[Title 26 CFR ]
[Code of Federal Regulations (annual edition) - April 1, 2023 Edition]
[From the U.S. Government Publishing Office]
[[Page i]]
Title 26
Internal Revenue
________________________
Parts 300 to 499
Revised as of April 1, 2023
Containing a codification of documents of general
applicability and future effect
As of April 1, 2023
Published by the Office of the Federal Register
National Archives and Records Administration as a
Special Edition of the Federal Register
[[Page ii]]
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[[Page iii]]
Table of Contents
Page
Explanation................................................. v
Title 26:
Chapter I--Internal Revenue Service, Department of
the Treasury (Continued) 3
Finding Aids:
Table of CFR Titles and Chapters........................ 1031
Alphabetical List of Agencies Appearing in the CFR...... 1051
Table of OMB Control Numbers............................ 1061
List of CFR Sections Affected........................... 1079
[[Page iv]]
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Cite this Code: CFR
To cite the regulations in
this volume use title,
part and section number.
Thus, 26 CFR 300.0 refers
to title 26, part 300,
section 0.
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[[Page v]]
EXPLANATION
The Code of Federal Regulations is a codification of the general and
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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
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collection request.
[[Page vi]]
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(b) The matter incorporated is in fact available to the extent
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that volume.
[[Page vii]]
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Oliver A. Potts,
Director,
Office of the Federal Register
April 1, 2023.
[[Page ix]]
THIS TITLE
Title 26--Internal Revenue is composed of twenty-two volumes. The
contents of these volumes represent all current regulations codified
under this title by the Internal Revenue Service, Department of the
Treasury, as of April 1, 2023. The first fifteen volumes comprise part 1
(Subchapter A--Income Tax) and are arranged by sections as follows:
Sec. Sec. 1.0-1.60; Sec. Sec. 1.61-1.139; Sec. Sec. 1.140-1.169;
Sec. Sec. 1.170-1.300; Sec. Sec. 1.301-1.400; Sec. Sec. 1.401-1.409;
Sec. Sec. 1.410-1.440; Sec. Sec. 1.441-1.500; Sec. Sec. 1.501-1.640;
Sec. Sec. 1.641-1.850; Sec. Sec. 1.851-1.907; Sec. Sec. 1.908-1.1000;
Sec. Sec. 1.1001-1.1400; Sec. Sec. 1.1401-1.1550; and Sec. 1.1551 to
end of part 1. The sixteenth 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, Susannah C. Hurley was Chief Editor. The Code of
Federal Regulations publication program is under the direction of John
Hyrum Martinez, assisted by Stephen J. Frattini.
[[Page 1]]
TITLE 26--INTERNAL REVENUE
(This book contains parts 300 to 499)
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Part
chapter i--Internal Revenue Service, Department of the
Treasury (Continued)...................................... 300
[[Page 3]]
CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY
(CONTINUED)
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Editorial Note: IRS published a document at 45 FR 6088, Jan. 25, 1980,
deleting statutory sections from their regulations. In chapter I cross
references to the deleted material have been changed to the
corresponding sections of the IRS Code of 1954 or to the appropriate
regulations sections. When either such change produced a redundancy, the
cross reference has been deleted. For further explanation, see 45 FR
20795, Mar. 31, 1980.
SUBCHAPTER F--PROCEDURE AND ADMINISTRATION
Part Page
300 User fees................................... 5
301 Procedure and administration................ 9
302 Taxes under the International Claims
Settlement Act, as amended August 9,
1955.................................... 992
303 Taxes under the Trading With the Enemy Act.. 999
304
[Reserved]
305 Temporary procedural and administrative tax
regulations under the Indian Tribal
Governmental Tax Status Act of 1982..... 1005
306-399
[Reserved]
400 Temporary regulations under the Federal Tax
Lien Act of 1966........................ 1007
402
[Reserved]
403 Disposition of seized personal property..... 1019
404 Temporary regulations on procedure and
administration under the Tax Reform Act
of 1976................................. 1026
405-419
[Reserved]
420 Temporary regulations on procedure and
administration under the Employee
Retirement Income Security Act of 1974.. 1028
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.
300.3 Offer to compromise fee.
300.4 Enrolled agent special enrollment examination fee.
300.5 Enrollment of enrolled agent fee.
300.6 Renewal of enrollment of enrolled agent fee.
300.7 Enrollment of enrolled actuary fee.
300.8 Renewal of enrollment of enrolled actuary fee.
300.9 Renewal of enrollment of enrolled retirement plan agent fee.
300.10 Registered tax return preparer competency examination fee.
300.11 Fee for obtaining a preparer tax identification number.
300.12 Fee for estate tax closing letter.
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.
(3) Processing an offer to compromise.
(4) Taking the special enrollment examination to become an enrolled
agent.
(5) Enrolling an enrolled agent.
(6) Renewing the enrollment of an enrolled agent.
(7) Enrolling an enrolled actuary.
(8) Renewing the enrollment of an enrolled actuary.
(9) Renewing the enrollment of an enrolled retirement plan agent.
(10) Taking the registered tax return preparer competency
examination.
(11) Applying for a preparer tax identification number.
(12) Requesting an estate tax closing letter.
[T.D. 8589, 60 FR 8299, Feb. 14, 1995, as amended by T.D. 9086, 68 FR
48787, Aug. 15, 2003; T.D. 9288, 71 FR 58742, Oct. 5, 2006; T.D. 9306,
71 FR 78075, Dec. 28, 2006; T.D. 9370, 72 FR 72607, Dec. 21, 2007; T.D.
9503, 75 FR 60320, Sept. 30, 2010; T.D. 9523, 76 FR 21806, Apr. 19,
2011; T.D. 9559, 76 FR 72623, Nov. 25, 2011; T.D. 9858, 84 FR 20804, May
13, 2019; T.D. 9957, 86 FR 53542, Sept. 28, 2021; T.D. 9962, 87 FR
11297, Mar. 1, 2022]
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 before
January 1, 2017, is $120. The fee for entering into an installment
agreement on or after January 1, 2017, is $225. A reduced fee applies in
the following situations:
(1) For installment agreements entered into before January 1, 2017,
the fee is $52 when the taxpayer pays by way of a direct debit from the
taxpayer's bank account. The fee is $107 when the taxpayer pays by way
of a direct debit from the taxpayer's bank account for installment
agreements entered into on or after January 1, 2017;
(2) For online payment agreements entered into before January 1,
2017, the fee is $120, except that the fee is $52 when the taxpayer pays
by way of a direct debit from the taxpayer's bank account. The fee is
$149 for entering into online payment agreements on or after January 1,
2017, except that the fee is $31 when the taxpayer pays by way of a
direct debit from the taxpayer's bank account; and
(3) Notwithstanding the type of installment agreement and method of
payment, the fee is $43 if the taxpayer is a low-income taxpayer, that
is, an individual who falls at or below 250 percent of the dollar
criteria established by the poverty guidelines updated annually in the
Federal Register by the U.S. Department of Health and Human Services
under authority of section 673(2) of the Omnibus Budget Reconciliation
Act of 1981 (95 Stat. 357, 511), or such other measure that is adopted
by
[[Page 6]]
the Secretary, except that the fee is $31 when the taxpayer pays by way
of a direct debit from the taxpayer's bank account with respect to
online payment agreements entered into on or after January 1, 2017;
(c) Person liable for fee. The person liable for the installment
agreement fee is the taxpayer entering into an installment agreement.
(d) Applicability date. This section is applicable beginning January
1, 2017.
[T.D. 8589, 60 FR 8299, Feb. 14, 1995, as amended by T.D. 9306, 71 FR
78075, Dec. 28, 2006; T.D. 9503, 75 FR 60320, Sept. 30, 2010; T.D. 9647,
78 FR 72018, Dec. 2, 2013; T.D. 9798, 81 FR 86960, Dec. 2, 2016]
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 before January 1, 2017, is $50. The fee for restructuring or
reinstating an installment agreement on or after January 1, 2017, is
$89. If the taxpayer is a low-income taxpayer, that is, an individual
who falls at or below 250 percent of the dollar criteria established by
the poverty guidelines updated annually in the Federal Register by the
U.S. Department of Health and Human Services under authority of section
673(2) of the Omnibus Budget Reconciliation Act of 1981 (95 Stat. 357,
511), or such other measure that is adopted by the Secretary, then the
fee for restructuring or reinstating an installment agreement on or
after January 1, 2017 is $43.
(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.
(d) Applicability date. This section is applicable beginning January
1, 2017.
[T.D. 8589, 60 FR 8299, Feb. 14, 1995, as amended by T.D. 9306, 71 FR
78075, Dec. 28, 2006; T.D. 9503, 75 FR 60320, Sept. 30, 2010; T.D. 9647,
78 FR 72018, Dec. 2, 2013; T.D. 9798, 81 FR 86960, Dec. 2, 2016]
Sec. 300.3 Offer to compromise fee.
(a) Applicability. This section applies to the processing of offers
to compromise tax liabilities pursuant to Sec. 301.7122-1 of this
chapter. Except as provided in this section, this fee applies to all
offers to compromise accepted for processing.
(b) Fee. (1) The fee for processing an offer to compromise submitted
before April 27, 2020, is $186. The fee for processing an offer to
compromise submitted on or after April 27, 2020, is $205. No fee will be
charged if an offer is--
(i) Based solely on doubt as to liability as defined in Sec.
301.7122-1(b)(1) of this chapter;
(ii) Made by a low-income taxpayer, that is, an individual whose
income falls at or below the dollar criteria established by the poverty
guidelines updated annually in the Federal Register by the U.S.
Department of Health and Human Services under authority of section
673(2) of the Omnibus Budget Reconciliation Act of 1981 (95 Stat. 357,
511) or such other measure that is adopted by the Secretary; or
(iii) Made by a low-income taxpayer, as described in section
7122(c)(3) of the Internal Revenue Code, and submitted after July 1,
2019.
(2) The fee will be applied against the amount of the offer, unless
the taxpayer requests that it be refunded, if the offer is--
(i) Accepted to promote effective tax administration pursuant to
Sec. 301.7122-1(b)(3) of this chapter; or
(ii) Accepted based on doubt as to collectibility and a
determination that collection of an amount greater than the amount
offered would create economic hardship within the meaning of Sec.
301.6343-1 of this chapter.
(3) Except as otherwise provided in this paragraph (b), the fee will
not be refunded to the taxpayer if the offer is accepted, rejected,
withdrawn, or returned as nonprocessable after acceptance for
processing.
[[Page 7]]
(4) No additional fee will be charged if a taxpayer resubmits an
offer the Secretary determines to have been rejected in error or
returned in error after acceptance for processing.
(c) Person liable for the fee. The person liable for the processing
fee is the taxpayer whose tax liabilities are the subject of the offer.
(d) Applicability date. This section is applicable beginning April
27, 2020.
[T.D. 9086, 68 FR 48787, Aug. 15, 2003, as amended by T.D. 9503, 75 FR
60320, Sept. 30, 2010; T.D. 9647, 78 FR 72018, Dec. 2, 2013; T.D. 9894,
85 FR 14572, Mar. 13, 2020]
Sec. 300.4 Enrolled agent special enrollment examination fee.
(a) Applicability. This section applies to the special enrollment
examination to become an enrolled agent pursuant to 31 CFR 10.4(a).
(b) Fee. The fee for taking the enrolled agent special enrollment
examination is $99 per part, which is the cost to the government for
overseeing the development and administration of the examination and is
in addition to the fees charged by the administrator of the examination.
(c) Person liable for the fee. The person liable for the special
enrollment examination fee is the applicant taking the examination.
(d) Applicability date. This section applies to registrations for
the enrolled agent special enrollment examination that occur on or after
March 31, 2022.
[T.D. 9288, 71 FR 58742, Oct. 5, 2006, as amended by T.D. 9503, 75 FR
60320, Sept. 30, 2010; T.D. 9523, 76 FR 21806, Apr. 19, 2011; T.D. 9820,
82 FR 33012, July 19, 2017; T.D. 9962, 87 FR 11297, Mar. 1, 2022]
Sec. 300.5 Enrollment of enrolled agent fee.
(a) Applicability. This section applies to the initial enrollment of
enrolled agents with the IRS Office of Professional Responsibility
pursuant to 31 CFR 10.5(b).
(b) Fee. The fee for initially enrolling as an enrolled agent with
the IRS is $140.
(c) Person liable for the fee. The person liable for the enrollment
fee is the applicant filing for enrollment as an enrolled agent with the
IRS Office of Professional Responsibility.
(d) Applicability date. This section is applicable beginning October
31, 2022.
[T.D. 9288, 71 FR 58742, Oct. 5, 2006, as amended by T.D. 9503, 75 FR
60320, Sept. 30, 2010; T.D. 9523, 76 FR 21807, Apr. 19, 2011; T.D. 9858,
84 FR 20804, May 13, 2019; T.D. 9966, 87 FR 58972, Sept. 29, 2022]
Sec. 300.6 Renewal of enrollment of enrolled agent fee.
(a) Applicability. This section applies to the renewal of enrollment
of enrolled agents with the IRS Office of Professional Responsibility
pursuant to 31 CFR 10.6(d)(6).
(b) Fee. The fee for renewal of enrollment as an enrolled agent with
the IRS is $140.
(c) Person liable for the fee. The person liable for the renewal of
enrollment fee is the person renewing their enrollment as an enrolled
agent with the IRS Office of Professional Responsibility.
(d) Applicability date. This section is applicable beginning October
31, 2022.
[T.D. 9288, 71 FR 58742, Oct. 5, 2006, as amended by T.D. 9503, 75 FR
60321, Sept. 30, 2010; T.D. 9523, 76 FR 21807, Apr. 19, 2011; T.D. 9858,
84 FR 20804, May 13, 2019; T.D. 9966, 87 FR 58972, Sept. 29, 2022]
Sec. 300.7 Enrollment of enrolled actuary fee.
(a) Applicability. This section applies to the initial enrollment of
enrolled actuaries with the Joint Board for the Enrollment of Actuaries
pursuant to 20 CFR Part 901.
(b) Fee. The fee for initially enrolling as an enrolled actuary with
the Joint Board for the Enrollment of Actuaries is $250.00.
(c) Person liable for the fee. The person liable for the enrollment
fee is the applicant filing for enrollment as an enrolled actuary with
the Joint Board for the Enrollment of Actuaries.
(d) Effective/applicability date. This section is applicable
beginning January 22, 2008.
[T.D. 9370, 72 FR 72607, Dec. 21, 2007, as amended by T.D. 9503, 75 FR
60321, Sept. 30, 2010]
Sec. 300.8 Renewal of enrollment of enrolled actuary fee.
(a) Applicability. This section applies to the renewal of enrollment
of enrolled actuaries with the Joint Board
[[Page 8]]
for the Enrollment of Actuaries pursuant to 20 CFR Part 901.
(b) Fee. The fee for renewal of enrollment as an enrolled actuary
with the Joint Board for the Enrollment of Actuaries is $250.00.
(c) Person liable for the fee. The person liable for the renewal of
enrollment fee is the person renewing their enrollment as an enrolled
actuary with the Joint Board for the Enrollment of Actuaries.
(d) Effective/applicability date. This section is applicable
beginning January 22, 2008.
[T.D. 9370, 72 FR 72607, Dec. 21, 2007, as amended by T.D. 9503, 75 FR
60321, Sept. 30, 2010]
Sec. 300.9 Renewal of enrollment of enrolled retirement plan agent fee.
(a) Applicability. This section applies to the renewal of enrollment
of enrolled retirement plan agents with the IRS pursuant to 31 CFR
10.5(b).
(b) Fee. The fee for renewal of enrollment as an enrolled retirement
plan agent with the IRS is $140.
(c) Person liable for the fee. The person liable for the renewal of
enrollment fee is the person renewing enrollment as an enrolled
retirement plan agent with the IRS.
(d) Applicability date. This section is applicable beginning October
31, 2022.
[T.D. 9523, 76 FR 21807, Apr. 19, 2011. Redesignated and amended at 84
FR 20804, May 13, 2019. Redesignated by T.D. 9962 at 87 FR 11297, Mar.
1, 2022; T.D. 9966, 87 FR 58972, Sept. 29, 2022]
Sec. 300.10 Registered tax return preparer competency examination fee.
(a) Applicability. This section applies to the competency
examination to become a registered tax return preparer pursuant to 31
CFR 10.4(c).
(b) Fee. The fee for taking the registered tax return preparer
competency examination is $27, which is the government cost for
overseeing the examination and does not include any fees charged by the
administrator of the examination.
(c) Person liable for the fee. The person liable for the competency
examination fee is the applicant taking the examination.
(d) Effective/applicability date. This section is applicable
beginning November 25, 2011.
[T.D. 9559, 76 FR 72623, Nov. 25, 2011. Redesignated at 84 FR 20804, May
13, 2019. Redesignated by T.D. 9962 at 87 FR 11297, Mar. 1, 2022]
Sec. 300.11 Fee for obtaining a preparer tax identification number.
(a) Applicability. This section applies to the application for and
renewal of a preparer tax identification number pursuant to 26 CFR
1.6109-2(d).
(b) Fee. The fee to apply for or renew a preparer tax identification
number is $21 per year and is in addition to the fee charged by the
contractor.
(c) Person liable for the fee. The individual liable for the
application or renewal fee is the individual applying for and renewing a
preparer tax identification number from the IRS.
(d) Applicability date. This section applies to applications for or
renewal of a preparer tax identification number filed on or after August
17, 2020.
[T.D. 9503, 75 FR 60321, Sept. 30, 2010. Redesignated at T.D. 9523, 76
FR 21807, Apr. 19, 2011, and further redesignated by T.D. 9559, 76 FR
72623, Nov. 25, 2011; T.D. 9742, 80 FR 66794, Oct. 30, 2015; T.D. 9781,
81 FR 52767, Aug. 10, 2016. Redesignated at 84 FR 20804, May 13, 2019.
T.D. 9903, 85 FR 43436, July 17, 2020. Redesignated by T.D. 9962 at 87
FR 11297, Mar. 1, 2022]
Sec. 300.12 Fee for estate tax closing letter.
(a) Applicability. This section applies to the request by a person
described in paragraph (c) of this section for an estate tax closing
letter from the IRS.
(b) Fee. The fee for issuing an estate tax closing letter is $67.
(c) Person liable for the fee. The person liable for the fee is the
estate of the decedent or other person requesting, in accordance with
applicable procedures and policies, an estate tax closing letter to be
issued with respect to the estate.
(d) Applicability date. This section applies to requests for estate
tax closing letters received by the IRS on or after October 28, 2021.
[T.D. 9957, 86 FR 53542, Sept. 28, 2021. Redesignated by T.D. 9962 at 87
FR 11297, Mar. 1, 2022]
[[Page 9]]
PART 301_PROCEDURE AND ADMINISTRATION--Table of Contents
Information and Returns
Returns and Records
records, statements, and special returns
Sec.
301.269B-1 Stapled foreign corporations.
301.1474-1 Required use of electronic form for financial institutions
filing Form 1042, Form 1042-S, or Form 8966.
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 electronic form.
301.6011-3 Required use of electronic form for partnership returns.
301.6011-5 Required use of electronic form for corporate income tax
returns.
301.6011-6 Statement of series and series organizations [Reserved]
301.6011-7 Specified tax return preparers required to file individual
income tax returns using magnetic media.
301.6011-10 Certain organizations, including trusts, required to file
unrelated business income tax returns in electronic form.
301.6011-11 Required use of electronic form for certain returns for tax-
advantaged bonds.
301.6011-12 Required use of electronic form for returns of certain
excise taxes under Chapters 41 and 42 of the Internal Revenue
Code.
301.6011-13 Required use of electronic form for split-interest trust
returns.
301.6011-14 Required use of electronic form or other machine-readable
form for material advisor disclosure statements.
301.6011-15 Required use of electronic form for withholding tax returns.
301.6011(g)-1 Disclosure by taxable party to the tax-exempt entity.
Income Tax Returns
301.6012-1 Persons required to make returns of income.
301.6012-2 Required use of electronic form for income tax returns of
certain political organizations.
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 the Commissioner 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.
301.6033-4 Required filing in electronic form for returns by
organizations required to file returns under section 6033.
301.6033-5 Disclosure by tax-exempt entities that are parties to certain
reportable transactions.
301.6034-1 Returns by trusts described in section 4947(a)(2) or claiming
charitable or other deductions under section 642(c).
301.6036-1 Notice required of executor or of receiver or other like
fiduciary.
301.6037-1 Return of electing small business corporation.
301.6037-2 Required use of electronic form for returns 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.
301.6039E-1 Information reporting by passport applicants.
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.
301.6049-1 Returns regarding payments of interest.
[[Page 10]]
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.
301.6056-1 Rules relating to reporting by applicable large employers on
health insurance coverage offered under employer-sponsored
plans.
301.6056-2 Electronic furnishing of statements.
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.
301.6057-3 Required use of electronic form for filing requirements
relating to deferred vested retirement benefit.
301.6058-1 Information required in connection with certain plans of
deferred compensation.
301.6058-2 Required use of electronic form for filing requirements
relating to information required in connection with certain
plans of deferred compensation.
301.6059-1 Periodic report of actuary.
301.6059-2 Required use of electronic form for filing requirements
relating to 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.
301.6081-2 Automatic extension of time for filing an information return
with respect to certain foreign trusts.
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.
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 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(h)(4)-1 Disclosure of returns and return information in
whistleblower administrative proceedings.
301.6103(i)-1 Disclosure of returns and return information (including
taxpayer return information) to and by officers and employees
of the Department of Justice or another Federal agency for use
in Federal grand jury proceeding, or preparation for
proceeding or investigation, involving enforcement of Federal
criminal statute not involving tax administration.
301.6103(j)(1)-1 Disclosures of return information reflected on returns
to officers and employees of the Department of Commerce for
certain statistical purposes and related activities.
301.6103(j)(5)-1 Disclosures of return information reflected on returns
to officers and employees of the Department of Agriculture for
conducting the census of agriculture.
[[Page 11]]
301.6103(k)(6)-1 Disclosure of return information by certain officers
and employees for investigative purposes.
301.6103(k)(9)-1 Disclosure of returns and return information relating
to payment of tax by credit card and debit card.
301.6103(l)-1 Disclosure of returns and return information for purposes
other than tax administration.
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(m)-1 Disclosure of taxpayer identity information.
301.6103(n)-1 Disclosure of returns and return information in connection
with written contracts or agreements for the acquisition of
property or services for tax administration purposes.
301.6103(n)-2 Disclosure of return information in connection with
written contracts among the IRS, whistleblowers, and legal
representatives of whistleblowers.
301.6103(p)(2)(B)-1 Disclosure of returns and return information by
other agencies.
301.6103(p)(4)-1 Procedures relating to safeguards for returns or return
information.
301.6103(p)(7)-1 Procedures for administrative review of a determination
that an authorized recipient has failed to safeguard 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 officials.
301.6104(d)-0 Table of contents.
301.6104(d)-1 Public inspection and distribution of applications for tax
exemption and annual information returns of tax-exempt
organizations.
301.6104(d)-2 Making applications and returns widely available.
301.6104(d)-3 Tax-exempt organization subject to harassment campaign.
301.6105-1 Compilation of relief from excess profits tax cases.
301.6106-1 Publicity of unemployment tax returns.
301.6108-1 Publication of statistics of income.
301.6109-1 Identifying numbers.
301.6109-2 Authority of the Secretary of Agriculture to collect employer
identification numbers for purposes of the Food Stamp Act of
1977.
301.6109-3 IRS adoption taxpayer identification numbers.
301.6109-4 IRS truncated taxpayer identification numbers.
301.6110-1 Public inspection of written determinations and background
file documents.
301.6110-2 Meaning of terms.
301.6110-3 Deletion of certain information in written determinations
open to public inspection.
301.6110-4 Communications from third parties.
301.6110-5 Notice and time requirements; actions to restrain disclosure;
actions to obtain additional disclosure.
301.6110-6 Written determinations issued in response to requests
submitted before November 1, 1976.
301.6110-7 Miscellaneous provisions.
301.6111-1T Questions and answers relating to tax shelter registration.
301.6111-2 Confidential corporate tax shelters.
301.6111-3 Disclosure of reportable transactions.
301.6112-1 Material advisors of reportable transactions must keep lists
of advisees, etc.
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.
301.6153-1 Installment payments of estimated income tax by individuals.
301.6155-1 Payment on notice and demand.
301.6159-0 Table of contents.
301.6159-1 Agreements for the payment of tax liabilities in
installments.
Extension of Time for Payment
301.6161-1 Extension of time for paying tax.
301.6162-1 Extension of time for payment of tax on gain attributable to
liquidation of personal holding companies.
301.6163-1 Extension of time for payment of estate tax on value of
reversionary or remainder interest in property.
301.6164-1 Extension of time for payment of taxes by corporations
expecting carrybacks.
[[Page 12]]
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.
301.6212-2 Definition of last known address.
301.6213-1 Restrictions applicable to deficiencies; petition to Tax
Court.
301.6215-1 Assessment of deficiency found by Tax Court.
301.6221-1 Tax treatment determined at partnership level.
301.6221(a)-1 Determination at partnership level.
301.6221(b)-1 Election out for certain partnerships with 100 or fewer
partners.
301.6222-1 Partner's return must be consistent with partnership return.
301.6222(a)-1 Consistent treatment of partnership items.
301.6222(a)-2 Application of consistent reporting and notification rules
to indirect partners.
301.6222(b)-1 Notification to the Internal Revenue Service when
partnership items are treated inconsistently.
301.6222(b)-2 Effect of notification of inconsistent treatment.
301.6222(b)-3 Partner receiving incorrect schedule.
301.6223-1 Partnership representative.
301.6223-2 Binding effect of actions of the partnership and partnership
representative.
301.6223(a)-1 Notice sent to tax matters partner.
301.6223(a)-2 Withdrawal of notice of the beginning of an administrative
proceeding.
301.6223(b)-1 Notice group.
301.6223(c)-1 Additional information regarding partners furnished to the
Internal Revenue Service.
301.6223(e)-1 Effect of Internal Revenue Service's failure to provide
notice.
301.6223(e)-2 Elections if Internal Revenue Service fails to provide
timely notice.
301.6223(f)-1 Duplicate copy of final partnership administrative
adjustment.
301.6223(g)-1 Responsibilities of the tax matters partner.
301.6223(h)-1 Responsibilities of pass-thru partner.
301.6224(a)-1 Participation in administrative proceedings.
301.6224(b)-1 Partner may waive rights.
301.6224(c)-1 Tax matters partner may bind nonnotice partners.
301.6224(c)-2 Pass-thru partner binds indirect partners.
301.6224(c)-3 Consistent settlements.
301.6225-1 Partnership adjustment by the Internal Revenue Service.
301.6225-2 Modification of imputed underpayment.
301.6225-3 Treatment of partnership adjustments that do not result in an
imputed underpayment.
301.6226-1 Election for an alternative to the payment of the imputed
underpayment.
301.6226-2 Statements furnished to partners and filed with the IRS.
301.6226-3 Adjustments taken into account by partners.
301.6226(a)-1 Principal place of business of partnership.
301.6226(b)-1 5-percent group.
301.6226(e)-1 Jurisdictional requirement for bringing an action in
District Court or United States Court of Federal Claims.
301.6226(f)-1 Scope of judicial review.
301.6227-1 Administrative adjustment request by partnership.
301.6227-2 Determining and accounting for adjustments requested in an
administrative adjustment request by the partnership.
301.6227-3 Adjustments requested in an administrative adjustment request
taken into account by reviewed year partners.
301.6227(c)-1 Administrative adjustment request by the tax matters
partner on behalf of the partnership.
301.6227(d)-1 Administrative adjustment request filed on behalf of a
partner.
301.6229(b)-1 Extension by agreement.
301.6229(b)-2 Special rule with respect to debtors in title 11 cases.
301.6229(c)(2)-1 Substantial omission of income.
301.6229(e)-1 Information with respect to unidentified partner.
301.6229(f)-1 Special rule for partial settlement agreements.
301.6230(b)-1 Request that correction not be made.
301.6230(c)-1 Claim arising out of erroneous computation, etc.
301.6230(e)-1 Tax matters partner required to furnish names.
301.6231-1 Notice of proceedings and adjustments.
301.6231(a)(1)-1 Exception for small partnerships.
301.6231(a)(2)-1 Persons whose tax liability is determined indirectly by
partnership items.
301.6231(a)(3)-1 Partnership items.
301.6231(a)(5)-1 Definition of affected item.
301.6231(a)(6)-1 Computational adjustments.
301.6231(a)(7)-1 Designation or selection of tax matters partner.
[[Page 13]]
301.6231(a)(7)-2 Designation or selection of tax matters partner for a
limited liability company (LLC).
301.6231(a)(12)-1 Special rules relating to spouses.
301.6231(c)-1 Special rules for certain applications for tentative
carryback and refund adjustments based on partnership losses,
deductions, or credits.
301.6231(c)-2 Special rules for certain refund claims based on losses,
deductions, or credits from abusive tax shelter partnerships.
301.6231(c)-3 Limitation on applicability of Sec. Sec. 301.6231(c)-4
through 301.6231(c)-8.
301.6231(c)-4 Termination and jeopardy assessment.
301.6231(c)-5 Criminal investigations.
301.6231(c)-6 Indirect method of proof of income.
301.6231(c)-7 Bankruptcy and receivership.
301.6231(c)-8 Prompt assessment.
301.6231(d)-1 Time for determining profits interest of partners for
purposes of sections 6223(b) and 6231(a)(11).
301.6231(e)-1 Effect of a determination with respect to a nonpartnership
item on the determination of a partnership item.
301.6231(e)-2 Judicial decision not a bar to certain adjustments.
301.6231(f)-1 Disallowance of losses and credits in certain cases.
301.6232-1 Assessment, collection, and payment of imputed underpayment.
301.6233-1 Extension to entities filing partnership returns.
301.6233(a)-1 Interest and penalties determined from reviewed year.
301.6233(b)-1 Interest and penalties with respect to the adjustment year
return.
301.6234-1 Judicial review of partnership adjustment.
301.6235-1 Period of limitations on making adjustments.
301.6241-1 Definitions.
301.6241-2 Bankruptcy of the partnership.
301.6241-3 Treatment where a partnership ceases to exist.
301.6241-4 Payments nondeductible.
301.6241-5 Extension to entities filing partnership returns.
301.6241-6 Coordination with other chapters of the Internal Revenue
Code.
301.6241-7 Treatment of special enforcement matters.
Collection
General Provisions
301.6301-1 Collection authority.
301.6302-1 Manner or time of collection of taxes.
301.6303-1 Notice and demand for tax.
301.6305-1 Assessment and collection of certain liability.
Receipt of Payment
301.6311-1 Payment by check or money order.
301.6311-2 Payment by credit card and debit card.
301.6312-1 Treasury certificates of indebtedness, Treasury notes, and
Treasury bills acceptable in payment of internal revenue taxes
or stamps.
301.6312-2 Certain Treasury savings notes acceptable in payment of
certain internal revenue taxes.
301.6313-1 Fractional parts of a cent.
301.6314-1 Receipt for taxes.
301.6315-1 Payments of estimated income tax.
301.6316-1 Payment of income tax in foreign currency.
301.6316-2 Definitions.
301.6316-3 Allocation of tax attributable to foreign currency.
301.6316-4 Return requirements.
301.6316-5 Manner of paying tax by foreign currency.
301.6316-6 Declarations of estimated tax.
301.6316-7 Payment of Federal Insurance Contributions Act taxes in
foreign currency.
301.6316-8 Refunds and credits in foreign currency.
301.6316-9 Interest, additions to tax, etc.
Lien for Taxes
301.6320-1 Notice and opportunity for hearing upon filing of notice of
Federal tax lien.
301.6321-1 Lien for taxes.
301.6323(a)-1 Purchasers, holders of security interests, mechanic's
lienors, and judgment lien creditors.
301.6323(b)-1 Protection for certain interests even though notice filed.
301.6323(c)-1 Protection for commercial transactions financing
agreements.
301.6323(c)-2 Protection for real property construction or improvement
financing agreements.
301.6323(c)-3 Protection for obligatory disbursement agreements.
301.6323(d)-1 45-day period for making disbursements.
301.6323(e)-1 Priority of interest and expenses.
301.6323(f)-1 Place for filing notice; form.
301.6323(g)-1 Refiling of notice of tax lien.
301.6323(h)-0 Scope of definitions.
301.6323(h)-1 Definitions.
301.6323(i)-1 Special rules.
301.6323(j)-1 Withdrawal of notice of federal tax lien in certain
circumstances.
301.6324-1 Special liens for estate and gift taxes; personal liability
of transferees and others.
301.6324A-1 Election of and agreement to special lien for estate tax
deferred under section 6166 or 6166A.
[[Page 14]]
301.6325-1 Release of lien or discharge of property.
301.6326-1 Administrative appeal of the erroneous filing of notice of
federal tax lien.
Seizure of Property for Collection of Taxes
301.6330-1 Notice and opportunity for hearing prior to levy.
301.6331-1 Levy and distraint.
301.6331-2 Procedures and restrictions on levies.
301.6331-3 Restrictions on levy while offers to compromise are pending.
301.6331-4 Restrictions on levy while installment agreements are pending
or in effect.
301.6332-1 Surrender of property subject to levy.
301.6332-2 Surrender of property subject to levy in the case of life
insurance and endowment contracts.
301.6332-3 The 21-day holding period applicable to property held by
banks.
301.6333-1 Production of books.
301.6334-1 Property exempt from levy.
301.6334-2 Wages, salary, and other income.
301.6334-3 Determination of exempt amount.
301.6334-4 Verified statements.
301.6335-1 Sale of seized property.
301.6336-1 Sale of perishable goods.
301.6337-1 Redemption of property.
301.6338-1 Certificate of sale; deed of real property.
301.6339-1 Legal effect of certificate of sale of personal property and
deed of real property.
301.6340-1 Records of sale.
301.6341-1 Expense of levy and sale.
301.6342-1 Application of proceeds of levy.
301.6343-1 Requirement to release levy and notice of release.
301.6343-2 Return of wrongfully levied upon property.
301.6343-3 Return of property in certain cases.
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.
301.6404-4 Suspension of interest and certain penalties when the
Internal Revenue Service does not timely contact the taxpayer.
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.
[[Page 15]]
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).
301.6502-1 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 owner and discharge of lien
for substitution of value.
301.6503(g)-1 Suspension pending correction.
Limitations on Credit or Refund
301.6503(j)-1 Suspension of running of period of limitations; extension
in case of designated and related summonses.
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(e)-1 Special rules applicable to manufactured sugar.
301.6511(f)-1 Special rules for chapter 42 taxes.
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.
[[Page 16]]
301.6654-1 Failure by individual to pay estimated income tax.
301.6655-1 Failure by corporation to pay estimated income tax.
301.6656-1 Abatement of penalty.
301.6657-1 Bad checks.
301.6658-1 Addition to tax in case of jeopardy.
301.6659-1 Applicable rules.
Assessable Penalties
301.6671-1 Rules for application of assessable penalties.
301.6672-1 Failure to collect and pay over tax, or attempt to evade or
defeat tax.
301.6673-1 Damages assessable for instituting proceedings before the Tax
Court merely for delay.
301.6674-1 Fraudulent statement or failure to furnish statement to
employee.
301.6678-1 Failure to furnish statements to payees.
301.6679-1 Failure to file returns, etc. with respect to foreign
corporations or foreign partnerships for taxable years
beginning after September 3, 1982.
301.6682-1 False information with respect to withholding allowances
based on itemized deductions.
301.6684-1 Assessable penalties with respect to liability for tax under
chapter 42.
301.6685-1 Assessable penalties with respect to private foundations'
failure to comply with section 6104(d).
301.6686-1 Failure of DISC to file returns.
301.6688-1 Assessable penalties with respect to information required to
be furnished with respect to possessions.
301.6689-1 Failure to file notice of redetermination of foreign income
taxes.
301.6690-1 Penalty for fraudulent statement or failure to furnish
statement to plan participant.
301.6692-1 Failure to file actuarial report.
301.6693-1 Penalty for failure to provide reports and documents
concerning individual retirement accounts or annuities.
301.6707-1 Failure to furnish information regarding reportable
transactions.
301.6707A-1 Failure to include on any return or statement any
information required to be disclosed under section 6011 with
respect to a reportable transaction.
301.6708-1 Failure to maintain lists of advisees with respect to
reportable transactions.
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.
[[Page 17]]
301.6902-1 Burden of proof.
301.6903-1 Notice of fiduciary relationship.
301.6905-1 Discharge of executor from personal liability for decedent's
income and gift taxes.
Licensing
301.7001-1 License to collect foreign items.
Bonds
301.7101-1 Form of bond and security required.
301.7102-1 Single bond in lieu of multiple bonds.
Closing Agreements and Compromises
301.7121-1 Closing agreements.
301.7122-0 Table of contents.
301.7122-1 Compromises.
Crimes, Other Offenses, and Forfeitures
Crimes
general provisions
301.7207-1 Fraudulent returns, statements, or other documents.
301.7209-1 Unauthorized use or sale of stamps.
301.7214-1 Offenses by officers and employees of the United States.
301.7216-0 Table of contents.
301.7216-1 Penalty for disclosure or use of tax return information.
301.7216-2 Permissible disclosures or uses without consent of the
taxpayer.
301.7216-3 Disclosure or use permitted only with the taxpayer's consent.
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.
301.7426-2 Recovery of damages in certain cases.
301.7429-1 Review of jeopardy and termination assessment and jeopardy
levy procedures; information to taxpayer.
301.7429-2 Review of jeopardy and termination assessment and jeopardy
levy procedures.
301.7429-3 Review of jeopardy and termination assessment and jeopardy
levy procedures; judicial action.
301.7430-0 Table of contents.
301.7430-1 Exhaustion of administrative remedies.
301.7430-2 Requirements and procedures for recovery of reasonable
administrative costs.
301.7430-3 Administrative proceeding and administrative proceeding date.
301.7430-4 Reasonable administrative costs.
301.7430-5 Prevailing party.
301.7430-6 Effective/applicability dates.
301.7430-7 Qualified offers.
301.7430-8 Administrative costs incurred in damage actions for
violations of section 362 or 524 of the Bankruptcy Code.
301.7432-1 Civil cause of action for failure to release a lien.
301.7433-1 Civil cause of action for certain unauthorized collection
actions.
301.7433-2 Civil cause of action for violation of section 362 or 524 of
the Bankruptcy Code.
[[Page 18]]
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 the value of certain gifts
for gift tax purposes.
court review of tax court decisions
301.7481-1 Date when Tax Court decision becomes final; decision modified
or reversed.
301.7482-1 Courts of review; venue.
301.7483-1 Petition for review.
301.7484-1 Change of incumbent in office.
miscellaneous provisions
301.7502-1 Timely mailing of documents and payments treated as timely
filing and paying.
301.7503-1 Time for performance of acts where last day falls on
Saturday, Sunday, or legal holiday.
301.7505-1 Sale of personal property acquired by the United States.
301.7506-1 Administration of real estate acquired by the United States.
301.7507-1 Banks and trust companies covered.
301.7507-2 Scope of section generally.
301.7507-3 Segregated or transferred assets.
301.7507-4 Unsegregated assets.
301.7507-5 Earnings.
301.7507-6 Abatement and refund.
301.7507-7 Establishment of immunity.
301.7507-8 Procedure during immunity.
301.7507-9 Termination of immunity.
301.7507-10 Collection of tax after termination of immunity.
301.7507-11 Exception of employment taxes.
301.7508-1 Time for performing certain acts postponed by reason of
service in a combat zone.
301.7508A-1 Postponement of certain tax-related deadlines by reasons of
a federally declared disaster or terroristic or military
action.
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.
301.7602-2 Third party contacts.
301.7603-1 Service of summons.
301.7603-2 Third-party recordkeepers.
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 Notification of persons identified in third-party summonses.
301.7609-3 Duty of and protection for the summoned party.
301.7609-4 Right to intervene; right to institute a proceeding to quash.
301.7609-5 Suspension of periods 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 General rules, submitting information on underpayments of tax
or violations of the internal revenue laws, and filing claims
for award.
301.7623-2 Definitions.
301.7623-3 Whistleblower administrative proceedings and appeals of award
determinations.
301.7623-4 Amount and payment of award.
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.
[[Page 19]]
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 and foreign business entities.
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 Tax return preparer.
301.7701-16 Other terms.
301.7701-17T Collective--bargaining plans and agreements (temporary).
301.7701-18 Definitions; spouse, husband and wife, husband, wife,
marriage.
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/applicability dates of Sec. Sec. 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.
301.7705-1 Certified professional employer organization.
301.7705-2 CPEO certification process.
General Rules
Application of Internal Revenue Laws
301.7803-1 Security bonds covering personnel of the Internal Revenue
Service.
301.7805-1 Rules and regulations.
301.7811-1 Taxpayer assistance orders.
Miscellaneous Provisions
301.9000-1 Definitions when used in Sec. Sec. 301.9000-1 through
301.9000-6.
301.9000-2 Considerations in responding to a request or demand for IRS
records or information.
301.9000-3 Testimony authorizations.
301.9000-4 Procedure in the event of a request or demand for IRS records
or information.
301.9000-5 Written statement required for requests or demands in non-IRS
matters.
301.9000-6 Examples.
301.9000-7 Effective date.
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.
[[Page 20]]
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.
301.9100-22 Time, form, and manner of making the election under section
1101(g)(4) of the Bipartisan Budget Act of 2015 for returns
filed for partnership taxable years beginning after November
2, 2015 and before January 1, 2018.
Authority: 26 U.S.C. 7805.
Section 301.1474-1 also issued under 26 U.S.C. 1474(f).
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 301.6011-5 also issued under 26 U.S.C. 6011.
Section 301.6011-6 also issued under 26 U.S.C. 6011(a).
Section 301.6011-7 also issued under 26 U.S.C. 6011(e).
Section 301.6011-10 also issued under 26 U.S.C. 6011.
Section 301.6011-11 also issued under 26 U.S.C. 6011.
Section 301.6011-12 also issued under 26 U.S.C. 6011.
Section 301.6011-13 also issued under 26 U.S.C. 6011.
Section 301.6011-14 also issued under 26 U.S.C. 6011.
Section 301.6011-15 also issued under 26 U.S.C. 6011.
Section 301.6012-2 also issued under 26 U.S.C. 6012.
Section 301.6033-4 also issued under 26 U.S.C. 6033.
Section 301.6036-1 also issued under 26 U.S.C. 6036.
Section 301.6037-2 also issued under 26 U.S.C. 6037.
Section 301.6039E-1 also issued under 26 U.S.C. 6039E.
Section 301.6050M-1 also issued under 26 U.S.C. 6050M.
Section 301.6057-3 also issued under 26 U.S.C. 6011 and 6057.
Section 301.6058-2 also issued under 26 U.S.C. 6011 and 6058.
Section 301.6059-2 also issued under 26 U.S.C. 6011 and 6059.
Section 301.6061-1 also issued under 26 U.S.C. 6061.
Section 301.6081-2 also issued under 26 U.S.C. 6081(a).
Section 301.6103(c)-1 also issued under 26 U.S.C. 6103(c).
Section 301.6103(h)(4)-1 also issued under 26 U.S.C. 6103(h)(4) and
26 U.S.C. 6103(q).
Section 301.6103(j)(1)-1 also issued under 26 U.S.C. 6103(j)(1).
Section 301.6103(j)(1)-1T also issued under 26 U.S.C. 6103(j)(1);
Section 301.6103(j)(5)-1 also issued under 26 U.S.C. 6103(j)(5).
Section 301.6103(k)(6)-1 also issued under 26 U.S.C. 6103(k)(6);
Section 301.6103(k)(6)-1T also issued under 26 U.S.C. 6103(k)(6);
Section 301.6103(k)(9)-1 also issued under 26 U.S.C. 6103(k)(9) and
26 U.S.C. 6103(q).
Section 301.6103(l)-1 also issued under 26 U.S.C. 6103(q).
Section 301.6103(l)(14)-1 also issued under 26 U.S.C. 6103(l)(14).
Section 301.6103(l)(21)-(1) also issued under 26 U.S.C. 6103(l)(21)
and 6103(q).
Section 301.6103(m)-1 also issued under 26 U.S.C. 6103(q).
Section 301.6103(n)-1 also issued under 26 U.S.C. 6103(n).
Section 301.6103(n)-2 also issued under 26 U.S.C. 6103(n).
Section 301.6103(n)-2 also issued under 26 U.S.C. 6103(q).
Section 301.6103(p)(2)(B)-1 also issued under 26 U.S.C. 6103(p)(2).
Section 301.6103(p)(2)(B)-1T also issued under 26 U.S.C. 6103(p)(2).
Sections 301.6103(p)(4)-1 and 301.6103(p)(7)-1T also issued under 26
U.S.C. 6103(p)(4) and (7) and (q),
Section 301.6104(a)-6(d) is also issued under 5 U.S.C. 552.
Section 301.6104(b)-1(d)(4) is also issued under 5 U.S.C. 552.
Section 301.6104(c)-1 also issued under 26 U.S.C. 6104(c).
Section 301.6104(d)-1(d)(3)(i) is also issued under 5 U.S.C. 552.
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 301.6111-3 also issued under 26 U.S.C. 6111.
Section 301.6111-3T also issued under 26 U.S.C. 6111.
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 301.6221(a)-1 also issued under 26 U.S.C. 6221.
Section 301.6221(b)-1 also issued under sections 6221 and 6241.
Section 301.6222-1 also issued under 26 U.S.C. 6222 and 6223.
[[Page 21]]
Section 301.6222(a)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6222(a)-2T also issued under 26 U.S.C. 6230(k).
Section 301.6222(b)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6222(b)-2T also issued under 26 U.S.C. 6230(k).
Section 301.6222(b)-3T also issued under 26 U.S.C. 6230 (i) and (k).
Section 301.6223(a)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6223(a)-2T also issued under 26 U.S.C. 6230(k).
Section 301.6223(b)-1T also issued under 26 U.S.C. 6230 (i) and (k).
Section 301.6223(b)-2T also issued under 26 U.S.C. 6230(k).
Section 301.6223(c)-1T also issued under 26 U.S.C. 6223(c) and 6230
(i) and (k).
Section 301.6223(e)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6223(e)-2T also issued under 26 U.S.C. 6230 (i) and (k).
Section 301.6223(f)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6223(g)-1T also issued under 26 U.S.C. 6223(g) and 6230
(i) and (k).
Section 301.6223(h)-1T also issued under 26 U.S.C. 6230 (i) and (k).
Section 301.6224(a)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6224(b)-1T also issued under 26 U.S.C. 6230 (i) and (k).
Section 301.6224(c)-1T also issued under 26 U.S.C. 6230 (i) and (k).
Section 301.6224(c)-2T also issued under 26 U.S.C. 6230(k).
Section 301.6224(c)-3T also issued under 26 U.S.C. 6230 (i) and (k).
Section 301.6225-1 also issued under 26 U.S.C. 6225.
Section 301.6225-2 also issued under 26 U.S.C. 6223 and 6225.
Section 301.6225-3 also issued under 26 U.S.C. 6225.
Section 301.6226-1 also issued under 26 U.S.C. 6223 and 6226.
Section 301.6226-2 also issued under 26 U.S.C. 6226.
Section 301.6226-3 also issued under 26 U.S.C. 6226.
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 301.6227-1 also issued under 26 U.S.C. 6223 and 6227.
Section 301.6227-2 also issued under 26 U.S.C. 6227.
Section 301.6227-3 also issued under 26 U.S.C. 6227.
Section 301.6229(c)(2)-1 is also issued under 26 U.S.C. 6230(k).
Section 301.6229(c)(2)-1T also issued under 26 U.S.C. Sec. 6230(k).
Section 301.6231-1 also issued under 26 U.S.C. 6231.
Section 301.6231(a)(6)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6231(a)(7)-1 also issued under 26 U.S.C. 6230 (i) and
(k).
Section 301.6231(a)(7)-2 also issued under 26 U.S.C. 6230 (i) and
(k).
Section 301.6231(a)(12)-1T also issued under 26 U.S.C. 6230(k) and
6231(a)(12).
Section 301.6231(c)-1 also issued under 26 U.S.C. 6231(c)(1) and
(3).
Section 301.6231(c)-2 also issued under 26 U.S.C. 6231(c)(1) and
(3).
Section 301.6231(c)-3T also issued under 26 U.S.C. 6230(k) and
6231(c).
Section 301.6231(c)-4T also issued under 26 U.S.C. 6230(k) and
6231(c).
Section 301.6231(c)-5T also issued under 26 U.S.C. 6230(k) and
6231(c).
Section 301.6231(c)-6T also issued under 26 U.S.C. 6230(k) and
6231(c).
Section 301.6231(c)-7T also issued under 26 U.S.C. 6230(k) and
6231(c).
Section 301.6231(c)-8T also issued under 26 U.S.C. 6230(k) and
6231(c).
Section 301.6231(d)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6231(e)-1T also issued under 26 U.S.C. 6230(k).
Section 301.6231(e)-2T also issued under 26 U.S.C. 6230(k).
Section 301.6231(f)-1T also issued under 26 U.S.C. 6230 (i) and (k)
and 6231(f).
Section 301.6232-1 also issued under 26 U.S.C. 6232.
Section 301.6233-1T also issued under 26 U.S.C. 6230(k) and 6233.
Section 301.6233(a)-1 also issued under 26 U.S.C. 6233.
Section 301.6233(b)-1 also issued under 26 U.S.C. 6233.
Section 301.6234-1 also issued under 26 U.S.C. 6234.
Section 301.6235-1 also issued under 26 U.S.C. 6235.
Section 301.6241-1 also issued under 26 U.S.C. 6241.
Section 301.6241-2 also issued under 26 U.S.C. 6241.
Section 301.6241-3 also issued under 26 U.S.C. 6241.
Section 301.6241-4 also issued under 26 U.S.C. 6241.
Section 301.6241-5 also issued under 26 U.S.C. 6241.
Section 301.6241-6 also issued under 26 U.S.C. 6241.
Section 301.6241-7 also issued under 26 U.S.C. 6241.
Section 301.6311-2 also issued under 26 U.S.C. 6311.
[[Page 22]]
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 301.6402-2(g) also issued under 26 U.S.C. 6402(n).
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 301.6689-1 also issued under 26 U.S.C. 6689(a), 26 U.S.C.
6227(d), and 26 U.S.C. 6241(11).
Section 301.6689-1T also issued under 26 U.S.C. 6689(a).
Section 301.6708-1 also issued under 26 U.S.C. 6708
Section 301.6721-1 also issued under 26 U.S.C. 6011 and 6721.
Section 301.7216-2, paragraphs (o) and (p) also issued under 26
U.S.C. 7216(b)(3).
Section 301.7502-1 also issued under 26 U.S.C. 7502.
Section 301.7502-2 also issued under 26 U.S.C. 7502.
Section 301.7507-1 also issued under 26 U.S.C. 597.
Section 301.7507-9 also issued under 26 U.S.C. 597.
Section 301.7508-1 also issued under 26 U.S.C. 7508(a)(1)(K).
Section 301.7508A-1 also issued under 26 U.S.C. 7508(a)(1)(K) and
7508A(a).
Section 301.7605-1 also issued under section 6228(b) of the
Technical and Miscellaneous Revenue Act of 1988.
Sections 301.7623-1 through 301.7623-4 also issued under 26 U.S.C.
7623.
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 301.7705-1 also issued under 26 U.S.C. 7705(h).
Section 301.7705-2 also issued under 26 U.S.C. 7705(h).
Section 301.9000-1 also issued under 5 U.S.C. 301 and 26 U.S.C.
6103(q) and 7804;
Section 301.9000-2 also issued under 5 U.S.C. 301 and 26 U.S.C.
6103(q) and 7804;
Section 301.9000-3 also issued under 5 U.S.C. 301 and 26 U.S.C.
6103(q) and 7804;
Section 301.9000-4 also issued under 5 U.S.C. 301 and 26 U.S.C.
6103(q) and 7804;
Section 301.9000-5 also issued under 5 U.S.C. 301 and 26 U.S.C.
6103(q) and 7804;
Section 301.9000-6 also issued under 5 U.S.C. 301 and 26 U.S.C.
6103(q) and 7804;
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).
Section 301.9100-22T is also issued under section 1101(g)(4) of
Public Law 114-74.
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.
[[Page 23]]
Information and Returns
Returns and Records
records, statements, and special returns
Sec. 301.269B-1 Stapled foreign corporations.
In accordance with section 269B(a)(1), a stapled foreign corporation
is subject to the same taxes that apply to a domestic corporation under
title 26 of the Internal Revenue Code. For provisions concerning taxes
other than income for which the stapled foreign corporation is liable,
apply the same rules as set forth in Sec. 1.269B-1(a) through
(f)(1)(i), and (g) of this Chapter, except that references to income tax
shall be replaced with the term tax. In addition, for purposes of
collecting those taxes solely from the stapled foreign corporation, the
term tax means any tax liability imposed on a domestic corporation under
title 26 of the United States Code, including additions to tax,
additional amounts, penalties, and interest related to that tax
liability.
[T.D. 9216, 70 FR 43760, July 29, 2005]
Sec. 301.1474-1 Required use of electronic form for financial
institutions filing Form 1042, Form 1042-S, or Form 8966.
(a) Financial institutions filing certain returns. If a financial
institution is required to file a Form 1042, Annual Withholding Tax
Return for U.S. Source Income of Foreign Persons, (or successor form)
under Sec. 1.1474-1(c) of this chapter, the financial institution must
file the return information required by the applicable forms and
schedules electronically. If a financial institution is required to file
a Form 1042-S, Foreign Person's U.S. Source Income Subject to
Withholding, (or such other form as the IRS may prescribe) under Sec.
1.1474-1(d) of this chapter, the financial institution must file the
information required by the applicable forms and schedules
electronically. Additionally, if a financial institution is required to
file Form 8966, FATCA Report, (or such other form as the IRS may
prescribe) to report certain information about U.S. accounts,
substantial U.S. owners of foreign entities, or owner-documented FFIs as
required under this chapter, the financial institution must file the
required information in electronic form. Returns filed electronically
must be made in accordance with applicable regulations, revenue
procedures, publications, forms, instructions, and the IRS.gov internet
site. In prescribing regulations, revenue procedures, publications,
forms, and instructions, including those on the IRS.gov internet site,
the Commissioner may direct the type of electronic filing.
(b) Exclusions from electronic-filing requirements--(1) Waivers. The
Commissioner may grant waivers of the requirements of this section in
cases of undue hardship. One principal factor in determining hardship
will be the amount, if any, by which the cost of filing the return
electronically in accordance with this section exceeds the cost of
filing the return on paper. A request for a waiver must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website. The waiver request will specify the type of filing (that is, a
return required under Sec. 1.1474-1(c) or (d) of this chapter, or a
Form 8966) and the period to which it applies.
(2) Exemptions. The Commissioner may provide exemptions from the
requirements of this section to promote effective and efficient tax
administration. A submission claiming an exemption must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website.
(3) Additional Exclusion. If the IRS's systems do not support
electronic filing, taxpayers will not be required to file
electronically.
(c) Failure to file. If a financial institution fails to file a Form
1042 electronically when required to do so by this section, the
financial institution has failed to file the return. See section 6651
for the addition to tax for failure to file a return. In determining
whether there is reasonable cause for failure to file the return, Sec.
301.6651-1(c) and rules similar to the rules in
[[Page 24]]
Sec. 301.6724-1(c)(3) (undue economic hardship related to filing
information returns electronically) will apply. If a financial
institution fails to file a Form 1042-S or a Form 8966 electronically
when required to do so by this section, the financial institution has
failed to comply with the information reporting requirements under
section 6721 of the Code. See section 6724(c) for failure to meet
magnetic media requirements. In determining whether there is reasonable
cause for failure to file the return, Sec. 301.6651-1(c) and rules
similar to the rules in Sec. 301.6724-1(c)(3) (undue economic hardship
related to filing information returns on magnetic media) will apply.
(d) Meaning of terms. The following definitions apply for purposes
of this section--(1) Magnetic media or electronic form. The terms
magnetic media or electronic form mean any media or form permitted under
applicable regulations, revenue procedures, or publications. These
generally include electronic filing, as well as magnetic tape, tape
cartridge, diskette, and other media specifically permitted under the
applicable regulations, procedures, publications, forms, instructions,
or other guidance.
(2) Financial institution. The term financial institution has the
meaning set forth in section 1471(d)(5) of the Code and the regulations
thereunder.
(e) Applicability date. This section applies to any Form 1042 (or
successor form) required to be filed for taxable years ending on or
after December 31, 2023. This section applies to any Form 1042-S or Form
8966 (or any other form that the IRS may prescribe) filed with respect
to calendar years ending after December 31, 2013, except that paragraph
(b)(2) of this section only applies to Forms 1042-S or Forms 8966
required to be filed for taxable years ending on or after December 31,
2023.
[T.D. 9610, 78 FR 5994, Jan. 28, 2013, as amended by T.D. 9809, 82 FR
2192, Jan. 6, 2017; T.D. 9972, 88 FR 11767, Feb. 23, 2023]
Sec. 301.6001-1 Notice or regulations requiring records,
statements, and special returns.
For provisions requiring records, statements, and special returns,
see the regulations relating to the particular tax.
tax returns or statements
General Requirement
Sec. 301.6011-1 General requirement of return, statement or list.
(a) For provisions requiring returns, statements, or lists, see the
regulations relating to the particular tax.
(b) The Internal Revenue Service may prescribe in forms,
instructions, or other appropriate guidance the information or
documentation required to be included with any return or any statement
required to be made or other document required to be furnished under any
provision of the internal revenue laws or regulations.
[T.D. 9040, 68 FR 4921, Jan. 31, 2003]
Sec. 301.6011-2 Required use of electronic form.
(a) Meaning of terms. The following definitions apply for purposes
of this section:
(1) Magnetic media or electronic form. The terms magnetic media or
electronic form mean any media or form 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 electronic filing,
as well as magnetic tape, tape cartridge, diskette, and other media
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
[[Page 25]]
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 electronically. (1) If the use of Form 1042-S,
Form 1094 series, Form 1095-B, Form 1095-C, Form 1097-BTC, Form 1098,
Form 1098-C, Form 1098-E, Form 1098-Q, Form 1098-T, Form 1099 series,
Form 3921, Form 3922, Form 5498 series, Form 8027, or Form W-2G 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 electronically, except as otherwise provided in
paragraph (c) of this section. Returns filed electronically must be made
in accordance with applicable revenue procedures, publications, forms,
or instructions.
(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), or Form W-2AS (American Samoa Wage and Tax Statement) is
required for the purpose of making an information return, the
information required by the form must be submitted electronically,
except as otherwise provided in paragraph (c) of this section. Returns
described in this paragraph (b)(2) must be made in accordance with
applicable Social Security Administration procedures or publications
(which may be obtained from the local office of the Social Security
Administration).
(3) If a person is required to make a return for the purpose of
section 6050I, and such person is required to file returns described in
paragraphs (b)(1) and (2) of this section electronically, then such
person must also file the information required by section 6050I
electronically. Returns described in this paragraph (b)(3) must be made
in accordance with applicable IRS revenue procedures, publications,
forms, instructions, or other guidance, including postings to the
IRS.gov website, as well as instructions and guidance on the FinCEN.gov
website.
(4) The Commissioner may exempt certain returns from the electronic
requirements of this section through revenue procedures, publications,
forms, instructions, or other guidance, including postings to the
IRS.gov website.
(c) Electronic-filing threshold--(1) In general. No person is
required to file information returns electronically in a calendar year
unless the person is required to file at least 10 returns during that
calendar year. Persons required to file fewer than 10 returns during the
calendar year may make the returns on the prescribed paper form or,
alternatively, electronically in accordance with paragraph (b) of this
section.
(2) Machine-readable forms. Returns made on a paper form under
paragraph (c)(1) of this section must be machine-readable, as described
in paragraph (a)(2) of this section, if applicable revenue procedures
provide for a machine-readable paper form.
(3) Special rule for partnerships. Notwithstanding paragraph (c)(1)
of this section, a partnership with more than 100 partners is required
to file its information returns covered under paragraph (b) of this
section electronically.
(4) Calculating the number of returns--(i) Aggregation of returns.
In calculating whether a person is required to file at least 10 returns
under paragraph (c)(1) of this section, all the information returns
described in paragraphs (b)(1) and (2) of this section required to be
filed during the calendar year are counted in the aggregate. Neither
corrected information returns, information returns described in
paragraph (b)(3) of this section, nor returns other than those described
in paragraphs (b)(1) and (2) of this section are taken into account in
calculating whether a person is required to file at least 10 returns.
(ii) Corrected returns. (A) If an original information return
covered by paragraph (b) of this section is required to be filed
electronically, any corrected information return corresponding to that
original return must also be filed electronically.
(B) If an original information return is permitted to be filed on
paper and is filed on paper, any corrected information return
corresponding to that original return must be filed on paper.
[[Page 26]]
(5) Examples. The provisions of paragraphs (c)(3) and (4) of this
section are illustrated by the following examples:
(i) Example 1. During the 2024 calendar year, Company W, is required
to file five Forms 1099-INT, Interest Income, and five Forms 1099-DIV,
Dividends and Distributions, for a total of 10 returns covered by
paragraphs (b)(1) and (2) of this section. Because Company W is required
to file 10 returns as calculated under paragraph (c)(4) of this section
during the 2024 calendar year, Company W must file all its 2023 Forms
1099-INT and 1099-DIV electronically.
(ii) Example 2. Same facts as paragraph (c)(5)(i) of this section
(Example 1), except after electronically filing its 10 Forms 1099-DIV
and 1099-INT, Company W files two corrected Forms 1099-DIV and four
corrected Forms 1099-INT. Because Company W electronically filed its
original 2023 Forms 1099-DIV and 1099-INT, Company W must electronically
file its corrected 2023 Forms 1099-DIV and 1099-INT.
(iii) Example 3. Same facts as paragraph (c)(5)(i) of this section
(Example 1), except on May 16, 2024, Company W received cash in excess
of $10,000 and must file a Form 8300 by May 31, 2024. Because Company W
is required to file information returns covered under paragraphs (b)(1)
and (2) of this section electronically during the 2024 calendar year,
Company W must also file all its Forms 8300 electronically during the
2024 calendar year.
(iv) Example 4. Same facts as paragraph (c)(5)(i) of this section
(Example 1), except Company W is not required to file any Forms 1099-INT
during calendar year 2024. On December 19, 2023, Company W receives cash
in excess of $10,000 and must file a Form 8300 by January 3, 2024.
Because Company W is not required to file information returns covered
under paragraphs (b)(1) and (2) of this section electronically during
the 2024 calendar year, Company W is not required to file this Form 8300
electronically.
(v) Example 5. During the 2024 calendar year, Partnership P, a
partnership with 15 partners, is required to file eight Forms 1099-MISC,
Miscellaneous Information, and five Forms 1099-INT. Because Partnership
P is required to file at least 10 returns covered by paragraphs (b)(1)
and (2) of this section during the 2024 calendar year, Partnership P
must electronically file all its 2022 Forms 1099-MISC and 1099-INT.
(6) Exclusions from electronic-filing requirements--(i) Waivers. The
Commissioner may grant waivers of the requirements of this section in
cases of undue hardship. One principal factor in determining hardship
will be the amount, if any, by which the cost of filing the return
electronically in accordance with this section exceeds the cost of
filing the return on paper. A request for a waiver must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website. The waiver request will specify the type of filing (that is, a
return required under paragraph (b) of this section) and the period to
which it applies. For purposes of paragraph (b)(3) of this section, a
waiver granted for a return under paragraph (b)(1) or (2) will be deemed
to have waived the electronic-filing requirement for any returns
required to be filed under section 6050I.
(ii) Exemptions. The Commissioner may provide exemptions from the
requirements of this section to promote effective and efficient tax
administration. An exemption will be allowed for filers for whom using
the technology required to file in electronic form conflicts with their
religious beliefs. A submission claiming an exemption must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website.
(iii) Additional Exclusion. 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, if the IRS's systems do not support electronic filing,
taxpayers will not be required to file electronically (see Sec.
31.6071(a)-1(a)(3)(ii) of this chapter).
(d) Paper form returns. Returns submitted on paper forms (whether or
not machine-readable) permitted under paragraph (c) of this section
shall be in
[[Page 27]]
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 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) Applicability date. The rules of this section apply to
information returns required to be filed during calendar years beginning
after December 31, 2023.
[T.D. 8081, 51 FR 10348, Mar. 25, 1986, as amended by T.D. 8097, 51 FR
30352, Aug. 26, 1986; T.D. 8140, 52 FR 19137, May 21, 1987; T.D. 8636,
60 FR 66142, Dec. 21, 1995; T.D. 8772, 63 FR 35519, June 30, 1998; T.D.
8992, 67 FR 20907, Apr. 29, 2002; T.D. 9029, 67 FR 77687, Dec. 19, 2002;
T.D. 9660, 79 FR 13231, Mar. 10, 2014; T.D. 9804, 81 FR 91768, Dec. 19,
2016; T.D. 9923, 85 FR 74047, Nov. 19, 2020; T.D. 9972, 88 FR 11767,
Feb. 23, 2023]
Sec. 301.6011-3 Required use of electronic form for partnership
returns.
(a) Partnership returns required electronically. (1) Except as
otherwise provided in paragraph (b) of this section, a partnership
required to file a partnership return pursuant to Sec. 1.6031(a)-1 of
this chapter, must file the information required by the applicable forms
and schedules electronically, if
(i) the partnership is required by the Internal Revenue Code or
regulations to file at least 10 returns (as described in paragraph
(d)(5) of this section) during the calendar year ending with or within
the taxable year of the partnership, or
(ii) the partnership has more than 100 partners during the
partnership's taxable year.
(2) The Commissioner may direct the type of electronic filing and
may also exempt certain returns from the electronic requirements of this
section through revenue procedures, publications, forms, instructions,
or other guidance, including postings on the IRS.gov website. Returns
filed electronically must be made in accordance with the applicable
revenue procedures, publications, forms, instructions, or other
guidance.
(b) Exclusions from electronic-filing requirements--(1) Waivers. The
Commissioner may grant waivers of the requirements of this section in
cases of undue hardship. One principal factor in determining hardship
will be the amount, if any, by which the cost of filing the return
electronically in accordance with this section exceeds the cost of
filing the return on paper. A request for a waiver must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website. The waiver request will specify the type of filing (that is, a
return required under Sec. 1.6031(a)-1 of this chapter) and the period
to which it applies.
(2) Exemptions. The Commissioner may provide exemptions from the
requirements of this section to promote effective and efficient tax
administration. An exemption will be allowed for filers for whom using
the technology required to file in electronic form conflicts with their
religious beliefs. A submission claiming an exemption must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website.
[[Page 28]]
(3) Additional Exclusion. If the IRS's systems do not support
electronic filing, taxpayers will not be required to file
electronically.
(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 or electronic form. The terms magnetic media or
electronic form mean any media or form permitted under applicable
regulations, revenue procedures, or publications. These generally
include electronic filing, as well as magnetic tape, tape cartridge,
diskette, and other media specifically permitted under the applicable
regulations, procedures, publications, forms, instructions, or other
guidance.
(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) Calculating the number of returns. For purposes of this section,
a partnership is required to file at least 10 returns if, during the
calendar year ending with or within the taxable year of the partnership,
the partnership is required to file at least 10 returns of any type,
including income tax returns, employment tax returns, excise tax
returns, and information returns (for example, Forms W-2 and Forms 1099,
but not including schedules required to be included with a partnership
return). In the case of a short-period return, a partnership is required
to file at least 10 returns if, during the calendar year in which the
partnership's short taxable year ends, the partnership is required to
file at least 10 returns of any type, including information returns (for
example, Forms W-2 and Forms 1099, but not including schedules required
to be included with a partnership return), income tax returns,
employment tax returns, and excise tax returns.
(6) 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)(6), 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
this section. In the examples, the partnerships' taxable year is the
calendar year 2023 and the partnerships had fewer than 10 returns
required to be filed during calendar year 2023:
(1) Example 1. Partnership P had five general partners and 90
limited partners on January 1, 2023. On March 15, 2023, 10 more limited
partners acquired an interest in P. On September 29, 2023, 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, 2023,
P had the same five general partners and 90 limited partners it had on
January 1, 2023. P had a total of 105 partners over the course of
partnership taxable year 2023. Therefore, P must file its 2023
partnership return electronically.
(2) Example 2. Partnership Q is a general partnership that had 95
partners on January 1, 2023. On March 15, 2023, 10 partners sold their
individual partnership interests to corporation D, which was not
previously a partner in Q. On
[[Page 29]]
September 29, 2023, 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, 2023, Q had a total of 91 partners, and
on no date in 2023 did Q have more than 100 partners. Over the course of
the year, however, Q had 101 partners. Therefore, Q must file its 2023
partnership return electronically.
(3) Example 3. Partnership G is a general partnership with 100
partners on January 1, 2023. There are no new partners added to G in
2023. 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 2023 partnership return
electronically.
(4) Example 4. Same facts as paragraph (e)(3) of this section
(Example 3), except partnership G is also required to file nine Forms
1099-MISC during calendar year 2023 in addition to its 2022 partnership
return. Because partnership G is required to file at least 10 returns of
any type during calendar year 2023, partnership G must file its 2023
partnership return electronically.
(f) Applicability date. The rules of this section apply to
partnership returns required to be filed during calendar years beginning
after December 31, 2023.
[T.D. 8843, 64 FR 61503, Nov. 12, 1999, as amended by T.D. 9972, 88 FR
11769, Feb. 23, 2023]
Sec. 301.6011-5 Required use of electronic form for corporate
income tax returns.
(a) Corporate income tax returns required electronically. (1) A
corporation required to file a corporate income tax return on Form 1120,
U.S. Corporation Income Tax Return, under Sec. 1.6012-2 of this chapter
must file its corporate income tax return electronically if the
corporation is required by the Internal Revenue Code or regulations to
file at least 10 returns (as defined in paragraph (d)(5) of this
section) during the calendar year ending with or within the taxable year
of the corporation.
(2) All members of a controlled group of corporations must file
their corporate income tax returns electronically if the aggregate
number of returns required to be filed by the controlled group of
corporations is at least 10 (as defined in paragraph (d)(5) of this
section) during the calendar year ending with or within the taxable year
of the controlled group of corporations.
(3) The Commissioner may direct the type of electronic filing and
may also exempt certain returns from the electronic requirements of this
section through revenue procedures, publications, forms, instructions,
or other guidance, including postings on the IRS.gov website. Returns
filed electronically must be made in accordance with the applicable
revenue procedures, publications, forms, instructions, or other
guidance.
(b) Exclusions from electronic-filing requirements--(1) Waivers. The
Commissioner may grant waivers of the requirements of this section in
cases of undue hardship. One principal factor in determining hardship
will be the amount, if any, by which the cost of filing the return
electronically in accordance with this section exceeds the cost of
filing the return on paper. A request for a waiver must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website. The waiver request will specify the type of filing (that is, a
return required under Sec. 1.6012-2 of this chapter) and the period to
which it applies.
(2) Exemptions. The Commissioner may provide exemptions from the
requirements of this section to promote effective and efficient tax
administration. An exemption will be allowed for filers for whom using
the technology required to file in electronic form conflicts with their
religious beliefs. A submission claiming an exemption must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website.
(3) Additional Exclusion. If the IRS's systems do not support
electronic filing, taxpayers will not be required to file
electronically.
(c) Failure to file. If a corporation fails to file a corporate
income tax return on magnetic media when required to do so by this
section, the corporation is deemed to have failed to file the
[[Page 30]]
return. (See section 6651 for the addition to tax for failure to file a
return). In determining whether there is reasonable cause for failure to
file the return, Sec. 301.6651-1(c) and rules similar to the rules in
Sec. 301.6724-1(c)(3) (undue economic hardship related to filing
information returns on magnetic media) will apply.
(d) Meaning of terms. The following definitions apply for purposes
of this section:
(1) Magnetic media or electronic form. The terms magnetic media or
electronic form mean any media or form permitted under applicable
regulations, revenue procedures, or publications. These generally
include electronic filing, as well as magnetic tape, tape cartridge,
diskette, and other media specifically permitted under the applicable
regulations, procedures, publications, forms, instructions, or other
guidance.
(2) Corporation. The term corporation means a corporation as defined
in section 7701(a)(3).
(3) Controlled group of corporations. The term controlled group of
corporations means a group of corporations as defined in section
1563(a).
(4) Corporate income tax return. The term corporate income tax
return means a Form 1120, ``U.S. Corporation Income Tax Return,'' along
with all other related forms, schedules, and statements that are
required to be attached to the Form 1120, and all members of the Form
1120 series of returns, including amended and superseding returns.
(5) Calculating the number of returns. For purposes of this section,
a corporation or controlled group of corporations is required to file at
least 10 returns if, during the calendar year ending with or within the
taxable year of the corporation or the controlled group, the corporation
or the controlled group is required to file at least 10 returns of any
type, including information returns (for example, Forms W-2 and Forms
1099), income tax returns, employment tax returns, and excise tax
returns. In the case of a short-period return, a corporation is required
to file at least 10 returns if, during the calendar year in which the
corporation's short taxable year ends, the corporation is required to
file at least 10 returns of any type, including information returns (for
example, Forms W-2 and Forms 1099), income tax returns, employment tax
returns, and excise tax returns. If the corporation is a member of a
controlled group, calculating the number of returns the corporation is
required to file includes all returns required to be filed by all
members of the controlled group during the calendar year ending with or
within the taxable year of the controlled group.
(e) Example. The following example illustrates the provisions of
this section:
(1) The taxable year of Corporation X, a fiscal-year taxpayer, ends
on September 30. During the calendar year ending December 31, 2023, X
was required to file one Form 1120, U.S. Corporation Income Tax Return,
six Forms W-2, Wage and Tax Statement, three Forms 1099-DIV, Dividends
and Distributions, one Form 940, Employer's Annual Federal Unemployment
(FUTA) Tax Return, and four Forms 941, Employer's Quarterly Federal Tax
Return. Because X is required to file 10 returns of any type during
calendar year 2023, the calendar year that ended within its taxable year
ending September 30, 2024, X is required to file its Form 1120
electronically for its taxable year ending September 30, 2024.
(2) [Reserved]
(f) Applicability date. The rules of this section apply to corporate
income tax returns required to be filed during calendar years beginning
after December 31, 2023.
[T.D. 9363, 72 FR 63811, Nov. 13, 2007, as amended by T.D. 9972, 88 FR
11769, Feb. 23, 2023]
Sec. 301.6011-6 Statement of series and series organizations
[Reserved]
Sec. 301.6011-7 Specified tax return preparers required to file
individual income tax returns using magnetic media.
(a) Definitions. (1) Magnetic media. For purposes of this section,
the term magnetic media has the same meaning as in Sec. 301.6011-
2(a)(1).
(2) Individual income tax return. The term individual income tax
return means any return of tax imposed by subtitle A on individuals,
estates, and trusts.
[[Page 31]]
(3) Specified tax return preparer. The term specified tax return
preparer means any person who is a tax return preparer, as defined in
section 7701(a)(36) and Sec. 301.7701-15, unless that person reasonably
expects to file 10 or fewer individual income tax returns in a calendar
year. If a person who is a tax return preparer is a member of a firm,
that person is a specified tax return preparer unless the person's firm
members in the aggregate reasonably expect to file 10 or fewer
individual income tax returns in a calendar year. Solely for the 2011
calendar year, a person will not be considered a specified tax return
preparer if that person reasonably expects, or if the person is a member
of a firm, the firm's members in the aggregate reasonably expect, to
file fewer than 100 individual income tax returns in the 2011 calendar
year. Solely for purposes of this section, a person is considered a
member of a firm if the person is an employee, agent, member, partner,
shareholder, or other equity holder of the firm.
(4) File or Filed. (i) For purposes of section 6011(e)(3) and these
regulations only, an individual income tax return is considered to be
``filed'' by a tax return preparer or a specified tax return preparer if
the preparer submits the individual income tax return to the IRS on the
taxpayer's behalf, either electronically (by e-file or other magnetic
media) or in non-electronic (paper) form. Submission of an individual
income tax return by a tax return preparer or a specified tax return
preparer in non-electronic form includes the transmission, sending,
mailing or otherwise delivering of the paper individual income tax
return to the IRS by the preparer, any member, employee, or agent of the
preparer, or any member, employee, or agent of the preparer's firm.
(ii) An individual income tax return will not be considered to be
filed, as defined in paragraph (a)(4)(i) of this section, by a tax
return preparer or specified tax return preparer if the tax return
preparer or specified tax return preparer who prepared the return
obtains, on or prior to the date the individual income tax return is
filed, a hand-signed and dated statement from the taxpayer (by either
spouse if a joint return) that states the taxpayer chooses to file the
individual income tax return in paper format, and that the taxpayer, and
not the preparer, will submit the paper individual income tax return to
the IRS. The IRS may provide guidance through forms, instructions or
other appropriate guidance regarding how tax return preparers and
specified tax return preparers can document a taxpayer's choice to file
an individual income tax return in paper format.
(iii) The rules contained in this section do not alter or affect a
taxpayer's obligation to file returns under any other provision of law.
The definition of file or filed by a tax return preparer or specified
tax return preparer contained in paragraph (a)(4)(i) of this section
applies only for the purposes of section 6011(e)(3) and these
regulations and does not apply for any other purpose under any other
provision of law.
(b) Magnetic media filing requirement. Except as provided in
paragraphs (a)(4)(ii) and (c) of this section, any individual income tax
return prepared by a specified tax return preparer in a calendar year
must be filed on magnetic media if the return is filed by the specified
tax return preparer.
(c) Exclusions. The following exclusions apply to the magnetic media
filing requirement in this section:
(1) Undue hardship waiver. The IRS may grant a waiver of the
requirement of this section in cases of undue hardship. An undue
hardship waiver may be granted upon application by a specified tax
return preparer consistent with instructions provided in published
guidance and as prescribed in relevant forms and instructions. A
determination of undue hardship will be based upon all facts and
circumstances. The undue hardship waiver provided to a specified tax
return preparer may apply to a series or class of individual income tax
returns or for a specified period of time, subject to the terms and
conditions regarding the method of filing prescribed in such waiver.
(2) Administrative exemptions. The IRS may provide administrative
exemptions from the requirement of this section for certain classes of
specified tax return preparers, or regarding certain types of individual
income tax returns,
[[Page 32]]
as the IRS determines necessary to promote effective and efficient tax
administration. The IRS may provide administrative exemptions and any
criteria or procedures necessary to claim an administrative exemption
through forms, instructions, or other appropriate guidance.
(d) Reasonably expect to file--(1) In general. The determination of
whether a tax return preparer reasonably expects, or if the preparer is
a member of a firm, the firm's members in the aggregate reasonably
expect, to file 10 or fewer individual income tax returns (or, in the
case of the 2011 calendar year, fewer than 100 individual income tax
returns) is made by adding together all of the individual income tax
returns the tax return preparer and, if the preparer is a member of a
firm, the firm's members reasonably expect to prepare and file in the
calendar year. In making this determination, individual income tax
returns that the tax return preparer reasonably expects will not be
subject to the magnetic media filing requirement under paragraph
(a)(4)(ii) of this section or are excluded from the requirement under
(c)(2) of this section are not to be counted. Individual income tax
returns excluded from the magnetic media filing requirement under
paragraph (c)(1) of this section are to be counted for purposes of
making this determination.
(2) Time for making determination of reasonable expectations. The
determination regarding reasonable expectations is made separately for
each calendar year in order to ascertain whether the magnetic media
filing requirement applies to a tax return preparer for that year. For
each calendar year, the determination of whether a tax return preparer
and the preparer's firm reasonably expect to file 10 or fewer individual
income tax returns (or, in the case of the 2011 calendar year, fewer
than 100 individual income tax returns) is made based on all relevant,
objective, and demonstrable facts and circumstances prior to the time
the tax return preparer and the preparer's firm first file an individual
income tax return during the calendar year.
(e) Examples. The following examples illustrate the rules of
paragraphs (a) through (d) of this section.
Example 1. Tax Return Preparer A is an accountant who recently
graduated from college with an accounting degree and has opened his own
practice. A has not prepared individual income tax returns for
compensation in the past and does not plan to focus his practice on
individual income tax return preparation. A intends instead to focus his
practice on providing specialized accounting services to certain health
care service providers. A has no plans to, and does not, employ or
engage any other tax return preparers. A estimates that he may be asked
by some clients to prepare and file their individual income tax returns
for compensation, but A expects that the number of people who do ask him
to provide this service will be no more than seven in 2012. In fact, A
actually prepares and files six paper Forms 1040 (U.S. Individual Income
Tax Return) in 2012. Due to a growing client base, and based upon his
experience in 2012, A expects that the number of individual income tax
returns he will prepare and file in 2013 will at least double,
estimating he will prepare and file 12 Form 1040 returns in 2013. A does
not qualify as a specified tax return preparer for 2012 because A
reasonably expects to file 10 or fewer returns (seven) in 2012.
Consequently, A is not required to electronically file the individual
income tax returns he prepares and files in 2012. A's expectation is
reasonable based on his business projections, individual income tax
return filing history, and staffing decisions. A is a specified tax
return preparer in 2013, however, because based on those same factors A
reasonably expects to file more than 10 individual income tax returns
(12) during that calendar year. A, therefore, must electronically file
all individual income tax returns that A prepares and files in 2013 that
are not otherwise excluded from the electronic filing requirement.
Example 2. Same facts as in Example 1, except three of Tax Return
Preparer A's clients specifically chose to have A prepare their
individual income tax returns in paper format in 2012 with the clients
mailing their respective returns to the IRS. A expects that these three
clients will similarly choose to have him prepare their returns in paper
format in 2013, with the clients being responsible for mailing their
returns to the IRS. A is not required to electronically file these three
returns in 2013 because the taxpayers chose to file their returns in
paper format. A obtained a hand-signed and dated statement from each of
those taxpayers, indicating that they chose to file their returns in
paper format. These three individual income tax returns are not counted
in determining how many individual income tax returns A reasonably
expects to file in 2013. Because the total number of individual income
tax returns A reasonably expects to file in 2013 (nine) does not exceed
10, A is not a specified tax return preparer for calendar year 2013, and
A is not
[[Page 33]]
required to electronically file any individual income tax return that he
prepares and files in 2013.
Example 3. Tax Return Preparer B is a solo general practice attorney
in a small county. Her practice includes the preparation of wills and
assisting executors in administering estates. As part of her practice, B
infrequently prepares and files Forms 1041 (U.S. Income Tax Return for
Estates and Trusts) for executors. In the past three years, she prepared
and filed an average of five Forms 1041 each year and never exceeded
more than seven Forms 1041 in any year. Based on B's prior experience
and her estimate for 2012, made prior to the time she first files an
individual income tax return in 2012, she reasonably expects to prepare
and file no more than five Forms 1041 in 2012. Due to the unforeseen
deaths of several of her clients in late 2011, B actually prepares and
files 12 Forms 1041 in 2012. B does not find out about these deaths
until after she has already filed the first Form 1041 in 2012 for
another client. B is not required to electronically file these returns
in 2012. She does not qualify as a specified tax return preparer for
calendar year 2012 because prior to the time she filed the first Form
1041 in 2012, she reasonably expected to file 10 or fewer individual
income tax returns in 2012.
Example 4. Same facts as Example 3, except, in addition to the five
Forms 1041 that she expects to prepare and file in 2012, Tax Return
Preparer B also expects to prepare and file 10 paper Forms 1040 (U.S.
Individual Income Tax Return) in 2012, based upon the requests that she
has received from some of her clients. Because the total number of
individual income tax returns B reasonably expects to file in 2012
(fifteen) exceeds 10, B is a specified tax return preparer for calendar
year 2012, and B must electronically file all individual income tax
returns that B prepares and files in 2012 that are not otherwise
excluded from the electronic filing requirement.
Example 5. Firm X consists of two tax return preparers, Tax Return
Preparer C who owns Firm X, and Tax Return Preparer D who is employed by
C in Firm X. Based upon the firm's experience over the past three years,
C and D reasonably expect to file nine and ten individual income tax
returns for compensation, respectively, in 2012. Both C and D must
electronically file the individual income tax returns that they prepare
in 2012, unless the returns are otherwise excluded from the electronic
filing requirement, because they are members of the same firm and the
aggregated total of individual income tax returns that they reasonably
expect to file in 2012 (nineteen), exceeds 10 individual income tax
returns.
(f) Additional guidance. The IRS may implement the requirements of
this section through additional guidance, including by revenue
procedures, notices, publications, forms and instructions, including
those issued electronically.
(g) Effective/applicability date. This section is effective on March
30, 2011, and applicable to individual income tax returns filed after
December 31, 2010.
[T.D. 9518, 76 FR 17528, Mar. 30, 2011]
Sec. 301.6011-10 Certain organizations, including trusts,
required to file unrelated business income tax returns in electronic form.
(a) Unrelated business income tax returns required in electronic
form. (1) Organizations, including trusts, subject to tax under section
511 that are required to file a return under Sec. 1.6012-2(e) or Sec.
1.6012-3(a)(5) of this chapter to report gross income included in
computing unrelated business taxable income, as defined in section 512,
or that are otherwise required to file Form 990-T, Exempt Organization
Business Income Tax Return (and proxy tax under section 6033(e)), are
required to file that return in electronic form.
(2) Returns filed in electronic form must be filed in accordance
with applicable revenue procedures, publications, forms, instructions,
or other guidance.
(b) Failure to file. If an organization or trust fails to file an
unrelated business income tax return in electronic form when required to
do so by this section, the organization or trust has failed to file the
return. See section 6651 for the addition to tax for failure to file a
return. In determining whether there is reasonable cause for failure to
file the return, Sec. 301.6651-1(c) will apply.
(c) Applicability date. The rules of this section apply to unrelated
business income tax returns required to be filed during calendar years
beginning after February 23, 2023.
[T.D. 9972, 88 FR 11770, Feb. 23, 2023]
Sec. 301.6011-11 Required use of electronic form for certain
returns for tax-advantaged bonds.
(a) Return for credit payments to issuers of qualified bonds. (1) An
issuer of a qualified bond required to file a return for credit payments
on Form 8038-CP, Return for Credit Payments to Issuers of
[[Page 34]]
Qualified Bonds, must file the return electronically if the issuer is
required to file at least 10 returns (as determined under paragraph (d)
of this section) during the calendar year.
(2) Returns filed electronically must be completed in accordance
with applicable revenue procedures, publications, forms, instructions,
or other guidance, including postings to the IRS.gov website.
(b) Exclusions from electronic-filing requirements--(1) Waivers. The
Commissioner may grant waivers of the requirements of this section in
cases of undue hardship. One principal factor in determining hardship
will be the amount, if any, by which the cost of filing the return
electronically in accordance with this section exceeds the cost of
filing a paper return. An issuer's request for a waiver must be
submitted in accordance with applicable revenue procedures,
publications, forms, instructions, or other guidance, including postings
to the IRS.gov website. The waiver request must specify the type of
filing (that is, the return required to be filed electronically under
this section), the name of the issuer, the name of the bond issue, the
issue date of the tax-advantaged bond (as defined in Sec. 1.150-1(b) of
this chapter), and any other information specified in the applicable
revenue procedures, publications, forms, instructions, or other
guidance, including postings to the IRS.gov website.
(2) Exemptions. The Commissioner may provide an exemption from the
electronic-filing requirement of paragraph (a)(1) of this section
through revenue procedures, publications, forms, instructions, or other
guidance, including postings to the IRS.gov website, to promote
effective and efficient tax administration. A submission claiming an
exemption must be made in accordance with applicable revenue procedures,
publications, forms, instructions, or other guidance, including postings
to the IRS.gov website.
(3) Additional Exclusion. If the IRS's systems do not support
electronic filing, taxpayers will not be required to file a return
electronically under this section.
(c) Meaning of terms. The following definitions apply for purposes
of this section:
(1) Magnetic media or electronic form. The terms magnetic media or
electronic form mean any media or form permitted under applicable
regulations, revenue procedures, or publications. These generally
include electronic filing, as well as magnetic tape, tape cartridge,
diskette, and other media specifically permitted under the applicable
regulations, procedures, publications, forms, instructions, or other
guidance.
(2) Qualified bond. The term qualified bond means a tax-advantaged
bond that is a taxable bond that provides a refundable Federal tax
credit payable directly to the issuer of the bond under former section
6431 or any other tax-advantaged bond (as defined in Sec. 1.150-1(b) of
this chapter) that provides a refundable Federal tax credit payment to
an issuer of such bond.
(3) Return for credit payments to issuers of qualified bonds. The
term return for credit payments to issuers of qualified bonds means a
Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds,
or such other form prescribed by the Commissioner for the purpose of
filing a return for credit payment with respect to a qualified bond.
(d) Calculating the number of returns--(1) Aggregation of returns.
For purposes of this section, an issuer of a tax-advantaged bond is
required to file at least 10 returns if, during the calendar year, the
issuer is required to file at least 10 returns of any type, including
information returns (for example, Forms W-2 and Forms 1099), income tax
returns, employment tax returns, and excise tax returns.
(2) Corrected returns. (i) If an original return covered by this
section is required to be filed electronically, any corrected return
corresponding to that original return must also be filed electronically.
(ii) If an original return covered by this section is permitted to
be filed on paper and is filed on paper, any corrected return
corresponding to that original return must be filed on paper.
[[Page 35]]
(e) Applicability date. The rules of this section apply to returns
for tax-advantaged bonds filed after December 31, 2023.
[T.D. 9972, 88 FR 11770, Feb. 23, 2023]
Sec. 301.6011-12 Required use of electronic form for returns
of certain excise taxes under Chapters 41 and 42 of the
Internal Revenue Code.
(a) Excise tax returns required electronically. (1) Any person
required to file an excise tax return on Form 4720, Return of Certain
Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code,
under Sec. 53.6011-1 of this chapter must file its excise tax return
electronically if the person is required by the Internal Revenue Code or
regulations to file at least 10 returns (as defined in paragraph (d)(3)
of this section) during the calendar year.
(2) The Commissioner may direct the type of electronic filing and
may also exempt certain returns from the electronic requirements of this
section through revenue procedures, publications, forms, instructions,
or other guidance, including postings on the IRS.gov website. Returns
filed electronically must be made in accordance with the applicable
revenue procedures, publications, forms, instructions, or other
guidance.
(3) Paragraph (a)(1) of this section is not applicable to private
foundations that are subject to the filing requirements of Sec.
301.6033-4.
(b) Exclusions from electronic-filing requirements--(1) Waivers. The
Commissioner may grant waivers of the requirements of this section in
cases of undue hardship. One principal factor in determining hardship
will be the amount, if any, by which the cost of filing the return
electronically in accordance with this section exceeds the cost of
filing the return on paper. A request for a waiver must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website. The waiver request will specify the type of filing (that is, a
return required under Sec. 53.6011-1 of this chapter) and the period to
which it applies.
(2) Exemptions. The Commissioner may provide exemptions from the
requirements of this section to promote effective and efficient tax
administration. A submission claiming an exemption must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website.
(3) Additional exclusion. If the IRS's systems do not support
electronic filing, taxpayers will not be required to file
electronically.
(c) Failure to file. If a person fails to file an excise tax return
electronically when required to do so by this section, the person has
failed to file the return. See section 6651 for the addition to tax for
failure to file a return. In determining whether there is reasonable
cause for failure to file the return, Sec. 301.6651-1(c) and rules
similar to the rules in Sec. 301.6724-1(c)(3) (undue economic hardship
related to filing information returns electronically) will apply.
(d) Meaning of terms. The following definitions apply for purposes
of this section:
(1) Magnetic media or electronic form. The terms magnetic media or
electronic form mean any media or form permitted under applicable
regulations, revenue procedures, or publications. These generally
include electronic filing, as well as magnetic tape, tape cartridge,
diskette, and other media specifically permitted under the applicable
regulations, procedures, publications, forms, instructions, or other
guidance.
(2) Excise tax return. The term excise tax return means a Form 4720,
Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal
Revenue Code, along with all other related forms, schedules, and
statements that are required to be attached to the Form 4720, including
amended and superseding returns.
(3) Calculating the number of returns. For purposes of this section,
a person is required to file at least 10 returns if, during the calendar
year ending with or within the person's taxable year, the person is
required to file at least 10 returns of any type, including information
returns (for example, Forms W-2 and Forms 1099), income tax returns,
employment tax returns, and excise
[[Page 36]]
tax returns. In the case of a short-period return, a person is required
to file at least 10 returns if, during the calendar year in which the
person's short taxable year ends, the person is required to file at
least 10 returns of any type, including information returns (for
example, Forms W-2 and Forms 1099), income tax returns, employment tax
returns, and excise tax returns.
(e) Example. The following example illustrates the provisions of
this section:
(1) During the calendar year ending December 31, 2023, Trust X was
required to file one Form 4720, Return of Certain Excise Taxes Under
Chapters 41 and 42 of the Internal Revenue Code, which related to the
2022 taxable year, and 10 Forms W-2, Wage and Tax Statement, which
reported wages paid to employees during 2022. Because X is required to
file 11 returns during calendar year 2023, X is required to file its
Form 4720 electronically for its taxable year ended December 31, 2023.
(2) [Reserved]
(f) Applicability date. The rules of this section apply to excise
tax returns required to be filed for taxable years ending on or after
December 31, 2023.
[T.D. 9972, 88 FR 11771, Feb. 23, 2023]
Sec. 301.6011-13 Required use of electronic form
for split-interest trust returns.
