ii) of Sec. 301.6323(c)-1) is subject, at the time
of tax lien filing, to the lien imposed by section 6321 if, and to the
extent, a right to payment has been earned by performance at such time.
For purposes of subparagraph (2) of this paragraph (a), a judgment lien
is a lien held by a judgment lien creditor as defined in paragraph (g)
of Sec. 301.6323(h)-1. For purposes of this section, it is immaterial
that the written agreement provides that the disbursements are to be
made at the option of the person making the disbursements. See
paragraphs (a) and (e) of Sec. 301.6323(h)-1 for definitions of the
terms ``security interest'' and ``tax lien filing,'' respectively. See
paragraph (a) of Sec. 301.6323(i)-1 for certain circumstances under
which a person is deemed to have actual notice or knowledge of a fact.
(b) Examples. The application of this section may be illustrated by
the following examples:
Example 1. On December 1, 1967, an assessment is made against A with
respect to his delinquent tax liability. On January 2, 1968, A enters
into a written agreement with B whereby B agrees to lend A $10,000 in
return for a security interest in certain property owned by A. On
January 10, 1968, in accordance with Sec. 301.6323(f)-1 notice of the
tax lien affecting the property is filed. On February 1, 1968, B,
without actual notice or knowledge of the tax lien filing, disburses the
loan to A. Under local law, the security interest arising by reason of
the disbursement is entitled to priority over a judgment lien arising
January 10, 1968 (the date of tax lien filing) out of an unsecured
obligation. Because the disbursement was made before the 46th day after
tax lien filing, because the disbursement was made pursuant to a written
agreement entered into before tax lien filing, and because the resulting
security interest is protected under local law against a judgment lien
arising as of the date of tax lien filing out of an unsecured
obligation, B's $10,000 security interest has priority over the tax
lien.
Example 2. Assume the same facts as in example 1 except that when B
disburses the $10,000 to A on February 10, 1968, B has actual knowledge
of the tax lien filing. Because the disbursement was made with actual
knowledge of tax lien filing, B's security interest does not have
priority over the tax lien even though the disbursement was made before
the 46th day after the tax lien filing. Furthermore, B is not protected
under Sec. 301.6323(a)-1(a) as a holder of a security interest because
he had not parted with money or money's worth prior to the time the
notice of tax lien was filed (January 10, 1968) even though he had made
a firm commitment to A before that time.
[T.D. 7429, 41 FR 35505, Aug. 23, 1976]
Sec. 301.6323(e)-1 Priority of interest and expenses.
(a) In general. If the lien imposed by section 6321 is not valid as
against another lien or security interest, the priority of the other
lien or security interest also extends to each of the following items to
the extent that under local law the item has the same priority as the
lien or security interest to which it relates:
(1) Any interest or carrying charges (including finance, service,
and similar charges) upon the obligation secured,
(2) The reasonable charges and expenses of an indenture trustee
(including, for example, the trustee under a deed of trust) or agent
holding the security interest for the benefit of the holder of the
security interest,
(3) The reasonable expenses, including reasonable compensation for
attorneys, actually incurred in collecting or enforcing the obligation
secured,
(4) The reasonable costs of insuring, preserving, or repairing the
property to which the lien or security interest relates,
(5) The reasonable costs of insuring payment of the obligation
secured (including amounts paid by the holder of the security
[[Page 200]]
interest for mortgage insurance, such as that issued by the Federal
Housing Administration), and
(6) Amounts paid to satisfy any lien on the property to which the
lien or security interest relates, but only if the lien so satisfied is
entitled to priority over the lien imposed by section 6321.
(b) Collection expenses. The reasonable expenses described in
paragraph (a)(3) of this section include expenditures incurred by the
protected holder of the lien or security interest to establish the
priority of his interest or to collect, by foreclosure or otherwise, the
amount due him from the property subject to his lien. Accordingly, the
amount of the encumbrance which is protected is increased by the amounts
so expended by the holder of the security interest.
(c) Costs of insuring, preserving, etc. The reasonable costs of
insuring, preserving, or repairing described in paragraph (a)(4) of this
section include expenditures by the holder of a security interest for
fire and casualty insurance on the property subject to the security
interest and amounts paid by the holder of the lien or security interest
to repair the property. Such reasonable costs also include the amounts
paid by the holder of the lien or security interest in a leasehold to
the lessor of the leasehold to preseve the leasehold subject to the lien
or security interest. Accordingly, the amount of the lien or security
interest which is protected is increased by the amounts so expended by
the holder of the lien or security interest.
(d) Satisfaction of liens. The amounts described in paragraph (a)(6)
of this section include expenditures incurred by the protected holder of
a lien or security interest to discharge a statutory lien for State
sales taxes on the property subject to his lien or security interest if
both his lien or security interest and the sales tax lien have priority
over a Federal tax lien. Accordingly, the amount of the lien or security
interest is increased by the amounts so expended by the holder of the
lien or security interest even though under local law the holder of the
lien or security interest is not subrogated to the rights of the holder
of the State sales tax lien. However, if the holder of the lien or
security interest is subrogated, within the meaning of paragraph (b) of
Sec. 301.6323(i)-1, to the rights of the holder of the sales tax lien,
he will also be entitled to any additional protection afforded by
section 6323(i)(2).
[T.D. 7429, 41 FR 35506, Aug. 23, 1976]
Sec. 301.6323(f)-1 Place for filing notice; form.
(a) Place for filing. The notice of lien referred to in
Sec. 301.6323(a)-1 shall be filed as follows:
(1) Under State laws--(i) Real property. In the case of real
property, notice shall be filed in one office within the State (or the
county or other governmental subdivision), as designated by the laws of
the State, in which the property subject to the lien is deemed situated
under the provisions of paragraph (b)(1) of this section.
(ii) Personal property. In the case of personal property, whether
tangible or intangible, the notice shall be filed in one office within
the State (or the county or other governmental subdivision), as
designated by the laws of the State, in which the property subject to
the lien is deemed situated under the provisions of paragraph (b)(2) of
this section.
(2) With the clerk of the United States district court. Whenever a
State has not by law designated one office which meets the requirements
of subparagraph (1)(i) or (1)(ii) of this paragraph (a), the notice
shall be filed in the office of the clerk of the U.S. district court for
the judicial district in which the property subject to the lien is
deemed situated under the provisions of paragraph (b) of this section.
For example, a State has not by law designated one office meeting the
requirements of subparagraph (1)(i) of this paragraph (a), if more than
one office is designated within the State, county, or other governmental
subdivision for filing notices with respect to all real property located
in such State, county, or other governmental subdivision. A State has
not by law designated one office meeting the requirements of
subparagraph (1)(ii) of this paragraph (a), if more than one office is
designated in the State, county, or other governmental subdivision for
filing notices with respect to all of the personal property of a
particular taxpayer. A state
[[Page 201]]
law that conforms to or reenacts a federal law establishing a national
filing system does not constitute a designation by state law of an
office for filing liens against personal property. Thus, if state law
provides that a notice of lien affecting personal property must be filed
in the office of the county clerk for the county in which the taxpayer
resides and also adopts a federal law that requires a notice of lien to
be filed in another location in order to attach to a specific type of
property, the state is considered to have designated only one office for
the filing of the notice of lien, and to protect its lien the Internal
Revenue Service need only file its notice in the office of the county
clerk for the county in which the taxpayer resides.
(3) With the Recorder of Deeds of the District of Columbia. If the
property subject to the lien imposed by section 5321 is deemed situated,
under the provisions of paragraph (b) of this section, in the District
of Columbia, the notice shall be filed in the office of the Recorder of
Deeds of the District of Columbia.
(b) Situs of property subject to lien. For purposes of paragraph (a)
of this section, property is deemed situated as follows:
(1) Real property. Real property is deemed situated at its physical
location.
(2) Personal property. Personal property, whether tangible or
intangible, is deemed situated at the residence of the taxpayer at the
time the notice of lien is filed.
For purposes of subparagraph (2) of this paragraph (b), the residence of
a corporation or partnership is deemed to be the place at which the
principal executive office of the business is located, and the residence
of a taxpayer whose residence is not within the United States is deemed
to be in the District of Columbia.
(c) National filing system. The filing of federal tax liens is to be
governed solely by the Internal Revenue Code and is not subject to any
other federal law that may establish a national system for filing liens
and encumbrances against a particular type of personal property. Thus,
for example, the Service is not subject to the requirements established
by the Federal Aviation Agency for filing liens against civil aircraft
in Oklahoma City, Oklahoma.
(d) Form--(1) In general. The notice referred to in
Sec. 301.6323(a)-1 shall be filed on Form 668, ``Notice of Federal Tax
Lien Under Internal Revenue Laws''. Such notice is valid notwithstanding
any other provision of law regarding the form or content of a notice of
lien. For example, omission from the notice of lien of a description of
the property subject to the lien does not affect the validity thereof
even though State law may require that the notice contain a description
of the property subject to the lien.
(2) Form 668 defined. The term ``Form 668'' generally means a paper
form. However, if a state in which a notice referred to in
Sec. 301.6323(a)-1 is filed permits a notice of Federal tax lien to be
filed by the use of an electronic or magnetic medium, the term ``Form
668'' includes a Form 668 filed by the use of any electronic or magnetic
medium permitted by that state. A Form 668 must identify the taxpayer,
the tax liability giving rise to the lien, and the date the assessment
arose regardless of the method used to file the notice of Federal tax
lien.
(e) Examples. The provisions of this section may be illustrated by
the following examples:
Example 1. The law of State X provides that notices of Federal tax
lien affecting personal property are to be filed in the Office of the
Recorder of Deeds of the county where the taxpayer resides. The laws of
State X also provide that notices of lien affecting real property are to
be filed with the recorder of deeds of the county where the real
property is located. On June 1, 1970, in accordance with
Sec. 301.6323(f)-1, a notice of lien is filed in county M with respect
to the delinquent tax liability of A. At the time the notice is filed, A
is a resident of county M and owns real property in that county. One
year later A moves to county N and one year after that A moves to county
O. Because the situs of personal property is deemed to be at the
residence of the taxpayer at the time the notice of lien is filed, the
notice continues to be effectively filed with respect to A's personal
property even though A no longer resides in county M. Furthermore,
because the situs of real property is deemed to be at its physical
location, the notice of lien also continues to be effectively filed with
respect to A's real property.
[[Page 202]]
Example 2. B is a resident of Canada but owns personal property in
the United States. On January 4, 1971, in accordance with
Sec. 301.6323(f)-1, a notice of lien is filed with the Office of the
Recorder of Deeds of the District of Columbia. On January 2, 1973, B
changes his residence to State Y in the United States. Because the
residence of a taxpayer who is not a resident of the United States is
deemed to be in the District of Columbia and the situs of personal
property is deemed to be at the residence of the taxpayer at the time of
filing, the lien continues to be effectively filed with respect to the
personal property of B located in the United States even though B has
returned to the United States and taken up residence in State Y and even
though B has at no time been in the District of Columbia.
Example 3. The law of State Z in effect before July 1, 1967,
provides that notices of lien affecting real property are to be filed in
the office of the recorder of deeds of the county in which the real
property is located, but that if the real property is registered under
the Torrens system of title registration the notice is to be filed with
the registrar of titles rather than the recorder of deeds. The law of
State Z in effect after June 30, 1967, provides that all notices of lien
affecting real property are to be filed with the recorder of deeds of
the county in which the real property is located. Accordingly, where the
Torrens system is adopted by a county in State Z, there were before July
1, 1967, two offices designated for filing notices of Federal tax lien
affecting real property in the county because one office was designated
for Torrens real property and another office was designated for non-
Torrens real property. Because State Z had not designated one office
within the State, county, or other governmental subdivision for filing
notices before July 1, 1967, with respect to all real property located
in the State, county, or governmental subdivision, before July 1, 1967,
the place for filing notices of lien under this section, affecting
property located in counties adopting the Torrens system, was with the
clerk of the U.S. district court for the judicial district in which the
real property is located. However, after June 30, 1967, the place for
filing notices of lien under this section, affecting both Torrens and
non-Torrens real property in counties adopting the Torrens system is
with the recorder of deeds for each such county. Notices of lien filed
under this section with the clerk of the U.S. district court before July
1, 1967, remain validly filed whether or not refiled with the recorder
of deeds after the change in State law or upon refiling during the
required refiling period.
Example 4. The law of State W provides that notices of lien
affecting personal property of corporations and partnerships are to be
filed in the office of the Secretary of State. Notices of lien affecting
personal property of any other person are to be filed in the office of
the clerk of court for the county where the person resides. Because the
State law designates only one filing office within State W with respect
to personal property of any particular taxpayer, notices of lien filed
under this section, affecting personal property, shall be filed in the
office designated under State law.
Example 5. The law of State F provides that notices of lien
affecting personal property are to be filed with the clerk of the
circuit court in the county in which the personal property is located.
State F has conformed state law to federal law to provide that all
instruments affecting title to an interest in any civil aircraft of the
United States must be recorded in the Office of the Federal Aviation
Administrator (FAA) in Oklahoma City, Oklahoma. On July 1, 1990, a tax
lien arises against ABC airline, which owns aircraft situated in State
F. The Internal Revenue Service files a Notice of Federal Tax Lien with
the clerk of the circuit court in the county in which the aircraft is
located but does not file the notice with the FAA in Oklahoma City,
Oklahoma. Because the FAA system adopted by State F does not constitute
a second place of filing pursuant to section 6323(f), the federal tax
lien is validly filed.
Example 6. Assume the same facts as Example 5 except that State F
did not reenact or conform state law to the FAA requirements. The result
is the same because the filing of federal tax liens is governed solely
by the Internal Revenue Code, and is not subject to any other national
filing system.
[T.D. 7429, 41 FR 35507, Aug. 23, 1976; 41 FR 41690, Sept. 23, 1976, as
amended by T.D. 8234, 53 FR 47676, Nov. 25, 1988; T.D. 8557, 59 FR
38120, July 27, 1994]
Sec. 301.6323(g)-1 Refiling of notice of tax lien.
(a) In general--(1) Requirement to refile. In order to continue the
effect of a notice of lien, the notice must be refiled in the place
described in paragraph (b) of this section during the required refiling
period (described in paragraph (c) of this section). In the event that
two or more notices of lien are filed with respect to a particular tax
assessment, the failure to comply with the provisions of paragraphs
(b)(1)(i) and (c) of this section in respect of one of the notices of
lien does not affect the effectiveness of the refiling of any other
notice of lien. Except for the filing of a notice of lien required by
paragraph (bb)(1)(ii) of this section (relating to a change of
residence) the validity of any refiling of a
[[Page 203]]
notice of lien is not affected by the refiling or nonrefiling of any
other notice of lien.
(2) Effect of refiling. A timely refiled notice of lien is effective
as of the date on which the notice of lien to which it relates was
effective.
(3) Effect of failure to refile If the district director fails to
refile a notice of lien in the manner described in paragraphs (b) and
(c) of this section, the notice of lien is not effective, after the
expiration of the required refiling period, as against any person
without regard to when the interest of the person in the property
subject to the lien was acquired. However, the failure of the district
director to refile a notice of lien during the required refiling period
will not, following the expiration of the refiling period, affect the
effectiveness of the notice with respect to:
(i) Property which is the subject matter of a suit, to which the
United States is a party, commenced prior to the expiration of the
required refiling period, or
(ii) Property which has been levied upon by the United States prior
to the expiration of the refiling period.
However, if a suit or levy referred to in the preceding sentence is
dismissed or released and the property is subject to the lien at such
time, a notice of lien with respect to the property is not effective
after the suit or levy is dismissed or released unless refiled during
the required refiling period. Failure to refile a notice of lien does
not affect the existence of the lien.
(4) Filing of new notice. If a notice of lien is not refiled, and if
the lien remains in existence, the Internal Revenue Service may
nevertheless file a new notice of lien either on the form prescribed for
the filing of a notice of lien or on the form prescribed for refiling a
notice of lien. This new filing must meet the requirements of section
6323(f) and Sec. 301.6323(f)-1 and is effective from the date on which
such filing is made.
(b) Place for refiling notice of lien--(1) In general. A notice of
lien refiled during the required refiling period (described in paragraph
(c) of this section) shall be effective only--
(i) If the notice of lien is refiled in the office in which the
prior notice of lien (including a refiled notice) was filed under the
provisions of section 6323; and
(ii) In any case in which 90 days or more prior to the date the
refiling of the notice of lien under subdivision (i) is completed, the
Internal Revenue Service receives written information (in the manner
described in subparagraph (2) of this paragraph (b)) concerning a change
in the taxpayer's residence, if a notice of such lien is also filed in
accordance with section 6323(f)(1)(A)(ii) in the State in which such new
residence is located (or, if such new residence is located without the
United States, in the District of Columbia).
A notice of lien is considered as refiled in the office in which the
prior notice or refiled notice was filed under the provisions of section
6323 if it is refiled in the office which, pursuant to a change in the
applicable local law, assumed the functions of the office in which the
prior notice or refiled notice was filed. If on or before the 90th day
referred to in subdivision (ii) more than one written notice is received
concerning a change in the taxpayer's residence, a notice of lien is
required by this subdivision to be filed only with respect to the
residence shown on the written notice received on the most recent date.
Subdivision (ii) is applicable regardless of whether the taxpayer
resides at the new residence on the date the refiling of notice of lien
under subdivision (i) of this subparagraph is completed.
(2) Notice of change of taxpayer's residence--(i) In general. Except
as provided in subdivision (ii) or (iii) of this subparagraph, for
purposes of this section, a notice of change of a taxpayer's residence
will be effective only if it (A) is received, in writing, from the
taxpayer or his representative by the district director or the service
center director having jurisdiction where the original notice of lien
was filed, (B) relates to an unpaid tax liability of the taxpayer, and
(C) states the taxpayer's name and the address of his new residence.
Although it is not necessary that a written notice contain the
taxpayer's identifying number authorized by section 6109, it is
preferable that it include such number. For purposes of
[[Page 204]]
this subdivision, a notice of change of a taxpayer's residence shown on
a return or an amended return (including a return of the same tax) will
not be effective to notify the Internal Revenue Service.
(ii) Notice received before August 23, 1976. For purposes of this
section, a notice of a change of a taxpayer's residence will also be
effective if it (A) is received, in writing, by any office of the
Internal Revenue Service before August 23, 1976, from the taxpayer or
his representative, (B) relates to an unpaid tax liability of the
taxpayer, and (C) states the taxpayer's name and the address of his new
residence.
(iii) By return or amended return. For purposes of this section, in
the case of a notice of lien which relates to an assessment of tax made
after December 31, 1966, a notice of change of a taxpayer's residence
will also be effective if it is contained in a return or amended return
of the same type of tax filed with the Internal Revenue Service by the
taxpayer or his representative which on its face indicates that there is
a change in the taxpayer's address and correctly states the taxpayer's
name, the address of his new residence, and his identifying number
required by section 6109.
(iv) Other rules applicable. Except as provided in subdivisions (i),
(ii), and (iii) of this subparagraph, no communication (either written
or oral) to the Internal Revenue Service will be considered effective as
notice of a change of a taxpayer's residence under this section, whether
or not the Service has actual notice or knowledge of the taxpayer's new
residence. For the purpose of determining the date on which a notice of
change of a taxpayer's residence is received under this section, the
notice shall be treated as received on the date it is actually received
by the Internal Revenue Service without reference to the provisions of
section 7502.
(3) Examples. The provisions of this section may be illustrated by
the following examples:
Example 1. A, a delinquent taxpayer, is a resident of State M and
owns real property in State N. In accordance with Sec. 301.6323(f)-1,
notices of lien are filed in States M and N. In order to continue the
effect of the notice of lien filed in M, the Internal Revenue Service
must refile, during the required refiling period, the notice of lien
with the appropriate office in M but is not required to refile the
notice of lien with the appropriate office in N. Similarly, in order to
continue the effect of the notice of lien filed in State N, the Internal
Revenue Service must refile, during the required refiling period, the
notice of lien with the appropriate office in N but is not required to
refile the notice of lien with the appropriate office in M.
Example 2. B, a delinquent taxpayer, is a resident of State M. In
accordance with Sec. 301.6323(f)-1, notice of lien is properly filed in
that State. One year before the beginning of the required refiling
period, B establishes his residence in State N, and B immediately
notifies the Internal Revenue Service of his change in residence in
accordance with the provisions of paragraph (b)(2) of this section. In
order to continue the effect of the notice of lien filed in M, the
Internal Revenue Service must refile, during the required refiling
period, notices of lien with (i) the appropriate office in M, and (ii)
the appropriate office in N, because B properly notified the Internal
Revenue Service of his change in residence to N more than 89 days prior
to the date refiling of the notice of lien in M is completed. Even if
the Internal Revenue Service had acquired actual notice or knowledge of
B's change in residence by other means, if B had not properly notified
the Internal Revenue Service of his change in residence, the effect of
the notice of lien in State M could have been continued without any
refiling in State N.
