[Title 26 CFR ]
[Code of Federal Regulations (annual edition) - April 1, 2000 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

          

                    26


          Part 300 to 499

                         Revised as of April 1, 2000

Internal Revenue





          Containing a Codification of documents of general 
          applicability and future effect
          As of April 1, 2000
          With Ancillaries
          Published by
          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 : 2000



               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........................     743
      Alphabetical List of Agencies Appearing in the CFR......     761
      Table of OMB Control Numbers............................     771
      List of CFR Sections Affected...........................     789



[[Page iv]]


      


                     ----------------------------

                     Cite this Code:  CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus,  26 CFR 300.0 refers 
                       to title 26, part 300, 
                       section 0.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, April 1, 2000), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
number of the Federal Register and date of publication. Publication 
dates and effective dates are usually not the same and care must be 
exercised by the user in determining the actual effective date. In 
instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

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 
amendments to existing regulations in the CFR. These OMB numbers are 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
the cover of each volume are not carried. Code users may find the text 
of provisions in effect on a given date in the past by using the 
appropriate numerical list of sections affected. For the period before 
January 1, 1986, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, or 1973-1985, published in seven separate volumes. For 
the period beginning January 1, 1986, a ``List of CFR Sections 
Affected'' is published at the end of each CFR volume.

CFR INDEXES AND TABULAR GUIDES

    A subject index to the Code of Federal Regulations is contained in a 
separate volume, revised annually as of January 1, entitled CFR Index 
and Finding Aids. This volume contains the Parallel Table of Statutory 
Authorities and Agency Rules (Table I). A list of CFR titles, chapters, 
and parts and an alphabetical list of agencies publishing in the CFR are 
also included in this volume.
    An index to the text of ``Title 3--The President'' is carried within 
that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.
    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

REPUBLICATION OF MATERIAL

    There are no restrictions on the republication of material appearing 
in the Code of Federal Regulations.

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
volume, contact the issuing agency. The issuing agency's name appears at 
the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-523-5227 
or write to the Director, Office of the Federal Register, National 
Archives and Records Administration, Washington, DC 20408.

SALES

    The Government Printing Office (GPO) processes all sales and 
distribution of the CFR. For payment by credit card, call 202-512-1800, 
M-F 8 a.m. to 4 p.m. e.s.t. or fax your order to 202-512-2233, 24 hours 
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Customer Service call 202-512-1803.

ELECTRONIC SERVICES

    The full text of the Code of Federal Regulations, the LSA (List of 
CFR Sections Affected), The United States Government Manual, the Federal 
Register, Public Laws, Weekly Compilation of Presidential Documents and 
the Privacy Act Compilation are available in electronic format at 
www.access.gpo.gov/nara (``GPO Access''). For more information, contact 
Electronic Information Dissemination Services, U.S. Government Printing 
Office. Phone 202-512-1530, or 888-293-6498 (toll-free). E-mail, 
[email protected]

[[Page vii]]

    The Office of the Federal Register also offers a free service on the 
National Archives and Records Administration's (NARA) World Wide Web 
site for public law numbers, Federal Register finding aids, and related 
information. Connect to NARA's web site at www.nara.gov/fedreg. The NARA 
site also contains links to GPO Access.

                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

April 1, 2000.



[[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, 
2000. 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, Jonn V. Lilyea 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)

  --------------------------------------------------------------------
                                                                    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....................................         702
303             Taxes under the Trading With the Enemy Act..         708
304             [Reserved]

305             Temporary procedural and administrative tax 
                    regulations under the Indian Tribal 
                    Governmental Tax Status Act of 1982.....         714
306-399         [Reserved]

400             Temporary regulations under the Federal Tax 
                    Lien Act of 1966........................         717
401             Temporary procedures and administration 
                    regulations under the Tax Equity and 
                    Fiscal Responsibility Act of 1982 (Pub. 
                    L. 97-248)..............................         729
402             [Reserved]

403             Disposition of seized personal property.....         730
404             Temporary regulations on procedure and 
                    administration under the Tax Reform Act 
                    of 1976.................................         736
405-419         [Reserved]

420             Temporary regulations on procedure and 
                    administration under the Employee 
                    Retirement Income Security Act of 1974..         739
421-499         [Reserved]

[[Page 5]]





               SUBCHAPTER F--PROCEDURE AND ADMINISTRATION





PART 300--USER FEES--Table of Contents




Sec.
300.0  User fees; in general.
300.1  Installment agreement fee.
300.2  Restructuring or reinstatement of installment agreement fee.

    Authority: 31 U.S.C. 9701.

    Source: T.D. 8589, 60 FR 8299, Feb. 14, 1995, unless otherwise 
noted.



Sec. 300.0  User fees; in general.

    (a) In general. The regulations in this part 300 are designated the 
User Fee Regulations and provide rules relating to user fees under 31 
U.S.C. 9701.
    (b) Applicability. User fees are imposed on the following services:
    (1) Entering into an installment agreement.
    (2) Restructuring or reinstating an installment agreement.
    (c) Effective date. This part 300 is effective March 16, 1995.



Sec. 300.1  Installment agreement fee.

    (a) Applicability. This section applies to installment agreements 
under section 6159 of the Internal Revenue Code.
    (b) Fee. The fee for entering into an installment agreement is $43.
    (c) Person liable for fee. The person liable for the installment 
agreement fee is the taxpayer entering into an installment agreement.



Sec. 300.2  Restructuring or reinstatement of installment agreement fee.

    (a) Applicability. This section applies to installment agreements 
under section 6159 of the Internal Revenue Code that are in default. An 
installment agreement is deemed to be in default when a taxpayer fails 
to meet any of the conditions of the installment agreement.
    (b) Fee. The fee for restructuring or reinstating an installment 
agreement is $24.
    (c) Person liable for fee. The person liable for the restructuring 
or reinstatement fee is the taxpayer that has an installment agreement 
restructured or reinstated.



PART 301--PROCEDURE AND ADMINISTRATION--Table of Contents




                         Information and Returns

                           Returns and Records

                records, statements, and special returns

Sec.
301.6001-1  Notice or regulations requiring records, statements, and 
          special returns.

                        tax returns or statements

                           General Requirement

301.6011-1  General requirement of return, statement, or list.
301.6011-2  Required use of magnetic media.
301.6011-3  Required use of magnetic media for partnership returns.

                           Income Tax Returns

301.6012-1  Persons required to make returns of income.
301.6013-1  Joint returns of income tax by husband and wife.
301.6014-1  Income tax return--tax not computed by taxpayer.
301.6015-1  Declaration of estimated income tax by individuals.
301.6016-1  Declarations of estimated income tax by corporations.
301.6017-1  Self-employment tax returns.

                       Estate and Gift Tax Returns

301.6018-1  Estate tax returns.
301.6019-1  Gift tax returns.

                        Miscellaneous Provisions

301.6020-1  Returns prepared or executed by district directors or other 
          internal revenue officers.
301.6021-1  Listing by district directors of taxable objects owned by 
          nonresidents of internal revenue districts.

                           information returns

      Information Concerning Persons Subject to Special Provisions

301.6031(a)-1  Return of partnership income.
301.6032-1  Returns of banks with respect to common trust funds.
301.6033-1  Returns by exempt organizations.
301.6034-1  Returns by trusts described in section 4947(a)(2) or 
          claiming charitable or other deductions under section 642(c).
301.6035-1  Returns of officers, directors, and shareholders of foreign 
          personal holding companies.
301.6036-1  Notice required of executor or of receiver or other like 
          fiduciary.

[[Page 6]]

301.6037-1  Return of electing small business corporation.
301.6038-1  Information returns required of U.S. persons with respect to 
          certain foreign corporations.
301.6039-1  Information returns and statements required in connection 
          with certain options.

         Information Concerning Transactions With Other Persons

301.6041-1  Returns of information regarding certain payments.
301.6042-1  Returns of information regarding payments of dividends and 
          corporate earnings and profits.
301.6043-1  Returns regarding liquidation, dissolution, termination, or 
          contraction.
301.6044-1  Returns of information regarding payments of patronage 
          dividends.
301.6046-1  Returns as to organization or reorganization of foreign 
          corporations and as to acquisitions of their stock.
301.6047-1  Information relating to certain trusts and annuity and bond 
          purchase plans.
301.6048-1  Returns as to creation of or transfers to certain foreign 
          trusts.
301.6049-1  Returns regarding payments of interest.
301.6050A-1  Information returns regarding services performed by certain 
          crewmen on fishing boats.
301.6050M-1  Information returns relating to persons receiving contracts 
          from certain Federal executive agencies.

               Information Regarding Wages Paid Employees

301.6051-1  Receipts for employees.
301.6052-1  Information returns and statements regarding payment of 
          wages in the form of group-term life insurance.
301.6057-1  Employee retirement benefit plans; identification of 
          participant with deferred vested retirement benefit.
301.6057-2  Employee retirement benefit plans; notification of change in 
          plan status.
301.6058-1  Information required in connection with certain plans of 
          deferred compensation.
301.6059-1  Periodic report of actuary.

          signing and verifying of returns and other documents

301.6061-1  Signing of returns and other documents.
301.6062-1  Signing of corporation returns.
301.6063-1  Signing of partnership returns.
301.6064-1  Signature presumed authentic.
301.6065-1  Verification of returns.

               time for filing returns and other documents

301.6071-1  Time for filing returns and other documents.
301.6072-1  Time for filing income tax returns.
301.6073-1  Time for filing declarations of estimated income tax by 
          individuals.
301.6074-1  Time for filing declarations of estimated income tax by 
          corporations.
301.6075-1  Time for filing estate and gift tax returns.

                  extension of time for filing returns

301.6081-1  Extension of time for filing returns.

               place for filing returns or other documents

301.6091-1  Place for filing returns and other documents.
301.6096-1  Designation by individuals for taxable years beginning after 
          December 31, 1972.
301.6096-2  Designation by individuals for taxable years ending on or 
          after December 31, 1972 and beginning before January 1, 1973.

                        miscellaneous provisions

301.6101-1  Period covered by returns or other documents.
301.6102-1  Computations on returns or other documents.
301.6103(a)-1  Disclosures after December 31, 1976, by officers and 
          employees of Federal agencies of returns and return 
          information (including taxpayer return information) disclosed 
          to such officers and employees by the Internal Revenue Service 
          before January 1, 1977, for a purpose not involving tax 
          administration.
301.6103(a)-2  Disclosures after December 31, 1976, by attorneys of the 
          Department of Justice and officers and employees of the Office 
          of the Chief Counsel for the Internal Revenue Service of 
          returns and return information (including taxpayer return 
          information) disclosed to such attorneys, officers, and 
          employees by the Service before January 1, 1977, for a purpose 
          involving tax administration.
301.6103(c)-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.
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

[[Page 7]]

          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(j)(1)-1T  Disclosure of return information to officers and 
          employees of the Department of Commerce for certain 
          statistical purposes and related activities (temporary).
301.6103(j)(5)-1T  Disclosures of return information to officers and 
          employees of the Department of Agriculture for certain 
          statistical purposes and related activities (temporary).
301.6103(k)(6)-1  Disclosure of return information by Internal Revenue 
          officers and employees for investigative purposes.
301.6103(k)(9)-1T  Disclosure of returns and return information relating 
          to payment of tax by credit card and debit card (temporary).
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)-0  Table of contents.
301.6104(d)-1  Public inspection and distribution of applications for 
          tax exemption and annual information returns of tax-exempt 
          organinzations.
301.6104(d)-2  Making applications and returns widely available.
301.6104(d)-3  Tax-exempt organization subject to harassment campaign.
301.6105-1  Compilation of relief from excess profits tax cases.
301.6106-1  Publicity of unemployment tax returns.
301.6108-1  Publication of statistics of income.
301.6109-1  Identifying numbers.
301.6109-2  Authority of the Secretary of Agriculture to collect 
          employer identification numbers for purposes of the Food Stamp 
          Act of 1977.
301.6109-3  IRS adoption taxpayer identification numbers.
301.6110-1  Public inspection of written determinations and background 
          file documents.
301.6110-2  Meaning of terms.
301.6110-3  Deletion of certain information in written determinations 
          open to public inspection.
301.6110-4  Communications from third parties.
301.6110-5  Notice and time requirements; actions to restrain 
          disclosure; actions to obtain additional disclosure.
301.6110-6  Written determinations issued in response to requests 
          submitted before November 1, 1976.
301.6110-7  Miscellaneous provisions.
301.6111-1T  Questions and answers relating to tax shelter registration.
301.6111-2T  Confidential corporate tax shelters (temporary).
301.6112-1T  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.

[[Page 8]]

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.

                               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.
301.6221-1T  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 settlement terms (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(b)-2T  Special rule with respect to debtors in Title 11 cases 
          (temporary).
301.6229(e)-1T  Information with respect to unidentified partner 
          (temporary).
301.6229(f)-1T  Special rule for partial settlement agreements 
          (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)-1T  Designation or selection of tax matters partner 
          (temporary).
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).

[[Page 9]]

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 to certain adjustments 
          (temporary).
301.6231(f)-1T  Disallowance of losses and credits in certain cases 
          (temporary).
301.6233-1T  Extension to entities filing partnership returns, etc. 
          (temporary).
301.6241-1T  Tax treatment determined at corporate level.
301.6245-1T  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.
301.6311-2T  Payment by credit card and debit card (temporary).
301.6312-1  Treasury certificates of indebtedness, Treasury notes, and 
          Treasury bills acceptable in payment of internal revenue taxes 
          or stamps.
301.6312-2  Certain Treasury savings notes acceptable in payment of 
          certain internal revenue taxes.
301.6313-1  Fractional parts of a cent.
301.6314-1  Receipt for taxes.
301.6315-1  Payments of estimated income tax.
301.6316-1  Payment of income tax in foreign currency.
301.6316-2  Definitions.
301.6316-3  Allocation of tax attributable to foreign currency.
301.6316-4  Return requirements.
301.6316-5  Manner of paying tax by foreign currency.
301.6316-6  Declarations of estimated tax.
301.6316-7  Payment of Federal Insurance Contributions Act taxes in 
          foreign currency.
301.6316-8  Refunds and credits in foreign currency.
301.6316-9  Interest, additions to tax, etc.

                             Lien for Taxes

301.6320-1T  Notice and opportunity for hearing upon filing of notice of 
          Federal tax lien (temporary).
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.

301.6330-1T  Notice and opportunity for hearing prior to levy 
          (temporary)
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.

[[Page 10]]

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.
301.6362-7  Additional requirements.
301.6363-1  State agreements.
301.6363-2  Withdrawal from State agreements.
301.6363-3  Transition years.
301.6363-4  Judicial review.
301.6365-1  Definitions.
301.6365-2  Commencement and cessation of applicability of subchapter E 
          to individual taxpayers.

                    Abatements, Credits, and Refunds

                          Procedure in General

301.6401-1  Amounts treated as overpayments.
301.6402-1  Authority to make credits or refunds.
301.6402-2  Claims for credit or refund.
301.6402-3  Special rules applicable to income tax.
301.6402-4  Payments in excess of amounts shown on return.
301.6402-5  Offset of past-due support against overpayment.
301.6402-6  Offset of past-due, legally enforceable debt against 
          overpayment.
301.6402-7  Claims for refund and applications for tentative carryback 
          adjustments involving consolidated groups that include 
          insolvent financial institutions.
301.6403-1  Overpayment of installment.
301.6404-0  Table of contents.
301.6404-1  Abatements.
301.6404-2  Abatement of interest.
301.6404-3  Abatement of penalty or addition to tax attributable to 
          erroneous written advice of the Internal Revenue Service.
301.6405-1  Reports of refunds and credits.
301.6407-1  Date of allowance of refund or credit.

                      Rules of Special Application

301.6411-1  Tentative carryback adjustments.
301.6413-1  Special rules applicable to certain employment taxes.
301.6414-1  Income tax withheld.
301.6425-1  Adjustment of overpayment of estimated income tax by 
          corporation.

                               Limitations

                Limitations on Assessment and Collection

301.6501(a)-1  Period of limitations upon assessment and collection.
301.6501(b)-1  Time return deemed filed for purposes of determining 
          limitations.
301.6501(c)-1  Exceptions to general period of limitations on assessment 
          and collection.
301.6501(d)-1  Request for prompt assessment.
301.6501(e)-1  Omission from return.
301.6501(f)-1  Personal holding company tax.
301.6501(g)-1  Certain income tax returns of corporations.
301.6501(h)-1  Net operating loss or capital loss carrybacks.
301.6501(i)-1  Foreign tax carrybacks; taxable years beginning after 
          December 31, 1957.
301.6501(j)-1  Investment credit carryback; taxable years ending after 
          December 31, 1961.
301.6501(m)-1  Tentative carryback adjustment assessment period.
301.6501(n)-1  Special rules for chapter 42 and similar taxes.
301.6501(n)-2  Certain contributions to section 501(c)(3) organizations.
301.6501(n)-3  Certain set-asides described in section 4942(g)(2).
301.6501(o)-1  Work incentive program credit carrybacks, taxable years 
          beginning after December 31, 1971.
301.6501(o)-2  Special rules for partnership items of federally 
          registered partnerships.
301.6501(o)-3  Partnership items.
301.6502-1  Collection after assessment.
301.6503(a)-1  Suspension of running of period of limitation; issuance 
          of statutory notice of deficiency.
301.6503(b)-1  Suspension of running of period of limitation; assets of 
          taxpayer in control or custody of court.
301.6503(c)-1  Suspension of running of period of limitation; location 
          of property outside the United States or removal of property 
          from the United States; taxpayer outside of United States.
301.6503(d)-1  Suspension of running of period of limitation; extension 
          of time for payment of estate tax.
301.6503(e)-1  Suspension of running of period of limitation; certain 
          powers of appointment.
301.6503(f)-1  Suspension of running of period of limitation; wrongful 
          seizure of property of third party.

[[Page 11]]

301.6503(g)-1  Suspension pending correction.

                     Limitations on Credit or Refund

301.6511(a)-1  Period of limitation on filing claim.
301.6511(b)-1  Limitations on allowance of credits and refunds.
301.6511(c)-1  Special rules applicable in case of extension of time by 
          agreement.
301.6511(d)-1  Overpayment of income tax on account of bad debts, 
          worthless securities, etc.
301.6511(d)-2  Overpayment of income tax on account of net operating 
          loss or capital loss carrybacks.
301.6511(d)-3  Special rules applicable to credit against income tax for 
          foreign taxes.
301.6511(d)-4  Overpayment of income tax on account of investment credit 
          carryback.
301.6511(d)-7  Overpayment of income tax on account of work incentive 
          program credit carryback.
301.6511(e)-1  Special rules applicable to manufactured sugar.
301.6511(f)-1  Special rules for chapter 42 taxes.
301.6511(g)-1  Special rule for partnership items of federally 
          registered partnerships.
301.6512-1  Limitations in case of petition to Tax Court.
301.6513-1  Time return deemed filed and tax considered paid.
301.6514(a)-1  Credits or refunds after period of limitation.
301.6514(b)-1  Credit against barred liability.

              Mitigation of Effect of Period of Limitations

301.6521-1  Mitigation of effect of limitation in case of related 
          employee social security tax and self-employment tax.
301.6521-2  Law applicable in determination of error.

              Periods of Limitation in Judicial Proceedings

301.6532-1  Periods of limitation on suits by taxpayers.
301.6532-2  Periods of limitation on suits by the United States.
301.6532-3  Periods of limitation on suits by persons other than 
          taxpayers.

                                Interest

                        Interest on Underpayments

301.6601-1  Interest on underpayments.
301.6602-1  Interest on erroneous refund recoverable by suit.

                        Interest on Overpayments

301.6611-1  Interest on overpayments.

                     Determination of Interest Rate

301.6621-1  Interest rate.
301.6621-2T  Questions and answers relating to the increased rate of 
          interest on substantial underpayments attributable to certain 
          tax motivated transactions (temporary).
301.6621-3  Higher interest rate payable on large corporate 
          underpayments.
301.6622-1  Interest compounded daily.

   Additions to the Tax, Additional Amounts, and Assessable Penalties

               Additions to the Tax and Additional Amounts

301.6651-1  Failure to file tax return or to pay tax.
301.6652-1  Failure to file certain information returns.
301.6652-2  Failure by exempt organizations and certain nonexempt 
          organizations to file certain returns or to comply with 
          section 6104(d) for taxable years beginning after December 31, 
          1969.
301.6652-3  Failure to file information with respect to employee 
          retirement benefit plan.
301.6653-1  Failure to pay tax.
301.6654-1  Failure by individual to pay estimated income tax.
301.6655-1  Failure by corporation to pay estimated income tax.
301.6656-1  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.

[[Page 12]]

301.6685-1  Assessable penalties with respect to private foundations' 
          failure to comply with section 6104(d).
301.6686-1  Failure of DISC to file returns.
301.6688-1  Assessable penalties with respect to information required to 
          be furnished under section 7654 on allocation of tax to Guam 
          or the United States.
301.6689-1T  Failure to file notice of redetermination of foreign tax 
          (temporary).
301.6690-1  Penalty for fraudulent statement or failure to furnish 
          statement to plan participant.
301.6692-1  Failure to file actuarial report.
301.6693-1  Penalty for failure to provide reports and documents 
          concerning individual retirement accounts or annuities.
301.6707-1T  Questions and answers relating to penalties for failure to 
          furnish information regarding tax shelters.
301.6708-1T  Failure to maintain list of investors in potentially 
          abusive tax shelters (temporary).
301.6712-1  Failure to disclose treaty-based return positions.
301.6721-0  Table of Contents.
301.6721-1  Failure to file correct information returns.
301.6722-1  Failure to furnish correct payee statements.
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

301.6723-1A  Failure to include correct information.

                  General Provisions Relating to Stamps

301.6801-1  Authority for establishment, alteration, and distribution.
301.6802-1  Supply and distribution.
301.6803-1  Accounting and safeguarding.
301.6804-1  Attachment and cancellation.
301.6805-1  Redemption of stamps.
301.6806-1  Posting occupational tax stamps.

                 Jeopardy, Bankruptcy, and Receiverships

                                Jeopardy

                       termination of taxable year

301.6851-1  Termination of taxable year.
301.6852-1  Termination assessments of tax in the case of flagrant 
          political expenditures of section 501(c)(3) organizations.

                          jeopardy assessments

301.6861-1  Jeopardy assessments of income, estate, gift, and certain 
          excise taxes.
301.6862-1  Jeopardy assessment of taxes other than income, estate, 
          gift, and certain excise taxes.
301.6863-1  Stay of collection of jeopardy assessments; bond to stay 
          collection.
301.6863-2  Collection of jeopardy assessment; stay of sale of seized 
          property pending Tax Court decision.
301.6867-1  Presumptions where owner of large amount of cash is not 
          identified.

                      Bankruptcy and Receiverships

301.6871(a)-1  Immediate assessment of claims for income, estate, and 
          gift taxes in bankruptcy and receivership proceedings.
301.6871(a)-2  Collection of assessed taxes in bankruptcy and 
          receivership proceedings.
301.6871(b)-1  Claims for income, estate, and gift taxes in proceedings 
          under the Bankruptcy Act and receivership proceedings; claim 
          filed despite pendency of Tax Court proceedings.
301.6872-1  Suspension of running of period of limitations on 
          assessment.
301.6873-1  Unpaid claims in bankruptcy or receivership proceedings.

                       Transferees and Fiduciaries

301.6901-1  Procedure in the case of transferred assets.
301.6902-1  Burden of proof.
301.6903-1  Notice of fiduciary relationship.
301.6905-1  Discharge of executor from personal liability for decedent's 
          income and gift taxes.

                                Licensing

301.7001-1  License to collect foreign items.

                                  Bonds

301.7101-1  Form of bond and security required.
301.7102-1  Single bond in lieu of multiple bonds.

                   Closing Agreements and Compromises

301.7121-1  Closing agreements.
301.7122-0T  Table of contents.
301.7122-1T  Compromises (temporary).

                 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.

[[Page 13]]

301.7216-2  Disclosure or use without formal consent of taxpayer.
301.7216-3  Disclosure or use only with formal consent of taxpayer.

                  penalties applicable to certain taxes

301.7231-1  Failure to obtain license for collection of foreign items.

                             Other Offenses

301.7269-1  Failure to produce records.
301.7272-1  Penalty for failure to register.

                               Forfeitures

                     property subject to forfeiture

301.7304-1  Penalty for fraudulently claiming drawback.

                    provisions common to forfeitures

301.7321-1  Seizure of property.
301.7322-1  Delivery of seized property to U.S. marshal.
301.7324-1  Special disposition of perishable goods.
301.7325-1  Personal property valued at $2,500 or less.
301.7326-1  Disposal of forfeited or abandoned property in special 
          cases.
301.7327-1  Customs laws applicable.

                          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 dates.
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.
301.7502-1T  Timely mailing treated as timely filing (temporary).
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.

[[Page 14]]

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.
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.
301.7624-1  Reimbursement to State and local law enforcement agencies

           Supervision of Operations of Certain Manufacturers

301.7641-1  Supervision of operations of certain manufacturers.

                               Possessions

301.7654-1  Coordination of U.S. and Guam individual income taxes.

                               Definitions

301.7701-1  Classification of organizations for federal tax purposes.
301.7701-2  Business entities; definitions.
301.7701-3  Classification of certain business entities.
301.7701-4  Trusts.
301.7701-5  Domestic, foreign, resident, and nonresident persons.
301.7701-6  Definitions; person, fiduciary.
301.7701-7  Trusts--domestic and foreign.
301.7701-8  Military or naval forces and Armed Forces of the United 
          States.
301.7701-9  Secretary or his delegate.
301.7701-10  District director.
301.7701-11  Social security number.
301.7701-12  Employer identification number.
301.7701-13  Pre-1970 domestic building and loan association.
301.7701-13A  Post-1969 domestic building and loan association.
301.7701-14  Cooperative bank.
301.7701-15  Income tax return preparer.
301.7701-16  Other terms.
301.7701-17T  Collective-bargaining plans and agreements (temporary).
301.7701(b)-0  Outline of regulation provision for section 7701(b)-1 
          through (b)-9.
301.7701(b)-1  Resident alien.
301.7701(b)-2  Closer connection exception.
301.7701(b)-3  Days of presence in the United States that are excluded 
          for purposes of section 7701(b).
301.7701(b)-4  Residency time periods.
301.7701(b)-5  Coordination with section 877.
301.7701(b)-6  Taxable year.
301.7701(b)-7  Coordination with income tax treaties.
301.7701(b)-8  Procedural rules.
301.7701(b)-9  Effective dates of Secs. 301.7701(b)-1 through 
          301.7701(b)-7.
301.7701(i)-0  Outline of taxable mortgage pool provisions.
301.7701(i)-1  Definition of a taxable mortgage pool.
301.7701(i)-2  Special rules for portions of entities.
301.7701(i)-3  Effective dates and duration of taxable mortgage pool 
          classification.
301.7701(i)-4  Special rules for certain entities.
301.7704-2  Transition provisions.

                              General Rules

                  Application of Internal Revenue Laws

301.7803-1  Security bonds covering personnel of the Internal Revenue 
          Service.
301.7805-1  Rules and regulations.
301.7811-1  Taxpayer assistance orders.

[[Page 15]]

                        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.
301.9100-5T  Time and manner of making certain elections under the Tax 
          Equity and Fiscal Responsibility Act of 1982.
301.9100-6T  Time and manner of making certain elections under the 
          Deficit Reduction Act of 1984.
301.9100-7T  Time and manner of making certain elections under the Tax 
          Reform Act of 1986.
301.9100-8  Time and manner of making certain elections under the 
          Technical and Miscellaneous Revenue Act of 1988.
301.9100-9T  Election by a bank holding company to forego grandfather 
          provision for all property representing pre-June 30, 1968, 
          activities.
301.9100-10T  Election by certain family-owned bank holding companies to 
          divest all banking or nonbanking property.
301.9100-11T  Election by a qualified bank holding corporation to pay in 
          installments the tax attributable to sales under the Bank 
          Holding Company Act.
301.9100-12T  Various elections under the Tax Reform Act of 1976.
301.9100-14T  Individual's election to terminate taxable year when case 
          commences.
301.9100-15T  Election to use retroactive effective date.
301.9100-16T  Election to accrue vacation pay.
301.9100-17T  Procedure applicable to certain elections.
301.9100-18T  Election to include in gross income in year of transfer.
301.9100-19T  Election relating to passive investment income of electing 
          small business corporations.
301.9100-20T  Election to treat certain distributions as made on the 
          last day of the taxable year.
301.9100-21  References to other temporary elections under various tax 
          acts.

    Authority: 26 U.S.C. 7805, unless otherwise noted.
    Section 301.6011-2 also issued under 26 U.S.C. 6011(e);
    Section 301.6011-3 also issued under 26 U.S.C. 6011;
    Section 301.6036-1 also issued under 26 U.S.C. 6036;
    Section 301.6050M-1 also issued under 26 U.S.C. 6050M;
    Section 301.6061-1 also issued under 26 U.S.C. 6061;
    Section 301.6103(j)(1)-1T also issued under 26 U.S.C. 6103(j)(1);
    Section 301.6103(j)(5)-1T also issued under 26 U.S.C. 6103(j)(5);
    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 301.6104(d)-2 also issued under 26 U.S.C. 6104(d)(3);
    Section 301.6104(d)-3 also issued under 26 U.S.C. 6104(d)(3);
    Section 301.6104(d)-4 also issued under 26 U.S.C. 6104(e)(3);
    Section 301.6104(d)-5 also issued under 26 U.S.C. 6104(e)(3);
    Section 301.6109-1 also issued under 26 U.S.C. 6109 (a), (c), and 
(d);
    Section 301.6109-3 also issued under 26 U.S.C. 6109;
    Section 301.6111-1T also issued under 26 U.S.C. 6111;
    Section 301.6111-2T also issued under 26 U.S.C. 6111(f)(4);
    Section 301.6112-1T also issued under 26 U.S.C. 6112;
    Section 301.6114-1 also issued under 26 U.S.C. 6114;
    Section 301.6222(a)-1T also issued under 26 U.S.C. 6230(k);
    Section 301.6222(a)-2T also issued under 26 U.S.C. 6230(k);
    Section 301.6222(b)-1T also issued under 26 U.S.C. 6230(k);
    Section 301.6222(b)-2T also issued under 26 U.S.C. 6230(k);
    Section 301.6222(b)-3T also issued under 26 U.S.C. 6230 (i) and (k);
    Section 301.6223(a)-1T also issued under 26 U.S.C. 6230(k);
    Section 301.6223(a)-2T also issued under 26 U.S.C. 6230(k);
    Section 301.6223(b)-1T also issued under 26 U.S.C. 6230 (i) and (k);
    Section 301.6223(b)-2T also issued under 26 U.S.C. 6230(k);
    Section 301.6223(c)-1T also issued under 26 U.S.C. 6223(c) and 6230 
(i) and (k);
    Section 301.6223(e)-1T also issued under 26 U.S.C. 6230(k);
    Section 301.6223(e)-2T also issued under 26 U.S.C. 6230 (i) and (k);
    Section 301.6223(f)-1T also issued under 26 U.S.C. 6230(k);
    Section 301.6223(g)-1T also issued under 26 U.S.C. 6223(g) and 6230 
(i) and (k);

[[Page 16]]

    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);
    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 301.6404-2 also issued under 26 U.S.C. 6404;
    Section 301.6404-3 also issued under 26 U.S.C. 6404(f)(3);
    Section 301.6621-1 also issued under 26 U.S.C. 6230(k);
    Section 301.6689-1T also issued under 26 U.S.C. 6689(a);
    Section 301.7216-2, paragraphs (o) and (p) also issued under 26 
U.S.C. 7216(b)(3);
    Section 301.7502-1T also issued under 26 U.S.C. 7502(c);
    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).

[[Page 17]]


    Source: 32 FR 15241, Nov. 3, 1967, unless otherwise noted.

    Editorial Note: In the text of this part, integral section 
references are to sections of the Internal Revenue Code of 1954; decimal 
section references are to the Code of Federal Regulations.
    References in the text to the ``Code'' are references to sections of 
the Internal Revenue Code of 1954.

                         Information and Returns

                           Returns and Records

                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.



Sec. 301.6011-2  Required use of magnetic media.

    (a) Meaning of terms. The following definitions apply for purposes 
of this section:
    (1) Magnetic media. The term magnetic media means any media 
permitted under applicable regulations, revenue procedures or 
publications, or, in the case of returns filed with the Social Security 
Administration, Social Security Administration publications. These 
generally include magnetic tape, tape cartridge, and diskette, as well 
as other media (such as electronic filing) specifically permitted under 
the applicable regulations, procedures, or publications.
    (2) Machine-readable paper form. The term ``machine-readable paper 
form'' means--
    (i) Optical-scan paper form; or
    (ii) Any other machine-readable paper form permitted under 
applicable regulations, revenue procedures, or Social Security 
Administration publications.
    (3) Person. The term ``person'' includes any person that is required 
to file a return that is described in paragraph (b) of this section. 
Thus, the term ``person'' includes the United States, a State, the 
District of Columbia, a foreign government, a political subdivision of a 
State or of a foreign government, or an international organization. In 
addition, in the case of an affiliated group of corporations filing a 
consolidated return, each member of the affiliated group is a separate 
person.
    (b) Returns required on magnetic media. (1) If the use of Form 1042-
S, 1098, 1099 series, 5498, 8027, W-2G , or other form treated as a form 
specified in this paragraph (b)(1) is required by the applicable 
regulations or revenue procedures for the purpose of making an 
information return, the information required by the form must be 
submitted on magnetic media, except as otherwise provided in paragraph 
(c) of this section. Returns on magnetic media must be made in 
accordance with applicable revenue procedures or publications (see 
Sec. 601.601(d)(2)(ii)(b) of this chapter). Pursuant to these 
procedures, the consent of the Commissioner of Internal Revenue (or 
other authorized officer or employee of the Internal Revenue Service) to 
a magnetic medium must be obtained by submitting Form 4419 (Application 
for Filing Information Returns Magnetically/Electronically) prior to 
submitting a return described in this paragraph (b)(1) on the magnetic 
medium.
    (2) If the use of Form W-2 (Wage and Tax Statement), Form 499R-2/W-
2PR (Withholding Statement (Puerto Rico)), Form W-2VI (U.S. Virgin 
Islands Wage and Tax Statement), Form W-2GU (Guam Wage and Tax 
Statement), Form W-2AS (American Samoa Wage and Tax Statement), or other 
form treated as a form specified in this paragraph (b)(2) is required 
for the purpose of making an information return, the information 
required by the form must be submitted on magnetic media, except as 
otherwise provided in paragraph (c) of this section. Returns described 
in this paragraph (b)(2) must be

[[Page 18]]

made in accordance with applicable Social Security Administration 
procedures or publications (which may be obtained from the local office 
of the Social Security Administration).
    (3) The Commissioner may prescribe by revenue procedure that 
additional forms are treated, for purposes of this section, as forms 
specified in paragraph (b)(1) or (b)(2) of this section.
    (c) Exceptions--(1) Low-volume filers/250-threshold--(i) In general. 
No person is required to file information returns on magnetic media 
unless the person is required to file 250 or more returns during the 
calendar year. Persons filing fewer than 250 returns during the calendar 
year may make the returns on the prescribed paper form, or, 
alternatively, such persons may make returns on magnetic media in 
accordance with paragraph (b) of this section.
    (ii) Machine-readable forms. Returns made on a paper form under this 
paragraph (c)(1) shall be machine-readable if applicable revenue 
procedures provide for a machine-readable paper form.
    (iii) No aggregation. Each type of information return described in 
paragraphs (b)(1) and (2) of this section is considered a separate 
return for purposes of this paragraph (c)(1). Therefore, the 250-
threshold applies separately to each type of form required to be filed.
    (iv) Examples. The provisions of paragraph (c)(1)(iii) of this 
section are illustrated by the following examples:

    Example 1. For the calendar year ending December 31, 1998, Company X 
is required to file 200 returns on Form 1099-INT and 350 returns on Form 
1099-MISC. Company X is not required to file Forms 1099-INT on magnetic 
media but is required to file Forms 1099-MISC on magnetic media.
    Example 2. During the calendar year ending December 31, 1998, 
Company Y has 275 employees in Puerto Rico and 50 employees in American 
Samoa. Company Y is required to file Forms 499R-2/W-2PR on magnetic 
media but is not required to file Forms W-2AS on magnetic media.
    Example 3. For the calendar year ending December 31, 1998, Company Z 
files 300 original returns on Form 1099-DIV and later files 70 corrected 
returns on Form 1099-DIV. Company Z is required to file the original 
returns on magnetic media. However, Company Z is not required to file 
the corrected returns on magnetic media because the corrected returns 
fall under the 250-threshold. See Sec. 301.6721-1(a)(2)(ii).

    (2) Waiver. (i) The Commissioner may waive the requirements of this 
section if hardship is shown in a request for waiver filed in accordance 
with this paragraph (c)(2)(i). The principal factor in determining 
hardship will be the amount, if any, by which the cost of filing the 
information returns in accordance with this section exceeds the cost of 
filing the returns on other media. Notwithstanding the foregoing, if an 
employer is required to make a final return on Form 941, or a variation 
thereof, and expedited filing of Forms W-2, Forms 499R-2/W-2PR, Forms W-
2VI, Forms W-2GU, or Form W-2AS is required, the unavailability of the 
specifications for magnetic media filing will be treated as creating a 
hardship (see Sec. 31.6071(a)-1(a)(3)(ii) of this chapter). A request 
for waiver must be made in accordance with applicable revenue procedures 
or publications (see Sec. 601.601(d)(2)(ii)(b) of this chapter). 
Pursuant to these procedures, a request for waiver should be filed at 
least 45 days before the due date of the information return in order for 
the Service to have adequate time to respond to the request for waiver. 
The waiver will specify the type of information return and the period to 
which it applies and will be subject to such terms and conditions 
regarding the method of reporting as may be prescribed by the 
Commissioner.
    (ii) The Commissioner may prescribe rules that supplement the 
provisions of paragraph (c)(2)(i) of this section.
    (d) Paper form returns. Returns submitted on paper forms (whether or 
not machine-readable) permitted under paragraph (c) of this section 
shall be in accordance with applicable Internal Revenue Service or 
Social Security Administration procedures.
    (e) Applicability of current procedures. Until procedures are 
prescribed which further implement the mandatory filing on magnetic 
media provided by this section, a return to which this section applies 
shall be made in the manner and shall be subject to the requirements and 
conditions (including the requirement of applying for consent to the 
magnetic medium) prescribed in the regulations, revenue procedures

[[Page 19]]

and Social Security Administration publications relating to the filing 
of such return on magnetic media.
    (f) Failure to file. If a person fails to file an information return 
on magnetic media when required to do so by this section, the person is 
deemed to have failed to file the return. In addition, if a person 
making returns on a paper form under paragraph (c) of this section fails 
to file a return on machine-readable paper form when required to do so 
by this section, the person is deemed to have failed to file the return. 
See sections 6652, 6693, and 6721 for penalties for failure to file 
certain returns. See also section 6724 and the regulations under section 
6721 for the specific rules and limitations regarding the penalty 
imposed under section 6721 for failure to file on magnetic media.
    (g) Effective dates. (1) Except as otherwise provided in paragraph 
(g)(2) of this section, this section applies to returns filed after 
December 31, 1986.
    (2) Paragraphs (a)(1), (b)(1), (b)(2), (c)(1)(i), (c)(1)(iii), 
(c)(1)(iv), (c)(2), (d), (e), and (f) of this section are effective for 
information returns required to be filed after December 31, 1996. For 
information returns required to be filed after December 31, 1989, and 
before January 1, 1997, see section 6011(e).

[T.D. 8081, 51 FR 10348, Mar. 25, 1986, as amended by T.D. 8097, 51 FR 
30352, Aug. 26, 1986; T.D. 8140, 52 FR 19137, May 21, 1987; T.D. 8636, 
60 FR 66142, Dec. 21, 1995; T.D. 8772, 63 FR 35519, June 30, 1998]



Sec. 301.6011-3  Required use of magnetic media for partnership returns.

    (a) Partnership returns required on magnetic media. If a partnership 
with more than 100 partners is required to file a partnership return 
pursuant to Sec. 1.6031(a)-1 of this chapter, the information required 
by the applicable forms and schedules must be filed on magnetic media, 
except as otherwise provided in paragraph (b) of this section. Returns 
filed on magnetic media must be made in accordance with applicable 
revenue procedures or publications. In prescribing revenue procedures or 
publications, the Commissioner may determine that partnerships will be 
required to use any one form of magnetic media filing. For example, the 
Commissioner may determine that partnerships with more than 100 partners 
must file their partnership returns electronically. In filing its 
return, a partnership must register to participate in the magnetic media 
filing program in the manner prescribed by the Internal Revenue Service 
in applicable revenue procedures or publications.
    (b) Waiver. The Commissioner may waive the requirements of this 
section if hardship is shown in a request for waiver filed in accordance 
with this paragraph (b). A determination of hardship will be based upon 
all of the facts and circumstances. One factor in determining hardship 
will be the reasonableness of the incremental cost to the partnership of 
complying with the magnetic media filing requirements. Other factors, 
such as equipment breakdowns or destruction of magnetic media filing 
equipment, also may be considered. A request for waiver must be made in 
accordance with applicable revenue procedures or publications. The 
waiver will specify the type of partnership return and the period to 
which it applies. The waiver will also be subject to such terms and 
conditions regarding the method of filing as may be prescribed by the 
Commissioner.
    (c) Failure to file. If a partnership fails to file a partnership 
return on magnetic media in the manner required and when required to do 
so by this section, the partnership will be deemed to have failed to 
file the return in the manner prescribed for purposes of the information 
return penalty under section 6721. See Sec. 301.6724-1(c)(3) for rules 
regarding the waiver of penalties for undue economic hardship relating 
to filing returns on magnetic media.
    (d) Meaning of terms. The following definitions apply for purposes 
of this section:
    (1) Magnetic media. The term magnetic media means any magnetic media 
permitted under applicable regulations, revenue procedures, or 
publications. These generally include magnetic tape, tape cartridge, and 
diskette, as well as other media (such as electronic filing) 
specifically permitted under the applicable regulations, procedures, or 
publications.

[[Page 20]]

    (2) Partnership. The term partnership means a partnership as defined 
in Sec. 1.761-1(a) of this chapter.
    (3) Partner. The term partner means a member of a partnership as 
defined in section 7701(a)(2).
    (4) Partnership return. The term partnership return means a form in 
Series 1065 (including Form 1065, U.S. Partnership Return of Income, and 
Form 1065-B, U.S. Return of Income for Electing Large Partnerships), 
along with the corresponding Schedules K-1 and all other related forms 
and schedules that are required to be attached to the Series 1065 form.
    (5) Partnerships with more than 100 partners. A partnership has more 
than 100 partners if, over the course of the partnership's taxable year, 
the partnership had more than 100 partners, regardless of whether a 
partner was a partner for the entire year or whether the partnership had 
over 100 partners on any particular day in the year. For purposes of 
this paragraph (d)(5), however, only those persons having a direct 
interest in the partnership must be considered partners for purposes of 
determining the number of partners during the partnership's taxable 
year.
    (e) Examples. The following examples illustrate the provisions of 
paragraph (d)(5) of this section. In the examples, the partnerships 
utilize the calendar year, and the taxable year in question is 2000:

    Example 1. Partnership P had five general partners and 90 limited 
partners on January 1, 2000. On March 15, 2000, 10 more limited partners 
acquired an interest in P. On September 29, 2000, the 10 newest partners 
sold their individual partnership interests to C, a corporation which 
was one of the original 90 limited partners. On December 31, 2000, P had 
the same five general partners and 90 limited partners it had on January 
1, 2000. P had a total of 105 partners over the course of partnership 
taxable year 2000. Therefore, P must file its 2000 partnership return on 
magnetic media.
    Example 2. Partnership Q is a general partnership that had 95 
partners on January 1, 2000. On March 15, 2000, 10 partners sold their 
individual partnership interests to corporation D, which was not 
previously a partner in Q. On September 29, 2000, corporation D sold 
one-half of its partnership interest in equal shares to five 
individuals, who were not previously partners in Q. On December 31, 
2000, Q had a total of 91 partners, and on no date in the year did Q 
have more than 100 partners. Over the course of the year, however, Q had 
101 partners. Therefore, Q must file its 2000 partnership return on 
magnetic media.
    Example 3. Partnership G is a general partnership with 100 partners 
on January 1, 2000. There are no new partners added to G in 2000. One of 
G's partners, A, is a partnership with 53 partners. A is one partner, 
regardless of the number of partners A has. Therefore, G has 100 
partners and is not required to file its 2000 partnership return on 
magnetic media.

    (f) Effective date. In general, this section applies to partnership 
returns for taxable years ending on or after December 31, 2000. However, 
electing large partnerships under section 775 and partnerships using 
foreign addresses on their Series 1065 forms are not required to file 
using magnetic media for taxable years ending before January 1, 2001.

[T.D. 8843, 64 FR 61503, Nov. 12, 1999]

                           Income Tax Returns



Sec. 301.6012-1  Persons required to make returns of income.

    For provisions with respect to persons required to make returns of 
income, see Secs. 1.6012-1 to 1.6012-4, inclusive, of this chapter 
(Income Tax Regulations).



Sec. 301.6013-1  Joint returns of income tax by husband and wife.

    For provisions with respect to joint returns of income tax by 
husband and 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]

[[Page 21]]



Sec. 301.6014-1  Income tax return--tax not computed by taxpayer.

    For provisions relating to the election not to show on an income tax 
return the amount of tax due in connection therewith, see Secs. 1.6014-1 
and 1.6014-2 of this chapter (Income Tax Regulations).

[T.D. 7102, 36 FR 5498, Mar. 24, 1971]



Sec. 301.6015-1  Declaration of estimated income tax by individuals.

    For provisions relating to requirements of declarations of estimated 
income tax by individuals, see Secs. 1.6015 (a)-1 through 1.6015 (j)-1 
of this chapter (Income Tax Regulations).

[T.D. 7427, 41 FR 34033, Aug. 12, 1976]



Sec. 301.6016-1  Declarations of estimated income tax by corporations.

    For provisions concerning the requirement of declarations of 
estimated income tax by corporations, see Secs. 1.6016-1 to 1.6016-4, 
inclusive, of this chapter (Income Tax Regulations).



Sec. 301.6017-1  Self-employment tax returns.

    For provisions relating to the requirement of self-employment tax 
returns, see Sec. 1.6017-1 of this chapter (Income Tax Regulations).

                       Estate and Gift Tax Returns



Sec. 301.6018-1  Estate tax returns.

    For provisions relating to requirement of estate tax returns, see 
Secs. 20.6018-1 to 20.6018-4, inclusive, of this chapter (Estate Tax 
Regulations).



Sec. 301.6019-1  Gift tax returns.

    For provisions relating to requirement of gift tax returns, see 
Secs. 25.6019-1 to 25.6019-4, inclusive, of this chapter (Gift Tax 
Regulations).

                        Miscellaneous Provisions



Sec. 301.6020-1  Returns prepared or executed by district directors or other internal revenue officers.

    (a) Preparation of returns--(1) In general. If any person required 
by the Code or by the regulations prescribed thereunder to make a return 
fails to make such return, it may be prepared by the district director 
or other authorized internal revenue officer or employee provided such 
person consents to disclose all information necessary for the 
preparation of such return. The return upon being signed by the person 
required to make it shall be received by the district director as the 
return of such person.
    (2) Responsibility of person for whom return is prepared. A person 
for whom a return is prepared in accordance with subparagraph (1) of 
this paragraph shall for all legal purposes remain responsible for the 
correctness of the return to the same extent as if the return had been 
prepared by him.
    (b) Execution of returns--(1) In general. If any person required by 
any internal revenue law or by the regulations prescribed thereunder to 
make a return (other than a declaration of estimated tax required under 
section 6015 or 6016) fails to make such return at the time prescribed 
therefor, or makes, willfully or otherwise, a false or fraudulent 
return, the district director or other authorized internal revenue 
officer or employee shall make such return from his own knowledge and 
from such information as he can obtain through testimony or otherwise.
    (2) Status of returns. Any return made in accordance with 
subparagraph (1) of this paragraph and subscribed by the district 
director or other authorized internal revenue officer or employee shall 
be prima facie good and sufficient for all legal purposes.
    (3) Deficiency procedures. For deficiency procedures in the case of 
income, estate, and gift taxes, see sections 6211 to 6216, inclusive, 
and Secs. 301.6211-1 to 301.6215-1, inclusive.
    (c) Cross references. (1) For provisions that a return executed by a 
district director or other authorized internal revenue officer or 
employee will not start the running of the period of limitations 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.

[[Page 22]]

    (3) For additions to the tax for failure to pay tax, see section 
6653 and Sec. 301.6653-1.
    (4) For criminal penalties for willful failure to make returns, see 
sections 7201, 7202, and 7203.
    (5) For criminal penalties for willfully making false or fraudulent 
returns, see sections 7206 and 7207.
    (6) For authority to examine books and witnesses, see section 7602 
and Sec. 301.7602-1.



Sec. 301.6021-1  Listing by district directors of taxable objects owned by nonresidents of internal revenue districts.

    Whenever there are in any internal revenue district any articles 
subject to tax, which are not owned or possessed by or under the care or 
control of any person within such district, and of which no list has 
been transmitted to the district director, as required by law or by 
regulations prescribed pursuant to law, the district director, or other 
authorized internal revenue officer or employee, shall enter the 
premises where such articles are situated, shall make such inspection of 
the articles as may be necessary, and shall make lists of the same 
according to the forms prescribed. Such lists, being subscribed by the 
district director or other authorized internal revenue officer or 
employee, shall be sufficient lists of such articles for all purposes.

                           information returns

      Information Concerning Persons Subject to Special Provisions



Sec. 301.6031(a)-1  Return of partnership income.

    For provisions relating to the requirement of returns of partnership 
income, see Sec. 1.6031(a)-1 of this chapter.

[T.D. 8841, 64 FR 61502, Nov. 12, 1999]



Sec. 301.6032-1  Returns of banks with respect to common trust funds.

    For provisions relating to requirement of returns of banks with 
respect to common trust funds, see Sec. 1.6032-1 of this chapter (Income 
Tax Regulations).



Sec. 301.6033-1  Returns by exempt organizations.

    For provisions relating to the requirement of returns by exempt 
organizations, see Sec. 1.6033-1 of this chapter (Income Tax 
Regulations).



Sec. 301.6034-1  Returns by trusts described in section 4947(a)(2) or claiming charitable or other deductions under section 642(c).

    For provisions relating to the requirement of returns by trusts 
described in section 4947(a)(2) or claiming charitable or other 
deductions under section 642(c), see Sec. 1.6034-1 of this chapter 
(Income Tax Regulations).

[T.D. 8026, 50 FR 20757, May 20, 1985]



Sec. 301.6035-1  Returns of officers, directors, and shareholders of foreign personal holding companies.

    For provisions relating to the requirement of returns by officers, 
directors, and shareholders of foreign personal holding companies, see 
Secs. 1.6035-1 to 1.6035-3, inclusive, of this chapter (Income Tax 
Regulations).



Sec. 301.6036-1  Notice required of executor or of receiver or other like fiduciary.

    (a) Receivers and other like fiduciaries--(1) Exemption for 
bankruptcy proceedings. (i) A bankruptcy trustee, debtor in possession 
or other like fiduciary in a bankruptcy proceeding is not required by 
this section to give notice of appointment, qualification or 
authorization to act to the Secretary or his delegate. (However, see the 
notice requirements under the Bankruptcy Rules.)
    (ii) Paragraph (a)(1)(i) of this section is effective for 
appointments, qualifications and authorizations to act made on or after 
January 29, 1988. For appointments, qualifications and authorizations to 
act made before the foregoing date, 26 CFR 301.6036-1 (a)(1) and (4)(i) 
(revised as of April 1, 1986) apply.
    (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

[[Page 23]]

Columbia as in control of all or substantially all the assets of a 
debtor or other party to such proceeding shall, on, or within 10 days 
of, the date of his appointment or authorization to act, give notice 
thereof in writing to the district director for the internal revenue 
district in which the debtor, or such other party, is or was required to 
make returns. Moreover, any fiduciary in aid of foreclosure not 
appointed by order of any such court, if he takes possession of all or 
substantially all the assets of the debtor, shall, on, or within 10 days 
of, the date of his taking possession, give notice thereof in writing to 
such district director.
    (3) Assignment for benefit of creditors. An assignee for the benefit 
of a creditor or creditors shall, on, or within 10 days of, the date of 
an assignment, give notice thereof in writing to the district director 
for the internal revenue district in which the debtor is or was required 
to make returns. For purposes of this subparagraph, an assignee for the 
benefit of creditors shall be any person who, by authority of law, by 
the order of any court, by oral or written agreement, or in any other 
manner acquires control or possession of or title to all or 
substantially all the assets of a debtor, and who under such acquisition 
is authorized to use, reassign, sell, or in any manner dispose of such 
assets so that the proceeds from the use, sale, or other disposition may 
be paid to or may inure directly or indirectly to the benefit of a 
creditor or creditors of such debtor.
    (4) Contents of notice--(i) Proceedings other than bankruptcy. The 
written notice required under paragraph (a)(2) of this section shall 
contain:
    (a) The name and address of the person making such notice and the 
date of his appointment or of his taking possession of the assets of the 
debtor or other person whose assets are controlled,
    (b) The name, address, and, for notices filed after December 21, 
1972, the taxpayer identification number of the debtor or other person 
whose assets are controlled.
    (c) In the case of a court proceeding:
    (1) The name and location of the court in which the proceedings are 
pending,
    (2) The date on which such proceedings were instituted,
    (3) The number under which such proceedings are docketed, and
    (4) When possible, the date, time, and place of any hearing, meeting 
of creditors, or other scheduled action with respect to such 
proceedings.
    (ii) Assignment for benefit of creditors. The written notice 
required under subparagraph (3) of this paragraph shall contain:
    (a) The name and address of, and the date the asset or assets were 
assigned to, the assignee,
    (b) The name, address, and, for notice filed after December 21, 
1972, the taxpayer identification number of the debtor whose assets were 
assigned.
    (c) A brief description of the assets assigned,
    (d) An explanation of the action expected to be taken with respect 
to such assets, and
    (e) When possible, the date, time, and place of any hearing, meeting 
of creditors, sale, or other scheduled action with respect to such 
assets.
    (iii) The notice required by this section shall be sent to the 
attention of the Chief, Special Procedures Staff, of the district office 
to which it is required to be sent.
    (b) Executors, administrators, and persons in possession of property 
of decedent. For provisions relating to the requirement of filing, by an 
executor, administrator, or person in possession of property of a 
decedent, of a preliminary notice in the case of the estate of a 
decedent dying before January 1, 1971, see Sec. 20.6036-1 of this 
chapter (Estate Tax Regulations).
    (c) Notice of fiduciary relationship. When a notice is required 
under Sec. 301.6903-1 of a person acting in a fiduciary capacity and is 
also required of such person under this section, notice given in 
accordance with the provisions of this section shall be considered as 
complying with both sections.
    (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

[[Page 24]]

proceeding, see section 6872 and Sec. 301.6872-1.
    (e) Applicability. Except as provided in paragraph (a)(1)(ii) of 
this section, the provisions of this section shall apply to those 
persons referred to in this section whose appointments, authorizations, 
or assignments occur on or after the date of publication of these 
regulations in the Federal Register as a Treasury decision.
    (f) Cross references. (1) For criminal penalty for willful failure 
to supply information, see section 7203.
    (2) For criminal penalties for willfully making false or fraudulent 
statements, see sections 7206 and 7207.
    (3) For time for performance of acts where the last day falls on a 
Saturday, Sunday, or legal holiday, see section 7503 and Sec. 301.7503-
1.

[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7218, 37 FR 24748, Nov. 
21, 1972; T.D. 7238, 37 FR 28738, Dec. 29, 1972; T.D. 8172, 53 FR 2600, 
Jan. 29, 1988]



Sec. 301.6037-1  Return of electing small business corporation.

    For provisions relating to requirement of return of electing small 
business corporation, see Sec. 1.6037-1 of this chapter (Income Tax 
Regulations).



Sec. 301.6038-1  Information returns required of U.S. persons with respect to certain foreign corporations.

    For provisions relating to information returns required of U.S. 
persons with respect to certain foreign corporations, see Secs. 1.6038-1 
and 1.6038-2 of this chapter (Income Tax Regulations).



Sec. 301.6039-1  Information returns and statements required in connection with certain options.

    For provisions relating to information returns and statements 
required in connection with certain options, see Secs. 1.6039-1 and 
1.6039-2 of this chapter (Income Tax Regulations).

[T.D. 7275, 38 FR 11346, May 7, 1973]

         Information Concerning Transactions With Other Persons



Sec. 301.6041-1  Returns of information regarding certain payments.

    For provisions relating to the requirement of returns of information 
regarding certain payments, see Secs. 1.6041-1 to 1.6041-6, inclusive, 
of this chapter (Income Tax Regulations).



Sec. 301.6042-1  Returns of information regarding payments of dividends and corporate earnings and profits.

    For provisions relating to the requirement of returns of information 
regarding payments of dividends and corporate earnings and profits, see 
Secs. 1.6042-1 to 1.6042-4, inclusive, of this chapter (Income Tax 
Regulations).



Sec. 301.6043-1  Returns regarding liquidation, dissolution, termination, or contraction.

    For provisions relating to the requirement of returns of information 
regarding liquidations, dissolutions, terminations, or contracts, see 
Secs. l.6043-1, 1.6043-2, and 1.6043-3 of this chapter (Income Tax 
Regulations).