(a) Split-interest trust returns required electronically. (1) Any
trust required to file an information return on Form 5227, Split-
Interest Trust Information Return, under Sec. 53.6011-1 of this chapter
must file its return electronically if the trust is required by the
Internal Revenue Code or regulations to file at least 10 returns (as
defined in paragraph (d)(3) of this section) during the calendar year.
(2) The Commissioner may direct the type of electronic filing and
may also exempt certain returns from the electronic requirements of this
section through revenue procedures, publications, forms, instructions,
or other guidance, including postings on the IRS.gov website. Returns
filed electronically must be made in accordance with applicable revenue
procedures, publications, forms, or instructions.
(b) Exclusions from electronic-filing requirements--(1) Waivers. The
Commissioner may grant waivers of the requirements of this section in
cases of undue hardship. One principal factor in determining hardship
will be the amount, if any, by which the cost of filing the return
electronically in accordance with this section exceeds the cost of
filing the return on paper. A request for a waiver must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website. The waiver request will specify the type of filing (that is, a
return required under Sec. 53.6011-1 of this chapter) and the period to
which it applies.
(2) Exemptions. The Commissioner may provide exemptions from the
requirements of this section to promote effective and efficient tax
administration. A submission claiming an exemption must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website.
(3) Additional exclusion. If the IRS's systems do not support
electronic filing, taxpayers will not be required to file
electronically.
(c) Failure to file. If a trust fails to file an excise tax return
electronically when required to do so by this section, the trust has
failed to file the return. See section 6652 for the addition to tax for
failure to file a return. In determining whether there is reasonable
cause for failure to file the return, Sec. 301.6652-1(f) and rules
similar to the rules in Sec. 301.6724-1(c)(3) (undue economic hardship
related to filing information returns electronically) will apply.
(d) Meaning of terms. The following definitions apply for purposes
of this section:
(1) Magnetic media or electronic form. The terms magnetic media or
electronic form mean any media or form permitted under applicable
regulations, revenue procedures, or publications.
[[Page 37]]
These generally include electronic filing, as well as magnetic tape,
tape cartridge, diskette, and other media specifically permitted under
the applicable regulations, procedures, publications, forms,
instructions, or other guidance.
(2) Split-Interest Trust return. The term split-interest trust
return means a Form 5227, Split-Interest Trust Information Return, along
with all other related forms, schedules, and statements that are
required to be attached to the Form 5227, including amended and
superseding returns.
(3) Calculating the number of returns. For purposes of this section,
a trust is required to file at least 10 returns if, during the calendar
year ending with or within the trust's taxable year, the trust is
required to file at least 10 returns of any type, including information
returns (for example, Forms W-2 and Forms 1099), income tax returns,
employment tax returns, and excise tax returns. In the case of a short-
period return, a trust is required to file at least 10 returns if,
during the calendar year in which the trust's short taxable year ends,
the trust is required to file at least 10 returns of any type, including
information returns (for example, Forms W-2 and Forms 1099), income tax
returns, employment tax returns, and excise tax returns.
(e) Example. The following example illustrates the provisions of
this section:
(1) During the calendar year ending December 31, 2023, Trust X was
required to file one Form 5227, Split-Interest Trust Information Return,
one Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42
of the Internal Revenue Code, and 10 Forms 1099-DIV, Dividends and
Distributions. Because X is required to file 12 returns during the
calendar year 2023, X is required to file its Form 5227 electronically
for its taxable year ending December 31, 2023.
(2) [Reserved]
(f) Applicability date. The rules of this section apply to Split-
Interest Trust returns required to be filed for taxable years ending on
or after December 31, 2023.
[T.D. 9972, 88 FR 11772, Feb. 23, 2023]
Sec. 301.6011-14 Required use of electronic form or other
machine-readable form for material advisor disclosure
statements.
(a) Material advisor disclosure statements required electronically
or in other machine-readable form. (1) Any material advisor required to
file a return on Form 8918, Material Advisor Disclosure Statement, under
Sec. 301.6111-3(a) of this chapter must file its return electronically
or in other machine-readable form, in accordance with revenue
procedures, publications, forms, instructions, or other guidance,
including postings on the IRS.gov website, if the material advisor is
required by the Internal Revenue Code or regulations to file at least 10
returns (as determined under paragraph (d)(4) of this section) during
the calendar year.
(2) The Commissioner may direct the type of electronic or other
machine-readable form through revenue procedures, publications, forms,
instructions, or other guidance, including postings on the IRS.gov
website. Returns filed electronically or in other machine-readable form
must be made in accordance with applicable revenue procedures,
publications, forms, instructions, or other guidance.
(b) Exclusions from electronic-filing requirements--(1) Waivers. The
Commissioner may grant waivers of the requirements of this section in
cases of undue hardship. One principal factor in determining hardship
will be the amount, if any, by which the cost of filing the return
electronically in accordance with this section exceeds the cost of
filing the return on paper. A request for a waiver must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website. The waiver request will specify the type of filing (that is, a
return required under Sec. 301.6111-3(a) of this chapter) and the
period to which it applies.
(2) Exemptions. The Commissioner may provide exemptions from the
requirements of this section to promote effective and efficient tax
administration. A submission claiming an exemption must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or
[[Page 38]]
other guidance, including postings to the IRS.gov website.
(3) Additional Exclusion. If the IRS's systems do not support
electronic filing, taxpayers will not be required to file
electronically.
(c) Failure to file. If a material advisor fails to file Form 8918
electronically or in other machine-readable form when required to do so
by this section, the material advisor has failed to file the return. See
section 6707 for the penalty for failure to file the return.
(d) Meaning of terms. The following definitions apply for purposes
of this section:
(1) Magnetic media or electronic form. The terms magnetic media or
electronic form mean any media or form permitted under applicable
regulations, revenue procedures, or publications. These generally
include electronic filing, as well as magnetic tape, tape cartridge,
diskette, and other media specifically permitted under the applicable
regulations, procedures, publications, forms, instructions, or other
guidance.
(2) Machine-readable form. The term machine-readable form means any
machine-readable form specifically permitted under applicable
regulations, procedures, publications, forms, instructions, or other
guidance.
(3) Material advisor disclosure statement. The term material advisor
disclosure statement means a Form 8918, Material Advisor Disclosure
Statement, along with all other related forms, schedules, and statements
that are required to be attached to the Form 8918, including amended
material advisor disclosure statements.
(4) Calculating the number of returns. (i) Except as provided in
paragraph (d)(4)(ii) of this section, for purposes of this section, a
material advisor is required to file at least 10 returns if during the
calendar year the material advisor is required to file at least 10
returns of any type, including information returns (for example, Forms
W-2 and Forms 1099), income tax returns, employment tax returns, and
excise tax returns.
(ii) Form 8918 is not taken into account in calculating whether a
material advisor is required to file at least 10 returns during a
calendar year.
(e) Example. The following example illustrates the provisions of
this section:
(1) During the calendar year ending December 31, 2024, Material
Advisor X was required to file one Form 1040, U.S. Individual Income Tax
Return, and 10 Forms 1099-NEC, Nonemployee Compensation. Because
Material Advisor X is required to file 11 returns during the calendar
year 2024, X is required to file its Forms 8918 electronically or in
other machine-readable form, in accordance with revenue procedures,
publications, forms, instructions, or other guidance, including postings
on the IRS.gov website, during the calendar year ending December 31,
2024.
(2) [Reserved]
(f) Applicability date. The rules of this section apply to Material
Advisor Disclosure Statements required to be filed after December 31,
2023.
[T.D. 9972, 88 FR 11772, Feb. 23, 2023]
Sec. 301.6011-15 Required use of electronic form for
withholding tax returns.
(a) Withholding tax returns required electronically. (1) A
withholding agent required to file an income tax return on Form 1042,
Annual Withholding Tax Return for U.S. Source Income of Foreign Persons,
under Sec. 1.1461-1(b) of this chapter must file its return
electronically if the withholding agent is required by the Internal
Revenue Code or regulations to file at least 10 returns (as defined in
paragraph (d)(5) of this section) during the calendar year in which the
Form 1042 is required to be filed. Notwithstanding the previous
sentence, a withholding agent that is an individual, estate, or trust is
not required to file its Form 1042 electronically.
(2) The Commissioner may direct the type of electronic filing and
may also exempt certain returns from the electronic requirements of this
section through revenue procedures, publications, forms, instructions,
or other guidance, including postings on the IRS.gov website. Returns
filed electronically must be made in accordance
[[Page 39]]
with the applicable revenue procedures, publications, forms,
instructions, or other guidance.
(b) Exclusions from electronic-filing requirements--(1) Waivers. The
Commissioner may grant waivers of the requirements of this section in
cases of undue hardship. One principal factor in determining hardship
will be the amount, if any, by which the cost of filing the return
electronically in accordance with this section exceeds the cost of
filing the return on paper. A request for a waiver must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website. The waiver request will specify the type of filing (that is, a
return required under Sec. 1.1461-1 of this chapter) and the period to
which it applies.
(2) Exemptions. The Commissioner may provide exemptions from the
requirements of this section to promote effective and efficient tax
administration. A submission claiming an exemption must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website.
(3) Additional exclusion. If the IRS's systems do not support
electronic filing, taxpayers will not be required to file
electronically.
(c) Failure to file. If a withholding agent fails to file a
withholding tax return electronically when required to do so by this
section, the withholding agent has failed to file the return. See
section 6651 for the addition to tax for failure to file a return. In
determining whether there is reasonable cause for failure to file the
return, Sec. 301.6651-1(c) and rules similar to the rules in Sec.
301.6724-1(c)(3) (undue economic hardship related to filing information
returns electronically) will apply.
(d) Meaning of terms. The following definitions apply for purposes
of this section:
(1) Magnetic media or electronic form. The terms magnetic media or
electronic form mean any media or form permitted under applicable
regulations, revenue procedures, or publications. These generally
include electronic filing, as well as magnetic tape, tape cartridge, and
diskette, and other media specifically permitted under the applicable
regulations, procedures, publications, forms, or instructions.
(2) Withholding agent. The term withholding agent means a
withholding agent as defined in Sec. 1.1441-7(a) of this chapter.
(3) Withholding tax return. The term withholding tax return means a
Form 1042, Annual Withholding Tax Return for U.S. Source Income of
Foreign Persons, along with all other related forms, schedules, and
statements that are required to be attached to the Form 1042, including
amended and superseding returns.
(4) Special rule for partnerships. Notwithstanding paragraph (d)(5)
of this section, a withholding agent that is a partnership with more
than 100 partners (as determined under Sec. 301.6011-3(d)(6)) is
required to file a return described in paragraph (a) of this section
electronically.
(5) Calculating the number of returns. For purposes of this section,
a withholding agent is required to file at least 10 returns if, during
the calendar year in which the Form 1042 is required to be filed, the
withholding agent is required to file at least 10 returns of any type,
including information returns (for example, Forms W-2, Forms 1099, Forms
1042-S), income tax returns (for example, Form 1042), employment tax
returns, and excise tax returns.
(e) Special rule for returns filed by financial institutions. For
rules that require withholding agents that are financial institutions to
file returns electronically, see Sec. 301.1474-1.
(f) Applicability date. The rules of this section apply to
withholding tax returns required to be filed for taxable years ending on
or after December 31, 2023.
[T.D. 9972, 88 FR 11773, Feb. 23, 2023]
Sec. 301.6011(g)-1 Disclosure by taxable party to the tax-exempt entity.
(a) Requirement of disclosure--(1) In general. Except as provided in
paragraph (d)(2) of this section, any taxable party (as defined in
paragraph (c) of this section) to a prohibited tax shelter transaction
(as defined in section 4965(e) and Sec. 53.4965-3 of this chapter) must
disclose by statement to each
[[Page 40]]
tax-exempt entity (as defined in section 4965(c) and Sec. 53.4965-2 of
this chapter) that the taxable party knows or has reason to know is a
party to such transaction (as defined in paragraph (b) of this section)
that the transaction is a prohibited tax shelter transaction.
(2) Determining whether a taxable party knows or has reason to know.
Whether a taxable party knows or has reason to know that a tax-exempt
entity is a party to a prohibited tax shelter transaction is based on
all the facts and circumstances. If the taxable party knows or has
reason to know that a prohibited tax shelter transaction involves a tax-
exempt, tax indifferent or tax-favored entity, relevant factors for
determining whether the taxable party knows or has reason to know that a
specific tax-exempt entity is a party to the transaction include--
(i) The extent of the efforts made to determine whether a tax-exempt
entity is facilitating the transaction by reason of its tax-exempt, tax
indifferent or tax-favored status (or is identified in published
guidance, by type, class or role, as a party to the transaction); and
(ii) If a tax-exempt entity is facilitating the transaction by
reason of its tax-exempt, tax indifferent or tax-favored status (or is
identified in published guidance, by type, class or role, as a party to
the transaction), the extent of the efforts made to determine the
identity of the tax-exempt entity.
(b) Definition of tax-exempt party to a prohibited tax shelter
transaction. For purposes of section 6011(g), a tax-exempt entity is a
party to a prohibited tax shelter transaction if the entity is defined
as such under Sec. 53.4965-4 of this chapter.
(c) Definition of taxable party--(1) In general. For purposes of
this section, the term taxable party means--
(i) A person who has entered into and participates or expects to
participate in the transaction under Sec. Sec. 1.6011-4(c)(3)(i)(A),
(B), or (C), 20.6011-4, 25.6011-4, 31.6011-4, 53.6011-4, 54.6011-4, or
56.6011-4 of this chapter; or
(ii) A person who is designated as a taxable party by the Secretary
in published guidance.
(2) Special rules--(i) Certain listed transactions. If a transaction
that was otherwise not a prohibited tax shelter transaction becomes a
listed transaction after the filing of a person's tax return (including
an amended return) reflecting either tax consequences or a tax strategy
described in the published guidance listing the transaction (or a tax
benefit derived from tax consequences or a tax strategy described in the
published guidance listing the transaction), the person is a taxable
party beginning on the date the transaction is described as a listed
transaction in published guidance.
(ii) Persons designated as non-parties. Published guidance may
identify which persons, by type, class or role, will not be treated as a
party to a prohibited tax shelter transaction for purposes of section
6011(g).
(d) Time for providing disclosure statement--(1) In general. A
taxable party to a prohibited tax shelter transaction must make the
disclosure required by this section to each tax-exempt entity that the
taxable party knows or has reason to know is a party to the transaction
within 60 days after the last to occur of--
(i) The date the person becomes a taxable party to the transaction
within the meaning of paragraph (c) of this section;
(ii) The date the taxable party knows or has reason to know that the
tax-exempt entity is a party to the transaction within the meaning of
paragraph (b) of this section; or
(iii) July 6, 2010.
(2) Termination of a disclosure obligation. A person shall not be
required to provide the disclosure otherwise required by this section if
the person does not know or have reason to know that the tax-exempt
entity is a party to the transaction within the meaning of paragraph (b)
of this section on or before the first date on which the transaction is
required to be disclosed by the person under Sec. Sec. 1.6011-4,
20.6011-4, 25.6011-4, 31.6011-4, 53.6011-4, 54.6011-4, or 56.6011-4 of
this chapter.
(3) Disclosure is not required with respect to any prohibited tax
shelter transaction entered into by a tax-exempt entity on or before May
17, 2006.
[[Page 41]]
(e) Frequency of disclosure. One disclosure statement is required
per tax-exempt entity per transaction. See paragraph (h) of this section
for rules relating to designation agreements.
(f) Form and content of disclosure statement. The statement
disclosing to the tax-exempt entity that the transaction is a prohibited
tax shelter transaction must be a written statement that--
(1) Identifies the type of prohibited tax shelter transaction
(including the published guidance citation for a listed transaction);
and
(2) States that the tax-exempt entity's involvement in the
transaction may subject either it or its entity manager(s) or both to
excise taxes under section 4965 and to disclosure obligations under
section 6033(a) of the Internal Revenue Code.
(g) To whom disclosure is made. The disclosure statement must be
provided--
(1) In the case of a non-plan entity as defined in Sec. 53.4965-
2(b) of this chapter, to--
(i) Any entity manager of the tax-exempt entity with authority or
responsibility similar to that exercised by an officer, director or
trustee of an organization; or
(ii) If a person described in paragraph (g)(1)(i) of this section is
not known, to the primary contact on the transaction.
(2) In the case of a plan entity as defined in Sec. 53.4965-2(c) of
this chapter, including a fully self-directed qualified plan, IRA, or
other savings arrangement, to any entity manager of the plan entity who
approved or otherwise caused the entity to become a party to the
prohibited tax shelter transaction.
(h) Designation agreements. If more than one taxable party is
required to disclose a prohibited tax shelter transaction under this
section, the taxable parties may designate by written agreement a single
taxable party to disclose the transaction. The transaction must then be
disclosed in accordance with this section. The designation of one
taxable party to disclose the transaction does not relieve the other
taxable parties of their obligation to disclose the transaction to a
tax-exempt entity that is a party to the transaction in accordance with
this section, if the designated taxable party fails to disclose the
transaction to the tax-exempt entity in a timely manner.
(i) Penalty for failure to provide disclosure statement. See section
6707A for the penalty applicable to the failure to disclose a prohibited
tax shelter transaction in accordance with this section.
(j) Effective date/applicability date. This section will apply with
respect to transactions entered into by a tax-exempt entity after May
17, 2006.
[T.D. 9492, 75 FR 38709, July 6, 2010]
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 Sec. Sec. 1.6012-1 to 1.6012-4, inclusive, of this chapter
(Income Tax Regulations).
Sec. 301.6012-2 Required use of electronic form for income
tax returns of certain political organizations.
(a) Income tax returns of certain political organizations required
electronically. (1) Any organization required to file an income tax
return on Form 1120-POL, U.S. Income Tax Return for Certain Political
Organizations, under Sec. 1.6012-6 of this chapter must file its income
tax return, along with all other related forms, schedules, and
statements that are required to be attached to the Form 1120-POL,
including amended and superseding returns, electronically if the
organization is required by the Internal Revenue Code or regulations to
file at least 10 returns of any type (as defined in paragraph (d)(2) of
this section) during the calendar year.
(2) The Commissioner may direct the type of electronic filing and
may also exempt certain returns from the electronic requirements of this
section through revenue procedures, publications, forms, instructions,
or other guidance, including postings on the IRS.gov website. Returns
filed electronically must be made in accordance with the applicable
revenue procedures, publications, forms, instructions, or other
guidance.
[[Page 42]]
(b) Exclusions from electronic-filing requirements--(1) Waivers. The
Commissioner may grant waivers of the requirements of this section in
cases of undue hardship. One principal factor in determining hardship
will be the amount, if any, by which the cost of filing the return
electronically in accordance with this section exceeds the cost of
filing the return on paper. A request for a waiver must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website. The waiver request will specify the type of filing (that is, a
return required under Sec. 1.6012-6 of this chapter) and the period to
which it applies.
(2) Exemptions. The Commissioner may provide exemptions from the
requirements of this section to promote effective and efficient tax
administration. A submission claiming an exemption must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website.
(3) Additional exclusion. If the IRS's systems do not support
electronic filing, taxpayers will not be required to file
electronically.
(c) Failure to file. If an organization fails to file an income tax
return electronically when required to do so by this section, the
organization has failed to file the return. See section 6651 for the
addition to tax for failure to file a return. In determining whether
there is reasonable cause for failure to file the return, Sec.
301.6651-1(c) and rules similar to the rules in Sec. 301.6724-1(c)(3)
(undue economic hardship related to filing information returns
electronically) will apply.
(d) Meaning of terms. The following definitions apply for purposes
of this section:
(1) Magnetic media or electronic form. The terms magnetic media or
electronic form mean any media or form permitted under applicable
regulations, revenue procedures, or publications. These generally
include electronic filing, as well as magnetic tape, tape cartridge,
diskette, and other media specifically permitted under the applicable
regulations, procedures, publications, forms, instructions, or other
guidance.
(2) Income tax return for certain political organizations. The term
income tax return for certain political organizations means a Form 1120-
POL, U.S. Income Tax Return for Certain Political Organizations, along
with all other related forms, schedules, and statements that are
required to be attached to the Form 1120-POL, including amended and
superseding returns.
(3) Calculating the number of returns. For purposes of this section,
an organization is required to file at least 10 returns if, during the
calendar year ending with or within the organization's taxable year, the
organization is required to file at least 10 returns of any type,
including information returns (for example, Forms W-2 and Forms 1099),
income tax returns, employment tax returns, and excise tax returns. In
the case of a short-period return, an organization is required to file
at least 10 returns if, during the calendar year in which the
organization's short taxable year ends, the organization is required to
file at least 10 returns of any type, including information returns (for
example, Forms W-2 and Forms 1099), income tax returns, employment tax
returns, and excise tax returns.
(e) Example. The following example illustrates the provisions of
this section:
(1) During the calendar year ending December 31, 2023, Organization
X was required to file one Form 1120-POL, U.S. Income Tax Return for
Certain Political Organizations, four (quarterly) Forms 8872, Political
Organization Report of Contributions and Expenditures, two Forms W-2,
Wage and Tax Statement, one Form 940, Employer's Annual Federal
Unemployment (FUTA) Tax Return, and four Forms 941, Employer's Quarterly
Federal Tax Return. Because X is required to file 12 returns during the
calendar year, X is required to file its Form 1120-POL electronically
for its taxable year ending December 31, 2023.
(2) [Reserved]
(f) Applicability date. The rules of this section apply to income
tax returns required to be filed for taxable years ending on or after
December 31, 2023.
[T.D. 9972, 88 FR 11774, Feb. 23, 2023]
[[Page 43]]
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 Sec. Sec. 1.6013-1 to 1.6013-7, inclusive, of
this chapter (Income Tax Regulations).
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7670, 45 FR 6932, Jan.
31, 1980]
Sec. 301.6014-1 Income tax return--tax
not computed by taxpayer.
For provisions relating to the election not to show on an income tax
return the amount of tax due in connection therewith, see Sec. Sec.
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 Sec. Sec. 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 Sec. Sec. 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
Sec. Sec. 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
Sec. Sec. 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 the
Commissioner or other Internal Revenue Officers.
(a) Preparation of returns--(1) In general. If any person required
by the Internal Revenue Code or by the regulations to make a return
fails to make such return, it may be prepared by the Commissioner 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 Commissioner 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 paragraph (a)(1) of
this section 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
the Internal Revenue Code or by the regulations to make a return (other
than a declaration of estimated tax required under section 6654 or 6655)
fails to make such return at the time prescribed therefore, or makes,
willfully or otherwise, a false, fraudulent or frivolous return, the
Commissioner 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. The Commissioner or
other authorized Internal Revenue Officer or employee may make the
return by gathering information and making computations through
electronic, automated or other means to make a determination of the
taxpayer's tax liability.
(2) Form of the return. A document (or set of documents) signed by
the Commissioner or other authorized Internal Revenue Officer or
employee shall be a return for a person described in paragraph (b)(1) of
this section if the document (or set of documents) identifies the
taxpayer by name and taxpayer
[[Page 44]]
identification number, contains sufficient information from which to
compute the taxpayer's tax liability, and purports to be a return. A
Form 13496, ``IRC Section 6020(b) Certification,'' or any other form
that an authorized Internal Revenue Officer or employee signs and uses
to identify a set of documents containing the information set forth in
this paragraph as a section 6020(b) return, and the documents
identified, constitute a return under section 6020(b). A return may be
signed by the name or title of an Internal Revenue Officer or employee
being handwritten, stamped, typed, printed or otherwise mechanically
affixed to the return, so long as that name or title was placed on the
document to signify that the Internal Revenue Officer or employee
adopted the document as a return for the taxpayer. The document and
signature may be in written or electronic form.
(3) Status of returns. Any return made in accordance with paragraph
(b)(1) of this section and signed by the Commissioner or other
authorized Internal Revenue Officer or employee shall be good and
sufficient for all legal purposes except insofar as any Federal statute
expressly provides otherwise. Furthermore, the return shall be treated
as the return filed by the taxpayer for purposes of determining the
amount of the addition to tax under sections 6651(a)(2) and (3).
(4) Deficiency procedures. For deficiency procedures in the case of
income, estate, and gift taxes, see sections 6211 through 6216,
inclusive, and Sec. Sec. 301.6211-1 through 301.6215-1, inclusive.
(5) Employment status procedures. For pre-assessment procedures in
employment taxes cases involving worker classification, see section 7436
(proceedings for determination of employment status).
(6) Examples. The application of this paragraph (b) is illustrated
by the following examples:
Example 1. Individual A, a calendar-year taxpayer, fails to file his
2003 return. Employee X, an Internal Revenue Service employee, opens an
examination related to A's 2003 taxable year. At the end of the
examination, X completes a Form 13496, ``IRC Section 6020(b)
Certification,'' and attached to it the documents listed on the form.
Those documents explain examination changes and provide sufficient
information to compute A's tax liability. The Form 13496 provides that
the Service employee identified on the form certifies that the attached
pages constitute a return under section 6020(b). When X signs the
certification package, the package constitutes a return under paragraph
(b) of this section because the package identifies A by name, contains
A's taxpayer identifying number (TIN), has sufficient information to
compute A's tax liability, and contains a statement stating that it
constitutes a return under section 6020(b). In addition, the Service
will determine the amount of the additions to tax under section
6651(a)(2) by treating the section 6020(b) return as the return filed by
the taxpayer. Likewise, the Service will determine the amount of any
addition to tax under section 6651(a)(3), which arises only after notice
and demand for payment, by treating the section 6020(b) return as the
return filed by the taxpayer.
Example 2. Same facts as in Example 1, except that, after performing
the examination, X does not compile any examination documents together
as a related set of documents. X also does not sign and complete the
Form 13496 nor associate the forms explaining examination changes with
any other document. Because X did not sign any document stating that it
constitutes a return under section 6020(b) and the documents otherwise
do not purport to be a section 6020(b) return, the documents do not
constitute a return under section 6020(b). Therefore, the Service cannot
determine the section 6651(a)(2) addition to tax against nonfiler A for
A's 2003 taxable year on the basis of those documents.
Example 3. Individual C, a calendar-year taxpayer, fails to file his
2003 return. The Service determines through its automated internal
matching programs that C received reportable income and failed to file a
return. The Service, again through its automated systems, generates a
Letter 2566, ``30 Day Proposed Assessment (SFR-01) 910 SC/CG.'' This
letter contains C's name, TIN, and has sufficient information to compute
C's tax liability. Contemporaneous with the creation of the Letter 2566,
the Service, through its automated system, electronically creates and
stores a certification stating that the electronic data contained as
part of C's account constitutes a valid return under section 6020(b) as
of that date. Further, the electronic data includes the signature of the
Service employee authorized to sign the section 6020(b) return upon its
creation. Although the signature is stored electronically, it can appear
as a printed name when the Service requests a paper copy of the
certification. The electronically created information, signature, and
certification is a return under section 6020(b). The Service will treat
that return as the return filed by the
[[Page 45]]
taxpayer in determining the amount of the section 6651(a)(2) addition to
tax with respect to C's 2003 taxable year. Likewise, the Service will
determine the amount of any addition to tax under section 6651(a)(3),
which arises only after notice and demand for payment, by treating the
section 6020(b) return as the return filed by the taxpayer.
Example 4. Corporation M, a quarterly taxpayer, fails to file a Form
941, ``Employer's Quarterly Federal Tax Return,'' for the second quarter
of 2004. Q, a Service employee authorized to sign returns under section
6020(b), prepares a Form 941 by hand, stating Corporation M's name,
address, and TIN. Q completes the Form 941 by entering line item
amounts, including the tax due, and then signs the document. The Form
941 that Q prepared and signed constitutes a section 6020(b) return
because the Form 941 purports to be a return under section 6020(b), the
form contains M's name and TIN, and it includes sufficient information
to compute M's tax liability for the second quarter of 2004.
(c) Cross references--(1) For provisions that a return executed by
the Commissioner 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 Sec. 301.6501(b)-
1(e).
(2) For determining the period of limitations on collection after
assessment of a liability on a return executed by the Commissioner or
other authorized Internal Revenue Officer or employee, see section 6502
and Sec. 301.6502-1.
(3) 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.
(4) For additions to the tax for failure to pay tax, see section
6651 and Sec. 301.6651-1.
(5) For criminal penalties for willful failure to make returns, see
sections 7201, 7202 and 7203.
(6) For criminal penalties for willfully making false or fraudulent
returns, see sections 7206 and 7207.
(7) For civil penalties for filing frivolous income tax returns, see
section 6702.
(8) For authority to examine books and witnesses, see section 7602
and Sec. 301.7602-1.
(d) Effective/Applicability date. This section is applicable on
February 20, 2008.
[T.D. 9380, 73 FR 9189, Feb. 20, 2008]
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).
[[Page 46]]
Sec. 301.6033-4 Required filing in electronic form for returns
by organizations required to file returns under section 6033.
(a) Returns by organizations required to file returns under section
6033 in electronic form. (1) An organization required to file a return
under section 6033 must file its return in electronic form.
(2) Returns filed in electronic form must be filed in accordance
with applicable revenue procedures, publications, forms, instructions,
or other guidance.
(b) Failure to file. If an organization required to file a return
under section 6033 fails to file an information return in electronic
form when required to do so by this section, the organization has failed
to file the return. See section 6652 for the addition to tax for failure
to file a return. In determining whether there is reasonable cause for
failure to file the return, Sec. 301.6652-2(f) will apply.
(c) Meaning of terms. For purposes of this section the term return
required under section 6033 means a Form 990, Return of Organization
Exempt From Income Tax; Form 990-EZ, Short Form Return of Organization
Exempt From Income Tax; and Form 990-PF, Return of Private Foundation or
Section 4947(a)(1) Trust Treated as Private Foundation, along with all
other related forms, schedules, and statements that are required to be
attached to the Form 990, Form 990-EZ, or Form 990-PF, and all members
of the Form 990 series of returns, including amended and superseding
returns. A Form 4720 filed by a private foundation is a form required to
be filed under section 6033.
(d) Applicability date. The rules of this section apply to any
returns under section 6033 required to be filed during calendar years
beginning after February 23, 2023.
[T.D. 9972, 88 FR 11775, Feb. 23, 2023]
Sec. 301.6033-5 Disclosure by tax-exempt entities that
are parties to certain reportable transactions.
(a) In general. For provisions relating to the requirement of the
disclosure by a tax-exempt entity that it is a party to certain
reportable transactions, see Sec. 1.6033-5 of this chapter (Income Tax
Regulations).
(b) Effective date/applicability date. This section applies with
respect to transactions entered into by a tax-exempt entity after May
17, 2006.
[T.D. 9492, 75 FR 38710, July 6, 2010]
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. 301.6036-1 Notice required of executor or of receiver
or other like fiduciary.
(a) Receivers and other like fiduciaries--(1) Exemption for
bankruptcy proceedings. (i) A bankruptcy trustee, debtor in possession
or other like fiduciary in a bankruptcy proceeding is not required by
this section to give notice of appointment, qualification or
authorization to act to the Secretary or his delegate. (However, see the
notice requirements under the Bankruptcy Rules.)
(ii) Paragraph (a)(1)(i) of this section is effective for
appointments, qualifications and authorizations to act made on or after
January 29, 1988. For appointments, qualifications and authorizations to
act made before the foregoing date, 26 CFR 301.6036-1 (a)(1) and (4)(i)
(revised as of April 1, 1986) apply.
(2) Proceedings other than bankruptcy. A receiver in a receivership
proceeding or a similar fiduciary in any proceeding (including a
fiduciary in aid of foreclosure), designated by order of any court of
the United States or of any State or Territory or of the District of
Columbia as in control of all or substantially all the assets of a
debtor or other party to such proceeding shall, on, or within 10 days
of, the date of his appointment or authorization to act, give notice
thereof in writing to the district director for the internal revenue
district in which the debtor, or such other party, is or was required to
make returns. Moreover, any fiduciary in aid of foreclosure not
appointed by order of any such court, if he takes
[[Page 47]]
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 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.
[[Page 48]]
(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. 301.6037-2 Required use of electronic form for
returns of electing small business corporation.
(a) Returns of electing small business corporation required
electronically. (1) An electing small business corporation required to
file an electing small business return on Form 1120-S, U.S. Income Tax
Return for an S Corporation, under Sec. 1.6037-1 of this chapter must
file its Form 1120-S electronically if the small business corporation is
required by the Internal Revenue Code and regulations to file at least
10 returns during the calendar year.
(2) The Commissioner may direct the type of electronic filing and
may also exempt certain returns from the electronic requirements of this
section through revenue procedures, publications, forms, instructions,
or other guidance, including postings on the IRS.gov website. Returns
filed electronically must be made in accordance with the applicable
revenue procedures, publications, forms, instructions, or other
guidance.
(b) Exclusions from electronic-filing requirements--(1) Waivers. The
Commissioner may grant waivers of the requirements of this section in
cases of undue hardship. One principal factor in determining hardship
will be the amount, if any, by which the cost of filing the return
electronically in accordance with this section exceeds the cost of
filing the return on paper. A request for a waiver must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website. The waiver request will specify the type of filing (that is, a
return required under section 6037) and the period to which it applies.
(2) Exemptions. The Commissioner may provide exemptions from the
requirements of this section to promote effective and efficient tax
administration. An exemption will be allowed for filers for whom using
the technology required to file in electronic form conflicts with their
religious beliefs. A submission claiming an exemption must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website.
(3) Additional Exclusion. If the IRS's systems do not support
electronic filing, taxpayers will not be required to file
electronically.
(c) Failure to file. If an electing small business corporation fails
to file a return on magnetic media when required to do so by this
section, the corporation is deemed to have failed to file the return.
(See section 6651 for the addition to tax for failure to file a return.)
In determining whether there is reasonable cause for failure to file the
return, Sec. 301.6651-1(c) and rules similar to the rules in Sec.
301.6724-1(c)(3) (undue economic hardship related to filing information
returns on magnetic media) will apply.
(d) Meaning of terms. The following definitions apply for purposes
of this section:
(1) Magnetic media or electronic form. The terms magnetic media or
electronic form mean any media or form permitted under applicable
regulations, revenue procedures, or publications. These generally
include electronic filing, as well as magnetic tape, tape cartridge,
diskette, and other media specifically permitted under the applicable
regulations, procedures, publications, forms, instructions, or other
guidance.
(2) Corporation. The term corporation means a corporation as defined
in section 7701(a)(3).
[[Page 49]]
(3) Electing small business corporation return. The term electing
small business corporation return means a Form 1120S, ``U.S. Income Tax
Return for an S Corporation,'' along with all other related forms,
schedules, and statements that are required to be attached to the Form
1120S, and all members of the Form 1120S series of returns, including
amended and superseding returns.
(4) Electing small business corporation. The term electing small
business corporation means an S corporation as defined in section
1361(a)(1).
(5) Calculating the number of returns. For purposes of this section,
a corporation is required to file at least 10 returns if, during the
calendar year ending with or within the corporation's taxable year, the
corporation is required to file at least 10 returns of any type,
including income tax returns, employment tax returns, excise tax
returns, and information returns (for example, Forms W-2, Forms 1099,
but not including schedules required to be attached to an S corporation
return). In the case of a short-period return, a corporation is required
to file at least 10 returns if, during the calendar year in which the
corporation's short taxable year ends, the corporation is required to
file at least 10 returns of any type, including information returns (for
example, Forms W-2, Forms 1099, but not including schedules required to
be attached to an S corporation return), income tax returns, employment
tax returns, and excise tax returns.
(e) Example. The following example illustrates the provisions of
this section. In the example, the corporation is a calendar-year
taxpayer.
(1) In 2023, Corporation S, an electing small business corporation,
is required to file one 2022 Form 1120-S, U.S. Income Tax Return for an
S Corporation, two Forms W-2, Wage and Tax Statement, two Forms 1099-
DIV, Dividends and Distributions, one Form 940, Employer's Annual
Federal Unemployment (FUTA) Tax Return, and four Forms 941, Employer's
Quarterly Federal Tax Return. Because S is required to file 10 returns
during the calendar year 2023, S is required to file its 2023 Form 1120-
S electronically.
(2) [Reserved]
(f) Applicability date. The rules of this section apply to electing
small business corporation returns required to be filed during calendar
years beginning after December 31, 2023.
[T.D. 9363, 72 FR 63812, Nov. 13, 2007, as amended by T.D. 9972, 88 FR
11775, Feb. 23, 2023]
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 Sec. Sec.
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 Sec. Sec. 1.6039-1 and
1.6039-2 of this chapter (Income Tax Regulations).
[T.D. 7275, 38 FR 11346, May 7, 1973]
Sec. 301.6039E-1 Information reporting by passport applicants.
(a) In general. Every individual who applies for a U.S. passport or
the renewal of a passport (passport applicant), other than a passport
for use in diplomatic, military, or other official U.S. government
business, shall include with his or her passport application the
information described in paragraph (b)(1) of this section in the time
and manner described in paragraph (b)(2) of this section.
(b) Required information--(1) In general. The information required
under paragraph (a) of this section shall include the following
information:
(i) The passport applicant's full name and, if applicable, previous
name;
(ii) The passport applicant's permanent address and, if different,
mailing address;
(iii) The passport applicant's taxpayer identifying number (TIN), if
such a number has been issued to the passport applicant. A TIN means the
individual's social security number (SSN) issued by the Social Security
Administration. A passport applicant who does not have an SSN must enter
zeros in
[[Page 50]]
the appropriate space on the passport application; and
(iv) The passport applicant's date of birth.
(2) Time and manner for furnishing information. A passport applicant
must provide the information required by this section with his or her
passport application, whether by personal appearance or mail, to the
Department of State (including United States Embassies and Consular
posts abroad).
(c) Penalties--(1) In general. If the information required by
paragraph (b)(1) of this section is incomplete or incorrect, or the
information is not filed in the time and manner described in paragraph
(b)(2) of this section, then the passport applicant may be subject to a
penalty equal to $500 per application. Before assessing a penalty under
this section, the IRS will provide to the passport applicant written
notice of the potential assessment of the $500 penalty, requesting the
information being sought, and offering the applicant an opportunity to
explain why the information was not provided with the passport
application. A passport applicant has 60 days from the date of the
notice of the potential assessment of the penalty (90 days from such
date if the notice is addressed to an applicant outside the United
States) to respond to the notice. If the passport applicant demonstrates
to the satisfaction of the Commissioner (or the Commissioner's delegate)
that the failure is due to reasonable cause and not due to willful
neglect, after considering all the surrounding circumstances, then the
IRS will not assess the penalty.
(2) Example. The following example illustrates the provisions of
paragraph (c) of this section.
Example. C, a citizen of the United States, makes an error in
supplying information on his passport application. Based on the nature
of the error and C's timely response to correct the error after being
contacted by the IRS, the Commissioner concludes that the mistake is due
to reasonable cause and not due to willful neglect. Accordingly, no
penalty is assessed.
(d) Effective/applicability date. This section applies to passport
applications submitted after July 18, 2014.
[T.D. 9679, 79 FR 41891, July 18, 2014]
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 Sec. Sec. 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
Sec. Sec. 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
Sec. Sec. 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 Sec. Sec. 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 Sec. Sec. 1.6046-1 to 1.6046-3, inclusive, of this
chapter. (Income Tax Regulations.)
[[Page 51]]
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. 301.6049-1 Returns regarding payments of interest.
For provisions relating to the requirement of returns regarding
payments of interest, see Sec. Sec. 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 Sec. Sec. 1.6052-1 and 1.6052-2 of this
chapter (income tax regulations).
[T.D. 7275, 38 FR 11346, May 7, 1973]
Sec. 301.6056-1 Rules relating to reporting by applicable
large employers on health insurance coverage offered under
employer-sponsored plans.
(a) In general. Section 6056 requires an applicable large employer
subject to the requirements of section 4980H to report certain health
insurance coverage information to the Internal Revenue Service, and to
furnish certain related employee statements to its full-time employees.
Paragraph (b) of this section contains definitions for purposes of this
section. Paragraph (c) of this section prescribes general rules for
filing the required information with the IRS and furnishing the required
employee statements to employees. Paragraphs (d) and (e) of this section
describe the information required to be reported on a section 6056
information return and the time and manner for filing. Paragraph (f) of
this section provides information about the statement required to be
furnished to a full-time employee. Paragraph (g) of this section
prescribes the time and manner of furnishing the statement, including
extensions of time to furnish, to a full-time employee. Paragraph (h)
addresses corrections of returns. Paragraph (i) of this section
describes the information return penalties applicable to section 6056
returns. Paragraph (j) of this section describes alternative reporting
methods available to certain applicable large employers with certain
employees. Paragraph (k) of this section describes certain special rules
applicable to applicable large employers that are governmental units.
(b) Definitions--(1) In general. The definitions in this paragraph
(b) apply for purposes of this section.
(2) Applicable large employer. The term applicable large employer
has the same meaning as in section 4980H(c)(2) and Sec. 54.4980H-
1(a)(4) of this chapter.
(3) Applicable large employer member. The term applicable large
employer member has the same meaning as in Sec. 54.4980H-1(a)(5) of
this chapter.
[[Page 52]]
(4) Dependent. The term dependent has the same meaning as in Sec.
54.4980H-1(a)(11) of this chapter.
(5) Eligible employer-sponsored plan. The term eligible employer-
sponsored plan has the same meaning as in section 5000A(f)(2) and Sec.
1.5000A-2(c)(1) of this chapter.
(6) Full-time employee. The term full-time employee has the same
meaning as in section 4980H and Sec. 54.5980H-1(a)(21) of this chapter,
as applied to the determination and calculation of liability under
section 4980H(a) and (b) with respect to any individual employee, and
not as applied to the determination of status as an applicable large
employer, if different.
(7) Governmental unit. The term governmental unit refers to the
government of the United States, any State or political subdivision
thereof, or any Indian tribal government (as defined in section
7701(a)(40)) or subdivision of an Indian tribal government (as defined
in section 7871(d)).
(8) Agency or instrumentality of a governmental unit. [Reserved]
(9) Minimum essential coverage. The term minimum essential coverage
has the same meaning as in section 5000A(f) and the regulations issued
under that section.
(10) Minimum value. The term minimum value has the same meaning as
in section 36B and any applicable regulations.
(11) Person. The term person has the same meaning as in section
7701(a)(1) and applicable regulations.
(c) Content and timing of reporting by applicable large employer
members--(1) In general. Each applicable large employer member required
to make a return and furnish a related statement to its full-time
employees under section 6056 for a calendar year must make a return and
furnish the related statement using such form(s) as may be prescribed by
the Internal Revenue Service. An applicable large employer member will
satisfy its reporting requirements under section 6056 if it files with
the Internal Revenue Service a return for each full-time employee using
Form 1095-C or another form the IRS designates, and a transmittal form
using Form 1094-C or another form the IRS designates, as prescribed in
this section and in the instructions to the forms. Each Form 1095-C and
the transmittal Form 1094-C will together constitute an information
return to be filed with the Internal Revenue Service.
(2) Reporting facilitated by third parties. A separate section 6056
information return must be filed for each applicable large employer
member. If more than one section 6056 information return is being filed
for an applicable large employer member, there must be one authoritative
section 6056 transmittal (Form 1094-C) reporting aggregate employer-
level data for all full-time employees of the applicable large employer
member, in accordance with forms and instructions. Additionally, there
must be only one section 6056 employee statement (Form 1095-C) for each
full-time employee with respect to that full-time employee's employment
with the applicable large employer member, so that all required
information for a particular full-time employee of the applicable large
employer member is reflected on a single Form 1095-C.
(d) Information required to be reported to the Internal Revenue
Service--(1) In general. Except as provided in paragraph (j) of this
section (relating to alternative reporting methods for eligible
applicable large employer members), every applicable large employer
member must make a section 6056 information return with respect to each
full-time employee. Each section 6056 information return must show--
(i) The name, address, and employer identification number of the
applicable large employer member,
(ii) The name and telephone number of the applicable large employer
member's contact person,
(iii) The calendar year for which the information is reported,
(iv) A certification as to whether the applicable large employer
member offered to its full-time employees (and their dependents) the
opportunity to enroll in minimum essential coverage under an eligible
employer-sponsored plan, by calendar month,
(v) The months during the calendar year for which minimum essential
coverage under the plan was available,
(vi) Each full-time employee's share of the lowest cost monthly
premium
[[Page 53]]
(self-only) for coverage providing minimum value offered to that full-
time employee under an eligible employer-sponsored plan, by calendar
month;
(vii) The number of full-time employees for each month during the
calendar year,
(viii) The name, address, and taxpayer identification number of each
full-time employee during the calendar year and the months, if any,
during which the employee was covered under the plan, and
(ix) Any other information specified in forms, instructions, or
published guidance, see Sec. Sec. 601.601(d) and 601.602 of this
chapter.
(2) Form of the return. A return required under this paragraph (d)
may be made on Forms 1094-C and 1095-C or other form(s) designated by
the Internal Revenue Service, or a substitute form. A substitute form
must include the information required to be reported on Forms 1094-C and
1095-C and must comply with applicable revenue procedures or other
published guidance relating to substitute statements. See Sec.
601.601(d)(2) of this chapter.
(e) Time and manner for filing return. An applicable large employer
member must file the return and transmittal form required under
paragraph (d)(2) of this section on or before February 28 (March 31 if
filed electronically) of the year succeeding the calendar year to which
it relates in accordance with any applicable guidance and the
instructions to the form. An applicable large employer member must file
the return and transmittal form at the address specified on the return
form or its instructions. For extensions of time for filing returns
under this section, see Sec. Sec. 1.6081-1 and 1.6081-8 of this
chapter. See Sec. 301.6011-2 for rules relating to electronic filing.
(f) Statements required to be furnished to full-time employees--(1)
In general. Except as provided in paragraph (j) of this section, every
applicable large employer member required to file a return under section
6056 must furnish to each of its full-time employees identified on the
return a written statement showing--
(i) The name, address and employer identification number of the
applicable large employer member, and
(ii) The information required to be shown on the section 6056 return
with respect to the full-time employee.
(2) Form of the statement. A statement required under this paragraph
(f) may be made either by furnishing to the full-time employee a copy of
Form 1095-C or another form the IRS designates as prescribed in this
section and in the instructions to such forms, or a substitute
statement. A substitute statement must include the information required
to be shown on the return filed with the IRS and must comply with
requirements in published guidance (see Sec. 601.601(d)(2) of this
chapter) relating to substitute statements. An IRS truncated taxpayer
identification number may be used as the identifying number for an
individual in lieu of the identifying number appearing on the
corresponding information return filed with the IRS.
(g) Time and manner for furnishing statements--(1) Time for
furnishing--Except as otherwise provided in this paragraph (g)(1), each
statement required by this section for a calendar year must be furnished
to a full-time employee on or before January 31 of the year succeeding
the calendar year in accordance with applicable Internal Revenue Service
procedures and instructions. Applicable large employers are granted an
automatic, 30-day extension of time in which to furnish these
statements.
(2) Manner of furnishing. If mailed, the statement must be sent to
the full-time employee's last known permanent address or, if no
permanent address is known, to the employee's temporary address. For
purposes of this paragraph (g), an applicable large employer member's
first class mailing to the last known permanent address, or if no
permanent address is known, the temporary address, discharges the
requirement to furnish the statement. An applicable large employer
member may furnish the statement electronically in accordance with Sec.
301.6056-2.
(h) Correction of returns. See Sec. 301.6056-1(i)(2).
(i) Penalties--(1) In general. For provisions relating to the
penalty for failure to file timely a correct information return required
under section 6056, see section 6721 and the regulations under
[[Page 54]]
that section. For provisions relating to the penalty for failure to
furnish timely a correct statement to full-time employees required under
section 6056, see section 6722 and the regulations under that section.
See section 6724 and the regulations under that section for rules
relating to the waiver of penalties if a failure to file timely or
accurately is due to reasonable cause and is not due to willful neglect.
(2) Application of section 6721 and 6722 penalties to section 6056
reporting. For purposes of section 6056 reporting, if the information
reported on a return (including a transmittal) or a statement required
by this section is incomplete or incorrect as a result of a change in
circumstances (such as a retroactive change in coverage), a failure to
timely file or furnish a corrected document is a failure to file or
furnish a correct return or statement under sections 6721 and 6722.
(j) Alternative reporting methods for eligible applicable large
employer members. In lieu of the general reporting method described in
paragraph (d) of this section, eligible applicable large employer
members may use the following alternative reporting methods described in
this paragraph (j).
(1) Certification of qualifying offer. An applicable large employer
member is an eligible applicable large employer member and is treated as
meeting its reporting obligation under section 6056 if:
(i) The applicable large employer member certifies on the section
6056 transmittal form, in accordance with the form and the instructions
to the form, that it made a qualifying offer. A qualifying offer is an
offer to one or more of its full-time employees for all months during
the year for which the employee was a full-time employee and which are
not within a limited nonassessment period (as defined in Sec. 54.4980H-
1(a)(26) of this chapter), of minimum essential coverage providing
minimum value at an employee cost for employee-only coverage not
exceeding 9.5 percent of the mainland single federal poverty line, and
that includes an offer of minimum essential coverage to the employees'
spouses and dependents. For this purpose, the applicable federal poverty
line is the federal poverty line as defined in Sec. 54.4980H-1(a)(19)
of this chapter, as calculated and applied to the 48 contiguous states
and the District of Columbia;
(ii) The applicable large employer member provides on the Form 1095-
C or other form as designated by the IRS, in accordance with the form
and the instructions to the form, the information with respect to each
full-time employee to whom a qualifying offer, as defined in paragraph
(j)(1)(i) of this section, is made for all twelve months of the
applicable calendar year;
(iii) The applicable large employer member provides a statement to
each full-time employee to whom a qualifying offer (as defined in
paragraph (j)(1)(i) of this section) was made for all twelve months of
the applicable calendar year, in such form and manner as prescribed by
the Secretary, or a copy of the Form 1095-C filed with the IRS with
respect to that full-time employee; and
(D) The applicable large employer member files section 6056 returns
and furnishes section 6056 employee statements with respect to all other
full-time employees under the general reporting method described in
paragraph (d) of this section, in accordance with forms and
instructions.
(2) Option to report without separate identification of full-time
employees if certain conditions related to offers of coverage are
satisfied (98 percent offers). An applicable large employer member that
otherwise meets its reporting obligation under section 6056 is not
required to identify on its section 6056 return whether a particular
employee is a full-time employee for one or more calendar months of the
reporting year or report the total number of its full-time employees for
the reporting year, if it certifies that it offered minimum essential
coverage providing minimum value that was affordable under section 4980H
to at least 98 percent of the employees (and their dependents) with
respect to whom it reports for purposes of section 6056 in accordance
with paragraph (d) of this section (regardless of whether the employee
is a full-time employee for purposes of section 4980H for a calendar
month during the year).
[[Page 55]]
(k) Special rules for governmental units--(1) Person appropriately
designated. In the case of any applicable large employer member that is
a governmental unit or any agency or instrumentality thereof, the person
or persons appropriately designated under section 6056(e) for purposes
of the filing and furnishing requirements of section 6056 must be part
of or related to the same governmental unit as the applicable large
employer member. The applicable large employer member must make (or
revoke) the designation before the earlier of the deadline for filing
the returns or furnishing the statements required by this section. A
person that has been appropriately designated under section 6056(e) must
file a separate section 6056 return and transmittal for each applicable
large employer member for which the person is reporting. The person
appropriately designated under section 6056(e) assumes responsibility
for the section 6056 requirements on behalf of the applicable large
employer member for which the person is designated. Notwithstanding the
designation, a separate section 6056 information return must be filed
for each applicable large employer member that is a governmental unit.
If more than one section 6056 information return is being filed for an
applicable large employer member, there must be one authoritative
section 6056 transmittal (Form 1094-C) reporting aggregate employer-
level data for all full-time employees of the applicable large employer
member, in accordance with forms and instructions. In addition,
notwithstanding the designation, there must be only one section 6056
employee statement (Form 1095-C) for each full-time employee with
respect to that full-time employee's employment with the applicable
large employer member, so that all required information for a particular
full-time employee of the applicable large employer member is reflected
on a single Form 1095-C.
(2) Written designation. The designation under section 6056(e) must
be made in writing, must be signed by both the applicable large employer
member and the designated person, and must be effective under all
applicable laws. The designation must set forth the name, address, and
employer identification number of the designated person, and appoint
such person as the person responsible for reporting under section 6056
on behalf of the applicable large employer member. The designation must
contain information identifying the category of full-time employees
(which may be full-time employees eligible for a specified health plan,
or in a particular job category, as long as the specific employees
covered by the designation can be identified) for which the designated
person is responsible for reporting under section 6056 on behalf of the
applicable large employer member. If the designated person is
responsible for reporting under section 6056 for all full-time employees
of an applicable large employer member, the designation must so
indicate. The designation must contain language that the designated
person agrees and certifies that it is the appropriately designated
person under section 6056(e), and an acknowledgement that the designated
person is responsible for reporting under section 6056 on behalf of the
applicable large employer member and subject to the requirements of
section 6056, including for purposes of information reporting
requirements under sections 6721, 6722, and 6724. The designation must
also set forth the name and employer identification number of the
applicable large employer member, identifying the applicable large
employer member as the person subject to the requirements of section
4980H. An equivalent applicable statutory or regulatory designation
containing the language described in this paragraph (k)(2) will be
treated as a written designation for purposes of section 6056(e) and
this section. The designation will not be submitted to the IRS and
should be maintained under the normal record-retention rules under
section 6103.
(3) Application to alternative reporting methods. A person
designated under this paragraph (k) may use the alternative reporting
method identified in paragraph (j)(1) of this section for the full-time
employees for which it is reporting with respect to a particular
governmental unit if that particular governmental unit meets the
eligibility requirements with respect to
[[Page 56]]
those employees, but may use the alternative reporting method identified
in paragraph (j)(2) of this section only if the governmental unit on
whose behalf it is reporting would itself be eligible to use that
alternative reporting method.
(l) Additional guidance. The Commissioner may prescribe additional
guidance of general applicability, published in the Internal Revenue
Bulletin (see Sec. 601.601(d)(2) of this chapter) to provide additional
rules under section 6056, including rules permitting use of alternative
optional methods to meet reporting requirements.
(m) Applicability date. Except as otherwise provided in this
paragraph (m), this section applies for calendar years beginning after
December 31, 2014. Paragraph (g)(1) of this section applies for calendar
years beginning after December 31, 2021, but applicable large employers
may choose to apply paragraph (g)(1) of this section for calendar years
beginning after December 31, 2020. Except as otherwise provided in this
paragraph (m), paragraph (g)(1), as contained in 26 CFR part 1 edition
revised as of April 1, 2021, applies to calendar years ending after
December 31, 2014, and beginning before January 1, 2022.
[T.D. 9661, 79 FR 13247, Mar. 10, 2014, as amended by T.D. 9970, 87 FR
76576, Dec. 15, 2022; 88 FR 14259, Mar. 8, 2023]
Sec. 301.6056-2 Electronic furnishing of statements.
(a) Electronic furnishing of statements--(1) In general. An
applicable large employer member required by Sec. 301.6056-1 to furnish
a statement (furnisher) to a full-time employee (a recipient) as
required by section 6056 may furnish the section 6056 employee statement
(the statement) in an electronic format in lieu of a paper format,
provided that the furnisher meets the requirements of paragraphs (a)(2)
through (a)(6) of this section. An applicable large employer member who
meets the requirements of paragraphs (a)(2) through (6) of this section
is treated as furnishing the statement in a timely manner.
(2) Consent--(i) In general. The recipient must have affirmatively
consented to receive the statement in an electronic format. The
recipient may make the consent electronically in any manner that
reasonably demonstrates that the recipient can access the statement in
the electronic format in which it will be furnished to the recipient.
Alternatively, the recipient may make the consent in a paper document if
the recipient confirms the consent electronically.
(ii) Withdrawal of consent. The consent requirement of this
paragraph (a)(2) is not satisfied if the recipient withdraws the consent
and the withdrawal takes effect before the statement is furnished. The
furnisher may provide that a withdrawal of consent takes effect either
on the date it is received by the furnisher or on a subsequent date. The
furnisher may also provide that a recipient's request for a paper
statement will be treated as a withdrawal of the recipient's consent.
(iii) Change in hardware or software requirements. If a change in
the hardware or software required to access the statement creates a
material risk that the recipient will not be able to access the
statement, the furnisher must, prior to changing the hardware or
software, provide the recipient with a notice. The notice must describe
the revised hardware and software required to access the statement and
inform the recipient that a new consent to receive the statement in the
revised electronic format must be provided to the furnisher. After
implementing the revised hardware and software, the furnisher must
obtain from the recipient, in the manner described in paragraph
(a)(2)(i) of this section, a new consent or confirmation of consent to
receive the statement electronically.
(iv) Examples. The following examples illustrate the rules of this
paragraph (a)(2):
Example 1. Furnisher F sends Recipient R a letter stating that R may
consent to receive the statement required under section 6056
electronically on a Web site instead of in a paper format. The letter
contains instructions explaining how to consent to receive the statement
electronically by accessing the Web site, downloading the consent
document, completing the consent document and emailing the completed
consent back to F. The consent document posted on the Web site uses the
same electronic format that F will use for the electronically furnished
[[Page 57]]
statement. R reads the instructions and accesses the Web site, downloads
and completes the consent document, and emails the completed consent
back to F. R has consented to receive the statement required under
section 6056 electronically in the manner described in paragraph
(a)(2)(i) of this section.
Example 2. Furnisher F sends Recipient R an email stating that R may
consent to receive the statement required under section 6056
electronically instead of in a paper format. The email contains an
attachment instructing R how to consent to receive the statement
electronically. The email attachment uses the same electronic format
that F will use for the electronically furnished statement. R opens the
attachment, reads the instructions, and submits the consent in the
manner provided in the instructions. R has consented to receive the
statement required under section 6056 electronically in the manner
described in paragraph (a)(2)(i) of this section.
Example 3. Furnisher F posts a notice on its Web site stating that
Recipient R may receive the statement required under section 6056
electronically instead of in a paper format. The Web site contains
instructions on how R may access a secure Web page and consent to
receive the statement electronically. The consent via the secure Web
page uses the same electronic format that F will use for the
electronically furnished statement. R accesses the Web site and follows
the instructions for giving consent. R has consented to receive section
6056 statements electronically in the manner described in paragraph
(a)(2)(i) of this section.
(3) Required disclosures--(i) In general. Prior to, or at the time
of, a recipient's consent, a furnisher must provide to the recipient a
clear and conspicuous disclosure statement containing each of the
disclosures described in paragraphs (a)(3)(ii) through (viii) of this
section.
(ii) Paper statement. The furnisher must inform the recipient that
the statement will be furnished on paper if the recipient does not
consent to receive it electronically.
(iii) Scope and duration of consent. The furnisher must inform the
recipient of the scope and duration of the consent. For example, the
recipient must be informed whether the consent applies to each statement
required to be furnished after the consent is given until it is
withdrawn in the manner described in paragraph (a)(3)(v)(A) of this
section or only to the first statement required to be furnished
following the date of the consent.
(iv) Post-consent request for a paper statement. The furnisher must
inform the recipient of any procedure for obtaining a paper copy of the
recipient's statement after giving the consent described in paragraph
(a)(2)(i) of this section and whether a request for a paper statement
will be treated as a withdrawal of consent.
(v) Withdrawal of consent. The furnisher must inform the recipient
that--
(A) The recipient may withdraw a consent by writing (electronically
or on paper) to the person or department whose name, mailing address,
telephone number, and email address is provided in the disclosure
statement,
(B) The furnisher will confirm the withdrawal and the date on which
it takes effect in writing (either electronically or on paper), and
(C) A withdrawal of consent does not apply to a statement that was
furnished electronically in the manner described in this paragraph (a)
before the date on which the withdrawal of consent takes effect.
(vi) Notice of termination. The furnisher must inform the recipient
of the conditions under which a furnisher will cease furnishing
statements electronically to the recipient (for example, termination of
the recipient's employment with furnisher-employer).
(vii) Updating information. The furnisher must inform the recipient
of the procedures for updating the information needed to contact the
recipient. The furnisher must inform the recipient of any change in the
furnisher's contact information.
(viii) Hardware and software requirements. The furnisher must
provide the recipient with a description of the hardware and software
required to access, print, and retain the statement, and the date when
the statement will no longer be available on the Web site. The furnisher
must advice the recipient that the statement may be required to be
printed and attached to a Federal, State, or local income tax return.
(4) Format. The electronic version of the statement must contain all
required information and comply with
[[Page 58]]
applicable revenue procedures relating to substitute statements to
recipients.
(5) Notice--(i) In general. If the statement is furnished on a Web
site, the furnisher must notify the recipient that the statement is
posted on a Web site. The notice may be delivered by mail, electronic
mail, or in person. The notice must provide instructions on how to
access and print the statement. The notice must include the following
statement in capital letters, ``IMPORTANT TAX RETURN DOCUMENT
AVAILABLE.'' If the notice is provided by electronic mail, the foregoing
statement must be on the subject line of the electronic mail.
(ii) Undeliverable electronic address. If an electronic notice
described in paragraph (a)(5)(i) of this section is returned as
undeliverable, and the correct electronic address cannot be obtained
from the furnisher's records or from the recipient, then the furnisher
must furnish the notice by mail or in person within 30 days after the
electronic notice is returned.
(iii) Corrected statement. If the furnisher has corrected a
recipient's statement as directed in Sec. 301.6056-1(k) and the
original statement was furnished electronically, the furnisher must
furnish the corrected statement to the recipient electronically. If the
original statement was furnished through a Web site posting and the
furnisher has corrected the statement, the furnisher must notify the
recipient that it has posted the corrected statement on the Web site
within 30 days of such posting in the manner described in paragraph
(a)(5)(i) of this section. The corrected statement or the notice must be
furnished by mail or in person if--
(A) An electronic notice of the Web site posting of an original
statement or the corrected statement was returned as undeliverable, and
(B) The recipient has not provided a new email address.
(6) Access period. Statements furnished on a Web site must be
retained on the Web site through October 15 of the year following the
calendar year to which the statements relate (or the first business day
after October 15, if October 15 falls on a Saturday, Sunday, or legal
holiday). The furnisher must maintain access to corrected statements
that are posted on the Web site through October 15 of the year following
the calendar year to which the statements relate (or the first business
day after such October 15, if October 15 falls on a Saturday, Sunday, or
legal holiday) or the date 90 days after the corrected forms are posted,
whichever is later.
(7) Paper statements after withdrawal of consent. A furnisher must
furnish a paper statement if a recipient withdraws consent to receive a
statement electronically and the withdrawal takes effect before the
statement is furnished. A paper statement furnished after the statement
due date under this paragraph (a)(7) is timely if furnished within 30
days after the date the furnisher receives the withdrawal of consent.
(b) Effective/applicability date. This section applies for calendar
years beginning after December 31, 2014. Reporting entities will not be
subject to penalties under section 6722 with respect to the reporting
requirements for 2014 (for statements furnished in 2015).
[T.D. 9661, 79 FR 13250, Mar. 10, 2014]
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
[[Page 59]]
(b)(2) of this section. Paragraph (b) of this section also provides
other rules applicable only to plans to which more than one employer
contributes.
(2) Deferred vested retirement benefit. For purposes of this
section, a plan participant's deferred retirement benefit is considered
a vested benefit if it is vested under the terms of the plan at the
close of the plan year described in paragraph (a)(5) or (b)(4) of this
section (whichever is applicable) for which information relating to any
deferred vested retirement benefit of the participant must be filed. A
participant's deferred retirement benefit need not be a nonforfeitable
benefit within the meaning of section 411(a) for the filing requirements
described in this section to apply. Accordingly, information relating to
a participant's deferred vested retirement benefit must be filed as
required by this section notwithstanding that the benefit is subject to
forfeiture by reason of an event or condition occurring subsequent to
the close of the plan year described in paragraph (a)(5) or (b)(4) of
this section (whichever is applicable) for which information relating to
any deferred vested retirement benefit of the participant must be filed.
(3) Plans subject to filing requirement. The term ``employee
retirement benefit plan'' means a plan to which the vesting standards of
section 203 of part 2 of subtitle B of title I of the Employee
Retirement Income Security Act of 1974 (88 Stat. 854) apply for any day
in the plan year. (For purposes of this section, ``plan year'' means the
plan year as determined for purposes of the annual return required by
section 6058(a)). Accordingly, a plan need not be a qualified plan
within the meaning of section 401(a) to be subject to these filing
requirements. A plan to which more than one employer contributes must
file the report of deferred vested retirement benefits described in this
section, but see paragraph (b) of this section for special rules
applicable to such a plan. The filing requirements described in this
section and Sec. 301.6057-2 (relating to notification of change in plan
status) do not apply to a governmental or church plan described in
section 414 (d) or (e).
(4) Filing requirements. Information relating to the deferred vested
retirement benefit of a plan participant must be filed on schedule SSA
as an attachment to the Annual Return/Report of Employee Benefit Plan
(form 5500 series). Schedule SSA shall be filed on behalf of an employee
retirement benefit plan for each plan year for which information
relating to the deferred vested retirement benefit of a plan participant
is filed under paragraph (a)(5) or (b)(2) of this section. There shall
be filed on schedule SSA the name and social security number of the
participant, a description of the nature, form, and amount of the
deferred vested retirement benefit to which the participant is entitled,
and such other information as is required by section 6057(a) or schedule
SSA and the accompanying instructions. The form of the benefit reported
on schedule SSA shall be the normal form of benefit under the plan, or,
if the plan administrator (within the meaning of section 414(g))
considers it more appropriate, any other form of benefit.
(5) Time for reporting deferred vested retirement benefit--(i) In
general. In the 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.
[[Page 60]]
(ii) Exception. Notwithstanding subdivision (i), no information
relating to the deferred vested retirement benefit of a separated
participant is required to be filed on schedule SSA if, before the date
such schedule SSA is required to be filed (including any extension of
time for filing granted pursuant to section 6081), the participant (A)
is paid some or all of the deferred vested retirement benefit under the
plan, (B) returns to service covered by the plan, or (C) forfeits all of
the deferred vested retirement benefit under the plan.
(b) Plans to which more than one employer contributes--(1)
Application. Section 6057 and this section apply to a plan to which more
than one employer contributes with the modifications set forth in this
paragraph. For purposes of section 6057 and this section, whether or not
more than one employer contributes to a plan shall be determined by the
number of employers who are required to contribute to the plan. Thus,
for example, this paragraph applies to plans maintained by more than one
employer which are collectively bargained as described in section
413(a), multiple-employer plans described in section 413(c) and the
regulations thereunder, multiemployer plans described in section 414(f),
and plans adopted by more than one employer of certain controlled and
common control groups described in section 414 (b) and (c).
(2) Time for reporting deferred vested retirement benefit--(i) In
general. In the case of a plan to which more than one employer
contributes, information relating to the deferred vested retirement
benefit of a plan participant must be filed no later than on the
schedule SSA filed for the plan year within which the participant
completes the second of two consecutive one-year breaks in service (as
defined in the plan for vesting percentage purposes) in service
computation periods (as defined in the plan for vesting percentage
purposes) which begin after December 31, 1974. At the option of the plan
administrator, information relating to a participant's deferred vested
retirement benefit may be filed earlier (that is, on the schedule SSA
filed for the plan year in which the participant incurs the first one-
year break in service or, in the case of a separated participant, on the
schedule SSA filed for the plan year in which the participant separates
from service).
(ii) Special rules--For purposes of this subparagraph (1)--
(A) For the definition of the term ``1-year break in service'' in
the case of a plan which uses the elapsed time method described in
Department of Labor Regulations for crediting service for vesting
percentage purposes, see Sec. 1.411(a)-6(c)(2).
(B) In the case of a plan which does not define the term ``1-year
break in service'' for vesting percentage purposes, a plan participant
shall be deemed to incur a 1-year break in service under the plan in any
plan year within which the participant does not complete more than 500
hours of service covered by the plan.
(iii) Transitional rule. Notwithstanding subdivision (i), if the
second consecutive 1-year break in service described in subdivision (i)
is incurred in a plan year beginning before January 1, 1978, information
relating to the participant's deferred vested retirement benefit is not
required to be filed earlier than on the schedule SSA filed for 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
[[Page 61]]
incomplete as of the close of the plan year with respect to which the
plan administrator files information relating to the participant on
schedule SSA, the plan administrator may elect to file the information
required by schedule SSA based only upon these incomplete records. The
plan administrator is not required, for purposes of completing schedule
SSA, to compile from sources other than such records a complete record
of a participant's years of service covered by the plan. Similarly, if
retirement benefits under the plan are determined by taking into account
a participant's service with an employer which is not service covered by
the plan, but the plan administrator maintains records only with respect
to periods of service covered by the plan, the plan administrator may
complete schedule SSA taking into account only the participant's period
of service covered by the plan.
(ii) Inability to determine correct amount of participant's deferred
vested retirement benefit. If the amount of a participant's deferred
vested retirement benefit which is filed on schedule SSA is computed on
the basis of plan records maintained by the plan administrator which--
(A) Are incomplete with respect to the participant's service covered
by the plan (as described in subdivision (i)), or
(B) Fail to account for the participant's service not covered by the
plan which is relevant to a determination of the participant's deferred
vested retirement benefit under the plan (as described in subdivision
(i)), then the plan administrator must indicate on schedule SSA that the
amount of the deferred vested retirement benefit shown therein may be
other than that to which the participant is actually entitled because
the amount is based upon incomplete records.
(iii) Inability to determine whether participant vested in deferred
retirement benefit. Where, as described in subdivision (i), information
to be reported on schedule SSA is to be based upon records which are
incomplete with respect to a participant's service covered by the plan
or which fail to take into account relevant service not covered by the
plan, the plan administrator may be unable to determine whether or not
the participant is vested in any deferred retirement benefit. If, in
view of information provided either by the incomplete records or the
plan participant, there is a significant likelihood that the plan
participant is vested in a deferred retirement benefit under the plan,
information relating to the participant must be filed on schedule SSA
with the notation that the participant may be entitled to a deferred
vested retirement benefit under the plan, but information relating to
the amount of the benefit may be omitted. This subdivision (iii) does
not apply in a case in which it can be determined from plan records
maintained by the plan administrator that the participant is vested in a
deferred retirement benefit. Subdivision (ii), however, may apply in
such a case.
(c) Voluntary filing--(1) In general. The plan administrator of an
employee retirement benefit plan described in paragraph (a)(3) of this
section, or any other employee retirement benefit plan (including a
governmental or church plan), may at its option, file on schedule SSA
information relating to the deferred vested retirement benefit of any
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
[[Page 62]]
relating to the deferred vested retirement benefit of a plan participant
is required to be filed on schedule SSA if before the date such schedule
SSA is required to be filed, some of the deferred vested retirement
benefit is paid to the participant, and information relating to a
participant's deferred vested retirement benefit which was previously
filed on schedule SSA may be deleted if the participant is paid some of
the deferred vested retirement benefit. If payment of the deferred
vested retirement benefit ceases before all of the benefit to which the
participant is entitled is paid to the participant, information relating
to the deferred vested retirement benefit to which the participant
remains entitled shall be filed on the schedule SSA filed for the plan
year following the last plan year within which a portion of the benefit
is paid to the participant.
(2) Exception. Notwithstanding subparagraph (1) of this paragraph,
no information relating to the deferred vested retirement benefit to
which the participant remains entitled is required to be filed on
schedule SSA if, before the date such schedule SSA is required to be
filed (including any extension of time for filing granted pursuant to
section 6081), the participant (i) returns to service covered by the
plan, (ii) accrues additional retirement benefits under the plan, or
(iii) forfeits the benefit under the plan.
(e) Individual statement to participant. The plan administrator of
an employee retirement benefit plan defined in paragraph (a)(3) of this
section must provide each participant with respect to whom information
is required to be filed on schedule SSA a statement describing the
deferred vested retirement benefit to which the participant is entitled.
The description provided the participant must include the information
filed with respect to the participant on schedule SSA. The statement is
to be delivered to the participant or forwarded to the participant's
last known address no later than the date on which any schedule SSA
reporting information with respect to the participant is required to be
filed (including any extension of time for filing granted pursuant to
section 6081).
(f) Penalties. For amounts imposed in the case of failure to file
the report of deferred vested retirement benefits required by section
6057(a) and paragraph (a) or (b) of this section, see section
6652(e)(1). For the penalty relating to a failure to provide the
participant the individual statement of deferred vested retirement
benefit required by section 6057(e) and paragraph (e) of this section,
see section 6690.
(g) Effective dates--(1) Plans to which only one employer
contributes. In the case of a plan to which only one employer
contributes, this section is effective for plan years beginning after
December 31, 1975, and with respect to a participant who separates from
service covered by the plan in plan years beginning after that date.
(2) Plans to which more than one employer contributes. In the case
of a plan to which more than one employer contributes, this section is
effective for plan years beginning after December 31, 1977, and with
respect to a participant who completes two consecutive 1-year breaks in
service under the plan in service computation periods beginning after
December 31, 1974.
[T.D. 7561, 43 FR 38004, Aug. 25, 1978]
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
[[Page 63]]
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]
Sec. 301.6057-3 Required use of electronic form for filing
requirements relating to deferred vested retirement benefit.
(a) Electronic-filing requirements under section 6057. A
registration statement required under section 6057(a) or a notification
required under section 6057(b) with respect to an employee benefit plan
must be filed electronically if the filer is required by the Internal
Revenue Code or regulations to file at least 10 returns during the
calendar year that includes the first day of the plan year. The
Commissioner may direct the type of electronic filing and may also
exempt certain returns from the electronic requirements of this section
through revenue procedures, publications, forms, instructions, or other
guidance, including postings on the IRS.gov website. Returns filed
electronically must be made in accordance with applicable revenue
procedures, publications, forms, instructions, or other guidance.
(b) Exclusions from electronic-filing requirements--(1) Waivers. The
Commissioner may grant waivers of the requirements of this section in
cases of undue hardship. One principal factor in determining hardship
will be the amount, if any, by which the cost of filing the return
electronically in accordance with this section exceeds the cost of
filing the return on paper. A request for a waiver must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website. The waiver request will specify the type of filing (that is, a
registration statement or notification under section 6057) and the
period to which it applies.
(2) Exemptions. The Commissioner may provide exemptions from the
requirements of this section to promote effective and efficient tax
administration. A submission claiming an exemption must be made in
accordance with applicable IRS revenue procedures, publications, forms,
instructions, or other guidance, including postings to the IRS.gov
website.
(3) Additional Exclusion. If the IRS's systems do not support
electronic filing, taxpayers will not be required to file
electronically.
(c) Failure to file. If a filer required to file a registration
statement or other notification under section 6057 fails to file the
statement or other notification on magnetic media when required to do so
by this section, the filer is deemed to have failed to file the
statement or other notification. See section 6652(d) for the amount
imposed for the failure to file a registration statement or other
notification required under section 6057. In determining whether there
is reasonable cause for the failure to file the registration statement
or notification under section 6057, Sec. 301.6652-3(b) and rules
similar to the rules in Sec. 301.6724-1(c)(3)(ii) (regarding undue
economic hardship related to filing information returns on magnetic
media) will apply.
(d) Meaning of terms. The following definitions apply for purposes
of this section.
(1) Magnetic media or electronic form. The terms magnetic media or
electronic form mean any media or form permitted under applicable
regulations, revenue procedures, or publications. These generally
include electronic filing, as well as magnetic tape, tape cartridge,
diskette, and other media specifically permitted under the applicable
regulations, procedures, publications, forms, instructions, or other
guidance.
(2) Registration statement required under section 6057(a). The term
registration statement required under section 6057(a) means a Form 8955-
SSA (or its successor).
(3) Notification required under section 6057(b). The term
notification required under section 6057(b) means either a Form 8955-SSA
(or its successor) or a
[[Page 64]]
return in the Form 5500 series (or its successor).
(4) Calculating the number of returns--(i) In general. For purposes
of this section, a filer is required to file at least 10 returns if,
during the calendar year that includes the first day of the plan year,
the filer is required to file at least 10 returns of any type, including
information returns (for example, Forms W-2 and Forms 1099), income tax
returns, employment tax returns, and excise tax returns.
(ii) Definition of filer. For purposes of this section, the term
filer means the plan administrator within the meaning of section 414(g).
If the plan administrator within the meaning of section 414(g) is the
employer, the special rules in Sec. 1.6058-2(d)(3)(iii) will apply.
(e) Example. The following example illustrates the provisions of
paragraph (d)(4) of this section:
(1) Example. In 2024, P, the plan administrator of Plan B, is
required to file 12 returns (including Forms 1099-R, Distributions From
Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance
Contracts, etc.; Form 8955-SSA; Form 5500, Annual Return/Report of
Employee Benefit Plan; and Form 945, Annual Return of Withheld Federal
Income Tax). Plan B's plan year is the calendar year. Because P is
required to file at least 10 returns during the 2024 calendar year, P
must file the 2024 Form 8955-SSA for Plan B electronically.
(2) [Reserved]
(f) Applicability date. The rules of this section apply to
registration statements and other notifications required to be filed
under section 6057 for plan years that begin on or after January 1,
2024.
[T.D. 9695, 79 FR 58258, Sept. 29, 2014, as amended by T.D. 9972, 88 FR
11775, Feb. 23, 2023]
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.
[[Page 65]]
(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 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.
[[Page 66]]
(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. 301.6058-2 Required use of electronic form for filing
requirements relating to information required in connection
with certain plans of deferred
compensation.
(a) Electronic-filing requirements under section 6058. A return
required under section 6058 with respect to an employee benefit plan
must be filed electronically if the filer is required by the Internal
Revenue Code or regulations to file at least 10 returns during the
calendar year that includes the first day of the plan year. The
Commissioner may direct the type of electronic filing and may also
exempt certain returns from the electronic requirements of this section
through revenue procedures, publications, forms, instructions, or other
guidance, including postings on the IRS.gov website. Returns filed
electronically must be made in accordance with the applicable revenue
procedures, publications, forms, instructions, or other guidance.
(b) Undue hardship. The Commissioner may waive the requirements of
this section in cases of undue economic hardship. One principal factor
in determining hardship will be the amount, if any, by which the cost of
filing the return electronically in accordance with this section exceeds
the cost of filing the return on paper. A request for a waiver must be
made in accordance with applicable IRS revenue procedures, publications,
forms, instructions, or other guidance, including postings to the
IRS.gov website. The waiver request will specify the type of filing
(that is, a return required under section 6058) and the period to which
it applies.
(c) Failure to file. If a filer required to file a return under
section 6058 fails to file the return on magnetic media when required to
do so by this section, the filer is deemed to have failed to file the
return. See section 6652(e) for the amount imposed for the failure to
file a return required under section 6058. In determining whether there
is reasonable cause for failure to file the return, Sec. 301.6652-3(b)
and rules similar to the rules in Sec. 301.6724-1(c)(3)(ii) (regarding
undue economic hardship related to filing information returns on
magnetic media) will apply.
(d) Meaning of terms. The following definitions apply for purposes
of this section.
(1) Magnetic media or electronic form. The terms magnetic media or
electronic form mean any media or form permitted under applicable
regulations, revenue procedures, or publications. These generally
include electronic filing, as well as magnetic tape, tape cartridge,
diskette, and other media specifically permitted under the applicable
regulations, procedures, publications, forms, instructions, or other
guidance.
(2) Return required under section 6058. The term return required
under section 6058 means a return in the Form 5500 series (or its
successor).
(3) Calculating the number of returns--(i) In general. For purposes
of this section, a filer is required to file at least 10 returns if,
during the calendar year that includes the first day of the plan year,
the filer is required to file at least 10 returns of any type, including
information returns (for example, Forms W-2 and Forms 1099), income tax
returns, employment tax returns, and excise tax returns. See section
6011(e)(6), Application of numerical limitation to returns relating to
deferred compensation plans.
(ii) Definition of filer. For purposes of this section, the term
filer means the employer or employers maintaining
[[Page 67]]
the plan and the plan administrator within the meaning of section
414(g).
(iii) Special rules relating to calculating the number of returns.
For purposes of applying paragraph (d)(3)(ii) of this section, the
aggregation rules of section 414(b), (c), (m), and (o) will apply to a
filer that is or includes an employer. Thus, for example, a filer that
is a member of a controlled group of corporations within the meaning of
section 414(b) must file the Form 5500 series electronically if the
aggregate number of returns required to be filed by all members of the
controlled group of corporations is at least 10 returns.
(e) Example. The following example illustrates the provisions of
paragraph (d)(3) of this section:
(1) In 2024, Employer X (the plan sponsor and plan administrator of
Plan A) is required to file 12 returns. The sole shareholder of X and
his spouse are the only participants in Plan A. Employer X is required
to file the following: one Form 1120, U.S. Corporation Income Tax
Return; two Forms W-2, Wage and Tax Statement; one Form 940, Employer's
Annual Federal Unemployment (FUTA) Tax Return; four Forms 941,
Employer's Quarterly Federal Tax Return; one Form 945, Annual Return of
Withheld Federal Income Tax; and two Forms 1099-DIV, Dividends and
Distributions. Employer X is required to file one Form 5500-EZ. Plan A's
plan year is the calendar year. Because Employer X is required to file
at least 10 returns during the 2024 calendar year, the 2024 Form 5500-EZ
must be filed electronically.
(2) [Reserved]
(f) Applicability date. This section is applicable for returns
required to be filed under section 6058 for plan years that begin on or
after January 1, 2024.
[T.D. 9695, 79 FR 58259, Sept. 29, 2014, as amended by T.D. 9972, 88 FR
11776, Feb. 23, 2023]
Sec. 301.6059-1 Periodic report of actuary.
(a) In general. The actuarial report described in this section must
be filed on behalf on a defined benefit plan to which the minimum
funding standards of section 412 apply. The actuarial report must be
filed by the plan administrator (within the meaning of section 414(g))
on Schedule B as an attachment to the annual Return/Report of Employee
Benefit Plan (Form 5500 series). The instructions accompanying the Form
5500 series prescribe the place and date for filing Schedule B.
(b) Plan years for which report required. In the case of a plan in
existence on January 1, 1974, Schedule B must be filed for the first
plan year beginning after December 31, 1975, for which the minimum
funding standards apply to the plan, and for each plan year thereafter
for which the Schedule must be filed under the instructions accompanying
the Schedule and the Form 5500 series. In the case of a plan not in
existence on January 1, 1974, Schedule B must be filed for the first
plan year beginning after September 2, 1974, for which the minimum
funding standards apply to the plan, and for each plan year thereafter
for which the Schedule must be filed under the instructions accompanying
the Schedule and the Form 5500 series. For rules relating to when a plan
is considered to be in existence, see Sec. 1.410(a)-2(c). For purposes
of this section, ``plan year'' means the plan year as determined for
purposes of the minimum funding standards.
(c) Contents of report. The actuarial report of a plan filed on
Schedule B must contain--
(1) The date of the actuarial valuation applicable to the plan year
for which the report is filed (see section 412(c)(9) for rules relating
to the frequency with which an actuarial valuation of the plan is
required to be made),
(2) A description of the funding method and actuarial assumptions
used to determine costs under the plan,
(3) A certification of the contribution necessary to reduce the
accumulated funding deficiency (as defined in section 412(a)) to zero,
(4) A statement by the enrolled actuary signing the report that to
the best of the actuary's knowledge the report is complete and accurate,
(5) A statement by the enrolled actuary signing the report that in
the actuary's opinion the actuarial assumptions used are in the
aggregate (i) reasonably related to the experience of the plan and to
reasonable expectations,
[[Page 68]]
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
(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]
[[Page 69]]
Sec. 301.6059-2 Required use of electronic form for filing
requirements relating to periodic report of actuary.
(a) Electronic-filing requirements under section 6059. An actuarial
report required under section 6059 with respect to an employee benefit
plan must be filed electronically if the filer is required by the
Internal Revenue Code or regulations to file at least 10 returns during
the calendar year that includes the first day of the plan year. The
Commissioner may direct the type of electronic filing and may also
exempt certain returns from the electronic requirements of this section
through revenue procedures, publications, forms, instructions, or other
guidance, including postings on the IRS.gov website. Actuarial reports
filed electronically must be made in accordance with the applicable
revenue procedures, publications, forms, instructions, or other
guidance.
(b) Undue hardship. The Commissioner may waive the requirements of
this section in cases of undue economic hardship. One principal factor
in determining hardship will be the amount, if any, by which the cost of
filing the reports electronically in accordance with this section
exceeds the cost of filing the return on paper. A request for a waiver
must be made in accordance with applicable IRS revenue procedures,
publications, forms, instructions, or other guidance, including postings
to the IRS.gov website. The waiver request will specify the type of
filing (that is, an actuarial report required under 6059) and the period
to which it applies.
(c) Failure to file. If a filer required to file an actuarial report
under section 6059 fails to file the report on magnetic media when
required to do so by this section, the filer is deemed to have failed to
file the report. See section 6692 for the penalty for the failure to
file an actuarial report. In determining whether there is reasonable
cause for failure to file the report, Sec. 301.6692-1(c) and rules
similar to the rules in Sec. 301.6724-1(c)(3)(ii) (regarding undue
economic hardship related to filing information returns on magnetic
media) will apply.
(d) Meaning of terms. The following definitions apply for purposes
of this section.
(1) Magnetic media or electronic form. The terms magnetic media or
electronic form mean any media or form permitted under applicable
regulations, revenue procedures, or publications. These generally
include electronic filing, as well as magnetic tape, tape cartridge,
diskette, and other media specifically permitted under the applicable
regulations, procedures, publications, forms, instructions, or other
guidance.
(2) Actuarial report required under section 6059--(i) Single
employer plans. For a single employer plan, the term actuarial report
required under section 6059 means the Schedule SB, ``Single-Employer
Defined Benefit Plan Actuarial Information,'' of the Form 5500 series
(or its successor).
(ii) Multiemployer and certain money purchase plans. For
multiemployer and certain money purchase plans, the term actuarial
report required under section 6059 means the Schedule MB,
``Multiemployer Defined Benefit Plan and Certain Money Purchase Plan
Actuarial Information,'' of the Form 5500 series (or its successor).
(3) Calculating the number of returns--(i) In general. For purposes
of this section, a filer is required to file at least 10 returns if,
during the calendar year that includes the first day of the plan year,
the filer is required to file at least 10 returns of any type, including
information returns (or example, Forms W-2 and Forms 1099), income tax
returns, employment tax returns, and excise tax returns.
(ii) Definition of filer. For purposes of this section, the term
filer means the plan administrator within the meaning of section 414(g).
If the plan administrator within the meaning of section 414(g) is the
employer, the special rules in Sec. 1.6058-2(d)(3)(iii) will apply.
(e) Applicability date. This section is applicable for actuarial
reports required to be filed under section 6059 for plan years that
begin on or after January 1, 2024.
[T.D. 9695, 79 FR 58260, Sept. 29, 2014, as amended by T.D. 9972, 88 FR
11777, Feb. 23, 2023]
[[Page 70]]
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
Sec. Sec. 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 Sec. Sec. 1.6073-1 to 1.6073-4,
inclusive, of this chapter (Income Tax Regulations).
Sec. 301.6074-1 Time for filing declarations of estimated
income tax by corporations.
For provisions relating to time for filing declarations of estimated
income tax by corporations, see Sec. Sec. 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.
Sec. 301.6081-2 Automatic extension of time for filing an
information return with respect to certain foreign trusts.
(a) In general. A trust required to file a return on Form 3520-A,
``Annual Information Return of Foreign Trust with a U.S. Owner,'' will
be allowed an automatic 6-month extension of time to file the return
after the date prescribed for filing the return if the trust files an
application under this section in accordance with paragraph (b) of this
section.
[[Page 71]]
(b) Requirements. To satisfy this paragraph (b), a trust must--
(1) Submit a complete application on Form 7004, ``Application for
Automatic Extension of Time to File Certain Business Income Tax,
Information, and Other Returns,'' or in any other manner prescribed by
the Commissioner; and
(2) File the application on or before the date prescribed for filing
the return with the Internal Revenue Service office designated in the
application's instructions.
(c) Termination of automatic extension. The Commissioner may
terminate an automatic extension at any time by mailing to the trust a
notice of termination at least 10 days prior to the termination date
designated in such notice. The Commissioner must mail the notice of
termination to the address shown on the Form 7004 or to the trust's last
known address. For further guidance regarding the definition of last
known address, see Sec. 301.6212-2 of this chapter.
(d) Penalties. See section 6677 for failure to file information
returns with respect to certain foreign trusts.
(e) Effective/applicability dates. This section is applicable for
applications for an automatic extension of time to file an information
return with respect to certain foreign trusts listed in paragraph (a) of
this section filed after July 1, 2008.
[T.D. 9407, 73 FR 37371, July 1, 2008]
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 any person assigned the responsibility
to receive hand-carried returns in the local Internal Revenue Service
office that serves the legal residence or principal place of business of
such person, or, in the case of an estate, the local Internal Revenue
Service office serving 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 with an office of the Alcohol and Tobacco Tax and Trade
Bureau, by hand carrying as specified in regulations of the Alcohol and
Tobacco Tax and Trade Bureau, see, 27 CFR chapter I, subchapter F.
(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 any
person assigned the responsibility to receive hand-carried returns in
the local Internal Revenue Service office that serves 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 with an office of the Alcohol and Tobacco Tax and Trade Bureau, by
hand carrying as specified in regulations of the Alcohol and Tobacco Tax
and Trade Bureau, see, 27 CFR chapter I, subchapter F.
(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
any person assigned the responsibility to receive hand-carried returns
in the local Internal Revenue Service office 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
[[Page 72]]
the taxpayer. A return or document will not be considered to be hand
carried if it is sent to the Internal Revenue Service through the U.S.
Mail.
[T.D. 6950, 33 FR 5359, Apr. 4, 1968, as amended by T.D. 7008, 34 FR
3673, Mar. 1, 1969; T.D. 7012, 34 FR 7697, May 15, 1969; T.D. 7188, 37
FR 12794, June 29, 1972; T.D. 7238, 37 FR 28739, Dec. 29, 1972; T.D.
ATF-33, 41 FR 44038, Oct. 6, 1976; T.D. 7495, 42 FR 33727, July 1, 1977;
T.D. 9156, 69 FR 55747, Sept. 16, 2004]
Sec. 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]
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
[[Page 73]]
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, declaration, statement, or other document. They do
not apply to items which must be taken into account in making the
computations necessary to determine such amounts. For example, each item
of receipt must be taken into account at its exact amount, including
cents, in computing the amount of total receipts required to be reported
on an income tax return or supporting schedule. It is the amount of
total receipts, so computed, which is to be reported at the nearest
whole dollar on the return or supporting schedule.
(d) Effect on accounting method. Section 6102 and this section have
no effect on any authorized accounting method.
Sec. 301.6103(a)-1 Disclosures after December 31, 1976, by officers
and employees of Federal agencies of returns and return information
(including taxpayer
return information) disclosed to such officers and employees
by the Internal Revenue Service before January 1, 1977, for a
purpose not involving tax administration.
(a) General rule. Except as provided by paragraph (b) of this
section, a return or return information (including taxpayer return
information), as defined in section 6103(b) (1), (2), and (3) of the
Internal Revenue Code, disclosed by the Internal Revenue Service before
January 1, 1977, to an officer or employee of a Federal agency (as
defined in section 6103(b)(9)) for a purpose not involving tax
administration (as defined in section 6103(b)(4)) pursuant to the
authority of section 6103 (or any order of the President under section
6103 or rules and regulations thereunder prescribed by the Secretary or
his delegate and approved by the President) before amendment of such
section by section 1202 of the Tax Reform Act of 1976 (Pub. L. 94-455,
90 Stat. 1667) may be disclosed by, or on behalf of, such officer,
employee, or agency after December 31, 1976, for any purpose authorized
by such section (or such order or rules and regulations) before such
amendment.
(b) Exception. Notwithstanding the provisions of paragraph (a) of
this section, a return or return information (including taxpayer return
information) disclosed before January 1, 1977, by the Service to an
officer or employee of a Federal agency for a purpose unrelated to tax
administration as described in paragraph (a) may, after December 31,
1976, be disclosed by, or on behalf of, such agency, officer, or
employee in an administrative or judicial proceeding only if such
proceeding is one described in section 6103(i)(4) of
[[Page 74]]
the Code and if the requirements of section 6103(i)(4) have first been
met.
(Secs. 6103 and 7805 of the Internal Revenue Code of 1954 (90 Stat.
1667, 68A Stat. 917; 26 U.S.C. 6103 and 7805))
[T.D. 7723, 45 FR 65566, Oct. 3, 1980]
Sec. 301.6103(a)-2 Disclosures after December 31, 1976, by attorneys
of the Department of Justice and officers and employees of the
Office of the Chief
Counsel for the Internal Revenue Service of returns and return
information (including taxpayer return information) disclosed
to such attorneys, officers, and employees by the Service
before January 1, 1977, for a purpose involving tax
administration.
(a) General rule. Except as provided by paragraph (b) of this
section and subject to the requirements of this paragraph, a return or
return information (including taxpayer return information), as defined
in section 6103(b) (1), (2), and (3), of the Internal Revenue Code
disclosed by the Internal Revenue Service before January 1, 1977, to an
attorney of the Department of Justice (including a United States
attorney) or to an officer or employee of the Office of the Chief
Counsel for the Service for a purpose involving tax administration (as
defined in section 6103(b)(4)) pursuant to the authority of section 6103
(or any order of the President under section 6103 or rules and
regulations thereunder prescribed by the Secretary or his delegate and
approved by the President) before amendment of such section by section
1202 of the Tax Reform Act of 1976 (Pub. L. 94-455, 90 Stat. 1667) may
be disclosed by, or on behalf of, such attorney, officer, or employee
after December 31, 1976, for any purpose authorized by such section (or
such order or rules and regulations) before such amendment.