Example 3. C, a delinquent taxpayer, is a resident of State O. In
accordance with Sec. 301.6323(f)-1, notice of lien is properly filed in
that State. Four years before the required refiling period, C
establishes his residence in State P, and C immediately notifies the
Internal Revenue Service of his change in residence in accordance with
the provisions of paragraph (b)(2) of this section. Three years before
the required refiling period, C establishes his residence in State R,
and again C immediately notifies the Internal Revenue Service of his
change in residence in accordance with the provisions of paragraph (2)
of this section. In order to continue the effect of the notice of lien
filed in O, the Internal Revenue Service must refile, during the
required refiling period, notices of lien with (i) the appropriate
office in O, and (ii) the appropriate office in R. Refiling in R is
required because the notice received by the Service of C's change in
residence to R was the most recent notice received more than 89 days
prior to the date refiling in O is completed. The notice of lien is not
required to be filed in P, even though C properly notified the Internal
Revenue Service of his change in residence to P, because such notice is
not the most recent one received.
[[Page 205]]
Example 4. Assume the same facts as in example 3, except that C does
not notify the Internal Revenue Service of his change in residence to R
in accordance with the provisions of paragraph (b)(2) of this section.
In order to continue the effect of the notice of lien filed in O, the
Internal Revenue Service must refile, during the required refiling
period, the notice of lien with (i) the appropriate office in O, and
(ii) the appropriate office in P. Refiling in P is required because C
properly notified the Internal Revenue Service of his change in
residence to P, even though C is not a resident of P on the date
refiling of the notice of lien in O is completed. The Internal Revenue
Service is not required to file a notice of lien in R because C did not
properly notify the Service of his change in residence to R.
Example 5. D, a delinquent taxpayer, is a resident of State M and
owns real property in States N and O. In accordance with
Sec. 301.6323(f)-1, the Internal Revenue Service files notices of lien
in M, N, and O States. Five years and 6 months after the date of the
assessment shown on the notice of lien, D establishes his residence in
P, and at that time the Internal Revenue Service received from D a
notification of his change in residence in accordance with the
provisions of paragraph (b)(2) of this section. On a date which is 5
years and 7 months after the date of the assessment shown on the notice
of lien, the Internal Revenue Servbice properly refiles notices of lien
in M, N, and O which refilings are sufficient to continue the effect of
each of the notice of lien. The Internal Revenue Service is not required
to file a notice of lien in P because D did not notify the Internal
Revenue Service of his change of residence to P more than 89 days prior
to the date each of the refilings in M, N, and O was completed.
Example 6. Assume the same facts as in example 5 except that the
refiling of the notice of lien in O occurs 100 days after D notifies the
Internal Revenue Service of hischange in residence to P in accordance
with the provisions of paragraph (b)(2) of this section. In order to
continue the effect of the notice of lien filed in O, in addition to
refiling the notice of lien in O, the Internal Revenue Service must also
refile, during the required refiling period, a notice of lien in P
because D properly notified the Internal Revenue Service of his change
of residence to P more than 89 days prior to the date the refiling in O
was completed. However, the Internal Revenue Service is not required to
refile the notice of lien in P to maintain the effect of the notices of
lien in M and N because D did not notify the Internal Revenue Service of
his change in residence to P more than 89 days prior to the date the
refilings in M and N were completed.
Example 7. E, a delinquent taxpayer, is a resident of State T.
Because T has not designated one office in the case of personal property
for filing notices of lien in accordance with the provisions of section
6323(f)(1)(A)(ii), the Internal Revenue Service properly files a notice
of lien with the clerk of the appropriate United States district court.
However, solely as a matter of convenience for those who may have
occasion to search for notices of lien, and not as a matter of legal
effectiveness, the Internal Revenue Service also files notice of lien
with the recorder of deeds of the county in T where E resides. In
addition, the Internal Revenue Service sends a copy of the notice of
lien to the X life insurance company to give the company actual notice
of the notice of lien. In order to continue the effect of the notice of
lien, the Internal Revenue Service must refile the notice of lien with
the clerk of the appropriate United States district court during the
required refiling period. In order to continue the effect of the notice
of the lien, it is not necessary to refile the notice of lien with the
Recorder of Deeds of the county where E resides, because the refiling of
the notice of lien with the recorder of deeds does not constitute a
proper filing for the purposes of section 6323(f). In addition, to
continue the effect of the notice of lien under this section it is not
necessary to send a copy of the notice of lien to the X life insurance
company, because the sending of a notice of lien to an insurance company
does not constitute a proper filing for the purposes of section 6323(f).
(c) Required refiling period--(1) In general. For the purpose of
this section, except as provided in subparagraph (2) of this paragraph
(c), the term ``required refiling period'' means--
(i) The 1-year period ending 30 days after the expiration of 6 years
after the date of the assessment of the tax, and
(ii) The 1-year period ending with the expiration of 6 years after
the close of the preceding required refiling period for such notice of
lien.
(2) Tax assessments made before January 1, 1962. If the assessment
of the tax is made before January 1, 1962, the first required refiling
period shall be the calendar year 1967. Thus, to maintain the
effectiveness of any notice of lien on file which relates to a lien
which arose before January 1, 1962, the Internal Revenue Service will
refile the notice of lien during the calendar year 1967.
(3) Examples. The provisions of this paragraph may be illustrated by
the following examples:
[[Page 206]]
Example 1. On March 1, 1963, an assessment of tax is made against B,
a delinquent taxpayer, and a lien for the amount of the assessment
arises on that date. On July 1, 1963, in accordance with
Sec. 301.6323(f)-1, a notice of lien is filed. The notice of lien filed
on July 1, 1963, is effective through March 31, 1969. The first required
refiling period for the notice of lien begins on April 1, 1968, and ends
on March 31, 1969. A refiling of the notice of lien during that period
will extend the effectiveness of the notice of lien filed on July 1,
1963, through March 31, 1975. The second required refiling period for
the notice of lien begins on April 1, 1974, and ends of March 31, 1975.
Example 2. Assume the same facts as in example 1, except that
although the Internal Revenue Service fails to refile a notice of lien
during the first required refiling period (April 1, 1963, through March
31, 1969), a notice of lien is filed on June 2, 1971, in accordance with
Sec. 301.6323(f)-1. Because of this filing, the notice of lien filed on
June 2, 1971, is effective as of June 2, 1971. That notice must be
refiled during the 1-year period ending on March 31, 1975, if it is to
continue in effect after March 31, 1975.
Example 3. On April 1, 1960, an assessment of tax is made against B,
a delinquent taxpayer, and a tax lien for the amount of the assessment
arises on that date. On June 1, 1962, in accordance with
Sec. 301.6323(f)-1, a notice of lien is filed. Because the assessment of
tax was made before January 1, 1962, the notice of lien filed on June 1,
1962, is effective through December 31, 1967. The first required
refiling period for the notice of lien is the calendar year 1967. A
refiling of the notice of lien during 1967 will extend the effectiveness
of the notice of lien filed on June 1, 1962, through December 31, 1973.
[T.D. 7429, 41 FR 35509, Aug. 23, 1976]
Sec. 301.6323(h)-0 Scope of definitions.
Except as otherwise provided by Sec. 301.6323(h)-1 the definitions
provided by Sec. 301.6323(h)-1 apply for purposes of Secs. 301.6323(a)-1
through 301.6324-1.
[T.D. 7429, 41 FR 35509, Aug. 23, 1976]
Sec. 301.6323(h)-1 Definitions.
(a) Security interest--(1) In general. The term ``security
interest'' means any interest in property acquired by contract for the
purpose of securing payment or performance of an obligation or
indemnifying against loss or liability. A security interest exists at
any time--
(i) If, at such time, the property is in existence and the interest
has become protected under local law against a subsequent judgment lien
(as provided in subparagraph (2) of this paragraph (a)) arising out of
an unsecured obligation; and
(ii) To the extent that, at such time, the holder has parted with
money or money's worth (as defined in subparagraph (3) of this paragraph
(a)).
For purposes of this subparagraph, a contract right (as defined in
paragraph (c)(2)(i) of Sec. 301.6323(c)-1) is in existence when the
contract is made. An account receivable (as defined in paragraph
(c)(2)(ii) of Sec. 301.6323(c)-1) is in existence when, and to the
extent, a right to payment is earned by performance.
A security interest must be in existence, within the meaning of this
paragraph, at the time as of which its priority against a tax lien is
determined. For example, to be afforded priority under the provisions of
paragraph (a) of Sec. 301.6323(a)-1 a security interest must be in
existence within the meaning of this paragraph before a notice of lien
is filed.
(2) Protection against a subsequent judgment lien. (i) For purposes
of this paragraph, a security interest is deemed to be protected against
a subsequent judgment lien on--
(A) The date on which all actions required under local law to
establish the priority of a security interest against a judgment lien
have been taken, or
(B) If later, the date on which all required actions are deemed
effective, under local law, to establish the priority of the security
interest against a judgment lien.
For purposes of this subdivision, the dates described in (A) and (B) of
this subdivision (i) shall be determined without regard to any rule or
principle of local law which permits the relation back of any requisite
action to a date earlier than the date on which the action is actually
performed. For purposes of this paragraph, a judgment lien is a lien
held by a judgment lien creditor as defined in paragraph (g) of this
section.
(ii) The application of this subparagraph may be illustrated by the
following example:
Example. (i) Under the law of State X, a security interest in
negotiable instruments, stocks, bonds, or other securities may be
[[Page 207]]
perfected, and hence protected against a judgment lien, only by the
secured party taking possession of the instruments or securities.
However, a security interest in such intangible personal property is
considered to be temporarily perfected for a period of 21 days from the
time the security interest attaches, to the extent consideration other
than past consideration is given under a written security agreement.
Under the law of X, a security interest attaches to such collateral when
there is an agreement between the creditor and debtor that the interest
attaches, the debtor has rights in the property, and consideration is
given by the creditor. Under the law of X, in the case of temporary
perfection, the security interest in such property is protected during
the 21-day period against a judgment lien arising, after the security
interest attaches, out of an unsecured obligation. Upon expiration of
the 21-day period, the holder of the security interest must take
possession of the collateral to continue perfection.
(ii) Because the security interest is protected during the 21-day
period against a subsequent judgment lien arising out of an unsecured
obligation, and because the taking of possession before the conclusion
of the period of temporary perfection is not considered, for purposes of
subdivision (i) of this subparagraph, to be a requisite action which
relates back to the beginning of such period, the requirements of this
paragraph are satisfied. However, because taking possession is a
condition precedent to continued perfection, possession of the
collateral is a requisite action to establish such priority after
expiration of the period of temporary perfection. If there is a lapse of
perfection for failure to take possession, the determination of when the
security interest exists (for purposes of protection against the tax
lien) is made without regard to the period of temporary perfection.
(3) Money or money's worth. For purposes of this paragraph, the term
``money or money's worth'' includes money, a security (as defined in
paragraph (d) of this section), tangible or intangible property,
services, and other consideration reducible to a money value. Money or
money's worth also includes any consideration which otherwise would
constitute money or money's worth under the preceding sentence which was
parted with before the security interest would otherwise exist if, under
local law, past consideration is sufficient to support an agreement
giving rise to a security interest. A relinquishing or promised
relinquishment of dower, curtesy, or of a statutory estate created in
lieu of dower or curtesy, or of other marital rights is not a
consideration in money or money's worth. Nor is love and affection,
promise of marriage, or any other consideration not reducible to a money
value a consideration in money or money's worth.
(4) Holder of a security interest. For purposes of this paragraph,
the holder of a security interest is the person in whose favor there is
a security interest. For provisions relating to the treatment of a
purchaser of commercial financing security as a holder of a security
interest, see Sec. 301.6323(c)-1(e).
(b) Mechanic's lienor--(1) In general. The term ``mechanic's
lienor'' means any person who under local law has a lien on real
property (or on the proceeds of a contract relating to real property)
for services, labor, or materials furnished in connection with the
construction or improvement (including demolition) of the property. A
mechanic's lienor is treated as having a lien on the later of--
(i) The date on which the mechanic's lien first becomes valid under
local law against subsequent purchasers of the real property without
actual notice, or
(ii) The date on which the mechanic's lienor begins to furnish the
services, labor, or materials.
(2) Example. The provisions of this paragraph may be illustrated by
the following example:
Example. On February 1, 1968, A lets a contract for the construction
of an office building on property owned by him. On March 1, 1968, in
accordance with Sec. 301.6323(f)-1, a notice of lien for delinquent
Federal taxes owed by A is filed. On April 1, 1968, B, a lumber dealer,
delivers lumber to A's property. On May 1, 1968, B records a mechanic's
lien against the property to secure payment of the price of the lumber.
Under local law, B's mechanic's lien is valid against subsequent
purchasers of real property without notice from February 1, 1968, which
is the date the construction contract was entered into. Because the date
on which B's mechanic's lien is valid under local law against subsequent
purchasers is February 1, and the date on which B begins to furnish the
materials is April 1, the date on which B becomes a mechanic's lienor
within the meaning of this paragraph is April 1, the later of these two
dates. Under paragraph (a) of Sec. 301.6323(a)-1, B's mechanic's lien
will not have priority over the Federal tax lien, even though under
local law the mechanic's lien relates back to the date of the contract.
[[Page 208]]
(c) Motor vehicle. (1) The term ``motor vehicle'' means a self-
propelled vehicle which is registered for highway use under the laws of
any State, the District of Columbia, or a foreign country.
(2) A motor vehicle is ``registered for highway use'' at the time of
a sale if immediately prior to the sale it is so registered under the
laws of any State, the District of Columbia, or a foreign country. Where
immediately prior to the sale of a motor vehicle by a dealer, the dealer
is permitted under local law to operate it under a dealer's tag,
license, or permit issued to him, the motor vehicle is considered to be
registered for highway use in the name of the dealer at the time of the
sale.
(d) Security. The term ``security'' means any bond, debenture, note,
or certificate or other evidence of indebtedness, issued by a
corporation or a government or political subdivision thereof, with
interest coupons or in registered form, share of stock, voting trust
certificate, or any certificate of interest or participation in,
certificate of deposit or receipt for, temporary or interim certificate
for, or warrant or right to subscribe to or purchase, any of the
foregoing; negotiable instrument; or money.
(e) Tax lien filing. The term ``tax lien filing'' means the filing
of notice of the lien imposed by section 6321 in accordance with
Sec. 301.6323(f)-1.
(f) Purchaser--(1) In general. The term ``purchaser'' means a person
who, for adequate and full consideration in money or money's worth (as
defined in subparagraph (3) of this paragraph (f)), acquires an interest
(other than a lien or security interest) in property which is valid
under local law against subsequent purchasers without actual notice.
(2) Interest in property. For purposes of this paragraph, each of
the following interest is treated as an interest in property, if it is
not a lien or security interest:
(i) A lease of property,
(ii) A written executory contract to purchase or lease property,
(iii) An option to purchase or lease property and any interest
therein, or
(iv) An option to renew or extend a lease of property.
(3) Adequate and full consideration in money or money's worth. For
purposes of this paragraph, the term ``adequate and full consideration
in money or money's worth'' means a consideration in money or money's
worth having a reasonable relationship to the true value of the interest
in property acquired. See paragraph (a)(3) of this section for
definition of the term ``money or money's worth.'' Adequate and full
consideration in money or money's worth may include the consideration in
a bona fide bargain purchase. The term also includes the consideration
in a transaction in which the purchaser has not completed performance of
his obligation, such as the consideration in an installment purchase
contract, even though the purchaser has not completed the installment
payments.
(4) Examples. The provisions of this paragraph may be illustrated by
the following examples:
Example 1. A enters into a contract for the purchase of a house and
lot from B. Under the terms of the contract A makes a down payment and
is to pay the balance of the purchase price in 120 monthly installments.
After payment of the last installment, A is to receive a deed to the
property. A enters into possession, which under local law protects his
interest in the property against subsequent purchasers without actual
notice. After A has paid five monthly installments, a notice of lien for
Federal taxes is filed against B in accordance with Sec. 301.6323(f)-1.
Because the contract is an executory contract to purchase property and
is valid under local law against subsequent purchasers without actual
notice, A qualifies as a purchaser under this paragraph.
Example 2. C owns a residence which he leases to his son-in-law, D,
for a period of 5 years commencing January 1, 1968. The lease provides
for payment of $100 a year, although the fair rental value of the
residence is $2,500 a year. The lease is recorded on December 31, 1967.
On March 1, 1968, a notice of tax lien for unpaid Federal taxes of C is
filed in accordance with Sec. 301.6323(f)-1. Under local law, D's
interest is protected against subsequent purchasers without actual
notice. However, because the rental paid by D has no reasonable
relationship to the value of the interest in property acquired, D does
not qualify as a purchaser under this paragraph.
(g) Judgment lien creditor. The term ``judgment lien creditor''
means a person who has obtained a valid judgment, in a court of record
and of competent
[[Page 209]]
jurisdiction, for the recovery of specifically designated property or
for a certain sum of money. In the case of a judgment for the recovery
of a certain sum of money, a judgment lien creditor is a person who has
perfected a lien under the judgment on the property involved. A judgment
lien is not perfected until the identity of the lienor, the property
subject to the lien, and the amount of the lien are established.
Accordingly, a judgment lien does not include an attachment or
garnishment lien until the lien has ripened into judgment, even though
under local law the lien of the judgment relates back to an earlier
date. If recording or docketing is necessary under local law before a
judgment becomes effective against third parties acquiring liens on real
property, a judgment lien under such local law is not perfected with
respect to real property until the time of such recordation or
docketing. If under local law levy or seizure is necessary before a
judgment lien becomes effective against third parties acquiring liens on
personal property, then a judgment lien under such local law is not
perfected until levy or seizure of the personal property involved. The
term ``judgment'' does not include the determination of a quasi-judicial
body or of an individual acting in a quasi-judicial capacity such as the
action of State taxing authorities.
[T.D. 7429, 41 FR 35511, Aug. 23, 1976]
Sec. 301.6323(i)-1 Special rules.
(a) Actual notice or knowledge. For purposes of subchapter C
(section 6321 and following), chapter 64 of the Code, an organization is
deemed, in any transaction, to have actual notice or knowledge of any
fact from the time the fact is brought to the attention of the
individual conducting the transaction, and in any event from the time
the fact would have been brought to the individual's attention if the
organization had exercised due diligence. An organization exercises due
diligence if it maintains reasonable routines for communicating
significant information to the person conducting the transaction and
there is reasonable compliance with the routines. Due diligence does not
require an individual acting for the organization to communicate
information unless such communication is part of his regular duties or
unless he has reason to know of the transaction and that the transaction
would be materially affected by the information.
(b) Subrogation--(1) In general. Where, under local law, one person
is subrogated to the rights of another with respect to a lien or
interest, such person shall be subrogated to such rights for purposes of
any lien imposed by section 6321 or 6324. Thus, if a tax lien imposed by
section 6321 or 6324 is not valid with respect to a particular interest
as against the holder of that interest, then the tax lien also is not
valid with respect to that interest as against any person who, under
local law, is a successor in interest to the holder of that interest.
(2) Example. The application of this paragraph may be illustrated by
the following example:
Example. On February 1, 1968, an assessment is made and a tax lien
arises with respect to A's delinquent tax liability. On February 25,
1968, in accordance with Sec. 301.6323(f)-1, a notice of lien is
properly filed. On March 1, 1968, A negotiates a loan from B, the
security for which is a second mortgage on property owned by A. The
first mortgage on the property is held by C and has priority over the
tax lien. Upon default by A, C begins proceedings to foreclose upon the
first mortgage. On September 1, 1968, B pays the amount of principal and
interest in default to C in order to protect the second mortgage against
the pending foreclosure of C's senior mortgage. Under local law, B is
subrogated to C's rights to the extent of the payment to C. Therefore,
the tax lien is invalid against B to the extent he became subrogated to
C's rights even though the tax lien is valid against B's second mortgage
on the property.
(c) Disclosure of amount of outstanding lien. If a notice of lien
has been filed (see Sec. 301.6323(f)-1), the amount of the outstanding
obligation secured by the lien is authorized to be disclosed as a matter
of public record on Form 668 ``Notice of Federal Tax Lien Under Internal
Revenue Laws.'' The amount of the outstanding obligation secured by the
lien remaining unpaid at the time of an inquiry is authorized to be
disclosed to any person who has a proper interest in determining this
amount. Any person who has a right in the property or intends to obtain
a right in the
[[Page 210]]
property by purchase or otherwise will, upon presentation by him of
satisfactory evidence be considered to have a proper interest. Any
person desiring this information may make his request to the office of
the Internal Revenue Service named on the notice of lien with respect to
which the request is made. The request should clearly describe the
property subject to the lien, identify the applicable lien, and give the
reasons for requesting the information.
[T.D. 7429, 41 FR 35511, Aug. 23, 1976]
Sec. 301.6324-1 Special liens for estate and gift taxes; personal liability of transferees and others.
(a) Estate tax. (1) A lien for estate tax attaches at the date of
the decedent's death to every part of the gross estate, whether or not
the property comes into possession of the duly qualified executor or
administrator. The lien attaches to the extent of the tax shown to be
due by the return and of any deficiency in tax found to be due upon
review and audit. If the estate tax is not paid when due, then the
spouse, transferee, trustee (except the trustee of an employee's trust
which meets the requirements of section 401(a)), surviving tenant,
person in possession of the property by reason of the exercise,
nonexercise, or release of a power of appointment, or beneficiary, who
receives, or has on the date of the decedent's death, property included
in the gross estate under sections 2034 to 2042, inclusive, shall be
personally liable for the tax to the extent of the value, at the time of
the decedent's death, of the property.