[T.D. 7563, 43 FR 40222, Sept. 11, 1978]



Sec. 301.6044-1  Returns of information regarding payments of patronage dividends.

    For provisions relating to the requirement of returns of information 
regarding payments of patronage dividends, see Secs. 1.6044-1 to 1.6044-
5, inclusive, of this chapter (Income Tax Regulations).



Sec. 301.6046-1  Returns as to organization or reorganization of foreign corporations and as to acquisitions of their stock.

    For provisions relating to requirement of returns as to organization 
or reorganization of foreign corporations and as to acquisitions of 
their stock, see Secs. 1.6046-1 to 1.6046-3, inclusive, of this chapter. 
(Income Tax Regulations.)

[[Page 25]]



Sec. 301.6047-1  Information relating to certain trusts and annuity and bond purchase plans.

    For provisions relating to the requirement of returns of information 
regarding certain trusts and annuity and bond purchase plans, see 
Sec. 1.6047-1 of this chapter (Income Tax Regulations).



Sec. 301.6048-1  Returns as to creation of or transfers to certain foreign trusts.

    For provisions relating to the requirement of returns as to creation 
of or transfers to certain foreign trusts, see Sec. 16.3-1 of this 
chapter (Temporary Regulations under the Revenue Act of 1962).



Sec. 301.6049-1  Returns regarding payments of interest.

    For provisions relating to the requirement of returns regarding 
payments of interest, see Secs. 1.6049-1 to 1.6049-3, inclusive, of this 
chapter (Income Tax Regulations).



Sec. 301.6050A-1  Information returns regarding services performed by certain crewmen on fishing boats.

    For provisions relating to the requirement of returns of information 
regarding services performed by certain crewmen on fishing boats, see 
Sec. 1.6050A-1 of this chapter (Income Tax Regulations) and 
Sec. 301.6652-1 of this chapter (Regulations on Procedure and 
Administration).

[T.D. 7716, 45 FR 57124, Aug. 27, 1980]



Sec. 301.6050M-1  Information returns relating to persons receiving contracts from certain Federal executive agencies.

    For provisions relating to the requirements of returns of 
information relating to persons receiving contracts from certain Federal 
executive agencies, see Sec. 1.6050M-1 of this chapter (Income Tax 
Regulations).

[T.D. 8275, 54 FR 50372, Dec. 6, 1989]

               Information Regarding Wages Paid Employees



Sec. 301.6051-1  Receipts for employees.

    For provisions relating to statements for employees regarding 
remuneration paid during calendar year, see Sec. 31.6051-1 of this 
chapter (Employment Tax Regulations).



Sec. 301.6052-1  Information returns and statements regarding payment of wages in the form of group-term life insurance.

    For provisions relating to information returns and statements 
required in connection with the payment of wages in the form of group-
term life insurance, see Secs. 1.6052-1 and 1.6052-2 of this chapter 
(income tax regulations).

[T.D. 7275, 38 FR 11346, May 7, 1973]



Sec. 301.6057-1  Employee retirement benefit plans; identification of participant with deferred vested retirement benefit.

    (a) Annual registration statement--(1) In general. Under section 
6057(a), the plan administrator (within the meaning of section 414(g)) 
of an employee retirement benefit plan must file with the Internal 
Revenue Service information relating to each plan participant who 
separates from service covered by the plan and is entitled to a deferred 
vested retirement benefit under the plan, but is not paid this 
retirement benefit. Plans subject to this filing requirement are 
described in subparagraph (3) of this paragraph. Subparagraph (4) 
describes how the information is to be filed with the Internal Revenue 
Service. In the case of a plan to which only one employer contributes, 
the time for filing the information with respect to each separated 
participant is described in subparagraph (5). In the case of a plan to 
which more than one employer contributes the time for filing the 
information with respect to a participant is described in paragraph 
(b)(2) of this section. Paragraph (b) of this section also provides 
other rules applicable only to plans to which more than one employer 
contributes.
    (2) Deferred vested retirement benefit. For purposes of this 
section, a plan participant's deferred retirement benefit is considered 
a vested benefit if it is vested under the terms of the plan at the 
close of the plan year described in paragraph (a)(5) or (b)(4) of this 
section (whichever is applicable) for which information relating to any 
deferred

[[Page 26]]

vested retirement benefit of the participant must be filed. A 
participant's deferred retirement benefit need not be a nonforfeitable 
benefit within the meaning of section 411(a) for the filing requirements 
described in this section to apply. Accordingly, information relating to 
a participant's deferred vested retirement benefit must be filed as 
required by this section notwithstanding that the benefit is subject to 
forfeiture by reason of an event or condition occurring subsequent to 
the close of the plan year described in paragraph (a)(5) or (b)(4) of 
this section (whichever is applicable) for which information relating to 
any deferred vested retirement benefit of the participant must be filed.
    (3) Plans subject to filing requirement. The term ``employee 
retirement benefit plan'' means a plan to which the vesting standards of 
section 203 of part 2 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (88 Stat. 854) apply for any day 
in the plan year. (For purposes of this section, ``plan year'' means the 
plan year as determined for purposes of the annual return required by 
section 6058(a)). Accordingly, a plan need not be a qualified plan 
within the meaning of section 401(a) to be subject to these filing 
requirements. A plan to which more than one employer contributes must 
file the report of deferred vested retirement benefits described in this 
section, but see paragraph (b) of this section for special rules 
applicable to such a plan. The filing requirements described in this 
section and Sec. 301.6057-2 (relating to notification of change in plan 
status) do not apply to a governmental or church plan described in 
section 414 (d) or (e).
    (4) Filing requirements. Information relating to the deferred vested 
retirement benefit of a plan participant must be filed on schedule SSA 
as an attachment to the Annual Return/Report of Employee Benefit Plan 
(form 5500 series). Schedule SSA shall be filed on behalf of an employee 
retirement benefit plan for each plan year for which information 
relating to the deferred vested retirement benefit of a plan participant 
is filed under paragraph (a)(5) or (b)(2) of this section. There shall 
be filed on schedule SSA the name and social security number of the 
participant, a description of the nature, form, and amount of the 
deferred vested retirement benefit to which the participant is entitled, 
and such other information as is required by section 6057(a) or schedule 
SSA and the accompanying instructions. The form of the benefit reported 
on schedule SSA shall be the normal form of benefit under the plan, or, 
if the plan administrator (within the meaning of section 414(g)) 
considers it more appropriate, any other form of benefit.
    (5) Time for reporting deferred vested retirement benefit--(i) In 
general. In the case of a plan to which only one employer contributes, 
information relating to the deferred vested retirement benefit of a plan 
participant must be filed no later than on the schedule SSA filed for 
the plan year following the plan year within which the participant 
separates from service covered by the plan. Information relating to a 
separated participant may, at the option of the plan administrator, be 
reported earlier (that is, on the schedule SSA filed for the plan year 
in which the participant separates from service covered by the plan). 
For purposes of this paragraph a participant is not considered to 
separate from service covered by the plan solely because the participant 
incurs a break in service under the plan. In addition, for purposes of 
this paragraph, in the case of a plan which uses the elapsed time method 
described in Department of Labor regulations for crediting service for 
benefit accrual purposes, a participant is considered to separate from 
service covered by the plan on the date the participant severs from 
service covered by the plan.
    (ii) Exception. Notwithstanding subdivision (i), no information 
relating to the deferred vested retirement benefit of a separated 
participant is required to be filed on schedule SSA if, before the date 
such schedule SSA is required to be filed (including any extension of 
time for filing granted pursuant to section 6081), the participant (A) 
is paid some or all of the deferred vested retirement benefit under the 
plan, (B) returns to service covered by the plan, or (C) forfeits all of 
the deferred vested retirement benefit under the plan.

[[Page 27]]

    (b) Plans to which more than one employer contributes--(1) 
Application. Section 6057 and this section apply to a plan to which more 
than one employer contributes with the modifications set forth in this 
paragraph. For purposes of section 6057 and this section, whether or not 
more than one employer contributes to a plan shall be determined by the 
number of employers who are required to contribute to the plan. Thus, 
for example, this paragraph applies to plans maintained by more than one 
employer which are collectively bargained as described in section 
413(a), multiple-employer plans described in section 413(c) and the 
regulations thereunder, multiemployer plans described in section 414(f), 
and plans adopted by more than one employer of certain controlled and 
common control groups described in section 414 (b) and (c).
    (2) Time for reporting deferred vested retirement benefit--(i) In 
general. In the case of a plan to which more than one employer 
contributes, information relating to the deferred vested retirement 
benefit of a plan participant must be filed no later than on the 
schedule SSA filed for the plan year within which the participant 
completes the second of two consecutive one-year breaks in service (as 
defined in the plan for vesting percentage purposes) in service 
computation periods (as defined in the plan for vesting percentage 
purposes) which begin after December 31, 1974. At the option of the plan 
administrator, information relating to a participant's deferred vested 
retirement benefit may be filed earlier (that is, on the schedule SSA 
filed for the plan year in which the participant incurs the first one-
year break in service or, in the case of a separated participant, on the 
schedule SSA filed for the plan year in which the participant separates 
from service).
    (ii) Special rules--For purposes of this subparagraph (1)--
    (A) For the definition of the term ``1-year break in service'' in 
the case of a plan which uses the elapsed time method described in 
Department of Labor Regulations for crediting service for vesting 
percentage purposes, see Sec. 1.411(a)-6(c)(2).
    (B) In the case of a plan which does not define the term ``1-year 
break in service'' for vesting percentage purposes, a plan participant 
shall be deemed to incur a 1-year break in service under the plan in any 
plan year within which the participant does not complete more than 500 
hours of service covered by the plan.
    (iii) Transitional rule. Notwithstanding subdivision (i), if the 
second consecutive 1-year break in service described in subdivision (i) 
is incurred in a plan year beginning before January 1, 1978, information 
relating to the participant's deferred vested retirement benefit is not 
required to be filed earlier than on the schedule SSA filed for the 
first plan year beginning after December 31, 1977.
    (iv) Exception. Notwithstanding subdivision (i) or (iii) of this 
subparagraph, no information relating to a participant's deferred vested 
retirement benefit is required to be filed on schedule SSA if, before 
the date such schedule SSA is required to be filed (including any 
extension of time for filing granted pursuant to section 6081), the 
participant (A) is paid some or all of the deferred vested retirement 
benefit under the plan, (B) accrues additional retirement benefits under 
the plan, or (C) forfeits all of the deferred vested retirement benefit 
under the plan.
    (3) Information relating to deferred vested retirement benefit--(i) 
Incomplete records. Section 6057(a) and paragraph (a)(4) of this section 
require the filing on schedule SSA of a description of the deferred 
vested retirement benefit to which the participant is entitled. If the 
plan administrator of a plan to which more than one employer contributes 
maintains records of a participant's service covered by the plan which 
are incomplete as of the close of the plan year with respect to which 
the plan administrator files information relating to the participant on 
schedule SSA, the plan administrator may elect to file the information 
required by schedule SSA based only upon these incomplete records. The 
plan administrator is not required, for purposes of completing schedule 
SSA, to compile from sources other than such records a complete record 
of a participant's years of service covered by the plan. Similarly, if

[[Page 28]]

retirement benefits under the plan are determined by taking into account 
a participant's service with an employer which is not service covered by 
the plan, but the plan administrator maintains records only with respect 
to periods of service covered by the plan, the plan administrator may 
complete schedule SSA taking into account only the participant's period 
of service covered by the plan.
    (ii) Inability to determine correct amount of participant's deferred 
vested retirement benefit. If the amount of a participant's deferred 
vested retirement benefit which is filed on schedule SSA is computed on 
the basis of plan records maintained by the plan administrator which--
    (A) Are incomplete with respect to the participant's service covered 
by the plan (as described in subdivision (i)), or
    (B) Fail to account for the participant's service not covered by the 
plan which is relevant to a determination of the participant's deferred 
vested retirement benefit under the plan (as described in subdivision 
(i)),

then the plan administrator must indicate on schedule SSA that the 
amount of the deferred vested retirement benefit shown therein may be 
other than that to which the participant is actually entitled because 
the amount is based upon incomplete records.
    (iii) Inability to determine whether participant vested in deferred 
retirement benefit. Where, as described in subdivision (i), information 
to be reported on schedule SSA is to be based upon records which are 
incomplete with respect to a participant's service covered by the plan 
or which fail to take into account relevant service not covered by the 
plan, the plan administrator may be unable to determine whether or not 
the participant is vested in any deferred retirement benefit. If, in 
view of information provided either by the incomplete records or the 
plan participant, there is a significant likelihood that the plan 
participant is vested in a deferred retirement benefit under the plan, 
information relating to the participant must be filed on schedule SSA 
with the notation that the participant may be entitled to a deferred 
vested retirement benefit under the plan, but information relating to 
the amount of the benefit may be omitted. This subdivision (iii) does 
not apply in a case in which it can be determined from plan records 
maintained by the plan administrator that the participant is vested in a 
deferred retirement benefit. Subdivision (ii), however, may apply in 
such a case.
    (c) Voluntary filing--(1) In general. The plan administrator of an 
employee retirement benefit plan described in paragraph (a)(3) of this 
section, or any other employee retirement benefit plan (including a 
governmental or church plan), may at its option, file on schedule SSA 
information relating to the deferred vested retirement benefit of any 
plan participant who separates at any time from service covered by the 
plan, including plan participants who separate from service in plan 
years beginning before 1976.
    (2) Deleting previously filed information. If, after information 
relating to the deferred vested retirement benefit of a plan participant 
is filed on schedule SSA, the plan participant--
    (i) Is paid some or all of the deferred vested retirement benefit 
under the plan, or
    (ii) Forfeits all of the deferred vested retirement benefit under 
the plan, the plan administrator may, at its option, file on schedule 
SSA (or such other form as may be provided for this purpose) the name 
and social security number of the participant with the notation that 
information previously filed relating to the participant's deferred 
vested retirement benefit should be deleted.
    (d) Filing incident to cessation of payment of benefits--(1) In 
general. As described in this section, no information relating to the 
deferred vested retirement benefit of a plan participant is required to 
be filed on schedule SSA if before the date such schedule SSA is 
required to be filed, some of the deferred vested retirement benefit is 
paid to the participant, and information relating to a participant's 
deferred vested retirement benefit which was previously filed on 
schedule SSA may be deleted if the participant is paid some of the 
deferred vested retirement benefit. If payment of the deferred vested 
retirement benefit ceases before all of the benefit to which the 
participant is

[[Page 29]]

entitled is paid to the participant, information relating to the 
deferred vested retirement benefit to which the participant remains 
entitled shall be filed on the schedule SSA filed for the plan year 
following the last plan year within which a portion of the benefit is 
paid to the participant.
    (2) Exception. Notwithstanding subparagraph (1) of this paragraph, 
no information relating to the deferred vested retirement benefit to 
which the participant remains entitled is required to be filed on 
schedule SSA if, before the date such schedule SSA is required to be 
filed (including any extension of time for filing granted pursuant to 
section 6081), the participant (i) returns to service covered by the 
plan, (ii) accrues additional retirement benefits under the plan, or 
(iii) forfeits the benefit under the plan.
    (e) Individual statement to participant. The plan administrator of 
an employee retirement benefit plan defined in paragraph (a)(3) of this 
section must provide each participant with respect to whom information 
is required to be filed on schedule SSA a statement describing the 
deferred vested retirement benefit to which the participant is entitled. 
The description provided the participant must include the information 
filed with respect to the participant on schedule SSA. The statement is 
to be delivered to the participant or forwarded to the participant's 
last known address no later than the date on which any schedule SSA 
reporting information with respect to the participant is required to be 
filed (including any extension of time for filing granted pursuant to 
section 6081).
    (f) Penalties. For amounts imposed in the case of failure to file 
the report of deferred vested retirement benefits required by section 
6057(a) and paragraph (a) or (b) of this section, see section 
6652(e)(1). For the penalty relating to a failure to provide the 
participant the individual statement of deferred vested retirement 
benefit required by section 6057(e) and paragraph (e) of this section, 
see section 6690.
    (g) Effective dates--(1) Plans to which only one employer 
contributes. In the case of a plan to which only one employer 
contributes, this section is effective for plan years beginning after 
December 31, 1975, and with respect to a participant who separates from 
service covered by the plan in plan years beginning after that date.
    (2) Plans to which more than one employer contributes. In the case 
of a plan to which more than one employer contributes, this section is 
effective for plan years beginning after December 31, 1977, and with 
respect to a participant who completes two consecutive 1-year breaks in 
service under the plan in service computation periods beginning after 
December 31, 1974.

[T.D. 7561, 43 FR 38004, Aug. 25, 1978]



Sec. 301.6057-2  Employee retirement benefit plans; notification of change in plan status.

    (a) Change in plan status. The plan administrator (within the 
meaning of section 414(g)) of an employee retirement benefit plan 
defined in Sec. 301.6057-1(a)(3) (including a plan to which more than 
one employer contributes, as described in Sec. 301.6057-1(b)(1)) must 
notify the Internal Revenue Service of the following changes in plan 
status--
    (1) A change in the name of the plan.
    (2) A change in the name or address of the plan administrator,
    (3) The termination of the plan, or
    (4) The merger or consolidation of the plan with another plan or the 
division of the plan into two or more plans.
    (b) Notification. A notification of a change in status described in 
paragraph (a) of this section, must be filed on the Annual Return/Report 
of Employee Benefit Plan (form 5500 series) for the plan year in which 
the change in status occurred. The notification must be filed at the 
time and place and in the manner prescribed in the form and any 
accompanying instructions.
    (c) Penalty. For amounts imposed in the case of failure to file a 
notification of a change in plan status required by section 6057(b) and 
this section, see section 6652(e)(2).
    (d) Effective date. This section is effective for changes in plan 
status occurring within plan years beginning after December 31, 1975.

[T.D. 7561, 43 FR 38006, Aug. 25, 1978]

[[Page 30]]



Sec. 301.6058-1  Information required in connection with certain plans of deferred compensation.

    (a) Reporting of information--(1) Annual return. For each funded 
plan of deferred compensation an annual return must be filed with the 
Internal Revenue Service. The annual return of the plan is the 
appropriate Annual Return/Report of Employee Benefit Plan (Form 5500 
series) as determined under these forms. The annual period for the 
annual return of the plan shall be either the plan year or the taxable 
year of the employer maintaining the plan as determined under these 
forms. These forms are hereinafter referred to as the ``forms prescribed 
by section 6058(a).''
    (2) Plans subject to requirements. For purposes of this section, the 
term ``funded plan of deferred compensation'' means each pension, 
annuity, stock bonus, profit-sharing, or other funded plan of deferred 
compensation described in part 1 of subchapter D of chapter 1. 
Accordingly, the term includes qualified plans under sections 401(a), 
403(a), and 405(a); individual retirement accounts and annuities 
described in sections 408(a) and 408(b); and custodial accounts under 
section 403(b)(7). The term also includes: funded plans of deferred 
compensation which are not qualified plans; funded governmental plans 
and church plans, whether or not qualified (See sections 414(d) and 
414(e)); and plans maintained outside the United States primarily for 
nonresident aliens (as described in subsection (b)(4) of section 4 of 
subtitle A of title I of the Employee Retirement Income Security Act of 
1974; (88 Stat. 840)). The term does not include annuity contracts 
described in section 403(b)(1) or individual retirement accounts (an 
individual participant or surviving beneficiary in such account must 
file under paragraph (d)(2) of this section) and bonds described in 
sections 408(c) and 409.
    (3) Required information. The information required to be furnished 
on the forms prescribed by section 6058(a) shall include such 
information concerning the qualification of the plan, the financial 
condition of the trust, fund, or custodial or fiduciary account which is 
a part of the plan, and the operation of the plan as shall be required 
by the forms, applicable accompanying schedules and related instructions 
applicable to the annual period.
    (4) Time of filing. The forms prescribed by section 6058(a) shall be 
filed in the manner and at the time as required by the forms and related 
instructions applicable to the annual period.
    (b) Who must file--(1) In general. The annual return required to be 
filed under section 6058(a) and paragraph (a) of this section for the 
annual period shall be filed by either the employer maintaining the plan 
or the plan administrator (as defined in section 414(g)) of the plan for 
that annual period. Whether the employer or plan administrator files 
shall be determined under the forms prescribed by section 6058(a) and 
related instructions applicable to the annual period. Nothing in these 
forms shall preclude an employer from filing the return on behalf of the 
plan administrator, or the plan administrator from filing on behalf of 
the employer.
    (2) Definition of employer. For purposes of subparagraph (1) of this 
paragraph, the term ``employer'' includes a sole proprietor and a 
partnership.
    (c) Other rules applicable to annual returns--(1) Extensions of time 
for filing. For rules relating to the extension of time for filing, see 
section 6081 and the regulations thereunder and the instructions on the 
forms prescribed by section 6058(a).
    (2) Amended filing. Any form prescribed by this section may be filed 
as an amendment to a form previously filed under this section with 
respect to the same annual period pursuant to the instructions for such 
forms.
    (3) Additional information. In addition to the information otherwise 
required to be furnished by this section, the district director may 
require any further information that is considered necessary to 
determine allowable deductions under section 404, qualification under 
section 401, or the financial condition and operation of the plan.
    (4) Records. Records substantiating all data and information 
required by this section to be filed must be kept at all times available 
for inspection by internal revenue officers at the principal

[[Page 31]]

office or place of business of the employer or plan administrator.
    (5) Relief from filing. Notwithstanding paragraph (a) of this 
section, the Commissioner may, in his discretion, relieve an employer, 
or plan administrator, from reporting information on the forms 
prescribed by section 6058(a). This discretion includes the ability to 
relieve an employer, or plan administrator, from filing the applicable 
form.
    (d) Special rules for individual retirement arrangements--(1) 
Application. This paragraph, in lieu of paragraph (a) of this section, 
applies to an individual retirement account described in section 408(a) 
and an individual retirement annuity described in section 408(b), 
including such accounts and annuities for which a deduction is allowable 
under section 220 (spousal individual retirement arrangements).
    (2) General rule. For each taxable year beginning after December 31, 
1974, every individual who during such taxable year--
    (i) Establishes or maintains an individual retirement account 
described in section 408(a) (including an individual who is a 
participant in an individual retirement account described in section 
408(c)).
    (ii) Purchases or maintains an individual retirement annuity 
described in section 408(b), or
    (iii) Is a surviving beneficiary with respect to an account or 
annuity referred to in this subparagraph which is in existence during 
such taxable year, shall file Form 5329 (or any other form designated by 
the Commissioner for this purpose), as an attachment to or part of the 
Form 1040 filed by such individual for such taxable year, setting forth 
in full the information required by that form and the accompanying 
instructions.
    (3) Special information returns. If an individual described in 
subparagraph (2) of this paragraph is not required to file a Form 1040 
for such taxable year, such individual shall file a Form 5329 (or any 
other designated form) with the Internal Revenue Service by the 15th day 
of the 4th month following the close of such individual's taxable year 
setting forth in full the information required by that form and the 
accompanying instructions.
    (4) Relief from filing. The Commissioner may, in his discretion, 
relieve an individual from filing the form prescribed by this paragraph.
    (5) Retirement bonds. An individual who purchases, holds, or 
maintains a retirement bond described in section 409 may be required to 
file a return under other provisions of the Code.
    (e) Actuarial statement in case of mergers, etc. For requirements 
with respect to the filing of actuarial statements in the case of a 
merger, consolidation, or transfer of assets or liabilities, see section 
6058(b) and section 414(l) and the regulations thereunder.
    (f) Effective dates--(1) Section 6058 (a) requirements. The rules 
with respect to annual returns required under section 6058(a) (the rules 
in this section, other than paragraph (e) thereof) are effective for 
plan years beginning after September 2, 1974.
    (2) Section 6058(b) requirements. The requirements of section 
6058(b) relating to mergers, etc., and paragraph (e) of this section are 
effective on September 2, 1974, with respect to events described in 
section 6058(b) occurring on or after such date.

[T.D. 7551, 43 FR 29292, July 7, 1978]



Sec. 301.6059-1  Periodic report of actuary.

    (a) In general. The actuarial report described in this section must 
be filed on behalf on a defined benefit plan to which the minimum 
funding standards of section 412 apply. The actuarial report must be 
filed by the plan administrator (within the meaning of section 414(g)) 
on Schedule B as an attachment to the annual Return/Report of Employee 
Benefit Plan (Form 5500 series). The instructions accompanying the Form 
5500 series prescribe the place and date for filing Schedule B.
    (b) Plan years for which report required. In the case of a plan in 
existence on January 1, 1974, Schedule B must be filed for the first 
plan year beginning after December 31, 1975, for which the minimum 
funding standards apply to the plan, and for each plan year thereafter 
for which the Schedule must be filed under the instructions accompanying 
the Schedule and the Form 5500 series. In the case of a plan not in 
existence on January 1, 1974,

[[Page 32]]

Schedule B must be filed for the first plan year beginning after 
September 2, 1974, for which the minimum funding standards apply to the 
plan, and for each plan year thereafter for which the Schedule must be 
filed under the instructions accompanying the Schedule and the Form 5500 
series. For rules relating to when a plan is considered to be in 
existence, see Sec. 1.410(a)-2(c). For purposes of this section, ``plan 
year'' means the plan year as determined for purposes of the minimum 
funding standards.
    (c) Contents of report. The actuarial report of a plan filed on 
Schedule B must contain--
    (1) The date of the actuarial valuation applicable to the plan year 
for which the report is filed (see section 412(c)(9) for rules relating 
to the frequency with which an actuarial valuation of the plan is 
required to be made),
    (2) A description of the funding method and actuarial assumptions 
used to determine costs under the plan,
    (3) A certification of the contribution necessary to reduce the 
accumulated funding deficiency (as defined in section 412(a)) to zero,
    (4) A statement by the enrolled actuary signing the report that to 
the best of the actuary's knowledge the report is complete and accurate,
    (5) A statement by the enrolled actuary signing the report that in 
the actuary's opinion the actuarial assumptions used are in the 
aggregate (i) reasonably related to the experience of the plan and to 
reasonable expectations, and (ii) represent the actuary's best estimate 
of anticipated experience under the plan,
    (6) Such other information as may be necessary to fully and fairly 
disclose the actuarial position of the plan, and
    (7) Such other information as may be required by Schedule B or the 
instructions accompanying the Schedule and the Form 5500 series.
    (d) Certification by enrolled actuary. The actuarial report filed on 
Schedule B must be signed by an enrolled actuary (within the meaning of 
section 7701(a)(35)) or there may be attached to the report a statement 
signed by the actuary that contains the statements described in 
paragraph (c) (4) and (5) of this section.

An actuarial report filed for a plan year ending after January 25, 1982, 
does not satisfy the requirements of this section if the actuary seeks 
to materially qualify such statements. For this purpose, the following 
are not considered to materially qualify a statement required by 
paragraph (c) (4) or (5) of this section:
    (1) A statement that the report is based in part on information 
provided to the actuary by another person, that such information would 
customarily not be verified by the actuary, and that the actuary has no 
reason to doubt the substantial accuracy of the information (taking into 
account the facts and circumstances that are known or reasonably should 
be known to the actuary, including the contents of any other actuarial 
report prepared by the actuary for the plan),
    (2) A statement that the report is based in part on information 
provided by another person, that the actuary believes such information 
is or may be inaccurate or incomplete, but that the inaccuracies or 
omissions are not material, the inaccuracies or omissions are not so 
numerous or flagrant as to suggest that there may be material 
inaccuracies, and that therefore the actuarial report is substantially 
accurate and complete and fairly discloses the actuarial position of the 
plan,
    (3) A statement that the report reflects the requirement of a 
regulation or ruling, and that any statement regarding the actuarial 
position of the plan is made only in light of such requirement,
    (4) A statement that the report reflects an interpretation of a 
statute, regulation or ruling, that the actuary has no reason to doubt 
the validity of that interpretation, and that any statement regarding 
the actuarial position of the plan is made only in light of such 
interpretation,
    (5) A statement that in the opinion of the actuary the report fully 
reflects the requirements of an applicable statute, but does not conform 
to the requirements of a regulation or ruling promulgated under the 
statute that the actuary believes is contrary to the statute, or

[[Page 33]]

    (6) A statement furnished to comply with the requirements of 
paragraph (c)(6) of this section.

A statement otherwise described in a subparagraph of this paragraph (d) 
shall not be considered to satisfy the requirements of such subparagraph 
unless the statement identifies, with particularity, that matter to 
which the statement relates and the facts and circumstances surrounding 
the statement. In addition, a statement otherwise described in 
subparagraph (5) of this paragraph (d) shall not be considered to 
satisfy the requirements of that subparagraph unless the statement 
indicates whether an accumulated funding deficiency or a contribution 
that is not wholly deductible may result if the actuary's belief is 
determined to be incorrect.
    (e) Relief from filing. Notwithstanding paragraph (a) of this 
section, the Commissioner may, in the Commissioner's discretion, relieve 
a plan administrator from filing Schedule B or from reporting 
information required by Schedule B or paragraph (c) of this section.
    (f) Penalty. For the penalty imposed in the case of a failure to 
file the actuarial report required by this section, see section 6692 and 
Sec. 301.6692-1.

(Secs. 6059 and 7805 of the Internal Revenue Code of 1954 (88 Stat. 947, 
68A Stat. 917; 26 U.S.C. 6059, 7805))

[T.D. 7798, 46 FR 57483, Nov. 24, 1981; 46 FR 60435, Dec. 10, 1981]

          signing and verifying of returns and other documents



Sec. 301.6061-1  Signing of returns and other documents.

    (a) In general. For provisions concerning the signing of returns and 
other documents, see the regulations relating to the particular tax.
    (b) Method of signing. The Secretary may prescribe in forms, 
instructions, or other appropriate guidance the method of signing any 
return, statement, or other document required to be made under any 
provision of the internal revenue laws or regulations.
    (c) Effective dates. The rule in paragraph (a) is effective December 
12, 1996. The rule in paragraph (b) is effective on July 21, 1995.

[T.D. 8689, 61 FR 65320, Dec. 12, 1996]



Sec. 301.6062-1  Signing of corporation returns.

    For provisions relating to the signing of corporation income tax 
returns, see Sec. 1.6062-1 of this chapter (Income Tax Regulations).



Sec. 301.6063-1  Signing of partnership returns.

    For provisions relating to the signing of returns of partnership 
income, see Sec. 1.6063-1 of this chapter (Income Tax Regulations).



Sec. 301.6064-1  Signature presumed authentic.

    An individual's name signed to a return, statement, or other 
document shall be prima facie evidence for all purposes that the return, 
statement, or other document was actually signed by him.



Sec. 301.6065-1  Verification of returns.

    For provisions concerning the verification of returns and other 
documents, see the regulations relating to the particular tax.

               time for filing returns and other documents



Sec. 301.6071-1  Time for filing returns and other documents.

    For provisions concerning the time for filing returns and other 
documents, see the regulations relating to the particular tax.



Sec. 301.6072-1  Time for filing income tax returns.

    For provisions relating to time for filing income tax returns, see 
Secs. 1.6072-1 to 1.6072-4, inclusive, of this chapter (Income Tax 
Regulations).



Sec. 301.6073-1  Time for filing declarations of estimated income tax by individuals.

    For provisions relating to time for filing declarations of estimated 
income tax by individuals, see Secs. 1.6073-1 to 1.6073-4, inclusive, of 
this chapter (Income Tax Regulations).

[[Page 34]]



Sec. 301.6074-1  Time for filing declarations of estimated income tax by corporations.

    For provisions relating to time for filing declarations of estimated 
income tax by corporations, see Secs. 1.6074-1 to 1.6074-3, inclusive, 
of this chapter (Income Tax Regulations).



Sec. 301.6075-1  Time for filing estate and gift tax returns.

    For provisions relating to time for filing estate tax returns and 
gift tax returns, see Sec. 20.6075-1 of this chapter (Estate Tax 
Regulations) and Sec. 25.6075-1 of this chapter (Gift Tax Regulations), 
respectively.

                  extension of time for filing returns



Sec. 301.6081-1  Extension of time for filing returns.

    For provisions concerning extensions of time for filing returns or 
other documents, see the regulations relating to the particular tax.

               place for filing returns or other documents



Sec. 301.6091-1  Place for filing returns and other documents.

    (a) General rule. For provisions concerning the place for filing 
returns, including hand-carried returns, see the regulations relating to 
the particular tax. Except as provided in paragraph (b) of this section, 
for provisions concerning the place for filing documents other than 
returns, see the regulations relating to the particular tax.
    (b) Exception for hand-carried documents other than returns. 
Notwithstanding any other provisions of this chapter--
    (1) Persons other than corporations. If a document, other than a 
return, of a person (other than a corporation) is hand carried, and if 
the document is otherwise required to be filed with a service center, 
such document may be filed with the district director (or with any 
person assigned the administrative supervision of an area, zone or local 
office constituting a permanent post of duty within the internal revenue 
district of such director) for the internal revenue district in which is 
located the legal residence or principal place of business of such 
person, or, in the case of an estate, the internal revenue district in 
which was the domicile of the decedent at the time of his death. A 
document may also be filed by hand carrying such document to the 
appropriate service center, or, in the case of a document required to be 
filed (i) with the Office of International Operations, by hand carrying 
to such Office, or (ii) with the office of the assistant regional 
commissioner (alcohol and tobacco tax) by hand carrying to such office.
    (2) Corporations. If a document, other than a return, of a 
corporation is hand carried, and if the document is otherwise required 
to be filed with a service center, such document may be filed with the 
district director (or with any person assigned the administrative 
supervision of an area, zone or local office constituting a permanent 
post of duty within the internal revenue district of such director) for 
the internal revenue district in which is located the principal place of 
business or principal office or agency of the corporation. A document 
may also be filed by hand carrying such document to the appropriate 
service center, or, in the case of a document required to be filed (i) 
with the Office of International Operations, by hand carrying to such 
Office, or (ii) with the office of the assistant regional commissioner 
(alcohol and tobacco tax) by hand carrying to such office.
    (c) Definition of hand carried. For purposes of this section and 
section 6091(b)(4) and the regulations issued thereunder, a return or 
document will be considered to be hand carried if it is brought to the 
district director by the person required to file the return or other 
document, or by his agent. Examples of persons who will be considered to 
be agents, for purposes of the preceding sentence, are: Members of the 
taxpayer's family, an employee of the taxpayer, the taxpayer's attorney, 
accountant, or tax advisor, and messengers employed by the taxpayer. A 
return or document will not be considered to be hand carried if it is 
sent to

[[Page 35]]

the Internal Revenue Service through the U.S. Mail.

[T.D. 6950, 33 FR 5359, Apr. 4, 1968, as amended by T.D. 7008, 34 FR 
3673, Mar. 1, 1969; T.D. 7012, 34 FR 7697, May 15, 1969; T.D. 7188, 37 
FR 12794, June 29, 1972; T.D. 7238, 37 FR 28739, Dec. 29, 1972; T.D. 
ATF-33, 41 FR 44038, Oct. 6, 1976; T.D. 7495, 42 FR 33727, July 1, 1977]



301.6096-1  Designation by individuals for taxable years beginning after December 31, 1972.

    (a) In general. Every individual (other than a nonresident alien) 
whose income tax liability, as defined in paragraph (b) of this section, 
is one dollar or more may, at his option, designate that one dollar 
shall be paid over to the Presidential Election Campaign Fund, in 
accordance with the provisions of section 9006. In the case of a joint 
return of a husband and wife, each spouse may designate that one dollar 
be paid to the fund as provided in this paragraph only if the joint 
income tax liability of the husband and wife is two dollars or more.
    (b) Income tax liability. For purposes of paragraph (a) of this 
section, the income tax liability of an individual for any taxable year 
is the amount of the tax imposed by chapter 1 on such individual for the 
taxable year (as shown on his or her return) reduced by the sum of the 
credits (as shown on his or her return) allowable under sections 33, 37, 
38, 40, 41, 42, 44, and 44A.
    (c) Manner and time of designation. (1) A designation under 
paragraph (a) of this section may be made with respect to any taxable 
year at the time of the filing of the return of the tax imposed by 
chapter 1 for such taxable year, and shall be made either on the first 
page of the return or on the page bearing the taxpayer's signature, in 
accordance with the instructions applicable thereto.
    (2) With respect to any taxable year beginning after December 31, 
1972 for which no designation was made under paragraph (c)(1) of this 
section, a designation may be made on the form furnished by the Internal 
Revenue Service for such purpose, filed within 20 and one half months 
after the due date for the original return for such taxable year. In the 
case of a joint return where neither spouse made a designation or where 
only one spouse made a designation, a designation may be made, as 
provided in this subparagraph, by the spouse or spouses who had not 
previously made a designation.
    (3) A designation once made, whether by an original return or 
otherwise, may not be revoked.
    (d) Effective date. This section shall apply to taxable years 
beginning after December 31, 1972.

[T.D. 7304, 39 FR 4476, Feb. 4, 1974, as amended by T.D. 7643, 44 FR 
50338, Aug. 28, 1979]



Sec. 301.6096-2  Designation by individuals for taxable years ending on or after December 31, 1972 and beginning before January 1, 1973.

    (a) In general. (1) For taxable years ending on or after December 
31, 1972 and beginning before January 1, 1973, every individual (other 
than a non-resident alien) whose income tax liability, as defined in 
paragraph (b) of this section, is one dollar or more, may, at his 
option, designate that one dollar shall be paid over to the Presidential 
Election Campaign Fund, referred to in Sec. 301.6096-1 (a). Where in 
accordance with prior law, such a designation was made for the account 
of any candidate of any specified political party, or for a general 
account for all candidates for election to the offices of President and 
Vice President of the United States, such a designation shall be treated 
solely as a designation to such fund.
    (2) In the case of a joint return of a husband and wife, each spouse 
may designate that one dollar be paid to the fund as provided in 
paragraph (a)(1) of this section only if the joint income tax liability 
of the husband and wife is two dollars or more.
    (b) Income tax liability. For purposes of paragraph (a) of this 
section, the income tax liability of an individual for any taxable year 
is the amount of the tax imposed by chapter 1 on such individual for 
such taxable year (as shown on his return), reduced by the sum of the 
credits (as shown on his return).
    (c) Manner and time of designation. (1) A designation under 
paragraph (a) of this section may be made with respect to any such 
taxable year at the time of the filing of the return of the tax imposed 
by chapter 1 for such taxable year. If such designation is made at the

[[Page 36]]

time of filing the original return for such year, it shall be made by 
the individual on the form furnished by the Internal Revenue Service for 
such purpose in accordance with the instructions applicable thereto.
    (2) With respect to any taxable year ending on or after December 31, 
1972 and beginning before January 1, 1973, for which no designation was 
made under paragraph (c)(1) of this section, a designation may be made 
on the form furnished by the Internal Revenue Service for such purpose, 
filed within 20 and one half months after the due date for the original 
return for such taxable year. In the case of a joint return where 
neither spouse made a designation or where only one spouse made a 
designation, a designation may be made, as provided in this 
subparagraph, by the spouse or spouses who had not previously made a 
designation.
    (3) A designation once made, whether by an original return or 
otherwise, may not be revoked.

[T.D. 7304, 39 FR 4476, Feb. 4, 1974]

                        miscellaneous provisions



Sec. 301.6101-1  Period covered by returns or other documents.

    For provisions concerning the period covered by returns or other 
documents, see the regulations relating to the particular tax.



Sec. 301.6102-1  Computations on returns or other documents.

    (a) Amounts shown on forms. To the extent permitted by any internal 
revenue form or instructions prescribed for use with respect to any 
internal revenue return, declaration, statement, other document, or 
supporting schedules, any amount required to be reported on such form 
shall be entered at the nearest whole dollar amount. The extent to 
which, and the conditions under which, such whole dollar amounts shall 
be entered on any form will be set forth in the instructions issued with 
respect to such form. For the purpose of the computation to the nearest 
dollar, a fractional part of a dollar shall be disregarded unless it 
amounts to one-half dollar or more, in which case the amount (determined 
without regard to the fractional part of a dollar) shall be increased by 
$1. The following illustrates the application of this paragraph:

------------------------------------------------------------------------
                                                                 To be
                        Exact amount                           reported
                                                                 as--
------------------------------------------------------------------------
$18.49......................................................         $18
$18.50......................................................          19
$18.51......................................................          19
------------------------------------------------------------------------

    (b) Election not to use whole dollar amounts--(1) Method of 
election. Where any internal revenue form, or the instructions issued 
with respect to such form, provide that whole dollar amounts shall be 
reported, any person making a return, declaration, statement, or other 
document on such form may elect not to use whole dollar amounts by 
reporting thereon all amounts in full, including cents.
    (2) Time of election. The election not to use whole dollar amounts 
must be made at the time of filing the return, declaration, statement, 
or other document. Such election may not be revoked after the time 
prescribed for filing such return, declaration, statement, or other 
document, including extensions of time granted for such filing. Such 
election may be made on any return, declaration, statement, or other 
document which is filed after the time prescribed for filing (including 
extensions of time), and such an election is irrevocable.
    (3) Effect of election. The taxpayer's election shall be binding 
only on the return, declaration, statement, or other document filed for 
a taxable year or period, and a new election may be made on the return, 
declaration, statement, or other document filed for a subsequent taxable 
year or period. An election by either a husband or a wife not to report 
whole dollar amounts on a separate income tax return shall be binding on 
any subsequent joint return filed under the provisions of section 
6013(b).
    (4) Fractional part of a cent. For treatment of the fractional part 
of a cent in the payment of taxes, see section 6313 and Sec. 301.6313-1.
    (c) Inapplicability to computation of amount. The provisions of 
paragraph (a) of this section apply only to amounts required to be 
reported on a return,

[[Page 37]]

declaration, statement, or other document. They do not apply to items 
which must be taken into account in making the computations necessary to 
determine such amounts. For example, each item of receipt must be taken 
into account at its exact amount, including cents, in computing the 
amount of total receipts required to be reported on an income tax return 
or supporting schedule. It is the amount of total receipts, so computed, 
which is to be reported at the nearest whole dollar on the return or 
supporting schedule.
    (d) Effect on accounting method. Section 6102 and this section have 
no effect on any authorized accounting method.



Sec. 301.6103(a)-1  Disclosures after December 31, 1976, by officers and employees of Federal agencies of returns and return information (including taxpayer
 
          return information) disclosed to such officers and employees 
          by the Internal Revenue Service before January 1, 1977, for a 
          purpose not involving tax administration.

    (a) General rule. Except as provided by paragraph (b) of this 
section, a return or return information (including taxpayer return 
information), as defined in section 6103(b) (1), (2), and (3) of the 
Internal Revenue Code, disclosed by the Internal Revenue Service before 
January 1, 1977, to an officer or employee of a Federal agency (as 
defined in section 6103(b)(9)) for a purpose not involving tax 
administration (as defined in section 6103(b)(4)) pursuant to the 
authority of section 6103 (or any order of the President under section 
6103 or rules and regulations thereunder prescribed by the Secretary or 
his delegate and approved by the President) before amendment of such 
section by section 1202 of the Tax Reform Act of 1976 (Pub. L. 94-455, 
90 Stat. 1667) may be disclosed by, or on behalf of, such officer, 
employee, or agency after December 31, 1976, for any purpose authorized 
by such section (or such order or rules and regulations) before such 
amendment.
    (b) Exception. Notwithstanding the provisions of paragraph (a) of 
this section, a return or return information (including taxpayer return 
information) disclosed before January 1, 1977, by the Service to an 
officer or employee of a Federal agency for a purpose unrelated to tax 
administration as described in paragraph (a) may, after December 31, 
1976, be disclosed by, or on behalf of, such agency, officer, or 
employee in an administrative or judicial proceeding only if such 
proceeding is one described in section 6103(i)(4) of the Code and if the 
requirements of section 6103(i)(4) have first been met.

(Secs. 6103 and 7805 of the Internal Revenue Code of 1954 (90 Stat. 
1667, 68A Stat. 917; 26 U.S.C. 6103 and 7805))

[T.D. 7723, 45 FR 65566, Oct. 3, 1980]



Sec. 301.6103(a)-2  Disclosures after December 31, 1976, by attorneys of the Department of Justice and officers and employees of the Office of the Chief Counsel

          for the Internal Revenue Service of returns and return 
          information (including taxpayer return information) disclosed 
          to such attorneys, officers, and employees by the Service 
          before January 1, 1977, for a purpose involving tax 
          administration.

    (a) General rule. Except as provided by paragraph (b) of this 
section and subject to the requirements of this paragraph, a return or 
return information (including taxpayer return information), as defined 
in section 6103(b) (1), (2), and (3), of the Internal Revenue Code 
disclosed by the Internal Revenue Service before January 1, 1977, to an 
attorney of the Department of Justice (including a United States 
attorney) or to an officer or employee of the Office of the Chief 
Counsel for the Service for a purpose involving tax administration (as 
defined in section 6103(b)(4)) pursuant to the authority of section 6103 
(or any order of the President under section 6103 or rules and 
regulations thereunder prescribed by the Secretary or his delegate and 
approved by the President) before amendment of such section by section 
1202 of the Tax Reform Act of 1976 (Pub. L. 94-455, 90 Stat. 1667) may 
be disclosed by, or on behalf of, such attorney, officer, or employee 
after December 31, 1976, for any purpose authorized by such section (or 
such order or rules and regulations) before such amendment.
    (b) Exception. Notwithstanding the provisions of paragraph (a) of 
this section, a return or return information

[[Page 38]]

(including taxpayer return information) disclosed before January 1, 
1977, by the Service to an attorney of the Department of Justice or to 
an officer or employee of the Office of the Chief Counsel for the 
Service for a purpose related to tax administration as described in 
paragraph (a) may, after December 31, 1976, be disclosed by, or on 
behalf of, such attorney, officer, or employee in an administrative or 
judicial proceeding only if such proceeding is one described in section 
6103(h)(4) of the Code and if the requirements of section 6103 (h)(4) 
have first been met.

(Secs. 6103 and 7805 of the Internal Revenue Code of 1954 (90 Stat. 
1667, 68A Stat. 917; 26 U.S.C. 6103 and 7805))

[T.D. 7723, 45 FR 65567, Oct. 3, 1980]



Sec. 301.6103(c)-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 
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.

[[Page 39]]

    (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 
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

[[Page 40]]

and return information (including taxpayer return information), as 
defined in section 6103(b) (1), (2), and (3) of the Code, inspected by 
or disclosed to officers and employees of the Department of Justice as 
provided by paragraph (a) of this section may be disclosed by such 
officers and employees to other persons, including, but not limited to, 
persons described in paragraph (b)(2), but only to the extent necessary 
in connection with a Federal grand jury proceeding, or the proper 
preparation for a proceeding (or in connection with an investigation 
which may result in such a proceeding), described in paragraph (a). Such 
disclosures may include, but are not limited to, disclosures--
    (i) To properly accomplish any purpose or activity of the nature 
described in section 6103(k)(6) and the regulations thereunder which is 
essential to such Federal grand jury proceeding, or to such proper 
preparation (or to such investigation);
    (ii) To properly interview, consult, depose, or interrogate or 
otherwise obtain relevant information from, the taxpayer to whom such 
return or return information relates (or such taxpayer's legal 
representative) or from any witness who may be called to give evidence 
in the proceeding; or
    (iii) To properly conduct negotiations concerning, or obtain 
authorization for, settlement or disposition of the proceeding, in whole 
or in part, or stipulations of fact in connection with the proceeding.

Disclosure of a return or return information to a person other than the 
taxpayer to whom such return or return information relates or such 
taxpayer's legal representative to properly accomplish any purpose or 
activity described in this paragraph should be made, however, only if 
such purpose or activity cannot otherwise properly be accomplished 
without making such disclosure.
    (2) Among those persons to whom returns and return information may 
be disclosed by officers and employees of the Department of Justice as 
provided by paragraph (a)(1) of this section are--
    (i) Other officers and employees of the Department of Justice, such 
as personnel of an office, board, division, or bureau of such department 
(for example, the Federal Bureau of Investigation or the Drug 
Enforcement Administration), clerical personnel (for example, 
secretaries, stenographers, docket and file room clerks, and mail room 
employees) and supervisory personnel (such as supervisory personnel of 
the Federal Bureau of Investigation or the Drug Enforcement 
Administration);
    (ii) Officers and employees of another Federal agency (as defined in 
section 6103(b)(9)) working under the direction and control of any such 
officers and employees of the Department of Justice; and
    (iii) Court reporters.

(Secs. 6103 and 7805 of the Internal Revenue Code of 1954 (90 Stat. 
1667, 68A Stat. 917; 26 U.S.C. 6103 and 7805))

[T.D. 7723, 45 FR 65567, Oct. 3, 1980]



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

[[Page 41]]

States or such agency is or may be a party.
    (b) Disclosure of returns and return information (including taxpayer 
return information) by officers and employees of the Department of 
Justice or another Federal agency. (1) Returns and return information 
(including taxpayer return information), as defined in section 6103(b) 
(1), (2), and (3) of the Code, disclosed to officers and employees of 
the Department of Justice or other Federal agency (as defined in section 
6103(b)(9)) as provided by paragraph (a) of this section may be 
disclosed by such officers and employees to other persons, including, 
but not limited to, persons described in subparagraph (2) of this 
paragraph, but only to the extent necessary in connection with a Federal 
grand jury proceeding, or the proper preparation for a proceeding (or in 
connection with an investigation which may result in such a proceeding), 
described in paragraph (a). Such disclosures may include, but are not 
limited to, disclosures where necessary--
    (i) To properly obtain the services of persons having special 
knowledge or technical skills (such as, but not limited to, handwriting 
analysis, photographic development, sound recording enhancement, or 
voice identification);
    (ii) To properly interview, consult, depose, or interrogate or 
otherwise obtain relevant information from, the taxpayer to whom such 
return or return information relates (or such taxpayer's legal 
representative) or any witness who may be called to give evidence in the 
proceeding; or
    (iii) To properly conduct negotiations concerning, or obtain 
authorization for, disposition of the proceeding, in whole or in part, 
or stipulations of fact in connection with the proceeding.

Disclosure of a return or return information to a person other than the 
taxpayer to whom such return or return information relates or such 
taxpayer's legal representative to properly accomplish any purpose or 
activity described in this subparagraph should be made, however, only if 
such purpose or activity cannot otherwise properly be accomplished 
without making such disclosures.
    (2) Among those persons to whom returns and return information may 
be disclosed by officers and employees of the Department of Justice or 
other Federal agency as provided by subparagraph (1) of this paragraph 
are--
    (i) Other officers and employees of the Department of Justice 
(including an office, board, division, or bureau of such department, 
such as the Federal Bureau of Investigation or the Drug Enforcement 
Administration) or other Federal agency described in subparagraph (1), 
such as clerical personnel (for example, secretaries, stenographers, 
docket and file room clerks, and mail room employees) and supervisory 
personnel (for example, in the case of the Department of Justice, 
Section Chiefs, Deputy Assistant Attorneys General, Assistant Attorneys 
General, the Deputy Attorney General, the 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

[[Page 42]]

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 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.
    (b)(3) [Reserved]. For further guidance, see Sec. 301.6103(j)(1)-
1T(b)(3).
    (4) Officers or employees of the Service will disclose return 
information relating to a taxpayer contained in the exempt organization 
master files of the

[[Page 43]]

Service to officers and employees of the Bureau of the Census for 
purposes of, but only to the extent necessary in, conducting and 
preparing, as authorized by chapter 5 of title 13, United States Code, 
economic censuses. This return information 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) [Reserved]. For further guidance, see Sec. 301.6103(j)(1)-
1T(b)(6)(i)(A).
    (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
    (B) Taxable wages paid for purposes of chapter 21 to each employee.
    (d) Procedures and restrictions. Disclosure of return information by 
officers

[[Page 44]]

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; T.D. 
8811, 64 FR 3632, Jan. 25, 1999]



Sec. 301.6103(j)(1)-1T  Disclosure of return information to officers and employees of the Department of Commerce for certain statistical purposes and related 
          activities (temporary).

    (a) through (b)(2) [Reserved]. For further guidance, see 
Sec. 301.6103(j)(1)-1(a) through (b)(2).
    (b)(3) Officers or employees of the Internal Revenue 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 
and SE; Form 1065 and all attending schedules and Form 8825; Form 1120 
series and all attending schedules and Form 8825; Form 851; Form 1096; 
and other business returns, schedules and forms that the Internal 
Revenue Service may issue--
    (i) Taxpayer identity information (as defined in section 6103(b)(6)) 
including parent corporation, shareholder, partner, and employer 
identity information;
    (ii) Gross income, profits, or receipts;
    (iii) Returns and allowances;
    (iv) Cost of labor, salaries, and wages;
    (v) Total expenses or deductions;
    (vi) Total assets;
    (vii) Beginning- and end-of-year inventory;
    (viii) Royalty income;
    (ix) Interest income, including portfolio interest;
    (x) Rental income, including gross rents;
    (xi) Tax-exempt interest income;
    (xii) Net gain from sales of business property;
    (xiii) Other income;
    (xiv) Total income;
    (xv) Percentage of stock owned by each shareholder;
    (xvi) Percentage of capital ownership of each partner;
    (xvii) End-of-year code;
    (xviii) Months actively operated;

[[Page 45]]

    (xix) Principal industrial activity code, including the business 
description;
    (xx) Total number of documents and the total amount reported on the 
Form 1096 transmitting Forms 1099-MISC;
    (xxi) Form 941 indicator and business address on Schedule C; and
    (xxii) Consolidated return indicator.
    (b)(4) and (5) [Reserved]. For further guidance, see 
Sec. 301.6103(j)(1)-1(b)(4) and (5).
    (b)(6)(i) Officers or employees of the Internal Revenue Service will 
disclose the following return information (but not including return 
information described in section 6103(o)(2)) reflected on 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 Internal Revenue Service--
    (1) Taxpayer identity information (as defined in section 
6103(b)(6)), including parent corporation identity information;
    (2) Document code;
    (3) District office code;
    (4) Consolidated return and final return indicators;
    (5) Principal industrial activity code;
    (6) Partial year indicator;
    (7) Annual accounting period;
    (8) Gross receipts less returns and allowances; and
    (9) Total assets.
    (b)(6)(i)(B) and (ii) [Reserved]. For further guidance, see 
Sec. 301.6103(j)(1)-1(b)(6)(i)(B) and (ii).
    (iii) Information from an employment tax return disclosed pursuant 
to Sec. 301.6103(j)(1)-1(b)(2)(iii)(A), (B), (D), (I) and (J) may be 
used by officers and employees of the Bureau of the Census for the 
purpose described in and subject to the limitations of this paragraph 
(b)(6).
    (c) and (d) [Reserved]. For further guidance, see 
Sec. 301.6103(j)(1)-1(c) and (d).
    (e) Effective date. This section is applicable to the Bureau of the 
Census on January 25, 1999, through January 22, 2002.

[T.D. 8811, 64 FR 3632, Jan. 25, 1999]



Sec. 301.6103(j)(5)-1T  Disclosures of return information to officers and employees of the Department of Agriculture for certain statistical purposes and 
          related activities (temporary).

    (a) General rule. Pursuant to the provisions of section 6103(j)(5) 
of the Internal Revenue Code (Code) and subject to the requirements of 
paragraph (c) of this section, officers or employees of the Internal 
Revenue Service (IRS) will disclose return information to officers and 
employees of the Department of Agriculture to the extent, and for such 
purposes as may be, provided by paragraph (b) of this section.
    (b) Disclosure of return information to officers and employees of 
the Department of Agriculture. (1) Officers or employees of the IRS will 
disclose the return information in this paragraph (b) for individuals, 
partnerships, and corporations with agricultural activity, as determined 
generally by industry code classification or the filing of returns for 
such activity, to officers and employees of the Department of 
Agriculture for purposes of, but only to the extent necessary in, 
structuring, preparing, and conducting, as authorized by chapter 55 of 
title 7, United States Code, the Census of Agriculture.
    (2) From Form 1040/Schedule F--
    (i) Taxpayer Identity Information (as defined in section 6103(b)(6) 
of the Code);
    (ii) Spouse's SSN;
    (iii) Annual Accounting Period;
    (iv) Principal Business Activity (PBA) Code;
    (v) Sales of livestock and produce raised;
    (vi) Taxable cooperative distributions;
    (vii) Income from custom hire and machine work;
    (viii) Gross income;
    (ix) Master File Tax (MFT) Code;
    (x) Document Locator Number (DLN);
    (xi) Cycle Posted;
    (xii) Final return indicator; and
    (xiii) Part year return indicator.
    (3) From Form 943--
    (i) Taxpayer Identity Information;
    (ii) Annual Accounting Period;
    (iii) Total wages subject to Medicare taxes;
    (iv) Master File Tax (MFT) Code;

[[Page 46]]

    (v) Document Locator Number (DLN);
    (vi) Cycle Posted;
    (vii) Final return indicator; and
    (viii) Part year return indicator.
    (4) From Form 1120 series--
    (i) Taxpayer Identity Information;
    (ii) Annual Accounting Period;
    (iii) Gross receipts less returns and allowances;
    (iv) PBA code;
    (v) Parent corporation Employer Identification Number, and related 
Name and PBA Code for entities with agricultural activity;
    (vi) Master File Tax (MFT) Code;
    (vii) Document Locator Number (DLN);
    (viii) Cycle posted;
    (ix) Final return indicator;
    (x) Part year return indicator; and
    (xi) Consolidated return indicator.
    (5) From Form 851--
    (i) Subsidiary Taxpayer Identity Information;
    (ii) Annual Accounting Period;
    (iii) Subsidiary PBA Code;
    (iv) Parent Taxpayer Identity Information;
    (v) Parent PBA Code;
    (vi) Master File Tax (MFT) Code;
    (vii) Document Locator Number (DLN); and
    (viii) Cycle Posted.
    (6) From Form 1065 series--
    (i) Taxpayer Identity Information;
    (ii) Annual Accounting Period;
    (iii) PBA Code;
    (iv) Gross receipts less returns and allowances;
    (v) Net farm profit (loss);
    (vi) Master File Tax (MFT) Code;
    (vii) Document Locator Number (DLN);
    (viii) Cycle Posted;
    (ix) Final return indicator; and
    (x) Part year return indicator.
    (c) Procedures and Restrictions. (1) Disclosure of return 
information by officers or employees of the IRS as provided by paragraph 
(b) of this section will be made only upon written request designating, 
by name and title, the officers and employees of the Department of 
Agriculture to whom such disclosure is authorized, to the Commissioner 
of Internal Revenue by the Secretary of the Department of Agriculture 
and describing--
    (i) The particular return information to be disclosed;
    (ii) The taxable period or date to which such return information 
relates; and
    (iii) The particular purpose for which the return information is to 
be used.
    (2) No such officer or employee to whom return information is 
disclosed pursuant to the provisions of paragraph (b) of this section 
shall disclose such return information to any person, other than the 
taxpayer to whom such return information relates or other officers or 
employees of the Department of Agriculture whose duties or 
responsibilities require such disclosure for a purpose described in 
paragraph (b) of this section, except in a form that cannot be 
associated with, or otherwise identify, directly or indirectly, a 
particular taxpayer. If the IRS determines that the Department of 
Agriculture, or any officer or employee thereof, has failed to, or does 
not, satisfy the requirements of section 6103(p)(4) of the Code or 
regulations or published procedures thereunder, the IRS 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)(5) and paragraph (b) 
of this section, until the IRS determines that such requirements have 
been or will be satisfied.
    (d) Effective date. This section is applicable from January 4, 2000, 
through January 3, 2003.