(b) Exception. Notwithstanding the provisions of paragraph (a) of
this section, a return or return information (including taxpayer return
information) disclosed before January 1, 1977, by the Service to an
attorney of the Department of Justice or to an officer or employee of
the Office of the Chief Counsel for the Service for a purpose related to
tax administration as described in paragraph (a) may, after December 31,
1976, be disclosed by, or on behalf of, such attorney, officer, or
employee in an administrative or judicial proceeding only if such
proceeding is one described in section 6103(h)(4) of the Code and if the
requirements of section 6103 (h)(4) have first been met.
(Secs. 6103 and 7805 of the Internal Revenue Code of 1954 (90 Stat.
1667, 68A Stat. 917; 26 U.S.C. 6103 and 7805))
[T.D. 7723, 45 FR 65567, Oct. 3, 1980]
Sec. 301.6103(c)-1 Disclosure of returns and return information
to designee of taxpayer.
(a) Overview. Subject to such requirements and conditions as the
Secretary may prescribe by regulation, section 6103(c) of the Internal
Revenue Code authorizes the Internal Revenue Service to disclose a
taxpayer's return or return information to such person or persons as the
taxpayer may designate in a request for or consent to such disclosure,
or to any other person at the taxpayer's request to the extent necessary
to comply with the taxpayer's request to such other person for
information or assistance. This regulation contains the requirements
that must be met before, and the conditions under which, the Internal
Revenue Service may make such disclosures. Paragraph (b) of this section
provides the requirements that are generally applicable to designate a
third party to receive the taxpayer's returns and return information.
Paragraph (c) of this section provides requirements under which the
Internal Revenue Service may disclose information in connection with a
taxpayer's written or nonwritten request for a third party to provide
information or assistance with regard to a tax matter, for example, a
Congressional inquiry. Paragraph (d) of this section provides the
parameters for disclosure consents connected with electronic return
filing programs and combined Federal-State filing. Finally, paragraph
(e) of this section provides definitions and general rules related to
requests for or consents to disclosure.
(b) Disclosure of returns and return information to person or
persons designated in a written request or consent--(1) General
requirements. Pursuant to section 6103(c) of the Internal Revenue Code,
the Internal Revenue Service (or an agent or contractor of the Internal
[[Page 75]]
Revenue Service) may disclose a taxpayer's return or return information
(in written or nonwritten form) to such person or persons as the
taxpayer may designate in a request for or consent to such disclosure. A
request for or consent to disclosure under this paragraph (b) must be in
the form of a separate written document pertaining solely to the
authorized disclosure. (For the meaning of separate written document,
see paragraph (e)(1) of this section.) The separate written document
must be signed (see paragraph (e)(2) of this section) and dated by the
taxpayer who filed the return or to whom the return information relates.
At the time it is signed and dated by the taxpayer, the written document
must also indicate--
(i) The taxpayer's taxpayer identity information described in
section 6103(b)(6);
(ii) The identity of the person or persons to whom the disclosure is
to be made;
(iii) The type of return (or specified portion of the return) or
return information (and the particular data) that is to be disclosed;
and
(iv) The taxable year or years covered by the return or return
information.
(2) Requirement that request or consent be received within one
hundred twenty days of when signed and dated. The disclosure of a return
or return information authorized by a written request for or written
consent to the disclosure shall not be made unless the request or
consent is received by the Internal Revenue Service (or an agent or
contractor of the Internal Revenue Service) within 120 days following
the date upon which the request or consent was signed and dated by the
taxpayer.
(c) Disclosure of returns and return information to designee of
taxpayer to comply with a taxpayer's request for information or
assistance. If a taxpayer makes a written or nonwritten request,
directly to another person or to the Internal Revenue Service, that such
other person (for example, a member of Congress, friend, or relative of
the taxpayer) provide information or assistance relating to the
taxpayer's return or to a transaction or other contact between the
taxpayer and the Internal Revenue Service, the Internal Revenue Service
(or an agent or contractor of the Internal Revenue Service or a Federal
government agency performing a Federal tax administration function) may
disclose returns or return information (in written or nonwritten form)
to such other person under the circumstances set forth in paragraphs
(c)(1) through (3) of this section.
(1) Written request for information or assistance. (i) The
taxpayer's request for information or assistance may be in the form of a
letter or other written document, which must be signed (see paragraph
(e)(2) of this section) and dated by the taxpayer. The taxpayer must
also indicate in the written request--
(A) The taxpayer's taxpayer identity information described in
section 6103(b)(6);
(B) The identity of the person or persons to whom disclosure is to
be made; and
(C) Sufficient facts underlying the request for information or
assistance to enable the Internal Revenue Service to determine the
nature and extent of the information or assistance requested and the
returns or return information to be disclosed in order to comply with
the taxpayer's request.
(ii) A person who receives a copy of a taxpayer's written request
for information or assistance but who is not the addressee of the
request, such as a member of Congress who is provided with a courtesy
copy of a taxpayer's letter to another member of Congress or to the
Internal Revenue Service, cannot receive returns or return information
under paragraph (c)(1) of this section.
(2) Nonwritten request or consent. (i) A request for information or
assistance may also be nonwritten. Disclosure of returns and return
information to a designee pursuant to a taxpayer's nonwritten request
will be made only after the Internal Revenue Service has--
(A) Obtained from the taxpayer sufficient facts underlying the
request for information or assistance to enable the Internal Revenue
Service to determine the nature and extent of the information or
assistance requested and the return or return information to be
disclosed in order to comply with the taxpayer's request;
[[Page 76]]
(B) Confirmed the identity of the taxpayer and the designee; and
(C) Confirmed the date, the nature, and the extent of the
information or assistance requested.
(ii) Examples of disclosures pursuant to nonwritten requests for
information or assistance under this paragraph (c)(2) include, but are
not limited to, disclosures to a friend, relative, or other person whom
the taxpayer brings to an interview or meeting with Internal Revenue
Service officials, and disclosures to a person whom the taxpayer wishes
to involve in a telephone conversation with Internal Revenue Service
officials.
(iii) As long as the requirements of this paragraph (c)(2) are met,
the taxpayer does not need to be present, either in person or as part of
a telephone conversation, for disclosures of returns and return
information to be made to the other person.
(3) Rules applicable to written and nonwritten requests for
information or assistance. A return or return information will be
disclosed to the taxpayer's designee as provided by this paragraph only
to the extent considered necessary by the Internal Revenue Service to
comply with the taxpayer's request or consent. Such disclosures shall
not be made unless the request or consent is received by the Internal
Revenue Service, its agent or contractor, or a Federal government agency
performing a Federal tax administration function in connection with a
request for advice or assistance relating to such function. This
paragraph (c) does not apply to disclosures to a taxpayer's
representative in connection with practice before the Internal Revenue
Service (as defined in Treasury Department Circular No. 230, 31 CFR part
10). For disclosures in these cases, see section 6103(e)(6) and
Sec. Sec. 601.501 through 601.508 of this chapter.
(d) Acknowledgments of electronically filed returns and other
documents; combined filing programs with State tax agencies. The
requirements of paragraphs (b) and (c) of this section do not apply to
this paragraph (d).
(1) Acknowledgment of, and notices regarding, electronically filed
returns and other documents. When a taxpayer files returns or other
documents or information with the Internal Revenue Service
electronically, the taxpayer may consent to the disclosure of return
information to the transmitter or other third party, such as the
taxpayer's financial institution, necessary to acknowledge that the
electronic transmission was received and either accepted or rejected by
the Internal Revenue Service, the reason for any rejection, and such
other information as the Internal Revenue Service determines is
necessary to the operation of the electronic filing program. The consent
must inform the taxpayer of the return information that will be
transmitted and to whom disclosure will be made.
(2) Combined return filing programs with State tax agencies. (i) A
taxpayer's participation in a combined return filing program between the
Internal Revenue Service and a State agency, body, or commission (State
agency) described in section 6103(d)(1) constitutes a consent to the
disclosure by the Internal Revenue Service, to the State agency, of
taxpayer identity information, signature, and items of common data
contained on the return. For purposes of this paragraph, common data
means information reflected on the Federal return required by State law
to be attached to or included on the State return. Instructions
accompanying the forms or published procedures involved in such program
must indicate that by participating in the program, the taxpayer is
consenting to the Internal Revenue Service's disclosure to the State
agency of the taxpayer identity information, signature, and items of
common data, and that such information will be treated by the State
agency as if it had been directly filed with the State agency. Such
instructions or procedures must also describe any verification that
takes place before the taxpayer identity information, signature and
common data is transmitted by the Internal Revenue Service to the State
agency.
(ii) No disclosures may be made under this paragraph (d)(2) unless
there are provisions of State law protecting the confidentiality of such
items of common data.
(e) Definitions and rules applicable to this section--(1) Separate
written document. (i) For the purposes of paragraph
[[Page 77]]
(b) of this section, separate written document means--
(A) Text appearing on one or more sheets of 8\1/2\ -inch by 11-inch
or larger paper, each of which pertains solely to the authorized
disclosure, so long as such sheet or sheets, taken together, contain all
the elements described in paragraph (b)(1) of this section;
(B) Text appearing on one or more computer screens, each of which
pertains solely to the authorized disclosure, so long as such screen or,
taken together, such screens--
(1) Contain all the elements described in paragraph (b)(1) of this
section,
(2) Can be signed (see paragraph (e)(2) of this section) and dated
by the taxpayer, and
(3) Can be reproduced, if necessary; or
(C) A consent on the record in an administrative or judicial
proceeding, or a transcript of such proceeding recording such consent,
containing the information required under paragraph (b)(1) of this
section.
(ii) A provision included in a taxpayer's application for a loan or
other benefit authorizing the grantor of the loan or other benefit to
obtain any financial information, including returns or return
information, from any source as the grantor may request for purposes of
verifying information supplied on the application, does not meet the
requirements of paragraph (b)(1) of this section because the provision
is not a separate written document relating solely to the disclosure of
returns and return information. In addition, the provision does not
contain the other information specified in paragraph (b)(1) of this
section.
(2) Method of signing. A request for or consent to disclosure may be
signed by any method of signing the Secretary has prescribed pursuant to
Sec. 301.6061-1(b) in forms, instructions, or other appropriate
guidance.
(3) Permissible designees and public forums. Permissible designees
under this section include individuals; trusts; estates; corporations;
partnerships; Federal, State, local and foreign government agencies or
subunits of such agencies; or the general public. When disclosures are
to be made in a public forum, such as in a courtroom or congressional
hearing, the request for or consent to disclosure must describe the
circumstances surrounding the public disclosure, e.g., congressional
hearing, judicial proceeding, media, and the date or dates of the
disclosure. When a designee is an individual, this section does not
authorize disclosures to other individuals associated with such
individual, such as employees of such individual or members of such
individual's staff.
(4) Authority to execute a request for or consent to disclosure. Any
person who may obtain returns under section 6103(e)(1) through (5),
except section 6103(e)(1)(D)(iii), may execute a request for or consent
to disclose a return or return information to third parties. For
taxpayers that are legal entities, such as corporations and municipal
bond issuers, any officer of the entity with authority under applicable
State law to legally bind the entity may execute a request for or
consent to disclosure. A person described in section 6103(e)(6) (a
taxpayer's representative or individual holding a power of attorney) may
not execute a request for or consent to disclosure unless the
designation of representation or power of attorney specifically
delegates such authority. A designee pursuant to this section does not
have authority to execute a request for or consent to disclosure
permitting the Internal Revenue Service to disclose returns or return
information to another person.
(5) No disclosure of return information if impairment. A disclosure
of return information shall not be made under this section if the
Internal Revenue Service determines that the disclosure would seriously
impair Federal tax administration (as defined in section 6103(b)(4) of
the Internal Revenue Code).
(f) Applicability date. This section is applicable on April 29,
2003, except that paragraph (b)(2) is applicable to section 6103(c)
authorizations signed on or after October 19, 2009.
(g) Effective date. This section is effective on April 29, 2003,
except that paragraphs (b)(2) and (f) are effective on May 7, 2013.
[T.D. 9054, 68 FR 22598, Apr. 29, 2003, as amended by T.D. 9618, 78 FR
26507, May 7, 2013]
[[Page 78]]
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 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
[[Page 79]]
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(h)(4)-1 Disclosure of returns and return
information in whistleblower administrative proceedings.
(a) In general. A whistleblower administrative proceeding (as
described in Sec. 301.7623-3) is an administrative proceeding
pertaining to tax administration within the meaning of section
6103(h)(4).
(b) Disclosures in whistleblower administrative proceedings.
Pursuant to section 6103(h)(4) and paragraph (a) of this section, the
Director, officers, and employees of the Whistleblower Office may
disclose returns and return information (as defined by section 6103(b))
to a whistleblower (or the whistleblower's legal representative, if any)
to the extent necessary to conduct a whistleblower administrative
proceeding (as described in Sec. 301.7623-3), including but not limited
to--
(1) By communicating a preliminary award recommendation or
preliminary denial letter to the whistleblower;
(2) By providing the whistleblower with an award report package;
(3) By conducting a meeting with the whistleblower to review
documents supporting the preliminary award recommendation; and
(4) By sending an award decision letter, award determination letter,
or award denial letter to the whistleblower.
(c) Effective/applicability date. This rule is effective on August
12, 2014. This rule applies to information submitted on or after August
12, 2014, and to claims for award under sections 7623(a) and 7623(b)
that are open as of August 12, 2014.
[T.D. 9687, 79 FR 47264, Aug. 12, 2014]
[[Page 80]]
Sec. 301.6103(i)-1 Disclosure of returns and return information
(including taxpayer return information) to and by officers and
employees of the Department of
Justice or another Federal agency for use in Federal
grand
jury proceeding, or preparation for proceeding or
investigation, involving enforcement of Federal criminal
statute not involving tax administration.
(a) Disclosure of returns and return information (including
taxpayer
return information) to officers and employees of the Department of
Justice or another Federal agency. Returns and return information
(including taxpayer return information), as defined in section
6103(b)(1), (2), and (3) of the Internal Revenue Code, shall, to the
extent provided by section 6103(i) (1), (2), and (3) and subject to the
requirements of section 6103(i) (1) and (2), be open to inspection by or
disclosure to officers and employees of the Department of Justice
(including United States attorneys) or of another Federal agency (as
defined in section 6103(b)(9)) personally and directly engaged in, and
for their necessary use in, any Federal grand jury proceeding, or
preparation for any administration or judicial proceeding (or their
necessary use in an investigation which may result in such a
proceeding), pertaining to enforcement of a specifically designated
Federal criminal statute not involving or related to tax administration
to which the United States or such agency is or may be a party.
(b) Disclosure of returns and return information (including taxpayer
return information) by officers and employees of the Department of
Justice or another Federal agency. (1) Returns and return information
(including taxpayer return information), as defined in section 6103(b)
(1), (2), and (3) of the Code, disclosed to officers and employees of
the Department of Justice or other Federal agency (as defined in section
6103(b)(9)) as provided by paragraph (a) of this section may be
disclosed by such officers and employees to other persons, including,
but not limited to, persons described in subparagraph (2) of this
paragraph, but only to the extent necessary in connection with a Federal
grand jury proceeding, or the proper preparation for a proceeding (or in
connection with an investigation which may result in such a proceeding),
described in paragraph (a). Such disclosures may include, but are not
limited to, disclosures where necessary--
(i) To properly obtain the services of persons having special
knowledge or technical skills (such as, but not limited to, handwriting
analysis, photographic development, sound recording enhancement, or
voice identification);
(ii) To properly interview, consult, depose, or interrogate or
otherwise obtain relevant information from, the taxpayer to whom such
return or return information relates (or such taxpayer's legal
representative) or any witness who may be called to give evidence in the
proceeding; or
(iii) To properly conduct negotiations concerning, or obtain
authorization for, disposition of the proceeding, in whole or in part,
or stipulations of fact in connection with the proceeding.
Disclosure of a return or return information to a person other than the
taxpayer to whom such return or return information relates or such
taxpayer's legal representative to properly accomplish any purpose or
activity described in this subparagraph should be made, however, only if
such purpose or activity cannot otherwise properly be accomplished
without making such disclosures.
(2) Among those persons to whom returns and return information may
be disclosed by officers and employees of the Department of Justice or
other Federal agency as provided by subparagraph (1) of this paragraph
are--
(i) Other officers and employees of the Department of Justice
(including an office, board, division, or bureau of such department,
such as the Federal Bureau of Investigation or the Drug Enforcement
Administration) or other Federal agency described in subparagraph (1),
such as clerical personnel (for example, secretaries, stenographers,
docket and file room clerks, and mail room employees) and supervisory
personnel (for example, in the case of the Department of Justice,
Section Chiefs, Deputy Assistant Attorneys General, Assistant Attorneys
General, the Deputy Attorney General, the
[[Page 81]]
Attorney General, and supervisory personnel of the Federal Bureau of
Investigation or the Drug Enforcement Administration);
(ii) Officers and employees of another Federal agency (as defined in
section 6103(b)(9)) working under the direction and control of such
officers and employees of the Department of Justice or other Federal
agency described in subparagraph (1); and
(iii) Court reporters.
(Secs. 6103 and 7805 of the Internal Revenue Code of 1954 (90 Stat.
1667, 68A Stat. 917; 26 U.S.C. 6103 and 7805))
[T.D. 7723, 45 FR 65568, Oct. 3, 1980]
Sec. 301.6103(j)(1)-1 Disclosures of return information
reflected on returns to officers and employees of the
Department of Commerce for certain statistical
purposes and related activities.
(a) General rule. Pursuant to the provisions of section 6103(j)(1)
of the Internal Revenue Code and subject to the requirements of
paragraph (d) of this section, officers or employees of the Internal
Revenue Service will disclose return information (as defined by section
6103(b)(2) but not including return information described in section
6103(o)(2)) reflected on returns to officers and employees of the
Department of Commerce to the extent, and for such purposes as may be,
provided by paragraphs (b) and (c) of this section. Further, in the case
of any disclosure of return information reflected on returns so provided
by paragraphs (b) and (c) of this section, the tax period or accounting
period to which such information relates will also be disclosed.
``Return information reflected on returns'' includes, but is not limited
to, information on returns, information derived from processing such
returns, and information derived from the Social Security Administration
and other sources for the purposes of establishing and maintaining
taxpayer information relating to returns.
(b) Disclosure of return information reflected on returns to
officers and employees of the Bureau of the Census. (1) Officers or
employees of the Internal Revenue Service will disclose the following
return information reflected on returns of individual taxpayers to
officers and employees of the Bureau of the Census for purposes of, but
only to the extent necessary in, conducting and preparing, as authorized
by chapter 5 of title 13, United States Code, intercensal estimates of
population and income for all geographic areas included in the
population estimates program and demographic statistics programs,
censuses, and related program evaluation:
(i) Taxpayer identity information (as defined in section 6103(b)(6)
of the Internal Revenue Code), validity code with respect to the
taxpayer identifying number (as described in section 6109), and taxpayer
identity information of spouse and dependents, if reported.
(ii) Location codes (including area/district office and campus/
service center codes).
(iii) Marital status.
(iv) Number and classification of reported exemptions.
(v) Wage and salary income.
(vi) Dividend income.
(vii) Interest income.
(viii) Gross rent and royalty income.
(ix) Total of--
(A) Wages, salaries, tips, etc.;
(B) Interest income;
(C) Dividend income;
(D) Alimony received;
(E) Business income;
(F) Pensions and annuities;
(G) Income from rents, royalties, partnerships, estates, trusts,
etc.;
(H) Farm income;
(I) Unemployment compensation; and
(J) Total Social Security benefits.
(x) Adjusted gross income.
(xi) Type of tax return filed.
(xii) Entity code.
(xiii) Code indicators for Form 1040, Form 1040 (Schedules A, C, D,
E, F, and SE), and Form 8814.
(xiv) Posting cycle date relative to filing.
(xv) Social Security benefits.
(xvi) Earned Income (as defined in section 32(c)(2)).
(xvii) Number of Earned Income Tax Credit-eligible qualifying
children.
(xviii) Electronic Filing System Indicator.
(xix) Return Processing Indicator.
(xx) Paid Preparer Code.
[[Page 82]]
(2) Officers or employees of the Internal Revenue Service will
disclose to officers and employees of the Bureau of the Census for
purposes of, but only to the extent necessary in, conducting, as
authorized by chapter 5 of title 13, United States Code, demographic,
economic, and agricultural statistics programs and censuses and related
program evaluation--
(i) From the business master files of the Internal Revenue Service--
the taxpayer name directory and entity records consisting of taxpayer
identity information (as defined in section 6103(b)(6)) with respect to
taxpayers engaged in a trade or business, the principal industrial
activity code, the filing requirement code, the employment code, the
physical location, the location codes (including area/district office
and campus/service center codes), and monthly corrections of, and
additions to, such entity records;
(ii) From Form SS-4--all information reflected on such form;
(iii) From an employment tax return--
(A) Taxpayer identifying number (as described in section 6109) of
the employer;
(B) Total compensation reported;
(C) Master file tax account code (MFT);
(D) Taxable period covered by such return;
(E) Employer code;
(F) Document locator number;
(G) Record code;
(H) Total number of individuals employed in the taxable period
covered by the return;
(I) Total taxable wages paid for purposes of chapter 21;
(J) Total taxable tip income reported for purposes of chapter 21;
(K) If a business has closed or stopped paying wages;
(L) Final date a business paid wages; and
(M) If a business is a seasonal employer and does not have to file a
return for every quarter of the year;
(iv) From Form 1040 (Schedule SE)--
(A) Taxpayer identifying number of self-employed individual;
(B) Business activities subject to the tax imposed by chapter 21;
(C) Net earnings from farming;
(D) Net earnings from nonfarming activities;
(E) Total net earnings from self-employment; and
(F) Taxable self-employment income for purposes of chapter 2;
(v) Total Social Security taxable earnings; and
(vi) Quarters of Social Security coverage.
(3) Officers or employees of the Internal Revenue Service will
disclose the following business-related return information reflected on
returns of taxpayers to officers and employees of the Bureau of the
Census for purposes of, but only to the extent necessary in, conducting
and preparing, as authorized by chapter 5 of title 13, United States
Code, demographic and economic statistics programs, censuses, and
surveys. (The ``returns of taxpayers'' include, but are not limited to:
Form 941; Form 990 series; Form 1040 series and Schedules C and SE; Form
1065 and all attending schedules and Form 8825; Form 1120 series and all
attending schedules and Form 8825; Form 851; Form 1096; and other
business returns, schedules and forms that the Internal Revenue Service
may issue.):
(i) Taxpayer identity information (as defined in section 6103(b)(6))
including parent corporation, shareholder, partner, and employer
identity information.
(ii) Gross income, profits, or receipts.
(iii) Returns and allowances.
(iv) Cost of labor, salaries, and wages.
(v) Total expenses or deductions, including totals of the following
components thereof:
(A) Repairs (and maintenance) expense;
(B) Rents (or lease) expense;
(C) Taxes and licenses expense;
(D) Interest expense, including mortgage or other interest;
(E) Depreciation expense;
(F) Depletion expense;
(G) Advertising expense;
(H) Pension and profit-sharing plans (retirement plans) expense;
(I) Employee benefit programs expense;
(J) Utilities expense;
(K) Supplies expense;
(L) Contract labor expense; and
[[Page 83]]
(M) Management (and investment advisory) fees.
(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) Principal industrial activity code, including the business
description.
(xviii) Consolidated return indicator.
(xix) Wages, tips, and other compensation.
(xx) Social Security wages.
(xxi) Deferred wages.
(xxii) Social Security tip income.
(xxiii) Total Social Security taxable earnings.
(xxiv) Gross distributions from employer-sponsored and individual
retirement plans from Form 1099-R.
(xxv) From Form 6765 (when filed with corporation income tax
returns)--
(A) Indicator that total qualified research expenses is greater than
zero, but less than $1 million; greater than or equal to $1 million, but
less than $3 million; or, greater than or equal to $3 million;
(B) Cycle posted; and
(C) Research tax credit amount to be carried over to a business
return, schedule, or form.
(xxvi) Total number of documents reported on Form 1096 transmitting
Forms 1099-MISC.
(xxvii) Total amount reported on Form 1096 transmitting Forms 1099-
MISC.
(xxviii) Type of REIT.
(xxix) From Form 1125-A-- purchases.
(xxx) From Form 1040, Schedule C--
(A) Purchases less cost of items withdrawn for personal use; and
(B) Materials and supplies.
(xxxi) Electronic filing system indicator.
(xxxii) Posting cycle date relative to filing.
(xxxiii) Dividends, including ordinary or qualified.
(xxxiv) From Form 1120S, Schedule K-1--ordinary business income
(loss).
(xxxv) From Form 1065, Schedule K-1--
(A) Publicly-traded partnership indicator;
(B) Partner's share of nonrecourse, qualified nonrecourse, and
recourse liabilities; and
(C) Ordinary business income (loss).
(4) Officers or employees of the Internal Revenue Service will
disclose return information reflected on returns of taxpayers contained
in the exempt organization master files of the Internal Revenue Service
to officers and employees of the Bureau of the Census for purposes of,
but only to the extent necessary in, conducting and preparing, as
authorized by chapter 5 of title 13, United States Code, economic
censuses. This return information reflected on returns of taxpayers
consists of taxpayer identity information (as defined in section
6103(b)(6)), activity codes, and filing requirement code, and monthly
corrections of, and additions to, such information.
(5) Subject to the requirements of paragraph (d) of this section and
Sec. 301.6103(p)(2)(B)-1, officers or employees of the Social Security
Administration to whom the following return information reflected on
returns has been disclosed as provided by section 6103(l)(1)(A) or
(l)(5) may disclose such information to officers and employees of the
Bureau of the Census for necessary purposes described in paragraph
(b)(2) or (3) of this section:
(i) From Form SS-4--all information reflected on such form.
(ii) From Form 1040 (Schedule SE)--
(A) Taxpayer identifying number of self-employed individual;
(B) Business activities subject to the tax imposed by chapter 21;
(C) Net earnings from farming;
(D) Net earnings from nonfarming activities;
(E) Total net earnings from self-employment; and
(F) Taxable self-employment income for purposes of chapter 2.
[[Page 84]]
(iii) From Form W-2, and related forms and schedules--
(A) Social Security number;
(B) Employer identification number;
(C) Wages, tips, and other compensation;
(D) Social Security wages; and
(E) Deferred wages.
(iv) Total Social Security taxable earnings.
(v) Quarters of Social Security coverage.
(6)(i) Officers or employees of the Internal Revenue Service will
disclose the following return information (but not including return
information described in section 6103(o)(2)) reflected on returns of
corporations with respect to the tax imposed by chapter 1 to officers
and employees of the Bureau of the Census for purposes of, but only to
the extent necessary in, developing and preparing, as authorized by law,
the Quarterly Financial Report:
(A) From the business master files of the Internal Revenue Service--
(1) Taxpayer identity information (as defined in section
6103(b)(6)), including parent corporation identity information;
(2) Document code;
(3) Location codes (including area/district office and campus/
service center codes);
(4) Consolidated return and final return indicators;
(5) Principal industrial activity code;
(6) Partial year indicator;
(7) Annual accounting period;
(8) Gross receipts less returns and allowances; and
(9) Total assets.
(B) From Form SS-4--
(1) Month and year in which such form was executed;
(2) Taxpayer identity information; and
(3) Principal industrial activity, geographic, firm size, and reason
for application codes.
(C) From Form 1120-REIT--
(1) Type of REIT; and
(2) Gross rents from real property;
(D) From Form 1120F--corporation's method of accounting.
(E) From Form 1096--total amount reported.
(ii) Subject to the requirements of paragraph (d) of this section
and Sec. 301.6103(p)(2)(B)-1, officers or employees of the Social
Security Administration to whom return information reflected on returns
of corporations described in paragraph (b)(6)(i)(B) of this section has
been disclosed as provided by section 6103(l)(1)(A) or (l)(5) may
disclose such information to officers and employees of the Bureau of the
Census for a purpose described in this paragraph (b)(6).
(iii) Return information reflected on employment tax returns
disclosed pursuant to paragraphs (b)(2)(iii) (A), (B), (D), (I) and (J)
of this section may be 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).
(7) Officers or employees of the Internal Revenue Service will
disclose the following return information reflected on Form 1098
``Mortgage Interest Statement'' 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 statistics programs, censuses, and surveys--
(i) Payee/Payer/Employee Taxpayer Identification Number;
(ii) Payee/Payer/Employee Name (First, Middle, Last, Suffix);
(iii) Street Address;
(iv) City;
(v) State;
(vi) ZIP Code (9 digit);
(vii) Posting Cycle Week;
(viii) Posting Cycle Year; and
(ix) Document Code.
(c) Disclosure of return information reflected on returns of
corporations to officers and employees of the Bureau of Economic
Analysis.
(1) As authorized by law for purposes of, but only to the extent
necessary in, conducting and preparing statistical analyses, the
Internal Revenue Service will disclose to officers and employees of the
Bureau of Economic Analysis all return information, regardless of format
or medium and including edited information from the Statistics of Income
sample, of designated classes or categories of corporations with respect
to the tax imposed by chapter 1 of the Internal Revenue Code.
[[Page 85]]
(2) [Reserved]
(3) The Internal Revenue Service will disclose the following return
information reflected on returns filed by corporations to officers and
employees of the Bureau of Economic Analysis:
(i) From the business master files of the Internal Revenue Service--
(A) Taxpayer identity information (as defined in section 6103(b)(6))
with respect to corporate taxpayers;
(B) Business or industry activity codes;
(C) Filing requirement code; and
(D) Physical location.
(ii) From Form SS-4, ``Application for Employer Identification
Number,'' filed by an entity identifying itself on the form as a
corporation or a private services corporation--
(A) Taxpayer identity information (as defined in section 6103(b)(6),
including legal, trade, and business name);
(B) Physical location;
(C) State or country of incorporation;
(D) Entity type (corporate only);
(E) Estimated highest number of employees expected in the next 12
months;
(F) Principal activity of the business;
(G) Principal line of merchandise;
(H) Posting cycle date relative to filing; and
(I) Document code.
(iii) From an employment tax return filed by a corporation--
(A) Taxpayer identity information (as defined in section
6103(b)(6));
(B) Total compensation reported;
(C) Taxable wages paid for purposes of Chapter 21 to each employee;
(D) Master file tax account code (MFT);
(E) Total number of individuals employed in the taxable period
covered by the return;
(F) Posting cycle date relative to filing;
(G) Accounting period covered; and
(H) Document code.
(iv) From returns of corporate taxpayers, including Form 1120,
``U.S. Corporation Income Tax Return,'' Form 851, ``Affiliations
Schedule,'' and other business returns, schedules and forms that the
Internal Revenue Service may issue--
(A) Taxpayer identity information (as defined in section
6103(b)(6)), including that of a parent corporation, affiliate, or
subsidiary; a shareholder; a foreign corporation of which one or more
U.S. shareholders (as defined in section 951(b)) own at least 10% of the
voting stock; a foreign trust; and a U.S. agent of a foreign trust;
(B) Gross sales and receipts;
(C) Gross income, including life insurance company gross income;
(D) Gross income from sources outside the U.S.;
(E) Gross rents from real property;
(F) Other Gross Rents;
(G) Total Gross Rents;
(H) Returns and allowances;
(I) Percentage of foreign ownership of corporations and trusts;
(J) Fact of ownership of foreign partnerships;
(K) Fact of ownership of foreign entity disregarded as a foreign
entity;
(L) Country of the foreign owner;
(M) Gross value of the portion of the foreign trust owned by filer;
(N) Country of incorporation;
(O) Cost of labor, salaries, and wages;
(P) Total assets;
(Q) The quantity of certain forms attached that are returns of U.S.
persons with respect to foreign disregarded entities, partnerships, and
corporations.
(R) Posting cycle date relative to filing;
(S) Accounting period covered;
(T) Master file tax account code (MFT);
(U) Document code; and
(V) Principal industrial activity code.
(d) Procedures and restrictions. Disclosure of return information
reflected on returns by officers or employees of the Internal Revenue
Service or the Social Security Administration as provided by paragraphs
(b) and (c) of this section will be made only upon written request to
the Commissioner of Internal Revenue by the Secretary of Commerce
describing--
(1) The particular return information reflected on returns to be
disclosed;
(2) The taxable period or date to which such return information
reflected on returns relates; and
(3)(i) The particular purpose for which the return information
reflected on returns is to be used, and designating by name and title
the officers and employees of the Bureau of the
[[Page 86]]
Census or the Bureau of Economic Analysis to whom such disclosure is
authorized.
(ii) No such officer or employee to whom return information
reflected on returns is disclosed pursuant to the provisions of
paragraph (b) or (c) of this section shall disclose such information to
any person, other than the taxpayer to whom such return information
reflected on returns relates or other officers or employees of such
bureau whose duties or responsibilities require such disclosure for a
purpose described in paragraph (b) or (c) of this section, except in a
form which cannot be associated with, or otherwise identify, directly or
indirectly, a particular taxpayer. If the Internal Revenue Service
determines that the Bureau of the Census or the Bureau of Economic
Analysis, or any officer or employee thereof, has failed to, or does
not, satisfy the requirements of section 6103(p)(4) of the Internal
Revenue Code or regulations or published procedures thereunder (see
Sec. 601.601(d)(2) of this chapter), the Internal Revenue Service may
take such actions as are deemed necessary to ensure that such
requirements are or will be satisfied, including suspension of
disclosures of return information reflected on returns otherwise
authorized by section 6103 (j)(1) and paragraph (b) or (c) of this
section, until the Internal Revenue Service determines that such
requirements have been or will be satisfied.
(e) Applicability date. Paragraphs (b)(2)(iii)(I), (b)(2)(iii)(K)
through (b)(2)(iii)(M), (b)(3)(v), (b)(3)(xxv) through (b)(3)(xxxv), and
(b)(6)(i)(C) through (b)(6)(i)(E) of this section apply to disclosure to
the Bureau of the Census made on or after December 9, 2016. For rules
that apply to disclosure to the Bureau of the Census before December 9,
2016, see 26 CFR 301.6103(j)(1)-1 (revised as of April 1, 2016).
[T.D. 9037, 68 FR 2693, Jan. 21, 2003, as amended by T.D. 9188, 70 FR
12141, Mar. 11, 2005; T.D. 9267, 71 FR 38263, July 6, 2006; T.D. 9372,
72 FR 73262, Dec. 27, 2007; T.D. 9439, 73 FR 79361, Dec. 29, 2008; T.D.
9500, 75 FR 52459, Aug. 26, 2010; T.D. 9631, 78 FR 52857, Aug. 27, 2013
T.D. 9754, 81 FR 9767, Feb. 26, 2016; T.D. 9856, 84 FR 14011, Apr. 9,
2019]
Sec. 301.6103(j)(5)-1 Disclosures of return information
reflected on returns to officers and employees of the
Department of Agriculture for conducting the
census of agriculture.
(a) General rule. Pursuant to the provisions of section 6103(j)(5)
of the Internal Revenue Code and subject to the requirements of
paragraph (c) of this section, officers or employees of the Internal
Revenue Service will disclose return information reflected on returns 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. ``Return information reflected on returns'' includes, but is
not limited to, information on returns, information derived from
processing such returns, and information derived from other sources for
the purposes of establishing and maintaining taxpayer information
relating to returns.
(b) Disclosure of return information reflected on returns to
officers and employees of the Department of Agriculture. (1) Officers or
employees of the Internal Revenue Service will disclose the following
return information reflected on returns described 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 ``U.S. Individual Income Tax Return'', Form 1041
``U.S. Income Tax Return for Estates and Trusts'', Form 1065 ``U.S.
Return of Partnership Income'' and Form 1065-B ``U.S. Return of Income
for Electing Large Partnerships'' (Schedule F)--
(i) Taxpayer identity information (as defined in section 6103(b)(6)
of the Internal Revenue Code);
(ii) Spouse's Social Security Number;
(iii) Annual accounting period;
(iv) Principal Business Activity (PBA) code;
(v) Taxable cooperative distributions;
(vi) Income from custom hire and machine work;
[[Page 87]]
(vii) Gross income;
(viii) Master File Tax (MFT) code;
(ix) Document Locator Number (DLN);
(x) Cycle posted;
(xi) Final return indicator;
(xii) Part year return indicator; and
(xiii) Taxpayer telephone number.
(3) From Form 943, ``Employer's Annual Tax Return for Agricultural
Employees''--
(i) Taxpayer identity information;
(ii) Annual accounting period;
(iii) Total wages subject to Medicare taxes;
(iv) MFT code;
(v) DLN;
(vi) Cycle posted;
(vii) Final return indicator; and
(viii) Part year return indicator.
(4) From Form 1120 series, ``U.S. Corporation Income Tax Return''--
(i) Taxpayer identity information;
(ii) Annual accounting period;
(iii) Gross receipts less returns and allowances;
(iv) PBA code;
(v) MFT Code;
(vi) DLN;
(vii) Cycle posted;
(viii) Final return indicator;
(ix) Part year return indicator; and
(x) Consolidated return indicator.
(5) From Form 1065 series, ``U.S. Return of Partnership Income''--
(i) Taxpayer identity information;
(ii) Annual accounting period;
(iii) PBA code;
(iv) Gross receipts less returns and allowances;
(v) Net farm profit (loss);
(vi) MFT code;
(vii) DLN;
(viii) Cycle posted;
(ix) Final return indicator; and
(x) Part year return indicator.
(c) Procedures and Restrictions. (1) Disclosure of return
information reflected on returns by officers or employees of the
Internal Revenue Service 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 Agriculture and describing--
(i) The particular return information reflected on returns for
disclosure;
(ii) The taxable period or date to which such return information
reflected on returns relates; and
(iii) The particular purpose for the requested return information
reflected on returns.
(2)(i) No such officer or employee to whom the Internal Revenue
Service discloses return information reflected on returns pursuant to
the provisions of paragraph (b) of this section shall disclose such
information to any person, other than the taxpayer to whom such return
information reflected on returns relates or other officers or employees
of the Department of Agriculture whose duties or responsibilities
require such disclosure for a purpose described in paragraph (b)(1) of
this section, except in a form that cannot be associated with, or
otherwise identify, directly or indirectly, a particular taxpayer.
(ii) If the Internal Revenue Service determines that the Department
of Agriculture, or any officer or employee thereof, has failed to, or
does not, satisfy the requirements of section 6103(p)(4) of the Internal
Revenue Code or regulations or published procedures, the Internal
Revenue Service may take such actions as are deemed necessary to ensure
that such requirements are or will be satisfied, including suspension of
disclosures of return information reflected on returns otherwise
authorized by section 6103(j)(5) and paragraph (b) of this section,
until the Internal Revenue Service determines that such requirements
have been or will be satisfied.
(d) Effective date. This section is applicable on February 22, 2006.
[T.D. 9245, 71 FR 8945, Feb. 22, 2006]
Sec. 301.6103(k)(6)-1 Disclosure of return information by
certain officers and employees for investigative purposes.
(a) General rule. (1) Pursuant to the provisions of section
6103(k)(6) and subject to the conditions of this section, an internal
revenue employee or an Office of Treasury Inspector General for Tax
Administration (TIGTA) employee, in connection with official duties
relating to any examination, administrative appeal, collection activity,
administrative, civil or criminal
[[Page 88]]
investigation, enforcement activity, ruling, negotiated agreement,
prefiling activity, or other proceeding or offense under the internal
revenue laws or related statutes, or in preparation for any proceeding
described in section 6103(h)(2) (or investigation which may result in
such a proceeding), may disclose return information, of any taxpayer, to
the extent necessary to obtain information relating to such official
duties or to accomplish properly any activity connected with such
official duties, including, but not limited to--
(i) Establishing or verifying the correctness or completeness of any
return or return information;
(ii) Determining the responsibility for filing a return, for making
a return if none has been made, or for performing such acts as may be
required by law concerning such matters;
(iii) Establishing or verifying 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 related statutes or the amount
thereof for collection;
(iv) Establishing or verifying misconduct (or possible misconduct)
or other activity proscribed by the internal revenue laws or related
statutes;
(v) Obtaining 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 paragraph (a)(1)(iii) of this section 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 if relevant to
proper performance of official duties described in this paragraph;
(vi) Establishing or verifying 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 paragraph (a)(1)(iii)
of this section for collection, or otherwise to apply the provisions of
the Internal Revenue Code relating to establishment of liens against
such assets, or levy, seizure, or sale on or of the assets to satisfy
any such liability;
(vii) Preparing for any proceeding described in section 6103(h)(2)
or conducting an investigation which may result in such a proceeding; or
(viii) Obtaining, verifying, or establishing information concerned
with making determinations regarding a taxpayer's liability under the
Internal Revenue Code, including, but not limited to, the administrative
appeals process and any ruling, negotiated agreement, or prefiling
process.
(2) Disclosure of return information for the purpose of obtaining
information to carry out properly the official duties described by this
paragraph, or any activity connected with the official duties, is
authorized only if the internal revenue or TIGTA employee reasonably
believes, under the facts and circumstances, at the time of a
disclosure, the information is not otherwise reasonably available, or if
the activity connected with the official duties cannot occur properly
without the disclosure.
(3) Internal revenue and TIGTA employees may identify themselves,
their organizational affiliation (e.g., Internal Revenue Service (IRS),
Criminal Investigation (CI) or TIGTA, Office of Investigations (OI)),
and the nature of their investigation, when making an oral, written, or
electronic contact with a third party witness. Permitted disclosures
include, but are not limited to, the use and presentation of any
identification media (such as a Federal agency badge, credential, or
business card) or the use of an information document request, summons,
or correspondence on Federal agency letterhead or which bears a return
address or signature block that reveals affiliation with the Federal
agency.
(4) This section does not address or affect the requirements under
section 7602(c) (relating to contact of third parties).
(b) Disclosure of return information in connection with certain
personnel or
[[Page 89]]
claimant representative matters. In connection with official duties
relating to any investigation concerned with enforcement of any
provision of the Internal Revenue Code, including enforcement of any
rule or directive prescribed by the Secretary or the Commissioner of
Internal Revenue under any provision of the Internal Revenue Code, or
the enforcement of any provision related to tax administration, that
affects or may affect the personnel or employment rights or status, or
civil or criminal liability, of any former, current, or prospective
employee of the Treasury Department, Bureau of Alcohol, Tobacco,
Firearms, and Explosives, United States Customs Service, United States
Secret Service, or any successor agency, 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. 330 (relating to practice before the Treasury
Department), an internal revenue, TIGTA, or other Federal officer or
employee who is responsible for investigating such employees and persons
and is properly in possession of relevant return information is
authorized to disclose such return information to the extent necessary
for the purpose of obtaining, verifying, or establishing other
information which is or may be relevant and material to the
investigation.
(c) Definitions. The following definitions apply to this section--
(1) Disclosure of return information to the extent necessary means a
disclosure of return information which an internal revenue or TIGTA
employee, based on the facts and circumstances, at the time of the
disclosure, reasonably believes is necessary to obtain information to
perform properly the official duties described by this section, or to
accomplish properly the activities connected with carrying out those
official duties. The term necessary in this context does not mean
essential or indispensable, but rather appropriate and helpful in
obtaining the information sought. Nor does necessary in this context
refer to the necessity of conducting an investigation or the
appropriateness of the means or methods chosen to conduct the
investigation. Section 6103(k)(6) does not limit or restrict internal
revenue or TIGTA employees with respect to the decision to initiate or
the conduct of an investigation. Disclosures under this paragraph
(c)(1), however, may not be made indiscriminately or solely for the
benefit of the recipient or as part of a negotiated quid pro quo
arrangement. This paragraph (c)(1) is illustrated by the following
examples:
Example 1. A revenue agent contacts a taxpayer's customer regarding
the customer's purchases made from the taxpayer during the year under
investigation. The revenue agent is able to obtain the purchase
information only by disclosing the taxpayer's identity and the fact of
the investigation. Depending on the facts and circumstances known to the
revenue agent at the time of the disclosure, such as the way the
customer maintains his records, it also may be necessary for the revenue
agent to inform the customer of the date of the purchases and the types
of merchandise involved for the customer to find the purchase
information.
Example 2. A revenue agent contacts a third party witness to obtain
copies of invoices of sales made to a taxpayer under examination. The
third party witness provides copies of the sales invoices in question
and then asks the revenue agent for the current address of the taxpayer
because the taxpayer still owes money to the third party witness. The
revenue agent may not disclose that current address because this
disclosure would be only for the benefit of the third party witness and
not necessary to obtain information for the examination.
Example 3. A revenue agent contacts a third party witness to obtain
copies of invoices of sales made to a taxpayer under examination. The
third party witness agrees to provide copies of the sales invoices in
question only if the revenue agent provides him with the current address
of the taxpayer because the taxpayer still owes money to the third party
witness. The revenue agent may not disclose that current address because
this disclosure would be a negotiated quid pro quo arrangement.
(2) Disclosure of return information to accomplish properly an
activity connected with official duties means a disclosure of return
information to carry out a function associated with official duties
generally consistent with established practices and procedures. This
paragraph (c)(2) is illustrated by the following example:
Example. A taxpayer failed to file an income tax return and pay the
taxes owed.
[[Page 90]]
After the taxes were assessed and the taxpayer was notified of the
balance due, a revenue officer filed a notice of federal tax lien and
then served a notice of levy on the taxpayer's bank. The notices of lien
and levy contained the taxpayer's name, social security number, amount
of outstanding liability, and the tax period and type of tax involved.
The taxpayer's assets were levied to satisfy the tax debt, but it was
determined that, prior to the levy, the revenue officer failed to issue
the taxpayer a notice of intent to levy, as required by section 6331,
and a notice of right to hearing before the levy, as required by section
6330. The disclosure of the taxpayer's return information in the notice
of levy is authorized by section 6103(k)(6) despite the revenue
officer's failure to issue the notice of intent to levy or the notice of
right to hearing. The ultimate validity of the underlying levy is
irrelevant to the issue of whether the disclosure was authorized by
section 6103(k)(6).
(3) Information not otherwise reasonably available means information
that an internal revenue or TIGTA employee reasonably believes, under
the facts and circumstances, at the time of a disclosure, cannot be
obtained in a sufficiently accurate or probative form, or in a timely
manner, and without impairing the proper performance of the official
duties described by this section, without making the disclosure. This
definition does not require or create the presumption or expectation
that an internal revenue or TIGTA employee must seek information from a
taxpayer or authorized representative prior to contacting a third party
witness in an investigation. Neither the Internal Revenue Code, IRS
procedures, nor these regulations require repeated contacting of an
uncooperative taxpayer. Moreover, an internal revenue or TIGTA employee
may make a disclosure to a third party witness to corroborate
information provided by a taxpayer. This paragraph (c)(3) is illustrated
by the following examples:
Example 1. A revenue agent is conducting an examination of a
taxpayer. The taxpayer refuses to cooperate or provide any information
to the revenue agent. Information relating to the taxpayer's examination
would be information not otherwise reasonably available because of the
taxpayer's refusal to cooperate and supply any information to the
revenue agent. The revenue agent may seek information from a third party
witness.
Example 2. A special agent is conducting a criminal investigation of
a taxpayer. The special agent has acquired certain information from the
taxpayer. Although the special agent has no specific reason to
disbelieve the taxpayer's information, the special agent contacts
several third party witnesses to confirm the information. The special
agent may contact third party witnesses to verify the correctness of the
information provided by the taxpayer because the IRS is not required to
rely solely on information provided by a taxpayer, and a special agent
may take appropriate steps, including disclosures to third party
witnesses under section 6103(k)(6), to verify independently or
corroborate information obtained from a taxpayer.
(4) Internal revenue employee means, for purposes of this section,
an officer or employee of the IRS or Office of Chief Counsel for the
IRS, or an officer or employee of a Federal agency responsible for
administering and enforcing taxes under Chapters 32 (Part III of
Subchapter D), 51, 52, or 53 of the Internal Revenue Code, or
investigating tax refund check fraud under 18 U.S.C. 510.
(5) TIGTA employee means an officer or employee of the Office of
Treasury Inspector General for Tax Administration.
(d) Examples. The following examples illustrate the application of
this section:
Example 1. A revenue agent is conducting an examination of a
taxpayer. The taxpayer has been very cooperative and has supplied copies
of invoices as requested. Some of the taxpayer's invoices show purchases
that seem excessive in comparison to the size of the taxpayer's
business. The revenue agent contacts the taxpayer's suppliers for the
purpose of corroborating the invoices the taxpayer provided. In
contacting the suppliers, the revenue agent discloses the taxpayer's
name, the dates of purchase, and the type of merchandise at issue. These
disclosures are permissible under section 6103(k)(6) because, under the
facts and circumstances known to the revenue agent at the time of the
disclosures, the disclosures were necessary to obtain information
(corroboration of invoices) not otherwise reasonably available because
suppliers would be the only source available for corroboration of this
information.
Example 2. A revenue agent is conducting an examination of a
taxpayer. The revenue agent asks the taxpayer for business records to
document the deduction of the cost of goods sold shown on Schedule C of
the taxpayer's return. The taxpayer will not provide the business
records to the revenue agent, who contacts a third party witness for
verification of the amount on the Schedule
[[Page 91]]
C. In the course of the contact, the revenue agent shows the Schedule C
to the third party witness. This disclosure is not authorized under
section 6103(k)(6). Section 6103(k)(6) permits disclosure only of return
information, not the return (including schedules and attachments)
itself. If necessary, a revenue agent may disclose return information
extracted from a return when questioning a third party witness. Thus,
the revenue agent could have extracted the amount of cost of goods sold
from the Schedule C and disclosed that amount to the third party
witness.
Example 3. A special agent is conducting a criminal investigation of
a taxpayer, a doctor, for tax evasion. Notwithstanding the records
provided by the taxpayer and the taxpayer's bank, the special agent
decided to obtain information from the taxpayer's patients to verify
amounts paid to the taxpayer for his services. Accordingly, the special
agent sent letters to the taxpayer's patients to verify these amounts.
In the letters, the agent disclosed that he was a special agent with
IRS-CI and that he was conducting a criminal investigation of the
taxpayer. Section 6103(k)(6) permits these disclosures (including the
special agent disclosing his affiliation with CI and the nature of the
investigation) to confirm the taxpayer's income. The decision whether to
verify information already obtained is a matter of investigative
judgment and is not limited by section 6103(k)(6).
Example 4. Corporation A requests a private letter ruling (PLR) as
to the tax consequences of a planned transaction. Corporation A has
represented that it is in compliance with laws administered by Agency B
that may relate to the tax consequences of the proposed transaction.
Further information is needed from Agency B relating to possible tax
consequences. Under section 6103(k)(6), the IRS may disclose Corporation
A's return information to Agency B to the extent necessary to obtain
information from Agency B for the purpose of properly considering the
tax consequences of the proposed transaction that is the subject of the
PLR.
(e) Effective date. This section is applicable on July 11, 2006.
[T.D. 9274, 71 FR 38986, July 11, 2006, as amended by 71 FR 60827, Oct.
17, 2006; 71 FR 61833, Oct. 19, 2006]
Sec. 301.6103(k)(9)-1 Disclosure of returns and return
information relating to payment of tax by credit card
and debit card.
Officers and employees of the Internal Revenue Service may disclose
to card issuers, financial institutions, or other persons such return
information as the Commissioner deems necessary in connection with
processing credit card and debit card transactions to effectuate payment
of tax as authorized by Sec. 301.6311-2. Officers and employees of the
Internal Revenue Service may disclose such return information to such
persons as the Commissioner deems necessary in connection with billing
or collection of the amounts charged or debited, including resolution of
errors relating to the credit card or debit card account as described in
Sec. 301.6311-2(d).
[T.D. 8969, 66 FR 64742, Dec. 14, 2001]
Sec. 301.6103(l)-1 Disclosure of returns and return information
for purposes other than tax administration.
(a) Definition. For purposes of applying the provisions of section
6103(l) of the Internal Revenue Code, the term agent includes a
contractor.
(b) Effective date. This section is applicable January 6, 2004.
[T.D. 9111, 69 FR 507, Jan. 6, 2004]
Sec. 301.6103(l)(2)-1 Disclosure of returns and return information
to Pension Benefit Guaranty Corporation for purposes of research and studies.
(a) General rule. Pursuant to the provisions of section 6103(l)(2)
of the Internal Revenue Code and subject to the requirements of
paragraph (b) of this section, officers and employees of the Internal
Revenue Service may disclose returns and return information (as defined
by section 6103(b)) to officers and employees of the Pension Benefit
Guaranty Corporation for purposes of, but only to the extent necessary
in, conducting research and studies authorized by title IV of the
Employee Retirement Income Security Act of 1974.
(b) Procedures and restrictions. Disclosure of returns or return
information by officers or employees of the Service as provided by
paragraph (a) of this section will be made only upon written request to
the Commissioner of Internal Revenue by the Executive Director of the
Pension Benefit Guaranty Corporation describing the returns or return
information to be disclosed, the taxable period or date to which such
returns or return information relates, and the purpose for which the
returns
[[Page 92]]
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) of this paragraph alleges that certain
[[Page 93]]
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-sharing, or stock
bonus plan, a trust
[[Page 94]]
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 or return
information is needed in the
[[Page 95]]
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 96]]
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 97]]
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 98]]
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 99]]
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(l)(21)-1 Disclosure of return information
to the Department of Health and Human Services to carry
out eligibility requirements for health
insurance affordability programs.
(a) General rule. Pursuant to the provisions of section
6103(l)(21)(A) of the Internal Revenue Code, officers and employees of
the Internal Revenue Service will disclose, upon written request, for
each relevant taxpayer on a single application those items of return
information that are described under section 6103(l)(21)(A) and
paragraphs (a)(1) through (7) of this section, for the reference tax
year, as applicable, to officers, employees, and contractors of the
Department of Health and Human Services. Such information shall be
provided solely for purposes of, and to the extent necessary in,
establishing an individual's eligibility for participation in an
Exchange established under the Patient Protection and Affordable Care
Act, verifying the appropriate amount of any premium tax credit under
section 36B or cost-sharing reduction under section 1402 of the Patient
Protection and Affordable Care Act, or determining eligibility for the
State programs described in section 6103(l)(21)(A).
(1) With respect to each relevant taxpayer for the reference tax
year where the amount of social security benefits not included in gross
income under section 86 of the Internal Revenue Code of that relevant
taxpayer is unavailable:
(i) The aggregate amount of the following items of return
information--
(A) Adjusted gross income, as defined by section 62 of the Internal
Revenue Code;
(B) Any amount excluded from gross income under section 911 of the
Internal Revenue Code; and
(C) Any amount of interest received or accrued by the taxpayer
during the taxable year that is exempt from tax.
(ii) Information indicating that the amount of social security
benefits not included in gross income under section 86 of the Internal
Revenue Code is unavailable.
(2) Adjusted gross income, as defined by section 62 of the Internal
Revenue Code, of a relevant taxpayer for the reference tax year, in
circumstances where the modified adjusted gross income (MAGI), as
defined by section 36B(d)(2)(B) of the Internal Revenue Code, of that
relevant taxpayer is unavailable, as well as information indicating that
the components of MAGI other than adjusted gross income must be taken
into account to determine MAGI;
(3) The amount of social security benefits of the relevant taxpayer
that is included in gross income under section 86 of the Internal
Revenue Code for the reference tax year;
(4) Information indicating that certain return information of a
relevant taxpayer is unavailable for the reference tax year because the
relevant taxpayer jointly filed a U.S. Individual Income Tax Return for
that year with a spouse who is not a relevant taxpayer listed on the
same application;
(5) Information indicating that, although a return for an individual
identified on the application as a relevant taxpayer for the reference
tax year is available, return information is not being provided because
of possible authentication issues with respect to the identity of the
relevant taxpayer;
(6) Information indicating that a relevant taxpayer who is
identified as a dependent for the tax year in which the premium tax
credit under section 36B of the Internal Revenue Code would be claimed,
did not have a filing requirement for the reference tax year based upon
the U.S. Individual Income Tax Return the relevant taxpayer filed for
the reference tax year; and
(7) Information indicating that a relevant taxpayer who received
advance payments of the premium tax credit in the reference tax year did
not file a tax return for the reference tax year reconciling the advance
payments of the premium tax credit with any premium tax credit under
section 36B of the Internal Revenue Code available for that year.
(b) Relevant taxpayer defined. For purposes of paragraph (a) of this
section, a relevant taxpayer is defined to be any individual listed, by
name and social
[[Page 100]]
security number, on an application submitted pursuant to Title I,
Subtitle E, of the Patient Protection and Affordable Care Act, whose
income may bear upon a determination of any advance payment of any
premium tax credit under section 36B of the Internal Revenue Code, cost-
sharing reduction under section 1402 of the Patient Protection and
Affordable Care Act, or eligibility for any program described in section
6103(l)(21)(A) of the Internal Revenue Code.
(c) Reference tax year defined. For purposes of section
6103(l)(21)(A) of the Internal Revenue Code and this section, the
reference tax year is the first calendar year or, where no return
information is available in that year, the second calendar year, prior
to the submission of an application pursuant to Title I, Subtitle E, of
the Patient Protection and Affordable Care Act.
(d) Effective/applicability date. This section applies to
disclosures to the Department of Health and Human Services on or after
August 14, 2013.
[T.D. 9628, 78 FR 49369, Aug. 14, 2013]
Sec. 301.6103(m)-1 Disclosure of taxpayer identity information.
(a) Definition. For purposes of applying the provisions of section
6103(m) of the Internal Revenue Code, the term agent includes a
contractor.
(b) Effective date. This section is applicable January 6, 2004.
[T.D. 9111, 69 FR 507, Jan. 6, 2004]
Sec. 301.6103(n)-1 Disclosure of returns and return
information in connection with written contracts or
agreements for the acquisition of property or services
for tax administration purposes.
(a) General rule. (1) Pursuant to the provisions of section 6103(n)
of the Internal Revenue Code and subject to the conditions of this
section, officers and 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 the person, for purposes of tax administration
(as defined in section 6103(b)(4)), to the extent necessary in
connection with a written contract or agreement for the acquisition of--
(i) Equipment or other property; or
(ii) Services relating to the processing, storage, transmission, or
reproduction of returns or return information, the programming,
maintenance, repair, or testing of equipment or other property, or the
providing of other services.
(2) Any person, or officer or employee of the person, who receives
returns or return information under paragraph (a)(1) of this section,
may--
(i) Further disclose the returns or return information to another
officer or employee of the person whose duties or responsibilities
require the returns or return information for a purpose described in
this paragraph (a); or
(ii) Further disclose the returns or return information, when
authorized in writing by the Internal Revenue Service (IRS), to the
extent necessary to carry out the purposes described in this paragraph
(a). Disclosures may include disclosures to an agent or subcontractor of
the person, or officer or employee of the agent or subcontractor.
(3) An agent or subcontractor, or officer or employee of the agent
or subcontractor, who receives returns or return information under
paragraph (a)(2)(ii) of this section, may further disclose the returns
or return information to another officer or employee of the agent or
subcontractor whose duties or responsibilities require the returns or
return information for a purpose described in this paragraph (a).
(4) Any person, or officer, employee, agent or subcontractor of the
person, or officer or employee of the agent or subcontractor, who
receives returns or return information under this paragraph (a), may,
subject to the provisions of Sec. 301.6103(p)(2)(B)-1 (concerning
disclosures by a Federal, State, or local agency, or its agents or
contractors), further disclose the returns or return information for a
purpose authorized, and subject to all applicable conditions imposed, by
section 6103.
[[Page 101]]
(b) Limitations. (1) Disclosure of returns or return information in
connection with a written contract or agreement for the acquisition of
property or services described in paragraph (a) of this section will be
treated as necessary only if the performance of the contract or
agreement cannot otherwise be reasonably, properly, or economically
carried out without the disclosure.
(2) Disclosure of returns or return information in connection with a
written contract or agreement for the acquisition of property or
services described in paragraph (a) of this section shall be made only
to the extent necessary to reasonably, properly, or economically perform
the contract. For example, disclosure of returns or return information
to employees of a contractor for purposes of programming, maintaining,
repairing, or testing computer equipment used by the IRS or a State tax
agency shall be made only if the services cannot be reasonably,
properly, or economically performed without the disclosure. If it is
determined that disclosure of returns or return information is
necessary, and if the services can be reasonably, properly, or
economically performed by disclosure of only parts or portions of a
return or if deletion of taxpayer identity information (as defined in
section 6103(b)(6)) reflected on a return would not seriously impair the
ability of the employees to perform the services, then only the parts or
portions of the return, or only the return with taxpayer identity
information deleted, may be disclosed.
(c) Penalties. Any person, or officer, employee, agent or
subcontractor of the person, or officer or employee of the agent or
subcontractor, who receives returns or return information under
paragraph (a) of this section, is subject to the civil and criminal
penalty provisions of sections 7431, 7213, and 7213A for the
unauthorized inspection or disclosure of the returns or return
information.
(d) Notification requirements. Any person, or agent or subcontractor
of the person, who receives returns or return information under
paragraph (a) of this section shall provide written notice to his, her,
or its officers and employees receiving the returns or return
information that--
(1) Returns or return information disclosed to the officer or
employee may be used only for a purpose and to the extent authorized by
paragraph (a) of this section and that the officer or employee is
subject to the civil and criminal penalty provisions of sections 7431,
7213, and 7213A for the unauthorized inspection or disclosure of the
returns or return information;
(2) Further inspection of any returns or return information for a
purpose or to an extent not authorized by paragraph (a) of this section
constitutes a misdemeanor, punishable upon conviction by a fine of as
much as $1,000, or imprisonment for as long as 1 year, or both, together
with costs of prosecution;
(3) Further disclosure of any returns or return information for a
purpose or to an extent not authorized by paragraph (a) of this section
constitutes a felony, punishable upon conviction by a fine of as much as
$5,000, or imprisonment for as long as 5 years, or both, together with
the costs of prosecution;
(4) Further inspection or disclosure of returns or return
information by any person who is not an officer or employee of the
United States for a purpose or to an extent not authorized by paragraph
(a) of this section may result also in an award of civil damages against
that person in an amount not less than $1,000 for each act of
unauthorized inspection or disclosure; or the sum of actual damages
sustained by the plaintiff as a result of the unauthorized inspection or
disclosure plus, in the case of a willful inspection or disclosure or an
inspection or disclosure that is the result of gross negligence,
punitive damages. In addition, costs and reasonable attorneys fees may
be awarded; and
(5) A conviction for an offense referenced in paragraph (d)(2) or
(3) of this section shall, in addition to any other punishment, result
in dismissal from office or discharge from employment if the person
convicted is an officer or employee of the United States.
(e) Safeguards. (1) Any person, or agent or subcontractor of the
person, who may receive returns or return information under paragraph
(a) of this
[[Page 102]]
section, shall agree, before disclosure of any returns or return
information to the person, agent, or subcontractor, to permit an
inspection by the IRS of his, her, or its site or facilities.
(2) Any person, or officer, employee, agent or subcontractor of the
person, or officer or employee of the agent or subcontractor, who
receives returns or return information under paragraph (a) of this
section, shall comply with all applicable conditions and requirements as
the IRS may prescribe from time to time (prescribed requirements) for
the purposes of protecting the confidentiality of returns and return
information and preventing any disclosure or inspection of returns or
return information in a manner not authorized by this section.
(3) The terms of any written contract or agreement for the
acquisition of property or services as described in paragraph (a) of
this section shall provide, or shall be amended to provide, that any
person, or officer, employee, agent or subcontractor of the person, or
officer or employee of the agent or subcontractor, who receives returns
or return information under paragraph (a) of this section, shall comply
with the prescribed requirements. Any contract or agreement shall be
made available to the IRS before execution of the contract or agreement.
For purposes of this paragraph (e)(3), a written contract or agreement
shall include any contract or agreement between a person and an agent or
subcontractor of the person to provide the property or services
described in paragraph (a) of this section.
(4) If the IRS determines that any person, or officer, employee,
agent or subcontractor of the person, or officer or employee of the
agent or subcontractor, who receives returns or return information under
paragraph (a) of this section, has failed to, or does not, satisfy the
prescribed requirements, the IRS, consistent with the regulations under
section 6103(p)(7), may take any actions it deems necessary to ensure
that the prescribed requirements are or will be satisfied, including--
(i) Suspension of further disclosures of returns or return
information by the IRS to the State tax agency, the Social Security
Administration, or the Department of Justice, until the IRS determines
that the conditions and requirements have been or will be satisfied;
(ii) Suspension of further disclosures by the Treasury Department
otherwise authorized by paragraph (a) of this section; and
(iii) Suspension or termination of any duty or obligation arising
under a contract or agreement with the Treasury Department.
(f) Definitions. For purposes of this section--
(1) The term Treasury Department includes the IRS, the Office of the
Chief Counsel for the IRS, and the Office of the Treasury Inspector
General for Tax Administration;
(2) The term State tax agency means an agency, body, or commission
described in section 6103(d); and
(3) The term Department of Justice includes offices of the United
States Attorneys.
(g) Effective date. This section is applicable on June 5, 2007.
[T.D. 9327, 72 FR 30976, June 5, 2007]
Sec. 301.6103(n)-2 Disclosure of return information in
connection with written contracts among the IRS, whistleblowers,
and legal representatives of
whistleblowers.
(a) General rule. (1) Pursuant to the provisions of sections 6103(n)
and 7623 of the Internal Revenue Code and subject to the conditions of
this section, an officer or employee of the Treasury Department is
authorized to disclose return information (as defined in section
6103(b)(2)) to a whistleblower and, if applicable, the legal
representative of the whistleblower, to the extent necessary in
connection with a written contract among the Internal Revenue Service
(IRS), the whistleblower and, if applicable, the legal representative of
the whistleblower, for services relating to the detection of violations
of the internal revenue laws or related statutes.
(2) The IRS shall have the discretion to determine whether to enter
into a written contract pursuant to section 7623 with the whistleblower
and, if applicable, the legal representative of the whistleblower, for
services described in paragraph (a)(1) of this section.
[[Page 103]]
(b) Limitations. (1) Disclosure of return information in connection
with a written contract for services described in paragraph (a)(1) of
this section shall be made only to the extent the IRS deems it necessary
in connection with the reasonable or proper performance of the contract.
Disclosures may include, but are not limited to, disclosures to
accomplish properly any purpose or activity of the nature described in
section 6103(k)(6) and the regulations thereunder.
(2) If the IRS determines that the services of a whistleblower and,
if applicable, the legal representative of the whistleblower, as
described in paragraph (a)(1) of this section, can be performed
reasonably or properly by disclosure of only parts or portions of return
information, then only the parts or portions of the return information
shall be disclosed.
(3) Upon written request by a whistleblower, or a legal
representative of a whistleblower, with whom the IRS has entered into a
written contract for services as described in paragraph (a)(1) of this
section, the Director of the Whistleblower Office, or designee of the
Director, may inform the whistleblower and, if applicable, the legal
representative of the whistleblower, of the status of the
whistleblower's claim for award under section 7623, including whether
the claim is being evaluated for potential investigative action, or is
pending due to an ongoing examination, appeal, collection action, or
litigation. The information may be disclosed only if the IRS determines
that the disclosure would not seriously impair Federal tax
administration.
(4) Return information disclosed to a whistleblower and, if
applicable, a legal representative of a whistleblower, under this
section, shall not be further disclosed or otherwise used by the
whistleblower or a legal representative of a whistleblower, except as
expressly authorized in writing by the IRS.
(c) Penalties. Any whistleblower, or legal representative of a
whistleblower, who receives return information under this section, is
subject to the civil and criminal penalty provisions of sections 7431,
7213, and 7213A for the unauthorized inspection or disclosure of the
return information.
(d) Safeguards. (1) Any whistleblower, or the legal representative
of a whistleblower, who receives return information under this section,
shall comply with all applicable conditions and requirements as the IRS
may prescribe from time to time for the purposes of protecting the
confidentiality of the return information and preventing any disclosure
or inspection of the return information in a manner not authorized by
this section (prescribed requirements).
(2) Any written contract for services as described in paragraph
(a)(1) of this section shall provide that any whistleblower and, if
applicable, the legal representative of a whistleblower, who has access
to return information under this section, shall comply with the
prescribed requirements.
(3) Any whistleblower, or the legal representative of a
whistleblower, who may receive return information under this section,
shall agree in writing, before any disclosure of return information is
made, to permit an inspection of the whistleblower's or the legal
representative's premises by the IRS relative to the maintenance of the
return information disclosed under these regulations and, upon
completion of services as described in the written contract with the
IRS, to dispose of all return information by returning the return
information, including any and all copies or notes made, to the IRS, or
to the extent that it cannot be returned, by destroying the information
in a manner consistent with prescribed requirements.
(4) If the IRS determines that any whistleblower, or the legal
representative of a whistleblower, who has access to return information
under this section, has failed to, or does not, satisfy the prescribed
requirements, the IRS, using the procedures described in the regulations
under section 6103(p)(7), may take any action it deems necessary to
ensure that the prescribed requirements are or will be satisfied,
including--
(i) Suspension of further disclosures of return information by the
IRS to the whistleblower and, if applicable, the legal representative of
the whistleblower, until the IRS determines that
[[Page 104]]
the conditions and requirements have been or will be satisfied; and
(ii) Suspension or termination of any duty or obligation arising
under the contract with the IRS.
(e) Definitions. For purposes of this section--
(1) The term Treasury Department includes the IRS and the Office of
the Chief Counsel for the IRS.
(2) The term whistleblower means an individual who provides
information to the IRS regarding violations of the tax laws or related
statutes and submits a claim for an award under section 7623 with
respect to the information.
(3) The term legal representative means any individual who is a
member in good standing in the bar of the highest court of any state,
possession, territory, commonwealth, or the District of Columbia, and
who has a written power of attorney executed by the whistleblower.
(f) Effective/applicability date. This section is applicable on
March 15, 2011.
[T.D. 9516, 76 FR 13882, Mar. 15, 2011]
Sec. 301.6103(p)(2)(B)-1 Disclosure of returns and return
information by other agencies.
(a) General rule. Subject to the requirements of paragraphs (b),
(c), and (d) of this section, returns or return information that have
been obtained by a Federal, state or local agency, or its agents or
contractors, in accordance with section 6103 (the first recipient) may
be disclosed by the first recipient to another recipient authorized to
receive such returns or return information under section 6103 (the
second recipient).
(b) Approval by Commissioner. A disclosure described in paragraph
(a) of this section may be made if the Commissioner of Internal Revenue
(the Commissioner) determines, after receiving a written request under
this section, that such returns or return information are more readily
available from the first recipient than from the Internal Revenue
Service (IRS). The disclosure authorization by the Commissioner shall be
directed to the head of the first recipient and may contain such
conditions or restrictions as the Commissioner may prescribe. The
disclosure authorization may be revoked by the Commissioner at any time.
(c) Requirements and restrictions. The second recipient may receive
only returns or return information as authorized by the provision of
section 6103 applicable to such second recipient. Any returns or return
information disclosed may be used by the second recipient only for a
purpose authorized by and subject to any conditions imposed by section
6103 and the regulations thereunder, including, if applicable,
safeguards imposed by section 6103(p)(4).
(d) Records and reports of disclosure. The first recipient shall
maintain to the satisfaction of the IRS a permanent system of
standardized records regarding such disclosure authorization described
in paragraph (a) of this section and any disclosure of returns and
return information made pursuant to such authorization, and shall
provide such information as prescribed by the Commissioner in order to
enable the IRS to comply with its obligations under section 6103(p)(3)
to keep accountings for disclosures and to make annual reports of
disclosures to the Joint Committee on Taxation. The information required
for reports to the Joint Committee on Taxation must be provided within
30 days after the close of each calendar year. The requirements of this
paragraph do not apply to the disclosure of returns and return
information as provided by paragraph (a) of this section which, had such
disclosures been made directly by the IRS, would not have been subject
to the recordkeeping requirements imposed by section 6103(p)(3)(A).
(e) Effective date. This section is applicable on January 21, 2003.
[T.D. 9036, 68 FR 2696, Jan. 21, 2003]
Sec. 301.6103(p)(4)-1 Procedures relating to safeguards for
returns or return information.
For security guidelines and other safeguards for protecting returns
and return information, see guidance published by the Internal Revenue
Service.
[[Page 105]]
For procedures for administrative review of a determination that an
authorized recipient has failed to safeguard returns or return
information, see Sec. 301.6103(p)(7)-1.
[T.D. 9445, 74 FR 6830, Feb. 11, 2009]
Sec. 301.6103(p)(7)-1 Procedures for administrative review
of a determination that an authorized recipient has failed to safeguard returns or return
information.
(a) In general. Notwithstanding any section of the Internal Revenue
Code (Code), the Internal Revenue Service (IRS) may terminate or suspend
disclosure of returns and return information to any authorized recipient
specified in section (p)(4) of section 6103, if the IRS determines that:
(1) The authorized recipient has allowed an unauthorized inspection
or disclosure of returns or return information and that the authorized
recipient has not taken adequate corrective action to prevent the
recurrence of an unauthorized inspection or disclosure; or
(2) The authorized recipient does not satisfactorily maintain the
safeguards prescribed by section 6103(p)(4), and has made no adequate
plan to improve its system to maintain the safeguards satisfactorily.
(b) Notice of IRS's intention to terminate or suspend disclosure.
Prior to terminating or suspending authorized disclosures, the IRS will
notify the authorized recipient in writing of the IRS's preliminary
determination and of the IRS's intention to discontinue disclosure of
returns and return information to the authorized recipient. Upon so
notifying the authorized recipient, the IRS, if it determines that tax
administration otherwise would be seriously impaired, may suspend
further disclosures of returns and return information to the authorized
recipient pending a final determination by the Commissioner or a Deputy
Commissioner described in paragraph (d)(2) of this section.
(c) Authorized recipient's right to appeal. An authorized recipient
shall have 30 days from the date of receipt of a notice described in
paragraph (b) of this section to appeal the preliminary determination
described in paragraph (b) of this section. The appeal shall be made
directly to the Commissioner.
(d) Procedures for administrative review. (1) To appeal a
preliminary determination described in paragraph (b) of this section,
the authorized recipient shall send a written request for a conference
to: Commissioner of Internal Revenue (Attention: SE:S:CLD:GLD), 1111
Constitution Avenue, NW., Washington, DC 20224. The request must include
a complete description of the authorized recipient's present system of
safeguarding returns or return information received by the authorized
recipient (and its authorized contractors or agents, if any). The
request must state the reason or reasons the authorized recipient
believes that such system or practice (including improvements, if any,
to such system or practice expected to be made in the near future) is or
will be adequate to safeguard returns or return information.
(2) Within 45 days of the receipt of the request made in accordance
with the provisions of paragraph (d)(1) of this section, the
Commissioner or Deputy Commissioner personally shall hold a conference
with representatives of the authorized recipient, after which the
Commissioner or Deputy Commissioner shall make a final determination
with respect to the appeal.
(e) Effective/applicability date. This section applies to all
authorized recipients of returns and return information that are subject
to the safeguard requirements set forth in section 6103(p)(4) on or
after February 11, 2009.
[T.D. 9445, 74 FR 6830, Feb. 11, 2009]
Sec. 301.6104(a)-1 Public inspection of material relating
to tax-exempt organizations.
(a) Applications for exemption from Federal income tax, applications
for a group exemption letter, and supporting documents. If the Internal
Revenue Service determines that an organization described in section
501(c) or section 501(d) is exempt from Federal income tax for any
taxable year, the application upon which the determination is based,
together with any supporting documents, shall be open to public
inspection. Such applications and supporting documents shall be open for
public inspection even after
[[Page 106]]
any revocation of the Internal Revenue Service's determination that the
organization is exempt from Federal income tax. In the past, some
applications were destroyed and therefore are not available for
inspection. For purposes of determining the availability for public
inspection, a claim for exemption from Federal income tax filed to re-
establish 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 exemption from Federal income tax.
(b) Notices of status filed by political organizations. If, in
accordance with section 527(i), an organization notifies the Internal
Revenue Service that it is a political organization as described in
section 527, exempt from Federal income tax for any taxable year, the
notice of status filed by the political organization shall be open to
public inspection.
(c) Letters or documents issued by the Internal Revenue Service with
respect to an application for exemption from Federal income tax. If an
application for exemption from Federal income tax 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 that
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 (c) applies include,
but are not limited to--
(1) Favorable rulings and determination letters, including group
exemption letters, issued in response to applications for exemption from
Federal income tax;
(2) Technical advice memoranda issued with respect to the approval,
or subsequent approval, of an application for exemption from Federal
income tax;
(3) Letters issued in response to an application for exemption from
Federal income tax (including applications for a group exemption letter)
that propose a finding that the applicant is not entitled to be exempt
from Federal income tax, if the applicant is subsequently determined, on
the basis of that application, to be exempt from Federal income tax; and
(4) Any letter or document issued by the Internal Revenue Service
relating to an organization's status as an organization described in
section 509(a), 4940(d)(2), 4942(j)(3), or 4943(f), including a
determination letter that the organization is or is not a private
foundation.
(d) Requirement of exempt status. An application for exemption from
Federal income tax (including applications for a group exemption
letter), supporting documents, and letters or documents issued by the
Internal Revenue Service that relate to the application shall not be
open to public inspection before the organization is determined, on the
basis of that application, to be exempt from Federal income tax for any
taxable year. If an organization is determined to be exempt from Federal
income tax for any taxable year, these materials shall not be withheld
from public inspection on the basis that the organization is
subsequently determined not to be exempt for any other taxable year.
(e) Documents included in the term ``application for exemption from
Federal income tax.'' For purposes of this section--
(1) Prescribed application form. If a form is prescribed for an
organization's application for exemption from Federal income tax, the
application includes the form and all documents and statements that the
Internal Revenue Service requires to be filed with the form, any
amendments or revisions to the original application, or any resubmitted
applications where the original application was submitted in draft form
or was withdrawn. An application includes an application for
reinstatement of tax-exempt status after an organization's tax-exempt
status has been revoked pursuant to section 6033(j). An application
submitted in draft form or an application submitted and later withdrawn
is not considered an application.
(2) No prescribed application form. If no form is prescribed for an
organization's application for exemption from Federal income tax, the
application includes
[[Page 107]]
the submission by letter requesting recognition of tax exemption and any
statements or documents as prescribed by Revenue Procedure 2011-9, IRB
2011-2 (January 10, 2011), or any successor guidance describing
procedures for application for exempt status pursuant to section 501 and
section 521 of the Internal Revenue Code. See Sec.
601.601(d)(2)(ii)(b).
(3) Application for a Group Exemption Letter. The application for a
group exemption letter includes the letter submitted by or on behalf of
subordinate organizations that seek exempt status pursuant to a group
exemption letter and any statements or documents as prescribed by
Revenue Procedure 80-27, 1980-1 CB 677 (June 20, 1980), and any
successor guidance. See Sec. 601.601(d)(2)(ii)(b).
(4) Notice of status filed under section 527(i). For purposes of
this section, documents included in the term ``notice of status filed
under section 527(i)'' include--
(i) Form 8871, ``Political Organization Notice of Section 527
Status;''
(ii) Form 8453-X, ``Declaration of Electronic Filing of Notice of
Section 527 Status;'' and
(iii) Any other additional forms or documents that the Internal
Revenue Service may prescribe.
(f) Material open to public inspection under section 6110. Under
section 6110, certain written determinations, including negative
determinations issued to organizations that applied for an exemption
from Federal income tax, issued by the Internal Revenue Service are made
available for public inspection. Section 6110 does not apply, however,
to material that is open to public inspection under section 6104. See
sections 6104(a)(1) and 6110(l)(1).
(g) Supporting documents defined. For purposes of this section,
``supporting documents,'' with respect to an application for exemption
from Federal income tax, means any statement or document not described
in paragraph (e) of this section that is submitted by the organization
or group in support of its application prior to a determination
described in paragraph (a) of this section. Items submitted in
connection with an application in draft form, or with an application
submitted and later withdrawn, are not supporting documents. There are
no supporting documents with respect to Notices of Status filed by
political organizations.
(h) Statement of exempt status. For efficient tax administration,
the Internal Revenue Service may publish, in paper or electronic format,
the names of organizations currently recognized as exempt from Federal
income tax, including organizations recognized as exempt from Federal
income tax under particular paragraphs of section 501(c) or section
501(d). In addition to having the opportunity to inspect material
relating to an organization exempt from Federal income tax, a person may
request a statement, or the Internal Revenue Service may disclose, in
response to or in anticipation of a request, the following information--
(1) The subsection and paragraph of section 501 (or the
corresponding provision of any prior revenue law) under which the
organization or group has been determined, on the basis of an
application open to public inspection, to qualify for exemption from
Federal income tax; and
(2) Whether an organization or group is currently recognized as
exempt from Federal income tax.
(i) Publication of non-exempt status. (1) For publication of the
notice of the revocation of a determination that an organization is
described in section 501(c)(3), see section 7428(c).
(2) For publication of a list including any organization the tax
exemption of which is revoked for failure to file required returns or
notices for three consecutive years, see section 6033(j).
(3) For publication of notice of suspension of tax exemption of
terrorist organizations, see section 501(p).
(j) Withholding of certain information from public inspection. For
rules relating to certain information contained in an application for
exemption from Federal income tax and supporting documents that will be
withheld from public inspection, see Sec. 301.6104(a)-5(a).
(k) Procedures for inspection. For rules relating to procedures for
public inspection of applications for exemption from Federal income tax
and supporting documents, see Sec. 301.6104(a)-6.
[[Page 108]]
(l) Effective/applicability date. The rules of this section apply
February 29, 2012.
[T.D. 9581, 77 FR 12203, Feb. 29, 2012]
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 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
[[Page 109]]
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,
(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
[[Page 110]]
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
Sec. Sec. 301.6104(a)-2 and 301.6104(a)-3 as open to public inspection
is only open to inspection by a plan participant or the participant's
authorized representative. This limitation does not apply, however, with
respect to documents which an applicant files with respect to a request
for approval of a master, prototype, pattern or other such plan (see
Sec. 301.6104 (a)-2 (b)(3)) or to opinion, notification or other such
letters issued by the Internal Revenue Service with respect to such
plans (see Sec. 301.6104 (a)-3 (a)(3)).
(b) Determining number of plan participants--(1) In general. For
purposes of determining whether a plan has fewer than 26 participants,
the number of plan participants will be the number indicated on the most
recent annual return filed for the plan under section 6058. Where an
annual return indicates the number of participants both at the beginning
and end of the plan year, the number indicated on the return means the
number at the end of the plan year. If no annual return has been filed
for the plan, then the number of plan participants will be the number
indicated on the most recent application for a determination letter
filed for the plan. If, however, the number of plan participants is
increased prior to final Internal Revenue Service action on the
application, the number of plan participants will be that increased
number.
(2) Decreasing number of plan participants. If a plan having 26 or
more participants, as indicated on an annual return or application for a
determination letter, subsequently files an annual return indicating
fewer than 26 plan participants, then material relating to the plan
which is issued or received by the
[[Page 111]]
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 Sec. Sec. 301.6104(a)-2 and
301.6104(a)-3. The document designating the authorized representative
must be signed by the plan participant and must specify that the
representative is authorized to inspect the material. The document, or a
copy, must be filed with the office of the Internal Revenue Service in
which the authorized representative is to inspect the material. A copy
which is reproduced by a photographic process need not be certified as a
true and correct copy of the original.
(Secs. 6104(a)(1)(A), 6104(a)(1)(B), and 7805 of the Internal Revenue
Code of 1954 (72 Stat. 1660, 88 Stat. 940, 68A Stat. 917; 26 U.S.C.
6104(a)(1)(A), 6104(a)(1)(B), 7805))
[T.D. 7845, 47 FR 50488, Nov. 8, 1982]
Sec. 301.6104(a)-5 Withholding of certain information from public
inspection.
(a) Tax exempt organizations--(1) Trade secrets, patents, processes,
styles of work, or apparatus. An organization whose application for tax
exemption is open to public inspection under section 6104(a)(1)(A) and
Sec. 301.6104(a)-1 may in writing request the withholding of
information contained in the application or supporting documents which
relates to any trade secret, patent, process, style of work, or
apparatus of the organization. The information will be withheld from
public inspection if the Commissioner determines that the disclosure of
such information would adversely affect the organization. Requests for
withholding information from public inspection should be filed with the
office with which the organization files the documents containing the
information. The request must clearly identify the material desired to
be withheld (the document, page, paragraph, and line) and must state why
[[Page 112]]
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 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
[[Page 113]]
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 Sec. Sec. 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 Sec. Sec. 301.6104(a)-1 through
Sec. 301.6104(a)-3 will be available for inspection only upon request.
If inspection at the National Office is desired, a request should be
made in writing to the Commissioner of Internal Revenue, Attention:
Freedom of Information Reading Room, 1111 Constitution Avenue, NW.,
Washington, D.C. 20224. Requests for inspection in the office of a
district director should be made in writing to the district director's
office. The request must describe the material to be inspected in
reasonably sufficient detail so that Internal Revenue Service personnel
can locate the material. If a tax-exempt organization has more than one
application for tax exemption open to public inspection, or if a pension
or other plan has more than one application for a determination letter
open to public inspection, only the most recent application and related
material will be made available for inspection unless the request states
otherwise. Further, in the case of a pension or other plan, only
Internal Revenue Service documents issued or delivered after the date of
the filing of the most recent application for a determination letter
will be made available for inspection, unless the request states
otherwise.
(2) Pension and other plans; inspection by plan participant or
authorized representative. As described in Sec. 301.6104(a)-4, material
relating to plans having fewer than 26 participants is only open to
inspection by a plan participant or authorized representative. In the
case of such a plan, the rules described in subparagraph (1) of this
paragraph apply. The request for inspection must include satisfactory
evidence that the person requesting inspection is a plan participant
(see Sec. 301.6104(a)-4(c)) or an authorized representative of such a
plan participant within the meaning of Sec. 301.6104(a)-4(d).
[[Page 114]]
(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. Any fees the Internal Revenue Service may charge for
furnishing copies under this section shall be no more than under the fee
schedule promulgated pursuant to section (a)(4)(A)(i) of the Freedom of
Information Act, 5 U.S.C. 552, by the Commissioner from time to time.
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, as amended by T.D. 9070, 68 FR
40769, July 9, 2003]
Sec. 301.6104(b)-1 Publicity of information on certain information
returns.
(a) In general. The following information, together with the name
and address of the organization or trust furnishing such information,
shall be a matter of public record:
(1) Except as otherwise provided in section 6104 and the regulations
thereunder, the information required by section 6033.
(2) The information furnished pursuant to section 6034 (relating to
returns by certain trusts) on Form 1041-A.
(3) The information required to be furnished by section 6058.
(b) Nondisclosure of certain information--(1) Names and addresses of
contributors. The names and addresses of contributors to an organization
other than a private foundation shall not be made available for public
inspection under section 6104(b).
(2) Amounts of contributions. The amounts of contributions and
bequests to an organization shall be available for public inspection
unless the disclosure of such information can reasonably be expected to
identify any contributor. Notwithstanding the preceding sentence, the
amounts of contributions and bequests to a private foundation shall be
available for public inspection.
(3) Foreign organizations. The names, addresses, and amounts of
contributions or bequests of persons who are not citizens of the United
States to a foreign organization described in section 4948(b) shall not
be made available for public inspection under section 6104(b).
(4) Confidential business information. Confidential business
information of contributors to any trust described in section 501(c)(21)
(black lung trusts) shall not be available for public inspection under
section 6104(b) provided:
(i) A request if filed with the office with which the trustee filed
the documents in which the information to be withheld is contained.
(ii) Such request clearly specifies the information to be withheld
and the reasons supporting the request for withholding, and
(iii) The Commissioner determines that such information is
confidential business information.
Information such as the contributor's estimated total liability for
black lung benefits, the contributor's coal pricing policies, or any
background information necessary to establish estimated total liability
or coal pricing policies are examples of confidential business
information that shall not be disclosed to the public under this
subparagraph.
(c) Place of inspection. Information furnished on the public portion
of returns (as described in paragraph (a) of this section) shall be made
available for public inspection at the Freedom of Information Reading
Room. Internal
[[Page 115]]
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. Any fees
the Internal Revenue Service may charge for furnishing copies under this
section shall be no more than under the fee schedule promulgated
pursuant to section (a)(4)(A)(i) of the Freedom of Information Act, 5
U.S.C. 552, by the Commissioner from time to time.
[T.D. 8026, 50 FR 20757, May 20, 1985, as amended by T.D. 9070, 68 FR
40769, July 9, 2003]
Sec. 301.6104(c)-1 Disclosure of certain information to State officials.
(a) In general--(1) Charitable organizations and applicants. Subject
to the disclosure, recordkeeping, and safeguard provisions of section
6103 of the Internal Revenue Code (Code), and only as necessary to
administer State laws regulating charitable organizations, upon written
request by an appropriate State officer (ASO, as defined in paragraph
(i)(1) of this section), the Internal Revenue Service (IRS) may, under
section 6104(c)(1) and (2), disclose or make available to the ASO (or to
a person designated by the ASO as provided in paragraph (f)(1)(ii) of
this section) the returns and return information described in paragraph
(c) of this section with respect to--
(i) Any organization described or formerly described in section
501(c)(3) and exempt or formerly exempt from taxation under section
501(a) (a charitable organization); or
(ii) Any organization that has applied for recognition as an
organization described in section 501(c)(3) (an applicant).
[[Page 116]]
(2) Section 501(c) organizations not described in section 501(c)(1)
or (3). Subject to the disclosure, recordkeeping, and safeguard
provisions of section 6103, and upon written request by an ASO, the IRS
may disclose or make available to the ASO (or to a person designated by
the ASO as provided in paragraph (f)(1)(ii) of this section) under
section 6104(c)(3) returns and return information regarding any
organization described or formerly described in section 501(c) other
than section 501(c)(1) or (3). Such information will be disclosed or
made available only as necessary to administer State laws regulating the
solicitation or administration of the charitable funds or charitable
assets of these organizations.
(b) Disclosure agreement. The IRS may require an ASO to execute a
disclosure agreement or similar document specifying the procedures,
terms, and conditions for the disclosure or inspection of information
under section 6104(c), including compliance with the safeguards
prescribed by section 6103(p)(4), as well as specifying the information
to be disclosed. Such an agreement or similar document constitutes the
request for disclosure required by section 6104(c)(1)(C), as well as the
written request required by section 6104(c)(2)(C)(i) and (c)(3).
(c) Disclosures regarding charitable organizations and applicants--
(1) In general. With respect to any organization described in paragraph
(d) of this section, the IRS may disclose or make available for
inspection under section 6104(c)(1) and (2) and paragraph (a)(1) of this
section to an ASO the following returns and return information with
respect to a charitable organization or applicant:
(i) A refusal or proposed refusal to recognize an organization's
exemption as a charitable organization (a final or proposed denial
letter).
(ii) Return information regarding a grant of exemption following a
proposed denial.
(iii) A revocation of exemption as a charitable organization (a
final revocation letter), including a notice of termination or
dissolution.
(iv) A proposed revocation of recognition of exemption as a
charitable organization (a proposed revocation letter).
(v) Return information regarding the final disposition of a proposed
revocation of recognition other than by final revocation.
(vi) A notice of deficiency or proposed notice of deficiency of tax
imposed under section 507 or chapter 41 or 42 of the Code on the
organization or on a taxable person (as described in paragraph (i)(4) of
this section).
(vii) Returns and return information regarding the final disposition
of a proposed notice of deficiency of tax imposed under section 507 or
chapter 41 or 42 of the Code on the organization other than by issuance
of a notice of deficiency.
(viii) The names, addresses, and taxpayer identification numbers of
applicants for charitable status, provided on an applicant-by-applicant
basis or by periodic lists of applicants. Under this paragraph
(c)(1)(viii), the IRS may respond to inquiries from an ASO as to whether
a particular organization has applied for recognition of exemption as a
charitable organization.
(ix) Return information regarding the final disposition of an
application for recognition of exemption where no proposed denial letter
is issued, including whether the application was withdrawn or whether
the applicant failed to establish its exemption.
(x) Returns and return information relating to the return
information described in paragraph (c)(1) of this section, except for
returns and return information relating to proposed notices of
deficiency described in paragraph (c)(1)(vi) of this section with
respect to taxable persons.
(2) Disclosure of evidence of noncompliance with certain State laws.
With respect to any organization described in paragraph (d) of this
section, the IRS may disclose to the ASO or make available for the ASO's
inspection under section 6104(c)(1) and (2) and paragraph (a)(1) of this
section the returns and return information of a charitable organization
or applicant, as listed in paragraph (c)(1) of this section, if the IRS
determines that such information might constitute evidence of
noncompliance with the laws under the jurisdiction of the ASO regulating
charitable organizations and applicants. Such information may be
disclosed on
[[Page 117]]
the IRS's own initiative, subject to the disclosure, recordkeeping, and
safeguard provisions of section 6103. Disclosures under this paragraph
(c)(2) may be made before the IRS issues a proposed determination
(denial of recognition, revocation, or notice of deficiency) or any
other action by the IRS described in this section.
(d) Organizations to which disclosure applies. Regarding the
information described in paragraphs (a)(1) and (2) of this section, the
IRS will disclose or make available for inspection to an ASO such
information only with respect to--
(1) An organization formed under the laws of the ASO's State;
(2) An organization, the principal office of which is located in the
ASO's State;
(3) An organization that, as determined by the IRS, is or might be
subject to the laws of the ASO's State regulating charitable
organizations or the solicitation or administration of charitable funds
or charitable assets; or
(4) A private foundation required by Sec. 1.6033-2(a)(iv) of this
chapter to list the ASO's State on any of the foundation's returns filed
for its last five taxable years.