(2) Unless the tax is paid in full or becomes unenforceable by
reason of lapse of time, and except as otherwise provided in paragraph
(c) of this section, the lien upon the entire property constituting the
gross estate continues for a period of 10 years after the decedent's
death, except that the lien shall be divested with respect to--
(i) The portion of the gross estate used for the payment of charges
against the estate and expenses of its administration allowed by any
court having jurisdiction thereof;
(ii) Property included in the gross estate under sections 2034 to
2042, inclusive, which is transferred by (or transferred by the
transferee of) the spouse, transferee, trustee, surviving tenant, person
in possession of the property by reason of the exercise, nonexercise, or
release of a power of appointment, or beneficiary to a purchaser or
holder of a security interest. In such case a like lien attaches to all
the property of the spouse, transferee, trustee, surviving tenant,
person in possession, beneficiary, or transferee of any such person,
except the part which is transferred to a purchaser or a holder of a
security interest. See section 6323(h) (1) and (6) and the regulations
thereunder, respectively, for the definitions of ``security interest''
and ``purchaser'';
(iii) The portion of the gross estate (or any interest therein)
which has been transferred to a purchaser or holder of a security
interest if payment is made of the full amount of tax determined by the
district director pursuant to a request of the fiduciary (executor, in
the case of the estate of a decedent dying before January 1, 1971) for
discharge from personal liability as authorized by section 2204
(relating to discharge of fiduciary from personal liability) but there
is substituted a like lien upon the consideration received from the
purchaser or holder of a security interest; and
(iv) Property as to which the district director has issued a
certificate releasing a lien under section 6325(a) and the regulations
thereunder.
(b) Lien for gift tax. Except as provided in paragraph (c) of this
section, a lien attaches upon all gifts made during the period for which
the return was filed (see Sec. 25.6019-1 of this chapter) for the amount
of tax imposed upon the gifts made during such period. The lien extends
for a period of 10 years from the time the gifts are made, unless the
tax is sooner paid in full or becomes unenforceable by reason of lapse
of time. If the tax is not paid when due, the donee of any gift becomes
personally liable for the tax to the extent of the value of his gift.
Any part of the property comprised in the gift transferred by the donee
(or by a transferee of the donee) to a purchaser or holder of a security
interest is divested of the lien, but a like lien, to the extent of the
value of the gift, attaches to all the property (including after-
acquired
[[Page 211]]
property) of the donee (or the transferee) except any part transferred
to a purchaser or holder of a security interest. See section 6323(h) (1)
and (6) and the regulations thereunder, respectively, for the
definitions of ``security interest'' and ``purchaser.''
(c) Exceptions. (1) A lien described in either paragraph (a) or
paragraph (b) of this section is not valid against a mechanic's lienor
(as defined in section 6323(h) (2) and the regulations thereunder) and,
subject to the conditions set forth under section 6323(b) (relating to
protection for certain interests even though notice filed), is not valid
with respect to any lien or interest described in section 6323(b) and
the regulations thereunder.
(2) If a lien described in either paragraph (a) or paragraph (b) of
this section is not valid against a lien or security interest (as
defined in section 6323(h) (1) and the regulations thereunder), the
priority of the lien or security interest extends to any item described
in section 6323(e) (relating to priority of interest and expenses) to
the extent that, under local law, the item has the same priority as the
lien or security interest to which it relates.
(d) Application of lien imposed by section 6321. The general lien
under section 6321 and the special lien under subsection (a) or (b) of
section 6324 for the estate or gift tax are not exclusive of each other,
but are cumulative. Each lien will arise when the conditions precedent
to the creation of such lien are met and will continue in accordance
with the provisions applicable to the particular lien. Thus, the special
lien may exist without the general lien being in force, or the general
lien may exist without the special lien being in force, or the general
lien and the special lien may exist simultaneously, depending upon the
facts and pertinent statutory provisions applicable to the respective
liens.
[T.D. 7238, 37 FR 28740, Dec. 29, 1972]
Sec. 301.6324A-1 Election of and agreement to special lien for estate tax deferred under section 6166 or 6166A.
(a) Election of lien. If payment of a portion of the estate tax is
deferred under section 6166 or 6166A (as in effect prior to its repeal
by Economic Recovery Tax Act of 1981), an executor of a decedent's
estate who seeks to be discharged from personal liability may elect a
lien in favor of the United States in lieu of the bonds required by
sections 2204 and 6165. This election is made by applying to the
Internal Revenue Service office where the estate tax return is filed at
any time prior to payment of the full amount of estate tax and interest
due. The application is to be a notice of election requesting the
special lien provided by section 6324A and is to be accompanied by the
agreement described in paragraph (b) (1) of this section.
(b) Agreement to lien--(1) In general. A lien under this section
will not arise unless all parties having any interest in all property
designated in the notice of election as property to which the lien is to
attach sign an agreement in which they consent to the creation of the
lien. (Property so designated need not be property included in the
decedent's estate.) The agreement is to be attached to the notice in
which the lien under section 6324A is elected. It must be in a form that
is binding on all parties having any interest on the property and must
contain the following:
(i) The decedent's name and taxpayer identification number as they
appear on the estate tax return;
(ii) The amount of the lien;
(iii) The fair market value of the property to be subject to the
lien as of the date of the decedent's death and the date of the election
under this section;
(iv) The amount, as of the date of the decedent's death and the date
of the election, of all encumbrances on the property, including
mortgages and any lien under section 6324B;
(v) A clear description of the property which is to be subject to
the lien, and in the case of property other than land, a statement of
its estimated remaining useful life; and
(vi) Designation of an agent (including the agent's address) for the
beneficiaries of the estate and the consenting parties to the lien for
all dealings with the Internal Revenue Service on matters arising under
section 6166 or 6166A (as in effect prior to its repeal by
[[Page 212]]
Economic Recovery Tax Act of 1981), or under section 6324A.
(2) Persons having an interest in designated property. An interest
in property is any interest which as of the date of the election can be
asserted under applicable local law so as to affect the disposition of
any property designated in the agreement required under this section.
Any person in being at the date of the election who has any such
interest in the property, whether present or future, or vested or
contingent, must enter into the agreement. Included among such persons
are owners of remainder and executory interests, the holders of general
or special powers of appointment, beneficiaries of a gift over in
default of exercise of any such power, co-tenants, joint tenants, and
holders of other undivided interests when the decedent held a joint or
undivided interest in the property, and trustees of trusts holding any
interest in the property. An heir who has the power under local law to
caveat (challenge) a will and thereby affect disposition of the property
is not, however, considered to be a person with an interest in property
under section 6324A solely by reason of that right. Likewise, creditors
of an estate are not such persons solely by reason of their status as
creditors.
(3) Consent on behalf of interested party. If any person required to
enter into the agreement provided for by this paragraph either desires
that an agent act for him or her or cannot legally bind himself or
herself due to infancy or other incompetency, a representative
authorized under local law to bind the interested party in an agreement
of this nature is permitted to sign the agreement on his or her behalf.
(4) Duties of agent designated in agreement. The Internal Revenue
Service will contact the agent designated in the agreement under
paragraph (b)(1) on all matters relating to continued qualification of
the estate under section 6166 or 6166A (as in effect prior to its repeal
by Economic Recovery Tax Act of 1981) and on all matters relating to the
special lien arising under section 6324A. It is the duty of the agent as
attorney-in-fact for the parties with interests in the property subject
to the lien under section 6324A to furnish the Service with any
requested information and to notify the Service of any event giving rise
to acceleration of the deferred amount of tax.
(c) Partial substitution of bond for lien. If the amount of unpaid
estate tax plus interest exceeds the value (determined for purposes of
section 6324A(b)(2)) of property listed in the agreement under paragraph
(b) of this section, the Internal Revenue Service may condition the
release from personal liability upon the executor's submitting an
agreement listing additional property or furnishing an acceptable bond
in the amount of such excess.
(d) Relation of sections 6324A and 2204. The lien under section
6324A is deemed to be a bond under section 2204 for purposes of
determining an executor's release from personal liability. If an
election has been made under section 6324A, the executor may not
substitute a bond pursuant to section 2204 in lieu of that lien. If a
bond has been supplied under section 2204, however, the executor may, by
filing a proper notice of election and agreement, substitute a lien
under section 6324A for any part or all of such bond.
(e) Relation of sections 6324A and 6324. If there is a lien under
this section on any property with respect to an estate, that lien is in
lieu of the lien provided by section 6324 on such property with respect
to the same estate.
(f) Section 6324A lien to be in lieu of bond under section 6165. The
lien under section 6324A is in lieu of any bond otherwise required under
section 6165 with respect to tax to be paid in installments under
section 6166 or section 6166A (as in effect prior to its repeal by
Economic Recovery Tax Act of 1981).
(g) Special rule for estates for which elections under section 6324A
are made on or before August 30, 1980. If a lien is elected under
section 6324A on or before August 30, 1980, the original election may be
revoked. To revoke an election, the executor must file a notice of
revocation containing the decedent's name, date of death, and taxpayer
identification number with the Internal Revenue Service office where the
original estate tax return for the decedent was filed. The notice must
be filed on or before January 31, 1981 (or if
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earlier, the date on which the period of limitation for assessment
expires).
(Approved by the Office of Management and Budget under control number
1545-0754)
(Secs. 2032A and 7805 of the Internal Revenue Code of 1954 (90 Stat.
1856, 68A Stat. 917; 26 U.S.C. 2032A, 7805); secs. 6324A(a) and 7805 of
the Internal Revenue Code of 1954 (90 Stat. 1808, 68A Stat. 917; 26
U.S.C. 6324A(a), 7805))
[T.D. 7710, 45 FR 50747, July 31, 1980, as amended by T.D. 7941, 49 FR
4469, Feb. 7, 1984]
Sec. 301.6325-1 Release of lien or discharge of property.
(a) Release of lien--(1) Liability satisfied or unenforceable. Any
district director may issue a certificate of release of a lien imposed
with respect to any internal revenue tax, whenever he finds that the
entire liability for the tax has been satisfied or has become
unenforceable as a matter of law (and not merely uncollectible or
unenforceable as a matter of fact). Tax liabilities frequently are
unenforceable in fact for the time being, due to the temporary
nonpossession by the taxpayer of discoverable property or property
rights. In all cases the liability for the payment of the tax continues
until satisfaction of the tax in full or until the expiration of the
statutory period for collection, including such extension of the period
for collection as may be agreed upon in writing by the taxpayer and the
district director.
(2) Bond accepted. The district director may, in his discretion,
issue a certificate of release of any tax lien if he is furnished and
accepts a bond that is conditioned upon the payment of the amount
assessed (together with all interest in respect thereof), within the
time agreed upon in the bond, but not later than 6 months before the
expiration of the statutory period for collection, including any period
for collection agreed upon in writing by the district director and the
taxpayer. For provisions relating to bonds, see sections 7101 and 7102
and Secs. 301.7101-1 and 301.7102-1.
(b) Discharge of specific property from the lien--(1) Property
double the amount of the liability. (i) The district director may, in
his discretion, issue a certificate of discharge of any part of the
property subject to a lien imposed under chapter 64 of the Code if he
determines that the fair market value of that part of the property
remaining subject to the lien is at least double the sum of the amount
of the unsatisfied liability secured by the lien and of the amount of
all other liens upon the property which have priority over the lien. In
general, fair market value is that amount which one ready and willing
but not compelled to buy would pay to another ready and willing but not
compelled to sell the property.
(ii) The following example illustrates a case in which a certificate
of discharge may not be given under this subparagraph:
Example. The Federal tax liability secured by a lien is $1,000. The
fair market value of all property which after the discharge will
continue to be subject to the Federal tax lien is $10,000. There is a
prior mortgage on the property of $5,000, including interest, and the
property is subject to a prior lien of $100 for real estate taxes.
Accordingly, the taxpayer's equity in the property over and above the
amount of the mortgage and real estate taxes is $4,900, or nearly five
times the amount required to pay the assessed tax on which the Federal
tax lien is based. Nevertheless, a discharge under this subparagraph is
not permissible. In the illustration, the sum of the amount of the
Federal tax liability ($1,000) and of the amount of the prior mortgage
and the lien for real estate taxes ($5,000+$100=$5,100) is $6,100.
Double this sum is $12,200, but the fair market value of the remaining
property is only $10,000. Hence, a discharge of the property is not
permissible under this subparagraph, since the Code requires that the
fair market value of the remaining property be at least double the sum
of two amounts, one amount being the outstanding Federal tax liability
and the other amount being all prior liens upon such property. In order
that the discharge may be issued, it would be necessary that the
remaining property be worth not less than $12,200.
(2) Part payment; interest of United States valueless--(i) Part
payment. The district director may, in his discretion, issue a
certificate of discharge of any part of the property subject to a lien
imposed under chapter 64 of the Code if there is paid over to him in
partial satisfaction of the liability secured by the lien an amount
determined by him to be not less than the value of the interest of the
United States in the property to be so discharged. In determining the
amount to be paid, the district director will take into consideration
all the
[[Page 214]]
facts and circumstances of the case, including the expenses to which the
Government has been put in the matter. In no case shall the amount to be
paid be less than the value of the interest of the United States in the
property with respect to which the certificate of discharge is to be
issued.
(ii) Interest of the United States valueless. The district director
may, in his discretion, issue a certificate of discharge of any part of
the property subject to the lien if he determines that the interest of
the United States in the property to be so discharged has no value.
(iii) Valuation of interest of United States. For purposes of this
subparagraph, in determining the value of the interest of the United
States in the property, or any part thereof, with respect to which the
certificate of discharge is to be issued, the district director shall
give consideration to the value of the property and the amount of all
liens and encumbrances thereon having priority over the Federal tax
lien. In determining the value of the property, the district director
may, in his discretion, give consideration to the forced sale value of
the property in appropriate cases.
(3) Discharge of property by substitution of proceeds of sale. A
district director may, in his discretion, issue a certificate of
discharge of any part of the property subject to a lien imposed under
chapter 64 of the Code if such part of the property is sold and,
pursuant to a written agreement with the district director, the proceeds
of the sale are held, as a fund subject to the liens and claims of the
United States, in the same manner and with the same priority as the lien
or claim had with respect to the discharged property. This subparagraph
does not apply unless the sale divests the taxpayer of all right, title,
and interest in the property sought to be discharged. Any reasonable and
necessary expenses incurred in connection with the sale of the property
and the administration of the sale proceeds shall be paid by the
applicant or from the proceeds of the sale before satisfaction of any
lien or claim of the United States.
(4) Application for certificate of discharge. Any person desiring a
certificate of discharge under this paragraph shall submit an
application in writing to the district director responsible for
collection of the tax. The application shall contain such information as
the district director may require.
(c) Estate or gift tax liability fully satisfied or provided for--
(1) Certificate of discharge. If the district director determines that
the tax liability for estate or gift tax has been fully satisfied, he
may issue a certificate of discharge of any or all property from the
lien imposed thereon. If the district director determines that the tax
liability for estate or gift tax has been adequately provided for, he
may issue a certificate discharging particular items of property from
the lien. If a lien has arisen under section 6324B (relating to special
lien for additional estate tax attributable to farm, etc., valuation)
and the district director determines that the liability for additional
estate tax has been fully secured in accordance with Sec. 20.6324B-1(c)
of this chapter, the district director may issue a certificate of
discharge of the real property from the section 6324B lien. The issuance
of such a certificate is a matter resting within the discretion of the
district director, and a certificate will be issued only in case there
is actual need therefor. The primary purpose of such discharge is not to
evidence payment or satisfaction of the tax, but to permit the transfer
of property free from the lien in case it is necessary to clear title.
The tax will be considered fully satisfied only when investigation has
been completed and payment of the tax, including any deficiency
determined, has been made.
(2) Application for certificate of discharge. An application for a
certificate of discharge of property from the lien for estate or gift
tax should be filed with the district director responsible for the
collection of the tax. It should be made in writing under penalties of
perjury and should explain the circumstances that require the discharge,
and should fully describe the particular items for which the discharge
is desired. Where realty is involved each parcel sought to be discharged
from the lien should be described on a separate
[[Page 215]]
page and each such description submitted in duplicate. In the case of an
estate tax lien, the application should show the applicant's
relationship to the estate, such as executor, heir, devisee, legatee,
beneficiary, transferee, or purchaser. If the estate or gift tax return
has not been filed, a statement under penalties of perjury may be
required showing (i) the value of the property to be discharged, (ii)
the basis for such valuation, (iii) in the case of the estate tax, the
approximate value of the gross estate and the approximate value of the
total real property included in the gross estate, (iv) in the case of
the gift tax, the total amount of gifts made during the calendar year
and the prior calendar years subsequent to the enactment of the Revenue
Act of 1932 and the approximate value of all real estate subject to the
gift tax lien, and (v) if the property is to be sold or otherwise
transferred, the name and address of the purchaser or transferee and the
consideration, if any, paid or to be paid by him.
(3) For provisions relating to transfer certificates in the case of
nonresident estates, see Sec. 20.6325-1 of this chapter (Estate Tax
Regulations).
(d) Subordination of lien--(1) By payment of the amount
subordinated. A district director may, in his discretion, issue a
certificate of subordination of a lien imposed under chapter 64 of the
Code upon any part of the property subject to the lien if there is paid
over to the district director an amount equal to the amount of the lien
or interest to which the certificate subordinates the lien of the United
States. For this purpose, the tax lien may be subordinated to another
lien or interest on a dollar-for-dollar basis. For example, if a notice
of a Federal tax lien is filed and a delinquent taxpayer secures a
mortgage loan on a part of the property subject to the tax lien and pays
over the proceeds of the loan to a district director after an
application for a certificate of subordination is approved, the district
director will issue a certificate of subordination. This certificate
will have the effect of subordinating the tax lien to the mortgage.
(2) To facilitate tax collection--(i) In general. A district
director may, in his discretion, issue a certificate of subordination of
a lien imposed under chapter 64 of the Code upon any part of the
property subject to the lien if the district director believes that the
subordination of the lien will ultimately result in an increase in the
amount realized by the United States from the property subject to the
lien and will facilitate the ultimate collection of the tax liability.
(ii) Examples. The provisions of this subparagraph may be
illustrated by the following examples:
Example 1. A, a farmer needs money in order to harvest his crop. A
Federal tax lien, notice of which has been filed, is outstanding with
respect to A's property. B, a lending institution is willing to make the
necessary loan if the loan is secured by a first mortgage on the farm
which is prior to the Federal tax lien. Upon examination, the district
director believes that ultimately the amount realizable from A's
property will be increased and the collection of the tax liability will
be facilitated by the availability of cash when the crop is harvested
and sold. In this case, the district director may, in his discretion,
subordinate the tax lien on the farm to the mortgage securing the crop
harvesting loan.
Example 2. C owns a commercial building which is deteriorating and
in unsalable condition. Because of outstanding Federal tax liens,
notices of which have been filed, C is unable to finance the repair and
rehabilitation of the building. D, a contractor, is willing to do the
work if his mechanic's lien on the property is superior to the Federal
tax liens. Upon examination, the district director believes that
ultimately the amount realizable from C's property will be increased and
the collection of the tax liability will be facilitated by arresting
deterioration of the property and restoring it to salable condition. In
this case, the district director may, in his discretion, subordinate the
tax lien on the building to the mechanic's lien.
Example 3. E, a manufacturer of electronic equipment, obtains
financing from F, a lending institution, pursuant to a security
agreement, with respect to which a financing statement was duly filed
under the Uniform Commercial Code on June 1, 1970. On April 15, 1971, F
gains actual notice or knowledge that notice of a Federal tax lien had
been filed against E on March 31, 1971, and F refuses to make further
advances unless its security interest is assured of priority over the
Federal tax lien. Upon examination, the district director believes that
ultimately the amount realizable from E's property will be increased and
the collection of the tax liability will be facilitated if the work in
process can be completed and the equipment sold. In
[[Page 216]]
this case, the district director may, in his discretion, subordinate the
tax lien to F's security interest for the further advances required to
complete the work.
Example 4. Suit is brought against G by H, who claims ownership of
property the legal title to which is held by G. A Federal tax lien
against G, notice of which has previously been filed, will be
enforceable against the property if G's title is confirmed. Because
section 6323(b)(8) is inapplicable, J, an attorney, is unwilling to
defend the case for G unless he is granted a contractual lien on the
property, superior to the Federal tax lien. Upon examination, the
district director believes that the successful defense of the case by G
will increase the amount ultimately realizable from G's property and
will facilitate collection of the tax liability. In this case, the
district director may, in his discretion, subordinate the tax lien to
J's contractual lien on the disputed property to secure J's reasonable
fees and expenses.
(3) Subordination of section 6324B lien. The district director may
issue a certificate of subordination with respect to a lien imposed by
section 6324B if the district director determines that the interests of
the United States will be adequately secured after such subordination.
For example, A, a qualified heir of qualified real property, needs to
borrow money for farming purposes. If the current fair market value of
the real property is $150,000, the amount of the claim to which the
special lien is to be subordinated is $40,000, the potential liability
for additional tax (as defined in section 2032A(c)) is less than
$55,000, and there are no other facts to indicate that the interest of
the United States will not be adequately secured, the district director
may issue a certificate of subordination. The result would be the same
if the loan were for bona fide purposes other than farming.