[T.D. 8854, 65 FR 216, Jan. 4, 2000]



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

[[Page 47]]

proceeding (or investigation which may result in such a proceeding) 
described in section 6103(h)(2) of the Internal Revenue Code, an officer 
or employee of the Internal Revenue Service or Office of the Chief 
Counsel therefor is authorized to disclose taxpayer identity information 
(as defined in section 6103(b)(6)), the fact that the inquiry pertains 
to the performance of official duties, and the nature of the official 
duties in order to obtain necessary information relating to performance 
of such official duties or where necessary in order to properly 
accomplish any activity described in subparagraph (6) of paragraph (b) 
of this section. Disclosure of taxpayer identity information to a person 
other than the taxpayer to whom such taxpayer identity information 
relates or such taxpayer's legal representative for the purpose of 
obtaining such necessary information or otherwise properly accomplishing 
such activities as authorized by this paragraph should be made, however, 
only if the necessary information cannot, under the facts and 
circumstances of the particular case, otherwise reasonably be obtained 
in accurate and sufficiently probative form, or in a timely manner, and 
without impairing the proper performance of the official duties, or if 
such activities cannot otherwise properly be accomplished without making 
such disclosure.
    (b) Disclosure of return information in connection with official 
duties relating to examination, collection activity, civil or criminal 
investigation, enforcement activity, or other offense under the internal 
revenue laws. In connection with the performance of official duties 
relating to any examination, collection activity, civil or criminal 
investigation, enforcement activity, or other offense under the internal 
revenue laws, an officer or employee of the Service or Office of the 
Chief Counsel therefor is authorized to disclose return information (as 
defined in section 6103(b)(2)) in order to obtain necessary information 
relating to the following--
    (1) To establish or verify the correctness or completeness of any 
return (as 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

[[Page 48]]

for the purpose of otherwise properly accomplishing any activity 
described in subparagraph (6) of this paragraph should be made, however, 
only if such necessary information cannot, under the facts and 
circumstances of the particular case, otherwise reasonably be obtained 
in accurate and sufficiently probative form, or in a timely manner, and 
without impairing the proper performance of such duties and 
responsibilities, or if the activities described in subparagraph (6) of 
this paragraph cannot otherwise properly be accomplished without making 
such disclosure.
    (c) Disclosure of return information in connection with certain 
personnel or claimant representative matters. In connection with the 
performance of official duties relating to any investigation concerned 
with the enforcement of any provision of the Code, including enforcement 
of any rules, directives, or manual issuances prescribed by the 
Secretary or his delegate under section 7803 or any other provision of 
the Code, which affect or may affect the personnel or employment rights 
or status, or civil or criminal liability, of any employee or former or 
prospective employee of the Treasury Department or the rights of any 
person who is or may be a party to an administrative action or 
proceeding pursuant to 31 U.S.C. 1026, an officer or employee of the 
Service or Office of the Chief Counsel therefor is authorized to 
disclose return information (as defined in section 6103(b)(2)) for the 
purpose of obtaining, verifying, or establishing other information which 
is or may be relevant and material to such investigation. Disclosure of 
return information to a person other than the taxpayer to whom such 
return information relates or such taxpayer's legal representative for 
the purpose of obtaining information necessary to properly carry out the 
foregoing duties and responsibilities as authorized by this paragraph 
should be made, however, only if such necessary information cannot, 
under the facts and circumstances of the particular case, otherwise 
reasonably be obtained in accurate and sufficiently probative form, or 
in a timely manner, and without impairing the proper performance of such 
duties and responsibilities.

(Secs. 6103 and 7805 of the Internal Revenue Code of 1954 (90 Stat. 
1667, 68A Stat. 917; 26 U.S.C. 6103 and 7805))

[T.D. 7723, 45 FR 65569, Oct. 3, 1980]



Sec. 301.6103(k)(9)-1T  Disclosure of returns and return information relating to payment of tax by credit card and debit card (temporary).

    Officers and employees of the Internal Revenue Service may disclose 
to card issuers, financial institutions or other persons such return 
information as the Secretary deems necessary in connection with 
processing credit card and debit card transactions to effectuate payment 
of tax as authorized by Sec. 301.6311-2T. Officers and employees of the 
Service may disclose such return information to such persons as the 
Secretary deems necessary in connection with billing or collection of 
the amounts charged or debited, including resolution of errors relating 
to the credit card or debit card account as described in Sec. 301.6311-
2T(d).

[T.D. 8793, 63 FR 68996, Dec. 15, 1998]



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

[[Page 49]]

returns or return information relates, and the purpose for which the 
returns or return information is needed in the administration of title 
IV of the Employee Retirement Income Security Act of 1974, and 
designating by title the officers and employees of such corporation to 
whom such disclosure is authorized. No such officer or employee to whom 
returns or return information is disclosed pursuant to the provisions of 
paragraph (a) shall disclose such returns or return information to any 
person, other than the taxpayer by whom the return was made or to whom 
the return information relates or other officers or employees of such 
corporation whose duties or responsibilities require such disclosure for 
a purpose described in paragraph (a), except in a form which cannot be 
associated with, or otherwise identify, directly or indirectly, a 
particular taxpayer.

(Secs. 6103 and 7805 of the Internal Revenue Code of 1954 (90 Stat. 
1667, 68A Stat. 917; 26 U.S.C. 6103 and 7805))

[T.D. 7723, 45 FR 65570, Oct. 3, 1980]



Sec. 301.6103(l)(2)-2  Disclosure of returns and return information to Department of Labor for purposes of research and studies.

    (a) General rule. Pursuant to the provisions of section 6103(l)(2) 
of the Internal Revenue Code and subject to the requirements of 
paragraph (b) of this section, officers or employees of the Internal 
Revenue Service may disclose returns and return information (as defined 
by section 6103(b)) to officers and employees of the Department of Labor 
for purposes of, but only to the extent necessary in, conducting 
research and studies authorized by section 513 of the Employee 
Retirement Income Security Act of 1974.
    (b) Procedures and restrictions. Disclosure of returns or return 
information by officers or employees of the Service as provided by 
paragraph (a) of this section will be made only upon written request to 
the Commissioner of Internal Revenue by the Administrator of 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)

[[Page 50]]

of this paragraph alleges that certain employees may be excluded from 
participation by reason of section 410(b)(2) (A) and (B) for the purpose 
of obtaining the finding necessary for the application of such section;
    (3) An application by a particular taxpayer for a determination of 
whether a pension, profit-sharing, or stock bonus plan, or an annuity or 
bond purchase plan, meets the applicable requirements of part I of 
subchapter D of chapter 1 of the Code with respect to a termination or 
proposed termination of the plan or to a partial termination or proposed 
partial termination of the plan, and any statement filed as provided by 
section 6058(b);
    (4) Notification that the Service has determined that a plan or 
trust described in subparagraph (1) or (3) of this paragraph meets or 
does not meet the applicable requirements of part I of subchapter D of 
chapter 1 of the Code and has issued a determination letter to such 
effect to a particular taxpayer or that an application for such a 
determination has been withdrawn by the taxpayer;
    (5) If the Department of Labor or the Pension Benefit Guaranty 
Corporation has commented on an application upon which a determination 
letter described in subparagraph (4) of this paragraph has been issued, 
a copy of the letter or document issued to the applicant;
    (6) Notification to a particular taxpayer that the Service intends 
to disqualify a pension, profit-sharing, or stock bonus plan, a trust 
which is a part of such plan, or an annuity or bond purchase plan 
because such plan or trust does not meet the requirements of section 
410(a) or 411 as of the date that such notification is issued;
    (7) Notification required by section 3002(a) of the Act of the 
commencement of any proceeding to determine whether a particular 
pension, profit-sharing, or stock bonus plan, a trust which is a part of 
such plan, or an annuity or bond purchase plan meets the requirements of 
section 410(a) or 411;
    (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-

[[Page 51]]

sharing, or stock bonus plan, a trust which is a part of such plan, or 
an annuity or stock purchase plan for an extension of time for filing an 
annual return by such plan or trust;
    (17) Notification that the Service has received and responded to a 
request on behalf of a particular pension, profit-sharing, or stock 
bonus plan, a trust which is a part of such plan, or an annuity or stock 
purchase plan to change the annual accounting period of such plan or 
trust;
    (18) Notification that the Service has determined that a particular 
plan does not meet the requirements of section 412 without regard to 
whether such plan is one described in section 4021(a)(2) of the Act;
    (19) Notification of the results of an investigation by the Service 
requested by the Department of Labor or the Pension Benefit Guaranty 
Corporation, or both, with respect to whether the tax described in 
section 4971 should be imposed on any employer named in such request or 
whether the tax imposed by section 4975 should be paid by any person 
named in the request;
    (20) Notification of receipt by the Service of an application by a 
particular taxpayer for exemption under section 4975(c)(2) or of 
initiation by the Service of an administrative proceeding for such 
exemption;
    (21) Notification of receipt by the Service of, and action taken 
with respect to, an application by or on behalf of a particular taxpayer 
for a waiver or variance of the minimum funding standard under section 
303 of the Act or section 412(d);
    (22) Notification that the Service intends to undertake, is 
undertaking, or has completed, an examination to determine whether--
    (i) A particular pension, profit-sharing, or stock bonus plan, a 
trust which is a part of such plan, or an annuity or stock purchase plan 
meets the applicable requirements of part I of subchapter D of chapter 1 
of the Code,
    (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

[[Page 52]]

or return information is needed in the administration of title I or IV 
of the Act, and designating by title the officers and employees of the 
Department of Labor or such corporation to whom such disclosure is 
authorized.
    (b) Additional returns and return information subject to 
disclosure--(1) Returns and return information relating to automatic 
notification. (i) Subject to the requirements of subparagraph (3)(i) of 
this paragraph, officers or employees of the Service may disclose to 
officers and employees of the Department of Labor or the Pension Benefit 
Guaranty Corporation for purposes of, but only to the extent necessary 
in, the administration of title I or IV of the Act additional return and 
return information relating to any item described in paragraph (a) of 
this section.
    (ii) Subject to the requirements of subparagraph (3)(ii) of this 
paragraph, in connection with the disclosure of any item as provided by 
paragraph (a) of this section, officers and employees of the Service may 
disclose to officers and employees of the Department of Labor or the 
Pension Benefit Guaranty Corporation such additional returns and return 
information relating to such item as the Service determines are or may 
be necessary in the administration of title I or IV of the Act.
    (2) Other returns and return information. Subject to the 
requirements of subparagraph (3)(i) of this paragraph, officers or 
employees of the Service may disclose to officers and employees of the 
Department of Labor or the Pension Benefit Guaranty Corporation returns 
and return information (other than returns and return information 
disclosed as provided by paragraph (a) of this section or 
Sec. 301.6103(l)(2)-1 or Sec. 301.6103(l)(2)-2 for purposes of, but only 
to the extent necessary in, administration of title I or IV of the Act.
    (3) Procedures. (i) Disclosure of returns or return information by 
officers or employees of the Service as provided by subparagraph (1)(i) 
or (2) of this 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

[[Page 53]]

Benefit Guaranty Corporation as provided by this section may be 
disclosed by such officers and employees to officers and employees of 
the Department of Justice (including United States attorneys) personally 
and directly engaged in, and for their necessary use in, any Federal 
grand jury proceeding, or preparation for any civil or criminal judicial 
proceeding (or for their necessary use in an investigation which may 
result in such a proceeding), authorized by, or described in, title I or 
IV of the Act.
    (ii) Returns and return information disclosed to officers and 
employees of the Department of Labor, the Pension Benefit Guaranty 
Corporation, and the Department of Justice as provided by this section 
may be disclosed by such officers and employees to other persons, 
including, but not limited to, persons described in subparagraph 
(2)(iii) of this paragraph, but only to the extent necessary in 
connection with administration of the provisions of title I or IV of the 
Act, including a Federal grand jury proceeding, and proper preparation 
for a proceeding (or investigation), described in subparagraph (1) or 
(2)(i). Such disclosures may include, but are not limited to, 
disclosures where necessary--
    (A) To properly obtain the services of persons having special 
knowledge or technical skills;
    (B) To properly interview, consult, depose, or interrogate or 
otherwise obtain relevant information from the taxpayer to whom such 
return or return information relates (or the legal representative of 
such taxpayer) or any witness who may be called to give evidence in the 
proceeding; or
    (C) To properly conduct negotiations concerning, or obtain 
authorization for, settlement or disposition of the proceeding, in whole 
or in part, or stipulations of fact in connection with the proceeding.

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

[[Page 54]]

Treasury and Labor. Upon general written request to the Commissioner of 
Internal Revenue by the Secretary of Labor, officers and employees of 
the Service may disclose to officers and employees of the Department of 
Labor such returns and return information as may be necessary to 
properly carry out any consultation required by section 3002, 3003, or 
3004 of the Act.
    (e) Return information open to public inspection under section 6104. 
Nothing in these regulations shall be construed to deny officers and 
employees of the Department of Labor and the Pension Benefit Guaranty 
Corporation the right to inspect return information available to the 
public under section 6104 of the Code.

(Secs. 6103 and 7805 of the Internal Revenue Code of 1954 (90 Stat. 
1667, 1685, 68A Stat. 917; 26 U.S.C. 6103 and 7805))

[T.D. 7723, 45 FR 65571, Oct. 3, 1980, as amended by T.D. 7757, 46 FR 
6930, Jan. 22, 1981; T.D. 7911, 48 FR 40377, Sept. 7, 1983]



Sec. 301.6103(l)(14)-1  Disclosure of return information to United States Customs Service.

    (a) General rule. Pursuant to the provisions of section 6103(l)(14) 
of the Internal Revenue Code, officers and employees of the Internal 
Revenue Service may disclose to officers and employees of the United 
States Customs Service return information (as defined by section 
6103(b)) with respect to taxes imposed by chapters 1 and 6 of the 
Internal Revenue Code solely for purposes of, and only to the extent 
necessary in--
    (1) Ascertaining the correctness of any entry in audits as provided 
for in section 509 of the Tariff Act of 1930 or;
    (2) Other actions to recover any loss of revenue, or to collect 
duties, taxes, and fees, determined to be due and owing pursuant to such 
audits.
    (b) Procedures. Disclosure of return information by officers or 
employees of 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

[[Page 55]]

taxpayer may not be disclosed pursuant to this section if the IRS 
determines that the disclosure would identify a confidential informant 
or seriously impair any civil or criminal tax investigation or 
proceeding.
    (f) Use by Customs Service. Return information disclosed under this 
section may be used by the U.S. Customs Service to the extent necessary 
to ascertain or to document the correctness of any entry in audits as 
provided for in section 509 of the Tariff Act of 1930 and in any related 
administrative proceedings to recover any loss of revenue, or to collect 
duties, taxes or fees, determined to be due and owing pursuant to these 
audits. Uses may include, to the extent necessary, disclosure to the 
importer (or the legal representative of such importer) subject to the 
audit with respect to which the information was requested.
    (g) Disclosure to, and use by, the Department of Justice. Return 
information disclosed to officers and employees of the U.S. Customs 
Service as provided by this section may be disclosed by these officers 
and employees to officers and employees of the Department of Justice 
(including United States attorneys) personally and directly engaged in, 
and solely for their necessary use in, advocating or defending the 
correctness of Customs determinations with respect to any entry, in any 
civil judicial proceeding, or any preparations therefor (or for their 
necessary use in an investigation which may result in such a 
proceeding), to recover any loss of revenue, or to collect duties, taxes 
or fees, determined to be due and owing as a consequence of an audit 
provided for in section 509 of the Tariff Act of 1930.
    (h) Disclosure by officers and employees of the Department of 
Justice. Return information disclosed to officers and employees of the 
Department of Justice (including United States Attorneys) as provided by 
this section may be disclosed by these officers and employees to other 
persons as is necessary to properly accomplish the purposes or 
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,

[[Page 56]]

or as otherwise provided by section 6103 of the Internal Revenue Code.

[T.D. 8527, 59 FR 11548, Mar. 11, 1994. Redesignated by T.D. 8694, 61 FR 
66220, Dec. 17, 1996]



Sec. 301.6103(n)-1  Disclosure of returns and return information in connection with procurement of property and services for tax administration purposes.

    (a) General rule. Pursuant to the provisions of section 6103(n) of 
the Internal Revenue Code and subject to the requirements of paragraphs 
(b), (c), and (d) of this section, officers or employees of the Treasury 
Department, a State tax agency, the Social Security Administration, or 
the Department of Justice, are authorized to disclose returns and return 
information (as defined in section 6103(b)) to any person (including, in 
the case of the Treasury Department, any person described in section 
7513(a)), or to an officer or employee of such person, to the extent 
necessary in connection with contractual procurement of--
    (1) Equipment or other property, or
    (2) Services relating to the processing, storage, transmission, or 
reproduction of such returns or return information, the programming, 
maintenance, repair, or testing of equipment or other property, or the 
providing of other services, for purposes of tax administration (as 
defined in section 6103(b)(4)).

No person, or officer or employee of such person, to whom a return or 
return information is disclosed by an officer or employee of the 
Treasury Department, the State tax agency, the Social Security 
Administration, or the Department of Justice, under the authority of 
this paragraph shall in turn disclose such return or return information 
for any purpose other than as described in this paragraph, and no such 
further disclosure for any such described purpose shall be made by such 
person, officer, or employee to anyone, other than another officer or 
employee of such person whose duties or responsibilities require such 
disclosure for a 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

[[Page 57]]

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 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

[[Page 58]]

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 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.

[[Page 59]]

    (b) State tax agency's right to appeal. A State tax agency shall 
have 30 days from the date of receipt of a notice described in paragraph 
(a) of this section to appeal the preliminary determination described in 
paragraph (a) of this section. The appeal shall be made directly to the 
Commissioner.
    (c) Procedures for administrative review. (1) To appeal a 
preliminary determination described in paragraph (a) of this section, 
the State agency shall send a written request for a conference to: 
Commissioner of Internal Revenue (Attention: C), 1111 Constitution 
Avenue, NW., Washington, D.C. 20224. The request must include a complete 
description of the State tax agency's present system of safeguarding 
Federal returns or return information received from the Service. The 
request must then state the reason or reasons that the State agency 
believes that such system, including improvements, if any, to such 
system expected to be made in the near future, is or will be adequate to 
safeguard Federal returns or return information received from the 
Service.
    (2) Within 45 days of the receipt of a request made in accordance 
with the provisions of subparagraph (1) of this paragraph, the 
Commissioner or Deputy Commissioner will personally hold a conference 
with representatives of the State tax agency, after which the 
Commissioner or Deputy Commissioner will make a final determination with 
respect to the appeal.

(Secs. 6103(p)(7) and 7805 of the Internal Revenue Code of 1954 (90 
Stat. 1685, 26 U.S.C. 6103(p)(7); 68A Stat. 917; 26 U.S.C. 7805))

[T.D. 7693, 45 FR 26325, Apr. 18, 1980]



Sec. 301.6104(a)-1  Public inspection of material relating to tax-exempt organizations.

    (a) Application for tax exemption and supporting documents. If the 
Internal Revenue Service determines that an organization described in 
section 501 (c) or (d) is exempt from taxation for any taxable year, the 
application for tax 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.

[[Page 60]]

    (d) Documents included in the term ``application for tax 
exemption''. For purposes of this section--
    (1) Prescribed application form. If a form is prescribed for an 
organization's application for tax exemption, the application for tax 
exemption includes the form and all documents and statements the 
Internal Revenue Service requires to be filed with the form.
    (2) No prescribed application form. If no form is prescribed for an 
organization's application for tax exemption, the application for tax 
exemption includes:
    (i) The application letter and a copy of the articles of 
incorporation, declaration of trust, or other instrument of similar 
import that sets forth the permitted powers or activities of the 
organization,
    (ii) The bylaws or other code of regulations,
    (iii) The latest financial statement showing assets, liabilities, 
receipts and disbursements,
    (iv) Statements showing the character of the organization, the 
purpose for which it was organized, and its actual activities,
    (v) Statements showing sources of income and receipts and the 
disposition thereof, and whether or not any income or receipts is 
credited to surplus or may inure to the benefit of any private 
shareholder or individual, and
    (vi) Any other statements or documents the Internal Revenue Service 
requires to be filed with the application lettter.
    (3) Prohibited transactions. An application for tax exemption does 
not include a request for a ruling as to whether a proposed transaction 
is a prohibited transaction under section 503.
    (e) Supporting documents defined. For purposes of this section, 
``supporting documents'', as used with respect to an application for tax 
exemption, means any statement or document not described in paragraph 
(d) of this section that is submitted by an organization in support of 
its application. For example, a legal brief submitted in support of an 
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

[[Page 61]]

application for tax exemption or the revocation or modification of a 
favorable determination letter,
    (4) Any letter or document filed with or issued by the Internal 
Revenue Service relating to whether a proposed or accomplished 
transaction is a prohibited transaction under section 503,
    (5) Any letter or document filed with or issued by the Internal 
Revenue Service relating to an organization's status as an organization 
described in section 509 (a) or 4942(j)(3), unless the letter or 
document relates to the organization's application for tax exemption, 
and
    (6) Any other letter or document filed with or issued by the 
Internal Revenue Service which, although it relates to an organization's 
tax exempt status as an organization described in section 501 (c) or 
(d), does not relate to that organization's application for tax 
exemption, within the meaning of paragraph (d).

(Secs. 6104(a)(1)(A), 6104(a)(1)(B), and 7805 of the Internal Revenue 
Code of 1954 (72 Stat. 1660, 88 Stat. 940, 68A Stat. 917; 26 U.S.C. 
6104(a)(1)(A), 6104(a)(1)(B), 7805))

[T.D. 7845, 47 FR 50486, Nov. 8, 1982]



Sec. 301.6104(a)-2  Public inspection of material relating to pension and other plans.

    (a) Material open to inspection. Except as provided in 
Sec. 301.6104(a)-4 with respect to plans having fewer than 26 
participants, an application for a determination letter which is filed 
with the Internal Revenue Service after September 2, 1974, together with 
supporting documents filed by the applicant in support of the 
application, will be open to public inspection under section 
6104(a)(1)(B) (i) and (ii). An application for a determination letter 
and supporting documents will be open to public inspection whether or 
not the application is withdrawn by the applicant, and whether or not 
the Internal Revenue Service determines that the plan, account, or 
annuity to which the application relates is qualified or that 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

[[Page 62]]

failure to notify all interested parties in accordance with the 
regulations under section 7476 (relating to declaratory judgments), and
    (3) A request for a ruling as to whether a proposed transaction is a 
prohibited transaction under section 4975.
    (d) Supporting documents. ``Supporting documents'', as used with 
respect to an application for a determination letter which is open to 
public inspection under this section, means any statement or document 
submitted in support of the application which is not specifically 
required by the application form or the Internal Revenue Service. For 
example, a legal brief submitted in support of an application for a 
determination letter is a supporting document.
    (e) Applicant. For purposes of this section, Sec. 301.6104(a)-3 
(relating to Internal Revenue Service letters and documents open to 
public inspection) and Sec. 301.6104(a)-5 (relating to the withholding 
of certain information from public inspection), an ``applicant'' 
includes, but is not limited to, an employer, plan administrator (as 
defined in section 414(g)), labor union, bank, or insurance company that 
files an application for a determination letter.

(Secs. 6104(a)(1)(A), 6104(a)(1)(B), and 7805 of the Internal Revenue 
Code of 1954 (72 Stat. 1660, 88 Stat. 940, 68A Stat. 917; 26 U.S.C. 
6104(a)(1)(A), 6104(a)(1)(B), 7805))

[T.D. 7845, 47 FR 50487, Nov. 8, 1982]



Sec. 301.6104(a)-3  Public inspection of Internal Revenue Service letters and documents relating to pension and other plans.

    (a) In general. Except as provided in Sec. 301.6104(a)-4 with 
respect to plans having fewer than 26 participants, a letter or other 
document issued by the Internal Revenue Service after September 2, 1974, 
is open to public inspection under section 6104(a)(1)(B)(iv) and this 
section, if it is issued with respect to--
    (1) The qualification of a pension, profit-sharing or stock bonus 
plan 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,

[[Page 63]]

    (4) Letters or documents revoking or modifying any prior favorable 
determination letter or denying the qualification of a plan, account or 
annuity for which no determination letter has been issued,
    (5) Determination letters relating to the exemption from tax of a 
trust or custodial account described in paragraph (a)(2) of this section 
(see Sec. 601.201 (o)(2)(i)(b)), or
    (6) Opinion letters relating to the acceptability of the form of any 
master, prototype or other such plan or account (see Sec. 601.201 (p) 
and (q)) or notification letters issued with respect to pattern plans.
    (d) Extent letter or document open to public inspection. A letter or 
document issued by the Internal Revenue Service is open to public 
inspection under section 6104(a)(1)(B)(iv) and this section only to the 
extent it relates directly to the qualification of a plan, account or 
annuity, the exemption from tax of a related organization or custodial 
account, or the approval of a master, prototype, pattern or other such 
plan. Any part of the letter or document which does not directly relate 
to such a qualification, exemption or approval is not open to public 
inspection. For example, a letter to an employer which concludes that an 
employee's plan is not qualified and the related trust is not tax exempt 
will be open to public inspection. However, that same letter may also 
assert an income tax deficiency because employer contributions to the 
trust are, therefore, not deductible. In such a case, that part of the 
letter relating to the tax deficiency will be deleted before the letter 
is opened to public inspection.
    (e) Letters or documents issued with respect to tax return 
examination. In the case of an examination of a taxpayer's return or 
consideration of a taxpayer's claim for credit or refund, no letter or 
document issued to the taxpayer before the preliminary or ``30-day'' 
letter described in Sec. 601.105(d)(1) is issued to the taxpayer will be 
open to public inspection under section 6104(a)(1)(B)(iv) and this 
section. The ``30-day'' letter and 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

[[Page 64]]

number indicated on the return means the number at the end of the plan 
year. If no annual return has been filed for the plan, then the number 
of plan participants will be the number indicated on the most recent 
application for a determination letter filed for the plan. If, however, 
the number of plan participants is increased prior to final Internal 
Revenue Service action on the application, the number of plan 
participants will be that increased number.
    (2) Decreasing number of plan participants. If a plan having 26 or 
more participants, as indicated on an annual return or application for a 
determination letter, subsequently files an annual return indicating 
fewer than 26 plan participants, then material relating to the plan 
which is issued or received by the Internal Revenue Service after the 
date the annual return is filed will be open to inspection only by plan 
participants or their authorized representatives. Similarly, if a plan 
having 26 or more participants as indicated on an annual return or an 
application for a determination letter, subsequently files an 
application for a determination letter which indicates fewer than 26 
plan participants, then that application and related material, as well 
as any other material relating to the plan which is received or issued 
by the Internal Revenue Service after the date of receipt of that 
application, will be open to inspection only by plan participants or 
their authorized representatives. In either case, material open to 
public inspection pursuant to the number of plan participants indicated 
on previous annual returns or applications for a determination letter 
will remain open to public inspection.
    (3) Increasing number of plan participants. If a plan having fewer 
than 26 plan participants, as indicated on an annual return or 
application for a determination letter, files a subsequent return or 
application indicating 26 or more plan participants, all the plan's 
prior applications and other material received or issued by the Internal 
Revenue Service after September 2, 1974, will be open to public 
inspection regardless of the number of plan participants indicated on 
any prior return or application.
    (c) Plan participant. Solely for purposes of determining who is a 
plan participant permitted to inspect material relating to a plan having 
fewer than 26 participants, the term ``plan participant'' includes, but 
is not limited to, former employees (such as certain retired and 
terminated employees) who have a nonforfeitable right to benefits under 
the plan. An individual who is merely a beneficiary of an employee or 
former employee is not a plan participant, unless the individual is a 
beneficiary of a deceased former employee and is receiving benefits or 
entitled to receive future benefits under the plan. The term ``plan 
participant'' also includes the administrator, executor, or trustee of 
the estate of a deceased plan participant if such administrator, 
executor, or trustee is receiving benefits or entitled to receive future 
benefits under the plan in his or her official capacity. That material 
may be available for inspection to an individual under this paragraph 
does not constitute a determination by the Internal Revenue Service that 
the individual is a plan participant for any purpose other than 
inspection under section 6104(a)(1)(B).
    (d) Authorized representative. ``Authorized representative'' means 
the representative of a plan participant designated by the participant 
in writing to inspect material described in Secs. 301.6104(a)-2 and 
301.6104(a)-3. The document designating the authorized representative 
must be signed by the plan participant and must specify that the 
representative is authorized to inspect the material. The document, or a 
copy, must be filed with the office of the Internal Revenue Service in 
which the authorized representative is to inspect the material. A copy 
which is reproduced by a photographic process need not be certified as a 
true and correct copy of the original.

(Secs. 6104(a)(1)(A), 6104(a)(1)(B), and 7805 of the Internal Revenue 
Code of 1954 (72 Stat. 1660, 88 Stat. 940, 68A Stat. 917; 26 U.S.C. 
6104(a)(1)(A), 6104(a)(1)(B), 7805))

[T.D. 7845, 47 FR 50488, Nov. 8, 1982]



Sec. 301.6104(a)-5  Withholding of certain information from public inspection.

    (a) Tax exempt organizations--(1) Trade secrets, patents, processes, 
styles of work, or apparatus. An organization whose

[[Page 65]]

application for tax exemption is open to public inspection under section 
6104(a)(1)(A) and Sec. 301.6104(a)-1 may in writing request the 
withholding of information contained in the application or supporting 
documents which relates to any trade secret, patent, process, style of 
work, or apparatus of the organization. The information will be withheld 
from public inspection if the Commissioner determines that the 
disclosure of such information would adversely affect the organization. 
Requests for withholding information from public inspection should be 
filed with the office with which the organization files the documents 
containing the information. The request must clearly identify the 
material desired to be withheld (the document, page, paragraph, and 
line) and must state why the information should not be open to public 
inspection. The organization will be notified of the Commissioner's 
determination as to whether the information will be withheld from public 
inspection. If the Commissioner determines that the information will be 
disclosed, the organization will be given 15 days after notification of 
the Commissioner's decision to contest that decision before the document 
is disclosed.
    (2) National defense material. The Internal Revenue Service will 
withhold from public inspection any information which is submitted by an 
organization whose application for tax exemption is open to inspection 
under section 6104(a)(1)(A) and Sec. 301.6104(a)-1, if the Commissioner 
determines that public disclosure would adversely affect the national 
defense.
    (b) Pension and other plans--(1) Applicant's exclusion of certain 
information. Except as provided in subparagraph (2) of this paragraph, 
information that, in the opinion of the applicant, is of the type 
described in section 6104(a)(1) (C) or (D) should not be included in an 
application for a determination letter, supporting documents, or any 
other 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

[[Page 66]]

document if the Commissioner determines that the information is in fact 
information of the type described in section 6104(a)(1) (C) or (D), and, 
in the case of information relating to any trade secret, patent, 
process, style of work or apparatus, the Commissioner further determines 
that disclosure would be adverse to the applicant. If the Commissioner 
determines that the information will be disclosed, the organization will 
be given 15 days after notification of the Commissioner's decision to 
contest the decision before the document is disclosed.
    (3) National defense material. The Internal Revenue Service will 
withhold from public inspection (including inspection by a plan 
participant or authorized representative) any information which is 
included in an application for a determination letter or supporting 
documents if the Commissioner determines that public disclosure would 
adversely affect the national defense. The information will be withheld 
whether or not submitted on a separate document pursuant to subparagraph 
(2) of this paragraph.
    (4) Confidential compensation information. If an application for a 
determination letter, supporting document, or related letter or document 
referred to in section 6104(a)(1)(B) and Secs. 301.6104(a)-2 and 
301.6104(a)-3 contains information (including aggregate figures) from 
which an individual's compensation (including deferred compensation) may 
be ascertained, that information is not open to public inspection 
(including inspection by a plan participant or authorized 
representative). Confidential compensation information includes the 
amount of benefit a specific plan participant may expect to receive at 
normal or early retirement age and the amount of the employer's 
contributions under the plan that may be allocated to a specific plan 
participant. However, so long as a plan has more than one participant, 
the amount of benefit provided under the plan to plan 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,

[[Page 67]]

only Internal Revenue Service documents issued or delivered after the 
date of the filing of the most recent application for a determination 
letter will be made available for inspection, unless the request states 
otherwise.
    (2) Pension and other plans; inspection by plan participant or 
authorized representative. As described in Sec. 301.6104(a)-4, material 
relating to plans having fewer than 26 participants is only open to 
inspection by a plan participant or authorized representative. In the 
case of such a plan, the rules described in subparagraph (1) of this 
paragraph apply. The request for inspection must include satisfactory 
evidence that the person requesting inspection is a plan participant 
(see Sec. 301.6104(a)-4(c)) or an authorized representative of such a 
plan participant within the meaning of Sec. 301.6104(a)-4(d).
    (c) Time and extent of inspection. A person requesting inspection 
will be notified when the material will be made available for 
inspection. The material will be made available for inspection at times 
that will not interfere with its use by the Internal Revenue Service or 
exclude other persons from inspecting it. In addition, the Commissioner 
or district director may limit the number of applications for tax 
exemption, applications for a determination letter, supporting 
documents, or letters and documents issued by the Internal Revenue 
Service that will be made available to any person for inspection on a 
given date. Inspection will be allowed only in the presence of an 
Internal Revenue Service employee and only during regular business 
hours.
    (d) Copies. Notes may be taken of the material open for inspection. 
Copies may be made manually or, if a person provides the equipment, 
photographically at the place of inspection. Photographic copying is 
subject to reasonable supervision with regard to the facilities and 
equipment used. A fee will be charged for copies of the material 
furnished by the Internal Revenue 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.

[[Page 68]]


Information such as the contributor's estimated total liability for 
black lung benefits, the contributor's coal pricing policies, or any 
background information necessary to establish estimated total liability 
or coal pricing policies are examples of confidential business 
information that shall not be disclosed to the public under this 
subparagraph.
    (c) Place of inspection. Information furnished on the public portion 
of returns (as described in paragraph (a) of this section) shall be made 
available for public inspection at the Freedom of Information Reading 
Room. Internal Revenue Service, 1111 Constitution Avenue, NW., 
Washington, D.C. 20224, and at the office of any district director.
    (d) Procedure for public inspection--(1) Requests for inspection. 
Information furnished on the public portion of returns (as described in 
paragraph (a) of this section) shall be available for public inspection 
only upon request. Requests for public inspection must be in writing to 
or at any of the offices mentioned in paragraph (c) of this section. 
Persons submitting requests for inspection must provide the name and 
address of the organization that filed the return, the type of return, 
and the year for which the organization filed.
    (2) Time and extent of inspection. A person requesting public 
inspection in the manner specified in subparagraph (1) of this paragraph 
shall be notified by the Internal Revenue Service when the material he 
desires to inspect will be made available for his inspection. 
Information on returns required by sections 6033, 6034, and 6058 will be 
made available for public inspection at such reasonable and proper 
times, and under such conditions, that will not interfere with their use 
by the Internal Revenue Service and will not exclude other persons from 
inspecting them. In addition the Commissioner, Director of the Service 
Center, or district director may limit the number of returns to be made 
available to any person for inspection on a given date. Inspection will 
be allowed only in the presence of an internal revenue officer or 
employee and only during the regular hours of business of the Internal 
Revenue Service office.
    (3) Returns available. Returns filed before January 1, 1970, shall 
be available for public inspection only pursuant to the provisions of 
section 6104 in effect for such years. The information furnished on all 
returns filed after December 31, 1969, purusant to the requirements of 
section 6033, 6034, or 6058, shall be available for public inspection in 
accordance with the provisions of section 6104.
    (4) Copies. Notes may be taken of the material opened for inspection 
under this section. Copies may be made manually or, if a person provides 
the equipment, photographically at the place of inspection, subject to 
reasonable supervision with regard to the facilities and equipment to be 
employed. Copies of the material opened for inspection will be furnished 
by the Internal Revenue Service to any person making request therefor. 
Requests for such copies shall be made in the same manner as requests 
for inspection (see subparagraph (1) of this paragraph) to the office of 
the Internal Revenue Service in which such material is available for 
inspection as provided in paragraph (c) of this section. Copies may also 
be obtained by written request to the director of any service center. If 
made at the time of inspection, the request for copies need not be in 
writing. Any copies furnished will be certified upon request. The 
Commissioner may prescribe a reasonable fee for furnishing copies of 
information pursuant to this section.

[T.D. 8026, 50 FR 20757, May 20, 1985]



Sec. 301.6104(c)-1  Disclosure of certain information to State officers.

    (a) Notification of determinations--(1) Automatic notification. Upon 
making a determination described in paragraph (c) of this section, the 
Internal Revenue Service will notify the Attorney General and the 
principal tax officer of each of the following States of such 
determination without application or request by such State officer--
    (i) In the case of any organization described in section 501(c)(3), 
the State in which the principal office of the organization is located 
(as shown on the last-filed return required by section 6033, or on the 
application for exemption if no return has been filed), and the State in 
which the organization

[[Page 69]]

was incorporated, or if a trust, in which it was created, and
    (ii) In the case of a private foundation, each State which the 
organization was required to list as an attachment to its last-filed 
return pursuant to Sec. 1.6033-2(a)(2)(iv).
    (2) Applications for notification by other State officers. Other 
officers of States described in subparagraph (1) of this paragraph, and 
officers of States not described in such subparagraph, may request that 
they be notified (either generally or with respect to a particular 
organization or type of organization) of determinations described in 
paragraph (c) of this section. In such cases, these State officers must 
show that they are appropriate State officers within the meaning of 
section 6104(c)(2). The required showing may be made by presenting a 
letter from the Attorney General of the State setting forth (i) the 
functions and authority of the State officer under State law, and (ii) 
sufficient facts for the Internal Revenue Service to determine that such 
officer is an appropriate State officer within the meaning of section 
6104(c)(2).
    (3) Manner of notification. A State officer who is entitled to be 
notified of a determination under this paragraph will be notified by 
sending him a copy of the communication from the Internal Revenue 
Service to the organization which informs such organization of the 
determination.
    (b) Inspection by State officers--(1) In general. After a 
determination described in paragraph (c) of this section has been made, 
appropriate State officers within the meaning of section 6104(c)(2) may 
inspect the material described in subparagraph (3) of this paragraph. 
Such material may be inspected at an office of the Internal Revenue 
Service which will be designated upon receipt of a request for 
inspection; the location of such office 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

[[Page 70]]

fulfilling his functions under State law relating to organizations of 
the type described in section 501(c)(3); material is made available to 
State officers under this section in reliance on such statements. For 
provisions relating to penalties for misuse of information which is made 
available under section 6104(c) and this section, see 18 U.S.C. 1001.
    (c) Determinations defined. For purposes of this section, a 
determination means a final determination by the Internal Revenue 
Service that--
    (1) An organization is refused recognition as an organization 
described in section 501(c)(3), or has been operated in such a manner 
that it will not, or will no longer, be recognized as meeting the 
requirements for exemption under that section, or
    (2) A deficiency of tax exists under section 507 or chapter 41 or 
42.

For purposes of this paragraph, a determination by the Internal Revenue 
Service is not final until all administrative review with respect to 
such determination has been completed. For purposes of this section, a 
waiver of restrictions on assessment and collection of deficiency in tax 
is treated as a final determination that a deficiency of tax exists when 
such waiver has been finally accepted by the Internal Revenue Service. 
For example, a final determination that a deficiency of tax exists under 
section 507 or chapter 41 or 42 is made when the organization is sent a 
notice of deficiency with respect to such tax.
    (d) Effective date. The provisions of this section apply with 
respect to all determinations made after December 31, 1969.

(Secs. 6033(a)(1), 6104(b), and 7805 of the Internal Revenue Code of 
1954 (83 Stat. 519, 68A Stat. 755 as amended by 83 Stat. 530, and 68A 
Stat. 917; 26 U.S.C. 6033(a)(1), 6104(b), and 7805); secs. 
6104(a)(1)(A), 6104(a)(1)(B), and 7805 of the Internal Revenue Code of 
1954 (72 Stat. 1660, 88 Stat. 940, 68A Stat. 917; 26 U.S.C. 
6104(a)(1)(A), 6104(a)(1)(B), 7805))

[T.D. 7122, 36 FR 11031, June 8, 1971, as amended by T.D. 7290, 38 FR 
31835, Nov. 19, 1973; T.D. 7785, 46 FR 38508, July 28, 1981. 
Redesignated by T.D. 7845, 47 FR 50490, Nov. 8, 1982]



Sec. 301.6104(d)-0  Table of contents.

    This section lists the major captions contained in 
Secs. 301.6104(d)-1 through 301.6104(d)-3 as follows:

 Sec. 301.6104(d)-1  Public inspection and distribution of applications 
     for tax exemption and annual information returns of tax-exempt 
                             organizations.

(a) In general.
(b) Definitions.
(1) Tax-exempt organization.
(2) Private foundation.
(3) Application for tax exemption.
(i) In general.
(ii) No prescribed application form.
(iii) Exceptions.
(iv) Local or subordinate organizations.
(4) Annual information return.
(i) In general.
(ii) Exceptions.
(iii) Returns more than 3 years old.
(iv) Local or subordinate organizations.
(5) Regional or district offices.
(i) In general.
(ii) Site not considered a regional or district office.
(c) Special rules relating to public inspection.
(1) Permissible conditions on public inspection.
(2) Organizations that do not maintain permanent offices.
(d) Special rules relating to copies.
(1) Time and place for providing copies in response to requests made in 
person.
(i) In general.
(ii) Unusual circumstances.
(iii) Agents for providing copies.
(2) Request for copies in writing.
(i) In general.
(ii) Time and manner of fulfilling written requests.
(A) In general.
(B) Request for a copy of parts of document.
(C) Agents for providing copies.
(3) Fees for copies.
(i) In general.
(ii) Form of payment.
(A) Request made in person.
(B) Request made in writing.
(iii) Avoidance of unexpected fees.
(iv) Responding to inquiries of fees charged.
(e) Documents to be provided by regional and district offices.
(f) Documents to be provided by local and subordinate organizations.
(1) Applications for tax exemption.
(2) Annual information returns.
(3) Failure to comply.
(g) Failure to comply with public inspection or copying requirements.
(h) Effective date.
(1) In general.

[[Page 71]]

(2) Private foundation annual information returns.

  Sec. 301.6104(d)-2  Making applications and returns widely available.

(a) In general.
(b) Widely available.
(1) In general.
(2) Internet posting.
(i) In general.
(ii) Transition rule.
(iii) Reliability and accuracy.
(c) Discretion to prescribe other methods for making documents widely 
available.
(d) Notice requirement.
(e) Effective date.

   Sec. 301.6104(d)-3  Tax-exempt organization subject to harassment 
                                campaign.

(a) In general.
(b) Harassment.
(c) Special rule for multiple requests from a single individual or 
address.
(d) Harassment determination procedure.
(e) Effect of a harassment determination.
(f) Examples.
(g) Effective date.

[T.D. 8861, 65 FR 2033, Jan. 13, 2000]



Sec. 301.6104(d)-1  Public inspection and distribution of applications for tax exemption and annual information returns of tax-exempt organizations.

    (a) In general. Except as otherwise provided in this section, if a 
tax-exempt organization (as defined in paragraph (b)(1) of this section) 
filed an application for recognition of exemption under section 501, it 
shall make its application for tax exemption (as defined in paragraph 
(b)(3) of this section) available for public inspection without charge 
at its principal, regional and district offices during regular business 
hours. Except as otherwise provided in this section, a tax-exempt 
organization shall make its annual information returns (as defined in 
paragraph (b)(4) of this section) available for public inspection 
without charge in the same offices during regular business hours. Each 
annual information return shall be made available for a period of three 
years beginning on the date the return is required to be filed 
(determined with regard to any extension of time for filing) or is 
actually filed, whichever is later. In addition, except as provided in 
Secs. 301.6104(d)-2 and 301.6104(d)-3, an organization shall provide a 
copy without charge, other than a reasonable fee for reproduction and 
actual postage costs, of all or any part of any application or return 
required to be made available for public inspection under this paragraph 
to any individual who makes a request for such copy in person or in 
writing. See paragraph (d)(3) of this section for rules relating to fees 
for copies.
    (b) Definitions. For purposes of applying the provisions of section 
6104(d), this section and Secs. 301.6104(d)-2 and 301.6104(d)-3, the 
following definitions apply:
    (1) Tax-exempt organization. The term tax-exempt organization means 
any organization that is described in section 501(c) or section 501(d) 
and is exempt from taxation under section 501(a). The term tax-exempt 
organization also includes any nonexempt charitable trust described in 
section 4947(a)(1) or nonexempt private foundation that is subject to 
the reporting requirements of section 6033 pursuant to section 6033(d).
    (2) Private foundation. The term private foundation means a private 
foundation as defined in section 509(a) or a nonexempt charitable trust 
described in section 4947(a)(1) or a nonexempt private foundation 
subject to the information reporting requirements of section 6033 
pursuant to section 6033(d).
    (3) Application for tax exemption--(i) In general. Except as 
described in paragraph (b)(3)(iii) of this section, the term application 
for tax exemption includes any prescribed application form (such as Form 
1023 or Form 1024), all documents and statements the Internal Revenue 
Service requires an applicant to file with the form, any statement or 
other supporting document submitted by an organization in support of its 
application, and any letter or other document issued by the Internal 
Revenue Service concerning the application (such as a favorable 
determination letter or a list of questions from the Internal Revenue 
Service about the application). For example, a legal brief submitted in 
support of an application, or a response to questions from the Internal 
Revenue Service during the application process, is part of an 
application for tax exemption.
    (ii) No prescribed application form. If no form is prescribed for an 
organization's application for tax exemption,

[[Page 72]]

the application for tax exemption includes--
    (A) The application letter and copy of the articles of 
incorporation, declaration of trust, or other similar instrument that 
sets forth the permitted powers or activities of the organization;
    (B) The organization's bylaws or other code of regulations;
    (C) The organization's latest financial statements showing assets, 
liabilities, receipts and disbursements;
    (D) Statements describing the character of the organization, the 
purpose for which it was organized, and its actual activities;
    (E) Statements showing the sources of the organization's income and 
receipts and their disposition; and
    (F) Any other statements or documents the Internal Revenue Service 
required the organization to file with, or that the organization 
submitted in support of, the application letter.
    (iii) Exceptions. The term application for tax exemption does not 
include--
    (A) Any application for tax exemption filed by an organization that 
the Internal Revenue Service has not yet recognized, on the basis of the 
application, as exempt from taxation under section 501 for any taxable 
year;
    (B) Any application for tax exemption filed before July 15, 1987, 
unless the organization filing the application had a copy of the 
application on July 15, 1987;
    (C) In the case of a tax-exempt organization other than a private 
foundation, the name and address of any contributor to the organization; 
or
    (D) Any material, including the material listed in Sec. 301.6104(a)-
1(i) and information that the Secretary would be required to withhold 
from public inspection, that is not available for public inspection 
under section 6104.
    (iv) Local or subordinate organizations. For rules relating to 
applications for tax exemption of local or subordinate organizations, 
see paragraph (f)(1) of this section.
    (4) Annual information return--(i) In general. Except as described 
in paragraph (b)(4)(ii) of this section, the term annual information 
return includes an exact copy of any return filed by a tax-exempt 
organization pursuant to section 6033. It also includes any amended 
return the organization files with the Internal Revenue Service after 
the date the original return is filed. Returns filed pursuant to section 
6033 include Form 990, Return of Organization Exempt From Income Tax, 
Form 990-PF, Return of Private Foundation, or any other version of Form 
990 (such as Forms 990-EZ or 990-BL, except Form 990-T) and Form 1065. 
Each copy of a return must include all information furnished to the 
Internal Revenue Service on the return, as well as all schedules, 
attachments and supporting documents. For example, in the case of a Form 
990, the copy must include Schedule A of Form 990 (containing 
supplementary information on section 501(c)(3) organizations), and those 
parts of the return that show compensation paid to specific persons 
(currently, Part V of Form 990 and Parts I and II of Schedule A of Form 
990).
    (ii) Exceptions. The term annual information return does not include 
Schedule A of Form 990-BL, Form 990-T, Exempt Organization Business 
Income Tax Return, Schedule K-1 of Form 1065 or Form 1120-POL, U.S. 
Income Tax Return For Certain Political Organizations. In the case of a 
tax-exempt organization other than a private foundation, the term annual 
information return does not include the name and address of any 
contributor to the organization.
    (iii) Returns more than 3 years old. The term annual information 
return does not include any return after the expiration of 3 years from 
the date the return is required to be filed (including any extension of 
time that has been granted for filing such return) or is actually filed, 
whichever is later. If an organization files an amended return, however, 
the amended return must be made available for a period of 3 years 
beginning on the date it is filed with the Internal Revenue Service.
    (iv) Local or subordinate organizations. For rules relating to 
annual information returns of local or subordinate organizations, see 
paragraph (f)(2) of this section.
    (5) Regional or district offices--(i) In general. A regional or 
district office is any office of a tax-exempt organization, other than 
its principal office, that has paid employees, whether part-

[[Page 73]]

time or full-time, whose aggregate number of paid hours a week are 
normally at least 120.
    (ii) Site not considered a regional or district office. A site is 
not considered a regional or district office, however, if--
    (A) The only services provided at the site further exempt purposes 
(such as day care, health care or scientific or medical research); and
    (B) The site does not serve as an office for management staff, other 
than managers who are involved solely in managing the exempt function 
activities at the site.
    (c) Special rules relating to public inspection--(1) Permissible 
conditions on public inspection. A tax-exempt organization may have an 
employee present in the room during an inspection. The organization, 
however, must allow the individual conducting the inspection to take 
notes freely during the inspection. If the individual provides 
photocopying equipment at the place of inspection, the organization must 
allow the individual to photocopy the document at no charge.
    (2) Organizations that do not maintain permanent offices. If a tax-
exempt organization does not maintain a permanent office, the 
organization shall comply with the public inspection requirements of 
paragraph (a) of this section by making its application for tax 
exemption and its annual information returns, as applicable, available 
for inspection at a reasonable location of its choice. Such an 
organization shall permit public inspection within a reasonable amount 
of time after receiving a request for inspection (normally not more than 
2 weeks) and at a reasonable time of day. At the organization's option, 
it may mail, within 2 weeks of receiving the request, a copy of its 
application for tax exemption and annual information returns to the 
requester in lieu of allowing an inspection. The organization may charge 
the requester for copying and actual postage costs only if the requester 
consents to the charge. An organization that has a permanent office, but 
has no office hours or very limited hours during certain times of the 
year, shall make its documents available during those periods when 
office hours are limited or not available as though it were an 
organization without a permanent office.
    (d) Special rules relating to copies--(1) Time and place for 
providing copies in response to requests made in-person--(i) In general. 
Except as provided in paragraph (d)(1)(iii) of this section, a tax-
exempt organization shall provide copies of the documents it is required 
to provide under section 6104(d) in response to a request made in person 
at its principal, regional and district offices during regular business 
hours. Except as provided in paragraph (d)(1)(ii) of this section, an 
organization shall provide such copies to a requester on the day the 
request is made.
    (ii) Unusual circumstances. In the case of an in-person request, 
where unusual circumstances exist such that fulfilling the request on 
the same business day places an unreasonable burden on the tax-exempt 
organization, the organization must provide the copies no later than the 
next business day following the day that the unusual circumstances cease 
to exist or the fifth business day after the date of the request, 
whichever occurs first. Unusual circumstances include, but are not 
limited to, receipt of a volume of requests that exceeds the 
organization's daily capacity to make copies; requests received shortly 
before the end of regular business hours that require an extensive 
amount of copying; or requests received on a day when the organization's 
managerial staff capable of fulfilling the request is conducting special 
duties, such as student registration or attending an off-site meeting or 
convention, rather than its regular administrative duties.
    (iii) Agents for providing copies. A principal, regional or district 
office of a tax-exempt organization subject to the requirements of this 
section may retain a local agent to process requests made in person for 
copies of its documents. A local agent must be located within reasonable 
proximity of the applicable office. A local agent that receives a 
request made in person for copies must provide the copies within the 
time limits and under the conditions that apply to the organization 
itself. For example, a local agent generally must provide a copy to a 
requester on the day the agent receives

[[Page 74]]

the request. When a principal, regional or district office of a tax-
exempt organization using a local agent receives a request made in 
person for a copy, it must immediately provide the name, address and 
telephone number of the local agent to the requester. An organization 
that provides this information is not required to respond further to the 
requester. However, the penalty provisions of sections 6652(c)(1)(C), 
6652(c)(1)(D), and 6685 continue to apply to the tax-exempt organization 
if the organization's local agent fails to provide the documents as 
required under section 6104(d).
    (2) Request for copies in writing--(i) In general. A tax-exempt 
organization must honor a written request for a copy of documents (or 
the requested part) that the organization is required to provide under 
section 6104(d) if the request--
    (A) Is addressed to, and delivered by mail, electronic mail, 
facsimile, or a private delivery service as defined in section 7502(f) 
to a principal, regional or district office of the organization; and
    (B) Sets forth the address to which the copy of the documents should 
be sent.
    (ii) Time and manner of fulfilling written requests--(A) In general. 
A tax-exempt organization receiving a written request for a copy shall 
mail the copy of the requested documents (or the requested parts of 
documents) within 30 days from the date it receives the request. 
However, if a tax-exempt organization requires payment in advance, it is 
only required to provide the copies within 30 days from the date it 
receives payment. For rules relating to payment, see paragraph (d)(3) of 
this section. In the absence of evidence to the contrary, a request or 
payment that is mailed shall be deemed to be received by an organization 
7 days after the date of the postmark. A request that is transmitted to 
the organization by electronic mail or facsimile shall be deemed 
received the day the request is transmitted successfully. If an 
organization requiring payment in advance receives a written request 
without payment or with an insufficient payment, the organization must, 
within 7 days from the date it receives the request, notify the 
requester of its prepayment policy and the amount due. A copy is deemed 
provided on the date of the postmark or private delivery mark (or if 
sent by certified or registered mail, the date of registration or the 
date of the postmark on the sender's receipt). If an individual making a 
request consents, a tax-exempt organization may provide a copy of the 
requested document exclusively by electronic mail. In such case, the 
material is provided on the date the organization successfully transmits 
the electronic mail.
    (B) Request for a copy of parts of document. A tax-exempt 
organization must fulfill a request for a copy of the organization's 
entire application for tax exemption or annual information return or any 
specific part or schedule of its application or return. A request for a 
copy of less than the entire application or less than the entire return 
must specifically identify the requested part or schedule.
    (C) Agents for providing copies. A tax-exempt organization subject 
to the requirements of this section may retain an agent to process 
written requests for copies of its documents. The agent shall provide 
the copies within the time limits and under the conditions that apply to 
the organization itself. For example, if the organization received the 
request first (e.g., before the agent), the deadline for providing a 
copy in response to a request shall be determined by reference to when 
the organization received the request, not when the agent received the 
request. An organization that transfers a request for a copy to such an 
agent is not required to respond further to the request. If the 
organization's agent fails to provide the documents as required under 
section 6104(d), however, the penalty provisions of sections 
6652(c)(1)(C), 6652(c)(1)(D), and 6685 continue to apply to the tax-
exempt organization.
    (3) Fees for copies--(i) In general. A tax-exempt organization may 
charge a reasonable fee for providing copies. A fee is reasonable only 
if it is no more than the per-page copying charge stated in 
Sec. 601.702(f)(5)(iv)(B) of this chapter (fee charged by the Internal 
Revenue Service for providing copies to a requester), plus no more than 
the actual

[[Page 75]]

postage costs incurred by the organization to provide the copies. Before 
the organization provides the documents, it may require that the 
individual requesting copies of the documents pay the fee. If the 
organization has provided an individual making a request with notice of 
the fee, and the individual does not pay the fee within 30 days, or if 
the individual pays the fee by check and the check does not clear upon 
deposit, the organization may disregard the request.
    (ii) Form of payment--(A) Request made in person. If a tax-exempt 
organization charges a fee for copying (as permitted under paragraph 
(d)(3)(i) of this section), it shall accept payment by cash and money 
order for requests made in person. The organization may accept other 
forms of payment, such as credit cards and personal checks.
    (B) Request made in writing. If a tax-exempt organization charges a 
fee for copying and postage (as permitted under paragraph (d)(3)(i) of 
this section), it shall accept payment by certified check, money order, 
and either personal check or credit card for requests made in writing. 
The organization may accept other forms of payment.
    (iii) Avoidance of unexpected fees. Where a tax-exempt organization 
does not require prepayment and a requester does not enclose payment 
with a request, an organization must receive consent from a requester 
before providing copies for which the fee charged for copying and 
postage exceeds $20.
    (iv) Responding to inquiries of fees charged. In order to facilitate 
a requester's ability to receive copies promptly, a tax-exempt 
organization shall respond to any questions from potential requesters 
concerning its fees for copying and postage. For example, the 
organization shall inform the requester of its charge for copying and 
mailing its application for exemption and each annual information 
return, with and without attachments, so that a requester may include 
payment with the request for copies.
    (e) Documents to be provided by regional and district offices. 
Except as otherwise provided, a regional or district office of a tax-
exempt organization must satisfy the same rules as the principal office 
with respect to allowing public inspection and providing copies of its 
application for tax exemption and annual information returns. A regional 
or district office is not required, however, to make its annual 
information return available for inspection or to provide copies until 
30 days after the date the return is required to be filed (including any 
extension of time that is granted for filing such return) or is actually 
filed, whichever is later.
    (f) Documents to be provided by local and subordinate 
organizations--(1) Applications for tax exemption. Except as otherwise 
provided, a tax-exempt organization that did not file its own 
application for tax exemption (because it is a local or subordinate 
organization covered by a group exemption letter referred to in 
Sec. 1.508-1 of this chapter) must, upon request, make available for 
public inspection, or provide copies of, the application submitted to 
the Internal Revenue Service by the central or parent organization to 
obtain the group exemption letter and those documents which were 
submitted by the central or parent organization to include the local or 
subordinate organization in the group exemption letter. However, if the 
central or parent organization submits to the Internal Revenue Service a 
list or directory of local or subordinate organizations covered by the 
group exemption letter, the local or subordinate organization is 
required to provide only the application for the group exemption ruling 
and the pages of the list or directory that specifically refer to it. 
The local or subordinate organization shall permit public inspection, or 
comply with a request for copies made in person, within a reasonable 
amount of time (normally not more than 2 weeks) after receiving a 
request made in person for public inspection or copies and at a 
reasonable time of day. In a case where the requester seeks inspection, 
the local or subordinate organization may mail a copy of the applicable 
documents to the requester within the same time period in lieu of 
allowing an inspection. In such a case, the organization may charge the 
requester for copying and actual postage costs only if the requester 
consents to the charge. If the

[[Page 76]]

local or subordinate organization receives a written request for a copy 
of its application for tax exemption, it must fulfill the request in the 
time and manner specified in paragraph (d)(2) of this section. The 
requester has the option of requesting from the central or parent 
organization, at its principal office, inspection or copies of the 
application for group exemption and the material submitted by the 
central or parent organization to include a local or subordinate 
organization in the group ruling. If the central or parent organization 
submits to the Internal Revenue Service a list or directory of local or 
subordinate organizations covered by the group exemption letter, it must 
make such list or directory available for public inspection, but it is 
required to provide copies only of those pages of the list or directory 
that refer to particular local or subordinate organizations specified by 
the requester. The central or parent organization must fulfill such 
requests in the time and manner specified in paragraphs (c) and (d) of 
this section.
    (2) Annual information returns. A local or subordinate organization 
that does not file its own annual information return (because it is 
affiliated with a central or parent organization that files a group 
return pursuant to Sec. 1.6033-2(d) of this chapter) must, upon request, 
make available for public inspection, or provide copies of, the group 
returns filed by the central or parent organization. However, if the 
group return includes separate schedules with respect to each local or 
subordinate organization included in the group return, the local or 
subordinate organization receiving the request may omit any schedules 
relating only to other organizations included in the group return. The 
local or subordinate organization shall permit public inspection, or 
comply with a request for copies made in person, within a reasonable 
amount of time (normally not more than 2 weeks) after receiving a 
request made in person for public inspection or copies and at a 
reasonable time of day. In a case where the requester seeks inspection, 
the local or subordinate organization may mail a copy of the applicable 
documents to the requester within the same time period in lieu of 
allowing an inspection. In such a case, the organization may charge the 
requester for copying and actual postage costs only if the requester 
consents to the charge. If the local or subordinate organization 
receives a written request for a copy of its annual information return, 
it must fulfill the request by providing a copy of the group return in 
the time and manner specified in paragraph (d)(2) of this section. The 
requester has the option of requesting from the central or parent 
organization, at its principal office, inspection or copies of group 
returns filed by the central or parent organization. The central or 
parent organization must fulfill such requests in the time and manner 
specified in paragraphs (c) and (d) of this section.
    (3) Failure to comply. If an organization fails to comply with the 
requirements specified in this paragraph, the penalty provisions of 
sections 6652(c)(1)(C), 6652(c)(1)(D), and 6685 apply.
    (g) Failure to comply with public inspection or copying 
requirements. If a tax-exempt organization denies an individual's 
request for inspection or a copy of an application for tax exemption or 
an annual information return as required under this section, and the 
individual wants to alert the Internal Revenue Service to the possible 
need for enforcement action, the individual may provide a statement to 
the district director for the key district in which the applicable tax-
exempt organization's principal office is located (or such other person 
as the Commissioner may designate) that describes the reason why the 
individual believes the denial was in violation of the requirements of 
section 6104(d).
    (h) Effective date--(1) In general. For a tax-exempt organization, 
other than a private foundation, this section is applicable June 8, 
1999. For a private foundation, this section is applicable (except as 
provided in paragraph (h)(2) of this section) beginning March 13, 2000.
    (2) Private foundation annual information returns. This section does 
not apply to any private foundation return the due date for which 
(determined with regard to any extension of time for filing) is before 
the applicable date for

[[Page 77]]

private foundations specified in paragraph (h)(1) of this section.