(e) Disclosure limitations. Notwithstanding any other provision of
this section, the IRS will not disclose or make available for inspection
under section 6104(c) any information, the disclosure of which it
determines would seriously impair Federal tax administration, including,
but not limited to--
(1) Identification of a confidential informant or interference with
a civil or criminal tax investigation; and
(2) Information obtained pursuant to a tax convention, as defined in
section 6105(c)(2), between the United States and a foreign government.
(f) Disclosure recipients--(1) In general. The IRS may disclose
returns and return information under section 6104(c) to, or make it
available for inspection by--
(i) An ASO, as defined in paragraph (i)(1) of this section, or
(ii) A person other than an ASO, but only if that person is a State
officer or employee (which excludes an agent or contractor) designated
by the ASO to receive information under section 6104(c) on behalf of the
ASO, as specified in paragraph (f)(2) of this section.
(2) Designation by ASO. An ASO may designate State officers or
employees to receive information under section 6104(c) on the ASO's
behalf by specifying in writing each person's name and job title, and
the name and address of the person's office. The ASO must promptly
notify the IRS in writing of any additions, deletions, or other changes
to the list of designated persons.
(g) Redisclosure--(1) In general. An ASO to whom a return or return
information has been disclosed may thereafter disclose such information
to another State officer or employee (which excludes an agent or
contractor) only as necessary to administer State laws governing
charitable organizations or State laws regulating the solicitation or
administration of charitable funds or charitable assets of noncharitable
exempt organizations.
(2) Civil administrative or judicial proceedings. Except as provided
in paragraph (h) of this section, an ASO to whom a return or return
information has been disclosed may thereafter disclose such information
to another State officer or employee (which excludes an agent or
contractor) who is personally and directly preparing for a civil
proceeding before a State administrative body or court in a matter
involving the enforcement of State laws regulating organizations with
respect to which information can be disclosed under this section, solely
for use in such a proceeding, but only if--
(i) The organization or a taxable person is a party to the
proceeding, or the proceeding arose out of, or in connection with,
determining the civil liability of the organization or a taxable person,
or collecting such civil liability, under State laws governing
organizations with respect to which information can be disclosed under
this subsection;
(ii) The treatment of an item reflected on such a return is directly
related to the resolution of an issue in the proceeding; or
(iii) The return or return information directly relates to a
transactional relationship between the organization or a taxable person
and a person who is a
[[Page 118]]
party to the proceeding that directly affects the resolution of an issue
in the proceeding.
(h) Redisclosure limitation. Before disclosing any return or return
information received under section 6104(c) in a proceeding described in
paragraph (g)(2) of this section, the ASO must notify the IRS of the
intention to make such a disclosure. No State officer or employee may
make such a disclosure except in accordance with any conditions the IRS
might impose in response to the ASO's notice of intent. No such
disclosure may be made if the IRS determines that the disclosure would
seriously impair Federal tax administration.
(i) Definitions. For purposes of section 6104(c) and this section--
(1) Appropriate State officer or ASO means--
(i) The State attorney general;
(ii) The State tax officer;
(iii) With respect to a charitable organization or applicant, any
State officer other than the attorney general or tax officer charged
with overseeing charitable organizations, provided that the officer
shows the IRS that the officer is an ASO by presenting a letter from the
State attorney general describing the functions and authority of the
officer under State law, with sufficient facts for the IRS to determine
that the officer is an ASO; and
(iv) With respect to a section 501(c) organization that is not
described in section 501(c)(1) or (c)(3), the head of the agency
designated by the State attorney general as having primary
responsibility for overseeing the solicitation of funds for charitable
purposes, provided that the officer shows the IRS that the officer is an
ASO by presenting a letter from the State attorney general describing
the functions and authority of the officer under State law, with
sufficient facts for the IRS to determine that the officer is an ASO.
(2) Return has the same meaning as in section 6103(b)(1).
(3) Return information has the same meaning as in section
6103(b)(2).
(4) Taxable person means any person who is liable or potentially
liable for excise taxes under chapter 41 or 42 of the Code. Such a
person includes--
(i) A disqualified person described in section 4946(a)(1),
4951(e)(4), or 4958(f);
(ii) A foundation manager described in section 4946(b);
(iii) An organization manager described in section 4955(f)(2) or
4958(f)(2);
(iv) A person described in section 4958(c)(3)(B);
(v) An entity manager described in section 4965(d); and
(vi) A fund manager described in section 4966(d)(3).
(j) Failure to comply. Upon a determination that an ASO has failed
to comply with the requirements of section 6103(p)(4), the IRS may take
the actions it deems necessary to ensure compliance, including the
refusal to disclose any further returns or return information to the ASO
until the IRS determines that the requirements of section 6103(p)(4)
have been met. For procedures for the administrative review of a
determination that an authorized recipient has failed to safeguard
returns or return information, see Sec. 301.6103(p)(7)-1.
(k) Applicability date. The rules of this section apply on and after
August 16, 2022.
[T.D. 9964, 87 FR 50244, Aug. 16, 2022]
Sec. 301.6104(d)-0 Table of contents.
This section lists the major captions contained in Sec. Sec.
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.
[[Page 119]]
(1) Permissible conditions on public inspection.
(2) Organizations that do not maintain permanent offices.
(d) Special rules relating to copies.
(1) Time and place for providing copies in response to requests made
in person.
(i) In general.
(ii) Unusual circumstances.
(iii) Agents for providing copies.
(2) Request for copies in writing.
(i) In general.
(ii) Time and manner of fulfilling written requests.
(A) In general.
(B) Request for a copy of parts of document.
(C) Agents for providing copies.
(3) Fees for copies.
(i) In general.
(ii) Form of payment.
(A) Request made in person.
(B) Request made in writing.
(iii) Avoidance of unexpected fees.
(iv) Responding to inquiries of fees charged.
(e) Documents to be provided by regional and district offices.
(f) Documents to be provided by local and subordinate organizations.
(1) Applications for tax exemption.
(2) Annual information returns.
(3) Failure to comply.
(g) Failure to comply with public inspection or copying
requirements.
(h) Effective date.
(1) In general.
(2) Private foundation annual information returns.
Sec. 301.6104(d)-2 Making applications and returns widely available.
(a) In general.
(b) Widely available.
(1) In general.
(2) Internet posting.
(i) In general.
(ii) Transition rule.
(iii) Reliability and accuracy.
(c) Discretion to prescribe other methods for making documents
widely available.
(d) Notice requirement.
(e) Effective date.
Sec. 301.6104(d)-3 Tax-exempt organization subject to harassment
campaign.
(a) In general.
(b) Harassment.
(c) Special rule for multiple requests from a single individual or
address.
(d) Harassment determination procedure.
(e) Effect of a harassment determination.
(f) Examples.
(g) Effective date.
[T.D. 8861, 65 FR 2033, Jan. 13, 2000]
Sec. 301.6104(d)-1 Public inspection and distribution of
applications for tax exemption and annual information returns
of tax-exempt organizations.
(a) In general. Except as otherwise provided in this section, if a
tax-exempt organization (as defined in paragraph (b)(1) of this section)
filed an application for recognition of exemption under section 501, it
shall make its application for tax exemption (as defined in paragraph
(b)(3) of this section) available for public inspection without charge
at its principal, regional and district offices during regular business
hours. Except as otherwise provided in this section, a tax-exempt
organization 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
Sec. Sec. 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 Sec. Sec. 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).
[[Page 120]]
(2) Private foundation. The term private foundation means a private
foundation as defined in section 509(a) or a nonexempt charitable trust
described in section 4947(a)(1) or a nonexempt private foundation
subject to the information reporting requirements of section 6033
pursuant to section 6033(d).
(3) Application for tax exemption--(i) In general. Except as
described in paragraph (b)(3)(iii) of this section, the term application
for tax exemption includes any prescribed application form (such as Form
1023 or Form 1024), all documents and statements the Internal Revenue
Service requires an applicant to file with the form, any statement or
other supporting document submitted by an organization in support of its
application, and any letter or other document issued by the Internal
Revenue Service concerning the application (such as a favorable
determination letter or a list of questions from the Internal Revenue
Service about the application). For example, a legal brief submitted in
support of an application, or a response to questions from the Internal
Revenue Service during the application process, is part of an
application for tax exemption.
(ii) No prescribed application form. If no form is prescribed for an
organization's application for tax exemption, the application for tax
exemption includes--
(A) The application letter and copy of the articles of
incorporation, declaration of trust, or other similar instrument that
sets forth the permitted powers or activities of the organization;
(B) The organization's bylaws or other code of regulations;
(C) The organization's latest financial statements showing assets,
liabilities, receipts and disbursements;
(D) Statements describing the character of the organization, the
purpose for which it was organized, and its actual activities;
(E) Statements showing the sources of the organization's income and
receipts and their disposition; and
(F) Any other statements or documents the Internal Revenue Service
required the organization to file with, or that the organization
submitted in support of, the application letter.
(iii) Exceptions. The term application for tax exemption does not
include--
(A) Any application for tax exemption filed by an organization that
the Internal Revenue Service has not yet recognized, on the basis of the
application, as exempt from taxation under section 501 for any taxable
year;
(B) Any application for tax exemption filed before July 15, 1987,
unless the organization filing the application had a copy of the
application on July 15, 1987;
(C) In the case of a tax-exempt organization other than a private
foundation, the name and address of any contributor to the organization;
or
(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).
[[Page 121]]
(ii) Exceptions. The term annual information return does not include
Schedule A of Form 990-BL, Form 990-T, Exempt Organization Business
Income Tax Return, Schedule K-1 of Form 1065 or Form 1120-POL, U.S.
Income Tax Return For Certain Political Organizations. In the case of a
tax-exempt organization other than a private foundation, the term annual
information return does not include the name and address of any
contributor to the organization.
(iii) Returns more than 3 years old. The term annual information
return does not include any return after the expiration of 3 years from
the date the return is required to be filed (including any extension of
time that has been granted for filing such return) or is actually filed,
whichever is later. If an organization files an amended return, however,
the amended return must be made available for a period of 3 years
beginning on the date it is filed with the Internal Revenue Service.
(iv) Local or subordinate organizations. For rules relating to
annual information returns of local or subordinate organizations, see
paragraph (f)(2) of this section.
(5) Regional or district offices--(i) In general. A regional or
district office is any office of a tax-exempt organization, other than
its principal office, that has paid employees, whether part-time or
full-time, whose aggregate number of paid hours a week are normally at
least 120.
(ii) Site not considered a regional or district office. A site is
not considered a regional or district office, however, if--
(A) The only services provided at the site further exempt purposes
(such as day care, health care or scientific or medical research); and
(B) The site does not serve as an office for management staff, other
than managers who are involved solely in managing the exempt function
activities at the site.
(c) Special rules relating to public inspection--(1) Permissible
conditions on public inspection. A tax-exempt organization may have an
employee present in the room during an inspection. The organization,
however, must allow the individual conducting the inspection to take
notes freely during the inspection. If the individual provides
photocopying equipment at the place of inspection, the organization must
allow the individual to photocopy the document at no charge.
(2) Organizations that do not maintain permanent offices. If a tax-
exempt organization does not maintain a permanent office, the
organization shall comply with the public inspection requirements of
paragraph (a) of this section by making its application for tax
exemption and its annual information returns, as applicable, available
for inspection at a reasonable location of its choice. Such an
organization shall permit public inspection within a reasonable amount
of time after receiving a request for inspection (normally not 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
[[Page 122]]
the day that the unusual circumstances cease to exist or the fifth
business day after the date of the request, whichever occurs first.
Unusual circumstances include, but are not limited to, receipt of a
volume of requests that exceeds the organization's daily capacity to
make copies; requests received shortly before the end of regular
business hours that require an extensive amount of copying; or requests
received on a day when the organization's managerial staff capable of
fulfilling the request is conducting special duties, such as student
registration or attending an off-site meeting or convention, rather than
its regular administrative duties.
(iii) Agents for providing copies. A principal, regional or district
office of a tax-exempt organization subject to the requirements of this
section may retain a local agent to process requests made in person for
copies of its documents. A local agent must be located within reasonable
proximity of the applicable office. A local agent that receives a
request made in person for copies must provide the copies within the
time limits and under the conditions that apply to the organization
itself. For example, a local agent generally must provide a copy to a
requester on the day the agent receives the request. When a principal,
regional or district office of a tax-exempt organization using a local
agent receives a request made in person for a copy, it must immediately
provide the name, address and telephone number of the local agent to the
requester. An organization that provides this information is not
required to respond further to the requester. However, the penalty
provisions of sections 6652(c)(1)(C), 6652(c)(1)(D), and 6685 continue
to apply to the tax-exempt organization if the organization's local
agent fails to provide the documents as required under section 6104(d).
(2) Request for copies in writing--(i) In general. A tax-exempt
organization must honor a written request for a copy of documents (or
the requested part) that the organization is required to provide under
section 6104(d) if the request--
(A) Is addressed to, and delivered by mail, electronic mail,
facsimile, or a private delivery service as defined in section 7502(f)
to a principal, regional or district office of the organization; and
(B) Sets forth the address to which the copy of the documents should
be sent.
(ii) Time and manner of fulfilling written requests--(A) In general.
A tax-exempt organization receiving a written request for a copy shall
mail the copy of the requested documents (or the requested parts of
documents) within 30 days from the date it receives the request.
However, if a tax-exempt organization requires payment in advance, it is
only required to provide the copies within 30 days from the date it
receives 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.
[[Page 123]]
(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 total of the applicable per-page copying
charge prescribed by the fee schedule promulgated pursuant to section
(a)(4)(A)(i) of the Freedom of Information Act, 5 U.S.C. 552, by the
Commissioner from time to time, and the actual postage costs incurred by
the organization to send the copies. The applicable per-page copying
charge shall be determined without regard to any applicable fee
exclusion provided in the fee schedule for an initial or de minimis
number of pages (e.g., the first 100 pages). 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
[[Page 124]]
local or subordinate organization covered by a group exemption letter
referred to in Sec. 1.508-1 of this chapter) must, upon request, make
available for public inspection, or provide copies of, the application
submitted to the Internal Revenue Service by the central or parent
organization to obtain the group exemption letter and those documents
which were submitted by the central or parent organization to include
the local or subordinate organization in the group exemption letter.
However, if the central or parent organization submits to the Internal
Revenue Service a list or directory of local or subordinate
organizations covered by the group exemption letter, the local or
subordinate organization is required to provide only the application for
the group exemption ruling and the pages of the list or directory that
specifically refer to it. The local or subordinate organization shall
permit public inspection, or comply with a request for copies made in
person, within a reasonable amount of time (normally not more than 2
weeks) after receiving a request made in person for public inspection or
copies and at a reasonable time of day. In a case where the requester
seeks inspection, the local or subordinate organization may mail a copy
of the applicable documents to the requester within the same time period
in lieu of allowing an inspection. In such a case, the organization may
charge the requester for copying and actual postage costs only if the
requester consents to the charge. If the local or subordinate
organization receives a written request for a copy of its application
for tax exemption, it must fulfill the request in the time and manner
specified in paragraph (d)(2) of this section. The requester has the
option of requesting from the central or parent organization, at its
principal office, inspection or copies of the application for group
exemption and the material submitted by the central or parent
organization to include a local or subordinate organization in the group
ruling. If the central or parent organization submits to the Internal
Revenue Service a list or directory of local or subordinate
organizations covered by the group exemption letter, it must make such
list or directory available for public inspection, but it is required to
provide copies only of those pages of the list or directory that refer
to particular local or subordinate organizations specified by the
requester. The central or parent organization must fulfill such requests
in the time and manner specified in paragraphs (c) and (d) of this
section.
(2) Annual information returns. A local or subordinate organization
that does not file its own annual information return (because it is
affiliated with a central or parent organization that files a group
return pursuant to Sec. 1.6033-2(d) of this chapter) must, upon
request, make available for public inspection, or provide copies of, the
group returns filed by the central or parent organization. However, if
the group return includes separate schedules with respect to each local
or subordinate organization included in the group return, the local or
subordinate organization receiving the 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.
[[Page 125]]
(3) Failure to comply. If an organization fails to comply with the
requirements specified in this paragraph, the penalty provisions of
sections 6652(c)(1)(C), 6652(c)(1)(D), and 6685 apply.
(g) Failure to comply with public inspection or copying
requirements. If a tax-exempt organization denies an individual's
request for inspection or a copy of an application for tax exemption or
an annual information return as required under this section, and the
individual wants to alert the Internal Revenue Service to the possible
need for enforcement action, the individual may provide a statement to
the district director for the key district in which the applicable tax-
exempt organization's principal office is located (or such other person
as the Commissioner may designate) that describes the reason why the
individual believes the denial was in violation of the requirements of
section 6104(d).
(h) Effective date--(1) In general. For a tax-exempt organization,
other than a private foundation, this section is applicable June 8,
1999. For a private foundation, this section is applicable (except as
provided in paragraph (h)(2) of this section) beginning March 13, 2000.
(2) Private foundation annual information returns. This section does
not apply to any private foundation return the due date for which
(determined with regard to any extension of time for filing) is before
the applicable date for private foundations specified in paragraph
(h)(1) of this section.
[T.D. 8818, 64 FR 17285, Apr. 9, 1999. Redesignated and amended by T.D.
8861, 65 FR 2033, 2034, Jan. 13, 2000, as amended by T.D. 9070, 68 FR
40769, July 9, 2003]
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 126]]
page on or before April 9, 1999 in a manner consistent with regulation
project REG-246250-96 (1997 C.B. 627) (See Sec. 601.601(d)(2) of this
chapter.) will be treated as satisfying the requirements of paragraphs
(b)(2)(i)(B) & (C) of this section until June 8, 2000 provided that an
individual can access, download, view and print the document without
payment of a fee to the tax-exempt organization or to another entity
maintaining the World Wide Web page.
(iii) Reliability and accuracy. In order for the document to be
widely available through an Internet posting, the entity maintaining the
World Wide Web page must have procedures for ensuring the reliability
and accuracy of the document that it posts on the page and must take
reasonable precautions to prevent alteration, destruction or accidental
loss of the document when posted on its page. In the event that a posted
document is altered, destroyed or lost, the entity must correct or
replace the document.
(c) Discretion to prescribe other methods for making documents
widely available. The Commissioner, from time to time, may prescribe
additional methods, other than an Internet posting meeting the
requirements of paragraph (b)(2) of this section, that a tax-exempt
organization may use to make its documents widely available.
(d) Notice requirement. If a tax-exempt organization has made its
application for tax exemption and/or an annual information return widely
available it must notify any individual requesting a copy where the
documents are available (including the address on the World Wide Web, if
applicable). If the request is made in person, the organization shall
provide such notice to the individual immediately. If the request is
made in writing, the notice shall be provided within 7 days of receiving
the request.
(e) Effective date. For a tax-exempt organization, other than a
private foundation, this section is applicable June 8, 1999. For a
private foundation, this section is applicable beginning March 13, 2000.
[T.D. 8818, 64 FR 17285, Apr. 9, 1999. Redesignated and amended by T.D.
8861, 65 FR 2034, Jan. 13, 2000]
Sec. 301.6104(d)-3 Tax-exempt organization subject to harassment
campaign.
(a) In general. If the district director for the key district in
which the organization's principal office is located (or such other
person as the Commissioner may designate) determines that the
organization is the subject of a harassment campaign and compliance with
the requests that are part of the harassment campaign would not be in
the public interest, a tax-exempt organization is not required to
fulfill a request for a copy (as otherwise required by Sec.
301.6104(d)-1(a)) that it reasonably believes is part of the campaign.
(b) Harassment. A group of requests for an organization's
application for tax exemption or annual information returns is
indicative of a harassment campaign if the requests are part of a single
coordinated effort to disrupt the 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
[[Page 127]]
district director for the applicable key district (or such other person
as the Commissioner may designate) has determined that the organization
is subject to a harassment campaign.
(d) Harassment determination procedure. A tax-exempt organization
may apply for a determination that it is the subject of a harassment
campaign and that compliance with requests that are part of the campaign
would not be in the public interest by submitting a signed application
to the district director for the key district where the organization's
principal office is located (or such other person as the Commissioner
may designate). The application shall consist of a written statement
giving the organization's name, address, employer identification number,
and the name, address and telephone number of the person to contact
regarding the application. The application must describe in detail the
facts and circumstances that the organization believes support a
determination that the organization is subject to a harassment campaign.
The organization may suspend compliance with respect to any request for
a copy of its documents based on its reasonable belief that such request
is part of a harassment campaign, provided that the organization files
an application for a determination within 10 business days from the day
the organization first suspends compliance with respect to a request
that is part of the alleged campaign. In addition, the organization may
suspend compliance with any request it reasonably believes to be part of
the harassment campaign until it receives a response to its application
for a harassment campaign determination.
(e) Effect of a harassment determination. If the appropriate
district director (or such other person as the Commissioner may
designate) determines that a tax-exempt organization is the subject of a
harassment campaign and it is not in the public interest to comply with
requests that are part of the campaign, such organization is not
required to comply with any request for copies that it reasonably
believes is part of the campaign. This determination may be subject to
other terms and conditions set forth by the district director (or such
other person as the Commissioner may designate). A person (as defined in
section 6652(c)(4)(C)) shall not be liable for any penalty under
sections 6652(c)(1)(C), 6652(c)(1)(D) or 6685 for failing to timely
provide a copy of documents in response to a request covered in a
request for a harassment determination if the organization fulfills the
request within 30 days of receiving a determination from the district
director (or such other person as the Commissioner may designate) that
the organization is not subject to a harassment campaign.
Notwithstanding the preceding sentence, if the district director (or
such other person as the Commissioner may designate) further determines
that the organization did not have a reasonable basis for requesting a
determination that it was subject to a harassment campaign or reasonable
belief that a request was part of the campaign, the 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
[[Page 128]]
the facts and circumstances show that some of the individuals making
requests are hostile to Y, they do not show that the individuals have
organized a campaign that will place enough of a burden on Y to disrupt
its activities. Therefore, Y must respond to each of the 25 requests it
receives in March.
Example 3. The facts are the same as in Example 2, except that
during March 1997, Y receives 100 requests. In addition to the fifteen
requests from members of organization X's board, 75 of the requests are
similarly worded form letters. Y discovers that several individuals
associated with X have urged the X's members and supporters, via the
Internet, to submit as many requests for a copy of Y's annual
information returns as they can. The message circulated on the Internet
provides a form letter that can be used to make the request. Both the
appeal via the Internet and the requests for copies received by Y
contain hostile language. During the same year but before the 100
requests were received, Y provided copies of its annual information
returns to the headquarters of X. The facts and circumstances show that
the 75 form letter requests are coordinated for the purpose of
disrupting Y's operations, and not to collect information that has
already been provided to an association representing the requesters'
interests. Thus, the fact and circumstances show that Y is the subject
of an organized harassment campaign. To confirm that it may disregard
the 90 requests that constitute the harassment campaign, Y must apply to
the applicable district director (or such other person as the
Commissioner may designate) for a determination. Y may disregard the 90
requests while the application is pending and after the determination is
received. However, it must respond within the applicable time limits to
the 10 requests it received in March that were not part of the
harassment campaign.
Example 4. The facts are the same as in Example 3, except that Y
receives 5 additional requests from 5 different representatives of the
news media who in the past have published articles about Y. Some of
these articles were hostile to Y. Normally, the Internal Revenue Service
will not consider a tax-exempt organization to have a reasonable belief
that a request from a member of the news media is part of a harassment
campaign absent additional facts that demonstrate that the organization
could reasonably believe the particular requests from the news media to
be part of a harassment campaign. Thus, absent such additional facts, Y
must respond within the applicable time limits to the 5 requests that it
received from representatives of the news media.
(g) Effective date. For a tax-exempt organization, other than a
private foundation, this section is applicable June 8, 1999. For a
private foundation, this section is applicable beginning March 13, 2000.
[T.D. 8818, 64 FR 17289, Apr. 9, 1999. Redesignated and amended by T.D.
8861, 65 FR 2034, Jan. 13, 2000]
Sec. 301.6105-1 Compilation of relief from excess profits tax cases.
Pursuant to and in accordance with the provisions of section 6105,
the Commissioner shall make and publish in the Federal Register a
compilation, for each fiscal year beginning after June 30, 1941, of all
cases in which relief under the provisions of section 722 of the
Internal Revenue Code of 1939, as amended, has been allowed during such
fiscal year by the Commissioner and by the Tax Court of the United
States.
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 Sec. Sec.
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
[[Page 129]]
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 Sec. Sec. 301.7701-11 and 301.7701-
12, respectively. For the definition of IRS individual taxpayer
identification number, see paragraph (d)(3) of this section. For the
definition of IRS adoption taxpayer identification number, see Sec.
301.6109-3(a). Except as otherwise provided in applicable regulations
under this chapter or on a return, statement, or other document, and
related instructions, taxpayer identifying numbers must be used as
follows:
(A) Except as otherwise provided in paragraph (a)(1)(ii)(B) and (D)
of this section, and Sec. 301.6109-3, an individual required to furnish
a taxpayer identifying number must use a social security number.
(B) Except as otherwise provided in paragraph (a)(1)(ii)(D) of this
section and Sec. 301.6109-3, an individual required to furnish a
taxpayer identifying number but who is not eligible to obtain a social
security number must use an IRS individual taxpayer identification
number.
(C) Any person other than an individual (such as corporations,
partnerships, nonprofit associations, trusts, estates, and similar
nonindividual persons) that is required to furnish a taxpayer
identifying number must use an employer identification number.
(D) An individual, whether U.S. or foreign, who is an employer or
who is engaged in a trade or business as a sole proprietor should use an
employer identification number as required by returns, statements, or
other documents and their related instructions.
(2) A trust that is treated as owned by one or more persons pursuant
to sections 671 through 678--(i) Obtaining a taxpayer identification
number--(A) General rule. Unless the exception in paragraph (a)(2)(i)(B)
of this section applies, a trust that is treated as owned by one or more
persons under sections 671 through 678 must obtain a taxpayer
identification number as provided in paragraph (d)(2) of this section.
(B) Exception for a trust all of which is treated as owned by one
grantor or one other person and that reports under Sec. 1.671-
4(b)(2)(i)(A) of this chapter. A trust that is treated as owned by one
grantor or one other person under sections 671 through 678 need not
obtain a taxpayer identification number, provided the trust reports
pursuant to Sec. 1.671-4(b)(2)(i)(A) of this chapter. The trustee must
obtain a taxpayer identification number as provided in paragraph (d)(2)
of this section for the first taxable year that the trust is no longer
owned by one grantor or one other person or for the first taxable year
that the trust does not report pursuant to Sec. 1.671-4(b)(2)(i)(A) 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.
(3) Obtaining a taxpayer identification number for a trust, or
portion of a trust, following the death of the individual treated as the
owner--(i) In general--(A) A trust all of which was treated as owned by
a decedent. In general, a trust all of which is treated as owned by a
decedent under subpart E (section 671 and following), part I, subchapter
J, chapter 1 of the Internal Revenue Code as of the date of the
decedent's death must obtain a new taxpayer identification number
following the death of the decedent if the trust will continue after the
death of the decedent.
[[Page 130]]
(B) Taxpayer identification number of trust with multiple owners.
With respect to a portion of a trust treated as owned under subpart E
(section 671 and following), part I, subchapter J, chapter 1 (subpart E)
of the Internal Revenue Code by a decedent as of the date of the
decedent's death, if, following the death of the decedent, the portion
treated as owned by the decedent remains part of the original trust and
the other portion (or portions) of the trust continues to be treated as
owned under subpart E by a grantor(s) or other person(s), the trust
reports under the taxpayer identification number assigned to the trust
prior to the decedent's death and the portion of the trust treated as
owned by the decedent prior to the decedent's death (assuming the
decedent's portion of the trust is not treated as terminating upon the
decedent's death) continues to report under the taxpayer identification
number used for reporting by the other portion (or portions) of the
trust. For example, if a trust, reporting under Sec. 1.671-4(a) of this
chapter, is treated as owned by three persons and one of them dies, the
trust, including the portion of the trust no longer treated as owned by
a grantor or other person, continues to report under the tax
identification number assigned to the trust prior to the death of that
person. See Sec. 1.671-4(a) of this chapter regarding rules for filing
the Form 1041, ``U.S. Income Tax Return for Estates and Trusts,'' where
only a portion of the trust is treated as owned by one or more persons
under subpart E.
(ii) Furnishing correct taxpayer identification number to payors
following the death of the decedent. If the trust continues after the
death of the decedent and is required to obtain a new taxpayer
identification number under paragraph (a)(3)(i)(A) of this section, the
trustee must furnish payors with a new Form W-9, ``Request for Taxpayer
Identification Number and Certification,'' or an acceptable substitute
Form W-9, containing the new taxpayer identification number required
under paragraph (a)(3)(i)(A) of this section, the name of the trust, and
the address of the trustee.
(4) Taxpayer identification number to be used by a trust upon
termination of a section 645 election--(i) If there is an executor. Upon
the termination of the section 645 election period, if there is an
executor, the trustee of the former electing trust may need to obtain a
taxpayer identification number. If Sec. 1.645-1(g) of this chapter
regarding the appointment of an executor after a section 645 election is
made applies to the electing trust, the electing trust must obtain a new
TIN upon termination of the election period. See the instructions to the
Form 1041 for whether a new taxpayer identification number is required
for other former electing trusts.
(ii) If there is no executor. Upon termination of the section 645
election period, if there is no executor, the trustee of the former
electing trust must obtain a new taxpayer identification number.
(iii) Requirement to provide taxpayer identification number to
payors. If the trustee is required to obtain a new taxpayer
identification number for a former electing trust pursuant to this
paragraph (a)(4), or pursuant to the instructions to the Form 1041, the
trustee must furnish all payors of the trust with a completed Form W-9
or acceptable substitute Form W-9 signed under penalties of perjury by
the trustee providing each payor with the name of the trust, the new
taxpayer identification number, and the address of the trustee.
(5) Persons treated as payors. For purposes of paragraphs (a)(2),
(3), and (4) of this section, a payor is a person described in
Sec. Sec. 1.671-4(b)(4) of this chapter.
(6) Effective date. Paragraphs (a)(3), (4), and (5) of this section
apply to trusts of decedents dying on or after December 24, 2002.
(b) Requirement to furnish one's own number--(1) U.S. persons. Every
U.S. person who makes under this title a return, statement, or other
document must furnish its own taxpayer identifying number as required by
the forms and the accompanying instructions. A U.S. person whose number
must be included on a document filed by another person must give the
taxpayer identifying number so required to the other person on request.
For penalties for failure to supply taxpayer identifying numbers, see
sections 6721 through 6724. For provisions dealing specifically with
[[Page 131]]
the duty of employees with respect to their social security numbers, see
Sec. 31.6011(b)-2 (a) and (b) of this chapter (Employment Tax
Regulations). For provisions dealing specifically with the duty of
employers with respect to employer identification numbers, see Sec.
31.6011(b)-1 of this chapter (Employment Tax Regulations).
(2) Foreign persons. The provisions of paragraph (b)(1) of this
section regarding the furnishing of one's own number shall apply to the
following foreign persons--
(i) A foreign person that has income effectively connected with the
conduct of a U.S. trade or business at any time during the taxable year;
(ii) A foreign person that has a U.S. office or place of business or
a U.S. fiscal or paying agent at any time during the taxable year;
(iii) A nonresident alien treated as a resident under section
6013(g) or (h);
(iv) A foreign person that makes a return of tax (including income,
estate, and gift tax returns), an amended return, or a refund claim
under this title but excluding information returns, statements, or
documents;
(v) A foreign person that makes an election under Sec. 301.7701-
3(c);
(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;
(vii) A foreign person whose taxpayer identifying number is required
to be furnished on any return, statement, or other document as required
by the income tax regulations under section 897 or 1445. This paragraph
(b)(2)(vii) applies as of November 3, 2003; and
(viii) A foreign person that furnishes a withholding certificate
described in Sec. 1.1446-1(c)(2) or (3) of this chapter or whose
taxpayer identification number is required to be furnished on any
return, statement, or other document as required by the income tax
regulations under section 1446. This paragraph (b)(2)(viii) shall apply
to partnership taxable years beginning after May 18, 2005, or such
earlier time as the regulations under Sec. Sec. 1.1446-1 through
1.1446-5 of this chapter apply by reason of an election under Sec.
1.1446-7 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),
(vi), (vii), or (viii) 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)
or (viii) 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), (vi), (vii), or (viii) 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. References in this paragraph
(c) to paragraph (b)(2)(viii) of this section shall apply to partnership
taxable years beginning after May 18, 2005, or such earlier time as the
regulations under Sec. Sec. 1.1446-1 through 1.1446-5 of this chapter
apply by reason of an election under Sec. 1.1446-7 of this chapter.
(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
[[Page 132]]
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) Updating of application information--(A) Requirements. Persons
issued employer identification numbers in accordance with the
application process set forth in paragraph (d)(2)(i) of this section
must provide to the Internal Revenue Service any updated application
information in the manner and frequency required by forms, instructions,
or other appropriate guidance.
(B) Effective/applicability date. Paragraph (d)(2)(ii)(A) of this
section applies to all persons possessing an employer identification
number on or after January 1, 2014.
(iii) Special rule for Section 708(b)(1)(B) terminations. A new
partnership that is formed as a result of the termination of a
partnership under section 708(b)(1)(B) will retain the employer
identification number of the terminated partnership. This paragraph
(d)(2)(iii) applies to terminations of partnerships under section
708(b)(1)(B) occurring on or after May 9, 1997; however, this paragraph
(d)(2)(iii) may be applied to terminations occurring on or after May 9,
1996, provided that the partnership and its partners apply this
paragraph (d)(2)(iii) to the termination in a consistent manner.
(3) IRS individual taxpayer identification number--(i) Definition.
The term IRS individual taxpayer identification number means a taxpayer
identifying number issued to an alien individual by the Internal Revenue
Service, upon application, for use in connection with filing
requirements under this title. The term IRS individual taxpayer
identification number does not refer to a social security number or an
account number for use in employment for wages. For purposes of this
section, the term alien individual means an individual who is not a
citizen or national of the United States.
(ii) General rule for obtaining number. Any individual who is not
eligible to obtain a social security number and is required to furnish a
taxpayer identifying number must apply for an IRS individual taxpayer
identification number on Form W-7, Application for IRS Individual
Taxpayer Identification Number, or such other form as may be prescribed
by the Internal Revenue Service. Form W-7 may be obtained from any
office of the Internal Revenue Service, U.S. consular office abroad, or
any acceptance agent described in paragraph (d)(3)(iv) of this section.
The individual shall furnish the information required by the form and
accompanying instructions, including the individual's name, address,
foreign tax identification number (if any), and specific reason for
obtaining an IRS individual taxpayer identification number. The
individual must make such application far enough in advance of the first
required use of the IRS individual taxpayer identification number to
permit issuance of the number in time for compliance with such
requirement. The application form, together with any supplementary
statement and documentation, must be prepared and filed
[[Page 133]]
in accordance with the form, accompanying instructions, and relevant
regulations, and must set forth fully and clearly the requested data.
(iii) General rule for assigning number. Under procedures issued by
the Internal Revenue Service, an IRS individual taxpayer identification
number will be assigned to an individual upon the basis of information
reported on Form W-7 (or such other form as may be prescribed by the
Internal Revenue Service) and any such accompanying documentation that
may be required by the Internal Revenue Service. An applicant for an IRS
individual taxpayer identification number must submit such documentary
evidence as the Internal Revenue Service may prescribe in order to
establish alien status and identity. Examples of acceptable documentary
evidence for this purpose may include items such as an original (or a
certified copy of the original) passport, driver's license, birth
certificate, identity card, or immigration documentation.
(iv) Acceptance agents--(A) Agreements with acceptance agents. A
person described in paragraph (d)(3)(iv)(B) of this section will be
accepted by the Internal Revenue Service to act as an acceptance agent
for purposes of the regulations under this section upon entering into an
agreement with the Internal Revenue Service, under which the acceptance
agent will be authorized to act on behalf of taxpayers seeking to obtain
a taxpayer identifying number from the Internal Revenue Service. The
agreement must contain such terms and conditions as are necessary to
insure proper administration of the process by which the Internal
Revenue Service issues taxpayer identifying numbers to foreign persons,
including proof of their identity and foreign status. In particular, the
agreement may contain--
(1) Procedures for providing Form SS-4 and Form W-7, or such other
necessary form to applicants for obtaining a taxpayer identifying
number;
(2) Procedures for providing assistance to applicants in completing
the application form or completing it for them;
(3) Procedures for collecting, reviewing, and maintaining, in the
normal course of business, a record of the required documentation for
assignment of a taxpayer identifying number;
(4) Procedures for submitting the application form and required
documentation to the Internal Revenue Service, or if permitted under the
agreement, submitting the application form together with a certification
that the acceptance agent has reviewed the required documentation and
that it has no actual knowledge or reason to know that the documentation
is not complete or accurate;
(5) Procedures for assisting taxpayers with notification procedures
described in paragraph (g)(2) of this section in the event of change of
foreign status;
(6) Procedures for making all documentation or other records
furnished by persons applying for a taxpayer identifying number promptly
available for review by the Internal Revenue Service, upon request; and
(7) Provisions that the agreement may be terminated in the event of
a material failure to comply with the agreement, including failure to
exercise due diligence under the agreement.
(B) Persons who may be acceptance agents. An acceptance agent may
include any financial institution as defined in section 265(b)(5) or
Sec. 1.165-12(c)(1)(v) of this chapter, any college or university that
is an educational organization as defined in Sec. 1.501(c)(3)-
1(d)(3)(i) of this chapter, any federal agency as defined in section
6402(f) or any other person or categories of persons that may be
authorized by regulations or Internal Revenue Service procedures. A
person described in this paragraph (d)(3)(iv)(B) that seeks to qualify
as an acceptance agent must have an employer identification number for
use in any communication with the Internal Revenue Service. In addition,
it must establish to the satisfaction of the Internal Revenue Service
that it has adequate resources and procedures in place to comply with
the terms of the agreement described in paragraph (d)(3)(iv)(A) of this
section.
(4) Coordination of taxpayer identifying numbers--(i) Social
security number. Any individual who is duly assigned a social security
number or who is entitled to a social security number will not be issued
an IRS individual taxpayer identification number. The individual can
[[Page 134]]
use the social security number for all tax purposes under this title,
even though the individual is, or later becomes, a nonresident alien
individual. Further, any individual who has an application pending with
the Social Security Administration will be issued an IRS individual
taxpayer identification number only after the Social Security
Administration has notified the individual that a social security number
cannot be issued. Any alien individual duly issued an IRS individual
taxpayer identification number who later becomes a U.S. citizen, or an
alien lawfully permitted to enter the United States either for permanent
residence or under authority of law permitting U.S. employment, will be
required to obtain a social security number. Any individual who has an
IRS individual taxpayer identification number and a social security
number, due to the circumstances described in the preceding sentence,
must notify the Internal Revenue Service of the acquisition of the
social security number and must use the newly-issued social security
number as the taxpayer identifying number on all future returns,
statements, or other documents filed under this title.
(ii) Employer identification number. Any individual with both a
social security number (or an IRS individual taxpayer identification
number) and an employer identification number may use the social
security number (or the IRS individual taxpayer identification number)
for individual taxes, and the employer identification number for
business taxes as required by returns, statements, and other documents
and their related instructions. Any alien individual duly assigned an
IRS individual taxpayer identification number who also is required to
obtain an employer identification number must furnish the previously-
assigned IRS individual taxpayer identification number to the Internal
Revenue Service on Form SS-4 at the time of application for the employer
identification number. Similarly, where an alien individual has an
employer identification number and is required to obtain an IRS
individual taxpayer identification number, the individual must furnish
the previously-assigned employer identification number to the Internal
Revenue Service on Form W-7, or such other form as may be prescribed by
the Internal Revenue Service, at the time of application for the IRS
individual taxpayer identification number.
(e) Banks, and brokers and dealers in securities. For additional
requirements relating to deposits, share accounts, and brokerage
accounts, see 31 CFR 103.34 and 103.35.
(f) Penalty. For penalties for failure to supply taxpayer
identifying numbers, see sections 6721 through 6724.
(g) Special rules for taxpayer identifying numbers issued to foreign
persons--(1) General rule--(i) Social security number. A social security
number is generally identified in the records and database of the
Internal Revenue Service as a number belonging to a U.S. citizen or
resident alien individual. A person may establish a different status for
the number by providing proof of foreign status with the Internal
Revenue Service under such procedures as the Internal Revenue Service
shall prescribe, including the use of a form as the Internal Revenue
Service may specify. Upon accepting an individual as a nonresident alien
individual, the Internal Revenue Service will assign this status to the
individual's social security number.
(ii) Employer identification number. An employer identification
number is generally identified in the records and database of the
Internal Revenue Service as a number belonging to a U.S. person.
However, the Internal Revenue Service may establish a separate class of
employer identification numbers solely dedicated to foreign persons
which will be identified as such in the records and database of the
Internal Revenue Service. A person may establish a different status for
the number either at the time of application or subsequently by
providing proof of U.S. or foreign status with the Internal Revenue
Service under such procedures as the Internal Revenue Service shall
prescribe, including the use of a form as the Internal Revenue Service
may specify. The Internal Revenue Service may require a person to apply
for the type of employer identification number that reflects the status
of that person as a U.S. or foreign person.
[[Page 135]]
(iii) IRS individual taxpayer identification number. An IRS
individual taxpayer identification number is generally identified in the
records and database of the Internal Revenue Service as a number
belonging to a nonresident alien individual. If the Internal Revenue
Service determines at the time of application or subsequently, that an
individual is not a nonresident alien individual, the Internal Revenue
Service may require that the individual apply for a social security
number. If a social security number is not available, the Internal
Revenue Service may accept that the individual use an IRS individual
taxpayer identification number, which the Internal Revenue Service will
identify as a number belonging to a U.S. resident alien.
(2) Change of foreign status. Once a taxpayer identifying number is
identified in the records and database of the Internal Revenue Service
as a number belonging to a U.S. or foreign person, the status of the
number is permanent until the circumstances of the taxpayer change. A
taxpayer whose status changes (for example, a nonresident alien
individual with a social security number becomes a U.S. resident alien)
must notify the Internal Revenue Service of the change of status under
such procedures as the Internal Revenue Service shall prescribe,
including the use of a form as the Internal Revenue Service may specify.
(3) Waiver of prohibition to disclose taxpayer information when
acceptance agent acts. As part of its request for an IRS individual
taxpayer identification number or submission of proof of foreign status
with respect to any taxpayer identifying number, where the foreign
person acts through an acceptance agent, the foreign person will agree
to waive the limitations in section 6103 regarding the disclosure of
certain taxpayer information. However, the waiver will apply only for
purposes of permitting the Internal Revenue Service and the acceptance
agent to communicate with each other regarding matters related to the
assignment of a taxpayer identifying number, including disclosure of any
taxpayer identifying number previously issued to the foreign person, and
change of foreign status. This paragraph (g)(3) applies to payments made
after December 31, 2001.
(h) Special rules for certain entities under Sec. 301.7701-3--(1)
General rule. Any entity that has an employer identification number
(EIN) will retain that EIN if its federal tax classification changes
under Sec. 301.7701-3.
(2) Special rules for entities that are disregarded as entities
separate from their owners--(i) When an entity becomes disregarded as an
entity separate from its owner. Except as otherwise provided in
regulations or other guidance, a single owner entity that is disregarded
as an entity separate from its owner under Sec. 301.7701-3, must use
its owner's taxpayer identifying number (TIN) for federal tax purposes.
(ii) When an entity that was disregarded as an entity separate from
its owner becomes recognized as a separate entity. If a single owner
entity's classification changes so that it is recognized as a separate
entity for federal tax purposes, and that entity had an EIN, then the
entity must use that EIN and not the TIN of the single owner. If the
entity did not already have its own EIN, then the entity must acquire an
EIN and not use the TIN of the single owner.
(3) Effective date. The rules of this paragraph (h) are applicable
as of January 1, 1997.
(i) Special rule for qualified subchapter S subsidiaries (QSubs)--
(1) General rule. Any entity that has an employer identification number
(EIN) will retain that EIN if a QSub election is made for the entity
under Sec. 1.1361-3 or if a QSub election that was in effect for the
entity terminates under Sec. 1.1361-5.
(2) EIN while QSub election in effect. Except as otherwise provided
in regulations or other published guidance, a QSub must use the parent S
corporation's EIN for Federal tax purposes.
(3) EIN when QSub election terminates. If an entity's QSub election
terminates, it may not use the EIN of the parent S corporation after the
termination. If the entity had an EIN prior to becoming a QSub or
obtained an EIN while it was a QSub in accordance with regulations or
other published guidance, the entity must use that EIN. If the entity
had no EIN, it must obtain
[[Page 136]]
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]
Editorial Note: For Federal Register citations affecting Sec.
301.6109-1, see the List of CFR Sections Affected, which appears in the
Finding Aids section of the printed volume and at www.govinfo.gov.
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.
[[Page 137]]
(ii) Numbers maintained by any other agency or instrumentality. The
individuals who are permitted access to employer identification numbers
obtained pursuant to paragraph (c) of this section and maintained by any
agency or instrumentality of the United States other than the Department
of Agriculture are officers and employees of the United States whose
duties or responsibilities require access to such employer
identification numbers for the purpose of effective administration and
enforcement of the Food Stamp Act of 1977 or for the purpose of
investigation of violations of other Federal laws or enforcement of
those laws.
(2) Other safeguards. The Secretary of Agriculture, and the head of
any other agency or instrumentality referred to in paragraph (c) of this
section, must provide for any additional safeguards that the Secretary
of the Treasury determines to be necessary or appropriate to protect the
confidentiality of the employer identification numbers. The Secretary of
Agriculture, and the head of any other agency or instrumentality
referred to in paragraph (c) of this section, may also provide for any
additional safeguards to protect the confidentiality of employer
identification numbers, provided these safeguards are consistent with
safeguards determined by the Secretary of the Treasury to be necessary
or appropriate.
(e) Confidentiality and disclosure of employer identification
numbers. Employer identification numbers obtained pursuant to paragraph
(a) or (c) of this section are confidential. No officer or employee of
the United States who has or had access to any such employer
identification number may disclose that number in any manner to an
individual not described in paragraph (d) of this section. For purposes
of this paragraph (e), officer or employee includes a former officer or
employee.
(f) Sanctions--(1) Unauthorized, willful disclosure of employer
identification numbers. Sections 7213(a) (1), (2), and (3) apply with
respect to the unauthorized, willful disclosure to any person of
employer identification numbers that are maintained pursuant to this
section by the Secretary of Agriculture, or any other agency or
instrumentality with which information is shared pursuant to paragraph
(c) of this section, in the same manner and to the same extent as
sections 7213(a) (1), (2), and (3) apply with respect to unauthorized
disclosures of returns and return information described in those
sections.
(2) Willful solicitation of employer identification numbers. Section
7213(a)(4) applies with respect to the willful offer of any item of
material value in exchange for any employer identification number
maintained pursuant to this section by the Secretary of Agriculture, or
any other agency or instrumentality with which information is shared
pursuant to paragraph (c) of this section, in the same manner and to the
same extent as section 7213(a)(4) applies with respect to offers (in
exchange for any return or return information) described in that
section.
(g) Delegation. All references in this section to the Secretary of
Agriculture are references to the Secretary of Agriculture or his or her
delegate.
(h) Effective date. Except as provided in the following sentence,
this section is effective on February 1, 1992. Any provisions relating
to the sharing of information by the Secretary of Agriculture with any
other agency or instrumentality of the United States are effective on
August 15, 1994.
[T.D. 8369, 56 FR 49685, Oct. 1, 1991, as amended by T.D. 8621, 60 FR
51725, Oct. 3, 1995; 61 FR 1035, Jan. 11, 1996]
Sec. 301.6109-3 IRS adoption taxpayer identification numbers.
(a) In general--(1) Definition. An IRS adoption taxpayer
identification number (ATIN) is a temporary taxpayer identifying number
assigned by the Internal Revenue Service (IRS) to a child (other than an
alien individual as defined in Sec. 301.6109-1(d)(3)(i)) who has been
placed, by an authorized placement agency, in the household of a
prospective adoptive parent for legal adoption. An ATIN is assigned to
the child upon application for use in connection with filing
requirements under the Internal Revenue Code and the regulations
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
[[Page 138]]
the ATIN, must be used as the child's taxpayer identification number on
all returns, statements, or other documents required under the Internal
Revenue Code and the regulations thereunder.
(2) Expiration and extension. An ATIN automatically expires two
years after the number is assigned. However, upon request, the IRS may
grant an extension if the IRS determines the extension is warranted.
(b) Definitions. For purposes of this section--
(1) Authorized placement agency has the same meaning as in Sec.
1.152-2(c) of this chapter;
(2) Prospective adoptive child or child means a child who has not
been adopted, but who has been placed in the household of a prospective
adoptive parent for legal adoption by an authorized placement agency;
and
(3) Prospective adoptive parent or parent means an individual in
whose household a prospective adoptive child is placed by an authorized
placement agency for legal adoption.
(c) General rule for obtaining a number--(1) Who may apply. A
prospective adoptive parent may apply for an ATIN for a child if--
(i) The prospective adoptive parent is eligible to claim a personal
exemption under section 151 with respect to the child;
(ii) An authorized placement agency places the child with the
prospective adoptive parent for legal adoption;
(iii) The Social Security Administration will not process an
application for an SSN by the prospective adoptive parent on behalf of
the child (for example, because the adoption is not final); and
(iv) The prospective adoptive parent has used all reasonable means
to obtain the child's assigned social security number, if any, but has
been unsuccessful in obtaining this number (for example, because the
biological parent who obtained the number is not legally required to
disclose the number to the prospective adoptive parent).
(2) Procedure for obtaining an ATIN. If the requirements of
paragraph (c)(1) of this section are satisfied, the prospective adoptive
parent may apply for an ATIN for a child on Form W-7A, Application for
Taxpayer Identification Number for Pending Adoptions (or such other form
as may be prescribed by the IRS). An application for an ATIN should be
made far enough in advance of the first intended use of the ATIN to
permit issuance of the ATIN in time for such use. An application for an
ATIN must include the information required by the form and accompanying
instructions, including the name and address of each prospective
adoptive parent and the child's name and date of birth. In addition, the
application must include such documentary evidence as the IRS may
prescribe to establish that a child was placed in the prospective
adoptive parent's household by an authorized placement agency for legal
adoption. Examples of acceptable documentary evidence establishing
placement for legal adoption by an authorized placement agency may
include--
(i) A copy of a placement agreement entered into between the
prospective adoptive parent and an authorized placement agency;
(ii) An affidavit or letter signed by the adoption attorney or
government official who placed the child for legal adoption pursuant to
state law;
(iii) A document authorizing the release of a newborn child from a
hospital to a prospective adoptive parent for adoption; and
(iv) A court document ordering or approving the placement of a child
for adoption.
(d) Effective date. The provisions of this section apply to income
tax returns due (without regard to extension) on or after April 15,
1998.
[T.D. 8839, 64 FR 51242, Sept. 22, 1999]
Sec. 301.6109-4 IRS truncated taxpayer identification numbers.
(a) In general-- Definition. An IRS truncated taxpayer
identification number (TTIN) is an individual's social security number
(SSN), IRS individual taxpayer identification number (ITIN), IRS
adoption taxpayer identification number (ATIN), or IRS employer
identification number (EIN) in which the first five digits of the nine-
digit number are replaced with Xs or asterisks. The TTIN takes the same
format of the identifying number it replaces, for example XXX-XX-1234
when replacing an
[[Page 139]]
SSN, or XX-XXX1234 when replacing an EIN.
(b) Use of a TTIN. (1) In general. Except as provided in paragraph
(b)(2) of this section, a TTIN may be used to identify any person on any
statement or other document that the internal revenue laws require to be
furnished to another person. Use of a TTIN is permissive and not
mandatory. Use of a TTIN as permitted by this section will not result in
application of any penalty for failure to include a correct taxpayer
identifying number on any payee statement or other document. For
example, the section 6722 penalty for failure to timely furnish a
correct statement would not apply solely because the payor used a TTIN
as permitted by this section.
(2) TTIN not permitted. Use of a TTIN is not permitted in the
following circumstances:
(i) A TTIN may not be used on a statement or other document if such
use is prohibited by statute, regulation, other guidance published in
the Internal Revenue Bulletin, form, or instructions.
(ii) A TTIN may not be used on a statement or document if a statute,
regulation, other guidance published in the Internal Revenue Bulletin,
form, or instructions, specifically requires use of an SSN, ITIN, ATIN,
or EIN and does not specifically state that the taxpayer identifying
number may be truncated. For example, a TTIN may not be used on a Form
W-8ECI or Form W-8IMY because the forms and/or form instructions
specifically prescribe use of an SSN, EIN, or ITIN for the U.S. taxpayer
identification number.
(iii) A TTIN may not be used on any return, statement, or other
document that is required to be filed with or furnished to the Internal
Revenue Service or the Social Security Administration in the case of
forms required to be filed with the Social Security Administration under
the internal revenue laws.
(iv) A person may not truncate its own taxpayer identifying number
on any statement or other document that it furnishes to another person.
For example, an employer may not truncate its EIN on a Form W-2, Wage
and Tax Statement, that the employer furnishes to an employee; and a
person may not truncate its TIN on a Form W-9, Request for Taxpayer
Identification Number and Certification.
(3) Examples. The provisions of this paragraph (b) are illustrated
by the following examples:
(i) Example 1. Pursuant to section 6051(d) and Sec. 31.6051-2(a) of
this chapter, Employer files the Social Security Administration copy of
Employee's Form W-2, Wage and Tax Statement, with the Social Security
Administration. Employer may not truncate any identifying number on the
Social Security Administration copy. Pursuant to section 6051(a) and
Sec. 31.6051-1(a)(1)(i) of this chapter, Employer furnishes copies of
Forms W-2 to Employee. There are no applicable statutes, regulations,
other published guidance, forms, or instructions that prohibit use of a
TTIN on Form W-2, and Sec. 31.6051-1(a)(1)(i) specifically permits
truncating employees' SSNs. Accordingly, Employer may truncate
Employee's SSN to appear in the form of a TTIN on copies of Forms W-2
furnished to Employee. Employer may not truncate its own EIN on copies
of Forms W-2 furnished to Employee.
(ii) Example 2. On April 5, year 1, Donor contributes a used car
with a blue book value of $1,100 to Charitable Organization. On April
20, year 1, Charitable Organization sends Donor copies B and C of the
Form 1098-C as a contemporaneous written acknowledgement of the $1,100
contribution as required by section 170(f)(12). In late-February, year
2, Charitable Organization prepares and files copy A of Form 1098-C with
the IRS, reporting Donor's donation of a qualified vehicle in year 1.
Charitable Organization may truncate Donor's SSN to appear in the form
of a TTIN in the Donor's Identification Number box on copies B and C of
the Form 1098-C because copies B and C of the Form 1098-C are documents
required by the Internal Revenue Code and regulations to be furnished to
another person; there are no applicable statutes, regulations, other
published guidance, forms or instructions that prohibit the use of a
TTIN on those copies; and there are no applicable statutes, regulations,
other published guidance, forms, or instructions that specifically
require use of an SSN or
[[Page 140]]
other identifying number on those copies. Charitable Organization may
not truncate its own EIN on copies B and C of the Form 1098-C because a
person cannot truncate its own taxpayer identifying number on any
statement or other document the person furnishes to another person.
Charitable Organization may not truncate any identifying number on copy
A of the Form 1098-C because copy A is required to be filed with the
IRS.
(c) Applicability date. This section is applicable to returns,
statements, and other documents required to be filed or furnished after
December 31, 2020.
[T.D. 9675, 79 FR 41131, July 15, 2014, as amended by T.D. 9861, 84 FR
31720, July 3, 2019]
Sec. 301.6110-1 Public inspection of written determinations
and background file documents.
(a) General rule. Except as provided in Sec. 301.6110-3, relating
to deletion of certain information, Sec. 301.6110-5(b), relating to
actions to restrain disclosure, paragraph (b)(2) of this section,
relating to technical advice memoranda involving civil fraud and
criminal investigations, and jeopardy and termination assessments, and
paragraph (b)(3) of this section, relating to general written
determinations relating to accounting or funding periods and methods,
the text of any written determination (as defined in Sec. 301.6110-
2(a)) issued pursuant to a request postmarked or hand delivered after
October 31, 1976, shall be open to public inspection in the places
provided in paragraph (c)(1) of this section. The text of any written
determination issued pursuant to a request postmarked or hand delivered
before November 1, 1976, shall be open to public inspection pursuant to
section 6110(h) and Sec. 301.6110-6, when funds are appropriated by
Congress for such purpose. The procedures and rules set forth in
Sec. Sec. 301.6110-1 through 301.6110-5 and Sec. 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
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 within 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 material that is open to public inspection under
section 6104. See section 6110(l)(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
[[Page 141]]
(as such term is defined in section 6851) shall not be subject to
inspection until all actions relating to such investigation or
assessment are completed and then only if a written request pursuant to
paragraph (c)(4) of this section is made for inspection of such
technical advice memorandum. A ``civil fraud investigation'' is any
administrative step or judicial proceeding in which an issue for
determination is whether the Commissioner should impose additional tax
pursuant to section 6653(b). A ``criminal investigation'' is any
administrative step or judicial proceeding in which an issue for
determination is whether a taxpayer should be charged with or is guility
of criminal conduct. An action relating to a civil fraud or criminal
investigation includes any such administrative step or judicial
proceeding, the review of subsequent related activities and related
returns of the taxpayer or related taxpayers, and any other
administrative step or judicial procedure or proceeding or appellate
process that is initiated as a consequence of the facts and
circumstances disclosed by such investigation. An action relating to a
jeopardy or termination assessment includes any administrative step or
judicial proceeding that is initiated to determine whether to make such
assessment, that is brought pursuant to section 7429 to determine the
appropriateness or reasonableness of such assessment, or that is brought
to resolve the legal consequences of the tax status or liability issue
underlying the making of such assessment. Any action relating to a civil
fraud or criminal investigation, a jeopardy assessment, or a termination
assessment is not completed until all available administrative steps and
judicial proceedings and remedies, including appeals, have been
completed.
(3) Written determinations with respect to adoption of or change in
certain accounting or funding periods and methods. Any general written
determination (as defined in Sec. 301.6110-2(c) that relates solely to
approval of any adoption of or change in--
(i) The funding method or plan year of a plan under section 412.
(ii) A taxpayer's annual accounting period under section 442.
(iii) A taxpayer's method of accounting under section 446(e), or
(iv) A partnership's or partner's taxable year under section 706
shall not be subject to inspection until such written determination
would, but for this paragraph (b)(3), be open to public inspection
pursuant to Sec. 301.6110-5(c) and then only if a written request
pursuant to paragraph (c)(4) of this section is made for inspection of
such written determination.
(c) Procecure for public inspection--(1) Place of public inspection.
The text of any ruling (as such term is defined in Sec. 301.6110-2(d)
or technical advice memorandum that is open to public inspection
pursuant to section 6110 shall be located in the National Office Reading
Room. The text of any determination letter (as such term is defined in
Sec. 301.6110-2(e)) that is open to public inspection pursuant to
section 6110 shall be located in the Reading Room of the Regional Office
in which is located the district office that issued such determination
letter. Inspection of any written determination subject to inspection
only upon written request shall be requested from the National Office
Reading Room. Inspection of any background file document shall be
requested only from the reading room in which the related written
determination is either open to public inspection or subject to
inspection upon written request. The locations and mailing addresses of
the reading rooms are set forth in Sec. 601.702(b)(3)(ii) of this
chapter.
(2) Time and manner of public inspection. The inspection authorized
by section 6110 will be allowed only in the place provided for such
inspection in the presence of an Internal Revenue officer or employee
and only during the regular hours of business of the Internal Revenue
Service office in which the 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.
[[Page 142]]
(3) Copies. Notes may be taken of any material open to public
inspection under section 6110, and copies may be made manually. Copies
of any material open to public inspection or subject to inspection upon
written request will be furnished by the Internal Revenue Service to any
person making requests therefor pursuant to paragraph (c)(4) of this
section. If made at the time of inspection the request for copies need
not be in writing, unless the material is not immediately available for
copying. The Commissioner may prescribe fees pursuant to section 6110(j)
for furnishing copies of material open or subject to inspection.
(4) Requests. Any request for copies of written determinations, for
inspection of general written determinations relating to accounting or
funding periods and methods or technical advice memoranda involving
civil fraud and criminal investigations, and jeopardy and termination
assessments, for inspection or copies of background file documents, and
for copies of the index shall be submitted to the reading room in which
is located the requested material. If made in person, the request may be
submitted to the internal revenue employee supervising the reading room.
The request shall contain:
(i) Authorization for the Internal Revenue Service to charge the
person making such request for making copies, searching for material,
and making deletions therefrom;
(ii) The maximum amount of charges which the Internal Revenue
Service may incur without further authorization from the person making
such request;
(iii) With respect to requests for inspection and copies of
background file documents, the file number of the written determination
to which such background file document relates and a specific
identification of the nature or type of the background file document
requested;
(iv) With respect to requests for inspections of general written
determinations relating to accounting or funding periods and methods,
the day, week, or month of issuance of such written determination, and
the applicable category as selected from a special summary listing of
categories prepared by the Internal Revenue Service;
(v) With respect to requests for copies of written determinations,
the file number of the written determination to be copied, which can be
ascertained in the reading room or from the index;
(vi) With respect to requests for copies of portions of the index,
the section of the Internal Revenue Code, related statute or tax treaty
in which the person making such request is interested;
(vii) With respect to material which is to be mailed, the name,
address, and telephone number of the person making such request and the
address to which copies of the requested material should be sent; and
(viii) Such other information as the Internal Revenue Service may
from time to time require in its operation of reading rooms.
(d) Effective/applicability date. The rules of paragraph (a) apply
February 29, 2012.
[T.D. 7524, 42 FR 63412, Dec. 16, 1977, as amended by T.D. 9581, 77 FR
12205, Feb. 29, 2012]
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
[[Page 143]]
determination that the Commissioner determines to be the basis for a
published revenue ruling is a reference written determination until such
revenue ruling is obsoleted, revoked, superseded or otherwise held to
have no effect.
(c) General written determination. A ``general written
determination'' is any written determination that is not a reference
written determination.
(d) Ruling. A ``ruling'' is a written statement issued by the
National Office to a taxpayer or to the taxpayer's authorized
representative (as such term is defined in Sec. 601.201(e)(7) of this
chapter) on behalf of the taxpayer, that interprets and applies tax laws
to a specific set of facts. A ruling generally recites the relevant
facts, sets forth the applicable provisions of law, and shows the
application of the law to the facts.
(e) Determination letter. A ``determination letter'' is a written
statement issued by a district director in response to a written inquiry
by an individual or an organization that applies principles and
precedents previously announced by the National Office to the particular
facts involved.
(f) Technical advice memorandum. A ``technical advice memorandum''
is a written statement issued by the National Office to, and adopted by,
a district director in connection with the examination of a taxpayer's
return or consideration of a taxpayer's claim for refund or credit. A
technical advice memorandum generally recites the relevant facts, sets
forth the applicable law, and states a legal conclusion.
(g) Background file document--(1) General rule. A ``background file
document'' is--(i) The request for a written determination.
(ii) Any written material submitted in support of such request by
the person by whom or on whose behalf the request for a written
determination is made,
(iii) Any written communication, or memorandum of a meeting,
telephone communication, or other contact, between employees of the
Internal Revenue Service or Office of its Chief Counsel and persons
outside the Internal Revenue Service in connection with such request or
written determination which is received prior to the issuance (as such
term is defined in paragraph (h) of this section) of the written
determination, but not including communications described in paragraph
(g)(2) of this section, and
(iv) Any subsequent communication between the National Office and a
district director concerning the factual circumstances underlying the
request for a technical advice memorandum, or concerning a request by
the district director for reconsideration by the National Office of a
proposed technical advice memorandum.
(2) Limitations. Notwithstanding paragraph (g)(1) of this section, a
``background file document'' shall not include any--
(i) Communication between the Department of Justice and the Internal
Revenue Service or the Office of its Chief Counsel relating to any
pending civil or criminal case or investigation,
(ii) Communication between Internal Revenue Service employees and
employees of the Office of its Chief Counsel,
(iii) Internal memorandum or attorney work product prepared by the
Internal Revenue Service or Office of its Chief Counsel which relates to
the development of the conclusion of the Internal Revenue Service in a
written determination, including, with respect to a technical advice
memorandum, the Transmittal Memorandum, as defined in Sec.
601.105(b)(5)(vi)(c) of this chapter,
(iv) Correspondence or any portion of correspondence between the
Internal Revenue Service and any person relating solely to the making of
or extent of deletions pursuant to section 6110(c), or a request
pursuant to section 6110(g) (3) and (4) for postponement of the time at
which a written determination is made open or subject to inspection,
(v) Material relating to (A) a request for a ruling or determination
letter that is withdrawn prior to issuance thereof or that the Internal
Revenue Service declines to answer, (B) a request for technical advice
that the National Office declines to answer, or (C) 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
[[Page 144]]
declines to adopt, and the district director's request for
reconsideration thereof.
(h) Issuance. ``Issuance'' of a written determination occurs, with
respect to rulings and determination letters, upon the mailing of the
ruling or determination letter to the person to whom it pertains.
Issuance of a technical advice memorandum occurs upon the adoption of
the technical advice memorandum by the district director.
(i) Person to whom written determination pertains. A ``person to
whom a written determination pertains'' is the person by whom a ruling
or determination letter is requested, but if requested by an authorized
representative, the person on whose behalf the request is made. With
respect to a technical advice memorandum, a ``person to whom a written
determination pertains'' is the taxpayer whose return is being examined
or whose claim for refund or credit is being considered.
(j) Person to whom a background file document relates. A ``person to
whom a background file document relates'' is the person to whom the
related written determination pertains, as such term is defined in
paragraph (i) of this section.
(k) Person who has a direct interest in maintaining confidentiality.
A ``person who has a direct interest in maintaining the confidentiality
of a written determination'' is any person whose name and address is
listed in the request for such written determination, as required by
Sec. 601.201(e)(2) of this chapter. A ``person who has a direct
interest in maintaining the confidentiality of a background file
document'' is any person whose name and address is in such background
file document, or who has a direct interest in maintaining the
confidentiality of the written determination to which such background
file document relates.
(l) Successor in interest. A ``successor in interest'' to any person
to whom a written determination pertains or background file document
relates is any person who acquires the rights and assumes the
liabilities of such person with respect to the transaction which was the
subject matter of the written determination, provided that the successor
in interest notifies the Commissioner with respect to the succession in
interest.
(d) Effective/applicability date. The rules of paragraph (a) apply
February 29, 2012.
[T.D. 7524, 42 FR 63413, Dec. 16, 1977, as amended by T.D. 9581, 77 FR
12205, Feb. 29, 2012]
Sec. 301.6110-3 Deletion of certain information in written
determinations open to public inspection.
(a) Information subject to deletion. There shall be deleted from the
text of any written determination open to public inspection or subject
to inspection upon written request and background file document subject
to inspection upon written request pursuant to section 6110 the
following types of information:
(1) Identifying details. (i) The names, addresses, and identifying
numbers (including telephone, license, social security, employer
identification, credit card, and selective service numbers) of any
person, other than the identifying details of a person who makes a
third-party communication described in Sec. 301.6110-4(a), and
(ii) Any other information that would permit a person generally
knowledgeable with respect to the appropriate community to identify any
person. The determination of whether information would permit
identification of a particular person will be made in view of
information available to the public at the time the written
determination or background file document is made open or subject to
inspection and in view of information that will subsequently become
available, provided the Internal Revenue Service is made aware of such
information and the potential that such information may identify any
person. The ``appropriate community'' is that group of persons who would
be able to associate a particular person with a category of transactions
one of which is described in the written determination or background
file document. The appropriate community may vary according to the
nature of the transaction which is the subject of the written
determination. For example, if a steel company proposes to enter a
transaction involving the purchase and installation of blast
[[Page 145]]
furnaces, the ``appropriate community'' may include all steel producers
and blast furnace manufacturers, but if the installation process is a
unique process of which everyone in national industry is aware, the
``appropriate community'' might also include the national industrial
community. On the other hand, if the steel company proposes to enter a
transaction involving the purchase of land on which to construct a
building to house the blast furnaces, the ``appropriate community'' may
also include those residing or doing business within the geographical
locale of the land to be purchased.
(2) Information concerning national defense and foreign policy.
Information specifically authorized under criteria established by an
Executive order to be kept secret in the interest of national defense or
foreign policy and which is in fact properly classified pursuant to such
order.
(3) Information exempted by other statutes and agency rules.
Information specifically exempted from disclosure by any statute other
than the Internal Revenue Code of 1954 and 5 U.S.C. 552 which is
applicable to the Internal Revenue Service, and any information obtained
by the Internal Revenue Service solely and directly from another Federal
agency subject to a nondisclosure rule of such agency. Deletion of
information shall not be made solely because the same information was
submitted to another Federal agency subject to a nondisclosure rule
applicable only to such agency.
(4) Trade secrets and privileged or confidential commercial or
financial information--(i) Deletions to be made. Any--
(A) Trade secrets, and
(B) Commercial or financial information obtained from any person
which, despite the fact that identifying details are deleted pursuant to
paragraph (a)(1) of this section, nonetheless remains privileged or
confidential.
(ii) Trade secret. For purposes of paragraph (a)(4)(i)(A) of this
section, a trade secret may consist of any formula, pattern, device or
compilation of information that is used in one's business, and that
gives one an opportunity to obtain an advantage over competitors who do
not know or use it. It may be a formula for a chemical compound, a
process of manufacturing, treating or preserving materials, a pattern
for a machine or other device, or a list of customers. The subject of a
trade secret must be secret, that is, it must not be of public knowledge
or of a general knowledge in the trade or business. Novelty, in the
patent law sense, is not required for a trade secret.
(iii) Privileged or confidential. For purposes of paragraph
(a)(4)(i)(B) of this section, information is privileged or confidential
if from examination of the request and supporting documents relating to
a written determination, and in consideration of the fact that
identifying details are deleted pursuant to paragraph (a)(1) of this
section, it is determined that disclosure of such information would
cause substantial harm to the competitive position of any person. For
example, while determining whether disclosure of certain information
would cause substantial harm to X's competitive position, the Internal
Revenue Service becomes aware that his information has previously been
disclosed to the public. In this situation, the Internal Revenue Service
will not agree with X's argument that disclosure of the information
would cause substantial harm to X's competitive position. An example of
information previously disclosed to the public is financial information
contained in the published annual reports of widely held public
corporations.
(5) Information within the ambit of personal privacy. Information
the disclosure of which would constitute a clearly unwarranted invasion
of personal privacy, despite the fact that identifying details are
deleted pursuant to paragraph (a)(1) of this section. Personal privacy
information encompasses embarrassing or sensitive information that a
reasonable person would not reveal to the public under ordinary
circumstances. Matters of personal privacy include, but are not limited
to, details not yet public of a pending divorce, medical treatment for
physical or mental disease or injury, adoption of a child, the amount of
a gift, and political preferences. A clearly unwarranted invasion of
personal privacy exists if from analysis of information submitted in
support of the request for a written determination it is determined that
[[Page 146]]
the public interest purpose for requiring disclosure is outweighed by
the potential harm attributable to such invasion of personal privacy.
(6) Information concerning agency regulation of financial
institutions. Information contained in or related to reports prepared
by, on behalf of, or for the use of an agency responsible for the
regulation or supervision of financial institutions concerning
examination, operation or condition of a financial institution,
disclosure of which would damage the standing of such financial
institution.
(7) Information concerning wells. Geological or geophysical
information and data, including maps, concerning wells.
(b) Manner of deletions. Whenever information, which is not to be
disclosed pursuant to section 6110(c), is deleted from the text of a
written determination or background file document, substitutions
therefore shall be made to the extent feasible if necessary for an
understanding of the legal analysis developed in such written
determination or to make the disclosed text of a background file
document comprehensible. Wherever any material is deleted, an indication
of such deletion, and of any substitution therefor, shall be made in
such manner as the Commissioner deems appropriate.
(c) Limitations on the making of deletions. Any portion of a written
determination or background file document that has been deleted will be
restored to the text thereof--
(1) If pursuant to section 6110(d)(3) or (f)(4)(A) a court orders
disclosure of such portion, or
(2) If pursuant, to Sec. 301.6110-5(d)(1) an agreement is reached
to disclose information.
[T.D. 7524, 42 FR 63414, Dec. 16, 1977]
Sec. 301.6110-4 Communications from third parties.
(a) General rule. Except as provided in paragraph (b) of this
section a record will be made of any communication, whether written, by
telephone, at a meeting, or otherwise, received by the Internal Revenue
Service or Office of its Chief Counsel prior to the issuance of written
determination from any person other than a person to whom the written
determination pertains or the authorized representative of such person.
This rule applies to any communication concerning such written
determination, any communication concerning the request for such written
determination, or any communication concerning other matters involving
such written determination. A notation that such communication has been
made shall be placed on such written determination when it is made open
to public inspection or available for inspection upon written request
pursuant to Sec. 301.6110-5. The notation to be placed on a written
determination shall consist of the date on which the communication was
received and the category of the person making such communication, for
example, Congressional, Department of Commerce, Treasury, trade
association, White House, educational institution. Any person may
request the Internal Revenue Service to disclose the name of any person
about whom a notation has been made pursuant to this paragraph.
(b) Limitations. The provisions of paragraph (a) of this section
shall not apply to communications received by the Internal Revenue
Service from employee of the Internal Revenue Service or Office of its
Chief Counsel, from the Chief of Staff of the Joint Committee on
Internal Revenue Taxation, from the Department of Justice with respect
to any pending civil or criminal case or investigation, or from another
government agency in response to a request made by the Internal Revenue
Service to such agency for assistance involving the expertise of such
agency.
(c) Action to obtain disclosure of identity of person to whom
written determination pertains--(1) Creation of remedy. With respect to
any written determination on which a notation has been placed pursuant
to paragraph (a) of this section, any person may file a petition in the
United States Tax Court or file a complaint in the United States
District Court for the District of Columbia for an order requiring that
the identity of any person to whom such written determination pertains
be disclosed, but such petition or complaint must be filed within 36
months of the date such written determination is made open or subject to
inspection.
[[Page 147]]
(2) Necessary disclosure. Whenever an action is brought pursuant to
section 6110(d)(3), the court may order that the identity of any person
to whom the written determination pertains be disclosed. Such disclosure
may be ordered if the court determines that there is evidence in the
record from which it could reasonably be concluded that an impropriety
occurred or undue influence was exercised with respect to such written
determination by or on behalf of the person to whom the written
determination pertains. The court may, pursuant to section 6110(d)(3),
also order the disclosure of any material deleted pursuant to section
6110(c) if such disclosure is in the public interest. The written
determination or background file document with respect to which the
disclosure was sought shall be revised to disclose the information which
the court orders to be disclosed.
(3) Required notice. If a proceeding is commenced pursuant to
section 6110(d)(3) and paragraph (c)(1) of this section with respect to
any written determination, the Secretary shall send notice of the
commencement of such proceeding to any person whose identity is subject
to being disclosed and to the person about whom a third-party
communication notation has been made pursuant to section 6110(d)(1).
Such notice shall be sent, by registered or certified mail, to the last
known address of the persons described in this paragraph (c)(3) within
15 days after notice of the petition or complaint filed pursuant to
section 6110(d)(3) is served on the Secretary. For further guidance
regarding the definition of last known address, see Sec. 301.6212-2.
(4) Intervention. Any person who is entitled to receive notice
pursuant to paragraph (c)(3) of this section shall have the right to
intervene in any action brought pursuant to section 6110(d)(3). If
appropriate such person shall be permitted to intervene anonymously.
[T.D. 7524, 42 FR 63415, Dec. 16, 1977, as amended by T.D. 8939, 66 FR
2819, Jan. 12, 2001]
Sec. 301.6110-5 Notice and time requirements; actions to restrain
disclosure; actions to obtain additional disclosure.
(a) Notice--(1) General rule. Before a written determination is made
open to public inspection or subject to inspection upon written request,
or before a background file document is subject to inspection upon
written request, the person to whom the written determination pertains
or background file document relates shall be notified by the
Commissioner of intention to disclose such written determination or
background file document. The notice with respect to a written
determination, other than a written determination described in Sec.
301.6110-1(b) (2) or (3) shall be mailed when such written determination
is issued. The notice with respect to any written determination relating
to accounting or funding periods and methods, any technical advice
memoranda involving civil fraud and criminal investigations, and
jeopardy and termination assessments, and any background file document
shall be mailed within a reasonable time after the receipt of the first
written request for inspection thereof.
(2) Contents of notice. The notice required by paragraph (a)(1) of
this section shall--
(i) Include a copy of the text of the written determination or
background file document, which the Commissioner proposes to make open
to public inspection or subject to inspection pursuant to a written
request, on which is indicated (A) the material that the Commissioner
proposes to delete pursuant to section 6110(c), (B) any substitutions
proposed to be made therefor, and (C) any third-party communication
notations required to be placed pursuant to Sec. 301.6110-4(a) on the
face of the written determination.
(ii) State that the written determination or background file
document is to be open to public inspection or subject to inspection
pursuant to a written request pursuant to section 6110.
(iii) State that the recipient of the notice has the right to seek
administrative remedies pursuant to paragraph (b)(1) of this section and
to commence
[[Page 148]]
judicial proceedings pursuant to section 6110(f)(3) within indicated
time periods, and
(iv) Prominently indicate the date on which the notice is mailed.
(b) Actions to restrain disclosure--(1) Administrative remedies. Any
person to whom a written determination pertains or background file
document relates, and any successor in interest, executor or authorized
representative of such person may pursue the administrative remedies
described in Sec. 601.105(b)(5) (iii)(i) and (vi)(f) and Sec.
601.201(e) (11) and (16) of this chapter. Any person who has a direct
interest in maintaining the confidentiality of any written determination
or background file document or portion thereof may pursue the
administrative remedies described in Sec. 601.105(b)(5)(vi)(f) and
Sec. 601.201(e)(16) of this chapter. No person about whom a third-party
communication notation has been made pursuant to Sec. 301.6110-4(a) may
pursue any administrative remedy for the purpose of restraining
disclosure of the identity of such person where such identity appears
with respect to the making of such third-party communication.
(2) Judicial remedy. Except as provided in paragraph (b)(3) of this
section, any person permitted to resort to administrative remedies
pursuant to paragraph (b)(1) of this section may, if such person
proposes any deletion not made pursuant to Sec. 301.6110-3 by the
Commissioner, file a petition in the United States Tax Court pursuant to
section 6110(f)(3) for a determination with respect to such proposed
deletion. If appropriate, such petition may be filed anonymously. Any
petition filed pursuant to section 6110(f)(3) must be filed within 60
days after the date on which the Commissioner mails the notice of
intention to disclose required by section 6110(f)(1).
(3) Limitations on right to bring judicial actions. No petition
shall be filed pursuant to section 6110(f)(3) unless the administrative
remedies provided by paragraph (b)(1) of this section have been
exhausted. However, if the petitioner has responded within the
prescribed time period to the notice pursuant to section 6110(f)(1) of
intention to disclose, but has not received the final administrative
conclusion of the Internal Revenue Service within 50 days after the date
on which the Commissioner mails the notice of intention to disclose
required by section 6110(f)(1), the petitioner may file a petition
pursuant to section 6110(f)(3). No judicial action with respect to any
written determination or background file document shall be commenced
pursuant to section 6110(f)(3) by any person who has received a notice
with respect to such written determination or background file document
pursuant to paragraph (b)(4) of this section.
(4) Required notice. If a proceeding is commenced pursuant to
section 6110(f)(3) with respect to any written determination or
background file document, the Secretary shall send notice of the
commencement of such proceeding to any person to whom such written
determination pertains or to whom such background file document relates.
No notice is required to be sent to persons who have filed the petition
that commenced the proceeding pursuant to section 6110(f)(3) with
respect to such written determination or background file document. The
notice shall be sent, by registered or certified mail, to the last known
address of the persons described in this paragraph (b)(4) within 15 days
after notice of the petition filed pursuant to section 6110(f)(3) is
served on the Secretary. For further guidance regarding the definition
of last known address, see Sec. 301.6212-2.
(5) Intervention. Any person who is entitled to receive notice
pursuant to paragraph (b)(4) of this section shall have the right to
intervene in any action brought pursuant to this section. If
appropriate, such person shall be permitted to intervene anonymously.
(c) Time at which open to public inspection--(1) General rule.
Except as otherwise provided in paragraph (c)(2) of this section, the
text of any written determination or background file document open to
public inspection or available for inspection upon written request
pursuant to section 6110 shall be made open to or available for
inspection no earlier than 75 days and no later than 90 days after the
date on which the Commissioner mails the notice required by paragraph
(a)(1) of this section. However, if an action is brought
[[Page 149]]
pursuant to section 6110(f)(3) to restrain disclosure of any portion of
such written determination or background file document the disputed
portion of such written determination or background file document shall
be made open to or available for inspection pursuant to paragraph
(c)(2)(i) of this section.
(2) Limitations--(i) Court order. The portion of the text of any
written determination or background file document that was subject to an
action pursuant to section 6110(f)(3) to restrain disclosure in which
the court determined that such disclosure should not be restrained shall
be made open to or available for inspection within 30 days of the date
that the court order becomes final. However, in no event shall such
portion of the text of such written determination or background file
document be made open to or available for inspection earlier than 75
days after the date on which the Commissioner mails the notice of
intention to disclose required by section 6110(f)(1) and paragraph
(a)(1) of this section. Such 30-day period may be extended for such time
as the court finds necessary to allow the Commissioner to comply with
its decision. Any portion of a written determination or background file
document which a court orders open to public inspection or subject to
inspection upon written request pursuant to section 6110(f)(4) or
disclosed pursuant to section 6110(d)(3) shall be made open or subject
to inspection or disclosed within such time as the court provides.
(ii) Postponement based on incomplete status of underlying
transaction--(A) Initial period not to exceed 90 days. The time period
set forth in paragraph (c)(1) of this section within which a written
determination shall be made open to public inspection or available for
inspection upon written request shall be extended, upon the written
request of the person to whom such written determination pertains or the
authorized representative of such person, until 15 days after the date
on which the transaction set forth in the written determination is
scheduled to be completed, but such day shall be no later than 180 days
after the date on which the Commissioner mails the notice of intention
to disclose.
(B) Additional period. The time period determined pursuant to
paragraph (c)(2)(ii)(A) of this section shall be further extended upon
an additional written request, if the Commissioner determines from the
information contained in such request that good cause exists to warrant
such extension. This further extension shall be until 15 days after the
date on which the transaction set forth in the written determination is
expected to be completed, but such day shall be no later than 360 days
after the date on which the Commissioner mails the notice of intention
to disclose. The good cause required by this paragraph (B) exists if the
person requesting the delay in inspection demonstrates to the
satisfaction of the Commissioner that it is likely that the lack of such
extension will cause interference with 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
[[Page 150]]
been completed, the Internal Revenue Service office which issued such
written determination shall be so notified by the person who requested
such extension. In such event, the written determination shall be made
open to public inspection or available for inspection upon written
request on the earlier of (1) 30 days after the day on which the
Commissioner is notified that the transaction is completed, or (2) the
day on which the written determination was scheduled to be made open to
public inspection or available for inspection upon written request
pursuant to paragraph (c)(2)(ii) of this section. Similarly, if the
Commissioner determines that the transaction was completed prior to the
day on which it was expected to have been completed, even if the person
requesting such extension has not so notified the Internal Revenue
Service, the written determination shall be made open to public
inspection or available for inspection upon written request on the
earlier of (1) the day which is 30 days after the Commissioner
ascertains that the transaction is completed sooner than has been
expected, or (2) the day on which the written determination was
scheduled to be made open to public inspection or available for
inspection upon written request pursuant to paragraph (c)(2)(ii) of this
section.
(d) Actions to obtain additional disclosure--(1) Administrative
remedies. Under section 6110(f)(4) any person may seek to obtain
additional disclosure of information contained in any written
determination or background file document that has been made open or
subject to inspection. A request for such additional disclosure shall be
submitted to the Internal Revenue Service office which issued such
written determination, or to which the request for inspection of such
background file document has been submitted pursuant to Sec. 301.6110-
1(c)(4), and must contain the file number of the written determination
or a description of the background file document (including the file
number of the related written determination), the deleted information
which in the opinion of such person should be open or subject to
inspection, and the basis for such opinion. If the Internal Revenue
Service determines that the request constitutes a request for disclosure
of the name, address, or the identifying numbers described in Sec.
301.6110-3(a)(1)(i) of any person, it shall within a reasonable time
notify the person requesting such disclosure that disclosure will not be
made. If the Internal Revenue Service determines that the request or any
portion thereof constitutes a request for disclosure of information
other than the name, address, or the identifying numbers described in
Sec. 301.6110-3(a)(1)(i) of any person, it shall send a notice that
such additional disclosure has been requested to any person to whom the
written determination pertains or background file document relates, and
to all persons who are identified by name and address in the written
determination or background file document. Notice that such persons have
been contacted shall be sent to the person requesting the additional
disclosure. The notice that additional disclosure has been requested
shall state that the Internal Revenue Service has determined that
additional disclosure of information other than the name, address, or
the identifying numbers described in Sec. 301.6110-3(a)(1)(i) of any
person has been requested, inform the recipient of the notice that the
person seeking the additional disclosure has the right under section
6110(f)(4) to bring a judicial action to attempt to compel such
disclosure, and request the recipient of the notice to reply within 20
days by submitting a statement of whether or not the recipient of the
notice agrees to the requested disclosure or portion thereof. If all
persons to whom a notice is sent pursuant to this paragraph (d)(1) of
this section agree to disclose the requested information or any portion
thereof, the person seeking such disclosure will be so informed; the
written determination or background file document shall be accordingly
revised to disclose the information with respect to which an agreement
to disclose has been reached. If any of the persons to whom a notice is
sent pursuant to this paragraph (d)(1) of this section do not agree to
the additional disclosure or do not respond to such notice, the Internal
Revenue Service
[[Page 151]]
shall within a reasonable time so notify the person requesting such
disclosure, and deny the request for additional disclosure.
(2) Judicial remedy. Except as provided in paragraph (d)(3) of this
section, any person who seeks to obtain additional disclosure of
information contained in any written determination or background file
document may file a petition pursuant to section 6110(f)(4) in the
United States Tax Court or a complaint in the United States District
Court for the District of Columbia for an order requiring that such
information be made open or subject to inspection. Nothing in this
paragraph shall prevent the Commissioner from disposing of written
determinations and related background file documents pursuant to Sec.
301.6110-7(a).
(3) Limitations on right to bring judicial action--(i) Exhaustion of
administrative remedies. No petition or complaint shall be filed
pursuant to section 6110(f)(4) unless the administrative remedies
provided by paragraph (d)(1) of this section have been exhausted.
However, if the Internal Revenue Service does not approve or deny the
request for additional disclosure within 180 days after the request is
submitted, the person making the request may file a petition pursuant to
section 6110(f)(4).
(ii) Actions to obtain identity. No petition or complaint shall be
filed pursuant to section 6110(f)(4) to obtain disclosure of the
identity of any person to whom a written determination on which a third-
party communication notation has been placed pursuant to Sec. 301.6110-
4(a) pertains. Such actions shall be brought pursuant to section
6110(d)(3).
(4) Required notice. If a proceeding is commenced pursuant to
section 6110(f)(4) with respect to any written determination or
background file document, the Secretary shall send notice of the
commencement of such proceeding to any person to whom the written
determination pertains or background file document relates, and to all
persons who are identified by name and address in the written
determination or background file document. The notice shall be sent, by
registered or certified mail, to the last known address of the persons
described in this paragraph (d)(4) within 15 days after notice of the
petition or complaint filed pursuant to section 6110(f)(4) is served on
the Secretary.
(5) Intervention. Any person who is entitled to receive notice
pursuant to paragraph (d)(4) of this section shall have the right to
intervene in any action brought pursuant to this section. If
appropriate, such person shall be permitted to intervene anonymously.
[T.D. 7524, 42 FR 63415, Dec. 16, 1977, as amended by T.D. 8939, 66 FR
2819, Jan. 12, 2001]
Sec. 301.6110-6 Written determinations issued in response to
requests submitted before November 1, 1976.
(a) Inspection of written determinations and background file
documents--(1) General rule. Except as provided in this section, the
text of any written determination issued in response to a request
postmarked or hand delivered before November 1, 1976 and any related
background file document shall be open or subject to inspection in
accordance with the rules in Sec. Sec. 301.6110-1 through 301.6110-5
and 301.6110-7. However, the rules in Sec. 301.6110-4 do not apply to
inspection under this section. The rules in Sec. 301.6110-5 (a), (b)
and (c) also do not apply, except with respect to background file
documents.
(2) Exclusions. The following written determinations are not open or
subject to inspection under this section.
(i) Written determinations with respect to matters for which the
determination of whether public inspection should occur is made under
section 6104. Some of these matters are listed in Sec. 301.6110-1(a).
(ii) Written determinations issued before September 2, 1974, dealing
with the qualification of a plan described in section 6104(a)(1)(B)(i)
or the exemption from tax under section 501(a) of an organization
forming part of such a plan.
(iii) Written determination issued pursuant to requests submitted
before November 1, 1976 with respect to the exempt staus under section
501(a) of organizations described in section 501 (c) or (d), the status
of organizations as private foundations under section 509(a), or the
status of organizations as operating foundations under section
4942(j)(3).
[[Page 152]]
(iv) General written determinations that relate solely to accounting
or funding periods and methods, as defined in Sec. 301.6110-1(b)(3).
(v) Determination letters.
(3) Items that may be inspected only under certain circumstances--
(i) Background file documents. A background file document relating to a
particular written determination issued in response to a request
submitted before November 1, 1976 shall not be subject to inspection
until the related written determination is open to public inspection or
available for inspection, and then only if a written request pursuant to
Sec. 301.6110-1(c)(4) is made for inspection of the background file
document. However, the following background file documents are not open
or subject to inspection:
(A) Background file documents relating to general written
determinations issued before July 5, 1967.
(B) Background file documents relating to written determinations
described in paragraph (a)(2) of this section.
(ii) General written determinations issued before July 5, 1967.
General written determinations issued before July 5, 1967 shall not be
subject to inspection until all other written determinations issued in
response to requests postmarked or hand delivered before November 1,
1976 that are open to inspection under this section have been made open
to public inspection, and then only if a written request pursuant to
Sec. 301.6110-1(c)(4) is made for inspection of the written
determination. In this regard, the request for inspection must also
contain the section of the Internal Revenue Code in which the requester
is interested and the dates of issuance of the written determinations.
(b) Notice and time requirements, and actions to restrain
disclosure--(1) Notice-- (i) General rule. Before a written
determination is made open to public inspection and before a particular
written determination is subject to inspection in response to the first
written request therefor, the Commissioner shall publish in the Federal
Register a notice that the written determination is to be made open or
subject to inspection. Notices with respect to written determinations,
other than those described in paragraph (a)(3)(ii) of this section,
shall be published at the earliest practicable time after this
regulation is adopted as a Treasury decision. Notices with respect to
written determinations subject to inspection upon written request shall
be published within a reasonable time after the receipt of the first
written request for inspection thereof, but no sooner than the day as of
which all other written determinations open to public inspection under
this section have been made open to public inspection. Notices with
respect to background file documents shall be sent in accordance with
the rules in Sec. 301.6110-5(a) and will be mailed by the Internal
Revenue Service to the most recent addresses of the persons to whom the
background file document relates that are in the written determination
file.
(ii) Sequence of notices. Notices with respect to written
determinations, other than general written determinations issued before
July 5, 1967, shall be published in the following order. The first
category is notices with respect to reference written determinations
issued under the Internal Revenue Code of 1954. The second category is
notices with respect to general written determinations issued after July
4, 1967. The third category is notices with respect to reference written
determinations issued under the Internal Revenue Code of 1939 or
corresponding provisions of prior law. Within a category, the
Commissioner may publish notices individually or for groups of written
determinations arranged according to the jurisdictions of the ruling
branches in the Office of the Assistant Commissioner (Technical) and the
Assistant Commissioner (Employee Plans and Exempt Organizations), as the
Commissioner may find reasonable. To the extent practicable, notices
published individually shall be published in the reverse order of the
issuance of the written determinations for which they are published,
starting with the most recent written determination issued. To the
extent practicable, each group shall consist of consecutively issued
written determinations. Notices for groups shall be published, to the
extent practicable, in the reverse order of the time period of issuance
of the written
[[Page 153]]
determinations in each group, starting with the most recent time period.
(iii) Contents of notice. The notice required by paragraph (b)(1)(i)
of this section shall:
(A) Identify by subject matter description and dates of issuance the
written determinations that the Commissioner proposes to make open or
subject to inspection.
(B) State that the written determinations will be made open or
subject to inspection pursuant to section 6110(h),
(C) State that the persons to whom the written determinations
pertain have the right to seek administrative remedies under paragraph
(b)(2)(ii) of this section and to commence judicial proceedings under
section 6110(h)(4) within indicated time periods,
(D) State that there exist the possibilities that someone might
request additional disclosure under section 6110(f)(4) and that someone
might request inspection of a related background file document, and
(E) State that any notice that must be mailed by the Internal
Revenue Service will be sent to the most recent address of the person to
whom the notice must be sent that is in the relevent written
determination file.