(4) Application for certificate of subordination. Any person
desiring a certificate of subordination under this paragraph shall
submit an application therefor in writing to the district director
responsible for the collection of the tax. The application shall contain
such information as the district director may require.
(e) Nonattachment of lien. If a district director determines that,
because of confusion of names or otherwise, any person (other than the
person against whom the tax was assessed) is or may be injured by the
appearance that a notice of lien filed in accordance with
Sec. 301.6323(f)-1 refers to such person, the district director may
issue a certificate of nonattachment. Such certificate shall state that
the lien, notice of which has been filed, does not attach to the
property of such person. Any person desiring a certificate of
nonattachment under this paragraph shall submit an application therefor
in writing to the district director responsible for the collection of
the tax. The application shall contain such information as the district
director may require.
(f) Effect of certificate--(1) Conclusiveness. Except as provided in
subparagraphs (2) and (3) of this paragraph, if a certificate is issued
under section 6325 by a district director and the certificate is filed
in the same office as the notice of lien to which it relates (if the
notice of lien has been filed), the certificate shall have the following
effect--
(i) In the case of a certificate of release issued under paragraph
(a) of this section, the certificate shall be conclusive that the tax
lien referred to in the certificate is extinguished;
(ii) In the case of a certificate of discharge issued under
paragraph (b) or (c) of this section, the certificate shall be
conclusive that the property covered by the certificate is discharged
from the tax lien;
(iii) In the case of a certificate of subordination issued under
paragraph (d) of this section, the certificate shall be conclusive that
the lien or interest to which the Federal tax lien is subordinated is
superior to the tax lien; and
(iv) In the case of a certificate of nonattachment issued under
paragraph (e) of this section, the certificate shall be conclusive that
the lien of the United States does not attach to the property of the
person referred to in the certificate.
(2) Revocation of certificate of release or nonattachment--(i) In
general. If a district director determines that either--
(a) A certificate of release or a certificate of nonattachment of
the general tax lien imposed by section 6321 was issued erroneously or
improvidently, or
(b) A certificate of release of such lien was issued in connection
with a
[[Page 217]]
compromise agreement under section 7122 which has been breached,
and if the period of limitation on collection after assessment of the
tax liability has not expired, the district director may revoke the
certificate and reinstate the tax lien. The provisions of this
subparagraph do not apply in the case of the lien imposed by section
6324 relating to estate and gift taxes.
(ii) Method of revocation and reinstatement. The revocation and
reinstatement described in subdivision (i) of this subparagraph is
accompanied by--
(a) Mailing notice of the revocation to the taxpayer at his last
known address, and
(b ) Filing notice of the revocation of the certificate in the same
office in which the notice of lien to which it relates was filed (if the
notice of lien has been filed).
(iii) Effect of reinstatement--(a) Effective date. A tax lien
reinstated in accordance with the provisions of this subparagraph is
effective on and after the date the notice of revocation is mailed to
the taxpayer in accordance with the provisions of subdivision (ii)(a) of
this subparagraph, but the reinstated lien is not effective before the
filing of notice of revocation, in accordance with the provisions of
subdivision (ii)(b) of this subparagraph, if the filing is required by
reason of the fact that a notice of the lien had been filed.
(b) Treatment of reinstated lien. As of the effective date of
reinstatement, a reinstated lien has the same force and effect as a
general tax lien imposed by section 6321 which arises upon assessment of
a tax liability. The reinstated lien continues in existence until the
expiration of the period of limitation on collection after assessment of
the tax liability to which it relates. The reinstatement of the lien
does not retroactively reinstate a previously filed notice of lien. The
reind lien became effective.
(iv) Example. The provisions of this subparagraph may be illustrated
by the following example:
Example. On March 1, 1967, an assessment of an unpaid Federal tax
liability is made against A. On March 1, 1968, notice of the Federal tax
lien, which arose at the time of assessment, is filed. On April 1, 1968,
A executes a bona fide mortgage on property belonging to him to B. On
May 1, 1968, a certificate of release of the tax lien is erroneously
issued and is filed by A in the same office in which the notice of lien
was filed. On June 3, 1968, the lien is reinstated in accordance with
the provisions of this subparagraph. On July 1, 1968, A executes a bona
fide mortgage on property belonging to him to C. On August 1, 1968, a
notice of the lien which was reinstated is properly filed in accordance
with the provisions of Sec. 301.6323(f)-1. The mortgages of both B and C
will have priority over the rights of the United States with respect to
the tax liability in question. Because a reinstated lien continues in
existence only until the expiration of the period of limitation on
collection after assessment of the tax liability to which the lien
relates, in the absence of any extension or suspension of the period of
limitation on collection after assessment, the reinstated lien will
become unenforceable by reason of lapse of time after February 28, 1973.
(3) Certificates void under certain conditions. Notwithstanding any
other provisions of subtitle F of the Code, any lien for Federal taxes
attaches to any property with respect to which a certificate of
discharge has been issued if the person liable for the tax reacquires
the property after the certificate has been issued. Thus, if property
subject to a Federal tax lien is discharged therefrom and is later
reacquired by the delinquent taxpayer at a time when the lien is still
in existence, the tax lien attaches to the reacquired property and is
enforceable against it as in the case of after-acquired property
generally.
(g) Filing of certificates and notices. If a certificate or notice
described in this section may not be filed in the office designated by
State law in which the notice of lien imposed by section 6321 (to which
the certificate or notice relates) is filed, the certificate or notice
is effective if filed in the office of the clerk of the United States
district court for the judicial district in which the State office where
the notice of lien is filed is situated.
(Secs. 6324B (90 Stat. 1861, 26 U.S.C. 6324B) and 7805 (68A Stat. 917,
26 U.S.C. 7805))
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7429, 41 FR 35512, Aug.
23, 1976; T.D. 7847, 47 FR 50857, Nov. 10, 1982]
[[Page 218]]
Sec. 301.6326-1 Administrative appeal of the erroneous filing of notice of federal tax lien.
(a) In general. Any person may appeal to the district director of
the district in which a notice of federal tax lien was filed on the
property or rights to property of such person for a release of lien
alleging an error in the filing of notice of lien. Such appeal may be
used only for the purpose of correcting the erroneous filing of a notice
of lien, not to challenge the underlying deficiency that led to the
imposition of a lien. If the district director determines that the
Internal Revenue Service has erroneously filed the notice of any federal
tax lien, the district director shall expeditiously, and, to the extent
practicable, within 14 days after such determination, issue a
certificate of release of lien. The certificate of release of such lien
shall include a statement that the filing of notice of lien was
erroneous.
(b) Appeal alleging an error in the filing of notice of lien. For
purposes of paragraph (a) of this section, an appeal of the filing of
notice of federal tax lien must be based on any one of the following
allegations:
(1) The tax liability that gave rise to the lien, plus any interest
and additions to tax associated with said liability, was satisfied prior
to the filing of notice of lien;
(2) The tax liability that gave rise to the lien was assessed in
violation of the deficiency procedures set forth in section 6213 of the
Internal Revenue Code;
(3) The tax liability that gave rise to the lien was assessed in
violation of title 11 of the United States Code (the Bankruptcy Code);
or
(4) The statutory period for collection of the tax liability that
gave rise to the lien expired prior to the filing of notice of federal
tax lien.
(c) Notice of federal tax lien that lists multiple liabilities. When
a notice of federal tax lien lists multiple liabilities, a person may
appeal the filing of notice of lien with respect to one or more of the
liabilities listed in the notice, if the notice was erroneously filed
with respect to such liabilities. If a notice of federal tax lien was
erroneously filed with respect to one or more liabilities listed in the
notice, the district director shall issue a certificate of release with
respect to such liabilities. For example, if a notice of federal tax
lien lists tax liabilities for years 1980, 1981 and 1982, and the entire
liabilities for 1981 and 1982 were paid prior to the filing of notice of
lien, the taxpayer may appeal the filing of notice of lien with respect
to the 1981 and 1982 liabilities and the district director must issue a
certificate of release with respect to the 1981 and 1982 liabilities.
(d) Procedures for appeal--(1) Manner. An appeal of the filing of
notice of federal tax lien shall be made in writing to the district
director (marked for the attention of the Chief, Special Procedures
Function) of the district in which the notice of federal tax lien was
filed.
(2) Form. The appeal shall include the following information and
documents:
(i) Name, current address, and taxpayer identification number of the
person appealing the filing of notice of federal tax lien;
(ii) A copy of the notice of federal tax lien affecting the
property, if available; and
(iii) The grounds upon which the filing of notice of federal tax
lien is being appealed.
(A) If the ground upon which the filing of notice is being appealed
is that the tax liability in question was satisfied prior to the filing,
proof of full payment as defined in paragraph (e) of this section must
be provided.
(B) If the ground upon which the filing of notice is being appealed
is that the tax liability that gave rise to lien was assessed in
violation of the deficiency procedures set forth in section 6213 of the
Internal Revenue Code, the appealing party must explain how the
assessment was erroneous.
(C) If the ground upon which the filing of notice is being appealed
is that the tax liability that gave rise to the lien was assessed in
violation of title 11 of the United States Code (the Bankruptcy Code),
the appealing party must provide the following:
(1) The identity of the court and the district in which the
bankruptcy petition was filed; and
(2) The docket number and the date of filing of the bankruptcy
petition.
(3) Time. An administrative appeal of the erroneous filing of notice
of federal
[[Page 219]]
tax lien shall be made within 1 year after the taxpayer becomes aware of
the erroneously filed tax lien.
(e) Proof of full payment. As used in paragraph (d)(2)(iii) of this
section, the term ``proof of full payment'' means:
(1) An internal revenue cashier's receipt reflecting full payment of
the tax liability in question prior to the date the federal tax lien
issue was filed;
(2) A canceled check to the Internal Revenue Service in an amount
which was sufficient to satisfy the tax liability for which release is
being sought; or
(3) Any other manner of proof acceptable to the district director.
(f) Exclusive remedy. The appeal established by section 6326 of the
Internal Revenue Code and by this section shall be the exclusive
administrative remedy with respect to the erroneous filing of a notice
of federal tax lien.
(g) Effective date. The provisions of this section are effective
July 7, 1989.
[T.D. 8250, 54 FR 19569, May 8, 1989. Redesignated at 56 FR 19948, May
1, 1991]
Seizure of Property for Collection of Taxes
Sec. 301.6331-1 Levy and distraint.
(a) Authority to levy--(1) In general. If any person liable to pay
any tax neglects or refuses to pay the tax within 10 days after notice
and demand, the district director to whom the assessment is charged (or,
upon his request, any other district director) may proceed to collect
the tax by levy. The district director may levy upon any property, or
rights to property, whether real or personal, tangible or intangible,
belonging to the taxpayer. The district director may also levy upon
property with respect to which there is a lien provided by section 6321
or 6324 for the payment of the tax. For exemption of certain property
from levy, see section 6334 and the regulations thereunder. As used in
section 6331 and this section, the term ``tax'' includes any interest,
additional amount, addition to tax, or assessable penalty, together with
costs and expenses. Property subject to a Federal tax lien which has
been sold or otherwise transferred by the taxpayer may be seized while
in the hands of the transferee or any subsequent transferee. However,
see provisions under sections 6323 and 6324 (a)(2) and (b) for
protection of certain transferees against a Federal tax lien. Levy may
be made by serving a notice of levy on any person in possession of, or
obligated with respect to, property or rights to property subject to
levy, including receivables, bank accounts, evidences of debt,
securities, and salaries, wages, commissions, or other compensation. A
levy on a bank reaches any interest that accrues on the taxpayer's
balance under the terms of the bank's agreement with the depositor
during the 21-day holding period provided for in section 6332(c). Except
as provided in Sec. 301.6331-1(b)(1) with regard to a levy on salary or
wages, a levy extends only to property possessed and obligations which
exist at the time of the levy. Obligations exist when the liability of
the obligor is fixed and determinable although the right to receive
payment thereof may be deferred until a later date. For example, if on
the first day of the month a delinquent taxpayer sold personal property
subject to an agreement that the buyer remit the purchase price on the
last day of the month, a levy made on the buyer on the 10th day of the
month would reach the amount due on the sale, although the buyer need
not satisfy the levy by paying over the amount to the district director
until the last day of the month. Similarly, a levy only reaches property
in the possession of the person levied upon at the time the levy is made
together with interest that accrues during the 21-day holding period
provided for in section 6332(c). For example, a levy made on a bank with
respect to the account of a delinquent taxpayer is satisfied if the bank
surrenders the amount of the taxpayer's balance at the time the levy is
made. The levy has no effect upon any subsequent deposit made in the
bank by the taxpayer. Subsequent deposits may be reached only by a
subsequent levy on the bank.
(2) Jeopardy cases. If the district director finds that the
collection of any tax is in jeopardy, he or she may make notice and
demand for immediate payment of such tax and, upon failure or refusal to
pay such tax, collection thereof by levy shall be lawful without regard
to the 10-day period provided in
[[Page 220]]
section 6331(a), the 30-day period provided in section 6331(d), or the
limitation on levy provided in section 6331(g)(1).
(3) Bankruptcy or receivership cases. During a bankruptcy proceeding
or a receivership proceeding in either a Federal or a State court, the
assets of the taxpayer are in general under the control of the court in
which such proceeding is pending. Taxes cannot be collected by levy upon
assets in the custody of a court, whether or not such custody is
incident to a bankruptcy or receivership proceeding, except where the
proceeding has progressed to such a point that the levy would not
interfere with the work of the court or where the court grants
permission to levy. Any assets which under applicable provisions of law
are not under the control of the court may be levied upon, for example,
property exempt from court custody under State law or the bankrupt's
earnings and property acquired after the date of bankruptcy. However,
levy upon such property is not mandatory and the Government may rely
upon payment of taxes in the proceeding.
(4) Certain types of compensation-- (i) Federal employees. Levy may
be made upon the salary or wages of any officer or employee (including
members of the Armed Forces), or elected or appointed official, of the
United States, the District of Columbia, or any agency or
instrumentality of either, by serving a notice of levy on the employer
of the delinquent taxpayer. As used in this subdivision, the term
``employer'' means (a) the officer or employee of the United States, the
District of Columbia, or of the agency or instrumentality of the United
States or the District of Columbia, who has control of the payment of
the wages, or (b) any other officer or employee designated by the head
of the branch, department, agency, or instrumentality of the United
States or of the District of Columbia as the party upon whom service of
the notice of levy may be made. If the head of such branch, department,
agency or instrumentality designates an officer or employee other than
one who has control of the payment of the wages, as the party upon whom
service of the notice of levy may be made, such head shall promptly
notify the Commissioner of the name and address of each officer or
employee so designated and the scope or extent of his authority as such
designee.
(ii) State and municipal employees. Salaries, wages, or other
compensation of any officer, employee, or elected or appointed official
of a State or Territory, or of any agency, instrumentality, or political
subdivision thereof, are also subject to levy to enforce collection of
any Federal tax.
(iii) Seamen. Notwithstanding the provisions of section 12 of the
Seamen's Act of 1915 (46 U.S.C. 601), wages of seamen, apprentice
seamen, or fishermen employed on fishing vessels are subject to levy.
See section 6334(c).
(5) Noncompetent Indians. 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.
(b) Continuing levies and successive seizures--(1) Continuing effect
of levy on salary and wages. A levy on salary or wages has continuous
effect from the time the levy originally is made until the levy is
released pursuant to section 6343. For this purpose, the term salary or
wages includes compensation for services paid in the form of fees,
commissions, bonuses, and similar items. The levy attaches to both
salary or wages earned but not yet paid at the time of the levy,
advances on salary or wages made subsequent to the date of the levy, and
salary or wages earned and becoming payable subsequent to the date of
the levy, until the levy is released pursuant to section 6343. In
general, salaries or wages that are the subject of a continuing levy and
are not exempt from levy under section 6334(a)(8) or (9), are to be paid
to the district director, the service center director, or the compliance
center director (director) on the same date the payor would otherwise
pay over the money to the taxpayer. For example, if an individual
normally is paid on the Wednesday following the close of each work week,
a levy made upon his or her employer on any Monday would apply to both
wages due for the prior work
[[Page 221]]
week and wages for succeeding work weeks as such wages become payable.
In such a case, the levy would be satisfied if, on the first Wednesday
after the levy and on each Wednesday thereafter until the employer
receives a notice of release from levy described in section 6343, the
employer pays over to the director wages that would otherwise be paid to
the employee on such Wednesday (less any exempt amount pursuant to
section 6334).
(2) Successive seizures. Whenever any property or rights to property
upon which a levy has been made are not sufficient to satisfy the claim
of the United States for which the levy is made, the district director
may thereafter, and as often as may be necessary, proceed to levy in
like manner upon any other property or rights to property subject to
levy of the person against whom such claim exists or on which there is a
lien imposed by section 6321 or 6324 (or the corresponding provision of
prior law) for the payment of such claim until the amount due from such
person, together with all costs and expenses, is fully paid.
(c) Service of notice of levy by mail. A notice of levy may be
served by mailing the notice to the person upon whom the service of a
notice of levy is authorized under paragraph (a)(1) of this section. In
such a case the date and time the notice is delivered to the person to
be served is the date and time the levy is made. If the notice is sent
by certificated mail, return receipt requested, the date of delivery on
the receipt is treated as the date the levy is made. If, after receipt
of a notice of levy, an officer or other person authorized to act on
behalf of the person served signs and notes the date and time of receipt
on the notice of levy, the date and time so the contrary, the date and
time of delivery.
Any person may, upon written notice to the district director having
audit jurisdiction over such person, have all notices of levy by mail
sent to one designated office. After such a notice is received by the
district director, notices of levy by mail will be sent to the
designated office until a written notice withdrawing the request or a
written notice designating a different office is received by the
district director.
(d) Effective date. These regulations are effective December 10,
1992.
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7139, 36 FR 15041, Aug.
12, 1971; T.D. 7620, 44 FR 27987, May 14, 1979; T.D. 7874, 48 FR 10061,
Mar. 10, 1983; T.D. 8558, 59 FR 38903, Aug. 1, 1994]
Sec. 301.6331-2 Procedures and restrictions on levies.
(a) Notice of intent to levy--(1) In general. Levy may be made upon
the salary, wages, or other property of a taxpayer for any unpaid tax no
less than 30 days after the district director, the service center
director, or the compliance center director (director) has notified the
taxpayer in writing of the intent to levy. The notice must be given in
person, be left at the dwelling or usual place of business of the
taxpayer, or be sent by registered or certified mail to the taxpayer's
last known address. The notice of intent to levy is separate from, but
may be given at the same time as, the notice and demand described in
Sec. 301.6331-1.
(2) Content of Notice. The notice of intent to levy is to contain a
brief statement in nontechnical terms including the following
information--
(i) The Internal Revenue Code provisions and the procedures relating
to levy and sale of property;
(ii) The administrative appeals available with respect to the levy
and sale of property and the procedures relating to such appeals;
(iii) The alternatives available that could prevent levy on the
property (including the use of an installment agreement under section
6159); and
(iv) The Internal Revenue Code provisions and the procedures
relating to redemption of property and release of liens on property.
(b) Uneconomical levy--(1) In general. No levy may be made on
property if the director estimates that the anticipated expenses with
respect to the levy and sale will exceed the fair market value of the
property. The estimate is to be made on an aggregate basis for all of
the items that are anticipated to be seized pursuant to the levy.
Generally, no levy should be made on individual items of insignificant
monetary value. For the definition of fair market value, see
Sec. 301.6325-1(b)(1)(i). See Sec. 301.6341-1
[[Page 222]]
concerning the expenses of levy and sale.
(2) Time of estimate. The estimate, which may be formal or informal,
is to be made at the time of the seizure or within a reasonable period
of time prior to a seizure. The estimate may be based on earlier
estimates of fair market value and anticipated expenses of the same or
similar property.
(3) Examples. The following examples illustrate the application of
this paragraph (b):
Example 1. A director anticipates that the taxpayer has only one
item of property that can be seized and sold. This item is estimated to
have a fair market value of $250.00. The director also estimates that
the costs of seizure and sale will total $300.00 if this item is seized.
The director is prohibited from levying on this one item of the
taxpayer's property because the costs of seizure and sale are estimated
to exceed the property's fair market value.
Example 2. The facts are the same as in Example 1 except that the
director anticipates that the taxpayer has 10 items of property that can
be seized and sold. Each of those items is estimated to have a fair
market value of $250.00. The director also estimates that the costs of
seizure and sale will total $300.00 regardless of how many of those
items are seized. The director is prohibited from levying on only one
item of the taxpayer's property because the costs of seizure and sale
are estimated to exceed the fair market value of the single item of
property. The director, however, would not be prohibited from levying on
two or more items of the taxpayer's property because the aggregate fair
market value of the seized property would exceed the estimated costs of
seizure and sale.
Example 3. The taxpayer has three items of property, A, B, and C.
The director anticipates that the value of items A, B, and C depends on
their being sold as a unit. The director estimates that due to high
anticipated costs of storing or maintaining item B prior to the sale,
the aggregate fair market value of items A, B, and C will not exceed the
anticipated expenses of seizure and sale if all three items are seized.
Accordingly, the director is prohibited from levying on items A, B, and
C.