[T.D. 8818, 64 FR 17285, Apr. 9, 1999. Redesignated and amended by T.D. 
8861, 65 FR 2033, 2034, Jan. 13, 2000]



Sec. 301.6104(d)-2  Making applications and returns widely available.

    (a) In general. A tax-exempt organization is not required to comply 
with a request for a copy of its application for tax exemption or an 
annual information return pursuant to Sec. 301.6104(d)-1(a) if the 
organization has made the requested document widely available in 
accordance with paragraph (b) of this section. An organization that 
makes its application for tax exemption and/or annual information return 
widely available must nevertheless make the document available for 
public inspection as required under Sec. 301.6104(d)-1(a), as 
applicable.
    (b) Widely available--(1) In general. A tax-exempt organization 
makes its application for tax exemption and/or an annual information 
return widely available if the organization complies with the 
requirements specified in paragraph (b)(2) of this section, and if the 
organization satisfies the requirements of paragraph (d) of this 
section.
    (2) Internet posting--(i) In general. A tax-exempt organization can 
make its application for tax exemption and/or an annual information 
return widely available by posting the document on a World Wide Web page 
that the tax-exempt organization establishes and maintains or by having 
the document posted, as part of a database of similar documents of other 
tax-exempt organizations, on a World Wide Web page established and 
maintained by another entity. The document will be considered widely 
available only if--
    (A) the World Wide Web page through which it is available clearly 
informs readers that the document is available and provides instructions 
for downloading it;
    (B) the document is posted in a format that, when accessed, 
downloaded, viewed and printed in hard copy, exactly reproduces the 
image of the application for tax exemption or annual information return 
as it was originally filed with the Internal Revenue Service, except for 
any information permitted by statute to be withheld from public 
disclosure. (See section 6104(d)(3) and Sec. 301.6104(d)-3(b)(3) and 
(4)); and
    (C) any individual with access to the Internet can access, download, 
view and print the document without special computer hardware or 
software required for that format (other than software that is readily 
available to members of the public without payment of any fee) and 
without payment of a fee to the tax-exempt organization or to another 
entity maintaining the World Wide Web page.
    (ii) Transition rule. A tax-exempt organization that posted its 
application for tax exemption or its annual information returns on a 
World Wide Web page on or before April 9, 1999 in a manner consistent 
with regulation project REG-246250-96 (1997 C.B. 627) (See 
Sec. 601.601(d)(2) of this chapter.) will be treated as satisfying the 
requirements of paragraphs (b)(2)(i)(B) & (C) of this section until June 
8, 2000 provided that an individual can access, download, view and print 
the document without payment of a fee to the tax-exempt organization or 
to another entity maintaining the World Wide Web page.
    (iii) Reliability and accuracy. In order for the document to be 
widely available through an Internet posting, the entity maintaining the 
World Wide Web page must have procedures for ensuring the reliability 
and accuracy of the document that it posts on the page and must take 
reasonable precautions to prevent alteration, destruction or accidental 
loss of the document when posted on its page. In the event that a posted 
document is altered, destroyed or lost, the entity must correct or 
replace the document.
    (c) Discretion to prescribe other methods for making documents 
widely available. The Commissioner, from time to time, may prescribe 
additional methods, other than an Internet posting meeting the 
requirements of paragraph (b)(2) of this section, that a tax-exempt 
organization may use to make its documents widely available.
    (d) Notice requirement. If a tax-exempt organization has made its 
application for tax exemption and/or an annual information return widely 
available it must notify any individual requesting

[[Page 78]]

a copy where the documents are available (including the address on the 
World Wide Web, if applicable). If the request is made in person, the 
organization shall provide such notice to the individual immediately. If 
the request is made in writing, the notice shall be provided within 7 
days of receiving the request.
    (e) Effective date. For a tax-exempt organization, other than a 
private foundation, this section is applicable June 8, 1999. For a 
private foundation, this section is applicable beginning March 13, 2000.

[T.D. 8818, 64 FR 17285, Apr. 9, 1999. Redesignated and amended by T.D. 
8861, 65 FR 2034, Jan. 13, 2000]



Sec. 301.6104(d)-3  Tax-exempt organization subject to harassment campaign.

    (a) In general. If the district director for the key district in 
which the organization's principal office is located (or such other 
person as the Commissioner may designate) determines that the 
organization is the subject of a harassment campaign and compliance with 
the requests that are part of the harassment campaign would not be in 
the public interest, a tax-exempt organization is not required to 
fulfill a request for a copy (as otherwise required by Sec. 301.6104(d)-
1(a)) that it reasonably believes is part of the campaign.
    (b) Harassment. A group of requests for an organization's 
application for tax exemption or annual information returns is 
indicative of a harassment campaign if the requests are part of a single 
coordinated effort to disrupt the operations of a tax-exempt 
organization, rather than to collect information about the organization. 
Whether a group of requests constitutes such a harassment campaign 
depends on the relevant facts and circumstances. Facts and circumstances 
that indicate the organization is the subject of a harassment campaign 
include: a sudden increase in the number of requests; an extraordinary 
number of requests made through form letters or similarly worded 
correspondence; evidence of a purpose to deter significantly the 
organization's employees or volunteers from pursuing the organization's 
exempt purpose; requests that contain language hostile to the 
organization; direct evidence of bad faith by organizers of the 
purported harassment campaign; evidence that the organization has 
already provided the requested documents to a member of the purported 
harassing group; and a demonstration by the tax-exempt organization that 
it routinely provides copies of its documents upon request.
    (c) Special rule for multiple requests from a single individual or 
address. A tax-exempt organization may disregard any request for copies 
of all or part of any document beyond the first two received within any 
30-day period or the first four received within any one-year period from 
the same individual or the same address, regardless of whether the 
district director for the applicable key district (or such other person 
as the Commissioner may designate) has determined that the organization 
is subject to a harassment campaign.
    (d) Harassment determination procedure. A tax-exempt organization 
may apply for a determination that it is the subject of a harassment 
campaign and that compliance with requests that are part of the campaign 
would not be in the public interest by submitting a signed application 
to the district director for the key district where the organization's 
principal office is located (or such other person as the Commissioner 
may designate). The application shall consist of a written statement 
giving the organization's name, address, employer identification number, 
and the name, address and telephone number of the person to contact 
regarding the application. The application must describe in detail the 
facts and circumstances that the organization believes support a 
determination that the organization is subject to a harassment campaign. 
The organization may suspend compliance with respect to any request for 
a copy of its documents based on its reasonable belief that such request 
is part of a harassment campaign, provided that the organization files 
an application for a determination within 10 business days from the day 
the organization first suspends compliance with respect to a request 
that is part of the alleged campaign. In addition, the organization may 
suspend

[[Page 79]]

compliance with any request it reasonably believes to be part of the 
harassment campaign until it receives a response to its application for 
a harassment campaign determination.
    (e) Effect of a harassment determination. If the appropriate 
district director (or such other person as the Commissioner may 
designate) determines that a tax-exempt organization is the subject of a 
harassment campaign and it is not in the public interest to comply with 
requests that are part of the campaign, such organization is not 
required to comply with any request for copies that it reasonably 
believes is part of the campaign. This determination may be subject to 
other terms and conditions set forth by the district director (or such 
other person as the Commissioner may designate). A person (as defined in 
section 6652(c)(4)(C)) shall not be liable for any penalty under 
sections 6652(c)(1)(C), 6652(c)(1)(D) or 6685 for failing to timely 
provide a copy of documents in response to a request covered in a 
request for a harassment determination if the organization fulfills the 
request within 30 days of receiving a determination from the district 
director (or such other person as the Commissioner may designate) that 
the organization is not subject to a harassment campaign. 
Notwithstanding the preceding sentence, if the district director (or 
such other person as the Commissioner may designate) further determines 
that the organization did not have a reasonable basis for requesting a 
determination that it was subject to a harassment campaign or reasonable 
belief that a request was part of the campaign, the person (as defined 
in section 6652(c)(4)(C)) remains liable for any penalties that result 
from not providing the copies in a timely fashion.
    (f) Examples. The provisions of this section are illustrated by the 
following examples:

    Example 1. V, a tax-exempt organization, receives an average of 25 
requests per month for copies of its three most recent information 
returns. In the last week of May, V is mentioned in a national news 
magazine story that discusses information contained in V's 1996 
information return. From June 1 through June 30, 1997 V receives 200 
requests for a copy of its documents. Other than the sudden increase in 
the number of requests for copies, there is no other evidence to suggest 
that the requests are part of an organized campaign to disrupt V's 
operations. Although fulfilling the requests will place a burden on V, 
the facts and circumstances do not show that V is subject to a 
harassment campaign. Therefore, V must respond timely to each of the 200 
requests it receives in June.
    Example 2. Y is a tax-exempt organization that receives an average 
of 10 requests a month for copies of its annual information returns. 
From March 1, 1997 to March 31, 1997, Y receives 25 requests for copies 
of its documents. Fifteen of the requests come from individuals Y knows 
to be active members of the board of organization X. In the past X has 
opposed most of the positions and policies that Y advocates. None of the 
requesters have asked for copies of documents from Y during the past 
year. Y has no other information about the requesters. Although the 
facts and circumstances show that some of the individuals making 
requests are hostile to Y, they do not show that the individuals have 
organized a campaign that will place enough of a burden on Y to disrupt 
its activities. Therefore, Y must respond to each of the 25 requests it 
receives in March.
    Example 3. The facts are the same as in Example 2, except that 
during March 1997, Y receives 100 requests. In addition to the fifteen 
requests from members of organization X's board, 75 of the requests are 
similarly worded form letters. Y discovers that several individuals 
associated with X have urged the X's members and supporters, via the 
Internet, to submit as many requests for a copy of Y's annual 
information returns as they can. The message circulated on the Internet 
provides a form letter that can be used to make the request. Both the 
appeal via the Internet and the requests for copies received by Y 
contain hostile language. During the same year but before the 100 
requests were received, Y provided copies of its annual information 
returns to the headquarters of X. The facts and circumstances show that 
the 75 form letter requests are coordinated for the purpose of 
disrupting Y's operations,

[[Page 80]]

and not to collect information that has already been provided to an 
association representing the requesters' interests. Thus, the fact and 
circumstances show that Y is the subject of an organized harassment 
campaign. To confirm that it may disregard the 90 requests that 
constitute the harassment campaign, Y must apply to the applicable 
district director (or such other person as the Commissioner may 
designate) for a determination. Y may disregard the 90 requests while 
the application is pending and after the determination is received. 
However, it must respond within the applicable time limits to the 10 
requests it received in March that were not part of the harassment 
campaign.
    Example 4. The facts are the same as in Example 3, except that Y 
receives 5 additional requests from 5 different representatives of the 
news media who in the past have published articles about Y. Some of 
these articles were hostile to Y. Normally, the Internal Revenue Service 
will not consider a tax-exempt organization to have a reasonable belief 
that a request from a member of the news media is part of a harassment 
campaign absent additional facts that demonstrate that the organization 
could reasonably believe the particular requests from the news media to 
be part of a harassment campaign. Thus, absent such additional facts, Y 
must respond within the applicable time limits to the 5 requests that it 
received from representatives of the news media.

    (g) Effective date. For a tax-exempt organization, other than a 
private foundation, this section is applicable June 8, 1999. For a 
private foundation, this section is applicable beginning March 13, 2000.

[T.D. 8818, 64 FR 17289, Apr. 9, 1999. Redesignated and amended by T.D. 
8861, 65 FR 2034, Jan. 13, 2000]



Sec. 301.6105-1  Compilation of relief from excess profits tax cases.

    Pursuant to and in accordance with the provisions of section 6105, 
the Commissioner shall make and publish in the Federal Register a 
compilation, for each fiscal year beginning after June 30, 1941, of all 
cases in which relief under the provisions of section 722 of the 
Internal Revenue Code of 1939, as amended, has been allowed during such 
fiscal year by the Commissioner and by the Tax Court of the United 
States.



Sec. 301.6106-1  Publicity of unemployment tax returns.

    For provisions relating to publicity of returns made in respect of 
unemployment tax imposed by chapter 23 of the Code, see 
Secs. 301.6103(a)-1, 301.6103 (b)-1, 301.6103(c)-1, 301.6103 (d)-1, and 
301.6103(f)-1.



Sec. 301.6108-1  Publication of statistics of income.

    Pursuant to and in accordance with the provisions of section 6108, 
statistics reasonably available with respect to the operation of the 
income tax laws shall be prepared and published annually by the 
Commissioner.



Sec. 301.6109-1  Identifying numbers.

    (a) In general--(1) Taxpayer identifying numbers--(i) Principal 
types. There are several types of taxpayer identifying numbers that 
include the following: social security numbers, Internal Revenue Service 
(IRS) individual taxpayer identification numbers, IRS adoption taxpayer 
identification numbers, and employer identification numbers. Social 
security numbers take the form 000-00-0000. IRS individual taxpayer 
identification numbers and IRS adoption taxpayer identification numbers 
also take the form 000-00-0000 but include a specific number or numbers 
designated by the IRS. Employer identification numbers take the form 00-
0000000.
    (ii) Uses. Social security numbers, IRS individual taxpayer 
identification numbers, and IRS adoption taxpayer identification numbers 
are used to identify individual persons. Employer identification numbers 
are used to identify employers. For the definition of social security 
number and employer identification number, see Secs. 301.7701-11 and 
301.7701-12, respectively. For the definition of IRS individual taxpayer 
identification number, see paragraph (d)(3) of this section. For the 
definition of IRS adoption taxpayer identification number, see 
Sec. 301.6109-3(a). Except as otherwise provided in applicable 
regulations under this chapter or on a return, statement, or other 
document,

[[Page 81]]

and related instructions, taxpayer identifying numbers must be used as 
follows:
    (A) Except as otherwise provided in paragraph (a)(1)(ii)(B) and (D) 
of this section, and Sec. 301.6109-3, an individual required to furnish 
a taxpayer identifying number must use a social security number.
    (B) Except as otherwise provided in paragraph (a)(1)(ii)(D) of this 
section and Sec. 301.6109-3, an individual required to furnish a 
taxpayer identifying number but who is not eligible to obtain a social 
security number must use an IRS individual taxpayer identification 
number.
    (C) Any person other than an individual (such as corporations, 
partnerships, nonprofit associations, trusts, estates, and similar 
nonindividual persons) that is required to furnish a taxpayer 
identifying number must use an employer identification number.
    (D) An individual, whether U.S. or foreign, who is an employer or 
who is engaged in a trade or business as a sole proprietor should use an 
employer identification number as required by returns, statements, or 
other documents and their related instructions.
    (2) A trust all of which is treated as owned by the grantor or 
another person pursuant to sections 671 through 678--(i) Obtaining a 
taxpayer identification number. If a trust does not have a taxpayer 
identification number and the trustee furnishes the name and taxpayer 
identification number of the grantor or other person treated as the 
owner of the trust and the address of the trust to all payors pursuant 
to Sec. 1.671-4(b)(2)(i)(A) of this chapter, the trustee need not obtain 
a taxpayer identification number for the trust until either the first 
taxable year of the trust in which all of the trust is no longer owned 
by the grantor or another person, or until the first taxable year of the 
trust for which the trustee no longer reports pursuant to Sec. 1.671-
4(b)(2)(i)(A) of this chapter. If the trustee has not already obtained a 
taxpayer identification number for the trust, the trustee must obtain a 
taxpayer identification number for the trust as provided in paragraph 
(d)(2) of this section in order to report pursuant to Sec. 1.671-4(a), 
(b)(2)(i)(B), or (b)(3)(i) of this chapter.
    (ii) Obligations of persons who make payments to certain trusts. Any 
payor 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

[[Page 82]]

shall apply to the following foreign persons--
    (i) A foreign person that has income effectively connected with the 
conduct of a U.S. trade or business at any time during the taxable year;
    (ii) A foreign person that has a U.S. office or place of business or 
a U.S. fiscal or paying agent at any time during the taxable year;
    (iii) A nonresident alien treated as a resident under section 
6013(g) or (h);
    (iv) A foreign person that makes a return of tax (including income, 
estate, and gift tax returns), an amended return, or a refund claim 
under this title but excluding information returns, statements, or 
documents;
    (v) A foreign person that makes an election under Sec. 301.7701-
3(c); and
    (vi) A foreign person that furnishes a withholding certificate 
described in Sec. 1.1441-1(e)(2) or (3) of this chapter or Sec. 1.1441-
5(c)(2)(iv) or (3)(iii) of this chapter to the extent required under 
Sec. 1.1441-1(e)(4)(vii) of this chapter.
    (c) Requirement to furnish another's number. Every person required 
under this title to make a return, statement, or other document must 
furnish such taxpayer identifying numbers of other U.S. persons and 
foreign persons that are described in paragraph (b)(2)(i), (ii), (iii), 
or (vi) of this section as required by the forms and the accompanying 
instructions. The taxpayer identifying number of any person furnishing a 
withholding certificate referred to in paragraph (b)(2)(vi) of this 
section shall also be furnished if it is actually known to the person 
making a return, statement, or other document described in this 
paragraph (c). If the person making the return, statement, or other 
document does not know the taxpayer identifying number of the other 
person, and such other person is one that is described in paragraph 
(b)(2)(i), (ii), (iii), or (vi) of this section, such person must 
request the other person's number. The request should state that the 
identifying number is required to be furnished under authority of law. 
When the person making the return, statement, or other document does not 
know the number of the other person, and has complied with the request 
provision of this paragraph (c), such person must sign an affidavit on 
the transmittal document forwarding such returns, statements, or other 
documents to the Internal Revenue Service, so stating. A person required 
to file a taxpayer identifying number shall correct any errors in such 
filing when such person's attention has been drawn to them.
    (d) Obtaining a taxpayer identifying number--(1) Social security 
number. Any individual required to furnish a social security number 
pursuant to paragraph (b) of this section shall apply for one, if he has 
not done so previously, on Form SS-5, which may be obtained from any 
Social Security Administration or Internal Revenue Service office. He 
shall make such application far enough in advance of the first required 
use of such number to permit issuance of the number in time for 
compliance with such requirement. The form, together with any 
supplementary statement, shall be prepared and filed in accordance with 
the form, instructions, and regulations applicable thereto, and shall 
set forth fully and clearly the data therein called for. Individuals who 
are ineligible for or do not wish to participate in the benefits of the 
social security program shall nevertheless obtain a social security 
number if they are required to furnish such a number pursuant to 
paragraph (b) of this section.
    (2) Employer identification number--(i) In general. Any person 
required to furnish an employer identification number must apply for 
one, if not done so previously, on Form SS-4. A Form SS-4 may be 
obtained from any office of the Internal Revenue Service, U.S. consular 
office abroad, or from an acceptance agent described in paragraph 
(d)(3)(iv) of this section. The person must make such application far 
enough in advance of the first required use of the employer 
identification number to permit issuance of the number in time for 
compliance with such requirement. The form, together with any 
supplementary statement, must be prepared and filed in accordance with 
the form, accompanying instructions, and relevant regulations, and must 
set forth fully and clearly the requested data.
    (ii) [Reserved]
    (iii) Special rule for Section 708(b)(1)(B) terminations. A new 
partnership that is

[[Page 83]]

formed as a result of the termination of a partnership under section 
708(b)(1)(B) will retain the employer identification number of the 
terminated partnership. This paragraph (d)(2)(iii) applies to 
terminations of partnerships under section 708(b)(1)(B) occurring on or 
after May 9, 1997; however, this paragraph (d)(2)(iii) may be applied to 
terminations occurring on or after May 9, 1996, provided that the 
partnership and its partners apply this paragraph (d)(2)(iii) to the 
termination in a consistent manner.
    (3) IRS individual taxpayer identification number--(i) Definition. 
The term IRS individual taxpayer identification number means a taxpayer 
identifying number issued to an alien individual by the Internal Revenue 
Service, upon application, for use in connection with filing 
requirements under this title. The term IRS individual taxpayer 
identification number does not refer to a social security number or an 
account number for use in employment for wages. For purposes of this 
section, the term alien individual means an individual who is not a 
citizen or national of the United States.
    (ii) General rule for obtaining number. Any individual who is not 
eligible to obtain a social security number and is required to furnish a 
taxpayer identifying number must apply for an IRS individual taxpayer 
identification number on Form W-7, Application for IRS Individual 
Taxpayer Identification Number, or such other form as may be prescribed 
by the Internal Revenue Service. Form W-7 may be obtained from any 
office of the Internal Revenue Service, U.S. consular office abroad, or 
any acceptance agent described in paragraph (d)(3)(iv) of this section. 
The individual shall furnish the information required by the form and 
accompanying instructions, including the individual's name, address, 
foreign tax identification number (if any), and specific reason for 
obtaining an IRS individual taxpayer identification number. The 
individual must make such application far enough in advance of the first 
required use of the IRS individual taxpayer identification number to 
permit issuance of the number in time for compliance with such 
requirement. The application form, together with any supplementary 
statement and documentation, must be prepared and filed 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;

[[Page 84]]

    (3) Procedures for collecting, reviewing, and maintaining, in the 
normal course of business, a record of the required documentation for 
assignment of a taxpayer identifying number;
    (4) Procedures for submitting the application form and required 
documentation to the Internal Revenue Service, or if permitted under the 
agreement, submitting the application form together with a certification 
that the acceptance agent has reviewed the required documentation and 
that it has no actual knowledge or reason to know that the documentation 
is not complete or accurate;
    (5) Procedures for assisting taxpayers with notification procedures 
described in paragraph (g)(2) of this section in the event of change of 
foreign status;
    (6) Procedures for making all documentation or other records 
furnished by persons applying for a taxpayer identifying number promptly 
available for review by the Internal Revenue Service, upon request; and
    (7) Provisions that the agreement may be terminated in the event of 
a material failure to comply with the agreement, including failure to 
exercise due diligence under the agreement.
    (B) Persons who may be acceptance agents. An acceptance agent may 
include any financial institution as defined in section 265(b)(5) or 
Sec. 1.165-12(c)(1)(v) of this chapter, any college or university that 
is an educational organization as defined in Sec. 1.501(c)(3)-1(d)(3)(i) 
of this chapter, any federal agency as defined in section 6402(f) or any 
other person or categories of persons that may be authorized by 
regulations or Internal Revenue Service procedures. A person described 
in this paragraph (d)(3)(iv)(B) that seeks to qualify as an acceptance 
agent must have an employer identification number for use in any 
communication with the Internal Revenue Service. In addition, it must 
establish to the satisfaction of the Internal Revenue Service that it 
has adequate resources and procedures in place to comply with the terms 
of the agreement described in paragraph (d)(3)(iv)(A) of this section.
    (4) Coordination of taxpayer identifying numbers--(i) Social 
security number. Any individual who is duly assigned a social security 
number or who is entitled to a social security number will not be issued 
an IRS individual taxpayer identification number. The individual can 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

[[Page 85]]

number, the individual must furnish the previously-assigned employer 
identification number to the Internal Revenue Service on Form W-7, or 
such other form as may be prescribed by the Internal Revenue Service, at 
the time of application for the IRS individual taxpayer identification 
number.
    (e) Banks, and brokers and dealers in securities. For additional 
requirements relating to deposits, share accounts, and brokerage 
accounts, see 31 CFR 103.34 and 103.35.
    (f) Penalty. For penalties for failure to supply taxpayer 
identifying numbers, see sections 6721 through 6724.
    (g) Special rules for taxpayer identifying numbers issued to foreign 
persons--(1) General rule--(i) Social security number. A social security 
number is generally identified in the records and database of the 
Internal Revenue Service as a number belonging to a U.S. citizen or 
resident alien individual. A person may establish a different status for 
the number by providing proof of foreign status with the Internal 
Revenue Service under such procedures as the Internal Revenue Service 
shall prescribe, including the use of a form as the Internal Revenue 
Service may specify. Upon accepting an individual as a nonresident alien 
individual, the Internal Revenue Service will assign this status to the 
individual's social security number.
    (ii) Employer identification number. An employer identification 
number is generally identified in the records and database of the 
Internal Revenue Service as a number belonging to a U.S. person. 
However, the Internal Revenue Service may establish a separate class of 
employer identification numbers solely dedicated to foreign persons 
which will be identified as such in the records and database of the 
Internal Revenue Service. A person may establish a different status for 
the number either at the time of application or subsequently by 
providing proof of U.S. or foreign status with the Internal Revenue 
Service under such procedures as the Internal Revenue Service shall 
prescribe, including the use of a form as the Internal Revenue Service 
may specify. The Internal Revenue Service may require a person to apply 
for the type of employer identification number that reflects the status 
of that person as a U.S. or foreign person.
    (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.

[[Page 86]]

    (h) Special rules for certain entities under Sec. 301.7701-3--(1) 
General rule. Any entity that has an employer identification number 
(EIN) will retain that EIN if its federal tax classification changes 
under Sec. 301.7701-3.
    (2) Special rules for entities that are disregarded as entities 
separate from their owners--(i) When an entity becomes disregarded as an 
entity separate from its owner. Except as otherwise provided in 
regulations or other guidance, a single owner entity that is disregarded 
as an entity separate from its owner under Sec. 301.7701-3, must use its 
owner's taxpayer identifying number (TIN) for federal tax purposes.
    (ii) When an entity that was disregarded as an entity separate from 
its owner becomes recognized as a separate entity. If a single owner 
entity's classification changes so that it is recognized as a separate 
entity for federal tax purposes, and that entity had an EIN, then the 
entity must use that EIN and not the TIN of the single owner. If the 
entity did not already have its own EIN, then the entity must acquire an 
EIN and not use the TIN of the single owner.
    (3) Effective date. The rules of this paragraph (h) are applicable 
as of January 1, 1997.
    (i) Special rule for qualified subchapter S subsidiaries (QSubs)--
(1) General rule. Any entity that has an employer identification number 
(EIN) will retain that EIN if a QSub election is made for the entity 
under Sec. 1.1361-3 or if a QSub election that was in effect for the 
entity terminates under Sec. 1.1361-5.
    (2) EIN while QSub election in effect. Except as otherwise provided 
in regulations or other published guidance, a QSub must use the parent S 
corporation's EIN for Federal tax purposes.
    (3) EIN when QSub election terminates. If an entity's QSub election 
terminates, it may not use the EIN of the parent S corporation after the 
termination. If the entity had an EIN prior to becoming a QSub or 
obtained an EIN while it was a QSub in accordance with regulations or 
other published guidance, the entity must use that EIN. If the entity 
had no EIN, it must obtain an EIN upon termination of the QSub election.
    (4) Effective date. The rules of this paragraph (i) apply on January 
20, 2000.
    (j) Effective date--(1) General rule. Except as otherwise provided 
in this paragraph (j), the provisions of this section are generally 
effective for information that must be furnished after April 15, 1974. 
However, the provisions relating to IRS individual taxpayer 
identification numbers apply on and after May 29, 1996. An application 
for an IRS individual taxpayer identification number (Form W-7) may be 
filed at any time on or after July 1, 1996.
    (2) Special rules--(i) Employer identification number of an estate. 
The requirement under paragraph (a)(1)(ii)(C) of this section that an 
estate obtain an employer identification number applies on and after 
January 1, 1984.
    (ii) Taxpayer identifying numbers of certain foreign persons. The 
requirement under paragraph (b)(2)(iv) of this section that certain 
foreign persons furnish a TIN on a return of tax is effective for tax 
returns filed after December 31, 1996.
    (iii) Paragraphs (a)(1)(i), (a)(1)(ii) introductory text, 
(a)(1)(ii)(A), and (a)(1)(ii)(B) of this section apply to income tax 
returns due (without regard to extensions) on or after April 15, 1998.

[T.D. 7306, 39 FR 9946, Mar. 15, 1974 as amended by T.D. 7670, 45 FR 
6932, Jan. 31, 1980; T.D. 7796, 46 FR 57482, Nov. 24, 1981; T.D. 8633, 
60 FR 66090, Dec. 21, 1995; T.D. 8637, 60 FR 66134, Dec. 21, 1995; T.D. 
8671, 61 FR 26790, May 29, 1996; 61 FR 33657, June 28, 1996; T.D. 8697, 
61 FR 66588, Dec. 18, 1996; T.D. 8717, 62 FR 25502, May 9, 1997; T.D. 
8734, 62 FR 53494, Oct. 14, 1997; T.D. 8739, 62 FR 62520, Nov. 24, 1997; 
T.D. 8739, 63 FR 13124, Mar. 18, 1998; T.D. 8839, 64 FR 51242, Sept. 22, 
1999; T.D. 8844, 64 FR 66583, Nov. 29, 1999; T.D. 8869, 65 FR 3856, Jan. 
25, 2000]

    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. By T.D. 8804, 63 FR 72183, Dec. 31, 1998 the effectiveness of the 
amendements to Sec. 301.6109-1 was delayed until Jan. 1, 2000. By T.D. 
8856, 64 FR 73408, Dec 30, 1999 the effectiveness of the amendements to 
Sec. 301.6109-1 was delayed until Jan. 1, 2001. For the convenience of 
the user, the superseded text is set forth as follows:

Sec. 301.6109-1  Identifying numbers.

    (b) * * * 
    (2) * * * 

[[Page 87]]

    (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 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 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. 301.6109-2  Authority of the Secretary of Agriculture to collect employer identification numbers for purposes of the Food Stamp Act of 1977.

    (a) In general. The Secretary of Agriculture may require each 
applicant retail food store or wholesale food concern to furnish its 
employer identification number in connection with the administration of 
section 9 of the Food Stamp Act of 1977 (7 U.S.C. 2018) (relating to the 
determination of the qualifications of applicants under the Food Stamp 
Act).
    (b) Limited purpose. The Secretary of Agriculture may have access to 
the employer identification numbers obtained pursuant to paragraph (a) 
of this section, but only for the purpose of establishing and 
maintaining a list of the names and employer identification numbers of 
the stores and concerns for use in determining those applicants who have 
been previously sanctioned or convicted under section 12 or 15 of the 
Food Stamp Act of 1977 (7 U.S.C. 2021 or 2024). The Secretary of 
Agriculture may use this determination of sanctions and convictions in 
administering section 9 of the Food Stamp Act of 1977.
    (c) Sharing of information--(1) Sharing permitted with certain 
United States agencies and instrumentalities. The Secretary of 
Agriculture may share the information contained in the list described in 
paragraph (b) of this section with any other agency or instrumentality 
of the United States that otherwise has access to employer 
identification numbers, but only to the extent the Secretary of 
Agriculture determines sharing such information will assist in verifying 
and matching that information against information maintained by the 
other agency or instrumentality.
    (2) Restrictions on the use of shared information. The information 
shared by the Secretary of Agriculture pursuant to this section may be 
used by any other agency or instrumentality of the United States only 
for the purpose of effective administration and enforcement of the Food 
Stamp Act of 1977 or for the purpose of investigation of violations of 
other Federal laws or enforcement of those laws.
    (d) Safeguards--(1) Restrictions on access to employer 
identification numbers by individuals--(i) Numbers maintained by the 
Secretary of Agriculture. The individuals who are permitted access to 
employer identification numbers obtained pursuant to paragraph (a) of 
this section and maintained by the Secretary of Agriculture are officers 
and employees of the United States whose duties or responsibilities 
require access to such employer identification numbers 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

[[Page 88]]

other than the Department of Agriculture are officers and employees of 
the United States whose duties or responsibilities require access to 
such employer identification numbers for the purpose of effective 
administration and enforcement of the Food Stamp Act of 1977 or for the 
purpose of investigation of violations of other Federal laws or 
enforcement of those laws.
    (2) Other safeguards. The Secretary of Agriculture, and the head of 
any other agency or instrumentality referred to in paragraph (c) of this 
section, must provide for any additional safeguards that the Secretary 
of the Treasury determines to be necessary or appropriate to protect the 
confidentiality of the employer identification numbers. The Secretary of 
Agriculture, and the head of any other agency or instrumentality 
referred to in paragraph (c) of this section, may also provide for any 
additional safeguards to protect the confidentiality of employer 
identification numbers, provided these safeguards are consistent with 
safeguards determined by the Secretary of the Treasury to be necessary 
or appropriate.
    (e) Confidentiality and disclosure of employer identification 
numbers. Employer identification numbers obtained pursuant to paragraph 
(a) or (c) of this section are confidential. No officer or employee of 
the United States who has or had access to any such employer 
identification number may disclose that number in any manner to an 
individual not described in paragraph (d) of this section. For purposes 
of this paragraph (e), officer or employee includes a former officer or 
employee.
    (f) Sanctions--(1) Unauthorized, willful disclosure of employer 
identification numbers. Sections 7213(a) (1), (2), and (3) apply with 
respect to the unauthorized, willful disclosure to any person of 
employer identification numbers that are maintained pursuant to this 
section by the Secretary of Agriculture, or any other agency or 
instrumentality with which information is shared pursuant to paragraph 
(c) of this section, in the same manner and to the same extent as 
sections 7213(a) (1), (2), and (3) apply with respect to unauthorized 
disclosures of returns and return information described in those 
sections.
    (2) Willful solicitation of employer identification numbers. Section 
7213(a)(4) applies with respect to the willful offer of any item of 
material value in exchange for any employer identification number 
maintained pursuant to this section by the Secretary of Agriculture, or 
any other agency or instrumentality with which information is shared 
pursuant to paragraph (c) of this section, in the same manner and to the 
same extent as section 7213(a)(4) applies with respect to offers (in 
exchange for any return or return information) described in that 
section.
    (g) Delegation. All references in this section to the Secretary of 
Agriculture are references to the Secretary of Agriculture or his or her 
delegate.
    (h) Effective date. Except as provided in the following sentence, 
this section is effective on February 1, 1992. Any provisions relating 
to the sharing of information by the Secretary of Agriculture with any 
other agency or instrumentality of the United States are effective on 
August 15, 1994.

[T.D. 8369, 56 FR 49685, Oct. 1, 1991, as amended by T.D. 8621, 60 FR 
51725, Oct. 3, 1995; 61 FR 1035, Jan. 11, 1996]



Sec. 301.6109-3  IRS adoption taxpayer identification numbers.

    (a) In general--(1) Definition. An IRS adoption taxpayer 
identification number (ATIN) is a temporary taxpayer identifying number 
assigned by the Internal Revenue Service (IRS) to a child (other than an 
alien individual as defined in Sec. 301.6109-1(d)(3)(i)) who has been 
placed, by an authorized placement agency, in the household of a 
prospective adoptive parent for legal adoption. An ATIN is assigned to 
the child upon application for use in connection with filing 
requirements under the Internal Revenue Code and the regulations 
thereunder. When an adoption becomes final, the adoptive parent must 
apply for a social security number for the child. After the social 
security number is assigned, that number, rather than the ATIN, must be 
used as the child's taxpayer identification number on all returns, 
statements, or other documents required under the Internal Revenue Code 
and the regulations thereunder.

[[Page 89]]

    (2) Expiration and extension. An ATIN automatically expires two 
years after the number is assigned. However, upon request, the IRS may 
grant an extension if the IRS determines the extension is warranted.
    (b) Definitions. For purposes of this section--
    (1) Authorized placement agency has the same meaning as in 
Sec. 1.152-2(c) of this chapter;
    (2) Prospective adoptive child or child means a child who has not 
been adopted, but who has been placed in the household of a prospective 
adoptive parent for legal adoption by an authorized placement agency; 
and
    (3) Prospective adoptive parent or parent means an individual in 
whose household a prospective adoptive child is placed by an authorized 
placement agency for legal adoption.
    (c) General rule for obtaining a number--(1) Who may apply. A 
prospective adoptive parent may apply for an ATIN for a child if--
    (i) The prospective adoptive parent is eligible to claim a personal 
exemption under section 151 with respect to the child;
    (ii) An authorized placement agency places the child with the 
prospective adoptive parent for legal adoption;
    (iii) The Social Security Administration will not process an 
application for an SSN by the prospective adoptive parent on behalf of 
the child (for example, because the adoption is not final); and
    (iv) The prospective adoptive parent has used all reasonable means 
to obtain the child's assigned social security number, if any, but has 
been unsuccessful in obtaining this number (for example, because the 
biological parent who obtained the number is not legally required to 
disclose the number to the prospective adoptive parent).
    (2) Procedure for obtaining an ATIN. If the requirements of 
paragraph (c)(1) of this section are satisfied, the prospective adoptive 
parent may apply for an ATIN for a child on Form W-7A, Application for 
Taxpayer Identification Number for Pending Adoptions (or such other form 
as may be prescribed by the IRS). An application for an ATIN should be 
made far enough in advance of the first intended use of the ATIN to 
permit issuance of the ATIN in time for such use. An application for an 
ATIN must include the information required by the form and accompanying 
instructions, including the name and address of each prospective 
adoptive parent and the child's name and date of birth. In addition, the 
application must include such documentary evidence as the IRS may 
prescribe to establish that a child was placed in the prospective 
adoptive parent's household by an authorized placement agency for legal 
adoption. Examples of acceptable documentary evidence establishing 
placement for legal adoption by an authorized placement agency may 
include--
    (i) A copy of a placement agreement entered into between the 
prospective adoptive parent and an authorized placement agency;
    (ii) An affidavit or letter signed by the adoption attorney or 
government official who placed the child for legal adoption pursuant to 
state law;
    (iii) A document authorizing the release of a newborn child from a 
hospital to a prospective adoptive parent for adoption; and
    (iv) A court document ordering or approving the placement of a child 
for adoption.
    (d) Effective date. The provisions of this section apply to income 
tax returns due (without regard to extension) on or after April 15, 
1998.

[T.D. 8839, 64 FR 51242, Sept. 22, 1999]



Sec. 301.6110-1  Public inspection of written determinations and background file documents.

    (a) General rule. Except as provided in Sec. 301.6110-3, relating to 
deletion of certain information, Sec. 301.6110-5(b), relating to actions 
to restrain disclosure, 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

[[Page 90]]

31, 1976, shall be open to public inspection in the places provided in 
paragraph (c)(1) of this section. The text of any written determination 
issued pursuant to a request postmarked or hand delivered before 
November 1, 1976, shall be open to public inspection pursuant to section 
6110(h) and Sec. 301.6110-6, when funds are appropriated by Congress for 
such purpose. The procedures and rules set forth in Secs. 301.6110-1 
through 301.6110-5 and 301.6110-7 do not apply to written determinations 
issued pursuant to requests postmarked or hand delivered before November 
1, 1976, unless Sec. 301.6110-6 states otherwise. There shall also be 
open to public inspection in each place of public inspection an index to 
the written determinations open or subject to inspection at such place. 
Each such index shall be arranged by section of the Internal Revenue 
Code, related statute, or tax treaty and by subject matter description 
with such section in such manner as the Commissioner may from time to 
time provide. The Commissioner shall not be required to make any written 
determination or background file document open to public inspection 
pursuant to section 6110 or refrain from disclosure of any such 
documents or any information therein, except as provided by section 6110 
or with respect to a discovery order made in connection with a judicial 
proceeding. The provisions of section 6110 shall not apply to matters 
for which the determination of whether public inspection should occur is 
made pursuant to section 6104. Matters within the ambit of section 6104 
include: Any application filed with the Internal Revenue Service with 
respect to the qualification or exempt status of an organization, plan, 
or account described in section 6104(a)(1), whether the plan or account 
has more than 25 or less than 26 participants; any document issued by 
the Internal Revenue Service in which the qualification or exempt status 
of an organization, plan, or account described in section 6104 (a)(1) is 
granted, denied or revoked or the portion of any document in which 
technical advice with respect thereto is given to a district director; 
any application filed, and any document issued by the Internal Revenue 
Service, with respect to the qualification or status of master, 
prototype, and pattern employee plans; the portion of any document 
issued by the Internal Revenue Service in which is discussed the effect 
on the qualification or exempt status of an organization, plan, or 
account described in section 6104(a)(1) of proposed transactions by such 
organization, plan, or account; and any document issued by the Internal 
Revenue Service in which is discussed the qualification or status of an 
organization described in section 509(a) or 4942(j)(3), but not 
including any document issued to nonexempt charitable trusts described 
in section 4947(a)(1).
    (b) Items that may be inspected only under certain circumstances--
(1) Background file documents. A background file document (as such term 
is defined in Sec. 301.6110-2(g)) relating to a particular written 
determination issued pursuant to a request postmarked or hand delivered 
after October 31, 1976, shall not be subject to inspection until such 
written determination is open to public inspection or available for 
inspection pursuant to paragraph (b) (2) or (3) of this section, and 
then only if a written request pursuant to paragraph (c)(4) of this 
section is made for inspection of such background file document. 
Background file documents relating to written determinations issued 
pursuant to requests postmarked or hand delivered before November 1, 
1976, shall be subject to inspection pursuant to section 6110 (h) and 
Sec. 301.6110-6, when funds are appropriated by Congress for such 
purpose. The version of the background file document which is available 
for inspection shall be the version originally made available for 
inspection, as modified by any additional disclosure pursuant to section 
6110(d)(3) and (f)(4).
    (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

[[Page 91]]

all actions relating to such investigation or assessment are completed 
and then only if a written request pursuant to paragraph (c)(4) of this 
section is made for inspection of such technical advice memorandum. A 
``civil fraud investigation'' is any administrative step or judicial 
proceeding in which an issue for determination is whether the 
Commissioner should impose additional tax pursuant to section 6653(b). A 
``criminal investigation'' is any administrative step or judicial 
proceeding in which an issue for determination is whether a taxpayer 
should be charged with or is guility of criminal conduct. An action 
relating to a civil fraud or criminal investigation includes any such 
administrative step or judicial proceeding, the review of subsequent 
related activities and related returns of the taxpayer or related 
taxpayers, and any other administrative step or judicial procedure or 
proceeding or appellate process that is initiated as a consequence of 
the facts and circumstances disclosed by such investigation. An action 
relating to a jeopardy or termination assessment includes any 
administrative step or judicial proceeding that is initiated to 
determine whether to make such assessment, that is brought pursuant to 
section 7429 to determine the appropriateness or reasonableness of such 
assessment, or that is brought to resolve the legal consequences of the 
tax status or liability issue underlying the making of such assessment. 
Any action relating to a civil fraud or criminal investigation, a 
jeopardy assessment, or a termination assessment is not completed until 
all available administrative steps and judicial proceedings and 
remedies, including appeals, have been completed.
    (3) Written determinations with respect to adoption of or change in 
certain accounting or funding periods and methods. Any general written 
determination (as defined in Sec. 301.6110-2(c) that relates solely to 
approval of any adoption of or change in--
    (i) The funding method or plan year of a plan under section 412.
    (ii) A taxpayer's annual accounting period under section 442.
    (iii) A taxpayer's method of accounting under section 446(e), or
    (iv) A partnership's or partner's taxable year under section 706

shall not be subject to inspection until such written determination 
would, but for this paragraph (b)(3), be open to public inspection 
pursuant to Sec. 301.6110-5(c) and then only if a written request 
pursuant to paragraph (c)(4) of this section is made for inspection of 
such written determination.
    (c) Procecure for public inspection-- (1) Place of public 
inspection. The text of any ruling (as such term is defined in 
Sec. 301.6110-2(d) or technical advice memorandum that is open to public 
inspection pursuant to section 6110 shall be located in the National 
Office Reading Room. The text of any determination letter (as such term 
is defined in Sec. 301.6110-2(e)) that is open to public inspection 
pursuant to section 6110 shall be located in the Reading Room of the 
Regional Office in which is located the district office that issued such 
determination letter. Inspection of any written determination subject to 
inspection only upon written request shall be requested from the 
National Office Reading Room. Inspection of any background file document 
shall be requested only from the reading room in which the related 
written determination is either open to public inspection or subject to 
inspection upon written request. The locations and mailing addresses of 
the reading rooms are set forth in Sec. 601.702(b)(3)(ii) of this 
chapter.
    (2) Time and manner of public inspection. The inspection authorized 
by section 6110 will be allowed only in the place provided for such 
inspection in the presence of an Internal Revenue officer or employee 
and only during the regular hours of business of the Internal Revenue 
Service office in which the 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

[[Page 92]]

made manually. Copies of any material open to public inspection or 
subject to inspection upon written request will be furnished by the 
Internal Revenue Service to any person making requests therefor pursuant 
to paragraph (c)(4) of this section. If made at the time of inspection 
the request for copies need not be in writing, unless the material is 
not immediately available for copying. The Commissioner may prescribe 
fees pursuant to section 6110(j) for furnishing copies of material open 
or subject to inspection.
    (4) Requests. Any request for copies of written determinations, for 
inspection of general written determinations relating to accounting or 
funding periods and methods or technical advice memoranda involving 
civil fraud and criminal investigations, and jeopardy and termination 
assessments, for inspection or copies of background file documents, and 
for copies of the index shall be submitted to the reading room in which 
is located the requested material. If made in person, the request may be 
submitted to the internal revenue employee supervising the reading room. 
The request shall contain:
    (i) Authorization for the Internal Revenue Service to charge the 
person making such request for making copies, searching for material, 
and making deletions therefrom;
    (ii) The maximum amount of charges which the Internal Revenue 
Service may incur without further authorization from the person making 
such request;
    (iii) With respect to requests for inspection and copies of 
background file documents, the file number of the written determination 
to which such background file document relates and a specific 
identification of the nature or type of the background file document 
requested;
    (iv) With respect to requests for inspections of general written 
determinations relating to accounting or funding periods and methods, 
the day, week, or month of issuance of such written determination, and 
the applicable category as selected from a special summary listing of 
categories prepared by the Internal Revenue Service;
    (v) With respect to requests for copies of written determinations, 
the file number of the written determination to be copied, which can be 
ascertained in the reading room or from the index;
    (vi) With respect to requests for copies of portions of the index, 
the section of the Internal Revenue Code, related statute or tax treaty 
in which the person making such request is interested;
    (vii) With respect to material which is to be mailed, the name, 
address, and telephone number of the person making such request and the 
address to which copies of the requested material should be sent; and
    (viii) Such other information as the Internal Revenue Service may 
from time to time require in its operation of reading rooms.

[T.D. 7524, 42 FR 63412, Dec. 16, 1977]



Sec. 301.6110-2  Meaning of terms.

    (a) Written determination. A ``written determination'' is a ruling, 
a determination letter, or a technical advice memorandum, as such terms 
are defined in paragraphs (d), (e), and (f) of this section, 
respectively. Notwithstanding paragraphs (d) through (f) of this 
section, a written determination does not include for example, opinion 
letters (as defined in Sec. 601.201(a)(4) of this chapter), information 
letters (as defined in Sec. 601.201(a)(5) of this chapter), technical 
information responses, technical assistance memoranda, notices of 
deficiency, reports on claims for refund, Internal Revenue Service 
decisions to accept taxpayers' offers in compromise, earnings and 
profits determinations, or documents issued by the Internal Revenue 
Service in the course of tax administration that are not disclosed to 
the persons to whose tax returns or tax liability the documents relate.
    (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

[[Page 93]]

written determination that is not a reference written determination.
    (d) Ruling. A ``ruling'' is a written statement issued by the 
National Office to a taxpayer or to the taxpayer's authorized 
representative (as such term is defined in Sec. 601.201(e)(7) of this 
chapter) on behalf of the taxpayer, that interprets and applies tax laws 
to a specific set of facts. A ruling generally recites the relevant 
facts, sets forth the applicable provisions of law, and shows the 
application of the law to the facts.
    (e) Determination letter. A ``determination letter'' is a written 
statement issued by a district director in response to a written inquiry 
by an individual or an organization that applies principles and 
precedents previously announced by the National Office to the particular 
facts involved.
    (f) Technical advice memorandum. A ``technical advice memorandum'' 
is a written statement issued by the National Office to, and adopted by, 
a district director in connection with the examination of a taxpayer's 
return or consideration of a taxpayer's claim for refund or credit. A 
technical advice memorandum generally recites the relevant facts, sets 
forth the applicable law, and states a legal conclusion.
    (g) Background file document--(1) General rule. A ``background file 
document'' is--(i) The request for a written determination.
    (ii) Any written material submitted in support of such request by 
the person by whom or on whose behalf the request for a written 
determination is made,
    (iii) Any written communication, or memorandum of a meeting, 
telephone communication, or other contact, between employees of the 
Internal Revenue Service or Office of its Chief Counsel and persons 
outside the Internal Revenue Service in connection with such request or 
written determination which is received prior to the issuance (as such 
term is defined in paragraph (h) of this section) of the written 
determination, but not including communications described in paragraph 
(g)(2) of this section, and
    (iv) Any subsequent communication between the National Office and a 
district director concerning the factual circumstances underlying the 
request for a technical advice memorandum, or concerning a request by 
the district director for reconsideration by the National Office of a 
proposed technical advice memorandum.
    (2) Limitations. Notwithstanding paragraph (g)(1) of this section, a 
``background file document'' shall not include any--
    (i) Communication between the Department of Justice and the Internal 
Revenue Service or the Office of its Chief Counsel relating to any 
pending civil or criminal case or investigation,
    (ii) Communication between Internal Revenue Service employees and 
employees of the Office of its Chief Counsel,
    (iii) Internal memorandum or attorney work product prepared by the 
Internal Revenue Service or Office of its Chief Counsel which relates to 
the development of the conclusion of the Internal Revenue Service in a 
written determination, including, with respect to a technical advice 
memorandum, the Transmittal Memorandum, as defined in 
Sec. 601.105(b)(5)(vi)(c) of this chapter,
    (iv) Correspondence or any portion of correspondence between the 
Internal Revenue Service and any person relating solely to the making of 
or extent of deletions pursuant to section 6110(c), or a request 
pursuant to section 6110(g) (3) and (4) for postponement of the time at 
which a written determination is made open or subject to inspection,
    (v) Material relating to (A) a request for a ruling or determination 
letter that is withdrawn prior to issuance thereof or that the Internal 
Revenue Service declines to answer, (B) a request for technical advice 
that the National Office declines to answer, or (C) 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

[[Page 94]]

memorandum occurs upon the adoption of the technical advice memorandum 
by the district director.
    (i) Person to whom written determination pertains. A ``person to 
whom a written determination pertains'' is the person by whom a ruling 
or determination letter is requested, but if requested by an authorized 
representative, the person on whose behalf the request is made. With 
respect to a technical advice memorandum, a ``person to whom a written 
determination pertains'' is the taxpayer whose return is being examined 
or whose claim for refund or credit is being considered.
    (j) Person to whom a background file document relates. A ``person to 
whom a background file document relates'' is the person to whom the 
related written determination pertains, as such term is defined in 
paragraph (i) of this section.
    (k) Person who has a direct interest in maintaining confidentiality. 
A ``person who has a direct interest in maintaining the confidentiality 
of a written determination'' is any person whose name and address is 
listed in the request for such written determination, as required by 
Sec. 601.201(e)(2) of this chapter. A ``person who has a direct interest 
in maintaining the confidentiality of a background file document'' is 
any person whose name and address is in such background file document, 
or who has a direct interest in maintaining the confidentiality of the 
written determination to which such background file document relates.
    (l) Successor in interest. A ``successor in interest'' to any person 
to whom a written determination pertains or background file document 
relates is any person who acquires the rights and assumes the 
liabilities of such person with respect to the transaction which was the 
subject matter of the written determination, provided that the successor 
in interest notifies the Commissioner with respect to the succession in 
interest.

[T.D. 7524, 42 FR 63413, Dec. 16, 1977]



Sec. 301.6110-3  Deletion of certain information in written determinations open to public inspection.