(2) Actions to restrain disclosure--(i) Information on written
determinations described by notice. Any person may, within 15 days after
the Commissioner publishes in the Federal Register a notice of intention
to disclose a written determination under section 6110(h), request the
Internal Revenue Service to provide certain information. This
information includes whether any of the written determinations described
by the notice is one that was issued to the person requesting this
information. The Internal Revenue Service will also inform the person
whether any of the written determinations described by the notice is one
that was issued to a person with respect to whom the person requesting
this information is a successor in interest executor or authorized
representative. However, in order to do so, the Internal Revenue Service
must be given the name and taxpayer identifying number of this other
person and documentation of the relationship between that person and the
person requesting the information. If the person requesting this
information is a person to whom a written determination described by the
notice pertains, or a successor in interest, executor, or authorized
representative of that person, the Internal Revenue Service will also
provide the person with a copy of the written determination on which is
indicated the material that the Commissioner proposes to delete under
section 6110(c) and any substitution proposed to be made therefor.
(ii) Administrative remedies. Any person to whom a written
determination described by the notice in the Federal Register pertains,
and any successor in interest, executor or authorized representative of
that person may pursue the administrative remedies described in this
paragraph (b)(2)(ii). If after receiving the information described in
paragraph (b)(2)(i) of this section, the person pursuing these
administrative remedies desires to protest the disclosure of certain
information in the written determination, that person must within 35
days after the notice is published submit a written statement
identifying those deletions not made by the Internal Revenue Service
which the person believes should have been made. The person pursuing
these administrative remedies must also submit a copy of the version of
the written determination proposed to be open or subject to inspection
on which that person indicates, by the use of brackets, the deletions
which the person believes should have been made. The Internal Revenue
Service shall, within 20 days after receipt of the response by the
person pursuing these administrative remedies, mail to that person its
final administrative conclusion with respect to the deletions to be
made.
(iii) Judicial remedy. Except as provided in paragraph (b)(2)(iv) of
this section, any person permitted to resort to administrative remedies
under paragraph (b)(2)(ii) of this section may, if that person proposed
any deletion not made under section 6110(c) by the Commissioner, file a
petition in the United States Tax Court under section 6110(h)(4) for a
determination with respect to the proposed deletion. If appropriate, the
petition may be filed anonymously. Any petition filed under section
6110(h)(4) must be filed within
[[Page 154]]
75 days after the date on which the Commissioner publishes in the
Federal Register the notice of intention to disclose required under
section 6110(h)(4).
(iv) Limitations on right to bring judicial actions. No petition
shall be filed under section 6110(h)(4) unless the administrative
remedies provided by paragraph (b)(2)(ii) of this section have been
exhausted. However, under two circumstances the petition may be filed
even though the administrative remedies have not been exhausted. The
first circumstance is if the petitioner requests the information
described in paragraph (b)(2)(i) of this section within 15 days after
the notice of intention to disclose is published in the Federal
Register, but does not receive it within 30 days after the notice is
published. The other circumstance is if the petitioner submits the
statement of deletions within 35 days after the notice is published, but
does not receive the final administrative conclusion of the Internal
Revenue Service within 65 days after the notice is published. No
judicial action with respect to any written determination shall be
commenced under section 6110(h)(4) by any person who has received a
notice with respect to the written determination under paragraph
(b)(2)(v) of this section.
(v) Required notice. If a proceeding is commenced under section
6110(h)(4) with respect to any written determination, the Secretary
shall send notice of the commencement of the proceeding to any person to
whom the written determination pertains. No notice is required to be
sent to persons who have filed the petition that commenced the
proceeding under section 6110(h)(4) with respect to the written
determination. The notice shall be sent, by registered or certified
mail, to the last known address of the persons described in this
paragraph (b)(2)(v) within 15 days after notice of the petition filed
under section 6110(h)(4) is served on the Secretary. For further
guidance regarding the definition of last known address, see Sec.
301.6212-2.
(vi) Intervention. Any person who is entitled to receive notice
under paragraph (b)(2)(v) of this section has the right to intervene in
any action brought under this paragraph (b)(2). If appropriate, this
person shall be permitted to intervene anonymously.
(vii) Background file documents. The following qualifications of the
rules in Sec. 301.6110-5(b) apply with respect to the restraint of
disclosure of background file documents related to written
determinations to which this section applies. First, the administrative
remedies described in Sec. Sec. 601.105 (b)(5)(iii)(i) and
601.201(e)(11) of this chapter do not apply. Second, the rule in
Sec. Sec. 601.105(b)(5)(vi)(f) and 601.201(e)(16) that the Internal
Revenue Service will not consider the deletion of material not proposed
for deletion prior to the issuance of the written determination does not
apply.
(3) Time at which open to public inspection--(i) General rule.
Except as otherwise provided in paragraph (b)(3)(ii) of this section,
the text of any written determination open to public inspection or
available for inspection upon written request under section 6110(h)
shall be made open to or available for inspection no earlier than 90
days and no later than 120 days after the date on which the Commissioner
publishes in the Federal Register the notice of intention to disclose
required under section 6110(h)(4). However, if an action is brought
under section 6110(h)(4) to restrain disclosure of any portion of a
written determination, the disputed portion of that written
determination shall be made open to or available for inspection under
paragraph (b)(3)(ii) of this section.
(ii) Limitation on account of court order. The portion of the text
of any written determination that was subject to an action under section
6110(h)(4) to restrain disclosure in which the court determined that the
disclosure should not be restrained shall be made open to or available
for inspection within 30 days of the date that the court order becomes
final. However, in no event shall that portion of the text of that
written determination be made open to or available for inspection
earlier than 90 days after the date on which the Commissioner publishes
in the Federal Register the notice of intention to disclose required by
section 6110(h)(4) and paragraph (b)(1) of this
[[Page 155]]
section. This 30-day period may be extended for such time as the court
finds necessary to allow the Commissioner to comply with its decision.
Any portion of a written determination which a court orders open to
public inspection or subject to inspection upon written request under
section 6110(f)(4) shall be open or subject to inspection within such
time as the court provides.
(iii) Background file documents. The rules in Sec. 301.6110-
5(c)(2)(ii) do not apply with respect to the time at which background
file documents related to written determinations to which this section
applies are subject to inspection.
[T.D. 7548, 43 FR 20791, May 15, 1978, as amended by T.D. 8939, 66 FR
2819, Jan. 12, 2001]
Sec. 301.6110-7 Miscellaneous provisions.
(a) Disposition of written determinations and background file
documents--(1) Reference written determinations. The Internal Revenue
Service shall not dispose of any reference written determinations or
related background file documents. The Commissioner may reclassify
reference written determinations as general written determinations if
the classification as reference was erroneous or if the Commissioner
determines that such written determination no longer has any significant
reference value. Notwithstanding the preceding sentence, the
Commissioner shall not classify as a general written determination any
written determination which is determined to be the basis for a
published revenue ruling unless such revenue ruling is obsoleted,
revoked, superseded or otherwise held to have no effect.
(2) General written determinations. The Internal Revenue Service may
dispose of general written determinations and any background file
document relating to such written determination pursuant to its
established records disposition procedures. Disposition of a written
determination shall not occur earlier than 3 years after the date on
which such written determination is made open to public inspection or
available for inspection upon written request. Disposition of a
background file document shall not occur earlier than 3 years after the
date on which the related written determination is made open to public
inspection or available for inspection upon written request.
(b) Precedential status of written determinations open to public
inspection. A written determination may not be used or cited as
precedent, but the rule set forth in this paragraph shall not apply to
change the precedential status, if any, of written determinations issued
with respect to taxes imposed by subtitle D of the Internal Revenue Code
of 1954.
(c) Civil remedies--(1) Liability for failure to make deletions or
to conform to time limitations--(i) Creation of remedy. An exclusive
remedy against the Commissioner shall exist in the Court of Claims for--
(A) The person to whom the written determination pertains whenever
the Commissioner fails to act in accordance with the time requirements
of section 6110(g), and
(B) The person to whom the written determination pertains and any
person identified in such written determination whenever the
Commissioner fails to make deletions required by section 6110(c) if as a
consequence of such failure there is disclosed the identity of such
person or other information with respect to such person that is required
to be deleted pursuant to section 6110(c).
(ii) Limitations. The remedy provided in paragraph (c)(1)(i) of this
section for failure to make deletions shall be available only if--
(A) The failure of the Commissioner to make the deletions required
by section 6110(c) is intentional or willful,
(B) The Commissioner fails to make any deletion required by section
6110(c) which the Commissioner has agreed to make, or
(C) The Commissioner fails to make any deletion which a court has
ordered to be made pursuant to section 6110(f)(3).
(iii) Damages. In any suit brought pursuant to paragraph (c)(1)(i)
of this section in which the court determines that an employee of the
Internal Revenue Service intentionally or willfully failed to make a
deletion required by section 6110(c), or intentionally or willfully
failed to act in accordance with the time requirements of section
[[Page 156]]
6110(g), the United States shall be liable, to the person described in
paragraph (c)(1)(i) of this section who brought the action, in an amount
equal to the sum of--
(A) Actual damages sustained by such person but in no case shall
such person be entitled to receive less than the sum of $1,000.
(B) The costs of the action, and
(C) Reasonable attorney's fees as determined by the court.
(2) Liability for making additional disclosure of information. The
Commissioner shall not be liable for making any additional disclosure
ordered pursuant to an action described in Sec. 301.6110-5(d)(2) if the
notice required by Sec. 301.6110-5(d)(4) is sent.
(3) Obligation to defend action for additional disclosure. The
Commissioner shall not be required to defend any action brought to
obtain additional disclosure pursuant to section 6110(f)(4) if the
notice required by Sec. 301.6110-5(d)(4) is sent.
(4) Obligation to make deletions. The Commissioner shall be
obligated to make only those deletions required by section 6110(c) which
he has agreed to make, those which a court has ordered to be made
pursuant to Sec. 301.6110-5(b)(2) and those the omission of which would
be intentional or willful.
(d) Fees--(1) General rule--(i) Copies. The Commissioner may
prescribe fees pursuant to Sec. 607.702(f)(4) of this chapter for the
costs of furnishing copies of material open to public inspection or
subject to inspection upon written request pursuant to section 6110.
(ii) Preparation of information available upon request. The
Commissioner may prescribe fees pursuant to Sec. 601.702(f) of this
chapter for the costs of searching for and making deletions from any
written determinations and background if documents that are subject to
inspection only upon written request pursuant to Sec. 301.6110-1(b).
(2) Reduction or waiver of fees--(i) Public interest. The
Commissioner shall reduce or waive the fees described in paragraph
(d)(1) of this section if the Commissioner determines that furnishing
copies of, searching for, or making deletions from any written
determination or background file document primarily benefits the general
public, as described in Sec. 601.702(f)(2)(ii)(B) of this chapter.
(ii) Previous requests. The Commissioner may waive the fees
described in paragraph (d)(1) of this section for searching for any
written determination or background file document if the search for such
written determination or background file document was made pursuant to a
previous request for inspection thereof. The Commissioner shall waive
the fees described in paragraph (d)(1) of this section for making
deletions from any written determination or background file document if
the making of such deletions from such written determination or
background file document was made pursuant to a previous request for
inspection thereof. Nothing in this (d)(2)(ii) shall prevent the
Commissioner from prescribing fees for making additional deletions from
such written determination or background file document pursuant to Sec.
301.6110-5(b).
[T.D. 7524, 42 FR 63417, Dec. 16, 1977]
Sec. 301.6111-1T Questions and answers relating to tax shelter registration.
The following questions and answers relate to the tax shelter
registration requirements of section 6111 of the Internal Revenue Code
of 1954, as added by section 141(a) of the Tax Reform Act of 1984 (Pub.
L. 98-369, 98 Stat. 678).
TABLE OF CONTENTS
The following table of contents is provided as part of these
temporary regulations to help the reader locate relevant provisions. The
headings are to be used only as a matter of convenience and have no
substantive effect.
In General
Overview of tax shelter registration, A-1
Overview of applicable penalties, A-2
Effect of registration, A-3
Tax Shelter Defined
Definition of tax shelter, A-4
Tax Shelter Ratio
Definition of tax shelter ratio, A-5
Deductions and Credits Represented as Potentially Allowable
Definition of amount of deductions and credits, A-6
Definition of year, A-7
Definition of explicit representation, A-8
[[Page 157]]
Definition of inferred representation, A-9
Effect of qualified representation, A-10
Representation regarding interest deduction, A-11
Representation regarding unintended events, A-12
Investment Base
Definition of investment base, A-13
Amounts eliminated from investment base, A-14
Tax Shelter Ratio--Miscellaneous
Effect of different ratios for different investors, A-15
Effect of alternate financing arrangements, A-16
Investments Subject to Securities Regulation
Federal law regulating securities, A-17
State law regulating securities, A-18
Exemptions from federal securities registration, A-19
Exemptions from state securities registration, A-20
Substantial Investment
Definition of substantial investment, A-21
Aggregation rules, A-22 and A-23
Exceptions From Tax Shelter Registration
Investments excepted from tax shelter registration, A-24
Certain persons not treated as investors, A-24A
Persons Required To Register a Tax Shelter
Tax shelter organizer, A-25 and A-26
Principal organizer, A-27
Participant in the organization, A-28 Manager, A-29
Exception for certain unrelated persons, A-30
Sellers, A-31
Absence of representations by organizer, A-32
Exception for suport services, A-33
Circumstances Under Which Tax Shelter Organizers Are Required To
Register a Tax Shelter
Principal organizer and a participant in the organization, A-34
Manager who has not signed designation agreement, A-35
Seller who has not signed designation agreement, A-36
Person acting in multiple capacities, A-37
Designation agreement (designated organizer), A-38
Person who has signed designation agreement, A-39
Registration--General Rules
Date registration is required, A-40
Requirement to provide registration notice to sellers and others, A-41
Definition of sale of an interest, A-42
Definition of offering for sale, A-43
No requirement to submit revised registration form A-44--A-45
Information reported on an amended application, 45A
Effect of resale of an asset, A-46
When registration is complete, A-47
Separate forms required for certain aggregated investments, A-48
Applicability of section 7502, A-49
Required investor disclaimer, A-50
Furnishing Tax Shelter Registration Numbers to Investors
Who must furnish number, A-51
When number must be furnished, A-52
Form required to furnish number, A-53 and A-54
Including the Registration Number on Tax Returns
Requirement to include registration number on investor's return, A-55
and A-57
Projected Income Investments
Special rules for projected income investments, A-57A
Definitions relating to projected income, investments A57B--A-57D
Tax shelters ineligible for the special rules, A-57E
Consequences of bad faith or unreasonable projections, A-57F
When a tax shelter ceases to be a projected income investment, A-57G
Special rule for registration, A-57H
Special rule for furnishing registration number, A-57I
Special rule for including registration number on tax return, A-57J
Effective Dates
Effective dates, A-58 and A-60
In General
Q-1. What is tax shelter registration?
A-1. Tax shelter registration is a new provision of the Internal
Revenue Code that affects organizers, sellers, investors, and certain
other persons associated with investments that are considered tax
shelters. The new provision imposes the following three requirements.
First, a tax shelter must be registered by the tax shelter organizer.
(See A-4 of this section for the definition of a tax shelter. See A-25
through A-39 of this section for rules relating to
[[Page 158]]
tax shelter organizers. See A-26 of this section for rules regarding
when the seller of an interest in a tax shelter is treated as the tax
shelter organizer.) Registration is accomplished by filing a properly
completed Form 8264 with the Internal Revenue Service. The Internal
Revenue Service will assign a registration number to each tax shelter
that is registered. Second, any person who sells or otherwise transfers
an interest in a tax shelter must furnish the registration number of the
tax shelter to the purchaser or transferee of the interest. (See A-51
through A-54 of this section for the time and manner in which the number
must be furnished.) Third, any person who claims a deduction, loss,
credit, or other tax benefit or reports any income from the tax shelter
must report the registration number of the tax shelter on any return on
which the deduction, loss, credit, benefit, or income in included. (See
A-55 through A-57 of this section for rules relating to the reporting of
tax shelter registration numbers.)
Q-2. Are penalties provided for failure to comply with the
requirements of tax shelter registration?
A-2. Yes. Separate penalties are provided for failure to satisfy any
of the requirements set forth in A-1 of this section. See A-1 of Sec.
301.6707-1T for the penalty for failure to register a tax shelter and A-
8 of Sec. 301.6707-1T for the penalty for filing false or incomplete
information will respect to the registration of a tax shelter. See A-12
of Sec. 301.6707-1T for the penalty for failure to furnish the tax
shelter registration number to purchasers or transferees. See A-13 of
301.6707-1T for the penalty for failure to report the tax shelter
registration number on a tax return on which a deduction, loss, credit,
income, or other tax benefit is included. In addition, criminal
penalties may be imposed for willful noncompliance with the requirements
of tax shelter registration. See, for example, section 7203, relating to
willful failure to supply information, and section 7206, relating to
fraudulent and false statements.
Q-3. Does registration of a tax shelter with the Internal Revenue
Service indicate that the Internal Revenue Service has reviewed,
examined, or approved the tax shelter or the claimed tax benefits?
A-3. No. Moreover, any representation to prospective investors that
states that a tax shelter is registered with the Internal Revenue
Service (or that registration is being sought) must include a legend
stating that registration does not indicate that the Internal Revenue
Service has reviewed, examined or approved the tax shelter or any of the
claimed tax benefits. (See A-50 of this section for the form and content
of the legend.)
Tax Shelter Defined
Q-4. What investments are tax shelters that are required to be
registered with the Internal Revenue Service?
A-4. A tax shelter is any investment that meets the following two
requirements:
(I) The investment must be one with respect to which a person could
reasonably infer, from the representations made or to be made in
connection with any offer for sale of any interest in the investment,
that the tax shelter ratio for any investor may be greater than 2 to 1
as of the close of any of the first 5 years ending after the date on
which the investment is offered for sale.
(II) The investment must be (i) required to be registered under a
federal or state law regulating securities, (ii) sold pursuant to an
exemption from registration requiring the filing of a notice with a
federal or state agency regulating the offering or sale of securities,
or (iii) a substantial investment.
An investment that satisfies these two requirements is considered a
tax shelter for registration purposes regardless of whether it is
marketed or customarily designated as a tax shelter. See A-5 of this
section for the definition of tax shelter ratio. See A-17 and A-18 of
this section for the definition of an investment required to be
registered under a federal or state law regulating securities. See A-19
and A-20 of this section for the definition of an investment sold
pursuant to an exemption from registration requiring the filing of a
notice. See A-21 of this section for the definition of a substantial
investment.
[[Page 159]]
Tax Shelter Ratio
Q-5. What does the term ``tax shelter ratio'' mean?
A-5. The term ``tax shelter ratio'' means, with respect to any year,
the ratio that the aggregate amount of deductions and 200 percent of the
credits that are or will be represented as potentially allowable to an
investor under subtitle A of the Internal Revenue Code for all periods
up to (and including) the close of such year, bears to the investment
base for such investor as of the close of such year.
Deductions and Credits Represented as Potentially Allowable
Q-6. What do the terms ``amount of deductions'' and ``credits''
mean?
A-6. The term ``amount of deductions'' means the amount of gross
deductions and other similar tax benefits potentially allowable with
respect to the investment. The gross deductions are not to be offset by
any gross income to be derived or potentially derived from the
investment. Thus, the term ``amount of deductions'' is not equivalent to
the net loss, if any, attributable to the investment. The term
``credits'' means the gross amount of credits potentially allowable with
respect to the investment without regard to any possible tax liability
resulting from the investment or any potential recapture of the credits.
Q-7. What does the term ``year'' mean for purposes of determining
the tax shelter ratio?
A-7. The term ``year'' means the taxable year of a tax shelter, or
if the tax shelter has no taxable year, the calendar year.
Q-8. Under what circumstances is a deduction or credit considered to
be represented as being potentially allowable to an investor?
A-8. A deduction or credit is considered to be represented as being
potentially allowable to an investor if any statement is made (or will
be made) in connection with the offering for sale of an interest in an
investment indicating that a tax deduction or credit is available or may
be used to reduce federal income tax or federal taxable income.
Representations of tax benefits may be oral or written and include those
made at the time of the initial offering for sale of interests in the
investment, such as advertisements, written offering materials,
prospectuses, or tax opinions, and those that are expected to be made
subsequent to the initial offering. Representations are not confined
solely to statements regarding actual dollar amounts of tax benefits,
but also include general representations that tax benefits are available
with respect to an investment. Thus, for example, an advertisement
stating that ``purchase of restaurant includes trade fixtures (5-year
write-off and investment tax credit)'' constitutes an explicit
representation of tax benefits.
Q-9. If a deduction or credit is not explicitly represented as being
potentially allowable to an investor may it be inferred as a represented
tax benefit that is includible in the tax shelter ratio?
A-9. Yes. Although some explicit representation concerning tax
benefits is necessary before an investment may be considered a tax
shelter, once an explicit representation is made (or will be made)
regarding any tax benefit, all deductions or credits typically
associated with the investment will be inferred to have been represented
as potentially allowable. Thus, the tax shelter ratio will be determined
with reference to those tax benefits that are explicitly represented as
being potentially allowable as well as all other tax benefits that are
typically associated with the investment. The amount of each deduction
or credit that is includible in the tax shelter ratio, if not
specifically represented as to amount, should be reasonably estimated
based on representations of economic value or economic projections, if
any, or on any other information available to the tax shelter organizer.
Reasonable estimates of deductions or credits may take into account past
experience with similar investments. Reasonable estimates must assume
use of the most accelerated allowable basis for cost recovery
deductions.
As an example of the application of this A-9, assume that an
advertisement explicitly states that a building is eligible for the
investment tax credit for rehabilitation of a certified historic
structure, but makes no mention of
[[Page 160]]
cost recovery deductions, amortization deductions for construction
period interest and taxes, real estate taxes after construction, ongoing
maintenance expenses, or other deductions or credits typically
associated with a building. Reasonable estimates of all such deductions
and credits must be included with the investment tax credit explicitly
represented in determining the tax shelter ratio associated with any
investor's acquisition of an interest in the building.
Q-10. Does the fact that representations are made (or to be made)
indicating that a deduction may be offset by income from the investment
or that a deduction or credit may be subject to recapture or may be
disallowed on audit affect the computation of the tax shelter ratio?
A-10. No. Deductions and credits represented as being potentially
allowable are taken into account in computing the tax shelter ratio
regardless of whether any qualifying statements are made.
Q-11. Is interest to be paid by an investor with respect to a debt
obligation incurred in connection with the acquisition of an interest in
the tax shelter included in the aggregate amount of deductions?
A-11. If a deduction for such interest is explicitly represented (or
will be represented) as being potentially allowable, the interest is
includible in the aggregate amount of the deductions. In addition, any
interest to be paid with respect to a debt obligation the proceeds of
which reduce the investment base (see A-14 of this section), regardless
of whether a deduction for such interest is explicitly represented as
being allowable, will be considered a deduction typically associated
with the investment (see A-9 of this section). Accordingly, such
interest will be considered to be represented as being potentially
allowable and must be taken into account in computing the tax shelter
ratio. If interest to be paid with respect to a debt obligation the
proceeds of which do not reduce the investment base (see A-14 of this
section) is not explicitly represented as being potentially allowable,
however, such interest will not be considered typically associated with
the investment and will not be taken into account in computing the tax
shelter ratio.
Q-12. If representations are made that part or all of an amount
invested in a tax shelter will be deductible upon the occurrence of an
unintended event, will the deduction be included in the aggregate amount
of deductions?
A-12. No. Thus, for example, if representations are made that a
person's investment in a tax shelter may give rise to a loss deduction
if the investment becomes worthless, the amount of the loss deduction
will not be included in the aggregate amount of deductions and will not
be taken into account in computing the tax shelter ratio. Similarly, if
representations are made that the costs of acquiring oil and gas lease
interests may be deductible if the lease is proved worthless by
abandonment, the amount of any loss deduction will not be included in
the aggregate amount of deductions.
Investment Base
Q-13. What does the term ``investment base'' mean?
A-13. The term ``investment base'' means, with respect to any year
(as defined in A-7 of this section), means the cumulative amount of
money and the adjusted basis of other property (reduced by any liability
to which such other property is subject) that is unconditionally
required to be contributed or paid directly to the tax shelter on or
before the close of such year by an investor.
Q-14. What amounts must be eliminated from the investment base?
A-14. The investment base must be reduced by the following amounts:
(1) Any amount borrowed by the investor, even if borrowed on a
recourse basis, from any person who participated in the organization,
sale, or management of the investment or who has an interest (other than
an interest as a creditor) in the investment (``a participating
person'') or from any person who is related (as defined in section 168
(e)(4)) to a participating person, unless the amount is unconditionally
required to be repaid by the investor before the close of the year for
which the determination is being made. An amount will be considered
unconditionally required to be repaid by the investor only
[[Page 161]]
if any offering material in which the borrowed amount is described and
any agreement to be entered into between a participating (or related)
person and the investor provide that the amount must be repaid (without
exception) by the end of the year for which the determination is being
made. An amount that is to be repaid only from earnings of the
investment is not an amount that is unconditionally required to be
repaid and is thus excluded from the investment base. In addition, an
amount is not unconditionally required to be repaid if the amount will
be (or is expected to be) reloaned to the investor during the 5-year
period ending after the date the investment is offered for sale.
(2) Any amount borrowed by the investor, even if borrowed on a
recourse basis, from a person, if the loan is arranged by a
participating (or related) person, unless the amount is unconditionally
required to be repaid by the investor before the close of the year for
which the determination is being made. Any borrowing that is represented
(orally or in writing) as being available from a specific source will be
treated as arranged by a participating (or related) person, if the
participating (or related) person provides a list of investors, or
information relating to the investment, to the lender or otherwise
informs the lender about the investment. However, in the case of an
amount borrowed on a recourse basis, the mere fact that a lender who is
actively and regularly engaged in the business of lending money obtained
information relating to the investment, from a participating (or
related) person, solely in response to a lender's request made in
connection with such borrowing or a prior loan to the investment, a
participating (or related) person, or an investor, will not, by itself,
result in a determination that the loans are arranged by a participating
(or related) person. Financing may be treated as arranged by a
participating (or related) person regardless of whether a commitment to
provide the financing is made by the lender to the participating or
related person.
For example, assume that a tax shelter organizer represents that the
purchase of an interest in a tax shelter may be financed with the
proceeds of a revolving loan, and the tax shelter organizer provides
investors with the names of several banks or other lending institutions
to which the tax shelter organizer has provided information about the
investment. Assume further that the information was not provided in
response to requests from such lending institutions made in connection
with prior loans. The proceeds of the revolving loan will be excluded
from the investment base because the loan is not unconditionally
required to be repaid and it is treated as having been arranged by the
tax shelter organizer.
(3) Any amount borrowed, directly or indirectly, from a lender
located outside the United States (``foreign-connected financing''), of
which a participating (or related) person knows or has reason to know.
(4) Any amounts to be held for the benefit of investors in cash,
cash equivalents, or marketable securities. An amount is to be held in
cash equivalents if the amount is to be held in a checking account,
savings account, mutual fund, certificate of deposit, book entry
government obligation, or any other similar account or arrangement.
Marketable securities are any securities that are part of an issue any
portion of which is traded on an established securities market and any
securities that are regularly quoted by brokers or dealers making a
market.
(5) Any distributions (whether of cash or property) that will be
made without regard to the income of the tax shelter, but only to the
extent such distributions exceed the amount to be held as of the close
of the year in cash, cash equivalents, or marketable securities.
Tax Shelter Ratio--Miscellaneous
Q-15. Does an investment satisfy the requirement in A-4 (I) of this
section (``the tax shelter ratio requirement'') if it may be inferred
from the representations made or to be made to investors that the tax
shelter ratio for some, but not all, of the investors may be greater
than 2 to 1 as of the close of any one of the first five years?
A-15. Yes. If the tax shelter ratio for any one investor may be
greater that 2 to 1, the investment satisfies the tax
[[Page 162]]
shelter ratio requirement and is a tax shelter if it also meets the
requirement in A-4(II) of this section. Moreover, an investment will
satisfy the tax shelter ratio requirement even if the tax shelter ratio
for a single investor exceeds 2 to 1 as of the close of only one of the
first five years.
For purposes of computing the tax shelter ratio for a year, all
persons with interests in the investment are considered investors,
except that general partners in a limited partnership will not be
treated as investors in the partnership if the general partners'
aggregate interest in each item of partnership income, gain, loss,
deduction, and credit for such year is not expected to exceed 2 percent.
In determining the general partners' interest in such items, limited
partnership interests owned by general partners shall not be taken into
account. For purposes other than the computation of the tax shelter
ratio, however, all general partners will be treated as investors. Thus,
for example, a general partner with a 1 percent interest in a limited
partnership will be treated as an investor for the purpose of
determining whether the partnership is a substantial investment.
Q-16. If a person could reasonably infer from the representations
made or to be made about an investment that the tax shelter ratio for
the investment may be greater than 2 to 1 under one arrangement for
financing the purchase of an interest by an investor, but would be 2 to
1 or less under an alternative financing arrangement, does the
investment satisfy the tax shelter ratio requirement of A-4 (I) of this
section.
A-16. Yes. An investment satisfies the tax shelter ratio requirement
of A-4 (I) of this section if a person could reasonably infer from the
representations made or to be made that the tax shelter ratio for any
person may be greater than 2 to 1 as of the close of any one of the
first five years. The tax shelter ratio requirement is met if the tax
shelter ratio may exceed 2 to 1 under any type of financing arrangement
that is or will be represented as being available to investors.
Investments Subject to Securities Regulation
Q-17. What is an investment that is required to be registered under
a federal law regulating securities?
A-17. An investment required to be registered under a federal law
regulating securities is any public offering of an investment that is
required to be registered under the Securities Act of 1933 (1933 Act),
the Investment Company Act of 1940, or any other federal law regulating
securities. An investment is required to be registered under the 1933
Act, the Investment Company Act, or any other federal law regulating
securities, if failure to register the investment would result in a
violations of the applicable federal law, whether or not the investment
has in fact been registered and, if proper notice has not been filed,
whether or not the investment could have been sold pursuant to an
exemption listed in A-19 of this section if such notice had been filed.
Q-18. What is an investment required to be registered under a state
law regulating securities?
A-18. An investment required to be registered under a state law
regulating securities is any investment required to be registered under
a blue sky law or other similar state statute regulating securities. The
term ``state'' includes the 50 states, the District of Columbia, and
possessions of the United States.
Q-19. What is an investment sold pursuant to an exemption from
registration requiring the filing of a notice with a federal agency
regulating the offering or sale of securities?
A-19. An investment sold pursuant to an exemption from registration
requiring the filing of a notice with such a federal agency is any
investment that is sold pursuant to an exemption from registration
requiring the filing or submission of a notice or other document with
the Securities and Exchange Commission or any other federal agency
regulating the offering or sale of securities, including the following
exemptions (and applicable filing):
(1) Regulation A, as promulgated under section (3)(b) of the 1933
Act (Form 1(A)),
[[Page 163]]
(2) Regulation B, as promulgated under section 3(b) of the 1933 Act
(Schedules A through F),
(3) Regulation D, as promulgated under sections (3)(b) and 4(2) of
the 1933 Act (Form D), and
(4) Any other statutory or regulatory exemption from registration
requiring the filing or submission of a notice or other document.
Q-20. What is an investment sold pursuant to an exemption from
registration requiring the filing of a notice with a state agency
regulating the offering or sale of securities?
A-20. An investment sold pursuant to an exemption from registration
requiring the filing of a notice with such a state agency is any
investment sold pursuant to an exemption under a blue sky law or other
similar state statutory or regulatory scheme that requires the filing or
submission of a notice or other document with such a state agency. See
A-18 of this section for the definition of state.
Substantial Investment
Q-21. What is a substantial investment?
A-21. An investment is a substantial investment if the aggregate
amount that may be offered for sale to all investors exceeds $250,000
and 5 or more investors are expected. The aggregate amount offered for
sale is the aggregate amount to be received from the sale of interests
in the investment and includes all cash, the fair market value of all
property contributed, and the principal amount of all indebtedness
received in exchange for interests in the investment, regardless of
whether the proceeds of the indebtedness are included in the investment
base under A-14 of this section. For purposes of determining whether 5
or more investors are expected in an investment involving real property
(and related personal property) that is used as a farm (as defined in
section 2032A(e)(4)) for farming purposes (as defined in section
2032A(e)(5)), interests in the investment expected to be held by a
husband and wife, their children and parents, and the spouses of their
children (or any of them) will be treated as if the interests were to be
held by one investor. Thus, for example, interests in a farm that are
offered to two brothers and their wives would be treated as interests
offered to one investor. Such an investment could be a substantial
investment only if four or more persons who were not members of the
family were expected to be investors in the farm.
Q-22. Will an investment be considered a substantial investment if
the investment involves a number of parts each including fewer than 5
investors or an aggregate amount of $250,000 or less?
A-22. Yes, under the circumstances described in this A-22. For
purposes of determining whether investments are parts of a substantial
investment, similar investments offered by the same person or related
persons (as defined in section 168(e)(4)) are aggregated together.
Investments are considered similar if they involve similar principal
business assets and similar plans or arrangements. Investments that
include no business assets will be considered similar if they involve
similar plans or arrangements.
Similar investments are aggregated solely for the purpose of
determining whether investments involving fewer than 5 investors or an
aggregate amount of $250,000 or less are substantial investments. For
this purpose, similar investments are aggregated even though some, but
not all, of the investments are (i) required to be registered under a
Federal or State law regulating securities or are sold pursuant to an
exemption from securities registration requiring the filing of a notice
with a Federal or State agency regulating the offering or sale of
securities (i.e., required to be registered as tax shelters whether or
not a substantial investment) or (ii) substantial investments without
regard to aggregation.
Assume, for example, that a person develops similar arrangements
involving 8 different partnerships, each investing in a separate but
similar asset (such as a separate master recording or separate piece of
similar real estate), each with a different general partner and each
with 3 different limited partners. Assume further that the arrangements
of all the partnerships are similar. These partnerships involving
similar arrangements and similar assets
[[Page 164]]
would be aggregated together. Thus, if each partner is expected to
invest $11,000, there will be 32 investors (1 general partner plus 3
limited partners times 8 partnerships) and an aggregate investment of
$352,000 (32 partners times $11,000). Accordingly, each partnership will
constitute part of a substantial investment. If representations are made
that $1,000 in tax credits and $3,000 in deductions are available to
each limited partner in the first year and $10,000 of the cash invested
was expected to be the proceeds of a loan arranged by the organizer, the
tax shelter ratio as of the close of the first year (assuming there are
no deductions or credits typically associated with such investment, as
described in A-9 of this section) would be 5 to 1 ($5,000 in total tax
benefits and $1,000 investment base). Accordingly, the organizer would
be required to register the partnerships with the Internal Revenue
Service.
Q-23. If an investment involving fewer than 5 investors or an
aggregate amount of $250,000 or less is offered for sale and, at the
time of the offering, it is not known (and there is no reason to know)
that subsequent similar investments will be offered by the person who
made the first offering (or a related person), will subsequent similar
investments offered by that person (or a related person) be aggregated
with the first investment for purposes of determining whether the
investments constitute a substantial investment?
A-23. No. However, a tax shelter organizer will be presumed to have
known of any similar investments (as defined in A-22 of this section)
offered during the 12 months following the first offering of an
investment.
Exceptions From Tax Shelter Registration
Q-24. Are there any investments that will not be subject to tax
shelter registration even if they satisfy the requirements of a tax
shelter (as defined in A-4 of this section)?
A-24. Yes. The following investments are not subject to tax shelter
registration:
(1) Sales of residences primarily to persons who are expected to use
the residences as their principal place of residence,
(2) Sales or leases or tangible personal property (other than master
sound recordings, motion picture or television films, videotapes,
lithograph plates, or other property relating to a literary, musical, or
artistic composition) by the manufacturer (or a member of an affiliated
group, within the meaning of section 1502, including the manufacturer)
of the property primarily to persons who are expected to use the
property in their principal active trade or business (see, however, A-32
and A-46 of this section for the additional rules applicable to a
purchaser of property described in this A-24 who organizes an investment
involving the property),
(3) Any other investment as specified by the Secretary in a rule-
related notice published in the Federal Register.
Q-24A. Under what other circumstances are particular sales or leases
of tangible personal property to certain persons or the performance of
particular services for certain persons exempt from tax shelter
registration?
A-24A. A person who, in the ordinary course of a trade or business,
sells or leases tangible personal property (other than collectibles (as
defined in section 408(m)(2)), master sound recordings, motion picture
or television films, videotapes, lithograph plates, or other property
that includes or relates to a literary, musical or artistic composition)
to a purchaser or lessee who is reasonably expected to use the property
either for a personal use or in the purchaser's or lessee's principal
active trade or business is not required for any purpose to treat such a
purchaser or lessee as an investor in a tax shelter. Property may be
reasonably expected to be used by a purchaser or lessee for personal use
only if sold or leased to the purchaser or lessee in a quantity that is
customary for such use. Similarly, a person who performs services for
another person in connection with the principal active trade or business
of the recipient of the services or for the recipient's personal use is
not required to treat the recipient as an investor in a tax shelter.
Persons who are not reasonably expected to use property or services
either in their principal active trade or business or for
[[Page 165]]
personal use must be treated as tax shelter investors in the event the
sales, leases, or performance of services otherwise constitute a tax
shelter.
Assume, for example, that an organizer forms Z corporation to feed
cattle and to provide services in connection with the cattle feeding
operations. Z will agree to serve customers with a minimum of 200 head
of cattle. The fee for the services is $20 per head. Feed for cattle
will cost $280 per head. Z represents that the service fee and the cost
of the feed may be financed by $5,000 of cash and $55,000 of proceeds of
a revolving recourse note that Z has arranged be available. Z provides
its services to 100 customers. Ninety-five of the customers are persons
whose principal active trade or business is reasonably expected to be
farming (as defined in section 464(e)(1)). Five of the customers are not
reasonably expected to engage in farming as their principal active trade
or business. Although all the individual investments involve similar
principal business assets and similar plans or arrangements, only the 5
customers who are not reasonably expected to be in the principal active
trade or business of farming will be treated as investors in a tax
shelter and aggregated to determine whether a substantial investment
exists. Thus, there will be 5 investors and an aggregate investment of
$300,000. If representations are made that the service fee and the cost
of the feed are tax deductible, the tax shelter ratio (assuming there
are no deductions or credits typically associated with such an
investment, as described in A-9 of this section) would be 12 to 1
($60,000 in total tax benefits and $5,000 investment base) and the
organizer would be required to register the five aggregated feeding
arrangements as a tax shelter. The registration number of the tax
shelter must be provided to the five customers treated as investors in
the tax shelter, but would not be required to be furnished to the
customers whose principal active trade or business is reasonably
expected to be farming.
Persons Required To Register a Tax Shelter
Q-25. Who has the legal obligation to register a tax shelter?
A-25. A tax shelter organizer is obligated to register the tax
shelter.
Q-26. What is the definition of tax shelter organizer?
A-26. Several categories of persons may be tax shelter organizers.
In general, the term tax shelter organizer means a person principally
responsible for organizing a tax shelter. If a person principally
responsible for organizing a tax shelter has not registered the tax
shelter by the day on which interests in the shelter are first offered
for sale, any other person who participated in the organization of the
tax shelter will be treated as a tax shelter organizer. If neither a
person principally responsible for organizing the tax shelter nor any
other person who participated in the organization of a tax shelter has
registered the tax shelter by the day on which interests in the tax
shelter are first offered for sale, then any person who participates in
the management of the tax shelter at a time when the tax shelter is not
registered will be treated as a tax shelter organizer. Finally, if a
person participates in the sale of a tax shelter at a time when the
person knows or has reason to know that a tax shelter has not been
registered, that person will be treated as a tax shelter organizer. See
A-38 of this section for rules relating to the execution of an agreement
among persons who may be treated as tax shelter organizers to designate
one person to register a tax shelter.
Q-27. Who is a person principally responsible for organizing a tax
shelter?
A-27. A person principally responsible for organizing a tax shelter
(``principal organizer'') is any person who discovers, creates,
investigates, or initiates the investment, devises the business or
financial plans for the investment, or carries out those plans through
negotiations or transactions with others.
Q-28. What constitutes participation in the organization of a tax
shelter?
A-28. Participation in the organization of a tax shelter includes
the performance of any act (directly or through an agent) related to the
establishment of the tax shelter, including the following:
(1) Preparation of any document establishing the tax shelter (for
example,
[[Page 166]]
articles of incorporation, a trust instrument, or a partnership
agreement);
(2) Preparation of any document in connection with the registration
(or exemption from registration) of the tax shelter with any federal,
state, or local government body;
(3) Preparation of a prospectus, offering memorandum, financial
statement, or other statement describing the tax shelter;
(4) Preparation of a tax or other legal opinion relating to the tax
shelter;
(5) Preparation of an appraisal relating to the tax shelter;
(6) Negotiation or other participation on behalf of the tax shelter
in the purchase of any property relating to the tax shelter.
Q-29. What constitutes participation in the management of a tax
shelter?
A-29. Participation in the management of a tax shelter includes
managing the assets of the tax shelter, directing the business activity
of the tax shelter, or, depending on the form of the tax shelter, acting
as a general partner who actively participates in the management of a
partnership, a trustee of a trust, a director or an officer of a
corporation (including a corporate general partner of a partnership), or
performing activities similar to those performed by such a general
partner, a trustee, a director, or an officer.
Q-30. Will the performance of any act described in A-27 through A-29
of this section constitute participation in the organization or
management of a tax shelter if the person performing the act is
unrelated to the tax shelter (or any principal organizer of the tax
shelter) and does not participate in the entrepreneurial risks or
benefits of the tax shelter?
A-30. No. The performance of an act described in A-27 through A-29
of this section will not constitute participation in the organization or
management of a tax shelter unless the person performing the act is
related to the tax shelter (or any principal organizer of the tax
shelter) or the person participates in the entrepreneurial risks or
benefits of the tax shelter. A person will be considered related to a
tax shelter if the person is related to the tax shelter or a principal
organizer of the tax shelter within the meaning of section 168(e)(4) or
is employed by the tax shelter or a principal organizer of the tax
shelter or has an interest (other than an interest as a creditor) in the
tax shelter. A person will be considered a participant in the
entrepreneurial risks or benefits of a tax shelter if the person's
compensation for performing an act described in A-27 through A-29 of
this section is contingent on any matter relating to the tax shelter
(e.g., the compensation is based in whole or in part upon (i) whether
interests in the tax shelter are actually sold or (ii) the number or
value of the units in the tax shelter that are sold), or if the person
will receive an interest in the tax shelter as part or all of the
person's compensation.
For example, assume that A forms Z partnership, a tax shelter for
which registration is required. Z hires the X law firm, none of the
partners of which is related to the tax shelter, to prepare the
documents necessary to register the offering of Z securities with the
Securities and Exchange Commission. X charges $100 an hour for its
services in connection with the preparation of the necessary documents,
and payment of the fee is not contingent. X will not be treated as a
participant in the organization of the tax shelter. If, however, X were
to charge a fee equal to 1 percent of the value of the units in the tax
shelter that are sold, X would be considered a participant in the
organization of the shelter.
As another example, assume that individual C is an attorney employed
by W corporation, the corporate general partner and principal organizer
of Z, and that C prepares the documents necessary to register the tax
shelter with the Securities and Exchange Commission. C will be treated
as having participated in the organization of the tax shelter regardless
of the way in which C's compensation is structured, because C, as an
employee, is related to the principal organizer of the tax shelter.
Q-31. What constitutes participation in the sale of a tax shelter?
A-31. Participation in the sale of a tax shelter includes any
marketing activities (directly or through an agent)
[[Page 167]]
with respect to an investment, including the following:
(1) Direct contact with a prospective purchaser of an interest, or
with a representative or agent of a prospective purchaser, but only if
the contract relates to the possible purchase of an interest in the tax
shelter;
(2) Solicitation of investors using the mail, telephone, or other
means, or by placing an advertisement for the tax shelter in a
newspaper, magazine, or other publication or medium;
(3) Instructing or advising salespersons regarding the tax shelter
or sales presentations.
Q-32. May persons be treated as tax shelter organizers if such
persons do not make any representations of tax benefits to investors?
A-32. Yes. If a person described in A-26 of this section knows or
has reason to know that representations of tax benefits have been made,
that person may be treated as a tax shelter organizer. For example, a
participant in the sale of a tax shelter may know or have reason to know
that representations of tax benefits have been made by the principal
organizer or others who participate in the organization of the tax
shelter. In addition, a person who acquires property from a manufacturer
in a transaction exempt from tax shelter registration under A-24 of this
section and who organizes an investment involving the property may know
or have reason to know of any representation of tax benefits made by the
manufacturer.
Q-33. If a person performs support services such as typing,
photocopying, or printing for a tax shelter (or a tax shelter organizer)
or performs other ministerial functions for the tax shelter (or a tax
shelter organizer), may the person be considered to have participated in
the organization, management, or sale of the tax shelter?
A-33. No. Merely performing support services or ministerial
functions will not be considered participation in the organization,
management, or sale of a tax shelter.
Circumstances Under Which Tax Shelter Organizers Are Required To
Register a Tax Shelter
Q-34. When is a principal organizer or a person who participates in
the organization of a tax shelter required to register a tax shelter?
A-34. A principal organizer or a person who participates in the
organization of a tax shelter (i.e., a person who could be treated as a
tax shelter organizer within the meaning of A-26 of this section) is
required to register the tax shelter by the day on which the first
offering for sale of interests in the tax shelter occurs, unless the
person has signed a designation agreement pursuant to A-38 of this
section. If a group of persons who could be treated as tax shelter
organizers has signed a designation agreement pursuant to A-38 of this
section, the designated organizer is required to register the tax
shelter by the day on which the first offering for sale of interests in
the tax shelter occurs. See A-39 of this section for additional rules
applicable to tax shelter organizers (other than a designated organizer)
who have signed a designation agreement.
Q-35. When is a person who participates in the management of a tax
shelter (``manager'') required to register a tax shelter?
A-35. A manager who has not signed a designation agreement pursuant
to A-38 of this section must register the tax shelter if the manager
participates in the management of the tax shelter on or after the first
offering for sale of interests in the tax shelter at a time when the tax
shelter has not been properly registered (i.e., the manager is treated
as a tax shelter organizer within the meaning of A-26 of this section).
Such a manager must register the tax shelter by the day on which the
first offering for sale of interests in the tax shelter occurs, or by
the day on which the manager's participation in the management of the
tax shelter commences, whichever is later. See A-39 of this section for
rules applicable to a manager who has signed a designation agreement.
Q-36. When is a person who participates in the sale of a tax shelter
(``seller'') required to register the tax shelter?
[[Page 168]]
A-36. A seller who has not signed a designation agreement pursuant
to A-38 of this section must register the tax shelter if the seller
participates in the sale of the tax shelter at a time when the seller
knows or has reason to know that the tax shelter has not been properly
registered (i.e., the seller is treated as a tax shelter organizer
within the meaning of A-26 of this section). A seller who has not signed
a designation agreement will be deemed to have reason to know that the
tax shelter has not been properly registered if the seller does not
receive a copy of the Internal Revenue Service tax shelter registration
notice containing the registration number within the 30-day period after
the seller first offers interests in the tax shelter for sale. A seller
must register the tax shelter as soon as practicable after the seller
first knows or has reason to know that the tax shelter has not been
properly registered. See A-39 of this section for rules applicable to a
seller who has signed a designation agreement.
Q-37. When is a person who acts in more than one capacity with
respect to a tax shelter required to register the shelter?
A-37. A person who acts in more than one capacity with respect to a
tax shelter (i.e., as two or more of the following: principal organizer,
participant in the organization, manager, or seller) must register the
tax shelter by the earliest day on which a tax shelter organizer acting
in any of the person's several capacities would be required to register
the tax shelter.
Q-38. May a group of persons who could be treated as tax shelter
organizers under A-26 of this section designate one person to register
the tax shelter?
A-38. Yes. A group of persons who could be treated as tax shelter
organizers under A-26 of this section may enter into a written agreement
designating one person as the tax shelter organizer responsible for
registering the tax shelter (``designated organizer''). The designated
organizer should ordinarily be a person principally responsible for
organizing the tax shelter, but may be any person who participates in
the organization of the tax shelter. Although persons who participate
only in the sale or management of a tax shelter may sign a designation
agreement, they may not be the designated organizer. In addition, the
designated organizer may not be a person who is a resident in a country
other than the United States. Any person who signs a designation
agreement, other than the designated organizer, will not be liable for
failing to register the tax shelter and will not be subject to a
penalty, even if the designated organizer fails to register the tax
shelter, unless the person fails to register the tax shelter when such
registration is required under A-39 of this section. See A-7 of Sec.
301.6707-1T for additional rules relating to the reasonable cause
exception applicable to persons who sign a designation agreement.
Q-39. Is a tax shelter organizer who has signed a designation
agreement and who is not the designated organizer required to register
the tax shelter under any circumstances?
A-39. Yes. If a tax shelter organizer who has signed a designation
agreement pursuant to A-38 of this section knows or has reason to know
on or after the day on which the first offering for sale of interests in
a tax shelter occurs that the designated organizer failed to register
the tax shelter, such tax shelter organizer must register the tax
shelter as soon as practicable after he first knows or has reason to
know of the failure. A tax shelter organizer who has signed a
designation agreement is deemed to have reason to know that the
designated organizer has failed to register the tax shelter if the tax
shelter organizer does not receive a copy of the Internal Revenue
Service registration notice containing the registration number from the
designated organizer within the 60-day period after the day on which the
first offering for sale of interests in the tax shelter occurs (or the
person signs the designation agreement, if later). See A-41 of this
section for the requirement that the designated organizer provide a copy
of the registration notice and number to persons who have signed the
designation agreement.
Registration--General Rules
Q-40. By what date must a tax shelter be registered?
[[Page 169]]
A-40. A tax shelter must be registered not later than the day on
which the first offering for sale of an interest in the tax shelter
occurs.
Q-41. Is a tax shelter organizer (including a designated organizer)
who registers a tax shelter responsible for performing any act with
respect to tax shelter registration other than registering the tax
shelter?
A-41. Yes. A tax shelter organizer (including a designated
organizer) who registers a tax shelter must provide a copy of the
Internal Revenue Service registration notice containing the registration
number within 7 days after the notice is received from the Internal
Revenue Service to the principal organizer (if a different person) and
to any persons who the tax shelter organizer knows or has reason to know
are participating in the sale of interests in the tax shelter (if such
persons begin to participate after the registration number is received,
they must be provided the notice within 7 days after they commence their
participation). In addition, a designated organizer must provide a copy
of the notice within 7 days after it is received to all persons who have
signed the designation agreement.
Q-42. What is the sale of an interest in a tax shelter?
A-42. The sale of an interest in a tax shelter includes the sale of
property, or any interest in property, the entry into a leasing
arrangement, a consulting, management or other agreement for the
performance of services, or the sale or entry into any other plan,
investment, or arrangement.
Q-43. What does the term ``offering for sale'' mean?
A-43. The term ``offering for sale'' means making any
representation, whether oral or written, relating to participation in a
tax shelter as an investor. The term includes any advertisement relating
to the tax shelter and any mail, telephonic, or other contact with
prospective investors. A representation relating to participation in a
tax shelter will be considered an offering for sale of an interest in
the tax shelter even though there is included in the representation an
explicit statement that the representation does not constitute an offer
to sell or a solicitation of an offer to buy an interest in the tax
shelter. In determining whether an offering for sale of an interest has
occurred, federal and state laws regulating securities are not
controlling.
Q-44. After a tax shelter has been registered, must it be registered
again each year that it continues to be offered for sale?
A-44. No. Registration is effective for the year in which first
accomplished and all subsequent years.
Q-45. If the facts relating to a tax shelter change after the tax
shelter has been registered, must the tax shelter be registered again or
must an amended application for registration be filed by the tax shelter
organizer?
A-45. No. The tax shelter organizer, however, is permitted to file
an amended application if a material change in facts occurs after the
initial registration. A material change in facts is--
(1) A change in the identifying information relating to the tax
shelter or tax shelter organizer,
(2) The acquisition or construction of a principal asset not
reported on the initial application for registration,
(3) A change in the method of financing a minimum investment unit,
or
(4) A change in the principal business activity.
In addition, a change in any tax shelter ratio reported on the
initial application for registration that increases or decreases the
reciprocal of the tax shelter ratio (i.e., the fraction in which the
amount of the applicable investment base is the numerator and the amount
of the applicable deductions and credits is the denominator) by 50
percent or more is a material change in facts. For example, if the tax
shelter ratio increases from 2 to 1 to 4 to 1, the reciprocal of the tax
shelter ratio decreases from \1/2\ to \1/4\, a 50-percent decrease.
Similarly, if the tax shelter ratio decreases from 6 to 1 to 4 to 1, the
reciprocal of the tax shelter ratio increases from \1/6\ to \1/4\, a 50-
percent increase. In either case, there is a material change in facts
and an amended application could be filed.
Q-45A. What information should be included on an amended application
for registration?
[[Page 170]]
A-45A. The tax shelter organizer must include the identifying
information requested on Form 8264, Application for Registration of a
Tax Shelter, and the tax shelter registration number that has been
assigned to the tax shelter. In addition, the tax shelter organizer
should include any other information requested on Form 8364(1) that has
changed since the tax shelter was registered, or (2) that the tax
shelter organizer did not know at the time the tax shelter was
registered but has learned of since the registration.
For example, assume that A organizes partnership L, a blind pool
that will invest in real estate. Before the real estate is identified or
acquired, interests in L will be offered to the public in an offering
that must be registered with the Securities and Exchange Commission.
Although A does not know what real estate L will acquire and therefore
is unable to calculate the tax shelter ratio with certainty, A concludes
(based on representations made or to be made) that the tax shelter ratio
will exceed 2 to 1 as to some of the investors. Accordingly, A registers
L as a tax shelter. A attaches a statement to the application for
registration, explaining that L is a blind pool organized to invest in
real estate, but that L has not yet acquired any real estate. In
addition, A attaches a statement explaining that although the tax
shelter ratio is expected to exceed 2 to 1, A cannot compute the tax
shelter ratio with certainty because L has not yet acquired any real
estate. Several months after L is registered, L acquires a shopping
center. A may file an amended application for registration. In addition
to reporting the identifying information and the tax shelter
registration number on the amended application, A should report the
shopping center as the principal asset and the recomputed tax shelter
ratio.
As another example, assume that C organizes a limited partnership
that is a tax shelter. On the application for registration, C reports
that the tax shelter ratio is 2.2 to 1. After the partnership has been
registered, C finds that the partnership is unable to attract sufficient
investors. To make investing in the partnership more attractive, C
decides to offer financing for the purchase or interests in the
partnership. As a result of the change in financing, the tax shelter
ratio will be 5 to 1. Because there is a change in financing and a
change in the tax shelter ratio that decreases the reciprocal of the tax
shelter ratio by 50 percent or more, C may file an amended application
for registration. In addition to reporting the identifying information
and the tax shelter registration number on the amended application, C
should report the recomputed tax shelter ratio and information relating
to the change in financing.
Q-46. If assets constituting a tax shelter are sold (``original
sale'') and, subsequently, either the assets or interests in the assets
are offered for sale by the purchaser (``resale''), must the purchaser
file a new application for registration if the resale is an offering or
sale of interests in a tax shelter?
A-46. If the resale constitutes a tax shelter, the purchaser must
file a new application for registration, unless the tax shelter
organizer with respect to the original sale is also the tax shelter
organizer with respect to the resale and the facts pertaining to the
resale were reflected in the application for registration filed with
respect to the original sale. For example, assume that A intends to sell
a building with an estimated fair market value of $2.5 million to a
group of 5 investors (i.e., a substantial investment, as defined in A-21
of this section). A also intends to make representations of tax benefits
attributable to an investment in the building. Based on these
representations and the investment base, the tax shelter ratio
attributable to an investment in the building may be greater than 2 to
1. A therefore files an application for registration relating to the
building with the Internal Revenue Service. The Internal Revenue Service
issues a registration number for the investment, and A furnishes the
registration number to each of the 5 investors in accordance with A-53
of this section. In an unrelated transaction, the 5 investors decide to
syndicate the building and to offer interests in the syndicate to
approximately 500 investors. In connection with this offer, the
investors expect to make representations concerning tax benefits with
respect to
[[Page 171]]
the syndication. If based on these representations and the investment
base, the tax shelter ratio may be greater than 2 to 1 for an investor
in the syndicate, the 5 investors must file an application for
registration for the syndicate before interests in the syndicate may be
offered for sale. The investors in the syndicate must be furnished with
the new registration number and not the registration number issued with
respect to A. On the other hand, if the original sale and the
syndication were part of A's plan to sell interests in the building, A
is a tax shelter organizer with respect to the syndication. If the facts
pertaining to the syndication were reflected on A's application for
registration with respect to the original sale, a second application for
registration would not be required with respect to the syndication.
However, the investors in the syndicate would have to be furnished with
the tax shelter registration number issued to A.
Q-47. When is a tax shelter considered registered?
A-47. A tax shelter is considered registered when a properly
completed Form 8264, Application for Registration of a Tax Shelter, is
filed with the appropriate Internal Revenue Service Center. See A-7 of
Sec. 301.6111-2T for rules relating to the information required to be
included on the form, and A-8 of Sec. 301.6707-1T for rules relating to
the penalty for filing incomplete information.
Q-48. Must a person registering a tax shelter that is a substantial
investment only by reason of an aggregation of multiple investments
under A-22 of this section complete a separate Form 8264 for each
investment constituting part of the substantial investment?
A-48. A separate Form 8264 must be completed for each investment
that differs from the other investments in a substantial investment with
respect to any of the following:
(1) Principal asset,
(2) Accounting methods,
(3) Federal or state agencies with which the investment is
registered or with which an exemption notice is filed,
(4) Methods of financing the purchase of an interest in the
investment,
(5) Tax shelter ratio.
Such aggregated investments, however, are part of a single tax
shelter.
Q-49. Do the rules of section 7502 of the Internal Revenue Code,
regarding timely mailing, apply to the filing of registration forms?
A-49. Yes.
Q-50. After a tax shelter has been registered, may representations
that the investment has been registered with the Internal Revenue
Service be made to potential investors?
A-50. Investors may be informed that the investment has been
registered with the Internal Revenue Service. Investors also must be
informed, however, that registration does not imply that the Internal
Revenue Service has reviewed, examined, or approved the investment or
the claimed tax benefits. The disclaimer must be substantially in the
form provided below:
ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE THAT THIS
INVESTMENT OR THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED, OR
APPROVED BY THE INTERNAL REVENUE SERVICE.
See A-53 of this section for rules relating to the legend that must
be included on any statement on which the tax shelter registration
number is furnished to investors.
Furnishing Tax Shelter Registration Numbers to Investors
Q-51. Who must furnish investors in a tax shelter with the
registration number of the tax shelter?
A-51. Any person who sells (or otherwise transfers) an interest in a
tax shelter is required to furnish the registration number assigned to
that tax shelter to each person who purchases (or otherwise acquires) an
interest in that tax shelter from the seller or transferor. For example,
X, a tax shelter organizer, sells an interest in a tax shelter to A. One
year later A sells A's interest in the shelter to B. X must furnish the
tax shelter registration number to A, and A must furnish the number to
B. If B sells or otherwise transfers the interest (by gift, for
example), B must furnish the number to the purchaser or transferee of
B's interest in the tax shelter.
[[Page 172]]
Q-52. When must the registration number be furnished to purchasers
of interests in the tax shelter?
A-52. The person who sells (or otherwise transfers) an interest in a
tax shelter must furnish the registration number to the purchaser (or
transferee) at the time of sale (or transfer) of the interest (or, if
later, within 20 days after the seller or transferor receives the
registration number). If the registration number is not furnished at the
time of the sale (or other transfer), the seller (or transferor) must
furnish the statement described in A-54 to the purchaser (or transferee)
at the time of the sale (or other transfer). If interests in a tax
shelter were sold before September 1, 1984, all investors who acquired
their interests in the tax shelter before September 1, 1984, must be
furnished with the registration number of the tax shelter by December
31, 1984. The registration number will be considered furnished to the
investor if it is mailed to the investor at the last address of the
investor known to the person required to furnish the number.
Q-53. How is a seller or transferor of an interest in a tax shelter
required to furnish the registration number to investors?
A-53. The person who sells (or otherwise transfers) an interest in a
tax shelter must furnish the registration number of the tax shelter to
the tax shelter to the purchaser (or transferee) on a written statement.
The written statement shall show the name, registration number, and
taxpayer identification number of the tax shelter, and include a
prominent legend in bold and conspicuous type stating that the
registration number must be included on any return on which the investor
claims any deduction, loss, credit, or other tax benefit, or reports any
income, by reason of the tax shelter. The statment must also include a
prominent legend in bold and conspicuous type stating that the issuance
of the registration number does not indicate that the Internal Revenue
Service has reviewed, examined, or approved the investment or the
claimed tax benefits. The statement shall be substantially in the form
provided below:
You have acquired an interest in [name and address of tax shelter]
whose taxpayer identification number is [if any]. The Internal Revenue
Service has issued [name of tax shelter] the following tax shelter
registration number: [Number]
YOU MUST REPORT THIS REGISTRATION NUMBER TO THE INTERNAL REVENUE
SERVICE, IF YOU CLAIM ANY DEDUCTION, LOSS, CREDIT, OR OTHER TAX BENEFIT
OR REPORT ANY INCOME BY REASON OR YOUR INVESTMENT IN [NAME OF TAX
SHELTER].
You must report the registration number (as well as the name, and
taxpayer identification number of [name of tax shelter]) on Form 8271.
FORM 8271 MUST BE ATTACHED TO THE RETURN ON WHICH YOU CLAIM THE
DEDUCTION, LOSS, CREDIT, OR OTHER TAX BENEFIT OR REPORT ANY INCOME.
ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE THAT THIS
INVESTMENT OR THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED, OR
APPROVED BY THE INTERNAL REVENUE SERVICE.
This statement may be modified as necessary if the tax shelter is
not a separate entity (e.g., certain Schedule F or Schedule C
activities) or has no name or taxpayer identification number.
Q-54. If a registration number has not been received by a seller (or
transferor) from the person who registered the tax shelter by the time
interests in the tax shelter are sold (or otherwise transferred), must
the seller (or transferor) of the interests furnish the purchaser (or
transferee) with any information regarding the registration?
A-54. Yes. At the time of the sale (or other transfer) the seller
(or other transferor) must furnish the purchaser (or transferee) with a
written statement in substantially the form prescribed in A-53 of this
section, except that the second sentence of the form prescribed in A-53
shall be replaced by a statement in the form provided below:
On behalf of [name of tax shelter], [name of tax shelter organizer
who has applied for registration] has applied to the Internal Revenue
Service for a tax
[[Page 173]]
shelter registration number. The number will be furnished to you when it
is received.
Including the Registration Number on Tax Returns
Q-55. Is an investor required to report the registration number of a
tax shelter in which the investor has acquired an interest to the
Internal Revenue Service?
A-55. Yes. Any person claiming any deduction, loss, credit, or other
tax benefit by reason of a tax shelter must report the registration
number of the tax shelter on Form 8271, Investor Reporting of Tax
Shelter Registration Number, which must be attached to the return on
which any deduction, loss credit, or other tax benefit attributable to
the tax shelter is claimed. For purposes of determining whether the tax
shelter registration number must be reported by an investor, income
attributable to an investment, such as a partner's distributive share of
income, constitutes a deduction or tax benefit that is claimed, because
gross deductions and other tax benefits are included in the net income
reported by the investor. Thus, the registration number also must be
reported on any return on which an investor reports any income
attributable to a tax shelter.
Q-56. What should the investor do if the investor has received a
notice that a registration number for the tax shelter has been applied
for, but the investor has not received the registration number by the
time the investor files a return on which a deduction, loss credit,
other tax benefit, or income attributable to the tax shelter is
included?
A-56. The investor must attach to the return a Form 8271 with the
words ``Applied For'' written in the space for the registration number
and must include on the Form 8271 the name and taxpayer identification
number (if any) of the tax shelter and the name of the person who has
applied for registration of the tax shelter.
Q-57. Does the requirement to include the tax shelter registration
number on a return apply to applications for tentative refund (Form 1045
and Form 1139) and amended returns (Form 1040X, Form 1120X)?
A-57. Yes. A completed Form 8271 must be attached to any such return
on which any deduction, loss, credit, other tax benefit, or income
relating to a tax shelter is included.
Projected Income Investments
Q-57A. Are the registration requirements suspended with respect to
any tax shelters?
A-57A. Yes. If a tax shelter is a projected income investment, it is
not required to be registered before the first offering for sale of an
interest in the tax shelters occurs, but is subject only to the
registration requirements set forth in A-57H through A-57J of this
section. A tax shelter is a projected income investment if--
(a) The tax shelter is not expected to reduce the cumulative tax
liability of any investor for any year during the 5-year period
described in A-4 (I) of this section; and
(b) The assets of the tax shelter do not include or relate to any
property described in A-57E of this section.
Q-57B. Under what circumstances does a tax shelter satisfy the
requirement of paragraph (a) of A-57A of this section?
A-57B. A tax shelter is not expected to reduce the cumulative tax
liability of any investor for any year during the 5-year period
described in A-4 (I) of this section only if--
(a) A written financial projection or other written representation
that is provided to investors before the sale of interests in the
investment states (or leads a reasonable investor to believe) that the
investment will not reduce the cumulative tax liability of any investor
with respect to any year (within the meaning of A-7 of this section) in
such 5-year period; and
(b) No written or oral projections or representations, other than
those related to circumstances that are highly unlikely to occur, state
(or lead a reasonable investor to believe) that the investment may
reduce the cumulative tax liability of any investor with respect to any
such year.
Thus, a tax shelter for which there are multiple written or oral
financial projections or other representations is not a projected income
investment if any such projection or representation that
[[Page 174]]
relates to circumstances that are not highly unlikely to occur states
(or leads a reasonable investor to believe) that the investment may
reduce the cumulative tax liability of any investor. See A-57D and A-57F
of this section for rules relating to financial projections or other
representations that are not made in good faith, that are not based on
reasonable economic and business assumptions, or that relate to
circumstances that are highly unlikely.
Q-57C. When does an investment reduce the cumulative tax liability
of an investor?
A-57C. (a) An investment reduces the cumulative tax liability of an
investor with respect to a year during the 5-year period described in A-
4 (I) of this section if, as of the close of such year, (i) cumulative
projected deductions for the investor exceed cumulative projected income
for the investor, or (ii) cumulative projected credits for the investor
exceed cumulative projected tax liability (without regard to credits)
for the investor.
(b) The cumulative projected deductions for an investor as of the
close of a year are the gross deductions of the investor with respect to
the investment, for all periods up to (and including) the end of such
year, that are included in the financial projection or upon which the
representation is based. The deductions with respect to an investment
include all deductions explicitly represented as being allowable and all
deductions typically associated (within the meaning of A-9 of this
section) with the investment. Therefore, interest to be paid by the
investor that is taken into account in determining the tax shelter ratio
of the investment (see A-11 of this section) is treated as a deduction
with respect to the investment.
(c) The cumulative projected income for an investor as of the close
of a year is the gross income of the investor with respect to the
investment, for all periods up to (and including) the end of such year,
that is included in the financial projection or upon which the
representation is based. For this purpose, income attributable to cash,
cash equivalents, or marketable securities (within the meaning of A-14
(4) of this section) may not be treated as income from the investment.
(d) The cumulative projected credits for an investor as of the close
of a year are the gross credits of the investor with respect to the
investment, for all periods up to (and including) the close of such
year, that are included in the financial projection or upon which the
representation is based. The credits with respect to an investment
include all credits explicitly represented as being allowable and all
credits typically associated (within the meaning of A-9 of this section)
with the investment.
(e) The cumulative projected tax liability (without regard to
credits) for an investor as of the close of a year is 50 percent of the
excess of cumulative projected income for the investor over cumulative
projected deductions for the investor with respect to the investment as
of the close of such year.
(f) The following examples illustrate the application of the
principles of this A-57C:
Example 1. The promotional material with respect to a tax shelter
includes a written financial projection indicating that the expected
income of the investment in each of its first 5 years is $800,000. In
subsequent oral discussions, investors are advised that, in certain
circumstances that are not highly unlikely, the income expected from the
investment may be as little as $500,000 per year. The subsequent oral
discussions are taken into account in determining whether any
projections or representations state or lead a reasonable investor to
believe that the investment may reduce the cumulative tax liability of
any investor. Thus, if the written financial projections indicate that
the gross deductions attributable to the investment in each of its first
5 years are expected to be $600,000 and the subsequent oral discussions
do not indicate that the amount of those deductions will change under
the circumstances in which the income expected may be as little as
$500,000, the subsequent oral discussions taken together with the
written financial projections state (or lead a reasonable investor to
believe) that the cumulative tax liability of an investor may be reduced
(i.e., the subsequent oral discussions (taken together with the
projections) state or lead a reasonable investor to believe that
cumulative projected deductions may exceed cumulative projected income
under circumstances that are not highly unlikely). Accordingly, under
paragraph (b) of A-57B of this section, the tax shelter would not
qualify as a projected income investment.
[[Page 175]]
Example 2. The written promotional material with respect to a tax
shelter states that certain deductions are allowable to an investor
(without specifying their amount), but there is no written statement
relating to the amount of income expected from the investment. Because
there is no written financial projection or other written representation
that states or leads a reasonable investor to believe that the
investment will not reduce the investor's cumulative tax liability
(i.e., the cumulative projected deductions, although not specified in
the projections, may exceed the cumulative projected income (0)), the
requirement of paragraph (a) of A-57B of this section would not be
satisifed. The result in this example would be the same if there were
only oral representations that the income to be derived from the
investment would exceed the deductions with respect to the investment,
because there would be no written statement as required by paragraph (a)
of A-57B of this section. The tax shelter in this case would qualify as
a projected income investment, however, if the written promotional
material contains good-faith representations based on reasonable
economic and business assumptions that state or lead reasonable
investors to believe that the cumulative projected income from the
investment will exceed the cumulative projected deductions allowable
with respect to the investment for each year in the 5-year period, even
though the amounts of income and deductions are not specified.
Example 3. The written promotional material with respect to a tax
shelter includes a good-faith financial projection for the first 5 years
of the investment. Based on reasonable economic and business
assumptions, the projection indicates that the expected net income of
the investment in each of its first 4 years is $100,000 ($500,000 of
gross income and $400,000 of gross deductions), but as a result of the
anticipated acquisition of new business assets a loss of $20,000 is
expected in the fifth year of the investment ($500,000 of gross income
and $520,000 of gross deductions). The projection also indicates that a
credit of $50,000 is expected in the fifth year of the investment. Such
a written financial projection would be considered to state that the
investment will not reduce the cumulative tax liability of any investor
with respect to any year in the 5-year period described in A-4 (I) of
this section. Although a loss and a credit are projected in the fifth
year of the investment, as of the close of such year, cumulative
projected income ($2,500,000) exceeds cumulative projected deductions
($2,120,000), and cumulative projected tax liability (without regard to
credits) ($380,000 x 50 percent = $190,000) exceeds cumulative projected
credits ($50,000). Assuming no contrary oral or written projections or
representations are made, the tax shelter would thus be a projected
income investment.
Example 4. The written promotional material with respect to a tax
shelter states that an investor will be entitled to a ``1.5 to 1 write-
off'' in the year of investment. This statement is a representation that
the investment will reduce the cumulative tax liability of an investor
with respect to the first year of the investment and, accordingly, the
investment is not a projected income investment. The result in this
example would be the same if any ``write-off'' were represented, even if
the write-off were less than 1.5 to 1.
Q-57D. Are all financial projections and representations relating to
the cumulative tax liability of an investor taken into account for
purposes of A-57B of this section?
A-57D. (a) No. A financial projection or other representation
relating to the cumulative tax liability of an investor is not taken
into account for purposes of A-57B of this section unless it is made in
good faith and is based on reasonable economic and business assumptions.
In addition, a financial projection or other representation is not taken
into account if it relates to circumstances that are highly unlikely.
Moreover, a general statement or disclaimer indicating that projected
income is not guaranteed or otherwise assured, standing alone, is not a
projection or representation for purposes of paragraph (b) of A-57B of
this section.
(b) The following example illustrates the application of the
principles of this A-57D:
Example. The written promotional material with respect to a tax
shelter contains a representation stating that the investment is
projected to produce net income for all investors in each of its first
five years and there are no credits potentially allowable with respect
to the investment. This statement is based on reasonable economic and
business assumptions. Such a written representation, if made in good
faith, would be considered under paragraph (a) of A-57B of this section
to state that the investment will not reduce the cumulative tax
liability of any investor with respect to any year in the 5-year period
described in A-4(I) of this section. In addition, no oral or written
statements or representations are communicated to investors that would
indicate under paragraph (b) of A-57B of this section that the
investment might reduce the cumulative tax liability of any investor
with respect to any year in the 5-year period.
Assume the tax shelter organizer has knowledge of certain other
facts that lead
[[Page 176]]
the tax shelter organizer to believe that it is more likely than not
that the investment will produce a net loss in the first year. The
representation projecting net income is thus contrary to the tax shelter
organizer's belief that it is more likely than not that the investment
will produce a net loss in the first year. Therefore, the representation
is not made in good faith. Since representations not made in good faith
are ignored under A-57D, the tax shelter would not be a projected income
investment. If, on the other hand, the tax shelter organizer did not
know of the other facts so that the tax shelter organizer did not
believe that the investment would produce a net loss in the first year,
the representation projecting income is made in good faith. In that
case, the tax shelter would be a projected income investment.
Q-57E. What assets may not be held by a projected income investment?
A-57E. A tax shelter is not a projected income investment if more
than an incidental amount of its assets include or relate to any
interest in a collectible (as defined in section 408(m)(2)), a master
sound recording, motion picture or television film, videotape,
lithograph plate, copyright, or a literary, musical, or artistic
composition.
Q-57F. What are the consequences if financial projections or other
representations are not made in good faith or are not based on
reasonable economic and business assumptions?
A-57F. If a tax shelter is not a projected income investment because
the financial projections or other representations are not made in good
faith or are not based on reasonable economic and business assumptions,
it must be registered not later than the day on which the first offering
for sale of an interest in the tax shelter occurs. If the tax shelter is
not registered timely, the tax shelter organizer may be subject to a
penalty. (See A-1 of Sec. 301.6707-1T.)
Q-57G. When does a tax shelter cease to be a projected income
investment?
A-57G. A tax shelter ceases to be a projected income investment on
the last day of the first year (as defined in A-7 of this section) in
the 5-year period described in A-4 (I) of this section for which, for
any investor, (i) the gross deductions allocable to the investor for
that year and prior years exceed the gross income allocable to the
investor for such years, or (ii) the credit allocable to the investor
for that year and prior years exceed 50 percent of the amount by which
gross income allocable to the investor exceeds gross deductions
allocable to the investor for such years. For purposes of determining
when a tax shelter ceases to be a projected income investment, the tax
shelter organizer is not required to take into account interest that may
be incurred by an investor with respect to debt described in A-14 (2) or
(3) of this section, but is required to take into account interest
incurred by an investor with respect to debt described in A-14 (1) of
this section. In addition, the tax shelter organizer may not take into
account income attributable to cash, cash equivalents, or marketable
securities (within the meaning of A-14 (4) of this section).
Q-57H. How does the requirement to register apply with respect to a
tax shelter that is a projected income investment?
A-57H. In the case of a tax shelter that is a projected income
investment, registration is not required unless the tax shelter ceases
to be a projected income investment under A-57G of this section. If the
tax shelter ceases to be a projected income investment, the tax shelter
organizer must register the tax shelter in accordance with the rules set
forth in A-1 through A-39 and A-41 through A-50 of this section. The tax
shelter must be registered--
(a) Within 30 days after the date on which the tax shelter ceases to
be a projected income investment, and
(b) Before the date on which the tax shelter or a tax shelter
organizer sends the investor any schedule of profit or loss, or income,
deduction, or credit that may be used in preparing the investor's income
tax return for the taxable year that includes the date on which the tax
shelter ceases to be a projected income investment. If a tax shelter
organizer fails to register timely as required by this A-57H, the tax
shelter organizer may be subject to a penalty. (See A-1 of Sec.
301.6707-1T.) For example, assume that C is the principal organizer and
general partner of a limited partnership. Interests in the partnership
will be offered for sale in a public offering required to be registered
[[Page 177]]
with the Securities and Exchange Commission. C knows that the tax
shelter ratio (as defined in A-5 of this section) for the limited
partners will be 5 to 1. Although C knows the partnership is a tax
shelter, C does not register the partnership by the day on which the
first offering for sale of an interest occurs because C believes the
partnership is a projected income investment. In the second year of the
partnership, the gross deductions allocable to each of the limited
partners for the first two years of the partnership exceed the gross
income allocable to the limited partners in such years. Thus, the
partnership ceases to be a projected income investment under A-57G of
this section. Assuming further that C continues as the general partner
and knowingly fails to register the partnership as a tax shelter within
the time prescribed in this A-57H, C will be subject to a penalty of 1
percent of the aggregate amount invested in the partnership. Because
there is an intentional disregard of the registration requirements, the
$10,000 limitation will not apply.
Q-57I. How does the requirement to furnish registration numbers (A-
51 through A-54 of this section) apply in the case of a tax shelter that
is a projected income investment?
A-57I. In the case of a tax shelter that is a projected income
investment, a person who sells or transfers an interest in the tax
shelter is not required to furnish a registration number under A-51 of
this section or a notice under A-54 of this section unless the tax
shelter ceases to be a projected income investment. If the tax shelter
ceases to be a projected income investment, the tax shelter organizer
who registers the tax shelter is required to furnish the registration
number to all persons who the tax shelter organizer knows or has reason
to know are participating in the sale of interests in the tax shelter
and to all persons who the tax shelter organizer knows or has reason to
know have acquired interests in the tax shelter. A person who sold (or
otherwise transferred) an interest in the tax shelter before the date on
which the tax shelter ceased to be a projected income investment is
required to furnish the registration number to the purchaser or
transferee as provided in A-51 of this section only if the seller or
transferor knows or has reason to know that the tax shelter has ceased
to be a projected income investment and that the tax shelter organizer
who registered the tax shelter has not provided a registration number to
such purchaser or transferee. In the case of persons who acquired
interests in the tax shelter before the date on which the tax shelter
ceased to be a projected income investment, the registration number must
be provided not later than the date described in paragraph (b) of A-57H
of this section or, if the tax shelter does not provide any schedule
described in paragraph (b) of A-57H of this section, within 60 days
after the date on which the tax shelter ceases to be a projected income
investment. Thus, for example, if a tax shelter that ceases to be a
projected income investment is a partnership, the tax shelter organizer
would be required to provide the registration number to each partner not
later than the date the Schedule K-1 for the year in which the tax
shelter ceases to be a projected income investment is provided to each
partner.
The registration number must be provided in accordance with A-51 and
A-52 of this section and must be accompanied by a statement explaining
that the tax shelter has ceases to be a projected income investment and
instructing the recipient to furnish the registration number to any
persons to whom the recipient has sold or otherwise transferred
interests in the tax shelter. A tax shelter organizer who fails to
provide the registration number as provided in this A-57I may be subject
to penalties. (See A-12 of Sec. 301.6707-1T.)
Q-57J. How does the requirement to include the registration number
on tax returns (A-55 through A-57 of this section) apply in the case of
a tax shelter that is a projected income investment?
A-57J. In the case of a tax shelter that is a projected income
investment, an investor is not required to report a registration number
on the investor's tax return unless the tax shelter ceases to be a
projected income investment. If the tax shelter ceases to be a projected
income investment, the requirements of A-55 through A-57 apply with
respect
[[Page 178]]
to returns for taxable years ending on or after the date on which the
tax shelter ceases to be a projected income investment.
Effective Dates
Q-58. On what date does the requirement to register a tax shelter
become effective?
A-58. In general, a tax shelter must be registered if any interest
in the tax shelter (other than an interest previously sold to an
investor) is sold on or after September 1, 1984 (whether or not
interests in the tax shelter were sold or offered for sale before
September 1, 1984). The tax shelter must be registered with the Internal
Revenue Service not later than the first day after August 31, 1984 on
which an interest in the tax shelter is offered for sale.
Q-59. By what date must the tax shelter registration number be
furnished to investors who acquired interests before September 1, 1984
in a tax shelter that is required to be registered.
A-59. All investors who acquired their interests in a tax shelter
before September 1, 1984 must be supplied with the tax shelter
registration number by December 31, 1984. See A-52 of this section for
the date by which registration numbers must be furnished to investors
who acquire their interests on or after September 1, 1984.
Q-60. What interests will be taken into account in determining
whether an investment in which interests were sold before September 1,
1984, is a substantial investment?
A-60. The determination of whether an investment is a substantial
investment will be made by taking into account only the interests that
are offered for sale on or after September 1, 1984. An investment will
be considered a substantial investment if there are expected to be 5 or
more investors on or after September 1, 1984, and the aggregate amount
offered for sale on or after September 1, 1984 is expected to exceed
$250,000. Amounts received from the sale of interests before September
1, 1984, however, are taken into account in computing the amount of the
penalty for failure to register.
(Secs. 6111 and 7805, Internal Revenue Code of 1954 (98 Stat. 678, 26
U.S.C. 6111; 68A Stat. 917, 26 U.S.C. 7805); secs. 6111, 6112 and 7805,
Internal Revenue Code of 1954 (98 Stat. 678, 98 Stat. 681, 68A Stat.
917; 26 U.S.C. 6111, 6112 and 7805))
[T.D. 7964, 49 FR 32713, Aug. 15, 1984, as amended by T.D. 7990, 49 FR
43641, Oct. 31, 1984; T.D. 7964, 49 FR 44461, Nov. 7, 1984; T.D. 8078,
51 FR 7440, Mar. 25, 1986; T.D. 7964, 73 FR 73180, Dec. 2, 2008]
Sec. 301.6111-2 Confidential corporate tax shelters.
(a) In general. (1) Under section 6111(d) and this section, a
confidential corporate tax shelter is treated as a tax shelter subject
to the requirements of sections 6111 (a) and (b).
(2) A confidential corporate tax shelter is any transaction--
(i) A significant purpose of the structure of which is the avoidance
or evasion of Federal income tax, as described in paragraph (b) of this
section, for a direct or indirect corporate participant;
(ii) That is offered to any potential participant under conditions
of confidentiality, as described in paragraph (c) of this section; and
(iii) For which the tax shelter promoters may receive fees in excess
of $100,000 in the aggregate, as described in paragraph (d) of this
section.
(3) For purposes of this section, references to the term transaction
include all of the factual elements relevant to the expected tax
treatment of any investment, entity, plan, or arrangement, and include
any series of steps carried out as part of a plan. For purposes of this
section, the term substantially similar includes any transaction that is
expected to obtain the same or similar types of tax consequences and
that is either factually similar or based on the same or similar tax
strategy. Receipt of an opinion regarding the tax consequences of the
transaction is not relevant to the determination of whether the
transaction is the same as or substantially similar to another
transaction. Further, the term substantially similar must be broadly
construed in favor of registration. For examples, see Sec. 1.6011-
4(c)(4) of this chapter.
[[Page 179]]
(4) A transaction described in paragraph (b) of this section is for
a direct or an indirect corporate participant if it is expected to
provide Federal income tax benefits to any corporation (U.S. or foreign)
whether or not that corporation participates directly in the
transaction.
(b) Transactions structured for avoidance or evasion of Federal
income tax--(1) In general. The avoidance or evasion of Federal income
tax will be considered a significant purpose of the structure of a
transaction if the transaction is described in paragraph (b)(2) or (3)
of this section. However, a transaction described in paragraph (b)(3) of
this section need not be registered if the transaction is described in
paragraph (b)(4) of this section. For purposes of this section, Federal
income tax benefits include deductions, exclusions from gross income,
nonrecognition of gain, tax credits, adjustments (or the absence of
adjustments) to the basis of property, status as an entity exempt from
Federal income taxation, and any other tax consequences that may reduce
a taxpayer's Federal income tax liability by affecting the amount,
timing, character, or source of any item of income, gain, expense, loss,
or credit.
(2) Listed transactions. A transaction is described in this
paragraph (b)(2) if the transaction is the same as or substantially
similar to one of the types of transactions that the Internal Revenue
Service (IRS) has determined to be a tax avoidance transaction and
identified by notice, regulation, or other form of published guidance as
a listed transaction. If a transaction becomes a listed transaction
after the date on which registration would otherwise be required under
this section, and if the transaction otherwise satisfies the
confidentiality and fee requirements of paragraphs (a)(2)(ii) and (iii)
of this section, registration shall in all events be required with
respect to any interests in the transaction that are offered for sale
after the transaction becomes a listed transaction. However, because a
transaction identified as a listed transaction is generally considered
to have been structured for a significant tax avoidance purpose, such a
transaction ordinarily will have been subject to registration under this
section before becoming a listed transaction if the transaction
previously satisfied the confidentiality and fee requirements of
paragraphs (a)(2)(ii) and (iii) of this section.
(3) Other tax-structured transactions. A transaction is described in
this paragraph (b)(3) if it has been structured to produce Federal
income tax benefits that constitute an important part of the intended
results of the transaction and the tax shelter promoter (or other person
who would be responsible for registration under this section) reasonably
expects the transaction to be presented in the same or substantially
similar form to more than one potential participant, unless the promoter
reasonably determines that--
(i) The potential participant is expected to participate in the
transaction in the ordinary course of its business in a form consistent
with customary commercial practice (a transaction involving the
acquisition, disposition, or restructuring of a business, including the
acquisition, disposition, or other change in the ownership or control of
an entity that is engaged in a business, or a transaction involving a
recapitalization or an acquisition of capital for use in the taxpayer's
business, shall be considered a transaction carried out in the ordinary
course of a taxpayer's business); and
(ii) There is a generally accepted understanding that the expected
Federal income tax benefits from the transaction (taking into account
any combination of intended tax consequences) are properly allowable
under the Internal Revenue Code for substantially similar transactions.
There is no minimum period of time for which such a generally accepted
understanding must exist. In general, however, a tax shelter promoter
(or other person who would be responsible for registration under this
section) cannot reasonably determine whether the intended tax treatment
of a transaction has become generally accepted unless information
relating to the tax treatment and tax structure of such transactions has
been in the public domain (e.g., rulings, published articles, etc.) and
widely known for a sufficient period of time (ordinarily a period of
years) to provide knowledgeable tax practitioners and
[[Page 180]]
the IRS reasonable opportunity to evaluate the intended tax treatment.
The mere fact that one or more knowledgeable tax practitioners have
provided an opinion or advice to the effect that the intended tax
treatment of the transaction should or will be sustained, if challenged
by the IRS, is not sufficient to satisfy the requirements of this
paragraph (b)(3)(ii).
(4) Excepted transactions. The avoidance or evasion of Federal
income tax will not be considered a significant purpose of the structure
of a transaction if the transaction is described in either paragraph
(b)(4)(i), (ii), or (iii) of this section.
(i) In the case of a transaction other than a transaction described
in paragraph (b)(2) of this section, the tax shelter promoter (or other
person who would be responsible for registration under this section)
reasonably determines that there is no reasonable basis under Federal
tax law for denial of any significant portion of the expected Federal
income tax benefits from the transaction. This paragraph (b)(4)(i)
applies only if the tax shelter promoter (or other person who would be
responsible for registration under this section) reasonably determines
that there is no basis that would meet the standard applicable to
taxpayers under Sec. 1.6662-3(b)(3) of this chapter under which the IRS
could disallow any significant portion of the expected Federal income
tax benefits of the transaction. Thus, the reasonable basis standard is
not satisfied by an IRS position that would be merely arguable or that
would constitute merely a colorable claim. However, the determination of
whether the IRS would or would not have a reasonable basis for such a
position must take into account the entirety of the transaction and any
combination of tax consequences that are expected to result from any
component steps of the transaction, must not be based on any
unreasonable or unrealistic factual assumptions, and must take into
account all relevant aspects of Federal tax law, including the statute
and legislative history, treaties, administrative guidance, and judicial
decisions that establish principles of general application in the tax
law (e.g., Gregory v. Helvering, 293 U.S. 465 (1935)). The determination
of whether the IRS would or would not have such a reasonable basis is
qualitative in nature and does not depend on any percentage or other
quantitative assessment of the likelihood that the taxpayer would
ultimately prevail if a significant portion of the expected tax benefits
were disallowed by the IRS.
(ii) The IRS makes a determination by published guidance that the
transaction is not subject to the registration requirements of this
section.
(iii) The IRS makes a determination by individual ruling under
paragraph (b)(5) of this section that a specific transaction is not
subject to the registration requirements of this section for the
taxpayer requesting the ruling.
(5) Requests for ruling. If a tax shelter promoter (or other person
who would be responsible for registration under this section) is
uncertain whether a transaction is properly classified as a confidential
corporate tax shelter or is otherwise uncertain whether registration is
required under this section, that person may, on or before the date that
registration would otherwise be required under this section, submit a
request to the IRS for a ruling as to whether the transaction is subject
to the registration requirements of this section. If the request fully
discloses all relevant facts relating to the transaction, that person's
potential obligation to register the transaction will be suspended
during the period that the ruling request is pending and, if the IRS
subsequently concludes that the transaction is a confidential corporate
tax shelter subject to registration under this section, until the
sixtieth day after the issuance of the ruling (or, if the request is
withdrawn, sixty days from the date that the request is withdrawn). In
the alternative, that person may register the transaction in accordance
with the requirements of this section and append a statement to the Form
8264, ``Application for Registration of a Tax Shelter'', which states
that the person is uncertain whether the transaction is required to be
registered as a confidential corporate tax shelter, and that the Form
8264 is being filed on a protective basis.
(6) Example. The following example illustrates the application of
paragraphs
[[Page 181]]
(b)(1) through (4) of this section. Assume, for purposes of the example,
that the transaction is not the same as or substantially similar to any
of the types of transactions that the IRS has identified as listed
transactions under section 6111 and, thus, is not described in paragraph
(b)(2) of this section. The example is as follows:
Example. (i) Facts. Y has designed a combination of financial
instruments to be issued as a package by corporations. The financial
instruments are expected to be treated as equity for financial
accounting purposes and as debt giving rise to allowable interest
deductions for Federal income tax purposes. Y reasonably expects to
present this method of raising capital to more than one potential
corporate participant. Assume that, because of the unusual nature of the
combination of financial instruments, Y cannot conclude either that the
transaction represented by the financial instruments is in customary
commercial form or that there is a generally accepted understanding that
interest deductions are available to issuers of substantially similar
combinations of financial instruments. Further, assume that Y cannot
reasonably determine that the IRS would have no reasonable basis to deny
the deductions.
(ii) Analysis. The transaction represented by this combination of
financial instruments is a transaction described in paragraph (b)(3) of
this section. However, if Y is uncertain whether this transaction is
described in paragraph (b)(3) of this section, or is otherwise uncertain
whether registration is required, Y may apply for a ruling under
paragraph (b)(5) of this section, and Y will not be required to register
the transaction while the ruling is pending or for sixty days
thereafter.
(c) Conditions of confidentiality--(1) In general. All the facts and
circumstances relating to the transaction will be considered when
determining whether an offer is made under conditions of confidentiality
as described in section 6111(d)(2), including prior conduct of the
parties. Pursuant to section 6111(d)(2)(A), if an offeree's disclosure
of the tax treatment or tax structure of the transaction is limited in
any manner by an express or implied understanding or agreement with or
for the benefit of any tax shelter promoter, an offer is considered made
under conditions of confidentiality, whether or not such understanding
or agreement is legally binding. The tax treatment of a transaction is
the purported or claimed Federal income tax treatment of the
transaction. The tax structure of a transaction is any fact that may be
relevant to understanding the purported or claimed Federal income tax
treatment of the transaction. Pursuant to section 6111(d)(2)(B), an
offer will also be considered made under conditions of confidentiality
in the absence of any such understanding or agreement if any tax shelter
promoter knows or has reason to know that the offeree's use or
disclosure of information relating to the tax treatment or tax structure
of the transaction is limited for the benefit of any person other than
the offeree in any other manner, such as where the transaction is
claimed to be proprietary or exclusive to the tax shelter promoter or
any party other than the offeree.
(2) Exceptions--(i) Securities law. An offer is not considered made
under conditions of confidentiality if disclosure of the tax treatment
or tax structure of the transaction is subject to restrictions
reasonably necessary to comply with securities laws and such disclosure
is not otherwise limited.
(ii) Mergers and acquisitions. In the case of a proposed taxable or
tax-free acquisition of historic assets of a corporation (other than an
investment company, as defined in section 351(e), that is not publicly
traded) that constitute an active trade or business the acquirer intends
to continue, or a proposed taxable or tax-free acquisition of more than
50 percent of the stock of a corporation (other than an investment
company, as defined in section 351(e), that is not publicly traded) that
owns historic assets used in an active trade or business the acquirer
intends to continue, the transaction is not considered offered under
conditions of confidentiality under paragraph (c)(1) of this section if
the offeree is permitted to disclose the tax treatment and tax structure
of the transaction no later than the earlier of the date of the public
announcement of discussions relating to the transaction, the date of the
public announcement of the transaction, or the date of the execution of
an agreement (with or without conditions) to enter into the transaction.