Example 4. The facts are the same as in Example 3 except that the
director does not anticipate that the value of items A, B, and C depends
on those items being sold as a unit. If the director estimates that the
aggregate fair market value of items A and C exceeds the aggregate
anticipated costs of the seizure and sale of those two items, items A
and C can be seized and sold. The director is prohibited from levying on
item B because the high cost of storing or maintaining item B is
estimated to exceed the fair market value of item B.
(c) Restriction on levy on date of appearance. Except for continuing
levies on salaries or wages described in Sec. 301.6331-1(b)(1), no levy
may be made on any property of a person on the day that person, or an
officer or employee of that person, is required to appear in response to
a summons served for the purpose of collecting any underpayment of tax
from that person. For purposes of this paragraph (c), the date on which
an appearance is required is the date fixed by an officer or employee of
the Internal Revenue Service pursuant to section 7605 or the date (if
any) fixed as the result of a judicial proceeding instituted under
sections 7604 and 7402(b) seeking the enforcement of the summons.
(d) Jeopardy. Paragraphs (a) and (c) of this section do not apply to
a levy if the director finds, for purposes of Sec. 301.6331-1(a)(2),
that the collection of tax is in jeopardy.
(e) Effective date. These regulations are effective December 10,
1992.
[T.D. 8558, 59 FR 38903, Aug. 1, 1994]
Sec. 301.6332-1 Surrender of property subject to levy.
(a) Requirement--(1) In general. Except as otherwise provided in
Sec. 301.6332-2, relating to levy in the case of life insurance and
endowment contracts, and in Sec. 301.6332-3, relating to property held
by banks, any person in possession of (or obligated with respect to)
property or rights to property subject to levy and upon which a levy has
been made shall, upon demand of the district director, surrender the
property or rights (or discharge the obligation) to the district
director, except that part of the property or rights (or obligation)
which, at the time of the demand, is actually or constructively under
the jurisdiction of a court because of an attachment or execution under
any judicial process.
(2) Levy on bank deposits held in offices outside the United States.
Notwithstanding subparagraph (1) of this paragraph (a), if a levy has
been made upon property or rights to property subject to levy which a
bank engaged in the banking business in the United States or a
[[Page 223]]
possession of the United States is in possession of (or obligated with
respect to), the Commissioner shall not enforce the levy with respect to
any deposits held in an office of the bank outside the United States or
a possession of the United States, unless the notice of levy specifies
that the district director intends to reach such deposits. The notice of
levy shall not specify that the district director intends to reach such
deposits unless the district director believes--
(i) That the taxpayer is within the jurisdiction of a U.S. court at
the time the levy is made and that the bank is in possession of (or
obligated with respect to) deposits of the taxpayer in an office of the
bank outside the United States or a possession of the United States; or
(ii) That the taxpayer is not within the jurisdiction of a U.S.
court at the time the levy is made, that the bank is in possession of
(or obligated with respect to) deposits of the taxpayer in an office
outside the United States or a possession of the United States, and that
such deposits consist, in whole or in part, of funds transferred from
the United States or a possession of the United States in order to
hinder or delay the collection of a tax imposed by the Code. For
purposes of this subparagraph, the term ``possession of the United
States'' includes Guam, the Midway Islands, the Panama Canal Zone, the
Commonwealth of Puerto Rico, American Samoa, the Virgin Islands, and
Wake Island.
(b) Enforcement of levy--(1) Extent of personal liability. Any
person who, upon demand of the district director, fails or refuses to
surrender any property or right to property subject to levy is liable in
his own person and estate in a sum equal to the value of the property or
rights not so surrendered, together with costs and interest. The
liability, however, may not exceed the amount of the taxes for the
collection of which the levy was made. Interest is to be computed at the
annual rate referred to in regulations under section 6621 from the date
of the levy, or, in the case of a continuing levy on salary or wages
(see section 6331(d)(3)), from the date the person would otherwise have
been obligated to pay over the wages or salary to the taxpayer. Any
amount recovered, other than cost, will be credited against the tax
liability for the collection of which the levy was made.
(2) Penalty for violation. In addition to the personal liability
described in subparagraph (1) of this paragraph (b), any person who is
required to surrender property or rights to property and who fails or
refuses to surrender them without reasonable cause is liable for a
penalty equal to 50 percent of the amount recoverable under section
6332(d)(1). No part of the penalty described in this subparagraph shall
be credited against the tax liability for the collection of which the
levy was made. The penalty described in this subparagraph is not
applicable in cases where bona fide dispute exists concerning the amount
of the property to be surrendered pursuant to a levy or concerning the
legal effectiveness of the levy. However, if a court in a later
enforcement suit sustains the levy, then reasonable cause would usually
not exist to refuse to honor a later levy made under similar
circumstances.
(c) Effect of honoring levy--(1) In general. Any person in
possession of, or obligated with respect to, property or rights to
property subject to levy and upon which a levy has been made who, upon
demand by the district director, surrenders the property or rights to
property, or discharges the obligation, to the district director, or who
pays a liability described in paragraph (b)(1) of this section, is
discharged from any obligation or liability to the delinquent taxpayer
and any other person with respect to the property or rights to property
arising from the surrender or payment.
(2) Exception for certain incorrectly surrendered property. Any
person who surrenders to the Internal Revenue Service property or rights
to property not properly subject to levy in which the delinquent
taxpayer has no apparent interest is not relieved of liability to a
third party who has an interest in the property. However, if the
delinquent taxpayer has an apparent interest in property or rights to
property, a person who makes a good faith determination that such
property or rights to property in his or her possession has been levied
upon by the Internal Revenue
[[Page 224]]
Service and who surrenders the property to the United States in response
to the levy is relived of liability to a third party who has an interest
in the property or rights to property, even if it is subsequently
determined that the property was not properly subject to levy.
(3) Remedy. In situations described in paragraphs (c)(1) and (c)(2)
of this section, taxpayers and third parties who have an interest in
property surrendered in response to a levy may secure from the Internal
Revenue Service the administrative relief provided for in section
6343(b) or may bring suit to recover the property under section 7426.
(4) Examples. The provisions of this paragraph (c) may be
illustrated by the following examples:
Example 1. M Bank is served with a notice of levy for an unpaid tax
liability due from A in the amount of $2,000. M Bank holds $2,000 in a
checking account in the names of A or B or C. Although all of the
deposits into the account were made by B and C, A has an unrestricted
right to withdraw the funds from the account. M Bank surrenders the
entire account to the district director at the end of the holding period
provided in section 6332(c). Under paragraph (c)(1) of this section, M
Bank is not liable to B or C for any amount, even if B or C prove that
the funds in the account did not belong to A, because A's unrestricted
right to withdraw the funds is an interest which in subject to levy. B
or C may, however, seek the return of the funds from the United States
as provided in sections 6343(b) and 7426 of the Internal Revenue Code.
Example 2. A is indebted to B for $400. Unbeknownst to A, B has
assigned his right to receive payment to C. A is served with a notice of
levy for an unpaid tax liability due from B for $400. A, acting with no
knowledge of the assignment to C, surrenders $400 to the district
director. A is discharged from his obligation to pay B, the taxpayer.
Under paragraph (c)(2) of this section, because B had an apparent
interest in the funds that A owed to B, and because A determined in good
faith that those funds had been levied upon, A is also discharged from
any liability to C, even though the money is not properly subject to
levy. C may, however, seek return of the payment from the United States
as provided in sections 6343(b) and 7426 of the Internal Revenue Code.
Example 3. M Bank is served with a notice of levy for an unpaid tax
liability due from ``John H. Smith, Sr.'' in the amount of $5,000. M
Bank fails to read the notice of levy carefully. When searching its
records, M Bank finds the name of ``John H. Smith, Jr.'' and looks no
further. M Bank surrenders $5,000 from John H. Smith, Jr.'s checking
account to the district director. M Bank is not discharged from
liability under section 6332(e) of the Internal Revenue Code because the
delinquent taxpayer (John H. Smith, Sr.) had no apparent interest in the
account of John H. Smith, Jr. (Generally, John H. Smith Jr. may seek
return of the payment from the United States as provided in sections
6343 and 7426 of the Internal Revenue Code.)
Example 4. M Bank is served with a notice of levy for an unpaid tax
liability due from ``Robert A. Jones'' in the amount of $5,000. M Bank
searches its records and identifies four separate accounts of $1,000
each in the name of ``Robert A. Jones.'' All four accounts list
different addresses and social security identification numbers. M Bank
surrenders all four accounts totalling $4,000 in response to the levy. M
Bank could not in good faith have determined that all four accounts were
levied upon. Therefore, M Bank is not discharged from liability to any
person other than the taxpayer whose account was levied upon.
(5) Effective date. Paragraph (c) of this section is effective
January 11, 1993. However, persons surrendering property to the Internal
Revenue Service may rely on the regulations with respect to levies
issued after November 10, 1988.
(d) Person defined. The term ``person,'' as used in section 6332(a)
and this section, includes an officer or employee of a corporation or a
member or employee of a partnership, who is under a duty to surrender
the property or rights to property or to discharge the obligation. In
the case of a levy upon the salary or wages of an officer, employee, or
elected or appointed official of the United States, the District of
Columbia, or any agency or instrumentality of either, the term
``person'' includes the officer or employee of the United States, of the
District of Columbia, or of such agency or instrumentality who is under
a duty to discharge the obligation. As to the officer or employee who is
under such duty, see paragraph (a)(4)(i) of Sec. 301.6331-1.
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7180, 37 FR 7317, Apr.
13, 1972; T.D. 7620, 44 FR 27988, May 14, 1979; T. D. 8466, 58 FR 17,
Jan. 4, 1993; T. D.8467, 58 FR 3829, Jan. 12, 1993]
[[Page 225]]
Sec. 301.6332-2 Surrender of property subject to levy in the case of life insurance and endowment contracts.
(a) In general. This section provides special rules relating to the
surrender of property subject to levy in the case of life insurance and
endowment contracts. The provisions of Sec. 301.6332-1 which relate
generally to the surrender of property subject to levy apply, to the
extent not inconsistent with the special rules set forth in this
section, to a levy in the case of life insurance and endowment
contracts.
(b) Effect of service of notice of levy--(1) In general. A notice of
levy served by a district director on an insuring organization with
respect to a life insurance or endowment contract issued by the
organization shall constitute--
(i) A demand by the district director for the payment of the cash
loan value of the contract adjusted in accordance with paragraph (c) of
this section, and
(ii) The exercise of the right of the person against whom the tax is
assessed to the advance of such cash loan value. It is unnecessary for
the district director to surrender the contract document to the insuring
organization upon which the levy is made. However, the notice of levy
will include a certification by the district director that a copy of the
notice of levy has been mailed to the person against whom the tax is
assessed at his last known address. At the time of service of the notice
of levy, the levy is effective with respect to the cash loan value of
the insurance contract, subject to the condition that if the levy is not
satisfied or released before the 90th day after the date of service, the
levy can be satisfied only by payment of the amount described in
paragraph (c) of this section. Other than satisfaction or release of the
levy, no event during the 90-day period subsequent to the date of
service of the notice of levy shall release the cash loan value from the
effect of the levy. For example, the termination of the policy by the
taxpayer or by the death of the insured during such 90-day period shall
not release the levy. For the rules relating to the time when the
insuring organization is to pay over the required amount, see paragraph
(c) of this section.
(2) Notification of amount subject to levy--(i) Full payment before
the 90th day. In the event that the unpaid liability to which the levy
relates is satisfied at any time during the 90-day period subsequent to
the date of service of the notice of levy, the district director will
promptly give the insuring organization written notification that the
levy is released.
(ii) Notification after the 90th day. In the event that notification
is not given under subdivision (i) of this subparagraph, the district
director will, promptly following the 90th day after service of the
notice of levy, give the insuring organization written notification of
the current status of all accounts listed on the notice of levy, and of
the total payments received since service of the notice of levy. This
notification will be given to the insuring organization whether or not
there has been any change in the status of the accounts.
(c) Satisfaction of levy--(1) In general. The levy described in
paragraph (b) of this section with respect to a life insurance or
endowment contract shall be deemed to be satisfied if the insuring
organization pays over to the district director the amount which the
person against whom the tax is assessed could have had advanced to him
by the organization on the 90th day after service of the notice of levy
on the organization. However, this amount is increased by the amount of
any advance (including contractual interest thereon), generally called a
policy loan, made to the person on or after the date the organization
has actual notice or knowledge, within the meaning of section
6323(i)(1), of the existence of the tax lien with respect to which the
levy is made. The insuring organization may, nevertheless, make an
advance (including contractual interest thereon), generally called an
automatic premium loan, made automatically to maintain the contract in
force under an agreement entered into before the organization has such
actual notice or knowledge. In any event, the amount paid to the
district director by the insuring organization is not to exceed the
amount of the unpaid liability shown on the notification described in
paragraph (b)(2) of this section. The
[[Page 226]]
amount, determined in accordance with the provisions of this section,
subject to the levy shall be paid to the district director by the
insuring organization promptly after receipt of the notification
described in paragraph (b)(2) of this section. The satisfaction of a
levy with respect to a life insurance or endowment contract will not
discharge the contract from the tax lien. However, see section
6323(b)(9)(C) and the regulations thereunder concerning the liability of
an insurance company after satisfaction of a levy with respect to a life
insurance or endowment contract. If the person against whom the tax is
assessed so directs, the insuring organization, on a date before the
90th day after service of the notice of levy, may satisfy the levy by
paying over an amount computed in accordance with the provisions of this
subparagraph substituting such date for the 90th day. In the event of
termination of the policy by the taxpayer or by the death of the insured
on a date before the 90th day after service of the notice of levy, the
amount to be paid over to the district director by the insuring
organization in satisfaction of the levy shall be an amount computed in
accordance with the provisions of this subparagraph substituting the
date of termination of the policy or the date of death for the 90th day.
(2) Examples. The provisions of this section may be illustrated by
the following examples:
Example 1. On March 5, 1968, a notice of levy for an unpaid income
tax assessment due from A in the amount of $3,000 is served on the X
Insurance Company with respect to A's life insurance policy. On March 5,
1968, the cash loan value of the policy is $1,500. On April 9, 1968, A
does not pay a premium due on the policy in the amount of $200. Under an
automatic premium advance provision contained in the policy originally
issued in 1960, X advances the premium out of the cash value of the
policy. As of June 3, 1968 (the 90th day after service of the notice of
levy), pursuant to the provisions of the policy, the amount of accrued
charges upon the automatic premium advance in the amount of $200 for the
period April 9, 1968, through June 3, 1968, is $2. On June 5, 1968, the
district director gives written notification to X indicating that A's
unpaid tax assessment is $2,500. Under this section, X is required to
pay to the district director, promptly after receipt of the June 5,
1968, notification, the sum of $1,298 ($1,500 less $200 less $2), which
is the amount A could have had advanced to him by X on June 3, 1968.
Example 2. Assume the same facts as in example 1 except that on May
10, 1968, A requests and X grants an advance in the amount of $1,000. X
has actual notice of the existence of the lien by reason of the service
of the notice of levy on March 5, 1968. This advance is not required to
be made automatically under the policy and reduces the amount of the
cash value of the policy. For the use of the $1,000 advance during the
period May 10, 1968, through June 3, 1968, X charges A the sum of $3.
Under this section, X is required to pay to the district director,
promptly after receipt of the June 5, 1968, notification, the sum of
$1,298. This $1,298 amount is composed of the $295 amount ($1,500 less
$200 less $2 less $1,000 less $3) A could have had advanced to him by X
on June 3, 1968, plus the $1,000 advance plus the charges in the amount
of $3 with respect thereto.
Example 3. Assume the same facts as in example 1 except that the
insurance contract does not contain an automatic premium advance
provision. The contract does provide that, upon default in the payment
of premiums, the policy shall automatically be converted to paid-up term
insurance with no cash or loan value. A fails to make the premium
payment of $200 due on April 9, 1968. After expiration of a grace period
to make the premium payment, the X Insurance Company applies the cash
loan value of $1,500 to effect the conversion. Since the service of the
notice of levy constitutes the exercise of A's right to receive the cash
loan value and the amount applied to effect the conversion is not an
automatic advance to A to maintain the policy in force, the conversion
of the policy is not an event which will release the cash loan value
from the effect of the levy. Therefore, X Insurance Company is required
to pay to the district director, promptly after receipt of the June 5,
1968 notification, the sum of $1,500.
(d) Other enforcement proceedings. The satisfaction of the levy
described in paragraph (b) of this section by an insuring organization
shall be without prejudice to any civil action for the enforcement of
any Federal tax lien with respect to a life insurance or endowment
contract. Thus, this levy procedure is not the exclusive means of
subjecting the life insurance and endowment contracts of the person
against whom a tax is assessed to the collection of his unpaid
assessment. The United States may choose to foreclose the tax lien in
any case where it is appropriate, as, for example, to reach the
[[Page 227]]
cash surrender value (as distinguished from cash loan value) of a life
insurance or endowment contract.
(e) Cross references. (1) For provisions relating to priority of
certain advances with respect to a life insurance or endowment contract
after satisfaction of a levy pursuant to section 6332(b), see section
6323(b)(9) and the regulations thereunder.
(2) For provisions relating to the issuance of a certificate of
discharge of a life insurance or endowment contract subject to a tax
lien, see section 6325(b) and the regulations thereunder.
[T.D. 7180, 37 FR 7317, Apr. 13, 1972]
Sec. 301.6332-3 The 21-day holding period applicable to property held by banks.
(a) In general. This section provides special rules relating to the
surrender, after 21 days, of deposits subject to levy which are held by
banks. The provisions of Sec. 301.6332-1 which relate generally to the
surrender of property subject to levy apply, to the extent not
inconsistent with the special rules set forth in this section, to a levy
on property held by banks.
(b) Definition of bank. For purposes of this section, the term
``bank'' means--
(1) A bank or trust company or domestic building and loan
association incorporated and doing business under the laws of the United
States (including laws relating to the District of Columbia) or of any
State, a substantial part of the business of which consists of receiving
deposits and making loans and discounts, or of exercising fiduciary
powers similar to those permitted to national banks under authority of
the Comptroller of the Currency, and which is subject by law to
supervision and examination by State or Federal authority having
supervision over banking institutions;
(2) Any credit union the member accounts of which are insured in
accordance with the provisions of title II of the Federal Credit Union
Act, 12 U.S.C. 1781 et seq.; and
(3) A corporation which, under the laws of the State of its
incorporation, is subject to supervision and examination by the
Commissioner of Banking or other officer of such State in charge of the
administration of the banking laws of such State.
(c) 21-day holding period--(1) In general. When a levy is made on
deposits held by a bank, the bank shall surrender such deposits (not
otherwise subject to an attachment or execution under judicial process)
only after 21 calendar days after the date the levy is made. The
district director may request an extension of the 21-day holding period
pursuant to paragraph (d)(2) of this section. During the prescribed
holding period, or any extension thereof, the levy shall be released
only upon notification to the bank by the district director of a
decision by the Internal Revenue Service to release the levy. If the
bank does not receive such notification from the district director
within the prescribed holding period, or any extension thereof, the bank
must surrender the deposits, including any interest thereon as
determined in accordance with paragraph (c)(2) of this section (up to
the amount of the levy), on the first business day after the holding
period, or any extension thereof, expires. See Sec. 301.6331-1(c) to
determine when a levy served by mail is made.
(2) Payment of interest on deposits. When a bank surrenders levied
deposits at the end of the 21-day holding period (or at the end of any
longer period that has been requested by the district director), the
bank must include any interest that has accrued on the deposits prior to
and during the holding period, and any extension thereof, under the
terms of the bank's agreement with its depositor, but the bank must not
surrender an amount greater than the amount of the levy. If the deposits
are held in a noninterest bearing account at the time the levy is made,
the bank need not include any interest on the deposits at the end of the
holding period, or any extension thereof, under this paragraph. Interest
that accrues on deposits and is surrendered to the district director at
the end of the holding period, or any extension thereof, is treated as a
payment to the bank's customer.
(3) Transactions affecting accounts. A levy on deposits held by a
bank applies to those funds on deposit at the time the levy is made, up
to the amount of the levy, and is effective as of the time
[[Page 228]]
the levy is made. No withdrawals may be made on levied upon deposits
during the 21-day holding period, or any extension thereof.
(4) Waiver of 21-day holding period. A depositor may waive the 21-
day holding period by notifying the bank of the depositor's intention to
do so. Where more than one depositor is listed as the owner of a levied
account, all depositors listed as owners of the account must agree to a
waiver of the 21-day holding period. If the 21-day holding period is
waived, the bank must include with the surrendered deposits a
notification to the district director of the waiver.
(5) Examples. The provisions of this paragraph (c) may be
illustrated by the following examples:
Example 1. On April 2, 1992, a notice of levy for an unpaid income
tax assessment due from A in the amount of $10,000 is served on X Bank
with respect to A's savings account. At the time the notice of levy is
served, X Bank holds $5,000 in A's interest-bearing savings account. On
April 24, 1992, (the first business day after the 21-day holding period)
X Bank must surrender $5,000 plus any interest that accrued on the
account under the terms of A's contract with X Bank up through April 23,
1992, (the last day of the holding period).