    (a) Information subject to deletion. There shall be deleted from the 
text of any written determination open to public inspection or subject 
to inspection upon written request and background file document subject 
to inspection upon written request pursuant to section 6110 the 
following types of information:
    (1) Identifying details. (i) The names, addresses, and identifying 
numbers (including telephone, license, social security, employer 
identification, credit card, and selective service numbers) of any 
person, other than the identifying details of a person who makes a 
third-party communication described in Sec. 301.6110-4(a), and
    (ii) Any other information that would permit a person generally 
knowledgeable with respect to the appropriate community to identify any 
person. The determination of whether information would permit 
identification of a particular person will be made in view of 
information available to the public at the time the written 
determination or background file document is made open or subject to 
inspection and in view of information that will subsequently become 
available, provided the Internal Revenue Service is made aware of such 
information and the potential that such information may identify any 
person. The ``appropriate community'' is that group of persons who would 
be able to associate a particular person with a category of transactions 
one of which is described in the written determination or background 
file document. The appropriate community may vary according to the 
nature of the transaction which is the subject of the written 
determination. For example, if a steel company proposes to enter a 
transaction involving the purchase and installation of blast 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

[[Page 95]]

doing business within the geographical locale of the land to be 
purchased.
    (2) Information concerning national defense and foreign policy. 
Information specifically authorized under criteria established by an 
Executive order to be kept secret in the interest of national defense or 
foreign policy and which is in fact properly classified pursuant to such 
order.
    (3) Information exempted by other statutes and agency rules. 
Information specifically exempted from disclosure by any statute other 
than the Internal Revenue Code of 1954 and 5 U.S.C. 552 which is 
applicable to the Internal Revenue Service, and any information obtained 
by the Internal Revenue Service solely and directly from another Federal 
agency subject to a nondisclosure rule of such agency. Deletion of 
information shall not be made solely because the same information was 
submitted to another Federal agency subject to a nondisclosure rule 
applicable only to such agency.
    (4) Trade secrets and privileged or confidential commercial or 
financial information--(i) Deletions to be made. Any--
    (A) Trade secrets, and
    (B) Commercial or financial information obtained from any person 
which, despite the fact that identifying details are deleted pursuant to 
paragraph (a)(1) of this section, nonetheless remains privileged or 
confidential.
    (ii) Trade secret. For purposes of paragraph (a)(4)(i)(A) of this 
section, a trade secret may consist of any formula, pattern, device or 
compilation of information that is used in one's business, and that 
gives one an opportunity to obtain an advantage over competitors who do 
not know or use it. It may be a formula for a chemical compound, a 
process of manufacturing, treating or preserving materials, a pattern 
for a machine or other device, or a list of customers. The subject of a 
trade secret must be secret, that is, it must not be of public knowledge 
or of a general knowledge in the trade or business. Novelty, in the 
patent law sense, is not required for a trade secret.
    (iii) Privileged or confidential. For purposes of paragraph 
(a)(4)(i)(B) of this section, information is privileged or confidential 
if from examination of the request and supporting documents relating to 
a written determination, and in consideration of the fact that 
identifying details are deleted pursuant to paragraph (a)(1) of this 
section, it is determined that disclosure of such information would 
cause substantial harm to the competitive position of any person. For 
example, while determining whether disclosure of certain information 
would cause substantial harm to X's competitive position, the Internal 
Revenue Service becomes aware that his information has previously been 
disclosed to the public. In this situation, the Internal Revenue Service 
will not agree with X's argument that disclosure of the information 
would cause substantial harm to X's competitive position. An example of 
information previously disclosed to the public is financial information 
contained in the published annual reports of widely held public 
corporations.
    (5) Information within the ambit of personal privacy. Information 
the disclosure of which would constitute a clearly unwarranted invasion 
of personal privacy, despite the fact that identifying details are 
deleted pursuant to paragraph (a)(1) of this section. Personal privacy 
information encompasses embarrassing or sensitive information that a 
reasonable person would not reveal to the public under ordinary 
circumstances. Matters of personal privacy include, but are not limited 
to, details not yet public of a pending divorce, medical treatment for 
physical or mental disease or injury, adoption of a child, the amount of 
a gift, and political preferences. A clearly unwarranted invasion of 
personal privacy exists if from analysis of information submitted in 
support of the request for a written 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

[[Page 96]]

of an agency responsible for the regulation or supervision of financial 
institutions concerning examination, operation or condition of a 
financial institution, disclosure of which would damage the standing of 
such financial institution.
    (7) Information concerning wells. Geological or geophysical 
information and data, including maps, concerning wells.
    (b) Manner of deletions. Whenever information, which is not to be 
disclosed pursuant to section 6110(c), is deleted from the text of a 
written determination or background file document, substitutions 
therefore shall be made to the extent feasible if necessary for an 
understanding of the legal analysis developed in such written 
determination or to make the disclosed text of a background file 
document comprehensible. Wherever any material is deleted, an indication 
of such deletion, and of any substitution therefor, shall be made in 
such manner as the Commissioner deems appropriate.
    (c) Limitations on the making of deletions. Any portion of a written 
determination or background file document that has been deleted will be 
restored to the text thereof--
    (1) If pursuant to section 6110(d)(3) or (f)(4)(A) a court orders 
disclosure of such portion, or
    (2) If pursuant, to Sec. 301.6110-5(d)(1) an agreement is reached to 
disclose information.

[T.D. 7524, 42 FR 63414, Dec. 16, 1977]



Sec. 301.6110-4  Communications from third parties.

    (a) General rule. Except as provided in paragraph (b) of this 
section a record will be made of any communication, whether written, by 
telephone, at a meeting, or otherwise, received by the Internal Revenue 
Service or Office of its Chief Counsel prior to the issuance of written 
determination from any person other than a person to whom the written 
determination pertains or the authorized representative of such person. 
This rule applies to any communication concerning such written 
determination, any communication concerning the request for such written 
determination, or any communication concerning other matters involving 
such written determination. A notation that such communication has been 
made shall be placed on such written determination when it is made open 
to public inspection or available for inspection upon written request 
pursuant to Sec. 301.6110-5. The notation to be placed on a written 
determination shall consist of the date on which the communication was 
received and the category of the person making such communication, for 
example, Congressional, Department of Commerce, Treasury, trade 
association, White House, educational institution. Any person may 
request the Internal Revenue Service to disclose the name of any person 
about whom a notation has been made pursuant to this paragraph.
    (b) Limitations. The provisions of paragraph (a) of this section 
shall not apply to communications received by the Internal Revenue 
Service from employee of the Internal Revenue Service or Office of its 
Chief Counsel, from the Chief of Staff of the Joint Committee on 
Internal Revenue Taxation, from the Department of Justice with respect 
to any pending civil or criminal case or investigation, or from another 
government agency in response to a request made by the Internal Revenue 
Service to such agency for assistance involving the expertise of such 
agency.
    (c) Action to obtain disclosure of identity of person to whom 
written determination pertains--(1) Creation of remedy. With respect to 
any written determination on which a notation has been placed pursuant 
to paragraph (a) of this section, any person may file a petition in the 
United States Tax Court or file a complaint in the United States 
District Court for the District of Columbia for an order requiring that 
the identity of any person to whom such written determination pertains 
be disclosed, but such petition or complaint must be filed within 36 
months of the date such written determination is made open or subject to 
inspection.
    (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

[[Page 97]]

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 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

[[Page 98]]

the administrative remedies described in Sec. 601.105(b)(5)(vi)(f) and 
Sec. 601.201(e)(16) of this chapter. No person about whom a third-party 
communication notation has been made pursuant to Sec. 301.6110-4(a) may 
pursue any administrative remedy for the purpose of restraining 
disclosure of the identity of such person where such identity appears 
with respect to the making of such third-party communication.
    (2) Judicial remedy. Except as provided in paragraph (b)(3) of this 
section, any person permitted to resort to administrative remedies 
pursuant to paragraph (b)(1) of this section may, if such person 
proposes any deletion not made pursuant to Sec. 301.6110-3 by the 
Commissioner, file a petition in the United States Tax Court pursuant to 
section 6110(f)(3) for a determination with respect to such proposed 
deletion. If appropriate, such petition may be filed anonymously. Any 
petition filed pursuant to section 6110(f)(3) must be filed within 60 
days after the date on which the Commissioner mails the notice of 
intention to disclose required by section 6110(f)(1).
    (3) Limitations on right to bring judicial actions. No petition 
shall be filed pursuant to section 6110(f)(3) unless the administrative 
remedies provided by paragraph (b)(1) of this section have been 
exhausted. However, if the petitioner has responded within the 
prescribed time period to the notice pursuant to section 6110(f)(1) of 
intention to disclose, but has not received the final administrative 
conclusion of the Internal Revenue Service within 50 days after the date 
on which the Commissioner mails the notice of intention to disclose 
required by section 6110(f)(1), the petitioner may file a petition 
pursuant to section 6110(f)(3). No judicial action with respect to any 
written determination or background file document shall be commenced 
pursuant to section 6110(f)(3) by any person who has received a notice 
with respect to such written determination or background file document 
pursuant to paragraph (b)(4) of this section.
    (4) Required notice. If a proceeding is commenced pursuant to 
section 6110(f)(3) with respect to any written determination or 
background file document, the Secretary shall send notice of the 
commencement of such proceeding to any person to whom such written 
determination pertains or to whom such background file document relates. 
No notice is required to be sent to persons who have filed the petition 
that commenced the proceeding pursuant to section 6110(f)(3) with 
respect to such written determination or background file document. The 
notice shall be sent, by registered or certified mail, to the last known 
address of the persons described in this paragraph (b)(4) within 15 days 
after notice of the petition filed pursuant to section 6110(f)(3) is 
served on the Secretary.
    (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

[[Page 99]]

file document be made open to or available for inspection earlier than 
75 days after the date on which the Commissioner mails the notice of 
intention to disclose required by section 6110(f)(1) and paragraph 
(a)(1) of this section. Such 30-day period may be extended for such time 
as the court finds necessary to allow the Commissioner to comply with 
its decision. Any portion of a written determination or background file 
document which a court orders open to public inspection or subject to 
inspection upon written request pursuant to section 6110(f)(4) or 
disclosed pursuant to section 6110(d)(3) shall be made open or subject 
to inspection or disclosed within such time as the court provides.
    (ii) Postponement based on incomplete status of underlying 
transaction--(A) Initial period not to exceed 90 days. The time period 
set forth in paragraph (c)(1) of this section within which a written 
determination shall be made open to public inspection or available for 
inspection upon written request shall be extended, upon the written 
request of the person to whom such written determination pertains or the 
authorized representative of such person, until 15 days after the date 
on which the transaction set forth in the written determination is 
scheduled to be completed, but such day shall be no later than 180 days 
after the date on which the Commissioner mails the notice of intention 
to disclose.
    (B) Additional period. The time period determined pursuant to 
paragraph (c)(2)(ii)(A) of this section shall be further extended upon 
an additional written request, if the Commissioner determines from the 
information contained in such request that good cause exists to warrant 
such extension. This further extension shall be until 15 days after the 
date on which the transaction set forth in the written determination is 
expected to be completed, but such day shall be no later than 360 days 
after the date on which the Commissioner mails the notice of intention 
to disclose. The good cause required by this paragraph (B) exists if the 
person requesting the delay in inspection demonstrates to the 
satisfaction of the Commissioner that it is likely that the lack of such 
extension will cause interference with consummation of the pending 
transaction.
    (C) Written request for extension. The written request for extension 
of the time when a written determination is to be made open to public 
inspection or available for inspection upon written request shall set 
forth the date on which it is expected that the underlying transaction 
will be completed, and, with respect to the additional extension 
described in paragraph (c)(2)(ii)(B) of this section, set forth the 
reason for requesting such extension. A request for extension of time 
may not be submitted until the notice of intention to disclose is mailed 
and must be received by the Internal Revenue Service office which issued 
such written determination no later than--
    (1) In the case of the initial extension, 60 days after the date on 
which the Commissioner mails the notice of intention to disclose, or
    (2) In the case of the additional extension, 15 days before the day 
on which, for purposes of paragraph (c)(2)(ii)(A) of this section, the 
transaction set forth in the written determination was expected to have 
been completed.
    (D) Notice and determination of actual completion. If an extension 
of time for inspection has been granted, and the transaction is 
completed prior to the day on which it was expected to have been 
completed, the Internal Revenue 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

[[Page 100]]

Revenue Service, the written determination shall be made open to public 
inspection or available for inspection upon written request on the 
earlier of (1) the day which is 30 days after the Commissioner 
ascertains that the transaction is completed sooner than has been 
expected, or (2) the day on which the written determination was 
scheduled to be made open to public inspection or available for 
inspection upon written request pursuant to paragraph (c)(2)(ii) of this 
section.
    (d) Actions to obtain additional disclosure--(1) Administrative 
remedies. Under section 6110(f)(4) any person may seek to obtain 
additional disclosure of information contained in any written 
determination or background file document that has been made open or 
subject to inspection. A request for such additional disclosure shall be 
submitted to the Internal Revenue Service office which issued such 
written determination, or to which the request for inspection of such 
background file document has been submitted pursuant to Sec. 301.6110-
1(c)(4), and must contain the file number of the written determination 
or a description of the background file document (including the file 
number of the related written determination), the deleted information 
which in the opinion of such person should be open or subject to 
inspection, and the basis for such opinion. If the Internal Revenue 
Service determines that the request constitutes a request for disclosure 
of the name, address, or the identifying numbers described in 
Sec. 301.6110-3(a)(1)(i) of any person, it shall within a reasonable 
time notify the person requesting such disclosure that disclosure will 
not be made. If the Internal Revenue Service determines that the request 
or any portion thereof constitutes a request for disclosure of 
information other than the name, address, or the identifying numbers 
described in Sec. 301.6110-3(a)(1)(i) of any person, it shall send a 
notice that such additional disclosure has been requested to any person 
to whom the written determination pertains or background file document 
relates, and to all persons who are identified by name and address in 
the written determination or background file document. Notice that such 
persons have been contacted shall be sent to the person requesting the 
additional disclosure. The notice that additional disclosure has been 
requested shall state that the Internal Revenue Service has determined 
that additional disclosure of information other than the name, address, 
or the identifying numbers described in Sec. 301.6110-3(a)(1)(i) of any 
person has been requested, inform the recipient of the notice that the 
person seeking the additional disclosure has the right under section 
6110(f)(4) to bring a judicial action to attempt to compel such 
disclosure, and request the recipient of the notice to reply within 20 
days by submitting a statement of whether or not the recipient of the 
notice agrees to the requested disclosure or portion thereof. If all 
persons to whom a notice is sent pursuant to this paragraph (d)(1) of 
this section agree to disclose the requested information or any portion 
thereof, the person seeking such disclosure will be so informed; the 
written determination or background file document shall be accordingly 
revised to disclose the information with respect to which an agreement 
to disclose has been reached. If any of the persons to whom a notice is 
sent pursuant to this paragraph (d)(1) of this section do not agree to 
the additional disclosure or do not respond to such notice, the Internal 
Revenue Service 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

[[Page 101]]

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 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.

[[Page 102]]

    (B) Background file documents relating to written determinations 
described in paragraph (a)(2) of this section.
    (ii) General written determinations issued before July 5, 1967. 
General written determinations issued before July 5, 1967 shall not be 
subject to inspection until all other written determinations issued in 
response to requests postmarked or hand delivered before November 1, 
1976 that are open to inspection under this section have been made open 
to public inspection, and then only if a written request pursuant to 
Sec. 301.6110-1(c)(4) is made for inspection of the written 
determination. In this regard, the request for inspection must also 
contain the section of the Internal Revenue Code in which the requester 
is interested and the dates of issuance of the written determinations.
    (b) Notice and time requirements, and actions to restrain 
disclosure--(1) Notice-- (i) General rule. Before a written 
determination is made open to public inspection and before a particular 
written determination is subject to inspection in response to the first 
written request therefor, the Commissioner shall publish in the Federal 
Register a notice that the written determination is to be made open or 
subject to inspection. Notices with respect to written determinations, 
other than those described in paragraph (a)(3)(ii) of this section, 
shall be published at the earliest practicable time after this 
regulation is adopted as a Treasury decision. Notices with respect to 
written determinations subject to inspection upon written request shall 
be published within a reasonable time after the receipt of the first 
written request for inspection thereof, but no sooner than the day as of 
which all other written determinations open to public inspection under 
this section have been made open to public inspection. Notices with 
respect to background file documents shall be sent in accordance with 
the rules in Sec. 301.6110-5(a) and will be mailed by the Internal 
Revenue Service to the most recent addresses of the persons to whom the 
background file document relates that are in the written determination 
file.
    (ii) Sequence of notices. Notices with respect to written 
determinations, other than general written determinations issued before 
July 5, 1967, shall be published in the following order. The first 
category is notices with respect to reference written determinations 
issued under the Internal Revenue Code of 1954. The second category is 
notices with respect to general written determinations issued after July 
4, 1967. The third category is notices with respect to reference written 
determinations issued under the Internal Revenue Code of 1939 or 
corresponding provisions of prior law. Within a category, the 
Commissioner may publish notices individually or for groups of written 
determinations arranged according to the jurisdictions of the ruling 
branches in the Office of the Assistant Commissioner (Technical) and the 
Assistant Commissioner (Employee Plans and Exempt Organizations), as the 
Commissioner may find reasonable. To the extent practicable, notices 
published individually shall be published in the reverse order of the 
issuance of the written determinations for which they are published, 
starting with the most recent written determination issued. To the 
extent practicable, each group shall consist of consecutively issued 
written determinations. Notices for groups shall be published, to the 
extent practicable, in the reverse order of the time period of issuance 
of the written 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

[[Page 103]]

6110(f)(4) and that someone might request inspection of a related 
background file document, and
    (E) State that any notice that must be mailed by the Internal 
Revenue Service will be sent to the most recent address of the person to 
whom the notice must be sent that is in the relevent written 
determination file.
    (2) Actions to restrain disclosure--(i) Information on written 
determinations described by notice. Any person may, within 15 days after 
the Commissioner publishes in the Federal Register a notice of intention 
to disclose a written determination under section 6110(h), request the 
Internal Revenue Service to provide certain information. This 
information includes whether any of the written determinations described 
by the notice is one that was issued to the person requesting this 
information. The Internal Revenue Service will also inform the person 
whether any of the written determinations described by the notice is one 
that was issued to a person with respect to whom the person requesting 
this information is a successor in interest executor or authorized 
representative. However, in order to do so, the Internal Revenue Service 
must be given the name and taxpayer identifying number of this other 
person and documentation of the relationship between that person and the 
person requesting the information. If the person requesting this 
information is a person to whom a written determination described by the 
notice pertains, or a successor in interest, executor, or authorized 
representative of that person, the Internal Revenue Service will also 
provide the person with a copy of the written determination on which is 
indicated the material that the Commissioner proposes to delete under 
section 6110(c) and any substitution proposed to be made therefor.
    (ii) Administrative remedies. Any person to whom a written 
determination described by the notice in the Federal Register pertains, 
and any successor in interest, executor or authorized representative of 
that person may pursue the administrative remedies described in this 
paragraph (b)(2)(ii). If after receiving the information described in 
paragraph (b)(2)(i) of this section, the person pursuing these 
administrative remedies desires to protest the disclosure of certain 
information in the written determination, that person must within 35 
days after the notice is published submit a written statement 
identifying those deletions not made by the Internal Revenue Service 
which the person believes should have been made. The person pursuing 
these administrative remedies must also submit a copy of the version of 
the written determination proposed to be open or subject to inspection 
on which that person indicates, by the use of brackets, the deletions 
which the person believes should have been made. The Internal Revenue 
Service shall, within 20 days after receipt of the response by the 
person pursuing these administrative remedies, mail to that person its 
final administrative conclusion with respect to the deletions to be 
made.
    (iii) Judicial remedy. Except as provided in paragraph (b)(2)(iv) of 
this section, any person permitted to resort to administrative remedies 
under paragraph (b)(2)(ii) of this section may, if that person proposed 
any deletion not made under section 6110(c) by the Commissioner, file a 
petition in the United States Tax Court under section 6110(h)(4) for a 
determination with respect to the proposed deletion. If appropriate, the 
petition may be filed anonymously. Any petition filed under section 
6110(h)(4) must be filed within 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.

[[Page 104]]

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 
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)

[[Page 105]]

Reference written determinations. The Internal Revenue Service shall not 
dispose of any reference written determinations or related background 
file documents. The Commissioner may reclassify reference written 
determinations as general written determinations if the classification 
as reference was erroneous or if the Commissioner determines that such 
written determination no longer has any significant reference value. 
Notwithstanding the preceding sentence, the Commissioner shall not 
classify as a general written determination any written determination 
which is determined to be the basis for a published revenue ruling 
unless such revenue ruling is obsoleted, revoked, superseded or 
otherwise held to have no effect.
    (2) General written determinations. The Internal Revenue Service may 
dispose of general written determinations and any background file 
document relating to such written determination pursuant to its 
established records disposition procedures. Disposition of a written 
determination shall not occur earlier than 3 years after the date on 
which such written determination is made open to public inspection or 
available for inspection upon written request. Disposition of a 
background file document shall not occur earlier than 3 years after the 
date on which the related written determination is made open to public 
inspection or available for inspection upon written request.
    (b) Precedential status of written determinations open to public 
inspection. A written determination may not be used or cited as 
precedent, but the rule set forth in this paragraph shall not apply to 
change the precedential status, if any, of written determinations issued 
with respect to taxes imposed by subtitle D of the Internal Revenue Code 
of 1954.
    (c) Civil remedies--(1) Liability for failure to make deletions or 
to conform to time limitations--(i) Creation of remedy. An exclusive 
remedy against the Commissioner shall exist in the Court of Claims for--
    (A) The person to whom the written determination pertains whenever 
the Commissioner fails to act in accordance with the time requirements 
of section 6110(g), and
    (B) The person to whom the written determination pertains and any 
person identified in such written determination whenever the 
Commissioner fails to make deletions required by section 6110(c) if as a 
consequence of such failure there is disclosed the identity of such 
person or other information with respect to such person that is required 
to be deleted pursuant to section 6110(c).
    (ii) Limitations. The remedy provided in paragraph (c)(1)(i) of this 
section for failure to make deletions shall be available only if--
    (A) The failure of the Commissioner to make the deletions required 
by section 6110(c) is intentional or willful,
    (B) The Commissioner fails to make any deletion required by section 
6110(c) which the Commissioner has agreed to make, or
    (C) The Commissioner fails to make any deletion which a court has 
ordered to be made pursuant to section 6110(f)(3).
    (iii) Damages. In any suit brought pursuant to paragraph (c)(1)(i) 
of this section in which the court determines that an employee of the 
Internal Revenue Service intentionally or willfully failed to make a 
deletion required by section 6110(c), or intentionally or willfully 
failed to act in accordance with the time requirements of section 
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

[[Page 106]]

shall not be required to defend any action brought to obtain additional 
disclosure pursuant to section 6110(f)(4) if the notice required by 
Sec. 301.6110-5(d)(4) is sent.
    (4) Obligation to make deletions. The Commissioner shall be 
obligated to make only those deletions required by section 6110(c) which 
he has agreed to make, those which a court has ordered to be made 
pursuant to Sec. 301.6110-5(b)(2) and those the omission of which would 
be intentional or willful.
    (d) Fees--(1) General rule--(i) Copies. The Commissioner may 
prescribe fees pursuant to Sec. 607.702(f)(4) of this chapter for the 
costs of furnishing copies of material open to public inspection or 
subject to inspection upon written request pursuant to section 6110.
    (ii) Preparation of information available upon request. The 
Commissioner may prescribe fees pursuant to Sec. 601.702(f) of this 
chapter for the costs of searching for and making deletions from any 
written determinations and background if documents that are subject to 
inspection only upon written request pursuant to Sec. 301.6110-1(b).
    (2) Reduction or waiver of fees--(i) Public interest. The 
Commissioner shall reduce or waive the fees described in paragraph 
(d)(1) of this section if the Commissioner determines that furnishing 
copies of, searching for, or making deletions from any written 
determination or background file document primarily benefits the general 
public, as described in Sec. 601.702(f)(2)(ii)(B) of this chapter.
    (ii) Previous requests. The Commissioner may waive the fees 
described in paragraph (d)(1) of this section for searching for any 
written determination or background file document if the search for such 
written determination or background file document was made pursuant to a 
previous request for inspection thereof. The Commissioner shall waive 
the fees described in paragraph (d)(1) of this section for making 
deletions from any written determination or background file document if 
the making of such deletions from such written determination or 
background file document was made pursuant to a previous request for 
inspection thereof. Nothing in this (d)(2)(ii) shall prevent the 
Commissioner from prescribing fees for making additional deletions from 
such written determination or background file document pursuant to 
Sec. 301.6110-5(b).

[T.D. 7524, 42 FR 63417, Dec. 16, 1977]



Sec. 301.6111-1T  Questions and answers relating to tax shelter registration.

    The following questions and answers relate to the tax shelter 
registration requirements of section 6111 of the Internal Revenue Code 
of 1954, as added by section 141(a) of the Tax Reform Act of 1984 (Pub. 
L. 98-369, 98 Stat. 678).

                            TABLE OF CONTENTS

    The following table of contents is provided as part of these 
temporary regulations to help the reader locate relevant provisions. The 
headings are to be used only as a matter of convenience and have no 
substantive effect.

                               In General

Overview of tax shelter registration, A-1
Overview of applicable penalties, A-2
Effect of registration, A-3

                           Tax Shelter Defined

Definition of tax shelter, A-4

                            Tax Shelter Ratio

Definition of tax shelter ratio, A-5

       Deductions and Credits Represented as Potentially Allowable

Definition of amount of deductions and credits, A-6
Definition of year, A-7
Definition of explicit representation, A-8
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

[[Page 107]]

Exemptions from federal securities registration, A-19
Exemptions from state securities registration, A-20

                         Substantial Investment

Definition of substantial investment, A-21
Aggregation rules, A-22 and A-23

                Exceptions From Tax Shelter Registration

Investments excepted from tax shelter registration, A-24
Certain persons not treated as investors, A-24A

               Persons Required To Register a Tax Shelter

Tax shelter organizer, A-25 and A-26
Principal organizer, A-27
Participant in the organization, A-28 Manager, A-29
Exception for certain unrelated persons, A-30
Sellers, A-31
Absence of representations by organizer, A-32
Exception for suport services, A-33

    Circumstances Under Which Tax Shelter Organizers Are Required To 
                         Register a Tax Shelter

Principal organizer and a participant in the organization, A-34
Manager who has not signed designation agreement, A-35
Seller who has not signed designation agreement, A-36
Person acting in multiple capacities, A-37
Designation agreement (designated organizer), A-38
Person who has signed designation agreement, A-39

                       Registration--General Rules

Date registration is required, A-40
Requirement to provide registration notice to sellers and others, A-41
Definition of sale of an interest, A-42
Definition of offering for sale, A-43
No requirement to submit revised registration form A-44--A-45
Information reported on an amended application, 45A
Effect of resale of an asset, A-46
When registration is complete, A-47
Separate forms required for certain aggregated investments, A-48
Applicability of section 7502, A-49
Required investor disclaimer, A-50

        Furnishing Tax Shelter Registration Numbers to Investors

Who must furnish number, A-51
When number must be furnished, A-52
Form required to furnish number, A-53 and A-54

            Including the Registration Number on Tax Returns

Requirement to include registration number on investor's return, A-55 
and A-57

                      Projected Income Investments

Special rules for projected income investments, A-57A
Definitions relating to projected income, investments A57B--A-57D
Tax shelters ineligible for the special rules, A-57E
Consequences of bad faith or unreasonable projections, A-57F
When a tax shelter ceases to be a projected income investment, A-57G
Special rule for registration, A-57H
Special rule for furnishing registration number, A-57I
Special rule for including registration number on tax return, A-57J

                             Effective Dates

Effective dates, A-58 and A-60

                               In General

    Q-1. What is tax shelter registration?
    A-1. Tax shelter registration is a new provision of the Internal 
Revenue Code that affects organizers, sellers, investors, and certain 
other persons associated with investments that are considered tax 
shelters. The new provision imposes the following three requirements. 
First, a tax shelter must be registered by the tax shelter organizer. 
(See A-4 of this section for the definition of a tax shelter. See A-25 
through A-39 of this section for rules relating 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

[[Page 108]]

number of the tax shelter on any return on which the deduction, loss, 
credit, benefit, or income in included. (See A-55 through A-57 of this 
section for rules relating to the reporting of tax shelter registration 
numbers.)
    Q-2. Are penalties provided for failure to comply with the 
requirements of tax shelter registration?
    A-2. Yes. Separate penalties are provided for failure to satisfy any 
of the requirements set forth in A-1 of this section. See A-1 of 
Sec. 301.6707-1T for the penalty for failure to register a tax shelter 
and A-8 of Sec. 301.6707-1T for the penalty for filing false or 
incomplete information will respect to the registration of a tax 
shelter. See A-12 of Sec. 301.6707-1T for the penalty for failure to 
furnish the tax shelter registration number to purchasers or 
transferees. See A-13 of 301.6707-1T for the penalty for failure to 
report the tax shelter registration number on a tax return on which a 
deduction, loss, credit, income, or other tax benefit is included. In 
addition, criminal penalties may be imposed for willful noncompliance 
with the requirements of tax shelter registration. See, for example, 
section 7203, relating to willful failure to supply information, and 
section 7206, relating to fraudulent and false statements.
    Q-3. Does registration of a tax shelter with the Internal Revenue 
Service indicate that the Internal Revenue Service has reviewed, 
examined, or approved the tax shelter or the claimed tax benefits?
    A-3. No. Moreover, any representation to prospective investors that 
states that a tax shelter is registered with the Internal Revenue 
Service (or that registration is being sought) must include a legend 
stating that registration does not indicate that the Internal Revenue 
Service has reviewed, examined or approved the tax shelter or any of the 
claimed tax benefits. (See A-50 of this section for the form and content 
of the legend.)

                           Tax Shelter Defined

    Q-4. What investments are tax shelters that are required to be 
registered with the Internal Revenue Service?
    A-4. A tax shelter is any investment that meets the following two 
requirements:
    (I) The investment must be one with respect to which a person could 
reasonably infer, from the representations made or to be made in 
connection with any offer for sale of any interest in the investment, 
that the tax shelter ratio for any investor may be greater than 2 to 1 
as of the close of any of the first 5 years ending after the date on 
which the investment is offered for sale.
    (II) The investment must be (i) required to be registered under a 
federal or state law regulating securities, (ii) sold pursuant to an 
exemption from registration requiring the filing of a notice with a 
federal or state agency regulating the offering or sale of securities, 
or (iii) a substantial investment.
    An investment that satisfies these two requirements is considered a 
tax shelter for registration purposes regardless of whether it is 
marketed or customarily designated as a tax shelter. See A-5 of this 
section for the definition of tax shelter ratio. See A-17 and A-18 of 
this section for the definition of an investment required to be 
registered under a federal or state law regulating securities. See A-19 
and A-20 of this section for the definition of an investment sold 
pursuant to an exemption from registration requiring the filing of a 
notice. See A-21 of this section for the definition of a substantial 
investment.

                            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?

[[Page 109]]

    A-6. The term ``amount of deductions'' means the amount of gross 
deductions and other similar tax benefits potentially allowable with 
respect to the investment. The gross deductions are not to be offset by 
any gross income to be derived or potentially derived from the 
investment. Thus, the term ``amount of deductions'' is not equivalent to 
the net loss, if any, attributable to the investment. The term 
``credits'' means the gross amount of credits potentially allowable with 
respect to the investment without regard to any possible tax liability 
resulting from the investment or any potential recapture of the credits.
    Q-7. What does the term ``year'' mean for purposes of determining 
the tax shelter ratio?
    A-7. The term ``year'' means the taxable year of a tax shelter, or 
if the tax shelter has no taxable year, the calendar year.
    Q-8. Under what circumstances is a deduction or credit considered to 
be represented as being potentially allowable to an investor?
    A-8. A deduction or credit is considered to be represented as being 
potentially allowable to an investor if any statement is made (or will 
be made) in connection with the offering for sale of an interest in an 
investment indicating that a tax deduction or credit is available or may 
be used to reduce federal income tax or federal taxable income. 
Representations of tax benefits may be oral or written and include those 
made at the time of the initial offering for sale of interests in the 
investment, such as advertisements, written offering materials, 
prospectuses, or tax opinions, and those that are expected to be made 
subsequent to the initial offering. Representations are not confined 
solely to statements regarding actual dollar amounts of tax benefits, 
but also include general representations that tax benefits are available 
with respect to an investment. Thus, for example, an advertisement 
stating that ``purchase of restaurant includes trade fixtures (5-year 
write-off and investment tax credit)'' constitutes an explicit 
representation of tax benefits.
    Q-9. If a deduction or credit is not explicitly represented as being 
potentially allowable to an investor may it be inferred as a represented 
tax benefit that is includible in the tax shelter ratio?
    A-9. Yes. Although some explicit representation concerning tax 
benefits is necessary before an investment may be considered a tax 
shelter, once an explicit representation is made (or will be made) 
regarding any tax benefit, all deductions or credits typically 
associated with the investment will be inferred to have been represented 
as potentially allowable. Thus, the tax shelter ratio will be determined 
with reference to those tax benefits that are explicitly represented as 
being potentially allowable as well as all other tax benefits that are 
typically associated with the investment. The amount of each deduction 
or credit that is includible in the tax shelter ratio, if not 
specifically represented as to amount, should be reasonably estimated 
based on representations of economic value or economic projections, if 
any, or on any other information available to the tax shelter organizer. 
Reasonable estimates of deductions or credits may take into account past 
experience with similar investments. Reasonable estimates must assume 
use of the most accelerated allowable basis for cost recovery 
deductions.
    As an example of the application of this A-9, assume that an 
advertisement explicitly states that a building is eligible for the 
investment tax credit for rehabilitation of a certified historic 
structure, but makes no mention of 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

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audit affect the computation of the tax shelter ratio?
    A-10. No. Deductions and credits represented as being potentially 
allowable are taken into account in computing the tax shelter ratio 
regardless of whether any qualifying statements are made.
    Q-11. Is interest to be paid by an investor with respect to a debt 
obligation incurred in connection with the acquisition of an interest in 
the tax shelter included in the aggregate amount of deductions?
    A-11. If a deduction for such interest is explicitly represented (or 
will be represented) as being potentially allowable, the interest is 
includible in the aggregate amount of the deductions. In addition, any 
interest to be paid with respect to a debt obligation the proceeds of 
which reduce the investment base (see A-14 of this section), regardless 
of whether a deduction for such interest is explicitly represented as 
being allowable, will be considered a deduction typically associated 
with the investment (see A-9 of this section). Accordingly, such 
interest will be considered to be represented as being potentially 
allowable and must be taken into account in computing the tax shelter 
ratio. If interest to be paid with respect to a debt obligation the 
proceeds of which do not reduce the investment base (see A-14 of this 
section) is not explicitly represented as being potentially allowable, 
however, such interest will not be considered typically associated with 
the investment and will not be taken into account in computing the tax 
shelter ratio.
    Q-12. If representations are made that part or all of an amount 
invested in a tax shelter will be deductible upon the occurrence of an 
unintended event, will the deduction be included in the aggregate amount 
of deductions?
    A-12. No. Thus, for example, if representations are made that a 
person's investment in a tax shelter may give rise to a loss deduction 
if the investment becomes worthless, the amount of the loss deduction 
will not be included in the aggregate amount of deductions and will not 
be taken into account in computing the tax shelter ratio. Similarly, if 
representations are made that the costs of acquiring oil and gas lease 
interests may be deductible if the lease is proved worthless by 
abandonment, the amount of any loss deduction will not be included in 
the aggregate amount of deductions.

                             Investment Base

    Q-13. What does the term ``investment base'' mean?
    A-13. The term ``investment base'' means, with respect to any year 
(as defined in A-7 of this section), means the cumulative amount of 
money and the adjusted basis of other property (reduced by any liability 
to which such other property is subject) that is unconditionally 
required to be contributed or paid directly to the tax shelter on or 
before the close of such year by an investor.
    Q-14. What amounts must be eliminated from the investment base?
    A-14. The investment base must be reduced by the following amounts:
    (1) Any amount borrowed by the investor, even if borrowed on a 
recourse basis, from any person who participated in the organization, 
sale, or management of the investment or who has an interest (other than 
an interest as a creditor) in the investment (``a participating 
person'') or from any person who is related (as defined in section 168 
(e)(4)) to a participating person, unless the amount is unconditionally 
required to be repaid by the investor before the close of the year for 
which the determination is being made. An amount will be considered 
unconditionally required to be repaid by the investor only 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.

[[Page 111]]

    (2) Any amount borrowed by the investor, even if borrowed on a 
recourse basis, from a person, if the loan is arranged by a 
participating (or related) person, unless the amount is unconditionally 
required to be repaid by the investor before the close of the year for 
which the determination is being made. Any borrowing that is represented 
(orally or in writing) as being available from a specific source will be 
treated as arranged by a participating (or related) person, if the 
participating (or related) person provides a list of investors, or 
information relating to the investment, to the lender or otherwise 
informs the lender about the investment. However, in the case of an 
amount borrowed on a recourse basis, the mere fact that a lender who is 
actively and regularly engaged in the business of lending money obtained 
information relating to the investment, from a participating (or 
related) person, solely in response to a lender's request made in 
connection with such borrowing or a prior loan to the investment, a 
participating (or related) person, or an investor, will not, by itself, 
result in a determination that the loans are arranged by a participating 
(or related) person. Financing may be treated as arranged by a 
participating (or related) person regardless of whether a commitment to 
provide the financing is made by the lender to the participating or 
related person.
    For example, assume that a tax shelter organizer represents that the 
purchase of an interest in a tax shelter may be financed with the 
proceeds of a revolving loan, and the tax shelter organizer provides 
investors with the names of several banks or other lending institutions 
to which the tax shelter organizer has provided information about the 
investment. Assume further that the information was not provided in 
response to requests from such lending institutions made in connection 
with prior loans. The proceeds of the revolving loan will be excluded 
from the investment base because the loan is not unconditionally 
required to be repaid and it is treated as having been arranged by the 
tax shelter organizer.
    (3) Any amount borrowed, directly or indirectly, from a lender 
located outside the United States (``foreign-connected financing''), of 
which a participating (or related) person knows or has reason to know.
    (4) Any amounts to be held for the benefit of investors in cash, 
cash equivalents, or marketable securities. An amount is to be held in 
cash equivalents if the amount is to be held in a checking account, 
savings account, mutual fund, certificate of deposit, book entry 
government obligation, or any other similar account or arrangement. 
Marketable securities are any securities that are part of an issue any 
portion of which is traded on an established securities market and any 
securities that are regularly quoted by brokers or dealers making a 
market.
    (5) Any distributions (whether of cash or property) that will be 
made without regard to the income of the tax shelter, but only to the 
extent such distributions exceed the amount to be held as of the close 
of the year in cash, cash equivalents, or marketable securities.

                    Tax Shelter Ratio--Miscellaneous

    Q-15. Does an investment satisfy the requirement in A-4 (I) of this 
section (``the tax shelter ratio requirement'') if it may be inferred 
from the representations made or to be made to investors that the tax 
shelter ratio for some, but not all, of the investors may be greater 
than 2 to 1 as of the close of any one of the first five years?
    A-15. Yes. If the tax shelter ratio for any one investor may be 
greater that 2 to 1, the investment satisfies the tax shelter ratio 
requirement and is a tax shelter if it also meets the requirement in A-
4(II) of this section. Moreover, an investment will satisfy the tax 
shelter ratio requirement even if the tax shelter ratio for a single 
investor exceeds 2 to 1 as of the close of only one of the first five 
years.
    For purposes of computing the tax shelter ratio for a year, all 
persons with interests in the investment are considered investors, 
except that general partners in a limited partnership will not be 
treated as investors in the partnership if the general partners' 
aggregate interest in each item of partnership income, gain, loss, 
deduction, and credit for such year is not expected to exceed 2 percent. 
In determining the

[[Page 112]]

general partners' interest in such items, limited partnership interests 
owned by general partners shall not be taken into account. For purposes 
other than the computation of the tax shelter ratio, however, all 
general partners will be treated as investors. Thus, for example, a 
general partner with a 1 percent interest in a limited partnership will 
be treated as an investor for the purpose of determining whether the 
partnership is a substantial investment.
    Q-16. If a person could reasonably infer from the representations 
made or to be made about an investment that the tax shelter ratio for 
the investment may be greater than 2 to 1 under one arrangement for 
financing the purchase of an interest by an investor, but would be 2 to 
1 or less under an alternative financing arrangement, does the 
investment satisfy the tax shelter ratio requirement of A-4 (I) of this 
section.
    A-16. Yes. An investment satisfies the tax shelter ratio requirement 
of A-4 (I) of this section if a person could reasonably infer from the 
representations made or to be made that the tax shelter ratio for any 
person may be greater than 2 to 1 as of the close of any one of the 
first five years. The tax shelter ratio requirement is met if the tax 
shelter ratio may exceed 2 to 1 under any type of financing arrangement 
that is or will be represented as being available to investors.

              Investments Subject to Securities Regulation

    Q-17. What is an investment that is required to be registered under 
a federal law regulating securities?
    A-17. An investment required to be registered under a federal law 
regulating securities is any public offering of an investment that is 
required to be registered under the Securities Act of 1933 (1933 Act), 
the Investment Company Act of 1940, or any other federal law regulating 
securities. An investment is required to be registered under the 1933 
Act, the Investment Company Act, or any other federal law regulating 
securities, if failure to register the investment would result in a 
violations of the applicable federal law, whether or not the investment 
has in fact been registered and, if proper notice has not been filed, 
whether or not the investment could have been sold pursuant to an 
exemption listed in A-19 of this section if such notice had been filed.
    Q-18. What is an investment required to be registered under a state 
law regulating securities?
    A-18. An investment required to be registered under a state law 
regulating securities is any investment required to be registered under 
a blue sky law or other similar state statute regulating securities. The 
term ``state'' includes the 50 states, the District of Columbia, and 
possessions of the United States.
    Q-19. What is an investment sold pursuant to an exemption from 
registration requiring the filing of a notice with a federal agency 
regulating the offering or sale of securities?
    A-19. An investment sold pursuant to an exemption from registration 
requiring the filing of a notice with such a federal agency is any 
investment that is sold pursuant to an exemption from registration 
requiring the filing or submission of a notice or other document with 
the Securities and Exchange Commission or any other federal agency 
regulating the offering or sale of securities, including the following 
exemptions (and applicable filing):
    (1) Regulation A, as promulgated under section (3)(b) of the 1933 
Act (Form 1(A)),
    (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

[[Page 113]]

sky law or other similar state statutory or regulatory scheme that 
requires the filing or submission of a notice or other document with 
such a state agency. See A-18 of this section for the definition of 
state.

                         Substantial Investment

    Q-21. What is a substantial investment?
    A-21. An investment is a substantial investment if the aggregate 
amount that may be offered for sale to all investors exceeds $250,000 
and 5 or more investors are expected. The aggregate amount offered for 
sale is the aggregate amount to be received from the sale of interests 
in the investment and includes all cash, the fair market value of all 
property contributed, and the principal amount of all indebtedness 
received in exchange for interests in the investment, regardless of 
whether the proceeds of the indebtedness are included in the investment 
base under A-14 of this section. For purposes of determining whether 5 
or more investors are expected in an investment involving real property 
(and related personal property) that is used as a farm (as defined in 
section 2032A(e)(4)) for farming purposes (as defined in section 
2032A(e)(5)), interests in the investment expected to be held by a 
husband and wife, their children and parents, and the spouses of their 
children (or any of them) will be treated as if the interests were to be 
held by one investor. Thus, for example, interests in a farm that are 
offered to two brothers and their wives would be treated as interests 
offered to one investor. Such an investment could be a substantial 
investment only if four or more persons who were not members of the 
family were expected to be investors in the farm.
    Q-22. Will an investment be considered a substantial investment if 
the investment involves a number of parts each including fewer than 5 
investors or an aggregate amount of $250,000 or less?
    A-22. Yes, under the circumstances described in this A-22. For 
purposes of determining whether investments are parts of a substantial 
investment, similar investments offered by the same person or related 
persons (as defined in section 168(e)(4)) are aggregated together. 
Investments are considered similar if they involve similar principal 
business assets and similar plans or arrangements. Investments that 
include no business assets will be considered similar if they involve 
similar plans or arrangements.
    Similar investments are aggregated solely for the purpose of 
determining whether investments involving fewer than 5 investors or an 
aggregate amount of $250,000 or less are substantial investments. For 
this purpose, similar investments are aggregated even though some, but 
not all, of the investments are (i) required to be registered under a 
Federal or State law regulating securities or are sold pursuant to an 
exemption from securities registration requiring the filing of a notice 
with a Federal or State agency regulating the offering or sale of 
securities (i.e., required to be registered as tax shelters whether or 
not a substantial investment) or (ii) substantial investments without 
regard to aggregation.
    Assume, for example, that a person develops similar arrangements 
involving 8 different partnerships, each investing in a separate but 
similar asset (such as a separate master recording or separate piece of 
similar real estate), each with a different general partner and each 
with 3 different limited partners. Assume further that the arrangements 
of all the partnerships are similar. These partnerships involving 
similar arrangements and similar assets 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

[[Page 114]]

total tax benefits and $1,000 investment base). Accordingly, the 
organizer would be required to register the partnerships with the 
Internal Revenue Service.
    Q-23. If an investment involving fewer than 5 investors or an 
aggregate amount of $250,000 or less is offered for sale and, at the 
time of the offering, it is not known (and there is no reason to know) 
that subsequent similar investments will be offered by the person who 
made the first offering (or a related person), will subsequent similar 
investments offered by that person (or a related person) be aggregated 
with the first investment for purposes of determining whether the 
investments constitute a substantial investment?
    A-23. No. However, a tax shelter organizer will be presumed to have 
known of any similar investments (as defined in A-22 of this section) 
offered during the 12 months following the first offering of an 
investment.

                Exceptions From Tax Shelter Registration

    Q-24. Are there any investments that will not be subject to tax 
shelter registration even if they satisfy the requirements of a tax 
shelter (as defined in A-4 of this section)?
    A-24. Yes. The following investments are not subject to tax shelter 
registration:
    (1) Sales of residences primarily to persons who are expected to use 
the residences as their principal place of residence,
    (2) Sales or leases or tangible personal property (other than master 
sound recordings, motion picture or television films, videotapes, 
lithograph plates, or other property relating to a literary, musical, or 
artistic composition) by the manufacturer (or a member of an affiliated 
group, within the meaning of section 1502, including the manufacturer) 
of the property primarily to persons who are expected to use the 
property in their principal active trade or business (see, however, A-32 
and A-46 of this section for the additional rules applicable to a 
purchaser of property described in this A-24 who organizes an investment 
involving the property),
    (3) Any other investment as specified by the Secretary in a rule-
related notice published in the Federal Register.
    Q-24A. Under what other circumstances are particular sales or leases 
of tangible personal property to certain persons or the performance of 
particular services for certain persons exempt from tax shelter 
registration?
    A-24A. A person who, in the ordinary course of a trade or business, 
sells or leases tangible personal property (other than collectibles (as 
defined in section 408(m)(2)), master sound recordings, motion picture 
or television films, videotapes, lithograph plates, or other property 
that includes or relates to a literary, musical or artistic composition) 
to a purchaser or lessee who is reasonably expected to use the property 
either for a personal use or in the purchaser's or lessee's principal 
active trade or business is not required for any purpose to treat such a 
purchaser or lessee as an investor in a tax shelter. Property may be 
reasonably expected to be used by a purchaser or lessee for personal use 
only if sold or leased to the purchaser or lessee in a quantity that is 
customary for such use. Similarly, a person who performs services for 
another person in connection with the principal active trade or business 
of the recipient of the services or for the recipient's personal use is 
not required to treat the recipient as an investor in a tax shelter. 
Persons who are not reasonably expected to use property or services 
either in their principal active trade or business or for 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

[[Page 115]]

reasonably expected to be farming (as defined in section 464(e)(1)). 
Five of the customers are not reasonably expected to engage in farming 
as their principal active trade or business. Although all the individual 
investments involve similar principal business assets and similar plans 
or arrangements, only the 5 customers who are not reasonably expected to 
be in the principal active trade or business of farming will be treated 
as investors in a tax shelter and aggregated to determine whether a 
substantial investment exists. Thus, there will be 5 investors and an 
aggregate investment of $300,000. If representations are made that the 
service fee and the cost of the feed are tax deductible, the tax shelter 
ratio (assuming there are no deductions or credits typically associated 
with such an investment, as described in A-9 of this section) would be 
12 to 1 ($60,000 in total tax benefits and $5,000 investment base) and 
the organizer would be required to register the five aggregated feeding 
arrangements as a tax shelter. The registration number of the tax 
shelter must be provided to the five customers treated as investors in 
the tax shelter, but would not be required to be furnished to the 
customers whose principal active trade or business is reasonably 
expected to be farming.

               Persons Required To Register a Tax Shelter

    Q-25. Who has the legal obligation to register a tax shelter?
    A-25. A tax shelter organizer is obligated to register the tax 
shelter.
    Q-26. What is the definition of tax shelter organizer?
    A-26. Several categories of persons may be tax shelter organizers. 
In general, the term tax shelter organizer means a person principally 
responsible for organizing a tax shelter. If a person principally 
responsible for organizing a tax shelter has not registered the tax 
shelter by the day on which interests in the shelter are first offered 
for sale, any other person who participated in the organization of the 
tax shelter will be treated as a tax shelter organizer. If neither a 
person principally responsible for organizing the tax shelter nor any 
other person who participated in the organization of a tax shelter has 
registered the tax shelter by the day on which interests in the tax 
shelter are first offered for sale, then any person who participates in 
the management of the tax shelter at a time when the tax shelter is not 
registered will be treated as a tax shelter organizer. Finally, if a 
person participates in the sale of a tax shelter at a time when the 
person knows or has reason to know that a tax shelter has not been 
registered, that person will be treated as a tax shelter organizer. See 
A-38 of this section for rules relating to the execution of an agreement 
among persons who may be treated as tax shelter organizers to designate 
one person to register a tax shelter.
    Q-27. Who is a person principally responsible for organizing a tax 
shelter?
    A-27. A person principally responsible for organizing a tax shelter 
(``principal organizer'') is any person who discovers, creates, 
investigates, or initiates the investment, devises the business or 
financial plans for the investment, or carries out those plans through 
negotiations or transactions with others.
    Q-28. What constitutes participation in the organization of a tax 
shelter?
    A-28. Participation in the organization of a tax shelter includes 
the performance of any act (directly or through an agent) related to the 
establishment of the tax shelter, including the following:
    (1) Preparation of any document establishing the tax shelter (for 
example, 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.

[[Page 116]]

    Q-29. What constitutes participation in the management of a tax 
shelter?
    A-29. Participation in the management of a tax shelter includes 
managing the assets of the tax shelter, directing the business activity 
of the tax shelter, or, depending on the form of the tax shelter, acting 
as a general partner who actively participates in the management of a 
partnership, a trustee of a trust, a director or an officer of a 
corporation (including a corporate general partner of a partnership), or 
performing activities similar to those performed by such a general 
partner, a trustee, a director, or an officer.
    Q-30. Will the performance of any act described in A-27 through A-29 
of this section constitute participation in the organization or 
management of a tax shelter if the person performing the act is 
unrelated to the tax shelter (or any principal organizer of the tax 
shelter) and does not participate in the entrepreneurial risks or 
benefits of the tax shelter?
    A-30. No. The performance of an act described in A-27 through A-29 
of this section will not constitute participation in the organization or 
management of a tax shelter unless the person performing the act is 
unrelated to the tax shelter (or any principal organizer of the tax 
shelter) or the person participates in the entrepreneurial risks or 
benefits of the tax shelter. A person will be considered related to a 
tax shelter if the person is related to the tax shelter or a principal 
organizer of the tax shelter within the meaning of section 168(e)(4) or 
is employed by the tax shelter or a principal organizer of the tax 
shelter or has an interest (other than an interest as a creditor) in the 
tax shelter. A person will be considered a participant in the 
entrepreneurial risks or benefits of a tax shelter if the person's 
compensation for performing an act described in A-27 through A-29 of 
this section is contingent on any matter relating to the tax shelter 
(e.g., the compensation is based in whole or in part upon (i) whether 
interests in the tax shelter are actually sold or (ii) the number or 
value of the units in the tax shelter that are sold), or if the person 
will receive an interest in the tax shelter as part or all of the 
person's compensation.
    For example, assume that A forms Z partnership, a tax shelter for 
which registration is required. Z hires the X law firm, none of the 
partners of which is related to the tax shelter, to prepare the 
documents necessary to register the offering of Z securities with the 
Securities and Exchange Commission. X charges $100 an hour for its 
services in connection with the preparation of the necessary documents, 
and payment of the fee is not contingent. X will not be treated as a 
participant in the organization of the tax shelter. If, however, X were 
to charge a fee equal to 1 percent of the value of the units in the tax 
shelter that are sold, X would be considered a participant in the 
organization of the shelter.
    As another example, assume that individual C is an attorney employed 
by W corporation, the corporate general partner and principal organizer 
of Z, and that C prepares the documents necessary to register the tax 
shelter with the Securities and Exchange Commission. C will be treated 
as having participated in the organization of the tax shelter regardless 
of the way in which C's compensation is structured, because C, as an 
employee, is related to the principal organizer of the tax shelter.
    Q-31. What constitutes participation in the sale of a tax shelter?
    A-31. Participation in the sale of a tax shelter includes any 
marketing activities (directly or through an agent) 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

[[Page 117]]

not make any representations of tax benefits to investors?
    A-32. Yes. If a person described in A-26 of this section knows or 
has reason to know that representations of tax benefits have been made, 
that person may be treated as a tax shelter organizer. For example, a 
participant in the sale of a tax shelter may know or have reason to know 
that representations of tax benefits have been made by the principal 
organizer or others who participate in the organization of the tax 
shelter. In addition, a person who acquires property from a manufacturer 
in a transaction exempt from tax shelter registration under A-24 of this 
section and who organizes an investment involving the property may know 
or have reason to know of any representation of tax benefits made by the 
manufacturer.
    Q-33. If a person performs support services such as typing, 
photocopying, or printing for a tax shelter (or a tax shelter organizer) 
or performs other ministerial functions for the tax shelter (or a tax 
shelter organizer), may the person be considered to have participated in 
the organization, management, or sale of the tax shelter?
    A-33. No. Merely performing support services or ministerial 
functions will not be considered participation in the organization, 
management, or sale of a tax shelter.

    Circumstances Under Which Tax Shelter Organizers Are Required To 
                         Register a Tax Shelter

    Q-34. When is a principal organizer or a person who participates in 
the organization of a tax shelter required to register a tax shelter?
    A-34. A principal organizer or a person who participates in the 
organization of a tax shelter (i.e., a person who could be treated as a 
tax shelter organizer within the meaning of A-26 of this section) is 
required to register the tax shelter by the day on which the first 
offering for sale of interests in the tax shelter occurs, unless the 
person has signed a designation agreement pursuant to A-38 of this 
section. If a group of persons who could be treated as tax shelter 
organizers has signed a designation agreement pursuant to A-38 of this 
section, the designated organizer is required to register the tax 
shelter by the day on which the first offering for sale of interests in 
the tax shelter occurs. See A-39 of this section for additional rules 
applicable to tax shelter organizers (other than a designated organizer) 
who have signed a designation agreement.
    Q-35. When is a person who participates in the management of a tax 
shelter (``manager'') required to register a tax shelter?
    A-35. A manager who has not signed a designation agreement pursuant 
to A-38 of this section must register the tax shelter if the manager 
participates in the management of the tax shelter on or after the first 
offering for sale of interests in the tax shelter at a time when the tax 
shelter has not been properly registered (i.e., the manager is treated 
as a tax shelter organizer within the meaning of A-26 of this section). 
Such a manager must register the tax shelter by the day on which the 
first offering for sale of interests in the tax shelter occurs, or by 
the day on which the manager's participation in the management of the 
tax shelter commences, whichever is later. See A-39 of this section for 
rules applicable to a manager who has signed a designation agreement.
    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

[[Page 118]]

or has reason to know that the tax shelter has not been properly 
registered. See A-39 of this section for rules applicable to a seller 
who has signed a designation agreement.
    Q-37. When is a person who acts in more than one capacity with 
respect to a tax shelter required to register the shelter?
    A-37. A person who acts in more than one capacity with respect to a 
tax shelter (i.e., as two or more of the following: principal organizer, 
participant in the organization, manager, or seller) must register the 
tax shelter by the earliest day on which a tax shelter organizer acting 
in any of the person's several capacities would be required to register 
the tax shelter.
    Q-38. May a group of persons who could be treated as tax shelter 
organizers under A-26 of this section designate one person to register 
the tax shelter?
    A-38. Yes. A group of persons who could be treated as tax shelter 
organizers under A-26 of this section may enter into a written agreement 
designating one person as the tax shelter organizer responsible for 
registering the tax shelter (``designated organizer''). The designated 
organizer should ordinarily be a person principally responsible for 
organizing the tax shelter, but may be any person who participates in 
the organization of the tax shelter. Although persons who participate 
only in the sale or management of a tax shelter may sign a designation 
agreement, they may not be the designated organizer. In addition, the 
designated organizer may not be a person who is a resident in a country 
other than the United States. Any person who signs a designation 
agreement, other than the designated organizer, will not be liable for 
failing to register the tax shelter and will not be subject to a 
penalty, even if the designated organizer fails to register the tax 
shelter, unless the person fails to register the tax shelter when such 
registration is required under A-39 of this section. See A-7 of 
Sec. 301.6707-1T for additional rules relating to the reasonable cause 
exception applicable to persons who sign a designation agreement.
    Q-39. Is a tax shelter organizer who has signed a designation 
agreement and who is not the designated organizer required to register 
the tax shelter under any circumstances?
    A-39. Yes. If a tax shelter organizer who has signed a designation 
agreement pursuant to A-38 of this section knows or has reason to know 
on or after the day on which the first offering for sale of interests in 
a tax shelter occurs that the designated organizer failed to register 
the tax shelter, such tax shelter organizer must register the tax 
shelter as soon as practicable after he first knows or has reason to 
know of the failure. A tax shelter organizer who has signed a 
designation agreement is deemed to have reason to know that the 
designated organizer has failed to register the tax shelter if the tax 
shelter organizer does not receive a copy of the Internal Revenue 
Service registration notice containing the registration number from the 
designated organizer within the 60-day period after the day on which the 
first offering for sale of interests in the tax shelter occurs (or the 
person signs the designation agreement, if later). See A-41 of this 
section for the requirement that the designated organizer provide a copy 
of the registration notice and number to persons who have signed the 
designation agreement.