[[Page 182]]
However, this exception is not available where the offeree's ability to
consult any tax advisor (including a tax advisor independent from all
other entities involved in the transaction) regarding the tax treatment
or tax structure of the transaction is limited in any way.
(3) Presumption. Unless facts and circumstances indicate otherwise,
an offer is not considered made under conditions of confidentiality if
the tax shelter promoter provides express written authorization to each
offeree permitting the offeree (and each employee, representative, or
other agent of such offeree) to disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the
transaction, and all materials of any kind (including opinions or other
tax analyses) that are provided to the offeree related to such tax
treatment and tax structure. Except as provided in paragraph (c)(2) of
this section, this presumption is available only in cases in which each
written authorization permits the offeree to disclose the tax treatment
and tax structure of the transaction immediately upon commencement of
discussions with the tax shelter promoter providing the authorization
and each written authorization is given no later than 30 days from the
day the tax shelter promoter commenced discussions with the offeree. A
transaction that is exclusive or proprietary to any party other than the
offeree will not be considered offered under conditions of
confidentiality if written authorization to disclose is provided to the
offeree in accordance with this paragraph (c)(3) and the transaction is
not otherwise confidential.
(d) Determination of fees. All the facts and circumstances relating
to the transaction will be considered when determining the amount of
fees, in the aggregate, that the tax shelter promoters may receive. For
purposes of this paragraph (d), all consideration that tax shelter
promoters may receive is taken into account, including contingent fees,
fees in the form of equity interests, and fees the promoters may receive
for other transactions as consideration for promoting the tax shelter.
For example, if a tax shelter promoter may receive a fee for arranging a
transaction that is a confidential corporate tax shelter and a separate
fee for another transaction that is not a confidential corporate tax
shelter, part or all of the fee paid with respect to the other
transaction may be treated as a fee paid with respect to the
confidential corporate tax shelter if the facts and circumstances
indicate that the fee paid for the other transaction is in consideration
for the confidential corporate tax shelter. For purposes of determining
whether the tax shelter promoters may receive fees in excess of
$100,000, the fees from all substantially similar transactions are
considered part of the same tax shelter and must be aggregated.
(e) Registration--(1) Time for registering--(i) In general. A tax
shelter must be registered not later than the day on which the first
offering for sale of interests in the shelter occurs. An offer to
participate in a confidential corporate tax shelter shall be treated as
an offer for sale. If interests in a confidential corporate tax shelter
were first offered for sale on or before February 28, 2000, the first
offer for sale of interests in the shelter that occurs after February
28, 2000 shall be considered the first offer for sale under this
section.
(ii) Special rule. If a transaction becomes a confidential corporate
tax shelter (e.g., because of a change in the law or factual
circumstances, or because the transaction becomes a listed transaction)
subsequent to the first offering for sale after February 28, 2000, and
the transaction was not previously required to be registered as a
confidential corporate tax shelter under this section, the transaction
must be registered under this section if interests are offered for sale
after the transaction becomes a confidential corporate tax shelter. The
transaction must be registered by the next offering for sale of
interests in the shelter. If, subsequent to the first offering for sale,
a transaction becomes a confidential corporate tax shelter because the
transaction becomes a listed transaction on or after February 28, 2003,
and the transaction was not previously required to be registered as a
confidential corporate tax shelter under this
[[Page 183]]
section, the transaction must be registered under this section within 60
days after the transaction becomes a listed transaction/confidential
corporate tax shelter if any interests were offered for sale within the
previous six years.
(2) Procedures for registering. To register a confidential corporate
tax shelter, the person responsible for registering the tax shelter must
file Form 8264, ``Application for Registration of a Tax Shelter''. (Form
8264 is also used to register tax shelters defined in section 6111(c).)
Similar to the treatment provided under Q&A-22 and Q&A-48 of Sec.
301.6111-1T, transactions involving similar business assets and similar
plans or arrangements that are offered to corporate taxpayers by the
same person or related persons are aggregated and considered part of a
single tax shelter. However, in contrast with the requirement of Q&A-48
of Sec. 301.6111-1T, the tax shelter promoter may file a single Form
8264 with respect to any such aggregated tax shelter, provided an
amended Form 8264 is filed to reflect any material changes and to
include any additional or revised written materials presented in
connection with an offer to participate in the shelter. Furthermore, all
transactions that are part of the same tax shelter and that are to be
carried out by the same corporate participant (or one or more other
members of the same affiliated group within the meaning of section 1504)
must be registered on the same Form 8264.
(f) Definition of tax shelter promoter. For purposes of section
6111(d)(2) and this section, the term tax shelter promoter includes a
tax shelter organizer and any other person who participates in the
organization, management or sale of a tax shelter (as those persons are
described in section 6111(e)(1) and Sec. 301.6111-1T (Q&A-26 through
Q&A-33) or any person related (within the meaning of section 267 or 707)
to such tax shelter organizer or such other person.
(g) Person required to register--(1) Tax shelter promoters. The
rules in section 6111 (a) and (e) and Sec. 301.6111-1T (Q&A-34 through
Q&A-39) determine who is required to register a confidential corporate
tax shelter. A promoter of a confidential corporate tax shelter must
register the tax shelter only if it is a person required to register
under the rules in section 6111(a) and (e) and Sec. 301.6111-1T (Q&A-34
through Q&A-39).
(2) Persons who discuss the transaction; all promoters are foreign
persons--(i) In general. If all of the tax shelter promoters of a
confidential corporate tax shelter are foreign persons, any person who
discusses participation in the transaction must register the shelter
under this section within 90 days after beginning such discussions.
(ii) Exceptions. Registration by a person discussing participation
in a transaction is not required if either--
(A) The person does not participate, directly or indirectly, in the
shelter and notifies the tax shelter promoter in writing, within 90 days
of beginning such discussions, that the person will not participate; or
(B) Within 90 days after beginning such discussions, the person
obtains and reasonably relies on both--
(1) A written statement from one of the tax shelter promoters that
such promoter has registered the tax shelter under this section; and
(2) A copy of the registration.
(iii) Determination of foreign status. For purposes of this
paragraph (g)(2), a person must presume that all tax shelter promoters
are foreign persons unless the person either--
(A) Discusses participation in the tax shelter with a promoter that
is a United States person; or
(B) Obtains and reasonably relies on a written statement from one of
the promoters that at least one of the promoters is a United States
person.
(iv) Discussion. Discussing participation in a transaction includes
discussing such participation with any person that conveys the tax
shelter promoter's proposal. For purposes of this paragraph (g)(2), any
person that participates directly or indirectly in a transaction will be
treated as having discussed participation in the transaction not later
than the date of the agreement to participate. Thus, a tax shelter
participant will be treated as having discussed participation in the
transaction even if all discussions were conducted by an intermediary
and the
[[Page 184]]
agreement to participate was made indirectly through another person
acting on the participant's behalf (for example, through an intermediary
empowered to commit the participant to participate in the shelter).
(v) Special rule for controlled entities. A person (first person)
will be treated as participating indirectly in a confidential corporate
tax shelter if a foreign person controlled by the first person
participates in the shelter, and a significant purpose of the shelter is
the avoidance or evasion of the first person's Federal income tax. For
purposes of this paragraph (g)(2)(v), control of a foreign corporation
or partnership will be determined under the rules of section 6038(e)(2)
and (3), except that such section shall be applied by substituting
``10'' for ``50'' each place it appears and ``at least'' for ``more
than'' each place it appears. In addition, section 6038(e)(2) shall be
applied for these purposes without regard to the constructive ownership
rules of section 318 and by treating stock as owned if it is owned
directly or indirectly. Section 6038(e)(3) shall be applied for these
purposes without regard to the last sentence of section 6038(e)(3)(B).
Any beneficiary with a 10 percent or more interest in a foreign trust or
estate shall be treated as controlling that trust or estate for purposes
of this paragraph (g)(2)(v).
(vi) Other rules. (A) For purposes of the registration requirements
under section 6111(d)(3), it is presumed that the tax shelter promoters
will receive fees in excess of $100,000 in the aggregate unless the
person responsible for registering the tax shelter can show otherwise.
(B) Any person treated as a tax shelter promoter under section
6111(d) solely by reason of being related (within the meaning of section
267 or 707) to a foreign promoter will be treated as a foreign promoter
for purposes of this paragraph (g)(2).
(h) Effective dates. This section applies to confidential corporate
tax shelters in which any interests are offered for sale after February
28, 2000. If an interest is sold after February 28, 2000, it is treated
as offered for sale after February 28, 2000, unless the sale was
pursuant to a written binding contract entered into on or before
February 28, 2000. However, paragraphs (a) through (g) of this section
apply to confidential corporate tax shelters in which any interests are
offered for sale on or after February 28, 2003, and to transactions
described in paragraph (e)(1)(ii) of this section. The rules that apply
to confidential corporate tax shelters in which any interests are
offered for sale after February 28, 2000, and before February 28, 2003,
are contained in Sec. 301.6111-2T in effect prior to February 28, 2003
(see 26 CFR part 301 revised as of April 1, 2002, 2002-28 I.R.B 91, and
2002-45 I.R.B. 823 (see Sec. 601.601(d)(2) of this chapter)).
[T.D. 9046, 68 FR 10170, Mar. 4, 2003]
Sec. 301.6111-3 Disclosure of reportable transactions.
(a) In general. Each material advisor, as defined in paragraph (b)
of this section, with respect to any reportable transaction, as defined
in Sec. 1.6011-4(b) of this chapter, must file a return as described in
paragraph (d) of this section by the date described in paragraph (e) of
this section.
(b) Material advisor--(1) In general. A person is a material advisor
with respect to a transaction if the person provides any material aid,
assistance, or advice with respect to organizing, managing, promoting,
selling, implementing, insuring, or carrying out any reportable
transaction, and directly or indirectly derives gross income in excess
of the threshold amount as defined in paragraph (b)(3) of this section
for the material aid, assistance, or advice. The term transaction
includes all of the factual elements relevant to the expected tax
treatment of any investment, entity, plan or arrangement, and includes
any series of steps carried out as part of a plan.
(2) Material aid, assistance, or advice--(i) In general. Except as
provided in paragraph (b)(5) of this section, a person provides material
aid, assistance, or advice with respect to organizing, managing,
promoting, selling, implementing, insuring, or carrying out any
transaction if the person makes or provides a tax statement to or for
the benefit of--
(A) A taxpayer who either is required to disclose the transaction
under
[[Page 185]]
Sec. Sec. 1.6011-4, 20.6011-4, 25.6011-4, 26.6011-4, 31.6011-4,
53.6011-4, 54.6011-4, or 56.6011-4 of this chapter because the
transaction is a listed transaction or a transaction of interest, or
would have been required to disclose the transaction under Sec. Sec.
1.6011-4, 20.6011-4, 25.6011-4, 26.6011-4, 31.6011-4, 53.6011-4,
54.6011-4, or 56.6011-4 of this chapter if the transaction had become a
listed transaction or a transaction of interest within the period of
limitations in Sec. 1.6011-4(e) of this chapter;
(B) A taxpayer who the potential material advisor knows is or
reasonably expects to be required to disclose the transaction under
Sec. 1.6011-4 of this chapter because the transaction is or is
reasonably expected to become a transaction described in Sec. 1.6011-
4(b)(3) through (5) or (7) of this chapter;
(C) A material advisor who is required to disclose the transaction
under this section because it is a listed transaction or a transaction
of interest; or
(D) A material advisor who the potential material advisor knows is
or reasonably expects to be required to disclose the transaction under
this section because the transaction is or is reasonably expected to
become a transaction described in Sec. 1.6011-4(b)(3) through (5) or
(7) of this chapter.
(ii) Tax statement--(A) In general. A tax statement is any statement
(including another person's statement), oral or written, that relates to
a tax aspect of a transaction that causes the transaction to be a
reportable transaction as defined in Sec. 1.6011-4(b)(2) through (7) of
this chapter. A tax statement under this section includes tax result
protection that insures some or all of the tax benefits of a reportable
transaction.
(B) Confidential transactions. A statement relates to a tax aspect
of a transaction that causes it to be a confidential transaction if the
statement concerns a tax benefit related to the transaction and either
the taxpayer's disclosure of the tax treatment or tax structure of the
transaction is limited in the manner described in Sec. 1.6011-4(b)(3)
of this chapter by or for the benefit of the person making the
statement, or the person making the statement knows the taxpayer's
disclosure of the tax structure or tax aspects of the transaction is
limited in the manner described in Sec. 1.6011-4(b)(3) of this chapter.
(C) Transactions with contractual protection. A statement relates to
a tax aspect of a transaction that causes it to be a transaction with
contractual protection if the statement concerns a tax benefit related
to the transaction and either--
(1) The taxpayer has the right to a full or partial refund of fees
paid to the person making the statement or the fees are contingent in
the manner described in Sec. 1.6011-4(b)(4) of this chapter; or
(2) The person making the statement knows or has reason to know that
the taxpayer has the right to a full or partial refund of fees
(described in Sec. 1.6011-4(b)(4)(ii) of this chapter) paid to another
if all or part of the intended tax consequences from the transaction are
not sustained or that fees (as described in Sec. 1.6011-4(b)(4)(ii) of
this chapter) paid by the taxpayer to another are contingent on the
taxpayer's realization of tax benefits from the transaction in the
manner described in Sec. 1.6011-4(b)(4) of this chapter.
(D) Loss transactions. A statement relates to a tax aspect of a
transaction that causes it to be a loss transaction if the statement
concerns an item that gives rise to a loss described in Sec. 1.6011-
4(b)(5) of this chapter.
(E) [Reserved]
(iii) Special rules--(A) Capacity as an employee. A material advisor
generally does not include a person who makes a tax statement solely in
the person's capacity as an employee, shareholder, partner or agent of
another person. Any tax statement made by that person will be attributed
to that person's employer, corporation, partnership or principal.
However, a person shall be treated as a material advisor if that person
forms or avails of an entity with the purpose of avoiding the rules of
section 6111 or 6112 or the penalties under section 6707 or 6708.
(B) Post-filing advice. A person will not be considered to be a
material advisor with respect to a transaction if that person does not
make or provide a tax statement regarding the transaction until after
the first tax return
[[Page 186]]
reflecting tax benefit(s) of the transaction is filed with the IRS.
However, this exception does not apply to a person who makes a tax
statement with respect to the transaction if it is expected that the
taxpayer will file a supplemental or amended return reflecting
additional tax benefits from the transaction.
(C) Publicly filed statements. A tax statement with respect to a
transaction that includes only information about the transaction
contained in publicly available documents filed with the Securities and
Exchange Commission no later than the close of the transaction will not
be considered a tax statement to or for the benefit of a person
described in paragraph (b)(2) of this section.
(3) Gross income derived for material aid, assistance, or advice--
(i) Threshold amount--(A) In general. The threshold amount of gross
income is $50,000 in the case of a reportable transaction substantially
all of the tax benefits from which are provided to natural persons
(looking through any partnerships, S corporations, or trusts). For all
other transactions, the threshold amount is $250,000.
(B) Listed transactions and transactions of interest. For listed
transactions described in Sec. Sec. 1.6011-4, 20.6011-4, 25.6011-4,
26.6011-4, 31.6011-4, 53.6011-4, 54.6011-4, or 56.6011-4 of this
chapter, the threshold amounts in paragraph (b)(3)(i)(A) of this section
are reduced from $50,000 to $10,000 and from $250,000 to $25,000. For
transactions of interest described in Sec. Sec. 1.6011-4, 20.6011-4,
25.6011-4, 26.6011-4, 31.6011-4, 53.6011-4, 54.6011-4, or 56.6011-4 of
this chapter, the threshold amounts in paragraph (b)(3)(i)(A) of this
section may be reduced as identified in the published guidance
describing the transaction.
(C) [Reserved]
(D) Substantially all of the tax benefits. For purposes of this
section, the determination of whether substantially all of the tax
benefits from a reportable transaction are provided to natural persons
is made based on all the facts and circumstances. Generally, unless the
facts and circumstances prove otherwise, if 70 percent or more of the
tax benefits from a reportable transaction are provided to natural
persons (looking through any partnerships, S corporations, or trusts)
then substantially all of the tax benefits will be considered to be
provided to natural persons.
(ii) Gross income derived directly or indirectly for the material
aid, assistance, or advice. In determining the amount of gross income a
person derives directly or indirectly for material aid, assistance, or
advice, all fees for a tax strategy or for services for advice (whether
or not tax advice) or for the implementation of a reportable transaction
are taken into account. Fees include consideration in whatever form
paid, whether in cash or in kind, for services to analyze the
transaction (whether or not related to the tax consequences of the
transaction), for services to implement the transaction, for services to
document the transaction, and for services to prepare tax returns to the
extent return preparation fees are unreasonable in light of all of the
facts and circumstances. A fee does not include amounts paid to a
person, including an advisor, in that person's capacity as a party to
the transaction. For example, a fee does not include reasonable charges
for the use of capital or the sale or use of property. The IRS will
scrutinize carefully all of the facts and circumstances in determining
whether consideration received in connection with a reportable
transaction constitutes gross income derived directly or indirectly for
aid, assistance, or advice. For purposes of this section, the threshold
amount must be met independently for each transaction that is a
reportable transaction and aggregation of fees among transactions is not
required.
(4) Date a person becomes a material advisor--(i) In general. A
person will be treated as becoming a material advisor when all of the
following events have occurred (in no particular order)--
(A) The person provides material aid, assistance or advice as
described in paragraph (b)(2) of this section;
(B) The person directly or indirectly derives gross income in excess
of the threshold amount as described in paragraph (b)(3) of this
section; and
(C) The transaction is entered into by the taxpayer to whom or for
whose benefit the person provided the tax
[[Page 187]]
statement, or in the case of a tax statement provided to another
material advisor, when the transaction is entered into by a taxpayer to
whom or for whose benefit that material advisor provided a tax
statement.
(ii) Determining if the taxpayer entered into the transaction.
Material advisors, including those who cease providing services before
the time the transaction is entered into, must make reasonable and good
faith efforts to determine whether the event described in paragraph
(b)(4)(i)(C) of this section has occurred.
(iii) Listed transactions and transactions of interest. If a
transaction that was not a reportable transaction is identified as a
listed transaction or a transaction of interest in published guidance
after the occurrence of the events described in paragraph (b)(4)(i) of
this section, the person will be treated as becoming a material advisor
on the date the transaction is identified as a listed transaction or a
transaction of interest.
(5) Other persons designated as material advisors. Published
guidance may identify other types or classes of persons as material
advisors.
(c) Definitions. For purposes of this section, the following
definitions apply:
(1) Reportable transaction. The term reportable transaction is
defined in Sec. 1.6011-4(b)(1) of this chapter.
(2) Listed transaction. The term listed transaction is defined in
Sec. 1.6011-4(b)(2) of this chapter. See also Sec. Sec. 20.6011-4(a),
25.6011-4(a), 26.6011-4, 31.6011-4(a), 53.6011-4(a), 54.6011-4(a), or
56.6011-4(a) of this chapter.
(3) Derive. The term derive means receive or expect to receive.
(4) Person. The term person means any person described in section
7701(a)(1), including an affiliated group of corporations that join in
the filing of a consolidated return under section 1501.
(5) Substantially similar. The term substantially similar is defined
in Sec. 1.6011-4(c)(4) of this chapter.
(6) Tax. The term tax means Federal tax.
(7) Tax benefit. A tax benefit includes deductions, exclusions from
gross income, nonrecognition of gain, tax credits, adjustments (or the
absence of adjustments) to the basis of property, status as an entity
exempt from Federal income taxation, and any other tax consequences that
may reduce a taxpayer's Federal tax liability by affecting the amount,
timing, character, or source of any item of income, gain, expense, loss,
or credit.
(8) Tax return. The term tax return means a Federal tax return and a
Federal information return.
(9) Tax structure. The tax structure of a transaction is any fact
that may be relevant to understanding the purported or claimed Federal
tax treatment of the transaction.
(10) Tax treatment. The tax treatment of a transaction is the
purported or claimed Federal tax treatment of the transaction.
(11) Taxpayer. The term taxpayer is defined in Sec. 1.6011-4(c)(1)
of this chapter.
(12) Tax result protection. The term tax result protection includes
insurance company and other third party products commonly described as
tax result insurance.
(13) Transaction of interest. The term transaction of interest is
defined in Sec. 1.6011-4(b)(6) of this chapter. See also Sec. Sec.
20.6011-4(a), 25.6011-4(a), 26.6011-4, 31.6011-4(a), 53.6011-4(a),
54.6011-4(a), or 56.6011-4(a) of this chapter.
(d) Form and content of material advisor's disclosure statement--(1)
In general. A material advisor required to file a disclosure statement
under this section must file a completed Form 8918, ``Material Advisor
Disclosure Statement'' (or successor form) in accordance with this
paragraph (d) and the instructions to the form. To be considered
complete, the information provided on the form must describe the
expected tax treatment and all potential tax benefits expected to result
from the transaction, describe any tax result protection with respect to
the transaction, and identify and describe the transaction in sufficient
detail for the IRS to be able to understand the tax structure of the
reportable transaction and the identity of any material advisor(s) whom
the material advisor knows or has reason to know acted as a material
advisor as defined in paragraph (b) of
[[Page 188]]
this section with respect to the transaction. An incomplete form
containing a statement that information will be provided upon request is
not considered a complete disclosure statement. A material advisor may
file a single form for substantially similar transactions. An amended
form must be filed if information previously provided is no longer
accurate, if additional information that was not disclosed becomes
available, or if there are material changes to the transaction. A
material advisor is not required to file an additional form for each
additional taxpayer that enters into the same or substantially similar
transaction. If the form is not completed in accordance with the
provisions in this paragraph (d) and the instructions to the form, the
material advisor will not be considered to have complied with the
disclosure requirements of this section.
(2) Reportable transaction number. The IRS will issue to a material
advisor a reportable transaction number with respect to the disclosed
reportable transaction. Receipt of a reportable transaction number does
not indicate that the disclosure statement is complete, nor does it
indicate that the transaction has been reviewed, examined, or approved
by the IRS. Material advisors must provide the reportable transaction
number to all taxpayers and material advisors for whom the material
advisor acts as a material advisor as defined in paragraph (b) of this
section. The reportable transaction number must be provided at the time
the transaction is entered into, or, if the transaction is entered into
prior to the material advisor receiving the reportable transaction
number, within 60 calendar days from the date the reportable transaction
number is mailed to the material advisor.
(e) Time of providing disclosure. The material advisor's disclosure
statement for a reportable transaction must be filed with the Office of
Tax Shelter Analysis (OTSA) by the last day of the month that follows
the end of the calendar quarter in which the advisor became a material
advisor with respect to the reportable transaction or in which the
circumstances necessitating an amended disclosure statement occur. The
disclosure statement must be sent to OTSA at the address provided in the
instructions for Form 8918 (or a successor form).
(f) Designation agreements. If more than one material advisor is
required to disclose a reportable transaction under this section, the
material advisors may designate by written agreement a single material
advisor to disclose the transaction. The transaction must be disclosed
by the last day of the month following the end of the calendar quarter
that includes the earliest date on which a material advisor who is a
party to the agreement became a material advisor with respect to the
transaction as described in paragraph (b)(4) of this section. The
designation of one material advisor to disclose the transaction does not
relieve the other material advisors of their obligation to disclose the
transaction to the IRS in accordance with this section, if the
designated material advisor fails to disclose the transaction to the IRS
in a timely manner.
(g) Protective disclosures. If a potential material advisor is
uncertain whether a transaction must be disclosed under this section,
the advisor may disclose the transaction in accordance with the
requirements of this section and comply with all the provisions of this
section, and indicate on the disclosure statement that the disclosure
statement is being filed on a protective basis. The IRS will not treat
disclosure statements filed on a protective basis any differently than
other disclosure statements filed under this section. For a protective
disclosure to be effective, the advisor must comply with the regulations
under this section and Sec. 301.6112-1 by providing to the IRS all
information requested by the IRS under these sections.
(h) Rulings. If a potential material advisor requests a ruling as to
whether a specific transaction is a reportable transaction on or before
the date that disclosure would otherwise be required under this section,
the Commissioner in his discretion may determine that the submission
satisfies the disclosure rules under this section for that transaction
if the request fully discloses all
[[Page 189]]
relevant facts relating to the transaction which would otherwise be
required to be disclosed under this section. The potential obligation of
the person to disclose the transaction under this section (or to
maintain or furnish the list under Sec. 301.6112-1) will not be
suspended during the period that the ruling request is pending.
(i) Effective/applicability date--(1) In general. This section
applies to transactions with respect to which a material advisor makes a
tax statement on or after August 3, 2007. However, this section applies
to transactions of interest entered into on or after November 2, 2006,
with respect to which a material advisor makes a tax statement under
this section on or after November 2, 2006. Paragraphs (b)(2)(i)(A),
(b)(3)(i)(B), (c)(2), and (c)(13) of this section apply to transactions
with respect to which a material advisor makes a tax statement under
this section after November 14, 2011. Paragraph (h) of this section
applies to ruling requests received on or after November 2, 2006.
Otherwise, the rules that apply on or before November 14, 2011 are
contained in this section in effect prior to November 14, 2011 (see 26
CFR part 301 revised as of April 1, 2011).
(2) [Reserved]
[T.D. 9351, 72 FR 43159, Aug. 3, 2007, as amended by T.D. 9556, 76 FR
70341, Nov. 14, 2011]
Sec. 301.6112-1 Material advisors of reportable transactions
must keep lists of advisees, etc.
(a) In general. Each material advisor, as defined in Sec. 301.6111-
3(b), with respect to any reportable transaction, as defined in Sec.
1.6011-4(b) of this chapter, shall prepare and maintain a list in
accordance with paragraph (b) of this section and shall furnish such
list to the Internal Revenue Service (IRS) in accordance with paragraph
(e) of this section.
(b) Preparation and maintenance of lists--(1) In general. A separate
list must be prepared and maintained for each reportable transaction.
However, one list must be maintained for substantially similar
transactions. A material advisor will have 30 calendar days from the
date the list maintenance requirement first arises (see Sec. 301.6111-
3(b)(4) and paragraph (a) of this section) with respect to a reportable
transaction to prepare the list that must be maintained under this
section with respect to that transaction. The Commissioner in his
discretion also may provide in published guidance designating a
transaction as a reportable transaction a list preparation time period
greater than 30 calendar days. If a list is requested under this section
during the list preparation time period, the request for the list will
be treated as having been made on the day after the list preparation
time period ends. A list must be maintained in a form that enables the
IRS to determine without undue delay or difficulty the information
required in paragraph (b)(3) of this section. The Commissioner in his
discretion may provide in published guidance a form or method for
maintaining or furnishing the list.
(2) Persons required to be included on lists. A material advisor is
required to maintain a list identifying each person with respect to whom
the advisor acted as a material advisor with respect to the reportable
transaction. However, a material advisor is not required to identify a
person on the list if the person entered into a listed transaction or a
transaction of interest more than 6 years before the transaction was
identified in published guidance as a listed transaction or a
transaction of interest.
(3) Contents. Each list must include the three components described
in paragraph (b)(3)(i), (ii), and (iii) of this section.
(i) Statement. An itemized statement containing the following
information--
(A) The name of each reportable transaction, the citation to the
published guidance number identifying the transaction if the transaction
is a listed transaction or a transaction of interest, and the reportable
transaction number obtained under section 6111;
(B) The name, address, and TIN of each person required to be
included on the list;
(C) The date on which each person required to be included on the
list entered into each reportable transaction, if known by the material
advisor;
[[Page 190]]
(D) The amount invested in each reportable transaction by each
person required to be included on the list, if known by the material
advisor;
(E) A summary or schedule of the tax treatment that each person is
intended or expected to derive from participation in each reportable
transaction; and
(F) The name of each other material advisor to the transaction, if
known by the material advisor.
(ii) Description of the transaction. A detailed description of each
reportable transaction that describes both the tax structure of the
transaction and the purported tax treatment of the transaction.
(iii) Documents. The following documents--
(A) A copy of any designation agreement (as described in paragraph
(f) of this section) to which the material advisor is a party; and
(B) Copies of any additional written materials, including tax
analyses or opinions, relating to each reportable transaction that are
material to an understanding of the purported tax treatment or tax
structure of the transaction that have been shown or provided to any
person who acquired or may acquire an interest in the transactions, or
to their representatives, tax advisors, or agents, by the material
advisor or any related party or agent of the material advisor. However,
a material advisor is not required to retain earlier drafts of a
document provided the material advisor retains a copy of the final
document (or, if there is no final document, the most recent draft of
the document) and the final document (or most recent draft) contains all
the information in the earlier drafts of such document that is material
to an understanding of the purported tax treatment or the tax structure
of the transaction.
(c) Definitions. For purposes of this section, the following terms
are defined as:
(1) Material advisor. The term material advisor is defined in Sec.
301.6111-3(b).
(2) Reportable transaction. The term reportable transaction is
defined in Sec. 1.6011-4(b)(1) of this chapter.
(3) Listed transaction. The term listed transaction is defined in
Sec. 1.6011-4(b)(2) of this chapter. See also Sec. Sec. 20.6011-4(a),
25.6011-4(a), 26.6011-4, 31.6011-4(a), 53.6011-4(a), 54.6011-4(a), or
56.6011-4(a) of this chapter.
(4) Substantially similar. The term substantially similar is defined
in Sec. 1.6011-4(c)(4) of this chapter.
(5) Person. The term person is defined in Sec. 301.6111-3(c)(4).
(6) Related party. A person is a related party with respect to
another person if such person bears a relationship to such other person
described in section 267(b) or 707(b).
(7) Tax. The term tax is defined in Sec. 301.6111-3(c)(6).
(8) Tax benefit. The term tax benefit is defined in Sec. 301.6111-
3(c)(7).
(9) Tax return. The term tax return is defined in Sec. 301.6111-
3(c)(8).
(10) Tax structure. The term tax structure is defined in Sec.
301.6111-3(c)(9).
(11) Tax treatment. The term tax treatment is defined in Sec.
301.6111-3(c)(10).
(12) Transaction of interest. The term transaction of interest is
defined in Sec. 1.6011-4(b)(6) of this chapter. See also Sec. Sec.
20.6011-4(a), 25.6011-4(a), 26.6011-4, 31.6011-4(a), 53.6011-4(a),
54.6011-4(a), or 56.6011-4(a) of this chapter.
(d) Retention of lists. Each material advisor must maintain each
component of the list described in paragraph (b)(3) of this section in a
readily accessible form for seven years following the earlier of the
date on which the material advisor last made a tax statement relating to
the transaction, or the date the transaction was last entered into, if
known. If the material advisor required to prepare, maintain, and
furnish the list is a corporation, partnership, or other entity (entity)
that has dissolved or liquidated before completion of the seven-year
period, the person responsible under state law for winding up the
affairs of the entity must prepare, maintain and furnish each component
of the list on behalf of the entity, unless the entity submits the list
to the Office of Tax Shelter Analysis (OTSA) within 60 days after the
dissolution or liquidation. If state law does not specify any person as
responsible for winding up the affairs, then each of the directors of
the corporation, the general partners of the partnership, or the
trustees, owners, or members of the entity are responsible
[[Page 191]]
for preparing, maintaining and furnishing each component of the list on
behalf of the entity, unless the entity submits the list to the OTSA
within 60 days after the dissolution or liquidation. The responsible
person must also provide notice to OTSA of such dissolution or
liquidation within 60 days after the dissolution or liquidation. The
list and the notice provided to OTSA must be sent to: Internal Revenue
Service, OTSA Mail Stop 4915, 1973 North Rulon White Blvd., Ogden, Utah
84404, or to such other address as provided by the Commissioner.
(e) Furnishing of lists--(1) In general. Each material advisor
responsible for maintaining a list must, upon written request by the
IRS, make each component of the list described in paragraph (b)(3) of
this section available to the IRS. Each component of the list must be
furnished to the IRS in a form that enables the IRS to determine without
undue delay or difficulty the information required in paragraph (b)(3)
of this section. If any component of the list is not in a form that
enables the IRS to determine without undue delay or difficulty the
information required in paragraph (b)(3) of this section, the material
advisor will not be considered to have complied with the list
maintenance provisions in section 6112 and this section. A material
advisor must make the list or each component of the list available to
the IRS within the period prescribed in section 6708 or published
guidance relating to section 6708.
(2) Claims of privilege. Each material advisor who is required to
maintain a list with respect to a reportable transaction, must still
maintain the list pursuant to the requirements of this section even if a
person asserts a claim of privilege with respect to the information
specified in paragraph (b)(3)(iii)(B) of this section.
(f) Designation agreements. If more than one material advisor is
required to maintain a list of persons for a reportable transaction, in
accordance with paragraph (b) of this section, the material advisors may
designate by written agreement a single material advisor (the designated
material advisor) to maintain the list or a portion of the list. A
designation agreement does not relieve material advisors from their
obligation to maintain a list in accordance with paragraph (b) of this
section or to furnish their list to the IRS in accordance with paragraph
(e)(1) of this section, but a designation agreement may allow one
material advisor to maintain a list on behalf of the other material
advisors who are a party to the designation agreement. A material
advisor is not relieved from the requirement of this section because a
material advisor is unable to obtain the list from any designated
material advisor, any designated material advisor did not maintain a
list, or the list maintained by any designated material advisor is not
complete. The existence of a designation agreement does not affect the
ability of the IRS to request a list from any party to the designation
agreement. The IRS may request a list from any party to the designation
agreement, and the party receiving the request must furnish their list
to the IRS in accordance with paragraph (e)(1) of this section,
regardless of whether their list was maintained by another party
pursuant to the terms of a designation agreement.
(g) Effective/applicability date. In general, this section applies
to transactions with respect to which a material advisor makes a tax
statement under Sec. 301.6111-3 on or after August 3, 2007. However,
this section applies to transactions of interest entered into on or
after November 2, 2006, with respect to which a material advisor makes a
tax statement under Sec. 301.6111-3 on or after November 2, 2006.
Paragraphs (b)(1), (c)(3), (c)(12), and (f) of this section apply to
transactions with respect to which a material advisor makes a tax
statement under Sec. 301.6111-3 after November 14, 2011. Otherwise, the
rules that apply on or before November 14, 2011 are contained in this
section in effect prior to November 14, 2011 (see 26 CFR part 301
revised as of April 1, 2011).
[T.D. 9352, 72 FR 43155, Aug. 3, 2007, as amended by T.D. 9556, 76 FR
70341, Nov. 14, 2011]
Sec. 301.6114-1 Treaty-based return positions.
(a) Reporting requirement--(1) General rule. (i) Except as provided
in paragraph (c) of this section, if a taxpayer takes a return position
that any treaty of the United States (including, but not
[[Page 192]]
limited to, an income tax treaty, estate and gift tax treaty, or
friendship, commerce and navigation treaty) overrules or modifies any
provision of the Internal Revenue Code and thereby effects (or
potentially effects) a reduction of any tax incurred as any time, the
taxpayer shall disclose such return position on a statement (in the form
required in paragraph (d) of this section) attached to such return.
(ii) If a return of tax would not otherwise be required to be filed,
a return must nevertheless be filed for purposes of making the
disclosure required by this section. For this purpose, such return need
include only the taxpayer's name, address, taxpayer identifying number,
and be signed under penalties of perjury (as well as the subject
disclosure). Also, the taxpayer's taxable year shall be deemed to be the
calendar year (unless the taxpayer has previously established, or timely
chooses for this purpose to establish, a different taxable year). In the
case of a disclosable return position relating solely to income subject
to withholding (as defined in Sec. 1.1441-2(a) of this chapter),
however, the statement required to be filed in paragraph (d) of this
section must instead be filed at times and in accordance with procedures
published by the Internal Revenue Service.
(2) Application. (i) A taxpayer is considered to adopt a ``return
position'' when the taxpayer determines its tax liability with respect
to a particular item of income, deduction or credit. A taxpayer may be
considered to adopt a return position whether or not a return is
actually filed. To determine whether a return position is a ``treaty-
based return position'' so that reporting is required under this
paragraph (a), the taxpayer must compare:
(A) The tax liability (including credits, carrybacks, carryovers,
and other tax consequences or attributes for the current year as well as
for any other affected tax years) to be reported on a return of the
taxpayer, and
(B) The tax liability (including such credits, carrybacks,
carryovers, and other tax consequences or attributes) that would be
reported if the relevant treaty provision did not exist.
If there is a difference (or potential difference) in these two amounts,
the position taken on a return is a treaty-based return position that
must be reported.
(ii) In the event a taxpayer's return position is based on a
conclusion that a treaty provision is consistent with a Code provision,
but the effect of the treaty provision is to alter the scope of the Code
provision from the scope that it would have in the absence of the
treaty, then the return position is a treaty-based return position that
must be reported.
(iii) A return position is a treaty-based return position unless the
taxpayer's conclusion that no reporting is required under paragraphs
(a)(2) (i) and (ii) of this section has a substantial probability of
successful defense if challenged.
(3) Examples. The application of section 6114 and paragraph (a)(2)
of this section may be illustrated by the following examples:
Example 1: X, a Country A corporation, claims the benefit of a
provision of the income tax treaty between the United States and Country
A that modifies a provision of the Code. This position does not result
in a change of X's U.S. tax liability for the current tax year but does
give rise to, or increases, a net operating loss which may be carried
back (or forward) such that X's tax liability in the carryback (or
forward) year may be affected by the position taken by X in the current
year. X must disclose this treaty-based return position with its tax
return for the current tax year.
Example 2: Z, a domestic corporation, is engaged in a trade or
business in Country B. Country B imposes a tax on the income from
certain of Z's petroleum activities at a rate significantly greater than
the rate applicable to income from other activities. Z claims a foreign
tax credit for this tax on its tax return. The tax imposed on Z is
specifically listed as a creditable tax in the income tax treaty between
the United States and Country B; however, there is no specific authority
that such tax would otherwise be a creditable tax for U.S. purposes
under sections 901 or 903 of the Code. Therefore, in the absence of the
treaty, the creditability of this petroleum tax would lack a substantial
probability of successful defense if challenged, and Z must disclose
this treaty-based return position (see also paragraph (b)(7) of this
section).
(b) Reporting specifically required. Reporting is required under
this section except as expressly waived under paragraph (c) of this
section. The following
[[Page 193]]
list is not a list of all positions for which reporting is required
under this section but is a list of particular positions for which
reporting is specifically required. These positions are as follows:
(1) That a nondiscrimination provision of a treaty precludes the
application of any otherwise applicable Code provision, other than with
respect to the making of or the effect of an election under section
897(i);
(2) That a treaty reduces or modifies the taxation of gain or loss
from the disposition of a United States real property interest;
(3) That a treaty exempts a foreign corporation from (or reduces the
amount of tax with respect to) the branch profits tax (section 884(a))
or the tax on excess interest (section 884(f)(1)(B));
(4) That, notwithstanding paragraph (c)(1)(i) of this section,
(i) A treaty exempts from tax, or reduces the rate of tax on,
interest or dividends paid by a foreign corporation that are from
sources within the United States by reason of section 861(a)(2)(B) or
section 884(f)(1)(A); or
(ii) A treaty exempts from tax, or reduces the rate of tax on, fixed
or determinable annual or periodical income subject to withholding under
section 1441 or 1442 that a foreign person receives from a U.S. person,
but only if described in paragraphs (b)(4)(ii)(A) and (B) of this
section, or in paragraph (b)(4)(ii)(C) or (D) of this section as
follows--
(A) the payment is not properly reported to the Service on a Form
1042S; and
(B) The foreign person is any of the following:
(1) A controlled foreign corporation (as defined in section 957) in
which the U.S. person is a U.S. shareholder within the meaning of
section 951(b);
(2) A foreign corporation that is controlled within the meaning of
section 6038 by the U.S. person;
(3) A foreign shareholder of the U.S. person that, in the case of
tax years beginning on or before July 10, 1989, is controlled within the
meaning of section 6038A by the foreign shareholder, or, in the case of
tax years beginning after July 10, 1989, is 25-percent owned within the
meaning of section 6038A by the foreign shareholder; or
(4) With respect to payments made after October 10, 1990, a foreign
related party, as defined in section 6038A (c)(2)(B), the 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
[[Page 194]]
(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) For amounts received on or after January 1, 2001, reporting
under paragraph (b)(4)(ii) is waived, unless reporting is specifically
required under paragraphs (b)(4)(ii)(A) and (B) of this section,
paragraph (b)(4)(ii)(C) of this section, or paragraph (b)(4)(ii)(D) of
this section;
(ii) 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);
(iii) For returns relating to taxable years for which the due date
for filing returns (without extensions) is on or before December 15,
1997, that residency of an individual is determined under a treaty and
apart from the Internal Revenue Code.
(iv) 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;
(v) 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;
(vi) That a nondiscrimination provision of a treaty allows the
making of an election under section 897(i);
(vii) That a Social Security Totalization Agreement or a Diplomatic
or Consular Agreement reduces or modifies the taxation of income derived
by the taxpayer; or
(viii) 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.
(ix) Notwithstanding paragraph (b)(1) of this section, that a
nondiscrimination provision of a qualified income tax treaty, as defined
in Treas. Reg. Sec. 1.5000C-1(c)(13), exempts a payment from tax under
section 5000C, but only if the foreign person claiming such relief has
provided a Section 5000C Certificate (such as Form W-14, ``Certificate
of Foreign Contracting Party Receiving Federal Procurement Payments'')
to the acquiring agency in accordance with section 5000C and the
regulations thereunder.
(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
[[Page 195]]
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)(i) For taxable years ending after December 31, 2004, except as
provided in paragraph (c)(6)(ii) of this section, reporting under
paragraph (b)(4)(ii) of this section is waived for amounts received by a
related party, within the meaning of section 6038A(c)(2), from a
withholding agent that is a reporting corporation, within the meaning of
section 6038A(a), and that are properly reported on Form 1042-S.
(ii) Paragraph (c)(6)(i) of this section does not apply to any
amounts for which reporting is specifically required under the
instructions to Form 8833.
(7)(i) For taxable years ending after December 31, 2004, except as
provided in paragraph (c)(7)(iv) of this section, reporting under
paragraph (b)(4)(ii) of this section is waived for amounts properly
reported on Form 1042-S (on either a specific payee or pooled basis) by
a withholding agent described in paragraph (c)(7)(ii) of this section if
the beneficial owner is described in paragraph (c)(7)(iii) of this
section.
(ii) A withholding agent described in this paragraph (c)(7)(ii) is a
U.S. financial institution, as defined in Sec. 1.1441-1(c)(5) of this
chapter, a qualified intermediary, as defined in Sec. 1.1441-
1(e)(5)(ii) of this chapter, a withholding foreign partnership, as
defined Sec. 1.1441-5(c)(2)(i) of this chapter, or a withholding
foreign trust, as defined in Sec. 1.1441-5(e)(5)(v) of this chapter.
(iii) A beneficial owner described in this paragraph (c)(7)(iii) of
this section is a direct account holder of a U.S. financial institution
or qualified intermediary, a direct partner of a withholding foreign
partnership, or a direct beneficiary or owner of a simple or grantor
trust that is a withholding foreign trust. A beneficial owner described
in this paragraph (c)(7)(iii) also includes an account holder to which a
qualified intermediary has applied section 4A.01 or 4A.02 of the
qualified intermediary agreement, contained in Revenue Procedure 2000-12
(2000-1 C.B. 387), (as amended by Revenue Procedure 2003-64, (2003-2
C.B. 306); Revenue Procedure 2004-21 (2004-1 C.B. 702); Revenue
Procedure 2005-77 (2005-51 I.R.B. 1176) (see Sec. 601.601(b)(2) of this
chapter) a partner to which a withholding foreign partnership has
applied section 10.01 or 10.02 of the withholding foreign partnership
agreement, and a beneficiary or owner to which a withholding foreign
trust has applied section 10.01 or 10.02 of the withholding foreign
trust agreement, contained in Revenue Procedure 2003-64, (2003-2 C.B.
306), (as amended by Revenue Procedure 2004-21 (2004-1 C.B. 702);
Revenue Procedure 2005-77 (2005-51 I.R.B. 1176); (see Sec.
601.601(b)(2) of this chapter).
(iv) Paragraph (c)(7)(i) of this section does not apply to any
amounts for which reporting is specifically required under the
instructions to Form 8833.
(8)(i) For taxable years ending after December 31, 2004, except as
provided in paragraph (c)(8)(ii) of this section, reporting under
paragraph (b)(4)(ii) of this section is waived for taxpayers that are
not individuals or States and that receive amounts of income that have
been properly reported on Form 1042-S, that do not exceed $500,000 in
the aggregate for the taxable year and that are not received through an
account with an intermediary, as defined in Sec. 1.1441-1(c) (13), or
with respect to interest in a flow-through entity, as defined in Sec.
1.1441-1(c)(23),
(ii) The exception contained in paragraph (c)(8)(i) of this section
does not apply to any amounts for which reporting is specifically
required under the instructions to Form 8833.
(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
[[Page 196]]
completed Form 8833 (Treaty-Based Return Position Disclosure Under
Section 6114 or 7701(b)) or appropriate successor form.
(2) Earlier returns. For returns relating to taxable years for which
the due date for filing returns (without extensions) is on or before
December 15, 1997, the taxpayer must furnish information in accordance
with paragraph (d) of this section in effect prior to December 15, 1997
(see Sec. 301.6114-1(d) as contained in 26 CFR part 301, revised April
1, 1997).
(3) In general--(i) Permanent establishment. For purposes of
determining the nature and amount (or reasonable estimate thereof) of
gross receipts, if a taxpayer takes a position that it does not have a
permanent establishment or a fixed base in the United States and
properly discloses that position, it need not separately report its
payment of actual or deemed dividends or interest exempt from tax by
reason of a treaty (or any liability for tax imposed by reason of
section 884).
(ii) Single income item. For purposes of the statement of facts
relied upon to support each separate Treaty-Based Return Position taken,
a taxpayer may treat payments or income items of the same type (e.g.,
interest items) received from the same ultimate payor (e.g., the obligor
on a note) as a single separate payment or income item.
(iii) Foreign source effectively connected income. If a taxpayer
takes the return position that, under the treaty, income that would be
income effectively connected with a U.S. trade or business is not
subject to U.S. taxation because it is income treated as derived from
sources outside the United States, the taxpayer may treat payments or
income items of the same type (e.g., interest items) as a single
separate payment or income item.
(iv) Sales or services income. Income from separate sales or
services, whether or not made or performed by an agent (independent or
dependent), to different U.S. customers on behalf of a foreign
corporation not having a permanent establishment in the United States
may be treated as a single payment or income item.
(v) Foreign insurers or reinsurers. For purposes of reporting by
foreign insurers or reinsurers, as described in paragraph (c)(1)(vii)(B)
of this section, such reporting must separately set forth premiums paid
with respect to casualty insurance and indemnity bonds (subject to
section 4371(1)); life insurance, sickness and accident policies, and
annuity contracts (subject to section 4371(2)); and reinsurance (subject
to section 4371(3)). All premiums paid with respect to each of these
three categories may be treated as a single payment or income item
within that category. For reports first due before May 1, 1991, the
report may disclose, for each of the three categories, the total amount
of premiums derived by the foreign insurer or reinsurer in U.S. dollars
(even if a portion of these premiums relate to risks that are not U.S.
situs). Reasonable estimates of the amounts required to be disclosed
will satisfy these reporting requirements.
(e) Effective/applicability date--(1) In general. 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--
(i) 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
(ii) 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
[[Page 197]]
paragraph (c)(7)(ii) of this section must so report for calendar years
1988 and 1989 no later than August 15, 1990.
(2) Section 5000C. Paragraph (c)(1)(ix) of this section applies to
payments made on and after November 16, 2016 pursuant to contracts
entered into on and after January 2, 2011. However, a taxpayer that
receives payments exempt from tax under section 5000C by reason of a
qualified income tax treaty before November 16, 2016 is not required to
disclose this position on Form 8833, provided it has properly relied on
Notice 2015-35, I.R.B. 2016-14, 533, in claiming the exemption.
(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; T.D.
9253, 71 FR 13007, Mar. 14, 2006; 71 FR 27321, May 10, 2006; T.D. 9782,
81 FR 55145, Aug. 18, 2016]
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. 301.6153-1 Installment payments of estimated income
tax by individuals.
For provisions relating to installment payments of estimated income
tax by individuals, see Sec. Sec. 1.6153-1 to 1.6153-4, 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. 301.6159-0 Table of contents.
This section lists the major captions that appear in the regulations
under Sec. 301.6159-1.
Sec. 301.6159-1 Agreements for the payment of tax liabilities in
installments.
(a) Authority.
(b) Procedures for submission and consideration of proposed
installment agreements.
(c) Acceptance, form, and terms of installment agreements.
(d) Rejection of a proposed installment agreement.
(e) Modification or termination of installment agreements by the
Internal Revenue Service.
(f) Effect of installment agreement or pending installment agreement
on collection activity.
(g) Suspension of the statute of limitations on collection.
(h) Annual statement.
(i) Biennial review of partial payment installment agreements.
(j) Cross reference.
(k) Effective/applicability date.
[T.D. 9473, 74 FR 61528, Nov. 25, 2009]
Sec. 301.6159-1 Agreements for payment of tax liabilities in installments.
(a) Authority. The Commissioner may enter into a written agreement
with a taxpayer that allows the taxpayer to make scheduled periodic
payments of any tax liability if the Commissioner determines that such
agreement will facilitate full or partial collection of the tax
liability.
(b) Procedures for submission and consideration of proposed
installment agreements--(1) In general. A proposed installment agreement
must be submitted according to the procedures, and in the form and
manner, prescribed by the Commissioner.
(2) When a proposed installment agreement becomes pending. A
proposed installment agreement becomes pending when it is accepted for
processing. The Internal Revenue Service (IRS) may not accept a proposed
installment agreement for processing following reference of a case
involving the liability
[[Page 198]]
that is the subject of the proposed installment agreement to the
Department of Justice for prosecution or defense. The proposed
installment agreement remains pending until the IRS accepts the
proposal, the IRS notifies the taxpayer that the proposal has been
rejected, or the proposal is withdrawn by the taxpayer. If a proposed
installment agreement that has been accepted for processing does not
contain sufficient information to permit the IRS to evaluate whether the
proposal should be accepted, the IRS will request the taxpayer to
provide the needed additional information. If the taxpayer does not
submit the additional information that the IRS has requested within a
reasonable time period after such a request, the IRS may reject the
proposed installment agreement.
(3) Revised proposals of installment agreements submitted following
rejection. If, following the rejection of a proposed installment
agreement, the IRS determines that the taxpayer made a good faith
revision of the proposal and submitted the revision within 30 days of
the date of rejection, the provisions of this section shall apply to
that revised proposal. If, however, the IRS determines that a revision
was not made in good faith, the provisions of this section do not apply
to the revision and the appeal period in paragraph (d)(3) of this
section continues to run from the date of the original rejection.
(c) Acceptance, form, and terms of installment agreements--(1)
Acceptance of an installment agreement--(i) In general. A proposed
installment agreement has not been accepted until the IRS notifies the
taxpayer or the taxpayer's representative of the acceptance. Except as
provided in paragraph (c)(1)(iii) of this section, the Commissioner has
the discretion to accept or reject any proposed installment agreement.
(ii) Acceptance does not reduce liabilities. The acceptance of an
installment agreement by the IRS does not reduce the amount of taxes,
interest, or penalties owed. (However, penalties may continue to accrue
at a reduced rate pursuant to section 6651(h).)
(iii) Guaranteed installment agreements. In the case of a liability
of an individual for income tax, the Commissioner shall accept a
proposed installment agreement if, as of the date the individual
proposes the installment agreement--
(A) The aggregate amount of the liability (not including interest,
penalties, additions to tax, and additional amounts) does not exceed
$10,000;
(B) The taxpayer (and, if the liability relates to a joint return,
the taxpayer's spouse) has not, during any of the preceding five taxable
years--
(1) Failed to file any income tax return;
(2) Failed to pay any required income tax; or
(3) Entered into an installment agreement for the payment of any
income tax;
(C) The Commissioner determines that the taxpayer is financially
unable to pay the liability in full when due (and the taxpayer submits
any information the Commissioner requires to make that determination);
(D) The installment agreement requires full payment of the liability
within three years; and
(E) The taxpayer agrees to comply with the provisions of the
Internal Revenue Code for the period the agreement is in effect.
(2) Form of installment agreements. An installment agreement must be
in writing. A written installment agreement may take the form of a
document signed by the taxpayer and the Commissioner or a written
confirmation of an agreement entered into by the taxpayer and the
Commissioner that is mailed or personally delivered to the taxpayer.
(3) Terms of installment agreements. (i) Except as otherwise
provided in this section, an installment agreement is effective from the
date the IRS notifies the taxpayer or the taxpayer's representative of
its acceptance until the date the agreement ends by its terms or until
it is superseded by a new installment agreement.
(ii) By its terms, an installment agreement may end upon the
expiration of the period of limitations on collection in section 6502
and Sec. 301.6502-1, or at some prior date.
[[Page 199]]
(iii) As a condition to entering into an installment agreement with
a taxpayer, the Commissioner may require that--
(A) The taxpayer agree to a reasonable extension of the period of
limitations on collection; and
(B) The agreement contain terms that protect the interests of the
Government.
(iv) Except as otherwise provided in an installment agreement, all
payments made under the installment agreement will be applied in the
best interests of the Government.
(v) While an installment agreement is in effect, the Commissioner
may request, and the taxpayer must provide, a financial condition update
at any time.
(vi) At any time after entering into an installment agreement, the
Commissioner and the taxpayer may agree to modify or terminate an
installment agreement or may agree to a new installment agreement that
supersedes the existing agreement.
(d) Rejection of a proposed installment agreement--(1) When a
proposed installment agreement becomes rejected. A proposed installment
agreement has not been rejected until the IRS notifies the taxpayer or
the taxpayer's representative of the rejection, the reason(s) for
rejection, and the right to an appeal.
(2) Independent administrative review. The IRS may not notify a
taxpayer or taxpayer's representative of the rejection of an installment
agreement until an independent administrative review of the proposed
rejection is completed.
(3) Appeal of rejection of a proposed installment agreement. The
taxpayer may administratively appeal a rejection of a proposed
installment agreement to the IRS Office of Appeals (Appeals) if, within
the 30-day period commencing the day after the taxpayer is notified of
the rejection, the taxpayer requests an appeal in the manner provided by
the Commissioner.
(e) Modification or termination of installment agreements by the
Internal Revenue Service--(1) Inadequate information or jeopardy. The
Commissioner may terminate an installment agreement if the Commissioner
determines that--
(i) Information which was provided to the IRS by the taxpayer or the
taxpayer's representative in connection with either the granting of the
installment agreement or a request for a financial update was inaccurate
or incomplete in any material respect; or
(ii) Collection of any liability to which the installment agreement
applies is in jeopardy.
(2) Change in financial condition, failure to timely pay an
installment or another Federal tax liability, or failure to provide
requested financial information. The Commissioner may modify or
terminate an installment agreement if--
(i) The Commissioner determines that the financial condition of a
taxpayer that is party to the agreement has significantly changed; or
(ii) A taxpayer that is party to the installment agreement fails
to--
(A) Timely pay an installment in accordance with the terms of the
installment agreement;
(B) Pay any other Federal tax liability when the liability becomes
due; or
(C) Provide a financial condition update requested by the
Commissioner.
(3) Request by taxpayer. Upon request by a taxpayer that is a party
to the installment agreement, the Commissioner may terminate or modify
the terms of an installment agreement if the Commissioner determines
that the financial condition of the taxpayer has significantly changed.
The taxpayer's request will not suspend the statute of limitations under
section 6502 for collection of any liability. While the Commissioner is
considering the request, the taxpayer shall comply with the terms of the
existing installment agreement.
(4) Notice. Unless the Commissioner determines that collection of
the tax is in jeopardy, the Commissioner will notify the taxpayer in
writing at least 30 days prior to modifying or terminating an
installment agreement pursuant to paragraph (e)(1) or (2) of this
section. The notice provided pursuant to this section must briefly
describe the reason for the intended modification or termination. Upon
receiving notice, the taxpayer may provide information showing that the
reason for the proposed modification or termination is incorrect.
(5) Appeal of modification or termination of an installment
agreement. The
[[Page 200]]
taxpayer may administratively appeal the modification or termination of
an installment agreement to Appeals if, following issuance of the notice
required by paragraph (e)(4) of this section and prior to the expiration
of the 30-day period commencing the day after the modification or
termination is to take effect, the taxpayer requests an appeal in the
manner provided by the Commissioner.
(f) Effect of installment agreement or pending installment agreement
on collection activity--(1) In general. No levy may be made to collect a
tax liability that is the subject of an installment agreement during the
period that a proposed installment agreement is pending with the IRS,
for 30 days immediately following the rejection of a proposed
installment agreement, during the period that an installment agreement
is in effect, and for 30 days immediately following the termination of
an installment agreement. If, prior to the expiration of the 30-day
period following the rejection or termination of an installment
agreement, the taxpayer appeals the rejection or termination decision,
no levy may be made while the rejection or termination is being
considered by Appeals. This section will not prohibit levy to collect
the liability of any person other than the person or persons named in
the installment agreement.
(2) Exceptions. Paragraph (f)(1) of this section shall not prohibit
levy if the taxpayer files a written notice with the IRS that waives the
restriction on levy imposed by this section, the IRS determines that the
proposed installment agreement was submitted solely to delay collection,
or the IRS determines that collection of the tax to which the
installment agreement or proposed installment agreement relates is in
jeopardy.
(3) Other actions by the IRS while levy is prohibited--(i) In
general. The IRS may take actions other than levy to protect the
interests of the Government with regard to the liability identified in
an installment agreement or proposed installment agreement. Those
actions include, for example--
(A) Crediting an overpayment against the liability pursuant to
section 6402;
(B) Filing or refiling notices of Federal tax lien; and
(C) Taking action to collect from any person who is not named in the
installment agreement or proposed installment agreement but who is
liable for the tax to which the installment agreement relates.
(ii) Proceedings in court. Except as otherwise provided in this
paragraph (f)(3)(ii), the IRS will not refer a case to the Department of
Justice for the commencement of a proceeding in court, against a person
named in an installment agreement or proposed installment agreement, if
levy to collect the liability is prohibited by paragraph (f)(1) of this
section. Without regard to whether a person is named in an installment
agreement or proposed installment agreement, however, the IRS may
authorize the Department of Justice to file a counterclaim or third-
party complaint in a refund action or to join that person in any other
proceeding in which liability for the tax that is the subject of the
installment agreement or proposed installment agreement may be
established or disputed, including a suit against the United States
under 28 U.S.C. 2410. In addition, the United States may file a claim in
any bankruptcy proceeding or insolvency action brought by or against
such person. If a person named in an installment agreement is joined in
a proceeding, the United States obtains a judgment against that person,
and the case is referred back to the IRS for collection, collection will
continue to occur pursuant to the terms of the installment agreement.
Notwithstanding the installment agreement, any claim or suit permitted
will be for the full amount of the liabilities owed.
(g) Suspension of the statute of limitations on collection. The
statute of limitations under section 6502 for collection of any
liability shall be suspended during the period that a proposed
installment agreement relating to that liability is pending with the
IRS, for 30 days immediately following the rejection of a proposed
installment agreement, and for 30 days immediately following the
termination of an installment agreement. If, within the 30 days
following the rejection or termination
[[Page 201]]
of an installment agreement, the taxpayer files an appeal with Appeals,
the statute of limitations for collection shall be suspended while the
rejection or termination is being considered by Appeals. The statute of
limitations for collection shall continue to run if an exception under
paragraph (f)(2) of this section applies and levy is not prohibited with
respect to the taxpayer.
(h) Annual statement. The Commissioner shall provide each taxpayer
who is party to an installment agreement under this section with an
annual statement setting forth the initial balance owed at the beginning
of the year, the payments made during the year, and the remaining
balance as of the end of the year.
(i) Biennial review of partial payment installment agreements. The
Commissioner shall perform a review of the taxpayer's financial
condition in the case of a partial payment installment agreement at
least once every two years. The purpose of this review is to determine
whether the taxpayer's financial condition has significantly changed so
as to warrant an increase in the value of the payments being made or
termination of the agreement.
(j) 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. For special rules regarding the
computation of the failure to pay penalty while certain installment
agreements are in effect, see section 6651(h) and Sec. 301.6651-
1(a)(4).
(k) Effective/applicability date. This section is applicable on
November 25, 2009.
[T.D. 9473, 74 FR 61528, Nov. 25, 2009]
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 Sec. Sec. 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 Sec. Sec. 20.6166-1 to 20.6166-4, inclusive, of this
chapter (Estate Tax Regulations).
Assessment
In General
Sec. 301.6201-1 Assessment authority.
(a) In general. The district director is authorized and required to
make all inquiries necessary to the determination and assessment of all
taxes imposed by the Internal Revenue Code of 1954 or any prior internal
revenue law. The district director is further authorized
[[Page 202]]
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
(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.
[[Page 203]]
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 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
[[Page 204]]
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 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
[[Page 205]]
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 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, 1978; T.D. 7838, 47 FR 44249,
Oct. 7, 1982; T.D. 7910, 48 FR 40376, Sept. 7, 1983; T.D. 8084, 51 FR
16305, May 2, 1986; T.D. 8628, 60 FR 62212, Dec. 5, 1995]
Sec. 301.6212-2 Definition of last known address.
(a) General rule. Except as provided in paragraph (b)(2) of this
section, a taxpayer's last known address is the address that appears on
the taxpayer's most recently filed and properly processed Federal tax
return, unless the Internal Revenue Service (IRS) is given
[[Page 206]]
clear and concise notification of a different address. Further
information on what constitutes clear and concise notification of a
different address and a properly processed Federal tax return can be
found in Rev. Proc. 90-18 (1990-1 C.B. 491) or in procedures
subsequently prescribed by the Commissioner.
(b) Address obtained from third party--(1) In general. Except as
provided in paragraph (b)(2) of this section, change of address
information that a taxpayer provides to a third party, such as a payor
or another government agency, is not clear and concise notification of a
different address for purposes of determining a last known address under
this section.
(2) Exception for address obtained from the United States Postal
Service--(i) Updating taxpayer addresses. The IRS will update taxpayer
addresses maintained in IRS records by referring to data accumulated and
maintained in the United States Postal Service (USPS) National Change of
Address database that retains change of address information for thirty-
six months (NCOA database). Except as provided in paragraph (b)(2)(ii)
of this section, if the taxpayer's name and last known address in IRS
records match the taxpayer's name and old mailing address contained in
the NCOA database, the new address in the NCOA database is the
taxpayer's last known address, unless the IRS is given clear and concise
notification of a different address.
(ii) Duration of address obtained from NCOA database. The address
obtained from the NCOA database under paragraph (b)(2)(i) of this
section is the taxpayer's last known address until one of the following
events occurs--
(A) The taxpayer files and the IRS properly processes a Federal tax
return with an address different from the address obtained from the NCOA
database; or
(B) The taxpayer provides the Internal Revenue Service with clear
and concise notification of a change of address, as defined in
procedures prescribed by the Commissioner, that is different from the
address obtained from the NCOA database.
(3) Examples. The following examples illustrate the rules of
paragraph (b)(2) of this section:
Example 1. (i) A is an unmarried taxpayer. The address on A's 1999
Form 1040, U.S. Individual Income Tax Return, filed on April 14, 2000,
and 2000 Form 1040 filed on April 13, 2001, is 1234 Anyplace Street,
Anytown, USA 43210. On May 15, 2001, A informs the USPS of a new
permanent address (9876 Newplace Street, Newtown, USA 12345) using the
USPS Form 3575, ``Official Mail Forwarding Change of Address Form.'' The
change of address is included in the weekly update of the USPS NCOA
database. On May 29, 2001, A's address maintained in IRS records is
changed to 9876 Newplace Street, Newtown, USA 12345.
(ii) In June 2001 the IRS determines a deficiency for A's 1999 tax
year and prepares to issue a notice of deficiency. The IRS obtains A's
address for the notice of deficiency from IRS records. On June 15, 2001,
the Internal Revenue Service mails the notice of deficiency to A at 9876
Newplace Street, Newtown, USA 12345. For purposes of section 6212(b),
the notice of deficiency mailed on June 15, 2001, is mailed to A's last
known address.
Example 2. (i) The facts are the same as in Example 1, except that
instead of determining a deficiency for A's 1999 tax year in June 2001,
the IRS determines a deficiency for A's 1999 tax year in May 2001.
(ii) On May 21, 2001, the IRS prepares a notice of deficiency for A
and obtains A's address from IRS records. Because A did not inform the
USPS of the change of address in sufficient time for the IRS to process
and post the new address in Internal Revenue Service's records by May
21, 2001, the notice of deficiency is mailed to 1234 Anyplace Street,
Anytown, USA 43210. For purposes of section 6212(b), the notice of
deficiency mailed on May 21, 2001, is mailed to A's last known address.
Example 3. (i) C and D are married taxpayers. The address on C and
D's 2000 Form 1040, U.S. Individual Income Tax Return, filed on April
13, 2001, and 2001 Form 1040 filed on April 15, 2002, is 2468 Spring
Street, Little City, USA 97531. On August 15, 2002, D informs the USPS
of a new permanent address (8642 Peachtree Street, Big City, USA 13579)
using the USPS Form 3575, ``Official Mail Forwarding Change of Address
Form.'' The change of address is included in the weekly update of the
USPS NCOA database. On August 29, 2002, D's address maintained in IRS
records is changed to 8642 Peachtree Street, Big City, USA 13579.
(ii) In October 2002 the IRS determines a deficiency for C and D's
2000 tax year and prepares to issue a notice of deficiency. The Internal
Revenue Service obtains C's address and D's address for the notice of
deficiency from IRS records. On October 15, 2002, the
[[Page 207]]
IRS mails a copy of the notice of deficiency to C at 2468 Spring Street,
Little City, USA 97531, and to D at 8642 Peachtree Street, Big City, USA
13579. For purposes of section 6212(b), the notices of deficiency mailed
on October 15, 2002, are mailed to C and D's respective last known
addresses.
(c) Last known address for all notices, statements, and documents.
The rules in paragraphs (a) and (b) of this section apply for purposes
of determining whether all notices, statements, or other documents are
mailed to a taxpayer's last known address whenever the term last known
address is used in the Internal Revenue Code or the regulations
thereunder.
(d) Effective Date--(1) In general. Except as provided in paragraph
(d)(2) of this section, this section is effective on January 29, 2001.
(2) Individual moves in the case of joint filers. In the case of
taxpayers who file joint returns under section 6013, if the NCOA
database contains change of address information for only one spouse,
paragraphs (b)(2) and (3) of this section will not apply to notices,
statements, and other documents mailed before the processing of the
taxpayers' 2000 joint return.
[T.D. 8939, 66 FR 2820, Jan. 12, 2001]
Sec. 301.6213-1 Restrictions applicable to deficiencies;
petition to Tax Court.
(a) Time for filing petition and restrictions on assessment--(1)
Time for filing petition. Within 90 days after notice of the deficiency
is mailed (or within 150 days after mailing in the case of such notice
addressed to a person outside the States of the Union and the District
of Columbia), as provided in section 6212, a petition may be filed with
the Tax Court of the United States for a redetermination of the
deficiency. In determining such 90-day or 150-day period, Saturday,
Sunday, or a legal holiday in the District of Columbia is not counted as
the 90th or 150th day. In determining the time for filing a petition
with the Tax Court in the case of a notice of deficiency mailed to a
resident of Alaska prior to 12:01 p.m., e.s.t., January 3, 1959, and in
the case of a notice of deficiency mailed to a resident of Hawaii prior
to 4 p.m., e.d.s.t., August 21, 1959, the term ``States of the Union''
does not include Alaska or Hawaii, respectively, and the 150-day period
applies. In determining the time within which a petition to the Tax
Court may be filed in the case of a notice of deficiency mailed to a
resident of Alaska after 12:01 p.m., e.s.t., January 3, 1959, and in the
case of a notice of deficiency mailed to a resident of Hawaii after 4
p.m., e.d.s.t., August 21, 1959, the term ``States of the Union''
includes Alaska and Hawaii, respectively, and the 90-day period applies.
(2) Restrictions on assessment. Except as otherwise provided by this
section, by sections 6851, 6852, and 6861(a) (relating to termination
and jeopardy assessments), by section 6871(a) (relating to immediate
assessment of claims for income, estate, and gift taxes in bankruptcy
and receivership cases), or by section 7485 (in case taxpayer petitions
for a review of a Tax Court decision without filing bond), no assessment
of a deficiency in respect of a tax imposed by subtitle A or B or
chapter 41, 42, 43, or 44 of the Code and no levy or proceeding in court
for its collection shall be made until notice of deficiency has been
mailed to the taxpayer, nor until the expiration of the 90-day or 150-
day period within which a petition may be filed with the Tax Court, nor,
if a petition has been filed with the Tax Court, until the decision of
the Tax Court has become final. As to the date on which a decision of
the Tax court becomes final, see section 7481. Notwithstanding the
provisions of section 7421(a), the making of an assessment or the
beginning of a proceeding or levy which is forbidden by this paragraph
may be enjoined by a proceeding in the proper court. In any case where
the running of the time prescribed for filing a petition in the Tax
Court with respect to a tax imposed by chapter 42 or 43 is suspended
under section 6213(e), no assessment of a deficiency in respect of such
tax shall be made until expiration of the entire period for filing the
petition.
(b) Exceptions to restrictions on assessment of deficiencies--(1)
Mathematical errors. If a taxpayer is notified of an additional amount
of tax due on account of a mathematical error appearing upon the return,
such notice is not deemed a notice of deficiency, and the taxpayer has
no right to file a petition with the
[[Page 208]]
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 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
[[Page 209]]
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, 4958, 4971, or 4975, shall be
suspended for any other period which the Commissioner has allowed for
making correction under Sec. 53.4963-1(e)(3). Where the time for filing
a petition with the Tax Court has been suspended under the authority of
this paragraph (e), the extension shall not be reduced as a result of
the correction being made prior to expiration of the period allowed for
making correction.
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7838, 47 FR 44250, Oct.
7, 1982; T.D. 8084, 51 FR 16035, May 2, 1986; T.D. 8628, 60 FR 62212,
Dec. 5, 1995; T.D. 8920, 66 FR 2171, Jan. 10, 2001]
Sec. 301.6215-1 Assessment of deficiency found by Tax Court.
Where a petition has been filed with the Tax Court, the entire
amount redetermined as the deficiency by the decision of the Tax Court
which has become final shall be assessed by the district director or the
director of the regional service center and the unpaid portion of the
amount so assessed shall be paid by the taxpayer upon notice and demand
therefor.
Sec. 301.6221-1 Tax treatment determined at partnership level.
(a) In general. A partner's treatment of partnership items on the
partner's return may not be changed except as provided in sections 6222
through 6231 and the regulations thereunder. Thus, for example, if a
partner treats an item on the partner's return consistently with the
treatment of the item on the partnership return, the IRS generally
cannot adjust the treatment of that item on the partner's return except
through a partnership-level proceeding. Similarly, the taxpayer may not
put partnership items in issue in a proceeding relating to
nonpartnership items. For example, the taxpayer may not offset a
potential increase in taxable income based on changes to nonpartnership
items by a potential decrease based on partnership items.
(b) Restrictions inapplicable after items become nonpartnership
items. Section 6221 and paragraph (a) of this section cease to apply to
items arising from a partnership with respect to a partner when those
items cease to be partnership items with respect to that partner under
section 6231(b).
(c) Penalties determined at partnership level. Any penalty, addition
to tax, or additional amount that relates to an adjustment to a
partnership item shall be determined at the partnership level. Partner-
level defenses to such items can only be asserted through refund actions
following assessment and payment. Assessment of any penalty, addition to
tax, or additional amount that relates to an adjustment to a partnership
item shall be made based on partnership-level determinations.
Partnership-level determinations include all the legal and factual
determinations that underlie the determination of any penalty, addition
to tax, or additional amount, other than partner-level defenses
specified in paragraph (d) of this section.
[[Page 210]]
(d) Partner-level defenses. Partner-level defenses to any penalty,
addition to tax, or additional amount that relates to an adjustment to a
partnership item may not be asserted in the partnership-level
proceeding, but may be asserted through separate refund actions
following assessment and payment. See section 6230(c)(4). Partner-level
defenses are limited to those that are personal to the partner or are
dependent upon the partner's separate return and cannot be determined at
the partnership level. Examples of these determinations are whether any
applicable threshold underpayment of tax has been met with respect to
the partner or whether the partner has met the criteria of section
6664(b) (penalties applicable only where return is filed), or section
6664(c)(1) (reasonable cause exception) subject to partnership-level
determinations as to the applicability of section 6664(c)(2).
(e) Cross-references. See Sec. Sec. 301.6231(c)-1 and 301.6231(c)-2
for special rules relating to certain applications and claims for refund
based on losses, deductions, or credits from abusive tax shelter
partnerships.
(f) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6221-1T contained in 26 CFR part
1, revised April 1, 2001.
[T.D. 8965, 66 FR 50544, Oct. 4, 2001]
Sec. 301.6221(a)-1 Determination at partnership level.
(a) In general. Except as otherwise provided under subchapter C of
chapter 63 of the Internal Revenue Code (subchapter C of chapter 63) and
the regulations in this part, any adjustment to a partnership-related
item (as defined in Sec. 301.6241-1(a)(6)(ii)) is determined, any tax
imposed by chapter 1 of the Internal Revenue Code (Code) attributable
thereto is assessed and collected, and the applicability of any penalty,
addition to tax, or additional amount that relates to an adjustment to
any partnership-related item is determined at the partnership level
under subchapter C of chapter 63.
(b) Legal and factual determinations at the partnership level.
Except as otherwise provided under subchapter C of chapter 63, any legal
or factual determinations underlying any adjustment or determination
made in accordance with paragraph (a) of this section are also
determined at the partnership level under subchapter C of chapter 63.
For instance, determinations under this paragraph (b) include any
determinations necessary to calculate the imputed underpayment or any
modification of the imputed underpayment under section 6225 and the
period of limitations on making adjustments under subchapter C of
chapter 63.
(c) Applicability date--(1) In general. Except as provided in
paragraph (c)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017, and ending after August
12, 2018.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable year beginning after November 2, 2015, and
before January 1, 2018, for which a valid election under Sec. 301.9100-
22 is in effect.
[T.D. 9844, 84 FR 6531, Feb. 27, 2019]
Sec. 301.6221(b)-1 Election out for certain partnerships with
100 or fewer partners.
(a) In general. The provisions of subchapter C of chapter 63 of the
Internal Revenue Code (subchapter C of chapter 63) do not apply for any
partnership taxable year for which an eligible partnership under
paragraph (b) of this section makes a valid election in accordance with
paragraph (c) of this section. For rules regarding deficiency
procedures, see subchapter B of chapter 63 of the Internal Revenue Code
and Sec. Sec. 301.6211-1 through 301.6215-1.
(b) Eligible partnership--(1) In general. Only an eligible
partnership may make an election under this section. A partnership is an
eligible partnership for purposes of this section if--
(i) The partnership has 100 or fewer partners as determined in
accordance with paragraph (b)(2) of this section, and
(ii) Each statement the partnership is required to furnish under
section 6031(b) for the partnership taxable year is furnished to a
partner that was an eligible partner (as defined in paragraph (b)(3) of
this section) for the partnership's entire taxable year.
[[Page 211]]
(2) 100 or fewer partners--(i) In general. Except as provided in
paragraph (b)(2)(ii) of this section, a partnership has 100 or fewer
partners if the partnership is required to furnish 100 or fewer
statements under section 6031(b) for the taxable year.
(ii) Special rule for S corporations. For purposes of this paragraph
(b)(2), a partnership with a partner that is an S corporation (as
defined in section 1361(a)(1)) must take into account each statement
required to be furnished by the S corporation to its shareholders under
section 6037(b) for the taxable year of the S corporation ending with or
within the partnership's taxable year.
(iii) Examples. The following examples illustrate the provisions of
this paragraph (b)(2). For purposes of these examples, each partnership
is required to file a return under section 6031(a):
Example 1. During its 2020 partnership taxable year, Partnership has
four partners each owning an interest in Partnership. Two of the
partners are Spouse 1 and Spouse 2 who are married to each other during
all of 2020. Spouse 1 and Spouse 2 each own a separate interest in
Partnership. The two other partners are unmarried individuals. Under
section 6031(b), Partnership is required to furnish a separate statement
(that is, Schedule K-1 (Form 1065), Partner's Share of Income,
Deductions, Credits, etc.) to each individual partner, including
separate statements to Spouse 1 and Spouse 2. Therefore, for purposes of
this paragraph (b)(2), Partnership has four partners during its 2020
taxable year.
Example 2. The facts are the same as in Example 1 of this paragraph
(b)(2)(iii), except Spouse 2 does not separately own an interest in
Partnership during 2020 and Spouse 1 and Spouse 2 live in a community
property state, State A. Spouse 1 acquired the partnership interest in
such a manner that by operation of State A law, Spouse 2 has a community
property interest in Spouse 1's partnership interest. Because Spouse 2's
community property interest in Spouse 1's partnership interest is not
taken into account for purposes of determining the number of statements
Partnership is required to furnish under section 6031(b), Partnership is
required to furnish a statement to Spouse 1, but not to Spouse 2.
Therefore, for purposes of this paragraph (b)(2), Partnership has three
partners during its 2020 taxable year.
Example 3. At the beginning of 2020, Partnership, which has a
taxable year ending December 31, 2020, has three partners--individuals
A, B, and C. Each individual owns an interest in Partnership. On June
30, 2020, Individual A dies, and A's interest in Partnership becomes an
asset of A's estate. A's estate owns the interest for the remainder of
2020. On September 1, 2020, B sells his interest in Partnership to
Individual D, who holds the interest for the remainder of the year.
Under section 6031(b), Partnership is required to furnish five
statements for its 2020 taxable year--one each to Individual A, the
estate of Individual A, Individual B, Individual C, and Individual D.
Therefore, for purposes of this paragraph (b)(2), Partnership has five
partners during its 2020 taxable year.
Example 4. During its 2020 taxable year, Partnership has 51
partners--50 partners who are individuals and S, an S corporation. S and
Partnership are both calendar year taxpayers. S has 50 shareholders
during the 2020 taxable year. Under section 6031(b), Partnership is
required to furnish 51 statements for the 2020 taxable year--one to S
and one to each of Partnership's 50 partners who are individuals. Under
section 6037(b), S is required to furnish a statement (that is, Schedule
K-1 (Form 1120-S), Shareholder's Share of Income, Deductions, Credits,
etc.) to each of its 50 shareholders. Under paragraph (b)(2)(ii) of this
section, the number of statements required to be furnished by S under
section 6037(b), which is 50, is taken into account to determine whether
partnership has 100 or fewer partners. Accordingly, for purposes of this
paragraph (b)(2), Partnership has a total of 101 partners (51 statements
furnished by Partnership to its partners plus 50 statements furnished by
S to its shareholders) and is therefore not an eligible partnership
under paragraph (b)(1) of this section. Because Partnership is not an
eligible partnership, it cannot make the election under paragraph (a) of
this section.
Example 5. During its 2020 taxable year, Partnership has two
partners, A, an individual, and E, an estate of a deceased partner. E
has 10 beneficiaries. Under section 6031(b), Partnership is required to
furnish two statements, one to A and one to E. Any statements that E may
be required to furnish to its beneficiaries are not taken into account
for purposes of this paragraph (b)(2). Therefore, for purposes of this
paragraph (b)(2), Partnership has two partners.
(3) Eligible Partners--(i) In general. For purposes of paragraph
(b)(1)(ii) of this section, the term eligible partner means a partner
that is an individual, a C corporation (as defined by section
1361(a)(2)), an eligible foreign entity described in paragraph
(b)(3)(iii) of this section, an S corporation, or an estate of a
deceased partner. An S corporation is an eligible partner regardless of
whether one or more shareholders of
[[Page 212]]
the S corporation are not an eligible partner.
(ii) Partners that are not eligible partners. A partner is not an
eligible partner under paragraph (b)(3)(i) of this section if the
partner is--
(A) A partnership,
(B) A trust,
(C) A foreign entity that is not an eligible foreign entity
described in paragraph (b)(3)(iii) of this section,
(D) A wholly owned entity disregarded as separate from its owner for
Federal income tax purposes,
(E) An estate of an individual other than a deceased partner, or
(F) Any person who holds an interest in the partnership on behalf of
another person, or
(G) A qualified subchapter S subsidiary, as defined in section
1361(b)(3)(B).
(iii) Eligible foreign entity. For purposes of this paragraph
(b)(3), a foreign entity is an eligible partner if the foreign entity
would be treated as a C corporation if it were a domestic entity. For
purposes of the preceding sentence, a foreign entity would be treated as
a C corporation if it were a domestic entity if the entity is classified
as a per se corporation under Sec. 301.7701-2(b)(1), (3), (4), (5),
(6), (7), or (8), is classified by default as an association taxable as
a corporation under Sec. 301.7701-3(b)(2)(i)(B), or is classified as an
association taxable as a corporation in accordance with an election
under Sec. 301.7701-3(c).
(iv) Examples. The following examples illustrate the rules of this
paragraph (b)(3). For purposes of these examples, each partnership is
required to file a return under section 6031(a):
Example 1. During the 2020 taxable year, Partnership has four equal
partners. Two partners are individuals. One partner is a C corporation.
The fourth partner, D, is a partnership. Because D is a partnership, D
is not an eligible partner under paragraph (b)(3)(i) of this section.
Accordingly, Partnership is not an eligible partnership under paragraph
(b)(1) of this section and, therefore, cannot make the election under
paragraph (a) of this section for its 2020 taxable year.
Example 2. During its 2020 taxable year, Partnership has four equal
partners. Two partners are individuals. One partner is a C corporation.
The fourth partner, S, is an S corporation. S has ten shareholders. One
of S's shareholders is a disregarded entity, and one is a qualified
small business trust. S is an eligible partner under paragraph (b)(3)(i)
of this section even though S's shareholders would not be considered
eligible partners if those shareholders held direct interests in
Partnership. See paragraph (b)(3)(i) of this section. Accordingly,
Partnership meets the requirements under this paragraph (b)(3) for its
2020 taxable year.
Example 3. During its 2020 taxable year, Partnership has two equal
partners, A, an individual, and C, a disregarded entity, wholly owned by
B, an individual. C is not an eligible partner under paragraph (b)(3)(i)
of this section. Accordingly, Partnership is not an eligible partnership
under paragraph (b)(1) of this section and, therefore, is ineligible to
make the election under paragraph (a) of this section for its 2020
taxable year.
(c) Election--(1) In general. An election under this section must be
made on the eligible partnership's timely filed return, including
extensions, for the taxable year to which the election applies and
include all information required by the Internal Revenue Service (IRS)
in forms, instructions, or other guidance. An election is not valid
unless the partnership discloses to the IRS all of the information
required under paragraph (c)(2) of this section and, in the case of a
partner that is an S corporation, the shareholders of such S
corporation. An election once made may not be revoked without the
consent of the IRS.
(2) Disclosure of partner information to the IRS. A partnership
making an election under this section must disclose to the IRS
information about each person that was a partner at any time during the
taxable year of the partnership to which the election applies, including
each partner's name and correct U.S. taxpayer identification number
(TIN) (or alternative form of identification required by forms,
instructions, or other guidance), each partner's Federal tax
classification, an affirmative statement that the partner is an eligible
partner under paragraph (b)(3)(i) of this section, and any other
information required by the IRS in forms, instructions, or other
guidance. If a partner is an S corporation, the partnership must also
disclose to the IRS information about each shareholder of the S
corporation that was a shareholder at any time during the taxable year
of the S corporation ending with or within the partnership's taxable
year, including
[[Page 213]]
each shareholder's name and correct TIN (or alternative form of
identification as prescribed by forms, instructions, or other guidance),
each shareholder's Federal tax classification, and any other information
required by the IRS in forms, instructions, or other guidance.
(3) Partner notification. A partnership that makes an election under
this section must notify each of its partners of the election within 30
days of making the election in the form and manner determined by the
partnership.
(d) Election made by a partnership that is a partner --(1) In
general. The fact that a partnership has made an election under this
section does not affect whether the provisions of subchapter C of
chapter 63 apply to any other partnership, including a partnership in
which the partnership making the election is a partner. Accordingly, the
provisions of subchapter C of chapter 63 that apply to partners in a
partnership that has not made an election under this section apply, to
the extent provided in the regulations under subchapter C of chapter 63,
to partners (that are themselves partnerships that have made an election
under this section) in their capacity as partners in the other
partnership.
(2) Examples. The following examples illustrate the rules of
paragraph (d)(1) of this section. For purposes of these examples, each
partnership is required to file a return under section 6031(a):
Example 1. During its 2020 taxable year, Partnership, a calendar
year taxpayer, has two partners. One partner, A, is also a calendar year
partnership. A files a valid election under this section with its timely
filed partnership return for its 2020 taxable year. Partnership does not
file an election under this section. Notwithstanding A's valid election
under this section, with respect to A's interest in Partnership, A is
subject to the rules applicable to partners in a partnership subject to
the rules under subchapter C of chapter 63, including the consistency
requirements of section 6222 and the regulations thereunder.
Example 2. The facts are the same as Example 1 of this paragraph
(d)(2). The IRS mails to Partnership a notice of final partnership
adjustment under section 6231 with respect to Partnership's 2020 taxable
year. Partnership timely elects the alternative to payment of imputed
underpayment under section 6226 and the regulations thereunder.
Partnership must provide A with a statement under section 6226
reflecting A's share of the adjustments for Partnership's 2020 taxable
year. A is subject to the rules applicable to partners in a partnership
subject to the rules under subchapter C of chapter 63 with respect to
A's interest in Partnership.
(e) Effect of an election--(1) In general. An election made under
this section is an action taken under subchapter C of chapter 63 by the
partnership for purposes of section 6223. Accordingly, the partnership
and all partners are bound by an election of the partnership under this
section unless the IRS determines that the election is invalid. See
Sec. 301.6223-2 for the binding nature of actions taken by a
partnership under subchapter C of chapter 63.
(2) IRS determination that election is invalid. If the IRS
determines that an election under this section for a partnership taxable
year is invalid, the IRS will notify the partnership in writing and the
provisions of subchapter C of chapter 63 will apply to that partnership
taxable year.
(f) Applicability date. These regulations are applicable to
partnership taxable years beginning after December 31, 2017.
Notwithstanding the preceding sentence, paragraphs (b)(3)(ii)(D), (F),
and (G) of this section apply to taxable years ending on or after
November 20, 2020.
[T.D. 9829, 83 FR 31, Jan. 2, 2018, as amended by T.D. 9969, 87 FR
75490, Dec. 9, 2022]
Sec. 301.6222-1 Partner's return must be consistent with partnership return.
(a) Consistent treatment of partnership-related items--(1) In
general. The treatment of partnership-related items (as defined in Sec.
301.6241-1(a)(6)(ii)) on a partner's return must be consistent with the
treatment of such items on the partnership return in all respects,
including the amount, timing, and characterization of such items. A
partner has not satisfied the requirement of this paragraph (a) if the
treatment of the partnership-related item on the partner's return is
consistent with how such item was treated on a schedule or other
information furnished to the partner by the partnership but inconsistent
with the treatment of the item on the partnership return actually
[[Page 214]]
filed. For rules relating to the election to be treated as having
reported the inconsistency where the partner treats a partnership-
related item consistently with an incorrect schedule or other
information furnished by the partnership, see paragraph (d) of this
section. For purposes of this section, the term partner's return
includes any return, statement, schedule, or list, and any amendment or
supplement thereto, filed by the partner with respect to any tax imposed
by the Internal Revenue Code (Code).
(2) Partner that is a partnership with an election in effect under
section 6221(b). The rules of this section apply to all partners,
including a partnership-partner (as defined in Sec. 301.6241-1(a)(7))
that has an election in effect under section 6221(b) for any taxable
year. Accordingly, unless the requirements of paragraph (c) of this
section are satisfied, a partnership-partner must treat partnership-
related items of a partnership in which it is a partner consistent with
the treatment of such items on the partnership return filed by the
partnership in which it is a partner.
(3) Partnership does not file a return. A partner's treatment of a
partnership-related item attributable to a partnership that does not
file a return is per se inconsistent.
(4) Treatment of items on a partnership return. For purposes of this
section, the treatment of a partnership-related item on a partnership
return includes--
(i) The treatment of such item on the partnership's return of
partnership income filed with the Internal Revenue Service (IRS) under
section 6031, and any amendment or supplement thereto, including an
administrative adjustment request (AAR) filed pursuant to section 6227;
and
(ii) The treatment of such item on any statement, schedule or list,
and any amendment or supplement thereto, filed by the partnership with
the IRS, including any statements filed pursuant to section 6226.
(5) Examples. The following examples illustrate the rules of this
paragraph (a). For purposes of these examples, each partnership is
subject to the provisions of subchapter C of chapter 63 of the Code
(subchapter C of chapter 63), and each partnership and its partners are
calendar year taxpayers, unless otherwise stated.
(i) Example 1. A is a partner in Partnership during 2018 and 2019.
In December 2018, Partnership receives an advance payment for services
to be performed in 2019 and reports this amount as income on its
partnership return for 2018. A includes its distributive share of income
from the advance payment on A's income tax return for 2019 and not on
A's income tax return for 2018. A has not satisfied the requirements of
paragraph (a) of this section because A's treatment of the income
attributable to Partnership is inconsistent with the treatment of that
item by Partnership on its partnership return.
(ii) Example 2. B is a partner in Partnership during 2018.
Partnership incurred start-up costs before it was actively engaged in
its business. Partnership capitalized these costs on its 2018
partnership return. B deducted his distributive share of the start-up
costs on B's 2018 income tax return. B has not satisfied the
requirements of paragraph (a) of this section because B's treatment of
the start-up costs is inconsistent with the treatment of that item by
Partnership on its partnership return.
(iii) Example 3. C is a partner in Partnership during 2018.
Partnership reports a loss of $100,000 on its partnership return for
2018. On the 2018 Schedule K-1 attached to the partnership return,
Partnership reports $5,000 as C's distributive share of that loss. On
the 2018 Schedule K-1 furnished to C, however, Partnership reports
$15,000 as C's distributive share of the loss. C reports the $15,000
loss on C's 2018 income tax return. C has not satisfied the requirements
of paragraph (a) of this section because C reported C's distributive
share of the loss in a manner that is inconsistent with how C's
distributive share of the loss was reported on the 2018 partnership
return actually filed. See, however, paragraph (d) of this section for
the election to be treated as having reported the inconsistency where
the partner treats an item consistently with an incorrect schedule.
(iv) Example 4. D was a partner in Partnership during 2018.
Partnership
[[Page 215]]
reports a loss of $100,000 on its partnership return for 2018. In 2020,
Partnership files an AAR under section 6227 reporting that the amount of
the loss on its 2018 partnership return is $90,000, rather than $100,000
as originally reported. Pursuant to section 6227, Partnership elects to
have its partners take the adjustment into account, and furnishes D a
statement showing D's share of the reduced loss for 2018. D fails to
take his share of the reduced loss for 2018 into account in accordance
with section 6227. D has not satisfied the requirements of paragraph (a)
of this section because D has not taken into account his share of the
loss in a manner consistent with how Partnership treated such items on
the partnership return actually filed.
(v) Example 5. E was a partner in Partnership during 2018. In 2021,
Partnership receives a notice of final partnership adjustment (FPA) in
an administrative proceeding under subchapter C of chapter 63 with
respect to Partnership's 2018 taxable year. The FPA reflects an imputed
underpayment. Partnership properly elects the application of section
6226 with respect to the imputed underpayment and files with the IRS and
furnishes to E a statement of E's share of adjustments with respect to
Partnership's 2018 taxable year. E fails to take his share of the
adjustments into account in accordance with section 6226. E has not
satisfied the requirements of paragraph (a) of this section because E
has not taken into account his share of adjustments with respect to
Partnership's 2018 taxable year in a manner consistent with how
Partnership treated such items on the section 6226 statement filed with
the IRS.
(vi) Example 6. F was a partner in Partnership during 2018. F has a
valid election under section 6221(b) in effect with respect to F's 2018
partnership taxable year. Notwithstanding F's election under section
6221(b) for its 2018 taxable year, F is subject to section 6222 for
taxable year 2018. F must treat, on its 2018 partnership return, any
items attributable to F's interest in Partnership in a manner that is
consistent with the treatment of those items on the 2018 partnership
return actually filed by Partnership.
(vii) Example 7. G was a partner in Partnership during 2018. G's
taxable year ends on the same day as Partnership's 2018 taxable year.
Partnership did not file a partnership return for its 2018 taxable year.
G files an income tax return for its 2018 taxable year and reports G's
share of a loss attributable to G's interest in Partnership. Because
Partnership failed to file a partnership return, G's treatment of such
loss is per se inconsistent pursuant to paragraph (a)(3) of this
section.
(b) Effect of inconsistent treatment--(1) Determination of
underpayment of tax resulting from inconsistent treatment. If a partner
fails to satisfy the requirements of paragraph (a) of this section,
unless the partner provides notice in accordance with paragraph (c) of
this section, the IRS may adjust the inconsistently reported
partnership-related item on the partner's return to make it consistent
with the treatment of such item on the partnership return (or where no
partnership return was filed, remove any treatment of such items from
the partner's return) and determine any underpayment of tax that results
from that adjustment. For purposes of this section, except as provided
in paragraph (b)(3) of this section, the underpayment of tax is the
amount by which the correct tax, as determined by making the partner's
return consistent with the partnership return, exceeds the tax shown on
the partner's return.