Example 2. The facts are the same as in Example 1 except that on
April 3, 1992, A deposits an additional $5,000 into the account. On
April 24, 1992, X Bank must still surrender only $5,000 plus the
interest which accrued thereon until the end of the holding period,
because the notice of levy served on April 2, 1992, attached only to
those funds on deposit at the time the notice was served and not to any
subsequent deposits.
Example 3. The facts are the same as in Example 1 except that at the
time the notice of levy is served on X Bank, A's savings account
contains $50,000. On April 24, 1992, X Bank must surrender $10,000,
which is the amount of the levy. The levy will not apply to any interest
that accrues on the deposit during the 21-day holding period, because
the entire amount of the levy is satisfied by the deposits existing at
the time the levy is served.
Example 4. The facts are the same as in Example 1 except that the
amount of the levy is $5,002. Under the terms of A's contract with the
bank, the account will earn more than $2 of interest during the 21-day
holding period. On April 24, 1992, X Bank must surrender $5,002 to the
district director. The remaining interest which accrued during the 21-
day holding period is not subject to the levy.
Example 5. On September 3, 1992, A opens a $5,000 six-month
certificate of deposit account with X Bank. Under the terms of the
account, the depositor must forfeit up to 30 days of interest on the
account in the event of early withdrawal. On January 4, 1993, a notice
of levy for an unpaid income tax assessment due from A in the amount of
$10,000 is served with respect to A's certificate of deposit account. On
January 26, 1993, the bank must surrender $5,000 plus the interest which
accrued on the account through January 25, 1993, minus the penalty of 30
days of interest as provided in the deposit agreement.
Example 6. Same facts as in Example 5 except that the notice of levy
is served on X Bank on February 15, 1993. The certificate matures on
March 2, 1993. On March 8, X Bank must surrender $5,000 plus the
interest that accrued on the certificate without any reduction for
penalties.
(d) Notification to the district director of errors with respect to
levied upon bank accounts--(1) In general. If a depositor believes that
there is an error with respect to the levied upon account which the
depositor wishes to have corrected, the depositor shall notify the
district director to whom the assessment is charged by telephone to the
telephone number listed on the face of the notice of levy in order to
enable the district director to conduct an expeditious review of the
alleged error. The district director may require any supporting
documentation necessary to the review of the alleged error. The
notification by telephone provided for in this section does not
constitute or substitute for the filing by a third party of a written
request under Sec. 301.6343-1(b)(2) for the return of property
wrongfully levied upon.
(2) Disputes regarding the merits of the underlying assessment. This
section does not constitute an additional procedure for an appeal
regarding the merits of an underlying assessment. However, if in the
judgment of the district director a genuine dispute regarding the merits
of an underlying assessment appears to exist, the district director may
request an extension of the 21-day holding period.
(3) Notification of errors from sources other than the depositor.
The district director may take action to release the levy on the bank
account based on information obtained from a source other than the
depositor, including the bank in which the account is maintained.
[[Page 229]]
(e) Effective date. These provisions are effective with respect to
levies issued on or after January 4, 1993.
[T. D. 8466, 58 FR 18, Jan. 4, 1993]
Sec. 301.6333-1 Production of books.
If a levy has been made or is about to be made on any property or
rights to property, any person, having custody or control of any books
or records containing evidence or statements relating to the property or
rights to property subject to levy, shall, upon demand of the internal
revenue officer who has made or is about to make the levy, exhibit such
books or records to such officer.
Sec. 301.6334-1 Property exempt from levy.
(a) Enumeration. In addition to exemptions allowed as a matter of
Internal Revenue Service policy, there shall be exempt from levy--
(1) Wearing apparel and school books. Such items of wearing apparel
and such school books as are necessary for the taxpayer or for members
of his family. Expensive items of wearing apparel, such as furs, which
are luxuries and are not necessary for the taxpayer or for members of
his family, are not exempt from levy.
(2) Fuel, provisions, furniture, and personal effects. So much of
the fuel, provisions, furniture, and personal effects in the taxpayer's
household, and of the arms for personal use, livestock, and poultry of
the taxpayer, that does not exceed $2,500 in value.
(3) Books and tools of a trade, business or profession. So many of
the books and tools necessary for the trade, business, or profession of
an individual taxpayer as do not exceed in the aggregate $1,250 in
value.
(4) Unemployment benefits. Any amount payable to an individual with
respect to his unemployment (including any portion thereof payable with
respect to dependents) under an unemployment compensation law of the
United States, of any State, or of the District of Columbia or of the
Commonwealth of Puerto Rico.
(5) Undelivered mail. Mail, addressed to any person, which has not
been delivered to the addressee.
(6) Certain annuity and pension payments. Annuity or pension
payments under the Railroad Retirement Act (45 U.S.C. chapter 9),
benefits under the Railroad Unemployment Insurance Act (45 U.S.C.
chapter 11), special pension payments received by a person whose name
has been entered on the Army, Navy, Air Force, and Coast Guard Medal of
Honor roll (38 U.S.C. 562), and annuities based on retired or retainer
pay under chapter 73 of title 10 of the United States Code.
(7) Workmen's compensation. Any amount payable to an individual as
workmen's compensation (including any portion thereof payable with
respect to dependents) under a workmen's compensation law of the United
States, any State, the District of Columbia, or the Commonwealth of
Puerto Rico.
(8) Judgments for support of minor children. If the taxpayer is
required under any type of order or decree (including an interlocutory
decree or a decree of support pendente lite) of a court of competent
jurisdiction, entered prior to the date of levy, to contribute to the
support of his minor children, so much of his salary, wages, or other
income as is necessary to comply with such order or decree. The taxpayer
must establish the amount necessary to comply with the order or decree.
The district director is not required to release a levy until such time
as he is satisfied that the amount to be released from levy will
actually be applied in satisfaction of the support obligation. The
district director may make arrangements with a delinquent taxpayer to
establish a specific amount of such taxpayer's salary, wage, or other
income for each pay period which shall be exempt from levy. Any request
for such an arrangement shall be directed to the Chief, Special
Procedures Staff, for the internal revenue district in which the
taxpayer resides. Where the taxpayer has more than one source of income
sufficient to satisfy the support obligation imposed by the order or
decree, the amount exempt from levy may at the discretion of the
district director be allocated entirely to one salary, wage, or source
of other income or be apportioned between the several salaries, wages,
or other sources of income.
[[Page 230]]
(9) Minimum exemption for wages, salary, and other income. Amounts
payable to or received by the taxpayer as wages or salary for personal
services, or as other income, to the extent provided in Sec. 301.6334-2
through Sec. 301.6334-4.
(10) Certain service-connected disability payments. Any amount
payable to an individual as a service-connected (within the meaning of
section 101(16) of title 38, United States Code (U.S.C.)) disability
benefit under--
(i) Subchapters II (wartime disability compensation), III (wartime
death compensation), IV (peacetime disability compensation), V
(peacetime death compensation), or VI (general compensation provisions)
of chapter 11 of title 38, U.S.C.; or
(ii) Chapters 13 (dependency and indemnity compensation for service
commenced deaths), 21 (specially adapted housing for disabled veterans),
23 (burial benefits), 31 (vocational rehabilitation), 32 (post-Vietnam
era veterans' educational assistance), 34 (veterans' educational
assistance), 35 (survivors' and dependents' educational assistance), 37
(home, condominium, and mobile home loans), or 39 (automobiles and
adaptive equipment for certain disabled veterans and members of the
armed forces) of title 38, U.S.C.
(11) Certain public assistance payments. Any amount payable to an
individual as a recipient of public assistance under--
(i) Title IV or title XVI (relating to supplemental security income
for the aged, blind, and disabled) of the Social Security Act (42 U.S.C.
301 et seq.); or
(ii) State or local government public assistance or public welfare
programs for which eligibility is determined by a needs or income test.
(12) Assistance under Job Training Partnership Act. Any amount
payable to a participant under the Job Training Partnership Act (29
U.S.C. 1501 et. seq.) from funds appropriated pursuant to such Act.
(13) Principal residence exempt in absence of certain approval or
jeopardy. Except to the extent provided in section 6334(e), the
principal residence (within the meaning of section 1034) of the taxpayer
whose tax liability is being sought to be collected upon.
(b) Appraisal. The internal revenue officer seizing property of the
type described in section 6334(a) shall appraise and set aside to the
owner the amount of such property declared to be exempt. If the taxpayer
objects at the time of the seizure to the valuation fixed by the officer
making the seizure, such officer shall summon three disinterested
individuals who shall make the valuation.
(c) Other property. No other property or rights to property are
exempt from levy except the property specifically exempted by section
6334(a). No provision of a State law may exempt property or rights to
property from levy for the collection of any Federal tax. Thus, property
exempt from execution under State personal or homestead exemption laws
is, nevertheless, subject to levy by the United States for collection of
its taxes.
(d) Levy allowed on principal residence. The principal residence of
the taxpayer is not exempt from levy if--
(1) A district director or an assistant district director personally
approves, in writing, the levy on such property; or
(2) The district director determines that the collection of tax is
in jeopardy.
(e) Inflation adjustment. For any calendar year beginning after
December 31, 1997, each dollar amount referred to in paragraphs (a)(2)
and (3) of this section will be increased by an amount equal to the
dollar amount multiplied by the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year (substituting ``calendar
year 1996'' for ``calendar year 1992'' in section 1(f)(3)(B)). If any
dollar amount as adjusted is not a multiple of $10, the dollar amount
will be rounded to the nearest multiple of $10 (rounding up if the
amount is a multiple of $5).
(f) Effective date. Generally, these provisions are applicable with
respect to levies made on or after July 1, 1989. However, any reasonable
attempt by a taxpayer to comply with the statutory amendments addressed
by the regulations in this section prior to February 21, 1995, will be
considered as meeting the requirements of the regulations in this
section. In addition, paragraphs (a)(2), (3), (11)(i) and (e) of this
section
[[Page 231]]
are applicable with respect to levies issued after December 31, 1996.
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7180, 37 FR 7319, Apr.
13, 1972; T.D. 7182, 37 FR 7887, Apr. 21, 1972; T.D. 7620, 44 FR 27988,
May 14, 1979; T.D. 8568, 59 FR 53088, Oct. 21, 1994; T.D. 8725, 62 FR
39117, July 22, 1997]
Sec. 301.6334-2 Wages, salary, and other income.
(a) In general. Under section 6334 (a)(9) and (d) certain amounts
payable to or received by a taxpayer as wages, salary, or other income
are exempt from levy. This section describes the income of a taxpayer
that is eligible for the exemption from levy (paragraph (b) of this
section) and how exempt amounts are to be paid to the taxpayer
(paragraph (c) of this section). Section 301.6334-3 describes that sum
that will be exempt from levy for each of the taxpayer's pay periods.
Pay periods are described in Sec. 301.6334-3. For the amounts exempt
from levy, see Sec. 301.6334-3.
(b) Eligible taxpayer income. Only wages, salary, or other income
payable to the taxpayer after the levy is made on the payor may be
exempt from levy under section 6334(a)(9). No amount of wages, salary,
or other income that is paid to the taxpayer before levy is made on the
payor will be so exempt from levy under section 6334(a)(9). The
provisions of this paragraph (b) may be illustrated by the following
example:
Example. Delinquent taxpayer A, an individual, is employed by the M
Corporation and is paid wages on Friday of each week. Accordingly, A is
paid wages on Friday, February 16, 1990. On Saturday, February 17, A
deposits these wages into his personal checking account at Bank N. On
Tuesday, February 20, a notice of levy is served on the M Corporation
and also on Bank N. Amounts payable to A as wages on Friday, February
23, 1990, and any payday thereafter may be exempt from levy under
section 6334(a)(9). No amount of wages A deposited in his account at
Bank N on February 17, 1990, is exempt from levy under section
6334(a)(9).
(c) Payment of exempt amounts to taxpayer--(1) From wages, salary,
or income from other sources where levy on all sources not made. In the
case of a taxpayer who has more than one source of wages, salary, or
other income, the district director may elect to levy on only one or
more sources while leaving other sources of income free from levy. If
the wages, salary, or other income that the district director leaves
free from levy equal or exceed the amount to which the taxpayer is
entitled as an exemption from levy under section 6334(a)(9), computed in
accordance with Sec. 301.6334-3 (and are not otherwise exempt), the
district director may treat no amount of the taxpayer's wages, salary,
or other income on which the district director elects to levy as exempt
from levy. In such a case, the district director must notify the
employer or other person upon whom the levy is served that no amount of
the taxpayer's wages, salary, or other income is exempt from levy. The
employer or other person upon whom the levy is served may rely on such
notification in paying over amounts pursuant to the levy. In the absence
of such notification from the district director, however, the employer
or other person upon whom the levy is served must determine the amount
exempt from levy pursuant to Sec. 301.6334-3 as if that employer or
other person upon whom the levy is served is the only source of wages,
salary, or other income. Amounts not exempt from levy are to be paid to
the district director in accordance with the terms of the levy. The
provisions of this paragraph (c)(1) may be illustrated by the following
example:
Example. Delinquent taxpayer C is an employee of O Corporation and
is paid wages totalling $450 on Friday of each week. C also performs
services for P Corporation and is paid a salary of $250 on Friday of
each week. On Tuesday, February 20, 1990, a levy is served on O
Corporation with respect to the wages payable to C. A levy is not served
on P Corporation. C's filing status is single and C is entitled to 1
personal exemption. Under Sec. 301.6334-3, C is entitled to an exemption
from levy under 6334(a)(9) totalling $101.92 for each weekly pay period.
However, because levy has not been made on C's salary paid by the P
Corporation ($250 per week) and that salary exceeds the weekly amount
($101.92) to which C is entitled as exempt from levy, the district
director may treat no amount of C's wages paid by the O Corporation as
exempt from levy. If the district director requires such treatment, the
district director must notify O Corporation that no amount of C's wages
is exempt from levy and O Corporation may rely on such notification; in
the absence of such notification O Corporation must treat $101.92 as
exempt from levy.
[[Page 232]]
(2) Where sources not levied upon are less than exempt amount. If
the taxpayer's income upon which the district director does not levy is
less than the amount to which the taxpayer is entitled as exempt from
levy, then an additional amount, determined to be exempt from levy
pursuant to Sec. 301.6334-3, may be paid to the taxpayer from the
sources of wages, salary, or other income upon which levy has been made.
In such a case, the district director must designate those wages,
salary, or other income from which the exempt amount is to be paid to
the taxpayer, and must notify the employer or other person upon whom the
levy is served of the amount of the taxpayer's wages, salary, or other
income that is exempt from levy. The employer or other person may rely
on such notification in paying over amounts pursuant to the levy. In the
absence of such notification from the district director, the employer or
other person upon whom the levy is served must determine the amount
exempt from levy pursuant to Sec. 301.6334-3 as if that employer or
other person upon whom the levy is served is the only source of wages,
salary, or other income. Amounts not exempt from levy are to be paid to
the district director in accordance with the terms of the levy. The
provisions of this paragraph (c)(2) may be illustrated by the following
example:
Example. Delinquent taxpayer C is an employee of O Corporation and
is paid wages totalling $50 on Friday of each week. C also performs
services for P Corporation and is paid a salary of $75 on Friday of each
week. On Tuesday, February 20, 1990, a levy is served on P Corporation
with respect to the wages and salary of C. C's filing status is single
and C is entitled to 1 personal exemption. Under Sec. 301.6334-3, C is
entitled to an exemption from levy under section 6334(a)(9) totalling
$101.92 for each weekly pay period. The district director may notify P
Corporation that only $51.92 of C's wages is exempt from levy and P
Corporation may rely on such notification; in the absence of such
notification, P Corporation must treat the entire $75 salary as exempt
from levy.
(d) Effective date. These provisions are effective with respect to
levies made on or after July 1, 1989. However, any reasonable attempt by
a taxpayer to comply with the statutory amendments addressed by these
regulations prior to February 21, 1995 will be considered as meeting the
requirements of these regulations.
[T.D. 8568, 59 FR 53088, Oct. 21, 1994]
Sec. 301.6334-3 Determination of exempt amount.
(a) Individuals paid on weekly basis. In the case of any individual
who is paid or receives all of his or her wages, salary, and other
income on a weekly basis, the amount of wages, salary, and other income
payable to or received by him or her during any week that is exempt from
levy under section 6334(a)(9) is the exempt amount.
(b) Term defined. The term exempt amount means an amount equal to--
(1) The sum of--
(i) The standard deduction (including additional standard deductions
on account of age or blindness); and
(ii) The aggregate amount of the deductions for personal exemptions
allowed the taxpayer under section 151 in the taxable year in which such
levy occurs;
(2) Divided by 52.
(c) Written and properly verified statement. Unless the taxpayer
submits to the employer for forwarding to the district director a
written and properly verified statement (as described in Sec. 301.6334-
4) specifying the facts necessary to determine the proper amount under
paragraphs (b)(1) (i) and (ii) of this section, paragraphs (b)(1) (i)
and (ii) of this section must be applied as if the taxpayer were a
married individual filing a separate return with only 1 personal
exemption.
(d) Individuals paid on basis other than weekly--(1) In general. In
the case of an individual who is paid or receives wages, salary, and
other income other than on a weekly basis, the amount payable to that
individual during any applicable pay period that is exempt from levy
under section 6334(a)(9) is the amount that as nearly as possible will
result in the same total exemption from levy for such individual over
that period of time other than weekly as that to which the individual
would have been entitled under paragraph (b) of this section if, during
such period of time, the individual were paid or received such wages,
salary, and other income on a regular weekly basis.
[[Page 233]]
(2) Specific pay periods other than weekly. In the case of wages,
salary, or other income paid to an individual on the basis of an
established calendar period regularly used by the employer or other
person levied upon for payroll or payment purposes, the exempt amount of
wages, salary, and other income payable to or received by an individual
during an applicable pay period other than weekly equals--
(i) The sum of--
(A) The standard deduction (including additional standard deductions
on account of age or blindness); and
(B) The aggregate amount of the deductions for personal exemptions
allowed the taxpayer under section 151 in the taxable year in which such
levy occurs;
(ii) Divided by--
(A) 260 in the case of a daily pay period;
(B) 26 in the case of a bi-weekly pay period;
(C) 24 in the case of a semi-monthly pay period; and
(D) 12 in the case of a monthly pay period.
(3) Nonspecific pay periods. In the case of wages, salary, or other
income paid to an individual on a one-time or a recurrent but irregular
basis and which is not paid on the basis of an established calendar
period regularly used by the employer or other person levied upon for
payroll or payment purposes, the exempt amount of wages, salary, and
other income payable to or received by an individual equals the exempt
amount defined in paragraph (b) of this section multiplied by the number
(but not more than 52) of full weeks (consisting of seven calendar days)
to which such payment is attributable. The provisions of this paragraph
(d)(3) may be illustrated by the following example:
Example. Taxpayer A's exempt amount per week (as determined under
paragraph (b) of this section) is $100. Taxpayer A is hired by
Corporation X to perform a specific task for Corporation X at a flat fee
of $1,500 which is to be paid at the completion of the task. Taxpayer A
completes the task in 10 weeks. The total exempt amount is $1,000 and
$500 is subject to levy.
(e) Levies continuing into following years. The exempt amount is
computed on the basis of the standard deduction (including additional
standard deductions on account of age or blindness) for the taxpayer's
filing status and the amount of the deduction for a personal exemption
in effect in the taxable year in which the original notice of levy is
served. Unless the taxpayer submits a new verified statement in
accordance with Sec. 301.6334-4, the exempt amount remains the same for
pay periods following the pay period in which the notice of levy is
served even if there is a change in the taxpayer's factual situation or
a change by operation of law (such as by indexing or otherwise) to the
standard deduction or personal exemption amounts.
(f) Effective date. These provisions are effective with respect to
levies made on or after July 1, 1989. However, any reasonable attempt by
a taxpayer to comply with the statutory amendments addressed by these
regulations prior to February 21, 1995 will be considered as meeting the
requirements of these regulations.
[T.D. 8568, 59 FR 53089, Oct. 21, 1994]
Sec. 301.6334-4 Verified statements.
(a) In general. For purposes of Secs. 301.6334-2 and 301.6334-3, the
amount of wages, salary, or other income that is exempt from levy must
be determined on the basis of a written and properly verified statement
submitted by the taxpayer to his or her employer for submission to the
district director specifying the facts necessary to determine the
standard deduction and the aggregate amount of the deductions for
personal exemptions allowed the taxpayer under section 151 in the
taxable year in which the levy is served. In the absence of submission
of such statement, the amount that is exempt from levy must be
determined as if the taxpayer were a married individual filing a
separate return with only 1 personal exemption.
(b) Content of statement. The statement in paragraph (a) of this
section must be a written statement signed under penalty of perjury, and
dated, containing the following information--
(1) The filing status of the taxpayer as either:
(i) Single;
(ii) Married filing a joint return;
[[Page 234]]
(iii) Married filing a separate return;
(iv) Head of household; or
(v) Qualifying widow or widower with dependent child;
(2) The name, relationship, and Social Security Number of each
individual whom the taxpayer can claim as a personal exemption on the
taxpayer's income tax return; and
(3) Any additional standard deductions that the taxpayer can claim
on account of age (65 or older) or blindness on the taxpayer's income
tax return.