                       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

[[Page 119]]

tax shelter (if such persons begin to participate after the registration 
number is received, they must be provided the notice within 7 days after 
they commence their participation). In addition, a designated organizer 
must provide a copy of the notice within 7 days after it is received to 
all persons who have signed the designation agreement.
    Q-42. What is the sale of an interest in a tax shelter?
    A-42. The sale of an interest in a tax shelter includes the sale of 
property, or any interest in property, the entry into a leasing 
arrangement, a consulting, management or other agreement for the 
performance of services, or the sale or entry into any other plan, 
investment, or arrangement.
    Q-43. What does the term ``offering for sale'' mean?
    A-43. The term ``offering for sale'' means making any 
representation, whether oral or written, relating to participation in a 
tax shelter as an investor. The term includes any advertisement relating 
to the tax shelter and any mail, telephonic, or other contact with 
prospective investors. A representation relating to participation in a 
tax shelter will be considered an offering for sale of an interest in 
the tax shelter even though there is included in the representation an 
explicit statement that the representation does not constitute an offer 
to sell or a solicitation of an offer to buy an interest in the tax 
shelter. In determining whether an offering for sale of an interest has 
occurred, federal and state laws regulating securities are not 
controlling.
    Q-44. After a tax shelter has been registered, must it be registered 
again each year that it continues to be offered for sale?
    A-44. No. Registration is effective for the year in which first 
accomplished and all subsequent years.
    Q-45. If the facts relating to a tax shelter change after the tax 
shelter has been registered, must the tax shelter be registered again or 
must an amended application for registration be filed by the tax shelter 
organizer?
    A-45. No. The tax shelter organizer, however, is permitted to file 
an amended application if a material change in facts occurs after the 
initial registration. A material change in facts is--
    (1) A change in the identifying information relating to the tax 
shelter or tax shelter organizer,
    (2) The acquisition or construction of a principal asset not 
reported on the initial application for registration,
    (3) A change in the method of financing a minimum investment unit, 
or
    (4) A change in the principal business activity.
    In addition, a change in any tax shelter ratio reported on the 
initial application for registration that increases or decreases the 
reciprocal of the tax shelter ratio (i.e., the fraction in which the 
amount of the applicable investment base is the numerator and the amount 
of the applicable deductions and credits is the denominator) by 50 
percent or more is a material change in facts. For example, if the tax 
shelter ratio increases from 2 to 1 to 4 to 1, the reciprocal of the tax 
shelter ratio decreases from \1/2\ to \1/4\, a 50-percent decrease. 
Similarly, if the tax shelter ratio decreases from 6 to 1 to 4 to 1, the 
reciprocal of the tax shelter ratio increases from \1/6\ to \1/4\, a 50-
percent increase. In either case, there is a material change in facts 
and an amended application could be filed.
    Q-45A. What information should be included on an amended application 
for registration?
    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

[[Page 120]]

not know what real estate L will acquire and therefore is unable to 
calculate the tax shelter ratio with certainty, A concludes (based on 
representations made or to be made) that the tax shelter ratio will 
exceed 2 to 1 as to some of the investors. Accordingly, A registers L as 
a tax shelter. A attaches a statement to the application for 
registration, explaining that L is a blind pool organized to invest in 
real estate, but that L has not yet acquired any real estate. In 
addition, A attaches a statement explaining that although the tax 
shelter ratio is expected to exceed 2 to 1, A cannot compute the tax 
shelter ratio with certainty because L has not yet acquired any real 
estate. Several months after L is registered, L acquires a shopping 
center. A may file an amended application for registration. In addition 
to reporting the identifying information and the tax shelter 
registration number on the amended application, A should report the 
shopping center as the principal asset and the recomputed tax shelter 
ratio.
    As another example, assume that C organizes a limited partnership 
that is a tax shelter. On the application for registration, C reports 
that the tax shelter ratio is 2.2 to 1. After the partnership has been 
registered, C finds that the partnership is unable to attract sufficient 
investors. To make investing in the partnership more attractive, C 
decides to offer financing for the purchase or interests in the 
partnership. As a result of the change in financing, the tax shelter 
ratio will be 5 to 1. Because there is a change in financing and a 
change in the tax shelter ratio that decreases the reciprocal of the tax 
shelter ratio by 50 percent or more, C may file an amended application 
for registration. In addition to reporting the identifying information 
and the tax shelter registration number on the amended application, C 
should report the recomputed tax shelter ratio and information relating 
to the change in financing.
    Q-46. If assets constituting a tax shelter are sold (``original 
sale'') and, subsequently, either the assets or interests in the assets 
are offered for sale by the purchaser (``resale''), must the purchaser 
file a new application for registration if the resale is an offering or 
sale of interests in a tax shelter?
    A-46. If the resale constitutes a tax shelter, the purchaser must 
file a new application for registration, unless the tax shelter 
organizer with respect to the original sale is also the tax shelter 
organizer with respect to the resale and the facts pertaining to the 
resale were reflected in the application for registration filed with 
respect to the original sale. For example, assume that A intends to sell 
a building with an estimated fair market value of $2.5 million to a 
group of 5 investors (i.e., a substantial investment, as defined in A-21 
of this section). A also intends to make representations of tax benefits 
attributable to an investment in the building. Based on these 
representations and the investment base, the tax shelter ratio 
attributable to an investment in the building may be greater than 2 to 
1. A therefore files an application for registration relating to the 
building with the Internal Revenue Service. The Internal Revenue Service 
issues a registration number for the investment, and A furnishes the 
registration number to each of the 5 investors in accordance with A-53 
of this section. In an unrelated transaction, the 5 investors decide to 
syndicate the building and to offer interests in the syndicate to 
approximately 500 investors. In connection with this offer, the 
investors expect to make representations concerning tax benefits with 
respect to 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

[[Page 121]]

respect to the syndication. However, the investors in the syndicate 
would have to be furnished with the tax shelter registration number 
issued to A.
    Q-47. When is a tax shelter considered registered?
    A-47. A tax shelter is considered registered when a properly 
completed Form 8264, Application for Registration of a Tax Shelter, is 
filed with the appropriate Internal Revenue Service Center. See A-7 of 
Sec. 301.6111-2T for rules relating to the information required to be 
included on the form, and A-8 of Sec. 301.6707-1T for rules relating to 
the penalty for filing incomplete information.
    Q-48. Must a person registering a tax shelter that is a substantial 
investment only by reason of an aggregation of multiple investments 
under A-22 of this section complete a separate Form 8264 for each 
investment constituting part of the substantial investment?
    A-48. A separate Form 8264 must be completed for each investment 
that differs from the other investments in a substantial investment with 
respect to any of the following:
    (1) Principal asset,
    (2) Accounting methods,
    (3) Federal or state agencies with which the investment is 
registered or with which an exemption notice is filed,
    (4) Methods of financing the purchase of an interest in the 
investment,
    (5) Tax shelter ratio.
    Such aggregated investments, however, are part of a single tax 
shelter.
    Q-49. Do the rules of section 7502 of the Internal Revenue Code, 
regarding timely mailing, apply to the filing of registration forms?
    A-49. Yes.
    Q-50. After a tax shelter has been registered, may representations 
that the investment has been registered with the Internal Revenue 
Service be made to potential investors?
    A-50. Investors may be informed that the investment has been 
registered with the Internal Revenue Service. Investors also must be 
informed, however, that registration does not imply that the Internal 
Revenue Service has reviewed, examined, or approved the investment or 
the claimed tax benefits. The disclaimer must be substantially in the 
form provided below:
    ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE THAT THIS 
INVESTMENT OR THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED, OR 
APPROVED BY THE INTERNAL REVENUE SERVICE.
    See A-53 of this section for rules relating to the legend that must 
be included on any statement on which the tax shelter registration 
number is furnished to investors.

        Furnishing Tax Shelter Registration Numbers to Investors

    Q-51. Who must furnish investors in a tax shelter with the 
registration number of the tax shelter?
    A-51. Any person who sells (or otherwise transfers) an interest in a 
tax shelter is required to furnish the registration number assigned to 
that tax shelter to each person who purchases (or otherwise acquires) an 
interest in that tax shelter from the seller or transferor. For example, 
X, a tax shelter organizer, sells an interest in a tax shelter to A. One 
year later A sells A's interest in the shelter to B. X must furnish the 
tax shelter registration number to A, and A must furnish the number to 
B. If B sells or otherwise transfers the interest (by gift, for 
example), B must furnish the number to the purchaser or transferee of 
B's interest in the tax shelter.
    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

[[Page 122]]

before September 1, 1984, must be furnished with the registration number 
of the tax shelter by December 31, 1984. The registration number will be 
considered furnished to the investor if it is mailed to the investor at 
the last address of the investor known to the person required to furnish 
the number.
    Q-53. How is a seller or transferor of an interest in a tax shelter 
required to furnish the registration number to investors?
    A-53. The person who sells (or otherwise transfers) an interest in a 
tax shelter must furnish the registration number of the tax shelter to 
the tax shelter to the purchaser (or transferee) on a written statement. 
The written statement shall show the name, registration number, and 
taxpayer identification number of the tax shelter, and include a 
prominent legend in bold and conspicuous type stating that the 
registration number must be included on any return on which the investor 
claims any deduction, loss, credit, or other tax benefit, or reports any 
income, by reason of the tax shelter. The statment must also include a 
prominent legend in bold and conspicuous type stating that the issuance 
of the registration number does not indicate that the Internal Revenue 
Service has reviewed, examined, or approved the investment or the 
claimed tax benefits. The statement shall be substantially in the form 
provided below:
    You have acquired an interest in [name and address of tax shelter] 
whose taxpayer identification number is [if any]. The Internal Revenue 
Service has issued [name of tax shelter] the following tax shelter 
registration number: [Number]
    YOU MUST REPORT THIS REGISTRATION NUMBER TO THE INTERNAL REVENUE 
SERVICE, IF YOU CLAIM ANY DEDUCTION, LOSS, CREDIT, OR OTHER TAX BENEFIT 
OR REPORT ANY INCOME BY REASON OR YOUR INVESTMENT IN [NAME OF TAX 
SHELTER].
    You must report the registration number (as well as the name, and 
taxpayer identification number of [name of tax shelter]) on Form 8271.
    FORM 8271 MUST BE ATTACHED TO THE RETURN ON WHICH YOU CLAIM THE 
DEDUCTION, LOSS, CREDIT, OR OTHER TAX BENEFIT OR REPORT ANY INCOME.
    ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE THAT THIS 
INVESTMENT OR THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED, OR 
APPROVED BY THE INTERNAL REVENUE SERVICE.
    This statement may be modified as necessary if the tax shelter is 
not a separate entity (e.g., certain Schedule F or Schedule C 
activities) or has no name or taxpayer identification number.
    Q-54. If a registration number has not been received by a seller (or 
transferor) from the person who registered the tax shelter by the time 
interests in the tax shelter are sold (or otherwise transferred), must 
the seller (or transferor) of the interests furnish the purchaser (or 
transferee) with any information regarding the registration?
    A-54. Yes. At the time of the sale (or other transfer) the seller 
(or other transferor) must furnish the purchaser (or transferee) with a 
written statement in substantially the form prescribed in A-53 of this 
section, except that the second sentence of the form prescribed in A-53 
shall be replaced by a statement in the form provided below:
    On behalf of [name of tax shelter], [name of tax shelter organizer 
who has applied for registration] has applied to the Internal Revenue 
Service for a tax 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

[[Page 123]]

to the tax shelter is claimed. For purposes of determining whether the 
tax shelter registration number must be reported by an investor, income 
attributable to an investment, such as a partner's distributive share of 
income, constitutes a deduction or tax benefit that is claimed, because 
gross deductions and other tax benefits are included in the net income 
reported by the investor. Thus, the registration number also must be 
reported on any return on which an investor reports any income 
attributable to a tax shelter.
    Q-56. What should the investor do if the investor has received a 
notice that a registration number for the tax shelter has been applied 
for, but the investor has not received the registration number by the 
time the investor files a return on which a deduction, loss credit, 
other tax benefit, or income attributable to the tax shelter is 
included?
    A-56. The investor must attach to the return a Form 8271 with the 
words ``Applied For'' written in the space for the registration number 
and must include on the Form 8271 the name and taxpayer identification 
number (if any) of the tax shelter and the name of the person who has 
applied for registration of the tax shelter.
    Q-57. Does the requirement to include the tax shelter registration 
number on a return apply to applications for tentative refund (Form 1045 
and Form 1139) and amended returns (Form 1040X, Form 1120X)?
    A-57. Yes. A completed Form 8271 must be attached to any such return 
on which any deduction, loss, credit, other tax benefit, or income 
relating to a tax shelter is included.

                      Projected Income Investments

    Q-57A. Are the registration requirements suspended with respect to 
any tax shelters?
    A-57A. Yes. If a tax shelter is a projected income investment, it is 
not required to be registered before the first offering for sale of an 
interest in the tax shelters occurs, but is subject only to the 
registration requirements set forth in A-57H through A-57J of this 
section. A tax shelter is a projected income investment if--
    (a) The tax shelter is not expected to reduce the cumulative tax 
liability of any investor for any year during the 5-year period 
described in A-4 (I) of this section; and
    (b) The assets of the tax shelter do not include or relate to any 
property described in A-57E of this section.
    Q-57B. Under what circumstances does a tax shelter satisfy the 
requirement of paragraph (a) of A-57A of this section?
    A-57B. A tax shelter is not expected to reduce the cumulative tax 
liability of any investor for any year during the 5-year period 
described in A-4 (I) of this section only if--
    (a) A written financial projection or other written representation 
that is provided to investors before the sale of interests in the 
investment states (or leads a reasonable investor to believe) that the 
investment will not reduce the cumulative tax liability of any investor 
with respect to any year (within the meaning of A-7 of this section) in 
such 5-year period; and
    (b) No written or oral projections or representations, other than 
those related to circumstances that are highly unlikely to occur, state 
(or lead a reasonable investor to believe) that the investment may 
reduce the cumulative tax liability of any investor with respect to any 
such year.

Thus, a tax shelter for which there are multiple written or oral 
financial projections or other representations is not a projected income 
investment if any such projection or representation that 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-

[[Page 124]]

year period described in A-4 (I) of this section if, as of the close of 
such year, (i) cumulative projected deductions for the investor exceed 
cumulative projected income for the investor, or (ii) cumulative 
projected credits for the investor exceed cumulative projected tax 
liability (without regard to credits) for the investor.
    (b) The cumulative projected deductions for an investor as of the 
close of a year are the gross deductions of the investor with respect to 
the investment, for all periods up to (and including) the end of such 
year, that are included in the financial projection or upon which the 
representation is based. The deductions with respect to an investment 
include all deductions explicitly represented as being allowable and all 
deductions typically associated (within the meaning of A-9 of this 
section) with the investment. Therefore, interest to be paid by the 
investor that is taken into account in determining the tax shelter ratio 
of the investment (see A-11 of this section) is treated as a deduction 
with respect to the investment.
    (c) The cumulative projected income for an investor as of the close 
of a year is the gross income of the investor with respect to the 
investment, for all periods up to (and including) the end of such year, 
that is included in the financial projection or upon which the 
representation is based. For this purpose, income attributable to cash, 
cash equivalents, or marketable securities (within the meaning of A-14 
(4) of this section) may not be treated as income from the investment.
    (d) The cumulative projected credits for an investor as of the close 
of a year are the gross credits of the investor with respect to the 
investment, for all periods up to (and including) the close of such 
year, that are included in the financial projection or upon which the 
representation is based. The credits with respect to an investment 
include all credits explicitly represented as being allowable and all 
credits typically associated (within the meaning of A-9 of this section) 
with the investment.
    (e) The cumulative projected tax liability (without regard to 
credits) for an investor as of the close of a year is 50 percent of the 
excess of cumulative projected income for the investor over cumulative 
projected deductions for the investor with respect to the investment as 
of the close of such year.
    (f) The following examples illustrate the application of the 
principles of this A-57C:

    Example 1. The promotional material with respect to a tax shelter 
includes a written financial projection indicating that the expected 
income of the investment in each of its first 5 years is $800,000. In 
subsequent oral discussions, investors are advised that, in certain 
circumstances that are not highly unlikely, the income expected from the 
investment may be as little as $500,000 per year. The subsequent oral 
discussions are taken into account in determining whether any 
projections or representations state or lead a reasonable investor to 
believe that the investment may reduce the cumulative tax liability of 
any investor. Thus, if the written financial projections indicate that 
the gross deductions attributable to the investment in each of its first 
5 years are expected to be $600,000 and the subsequent oral discussions 
do not indicate that the amount of those deductions will change under 
the circumstances in which the income expected may be as little as 
$500,000, the subsequent oral discussions taken together with the 
written financial projections state (or lead a reasonable investor to 
believe) that the cumulative tax liability of an investor may be reduced 
(i.e., the subsequent oral discussions (taken together with the 
projections) state or lead a reasonable investor to believe that 
cumulative projected deductions may exceed cumulative projected income 
under circumstances that are not highly unlikely). Accordingly, under 
paragraph (b) of A-57B of this section, the tax shelter would not 
qualify as a projected income investment.
    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

[[Page 125]]

written statement as required by paragraph (a) of A-57B of this section. 
The tax shelter in this case would qualify as a projected income 
investment, however, if the written promotional material contains good-
faith representations based on reasonable economic and business 
assumptions that state or lead reasonable investors to believe that the 
cumulative projected income from the investment will exceed the 
cumulative projected deductions allowable with respect to the investment 
for each year in the 5-year period, even though the amounts of income 
and deductions are not specified.
    Example 3. The written promotional material with respect to a tax 
shelter includes a good-faith financial projection for the first 5 years 
of the investment. Based on reasonable economic and business 
assumptions, the projection indicates that the expected net income of 
the investment in each of its first 4 years is $100,000 ($500,000 of 
gross income and $400,000 of gross deductions), but as a result of the 
anticipated acquisition of new business assets a loss of $20,000 is 
expected in the fifth year of the investment ($500,000 of gross income 
and $520,000 of gross deductions). The projection also indicates that a 
credit of $50,000 is expected in the fifth year of the investment. Such 
a written financial projection would be considered to state that the 
investment will not reduce the cumulative tax liability of any investor 
with respect to any year in the 5-year period described in A-4 (I) of 
this section. Although a loss and a credit are projected in the fifth 
year of the investment, as of the close of such year, cumulative 
projected income ($2,500,000) exceeds cumulative projected deductions 
($2,120,000), and cumulative projected tax liability (without regard to 
credits) ($380,000 x 50 percent = $190,000) exceeds cumulative projected 
credits ($50,000). Assuming no contrary oral or written projections or 
representations are made, the tax shelter would thus be a projected 
income investment.
    Example 4. The written promotional material with respect to a tax 
shelter states that an investor will be entitled to a ``1.5 to 1 write-
off'' in the year of investment. This statement is a representation that 
the investment will reduce the cumulative tax liability of an investor 
with respect to the first year of the investment and, accordingly, the 
investment is not a projected income investment. The result in this 
example would be the same if any ``write-off'' were represented, even if 
the write-off were less than 1.5 to 1.

    Q-57D. Are all financial projections and representations relating to 
the cumulative tax liability of an investor taken into account for 
purposes of A-57B of this section?
    A-57D. (a) No. A financial projection or other representation 
relating to the cumulative tax liability of an investor is not taken 
into account for purposes of A-57B of this section unless it is made in 
good faith and is based on reasonable economic and business assumptions. 
In addition, a financial projection or other representation is not taken 
into account if it relates to circumstances that are highly unlikely. 
Moreover, a general statement or disclaimer indicating that projected 
income is not guaranteed or otherwise assured, standing alone, is not a 
projection or representation for purposes of paragraph (b) of A-57B of 
this section.
    (b) The following example illustrates the application of the 
principles of this A-57D:

    Example. The written promotional material with respect to a tax 
shelter contains a representation stating that the investment is 
projected to produce net income for all investors in each of its first 
five years and there are no credits potentially allowable with respect 
to the investment. This statement is based on reasonable economic and 
business assumptions. Such a written representation, if made in good 
faith, would be considered under paragraph (a) of A-57B of this section 
to state that the investment will not reduce the cumulative tax 
liability of any investor with respect to any year in the 5-year period 
described in A-4(I) of this section. In addition, no oral or written 
statements or representations are communicated to investors that would 
indicate under paragraph (b) of A-57B of this section that the 
investment might reduce the cumulative tax liability of any investor 
with respect to any year in the 5-year period.
    Assume the tax shelter organizer has knowledge of certain other 
facts that lead 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.


[[Page 126]]


    Q-57E. What assets may not be held by a projected income investment?
    A-57E. A tax shelter is not a projected income investment if more 
than an incidental amount of its assets include or relate to any 
interest in a collectible (as defined in section 408(m)(2)), a master 
sound recording, motion picture or television film, videotape, 
lithograph plate, copyright, or a literary, musical, or artistic 
composition.
    Q-57F. What are the consequences if financial projections or other 
representations are not made in good faith or are not based on 
reasonable economic and business assumptions?
    A-57F. If a tax shelter is not a projected income investment because 
the financial projections or other representations are not made in good 
faith or are not based on reasonable economic and business assumptions, 
it must be registered not later than the day on which the first offering 
for sale of an interest in the tax shelter occurs. If the tax shelter is 
not registered timely, the tax shelter organizer may be subject to a 
penalty. (See A-1 of Sec. 301.6707-1T.)
    Q-57G. When does a tax shelter cease to be a projected income 
investment?
    A-57G. A tax shelter ceases to be a projected income investment on 
the last day of the first year (as defined in A-7 of this section) in 
the 5-year period described in A-4 (I) of this section for which, for 
any investor, (i) the gross deductions allocable to the investor for 
that year and prior years exceed the gross income allocable to the 
investor for such years, or (ii) the credit allocable to the investor 
for that year and prior years exceed 50 percent of the amount by which 
gross income allocable to the investor exceeds gross deductions 
allocable to the investor for such years. For purposes of determining 
when a tax shelter ceases to be a projected income investment, the tax 
shelter organizer is not required to take into account interest that may 
be incurred by an investor with respect to debt described in A-14 (2) or 
(3) of this section, but is required to take into account interest 
incurred by an investor with respect to debt described in A-14 (1) of 
this section. In addition, the tax shelter organizer may not take into 
account income attributable to cash, cash equivalents, or marketable 
securities (within the meaning of A-14 (4) of this section).
    Q-57H. How does the requirement to register apply with respect to a 
tax shelter that is a projected income investment?
    A-57H. In the case of a tax shelter that is a projected income 
investment, registration is not required unless the tax shelter ceases 
to be a projected income investment under A-57G of this section. If the 
tax shelter ceases to be a projected income investment, the tax shelter 
organizer must register the tax shelter in accordance with the rules set 
forth in A-1 through A-39 and A-41 through A-50 of this section. The tax 
shelter must be registered--
    (a) Within 30 days after the date on which the tax shelter ceases to 
be a projected income investment, and
    (b) Before the date on which the tax shelter or a tax shelter 
organizer sends the investor any schedule of profit or loss, or income, 
deduction, or credit that may be used in preparing the investor's income 
tax return for the taxable year that includes the date on which the tax 
shelter ceases to be a projected income investment. If a tax shelter 
organizer fails to register timely as required by this A-57H, the tax 
shelter organizer may be subject to a penalty. (See A-1 of 
Sec. 301.6707-1T.) For example, assume that C is the principal organizer 
and general partner of a limited partnership. Interests in the 
partnership will be offered for sale in a public offering required to be 
registered 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

[[Page 127]]

investment under A-57G of this section. Assuming further that C 
continues as the general partner and knowingly fails to register the 
partnership as a tax shelter within the time prescribed in this A-57H, C 
will be subject to a penalty of 1 percent of the aggregate amount 
invested in the partnership. Because there is an intentional disregard 
of the registration requirements, the $10,000 limitation will not apply.
    Q-57I. How does the requirement to furnish registration numbers (A-
51 through A-54 of this section) apply in the case of a tax shelter that 
is a projected income investment?
    A-57I. In the case of a tax shelter that is a projected income 
investment, a person who sells or transfers an interest in the tax 
shelter is not required to furnish a registration number under A-51 of 
this section or a notice under A-54 of this section unless the tax 
shelter ceases to be a projected income investment. If the tax shelter 
ceases to be a projected income investment, the tax shelter organizer 
who registers the tax shelter is required to furnish the registration 
number to all persons who the tax shelter organizer knows or has reason 
to know are participating in the sale of interests in the tax shelter 
and to all persons who the tax shelter organizer knows or has reason to 
know have acquired interests in the tax shelter. A person who sold (or 
otherwise transferred) an interest in the tax shelter before the date on 
which the tax shelter ceased to be a projected income investment is 
required to furnish the registration number to the purchaser or 
transferee as provided in A-51 of this section only if the seller or 
transferor knows or has reason to know that the tax shelter has ceased 
to be a projected income investment and that the tax shelter organizer 
who registered the tax shelter has not provided a registration number to 
such purchaser or transferee. In the case of persons who acquired 
interests in the tax shelter before the date on which the tax shelter 
ceased to be a projected income investment, the registration number must 
be provided not later than the date described in paragraph (b) of A-57H 
of this section or, if the tax shelter does not provide any schedule 
described in paragraph (b) of A-57H of this section, within 60 days 
after the date on which the tax shelter ceases to be a projected income 
investment. Thus, for example, if a tax shelter that ceases to be a 
projected income investment is a partnership, the tax shelter organizer 
would be required to provide the registration number to each partner not 
later than the date the Schedule K-1 for the year in which the tax 
shelter ceases to be a projected income investment is provided to each 
partner.
    The registration number must be provided in accordance with A-51 and 
A-52 of this section and must be accompanied by a statement explaining 
that the tax shelter has ceases to be a projected income investment and 
instructing the recipient to furnish the registration number to any 
persons to whom the recipient has sold or otherwise transferred 
interests in the tax shelter. A tax shelter organizer who fails to 
provide the registration number as provided in this A-57I may be subject 
to penalties. (See A-12 of Sec. 301.6707-1T.)
    Q-57J. How does the requirement to include the registration number 
on tax returns (A-55 through A-57 of this section) apply in the case of 
a tax shelter that is a projected income investment?
    A-57J. In the case of a tax shelter that is a projected income 
investment, an investor is not required to report a registration number 
on the investor's tax return unless the tax shelter ceases to be a 
projected income investment. If the tax shelter ceases to be a projected 
income investment, the requirements of A-55 through A-57 apply with 
respect 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

[[Page 128]]

registered with the Internal Revenue Service not later than the first 
day after August 31, 1984 on which an interest in the tax shelter is 
offered for sale.
    Q-59. By what date must the tax shelter registration number be 
furnished to investors who acquired interests before September 1, 1984 
in a tax shelter that is required to be registered.
    A-59. All investors who acquired their interests in a tax shelter 
before September 1, 1984 must be supplied with the tax shelter 
registration number by December 31, 1984. See A-52 of this section for 
the date by which registration numbers must be furnished to investors 
who acquire their interests on or after September 1, 1984.
    Q-60. What interests will be taken into account in determining 
whether an investment in which interests were sold before September 1, 
1984, is a substantial investment?
    A-60. The determination of whether an investment is a substantial 
investment will be made by taking into account only the interests that 
are offered for sale on or after September 1, 1984. An investment will 
be considered a substantial investment if there are expected to be 5 or 
more investors on or after September 1, 1984, and the aggregate amount 
offered for sale on or after September 1, 1984 is expected to exceed 
$250,000. Amounts received from the sale of interests before September 
1, 1984, however, are taken into account in computing the amount of the 
penalty for failure to register.

(Secs. 6111 and 7805, Internal Revenue Code of 1954 (98 Stat. 678, 26 
U.S.C. 6111; 68A Stat. 917, 26 U.S.C. 7805); secs. 6111, 6112 and 7805, 
Internal Revenue Code of 1954 (98 Stat. 678, 98 Stat. 681, 68A Stat. 
917; 26 U.S.C. 6111, 6112 and 7805))

[T.D. 7964, 49 FR 32713, Aug. 15, 1984, as amended by T.D. 7990, 49 FR 
43641, Oct. 31, 1984; T.D. 7964, 49 FR 44461, Nov. 7, 1984; T.D. 8078, 
51 FR 7440, Mar. 25, 1986]



Sec. 301.6111-2T  Confidential corporate tax shelters (temporary).

    (a) In general--(1) Under section 6111(d) and this section, a 
confidential corporate tax shelter is treated as a tax shelter subject 
to the requirements of sections 6111(a) and (b).
    (2) A confidential corporate tax shelter is any transaction--
    (i) A significant purpose of the structure of which is the avoidance 
or evasion of Federal income tax, as described in paragraph (b) of this 
section, for a direct or indirect corporate participant;
    (ii) That is offered to any potential participant under conditions 
of confidentiality, as described in paragraph (c) of this section; and
    (iii) For which the tax shelter promoters may receive fees in excess 
of $100,000 in the aggregate, as described in paragraph (d) of this 
section.
    (3) For purposes of this section, references to the term transaction 
include all of the factual elements necessary to support the tax 
benefits that are expected to be claimed with respect to any entity, 
plan, or arrangement, including any series of related steps carried out 
as part of a prearranged plan.
    (4) A transaction described in paragraph (b) of this section is for 
a direct or an indirect corporate participant if it is expected to 
provide Federal income tax benefits to any corporation (U.S. or foreign) 
whether or not that corporation participates directly in the 
transaction.
    (b) Transactions structured for avoidance or evasion of Federal 
income tax--(1) In general. The avoidance or evasion of Federal income 
tax will be considered a significant purpose of the structure of a 
transaction if the transaction is described in paragraph (b)(2), (3), or 
(4) of this section. However, a transaction described in paragraph 
(b)(3) or (4) of this section need not be registered if the transaction 
is described in paragraph (b)(5) of this section. For purposes of this 
section, Federal income tax benefits include deductions, exclusions from 
gross income, nonrecognition of gain, tax credits, adjustments (or the 
absence of adjustments) to the basis of property, and any other tax 
consequences that may reduce a taxpayer's Federal income tax liability 
by affecting the timing, character, or source of any item of income, 
gain, deduction, loss, or credit.
    (2) Listed transactions. A transaction is described in this 
paragraph (b)(2) if the transaction is the same as or substantially 
similar to one of the types of transactions that the Internal Revenue 
Service (IRS) has determined to be a

[[Page 129]]

tax avoidance transaction and identified by notice, regulation, or other 
form of published guidance as a listed transaction for purposes of 
section 6111. If a transaction becomes a listed transaction after the 
date on which registration would otherwise be required under this 
section, and if the transaction otherwise satisfies the confidentiality 
and fee requirements of paragraphs (a)(2)(ii) and (iii) of this section, 
registration shall in all events be required with respect to any 
interests in the transaction that are offered for sale after the 
transaction becomes a listed transaction. However, because a transaction 
identified as a listed transaction is generally considered to have been 
structured for a significant tax avoidance purpose, such a transaction 
ordinarily will have been subject to registration under this section 
before becoming a listed transaction if the transaction previously 
satisfied the confidentiality and fee requirements of paragraphs 
(a)(2)(ii) and (iii) of this section.
    (3) Transactions lacking economic substance--(i) Except as provided 
in paragraph (b)(3)(ii) of this section, a transaction is described in 
this paragraph (b)(3) if the present value of the participant's 
reasonably expected pre-tax profit (after taking into account foreign 
taxes as expenses and transaction costs) from the transaction is 
insignificant relative to the present value of the participant's 
expected net Federal income tax savings from the transaction.
    (ii) If the substance of the transaction is the borrowing of money 
or the acquisition of financial capital by a corporate participant, the 
transaction is described in this paragraph (b)(3) only if the present 
value of the Federal income tax deductions of the taxpayer to whom the 
loan or financial capital is provided significantly exceeds the present 
value of the pre-tax return of the person providing the loan or 
financial capital.
    (4) Other tax-structured transactions. A transaction is described in 
this paragraph (b)(4) if it has been structured to produce Federal 
income tax benefits that constitute an important part of the intended 
results of the transaction and the tax shelter promoter (or other person 
who would be responsible for registration under this section) reasonably 
expects the transaction to be presented in the same or substantially 
similar form to more than one potential participant, unless the promoter 
reasonably determines that--
    (i) The potential participant is expected to participate in the 
transaction in the ordinary course of its business (including 
transactions described in Sec. 1.6011-4T(b)(3)(iii)) in a form 
consistent with customary commercial practice; and
    (ii) There is a long-standing and generally accepted understanding 
that the expected Federal income tax benefits from the transaction 
(taking into account any combination of intended tax consequences) are 
allowable under the Internal Revenue Code for substantially similar 
transactions.
    (5) Excepted transactions. The avoidance or evasion of Federal 
income tax will not be considered a significant purpose of the structure 
of a transaction if the transaction is described in either paragraph 
(b)(5)(i) or (ii) of this section.
    (i) In the case of a transaction other than a transaction described 
in paragraph (b)(2) of this section, the tax shelter promoter (or other 
person who would be responsible for registration under this section) 
reasonably determines that there is no reasonable basis under Federal 
tax law for denial of any significant portion of the expected Federal 
income tax benefits from the transaction. Such a determination must take 
into account the entirety of the transaction and any combination of tax 
consequences that are expected to result from any component steps of the 
transaction, must not be based on any unreasonable or unrealistic 
factual assumptions, and must take into account all relevant aspects of 
Federal tax law, including the statute and legislative history, 
treaties, authoritative administrative guidance, and judicial decisions 
that establish principles of general application in the tax law (e.g., 
Gregory v. Helvering, 293 U.S. 465 (1935)).
    (ii) The IRS makes a determination, by published guidance, 
individual ruling under paragraph (b)(6) of this section, or otherwise, 
that the transaction

[[Page 130]]

is not subject to the registration requirements of this section.
    (6) Requests for ruling. If a tax shelter promoter (or other person 
who would be responsible for registration under this section) is 
uncertain whether a transaction is properly classified as a confidential 
corporate tax shelter or is otherwise uncertain whether registration is 
required under this section, that person may, on or before the date that 
registration would otherwise be required under this section, submit a 
request to the IRS for a ruling as to whether the transaction is subject 
to the registration requirements of this section. If the request fully 
discloses all relevant facts relating to the transaction, that person's 
potential obligation to register the transaction will be suspended 
during the period that the ruling request is pending and, if the IRS 
subsequently concludes that the transaction is a confidential corporate 
tax shelter subject to registration under this section, until the 
sixtieth day after the issuance of the ruling (or, if the request is 
withdrawn, sixty days from the date that the request is withdrawn). In 
the alternative, that person may register the transaction in accordance 
with the requirements of this section and append a statement to the Form 
8264, ``Application for Registration of a Tax Shelter'', which states 
that the person is uncertain whether the transaction is required to be 
registered as a confidential corporate tax shelter, and that the Form 
8264 is being filed on a protective basis.
    (7) Examples. The following examples illustrate the application of 
paragraphs (b)(1) through (b)(5) of this section. Assume, for purposes 
of these examples, that the transactions are not the same as or 
substantially similar to any of the types of transactions that the IRS 
has identified as listed transactions for purposes of section 6111 and 
thus are not described in paragraph (b)(2) of this section. The examples 
are as follows:

    Example 1--(i) Facts. Promoter organizes a transaction between X, a 
U.S. corporation, and FC, a foreign entity that is not subject to 
Federal income tax. FC contributes cash to PRS, a partnership, in 
exchange for a 99 percent partnership interest in PRS. Promoter is 
initially the only other partner in PRS. FC will receive a market rate 
of return on its cash contribution and a fee for participating in the 
transaction. PRS purchases personal property and then leases it. PRS 
sells its right to the lease payments in exchange for cash. PRS 
allocates 99 percent of the income from the sale to FC and one percent 
to Promoter. PRS retains the leased property. Shortly after PRS's sale 
of the lease payments, X buys FC's 99 percent partnership interest in 
PRS. The depreciation deductions on the leased property are then 
allocated 99 percent to X and one percent to Promoter.
    (ii) Analysis. The transaction is described in paragraph (b)(3)(i) 
of this section because the present value of X's reasonably expected 
pre-tax profit from the transaction is insignificant relative to the 
present value of X's expected net Federal income tax savings from the 
transaction. Therefore, unless Promoter can reasonably determine that 
the IRS would have no reasonable basis for denial of any significant 
portion of the Federal income tax benefits intended for X, the 
transaction is described in paragraph (b)(1) of this section.

    Example 2--(i) Facts. Y has designed a combination of financial 
instruments to be issued as a package by corporations. The financial 
instruments are expected to be treated as equity for financial 
accounting purposes and as debt giving rise to allowable interest 
deductions for Federal income tax purposes. Y reasonably expects to 
present this method of raising capital to more than one potential 
corporate participant. Assume the transaction is not described in 
paragraph (b)(3) of this section. Assume that, because of the unusual 
nature of the combination of financial instruments, Y cannot conclude 
either that the transaction represented by the financial instruments is 
in customary commercial form or that there is a long-standing and 
generally accepted understanding that interest deductions are available 
to issuers of substantially similar combinations of financial 
instruments. Further, assume that Y cannot reasonably determine that the 
IRS would have no reasonable basis to deny the deductions.
    (ii) Analysis. The transaction represented by this combination of 
financial instruments is a transaction described in paragraph (b)(4) of 
this section. However, if Y is uncertain whether this transaction is 
described in paragraph (b)(4) of this section, or is otherwise uncertain 
whether registration is required, Y may apply for a ruling under 
paragraph (b)(6) of this section, and the transaction will not be 
required to be registered while the ruling is pending or for sixty days 
thereafter.

    (c) Conditions of confidentiality--(1) In general. All the facts and 
circumstances relating to the transaction will be considered when 
determining

[[Page 131]]

whether an offer is made under conditions of confidentiality as 
described in section 6111(d)(2), including prior conduct of the parties. 
Pursuant to section 6111(d)(2)(A), if an offeree's disclosure of the 
structure or tax aspects of the transaction is limited in any way by an 
express or implied understanding or agreement with or for the benefit of 
any tax shelter promoter, an offer is considered made under conditions 
of confidentiality, whether or not such understanding or agreement is 
legally binding. Pursuant to section 6111(d)(2)(B), an offer will also 
be considered made under conditions of confidentiality in the absence of 
any such understanding or agreement if any tax shelter promoter knows or 
has reason to know that the transaction is protected from disclosure or 
use in any other manner, such as where the transaction is claimed to be 
proprietary to the tax shelter promoter or any party other than the 
offeree. An offeree's privilege to maintain the confidentiality of a 
communication relating to a tax shelter in which the taxpayer might 
participate or has agreed to participate, including an offeree's 
confidential communication with the offeree's attorney, is not itself a 
condition of confidentiality.
    (2) Presumption. Unless facts and circumstances clearly indicate 
otherwise, an offer is not considered made under conditions of 
confidentiality if the tax shelter promoter enters into a written 
agreement with each person who participates or discusses participation 
in the transaction and such agreement expressly authorizes such persons 
to disclose every aspect of the transaction with any and all persons, 
without limitation of any kind.
    (d) Determination of fees. All the facts and circumstances relating 
to the transaction will be considered when determining the amount of 
fees, in the aggregate, that the tax shelter promoters may receive. For 
purposes of this paragraph (d), all consideration that tax shelter 
promoters may receive is taken into account, including contingent fees, 
fees in the form of equity interests, and fees the promoters may receive 
for other transactions as consideration for promoting the tax shelter. 
For example, if a tax shelter promoter may receive a fee for arranging a 
transaction that is a confidential corporate tax shelter and a separate 
fee for another transaction that is not a confidential corporate tax 
shelter, part or all of the fee paid with respect to the other 
transaction may be treated as a fee paid with respect to the 
confidential corporate tax shelter if the facts and circumstances 
indicate that the fee paid for the other transaction is in consideration 
for the confidential corporate tax shelter. For purposes of determining 
whether the tax shelter promoters may receive fees in excess of 
$100,000, the fees from all substantially similar transactions are 
considered part of the same tax shelter and must be aggregated.
    (e) Registration--(1) Time for registering--(i) In general. A tax 
shelter must be registered not later than the day on which the first 
offering for sale of interests in the shelter occurs. An offer to 
participate in a confidential corporate tax shelter shall be treated as 
an offer for sale. If interests in a confidential corporate tax shelter 
were first offered for sale on or before February 28, 2000, the first 
offer for sale of interests in the shelter that occurs after February 
28, 2000 shall be considered the first offer for sale under this 
section.
    (ii) Certain registrations deemed timely--(A) In general. The IRS 
will consider a registration as timely made for a confidential corporate 
tax shelter in which interests are offered for sale after February 28, 
2000, if the tax shelter is registered no later than August 29, 2000. If 
an interest in a confidential corporate tax shelter is first offered for 
sale after February 28, 2000 and the tax shelter also constitutes a tax 
shelter under section 6111(c), the persons responsible for registering 
the tax shelter may either complete and file Form 8264, ``Application 
for Registration of a Tax Shelter'', including the information required 
by paragraph (e)(2) of this section, not later than the day on which an 
interest in the tax shelter is first offered for sale after February 28, 
2000, or complete and file Form 8264, ``Application for Registration of 
a Tax Shelter'', for the section 6111(c) tax shelter not later than the 
day on which

[[Page 132]]

an interest in the tax shelter is first offered for sale under section 
6111(a) and then file an amended Form 8264 with the information required 
by paragraph (e)(2) of this section not later than August 29, 2000.
    (B) Special rule. If a transaction becomes a confidential corporate 
tax shelter (e.g., because of a change in the law or factual 
circumstances, or because the transaction becomes a listed transaction) 
subsequent to the first offering for sale after February 28, 2000, and 
the transaction was not previously required to be registered as a 
confidential corporate tax shelter under this section, the transaction 
must be registered under this section if interests are offered for sale 
after the transaction becomes a confidential corporate tax shelter. The 
transaction must be registered by the later of the next offering for 
sale of interests in the shelter or August 29, 2000.
    (2) Procedures for registering--(i) In general. To register a 
confidential corporate tax shelter, the person responsible for 
registering the tax shelter must file Form 8264, ``Application for 
Registration of a Tax Shelter''. (Form 8264 is also used to register tax 
shelters defined in section 6111(c).) The exemptions from the 
registration requirements contained in the instructions to the current 
Form 8264 apply only to tax shelters defined in section 6111(c). Similar 
to the treatment provided under Q&A-22 and Q&A-48 of Sec. 301.6111-1T, 
transactions involving similar business assets and similar plans or 
arrangements that are offered to corporate taxpayers by the same person 
or related persons are aggregated and considered part of a single tax 
shelter. However, in contrast with the requirement of Q&A-48 of 
Sec. 301.6111-1T, the tax shelter promoter may file a single Form 8264 
with respect to any such aggregated tax shelter, provided an amended 
Form 8264 is filed to reflect any material changes and to include any 
additional or revised written materials presented in connection with an 
offer to participate in the shelter. Furthermore, all transactions that 
are part of the same tax shelter and that are to be carried out by the 
same corporate participant (or one or more other members of the same 
affiliated group within the meaning of section 1504) must be registered 
on the same Form 8264.
    (ii) Interim registration procedure. Until Form 8264 and its 
instructions are revised to incorporate the provisions of this paragraph 
(e)(2)(ii), the person responsible for registering a confidential 
corporate tax shelter must--
    (A) Type or legibly print ``Confidential Corporate Tax Shelter Filed 
Under Sec. 301.6111-2T'' at the top of Form 8264 (Rev. 11-99), 
``Application for Registration of a Tax Shelter'';
    (B) Complete Part I and lines 1a, 2, 3, 4, 6, and 12 in Part II of 
Form 8264;
    (C) In the section titled ``Explanation of Items'' on Form 8264, 
provide a detailed description of the tax shelter, including a 
description of the structure of the tax shelter and the intended tax 
benefits;
    (D) Attach any written materials that are presented to potential 
participants in connection with the offering of sales of interests in 
the tax shelter, including any analyses or opinions relating to the 
intended tax benefits of the shelter; and
    (E) Sign the Form 8264 and send it to the Internal Revenue Service 
Center, Kansas City, MO 64999.
    (iii) Use of subsequent versions of Form 8264. If a person who is 
required to register a confidential corporate tax shelter under section 
6111 uses a subsequent version of the Form 8264, the person must 
complete the appropriate parts of the revised form and follow the 
applicable instructions.
    (iv) Tax shelters that constitute both section 6111(c) and section 
6111(d) tax shelters. If a person is registering an arrangement that is 
both a confidential corporate tax shelter and a section 6111(c) tax 
shelter, the person must follow the requirements of this section and the 
instructions for Form 8264. In such a situation, the taxpayer must 
complete the entire form because the tax shelter is a section 6111(c) 
tax shelter and, if using Form 8264 (Rev. 11-99), type or legibly print 
``Confidential Corporate Tax Shelter filed under Sec. 301.6111-2T'' at 
the top of Form 8264 and include the information required in paragraphs 
(e)(2)(ii)(C) and (D) of this section because the tax shelter is also

[[Page 133]]

a confidential corporate tax shelter. If an arrangement is both a 
section 6111(c) tax shelter and a confidential corporate tax shelter and 
is a transaction described in the ``Exemptions from Registration'' 
section of the instructions for Form 8264 (Rev. 11-99), the person 
registering the arrangement must comply with the requirements of this 
section to register the arrangement as a confidential corporate tax 
shelter.
    (3) Claims of privilege. (i) In any case in which an attorney or 
federally authorized tax practitioner within the meaning of section 7525 
is the person required to register a confidential corporate tax shelter, 
and that person believes that information required to be disclosed under 
paragraph (e)(2) of this section is protected by the attorney-client 
privilege or by the confidentiality privilege of section 7525(a), any 
information omitted from the Form 8264 on the basis of such a claim must 
be supported by a statement attached to Form 8264 which satisfies the 
requirements set forth in paragraph (e)(3)(ii) of this section.
    (ii) A statement supporting a claim of privilege must be signed by 
the attorney or federally authorized tax practitioner under penalties of 
perjury, must identify each document or category of information for 
which a claim of privilege is made, and must include the following 
representations with respect to each document or category of information 
for which the privilege is claimed--
    (A) Specifically represent that the information was a confidential 
practitioner-client communication and, in the case of information which 
a federally authorized tax practitioner claims is privileged under 
section 7525, that the omitted information was not part of tax advice 
that constituted the promotion of a tax shelter within the meaning of 
section 7525(b);
    (B) Specifically represent that the person required to register 
(and, to the best of such person's knowledge and belief, all others in 
possession of the omitted information) did not disclose the omitted 
information to any person whose receipt of such information would result 
in a waiver of the privilege.
    (f) Definition of tax shelter promoter. For purposes of section 
6111(d)(2) and this section, the term ``tax shelter promoter'' includes 
a tax shelter organizer as defined in section 6111(e)(1) and 
Sec. 301.6111-1T(Q&A-26 through Q&A-32) and any other person who 
participates in the organization, management or sale of a tax shelter 
(other than a person who merely performs services of the kind described 
in Q&A-33 of Sec. 301.6111-1T) or any person related (within the meaning 
of section 267 or 707) to such tax shelter organizer or such other 
person. Any person that satisfies this requirement must comply with the 
requirements under section 6112.
    (g) Person required to register--(1) Tax shelter promoters. In 
addition to the rules in section 6111, taxpayers must use the rules of 
Sec. 301.6111-1T (Q&A-34 through Q&A-39) in determining the 
circumstances under which a tax shelter promoter must register a 
confidential corporate tax shelter described in section 6111(d).
    (2) Persons who discuss the transaction; all promoters are foreign 
persons--(i) In general. If all of the tax shelter promoters of a 
confidential corporate tax shelter are foreign persons, any person who 
discusses participation in the transaction must register the shelter 
under this section within 90 days after beginning such discussions.
    (ii) Exceptions. Registration by a person discussing participation 
in a transaction is not required if either--
    (A) The person does not participate, directly or indirectly, in the 
shelter and notifies the tax shelter promoter in writing, within 90 days 
of beginning such discussions, that the person will not participate; or
    (B) Within 90 days after beginning such discussions, the person 
obtains and reasonably relies on both--
    (1) A written statement from one of the tax shelter promoters that 
such promoter has registered the tax shelter under this section; and
    (2) A copy of the registration.
    (iii) Determination of foreign status. For purposes of this 
paragraph (g)(2), a person must presume that all tax shelter promoters 
are foreign persons unless the person either--

[[Page 134]]

    (A) Discusses participation in the tax shelter with a promoter that 
is a United States person; or
    (B) Obtains and reasonably relies on a written statement from one of 
the promoters that at least one of the promoters is a United States 
person.
    (iv) Discussion. Discussing participation in a transaction includes 
discussing such participation with any person that conveys the tax 
shelter promoter's proposal. For purposes of this paragraph (g)(2), any 
person that participates directly or indirectly in a transaction will be 
treated as having discussed participation in the transaction not later 
than the date of the agreement to participate. Thus, a tax shelter 
participant will be treated as having discussed participation in the 
transaction even if all discussions were conducted by an intermediary 
and the agreement to participate was made indirectly through another 
person acting on the participant's behalf (for example, through an 
intermediary empowered to commit the participant to participate in the 
shelter).
    (v) Special rule for controlled entities. A person (first person) 
will be treated as participating indirectly in a confidential corporate 
tax shelter if a foreign person controlled by the first person 
participates in the shelter, and a significant purpose of the shelter is 
the avoidance or evasion of the first person's Federal income tax. For 
purposes of this paragraph (g)(2)(v), control of a foreign corporation 
or partnership will be determined under the rules of section 6038(e)(2) 
and (3), except that such section shall be applied by substituting 
``10'' for ``50'' each place it appears and ``at least'' for ``more 
than'' each place it appears. In addition, section 6038(e)(2) shall be 
applied for these purposes without regard to the constructive ownership 
rules of section 318 and by treating stock as owned if it is owned 
directly or indirectly. Section 6038(e)(3) shall be applied for these 
purposes without regard to the last sentence of section 6038(e)(3)(B). 
Any beneficiary with a 10 percent or more interest in a foreign trust or 
estate shall be treated as controlling that trust or estate for purposes 
of this paragraph (g)(2)(v).
    (vi) Other rules--(A) For purposes of the registration requirements 
under section 6111(d)(3), it is presumed that the tax shelter promoters 
will receive fees in excess of $100,000 in the aggregate unless the 
person responsible for registering the tax shelter can show otherwise.
    (B) Any person treated as a tax shelter promoter under section 
6111(d) solely by reason of being related (within the meaning of section 
267 or 707) to a foreign promoter will be treated as a foreign promoter 
for purposes of this paragraph (g)(2).
    (h) Effective date. This section applies to confidential corporate 
tax shelters in which any interests are offered for sale after February 
28, 2000. If an interest is sold after February 28, 2000, it is treated 
as offered for sale after February 28, 2000 unless the sale was pursuant 
to a written binding contract entered into on or before February 28, 
2000.

[T.D. 8876, 65 FR 11218, Mar. 2, 2000]



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):

                               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

[[Page 135]]

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 and 
Sec. 301.6111-2T for rules relating to confidential corporate 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. (a) 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, and any transaction a significant 
purpose of the structure of which is the avoidance or evasion of Federal 
income tax within the meaning of section 6111(d)(1)(A) and 
Sec. 301.6111-2T(b). For this purpose, as under Sec. 301.6111-2T, the 
term transaction includes all of the factual elements necessary to 
support the tax benefits that are expected to be claimed with respect to 
any entity, plan, or arrangement, including any series of related steps 
carried out as part of a prearranged plan.
    (b) Section 301.6111-2T provides a procedure for obtaining rulings 
as to whether a transaction is subject to registration under 
Sec. 301.6111-2T. The same procedure shall be available to a person who 
is uncertain whether a transaction constitutes a tax shelter for which a 
list must be maintained under this section. The requirement to make a 
list which contains the information required by this section available 
for inspection by the Secretary shall be suspended during the period 
that such ruling request is pending and for sixty days thereafter; 
however, if it is ultimately determined that the transaction is a tax 
shelter, the pendency of such a ruling request shall not affect the 
requirement to maintain the list or limit the participants required to 
be included on the list or the other information required to be included 
as part of the list.

             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. An 
organizer also includes a promoter described in section 6111(d)(2). 
Under section 6111(d)(2), a

[[Page 136]]

promoter is any person who participates in the organization, management, 
or sale of the tax shelter or any related person (within the meaning of 
section 267 or 707).
    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) 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. In addition, in any case in 
which a person has directly or indirectly paid consideration to an 
organizer or seller for the right to participate in a tax shelter, for 
services necessary to the organization or structure of such tax shelter, 
or for information that is integral to participation in such tax 
shelter, the participant shall be considered to have acquired an 
interest in the tax shelter and to have been sold an interest in the tax 
shelter by the organizer or seller.

                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 
(as defined in section 465(b)(3)(C)) 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

[[Page 137]]

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 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 the organizer or a person related (as defined in section 
465(b)(3)(C)) to the organizer, or the tax shelter or a person related 
(as defined in section 465(b)(3)(C)) to the tax shelter (provided the 
organizer is involved in the tax shelter on the date the interest is 
transferred to the seller). See Q&A-8 of this section. 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 described in 
Q&A-4 of this section. 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--

[[Page 138]]

    (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 required to be registered under 
section 6111 at the time an agreement under A-12 of this section is 
signed, a seller or an 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--
    (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 described in A-4 of this section at the 
time an agreement under A-12 of this section is signed, a seller or an 
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, or the tax shelter becomes subject to the registration 
requirements under section 6111, 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 or that the tax 
shelter is subject to the registration requirements of section 6111, 
whichever applies, 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

[[Page 139]]

under A-12 of this section (including organizers who are such sellers) 
with respect to a tax shelter that is required to be registered under 
section 6111 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 designated person. In 
the case of a tax shelter described in A-4 of this section, a notice to 
investors need not be provided until such time, if any, as the tax 
shelter ceases to be a projected income investment under A-57G of 
Sec. 301.6111-1T, or the tax shelter becomes subject to the registration 
requirements under section 6111. 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, or that the tax shelter has 
otherwise become subject to the registration requirements under section 
6111, whichever applies.

                  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?
    A-15. An investor who retransfers an interest in a tax shelter that 
is described in A-4 of this section, is not required to maintain a list 
with respect to the retransfer unless prior to the retransfer the tax 
shelter ceases to be a projected income investment under A-57G of 
Sec. 301.6111-1T or otherwise becomes subject to the registration 
requirements under section 6111. 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) A list must contain the following information--

[[Page 140]]

    (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 and, in the case of a tax shelter that is a 
transaction described in section 6111(d)(1)(A) and Sec. 301.6111-2T(b), 
the name, address, and TIN of any indirect corporate participant in the 
shelter if known to the organizer or seller;
    (4) If applicable, 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) The amount of money invested in the tax shelter by each person 
required to be included on the list under A-8 or A-10 of this section;
    (7) A detailed description of the tax shelter that describes both 
the structure of the tax shelter and the intended tax benefits for 
participants in the tax shelter;
    (8) A summary or schedule of the tax benefits that each person is 
intended or expected to derive from participation in the tax shelter, if 
known by the organizer or seller;
    (9) Copies of any additional written materials, including tax 
analyses or opinions, relating to the tax shelter that have been given 
to any potential participants in the tax shelter or to any 
representatives, tax advisors, or agents of such potential participants 
by the organizer or seller or by any other person who has participated 
in the offering of the tax shelter (excluding any written materials that 
the organizer or seller has never possessed);
    (10) If the interest was not acquired from the person maintaining 
the list, the name of the person from whom the interest was acquired; 
and
    (11) 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.
    (b) In any case in which an organizer or a seller of a potentially 
abusive tax shelter believes that information required to be maintained 
as part of the list for that tax shelter is protected by the attorney-
client privilege or constitutes confidential tax advice protected under 
section 7525(a), such information may be withheld from disclosure to the 
Service, provided that the organizer or seller provides the Service with 
a statement signed under penalties of perjury with information and 
representations required in that statement that are the same as those 
required by Sec. 301.6111-2T if the promoter of a confidential corporate 
tax shelter asserts that information required to be included with Form 
8264, ``Application for Registration of a Tax Shelter,'' is privileged.
    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. 
Interests in substantially similar tax shelter transactions that are 
sold to different persons generally are to be treated as interests in 
the same tax shelter for purposes of this section. Further, the list for 
each tax shelter must identify each other tax shelter (if any) that the 
organizer or seller has offered that has not been treated as part of the 
same tax shelter, but that utilizes a similar structure or is intended 
to produce similar tax benefits.