(2) Assessment and collection of tax. The IRS may assess and collect
any underpayment of tax resulting from an adjustment described in
paragraph (b)(1) of this section in the same manner as if the
underpayment of tax were on account of a mathematical or clerical error
appearing on the partner's return, except that the procedures under
section 6213(b)(2) for requesting abatement of an assessment do not
apply.
(3) Effect when partner is a partnership. For the effect of a
failure to satisfy the requirements of paragraph (a) of this section
where the partner is itself a partnership (a partnership-partner), see
section 6232(d)(1)(B) and Sec. 301.6232-1(d).
(4) Examples. The following examples illustrate the rules of this
paragraph
[[Page 216]]
(b). For purposes of these examples, each partnership is subject to the
provisions of subchapter C of chapter 63, and each partnership and its
partners are calendar year taxpayers, unless otherwise stated.
(i) Example 1. H, an individual, is a partner in Partnership. On its
partnership return for taxable year 2018, Partnership reports $100,000
in ordinary income. On the Schedule K-1 attached to the partnership
return, as well as on the Schedule K-1 furnished to H, Partnership
reports $15,000 as H's distributive share of the $100,000 in ordinary
income. H reports only $5,000 of the $15,000 of ordinary income on his
2018 income tax return. The IRS may determine the amount of tax that
results from adjusting the ordinary income attributable to H's interest
in Partnership reported on H's 2018 income tax return from $5,000 to
$15,000 and assess that resulting underpayment in tax as if it were on
account of a mathematical or clerical error appearing on H's return. H
may not request an abatement of that assessment under section 6213(b).
(ii) Example 2. J was a partner in Partnership during 2018. In 2021,
Partnership receives an FPA in an administrative proceeding under
subchapter C of chapter 63 with respect to Partnership's 2018 taxable
year. The FPA reflects an imputed underpayment. Partnership properly
elects the application of section 6226 with respect to the imputed
underpayment and files with the IRS and furnishes to J a statement of
J's share of adjustments with respect to Partnership's 2018 taxable
year. J fails to report one adjustment reflected on the statement, J's
share of a decrease in the amount of losses for 2018, on J's return as
required by section 6226. The IRS may determine the amount of tax that
results from adjusting the decrease in the amount of losses on J's
return to be consistent with the amount included on the section 6226
statement filed with the IRS and may assess the resulting underpayment
in tax as if it were on account of a mathematical or clerical error
appearing on J's return. J may not request an abatement of that
assessment under section 6213(b).
(c) Notification to the IRS when items attributable to a partnership
are treated inconsistently--(1) In general. Paragraphs (a) and (b) of
this section (regarding the consistent treatment of partnership-related
items and the effect of inconsistent treatment) do not apply to
partnership-related items identified as inconsistent (or that may be
inconsistent) in a statement that the partner provides to the IRS
according to the forms, instructions, and other guidance prescribed by
the IRS. Instead, the procedures in paragraph (c)(3) of this section
apply. A statement does not identify an inconsistency for purposes of
this paragraph (c) unless it is attached to the partner's return on
which the partnership-related item is treated inconsistently.
(2) Coordination with section 6223. Paragraph (c)(1) of this section
is not applicable to a partnership-related item the treatment of which
is binding on the partner because of actions taken by the partnership
under subchapter C of chapter 63 or because of a final decision in a
proceeding with respect to the partnership under subchapter C of chapter
63. For instance, the provisions of paragraph (c)(1) of this section do
not apply with respect to the partner's treatment of a partnership-
related item reflected on a statement described in Sec. 301.6226-2
filed by the partnership with the IRS. See Sec. 301.6226-1(e)
(regarding the binding nature of statements described in Sec. 301.6226-
2). Any underpayment resulting from the inconsistent treatment of an
item described in this paragraph (c)(2) may be assessed and collected in
accordance with paragraph (b)(2) of this section.
(3) Partner protected only to extent of notification. A partner who
reports the inconsistent treatment of a partnership-related item is not
subject to paragraphs (a) and (b) of this section only with respect to
those items identified in the statement described in paragraph (c)(1) of
this section. Thus, if a partner notifying the IRS with respect to one
partnership-related item does not report the inconsistent treatment of
another partnership-related item, the IRS may determine the amount of
tax that results from adjusting the unidentified, inconsistently
reported item
[[Page 217]]
on the partner's return to make it consistent with the treatment of such
item on the partnership return and assess the resulting underpayment of
tax in accordance with paragraph (b)(2) of this section.
(4) Adjustment after notification--(i) In general. If a partner
notifies the IRS of the inconsistent treatment of a partnership-related
item in accordance with paragraph (c)(1) of this section and the IRS
disagrees with the inconsistent treatment, the IRS may adjust the
identified, inconsistently reported item in a proceeding with respect to
the partner. Nothing in this paragraph (c)(4)(i) precludes the IRS from
also conducting a proceeding with respect to the partnership. If the IRS
conducts a proceeding with respect to the partnership regarding the
identified, inconsistently reported item, each partner of the
partnership, including any partner that notified the IRS of inconsistent
treatment in accordance with paragraph (c)(1) of this section, is bound
by actions taken by the partnership and by any final decision in the
proceeding with respect to the partnership. See paragraph (c)(2) of this
section.
(ii) Adjustments in partner proceeding. In a proceeding with respect
to a partner described in paragraph (c)(4)(i) of this section, the IRS
may adjust any identified, inconsistently reported partnership-related
item to make the item consistent with the treatment of that item on the
partnership return or determine that the correct treatment of such item
differs from the treatment on the partnership return and instead adjust
the item to reflect the correct treatment, notwithstanding the treatment
of that item on the partnership return. The IRS may also adjust any item
on the partner's return, including items that are not partnership-
related items. Any final decision with respect to an inconsistent
position in a proceeding to which the partnership is not a party is not
binding on the partnership.
(5) Limitation on treating partnership-related items inconsistently
after notice of administrative proceeding. After a notice of
administrative proceeding with respect to a partnership taxable year has
been mailed by the IRS under section 6231, a partner may not notify the
IRS the partner is treating a partnership-related item on the partner's
return inconsistently with how such item was treated on the partnership
return for such taxable year, except as provided in Sec. 301.6225-2.
(6) Examples. The following examples illustrate the rules of this
paragraph (c). For purposes of these examples, each partnership is
subject to the provisions of subchapter C of chapter 63, and each
partnership and partner is a calendar year taxpayer, unless otherwise
stated.
(i) Example 1. K is a partner in Partnership during 2018. K treats a
deduction and a capital gain attributable to Partnership on K's 2018
income tax return in a manner that is inconsistent with the treatment of
those items by Partnership on its 2018 partnership return. K reports the
inconsistent treatment of the deduction in accordance with paragraph
(c)(1) of this section, but not the inconsistent treatment of the gain.
Because K did not notify the IRS of the inconsistent treatment of the
gain in accordance with paragraph (c)(1) of this section, the IRS may
determine the amount of tax that results from adjusting the gain
reported on K's 2018 income tax return in order to make the treatment of
that gain consistent with how the gain was treated on Partnership's
partnership return. Pursuant to paragraph (c)(3) of this section, the
IRS may assess and collect the underpayment of tax resulting from the
adjustment to the gain as if it were on account of a mathematical or
clerical error appearing on K's return.
(ii) Example 2. L is a partner in Partnership during 2018. On its
2018 partnership return, Partnership treats partner L's distributive
share of ordinary loss attributable to Partnership as $8,000. L,
however, claims an ordinary loss of $9,000 as attributable to
Partnership on its 2018 income tax return and notifies the IRS of the
inconsistent treatment in accordance with paragraph (c)(1) of this
section. As a result of the notice of inconsistent treatment, the IRS
conducts a separate proceeding under subchapter B of chapter 63 of the
Internal Revenue Code with respect to L's 2018 income tax return, a
proceeding to which Partnership is not a party. During the proceeding,
the IRS determines
[[Page 218]]
that the proper amount of L's distributive share of the ordinary loss
from Partnership is $3,000. During the same proceeding, the IRS also
determines that L overstated a charitable contribution deduction in the
amount of $2,500 on its 2018 income tax return. The determination of the
adjustment of L's share of ordinary loss is not binding on Partnership.
The charitable contribution deduction is not attributable to Partnership
or to another partnership subject to the provisions of subchapter C of
chapter 63. The IRS may determine the amount of tax that results from
adjusting the $9,000 ordinary loss deduction to $3,000 and from
adjusting the charitable contribution deduction. Pursuant to paragraph
(c)(4)(ii) of this section, the IRS is not limited to only adjusting the
ordinary loss of $9,000, as originally reported on L's partner return,
to $8,000, as originally reported by Partnership on its partnership
return, nor is the IRS prohibited from adjusting the charitable
contribution deduction in the proceeding with respect to L.
(d) Partner receiving incorrect information--(1) In general. A
partner is treated as having complied with section 6222(c)(1)(B) and
paragraph (c)(1) of this section with respect to a partnership-related
item if the partner--
(i) Demonstrates that the treatment of such item on the partner's
return is consistent with the treatment of that item on the statement,
schedule, or other form prescribed by the IRS and furnished to the
partner by the partnership; and
(ii) The partner makes an election in accordance with paragraph
(d)(2) of this section.
(2) Time and manner of making election--(i) In general. An election
under paragraph (d) of this section must be filed in writing with the
IRS office set forth in the notice that notified the partner of the
inconsistency no later than 60 days after the date of such notice.
(ii) Contents of election. The election described in paragraph
(d)(2)(i) of this section must be--
(A) Clearly identified as an election under section 6222(c)(2)(B);
(B) Signed by the partner making the election;
(C) Accompanied by a copy of the statement, schedule, or other form
furnished to the partner by the partnership and a copy of the IRS notice
that notified the partner of the inconsistency; and
(D) Include any other information required in forms, instructions,
or other guidance prescribed by the IRS.
(iii) Treatment of partnership-related item is unclear. Generally,
the requirement described in paragraph (d)(2)(ii)(C) of this section
will be satisfied by attaching a copy of the statement, schedule, or
other form furnished to the partner by the partnership to the election
(in addition to a copy of the IRS notice that notified the partner of
the inconsistency). However, if it is not clear from the statement,
schedule, or other form furnished by the partnership that the partner's
treatment of the partnership-related item on the partner's return is
consistent, the election must also include an explanation of how the
treatment of such item on the statement, schedule, or other form
furnished by the partnership is consistent with the treatment of the
item on the partner's return, including with respect to the
characterization, timing, and amount of such item.
(3) Example. M is a partner in Partnership for 2018. Partnership is
subject to subchapter C of chapter 63, and both Partnership and M are
calendar year taxpayers. On its 2018 partnership return, Partnership
reports that M's distributive share of ordinary income attributable to
Partnership is $1,000. Partnership furnishes to M a Schedule K-1 for
2018 showing $500 as M's distributive share of ordinary income. M
reports $500 of ordinary income attributable to Partnership on its 2018
income tax return consistent with the Schedule K-1 furnished to M. The
IRS notifies M that M's treatment of the ordinary income attributable to
Partnership on its 2018 income tax return is inconsistent with how
Partnership treated the ordinary income allocated to M on its 2018
partnership return. Within 60 days of receiving the notice from the IRS
of the inconsistency, M files an election with the IRS in accordance
with paragraph (d)(2) of this
[[Page 219]]
section. Because M made a valid election under section 6222(c)(2)(B) and
paragraph (d)(1) of this section, M is treated as having notified the
IRS of the inconsistency with respect to the ordinary income
attributable to Partnership under paragraph (c)(1) of this section.
(e) Applicability date--(1) In general. Except as provided in
paragraph (e)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017, and ending after August
12, 2018.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable year beginning after November 2, 2015, and
before January 1, 2018, for which a valid election under Sec. 301.9100-
22 is in effect.
[T.D. 9844, 84 FR 6531, Feb. 27, 2019]
Sec. 301.6222(a)-1 Consistent treatment of partnership items.
(a) In general. The treatment of a partnership item on the partner's
return must be consistent with the treatment of that item by the
partnership on the partnership return in all respects including the
amount, timing, and characterization of the item.
(b) Treatment must be consistent with partnership return. The
treatment of a partnership item on the partner's return must be
consistent with the treatment of that item on the partnership return.
Thus, a partner who treats an item consistently with a schedule or other
information furnished to the partner by the partnership has not
satisfied the requirement of paragraph (a) of this section if the
treatment of that item is inconsistent with the treatment of the item on
the partnership return actually filed. For rules relating to the
election to be treated as having reported the inconsistency where the
partner treats an item consistently with an incorrect schedule, see
Sec. 301.6222(b)-3.
(c) Examples. The following examples illustrate the principles of
this section:
Example 1. B is a partner of Partnership P. Both B and P use the
calendar year as the taxable year. In December 2001, P receives an
advance payment for services to be performed in 2002 and reports this
amount as income for calendar year 2001. However, B reports B's
distributive share of this amount on B's income tax return for 2002 and
not on B's return for 2001. B's treatment of this partnership item is
inconsistent with the treatment of the item by P.
Example 2. Partnership P incurred certain start-up costs before P
was actively engaged in its business. P capitalized these costs. C, a
partner in P, deducted C's proportionate share of these start-up costs.
C's treatment of the partnership expenditure is inconsistent with the
treatment of that item by P.
Example 3. D is a partner in partnership P. P reports a loss of
$100,000 on its return, $5,000 of which it reports on the Schedule K-1
attached to its return as D's distributive share. However, P reports
$15,000 as D's distributive share of P's loss on the Schedule K-1
furnished to D. D reports the $15,000 loss on D's income tax return. D
has not satisfied the consistent reporting requirement. See, however,
Sec. 301.6222(b)-3 for an election to be treated as having reported the
inconsistency.
(d) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001.
For years beginning prior to October 4, 2001, see Sec. 301.6222(a)-
1T contained in 26 CFR part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50545, Oct. 4, 2001]
Sec. 301.6222(a)-2 Application of consistent reporting and
notification rules to indirect partners.
(a) In general. The consistent reporting requirement of Sec.
301.6222(a)-1 is generally applied with respect to the source
partnership. For purposes of this section, the term source partnership
means the partnership (within the meaning of section 6231(a)(1)) from
which the partnership item originates.
(b) Indirect partner files consistently with source partnership. An
indirect partner who treats an item from a source partnership in a
manner consistent with the treatment of that item on the source
partnership's return satisfies the consistency requirement of section
6222(a) regardless of whether the indirect partner treats that item in a
manner consistent with the treatment of that item by the pass-thru
partner through which the indirect partner holds the interest in the
source partnership. Under these circumstances, therefore, the Internal
Revenue Service shall not send to the indirect partner the notice
described in section 6231(b)(1)(A).
(c) Indirect partner files inconsistently with source partnership--
(1) Indirect
[[Page 220]]
partner notifies the Internal Revenue Service of inconsistency. An
indirect partner who--
(i) Treats an item from a source partnership in a manner
inconsistent with the treatment of that item on the source partnership's
return; and
(ii) Files a statement identifying the inconsistency with the source
partnership in accordance with Sec. 301.6222(c)-1, shall not be subject
to a computational adjustment to conform the treatment of that item to
the treatment of that item on the return of the source partnership.
(2) Indirect partner does not notify the Internal Revenue Service of
inconsistency. Except as provided in paragraph (b)(3) of this section,
an indirect partner who--
(i) Treats an item from a source partnership in a manner
inconsistent with the treatment of that item on the source partnership's
return; and
(ii) Fails to file a statement identifying the inconsistency with
the source partnership in accordance with Sec. 301.6222(b)-1, is
subject to a computational adjustment to conform the treatment of that
item to the treatment of that item on the return of the source
partnership.
(3) Indirect partner files consistently with a pass-thru partner
that notifies the Internal Revenue Service of the inconsistency. If an
indirect partner treats an item from a source partnership in a manner
consistent with the treatment of that item by a pass-thru partner
through which the indirect partner holds the interest in the source
partnership and that pass-thru partner--
(i) Treats that item in a manner inconsistent with the treatment of
that item on the source partnership's return; and
(ii) Files a statement identifying the inconsistency with the source
partnership in accordance with Sec. 301.6222(b)-1, the indirect partner
is not subject to a computational adjustment to conform to the treatment
of that item on the return of the source partnership.
(d) Examples. The following examples illustrate the principles of
this section:
Example 1. One of the partners in Partnership A is Partnership B,
which has four equal partners C, D, E, and F. Both A and B are
partnerships within the meaning of section 6231(a)(1). On its return, A
reports $100,000 as B's distributive share of A's ordinary income. B,
however, reports only $80,000 as its distributive share of the income
and does not notify the Internal Revenue Service of this inconsistent
treatment with respect to A. C reports $20,000 as its distributive share
of the item. Although C reports the item consistently with B, C is
subject to a computational adjustment to conform the treatment of that
item on C's return to the treatment of that item on A's return.
Example 2. Assume the same facts as in Example 1, except that B
notified the Internal Revenue Service of its inconsistent treatment with
respect to source partnership A. C is not subject to a computational
adjustment.
Example 3. Assume the same facts as in Example 1. D reports only
$15,000 as D's distributive share of the income and does not report the
inconsistency. F reports only $9,000 as its distributive share of the
item but reports this inconsistency with respect to source partnership
A. D is subject to a computational adjustment to conform the treatment
of that item on D's return to the treatment of that item on A's return.
F is not subject to a computational adjustment.
Example 4. Assume the same facts as in Example 3, except that F
reported the inconsistency with respect to B and did not report the
inconsistency with respect to source partnership A. F is subject to a
computational adjustment to conform the treatment of that item on F's
return to the treatment of that item on A's return.
Example 5. Assume the same facts as in Example 1. E reports $25,000
as its distributive share of the item. Regardless of whether E reports
the inconsistency between its treatment of the item and that by B, E is
neither subject to a computational adjustment to conform E's treatment
of that item to that of B nor subject to the notice described in section
6231(b)(1)(A) with respect to any such notification of inconsistent
treatment.
(e) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6222(a)-2T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50545, Oct. 4, 2001]
Sec. 301.6222(b)-1 Notification to the Internal Revenue Service
when partnership items are treated inconsistently.
(a) In general. The statement identifying an inconsistency described
in section 6222(b)(1)(B) shall be filed by filing the form prescribed
for that purpose in
[[Page 221]]
accordance with the instructions accompanying that form.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6222(b)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50546, Oct. 4, 2001]
Sec. 301.6222(b)-2 Effect of notification of inconsistent treatment.
(a) In general. Generally, if a partner treats a partnership item on
the partner's return in a manner inconsistent with the treatment of that
item on the partnership return, the Internal Revenue Service may make a
computational adjustment to conform the treatment of the item by the
partner with the treatment of that item on the partnership return. Any
additional tax resulting from that computational adjustment may be
assessed without either the commencement of a partnership proceeding or
notification to the partner that all partnership items arising from that
partnership will be treated as nonpartnership items. However, if a
partner notifies the Internal Revenue Service of the inconsistent
treatment of a partnership item in the manner prescribed in Sec.
301.6222(b)-1, the Internal Revenue Service generally may not make an
adjustment with respect to that partnership item unless the Internal
Revenue Service--
(1) Conducts a partnership-level proceeding; or
(2) Notifies the partner under section 6231(b)(1)(A) that all
partnership items arising from that partnership will be treated as
nonpartnership items. See, however, Sec. Sec. 301.6231(c)-1 and
301.6231(c)-2 for special rules relating to certain applications and
claims for refund based on losses, deductions, or credits from abusive
tax shelter partnerships.
(b) Partner protected only to extent of notification. (1) A partner
who reports the inconsistent treatment of partnership items on the
partner's return is protected from computational adjustments under
section 6222(c) only with respect to those partnership items the
inconsistent treatment of which is reported. Thus, if a partner
notifying the Internal Revenue Service with respect to one item fails to
report the inconsistent treatment of another item, the partner is
subject to a computational adjustment with respect to that other item.
(2) The following example illustrates the principles of this
paragraph (b):
Example. Partner A of Partnership P treats a deduction and a capital
gain arising from P on A's return in a manner that is inconsistent with
the treatment of those items by P. A reports the inconsistent treatment
of the deduction but not of the gain. A is subject to a computational
adjustment under section 6222(c) with respect to the gain.
(c) Adjustments in a separate proceeding not limited to conforming
adjustments. (1) If the Internal Revenue Service conducts a separate
proceeding with a partner whose partnership items are treated as
nonpartnership items under section 6231(b), the Internal Revenue Service
is not limited to making adjustments that merely conform the partner's
return to the partnership return.
(2) Example. The following example illustrates the principles of
this paragraph (c):
Example. Partnership P allocates to E, one of its partners, a loss
of $8,000. E, however, claims a loss of $9,000 and reports the
inconsistent treatment. The Internal Revenue Service notifies E that it
will treat all of E's partnership items arising from P as nonpartnership
items. As a result of a separate proceeding with E, the Internal Revenue
Service may issue a deficiency notice which could include reducing the
loss to $3,000.
(d) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6222(b)-2T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50546, Oct. 4, 2001]
Sec. 301.6222(b)-3 Partner receiving incorrect schedule.
(a) In general. A partner shall be treated as having complied with
section 6222(b)(1)(B) and Sec. 301.6222(b)-1 with respect to a
partnership item if the partner--
(1) Demonstrates that the treatment of the partnership item on the
partner's return is consistent with the treatment of that item on the
schedule prescribed by the Internal Revenue Service and furnished to the
partner by
[[Page 222]]
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.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6222(b)-3T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50546, Oct. 4, 2001]
Sec. 301.6223-1 Partnership representative.
(a) Each partnership must have a partnership representative. A
partnership subject to subchapter C of chapter 63 of the Internal
Revenue Code (subchapter C of chapter 63) for a partnership taxable year
must designate a partnership representative for the partnership taxable
year in accordance with this section. There may be only one designated
partnership representative for a partnership taxable year at any time.
The designation of a partnership representative for a partnership
taxable year under this section remains in effect until the date on
which the designation of the partnership representative is terminated by
valid resignation (as described in paragraph (d) of this section), valid
revocation (as described in paragraph (e) of this section), or a
determination by the Internal Revenue Service (IRS) that the designation
is not in effect (as described in paragraph (f) of this section). A
designation of a partnership representative for a partnership taxable
year under paragraphs (e) or (f) of this section supersedes all prior
designations of a partnership representative for that year. If required
by forms, instructions, and other guidance prescribed by the IRS, a
partnership representative must update the partnership representative's
contact information when such information changes. Only a person
designated as a partnership representative in accordance with this
section will be recognized as the partnership representative under
section 6223. A power of attorney (including a Form 2848, Power of
Attorney) may not be used to designate a partnership representative. See
Sec. 301.6223-2(a), (b), and (c) with regard to the binding effect of
actions taken by the partnership representative. See Sec. 301.6223-2(d)
with regard to the sole authority of the partnership representative to
act on behalf of the partnership. See paragraph (f) of this section for
rules regarding designation of a partnership representative by the IRS.
(b) Eligibility to serve as a partnership representative--(1) In
general. Any person (as defined in section 7701(a)(1)) that meets the
requirements of paragraphs (b)(2) and (3) of this section, as
applicable, is eligible to serve as a
[[Page 223]]
partnership representative, including a wholly owned entity disregarded
as separate from its owner for federal tax purposes. A person designated
under this section as partnership representative is deemed to be
eligible to serve as the partnership representative unless and until the
IRS determines that the person is ineligible. A partnership can
designate itself as its own partnership representative provided it meets
the requirements of paragraphs (b)(2) and (3) of this section.
(2) Substantial presence in the United States. A person must have
substantial presence in the United States to be the partnership
representative. A person has substantial presence in the United States
for the purposes of this section if--
(i) The person makes themselves available to meet in person with the
IRS in the United States at a reasonable time and place as determined by
the IRS in accordance with Sec. 301.7605-1; and
(ii) The person has a United States taxpayer identification number,
a street address that is in the United States and a telephone number
with a United States area code.
(3) Eligibility of an entity to be a partnership representative--(i)
In general. A person who is not an individual may be a partnership
representative only if an individual who meets the requirements of
paragraph (b)(2) of this section is appointed by the partnership as the
sole individual through whom the partnership representative will act for
all purposes under subchapter C of chapter 63. A partnership
representative meeting the requirements of this paragraph (b)(3) is an
entity partnership representative, and the individual through whom such
entity partnership representative acts is the designated individual.
Designated individual status automatically terminates on the date that
the designation of the entity partnership representative for which the
designated individual was appointed is no longer in effect in accordance
with paragraph (d), (e), or (f) of this section.
(ii) Appointment of a designated individual. A designated individual
must be appointed by the partnership at the time of the designation of
the entity partnership representative in the manner prescribed by the
IRS in forms, instructions, and other guidance. Accordingly, if the
entity partnership representative is designated on the partnership
return for the taxable year in accordance with paragraph (c)(2) of this
section, the designated individual must be appointed by the partnership
at that time. Similarly, if the entity partnership representative is
designated under paragraph (e) of this section (regarding revocation and
subsequent designation after revocation of a partnership
representative), the designated individual must be appointed at that
time. If the partnership fails to appoint a designated individual at the
time and in the manner set forth in this paragraph (b)(3)(ii), the IRS
may determine that the entity partnership representative designation is
not in effect under paragraph (f) of this section.
(4) Examples. The following examples illustrate the rules of this
paragraph (b).
Example 1. Partnership designates PR as its partnership
representative for its 2018 tax year on its timely filed 2018
partnership return. The IRS initiates an administrative proceeding with
respect to Partnership's 2018 tax year. PR has a United States taxpayer
identification number, a United States street address, and a phone
number with a United States area code. The IRS contacts PR and requests
an in-person meeting with respect to the administrative proceeding. PR
works with the IRS and agrees to meet. PR has substantial presence in
the United States because she meets all the requirements under paragraph
(b)(2) of this section.
Example 2. The facts are the same as in Example 1 of this paragraph
(b)(4), except that PR is an entity and Partnership appointed DI, a
designated individual to act on behalf of PR for its 2018 tax year on
its timely filed 2018 partnership return. DI has a United States
taxpayer identification number and a phone number with a United States
area code. However, the address provided for DI is not a United States
address. Accordingly, PR is not an eligible partnership representative
because PR is an entity and DI does not satisfy the requirements of
paragraph (b)(3)(i) of this section. Although DI does not have
substantial presence in the United States under paragraph (b)(2) of this
section and therefore PR is not an eligible partnership representative,
until there is a resignation or revocation under paragraph (d) or (e) of
this section or until the IRS determines the partnership representative
designation is no longer in effect under paragraph (f) of this section,
the
[[Page 224]]
designation of PR as the partnership representative remains in effect in
accordance with paragraph (a) of this section, and Partnership and all
its partners are bound by the actions of PR as the partnership
representative.
Example 3. The facts are the same as in Example 1 of this paragraph
(b)(4), except PR works in a foreign country and spends the majority of
her time there. Unless PR otherwise fails to meet one of the
requirements under paragraph (b)(2) of this section, PR has substantial
presence in the United States. However, even if PR fails to meet one of
the requirements under paragraph (b)(2) of this section, until there is
a resignation or revocation under paragraph (d) or (e) of this section
or until the IRS determines the partnership representative designation
is no longer in effect under paragraph (f) of this section, the
designation of PR as the partnership representative remains in effect in
accordance with paragraph (a) of this section, and Partnership and all
its partners are bound by the actions of PR as the partnership
representative.
(c) Designation of partnership representative by the partnership--
(1) In general. The partnership must designate a partnership
representative separately for each taxable year. The designation of a
partnership representative for one taxable year is effective only for
the taxable year for which it is made.
(2) Designation. Except in the case of a designation of a
partnership representative (and the appointment of the designated
individual, if applicable) after an event described in paragraph (d) of
this section (regarding resignation), paragraph (e) of this section
(regarding revocation by the partnership), or paragraph (f) of this
section (regarding designation made by the IRS), or except as prescribed
in forms, instructions, and other guidance, designation of a partnership
representative (and the appointment of the designated individual, if
applicable) must be made on the partnership return for the partnership
taxable year to which the designation relates and must include all of
the information required by forms, instructions, and other guidance,
including information about the designated individual if paragraph
(b)(3) of this section applies. The designation of the partnership
representative (and the appointment of the designated individual, if
applicable) is effective on the date that the partnership return is
filed.
(3) Example. The following example illustrates the rules of this
paragraph (c).
Example. Partnership properly designates PR1 as its partnership
representative for taxable year 2018 on its 2018 partnership return.
Partnership designates PR2 as its partnership representative for taxable
year 2021 on its 2021 partnership return. In 2022, the IRS mails
Partnership a notice of administrative proceeding under section
6231(a)(1) with respect to Partnership's 2018 taxable year. PR1 is the
partnership representative for the 2018 partnership taxable year,
notwithstanding the designation of PR2 as partnership representative for
the 2021 partnership taxable year.
(d) Resignations--(1) In general. A partnership representative or
designated individual may resign as partnership representative or
designated individual, as applicable, for a partnership taxable year for
any reason by notifying the IRS in writing of the resignation in
accordance with forms, instructions, and other guidance prescribed by
the IRS. A resigning partnership representative may not designate a
successor partnership representative. A resigning designated individual
may not designate a successor designated individual or partnership
representative. No later than 30 days after the IRS receives a written
notification of resignation, the IRS will send written confirmation of
receipt of the written notification to the partnership and the resigning
partnership representative (to the attention of the designated
individual if appropriate). A failure by the IRS to send any
notification under this paragraph (d) does not invalidate a valid
resignation made pursuant to this paragraph (d). A failure by the
partnership representative (or designated individual, if the designated
individual is the person resigning) to satisfy the requirements of this
paragraph (d) is treated as if there were no resignation, and the
partnership representative designation (and designated individual
appointment, if applicable) remains in effect until the designation (or
appointment) is terminated by valid resignation (as described in this
paragraph (d)), valid revocation by the partnership (as described in
paragraph (e) of this section), or a determination by the IRS that the
designation is not in effect (as described in
[[Page 225]]
paragraph (f) of this section). See Sec. 301.6223-2 for binding nature
of actions taken by the partnership representative or designated
individual on behalf of a partnership representative, if applicable,
prior to resignation.
(2) Time for resignation. A partnership representative or designated
individual may submit the written notification of resignation described
in paragraph (d)(1) of this section to the IRS only after the IRS issues
a notice of administrative proceeding (NAP) under section 6231(a)(1) for
the partnership taxable year for which the partnership representative
designation is in effect or at such other time as prescribed by the IRS
in forms, instructions, or other guidance. If the IRS withdraws the NAP
pursuant to Sec. 301.6231-1(f), any valid resignation by the
partnership representative or designated individual under this paragraph
(d) prior to the withdrawal of the NAP remains in effect.
(3) Effective date of resignation. A valid resignation is
immediately effective upon the IRS's receipt of the written notification
described in paragraph (d)(1) of this section. As of the effective date
of the resignation--
(i) The resigning partnership representative (and designated
individual, if applicable) may not take any action on behalf of the
partnership with respect to the partnership taxable year affected by the
resignation;
(ii) The partnership representative designation is no longer in
effect with respect to the partnership taxable year affected by the
resignation;
(iii) In the case of a resigning entity partnership representative,
the appointment of the designated individual is no longer in effect with
respect to the partnership taxable year affected by the resignation; and
(iv) In the case of a resigning designated individual, the
designation of the entity partnership representative is no longer in
effect with respect to the partnership taxable year affected by the
resignation.
(e) Revocations--(1) In general. A partnership may revoke a
designation of a partnership representative or appointment of a
designated individual for a partnership taxable year for any reason by
notifying the IRS in writing of the revocation in accordance with forms,
instructions, and other guidance prescribed by the IRS. The partnership
may make such revocation regardless of when and how the designation or
appointment was made, except as provided in paragraph (e)(6) of this
section (regarding designation by the IRS). The revocation must include
the designation of a successor partnership representative (and the
appointment of a designated individual, if applicable). In the case of a
revocation of only the designated individual appointment, the
partnership must designate a successor designated individual. No later
than 30 days after the IRS receives a written notification of revocation
submitted at the time described in paragraph (e)(2)(i) of this section,
the IRS will send written confirmation of receipt of the written
notification to the partnership, the revoked partnership representative
or, in the case of a revocation of only the appointment of a designated
individual, to the revoked designated individual, and to the newly
designated partnership representative. In the case of a revocation of an
entity partnership representative, the notification will be sent to the
entity partnership representative, to the attention of the designated
individual. A failure by the IRS to send any notification under this
paragraph (e) does not invalidate a valid revocation made pursuant to
this paragraph (e). A failure by the partnership to satisfy the
requirements of this paragraph (e), including failure to designate a
successor, is treated as if no revocation has occurred and the
partnership representative designation (and designated individual
appointment, if applicable) remains in effect until the designation (or
appointment) is terminated either by valid resignation (as described in
paragraph (d) of this section), valid revocation by the partnership (as
described in this paragraph (e)), or determination by the IRS that the
designation is not in effect (as described in paragraph (f) of this
section). See Sec. 301.6223-2 for binding nature of actions taken by
the partnership representative or designated individual on behalf of a
partnership representative, if applicable, prior to revocation.
[[Page 226]]
(2) Time for revocation--(i) Revocation during an administrative
proceeding. Except as provided in paragraph (e)(2)(ii) of this section
or in forms, instructions, or other guidance prescribed by the IRS, a
partnership may revoke a designation of a partnership representative or
appointment of a designated individual only after the IRS issues a
notice of selection for examination or a NAP under section 6231(a)(1)
for the partnership taxable year for which the designation or
appointment is in effect. If the IRS withdraws the NAP pursuant to Sec.
301.6231-1(f), any valid revocation of a partnership representative
designation or designated individual appointment under this paragraph
(e) prior to the withdrawal of the NAP remains in effect.
(ii) Revocation with an AAR. The partnership may revoke a
designation of a partnership representative or appointment of a
designated individual for the taxable year prior to receiving a notice
of selection for examination or a NAP by filing a valid administrative
adjustment request (AAR) in accordance with section 6227 for a
partnership taxable year. A partnership may not use the form prescribed
by the IRS for filing an AAR solely for the purpose of revoking a
designation of a partnership representative or appointment of a
designated individual. See Sec. 301.6227-1 for the rules regarding the
time and manner of filing an AAR.
(3) Effective date of revocation. Except as described in paragraph
(e)(6)(ii) of this section (regarding the effective date of a revocation
of a partnership representative designated by the IRS under paragraph
(f)(5) of this section), a valid revocation is immediately effective
upon the IRS's receipt of the written notification described in
paragraph (e)(1) of this section. A revocation of a partnership
representative designation and a designation of a new partnership
representative (and appointment of a new designated individual, if
applicable) is effective on the date the partnership files a valid AAR.
Similarly, a revocation of a designated individual appointment and
appointment of a new designated individual is effective on the date the
partnership files a valid AAR. As of the effective date of the
revocation--
(i) The revoked partnership representative (and designated
individual, if applicable) may not take any action on behalf of the
partnership with respect to the partnership taxable year affected by the
revocation;
(ii) The designation of the revoked partnership representative is no
longer in effect, and the successor partnership representative
designation (and designated individual appointment, if applicable) is in
effect with respect to the partnership taxable year affected by the
revocation;
(iii) In the case of a revoked entity partnership representative,
the appointment of the designated individual is no longer in effect with
respect to the partnership taxable year affected by the revocation; and
(iv) In the case of a revoked designated individual where the
designation of the entity partnership representative has not been
revoked, the revoked designated individual may not take any action on
behalf of the partnership with respect to the partnership taxable year
affected by the revocation, the appointment of the revoked designated
individual is no longer in effect, and the appointment of the successor
designated individual is in effect.
(4) Partners who may sign revocation. A revocation under this
paragraph (e) must be signed by a person who was a partner at any time
during the partnership taxable year to which the revocation relates or
as provided in forms, instructions, and other guidance prescribed by the
IRS.
(5) Form of the revocation. The written notification of revocation
described in paragraph (e)(1) of this section must include the items
described in this paragraph (e)(5). A notification of revocation
described in paragraph (e)(1) of this section that does not include each
of the following items is not a valid revocation:
(i) A certification under penalties of perjury that the person
signing the notification is a partner described in paragraph (e)(4) of
this section authorized by the partnership to revoke the designation of
the partnership representative (or appointment of the designated
individual, if applicable).
[[Page 227]]
(ii) A statement that the person signing the notification is
revoking the designation of the partnership representative (or
appointment of the designated individual, if applicable);
(iii) A designation of a successor partnership representative (and
appointment of a designated individual, if applicable) in accordance
with this section and forms, instructions, and other guidance prescribed
by the IRS; and
(iv) In the case of a revocation of an appointment of a designated
individual, appointment of a successor designated individual in
accordance with this section and forms, instructions, and other guidance
prescribed by the IRS.
(6) Partnership representative designated by the IRS--(i) In
general. If a partnership representative is designated (and a designated
individual is appointed, if applicable) by the IRS pursuant to paragraph
(f)(5) of this section, the partnership may only revoke that designation
(or the appointment of the designated individual, if applicable) with
the permission of the IRS, which the IRS will not unreasonably withhold.
(ii) Effective date of revocation. The effective date of any
revocation submitted in accordance with paragraph (e)(6)(i) of this
section is the date on which the IRS sends notification that the
revocation is valid.
(7) Multiple revocations--(i) In general. The IRS may determine that
a designation is not in effect under paragraph (f) of this section if:
(A) The IRS receives a revocation of a designation of a partnership
representative or appointment of a designated individual, and
(B) Within the 90-day period prior to the date the revocation
described in paragraph (e)(7)(i)(A) of this section was received, the
IRS received another revocation for the same partnership taxable year.
(ii) Time limitation. The IRS may not determine that a designation
is not in effect in accordance with paragraph (e)(7)(i) of this section
later than 90 days after the IRS's receipt of the revocation described
in paragraph (e)(7)(i)(A) of this section.
(8) Examples. The following examples illustrate the rules of this
paragraph (e).
Example 1. Partnership properly designates PR, an individual, as
partnership representative for its 2018 taxable year on its timely filed
2018 partnership return. In 2020, Partnership mails written notification
to the IRS to revoke designation of PR as its partnership representative
for Partnership's 2018 taxable year. The revocation is not made in
connection with an AAR for Partnership's 2018 taxable year, and the IRS
has not mailed Partnership a notice of selection for examination or a
NAP under section 6231(a)(1) with respect to Partnership's 2018 taxable
year. Because the revocation was not made when permitted under paragraph
(e)(2) of this section, the revocation is not effective and PR remains
the partnership representative for Partnership's 2018 taxable year
unless and until PR's status as partnership representative is properly
revoked under paragraph (e) of this section or terminated in accordance
with paragraph (d) (regarding resignation) or (f) (regarding IRS
designation) of this section.
Example 2. During an administrative proceeding with respect to
Partnership's 2018 taxable year, Partnership provides the IRS with
written notification to revoke its designation of PR, an individual, as
its partnership representative for the 2018 taxable year. The written
notification does not include a designation of a new partnership
representative for Partnership's 2018 taxable year. Because the
revocation does not include a designation of a new partnership
representative as required under paragraph (e)(1) of this section, the
revocation is not effective and PR remains the partnership
representative for Partnership's 2018 taxable year unless and until PR's
status as partnership representative is properly revoked under paragraph
(e) of this section or terminated in accordance with paragraph (d)
(regarding resignation) or (f) (regarding IRS designation) of this
section.
(f) Designation of the partnership representative by the IRS--(1) In
general. If the IRS determines that a designation of a partnership
representative is not in effect for a partnership taxable year in
accordance with paragraph (f)(2) of this section, the IRS will notify
the partnership that a partnership representative designation is not in
effect. The IRS will also notify the most recent partnership
representative for the partnership taxable year, except as described in
paragraph (f)(2)(iii) of this section. In the case of an entity
partnership representative, the notification
[[Page 228]]
will be sent to the entity partnership representative, to the attention
of the designated individual. The determination that a designation is
not in effect is effective on the date the IRS mails the notification.
Except as described in paragraph (f)(4) of this section, the partnership
may designate, in accordance with paragraph (f)(3) of this section, a
successor partnership representative (and designated individual, if
applicable) eligible under paragraph (b) of this section within 30 days
of the date the IRS mails the notification. In the case of a resignation
of a partnership representative, this notification may include the
written confirmation of receipt described in paragraph (d)(1) of this
section. See paragraph (f)(2)(iv) of this section. If the partnership
does not designate a successor within 30 days from the date of IRS
notification, the IRS will designate a partnership representative in
accordance with paragraph (f)(5) of this section. A partnership
representative designation made in accordance with paragraphs (c), (e),
or (f) of this section remains in effect until the IRS determines the
designation is not in effect. See Sec. 301.6223-2 for binding nature of
actions taken by the partnership representative or designated individual
on behalf of a partnership representative, if applicable, prior to a
determination by the IRS that the designation is not in effect.
(2) IRS determination that partnership representative designation
not in effect. The IRS may, but is not required to, determine that a
partnership representative designation is not in effect. The IRS is not
obligated to search for or otherwise seek out information related to the
circumstances in which the IRS may determine a partnership
representative designation is not in effect, and the fact that the IRS
is aware of any such circumstances does not obligate the IRS to
determine that a partnership representative designation is not in
effect. The IRS may determine that the partnership representative
designation is not in effect if the IRS determines that--
(i) The partnership representative or the designated individual does
not have substantial presence as described in paragraph (b)(2) of this
section;
(ii) The partnership failed to appoint a designated individual as
described in paragraph (b)(3) of this section, as applicable;
(iii) The partnership failed to make a valid designation as
described in paragraph (c) of this section;
(iv) The partnership representative or designated individual resigns
as described in paragraph (d) of this section;
(v) The partnership has made multiple revocations as described in
paragraph (e)(7) of this section; or
(vi) The partnership representative designation is no longer in
effect as described in other published guidance.
(3) Designation by the partnership during the 30-day period.
Designation of a partnership representative (and appointment of a
designated individual, if applicable) by the partnership during the 30-
day period described in paragraph (f)(1) of this section must be made in
accordance with forms, instructions, and other guidance prescribed by
the IRS. If the partnership fails to provide all information required by
forms, instructions, and other guidance, the partnership will have
failed to make a designation (and appointment, if applicable). If the
partnership does not fully comply with the requirement of this paragraph
(f)(3) within the 30-day period described in paragraph (f)(1) of this
section, the IRS will designate a partnership representative (and
appoint a designated individual, if applicable).
(4) No opportunity for designation by the partnership in the case of
multiple revocations. In the event that the IRS determines a partnership
representative designation is not in effect due to multiple revocations
as described in paragraph (e)(7) of this section, the partnership will
not be given an opportunity to designate the successor partnership
representative prior to the designation by the IRS as described in
paragraph (f)(5) of this section. However, see paragraph (e)(6) of this
section regarding revocation of a partnership representative designated
by the IRS.
(5) Designation by the IRS--(i) In general. The IRS designates a
partnership representative under this paragraph (f)(5) by notifying the
partnership of
[[Page 229]]
the name, address, and telephone number of the new partnership
representative. If the IRS designates an entity partnership
representative, the IRS will also appoint a designated individual to act
on behalf of the entity partnership representative. The designation of a
partnership representative (and appointment of a designated individual,
if applicable) by the IRS is effective on the date on which the IRS
mails the notification of the designation (and appointment, if
applicable) to the partnership. The IRS will also mail a copy of the
notification of the designation (and appointment, if applicable) to the
new partnership representative (through the new designated individual,
if applicable) that has been designated (and appointed, if applicable)
by the IRS under this section.
(ii) Factors considered when partnership representative designated
by the IRS. The IRS will ordinarily consider one or more of the factors
set forth in this paragraph (f)(5)(ii) when determining whom to
designate as partnership representative. No single factor is
determinative, and other than as described in paragraph (f)(5)(iii) of
this section, the IRS may exercise its discretion to designate a person
as partnership representative even if none of the factors are applicable
to such person. The factors are not requirements for eligibility to be
designated by the IRS as partnership representative; the only
requirements for eligibility are described under paragraph (b) of this
section. The IRS is not obligated to search for or otherwise seek out
information related to the factors, and the fact that the IRS is aware
of any information related to such factors does not obligate the IRS to
designate a particular person. Although the IRS may designate any person
to be the partnership representative, a principal consideration in
determining whom to designate as a partnership representative is whether
there is a reviewed year partner that is eligible to serve as the
partnership representative in accordance with paragraph (b)(1) of this
section or whether there is a partner at the time the partnership
representative designation is made that is eligible to serve as the
partnership representative. Other factors that will ordinarily be
considered by the IRS in determining whom to designate as a partnership
representative include, but are not limited to:
(A) The views of the partners having a majority interest in the
partnership regarding the designation;
(B) The general knowledge of the person in tax matters and the
administrative operation of the partnership;
(C) The person's access to the books and records of the partnership;
(D) Whether the person is a United States person (within the meaning
of section 7701(a)(30)); and
(E) The profits interest of the partner in the case of a partner.
(iii) IRS employees. The IRS will not designate a current employee,
agent, or contractor of the IRS as the partnership representative unless
that employee, agent, or contractor was a reviewed year partner or is
currently a partner in the partnership.
(6) Examples. The following examples illustrate the rules of this
paragraph (f).
Example 1. The IRS determines that Partnership has designated a
partnership representative that does not have substantial presence in
the United States as defined in paragraph (b)(2) of this section. The
IRS may, but is not required to, determine that the designation is not
in effect and designate a new partnership representative after following
the procedures in this paragraph (f).
Example 2. Partnership designates as its partnership representative
a corporation but fails to appoint a designated individual to act on
behalf of the corporation as required under paragraph (b)(3) of this
section. The IRS may, but is not required to, determine that the
partnership representative designation is not in effect and may
designate a new partnership representative after following the
procedures in this paragraph (f).
Example 3. The partnership representative resigns pursuant to
paragraph (d) of this section. The IRS mails Partnership a notification
informing Partnership that no designation is in effect and that the IRS
plans to designate a new partnership representative. Partnership fails
to respond within 30 days of the date the IRS mails the notification.
The IRS must designate a partnership representative pursuant to this
paragraph (f).
Example 4. Partnership designated on its partnership return a
partnership representative, PR1. After Partnership received a NAP,
Partnership submits to the IRS the form described in paragraph (e)(4) of
this section requesting the revocation of PR1's designation
[[Page 230]]
as partnership representative and designating PR2 as the partnership
representative. Sixty days later, Partnership signs and submits a form
described in paragraph (e)(4) of this section requesting the revocation
of PR2's designation as partnership representative and designating PR3
as the partnership representative. The IRS accepts the revocation of PR2
and designation of PR3 as valid and effective upon receipt pursuant to
paragraph (e)(3) of this section. However, because PR2's revocation was
within 90 days of PR1's revocation, the IRS may determine within 90 days
of IRS's receipt of PR2's revocation, pursuant to paragraphs (e)(7) and
(f)(2) of this section, that there is no designation in effect due to
multiple revocations. The IRS may then designate a new partnership
representative pursuant to this paragraph (f) without allowing
Partnership an opportunity to designate a partnership representative
within the 30-day period described in paragraph (f)(1) of this section.
(g) Reliance on forms required by this section. The IRS may rely on
any form or other document filed or submitted under this section as
evidence of the designation, resignation, or revocation on such form and
as evidence of the date on which such form was filed or submitted
relating to a designation, resignation, or revocation.
(h) Applicability date--(1) In general. Except as provided in
paragraph (h)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable years beginning after November 2, 2015 and
before January 1, 2018 for which a valid election under Sec. 301.9100-
22 is in effect.
[T.D. 9839, 83 FR 39344, Aug. 9, 2018, as amended by T.D. 9839, 84 FR
46440, Sept. 4, 2019; T.D. 9969, 87 FR 75490, Dec. 9, 2022]
Sec. 301.6223-2 Binding effect of actions of the partnership
and partnership representative.
(a) Binding nature of actions by partnership and final decision in a
partnership proceeding. The actions of the partnership and the
partnership representative taken under subchapter C of chapter 63 of the
Internal Revenue Code (subchapter C of chapter 63) and any final
decision in a proceeding brought under subchapter C of chapter 63 with
respect to the partnership bind the partnership, all partners of the
partnership (including partnership-partners as defined in Sec.
301.6241-1(a)(7) that have a valid election under section 6221(b) in
effect for any taxable year that ends with or within the taxable year of
the partnership), and any other person whose tax liability is determined
in whole or in part by taking into account directly or indirectly
adjustments determined under subchapter C of chapter 63 (for example,
indirect partners as defined in Sec. 301.6241-1(a)(4)). For instance, a
settlement agreement entered into by the partnership representative on
behalf of the partnership, a notice of final partnership adjustment
(FPA) with respect to the partnership that is not contested by the
partnership, or the final decision of a court with respect to the
partnership if the FPA is contested, binds all persons described in the
preceding sentence.
(b) Actions by the partnership representative before termination of
designation. A termination of the designation of a partnership
representative because of a resignation under Sec. 301.6223-1(d) or a
revocation under Sec. 301.6223-1(e), or as a result of a determination
by the Internal Revenue Service (IRS) under Sec. 301.6223-1(f) that the
designation is not in effect, does not affect the validity of any action
taken by that partnership representative during the period prior to such
termination. For example, if a partnership representative properly
designated under Sec. 301.6223-1 consented to an extension of the
period of limitations on making adjustments under section 6235(b) in
accordance with Sec. 301.6235-1(d), that extension remains valid even
after termination of the designation of that partnership representative.
(c) Actions by the partnership representative upon withdrawal of
notice of administrative proceeding. If the IRS issues a notice of
administrative proceeding (NAP) under section 6231(a)(1) and
subsequently withdraws such NAP pursuant to Sec. 301.6231-1(f), any
actions taken by a partnership representative (or successor partnership
representative after a change to the partnership representative that
occurred after the issuance of the NAP and before the NAP was withdrawn)
are binding as described in paragraph (a) of this section
[[Page 231]]
even though the NAP has been withdrawn and has no effect for purposes of
subchapter C of chapter 63.
(d) Partnership representative has the sole authority to act on
behalf of the partnership--(1) In general. The partnership
representative has the sole authority to act on behalf of the
partnership for all purposes under subchapter C of chapter 63. In the
case of an entity partnership representative, the designated individual
has the sole authority to act on behalf of the partnership
representative and the partnership. Except for a partner that is the
partnership representative or the designated individual, no partner, or
any other person, may participate in an administrative proceeding
without the permission of the IRS. The failure of the partnership
representative to follow any state law, partnership agreement, or other
document or agreement has no effect on the authority of the partnership
representative or the designated individual as described in section
6223, Sec. 301.6223-1, and this section. Nothing in this section
affects, or otherwise restricts, the ability of a partnership
representative to authorize a person to represent the partnership
representative, in the partnership representative's capacity as the
partnership representative, before the IRS under a valid power of
attorney in a proceeding involving the partnership under subchapter C of
chapter 63.
(2) Designation provides authority to bind the partnership--(i)
Partnership representative. A partnership representative, by virtue of
being designated under section 6223 and Sec. 301.6223-1, has the
authority to bind the partnership for all purposes under subchapter C of
chapter 63.
(ii) Designated individual. A partnership that is required to
appoint a designated individual described under Sec. 301.6223-
1(b)(3)(i) acts through such designated individual. By virtue of being
appointed as part of the designation of the partnership representative
under Sec. 301.6223-1, the designated individual has the sole authority
to bind the partnership representative and therefore the partnership,
its partners, and any other person as described in paragraph (a) of this
section for all purposes under subchapter C of chapter 63 so long as the
partnership representative designation and designated individual
appointment are in effect.
(e) Examples. The following examples illustrate the rules of this
section.
Example 1. Partnership designates a partnership representative, PR,
on its timely filed partnership return for 2020. PR is a partner in
Partnership. The partnership agreement for Partnership includes a clause
that requires PR to consult with an identified management group of
partners in Partnership before taking any action with respect to an
administrative proceeding before the IRS. The IRS initiates an
administrative proceeding with respect to Partnership's 2020 taxable
year. During the course of the administrative proceeding, PR consents to
an extension of the period of limitations on making adjustments under
section 6235(b) allowing additional time for the IRS to mail an FPA. PR
failed to consult with the management group of partners prior to
agreeing to this extension of time. PR's consent provided to the IRS to
extend the time period is valid and binding on Partnership because,
pursuant to section 6223, PR, as the designated partnership
representative, has authority to bind Partnership and all its partners.
Example 2. Partnership designates a partnership representative, PR,
on its timely filed partnership return for 2020. PR is not a partner in
Partnership. During an administrative proceeding with respect to
Partnership's 2020 taxable year, PR agrees to certain partnership
adjustments and within 45 days after the issuance of the FPA elects the
alternative to payment of the imputed underpayment under section 6226.
Certain partners in Partnership challenge the actions taken by PR during
the administrative proceeding and the validity of the section 6226
statements furnished to those partners, alleging that PR was never
authorized to act on behalf of Partnership under state law or the
partnership agreement. Because PR was designated by Partnership as the
partnership representative under section 6223 and this section, PR was
authorized to act on behalf of Partnership for all purposes under
subchapter C of chapter 63, and the IRS may rely on that designation as
conclusive evidence of PR's authority to act on behalf of Partnership.
Example 3. Partnership designates an entity partnership
representative, EPR, and appoints an individual, A, as the designated
individual on its timely filed partnership return for 2020. EPR is a C
corporation. A is unaffiliated with EPR and is not an officer, director,
or employee of EPR. During an administrative proceeding with respect to
Partnership's 2020 taxable year, A, acting for EPR, agrees to an
extension of the period of
[[Page 232]]
limitations on making adjustments under section 6235(b) from March 15,
2024 to December 31, 2024. The IRS mails an FPA with respect to the 2020
partnership taxable year on December 13, 2024, before expiration of the
extended period of limitations on making adjustments as agreed to by
EPR, but after the expiration of the unextended period of limitations on
making adjustments. Partnership challenges the FPA as untimely, alleging
that A was not authorized under state law to act on behalf of EPR and
thus the extension agreement was invalid. Because A was appointed by the
partnership as the designated individual to act on behalf of EPR, A was
authorized to act on behalf of EPR for all purposes under subchapter C
of chapter 63, and the IRS may rely on that appointment as conclusive
evidence of A's authority to act on behalf of EPR and Partnership.
Example 4. The partnership representative, PR, consents to an
extension of the period of limitations on making adjustments under
section 6235(b) and Sec. 301.6235-1(d) for Partnership for the
partnership taxable year. After signing the consent, PR resigns as
partnership representative in accordance with Sec. 301.6223-1(d). The
consent to extend the period of limitations on making adjustments under
section 6235(b) remains valid even after PR resigns.
Example 5. Partnership designates a partnership representative who
does not make themselves available to meet with the IRS in person in the
United States as required by Sec. 301.6223-1(b). Although the
partnership representative does not have substantial presence in the
United States within the meaning of Sec. 301.6223-1(b)(2), until a
termination occurs under Sec. 301.6223-1(d) or (e) or the IRS
determines the partnership representative designation is no longer in
effect under Sec. 301.6223-1(f), the partnership representative
designation remains in effect, and Partnership and all its partners are
bound by the actions of the partnership representative.
Example 6. Partnership designates PR1 as the partnership
representative on its timely filed partnership return for 2020. On
September 1, 2022, the IRS sends a NAP for the 2020 taxable year to
Partnership and PR, and Partnership revokes PR1's designation and
designates PR2 as the partnership representative in accordance with
Sec. 301.6223-1(e). On November 1, 2023, PR2 consents to an extension
of the period of limitations on making adjustments under section 6235(b)
and Sec. 301.6235(d) for Partnership's 2020 taxable year. On December
1, 2023, the IRS then withdraws the NAP. PR2 remains the partnership
representative, and the consent to extend the period of limitations on
making adjustments under section 6235(b) remains valid even after the
NAP is withdrawn.
(f) Applicability date--(1) In general. Except as provided in
paragraph (f)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable years beginning after November 2, 2015 and
before January 1, 2018 for which a valid election under Sec. 301.9100-
22 is in effect.
[T.D. 9839, 83 FR 39349, Aug. 9, 2018]
Sec. 301.6223(a)-1 Notice sent to tax matters partner.
(a) In general. For purposes of subchapter C of chapter 63 of the
Internal Revenue Code, a notice is treated as mailed to the tax matters
partner on the earlier of--
(1) The date on which the notice is mailed to ``THE TAX MATTERS
PARTNER'' at the address of the partnership (as provided on the
partnership return, except as updated under Sec. 301.6223(c)-1); or
(2) The date on which the notice is mailed to the person who is the
tax matters partner at the address of that person (as provided on the
partner's return, except as updated under Sec. 301.6223(c)-1) or the
partnership. See Sec. 301.6223(c)-1 for rules relating to the
information used by the Internal Revenue Service in providing notices,
etc.
(b) Example. The provisions of this section may be illustrated by
the following example:
Example. Partnership P designates B as its tax matters partner in
accordance with Sec. 301.6231(a)(7)-1(b). On December 1 a notice of the
beginning of an administrative proceeding is mailed to ``THE TAX MATTERS
PARTNER'' at the address of P. On January 10, a copy of the notice is
mailed to B at B's address. December 1 is treated as the date that the
notice was mailed to the tax matters partner.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6223(a)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50547, Oct. 4, 2001]
Sec. 301.6223(a)-2 Withdrawal of notice of the beginning of
an administrative proceeding.
(a) In general. If the Internal Revenue Service, within 45 days
after the day on
[[Page 233]]
which the notice specified in section 6223(a)(1) is mailed to the tax
matters partner, decides not to propose any adjustments to the
partnership return as filed, the Internal Revenue Service may withdraw
the notice specified in section 6223(a)(1) by mailing a letter to that
effect to the tax matters partner within that 45-day period. Even if the
Internal Revenue Service does not withdraw the notice specified in
section 6223(a)(1), the Internal Revenue Service is not required to
issue a notice of final partnership administrative adjustment. If the
Internal Revenue Service withdraws the notice specified in section
6223(a)(1), neither the Internal Revenue Service nor the tax matters
partner is required to furnish any notice with respect to that
proceeding to any other partner. Except as provided in paragraph (b) of
this section, a notice specified in section 6223(a)(1) which has been
withdrawn shall be treated for purposes of subchapter C of chapter 63 of
the Internal Revenue Code as if that notice had never been mailed to the
tax matters partner.
(b) Internal Revenue Service may not reissue notice except under
certain circumstances. If the notice specified in section 6223(a)(1) was
mailed to the tax matters partner with respect to a partnership taxable
year and that notice was later withdrawn as provided in paragraph (a) of
this section, the Internal Revenue Service shall not mail a second
notice specified in section 6223(a)(1) with respect to that taxable year
unless--
(1) There is evidence of fraud, malfeasance, collusion, concealment,
or misrepresentation of a material fact;
(2) The prior proceeding involved the misapplication or erroneous
interpretation of an established Internal Revenue Service position
existing at the time of the previous examination, or the failure to make
an adjustment based on such a position; or
(3) Other circumstances exist which indicate that failure to reissue
the notice would be a serious administrative omission.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6223(a)-2T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50547, Oct. 4, 2001]
Sec. 301.6223(b)-1 Notice group.
(a) In general. If a group of partners having in the aggregate a 5
percent or more interest in the profits of a partnership requests and
designates one of their members to receive the notices described in
section 6223(a)(1) and (2), the member so designated shall be treated as
a partner to whom section 6223(a) applies. Thus, the designated
representative is entitled to receive any notice described in section
6223(a) that is mailed to the tax matters partner 30 days or more after
the day on which the Internal Revenue Service receives the request from
the group.
(b) Request for notice--(1) In general. The Internal Revenue Service
shall mail to the member of the notice group designated to receive such
notice any notice described in section 6223(a) that is mailed to the tax
matters partner 30 days or more after the day on which the Internal
Revenue Service receives the request for notice from the group if such
request for notice is made in accordance with the rules prescribed in
this paragraph (b).
(2) Content of request. The request for notice from a notice group
shall--
(i) Identify the partnership by name, address, and taxpayer
identification number;
(ii) Specify the taxable year or years for which the notice group is
formed;
(iii) Designate the member of the group to receive the notices;
(iv) Set out the name, address, taxpayer identification number, and
profits interest of each member of the group; and
(v) Be signed by all partners comprising the notice group.
(3) Place for filing. The request for notice from a notice group
generally must be filed with the service center where the partnership
return is filed. However, if the notice group representative knows that
the notice described in section 6223(a)(1) (beginning of an
administrative proceeding) has already been mailed to the tax matters
partner, the statement should be filed with the Internal Revenue Service
office that mailed that notice.
[[Page 234]]
(4) Copy to be sent to the tax matters partner. A copy of the
request for notice from a notice group shall be provided to the tax
matters partner by the notice group representative within 30 days after
the request is filed with the Internal Revenue Service.
(5) Years covered by request. A request for notice by a notice group
may relate only to partnership taxable years that have ended before the
request is filed. A request, however, may relate to more than one
partnership taxable year if the 5 percent or more profits interest
requirement of section 6223(b)(2) is satisfied for each year to which
the request relates.
(c) Composition of notice group--(1) In general. A notice group
shall be comprised only of persons who were partners at some time during
the partnership taxable year for which the group is formed. If a notice
group is formed for more than one taxable year, each member of the group
must have been a partner at some time during at least one of the taxable
years for which the group is formed. A notice group may include a
partner entitled to separate notice. See section 6231(d) and Sec.
301.6231(d)-1 for rules relating to determining the interest of a
partner in the profits of a partnership for a partnership taxable year
for purposes of section 6223(b). See paragraph (c)(6) of this section
for rules relating to indirect and pass-thru partners.
(2) Partner may be a member of only one group. A partner cannot be a
member of more than one notice group with respect to the same
partnership for the same partnership taxable year. See paragraph (c)(6)
of this section for rules relating to indirect and pass-thru partners.
(3) Partner may join group after formation. A partner may join a
notice group at any time after the formation of that group by filing
with the Internal Revenue Service office where the notice group filed
its request a statement that it is joining the notice group. The
statement shall identify the partner joining the notice group, the
partnership, and the members of the notice group by name, address, and
taxpayer identification number and shall be signed by the joining
partner. A copy of the statement shall be provided by the joining
partner to both the tax matters partner and the notice group
representative within 30 days after the request is filed with the
Internal Revenue Service. The partner shall become a member of the
notice group for each partnership taxable year for which the group was
formed and for which the partner was a partner at any time during such
partnership taxable year.
(4) Date on which a partner becomes a member of notice group. A
partner shall become a member of a notice group on the 30th day after
the day on which the Internal Revenue Service receives--
(i) A request for notice from a notice group that identifies that
partner as a member of that notice group; or
(ii) A statement filed in accordance with paragraph (c)(3) of this
section that states that the partner is joining the notice group.
(5) No withdrawal from notice group. A partner who has signed a
notice group request filed with the Internal Revenue Service remains a
member of that notice group until the group terminates. A partner cannot
withdraw from the notice group.
(6) Indirect and pass-thru partners--(i) Pass-thru partners and
unidentified indirect partners. A pass-thru partner may become a member
of a notice group as provided in this section. For purposes of applying
the aggregate interest requirement specified in paragraph (a) of this
section to a pass-thru partner, the partnership interest held by the
pass-thru partner shall not include any interest held through the pass-
thru partner by an indirect partner that has been identified as provided
in section 6223(c)(3) and Sec. 301.6223(c)-1 before the date on which
the pass-thru partner becomes a member of the notice group.
(ii) Indirect partners identified before the pass-thru partner joins
a notice group. An indirect partner may become a member of a notice
group with respect to a partnership taxable year only if--
(A) The indirect partner held an interest in the partnership (either
directly or through one or more pass-thru partners) at some time during
that taxable year; and
(B) The indirect partner was identified as provided in section
6223(c)(3) and Sec. 301.6223(c)-1 on or before the date
[[Page 235]]
on which the pass-thru partner became a member of a notice group.
(d) Termination of notice group. Unless the original request for
notice from the notice group or a subsequent statement filed by the
representative (in accordance with paragraphs (b)(3) and (4) of this
section) designates a successor to the designated group representative,
the group terminates if the representative dies (or, in the case of an
entity, if the entity is dissolved), resigns, or is adjudicated
incompetent.
(e) Notice group is not a 5-percent group. The forming of a notice
group under this section does not constitute the forming of a 5-percent
group for purposes of litigation. A notice group is formed solely for
the purpose of receiving notices. A 5-percent group is formed solely for
the purpose of filing a petition for judicial review or appealing a
judicial determination. See Sec. 301.6226(b)-1. Thus, a member of a
notice group may choose not to join a 5-percent group formed by other
members of the notice group.
(f) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6223(b)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50547, Oct. 4, 2001]
Sec. 301.6223(c)-1 Additional information regarding partners
furnished to the Internal Revenue Service.
(a) In general. In addition to the names, addresses, and profits
interests as shown on the partnership return, the Internal Revenue
Service will use additional information as provided in this section for
purposes of administering subchapter C of chapter 63 of the Internal
Revenue Code.
(b) Procedure for furnishing additional information--(1) In general.
Any person may furnish additional information at any time by filing a
written statement with the Internal Revenue Service. However, the
information contained in the statement will be considered for purposes
of determining whether a partner is entitled to a notice described in
section 6223(a) only if the Internal Revenue Service receives the
statement at least 30 days before the date on which the Internal Revenue
Service mails the notice to the tax matters partner. Similarly,
information contained in the statement generally will not be taken into
account for other purposes by the Internal Revenue Service until 30 days
after the statement is received.
(2) Where statement must be filed. A statement furnished under this
section generally must be filed with the service center where the
partnership return is filed. However, if the person filing the statement
knows that the notice described in section 6223(a)(1) (beginning of an
administrative proceeding) has already been mailed to the tax matters
partner, the statement should be filed with the Internal Revenue Service
office that mailed such notice.
(3) Contents of statement. The statement shall--
(i) Identify the partnership, each partner for whom information is
supplied, and the person supplying the information by name, address, and
taxpayer identification number;
(ii) Explain that the statement is furnished to correct or
supplement earlier information with respect to the partners in the
partnership;
(iii) Specify the taxable year to which the information relates;
(iv) Set out the corrected or additional information; and
(v) Be signed by the person supplying the information.
(c) No incorporation by reference to previously furnished documents.
Incorporation by reference of information contained in another document
previously furnished to the Internal Revenue Service will not be given
effect for purposes of section 6223(c) or 6229(e). For example,
reference to a return filed by a pass-thru partner which contains
identifying information with respect to the indirect partners of that
pass-thru partner is not sufficient to identify the indirect partners
unless a copy of the document referred to is attached to the statement.
Furthermore, reference to a prior general notification to the Internal
Revenue Service that a partner who would otherwise be the tax matters
partner is a debtor in a bankruptcy proceeding or has had a receiver
appointed for the partner in a receivership proceeding is not sufficient
unless
[[Page 236]]
a copy of the notification document referred to is attached to the
statement.
(d) Information supplied by a person other than the tax matters
partner. The Internal Revenue Service may require appropriate
verification in the case of information furnished by a person other than
the tax matters partner. The 30-day period referred to in paragraph
(b)(1) of this section shall not begin until that verification is
supplied.
(e) Power of attorney--(1) In general. This paragraph (e) applies to
powers of attorney with respect to proceedings under subchapter C of
chapter 63 of the Internal Revenue Code (chapter 63C) that begin on or
after January 2, 2002.
(2) Specifically for purposes of subchapter C of chapter 63 of the
Internal Revenue Code. A power of attorney specifically for purposes of
subchapter C of chapter 63 of the Internal Revenue Code shall be
furnished in accordance with paragraph (b)(2) of this section.
(3) Existing power of attorney. A power of attorney granted to
another person by a partner for other tax purposes shall not be given
effect for purposes of subchapter C of chapter 63 unless the partner
specifically requests that the power be given such effect in a statement
furnished to the Internal Revenue Service in accordance with paragraph
(b) of this section.
(f) Internal Revenue Service may use other information. In addition
to the information on the partnership return and that supplied on
statements filed under this section, the Internal Revenue Service may
use other information in its possession (for example, a change in
address reflected on a partner's return) in administering subchapter C
of chapter 63 of the Internal Revenue Code. However, the Internal
Revenue Service is not obligated to search its records for information
not expressly furnished under this section.
(g) Effective date. Except as provided in paragraph (e)(1) of this
section, this section is applicable to partnership taxable years
beginning on or after October 4, 2001. For years beginning prior to
October 4, 2001, see Sec. 301.6223(c)-1T contained in 26 CFR part 1,
revised April 1, 2001.
[T.D. 8965, 66 FR 50548, Oct. 4, 2001]
Sec. 301.6223(e)-1 Effect of Internal Revenue Service's
failure to provide notice.
(a) Notice group. Section 6223(e)(1)(B)(ii) applies with respect to
a notice group only if the request for notice described in Sec.
301.6223(b)-1 is received by the Internal Revenue Service at least 30
days before the notice is mailed to the tax matters partner.
(b) Indirect partners--(1) In general. For purposes of section
6223(e), the Internal Revenue Service's failure to provide notice to a
pass-thru partner entitled to notice under section 6223(b) is deemed a
failure to provide notice to indirect partners holding an interest in
the partnership through the pass-thru partner. However, this rule does
not apply if the indirect partner--
(i) Receives notice from the Internal Revenue Service;
(ii) Is identified as provided in section 6223(c)(3) and Sec.
301.6223(c)-1 at least 30 days before the notice is mailed to the tax
matters partner; or
(iii) Is a member of a notice group entitled to notice under
paragraph (a) of this section.
(2) Examples. The provisions of paragraph (b)(1) of this section may
be illustrated by the following examples:
Example 1. Partnership ABC has as one of its partners, A, a
partnership with three partners, X, Y, and Z. ABC does not have more
than 100 partners, and partnership A is entitled to notice under section
6223(a). In addition, Z was identified as provided in section 6223(c)(3)
and Sec. 301.6223(c)-1 on May 1, 2002. The Internal Revenue Service
mailed a notice to the tax matters partner of ABC on July 1, 2002, but
failed to provide notice to partnership A. Notwithstanding the Internal
Revenue Service's notice to the tax matters partner, the Internal
Revenue Service is deemed to have failed to provide notice to X and Y.
The Internal Revenue Service's failure to provide notice to A, however,
has no effect on Z; whether notice was provided to Z is determined
independently.
Example 2. Assume the same facts as in Example 1, except that the
Internal Revenue Service provided notice to partnership A but did not
provide separate notice to Z. Notwithstanding the Internal Revenue
Service's notice to partnership A, the Internal Revenue Service is
deemed to have failed to provide notice to Z.
Example 3. Assume the same facts as in Example 1, except that
partnership ABC has more than 100 partners and partnership A is
[[Page 237]]
entitled to notice under section 6223(b) because it had at least a 1
percent profits interest in partnership ABC. In addition, X became a
member of a notice group on June 1, 2002, and the Internal Revenue
Service mailed a notice to the designated member of that notice group.
The Internal Revenue Service also mailed a separate notice to Z. The
Internal Revenue Service's failure to provide notice to partnership A
only affects Y, who is deemed not to have been provided notice by the
Internal Revenue Service.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6223(e)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50549, Oct. 4, 2001]
Sec. 301.6223(e)-2 Elections if Internal Revenue Service
fails to provide timely notice.
(a) In general. This section applies in any case in which the
Internal Revenue Service fails to timely mail any notice described in
section 6223(a) of the Internal Revenue Code to a partner entitled to
such notice within the period specified in section 6223(d). The failure
to issue any notice within the period specified in section 6223(d) does
not invalidate the notice of the beginning of an administrative
proceeding or final partnership administrative adjustment (FPAA). An
untimely FPAA enables the recipient of the untimely notice to make the
elections described in paragraphs (b), (c), and (d) of this section. The
period within which to make the elections described in paragraphs (b),
(c), and (d) of this section commences with the mailing of an FPAA to
the partner. In the absence of an election, paragraphs (b) and (c) of
this section provide for the treatment of a partner's partnership items.
(b) Proceeding finished. If at the time the Internal Revenue Service
mails the partner an FPAA--
(1) The period within which a petition for review of the FPAA under
section 6226 may be filed has expired and no petition has been filed; or
(2) The decision of a court in an action begun by such a petition
has become final, the partner may elect in accordance with paragraph (d)
of this section to have that adjustment, that decision, or a settlement
agreement described in section 6224(c)(2) with respect to the
partnership taxable year to which the adjustment relates apply to that
partner. If the partner does not make an election in accordance with
paragraph (d) of this section, the partnership items of the partner for
the partnership taxable year to which the proceeding relates shall be
treated as having become nonpartnership items as of the day on which the
Internal Revenue Service mails the partner the FPAA.
(c) Proceeding still going on. If at the time the Internal Revenue
Service mails the partner an FPAA, paragraphs (b)(1) and (2) of this
section do not apply, the partner shall be a party to the proceeding
unless the partner elects, in accordance with paragraph (d) of this
section, to have--
(1) A settlement agreement described in section 6224(c)(2) with
respect to the partnership taxable year to which the proceeding relates
apply to the partner; or
(2) The partnership items of the partner for the partnership taxable
year to which the proceeding relates treated as having become
nonpartnership items as of the day on which the Internal Revenue Service
mails the partner the FPAA.
(d) Election--(1) In general. The election described in paragraph
(b) or (c) of this section shall be made in the manner prescribed in
this paragraph (d). The election shall apply to all partnership items
for the partnership taxable year to which the election relates.
(2) Time and manner of making election. The election shall be made
by filing a statement with the Internal Revenue Service office mailing
the FPAA within 45 days after the date on which the FPAA was mailed to
the partner making the election.
(3) Contents of statement. The statement shall--
(i) Be clearly identified as an election under section 6223(e)(2) or
(3);
(ii) Specify the election being made (that is, application of final
partnership administrative adjustment, court decision, consistent
settlement agreement, or nonpartnership item treatment);
(iii) Identify the partner making the election and the partnership
by name,
[[Page 238]]
address, and taxpayer identification number;
(iv) Specify the partnership taxable year to which the election
relates; and
(v) Be signed by the partner making the election.
(e) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6223(e)-2T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50550, Oct. 4, 2001]
Sec. 301.6223(f)-1 Duplicate copy of final partnership
administrative adjustment.
(a) In general. Section 6223(f) does not prohibit the Internal
Revenue Service from issuing a duplicate copy of the notice of final
partnership administrative adjustment (for example, in the event the
original notice is lost).
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6223(f)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50550, Oct. 4, 2001]
Sec. 301.6223(g)-1 Responsibilities of the tax matters partner.
(a) Notices described in section 6223(a)--(1) Notice of beginning of
proceeding. Except as otherwise provided in Sec. 301.6223(a)-2, the tax
matters partner shall, within 75 days after the Internal Revenue Service
mails the notice specified in section 6223(a)(1), forward a copy of that
notice to each partner not entitled to notice from the Internal Revenue
Service under section 6223. See Sec. 301.6230(e)-1 for information to
be furnished to the Internal Revenue Service.
(2) Notice of final partnership administrative adjustment. The tax
matters partner shall, within 60 days after the Internal Revenue Service
mails the notice specified in section 6223(a)(2), forward a copy of that
notice to each partner not entitled to notice from the Internal Revenue
Service under section 6223.
(3) Requirement inapplicable in certain cases. The tax matters
partner is not required to send notice to a partner if--
(i) Before the expiration of the applicable 75-day or 60-day period
the partnership items of that partner have become nonpartnership items
(for example, by settlement);
(ii) That partner is an indirect partner and has not been identified
to the tax matters partner at least 30 days before the tax matters
partner is required to send such notice;
(iii) That partner is treated as a partner solely by virtue of Sec.
301.6231(a)(2)-1;
(iv) That partner was a member of a notice group as of the date on
which the notice was mailed to the tax matters partner (see Sec.
301.6223(b)-1(c)(4) for the date on which a partner becomes a member of
a notice group);
(v) The notice has already been provided to that partner by another
person; or
(vi) The notice is withdrawn by the Internal Revenue Service under
Sec. 301.6223(a)-2.
(b) Other notices or information--(1) In general. The tax matters
partner shall furnish to the partners specified in paragraph (b)(2) of
this section information with respect to the following--
(i) Closing conference with the examining agent;
(ii) Proposed adjustments, rights of appeal, and requirements for
filing of a protest;
(iii) Time and place of any Appeals conference;
(iv) Acceptance by the Internal Revenue Service of any settlement
offer;
(v) Consent to the extension of the period of limitations with
respect to all partners;
(vi) Filing of a request for administrative adjustment (including a
request for substituted return treatment under Sec. 301.6227(c)-1) on
behalf of the partnership;
(vii) Filing by the tax matters partner or any other partner of any
petition for judicial review under sections 6226 or 6228(a);
(viii) Filing of any appeal with respect to any judicial
determination provided for in sections 6226 or 6228(a); and
(ix) Final judicial redetermination.
(2) Partners to be notified. The tax matters partner shall provide
information with respect to any action or other matter specified in
paragraph
[[Page 239]]
(b)(1) of this section to all notice group representatives and all other
partners except partners--
(i) Whose partnership items become nonpartnership items before the
expiration of the period specified in paragraph (b)(3) of this section
for furnishing that information;
(ii) Who are indirect partners and who are not identified to the tax
matters partner at least 30 days before the tax matters partner is
required to provide the information;
(iii) Who are treated as partners solely by virtue of Sec.
301.6231(a)(2)-1;
(iv) Who are members of a notice group as of the date on which the
tax matters partner takes that action or receives information with
respect to that matter (see Sec. 301.6223(b)-1(c)(4) for the date on
which a partner becomes a member of a notice group); or
(v) Who have already received information with respect to the action
or matter from any other person.
(3) Time for furnishing information. The tax matters partner shall
furnish information with respect to an action or other matter described
in paragraph (b)(1) of this section within 30 days of taking the action
or receiving information with respect to that matter.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6223(g)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50550, Oct. 4, 2001]
Sec. 301.6223(h)-1 Responsibilities of pass-thru partner.
(a) In general. The pass-thru partner shall, within 30 days of
receiving notice or any other information regarding a partnership
proceeding from the Internal Revenue Service, the tax matters partner,
or another pass-thru partner, forward a copy of that notice or
information to the person or persons holding an interest through the
pass-thru partner in the profits or losses of the partnership for the
partnership taxable year to which the notice or information relates. In
the case of a pass-thru partner that is a partnership within the meaning
of section 6231(a)(1), the tax matters partner of such partnership shall
forward copies of the notice or information to the partners of such
partnership.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6223(h)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50551, Oct. 4, 2001]
Sec. 301.6224(a)-1 Participation in administrative proceedings.
(a) In general. Every partner in the partnership, including an
indirect partner, has the right to participate in any phase of
administrative proceedings. However, except as provided in section 6223
and the regulations thereunder, neither the Internal Revenue Service nor
the tax matters partner is required to provide notice of any proceeding
to the partners. Consequently, a partner who wishes, for example, to be
present during a preliminary discussion between an examining agent and
the tax matters partner should make special arrangements with the tax
matters partner to obtain information as to the time and place of the
discussion. The Internal Revenue Service and the tax matters partner
will determine the time and place for all administrative proceedings.
Arrangements will generally not be changed merely for the convenience of
another partner.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6224(a)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50551, Oct. 4, 2001]
Sec. 301.6224(b)-1 Partner may waive rights.
(a) In general. A partner may at any time waive any right that the
partner has or any restriction on action by the Internal Revenue Service
under subchapter C of chapter 63 of the Internal Revenue Code.
(b) Form and manner of making waiver. The waiver described in
paragraph (a) of this section shall be made by a written statement. If
the Internal Revenue Service furnishes a form to be used for this
purpose, the partner may make the waiver by completing the form in
[[Page 240]]
accordance with the form's instructions. If such a form is not
furnished, the statement shall--
(1) Be clearly identified as a waiver under section 6224(b);
(2) Identify the partner and the partnership by name, address, and
taxpayer identification number;
(3) Specify the right or restriction being waived and the taxable
year(s) to which the waiver applies;
(4) Be signed by the partner making the waiver; and
(5) Be filed with the service center where the partnership return is
filed. However, if the person filing the statement knows that the notice
described in section 6223(a)(1) (beginning of an administrative
proceeding) has already been mailed to the tax matters partner, the
statement shall be filed with the Internal Revenue Service office that
mailed such notice.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6224(b)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50551, Oct. 4, 2001]
Sec. 301.6224(c)-1 Tax matters partner may bind nonnotice partners.
(a) In general. In the absence of a showing of fraud, malfeasance,
or misrepresentation of fact, if the tax matters partner enters into a
settlement agreement with the Internal Revenue Service with respect to
partnership items, including partnership-level determinations relating
to any penalty, addition to tax, or additional amounts that relate to
adjustments to partnership items, and expressly states that the
agreement shall be binding on the other partners, then that agreement
shall be binding on all partners except those who--
(1) Are, as of the day on which the agreement is entered into,
either notice partners or members of a notice group (see Sec.
301.6223(b)-1(c)(4) for the date on which a partner becomes a member of
a notice group); or
(2) Have, at least 30 days before the day on which the agreement is
entered into, filed with the Internal Revenue Service the statement
described in paragraph (c) of this section.
(b) Indirect partners--(1) In general. If, under paragraph (a) of
this section, a pass-thru partner is not bound by an agreement entered
into by the tax matters partner, all indirect partners holding an
interest in the partnership through that pass-thru partner shall not be
bound by that agreement. If, however, the pass-thru partner is bound by
an agreement entered into by the tax matters partner, paragraph (a) of
this section shall be applied separately to each indirect partner
holding an interest in the partnership through the pass-thru partner to
determine whether the indirect partner is also bound by the agreement.
(2) Example. The following example illustrates the principles of
this section:
Example. Partnership P has over 100 partners. Partnership J is a
partner in partnership P with a profits interest of less than 1 percent.
Partnership J has three partners, A, B, and C. A is a member of a notice
group with respect to partnership P, but B and C are not. On July 1,
2002, B filed the statement described in paragraph (c) of this section
not to be bound by any settlement agreement entered into by the tax
matters partner of partnership P. On August 1, 2002, the tax matters
partner of partnership P enters into a settlement agreement with the
Internal Revenue Service and states that the agreement is binding on
other partners as provided in section 6224(c)(3). Because partnership J
is bound by the settlement agreement, paragraph (a) of this section is
applied separately to each of the indirect partners to determine whether
they are bound. A is not bound by the agreement because A was a member
of a notice group on the day the agreement was entered into and B is not
bound because B filed the statement not to be bound at least 30 days
before the agreement was entered into. C is bound by the settlement
agreement.
(c) Statement not to be bound--(1) Contents of statement. The
statement referred to in paragraph (a)(2) of this section shall--
(i) Be clearly identified as a statement to deny settlement
authority to the tax matters partner under section 6224(c)(3)(B);
(ii) Identify the partner and partnership by name, address, and
taxpayer identification number;
(iii) Specify the taxable year or years to which the statement
applies; and
(iv) Be signed by the partner filing the statement.
[[Page 241]]
(2) Place where statement is to be filed. The statement described in
paragraph (c)(1) of this section generally shall be filed with the
Internal Revenue Service service center where the partnership return is
filed. However, if the partner knows that the notice described in
section 6223(a)(1) (beginning of an administrative proceeding) has
already been mailed to the tax matters partner, the statement shall be
filed with the Internal Revenue Service office that mailed that notice.
(3) Consolidated statements. The statement described in paragraph
(c)(1) of this section may be filed with respect to more than one
partner if the requirements of that paragraph (c)(1) (including
signatures) are satisfied with respect to each partner.
(d) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6224(c)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50551, Oct. 4, 2001]
Sec. 301.6224(c)-2 Pass-thru partner binds indirect partners.
(a) Pass-thru partner binds unidentified indirect partners--(1) In
general. If a pass-thru partner enters into a settlement agreement with
the Internal Revenue Service with respect to partnership items, that
agreement binds all indirect partners holding an interest in that
partnership through the pass-thru partner except those indirect partners
who have been identified as provided in section 6223(c)(3) and Sec.
301.6223(c)-1 at least 30 days before the date on which the agreement is
entered into. A settlement with respect to partnership items includes
partnership-level determinations relating to any penalty, addition to
tax, and additional amounts that relate to adjustments to partnership
items. However, if, in addition to the interest in the partnership held
through the pass-thru partner entering into a settlement agreement, an
indirect partner holds a separate interest in that partnership, either
directly or indirectly through a different pass-thru partner, then the
indirect partner shall not be bound by that settlement agreement with
respect to the interests held directly or indirectly through a pass-thru
partner other than the pass-thru partner entering into the settlement
agreement.
(2) Example. The provisions of paragraph (a)(1) of this section may
be illustrated by the following example:
Example. Partnership J is a partner in partnership P. C is a partner
in J but has not been identified as provided in section 6223(c)(3) and
Sec. 301.6223(c)-1. The only interest that C holds in P is through J.
The tax matters partner of J enters into a settlement agreement with the
Internal Revenue Service with respect to partnership items arising from
P. C is bound by the settlement agreement entered into by the tax
matters partner of J.
(b) Person in pass-thru partner authorized to enter into settlement
agreement that binds indirect partners. In the case of a pass-thru
partner that is--
(1) A partnership within the meaning of section 6231(a)(1), the tax
matters partner of that partnership;
(2) A partnership other than a partnership described in paragraph
(b)(1) of this section, any general partner of that partnership;
(3) An S corporation, any officer of that S corporation; or
(4) A trust, estate, or nominee, any person authorized in writing to
act on behalf of that trust, estate, or nominee, may enter into a
settlement agreement with the Internal Revenue Service on behalf of its
respective entity that would bind the unidentified indirect partners
that hold a partnership interest through the pass-thru partner.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6224(c)-2T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50552, Oct. 4, 2001]
Sec. 301.6224(c)-3 Consistent settlements.
(a) In general. If the Internal Revenue Service enters into a
settlement agreement with any partner with respect to partnership items,
whether comprehensive or partial, the Internal Revenue Service shall
offer to any other partner who so requests in accordance with paragraph
(c) of this section, settlement terms consistent with those contained in
the settlement agreement entered into.
[[Page 242]]
(b) Requirements for consistent settlement terms--(1) In general.
Consistent settlement terms are those based on the same determinations
with respect to partnership items. However, consistent settlement terms
also may include partnership-level determinations of any penalty,
addition to tax, or additional amount that relates to partnership items.
Settlements with respect to partnership items shall be self-contained;
thus, a concession by one party with respect to a partnership item may
not be based upon a concession by another party with respect to any item
that is not a partnership item other than a partnership-level
determination of any penalty, addition to tax, or additional amount that
relates to an adjustment to a partnership item. Consistent agreements
must be identical to the original settlement (that is, the settlement
upon which the offered settlement terms are based). A consistent
agreement must mirror the original settlement and may not be limited to
selected items from the original settlement. Once a partner has settled
a partnership item, or a partnership-level determination of any penalty,
addition to tax, or additional amount that relates to an adjustment to a
partnership item, that partner may not subsequently request settlement
terms consistent with a settlement that contains the previously settled
item. The requirement for consistent settlement terms applies only if--
(i) The items were partnership items (or a partnership-level
determination of any related penalty, addition to tax, or additional
amount) for the partner entering into the original settlement
immediately before the original settlement; and
(ii) The items are partnership items (or a partnership-level
determination of any related penalty, addition to tax, or additional
amount) for the partner requesting the consistent settlement at the time
the partner files the request.
(2) Effect of consistent agreement. Consistent settlement terms are
reflected in a consistent agreement. A consistent agreement is not a
settlement agreement that gives rise to further consistent settlement
rights because it is required to be given without volitional agreement
of the Secretary. Therefore, a consistent agreement required to be
offered to a requesting taxpayer is not a settlement agreement under
section 6224(c)(2) or paragraph (c)(3) of this section which starts a
new period for requesting consistent settlement terms. For all other
purposes of the Internal Revenue Code, however, (e.g., binding effect
under section 6224(c)(1) and conversion to nonpartnership items under
section 6231(b)(1)(C)), a consistent agreement is treated as a
settlement agreement.
(c) Time and manner of requesting consistent settlements--(1) In
general. A partner desiring settlement terms consistent with the terms
of any settlement agreement entered into between any other partner and
the Internal Revenue Service shall submit a written statement to the
Internal Revenue Service office that entered into the settlement.
(2) Contents of statement. Except as otherwise provided in
instructions to the taxpayer from the Internal Revenue Service, the
written statement described in paragraph (c)(1) of this section shall--
(i) Identify the statement as a request for consistent settlement
terms under section 6224(c)(2);
(ii) Contain the name, address, and taxpayer identification number
of the partnership and of the partner requesting the settlement offer
(and, in the case of an indirect partner, of the pass-thru partner
through which the indirect partner holds an interest);
(iii) Identify the earlier agreement to which the request refers;
and
(iv) Be signed by the partner making the request.
(3) Time for filing request. The statement shall be filed not later
than the later of--
(i) The 150th day after the day on which the notice of final
partnership administrative adjustment is mailed to the tax matters
partner; or
(ii) The 60th day after the day on which the settlement agreement
was entered into.
(d) Examples. The following examples illustrate the principles of
this section:
Example 1. The Internal Revenue Service seeks to disallow a $100,000
loss reported by Partnership P $20,000 of which was allocated
[[Page 243]]
to partner X, and $10,000 of which was allocated to partner Y. The
Internal Revenue Service agrees to a settlement with X in which the
Internal Revenue Service allows $12,000 of the loss, accepts the
treatment of all other partnership items on the partnership return, and
imposes a penalty for negligence related to the $8,000 loss
disallowance. Partner Y requests settlement terms consistent with the
settlement made between X and the Internal Revenue Service. The items
are partnership items (or a related penalty) for X immediately before X
enters into the settlement agreement and are partnership items (or a
related penalty) for Y at the time of the request. The Internal Revenue
Service must offer Y settlement terms allowing a $6,000 loss, a
negligence penalty on the $4,000 disallowance, and otherwise reflecting
the treatment of partnership items on the partnership return.
Example 2. F files inconsistently with Partnership P and reports the
inconsistency. The Internal Revenue Service notifies F that it will
treat all partnership items arising from P as nonpartnership items with
respect to F. Later, the Internal Revenue Service enters into a
settlement with F on these items. The Internal Revenue Service is not
required to offer the other partners of P settlement terms consistent
with the settlement reached between F and the Internal Revenue Service
because the items arising from P are not partnership items with respect
to F.
Example 3. G, a partner in Partnership P, filed suit under section
6228(b) after the Internal Revenue Service failed to allow an
administrative adjustment request with respect to a partnership item
arising from P for a taxable year. Under section 6231(b)(1)(B), the
partnership items of G for the partnership taxable year became
nonpartnership items as of the date G filed suit. After G filed suit,
another partner and the Internal Revenue Service entered into a
settlement agreement with respect to items arising from P in that year.
G is not entitled to consistent settlement terms because, at the time of
the settlement, the items arising from P are no longer partnership items
with respect to G.
(e) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6224(c)-3T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50552, Oct. 4, 2001]
Sec. 301.6225-1 Partnership adjustment by the Internal Revenue Service.
(a) Imputed underpayment based on partnership adjustments--(1) In
general. In the case of any partnership adjustments (as defined in Sec.
301.6241-1(a)(6)) by the Internal Revenue Service (IRS), if the
adjustments result in an imputed underpayment (as determined in
accordance with paragraph (b) of this section), the partnership must pay
an amount equal to such imputed underpayment in accordance with
paragraph (a)(2) of this section. If the adjustments do not result in an
imputed underpayment (as described in paragraph (f) of this section),
such adjustments must be taken into account by the partnership in the
adjustment year (as defined in Sec. 301.6241-1(a)(1)) in accordance
with Sec. 301.6225-3. Partnership adjustments may result in more than
one imputed underpayment pursuant to paragraph (g) of this section. Each
imputed underpayment determined under this section is based solely on
partnership adjustments with respect to a single taxable year.
(2) Partnership pays the imputed underpayment. An imputed
underpayment (determined in accordance with paragraph (b) of this
section and included in a notice of final partnership adjustment (FPA)
under section 6231(a)(3)) must be paid by the partnership in the same
manner as if the imputed underpayment were a tax imposed for the
adjustment year in accordance with Sec. 301.6232-1. The FPA will
include the amount of any imputed underpayment, as modified under Sec.
301.6225-2 if applicable, unless the partnership waives its right to
such FPA under section 6232(d)(2). See Sec. 301.6232-1(d)(2). For the
alternative to payment of the imputed underpayment by the partnership,
see Sec. 301.6226-1. If a partnership pays an imputed underpayment, the
partnership's expenditure for the imputed underpayment is taken into
account by the partnership in accordance with Sec. 301.6241-4. For
interest and penalties with respect to an imputed underpayment, see
section 6233.
(3) Imputed underpayment set forth in notice of proposed partnership
adjustment. An imputed underpayment set forth in a notice of proposed
partnership adjustment (NOPPA) under section 6231(a)(2) is determined in
accordance with paragraph (b) of this section without regard to any
modification under Sec. 301.6225-2. Modifications under Sec. 301.6225-
2, if allowed by the IRS, may
[[Page 244]]
change the amount of an imputed underpayment set forth in the NOPPA and
determined in accordance with paragraph (b) of this section. Only the
partnership adjustments set forth in a NOPPA are taken into account for
purposes of determining an imputed underpayment under this section and
for any modification under Sec. 301.6225-2.