(c) Submission of verified statement--(1) Obligation of employer. An
employer upon whom a notice of levy for wages, salary, or other income
of a taxpayer is served must promptly notify the taxpayer of the fact
that a notice of levy has been served. Unless otherwise indicated on the
face of the notice of levy, the employer must request the taxpayer to
provide the employer with a written statement signed under penalty of
perjury, and dated, containing the information set forth in paragraph
(b) of this section, and this statement must be submitted by the
employer to the district director. The employer must submit this
statement to the district director at the time the employer first
responds to the notice of levy.
(2) Submission by taxpayer. The taxpayer must provide the employer
upon whom the notice of levy has been served with a verified statement
complying with paragraph (b) of this section. Unless the taxpayer
provides a verified statement, the amount that is exempt from levy must
be determined as if the taxpayer were a married individual filing a
separate return with only 1 personal exemption.
(3) Additional statements. A taxpayer may submit a verified
statement to his or her employer at any time. Except as otherwise
provided in paragraph (d) of this section, such verified statement will
be effective for any payment of wages, salary, or other income made
after the date of submission and will replace any previously submitted
verified statement. The employer must provide the district director with
the statement on the next occasion on which the employer responds to the
notice of levy.
(d) Effect of verified statement--(1) A verified statement submitted
by an employee is effective upon receipt by the employer, and the
employer is required to compute the exempt amount on the basis of the
information contained in the verified statement unless notified to the
contrary by the Internal Revenue Service.
(2) The Internal Revenue Service may find that a verified statement
submitted by an employee contains a materially incorrect statement, or
it may determine, after written request to the employee for verification
of information contained in the verified statement, that it lacks
sufficient information to determine whether the verified statement is
correct. If the Internal Revenue Service so finds or determines, and
notifies the employer in writing that the verified statement is
defective, upon receipt of such notice the employer shall consider the
verified statement to be defective for purposes of computing the exempt
amount.
(3) If the Internal Revenue Service notifies the employer that the
verified statement is defective, the Internal Revenue Service will,
based upon its finding, advise the employer that the employer is to
compute the exempt amount as if no verified statement had been submitted
by the employee or will describe upon what basis the exempt amount is to
be computed. The Internal Revenue Service will also specify which
Internal Revenue Service office to contact for further information.
(4) In addition to any notice furnished to the employer for the
employer's use, the Internal Revenue Service will provide the employer
with a copy for the employee of each notice it furnishes the employer.
(5) The employer must promptly furnish the employee with a copy of
any Internal Revenue Service notice with respect to a verified statement
submitted by the employee.
(6) Once paragraph (d)(3) of this section applies, the employer must
continue to compute the exempt amount on the basis of the written notice
from the Internal Revenue Service until the Internal Revenue Service by
written notice advises the employer to compute the exempt amount on the
basis of a new verified statement (as described
[[Page 235]]
in paragraph (d)(7) of this section) and revokes its earlier written
notice.
(7) Once paragraph (d)(3) of this section applies, the employee may
submit a new verified statement together with a written explanation of
any circumstances of the employee which have changed since the Internal
Revenue Service's earlier written notice, or any other circumstances or
reasons as justification or support for the claims made by the employee
on the new verified statement. The employee may submit the new verified
statement and written explanation either--
(i) To the Internal Revenue Service office specified in the notice
furnished to the employer under paragraph (d)(3) of this section; or
(ii) To the employer, who must forward the new verified statement
and written explanation to the Internal Revenue Service office specified
in the notice earlier furnished to the employer on the next occasion on
which the employer responds to the notice of levy.
(e) Effective date. These provisions are effective with respect to
levies made on or after July 1, 1989. However, any reasonable attempt by
a taxpayer to comply with the statutory amendments addressed by these
regulations prior to February 21, 1995 will be considered as meeting the
requirements of these regulations.
[T.D. 8568, 59 FR 53090, Oct. 21, 1994]
Sec. 301.6335-1 Sale of seized property.
(a) Notice of seizure. As soon as practicable after seizure of
property, the internal revenue officer seizing the property shall give
notice in writing to the owner of the property (or, in the case of
personal property, to the possessor thereof). The written notice shall
be delivered to the owner (or to the possessor, in the case of personal
property) or left at his usual place of abode or business if he has such
within the internal revenue district where the seizure is made. If the
owner cannot be readily located, or has no dwelling or place of business
within such district, the notice may be mailed to his last known
address. Such notice shall specify the sum demanded and shall contain,
in the case of personal property, a list sufficient to identify the
property seized and, in the case of real property, a description with
reasonable certainty of the property seized.
(b) Notice of sale. (1) As soon as practicable after seizure of the
property, the district director shall give notice of sale in writing to
the owner. Such notice shall be delivered to the owner or left at his
usual place of abode or business if located within the internal revenue
district where the seizure is made. If the owner cannot be readily
located, or has no dwelling or place of business within such district,
the notice may be mailed to his last known address. The notice shall
specify the property to be sold, and the time, place, manner, and
conditions of the sale thereof, and shall expressly state that only the
right, title, and interest of the delinquent taxpayer in and to such
property is to be offered for sale. The notice shall also be published
in some newspaper published in the county wherein the seizure is made or
in a newspaper generally circulated in that county. For example, if a
newspaper of general circulation in a county but not published in that
county will reach more potential bidders for the property to be sold
than a newspaper published within the county, or if there is a newspaper
of general circulation within the county but no newspaper published
within the county, the district director may cause public notice of the
sale to be given in the newspaper of general circulation within the
county. If there is no newspaper published or generally circulated in
the county, the notice shall be posted at the post office nearest the
place where the seizure is made, and in not less than two other public
places.
(2) The district director may use other methods of giving notice of
sale and of advertising seized property in addition to those referred to
in subparagraph (1) of this paragraph (b), when he believes that the
nature of the property to be sold is such that a wider or more
specialized advertising coverage will enhance the possibility of
obtaining a higher price for the property.
(3) Whenever levy is made without regard to the 10-day period
provided in section 6331(a) (relating to cases in
[[Page 236]]
which collection is in jeopardy), a public notice of sale of the
property seized shall not be made within such 10-day period unless
section 6336 (relating to perishable goods) is applicable.
(c) Time, place, manner, and conditions of sale. The time, place,
manner, and conditions of the sale of property seized by levy shall be
as follows:
(1) Time and place of sale. The time of sale shall not be less than
10 days nor more than 40 days from the time of giving public notice
under section 6335(b) (see paragraph (b) of this section). The place of
sale shall be within the county in which the property is seized, except
that if it appears to the district director under whose supervision the
seizure was made that substantially higher bids may be obtained for the
property if the sale is held at a place outside such county, he may
order that the sale be held in such other place. The sale shall be held
at the time and place stated in the notice of sale.
(2) Adjournment of sale. When it appears to the district director
that an adjournment of the sale will best serve the interest of the
United States or that of the taxpayer, the district director may
adjourn, or cause the internal revenue officer conducting the sale to
adjourn, the sale from time to time, but the date of the sale shall not
be later than one month after the date fixed in the original notice of
sale.
(3) Determinations relating to minimum price--(i) Minimum price.
Before the sale of property seized by levy, the district director shall
determine a minimum price, taking into account the expenses of levy and
sale, for which the property shall be sold. The internal revenue officer
conducting the sale may either announce the minimum price before the
sale begins, or defer announcement of the minimum price until after the
receipt of the highest bid, in which case, if the highest bid is greater
than the minimum price, no announcement of the minimum price shall be
made.
(ii) Purchase by the United States. Before the sale of property
seized by levy, the district director shall determine whether the
purchase of property by the United States at the minimum price would be
in the best interest of the United States. In determining whether the
purchase of property would be in the best interest of the United States,
the district director may consider all relevant facts and circumstances
including for example--
(a) Marketability of the property;
(b) Cost of maintaining the property;
(c) Cost of repairing or restoring the property;
(d) Cost of transporting the property;
(e) Cost of safeguarding the property;
(f) Cost of potential toxic waste cleanup; and
(g) Other factors pertinent to the type of property.
(iii) Effective date. This paragraph (c)(3) applies to
determinations relating to minimum price made on or after December 17,
1996.
(4) Disposition of property at sale--(i) Sale to highest bidder at
or above minimum price. If one or more persons offer to buy the property
for at least the amount of the minimum price, the property shall be sold
to the highest bidder.
(ii) Property deemed sold to United States at minimum price. If no
one offers at least the amount of the minimum price for the property and
the Secretary has determined that it would be in the best interest of
the United States to purchase the property for the minimum price, the
property shall be declared to be sold to the United States for the
minimum price.
(iii) Release to owner. If the property is not declared to be sold
under paragraph (c)(4)(i) or (ii) of this section, the property shall be
released to the owner of the property and the expense of the levy and
sale shall be added to the amount of tax for the collection of which the
United States made the levy. Any property released under this paragraph
(c)(4)(iii) shall remain subject to any lien imposed by subchapter C of
chapter 64 of subtitle F of the Internal Revenue Code.
(iv) Effective date. This paragraph (c)(4) applies to dispositions
of property at sale made on or after December 17, 1996.
(5) Offering of property--(i) Sale of indivisible property. If any
property levied upon is not divisible, so as to enable the district
director by sale of a part thereof to raise the whole amount of the tax
and expenses of levy and sale, the whole of such property shall be
[[Page 237]]
sold. For application of surplus proceeds of sale, see section 6342(b).
(ii) Separately, in groups, or in the aggregate. The seized property
may be offered for sale--
(a) As separate items, or
(b) As groups of items, or
(c) In the aggregate, or
(d) Both as separate items (or in groups) and in the aggregate. In
such cases, the property shall be sold under the method which produces
the highest aggregate amount.
The district director shall select whichever of the foregoing methods of
offering the property for sale as, in his opinion, is most feasible
under all the facts and circumstances of the case, except that if the
property to be sold includes both real and personal property, only the
personal property may be grouped for the purpose of offering such
property for sale. However, real and personal property may be offered
for sale in the aggregate, provided the real property, as separate
items, and the personal property as a group, or as groups, or as
separate items, are first offered separately.
(iii) Condition of title and of property. Only the right, title, and
interest of the delinquent taxpayer in and to the property seized shall
be offered for sale, and such interest shall be offered subject to any
prior outstanding mortgages, encumbrances, or other liens in favor of
third parties which are valid as against the delinquent taxpayer and are
superior to the lien of the United States. All seized property shall be
offered for sale ``as is'' and ``where is'' and without recourse against
the United States. No guaranty or warranty, express or implied, shall be
made by the internal revenue officer offering the property for sale, as
to the validity of the title, quality, quantity, weight, size, or
condition of any of the property, or its fitness for any use or purpose.
No claim shall be considered for allowance or adjustment or for
rescission of the sale based upon failure of the property to conform
with any representation, express or implied.
(iv) Terms of payment. The property shall be offered for sale upon
whichever of the following terms is fixed by the district director in
the public notice of sale:
(a) Payment in full upon acceptance of the highest bid, without
regard to the amount of such bid, or
(b) If the aggregate price of all property purchased by a successful
bidder at the sale is more than $200, an initial payment of $200 or 20
percent of the purchase price, whichever is the greater, and payment of
the balance (including all costs incurred for the protection or
preservation of the property subsequent to the sale and prior to final
payment) within a specified period, not to exceed 1 month from the date
of the sale.
(6) Method of sale. The district director shall sell the property
either--
(i) At public auction, at which open competitive bids shall be
received, or
(ii) At public sale under sealed bids. The following rules, in
addition to the other rules provided in this paragraph, shall be
applicable to public sale under sealed bids:
(a) Invitation to bidders. Bids shall be solicited through a public
notice of sale.
(b) Form for use by bidders. A bid shall be submitted on a form
which will be furnished by the district director upon request. The form
shall be completed in accordance with the instructions thereon.
(c) Remittance with bid. If the total bid is $200 or less, the full
amount of the bid shall be submitted therewith. If the total bid is more
than $200, 20 percent of such bid or $200, whichever is greater, shall
be submitted therewith. (In the case of alternative bids submitted by
the same bidder for items of property offered separately, or in groups,
or in the aggregate, the bidder shall remit the full amount of the
highest alternative bid submitted, if that bid is $200 or less. If the
highest alternative bid submitted is more than $200, the bidder shall
remit 20 percent of the highest alternative bid or $200, whichever is
greater.) Such remittance shall be by a certified, cashier's, or
treasurer's check drawn on any bank or trust company incorporated under
the laws of the United States or under the laws of any State, Territory,
or possession of the United States, or by a U.S. postal, bank, express,
or telegraph money order.
[[Page 238]]
(d) Time for receiving and opening bids. Each bid shall be submitted
in a securely sealed envelope. The bidder shall indicate in the upper
left hand corner of the envelope his name and address and the time and
place of sale as announced in the public notice of sale. A bid will not
be considered unless it is received by the internal revenue officer
conducting the sale prior to the opening of the bids. The bids will be
opened at the time and place stated in the notice of sale, or at the
time fixed in the announcement of the adjournment of the sale.
(e) Consideration of bids. The public notice of sale shall specify
whether the property is to be sold separately, by groups, or in the
aggregate or by a combination of these methods, as provided in
subparagraph (4)(ii) of this paragraph. If the notice specifies an
alternative method, bidders may submit bids under one or more of the
alternatives. In case of error in the extension of prices in any bid,
the unit price will govern. The internal revenue officer conducting the
sale shall have the right to waive any technical defects in a bid. In
the event two or more highest bids are equal in amount, the internal
revenue officer conducting the sale shall determine the successful
bidder by drawing lots. After the opening, examination, and
consideration of all bids, the internal revenue officer conducting the
sale shall announce the amount of the highest bid or bids and the name
of the successful bidder or bidders. Any remittance submitted in
connection with an unsuccessful bid shall be returned at the conclusion
of the sale.
(f) Withdrawal of bids. A bid may be withdrawn on written or
telegraphic request received from the bidder prior to the time fixed for
opening the bids. A technical defect in a bid confers no right on the
bidder for the withdrawal of his bid after it has been opened.
(7) Payment of bid price. All payments for property sold under this
section shall be made by cash or by a certified, cashier's, or
treasurer's check drawn on any bank or trust company incorporated under
the laws of the United States or under the laws of any State, Territory,
or possession of the United States, or by a U.S. postal, bank, express,
or telegraph money order. If payment in full is required upon acceptance
of the highest bid, the payment shall be made at such time. If deferred
payment is permitted, the initial payment shall be made upon acceptance
of the bid, and the balance shall be paid on or before the date fixed
for payment thereof. Any remittance submitted with a successful sealed
bid shall be applied toward the purchase price.
(8) Delivery and removal of personal property. Responsibility of the
United States for the protection or preservation of seized personal
property shall cease immediately upon acceptance of the highest bid. The
risk of loss is on the purchaser of personal property upon acceptance of
his bid. Possession of any personal property shall not be delivered to
the purchaser until the purchase price has been paid in full. If payment
of part of the purchase price for personal property is deferred, the
United States will retain possession of such property as security for
the payment of the balance of the purchase price and, as agent for the
purchaser, will cause the property to be cared for until the purchase
price has been paid in full or the sale is declared null and void for
failure to make full payment of the purchase price. In such case, all
charges and expenses incurred in caring for the property after the
acceptance of the bid shall be borne by the purchaser.
(9) Default in payment. If payment in full is required upon
acceptance of the bid and is not then and there paid, the internal
revenue officer conducting the sale shall forthwith proceed again to
sell the property in the manner provided in section 6335(e) and this
section. If the conditions of the sale permit part of the payment to be
deferred, and if such part is not paid within the prescribed period,
suit may be instituted against the purchaser for the purchase price or
such part thereof as has not been paid, together with interest at the
rate of 6 percent per annum from the date of the sale; or, in the
discretion of the district director, the sale may be declared by the
district director to be null and void for failure to make full payment
of the purchase price and the property may again be
[[Page 239]]
advertised and sold as provided in subsections (b), (c), and (e) of
section 6335 and this section. In the event of such readvertisement and
sale, any new purchaser shall receive such property or rights to
property free and clear of any claim or right of the former defaulting
purchaser, of any nature whatsoever, and the amount paid upon the bid
price by such defaulting purchaser shall be forfeited to the United
States.
(10) Stay of sale of seized property pending Tax Court decision. For
restrictions on sale of seized property pending Tax Court decision, see
section 6863(b)(3) and Sec. 301.6863-2.
(d) Right to request the sale of seized property--(1) In general.
The owner of any property seized by levy may request that the district
director sell such property within 60 days after such request, or within
any longer period specified by the owner. The district director must
comply with such a request unless the district director determines that
compliance with the request is not in the best interests of the Internal
Revenue Service and notifies the owner of such determination within the
60 day period, or any longer period specified by the owner.
(2) Procedures to request the sale of seized property--(i) Manner. A
request for the sale of seized property shall be made in writing to the
group manager of the revenue officer whose signature is on Levy Form
668-B. If the owner does not know the group manager's name or address,
the owner may send the request to the revenue officer, marked for the
attention of his or her group manager.
(ii) Form. The request for sale of seized property within 60 days,
or such longer period specified by the owner, shall include:
(A) The name, current address, current home and work telephone
numbers and any convenient times to be contacted, and taxpayer
identification number of the owner making the request;
(B) A description of the seized property that is the subject of the
request;
(C) A copy of the notice of seizure, if available;
(D) The period within which the owner is requesting that the
property be sold; and
(E) The signature of the owner or duly authorized representative.
For purposes of these regulations, a duly authorized representative is
any attorney, certified public accountant, enrolled actuary, or any
other person permitted to represent the owner before the Internal
Revenue Service who is not disbarred or suspended from practice before
the Internal Revenue Service and who has written power of attorney
executed by the owner.
(3) Notification to owner. The group manager shall respond in
writing to a request for sale of seized property as soon as practicable
after receipt of such request and in no event later than 60 days after
receipt of the request, or, if later, the date specified by the owner
for the sale.
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7180, 37 FR 7319, Apr.
13, 1972; T.D. 8398, 57 FR 7546, Mar. 3, 1992; T.D. 8691, 61 FR 66217,
Dec. 17, 1996]
Sec. 301.6336-1 Sale of perishable goods.
(a) Appraisal of certain seized property. If the district director
determines that any property seized by levy is liable to perish or
become greatly reduced in price or value by keeping, or that such
property cannot be kept without great expense, he shall appraise the
value of such property and return it to the owner if the owner complies
with the conditions prescribed in paragraph (b) of this section or, if
the owner does not comply with such conditions, dispose of the property
in accordance with paragraph (c) of this section.
(b) Return to owner. If the owner of the property can be readily
found, the district director shall give him written notice of his
determination of the appraised value of the property. However, if the
district director determines that the circumstances require immediate
action, he may give the owner an oral notice of his determination of the
appraised value of the property, which notice shall be confirmed in
writing prior to sale. The property shall be returned to the owner if,
within the time specified in the notice, the owner--
(1) Pays to the district director an amount equal to the appraised
value, or
(2) Gives an acceptable bond as prescribed by section 7101 and
Sec. 301.7101-1.
[[Page 240]]
Such bond shall be in an amount not less than the appraised value of the
property and shall be conditioned upon the payment of such amount at
such time as the district director determines to be appropriate in the
circumstances.
(c) Immediate sale. If the owner does not pay the amount of the
appraised value of the seized property within the time specified in the
notice, or furnish bond as provided in paragraph (b) of this section
within such time, the district director shall as soon as practicable
make public sale of the property in accordance with the following terms
and conditions--
(1) Notice of sale. If the owner can readily be found, a notice
shall be given to him. A notice of sale also shall be posted in two
public places in the county in which the property is to be sold. The
notice shall specify the time and place of sale, the property to be
sold, and the manner and conditions of sale. The district director may
give such other notice and in such other manner as he deems advisable
under the circumstances.
(2) Sale. The property shall be sold at public auction to the
highest bidder.
(3) Terms. The purchase price shall be paid in full upon acceptance
of the highest bid. The payment shall be made in cash, or by a
certified, cashier's or treasurer's check drawn on any bank or trust
company incorporated under the laws of the United States or under the
laws of any State, Territory, or possession of the United States, or by
a U.S. postal, bank, express, or telegraph money order.
Sec. 301.6337-1 Redemption of property.
(a) Before sale. Any person whose property has been levied upon
shall have the right to pay the amount due, together with costs and
expenses of the proceeding, if any, to the district director at any time
prior to the sale of the property. Upon such payment the district
director shall restore such property to the owner and all further
proceedings in connection with the levy on such property shall cease
from the time of such payment.
(b) Redemption of real estate after sale--(1) Period. The owner of
any real estate sold as provided in section 6335, his heirs, executors,
or administrators, or any person having any interest therein, or a lien
thereon, or any person in their behalf, shall be permitted to redeem the
property sold, or any particular tract of such property, at any time
within 120 days after the sale thereof.
(2) Price. Such property or tract of property may be redeemed upon
payment to the purchaser, or in case he cannot be found in the county in
which the property to be redeemed is situated, then to the district
director for the internal revenue district in which the property is
situated, for the use of the purchaser, his heirs, or assigns, the
amount paid by such purchaser and interest thereon at the rate of 20
percent per annum. In case real and personal property (or several tracts
of real property) are purchased in the aggregate, the redemption price
of the real property (or of each of the several tracts) shall be
determined on the basis of the ratio, as of the time of sale, of the
value of the real property (or tract) to the value of the total property
purchased. For this purpose the minimum price or the highest bid price,
whichever is higher, offered for the property separately or in groups
shall be treated as the value.