                           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

[[Page 141]]

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 acquired by an investor (within the meaning of paragraph 
(c) of A-6 of this section) in a potentially abusive tax shelter after 
February 28, 2000. If a transaction becomes a potentially abusive tax 
shelter after interests are acquired by investors, an organizer or a 
seller must maintain a list with respect to any interest in the 
transaction acquired after the transaction becomes a potentially abusive 
tax shelter. Additionally, the Internal Revenue Service will not ask to 
inspect any list for a potentially abusive tax shelter, other than a tax 
shelter described in section 6111(c), until August 29, 2000. The lists 
required by the preceding two sentences with regard to interests 
acquired in potentially abusive tax shelters must contain the 
information required by A-17 of this section as it relates to such 
interests. The rules that apply with respect to interests acquired in 
potentially abusive tax shelters acquired on or before February 28, 
2000, are contained in 26 CFR part 301 revised as of April 1, 1999.

(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; T.D. 8875, 65 FR 11213, 
Mar. 2, 2000]



Sec. 301.6114-1  Treaty-based return positions.

    (a) Reporting requirement--(1) General rule. (i) Except as provided 
in paragraph (c) of this section, if a taxpayer takes a return position 
that any treaty of the United States (including, but not limited to, an 
income tax treaty, estate and gift tax treaty, or friendship, commerce 
and navigation treaty) overrules or modifies any provision of the 
Internal Revenue Code and thereby effects (or potentially effects) a 
reduction of any tax incurred as any time, the taxpayer shall disclose 
such return position on a statement (in the form required in paragraph 
(d) of this section) attached to such return.
    (ii) If a return of tax would not otherwise be required to be filed, 
a return must nevertheless be filed for purposes of making the 
disclosure required by this section. For this purpose, such return need 
include only the taxpayer's name, address, taxpayer identifying number, 
and be signed under penalties of perjury (as well as the subject 
disclosure). Also, the taxpayer's taxable year shall be deemed to be the 
calendar year (unless the taxpayer has previously established, or timely 
chooses for this purpose to establish, a different taxable year). In the 
case of a disclosable return position relating solely to income subject 
to withholding

[[Page 142]]

(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 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

[[Page 143]]

United States by reason of section 861(a)(2)(B) or section 884(f)(1)(A); 
or
    (ii) A treaty exempts from tax, or reduces the rate of tax on, fixed 
or determinable annual or periodical income subject to withholding under 
section 1441 or 1442 that a foreign person receives from a U.S. person, 
but only if described in paragraphs (b)(4)(ii)(A) and (B) of this 
section, or in paragraph (b)(4)(ii)(C) or (D) of this section as 
follows--
    (A) the payment is not properly reported to the Service on a Form 
1042S; and
    (B) The foreign person is any of the following:
    (1) A controlled foreign corporation (as defined in section 957) in 
which the U.S. person is a U.S. shareholder within the meaning of 
section 951(b);
    (2) A foreign corporation that is controlled within the meaning of 
section 6038 by the U.S. person;
    (3) A foreign shareholder of the U.S. person that, in the case of 
tax years beginning on or before July 10, 1989, is controlled within the 
meaning of section 6038A by the foreign shareholder, or, in the case of 
tax years beginning after July 10, 1989, is 25-percent owned within the 
meaning of section 6038A by the foreign shareholder; or
    (4) With respect to payments made after October 10, 1990, a foreign 
related party, as defined in section 6038A (c)(2)(B), the the U.S. 
person; or
    (C) For payments made after December 31, 2000, with respect to a 
treaty that contains a limitation on benefits article, that--
    (1) The treaty exempts from tax, or reduces the rate of tax on 
income subject to withholding (as defined in Sec. 1.1441-2(a) of this 
chapter) that is received by a foreign person (other than a State, 
including a political subdivision or local authority) that is the 
beneficial owner of the income and the beneficial owner is related to 
the person obligated to pay the income within the meaning of sections 
267(b) and 707(b), and the income exceeds $500,000; and
    (2) A foreign person (other than an individual or a State, including 
a political subdivision or local authority) meets the requirements of 
the limitation on benefits article of the treaty; or
    (D) For payments made after December 31, 2000, with respect to a 
treaty that imposes any other conditions for the entitlement of treaty 
benefits, for example as a part of the interest, dividends, or royalty 
article, that such conditions are met;
    (5) That, notwithstanding paragraph (c)(1)(i) of this section, under 
a treaty--
    (i) Income that is effectively connected with a U.S. trade or 
business of a foreign corporation or a nonresident alien is not 
attributable to a permanent establishment or a fixed base of operations 
in the United States and, thus, is not subject to taxation on a net 
basis, or that
    (ii) Expenses are allowable in determining net business income so 
attributable, notwithstanding an inconsistent provision of the Code;
    (6) Except as provided in paragraph (c)(1)(iv) of this section, that 
a treaty alters the source of any item of income or deduction;
    (7) That a treaty grants a credit for a specific foreign tax for 
which a foreign tax credit would not be allowed by the Code; or
    (8) For returns relating to taxable years for which the due date for 
filing returns (without extensions) is after December 15, 1997, that 
residency of an individual is determined under a treaty and apart from 
the Internal Revenue Code.
    (c) Reporting requirement waived. (1) Pursuant to the authority 
contained in section 6114 (b), reporting is waived under this section 
with respect to any of the following return positions taken by the 
taxpayer:
    (i) Notwithstanding paragraph (b)(4) or (5) of this section, that a 
treaty has reduced the rate of withholding tax otherwise applicable to a 
particular type of fixed or determinable annual or periodical income 
subject to withholding under section 1441 or 1442, such as dividends, 
interest, rents, or royalties to the extent such income is beneficially 
owned by an individual or a State (including a political subdivision or 
local authority);
    (ii) For returns relating to taxable years for which the due date 
for filing returns (without extensions) is on or

[[Page 144]]

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 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

[[Page 145]]

not separately report its payment of actual or deemed dividends or 
interest exempt from tax by reason of a treaty (or any liability for tax 
imposed by reason of section 884).
    (ii) Single income item. For purposes of the statement of facts 
relied upon to support each separate Treaty-Based Return Position taken, 
a taxpayer may treat payments or income items of the same type (e.g., 
interest items) received from the same ultimate payor (e.g., the obligor 
on a note) as a single separate payment or income item.
    (iii) Foreign source effectively connected income. If a taxpayer 
takes the return position that, under the treaty, income that would be 
income effectively connected with a U.S. trade or business is not 
subject to U.S. taxation because it is income treated as derived from 
sources outside the United States, the taxpayer may treat payments or 
income items of the same type (e.g., interest items) as a single 
separate payment or income item.
    (iv) Sales or services income. Income from separate sales or 
services, whether or not made or performed by an agent (independent or 
dependent), to different U.S. customers on behalf of a foreign 
corporation not having a permanent establishment in the United States 
may be treated as a single payment or income item.
    (v) Foreign insurers or reinsurers. For purposes of reporting by 
foreign insurers or reinsurers, as described in paragraph (c)(1)(vii)(B) 
of this section, such reporting must separately set forth premiums paid 
with respect to casualty insurance and indemnity bonds (subject to 
section 4371(1)); life insurance, sickness and accident policies, and 
annuity contracts (subject to section 4371(2)); and reinsurance (subject 
to section 4371(3)). All premiums paid with respect to each of these 
three categories may be treated as a single payment or income item 
within that category. For reports first due before May 1, 1991, the 
report may disclose, for each of the three categories, the total amount 
of premiums derived by the foreign insurer or reinsurer in U.S. dollars 
(even if a portion of these premiums relate to risks that are not U.S. 
situs). Reasonable estimates of the amounts required to be disclosed 
will satisfy these reporting requirements.
    (e) Effective date. This section is effective for taxable years of 
the taxpayer for which the due date for filing returns (without 
extensions) occurs after December 31, 1988. However, if--
    (1) A taxpayer has filed a return for such a taxable year, without 
complying with the reporting requirement of this section, before 
November 13, 1989, or
    (2) A taxpayer is not otherwise than by paragraph (a) of this 
section required to file a return for a taxable year before November 13, 
1989,

Such taxpayer must file (apart from any earlier filed return) the 
statement required by paragraph (d) of this section before June 12, 
1990, by mailing the required statement to the Internal Revenue Service, 
P.O. Box 21086, Philadelphia, PA 19114. Any such statement filed apart 
from a return must be dated, signed and sworn to by the taxpayer under 
the penalties of perjury. In addition, with respect to any return due 
(without extensions) on or before March 10, 1990, the reporting required 
by paragraph (a) of this section must be made no later than June 12, 
1990. If a taxpayer files or has filed a return on or before November 
13, 1989, that provides substantially the same information required by 
paragraph (d) of this section, no additional submission will be 
required. Foreign insurers and reinsurers subject to reporting described 
in paragraph (c)(7)(ii) of this section must so report for calendar 
years 1988 and 1989 no later than August 15, 1990.
    (f) Cross reference. For the provisions concerning penalties for 
failure to disclose a treaty-based return position, see section 6712 and 
Sec. 301.6712-1.

[T.D. 8292, 55 FR 9440, Mar. 14, 1990; 55 FR 10237, Mar. 20, 1990, as 
amended by T.D. 8305, 55 FR 28609, July 12, 1990; T.D. 8733, 62 FR 
53385, Oct. 14, 1997; T.D. 8734, 62 FR 53495, Oct. 14, 1997; T.D. 8804, 
63 FR 72189, Dec. 31, 1998; T.D. 8856, 64 FR 73413, Dec. 30, 1999]

    Effective Date Notes: 1. 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. By T.D. 8804, 63 FR 72183, Dec. 31, 1998, the 
effectiveness of the amendements was delayed

[[Page 146]]

until Jan. 1, 2000. By T.D. 8856, 64 FR 73408, Dec. 30, 1999 the 
effectiveness of the amendments was delayed until Jan. 1, 2001. 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 Indentification 
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 calender 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 
a dividends, interest, rents or royalties:

                                * * * * *

    2. By T.D. 8856, 64 FR 73413, Dec. 30, 1999 Sec. 301.6114-1 
paragraphs (b)(4)(ii)(C) and (b)(4)(ii)(D) were amended by replacing the 
date ``December 31, 1999'' with the date ``December 31, 2000'' in each 
paragraph, effective Jan. 1, 2001.

                      Time and Place for Paying Tax

                  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.



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

[[Page 147]]

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 agreement 
applies (other than actions pursuant to subchapter D of chapter 64 of 
subtitle F of the Internal Revenue Code against a person that is a party 
to the agreement), including any actions enumerated in the agreement. 
The actions include, for example--
    (1) Requesting updated financial information from any party to the 
agreement;
    (2) Conducting further investigations (including the issuance and 
enforcement of summonses) in connection with the tax liability to which 
the installment agreement applies;
    (3) Filing or refiling notices of federal tax lien; and
    (4) Taking collection action against any person who is not a party 
to the

[[Page 148]]

agreement but who is liable for the tax to which the agreement applies.
    (e) Termination. If an installment agreement is terminated by the 
director, the director may pursue collection of the unpaid balance of 
the tax liability.
    (f) Cross-reference. Pursuant to section 6601(b)(1), the last day 
prescribed for payment is determined without regard to any installment 
agreement, including for purposes of computing penalties and interest 
provided by the Internal Revenue Code.
    (g) Effective date. This section is effective December 23, 1994.

[T.D. 8583, 59 FR 66193, Dec. 23, 1994]

                      Extension of Time for Payment



Sec. 301.6161-1  Extension of time for paying tax.

    For provisions concerning the extension of time for paying a 
particular tax or for paying an amount determined as a deficiency, see 
the regulations relating to such tax.



Sec. 301.6162-1  Extension of time for payment of tax on gain attributable to liquidation of personal holding companies.

    For provisions relating to the extension of time for payment of tax 
on gain attributable to liquidation of personal holding companies, see 
Sec. 1.6162-1 of this chapter (Income Tax Regulations).



Sec. 301.6163-1  Extension of time for payment of estate tax on value of reversionary or remainder interest in property.

    For provisions relating to the extension of time for payment of 
estate tax on value of reversionary or remainder interest in property, 
see Sec. 20.6163-1 of this chapter (Estate Tax Regulations).



Sec. 301.6164-1  Extension of time for payment of taxes by corporations expecting carrybacks.

    For provisions relating to the extension of time for payment of 
taxes by corporations expecting carrybacks, see Secs. 1.6164-1 to 
1.6164-9, inclusive, of this chapter (Income Tax Regulations).



Sec. 301.6165-1  Bonds where time to pay the tax or deficiency has been extended.

    For provisions concerning bonds where time to pay a tax or 
deficiency has been extended, see the regulations relating to the 
particular tax.



Sec. 301.6166-1  Extension of time for payment of estate tax where estate consists largely of interest in closely held business.

    For provisions relating to the extension of time for payment of 
estate tax where estate consists largely of interest in closely held 
business, see Secs. 20.6166-1 to 20.6166-4, inclusive, of this chapter 
(Estate Tax Regulations).

                               Assessment



In General--Table of Contents






Sec. 301.6201-1  Assessment authority.

    (a) In general. The district director is authorized and required to 
make all inquiries necessary to the determination and assessment of all 
taxes imposed by the Internal Revenue Code of 1954 or any prior internal 
revenue law. The district director is further authorized and required, 
and the director of the regional service center is authorized, to make 
the determinations and the assessments of such taxes. However, certain 
inquiries and determinations are, by direction of the Commissioner, made 
by other officials, such as assistant regional commissioners. The term 
``taxes'' includes interest, additional amounts, additions to the taxes, 
and assessable penalties. The authority of the district director and the 
director of the regional service center to make assessments includes the 
following:
    (1) Taxes shown on return. The district director or the director of 
the regional service center shall assess all taxes determined by the 
taxpayer or by the district director or the director of the regional 
service center and disclosed on a return or list.
    (2) Unpaid taxes payable by stamp. (i) If without the use of the 
proper stamp:
    (a) Any article upon which a tax is required to be paid by means of 
a stamp is sold or removed for sale or use by the manufacturer thereof, 
or

[[Page 149]]

    (b) Any transaction or act upon which a tax is required to be paid 
by means of a stamp occurs;

The district director, upon such information as he can obtain, must 
estimate the amount of the tax which has not been paid and the district 
director or the director of the regional service center must make 
assessment therefor upon the person the district director determines to 
be liable for the tax. However, the district director or the director of 
the regional service center may not assess any tax which is payable by 
stamp unless the taxpayer fails to pay such tax at the time and in the 
manner provided by law or regulations.
    (ii) If a taxpayer gives a check or money order as a payment for 
stamps but the check or money order is not paid upon presentment, then 
the district director or the director of the regional service center 
shall assess the amount of the check or money order against the taxpayer 
as if it were a tax due at the time the check or money order was 
received by the district director.
    (3) Erroneous income tax prepayment credits. If the amount of income 
tax withheld or the amount of estimated income tax paid is overstated by 
a taxpayer on a return or on a claim for refund, the amount so 
overstated which is allowed against the tax shown on the return or which 
is allowed as a credit or refund shall be assessed by the district 
director or the director of the regional service center in the same 
manner as in the case of a mathematical error on the return. See section 
6213 (b)(1), relating to exceptions to restrictions on assessment.
    (b) Estimated income tax. Neither the district director nor the 
director of the regional service center shall assess any amount of 
estimated income tax required to be paid under section 6153 or 6154 
which is unpaid.
    (c) Compensation of child. Any income tax assessed against a child, 
to the extent of the amount attributable to income included in the gross 
income of the child solely by reason of section 73(a) or the 
corresponding provision of prior law, if not paid by the child, shall, 
for the purposes of the income tax imposed by chapter 1 of the Code (or 
the corresponding provisions of prior law), be considered as having also 
been properly assessed against the parent. In any case in which the 
earnings of the child are included in the gross income of the child 
solely by reason of section 73(a) or the corresponding provision of 
prior law, the parent's liability is an amount equal to the amount by 
which the tax assessed against the child (and not paid by him) has been 
increased by reason of the inclusion of such earnings in the gross 
income of the child. Thus, if for the calendar year 1954 the child has 
income of $1,000 from investments and of $3,000 for services rendered, 
and the latter amount is includible in the gross income of the child 
under section 73(a) and the child has no wife or dependents, the tax 
liability determined under section 3 is $625. If the child had only the 
investment income of $1,000, his tax liability would be $62. If the tax 
of $625 is assessed against the child, the difference between $625 and 
$62, or $563, is the amount of such tax which is considered to have been 
properly assessed against the parent, if not paid by the child.



Sec. 301.6203-1  Method of assessment.

    The district director and the director of the regional service 
center shall appoint one or more assessment officers. The district 
director shall also appoint assessment officers in a Service Center 
servicing his district. The assessment shall be made by an assessment 
officer signing the summary record of assessment. The summary record, 
through supporting records, shall provide identification of the 
taxpayer, the character of the liability assessed, the taxable period, 
if applicable, and the amount of the assessment. The amount of the 
assessment shall, in the case of tax shown on a return by the taxpayer, 
be the amount so shown, and in all other cases the amount of the 
assessment shall be the amount shown on the supporting list or record. 
The date of the assessment is the date the summary record is signed by 
an assessment officer. If the taxpayer requests a copy of the record of 
assessment, he shall be furnished a copy of the pertinent parts of the 
assessment which set forth the name of the taxpayer, the date of 
assessment, the character of the liability

[[Page 150]]

assessed, the taxable period, if applicable, and the amounts assessed.



Sec. 301.6204-1  Supplemental assessments.

    If any assessment is incomplete or incorrect in any material 
respect, the district director or the director of the regional service 
center, subject to the restrictions with respect to the assessment of 
deficiencies in income, estate, gift, chapter 41, 42, 43, and 44 taxes, 
and subject to the applicable period of limitation, may make a 
supplemental assessment for the purpose of correcting or completing the 
original assessment.

[T.D. 7838, 47 FR 44249, Oct. 7, 1982]



Sec. 301.6205-1  Special rules applicable to certain employment taxes.

    For regulations under section 6205, see Sec. 31.6205-1 of this 
chapter (Employment Tax Regulations).

                          Deficiency Procedures



Sec. 301.6211-1  Deficiency defined.

    (a) In the case of the income tax imposed by subtitle A of the Code, 
the estate tax imposed by chapter 11, subtitle B, of the Code, the gift 
tax imposed by chapter 12, subtitle B, of the Code, and any excise tax 
imposed by chapter 41, 42, 43, or 44 of the Code, the term 
``deficiency'' means the excess of the tax, (income, estate, gift, or 
excise tax as the case may be) over the sum of the amount shown as such 
tax by the taxpayer upon his return and the amounts previously assessed 
(or collected without assessment) as a deficiency; but such sum shall 
first be reduced by the amount of rebates made. If no return is made, or 
if the return (except a return of income tax pursuant to sec. 6014) does 
not show any tax, for the purpose of the definition ``the amount shown 
as the tax by the taxpayer upon his return'' shall be considered as 
zero. Accordingly, in any such case, if no deficiencies with respect to 
the tax have been assessed, or collected without assessment, and no 
rebates with respect to the tax have been made, the deficiency is the 
amount of the income tax imposed by subtitle A, the estate tax imposed 
by chapter 11, the gift tax imposed by chapter 12, or any excise tax 
imposed by chapter 41, 42, 43, or 44. Any amount shown as additional tax 
on an ``amended return,'' so-called (other than amounts of additional 
tax which such return clearly indicates the taxpayer is protesting 
rather than admitting) filed after the due date of the return, shall be 
treated as an amount shown by the taxpayer ``upon his return'' for 
purposes of computing the amount of a deficiency.
    (b) For purposes of the definition, the income tax imposed by 
subtitle A and the income tax shown on the return shall both be 
determined without regard to the credit provided in section 31 for 
income tax withheld at the source and without regard to so much of the 
credit provided in section 32 for income taxes withheld at the source as 
exceeds 2 percent of the interest on tax-free covenant bonds described 
in section 1451. Payments on account of estimated income tax, like other 
payments of tax by the taxpayer, shall likewise be disregarded in the 
determination of a deficiency. Any credit resulting from the collection 
of amounts assessed under section 6851 or 6852 as the result of a 
termination assessment shall not be taken into account in determining a 
deficiency.
    (c) The computation by the Internal Revenue Service, pursuant to 
section 6014, of the income tax imposed by subtitle A shall be 
considered as having been made by the taxpayer and the tax so computed 
shall be considered as the tax shown by the taxpayer upon his return.
    (d) If so much of the credit claimed on the return for income taxes 
withheld at the source as exceeds 2 percent of the interest on tax-free 
convenant bonds is greater than the amount of such credit allowable, the 
unpaid portion of the tax attributable to such difference will be 
collected not as a deficiency but as an underpayment of the tax shown on 
the return.
    (e) This section may be illustrated by the following examples:

    Example 1. The amount of income tax shown by the taxpayer upon his 
return for the calendar year 1954 was $1,600. The taxpayer had no 
amounts previously assessed (or collected without assessment) as a 
deficiency. He claimed a credit in the amount of $2,050 for tax withheld 
at source on wages under section 3402, and a refund of $450 (not a 
rebate under section 6211) was made to him

[[Page 151]]

as an overpayment of tax for the taxable year. It is later determined 
that the correct tax for the taxable year is $1,850. A deficiency of 
$250 is determined as follows:

Tax imposed by subtitle A.............................   $1,850
Tax shown on return...................................   $1,600
Tax previously assessed (or collected without              None
 assessment) as a deficiency..........................
                                                       ---------
    Total.............................................    1,600
Amount of rebates made................................     None
                                                       ---------
Balance...............................................  .......   51,600
                                                                --------
Deficiency............................................  .......      250
 

    Example 2. The taxpayer made a return for the calendar year 1954 
showing a tax of $1,250 before any credits for tax withheld at the 
source. He claimed a credit in the amount of $800 for tax withheld at 
source on wages under section 3402 and $60 for tax paid at source under 
section 1451 upon interest on bonds containing a tax-free covenant. The 
taxpayer had no amounts previously assessed (or collected without 
assessment) as a deficiency. The district director determines that the 2 
percent tax paid at the source on tax-free covenant bonds is $40 instead 
of $60 as claimed by the taxpayer and that the tax imposed by subtitle A 
is $1,360 (total tax $1,400 less $40 paid at source on tax-free covenant 
bonds). A deficiency in the amount of $170 is determined as follows:

Tax imposed by subtitle A ($1,400 minus $40)...................   $1,360
Tax shown on return ($1,250 minus $60)................   $1,190
Tax previously assessed (or collected without              None
 assessment) as a deficiency..........................
                                                       ---------
    Total.............................................    1,190
Amount of rebates made................................     None
                                                       ---------
Balance...............................................  .......    1,190
                                                                --------
Deficiency............................................  .......      170
 

    (f) As used in section 6211, the term rebate means so much of an 
abatement, credit, refund, or other repayment as is made on the ground 
that the income tax imposed by subtitle A, the estate tax imposed by 
chapter 11, the gift tax imposed by chapter 12, or the excise tax 
imposed by chapter 41, 42, 43, or 44, is less than the excess of (1) the 
amount shown as the tax by the taxpayer upon the return increased by the 
amount previously assessed (or collected without assessment) as a 
deficiency over (2) the amount of rebates previously made. For example, 
assume that the amount of income tax shown by the taxpayer upon his 
return for the taxable year is $600 and the amount claimed as a credit 
under section 31 for income tax withheld at the source is $900. If the 
district director determines that the tax imposed by subtitle A is $600 
and makes a refund of $300, no part of such refund constitutes a 
``rebate'' since the refund is not made on the ground that the tax 
imposed by subtitle A is less than the tax shown on the return. If, 
however, the district director determines that the tax imposed by 
subtitle A is $500 and refunds $400, the amount of $100 of such refund 
would constitute a rebate since it is made on the ground that the tax 
imposed by subtitle A ($500) is less than the tax shown on the return 
($600). The amount of such rebate ($100) would be taken into account in 
arriving at the amount of any deficiency subsequently determined.

[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7102, 36 FR 5498, Mar. 
24, 1971; T.D. 7575, 43 FR 58817, Dec. 18, 1978; T.D. 7838, 47 FR 44249, 
Oct. 7, 1982; T.D. 8628, 60 FR 62212, Dec. 5, 1995]



Sec. 301.6212-1  Notice of deficiency.

    (a) General rule. If a district director or director of a service 
center (or regional director of appeals), determines that there is a 
deficiency in respect of income, estate, or gift tax imposed by subtitle 
A or B, or excise tax imposed by chapter 41, 42, 43, or 44, of the Code, 
such official is authorized to notify the taxpayer of the deficiency by 
either registered or certified mail.
    (b) Address for notice of deficiency--(1) Income, gift, and chapter 
41, 42, 43, and 44 taxes. Unless the district director for the district 
in which the return in question was filed has been notified under the 
provisions of section 6903 as to the existence of a fiduciary 
relationship, notice of a deficiency in respect of income tax, gift tax, 
or tax imposed by chapter 41, 42, 43, or 44 shall be sufficient if 
mailed to the taxpayer at his last known address, even though such 
taxpayer is deceased, or is under a legal disability, or, in the case of 
a corporation, has terminated its existence.
    (2) Joint income tax returns. If a joint income tax return has been 
filed by husband and wife, the district director (or assistant regional 
commissioner, appellate) may, unless the district director for the 
district in which such joint return was filed has been notified by 
either spouse that a separate residence has been established, send 
either a joint or separate notice of deficiency to the taxpayers at 
their last known

[[Page 152]]

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 
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,

[[Page 153]]

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 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

[[Page 154]]

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 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.

[[Page 155]]



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) Penalties determined at partnership level (partnership taxable 
years ending after August 5, 1997). Any penalty, addition to tax, or 
additional amount that relates to an adjustment to a partnership item, 
shall be determined at the partnership level. Partner level defenses to 
such items can only be asserted through refund actions following 
assessment and payment. Assessment of any penalty, addition to tax, or 
additional amount that relates to an adjustment to a partnership item 
shall be made based on partnership level determinations. Partnership 
level determinations include all the legal and factual determinations 
that underlie the determination of any penalty, addition to tax, or 
additional amount, other than partner level defenses specified in 
paragraph (d) of this section.
    (d) Partner level defenses. Partner level defenses to any penalty, 
addition to tax, or additional amount that relates to an adjustment to a 
partnership item, may not be asserted in the partnership level 
proceeding, but may be asserted through separate refund actions 
following assessment and payment. See section 6230(c)(4). Partner level 
defenses are limited to those that are personal to the partner or are 
dependant upon the partner's separate return, and cannot be determined 
at the partnership level. Examples of these determinations are: whether 
any applicable threshold underpayment of tax has been met with respect 
to the partner or whether the partner has met the criteria of section 
6664(b)(penalties applicable only where return is filed), or section 
6664(c)(1)(reasonable cause exception) subject to partnership level 
determinations as to the applicability of section 6664(c)(2).
    (e) Cross 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, as amended by T.D. 8808, 64 FR 
3838, Jan. 26, 1999]



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.


[[Page 156]]


    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 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.


[[Page 157]]


    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 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

[[Page 158]]

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]



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

[[Page 159]]

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 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

[[Page 160]]

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 
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

[[Page 161]]

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]



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. 
Furthermore, reference to a prior general notification to the Service 
that a partner who would otherwise be the tax matters partner is a 
debtor in a bankruptcy proceeding or has had a receiver appointed for 
him in a receivership proceeding is not sufficient unless a copy of the 
notification document referred to is attached to the statement.
    (d) Information supplied by a person other than the tax matters 
partner. The 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

[[Page 162]]

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, as 
amended by T.D. 8808, 64 FR 3838, Jan. 26, 1999]



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

[[Page 163]]

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.
    (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)

[[Page 164]]

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
    (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.

[[Page 165]]

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
    (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.


[[Page 166]]


    (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]



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 settlement terms (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

[[Page 167]]

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 settlement terms--(1) In general. 
Consistent settlement terms are those based on the same determinations 
with respect to partnership items. However, consistent settlement terms 
also may include partnership level determinations of any penalty, 
addition to tax, or additional amount that relates to partnership items. 
Settlements with respect to partnership items shall be self-contained; 
thus, a concession by one party with respect to a partnership item may 
not be based upon a concession by another party with respect to any item 
that is not a partnership item other than any penalty, addition to tax, 
or additional amount that relates to an adjustment to a partnership 
item. Consistent agreements, whether comprehensive or partial, must be 
identical to the original settlement (that is, the settlement upon which 
the offered settlement terms are based). A consistent agreement must 
mirror the original settlement and may not be limited to selected items 
from the original settlement. Once a partner has settled a partnership 
item, or penalty, addition to tax, or additional amount that relates to 
an adjustment to a partnership item, that partner may not subsequently 
request settlement terms consistent with a settlement that contains the 
previously settled item. The requirement for consistent settlement terms 
applies only if--
    (i) The items were partnership items (and any related penalty, 
addition to tax, or additional amount) for the partner entering into the 
original settlement immediately before the original settlement; and
    (ii) The items are partnership items (and any related penalty, 
addition to tax, or additional amount) for the partner requesting the 
consistent settlement at the time the partner files the request.
    (2) Effect of consistent agreement. Consistent settlement terms are 
reflected in a consistent agreement. A consistent agreement is not a 
settlement agreement which gives rise to further consistent settlement 
rights because it is required to be given without volitional agreement 
of the Secretary. Therefore, a consistent agreement required to be 
offered to a requesting taxpayer is not a settlement agreement under 
section 6224(c)(2) of the Internal Revenue Code, or paragraph (c)(3) of 
this section which starts a new period for requesting consistent 
settlement terms. For all other purposes of the Internal Revenue Code, 
however, (e.g., binding effect under section 6224(c)(1), and conversion 
to nonpartnership items under section 6231(b)(1)(C)) a consistent 
agreement is treated as a settlement agreement.
    (c) Time and manner of requesting consistent settlements--(1) In 
general. A partner desiring settlement terms consistent with the terms 
of any settlement agreement entered into between any other partner and 
the 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 written statement 
described in paragraph (c)(1) of this section shall--
    (i) Identify the statement as a request for consistent settlement 
terms under section 6224(c)(2),
    (ii) Contain the name, address, and taxpayer identification number 
of the partnership and of the partner requesting the settlement offer 
(and, in the case of an indirect partner, of the pass-thru partner 
through which the indirect partner holds an interest),
    (iii) Identify the earlier agreement to which the request refers, 
and
    (iv) Be signed by the partner making the request.
    (3) Time for filing request. The statement shall be filed not later 
than the later of--
    (i) The 150th day after the day on which the notice of final 
partnership administrative adjustment is mailed to the tax matters 
partner, or
    (ii) The 60th day after the day on which the settlement agreement 
was entered into.
    (d) Examples. The following examples illustrate the principles set 
out in this section.


[[Page 168]]


    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, accepts the 
treatment of all other partnership items on the partnership return, and 
imposes a penalty for negligence related to the loss disallowance. 
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 (and a related penalty) 
for X immediately before X enters into the settlement agreement and are 
partnership items (and a related penalty) for Y at the time of the 
request. The Service must offer Y settlement terms allowing a $6,000 
loss, a negligence penalty on the $4,000 disallowance, and otherwise 
reflecting the treatment of partnership items on the partnership return.
    Example 2. F files inconsistently with partnership P and reports the 
inconsistency. The 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, as amended by T.D. 8808, 64 FR 
3839, Jan. 26, 1999]



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 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

[[Page 169]]

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 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

[[Page 170]]

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(b)-2T  Special rule with respect to debtors in Title 11 cases (temporary).

    (a) In general. Notwithstanding any other law or rule of law, if an 
agreement is entered into under section 6229(b)(1)(B), and the agreement 
is signed by a person who would be the tax matters partner but for the 
fact that, at the time that the agreement is executed, the person is a 
debtor in a bankruptcy proceeding under Title 11 of the United States 
Code, such agreement shall be binding on all partners in the partnership 
unless the Service has been notified of the bankruptcy proceeding in 
accordance with paragraph (b) of this section.
    (b) Procedures for notifying the Service of a partner's bankruptcy 
proceeding. (1) The Service shall be notified of the bankruptcy 
proceeding of the tax matters partner in accordance with the procedures 
set forth in Sec. 301.6223(c)-1T.
    (2) In addition to the information specified in Sec. 301.6223(c)-1T, 
notification that a person is (or was) a debtor in a bankruptcy 
proceeding shall include the date the bankruptcy proceeding was filed, 
the name and address of the court in which the bankruptcy proceeding 
exists (or took place), the caption of the bankruptcy proceeding 
(including the docket number or other identification number used by the 
court), and the status of the proceeding as of the date of notification.

[T.D. 8808, 64 FR 3839, Jan. 26, 1999]



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. 301.6229(f)-1T  Special rule for partial settlement agreements (temporary).

    (a) In general. If a partner enters into a settlement agreement with 
the Service with respect to the treatment of some of the partnership 
items in dispute for a partnership taxable year, but other partnership 
items for such year remain in dispute, the period of limitations for 
assessing any tax attributable to the settled items shall be determined 
as if such agreement had not been entered into.
    (b) Other items remaining in dispute. Pursuant to section 6226(c), a 
partner is a party to a partnership level judicial proceeding with 
respect to partnership items. When a partner settles partnership items, 
the settled partnership items convert to nonpartnership items

[[Page 171]]

under section 6231(b)(1)(C) and will not be subject to any future or 
pending partnership level proceeding pursuant to section 6226(d)(1). The 
remaining unsettled partnership items, however, will remain subject to 
determination under partnership level administrative and judicial 
procedures. Consequently, any remaining unsettled items will be deemed 
to remain in dispute. Thus, the period for assessing settled items will 
be governed by the period for assessing the remaining unsettled items.

[T.D. 8808, 64 FR 3839, Jan.26, 1999]



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 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) is applied to the number of natural persons 
(other than nonresident aliens), C corporations, and estates of deceased 
partners that were partners at any one time during the partnership 
taxable year. Thus, for example, a partnership that at no time during 
the taxable year had more than 10 partners may be treated as a small 
partnership even if, because of transfers of interests in the 
partnership, 11 or more natural persons, C corporations, or estates of 
deceased partners owned interests in the partnership for some portion of 
the taxable year. 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) Determination made annually. The determination of whether a 
partnership

[[Page 172]]

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 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, as 
amended by T.D. 8808, 64 FR 3839, Jan. 26, 1999]



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

[[Page 173]]

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:
    (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.

[[Page 174]]

    (2) Contributions. For purposes of its books and records, or for 
purposes of furnishing information to a partner, the partnership needs 
to determine:
    (i) The character of the amount received from a partner (for 
example, whether it is a contribution, a loan, or a repayment of a 
loan);
    (ii) The amount of money contributed by a partner;
    (iii) The applicability of the investment company rules of section 
721(b) with respect to a contribution; and
    (iv) The basis to the partnership of contributed property (including 
necessary preliminary determinations, such as the partner's basis in the 
contributed property).

To the extent that a determination of an item relating to a contribution 
can be made from these and similar determinations that the partnership 
is required to make, therefore, that item is a partnership item. To the 
extent that that determination requires other information, however, that 
item is not a partnership item. For example, it may be necessary to 
determine whether contribution of the property causes recapture by the 
contributing partner of the investment credit under section 47 in 
certain circumstances in which that determination is irrelevant to the 
partnership.
    (3) Distributions. For purposes of its books and records, or for 
purposes of furnishing information to a partner, the partnership needs 
to determine:
    (i) The character of the amount transferred to a partner (for 
example, whether it is a distribution, a loan, or a repayment of a 
loan);
    (ii) The amount of money distributed to a partner;
    (iii) The adjusted basis to the partnership of distributed property; 
and
    (iv) The character of partnership property (for example, whether an 
item is inventory or a capital asset).

To the extent that a determination of an item relating to a distribution 
can be made from these and similar determinations that the partnership 
is required to make, therefore, that item is a partnership item. To the 
extent that that determination requires other information, however, that 
item is not a partnership item. Such other information would include 
those factors used in determining the partner's basis for the 
partnership interest that are not themselves partnership items, such as 
the amount that the partner paid to 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

[[Page 175]]

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 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 Internal Revenue Code is made through a 
computational adjustment. A computational adjustment includes a change 
in tax liability that reflects a change in an affected item where that 
change is necessary to properly reflect the treatment of a partnership 
item, or any penalty, addition to tax, or additional amount that relates 
to an adjustment to a partnership item. However, if a change in a 
partner's tax liability cannot be made without making one or more 
partner level determinations, that portion of the change in tax 
liability attributable to the partner level determinations shall be made 
under the provisions of subchapter B of chapter 63 of the Internal

[[Page 176]]

Revenue Code (relating to deficiency procedures), except for any 
penalty, addition to tax, or additional amount which relates to an 
adjustment to a partnership item.
    (1) Changes in a partner's tax liability with respect to affected 
items that do not require partner level determinations (such as the 
threshold amount of medical deductions under section 213 that changes as 
the result of determinations made at the partnership level) are 
computational adjustments that are directly assessed. When making 
computational adjustments, the Service may assume that amounts the 
partner reported on the partner's individual return include all amounts 
reported to the partner by the partnership, absent contrary notice to 
the Service (for example, a ``Notice of Inconsistent Treatment''). Such 
an assumption by the Service does not constitute a partner level 
determination. Moreover, substituting redetermined partnership items for 
the partner's previously reported partnership items (including 
partnership items included in carryover amounts) does not constitute a 
partner level determination where the Service otherwise accepts all 
nonpartnership items (including, for example, nonpartnership item 
components of carryover amounts) as reported.
    (2) Changes in a partner's tax liability with respect to affected 
items that require partner level determinations (such as a partner's at-
risk amount to the extent it depends upon the source from which the 
partner obtained the funds that the partner contributed to the 
partnership) are computational adjustments subject to deficiency 
procedures. Nevertheless, any penalty, addition to tax, or additional 
amount that relates to an adjustment to a partnership item may be 
directly assessed following a partnership proceeding, based on 
determinations in that proceeding, regardless of whether partner level 
determinations are required.
    (b) Interest. A computational adjustment includes any interest due 
with respect to any underpayment or overpayment of tax attributable to 
adjustments to reflect properly the treatment of partnership items.

[T.D. 8128, 52 FR 6790, Mar. 5, 1987, as amended by T.D. 8808, 64 FR 
3840, Jan. 26, 1999]



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

[[Page 177]]

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 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

[[Page 178]]

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 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

[[Page 179]]

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 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--

[[Page 180]]

    (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 partnership. If it is impracticable under paragraph (o)(2) of 
this section to apply the largest-profits-interest rule of paragraph 
(m)(2) of this section, the Commissioner will select a partner 
(including a general or limited partner) as the tax matters partner in 
accordance with the criteria set forth in paragraph (q) of this section. 
The Commissioner will notify both the partner selected and the 
partnership of the selection, effective as of the date specified in the 
notice. For regulations applicable on or after January 26, 1999 
(reflecting statutory changes made effective July 22, 1998) and before 
January 25, 2002, see Sec. 301.6231(a)(7)-1T(p)(2).
    (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

[[Page 181]]

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. For regulations applicable on or after January 
26, 1999 (reflecting statutory changes made effective July 22, 1998) and 
before January 25, 2002, see Sec. 301.6231(a)(7)-1T(r)(1).
    (2) Limited opportunity for partnership to designate the tax matters 
partner. (i) Before the Commissioner selects a tax matters partner under 
paragraphs (p) (1) and (3)(i) of this section, the Commissioner will 
notify the partnership by mail that, after 30 days from the date of the 
notice, the Commissioner will make a determination that it is 
impracticable to apply the largest-profits-interest rule of paragraph 
(m)(2) of this section and will select the tax matters partner unless a 
prior designation is made by the partnership. This delay in making the 
determination will permit the partnership to designate a tax matters 
partner under paragraph (e) of this section (designation by general 
partners with a majority interest) or paragraph (f) of this section 
(designation by partners with a majority interest under certain 
circumstances), thereby avoiding a selection made by the Commissioner.
    (ii) During the 30-day period and prior to a tax-matters-partner 
designation by the partnership, the Commissioner will communicate with 
the partnership by sending all correspondence or notices to ``The Tax 
Matters Partner'' in care of the partnership at the partnership's 
address.
    (iii) Any subsequent designation of a tax matters partner by the 
partnership after the 30-day period will become effective as provided 
under paragraph (k)(2) of this section (concerning designations made 
after a notice of beginning of administrative proceeding is mailed).
    (s) Effective date. This section applies to all designations, 
selections, and terminations of a tax matters partner occurring on or 
after December 23, 1996.

[T.D. 8698, 61 FR 67459, Dec. 23, 1996, as amended by T.D. 8808, 64 FR 
3840, Jan. 26, 1999]



Sec. 301.6231(a)(7)-1T  Designation or selection of tax matters partner (temporary).

    (a) through (p)(1) [Reserved]. For further guidance, see 
Sec. 301.6231(a)(7)-1(a) through (p)(1).
    (p)(2) When each general partner is deemed to have no profits 
interest in the partnership. If it is impracticable under 
Sec. 301.6231(a)(7)-1(o)(2) to apply the largest-profits-interest rule 
of Sec. 301.6231(a)(7)-1(m)(2), 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 Sec. 301.6231(a)(7)-1(q). The 
Commissioner will notify, within 30 days of the selection, the partner 
selected, the partnership, and all partners required to receive notice 
under section 6223(a), effective as of the date specified in the notice. 
For regulations applicable before July 22, 1998, see 
Sec. 301.6231(a)(7)-1(p)(2).
    (p)(3) through (q) [Reserved]. For further guidance, see 
Sec. 301.6231(a)(7)-1(p)(3) through (q).
    (r) Notification of partnership--(1) In general. If the Commissioner 
selects a tax matters partner under the provisions of 
Sec. 301.6231(a)(7)-1(p)(1) or (3)(i), the Commissioner will notify, 
within 30 days of the selection, the partner selected, the partnership, 
and all partners required to receive notice under section 6223(a), 
effective as of the date specified in the notice. For regulations 
applicable before July 22, 1998, see Sec. 301.6231(a)(7)-1(r)(1).
    (r)(2) [Reserved]. For further guidance, see Sec. 301.6231(a)(7)-
1(r)(2).

[T.D. 8808, 64 FR 3840, Jan. 26, 1999]



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

[[Page 182]]

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).
    (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

[[Page 183]]

(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.
    (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]

[[Page 184]]



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.

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

[[Page 185]]

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]



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

[[Page 186]]

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 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,

[[Page 187]]


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 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--

[[Page 188]]

    (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 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

[[Page 189]]

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 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

[[Page 190]]

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 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

[[Page 191]]

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; 
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

[[Page 192]]

for the purposes stated; failure by the corporation actually to make a 
determination (for example, because it does not maintain proper books 
and records) does not prevent an item from being a subchapter S item.
    (2) Contributions. For purposes of its books and records, or for 
purposes of furnishing information to a shareholder, the S corporation 
must determine:
    (i) The character of the amount received by the corporation (for 
example, whether it is a contribution, loan, or repayment of a loan);
    (ii) The amount of money received by the corporation; and
    (iii) The basis to the corporation of contributed property 
(including necessary preliminary determinations, such as the 
shareholder's basis in the contributed property).

To the extent that a determination of an item relating to a contribution 
can be made from these and similar determinations that the corporation 
is required to make, that item is a subchapter S item. To the extent 
that the determination requires other information, however, that item is 
not a subchapter S item. Such other information would include those 
factors used in determining whether there is recapture under section 47 
by the contributing shareholder of the general business credit because 
of the contribution of property in circumstances in which that 
determination is irrelevant to the corporation.
    (3) Distributions. For purposes of its books and records, or for 
purposes of furnishing information to a shareholder, the S corporation 
must determine:
    (i) The character of the amount transferred to a shareholder (for 
example, whether it is a dividend, compensation, loan, or repayment of a 
loan);
    (ii) The amount of money distributed to a shareholder;
    (iii) The fair market value of property distributed to a 
shareholder;
    (iv) The adjusted basis to the corporation of distributed property; 
and
    (v) The character of corporation property (for example, whether an 
item is inventory or a capital asset).

To the extent that a determination of an item relating to a distribution 
can be made from these and similar determinations that the corporation 
is required to make, that item is a subchapter S item. To the extent 
that the determination requires other information, however, that item is 
not a subchapter S item. Such other information would include the 
determination of a shareholder's basis in the shareholder's stock or in 
the indebtedness of the S corporation to the shareholder.
    (d) Cross reference. For the definition of subchapter S item for 
purposes of the windfall profit tax, see Sec. 51.6245-1T.
    (e) Effective date. This section shall apply to taxable years 
beginning after December 31, 1982.

[T.D. 8122, 52 FR 3003, Jan. 30, 1987]

                               Collection



General Provisions--Table of Contents






Sec. 301.6301-1  Collection authority.

    The taxes imposed by the internal revenue laws shall be collected by 
district directors of internal revenue. See, however, section 6304, 
relating to the collection of certain taxes under the provisions of the 
Tariff Act of 1930 (19 U.S.C. ch. 4).



Sec. 301.6302-1  Mode or time of collection of taxes.

    (a) Employment and excise taxes. For provisions relating to the mode 
or time of collection of certain employment and excise taxes and the use 
of 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.

[[Page 193]]



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 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;

[[Page 194]]

    (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 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

[[Page 195]]

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 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.

[[Page 196]]

    (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 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

[[Page 197]]

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. 301.6311-2T  Payment by credit card and debit card (temporary).

    (a) Authority to receive--(1) Payments by credit card and debit 
card. Internal revenue taxes may be paid by credit card or debit card as 
authorized by this section. Payment of taxes by credit card or debit 
card is voluntary on the part of the taxpayer. However, only credit 
cards or debit cards approved by the Secretary may be used for this 
purpose, only the types of tax liabilities specified by the Secretary 
may be paid by credit card or debit card, and all such payments must be 
made in the manner and in accordance with the forms, instructions and 
procedures prescribed by the Secretary. All references in this section 
to ``tax'' also include interest, penalties and additions to tax.
    (2) Payments by electronic funds transfer other than payments by 
credit card and debit card. Provisions relating to payments by 
electronic funds transfer other than payments by credit card and debit 
card are contained in section 6302 and the Treasury Regulations 
promulgated pursuant to section 6302.
    (3) Definitions--(i) Credit card means any credit card as defined in 
section 103(k) of the Truth in Lending Act, 15 U.S.C. 1602(k), including 
any credit card, charge card or other credit device issued for the 
purpose of obtaining money, property, labor or services on credit.
    (ii) Debit card means any accepted card or other means of access as 
defined in section 903(1) of the Electronic Funds Transfer Act, 15 
U.S.C. 1693a(1),

[[Page 198]]

including any debit card or similar device or means of access to an 
account issued for the purpose of initiating electronic fund transfers 
to obtain money, property, labor or services.
    (b) When payment is deemed made. A payment of tax by credit card or 
debit card shall be deemed made when the issuer of the credit card or 
debit card properly authorizes the transaction, provided the payment is 
actually received by the Secretary in the ordinary course of business 
and is not returned pursuant to paragraph (d)(3) of this section.
    (c) Payment not made--(1) Continuing liability of taxpayer. A 
taxpayer who tenders payment of taxes by credit card or debit card is 
not relieved of liability for such taxes until the payment is actually 
received by the Secretary and is not required to be returned pursuant to 
paragraph (d)(3) of this section. This continuing liability of the 
taxpayer is in addition to, and not in lieu of, any liability of the 
issuer of the credit card or debit card or financial institution 
pursuant to paragraph (c)(2) of this section.
    (2) Liability of financial institutions. If a taxpayer has tendered 
a payment of internal revenue taxes by credit card or debit card, and 
the credit card or debit card transaction has been guaranteed expressly 
by a financial institution, and the United States is not duly paid, the 
United States shall have a lien for the guaranteed amount of the 
transaction upon all the assets of the institution making such 
guarantee. The unpaid amount shall be paid out of such assets in 
preference to any other claims whatsoever against such guaranteeing 
institution, except the necessary costs and expenses of administration 
and the reimbursement of the United States for the amount expended in 
the redemption of the circulating notes of such institution.
    (d) Resolution of errors relating to the credit card or debit card 
account--(1) In general. Payments of taxes by credit card or debit card 
shall be subject to the applicable error resolution procedures of 
section 161 of the Truth in Lending Act, 15 U.S.C. 1666, or section 908 
of the Electronic Fund Transfer Act, 15 U.S.C. 1693f, or any similar 
provisions of state law, for the purpose of resolving errors relating to 
the credit card or debit card account, but not for the purpose of 
resolving any errors, disputes or adjustments relating to the underlying 
tax liability.
    (2) Matters covered by error resolution procedures. (i) The error 
resolution procedures of paragraph (d)(1) of this section apply to the 
following types of errors:
    (A) An incorrect amount posted to the taxpayer's account as a result 
of a computational error, numerical transposition, or similar mistake.
    (B) An amount posted to the wrong taxpayer's account.
    (C) A transaction posted to the taxpayer's account without the 
taxpayer's authorization.
    (D) Similar types of errors that would be subject to resolution 
under these procedures in ordinary commercial transactions.
    (ii) An error described in paragraphs (d)(2)(i) (A) through (D) of 
this section may only be resolved through the procedures referred to in 
paragraph (d)(1) of this section and cannot be a basis for any claim or 
defense in any administrative or court proceeding involving the 
Secretary.
    (3) Return of funds pursuant to error resolution procedures. 
Notwithstanding section 6402 of the Internal Revenue Code, if a taxpayer 
is entitled to a return of funds pursuant to the error resolution 
procedures of paragraph (d)(1) of this section, the Secretary may, in 
the Secretary's sole discretion, effect such return by arranging for a 
credit to the taxpayer's account with the issuer of the credit card or 
debit card or any other financial institution or person that 
participated in the transaction in which the error occurred.
    (4) Matters not subject to error resolution procedures. The error 
resolution procedures of paragraph (d)(1) of this section do not apply 
to any error, question or dispute concerning the amount of tax owed by 
any person for any year. For example, these error resolution procedures 
do not apply to determine a taxpayer's entitlement to a refund of tax 
for any year for any reason, nor may they be used to pay a refund. All 
such matters shall be resolved through administrative and judicial 
procedures established pursuant to the Internal

[[Page 199]]

Revenue Code and the rules and regulations thereunder.
    (5) Payments of taxes by credit card or debit card are not subject 
to section 170 of the Truth in Lending Act, 15 U.S.C. 1666i, or to any 
similar provision of state law.
    (e) Fees or charges. The Internal Revenue Service may not impose any 
fee or charge on persons making payment of taxes by credit card or debit 
card. This section does not prohibit the imposition of fees or charges 
by issuers of credit cards or debit cards or by any other financial 
institution or person participating in the credit card or debit card 
transaction. The Internal Revenue Service may not receive any part of 
any fees that may be charged.
    (f) Authority to enter into contracts. The Secretary may enter into 
contracts related to receiving payments of tax by credit card or debit 
card if such contracts are cost beneficial to the Government. The 
determination of whether the contract is cost beneficial shall be based 
on an analysis appropriate for the contract at issue and at a level of 
detail appropriate to the size of the Government's investment or 
interest. The Secretary may not pay any fee or charge or provide any 
other monetary consideration under such contracts for such payments.
    (g) Use and disclosure of information relating to payment of taxes 
by credit card and debit card. Information obtained by any person other 
than the taxpayer in connection with payment of taxes by a credit card 
or debit card shall be treated as confidential, whether such information 
is received from the Secretary or from any other person (including the 
taxpayer). No person other than the taxpayer shall use or disclose such 
information except as follows:
    (1) Card issuers, financial institutions, or other persons 
participating in the credit card or debit card transaction may use or 
disclose such information for the purpose and in direct furtherance of 
servicing cardholder accounts, including the resolution of errors in 
accordance with paragraph (d) of this section. This authority includes 
the following:
    (i) Processing of the credit card or debit card transaction, in all 
of its stages through and including the crediting of the amount charged 
on account of tax to the United States Treasury.
    (ii) Billing the taxpayer for the amount charged or debited with 
respect to payment of the tax liability.
    (iii) Collection of the amount charged or debited with respect to 
payment of the tax liability.
    (iv) Returning funds to the taxpayer in accordance with paragraph 
(d)(3) of this section.
    (2) Card issuers, financial institutions or other persons 
participating in the credit card or debit card transaction may use and 
disclose such information for the purpose and in direct furtherance of 
any of the following activities:
    (i) Assessment of statistical risk and profitability.
    (ii) Transfer of receivables or accounts or any interest therein.
    (iii) Audit of account information.
    (iv) Compliance with Federal, State, or local law.
    (v) Cooperation in properly authorized civil, criminal, or 
regulatory investigations by Federal, State, or local authorities.
    (3) Notwithstanding the foregoing, use or disclosure of information 
relating to credit card and debit card transactions for purposes related 
to any of the following is not authorized:
    (i) Sale or exchange of such information separate from the 
underlying receivable or account.
    (ii) Marketing for any purpose, for example, marketing tax-related 
products or services, or marketing any product or service that targets 
those who have used a credit card or debit card to pay taxes.
    (iii) Furnishing such information to any credit reporting agency or 
credit bureau,5 except with respect to the aggregate amount of a 
cardholder's account, with the amount attributable to payment of taxes 
not separately identified.
    (4) Use and disclosure of information other than as authorized by 
this paragraph (g) may result in civil liability under section 7431(h) 
of the Internal Revenue Code.
    (h) Effective date. This section applies to payments of taxes made 
on and after

[[Page 200]]

January 1, 1999, and through December 14, 2001.

[T.D. 8793, 63 FR 68996, Dec. 15, 1998; T.D. 8793, 64 FR 36569, July 7, 
1999]



Sec. 301.6312-1  Treasury certificates of indebtedness, Treasury notes, and Treasury bills acceptable in payment of internal revenue taxes or stamps.

    (a) Treasury certificates of indebtedness, Treasury notes, or 
Treasury bills of any series (not including interim receipts issued by 
Federal reserve banks in lieu of definitive certificates, notes, or 
bills) may be tendered at or before maturity in payment of internal 
revenue taxes due on the date (or in payment for stamps purchased on the 
date), on which the certificates, notes, or bills mature, or in payment 
of internal revenue taxes due on a specified prior date, but only if 
such certificates, notes, or bills, according to the express terms of 
their issue, are made acceptable in payment of such taxes or for the 
purchase of stamps. If the taxes for which the certificates, notes, or 
bills are tendered in payment become due, or the stamps are purchased, 
on the same date as that on which such certificates, notes, or bills 
mature, they will be accepted at par plus accrued interest, if any, 
payable with the principal (not represented by coupons attached) in 
payment of such taxes or stamps. If the taxes for which the 
certificates, notes, or bills are tendered in payment become due, or the 
stamps are purchased, on a date prior to that on which the certificates, 
notes, or bills mature, they will be accepted at the value specified in 
the terms under which such certificates, notes, or bills were issued. 
All interest coupons attached to Treasury certificates of indebtedness 
or Treasury notes shall be detached by the taxpayer before such 
certificates or notes are tendered in payment of taxes or stamps.
    (b) Receipts given by a district director for Treasury certificates 
of indebtedness, Treasury notes, or Treasury bills received in payment 
of internal revenue taxes or for stamps as provided in this section 
shall contain an adequate description of such certificates, notes, or 
bills, and a statement of the value, including accrued interest, if any, 
payable with the principal (not represented by coupons attached), at 
which accepted, and shall show that 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

[[Page 201]]

with a Federal Reserve bank or branch, or with the Office of the 
Treasurer of the United States, in part or full satisfaction of such tax 
liability. As in the case of all remittances of amounts so required to 
be deposited, each such deposit of certificates, notes, or bills shall 
be accompanied by the appropriate deposit form in accordance with the 
regulations under section 6302. In such cases, notwithstanding 
paragraphs (b) and (c) of this section, receipts for such certificates, 
notes or bills shall no longer be issued in the name of the district 
director.



Sec. 301.6312-2  Certain Treasury savings notes acceptable in payment of certain internal revenue taxes.

    According to the express terms of their issue, the following series 
of Treasury savings notes are presently acceptable in payment of income 
taxes (current and back, personal and corporation taxes, and excess 
profits taxes) and estate and gift taxes (current and back):
    (a) Treasury Savings Notes, Series A,
    (b) Treasury Savings Notes, Series B,
    (c) Treasury Savings Notes, Series C.



Sec. 301.6313-1  Fractional parts of a cent.

    In the payment of any tax not payable by stamp, a fractional part of 
a cent shall be disregarded unless it amounts to one-half cent or more, 
in which case it shall be increased to one cent. Fractional parts of a 
cent shall not be disregarded in the computation of taxes.



Sec. 301.6314-1  Receipt for taxes.

    (a) In general. The district director or the director of a service 
center shall upon request, issue a receipt for each tax payment made 
(other than a payment for stamps sold and delivered). In addition, the 
district director or the director of a service center shall issue a 
receipt for each payment of 1 dollar or more made in cash, whether or 
not requested. In the case of payments made by check, the canceled check 
is usually a sufficient receipt. No receipt shall be issued in lieu of a 
stamp representing a tax, whether the payment is in cash or otherwise.
    (b) Duplicate receipt for payment of estate taxes. Upon request, the 
district director or the director of a service center will issue 
duplicate receipts to the person paying the estate tax, either of 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

[[Page 202]]

864, inclusive, and Secs. 1.861-1 to 1.864, inclusive, of this chapter 
(Income Tax Regulations); and
    (b) For any taxable year beginning on or after January 1, 1964, if 
such amounts--
    (1) Are disbursed from funds made available either to a foundation 
or commission, established pursuant to an agreement made under the 
authority of section 32(b) of the Surplus Property Act of 1944, as 
amended, or to a foundation or commission established or continued 
pursuant to an agreement made under the authority of the Mutual 
Educational and Cultural Exchange Act of 1961, as amended; or are paid 
from grants made to such citizen, or to a foundation or an educational 
or other institution, under the authority of the Mutual Educational and 
Cultural Exchange Act of 1961, as amended, or section 104 (h), (j), (k), 
(o), or (p) of the Agricultural Trade Development and Assistance Act of 
1954, as amended (7 U.S.C. 1704 (h), (j), (k), (o), (p));
    (2) Constitute either a grant made for a purpose authorized under 
any such agreement or law, or compensation for personal services 
performed in the employ of any organization engaged in administering any 
program or activity pursuant to any such agreement or law;
    (3) Are at least 70 percent of the entire amount of the grant or 
compensation; and
    (4) Are treated as income from sources without the United States 
under the provisions of sections 861 to 864, inclusive, and Secs. 1.861-
1 to 1.864, inclusive, of this chapter (Income Tax Regulations).