(c) Record. When any real property is redeemed, the district
director shall cause entry of the fact to be made upon the record of
sale kept in accordance with section 6340, and such entry shall be
evidence of such redemption. The party who redeems the property shall
notify the district director of the internal revenue district in which
the property is situated of the date of such redemption and of the
transfer of the certificate of sale, the amount of the redemption price,
and the name of the party to whom such redemption price was paid.
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7180, 37 FR 7319, Apr.
13, 1972]
Sec. 301.6338-1 Certificate of sale; deed of real property.
(a) Certificate of sale. In the case of property sold as provided in
section 6335 (relating to sale of seized property), the district
director shall give to the purchaser a certificate of sale upon payment
in full of the purchase price.
[[Page 241]]
A certificate of sale of real property shall set forth the real property
purchased, for whose taxes the same was sold, the name of the purchaser,
and the price paid therefor.
(b) Deed to real property. In the case of any real property sold as
provided in section 6335 and not redeemed in the manner and within the
time prescribed in section 6337, the district director shall execute (in
accordance with the laws of the State in which the real property is
situated pertaining to sales of real property under execution) to the
purchaser of such real property at the sale or his assigns, upon
surrender of the certificate of sale, a deed of the real property so
purchased, reciting the facts set forth in the certificate.
(c) Deed to real property purchased by the United States. If real
property is declared purchased by the United States at a sale pursuant
to section 6335, the district director shall at the proper time execute
a deed therefor and shall, without delay, cause the deed to be duly
recorded in the proper registry of deeds.
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7180, 37 FR 7319, Apr.
13, 1972]
Sec. 301.6339-1 Legal effect of certificate of sale of personal property and deed of real property.
(a) Certificate of sale of property other than real property. In all
cases of sale pursuant to section 6335 of property (other than real
property), the certificate of such sale--
(1) As evidence. Shall be prima facie evidence of the right of the
officer to make such sale, and conclusive evidence of the regularity of
his proceedings in making the sale; and
(2) As conveyance. Shall transfer to the purchaser all right, title,
and interest of the party delinquent in and to the property sold; and
(3) As authority for transfer of corporate stock. If such property
consists of corporate stocks, shall be notice, when received, to any
corporation, company, or association of such transfer, and shall be
authority to such corporation, company, or association to record the
transfer on its books and records in the same manner as if the stocks
were transferred or assigned by the party holding the stock certificate,
in lieu of any original or prior certificate, which shall be void,
whether canceled or not; and
(4) As receipts. If the subject of sale is securities or other
evidences of debt, shall be a good and valid receipt to the person
holding the certificate of sale as against any person holding or
claiming to hold possession of such securities or other evidences of
debt; and
(5) As authority for transfer of title to motor vehicle. If such
property consists of a motor vehicle, shall be notice, when received, to
any public official charged with the registration of title to motor
vehicles, of such transfer and shall be authority to such official to
record the transfer on his books and records in the same manner as if
the certificate of title to such motor vehicle were transferred or
assigned by the party holding the certificate of title, in lieu of any
original or prior certificate, which shall be null and void, whether
canceled or not.
(b) Deed to real property. In the case of the sale of real property
pursuant to section 6335--
(1) Deed as evidence. The deed of sale given pursuant to section
6338 shall be prima facie evidence of the facts therein stated; and
(2) Deed as conveyance of title. If the proceedings of the district
director as set forth have been substantially in accordance with the
provisions of law, such deed shall be considered and operate as a
conveyance of all the right, title, and interest the party delinquent
had in and to the real property thus sold at the time the lien of the
United States attached thereto.
(c) Effect of junior encumbrances. A certificate of sale of personal
property given or a deed to real property executed pursuant to section
6338 discharges the property from all liens, encumbrances, and titles
over which the lien of the United States, with respect to which the levy
was made, has priority. For example, a mortgage on real property
executed after a notice of a Federal tax lien has been filed is
extinguished when the district director executes a deed to the real
property to a purchaser thereof at a sale pursuant to section 6335
following the seizure of the property by the United States. The proceeds
of such a sale are distributed
[[Page 242]]
in accordance with priority of the liens, encumbrances, or titles. See
section 6342(b) and the regulations thereunder for provisions relating
to the distribution of surplus proceeds. See section 7426(a)(2) and the
regulations thereunder for judicial procedures with respect to surplus
proceeds.
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7180, 37 FR 7320, Apr.
13, 1972]
Sec. 301.6340-1 Records of sale.
(a) Requirement. Each district director shall keep a record of all
sales under section 6335 of real property situated within his district
and of redemptions of such property. The records shall set forth (1) the
tax for which any such sale was made, the dates of seizure and sale, the
name of the party assessed and all proceedings in making such sale, the
amount of expenses, the names of the purchasers, the date of the deed,
and, in the case of redemption of the property, (2) the date of such
redemption and of the transfer of the certificate of sale, the amount of
the redemption price, and the name of the party to whom such redemption
price was paid.
(b) Copy as evidence. A copy of such record, or any part thereof,
certified by the district director shall be evidence in any court of the
truth of the facts therein stated.
Sec. 301.6341-1 Expense of levy and sale.
The district director shall determine the expenses to be allowed in
all cases of levy and sale. Such expenses shall include the expenses of
protection and preservation of the property during the period subsequent
to the levy, as well as the actual expenses incurred in connection with
the sale thereof. In case real and personal property (or several tracts
of real property) are sold in the aggregate, the district director shall
properly apportion the expenses to the real property (or to each tract).
Sec. 301.6342-1 Application of proceeds of levy.
(a) Collection of liability. Any money realized by proceedings under
subchapter D, chapter 64, of the Code or by sale of property redeemed by
the United States (if the interest of the United States in the property
was a lien arising under the provisions of the Internal Revenue Code),
is applied in the manner specified in subparagraphs (1), (2), and (3) of
this paragraph (a). Money realized by proceedings under subchapter D,
chapter 64, of the Code includes money realized by seizure, by sale of
seized property, or by surrender under section 6332 (except money
realized by the imposition of a 50 percent penalty pursuant to section
6332(c)(2)).
(1) Expense of levy and sale. First, against the expenses of the
proceedings or sale, including expenses allowable under section 6341 and
amounts paid by the United States to redeem property.
(2) Specific tax liability on seized property. If the property
seized and sold is subject to a tax imposed by any internal revenue law
which has not been paid, the amount remaining after applying
subparagraph (1) of this paragraph (a), shall then be applied against
such tax liability (and, if such tax was not previously assessed, it
shall then be assessed);
(3) Liability of delinquent taxpayer. The amount, if any, remaining
after applying subparagraphs (1) and (2) of this paragraph (a), shall
then be applied against the liability in respect of which the levy was
made or the sale of redeemed property was conducted.
(b) Surplus proceeds. Any surplus proceeds remaining after the
application of paragraph (a) of this section shall, upon application and
satisfactory proof in support thereof, be credited or refunded by the
district director to the person or persons legally entitled thereto. The
delinquent taxpayer is the person entitled to the surplus proceeds
unless another person establishes a superior claim thereto.
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7180, 37 FR 7320, Apr.
13, 1972]
Sec. 301.6343-1 Requirement to release levy and notice of release.
(a) In general. A district director, service center director, or
compliance center director (director) must promptly release a levy upon
all, or part of, property or rights to property levied upon and must
promptly notify the person upon whom the levy was made of such a
release, if the director determines that any of the conditions in
[[Page 243]]
paragraph (b) of this section (conditions requiring release) exist. The
director must make a determination whether any of the conditions
requiring release exist if a taxpayer submits a request for release of
levy in accordance with paragraph (c) or (d) of this section; however,
the director may make this determination based upon information received
from a source other than the taxpayer. The director may require any
supporting documentation as is reasonably necessary to determine whether
a condition requiring release exists.
(b) Conditions requiring release. The director must release the levy
upon all or a part of the property or rights to property levied upon if
he or she determines that one of the following conditions exists--
(1) Liability satisfied or unenforceable--(i) General rule. The
liability for which the levy was made is satisfied or the period of
limitations provided in section 6502 (and any period during which the
period of limitations is suspended as provided by law) has lapsed. A
levy is considered made on the date on which the notice of seizure
provided in section 6335(a) is given. A levy that is made within the
period of limitations provided in section 6502 does not become
unenforceable simply because the person who receives the levy does not
surrender the subject property within the period of limitations. In this
case, the liability remains enforceable to the extent of the value of
the levied upon property. However, a levy made outside the period of
limitations (normally ten years without suspensions) must be released
unless--
(A) The taxpayer agreed in writing to extend the period of
limitations as provided in section 6502(a)(2) and Sec. 301.6502-1; or
(B) A proceeding in court to collect the liability has begun within
the period of limitations.
(ii) Special situations. A continuing levy on salary or wages made
under section 6331(e) must be released at the end of the period of
limitations in section 6502. However, a levy on a fixed and determinable
right to payment which right includes payments to be made after the
period of limitations expires does not become unenforceable upon the
expiration of the period of limitations and will not be released under
this condition unless the liability is satisfied.
(2) Release will facilitate collection. The release of the levy will
facilitate collection of the liability. A director has the discretion to
release the levy in all situations, including those where the proceeds
from the sale will not fully satisfy the tax liabilities of the
taxpayer, under terms and conditions as he or she determines are
warranted.
(i) Example. The following example illustrates the provisions of
this paragraph (b)(2):
Example. A and B each own machines which, when used together,
produce widgets. A owes delinquent federal taxes. A notice of federal
tax lien is properly filed against all property or rights to property
belonging to A. A's machine is seized to satisfy A's delinquent tax
liability. The fair market value of A's property is greater than the
expenses of seizure and sale, but less than the amount of A's tax
liability. A and B find a buyer who wants to buy both machines together.
The buyer will only buy the machines together. A's property has a
greater value as part of the package than it does by itself. The larger
value, as shown in the sale contract, is enough to pay A's tax liability
in full. In this situation a release of the levy will facilitate
collection because the sale of both machines can be completed and A's
liability will be paid in full at the settlement.
(ii) Compliance with other conditions. The director may find that
collection will be facilitated by the taxpayer's compliance with
conditions other than immediate payment, such as:
(A) The delinquent taxpayer delivers a satisfactory arrangement,
which is accepted by the director, for placing property in escrow to
secure the payment of the liability (including the expenses of the levy)
which is the basis of the levy.
(B) The delinquent taxpayer delivers an acceptable bond to the
director conditioned upon the payment of the liability (including the
expenses of levy) which is the basis of the levy. This bond shall be in
the form provided in section 7101 and Sec. 301.7101-1.
(C) There is paid to the director an amount determined by the
director to be equal to the interest of the United States in the seized
property or the
[[Page 244]]
part of the seized property to be released.
(D) The delinquent taxpayer executes an agreement to extend the
statute of limitations in accordance with section 6502(a)(2) and
Sec. 301.6502-1.
(iii) Expenses of sale exceed the government's interest. If the
director determines that the value of the United States' interest in the
seized property does not exceed the expenses of sale of the property, a
release of the levy will be deemed to facilitate collection of the
liability even though the fair market value of property which has been
seized exceeds the expenses of seizure and sale.
(3) Installment agreement. The taxpayer has entered into an
agreement under section 6159 to satisfy the liability by means of
installment payments, unless the agreement provides otherwise. However,
the director is not required to release the levy under this condition if
a release of the levy will jeopardize the secured creditor status of the
United States, e.g., where there is an intervening judgment lien
creditor and a notice of tax lien has not been filed.
(4) Economic hardship--(i) General rule. The levy is creating an
economic hardship due to the financial condition of an individual
taxpayer. This condition applies if satisfaction of the levy in whole or
in part will cause an individual taxpayer to be unable to pay his or her
reasonable basic living expenses. The determination of a reasonable
amount for basic living expenses will be made by the director and will
vary according to the unique circumstances of the individual taxpayer.
Unique circumstances, however, do not include the maintenance of an
affluent or luxurious standard of living.
(ii) Information from taxpayer. In determining a reasonable amount
for basic living expenses the director will consider any information
provided by the taxpayer including--
(A) The taxpayer's age, employment status and history, ability to
earn, number of dependents, and status as a dependent of someone else;
(B) The amount reasonably necessary for food, clothing, housing
(including utilities, home-owner insurance, home-owner dues, and the
like), medical expenses (including health insurance), transportation,
current tax payments (including federal, state, and local), alimony,
child support, or other court-ordered payments, and expenses necessary
to the taxpayer's production of income (such as dues for a trade union
or professional organization, or child care payments which allow the
taxpayer to be gainfully employed);
(C) The cost of living in the geographic area in which the taxpayer
resides;
(D) The amount of property exempt from levy which is available to
pay the taxpayer's expenses;
(E) Any extraordinary circumstances such as special education
expenses, a medical catastrophe, or natural disaster; and
(F) Any other factor that the taxpayer claims bears on economic
hardship and brings to the attention of the director.
(iii) Good faith requirement. In addition, in order to obtain a
release of a levy under this subparagraph, the taxpayer must act in good
faith. Examples of failure to act in good faith include, but are not
limited to, falsifying financial information, inflating actual expenses
or costs, or failing to make full disclosure of assets.
(5) Fair market value exceeds liability. The fair market value of
the property exceeds the liability for which the levy was made and
release of the levy on a part of the property can be made without
hindering the collection of the liability. The following example
illustrates the provisions of this paragraph (b)(5):
Example. The Internal Revenue Service levies upon ten widgets which
belong to the taxpayer to satisfy the taxpayer's outstanding tax
liabilities. Subsequent to the levy, the taxpayer establishes that
market conditions have increased the aggregate fair market value of
widgets so that the value of seven widgets equals the aggregate
anticipated expenses of sale and seizure and the tax liabilities for
which the levy was made. The director must release three widgets from
the levy and return them to the taxpayer.
(c) Request for release of levy--(1) Information to be submitted by
taxpayer. A taxpayer who wishes to obtain a release of a levy must
submit a request for release in writing or by telephone to the district
director for the Internal
[[Page 245]]
Revenue district in which the levy was made. The taxpayer making the
request must provide the following information--
(i) The name, address, and taxpayer identification number of the
taxpayer;
(ii) A description of the property levied upon;
(iii) The type of tax and the period for which the tax is due;
(iv) The date of the levy and the originating Internal Revenue
district, if known; and
(v) A statement of the grounds upon which the request for release of
the levy is based.
(2) Time for submission. Except in extraordinary circumstances, a
request for release of a levy must be made more than five days prior to
a scheduled sale of the property to which the levy relates.
(3) Determination by director--(i) When required. The director must
promptly make a determination concerning release prior to sale in all
cases where a request for release of a levy is made except those where
the request for release is made five or fewer days prior to a scheduled
sale of the property to which the levy relates.
(ii) Time for making required determination. The determination will
be made, generally, within 30 days of a request for release made 30 or
more days prior to a scheduled sale of the property to which the levy
relates. If a request for release is made less than 30 days prior to the
scheduled sale but more than 5 days before the scheduled sale, a
determination must be made prior to the scheduled sale. If necessary the
director may postpone the scheduled sale in order to make this
determination.
(iii) Discretionary determination. The director has the discretion,
but is not required, to make a determination concerning release prior to
sale in cases where a request for release of a levy is made five or
fewer days prior to a scheduled sale of the property to which the levy
relates.
(4) Notification to taxpayer of determination. The director must
promptly notify the taxpayer if the levy is released. If the director
determines that none of the conditions requiring release of the levy
exist, the director must promptly notify the taxpayer of the decision
not to release the levy and the reason why the levy is not being
released.
(d) Expedited determination with respect to certain business
property--(1) General procedure--(i) Submission by taxpayer. If a levy
is made on essential business property as is described in paragraph
(d)(2) of this section, the taxpayer may obtain an expedited
determination of whether any of the conditions requiring release of the
levy exist. In order to obtain an expedited determination, the taxpayer
must submit, within the time frame specified in paragraph (c)(2) of this
section, the information required in paragraph (c)(1) of this section
and include with the information an explanation of why the property
levied upon qualifies for an expedited determination of whether a
condition requiring release of the levy exists.
(ii) Time for making required determination. The director must make
such a determination by the later of 10 business days from the time the
director receives the request for release, or 10 business days from the
time the director receives any necessary supporting documentation, if 10
or more business days remain before a scheduled sale of the property to
which the levy relates. An expedited determination concerning release
must be made prior to sale in all cases where a request for release of a
levy is made within the time frame specified in paragraph (c)(2) of this
section. If necessary the director may postpone the scheduled sale in
order to make this determination.
(iii) Discretionary determination. The director has the discretion,
but is not required, to make an expedited determination concerning
release in cases where the taxpayer does not submit, within the time
frame specified in paragraph (c)(2) of this section, the information
required in paragraph (c)(1) of this section and include with the
information an explanation of why the property levied upon qualifies for
an expedited determination of whether a condition requiring release of
the levy exists.
(2) Essential business property defined. For purposes of this
section, essential
[[Page 246]]
business property means tangible personal property used in carrying on
the trade or business of the taxpayer which when levied upon prevents
the taxpayer from continuing to carry on the trade or business.
(3) Seizure of perishable goods. The provisions of this paragraph do
not apply in the case of a seizure of perishable goods. Those seizures
are governed by the provisions of section 6336 and Sec. 301.6336-1.
(e) Effect of a release of levy. If property has not yet been
surrendered to the director in response to a levy, a release of the levy
under section 6343(a) will relieve the possessor of any obligation to
surrender the property. Otherwise, a release of a levy under section
6343(a) will cause the property to be returned to the custody of the
person or persons legally entitled thereto. The release of a levy on any
property under this section does not prevent any subsequent levy on the
property. Section 301.6343-2, dealing with return of wrongfully levied
upon property, is subject to section 6402 which prohibits the Internal
Revenue Service from refunding a payment of money that has been
deposited in the Treasury and credited to the taxpayer's liability
unless there is an overpayment.
(f) Effective date. This section is effective as of December 30,
1994.
[T.D. 8587, 59 FR 35, Jan. 3, 1995]
Sec. 301.6343-2 Return of wrongfully levied upon property.
(a) Return of property--(1) General rule. If the district director,
service center director, or compliance center director (the director)
determines that property has been wrongfully levied upon, the director
may return--
(i) The specific property levied upon;
(ii) An amount of money equal to the amount of money levied upon; or
(iii) An amount of money equal to the amount of money received by
the United States from a sale of the property.
(2) Time of return. If the United States is in possession of
specific property, the property may be returned at any time. An amount
equal to the amount of money levied upon or received from a sale of the
property may be returned at any time before the expiration of 9 months
from the date of the levy. When a request described in paragraph (b) of
this section is filed for the return of property before the expiration
of 9 months from the date of levy, an amount of money may be returned
after a reasonable period of time subsequent to the expiration of the 9-
month period if necessary for the investigation and processing of such
request.
(3) Specific property. In general the specific property levied upon
will be returned whenever possible. For this purpose, money that is
specifically identifiable, as in the case of a coin collection which may
be worth substantially more than its face value, is treated as specific
property.
(4) Purchase by United States. For purposes of paragraph (a)(1)(iii)
of this section, if property is declared purchased by the United States
at a sale pursuant to section 6335(e), the United States is treated as
having received an amount of money equal to the minimum price determined
by the director before the sale or, if larger, the amount received by
the United States from the resale of the property.
(b) Request for return of property. A written request for the return
of property wrongfully levied upon must be addressed to the district
director (marked for the attention of the Chief, Special Procedures
Staff) for the Internal Revenue district in which the levy was made. The
written request must contain the following information--
(1) The name and address of the person submitting the request;
(2) A detailed description of the property levied upon;
(3) A description of the claimant's basis for claiming an interest
in the property levied upon; and
(4) The name and address of the taxpayer, the originating Internal
Revenue district, and the date of the levy as shown on the notice of
levy form, or levy form, or, in lieu thereof, a statement of the reasons
why such information cannot be furnished.
(c) Inadequate request. A request for the return of property
wrongfully levied upon will not be considered adequate unless it is a
written request containing the information required by paragraph (b) of
this section. However, unless a notification is mailed by the
[[Page 247]]
director to the claimant within 30 days of receipt of the request to
inform the claimant of the inadequacies, any written request will be
considered adequate. If the director timely notifies the claimant of the
inadequacies of his request, the claimant has 30 days from the receipt
of the notification of inadequacy to supply in writing any omitted
information. Where the omitted information is so supplied within the 30-
day period, the request will be considered to be adequate from the time
the original request was made for purposes of determining the applicable
period of limitation upon suit under section 6532(c).
(d) Payment of interest. Interest is paid at the overpayment rate
established under section 6621--
(1) In the case of money returned under paragraph (a)(1)(ii) of this
section, from the date the director received the money to a date (to be
determined by the director) preceding the date of return by not more
than 30 days; or
(2) In the case of money returned under paragraph (a)(1)(iii) of
this section, from the date of the sale of the property to a date (to be
determined by the director) preceding the date of return by not more
than 30 days.
(e) Effective date. This section is effective as of December 30,
1994.
[T.D. 8587, 59 FR 37, Jan. 3, 1995]