Sec. 301.6316-2  Definitions.

    For purposes of Secs. 301.6316-1 to 301.6316-9, inclusive:
    (a) The term tax, as used in Secs. 301.6316-1, 301.6316-3, 301.6316-
4, 301.6316-5, and 301.6316-6 means the income tax imposed for the 
taxable year by chapter 1 of the Internal Revenue Code of 1954, and as 
used in Sec. 301.6316-7 means the Federal Insurance Contributions Act 
taxes imposed by chapter 21 of the Code (or by the corresponding 
provisions of the Internal Revenue Code of 1939). The term ``tax'', as 
used in Secs. 301.6316-3 and 301.6316-9 shall relate to either of such 
taxes, whichever is appropriate.
    (b) The term nonconvertible foreign currency means currency of the 
government of a foreign country which, owing to (1) monetary, exchange, 
or other restrictions imposed by the foreign country, (2) an agreement 
entered into with the United States of America, or (3) the terms and 
conditions of the U.S. Government grant, is not convertible into U.S. 
dollars or into other money which is convertible into U.S. dollars. The 
term shall not, however, include currency which, notwithstanding such 
restrictions, agreement, terms, or conditions, is in fact converted into 
U.S. dollars or into property which is readily disposable for U.S. 
dollars.
    (c) If the taxpayer computes taxable income under the accrual 
method, then the term received shall be construed to mean ``accrued.''



Sec. 301.6316-3  Allocation of tax attributable to foreign currency.

    (a) Adjusted gross income ratio. The portion of the tax which is 
attributable to amounts received in nonconvertible foreign currency 
shall, for purposes of applying Sec. 301.6316-1 to the currency of each 
foreign country, be the amount by which:
    (1) The amount which bears the same ratio to the entire tax for the 
taxable year as (i) the taxpayer's adjusted gross income received in 
that currency bears to (ii) the adjusted gross income determined under 
section 62 by taking into account the entire gross income and all 
deductions allowable under that section without distinction as to 
amounts received in foreign currency, exceeds
    (2) The total of the allowable credits against tax, and payments on 
account of tax, which are properly allocable to the amount of that 
currency included in gross income.
    (b) Example. (1) For the calendar year 1955 Mr. Jones and his wife 
filed a joint return on which the adjusted gross income is as follows, 
after amounts received in foreign currency had been properly translated 
into United States dollars for tax computation purposes:

Fulbright grant received by Mr. Jones in nonconvertible foreign   $8,000
 currency......................................................
Dividends received by Mr. Jones entitled to dividends-received       500
 credit........................................................

[[Page 203]]

 
Compensation for personal services of Mrs. Jones...............    3,000
Net profit from business carried on by Mrs. Jones..............    2,500
                                                                --------
    Total adjusted gross income................................   14,000
 

    (2) The following amounts are allowable as properly deductible from 
adjusted gross income, no determination being made as to whether or not 
any part of them is properly allocable to the Fulbright grant:

Deduction for personal exemptions..............................   $3,000
Charitable contributions.......................................      500
Interest expense...............................................      400
Taxes..........................................................      300
                                                                --------
    Total allowable deductions.................................    4,200
 

    (3) For the taxable year the following amounts are allowable as 
credits against the tax, or as payments on account of the tax:

Foreign tax credit for foreign taxes paid on Fulbright grant..   $300.00
Dividends-received credit.....................................     20.00
Credit for income tax withheld upon compensation of Mrs. Jones    304.80
Payments of estimated tax (see Sec.  301.6316-
 6(b)(2) for determination of amounts):
  U.S. dollars......................................   $426.32
  Foreign currency..................................    893.88  1,320.20
                                                     -------------------
    Total allowable credits and payments......................  1,945.00
 

    (4) The portion of the tax which is attributable to amounts received 
in nonconvertible foreign currency is $33.49, determined as follows:

Adjusted gross income.......................................  $14,000.00
Less: Allowable deductions..................................    4,200.00
                                                 -------------
    Taxable income..........................................    9,800.00
                                                 =============
Tax computed under section 2................................    2,148.00
Ratio of adjusted gross income received in nonconvertible          57.14
 foreign currency to entire adjusted gross income
 ($8,000$14,000) (percent)..........................
Portion of tax attributable to nonconvertible foreign          $1,227.37
 currency ($2,148 x 57.14 percent)..........................
Less:
  Credit for foreign taxes paid on Fulbright         $300.00
   grant........................................
Payment in foreign currency of estimated tax....      893.88    1,193.88
                                                 -----------------------
    Portion of tax attributable to amounts received in             83.49
     nonconvertible foreign currency........................
 



Sec. 301.6316-4  Return requirements.

    (a) Place for filing. A return of income which includes amounts 
received in foreign currency on which the tax is paid in accordance with 
Sec. 301.6316-1 shall be filed with the Director of International 
Operations, Internal Revenue Service, Washington, D.C. 20225. For the 
time for filing income tax returns, see sections 6072 and 6081 and 
Secs. 1.6072-1, 1.6081-1, and 1.6081-2 of this chapter (Income Tax 
Regulations).
    (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.

[[Page 204]]

    (b) Certified statement. Every taxpayer who desires to pay tax in 
foreign currency under the provisions of Sec. 301.6316-1 shall first 
obtain the certified statement referred to in paragraph (b)(1) of 
Sec. 301.6316-4.
    (c) Determination of the tax. In determining the tax payable for the 
taxable year in U.S. dollars, the taxpayer, with respect to amounts 
described in paragraph (a) of Sec. 301.6316-1, or amounts described in 
paragraph (b) of Sec. 301.6316-1 received before November 1, 1965, shall 
use the rates of exchange which most clearly reflect the correct tax 
liability in dollars, whether it be the official rate, the open market 
rate, or any other appropriate rate. With respect to amounts described 
in paragraph (b) of Sec. 301.6316-1 received on or after November 1, 
1965, the taxpayer shall use the official rate of exchange in 
determining the tax payable for the taxable year in U.S. dollars. After 
determining the correct tax liability in U.S. dollars the taxpayer shall 
then ascertain, in accordance with the principles of Sec. 301.6316-3, 
the portion of the tax which is attributable to amounts received in 
nonconvertible foreign currency.
    (d) Deposit of foreign currency with disbursing officer. (1) After 
the portion of the tax which is attributable to amounts received in 
nonconvertible foreign currency is determined in U.S. dollars, the 
amount so determined shall be deposited in the same nonconvertible 
foreign currency with the disbursing officer of the Department of State 
for the foreign country where the fund is located from which the 
payments in nonconvertible foreign currency are made to the taxpayer. 
The amount of foreign currency to be deposited shall be that amount 
which, when converted at the rate of exchange used on the date of 
deposit by that disbursing officer for the acquisition of such currency 
for his official disbursements, equals the portion of the tax so 
determined in U.S. dollars.
    (2) The disbursing officer may rely upon the taxpayer for the 
determination of the amount of tax payable in foreign currency but may 
not accept any such currency for deposit until the taxpayer has 
presented for inspection the certified statement referred to in 
paragraph (b)(1) of Sec. 301.6316-4. Upon acceptance of foreign currency 
for deposit the disbursing officer shall give the taxpayer a receipt in 
duplicate showing the name and address of the 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

[[Page 205]]

declarations of estimated tax, see sections 6073 and 6081 and 
Secs. 1.6073-1 to 1.6073-4, inclusive, and Secs. 1.6081-1 and 1.6081-2 
of this chapter (Income Tax Regulations).
    (b) Determination of estimated tax-- (1) Allocation of tax 
attributable to foreign currency. In determining the amount of estimated 
tax for purposes of this section, all items of income, deduction, and 
credit, whether or not attributable to amounts received in 
nonconvertible foreign currency, shall be taken into account. The 
portion of the estimated tax which is attributable to amounts to be 
received during the taxable year in nonconvertible foreign currency 
shall be determined consistently with the manner prescribed by 
Sec. 301.6316-3.
    (2) Example. (i) For the calendar year 1955 Mr. Jones and his wife 
filed a joint declaration of estimated tax in the determination of which 
the adjusted gross income was estimated to be as follows, after amounts 
to be received in foreign currency had been properly translated into 
U.S. dollars for tax computation purposes:

Fulbright grant to be received by Mr. Jones in nonconvertible     $8,000
 foreign currency..............................................
Dividends to be received by Mr. Jones entitled to dividends-         875
 received credit...............................................
Compensation to be received by Mrs. Jones for personal services    3,000
Net profit to be derived from business carried on by Mrs. Jones    1,625
                                                                --------
    Total estimated adjusted gross income......................   13,000
 

    (ii) The following amounts were determined to be allowable as 
properly deductible from estimated adjusted gross income, no 
determination being made as to whether or not any part of them was 
properly allocable to the Fulbright grant:

Deduction for personal exemptions..............................   $3,000
Charitable contributions.......................................      300
Interest expense...............................................      400
Taxes..........................................................      300
                                                                --------
    Total allowable deductions.................................    4,000
 

    (iii) The following estimated amounts were determined to be 
allowable as credits against the tax for the taxable year:

Foreign tax credit for foreign taxes to be paid on               $300.00
 Fulbright grant...........................................
Credit for income tax expected to be withheld upon                304.80
 compensation of Mrs. Jones................................
Dividends-received credit..................................        15.00
                                                            ------------
    Total allowable estimated credits......................       619.80
 

    (iv) The portion of the estimated tax which is attributable to 
amounts to be received during the taxable year in nonconvertible foreign 
currency is $893.88, determined as follows:

Estimated adjusted gross income............................   $13,000.00
Less: Allowable deductions.................................     4,000.00
                                                            ------------
    Estimated taxable income...............................     9,000.00
Tax computed under section 2...............................     1,940.00
Ratio of estimated adjusted gross income to be received in         61.54
 nonconvertible foreign currency to entire estimated
 adjusted gross income ($8,000$13,000) (percent)...
Portion of above tax attributable to nonconvertible foreign     1,193.88
 currency ($1,940 x 61.54 percent).........................
Less: Credit for foreign taxes expected to be paid on             300.00
 Fulbright grant...........................................
                                                            ------------
    Portion of estimated tax which is attributable to             893.88
   amounts to be received during the taxable year in
   nonconvertible foreign currency.........................
 

    (v) The portion of the estimated tax which is payable in U.S. 
dollars is $426.32, determined as follows:

Tax computed under section 2...............................    $1,940.00
Less: Total allowable estimated credits....................       619.80
                                                            ------------
    Total estimated tax....................................     1,320.20
Less: Portion of estimated tax payable in foreign currency.       893.88
                                                            ------------
    Portion of estimated tax payable in U.S. dollars.......       426.32
 

    (c) Payment of estimated tax. (1) The provisions of Sec. 301.6316-5 
relating to the certified statement, determination of the tax, and the 
depositing of the foreign currency shall apply for purposes of this 
section. The full amount of estimated tax payable in foreign currency, 
as determined under paragraph (b) of this section, may be deposited 
before the date prescribed for the payment thereof.
    (2) Every taxpayer making a deposit of foreign currency in 
accordance with this paragraph shall tender to the Director of 
International Operations, Internal Revenue Service, Washington, D.C. 
20225, the original of the receipt from the disbursing officer as 
payment, to the extent of the amount represented thereby in U.S. 
dollars, of the estimated tax. For the dates prescribed for the payment 
of estimated tax, see sections 6153 and 6161 and Secs. 1.6153-1 to 
1.6153-4, inclusive, and Sec. 1.6161-1 of this chapter (Income Tax 
Regulations). A taxpayer should make the deposit required by this 
paragraph in ample time to permit him to tender such receipt by

[[Page 206]]

the date prescribed for payment of the estimated tax.
    (d) Credit on return for the taxable year. The receipt given by the 
disbursing officer of the Department of State and tendered in payment of 
estimated tax under this section shall, for purposes of paragraph (a)(2) 
of Sec. 301.6316-3, be considered as payment on account of the tax for 
the taxable year. The amount so considered to be paid shall be the 
amount in U.S. dollars represented by the receipt.



Sec. 301.6316-7  Payment of Federal Insurance Contributions Act taxes in foreign currency.

    (a) In general. The taxes imposed on employees and employers by 
sections 3101 and 3111, respectively, of chapter 21 of the Code (Federal 
Insurance Contributions Act) or the corresponding sections of the 
Internal Revenue Code of 1939 may, with respect to wages (as defined in 
section 3121(a) of chapter 21 of the Code or the corresponding section 
of the Internal Revenue Code of 1939) paid in nonconvertible foreign 
currency (as defined in paragraph (b) of Sec. 301.6316-2) for services 
performed on or after January 1, 1951, be paid in that currency if all 
such wages--
    (1) Are paid from funds made available to a foundation or commission 
established in a foreign country pursuant to an agreement made under the 
authority of section 32(b) of the Surplus Property Act of 1944, as 
amended (50 U.S.C. App. 1641(b)(2)), or established or continued 
pursuant to an agreement made under authority of the Mutual Educational 
and Cultural Exchange Act of 1961, as amended (22 U.S.C. 2451); and
    (2) Are paid to a U.S. citizen for services performed in the employ 
of such foundation or commission.
    (b) Return requirements--(1) Statements required. (i) A return on 
which payment of Federal Insurance Contributions Act taxes is made in 
accordance with this section shall have attached thereto a statement, 
certified by the foundation or commission filing the return, stating 
that the foundation or commission is an organization established 
pursuant to an agreement made under authority of section 32(b) of the 
Surplus Property Act of 1944, as amended, or established or continued 
pursuant to an agreement made under authority of the Mutual Educational 
and Cultural Exchange Act of 1961, as amended.
    (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

[[Page 207]]

acceptance of foreign currency for deposit the disbursing officer shall 
give the taxpayer a receipt in duplicate showing the name and address of 
the depositor, the date of the deposit, the amount of foreign currency 
deposited and its equivalent in U.S. dollars on the date of deposit, and 
the kind of tax for which the deposit is made.
    (iii) Every taxpayer making a deposit of foreign currency in 
accordance with this paragraph shall attach to the return required to be 
filed in accordance with paragraph (b) of this section the original of 
the receipt given by the disbursing officer. Tender of such receipt to 
the Director of International Operations shall be considered as payment 
of tax in an amount equal to the U.S. dollars represented by the 
receipt.
    (iv) A taxpayer shall make the deposit required by this paragraph in 
ample time to permit it to attach the receipt to its return for filing 
within the time prescribed by Sec. 31.6071(a)-1 of this chapter 
(Employment Tax Regulations).



Sec. 301.6316-8  Refunds and credits in foreign currency.

    (a) Refunds. The refund of any overpayment of tax which has been 
paid under section 6316 in foreign currency may, in the discretion of 
the Commissioner, be made in the same foreign currency by which the tax 
was paid. The amount of any such refund made in foreign currency shall 
be the amount of the overpayment in U.S. dollars converted, on the date 
of the refund check, at the rate of exchange then used for his official 
disbursements by the disbursing officer of the Department of State in 
the country where the foreign currency was originally deposited.
    (b) Credits. Unless otherwise in the best interest of the Internal 
Revenue Service, no credit of any overpayment of tax which has been paid 
under section 6316 in foreign currency shall be allowed against any 
outstanding liability of the person making the overpayment except in 
respect of that portion or the liability which, in accordance with 
Sec. 301.6316-1 or Sec. 301.6316-7, would otherwise be permitted to be 
paid in the same foreign currency.



Sec. 301.6316-9  Interest, additions to tax, etc.

    Any reference in Secs. 301.6316-1 to 301.6316-8, inclusive, to 
``tax'' shall be deemed also to refer to the interest, additions to the 
tax, additional amounts, and penalties attributable to the tax.

                             Lien for Taxes



Sec. 301.6320-1T  Notice and opportunity for hearing upon filing of notice of Federal tax lien (temporary).

    (a) Notification-- (1) In general. For a notice of federal tax lien 
(NFTL) filed on or after January 19, 1999, district directors, directors 
of service centers, and the Assistant Commissioner (International), or 
their successors, are required to notify the person described in section 
6321 of the filing of a NFTL not more than five business days after the 
date of any such filing. The Collection Due Process Hearing Notice (CDP 
Notice) and other notices given under this section must be given in 
person, left at the dwelling or usual place of business of such person, 
or sent by certified or registered mail to such person's last known 
address, not more than five business days after the day the NFTL was 
filed.
    (2) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (a) as follows:
    Q-A1. Who is the ``person'' entitled to notice under section 6320?
    A-A1. Under section 6320(a)(1), notification of the filing of a NFTL 
on or after January 19, 1999, is only required to be given to the person 
described in section 6321 who is named on the NFTL that is filed. The 
person described in section 6321 is the person liable to pay the tax due 
after notice and demand who refuses or neglects to pay the tax due 
(hereinafter, referred to as the taxpayer).
    Q-A2. When will the IRS provide the notice required under section 
6320?
    A-A2. The IRS will provide this notice within five business days 
after the filing of the NFTL.
    Q-A3. Will the IRS give notification to the taxpayer for each tax 
period listed in a NFTL filed on or after January 19, 1999?
    A-A3. Yes. Under section 6323(f), a NFTL can be filed for more than 
one

[[Page 208]]

tax period. The notification of the filing of a NFTL will specify each 
tax and tax period listed in the NFTL.
    Q-A4. Will the IRS give notification to the taxpayer of any filing 
of a NFTL for the same tax period or periods at another place of filing?
    A-A4. Yes. The IRS will notify a taxpayer when a NFTL is filed on or 
after January 19, 1999, for a tax period or periods at any recording 
office.
    Q-A5. Will the IRS give notification to the taxpayer if a NFTL is 
filed on or after January 19, 1999, for a tax period or periods for 
which a NFTL was filed in another recording office prior to that date?
    A-A5. Yes. The IRS will notify a taxpayer when each NFTL is filed on 
or after January 19, 1999, for a tax period or periods, at any location.
    Q-A6. Will the IRS give notification to the taxpayer when a NFTL is 
refiled on or after January 19, 1999?
    A-A6. No. Section 6320(a)(1) does not require the IRS to notify the 
taxpayer of the refiling of a NFTL. A taxpayer may, however, seek 
reconsideration by the IRS office that is collecting the tax or filing 
the NFTL, an administrative hearing before Appeals, or assistance from 
the National Taxpayer Advocate.
    Q-A7. Will the IRS give notification to a known nominee of, or 
person holding property of, the taxpayer of the filing of the NFTL?
    A-A7. No. Such person is not the person described in section 6321 
and is, therefore, not entitled to notice, but such persons have other 
remedies. See A-B5 of paragraph (b) of this section.
    Q-A8. Will the IRS give notification to the taxpayer when a 
subsequent NFTL is filed for the same period or periods?
    A-A8. Yes. If the IRS files an additional NFTL with respect to the 
same tax period or periods for which an original NFTL was filed, the IRS 
will notify the taxpayer when the subsequent NFTL is filed. Not all such 
notices will, however, give rise to a right to a CDP hearing (see 
paragraph (b) of this section).
    Q-A9. How will notification under section 6320 be accomplished?
    A-A9. The IRS will notify the taxpayer by letter. Included with this 
letter will be the additional information the IRS is required to provide 
taxpayers as well as, when appropriate, a Form 12153, Request for a Due 
Process Hearing. The IRS may effect delivery of the letter (and 
accompanying materials) in one of three ways: by delivering the notice 
personally to the taxpayer; by leaving the notice at the taxpayer's 
dwelling or usual place of business; or by mailing the notice to the 
taxpayer at his last known address by certified or registered mail.
    Q-A10. What must a CDP Notice given under section 6320 include?
    A-A10. These notices must include, in simple and nontechnical terms:
    (i) The amount of unpaid tax.
    (ii) A statement concerning the taxpayer's right to request a CDP 
hearing during the 30-day period that commences the day after the end of 
the five-day period described in section 6320(a)(2).
    (iii) The administrative appeals available to the taxpayer with 
respect to the NFTL and the procedures relating to such appeals.
    (iv) The statutory provisions and the procedures relating to the 
release of liens on property.
    Q-A11. What are the consequences if the taxpayer does not receive or 
accept a CDP Notice that is properly left at the taxpayer's dwelling or 
usual place of business, or sent by certified or registered mail to the 
taxpayer's last known address?
    A-A11. A CDP Notice properly sent by certified or registered mail to 
the taxpayer's last known address or left at the taxpayer's dwelling or 
usual place of business is sufficient to start the 30-day period that 
commences the day after the end of the five business day notification 
period within which the taxpayer may request a CDP hearing. Actual 
receipt is not a prerequisite to the validity of the notice.
    Q-A12. What if the taxpayer does not receive the CDP Notice because 
the IRS did not send that notice by certified or registered mail to the 
taxpayer's last known address, or failed to leave it at the dwelling or 
usual place of business of the taxpayer, and the taxpayer fails to 
request a CDP hearing with Appeals within the 30-day period commencing 
the day after the end of

[[Page 209]]

the five business day notification period?
    A-A12. A NFTL becomes effective upon filing. The validity and 
priority of a NFTL is not conditioned on notification to the taxpayer 
pursuant to section 6320. Therefore, the failure to notify the taxpayer 
concerning the filing of a NFTL does not affect the validity or priority 
of the NFTL. When the IRS determines that it failed properly to provide 
a taxpayer with a CDP Notice, it will promptly provide the taxpayer with 
a substitute CDP Notice and an opportunity to request a CDP hearing.
    (3) Examples. The following examples illustrate the principles of 
this paragraph (a):

    Example 1. H and W are jointly and severally liable with respect to 
a jointly filed income tax return for 1996. IRS files a NFTL with 
respect to H and W in County X on January 26, 1999. This is the first 
NFTL filed on or after January 19, 1999, for their 1996 liability. H and 
W will each be notified of the filing of the NFTL.
    Example 2. Employment taxes for 1997 are assessed against ABC 
Corporation. A NFTL is filed against ABC Corporation for the 1997 
liability in County X on June 5, 1998. A NFTL is filed against ABC 
Corporation for the 1997 liability in County Y on June 17, 1999. The IRS 
will notify the ABC Corporation with respect to the filing of the NFTL 
in County Y.
    Example 3. Federal income tax liability for 1997 is assessed against 
individual D. D buys an asset and puts it in individual E's name. A NFTL 
is filed against D in County X on June 5, 1999, for D's federal income 
tax liability for 1997. On June 17, 1999, a NFTL for the same tax 
liability is filed in County Y against E, as nominee of D. The IRS will 
notify D of the filing of the NFTL in both County X and County Y. The 
IRS will not notify E of the NFTL filed in County X. The IRS is not 
required to notify E of the NFTL filed in County Y. Although E is named 
on the NFTL filed in County Y, E is not the person described in section 
6321 (the taxpayer) who is named on the NFTL.

    (b) Entitlement to a Collection Due Process hearing (CDP hearing)--
(1) In general. A taxpayer is entitled to one CDP hearing with respect 
to the first filing of a NFTL (on or after January 19, 1999) for a given 
tax period or periods with respect to the amount of unpaid tax shown on 
the NFTL if the taxpayer timely requests such a hearing. The taxpayer 
must request such a hearing during the 30-day period that commences the 
day after the end of the five business day period within which the IRS 
is required to provide the taxpayer with notice of the filing of the 
NFTL.
    (2) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (b) as follows:
    Q-B1. Is a taxpayer entitled to a CDP hearing with respect to the 
filing of a NFTL for a tax and tax period previously subject to a CDP 
Notice in a different location?
    A-B1. No. Although the taxpayer will receive notice of each filing 
of the NFTL, under section 6320(b)(2), the taxpayer is entitled to only 
one CDP hearing under section 6320 for each tax period with respect to 
the first filing of a NFTL that occurs on or after January 19, 1999, 
with respect to an amount of unpaid tax. Accordingly, if the taxpayer 
does not timely request a CDP hearing with respect to the first filing 
of a NFTL on or after January 19, 1999, for a given tax period or 
periods with respect to an amount of unpaid tax, the taxpayer foregoes 
the right to a CDP hearing with Appeals and judicial review of Appeals's 
determination as to the NFTL. Under such circumstances, a taxpayer, 
however, may request an equivalent hearing as described in paragraph (i) 
of this section.
    Q-B2. Is the taxpayer entitled to a CDP hearing where a NFTL for a 
tax and tax period is filed on or after January 19, 1999, in one 
recording office and a NFTL was previously filed in another recording 
office prior to that date?
    A-B2. Yes. Under section 6320(b)(2), the taxpayer is entitled to a 
CDP hearing under section 6320 for each tax period with respect to the 
first filing of a NFTL on or after January 19, 1999, with respect to an 
amount of unpaid tax, whether or not a NFTL was filed prior to January 
19, 1999, for the same tax and tax period or periods.
    Q-B3. When the IRS provides the taxpayer with a substitute CDP 
Notice and the taxpayer timely requests a CDP hearing, is he entitled to 
a CDP hearing before Appeals?
    A-B3. Yes. Unless the taxpayer provides the IRS a written withdrawal 
of the request that Appeals conduct a CDP hearing, the taxpayer is 
entitled

[[Page 210]]

to a CDP hearing before Appeals. Following the hearing, Appeals will 
issue a Notice of Determination, and the taxpayer is entitled to seek 
judicial review of that Notice of Determination.
    Q-B4. If the IRS sends a second CDP Notice under section 6320 (other 
than a substitute CDP Notice) for a tax period and with respect to an 
amount of unpaid tax for which a section 6320 CDP Notice was previously 
sent, is the taxpayer entitled to a second section 6320 CDP hearing?
    A-B4. No. The taxpayer is entitled to only one CDP hearing under 
section 6320 for a tax and tax period set forth in a NFTL with respect 
to the first filing of a NFTL that occurs on or after January 19, 1999.
    Q-B5. Is a nominee of, or a person holding property of, the taxpayer 
entitled to a CDP hearing or an equivalent hearing?
    A-B5. No. Such person is not the person described in section 6321 
and is, therefore, not entitled to a CDP hearing or an equivalent 
hearing (as discussed in paragraph (i) of this section). Such person, 
however, may seek reconsideration by the IRS office collecting the tax 
or filing the NFTL, an administrative hearing before Appeals under its 
Collection Appeals Program, or assistance from the National Taxpayer 
Advocate. However, any such administrative hearing would not be a CDP 
hearing under section 6320 and any determination or decision resulting 
from the hearing would not be subject to judicial review. Such person 
may also avail himself of the administrative procedure included in 
section 6325(b)(4) of the Internal Revenue Code or of any other 
procedures to which he is entitled.
    (3) Examples. The following examples illustrate the principles of 
this paragraph (b):

    Example 1. H and W are jointly and severally liable with respect to 
a jointly filed income tax return for 1996. The IRS files a NFTL with 
respect to H and W in County X on January 26, 1999. This is the first 
NFTL filed on or after January 19, 1999, for their 1996 liability. H and 
W are each entitled to a CDP hearing with respect to the NFTL filed in 
County X.
    Example 2. Federal income tax liability for 1997 is assessed against 
individual D. D buys an asset and puts it in individual E's name. A NFTL 
is filed against D in County X on June 5, 1999, for D's federal income 
tax liability for 1997. On June 17, 1999, a NFTL for the same tax 
liability is filed in County Y against E, as nominee of D. The IRS will 
give D a CDP Notice with respect to the NFTL filed in County X. It will 
give D notification of the NFTL filed in County Y. The IRS will not 
notify E of the NFTL filed in County X. The IRS is not required to 
notify E of the filing of the NFTL in County Y. Although E is named on 
the NFTL filed in County Y, E is not the person described in section 
6321 (the taxpayer) who is named on the NFTL.

    (c) Requesting a CDP hearing--(1) In general. Where a taxpayer is 
entitled to a CDP hearing under section 6320, such a hearing must be 
requested during the 30-day period that commences the day after the end 
of the five business day period within which the IRS is required to 
provide the taxpayer with a CDP notice with respect to the filing of the 
NFTL.
    (2) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (c) as follows:
    Q-C1. What must a taxpayer do to obtain a CDP hearing?
    A-C1. The taxpayer must make a request in writing for a CDP hearing. 
A written request in any form, which requests a CDP hearing, will be 
acceptable. The request must include the taxpayer's name, address, and 
daytime telephone number, and must be signed by the taxpayer or the 
taxpayer's authorized representative and dated. Included with the CDP 
Notice will be a Form 12153, Request for a Collection Due Process 
Hearing, that can be used by the taxpayer in requesting a CDP hearing. 
The Form 12153 requests the following information: the taxpayer's name, 
address, daytime telephone number, and taxpayer identification number 
(SSN or TIN); the type of tax involved; the tax period at issue; a 
statement that the taxpayer requests a hearing with Appeals concerning 
the filing of the NFTL; and the reason or reasons why the taxpayer 
disagrees with the filing of the NFTL. Taxpayers are encouraged to use a 
Form 12153 in requesting a CDP hearing so that such a request can be 
readily identified and forwarded to Appeals. Taxpayers may obtain a copy 
of Form 12153 by contacting the IRS office that issued the

[[Page 211]]

CDP Notice or by calling, toll free, 1-800-829-3676.
    Q-C2. Must the request for the CDP hearing be in writing?
    A-C2. Yes. There are several reasons why the request for a CDP 
hearing must be in writing. First, the filing of a timely request for a 
CDP hearing is the first step in what may result in a court proceeding. 
A written request will provide proof that the CDP hearing was requested 
and thus permit the court to verify that it has jurisdiction over any 
subsequent appeal of the Notice of Determination issued by Appeals. In 
addition, the receipt of the written request will establish the date on 
which the periods of limitation under section 6502 (relating to 
collection after assessment), section 6531 (relating to criminal 
prosecutions), and section 6532 (relating to suits) are suspended as a 
result of the CDP hearing and any judicial appeal. Moreover, because the 
IRS anticipates that taxpayers will contact the IRS office that issued 
the CDP Notice for further information, for help in filling out Form 
12153, or in an attempt to resolve their liabilities prior to going 
through the CDP hearing process, the requirement of a written request 
should help to prevent any misunderstanding as to whether a CDP hearing 
has been requested. If the information requested on Form 12153 is 
furnished by the taxpayer, the written request will also help to 
establish the issues for which the taxpayer seeks a determination by 
Appeals.
    Q-C3. When must a taxpayer request a CDP hearing with respect to a 
CDP Notice issued under section 6320?
    A-C3. A taxpayer must submit a written request for a CDP hearing 
within the 30-day period that commences the day after the end of the 
five business day period following the filing of the NFTL. Any request 
filed during the five business day period (before the beginning of the 
30-day period) will be deemed to be filed on the first day of the 30-day 
period. The period for submitting a written request for a CDP hearing 
with respect to a CDP Notice issued under section 6320 is slightly 
different from the period taxpayers are allowed for submitting a written 
request for a CDP hearing with respect to a CDP Notice issued under 
section 6330. For a CDP Notice issued under section 6330, the taxpayer 
must request a CDP hearing within the 30-day period commencing the day 
after the date of the CDP Notice.
    Q-C4. How will the timeliness of a taxpayer's written request for a 
CDP hearing be determined?
    A-C4. The rules under section 7502 and the regulations under that 
section and section 7503 and the regulations under that section will 
apply to determine the timeliness of the taxpayer's request for a CDP 
hearing, if properly transmitted and addressed as provided in A-C6 of 
this paragraph (c)(2).
    Q-C5. Is the 30-day period within which a taxpayer must make a 
request for a CDP hearing extended because the taxpayer resides outside 
the United States?
    A-C5. No. Section 6320 does not make provision for such a 
circumstance. Accordingly, all taxpayers who want a CDP hearing under 
section 6320 must request such a hearing within the 30-day period that 
commences the day after the end of the five business day notification 
period.
    Q-C6. Where should the written request for a CDP hearing be sent?
    A-C6. The written request for a CDP hearing should be filed with the 
IRS office that issued the CDP Notice at the address indicated on the 
CDP Notice. If the address of that office is not known, the request may 
be sent to the District Director serving the district of the taxpayer's 
residence or principal place of business. If the taxpayer does not have 
a residence or principal place of business in the United States, the 
request may be sent to the Director, Philadelphia Service Center.
    Q-C7. What will happen if the taxpayer does not request a section 
6320 CDP hearing in writing within the 30-day period that commences the 
day after the end of the five business day notification period?
    A-C7. If the taxpayer does not request a CDP hearing in writing 
within the 30-day period that commences on the day after the end of the 
five business day notification period, the taxpayer will forego the 
right to a CDP hearing under section 6320 with respect to the tax and 
tax period or periods

[[Page 212]]

shown on the CDP Notice. The taxpayer may, however, request an 
equivalent hearing. See paragraph (i) of this section.
    Q-C8. When must a taxpayer request a CDP hearing with respect to a 
substitute CDP Notice?
    A-C8. A CDP hearing with respect to a substitute CDP Notice must be 
requested in writing by the taxpayer prior to the end of the 30-day 
period commencing the day after the date of the substitute CDP Notice.
    Q-C9. Can taxpayers attempt to resolve the matter of the NFTL with 
an officer or employee of the IRS office collecting the tax or filing 
the NFTL either before or after requesting a CDP hearing?
    A-C9. Yes. Taxpayers are encouraged to discuss their concerns with 
the IRS office collecting the tax or filing the NFTL, either before or 
after they request a CDP hearing. If such a discussion occurs before a 
request is made for a CDP hearing, the matter may be resolved without 
the need for Appeals consideration. However, these discussions do not 
suspend the running of the 30-day period that commences the day after 
the end of the five business day notification period within which the 
taxpayer is required to request a CDP hearing, nor do they extend that 
30-day period. If discussions occur after the request for a CDP hearing 
is filed and the taxpayer resolves the matter with the IRS office 
collecting the tax or filing the NFTL, the taxpayer may withdraw in 
writing the request that a CDP hearing be conducted by Appeals. The 
taxpayer can also waive in writing some or all of the requirements 
regarding the contents of the Notice of Determination.
    (3) Examples. The following examples illustrate the principles of 
this paragraph (c):

    Example 1. A NFTL for a 1997 income tax liability assessed against 
individual A is filed in County X on June 17, 1999. The IRS mails a CDP 
Notice to individual A's last known address on June 18, 1999. Individual 
A has until July 26, 1999, a Monday, to request a CDP hearing. The five 
business day period within which the IRS is required to notify 
individual A of the filing of the NFTL in County X expires on June 24, 
1999. The 30-day period within which individual A may request a CDP 
hearing begins on June 25, 1999. Because the 30-day period expires on 
July 24, 1999, a Saturday, individual A's written request for a CDP 
hearing will be considered timely if it is properly transmitted and 
addressed to the IRS in accordance with section 7502 and the regulations 
thereunder no later than July 26, 1999.
    Example 2. Same facts as in Example 1, except that individual A is 
on vacation, outside the United States, or otherwise does not receive or 
read the CDP Notice until July 19, 1999. As in (i), individual A has 
until July 26, 1999, to request a CDP hearing. If individual A does not 
request a CDP hearing, individual A may request an equivalent hearing as 
to the NFTL at a later time. The taxpayer should make a request for an 
equivalent hearing at the earliest possible time.
    Example 3. Same facts as in Example 2, except that individual A does 
not receive or read the CDP Notice until after July 26, 1999, and does 
not request a hearing by July 26, 1999. Individual A is not entitled to 
a CDP hearing. Individual A may request an equivalent hearing as to the 
NFTL at a later time.

    The taxpayer should make a request for an equivalent hearing at the 
earliest possible time.

    Example 4. Same facts as in Example 1, except the IRS determines 
that the CDP Notice mailed on June 18, 1999, was not mailed to 
individual A's last known address. As soon as practicable after making 
this determination, the IRS will mail a substitute CDP Notice to 
individual A at individual A's last known address, hand deliver the 
substitute CDP Notice to individual A, or leave the substitute CDP 
Notice at individual A's dwelling or usual place of business. Individual 
A will have 30 days commencing on the day after the date of the 
substitute CDP Notice within which to request a CDP hearing.

    (d) Conduct of CDP hearing--(1) In general. If a taxpayer requests a 
CDP hearing under section 6320(a)(3)(B) (and does not withdraw that 
request), the CDP hearing will be held with Appeals. The taxpayer is 
entitled to only one CDP hearing for a tax and tax period set forth in a 
NFTL under section 6320 with respect to the first filing of a NFTL on or 
after January 19, 1999. To the extent practicable, the CDP hearing 
requested under section 6320 will be held in conjunction with any CDP 
hearing the taxpayer requests under section 6330. A CDP hearing will be 
conducted by an employee or officer of Appeals who has had no 
involvement with respect to the tax for the tax period or periods 
covered by the hearing prior to the first CDP hearing under

[[Page 213]]

section 6320 or section 6330, unless the taxpayer waives that 
requirement.
    (2) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (d) as follows:
    Q-D1. Under what circumstances can a taxpayer receive more than one 
CDP hearing with respect to a tax period?
    A-D1. The taxpayer may receive more than one CDP hearing with 
respect to a tax period where the tax involved is a different type of 
tax (for example, an employment tax liability, where the original CDP 
hearing for the tax period involved an income tax liability), or where 
the same type of tax for the same period is involved, but where the 
amount of the tax has changed as a result of an additional assessment of 
tax for that period or an additional accuracy-related or filing 
delinquency penalty has been assessed. The taxpayer is not entitled to 
another CDP hearing if the additional assessment represents accruals of 
interest or accruals of penalties.
    Q-D2. Will a CDP hearing with respect to one tax period be combined 
with a CDP hearing with respect to another tax period?
    A-D2. To the extent practicable, a hearing with respect to one tax 
period shown on the NFTL will be combined with any and all other 
hearings to which the taxpayer may be entitled with respect to other tax 
periods shown on the NFTL.
    Q-D3. Will a CDP hearing under section 6320 be combined with a CDP 
hearing under section 6330?
    A-D3. To the extent practicable, a CDP hearing under section 6320 
will be held in conjunction with a CDP hearing under section 6330.
    Q-D4. What is considered to be prior involvement by an employee or 
officer of Appeals with respect to the tax and tax period or periods 
involved in the hearing?
    A-D4. Prior involvement by an employee or officer of Appeals 
includes participation or involvement in an Appeals hearing (other than 
a CDP hearing held under either section 6320 or section 6330) that the 
taxpayer may have had with respect to the tax and tax period or periods 
shown on the NFTL.
    Q-D5. How can a taxpayer waive the requirement that the officer or 
employee of Appeals had no prior involvement with respect to the tax and 
tax period or periods involved in the CDP hearing?
    A-D5. The taxpayer must sign a written waiver.
    (e) Matters considered at CDP hearing--(1) In general. Appeals has 
the authority to determine the validity, sufficiency, and timeliness of 
any CDP Notice given by the IRS and of any request for a CDP hearing 
that is made by a taxpayer. Prior to the issuance of a determinaton, the 
hearing officer is required to obtain verification from the IRS office 
collecting the tax or filing the NFTL that the requirements of any 
applicable law or administrative procedure have been met. The taxpayer 
may raise any relevant issue relating to the unpaid tax at the hearing, 
including appropriate spousal defenses, challenges to the 
appropriateness of the NFTL filing, and offers of collection 
alternatives. The taxpayer also may raise challenges to the existence or 
amount of the tax liability specified on the CDP Notice for any tax 
period shown on the CDP Notice if the taxpayer did not receive a 
statutory notice of deficiency for that tax liability or did not 
otherwise have an opportunity to dispute that tax liability. Finally, 
the taxpayer may not raise an issue that was raised and considered at a 
previous CDP hearing under section 6330 or in any other previous 
administrative or judicial proceeding if the taxpayer participated 
meaningfully in such hearing or proceeding. Taxpayers will be expected 
to provide all relevant information requested by Appeals, including 
financial statements, for its consideration of the facts and issues 
involved in the hearing.
    (2) Spousal defenses. A taxpayer may raise any appropriate spousal 
defenses at a CDP hearing. To claim a spousal defense under section 
6015, the taxpayer must do so in writing according to rules prescribed 
by the Secretary. Spousal defenses raised under section 6015 in a CDP 
hearing are governed in all respects by the provisions of section 6015 
and the procedures prescribed by the Secretary thereunder.

[[Page 214]]

    (3) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (e) as follows:
    Q-E1. What factors will Appeals consider in making its 
determination?
    A-E1. Appeals will consider the following matters in making its 
determination:
    (i) Whether the IRS met the requirements of any applicable law or 
administrative procedure.
    (ii) Any issues appropriately raised by the taxpayer relating to the 
unpaid tax.
    (iii) Any appropriate spousal defenses raised by the taxpayer.
    (iv) Any challenges made by the taxpayer to the appropriateness of 
the NFTL filing.
    (v) Any offers by the taxpayer for collection alternatives.
    (vi) Whether the continued existence of the filed NFTL represents a 
balance between the need for the efficient collection of taxes and the 
legitimate concern of the taxpayer that any collection action be no more 
intrusive than necessary.
    Q-E2. When is a taxpayer entitled to challenge the existence or 
amount of the tax liability specified in the CDP Notice?
    A-E2. A taxpayer is entitled to challenge the existence or amount of 
the tax liability specified in the CDP Notice if the taxpayer did not 
receive a statutory notice of deficiency for such liability or did not 
otherwise have an opportunity to dispute such liability. Receipt of a 
statutory notice of deficiency for this purpose means receipt in time to 
petition the Tax Court for a redetermination of the deficiency asserted 
in the notice of deficiency. An opportunity to dispute a liability 
includes a prior opportunity for a conference with Appeals that was 
offered either before or after the assessment of the liability.
    Q-E3. Are spousal defenses subject to the limitations imposed under 
section 6330(c)(2)(B) on a taxpayer's right to challenge the tax 
liability specified in the CDP Notice at a CDP hearing?
    A-E3. No. The limitations imposed under section 6330(c)(2)(B) do not 
apply to spousal defenses. A spousal defense raised under section 6015 
is governed by that section; therefore any limitations under section 
6015 will apply.
    Q-E4. May a taxpayer raise at a CDP hearing a spousal defense under 
section 6015 if that defense was raised and considered in a prior 
judicial proceeding that has become final?
    A-E4. No. A taxpayer is precluded by limitations under section 6015 
from raising a spousal defense under section 6015 in a CDP hearing under 
these circumstances.
    Q-E5. What collection alternatives are available to the taxpayer?
    A-E5. Collection alternatives would include, for example, withdrawal 
of the NFTL in circumstances that will facilitate the collection of the 
tax liability, an installment agreement, an offer-in-compromise, the 
posting of a bond, or the substitution of other assets.
    Q-E6. What issues may a taxpayer raise in a CDP hearing under 
section 6320 if he previously received a notice under section 6330 with 
respect to the same tax and tax period and did not request a CDP hearing 
with respect to that notice?
    A-E6. The taxpayer may raise appropriate spousal defenses, 
challenges to the appropriateness of the NFTL filing, and offers of 
collection alternatives. The existence or amount of the tax liability 
for the tax and tax period specified in the CDP Notice may be challenged 
only if the taxpayer did not already have an opportunity to dispute that 
tax liability. Where the taxpayer previously received a CDP Notice under 
section 6330 with respect to the same tax and tax period and did not 
request a CDP hearing with respect to that earlier CDP Notice, the 
taxpayer already had an opportunity to dispute the existence or amount 
of the tax liability.
    Q-E7. How will Appeals issue its determination?
    A-E7. (i) Taxpayers will be sent a dated Notice of Determination by 
certified or registered mail. The Notice of Determination will set forth 
Appeals's findings and decisions. It will state whether the IRS met the 
requirements of any applicable law or administrative procedure; it will 
resolve any issues appropriately raised by the taxpayer relating to the 
unpaid tax; it will include a decision on any appropriate spousal 
defenses raised by the taxpayer; it will

[[Page 215]]

include a decision on any challenges made by the taxpayer to the 
appropriateness of the NFTL filing; it will respond to any offers by the 
taxpayer for collection alternatives; and it will address whether the 
continued existence of the filed NFTL represents a balance between the 
need for the efficient collection of taxes and the legitimate concern of 
the taxpayer that any collection action be no more intrusive than 
necessary. The Notice of Determination will also set forth any 
agreements Appeals reached with the taxpayer, any relief given the 
taxpayer, and any actions the taxpayer and/or the IRS are required to 
take. Lastly, the Notice of Determination will advise the taxpayer of 
his right to seek judicial review within 30 days of the date of the 
Notice of Determination.
    (ii) Because taxpayers are encouraged to discuss their concerns with 
the IRS office collecting the tax or filing the NFTL, certain matters 
that might have been raised at a CDP hearing may be resolved without the 
need for Appeals consideration. Unless as a result of these discussions, 
the taxpayer agrees to withdraw in writing the request that Appeals 
conduct a CDP hearing, Appeals will still issue a Notice of 
Determination. The taxpayer can, however, waive in writing Appeals's 
consideration of some or all of the matters it would otherwise consider 
in making its determination.
    Q-E8. Is there a time limit on the CDP hearings or on when Appeals 
must issue a Notice of Determination?
    A-E8. No. Appeals will, however, attempt to conduct CDP hearings as 
expeditiously as possible.
    Q-E9. Why is the Notice of Determination and its date important?
    A-E9. The Notice of Determination will set forth Appeals's findings 
and decisions with respect to the matters set forth in A-E1 of this 
paragraph (e)(3). The date of the Notice of Determination establishes 
the beginning date of the 30-day period within which the taxpayer is 
permitted to seek judicial review of Appeals's determination.
    (4) Examples. The following examples illustrate the principles of 
this paragraph (e).

    Example 1. The IRS sends a statutory notice of deficiency to the 
taxpayer at his last known address asserting a deficiency for the 
taxable year 1995. The taxpayer receives the notice of deficiency in 
time to petition the Tax Court for a redetermination of the asserted 
deficiency. The taxpayer does not timely file a petition with the Tax 
Court. The taxpayer is therefore precluded from challenging the 
existence or amount of the tax liability in a subsequent CDP hearing.
    Example 2. Same facts as in Example 1, except the taxpayer does not 
receive the notice of deficiency in time to petition the Tax Court. The 
taxpayer is not, therefore, precluded from challenging the existence or 
amount of the tax liability in a subsequent CDP hearing.
    Example 3. The IRS properly assesses a trust fund recovery penalty 
against the taxpayer. The IRS offers the opportunity for a conference at 
which the taxpayer would have the opportunity to dispute the liability. 
The taxpayer declines the opportunity to participate in such a 
conference. The taxpayer is precluded from challenging the existence or 
amount of the tax liability in a subsequent CDP hearing.

    (f) Judicial review of Notice of Determination--(1) In general. 
Unless the taxpayer provides the IRS a written withdrawal of the request 
that Appeals conduct a CDP hearing, Appeals is required to issue a 
Notice of Determination in all cases where a taxpayer has timely 
requested a CDP hearing in writing. The taxpayer may appeal such 
determinations made by Appeals within 30 days after the date of the 
Notice of Determination to the Tax Court or a district court of the 
United States, as appropriate.
    (2) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (f) as follows:
    Q-F1. What must a taxpayer do to obtain judicial review of a Notice 
of Determination?
    A-F1. Subject to the jurisdictional limitations described in A-F2, 
the taxpayer must, within the 30-day period commencing the day after the 
date of the Notice of Determination, appeal the determination by Appeals 
to the Tax Court or to a district court of the United States.
    Q-F2. With respect to the relief available to the taxpayer under 
section 6015(b) or (c), what is the time frame within which a taxpayer 
may seek Tax Court review of Appeals's determination following a CDP 
hearing?

[[Page 216]]

    A-F2. If the taxpayer seeks Tax Court review not only of Appeals's 
denial of relief under section 6015 (b) or (c), but also of relief 
requested with respect to other issues raised in the CDP hearing, the 
taxpayer should request Tax Court review within the 30-day period 
commencing the day after the date of the Notice of Determination. If the 
taxpayer only seeks Tax Court review of Appeals's denial of relief under 
section 6015 (b) or (c), the taxpayer should request Tax Court review, 
as provided by section 6015(e), within 90 days of Appeals's 
determination. If a request for Tax Court review is filed after the 30-
day period for seeking judicial review under section 6320, then only the 
taxpayer's section 6015 (b) or (c) claims may be reviewable by the Tax 
Court.
    Q-F3. Where should a taxpayer direct a request for judicial review 
of a Notice of Determination?
    A-F3. If the Tax Court would have jurisdiction over the type of tax 
specified in the CDP Notice (for example, income and estate taxes), then 
the taxpayer must seek judicial review by the Tax Court. If the tax 
liability specified in the CDP Notice arises from a type of tax over 
which the Tax Court would not have jurisdiction, then the taxpayer must 
seek judicial review by a district court of the United States in 
accordance with Title 28 of the United States Code.
    Q-F4. What happens if the taxpayer timely appeals Appeals's 
determination to the incorrect court?
    A-F4. If the court to which the taxpayer directed a timely appeal of 
the Notice of Determination determines that the appeal was to the 
incorrect court (because of jurisdictional, venue or other reasons), the 
taxpayer will have 30 days after the court's determination to that 
effect within which to file an appeal to the correct court.
    Q-F5. What issue or issues may the taxpayer raise before the Tax 
Court or before a district court if the taxpayer disagrees with the 
Notice of Determination?
    A-F5. In seeking Tax Court or district court review of Appeals's 
Notice of Determination, the taxpayer can only request that the court 
consider an issue that was raised in the taxpayer's CDP hearing.
    (g) Effect of request for CDP hearing and judicial review on periods 
of limitation--(1) In general. The periods of limitation under section 
6502 (relating to collection after assessment), section 6531 (relating 
to criminal prosecutions), and section 6532 (relating to suits) are 
suspended until the date the IRS receives the taxpayer's written 
withdrawal of the request for a CDP hearing by Appeals or the 
determination resulting from the CDP hearing becomes final by expiration 
of the time for seeking review or reconsideration. In no event shall any 
of these periods of limitation expire before the 90th day after the date 
on which the IRS receives the taxpayer's written withdrawal of the 
request that Appeals conduct a CDP hearing or the determination with 
respect to such hearing becomes final upon expiration of the time for 
seeking review or reconsideration.
    (2) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (g) as follows:
    Q-G1. For what period of time will the periods of limitation under 
sections 6502, 6531, and 6532 remain suspended if the taxpayer timely 
requests a CDP hearing concerning the filing of a NFTL?
    A-G1. The suspension period commences on the date the IRS receives 
the taxpayer's written request for a CDP hearing. The suspension period 
continues until the IRS receives a written withdrawal by the taxpayer of 
the request for a CDP hearing or the determination resulting from the 
CDP hearing becomes final by expiration of the time for seeking review 
or reconsideration. In no event shall any of these periods of limitation 
expire before the 90th day after the day on which the IRS receives the 
taxpayer's written withdrawal of the request that Appeals conduct a CDP 
hearing or there is a final determination with respect to such hearing. 
The periods of limitation that are suspended under section 6320 are 
those which apply to the taxes and the tax period or periods to which 
the CDP Notice relates.
    Q-G2. For what period of time will the periods of limitation under 
sections 6502, 6531, and 6532 be suspended if the taxpayer does not 
request a CDP hearing concerning the filing of a NFTL, or

[[Page 217]]

the taxpayer requests a CDP hearing, but his request is not timely?
    A-G2. Under either of these circumstances, section 6320 does not 
provide for a suspension of the periods of limitation.
    (3) Examples. The following examples illustrate the principles of 
this paragraph (g).

    Example 1. The period of limitation under section 6502 with respect 
to the taxpayer's tax period listed in the NFTL will expire on August 1, 
1999. The IRS sent a CDP Notice to the taxpayer on April 30, 1999. The 
taxpayer timely requested a CDP hearing. The IRS received this request 
on May 15, 1999. Appeals sends the taxpayer its determination on June 
15, 1999. The taxpayer timely seeks judicial review of that 
determination. The period of limitation under section 6502 would be 
suspended from May 15, 1999, until the determination resulting from that 
hearing becomes final by expiration of the time for seeking review or 
reconsideration before the appropriate court, plus 90 days.
    Example 2. Same facts as in Example 1, except the taxpayer does not 
seek judicial review of Appeals's determination. Because the taxpayer 
requested the CDP hearing when fewer than 90 days remained on the period 
of limitation, the period of limitation will be extended to October 13, 
1999 (90 days from July 15, 1999).

    (h) Retained jurisdiction of Appeals--(1) In general. The Appeals 
office that makes a determination under section 6320 retains 
jurisdiction over that determination, including any subsequent 
administrative hearings that may be requested by the taxpayer regarding 
the NFTL and any collection actions taken or proposed with respect to 
Appeals's determination. Once a taxpayer has exhausted his other 
remedies, Appeals's retained jurisdiction permits it to consider whether 
a change in the taxpayer's circumstances affects its original 
determination. Where a taxpayer alleges a change in circumstances that 
affects Appeals's original determination, Appeals may consider whether 
changed circumstances warrant a change in its earlier determination.
    (2) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (h) as follows:
    Q-H1. Are the periods of limitation suspended during the course of 
any subsequent Appeals consideration of the matters raised by a taxpayer 
when the taxpayer invokes the retained jurisdiction of Appeals under 
section 6330(d)(2)(A) or (d)(2)(B)?
    A-H1. No. Under section 6320(b)(2), a taxpayer is entitled to only 
one section 6320 CDP hearing with respect to the tax and tax period or 
periods specified in the CDP Notice. Any subsequent consideration by 
Appeals pursuant to its retained jurisdiction is not a continuation of 
the original CDP hearing and does not suspend the periods of limitation.
    Q-H2. Is a decision of Appeals resulting from a retained 
jurisdiction hearing appealable to the Tax Court or a district court?
    A-H2. No. As discussed in A-H1, a taxpayer is entitled to only one 
section 6320 CDP hearing with respect to the tax and tax period or 
periods specified in the CDP Notice. Only determinations resulting from 
CDP hearings are appealable to the Tax Court or a district court.
    (i) Equivalent hearing--(1) In general. A taxpayer who fails to make 
a timely request for a CDP hearing is not entitled to a CDP hearing. 
Such a taxpayer may nevertheless request an administrative hearing with 
Appeals, which is referred to herein as an ``equivalent hearing.'' The 
equivalent hearing will be held by Appeals and will generally follow 
Appeals procedures for a CDP hearing. Appeals will not, however, issue a 
Notice of Determination. Under such circumstances, Appeals will issue a 
Decision Letter.
    (2) Questions and answers. The questions and answers illustrate the 
provisions of this paragraph (i) as follows:
    Q-I1. What issues will Appeals consider at an equivalent hearing?
    A-I1. In an equivalent hearing, Appeals will consider the same 
issues that it would have considered at a CDP hearing on the same 
matter.
    Q-I2. Are the periods of limitation under sections 6502, 6531, and 
6532 suspended if the taxpayer does not timely request a CDP hearing and 
is subsequently given an equivalent hearing?
    A-I2. No. The suspension period provided for in section 6330(e) 
relates only to hearings requested within the 30-day period that 
commences on the day after the end of the five business day

[[Page 218]]

period following the filing of the NFTL, that is, CDP hearings.
    Q-I3. Will collection action, including the filing of additional 
NFTLs, be suspended if a taxpayer requests and receives an equivalent 
hearing?
    A-I3. Collection action is not required to be suspended. 
Accordingly, the decision to take collection action during the pendency 
of an equivalent hearing will be determined on a case-by-case basis. 
Appeals may request the IRS office with responsibility for collecting 
the taxes to suspend all or some collection action or to take other 
appropriate action if it determines that such action is appropriate or 
necessary under the circumstances.
    Q-I4. What will the Decision Letter state?
    A-I4. The Decision Letter will generally contain the same 
information as a Notice of Determination.
    Q-I5. Will a taxpayer be able to obtain court review of a decision 
made by Appeals with respect to an equivalent hearing?
    A-I5. Section 6320 does not authorize a taxpayer to appeal the 
decision of Appeals with respect to an equivalent hearing. A taxpayer 
may under certain circumstances be able to seek Tax Court review of 
Appeals's denial of relief under section 6015(b) or (c). Such review 
must be sought within 90 days of the issuance of Appeals's determination 
on those issues, as provided by section 6015(e).
    (j) Effective date. This section is applicable with respect to any 
filing of a NFTL on or after January 19, 1999, and before January 21, 
2002.

[T.D. 8810, 64 FR 3399, Jan. 22, 1999]



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 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

[[Page 219]]

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 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)

[[Page 220]]

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 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,

[[Page 221]]

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 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

[[Page 222]]

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 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

[[Page 223]]

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 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.

[[Page 224]]

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 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

[[Page 225]]

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 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

[[Page 226]]

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 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

[[Page 227]]

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 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

[[Page 228]]

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.
    (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

[[Page 229]]

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 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

[[Page 230]]

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.
    (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

[[Page 231]]

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 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--

[[Page 232]]

    (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 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

[[Page 233]]

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 law that conforms to or reenacts a federal 
law establishing a national filing

[[Page 234]]

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.
    Example 2. B is a resident of Canada but owns personal property in 
the United States.

[[Page 235]]

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 236]]

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

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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 238]]

    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 Inte