(b) Determination of an imputed underpayment--(1) In general. In the
case of any partnership adjustment by the IRS, an imputed underpayment
is determined by-
(i) Grouping the partnership adjustments in accordance with
paragraph (c) of this section and, if appropriate, subgrouping such
adjustments in accordance with paragraph (d) of this section;
(ii) Netting the adjustments in accordance with paragraph (e) of
this section;
(iii) Calculating the total netted partnership adjustment in
accordance with paragraph (b)(2) of this section;
(iv) Multiplying the total netted partnership adjustment by the
highest rate of Federal income tax in effect for the reviewed year under
section 1 or 11; and
(v) Increasing or decreasing the product that results under
paragraph (b)(1)(iv) of this section by--
(A) Any amounts treated as net positive adjustments (as defined in
paragraph (e)(4)(i) of this section) under paragraph (e)(3)(ii) of this
section; and
(B) Except as provided in paragraph (e)(3)(ii) of this section, any
amounts treated as net negative adjustments (as defined in paragraph
(e)(4)(ii) of this section) under paragraph (e)(3)(ii) of this section.
(2) Calculation of the total netted partnership adjustment. For
purposes of determining an imputed underpayment under paragraph (b)(1)
of this section, the total netted partnership adjustment is the sum of
all net positive adjustments in the reallocation grouping described in
paragraph (c)(2) of this section and the residual grouping described in
paragraph (c)(5) of this section.
(3) Adjustments to items for which tax has been collected under
chapters 3 and 4 of the Internal Revenue Code (Code). A partnership
adjustment is disregarded for purposes of calculating the imputed
underpayment under paragraph (b) of this section to the extent that the
IRS has collected the tax required to be withheld under chapter 3 or
chapter 4 (as defined in Sec. 301.6241-6(b)(2)(ii) and (iii)) that is
attributable to the partnership adjustment. See Sec. 301.6241-6(b)(3)
for rules that apply when a partnership pays an imputed underpayment
that includes a partnership adjustment to an amount subject to
withholding (as defined in Sec. 301.6241-6(b)(2)(i)) under chapter 3 or
chapter 4 for which such tax has not yet been collected.
(4) Treatment of adjustment as zero for purposes of calculating the
imputed underpayment. If the effect of one partnership adjustment is
reflected in one or more other partnership adjustments, the IRS may
treat the one adjustment as zero solely for purposes of calculating the
imputed underpayment. In addition, if a positive adjustment to an item
is related to, or results from, a positive adjustment to another item,
one of the positive adjustments will generally be treated as zero solely
for purposes of calculating any imputed underpayment unless the IRS
determines that an adjustment should not be treated as zero in the
calculation of the imputed underpayment. This paragraph applies to the
calculation of any imputed underpayment, including imputed underpayments
calculated by a partnership or pass-through partner (for example, as
part of the filing of an administrative adjustment request (AAR) under
section 6227).
(c) Grouping of partnership adjustments--(1) In general. To
determine an imputed underpayment under paragraph (b) of this section,
partnership adjustments are placed into one of four groupings. These
groupings are the reallocation grouping described in paragraph (c)(2) of
this section, the credit grouping described in paragraph (c)(3) of this
section, the creditable expenditure grouping described in paragraph
(c)(4) of this section, and the residual grouping described in paragraph
(c)(5) of this section. Adjustments in groupings may be placed in
subgroupings, as appropriate, in accordance with paragraph (d) of this
section. The IRS may, in its discretion, group adjustments in a manner
other
[[Page 245]]
than the manner described in this paragraph (c) when such grouping would
appropriately reflect the facts and circumstances. For requests to
modify the groupings, see Sec. 301.6225-2(d)(6).
(2) Reallocation grouping--(i) In general. Any adjustment that
allocates or reallocates a partnership-related item to and from a
particular partner or partners is a reallocation adjustment. Except in
the case of an adjustment to a credit (as described in paragraph (c)(3)
of this section) or to a creditable expenditure (as described in
paragraph (c)(4) of this section), reallocation adjustments are placed
in the reallocation grouping. Adjustments that reallocate a credit to
and from a particular partner or partners are placed in the credit
grouping (see paragraph (c)(3) of this section), and adjustments that
reallocate a creditable expenditure to and from a particular partner or
partners are placed in the creditable expenditure grouping (see
paragraph (c)(4) of this section).
(ii) Each reallocation adjustment results in at least two separate
adjustments. Each reallocation adjustment generally results in at least
two separate adjustments. One adjustment reverses the effect of the
improper allocation of a partnership-related item, and the other
adjustment effectuates the proper allocation of the partnership-related
item. Generally, a reallocation adjustment results in one positive
adjustment (as defined in paragraph (d)(2)(iii) of this section) and one
negative adjustment (as defined in paragraph (d)(2)(ii) of this
section).
(3) Credit grouping. Each adjustment to a partnership-related item
that is reported or could be reported by a partnership as a credit on
the partnership's return, including a reallocation adjustment, is placed
in the credit grouping. Each adjustment to any tax, penalty, addition to
tax, or additional amount for the taxable year for which the partnership
is liable under chapter 1 of the Code (chapter 1) and each adjustment to
an imputed underpayment calculated by the partnership is placed in the
credit grouping.
(4) Creditable expenditure grouping--(i) In general. Each adjustment
to a creditable expenditure, including a reallocation adjustment to a
creditable expenditure, is placed in the creditable expenditure
grouping.
(ii) Adjustment to a creditable expenditure--(A) In general. For
purposes of this section, an adjustment to a partnership-related item is
treated as an adjustment to a creditable expenditure if any person could
take the item that is adjusted (or item as adjusted if the item was not
originally reported by the partnership) as a credit. See Sec. 1.704-
1(b)(4)(ii) of this chapter. For instance, if the adjustment is a
reduction of qualified research expenses, the adjustment is to a
creditable expenditure for purposes of this section because any person
allocated the qualified research expenses by the partnership could claim
a credit with respect to their allocable portion of such expenses under
section 41, rather than a deduction under section 174.
(B) Creditable foreign tax expenditures. The creditable expenditure
grouping includes each adjustment to a creditable foreign tax
expenditure (CFTE) as defined in Sec. 1.704-1(b)(4)(viii)(b) of this
chapter, including any reallocation adjustment to a CFTE.
(5) Residual grouping--(i) In general. Any adjustment to a
partnership-related item not described in paragraph (c)(2), (3), or (4)
of this section is placed in the residual grouping.
(ii) Adjustments to partnership-related items that are not allocated
under section 704(b). The residual grouping includes any adjustment to a
partnership-related item that derives from an item that would not have
been required to be allocated by the partnership to a reviewed year
partner under section 704(b).
(6) Recharacterization adjustments--(i) Recharacterization
adjustment defined. An adjustment that changes the character of a
partnership-related item is a recharacterization adjustment. For
instance, an adjustment that changes a loss from ordinary to capital or
from active to passive is a recharacterization adjustment.
(ii) Grouping recharacterization adjustments. A recharacterization
adjustment is placed in the appropriate grouping as described in
paragraphs (c)(2) through (5) of this section.
(iii) Recharacterization adjustments result in two partnership
adjustments. In
[[Page 246]]
general, a recharacterization adjustment results in at least two
separate adjustments in the appropriate grouping under paragraph
(c)(6)(ii) of this section. One adjustment reverses the improper
characterization of the partnership-related item, and the other
adjustment effectuates the proper characterization of the partnership-
related item. A recharacterization adjustment results in two adjustments
regardless of whether the amount of the partnership-related item is
being adjusted. Generally, recharacterization adjustments result in one
positive adjustment and one negative adjustment.
(d) Subgroupings--(1) In general. If all partnership adjustments are
positive adjustments, this paragraph (d) does not apply. If any
partnership adjustment within any grouping described in paragraph (c) of
this section is a negative adjustment, the adjustments within that
grouping are subgrouped in accordance with this paragraph (d). The IRS
may, in its discretion, subgroup adjustments in a manner other than the
manner described in this paragraph (d) when such subgrouping would
appropriately reflect the facts and circumstances. For requests to
modify the subgroupings, see Sec. 301.6225-2(d)(6).
(2) Definition of negative adjustments and positive adjustments--(i)
In general. For purposes of this section, partnership adjustments made
by the IRS are treated as follows:
(A) An increase in an item of gain is treated as an increase in an
item of income;
(B) A decrease in an item of gain is treated as a decrease in an
item of income;
(C) An increase in an item of loss or deduction is treated as a
decrease in an item of income; and
(D) A decrease in an item of loss or deduction is treated as an
increase in an item of income.
(ii) Negative adjustment. A negative adjustment is any adjustment
that is a decrease in an item of income; a partnership adjustment
treated under paragraph (d)(2)(i) of this section as a decrease in an
item of income; an increase in an item of credit; a decrease in an item
of tax, penalty, addition to tax, or additional amount for which the
partnership is liable under chapter 1; or a decrease to an imputed
underpayment calculated by the partnership for the taxable year.
(iii) Positive adjustment. A positive adjustment is any adjustment
that is not a negative adjustment as defined in paragraph (d)(2)(ii) of
this section.
(3) Subgrouping rules--(i) In general. Except as otherwise provided
in this paragraph (d)(3), an adjustment is subgrouped according to how
the adjustment would be required to be taken into account separately
under section 702(a) or any other provision of the Code, regulations,
forms, instructions, or other guidance prescribed by the IRS applicable
to the adjusted partnership-related item. A negative adjustment must be
placed in the same subgrouping as another adjustment if the negative
adjustment and the other adjustment would have been properly netted at
the partnership level and such netted amount would have been required to
be allocated to the partners of the partnership as a single partnership-
related item for purposes of section 702(a), other provision of the
Code, regulations, forms, instructions, or other guidance prescribed by
the IRS. For purposes of creating subgroupings under this section, if
any adjustment could be subject to any preference, limitation, or
restriction under the Code (or not allowed, in whole or in part, against
ordinary income) if taken into account by any person, the adjustment is
placed in a separate subgrouping from all other adjustments within the
grouping.
(ii) Subgrouping reallocation adjustments--(A) Reallocation
adjustments in the reallocation grouping. Each positive adjustment and
each negative adjustment resulting from a reallocation adjustment as
described in paragraph (c)(2)(ii) of this section is placed in its own
separate subgrouping within the reallocation grouping. For instance, if
the reallocation adjustment reallocates a deduction from one partner to
another partner, the decrease in the deduction (positive adjustment)
allocated to the first partner is placed in a subgrouping within the
reallocation grouping separate from the increase in the deduction
(negative adjustment)
[[Page 247]]
allocated to the second partner. Notwithstanding the requirement that
reallocation adjustments be placed into separate subgroupings, if a
particular partner or group of partners has two or more reallocation
adjustments allocable to such partner or group, such adjustments may be
subgrouped in accordance with paragraph (d)(3)(i) of this section and
netted in accordance with paragraph (e) of this section.
(B) Reallocation adjustments in the credit grouping. In the case of
a reallocation adjustment to a credit, which is placed in the credit
grouping pursuant to paragraph (c)(3) of this section, the decrease in
credits allocable to one partner or group of partners is treated as a
positive adjustment, and the increase in credits allocable to another
partner or group of partners is treated as a negative adjustment. Each
positive adjustment and each negative adjustment resulting from a
reallocation adjustment to credits is placed in its own separate
subgrouping within the credit grouping.
(iii) Subgroupings within the creditable expenditure grouping--(A)
In general. Each adjustment in the creditable expenditure grouping
described in paragraph (c)(4) of this section is subgrouped in
accordance with paragraphs (d)(3)(i) and (iii) of this section. For
rules related to creditable expenditures other than CFTEs, see paragraph
(d)(3)(iii)(C) of this section.
(B) Subgroupings for adjustments to CFTEs. Each adjustment to a CFTE
is subgrouped based on the separate category of income to which the CFTE
relates in accordance with section 904(d) and the regulations in part 1
of this chapter, and to account for any different allocation of the CFTE
between partners. Two or more adjustments to CFTEs are included within
the same subgrouping only if each adjustment relates to CFTEs in the
same separate category, and each adjusted partnership-related item would
be allocated to the partners in the same ratio had those items been
properly reflected on the partnership return for the reviewed year.
(iv) Subgrouping recharacterization adjustments. Each positive
adjustment and each negative adjustment resulting from a
recharacterization adjustment as described in paragraph (c)(6) of this
section is placed in its own separate subgrouping within the residual
grouping. If a particular partner or group of partners has two or more
recharacterization adjustments allocable to such partner or group, such
adjustments may be subgrouped in accordance with paragraph (d)(3)(i) of
this section and netted in accordance with paragraph (e) of this
section.
(e) Netting adjustments within each grouping or subgrouping--(1) In
general. All adjustments within a subgrouping determined in accordance
with paragraph (d) of this section are netted in accordance with this
paragraph (e) to determine whether there is a net positive adjustment
(as defined in paragraph (e)(4)(i) of this section) or net negative
adjustment (as defined in paragraph (e)(4)(ii) of this section) for that
subgrouping. If paragraph (d) of this section does not apply because a
grouping only includes positive adjustments, all adjustments in that
grouping are netted in accordance with this paragraph (e). For purposes
of this paragraph (e), netting means summing all adjustments together
within each grouping or subgrouping, as appropriate.
(2) Limitations on netting adjustments. Positive adjustments and
negative adjustments may only be netted against each other if they are
in the same grouping in accordance with paragraph (c) of this section.
If a negative adjustment is in a subgrouping in accordance with
paragraph (d) of this section, the negative adjustment may only net with
a positive adjustment also in that same subgrouping in accordance with
paragraph (d) of this section. An adjustment in one grouping or
subgrouping may not be netted against an adjustment in any other
grouping or subgrouping. Adjustments from one taxable year may not be
netted against adjustments from another taxable year.
(3) Results of netting adjustments within groupings or
subgroupings--(i) Groupings other than the credit and creditable
expenditure groupings. Except as described in paragraphs (e)(3)(ii) and
(iii) of this section, each net positive adjustment (as defined in
paragraph (e)(4)(i) of this section) with respect to
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a particular grouping or subgrouping that results after netting the
adjustments in accordance with this paragraph (e) is included in the
calculation of the total netted partnership adjustment under paragraph
(b)(2) of this section. Each net negative adjustment (as defined in
paragraph (e)(4)(ii) of this section) with respect to a grouping or
subgrouping that results after netting the adjustments in accordance
with this paragraph (e) is excluded from the calculation of the total
netted partnership adjustment under paragraph (b)(2) of this section.
Adjustments underlying a net negative adjustment described in the
preceding sentence are adjustments that do not result in an imputed
underpayment (as described in paragraph (f) of this section).
(ii) Credit grouping. Any net positive adjustment or net negative
adjustment in the credit grouping (including any such adjustment with
respect to a subgrouping within the credit grouping) is excluded from
the calculation of the total netted partnership adjustment. A net
positive adjustment described in this paragraph (e)(3)(ii) is taken into
account under paragraph (b)(1)(v) of this section. A net negative
adjustment described in this paragraph (e)(3)(ii), including a negative
adjustment to a credit resulting from a reallocation adjustment that was
placed in a separate subgrouping pursuant to paragraph (d)(3)(ii)(B) of
this section, is treated as an adjustment that does not result in an
imputed underpayment in accordance with paragraph (f)(1)(i) of this
section, unless the IRS determines that such net negative adjustment
should be taken into account under paragraph (b)(1)(v) of this section.A
net negative adjustment to a tax, penalty, addition to tax, or
additional amount for which the partnership is liable under chapter 1 or
an adjustment to any imputed underpayment calculated by the partnership
for the taxable year is not an adjustment described in paragraph (f) of
this section (adjustments that do not result in an imputed
underpayment).
(iii) Treatment of creditable expenditures--(A) Creditable foreign
tax expenditures. A net decrease to a CFTE in any CFTE subgrouping (as
described in paragraph (d)(3)(iii) of this section) is treated as a net
positive adjustment described in paragraph (e)(3)(ii) of this section
and is excluded from the calculation of the total netted partnership
adjustment under paragraph (b)(2) of this section. A net increase to a
CFTE in any CFTE subgrouping is treated as a net negative adjustment
described in paragraph (e)(3)(i) of this section. For rules related to
creditable expenditures other than CFTEs, see paragraph (e)(3)(iii)(B)
of this section.
(B) [Reserved]
(4) Net positive adjustment and net negative adjustment defined--(i)
Net positive adjustment. A net positive adjustment means an amount that
is greater than zero which results from netting adjustments within a
grouping or subgrouping in accordance with this paragraph (e). A net
positive adjustment includes a positive adjustment that was not netted
with any other adjustment. A net positive adjustment includes a net
decrease in an item of credit.
(ii) Net negative adjustment. A net negative adjustment means any
amount which results from netting adjustments within a grouping or
subgrouping in accordance with this paragraph (e) that is not a net
positive adjustment (as defined in paragraph (e)(4)(i) of this section).
A net negative adjustment includes a negative adjustment that was not
netted with any other adjustment.
(f) Partnership adjustments that do not result in an imputed
underpayment--(1) In general. Except as otherwise provided in paragraph
(e) of this section, a partnership adjustment does not result in an
imputed underpayment if--
(i) After grouping, subgrouping, and netting the adjustments as
described in paragraphs (c), (d), and (e) of this section, the result of
netting with respect to any grouping or subgrouping that includes a
particular partnership adjustment is a net negative adjustment (as
described in paragraph (e)(4)(ii) of this section); or
(ii) The calculation under paragraph (b)(1) of this section results
in an amount that is zero or less than zero, unless paragraph (f)(3) of
this section applies.
(2) Treatment of an adjustment that does not result in an imputed
underpayment. Any adjustment that does not result in an imputed
underpayment (as
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described in paragraph (f)(1) of this section) is taken into account by
the partnership in the adjustment year in accordance with Sec.
301.6225-3. If the partnership makes an election pursuant to section
6226 with respect to an imputed underpayment, the adjustments that do
not result in that imputed underpayment that are associated with that
imputed underpayment (as described in paragraph (g)(2)(iii)(B) of this
section) are taken into account by the reviewed year partners in
accordance with Sec. 301.6226-3.
(3) Exception to treatment as an adjustment that does not result in
an imputed underpayment--(i) Application of this paragraph (f)(3). If
the calculation under paragraph (b)(1) of this section results in an
amount that is zero or less than zero due to the inclusion of a net
negative adjustment to a tax, penalty, addition to tax, or additional
amount for which the partnership is liable under chapter 1 or an
adjustment to any imputed underpayment calculated by the partnership for
the taxable year, this paragraph (f)(3) applies, and paragraph (f)(1) of
this section does not apply except as provided in paragraph
(f)(3)(ii)(C) of this section.
(ii) Recalculation if paragraph (f)(3) of this section applies--(A)
In general. If this paragraph (f)(3) applies, the imputed underpayment
is recalculated under paragraph (b)(1) of this section without regard to
a net negative adjustment to a tax, penalty, addition to tax, or
additional amount for which the partnership is liable under chapter 1 or
an adjustment to any imputed underpayment calculated by the partnership
for the taxable year. The net negative adjustment that was excluded from
the imputed underpayment recalculation is then treated in one of two
ways under paragraphs (f)(3)(ii)(B) and (C) of this section depending on
the results of the recalculation.
(B) Recalculation is greater than zero. If the result of the
recalculation under paragraph (f)(3)(ii) of this section is greater than
zero, the IRS may apply the portion of the net negative adjustment(s)
that was excluded from the recalculation to reduce the imputed
underpayment to zero, but not below zero. In this case, the imputed
underpayment is zero, but the adjustments included in the recalculation
and the remaining net negative adjustment(s) excluded from the
recalculation under paragraph (f)(3)(ii)(A) of this section are not
adjustments that do not result in an imputed underpayment subject to
treatment as described in paragraph (f)(2) of this section. See
paragraph (h)(13) of this section (Example 13).
(C) Recalculation is zero or less than zero. If the result of the
recalculation under paragraph (f)(3)(ii) of this section is zero or less
than zero, the adjustments included in the recalculation are treated as
adjustments that do not result in an imputed underpayment under
paragraph (f)(1)(ii) of this section. The net negative adjustment(s)
that was excluded from the recalculation is not an adjustment that does
not result in an imputed underpayment subject to treatment as described
in paragraph (f)(2) of this section. See paragraph (h)(14) of this
section (Example 14).
(g) Multiple imputed underpayments in a single administrative
proceeding--(1) In general. The IRS, in its discretion, may determine
that partnership adjustments for the same partnership taxable year
result in more than one imputed underpayment. The determination of
whether there is more than one imputed underpayment for any partnership
taxable year, and if so, which partnership adjustments are taken into
account to calculate any particular imputed underpayment is based on the
facts and circumstances and nature of the partnership adjustments. See
Sec. 301.6225-2(d)(6) for modification of the number and composition of
imputed underpayments.
(2) Types of imputed underpayments--(i) In general. There are two
types of imputed underpayments: A general imputed underpayment
(described in paragraph (g)(2)(ii) of this section) and a specific
imputed underpayment (described in paragraph (g)(2)(iii) of this
section). Each type of imputed underpayment is separately calculated in
accordance with this section.
(ii) General imputed underpayment. The general imputed underpayment
is calculated based on all adjustments (other than adjustments that do
not result in an imputed underpayment under paragraph (f) of this
section)
[[Page 250]]
that are not taken into account to determine a specific imputed
underpayment under paragraph (g)(2)(iii) of this section. There is only
one general imputed underpayment in any administrative proceeding. If
there is one imputed underpayment in an administrative proceeding, it is
a general imputed underpayment and may take into account adjustments
described in paragraph (g)(2)(iii) of this section, if any, and all
adjustments that do not result in that general imputed underpayment (as
described in paragraph (f) of this section) are associated with that
general imputed underpayment.
(iii) Specific imputed underpayment--(A) In general. The IRS may, in
its discretion, designate a specific imputed underpayment with respect
to adjustments to a partnership-related item or items that were
allocated to one partner or a group of partners that had the same or
similar characteristics or that participated in the same or similar
transaction or on such other basis as the IRS determines properly
reflects the facts and circumstances. The IRS may designate more than
one specific imputed underpayment with respect to any partnership
taxable year. For instance, in a single partnership taxable year there
may be a specific imputed underpayment with respect to adjustments
related to a transaction affecting some, but not all, partners of the
partnership (such as adjustments that are specially allocated to certain
partners) and a second specific imputed underpayment with respect to
adjustments resulting from a reallocation of a distributive share of
income from one partner to another partner. The IRS may, in its
discretion, determine that partnership adjustments that could be taken
into account to calculate one or more specific imputed underpayments
under this paragraph (g)(2)(iii)(A) for a partnership taxable year are
more appropriately taken into account in determining the general imputed
underpayment for such taxable year. For instance, the IRS may determine
that it is more appropriate to calculate only the general imputed
underpayment if, when calculating the specific imputed underpayment
requested by the partnership, there is an increase in the number of the
partnership adjustments that after grouping and netting result in net
negative adjustments and are disregarded in calculating the specific
imputed underpayment.
(B) Adjustments that do not result in an imputed underpayment
associated with a specific imputed underpayment. If the IRS designates a
specific imputed underpayment, the IRS will designate which adjustments
that do not result in an imputed underpayment, if any, are appropriate
to associate with that specific imputed underpayment. If the adjustments
underlying that specific imputed underpayment are reallocation
adjustments or recharacterization adjustments, the net negative
adjustment that resulted from the reallocation or recharacterization is
associated with the specific imputed underpayment. Any adjustments that
do not result in an imputed underpayment that are not associated with a
specific imputed underpayment under this paragraph (g)(2)(iii)(B) are
associated with the general imputed underpayment.
(h) Examples. The following examples illustrate the rules of this
section. For purposes of these examples, unless otherwise stated, each
partnership is subject to the provisions of subchapter C of chapter 63
of the Code, each partnership and its partners are calendar year
taxpayers, all partners are U.S. persons, the highest rate of income tax
in effect for all taxpayers is 40 percent for all relevant periods, and
no partnership requests modification under Sec. 301.6225-2.
(1) Example 1. Partnership reports on its 2019 partnership return
$100 of ordinary income and an ordinary deduction of -$70. The IRS
initiates an administrative proceeding with respect to Partnership's
2019 taxable year and determines that ordinary income was $105 instead
of $100 ($5 adjustment) and that the ordinary deduction was -$80 instead
of -$70 (-$10 adjustment). Pursuant to paragraph (c) of this section,
the adjustments are both in the residual grouping. The -$10 adjustment
to the ordinary deduction would not have been netted at the partnership
level with the $5 adjustment to ordinary income and would not have been
required to be allocated to the partners of the partnership as a single
partnership-related item for purposes of section
[[Page 251]]
702(a), other provision of the Code, regulations, forms, instructions,
or other guidance prescribed by the IRS. Because the -$10 adjustment to
the ordinary deduction would result in a decrease in the imputed
underpayment if netted with the $5 adjustment to ordinary income and
because it might be limited if taken into account by any person, the -
$10 adjustment must be placed in a separate subgrouping from the $5
adjustment to ordinary income. See paragraph (d)(3)(i) of this section.
The total netted partnership adjustment is $5, which results in an
imputed underpayment of $2. The -$10 adjustment to the ordinary
deduction is a net negative amount and is an adjustment that does not
result in an imputed underpayment which is taken into account by
Partnership in the adjustment year in accordance with Sec. 301.6225-3.
(2) Example 2. The facts are the same as Example 1 in paragraph
(h)(1) of this section, except that the -$10 adjustment to the ordinary
deduction would have been netted at the partnership level with the $5
adjustment to ordinary income and would have been required to be
allocated to the partners of the partnership as a single partnership-
related item for purposes of section 702(a), other provision of the
Code, regulations, forms, instructions, or other guidance prescribed by
the IRS. Therefore, the $5 adjustment and the -$10 adjustment must be
placed in the same subgrouping within the residual grouping. The $5
adjustment and the -$10 adjustments are then netted in accordance with
paragraph (e) of this section. Such netting results in a net negative
adjustment (as defined under paragraph (e)(4)(ii) of this section) of -
$5. Pursuant to paragraph (f) of this section, the -$5 net negative
adjustment is an adjustment that does not result in an imputed
underpayment. Because the only net adjustment is an adjustment that does
not result in an imputed underpayment, there is no imputed underpayment.
(3) Example 3. Partnership reports on its 2019 partnership return
ordinary income of $300, long-term capital gain of $125, long-term
capital loss of -$75, a depreciation deduction of -$100, and a tax
credit that can be claimed by the partnership of $5. In an
administrative proceeding with respect to Partnership's 2019 taxable
year, the IRS determines that ordinary income is $500 ($200 adjustment),
long-term capital gain is $200 ($75 adjustment), long-term capital loss
is -$25 ($50 adjustment), the depreciation deduction is -$70 ($30
adjustment), and the tax credit is $3 ($2 adjustment). Pursuant to
paragraph (c) of this section, the adjustment to the tax credit is in
the credit grouping under paragraph (c)(3) of this section. The
remaining adjustments are part of the residual grouping under paragraph
(c)(5) of this section. Pursuant to paragraph (d)(2) of this section,
all of the adjustments in the residual grouping are positive
adjustments. Because there are no negative adjustments, there are no
subgroupings within the residual grouping. Under paragraph (b)(2) of
this section, the adjustments in the residual grouping are summed for a
total netted partnership adjustment of $355. Under paragraph (b)(1)(iv)
of this section, the total netted partnership adjustment is multiplied
by 40 percent (highest tax rate in effect), which results in $142. Under
paragraph (b)(1)(v) of this section, the $142 is increased by the $2
credit adjustment, resulting in an imputed underpayment of $144.
(4) Example 4. Partnership reported on its 2019 partnership return
long-term capital gain of $125. In an administrative proceeding with
respect to Partnership's 2019 taxable year, the IRS determines the long-
term capital gain should have been reported as ordinary income of $125.
There are no other adjustments for the 2019 taxable year. This
recharacterization adjustment results in two adjustments in the residual
grouping pursuant to paragraph (c)(6) of this section: an increase in
ordinary income of $125 ($125 adjustment) as well as a decrease of long-
term capital gain of $125 (-$125 adjustment). The decrease in long-term
capital gain is a negative adjustment under paragraph (d)(2)(ii) of this
section and the increase in ordinary income is a positive adjustment
under paragraph (d)(2)(iii) of this section. Under paragraph (d)(3)(i)
of this section, the adjustment to long-term capital gain is placed in a
subgrouping separate from
[[Page 252]]
the adjustment to ordinary income because the reduction of long-term
capital gain is required to be taken into account separately pursuant to
section 702(a). The $125 decrease in long-term capital gain is a net
negative adjustment in the long-term capital subgrouping and, as a
result, is an adjustment that does not result in an imputed underpayment
under paragraph (f) of this section and is taken into account in
accordance with Sec. 301.6225-3. The $125 increase in ordinary income
results in a net positive adjustment under paragraph (e)(4)(i) of this
section. Because the ordinary subgrouping is the only subgrouping
resulting in a net positive adjustment, $125 is the total netted
partnership adjustment under paragraph (b)(2) of this section. Under
paragraph (b)(1)(iv) of this section, $125 is multiplied by 40 percent
resulting in an imputed underpayment of $50.
(5) Example 5. Partnership reported a $100 deduction for certain
expenses on its 2019 partnership return and an additional $100 deduction
with respect to the same type of expenses on its 2020 partnership
return. The IRS initiates an administrative proceeding with respect to
Partnership's 2019 and 2020 taxable years and determines that
Partnership reported a portion of the expenses as a deduction in 2019
that should have been taken into account in 2020. Therefore, for taxable
year 2019, the IRS determines that Partnership should have reported a
deduction of $75 with respect to the expenses ($25 adjustment in the
2019 residual grouping). For 2020, the IRS determines that Partnership
should have reported a deduction of $125 with respect to these expenses
(-$25 adjustment in the 2020 residual grouping). There are no other
adjustments for the 2019 and 2020 partnership taxable years. Pursuant to
paragraph (e)(2) of this section, the adjustments for 2019 and 2020 are
not netted with each other. The 2019 adjustment of $25 is the only
adjustment for that year and a net positive adjustment under paragraph
(e)(4)(i) of this section, and therefore the total netted partnership
adjustment for 2019 is $25 pursuant to paragraph (b)(2) of this section.
The $25 total netted partnership adjustment is multiplied by 40 percent
resulting in an imputed underpayment of $10 for Partnership's 2019
taxable year. The $25 increase in the deduction for 2020, a net negative
adjustment under paragraph (e)(4)(ii) of this section, is an adjustment
that does not result in an imputed underpayment for that year.
Therefore, there is no imputed underpayment for 2020.
(6) Example 6. On its partnership return for the 2020 taxable year,
Partnership reported ordinary income of $100 and a capital gain of $50.
Partnership had four equal partners during the 2020 tax year, all of
whom were individuals. On its partnership return for the 2020 tax year,
the capital gain was allocated to partner E and the ordinary income was
allocated to all partners based on their interests in Partnership. In an
administrative proceeding with respect to Partnership's 2020 taxable
year, the IRS determines that for 2020 the capital gain allocated to E
should have been $75 instead of $50 and that Partnership should have
recognized an additional $10 in ordinary income. In the NOPPA mailed by
the IRS, the IRS may determine pursuant to paragraph (g) of this section
that there is a general imputed underpayment with respect to the
increase in ordinary income and a specific imputed underpayment with
respect to the increase in capital gain specially allocated to E.
(7) Example 7. On its partnership return for the 2020 taxable year,
Partnership reported a recourse liability of $100. During an
administrative proceeding with respect to Partnership's 2020 taxable
year, the IRS determines that the $100 recourse liability should have
been reported as a $100 nonrecourse liability. Under paragraph
(d)(2)(iii)(B) of this section, the adjustment to the character of the
liability is an adjustment to an item that cannot be allocated under
section 704(b). The adjustment therefore is treated as a $100 increase
in income because such recharacterization of a liability could result in
up to $100 in taxable income if taken into account by any person. The
$100 increase in income is a positive adjustment in the residual
grouping under paragraph (c)(5)(ii) of this section. There are no other
adjustments for the 2020 partnership taxable year. The $100 positive
adjustment is treated
[[Page 253]]
as a net positive adjustment under paragraph (e)(4)(i) of this section,
and the total netted partnership adjustment under paragraph (b)(2) of
this section is $100. Pursuant to paragraph (b)(1) of this section, the
total netted partnership adjustment is multiplied by 40 percent for an
imputed underpayment of $40.
(8) Example 8. Partnership reports on its 2019 partnership return
$400 of CFTEs in the general category under section 904(d). The IRS
initiates an administrative proceeding with respect to Partnership's
2019 taxable year and determines that the amount of CFTEs was $300
instead of $400 (-$100 adjustment to CFTEs). No other adjustments are
made for the 2019 taxable year. The -$100 adjustment to CFTEs is placed
in the creditable expenditure grouping described in paragraph (c)(4) of
this section. Pursuant to paragraph (e)(3)(iii) of this section, the
decrease to CFTEs in the creditable expenditure grouping is treated as a
positive adjustment to (decrease in) credits in the credit grouping
under paragraph (c)(3) of this section. Because no other adjustments
have been made, the $100 decrease in credits produces an imputed
underpayment of $100 under paragraph (b)(1) of this section.
(9) Example 9. Partnership reports on its 2019 partnership return
$400 of CFTEs in the passive category under section 904(d). The IRS
initiates an administrative proceeding with respect to Partnership's
2019 taxable year and determines that the CFTEs reported by Partnership
were general category instead of passive category CFTEs. No other
adjustments are made. Under the rules in paragraph (c)(6) of this
section, an adjustment to the category of a CFTE is treated as two
separate adjustments: An increase to general category CFTEs of $400 and
a decrease to passive category CFTEs of $400. Both adjustments are
included in the creditable expenditure grouping under paragraph (c)(4)
of this section, but they are included in separate subgroupings.
Therefore, the two amounts do not net. Instead, the $400 increase to
CFTEs in the general category subgrouping is treated as a net negative
adjustment under paragraph (e)(3)(iii)(A) of this section and is an
adjustment that does not result in an imputed underpayment under
paragraph (f) of this section. The decrease to CFTEs in the passive
category subgrouping of the creditable expenditure grouping results in a
decrease in CFTEs. Therefore, pursuant to paragraph (e)(3)(iii)(A) of
this section, it is treated as a positive adjustment to (decrease in)
credits in the credit grouping under paragraph (c)(3) of this section,
which results in an imputed underpayment of $400 under paragraph (b)(1)
of this section.
(10) Example 10. Partnership has two partners, A and B. Under the
partnership agreement, $100 of the CFTE is specially allocated to A for
the 2019 taxable year. The IRS initiates an administrative proceeding
with respect to Partnership's 2019 taxable year and determines that $100
of CFTE should be reallocated from A to B. Because the adjustment
reallocates a creditable expenditure, paragraph (c)(4) of this section
provides that it is included in the creditable expenditure grouping
rather than the reallocation grouping. The partnership adjustment is a -
$100 adjustment to general category CFTE allocable to A and an increase
of $100 to general category CFTE allocable to B. Pursuant to paragraph
(d)(3)(iii) of this section, the -$100 adjustment to general category
CFTE and the increase of $100 to general category CFTE are included in
separate subgroupings in the creditable expenditure grouping. The $100
increase in general category CFTEs, B-allocation subgrouping, is a net
negative adjustment, which does not result in an imputed underpayment
and is therefore taken into account by the partnership in the adjustment
year in accordance with Sec. 301.6225-3. The net decrease to CFTEs in
the general-category, A-allocation subgrouping, is treated as a positive
adjustment to (decrease in) credits in the credit grouping under
paragraph (c)(3) of this section, resulting in an imputed underpayment
of $100 under paragraph (b)(1) of this section.
(11) Example 11. Partnership has two partners, A and B. Partnership
owns two entities, DE1 and DE2, that are disregarded as separate from
their owner for Federal income tax purposes and are operating in and
paying taxes to
[[Page 254]]
foreign jurisdictions. The partnership agreement provides that all items
from DE1 and DE2 are allocable to A and B in the following manner. Items
related to DE1: To A 75 percent and to B 25 percent. Items related to
DE2: To A 25 percent and to B 75 percent. On Partnership's 2018 return,
Partnership reports CFTEs in the general category of $300, $100 with
respect to DE1 and $200 with respect to DE2. Partnership allocates the
$300 of CFTEs $125 and $175 to A and B respectively. During an
administrative proceeding with respect to Partnership's 2018 taxable
year, the IRS determines that Partnership understated the amount of
creditable foreign tax paid by DE2 by $40 and overstated the amount of
creditable foreign tax paid by DE1 by $80. No other adjustments are
made. Because the two adjustments each relate to CFTEs that are subject
to different allocations, the two adjustments are in different
subgroupings under paragraph (d)(3)(iii)(B) of this section. The
adjustment reducing the CFTEs related to DE1 results in a decrease in
CFTEs within that subgrouping and under paragraph (e)(3)(iii)(A) of this
section is treated as a decrease in credits in the credit grouping under
paragraph (c)(3) of this section and results in an imputed underpayment
of $80 under paragraph (b)(1) of this section. The increase of $40 of
general category CFTE related to the DE2 subgrouping results in an
increase in CFTEs within that subgrouping and is treated as a net
negative adjustment, which does not result in an imputed underpayment
and is taken into account in the adjustment year in accordance with
Sec. 301.6225-3.
(12) Example 12. Partnership has two partners, A and B. For the 2019
taxable year, Partnership allocated $70 of long term capital loss to B
as well as $30 of ordinary income. In an administrative proceeding with
respect to Partnership's 2019 taxable year, the IRS determines that the
$30 of ordinary income and the $70 of long term capital loss should be
reallocated from B to A. The partnership adjustments are a decrease of
$30 of ordinary income (-$30 adjustment) allocated to B and a
corresponding increase of $30 of ordinary income ($30 adjustment)
allocated to A, as well as a decrease of $70 of long term capital loss
($70 adjustment) allocated to B and a corresponding increase of $70 of
long term capital loss (-$70 adjustment) allocated to A. See paragraph
(c)(2)(ii) of this section. Pursuant to paragraph (d)(3)(ii)(A) of this
section, for purposes of determining the imputed underpayment, each
positive adjustment and each negative adjustment allocated to A and B is
placed in its own separate subgrouping. However, notwithstanding the
general requirement that reallocation adjustments be subgrouped
separately, the reallocation adjustments allocated to A and B may be
subgrouped in accordance with paragraph (d)(3)(i) of this section
because there are two reallocation adjustments allocated to each of A
and B, respectively. Pursuant to paragraph (d)(3)(i) of this section,
because the partnership adjustment allocated to A would not have been
netted at the partnership level and would not have been allocated to A
as a single partnership-related item for purposes of section 702(a),
other provisions of the Code, regulations, forms, instructions, or other
guidance prescribed by the IRS, the positive adjustment and the negative
adjustment allocated to A remain in separate subgroupings. For the same
reasons with respect to the adjustments allocated to B, the positive
adjustment and the negative adjustment allocated to B also remain in
separate subgroupings. As a result, the reallocation grouping would have
four subgroupings, one for each adjustment: The decrease in ordinary
income allocated to B (-$30 adjustment), the increase in ordinary income
allocated to A ($30 adjustment), the decrease in long term capital loss
allocated to B ($70 adjustment), and the increase long term capital loss
allocated to A (-$70 adjustment). Pursuant to paragraph (e) of this
section, no netting may occur between subgroupings. Accordingly, the
ordinary income allocated to A ($30 adjustment) and the long term
capital loss allocated to B ($70 adjustment) are both net positive
adjustments. These net positive adjustments are added together to
determine the total netted partnership adjustment of $100. The total
netted partnership adjustment is multiplied by 40 percent, which results
[[Page 255]]
in an imputed underpayment of $40. The ordinary income allocated to B (-
$30 adjustment) and the long term capital loss allocated to A (-$70
adjustment) are net negative adjustments treated as adjustments that do
not result in an imputed underpayment taken into account by the
partnership pursuant to Sec. 301.6225-3.
(13) Example 13. The IRS initiates an administrative proceeding with
respect to Partnership's 2019 partnership return and makes adjustments
as follows: net positive adjustment of $100 ordinary income, net
negative adjustment of $20 in credits, and a net negative adjustment of
$25 to a chapter 1 tax liability of the partnership. The IRS determines
that the net negative adjustment in credits should be taken into account
in the calculation of the imputed underpayment in accordance with
paragraph (b)(1)(v) of this section. Pursuant to paragraph (b)(1) of
this section, the $100 net positive adjustment to ordinary income is
multiplied by 40 percent (highest tax rate in effect), which results in
a $40 imputed underpayment. The adjustments in the credits grouping are
then applied, which include the adjustment to credits and the adjustment
to the chapter 1 tax liability. Applying the credits results in an
amount less than zero as described in paragraph (f)(3)(i) of this
section ($40-$20-$25 = -$5). Pursuant to paragraph (f)(3)(ii) of this
section, the imputed underpayment is recalculated without regard to the
adjustment to the chapter 1 tax liability, resulting in a recalculation
amount greater than zero as described in paragraph (f)(3)(ii)(B) of this
section ($40-$20 = $20). Pursuant to paragraph (f)(3)(ii)(B) of this
section, the IRS may apply a portion of the adjustment to chapter 1 tax
liability to reduce the recalculation to zero but not below zero. In
this case, the recalculation amount would be reduced to zero using $20
of the $25 adjustment to chapter 1 tax liability. Because the imputed
underpayment was reduced to zero, pursuant to paragraph (f)(3)(ii)(B) of
this section, the adjustments that went into the recalculation are not
adjustments that do not result in an imputed underpayment. These
adjustments are the $100 adjustment to ordinary income and the $20
adjustment to credits. The remaining $5 adjustment to the chapter 1 tax
liability of the partnership is an adjustment that is treated as
described in paragraph (e)(3)(ii) of this section and is therefore not
taken into account on the partnership's adjustment year return.
(14) Example 14. The facts are the same as in paragraph (h)(13) of
this section (Example 13), but the negative adjustment to credits is $50
instead of $20. Applying the credits results in an amount less than zero
as described in paragraph (f)(3)(i) of this section ($40-$50-$25 = -
$35). Pursuant to paragraph (f)(3)(ii) of this section, the imputed
underpayment is recalculated without regard to the adjustment to the
chapter 1 tax liability, resulting in a recalculation amount less than
zero as described in paragraph (f)(3)(ii)(C) of this section ($40-$50 =
-$10). Pursuant to paragraph (f)(3)(ii)(C) of this section, the
partnership adjustments resulting in the -$10 recalculation amount are
adjustments that do not result in an imputed underpayment treated in
accordance with paragraph (f)(1)(ii) of this section, and the $25
adjustment to chapter 1 tax liability is not treated as such an
adjustment and is therefore not taken into account on the partnership's
adjustment year return.
(15) Example 15. On its timely filed return for the 2022 taxable
year, Partnership reports that it self-certified as a qualified
opportunity fund, as defined in section 1400Z-2(d). Partnership also
reports that it has not satisfied the 90-percent investment standard, as
defined in Sec. 1.1400Z2(a)-1(b)(4) of this chapter, and reports an
amount due under section 1400Z-2(f) of $100. The IRS does not utilize
Sec. 301.6241-7(g) to determine adjustments to these partnership-
related items without regard to subchapter C of chapter 63. In an
administrative proceeding involving Partnership's 2022 taxable year, the
IRS, in examining the amount due under section 1400Z-2(f), determines
that Partnership incorrectly reported its qualified opportunity zone
property for one month and that there should be one $40 adjustment to
reduce the assets Partnership reported as qualified opportunity zone
property. The IRS also determines that the basis of one of
[[Page 256]]
Partnership's qualified opportunity zone properties should be reduced by
$30. Under paragraph (d) of this section, the adjustments to the basis
and character of an asset are not adjustments to an item of income.
Therefore, the $30 adjustment to the basis of the asset and the $40
recharacterization of an asset are treated as positive adjustments. As a
result of the determinations, the IRS determines that the amount due for
Partnership failing the section 1400Z-2(d)(1) investment standard should
be increased. This results in a $4 adjustment to Partnership's liability
under section 1400Z-2(f) which, under paragraph (d)(2) of this section
is a positive adjustment because it is an increase in an amount
Partnership is liable for under chapter 1. The total netted partnership
adjustment for the 2022 taxable year is $70 ($30 basis adjustment + $40
recharacterization adjustment). Under paragraph (c)(3) of this section,
the $4 adjustment to Partnership's liability under chapter 1 is treated
as an adjustment to a credit. Assuming the highest rate under section 1
or 11 is 40% this results in an imputed underpayment of $32 (($70 x 40%)
+ $4 section 1400Z-2(f) adjustment). The IRS issues a notice of final
partnership adjustment to Partnership for its 2022 taxable year and
Partnership makes a timely election under section 6226 with regard to
the $32 imputed underpayment. Under Sec. 301.6226-2(g)(4) , when
Partnership furnishes statements to its reviewed year partners,
Partnership must pay the $4 section 1400Z-2(f) amount because it is the
liability of Partnership and may not include that adjustment in the
statements.
(i) Applicability date--(1) In general. Except as provided in
paragraph (i)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017, and ending after August
12, 2018. Notwithstanding the preceding sentence, paragraphs (b)(4),
(c)(3), (d)(2)(ii), (e)(3)(ii), (f)(1)(ii), (f)(3), and (h)(13), (14),
and (15) of this section apply to taxable years ending on or after
November 20, 2020.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable year beginning after November 2, 2015 and
before January 1, 2018, for which a valid election under Sec. 301.9100-
22T is in effect.
[T.D. 9844, 84 FR 6534, Feb. 27, 2019, as amended by T.D. 9969, 87 FR
75490, Dec. 9, 2022; 88 FR 756, Jan. 5, 2023]
Sec. 301.6225-2 Modification of imputed underpayment.
(a) Partnership may request modification of an imputed underpayment.
A partnership that has received a notice of proposed partnership
adjustment (NOPPA) under section 6231(a)(2) from the Internal Revenue
Service (IRS) may request modification of a proposed imputed
underpayment set forth in the NOPPA in accordance with this section and
any forms, instructions, and other guidance prescribed by the IRS. The
effect of modification on a proposed imputed underpayment is described
in paragraph (b) of this section. Unless otherwise described in
paragraph (d) of this section, a partnership may request any type of
modification of an imputed underpayment described in paragraph (d) of
this section in the time and manner described in paragraph (c) of this
section. A partnership may request modification with respect to a
partnership adjustment (as defined in Sec. 301.6241-1(a)(6)) that does
not result in an imputed underpayment (as described in Sec. 301.6225-
1(f)(1)(ii)) as described in paragraph (e) of this section. Only the
partnership representative may request modification under this section.
See section 6223 and Sec. 301.6223-2 for rules regarding the binding
authority of the partnership representative. For purposes of this
section, the term relevant partner means any person for whom
modification is requested by the partnership that is--
(1) A reviewed year partner (as defined in Sec. 301.6241-1(a)(9)),
including any pass-through partner (as defined in Sec. 301.6241-
1(a)(5)), except for any reviewed year partner that is a wholly-owned
entity disregarded as separate from its owner for Federal income tax
purposes; or
(2) An indirect partner (as defined in Sec. 301.6241-1(a)(4))
except for any indirect partner that is a wholly-owned entity
disregarded as separate from its owner for Federal income tax purposes.
[[Page 257]]
(b) Effect of modification-(1) In general. A modification of an
imputed underpayment under this section that is approved by the IRS may
result in an increase or decrease in the amount of an imputed
underpayment set forth in the NOPPA. A modification under this section
has no effect on the amount of any partnership adjustment determined
under subchapter C of chapter 63 of the Internal Revenue Code
(subchapter C of chapter 63). See paragraph (e) of this section for the
effect of modification on adjustments that do not result in an imputed
underpayment. A modification may increase or decrease an imputed
underpayment by affecting the extent to which adjustments factor into
the determination of the imputed underpayment (as described in paragraph
(b)(2) of this section), the tax rate that is applied in calculating the
imputed underpayment (as described in paragraph (b)(3) of this section),
and the number and composition of imputed underpayments, including the
placement of adjustments in groupings and subgroupings (if applicable)
(as described in paragraph (b)(4) of this section), as well as to the
extent of other modifications allowed under rules provided in forms,
instructions, or other guidance prescribed by the IRS (as described in
paragraph (b)(5) of this section). If a partnership requests more than
one modification under this section, modifications are taken into
account in the following order:
(i) Modifications that affect the extent to which an adjustment
factors into the determination of the imputed underpayment under
paragraph (b)(2) of this section;
(ii) Modification of the number and composition of imputed
underpayments under paragraph (b)(4) of this section; and
(iii) Modifications that affect the tax rate under paragraph (b)(3)
of this section.
(2) Modifications that affect partnership adjustments for purposes
of determining the imputed underpayment. If the IRS approves
modification with respect to a partnership adjustment, such partnership
adjustment is excluded from the determination of the imputed
underpayment as determined under Sec. 301.6225-1(b). This paragraph
(b)(2) applies to modifications under--
(i) Paragraph (d)(2) of this section (amended returns and the
alternative procedure to filing amended returns);
(ii) Paragraph (d)(3) of this section (tax-exempt status);
(iii) Paragraph (d)(5) of this section (specified passive activity
losses);
(iv) Paragraph (d)(7) of this section (qualified investment
entities);
(v) Paragraph (d)(8) of this section (closing agreements), if
applicable;
(vi) Paragraph (d)(9) of this section (tax treaty modifications), if
applicable; and
(vii) Paragraph (d)(10) of this section (other modifications), if
applicable.
(3) Modifications that affect the tax rate--(i) In general. If the
IRS approves a modification with respect to the tax rate applied to a
partnership adjustment, such modification results in a reduction in tax
rate applied to the total netted partnership adjustment with respect to
the partnership adjustments in accordance with this paragraph (b)(3). A
modification of the tax rate does not affect how the partnership
adjustment factors into the calculation of the total netted partnership
adjustment. This paragraph (b)(3) applies to modifications under--
(A) Paragraph (d)(4) of this section (rate modification);
(B) Paragraph (d)(8) of this section (closing agreements), if
applicable;
(C) Paragraph (d)(9) of this section (tax treaty modifications), if
applicable; and
(D) Paragraph (d)(10) of this section (other modifications), if
applicable.
(ii) Determination of the imputed underpayment in the case of rate
modification. Except as described in paragraph (b)(3)(iv) of this
section, in the case of an approved modification described under
paragraph (b)(3)(i) of this section, the imputed underpayment is the sum
of the total netted partnership adjustment consisting of the net
positive adjustments not subject to rate reduction under paragraph
(b)(3)(i) of this section (taking into account any approved
modifications under paragraph (b)(2) of the section), plus the rate-
modified netted partnership adjustment determined under paragraph
(b)(3)(iii) of this section, reduced or increased by
[[Page 258]]
any adjustments to credits (taking into account any modifications under
paragraph (b)(4) of this section). The total netted partnership
adjustment not subject to rate reduction under paragraph (b)(3)(i) of
this section (taking into account any approved modifications under
paragraph (b)(2) of the section) is determined by multiplying the
partnership adjustments included in the total netted partnership
adjustment that are not subject to rate modification under paragraph
(b)(3)(i) of this section (including any partnership adjustment that
remains after applying paragraph (b)(3)(iii) of this section) by the
highest tax rate (as described in Sec. 301.6225-1(b)(1)(iv)).
(iii) Calculation of rate-modified netted partnership adjustment in
the case of a rate modification. The rate-modified netted partnership
adjustment is determined as follows--
(A) Determine each relevant partner's distributive share of the
partnership adjustments subject to an approved modification under
paragraph (b)(3)(i) of this section based on how each adjustment subject
to rate modification was allocated in the NOPPA, or if the appropriate
allocation was not addressed in the NOPPA, how the adjustment would be
properly allocated under subchapter K of chapter 1 of the Internal
Revenue Code (subchapter K) to such relevant partner in the reviewed
year (as defined in Sec. 301.6241-1(a)(8)).
(B) Multiply each partnership adjustment determined under paragraph
(b)(3)(iii)(A) of this section by the tax rate applicable to such
adjustment based on the approved modification described under paragraph
(b)(3)(i) of this section.
(C) Add all of the amounts calculated under paragraph (b)(3)(iii)(B)
of this section with respect to each partnership adjustment subject to
an approved modification described under paragraph (b)(3)(i) of this
section.
(iv) Rate modification in the case of special allocations. If an
imputed underpayment results from adjustments to more than one
partnership-related item and any relevant partner for whom modification
described under paragraph (b)(3)(i) of this section is approved has a
distributive share of such items that is not the same with respect to
all such items, the imputed underpayment as modified based on the
modification types described under paragraph (b)(3)(i) of this section
is determined as described in paragraphs (b)(3)(ii) and (iii) of this
section except that each relevant partner's distributive share is
determined based on the amount of net gain or loss to the partner that
would have resulted if the partnership had sold all of its assets at
their fair market value as of the close of the reviewed year
appropriately adjusted to reflect any approved modification under
paragraphs (d)(2), (3), and (5) through (10) of this section with
respect to any relevant partner. Notwithstanding the preceding sentence,
the partnership may request that the IRS apply the rule in paragraph
(b)(3)(iii)(A) of this section when determining each relevant partner's
distributive share for purposes of this paragraph (b)(3)(iv). Upon
request by the IRS, the partnership may be required to provide the
relevant partners' capital account calculation through the end of the
reviewed year, a calculation of asset liquidation gain or loss, and any
other information necessary to determine whether rate modification is
appropriate, consistent with the rules of paragraph (c)(2) of this
section. Any calculation by the partnership that is necessary to comply
with the rules in this paragraph (b)(3)(iv) is not considered a
revaluation for purposes of section 704.
(4) Modification of the number and composition of imputed
underpayments. Once approved by the IRS, a modification under paragraph
(d)(6) of this section affects the manner in which adjustments are
placed into groupings and subgroupings (as described in Sec. 301.6225-
1(c) and (d)) or whether the IRS designates one or more specific imputed
underpayments (as described in Sec. 301.6225-1(g)). If the IRS approves
a request for modification under this paragraph (b)(4), the imputed
underpayment and any specific imputed underpayment affected by or
resulting from the modification is determined according to the rules of
Sec. 301.6225-1 subject to any other modifications approved by the IRS
under this section.
[[Page 259]]
(5) Other modifications. The effect of other modifications described
in paragraph (d)(10) of this section, including the order that such
modification will be taken into account for purposes of paragraph (b)(1)
of this section, may be set forth in forms, instructions, or other
guidance prescribed by the IRS.
(c) Time, form, and manner for requesting modification--(1) In
general. In addition to the requirements described in paragraph (d) of
this section, a request for modification under this section must be
submitted in accordance with, and include the information required by,
the forms, instructions, and other guidance prescribed by the IRS. The
partnership representative must submit any request for modification and
all relevant information (including information required under
paragraphs (c)(2) and (d) of this section) to the IRS within the time
described in paragraph (c)(3) of this section. The IRS will notify the
partnership representative in writing of the approval or denial, in
whole or in part, of any request for modification. A request for
modification, including a request by the IRS for information related to
a request for modification, and the determination by the IRS to approve
or not approve all or a portion of a request for modification, is part
of the administrative proceeding with respect to the partnership under
subchapter C of chapter 63 and does not constitute an examination,
inspection, or other administrative proceeding with respect to any other
person for purposes of section 7605(b).
(2) Partnership must substantiate facts supporting a request for
modification--(i) In general. A partnership requesting modification
under this section must substantiate the facts supporting such a request
to the satisfaction of the IRS. The documents and other information
necessary to substantiate a particular request for modification are
based on the facts and circumstances of each request, as well as the
type of modification requested under paragraph (d) of this section, and
may include tax returns, partnership operating documents, certifications
in the form and manner required with respect to the particular
modification, and any other information necessary to support the
requested modification. The IRS may, in forms, instructions, or other
guidance, set forth procedures with respect to information and documents
supporting the modification, including procedures to require particular
documents or other information to substantiate a particular type of
modification, the manner for submitting documents and other information
to the IRS, and recordkeeping requirements. Pursuant to section
6241(10), the IRS may require the partnership to file or submit anything
required to be filed or submitted under this section to be filed or
submitted electronically. The IRS will deny a request for modification
if a partnership fails to provide information the IRS determines is
necessary to substantiate a request for modification, or if the IRS
determines there is a failure by any person to make any required
payment, within the time restrictions described in paragraph (c) of this
section.
(ii) Information to be furnished for any modification request. In
the case of any modification request, the partnership representative
must furnish to the IRS such information as is required by forms,
instructions, and other guidance prescribed by the IRS or that is
otherwise requested by the IRS related to the requested modification.
Such information may include a detailed description of the partnership's
structure, allocations, ownership, and ownership changes, its relevant
partners for each taxable year relevant to the request for modification,
as well as the partnership agreement as defined in Sec. 1.704-
1(b)(2)(ii)(h) of this chapter for each taxable year relevant to the
modification request. In the case of any modification request with
respect to a relevant partner that is an indirect partner, the
partnership representative must provide to the IRS any information that
the IRS may require relevant to any pass-through partner or wholly-owned
entity disregarded as separate from its owner for Federal income tax
purposes through which the relevant partner holds its interest in the
partnership. For instance, if the partnership requests modification with
respect to an amended return filed by a relevant partner pursuant to
paragraph (d)(2) of this section, the partnership
[[Page 260]]
representative may be required to provide to the IRS information that
would have been required to have been filed by pass-through partners
through which the relevant partner holds its interest in the partnership
as if those pass-through partners had also filed their own amended
returns.
(3) Time for submitting modification request and information--(i)
Modification request. Unless the IRS grants an extension of time, all
information required under this section with respect to a request for
modification must be submitted to the IRS in the form and manner
prescribed by the IRS on or before 270 days after the date the NOPPA is
mailed.
(ii) Extension of the 270-day period. The IRS may, in its
discretion, grant a request for extension of the 270-day period
described in paragraph (c)(3)(i) of this section provided the
partnership submits such request to the IRS, in the form and manner
prescribed by forms, instructions, or other guidance prescribed by the
IRS before expiration of such period, as extended by any prior extension
granted under this paragraph (c)(3)(ii).
(iii) Expiration of the 270-day period by agreement. The 270-day
period described in paragraph (c)(3)(i) of this section (including any
extensions under paragraph (c)(3)(ii) of this section) expires as of the
date the partnership and the IRS agree, in the form and manner
prescribed by form, instructions, or other guidance prescribed by the
IRS to waive the 270-day period after the mailing of the NOPPA and
before the IRS may issue a notice of final partnership adjustment. See
section 6231(b)(2)(A); Sec. 301.6231-1(b)(2).
(4) Approval of modification by the IRS. Notification of approval
will be provided to the partnership only after receipt of all relevant
information (including any supplemental information required by the IRS)
and all necessary payments with respect to the particular modification
requested before expiration of the 270-day period in paragraph (c)(3)(i)
of this section plus any extension granted by the IRS under paragraph
(c)(3)(ii) of this section.
(d) Types of modification--(1) In general. Except as otherwise
described in this section, a partnership may request one type of
modification or more than one type of modification described in
paragraph (d) of this section.
(2) Amended returns by partners--(i) In general. A partnership may
request a modification of an imputed underpayment based on an amended
return filed by a relevant partner provided all of the partnership
adjustments properly allocable to such relevant partner are taken into
account and any amount due is paid in accordance with paragraph (d)(2)
of this section. Only adjustments to partnership-related items or
adjustments to a relevant partner's tax attributes affected by
adjustments to partnership-related items may be taken into account on an
amended return under paragraph (d)(2) of this section. A partnership may
request a modification for purposes of paragraph (d)(2) of this section
by submitting a modification request based on the alternative procedure
to filing amended returns as described in paragraph (d)(2)(x) of this
section. The partnership may not request an additional modification of
any imputed underpayment for a partnership taxable year under this
section with respect to any relevant partner that files an amended
return (or utilizes the alternative procedure to filing amended returns)
under paragraph (d)(2) of this section or with respect to any
partnership adjustment allocated to such relevant partner.
(ii) Requirements for approval of a modification request based on
amended return. Except as otherwise provided under the alternative
procedure described in paragraph (d)(2)(x) of this section, an amended
return modification request under paragraph (d)(2) of this section will
not be approved unless the provisions of this paragraph (d)(2)(ii) are
satisfied. The partnership may satisfy the requirements of paragraph
(d)(2) of this section by demonstrating in accordance with forms,
instructions, and other guidance provided by the IRS that a relevant
partner has previously taken into account the partnership adjustments
described in paragraph (d)(2)(i) of this section, made any required
adjustments to tax
[[Page 261]]
attributes resulting from the partnership adjustments for the years
described in paragraph (d)(2)(ii)(B) of this section, and made all
required payments under paragraph (d)(2)(ii)(A) of this section.
(A) Full payment required. An amended return modification request
under paragraph (d)(2) of this section will not be approved unless the
relevant partner filing the amended return has paid all tax, penalties,
additions to tax, additional amounts, and interest due as a result of
taking into account all partnership adjustments in the first affected
year (as defined in Sec. 301.6226-3(b)(2)) and all modification years
(as described in paragraph (d)(2)(ii)(B) of this section) at the time
such return is filed with the IRS. Except for a pass-through partner
calculating its payment amount pursuant to paragraph (d)(2)(vi) of this
section, for purposes of this paragraph (d)(2)(ii)(A), the term tax
means tax imposed by chapter 1 of the Internal Revenue Code (chapter 1).
(B) Amended returns for all relevant taxable years must be filed.
Modification under paragraph (d)(2) of this section will not be approved
by the IRS unless a relevant partner files an amended return for the
first affected year and any modification year. A modification year is
any taxable year with respect to which any tax attribute (as defined in
Sec. 301.6241-1(a)(10)) of the relevant partner is affected by reason
of taking into account the relevant partner's distributive share of all
partnership adjustments in the first affected year. A modification year
may be a taxable year before or after the first affected year, depending
on the effect on the relevant partner's tax attributes of taking into
account the relevant partner's distributive share of the partnership
adjustments in the first affected year.
(C) Amended returns for partnership adjustments that reallocate
distributive shares. Except as described in this paragraph
(d)(2)(ii)(C), in the case of partnership adjustments that reallocate
the distributive shares of any partnership-related item from one partner
to another, a modification under paragraph (d)(2) of this section will
be approved only if all partners affected by such adjustments file
amended returns in accordance with paragraph (d)(2) of this section. The
IRS may determine that the requirements of this paragraph (d)(2)(ii)(C)
are satisfied even if not all relevant partners affected by such
adjustments file amended returns provided any relevant partners affected
by the reallocation not filing amended returns take into account their
distributive share of the adjustments through other modifications
approved by the IRS (including the alternative procedure to filing
amended returns under paragraph (d)(2)(x) of this section) or if a pass-
through partner takes into account the relevant adjustments in
accordance with paragraph (d)(2)(vi) of this section. For instance, in
the case of adjustments that reallocate a loss from one partner to
another, the IRS may determine that the requirements of this paragraph
(d)(2)(ii)(C) have been satisfied if one affected relevant partner files
an amended return taking into account the adjustments and the other
affected relevant partner signs a closing agreement with the IRS taking
into account the adjustments. Similarly, in the case of adjustment that
reallocate income from one partner to another, the IRS may determine
that the requirements of this paragraph (d)(2)(ii)(C) have been
satisfied to the extent an affected relevant partner meets the
requirements of paragraph (d)(3) of this section (regarding tax-exempt
partners) and through such modification fully takes into account all
adjustments reallocated to the affected relevant partner.
(iii) Form and manner for filing amended returns. A relevant partner
must file all amended returns required for modification under paragraph
(d)(2) of this section with the IRS in accordance with forms,
instructions, and other guidance prescribed by the IRS. Except as
otherwise provided under the alternative procedure described in
paragraph (d)(2)(x) of this section, the IRS will not approve
modification under paragraph (d)(2) of this section unless prior to the
expiration of the 270-day period described in paragraph (c)(3) of this
section, the partnership representative provides to the IRS, in the form
and manner prescribed by the IRS, an affidavit from each relevant
partner signed under penalties of perjury by
[[Page 262]]
such partner stating that all of the amended returns required to be
filed under paragraph (d)(2) of this section has been filed (including
the date on which such amended returns were filed) and that the full
amount of tax, penalties, additions to tax, additional amounts, and
interest was paid (including the date on which such amounts were paid).
(iv) Period of limitations. Generally, the period of limitations
under sections 6501 and 6511 do not apply to an amended return filed
under paragraph (d)(2) of this section provided the amended return
otherwise meets the requirements of paragraph (d)(2) of this section.
(v) Amended returns in the case of adjustments allocated through
certain pass-through partners. A request for modification related to an
amended return of a relevant partner that is an indirect partner holding
its interest in the partnership (directly or indirectly) through a pass-
through partner that could be subject to tax imposed by chapter 1
(chapter 1 tax) on the partnership adjustments that are properly
allocated to such pass-through partner will not be approved unless the
partnership--
(A) Establishes that the pass-through partner is not subject to
chapter 1 tax on the adjustments that are properly allocated to such
pass-through partner; or
(B) Requests modification with respect to the adjustments resulting
in chapter 1 tax for the pass-through partner, including full payment of
such chapter 1 tax for the first affected year and all modification
years under paragraph (d)(2) of this section or in accordance with
forms, instructions, or other guidance prescribed by the IRS.
(vi) Amended returns in the case of pass-through partners--(A) Pass-
through partners may file amended returns. A relevant partner that is a
pass-through partner, including a partnership-partner (as defined in
Sec. 301.6241-1(a)(7)) that has a valid election under section 6221(b)
in effect for a partnership taxable year, may, in accordance with forms,
instructions, and other guidance provided by the IRS and solely for
purposes of modification under paragraph (d)(2) of this section, take
into account its share of the partnership adjustments and determine and
pay an amount calculated in the same manner as the amount computed under
Sec. 301.6226-3(e)(4)(iii) subject to paragraph (d)(2)(vi)(B) of this
section, by treating any approved modifications and partnership
adjustments allocable to the pass-through partner as items reflected on
the statement furnished to the pass-through partner.
(B) Adjustments that do not result in an imputed underpayment. If a
pass-through partner takes into account its share of the adjustments by
paying an amount described in paragraph (d)(2)(vi)(A) of this section
and there are any adjustments that do not result in an imputed
underpayment (as defined in Sec. 301.6225-1(f)), those adjustments are
taken into account by the pass-through partner in accordance with Sec.
301.6225-3 in the taxable year of the pass-through partner that includes
the date the payment described in paragraph (d)(2)(vi)(A) of this
section is paid. This paragraph (d)(2)(vi)(B) does not apply if, after
making the calculation described in paragraph (d)(2)(vi)(A) of this
section, no amount exists and therefore no payment is required under
paragraph (d)(2)(vi)(A).
(vii) Limitations on amended returns--(A) In general. A relevant
partner may not file an amended return or claim for refund that takes
into account partnership adjustments except as described in paragraph
(d)(2) of this section.
(B) Further amended returns restricted. Except as described in
paragraph (d)(2)(vii)(C) of this section, if a relevant partner files an
amended return under paragraph (d)(2) of this section, or satisfies
paragraph (d)(2) of this section by following the alternative procedure
under paragraph (d)(2)(x) of this section (the alternative procedure),
such partner may not file a subsequent amended return or claim for
refund to change the treatment of partnership adjustments taken into
account through amended return or the alternative procedure.
(C) Subsequent returns in the case of changes to partnership
adjustments or denial of modification. Notwithstanding paragraph
(d)(2)(vii)(B) of this section, a relevant partner that has previously
filed an amended return under paragraph (d)(2) of this section, or
satisfied the requirements of paragraph (d)(2) of
[[Page 263]]
this section through the alternative procedure, to take partnership
adjustments into account may, in accordance with forms, instructions,
and other guidance prescribed by the IRS, file a subsequent return or
claim for refund if a determination is made by a court or by the IRS
that results in a change to the partnership adjustments taken into
account in modification under paragraph (d)(2) of this section or a
denial of modification by the IRS under paragraph (c)(2)(i) of this
section with respect to a modification request under paragraph (d)(2) of
this section. Such determinations include a court decision that changes
the partnership adjustments for which modification was requested or a
settlement between the IRS and the partnership pursuant to which the
partnership is not liable for all or a portion of the imputed
underpayment for which modification was requested. Any amended return or
claim for refund filed under this paragraph (d)(2)(vii) is subject to
the period of limitations under section 6511.
(viii) Penalties. The applicability of any penalties, additions to
tax, or additional amounts that relate to an adjustment to a
partnership-related item is determined at the partnership level in
accordance with section 6221(a). However, the amount of penalties,
additions to tax, and additional amounts a relevant partner must pay
under paragraph (d)(2)(ii)(A) of this section for the first affected
year and for any modification year is based on the underpayment or
understatement of tax, if any, reflected on the amended return filed by
the relevant partner under paragraph (d)(2) of this section. For
instance, if after taking into account the adjustments, the return of
the relevant partner for the first affected year or any modification
year reflects an underpayment or an understatement that falls below the
applicable threshold for the imposition of a penalty under section
6662(d), no penalty would be due from that relevant partner for such
year. Unless forms, instructions or other guidance provided by the IRS
allow for an alternative procedure for raising a partner-level defense
(as described in Sec. 301.6226-3(d)(3)), a relevant partner may raise a
partner-level defense by first paying the penalty, addition to tax, or
additional amount with the amended return filed under paragraph (d)(2)
of this section and then filing a claim for refund in accordance with
forms, instructions, and other guidance.
(ix) Effect on tax attributes binding. Any adjustments to the tax
attributes of any relevant partner which are affected by modification
under paragraph (d)(2) of this section are binding on the relevant
partner with respect to the first affected year and all modification
years (as defined in paragraph (d)(2)(ii)(B) of this section). A failure
to adjust any tax attribute in accordance with this paragraph (d)(2)(ix)
is a failure to treat a partnership-related item in a manner which is
consistent with the treatment of such item on the partnership return
within the meaning of section 6222. The provisions of section 6222(c)
and Sec. 301.6222-1(c) (regarding notification of inconsistent
treatment) do not apply with respect to tax attributes under this
paragraph (d)(2)(ix).
(x) Alternative procedure to filing amended returns--(A) In general.
A partnership may satisfy the requirements of paragraph (d)(2) of this
section by submitting on behalf of a relevant partner, in accordance
with forms, instructions, and other guidance provided by the IRS, all
information and payment of any tax, penalties, additions to tax,
additional amounts, and interest that would be required to be provided
if the relevant partner were filing an amended return under paragraph
(d)(2) of this section, except as otherwise provided in relevant forms,
instructions, and other guidance provided by the IRS. A relevant partner
for which the partnership seeks modification under paragraph (d)(2)(x)
of this section must agree to take into account, in accordance with
forms, instructions, and other guidance provided by the IRS, adjustments
to any tax attributes of such relevant partner. A modification request
submitted in accordance with the alternative procedure under paragraph
(d)(2)(x) of this section is not a claim for refund with respect to any
person.
(B) Modifications with respect to reallocation adjustments. A
submission made in accordance with paragraph (d)(2)(x) of this section
with respect to
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any relevant partner is treated as if such relevant partner filed an
amended return for purposes of paragraph (d)(2)(ii)(C) of this section
(regarding the requirement that all relevant partners affected by a
reallocation must file an amended return to be eligible to for the
modification under paragraph (d)(2) of this section) provided the
submission is with respect to the first affected year and all
modification years of such relevant partner as required under paragraph
(d)(2) of this section.
(3) Tax-exempt partners--(i) In general. A partnership may request
modification of an imputed underpayment with respect to partnership
adjustments that the partnership demonstrates to the satisfaction of the
IRS are allocable to a relevant partner that would not owe tax by reason
of its status as a tax-exempt entity (as defined in paragraph (d)(3)(ii)
of this section) in the reviewed year (tax-exempt partner).
(ii) Definition of tax-exempt entity. For purposes of paragraph
(d)(3) of this section, the term tax-exempt entity means a person or
entity defined in section 168(h)(2)(A), (C), or (D).
(iii) Modification limited to portion of partnership adjustments for
which tax-exempt partner not subject to tax. Only the portion of the
partnership adjustments properly allocated to a tax-exempt partner with
respect to which the partner would not be subject to tax for the
reviewed year (tax-exempt portion) may form the basis of a modification
of the imputed underpayment under paragraph (d)(3) of this section. A
modification under paragraph (d)(3) of this section will not be approved
by the IRS unless the partnership provides documentation in accordance
with paragraph (c)(2) of this section to support the tax-exempt
partner's status and the tax-exempt portion of the partnership
adjustment allocable to the tax-exempt partner.
(4) Modification based on a rate of tax lower than the highest
applicable tax rate. A partnership may request modification based on a
lower rate of tax for the reviewed year with respect to adjustments that
are attributable to a relevant partner that is a C corporation and
adjustments with respect to capital gains or qualified dividends that
are attributable to a relevant partner who is an individual. In no event
may the lower rate determined under the preceding sentence be less than
the highest rate in effect for the reviewed year with respect to the
type of income and taxpayer. For instance, with respect to adjustments
that are attributable to a C corporation, the highest rate in effect for
the reviewed year with respect to all C corporations would apply to that
adjustment, regardless of the rate that would apply to the C corporation
based on the amount of that C corporation's taxable income. For purposes
of this paragraph (d)(4), an S corporation is treated as an individual.
(5) Certain passive losses of publicly traded partnerships--(i) In
general. In the case of a publicly traded partnership (as defined in
section 469(k)(2)) requesting modification under this section, an
imputed underpayment is determined without regard to any adjustment that
the partnership demonstrates would be reduced by a specified passive
activity loss (as defined in paragraph (d)(5)(ii) of this section) which
is allocable to a specified partner (as defined in paragraph (d)(5)(iii)
of this section) or qualified relevant partner (as defined in paragraph
(d)(5)(iv) of this section).
(ii) Specified passive activity loss. A specified passive activity
loss carryover amount for any specified partner or qualified relevant
partner of a publicly traded partnership is the lesser of the section
469(k) passive activity loss of that partner which is separately
determined with respect to such partnership--
(A) At the end of the first affected year (affected year loss); or
(B) At the end of--
(1) The specified partner's taxable year in which or with which the
adjustment year (as defined in Sec. 301.6241-1(a)(1)) of the
partnership ends, reduced to the extent any such partner has utilized
any portion of its affected year loss to offset income or gain relating
to the ownership or disposition of its interest in such publicly traded
partnership during either the adjustment year or any other year; or
(2) If the adjustment year has not yet been determined, the most
recent year
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for which the publicly traded partnership has filed a return under
section 6031, reduced to the extent any such partner has utilized any
portion of its affected year loss to offset income or gain relating to
the ownership or disposition of its interest in such publicly traded
partnership during any year.
(iii) Specified partner. A specified partner is a person that for
each taxable year beginning with the first affected year through the
person's taxable year in which or with which the partnership adjustment
year ends satisfies the following three requirements-
(A) The person is a partner of the publicly traded partnership
requesting modification under this section;
(B) The person is an individual, estate, trust, closely held C
corporation, or personal service corporation; and
(C) The person has a specified passive activity loss with respect to
the publicly traded partnership.
(iv) Qualified relevant partner. A qualified relevant partner is a
relevant partner that meets the three requirements to be a specified
partner (as described in paragraphs (d)(5)(iii)(A), (B), and (C) of this
section) for each year beginning with the first affected year through
the year described in paragraph (d)(5)(ii)(B)(2) of this section.
Notwithstanding the preceding sentence, an indirect partner of the
publicly traded partnership requesting modification under this section
may also be a qualified relevant partner under this paragraph (d)(5)(iv)
if that indirect partner meets the requirements of paragraph
(d)(5)(iii)(B) and (C) of this section for each year beginning with the
first affected year through the year described in paragraph
(d)(5)(ii)(B)(2) of this section.
(v) Partner notification requirement to reduce passive losses. If
the IRS approves a modification request under paragraph (d)(5) of this
section, the partnership must report, in accordance with forms,
instructions, or other guidance prescribed by the IRS, to each specified
partner the amount of that specified partner's reduction of its
suspended passive activity loss carryovers at the end of the adjustment
year to take into account the amount of any passive activity losses
applied in connection with such modification request. In the case of a
qualified relevant partner, the partnership must report, in accordance
with forms, instructions, or other guidance prescribed by the IRS, to
each qualified relevant partner the amount of that qualified relevant
partner's reduction of its suspended passive activity loss carryovers at
the end of the taxable year for which the partnership's next return is
due to be filed under section 6031 to be taken into account by the
qualified relevant partner on the partner's return for the year that
includes the end of the partnership's taxable year for which the
partnership's next return is due to be filed under section 6031. In the
case of an indirect partner that is a qualified relevant partner, the
IRS may prescribe additional guidance through forms, instructions, or
other guidance to require reporting under this paragraph (d)(5)(v). The
reduction in suspended passive activity loss carryovers as reported to a
specified partner or qualified relevant partner under this paragraph
(d)(5)(v) is a determination of the partnership under subchapter C of
chapter 63 and is binding on the specified partners and qualified
relevant partners under section 6223.
(6) Modification of the number and composition of imputed
underpayments--(i) In general. A partnership may request modification of
the number or composition of any imputed underpayment included in the
NOPPA by requesting that the IRS include one or more partnership
adjustments in a particular grouping or subgrouping (as described in
Sec. 301.6225-1(c) and (d)) or specific imputed underpayments (as
described in Sec. 301.6225-1(g)) different from the grouping,
subgrouping, or imputed underpayment set forth in the NOPPA. For
example, a partnership may request under paragraph (d)(6) of this
section that one or more partnership adjustments taken into account to
determine a general imputed underpayment set forth in the NOPPA be taken
into account to determine a specific imputed underpayment.
(ii) Request for particular treatment regarding limitations or
restrictions. A modification request under paragraph (d)(6) of this
section includes a request
[[Page 266]]
that one or more partnership adjustments be treated as if no limitations
or restrictions under Sec. 301.6225-1(d) apply and as a result such
adjustments may be subgrouped with other adjustments.
(7) Partnerships with partners that are ``qualified investment
entities'' described in section 860--(i) In general. A partnership may
request a modification of an imputed underpayment based on the
partnership adjustments allocated to a relevant partner where the
modification is based on deficiency dividends distributed as described
in section 860(f) by a relevant partner that is a qualified investment
entity (QIE) under section 860(b) (which includes both a regulated
investment company (RIC) and a real estate investment trust (REIT)).
Modification under paragraph (d)(7) of this section is available only to
the extent that the deficiency dividends take into account adjustments
described in Sec. 301.6225-1 that are also adjustments within the
meaning of section 860(d)(1) or (d)(2) (whichever applies).
(ii) Documentation of deficiency dividend. The partnership must
provide documentation in accordance with paragraph (c) of this section
of the ``determination'' described in section 860(e). Under section
860(e)(2), Sec. 1.860-2(b)(1)(i) of this chapter, and paragraph (d)(8)
of this section, a closing agreement entered into by the QIE partner
pursuant to section 7121 and paragraph (d)(8) of this section is a
determination described in section 860(e), and the date of the
determination is the date in which the closing agreement is approved by
the IRS. In addition, under section 860(e)(4), a determination also
includes a Form 8927, Determination Under Section 860(e)(4) by a
Qualified Investment Entity, properly completed and filed by the RIC or
REIT pursuant to section 860(e)(4). To establish the date of the
determination under section 860(e)(4) and the amount of deficiency
dividends actually paid, the partnership must provide a copy of Form
976, Claim for Deficiency Dividends Deductions by a Personal Holding
Company, Regulated Investment Company, or Real Estate Investment Trust,
properly completed by or on behalf of the QIE pursuant to section
860(g), together with a copy of each of the required attachments for
Form 976.
(8) Closing agreements. A partnership may request modification based
on a closing agreement entered into by the IRS and the partnership or
any relevant partner, or both if appropriate, pursuant to section 7121.
If modification under this paragraph (d)(8) is approved by the IRS, any
partnership adjustment that is taken into account under such closing
agreement and for which any required payment under the closing agreement
is made will not be taken into account in determining the imputed
underpayment under Sec. 301.6225-1. Any required payment under the
closing agreement may include amounts of tax, including tax under
chapters other than chapter 1, interest, penalties, additions to tax and
additional amounts. Generally, the IRS will not approve any additional
modification under this section with respect to a relevant partner to
which a modification under this paragraph (d)(8) has been approved.
(9) Tax treaty modifications. A partnership may request a
modification under this paragraph (d)(9) with respect to a relevant
partner's distributive share of an adjustment to a partnership-related
item if, in the reviewed year, the relevant partner was a foreign person
who qualified under an income tax treaty with the United States for a
reduction or exemption from tax with respect to such partnership-related
item. A partnership requesting modification under this section may also
request a treaty modification under this paragraph (d)(9) regardless of
the treaty status of its partners if, in the reviewed year, the
partnership itself was an entity eligible for such treaty benefits.
(10) Other modifications. A partnership may request a modification
not otherwise described in paragraph (d) of this section, and the IRS
will determine whether such modification is accurate and appropriate in
accordance with paragraph (c)(4) of this section. Additional types of
modifications and the documentation necessary to substantiate such
modifications may be set forth in forms, instructions, or other guidance
prescribed by the IRS.
(e) Modification of adjustments that do not result in an imputed
underpayment. A
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partnership may request modification of adjustments that do not result
in an imputed underpayment (as described in Sec. 301.6225-1(f)(1)(ii))
using modifications described in paragraph (d)(2) of this section
(amended returns and the alternative procedure to filing amended
returns), paragraph (d)(6) of this section (number and composition of
the imputed underpayment), paragraph (d)(8) of this section (closing
agreements), or, if applicable, paragraph (d)(10) of this section (other
modifications).
(f) Examples. The following examples illustrate the rules of this
section. For purposes of these examples, each partnership is subject to
the provisions of subchapter C of chapter 63, each partnership and its
relevant partners are calendar year taxpayers, all relevant partners are
U.S. persons (unless otherwise stated), the highest rate of income tax
in effect for all taxpayers is 40 percent for all relevant periods, and
no partnership requests modification under this section except as
provided in the example.
(1) Example 1. Partnership has two partners during its 2019
partnership taxable year: P and S. P is a partnership, and S is an S
corporation. P has four partners during its 2019 partnership taxable
year: A, C, T and DE. A is an individual, C is a C corporation, T is a
trust, and DE is a wholly-owned entity disregarded as separate from its
owner for Federal income tax purposes. The owner of DE is B, an
individual. T has two beneficiaries during its 2019 taxable year: F and
G, both individuals. S has 3 shareholders during its 2019 taxable year:
H, J, and K, all individuals. For purposes of this section, if
Partnership requests modification with respect to A, B, C, F, G, H, J,
and K, those persons are all relevant partners (as defined in paragraph
(a) of this section). P, S, and DE are not relevant partners (as defined
in paragraph (a) of this section) because DE is a wholly-owned entity
disregarded as separate from its owner for Federal income tax purposes
and modification was not requested with respect to P and S.
(2) Example 2. The IRS initiates an administrative proceeding with
respect to Partnership's 2019 taxable year. The IRS mails a NOPPA to
Partnership for the 2019 partnership taxable year proposing a single
partnership adjustment increasing ordinary income by $100, resulting in
a $40 imputed underpayment ($100 multiplied by the 40 percent tax rate).
Partner A, an individual, held a 20 percent interest in Partnership
during 2019. Partnership timely requests modification under paragraph
(d)(2) of this section based on A's filing an amended return for the
2019 taxable year taking into account $20 of the partnership adjustment
and paying the tax and interest due attributable to A's share of the
increased income and the tax rate applicable to A for the 2019 tax year.
No tax attribute in any other taxable year of A is affected by A's
taking into account A's share of the partnership adjustment for 2019. In
accordance with paragraph (d)(2)(iii) of this section, Partnership's
partnership representative provides the IRS with documentation
demonstrating that A filed the 2019 return and paid all tax and interest
due. The IRS approves the modification and, in accordance with paragraph
(b)(2) of this section, the $20 increase in ordinary income allocable to
A is not included in the calculation of the total netted partnership
adjustment (determined in accordance with Sec. 301.6225-1).
Partnership's total netted partnership adjustment is reduced to $80
($100 adjustment less $20 taken into account by A), and the imputed
underpayment is reduced to $32 (total netted partnership adjustment of
$80 after modification multiplied by 40 percent).
(3) Example 3. The IRS initiates an administrative proceeding with
respect to Partnership's 2019 taxable year. Partnership has two equal
partners during its entire 2019 taxable year: an individual, A, and a
partnership-partner, B. During all of 2019, B has two equal partners: a
tax-exempt entity, C, and an individual, D. The IRS mails a NOPPA to
Partnership for its 2019 taxable year proposing a single partnership
adjustment increasing Partnership's ordinary income by $100, resulting
in a $40 imputed underpayment ($100 total netted partnership adjustment
multiplied by 40 percent). Partnership timely requests modification
under paragraph (d)(3) of this section
[[Page 268]]
with respect to B's partner, C, a tax-exempt entity. In accordance with
paragraph (d)(3)(iii) of this section, Partnership's partnership
representative provides the IRS with documentation substantiating to the
IRS's satisfaction that C held a 25 percent indirect interest in
Partnership through its interest in B during the 2019 taxable year, that
C was a tax-exempt entity defined in paragraph (d)(3)(ii) of this
section during the 2019 taxable year, and that C was not subject to tax
with respect to its entire allocable share of the partnership adjustment
allocated to B (which is $25 (50 percent x 50 percent x $100)). The IRS
approves the modification and, in accordance with paragraph (b)(2) of
this section, the $25 increase in ordinary income allocated to C,
through B, is not included in the calculation of the total netted
partnership adjustment (determined in accordance with Sec. 301.6225-1).
Partnership's total netted partnership adjustment is reduced to $75
($100 adjustment less C's share of the adjustment, $25), and the imputed
underpayment is reduced to $30 (total netted partnership adjustment of
$75, after modification, multiplied by 40 percent).
(4) Example 4. The facts are the same as in Example 3 in paragraph
(f)(3) of this section, except $10 of the $25 of the adjustment
allocated to C is unrelated business taxable income (UBTI) as defined in
section 512 because it is debt-financed income within the meaning of
section 514 (no section 512 UBTI modifications apply) with respect to
which C would be subject to tax if taken into account by C. As a result,
the modification under paragraph (d)(3) of this section with respect to
C relates only to $15 of the $25 of ordinary income allocated to C that
is not UBTI. Therefore, only a modification of $15 ($25 less $10) of the
total $100 partnership adjustment may be approved by the IRS under
paragraph (d)(3) of this section and, in accordance with paragraph
(b)(2) of this section, excluded when determining the imputed
underpayment for Partnership's 2019 taxable year. The total netted
partnership adjustment (determined in accordance with Sec. 301.6225-1)
is reduced to $85 ($100 less $15), and the imputed underpayment is
reduced to $34 (total netted partnership adjustment of $85, after
modification, multiplied by 40 percent).
(5) Example 5. The facts are the same as in Example 3 in paragraph
(f)(3) of this section, except that Partnership also timely requests
modification under paragraph (d)(2) of this section with respect to an
amended return filed by B, and, in accordance with (d)(2)(iii) of this
section, Partnership's partnership representative provides the IRS with
documentation demonstrating that B filed the 2019 return and paid all
tax and interest due. B reports 50 percent of the partnership
adjustments ($50) on its amended return, and B calculates an amount
under paragraph (d)(2)(vi)(A) of this section and Sec. 301.6226-
3(e)(4)(iii) that, pursuant to paragraph (d)(2)(vi)(B) of this section,
takes into account the modification under paragraph (d)(3) of this
section approved by the IRS with respect to B's partner C, a tax-exempt
entity. B makes a payment pursuant to paragraph (d)(2)(ii)(A) of this
section, and the IRS approves the requested modification. Partnership's
total netted partnership adjustment is reduced by $50 (the amount taken
into account by B). Partnership's total netted partnership adjustment
(determined in accordance with Sec. 301.6225-1) is $50, and the imputed
underpayment, after modification, is $20.
(6) Example 6. The facts are the same as in Example 3 in paragraph
(f)(3) of this section, except that in addition to the modification with
respect to tax-exempt entity C, which reduced the imputed underpayment
by excluding from the determination of the imputed underpayment $25 of
the $100 partnership adjustment reflected in the NOPPA, Partnership
timely requests modification under paragraph (d)(2) of this section with
respect to an amended return filed by individual D, and, in accordance
with paragraph (d)(2)(iii) of this section, Partnership's partnership
representative provides the IRS with documentation demonstrating that D
filed the 2019 return and paid all tax and interest due. D's amended
return for D's 2019 taxable year takes into account D's share of the
partnership adjustment (50 percent of B's 50 percent interest in
Partnership, or $25) and D
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paid the tax and interest due as a result of taking into account D's
share of the partnership adjustment in accordance with paragraph (d)(2)
of this section. No tax attribute in any other taxable year of D is
affected by D taking into account D's share of the partnership
adjustment for 2019. The IRS approves the modification and the $25
increase in ordinary income allocable to D is not included in the
calculation of the total netted partnership adjustment (determined in
accordance with Sec. 301.6225-1). As a result, Partnership's total
netted partnership adjustment is $50 ($100, less $25 allocable to C,
less $25 taken into account by D), and the imputed underpayment, after
modification, is $20.
(7) Example 7. The IRS initiates an administrative proceeding with
respect to Partnership's 2019 taxable year. All of Partnership's
partners during its 2019 taxable year are individuals. The IRS mails a
NOPPA to Partnership for the 2019 taxable year proposing three
partnership adjustments. The first partnership adjustment is an increase
to ordinary income of $75 for 2019. The second partnership adjustment is
an increase in the depreciation deduction allowed for 2019 of $25, which
under Sec. 301.6225-1(d)(2)(i) is treated as a $25 decrease in income.
The third adjustment is an increase in long-term capital gain of $10 for
2019. Under the partnership agreement in effect for Partnership's 2019
taxable year, the long-term capital gain and the increase in
depreciation would be specially allocated to B and the increase in
ordinary income would be specially allocated to A. In accordance with
Sec. 301.6225-1(c) and (d), the three adjustments are placed into three
separate subgroupings within the residual grouping because the
partnership adjustments would not have been netted at the partnership
level and would not have been required to be allocated to the partners
of the partnership as a single, net partnership-related item for
purposes of section 702(a), other provisions of the Code, regulations,
forms, instructions, or other guidance prescribed by the IRS.
Accordingly, the total netted partnership adjustment is $85 ($75 net
positive adjustment to ordinary income plus $10 net positive adjustment
to long term capital gain), and the imputed under payment is $34 ($85
multiplied by 40 percent). The net negative adjustment to depreciation
is an adjustment that does not result in an imputed underpayment subject
to treatment under Sec. 301.6225-3. Partnership requests a modification
under paragraph (d)(6) of this section to determine a specific imputed
underpayment with respect to the $75 adjustment to ordinary income
allocated to A. The specific imputed underpayment is with respect to $75
of the increase in income specially allocated to A and the general
imputed underpayment is with respect to $10 of the increase in capital
gain and the $25 increase in depreciation deduction specially allocated
to B. If the modification is approved by the IRS, the specific imputed
underpayment would consist of the $75 increase in ordinary income, and
thus the total netted partnership adjustment for the specific imputed
underpayment would be $75. The specific imputed underpayment is thus $30
($75 multiplied by 40 percent). The general imputed underpayment would
consist of two adjustments: The long term capital gain adjustment and
the depreciation adjustment. The long term capital gain adjustment and
the depreciation adjustment would be placed in different subgroupings
under Sec. 301.6225-1(d) because they are treated separately under
section 702. Accordingly, the long term capital gain adjustment and the
depreciation adjustment are not netted, and the long term capital gain
adjustment would be a net positive adjustment while the depreciation
adjustment would be a net negative adjustment. The long term capital
gain net positive adjustment would be the only net positive adjustment,
resulting in a total netted partnership adjustment of $10. The general
imputed underpayment is $4 ($10 multiplied by 40 percent), and the net
negative adjustment to depreciation of $25 would be an adjustment that
does not result in an imputed underpayment under Sec. 301.6225-1(f)
associated with the general imputed underpayment.
(8) Example 8. Partnership has two reviewed year partners, C1 and
C2, both of which are C corporations. The IRS mails to Partnership a
NOPPA with two adjustments, both based on rental
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real estate activity. The first adjustment is an increase of rental real
estate income of $100 attributable to Property A. The second adjustment
is an increase of rental real estate loss of $30 attributable to
Property B. The Partnership did not treat the leasing arrangement with
respect to Property A and Property B as an appropriate economic unit for
purposes of section 469. If the $100 increase in income attributable to
Property A and the $30 increase in loss attributable to Property B were
included in the same subgrouping and netted, then taking the $30
increase in loss into account would result in a decrease in the amount
of the imputed underpayment. Also, the $30 increased loss might be
limited or restricted if taken into account by any person under the
passive activity rules under section 469. For instance, under section
469, rental activities of the two properties could be treated as two
activities, which could limit a partner's ability to claim the loss. In
addition to the potential limitations under section 469, there are other
potential limitations that might apply if the $30 loss were taken into
account by any person. Therefore, in accordance with Sec. 301.6225-
1(d), the two adjustments are placed in separate subgroupings within the
residual grouping, the total netted partnership adjustment is $100, the
imputed underpayment is $40 ($100 x 40 percent), and the $30 increase in
loss is an adjustment that does not result in an imputed underpayment
under Sec. 301.6225-1(f). Partnership requests modification under
paragraph (d)(6) of this section, substantiating to the satisfaction of
the IRS that C1 and C2 are publicly traded C corporations, and
therefore, the passive activity loss limitations under section 469 of
the Code do not apply. Partnership also substantiates to the
satisfaction of the IRS that no other limitation or restriction applies
that would prevent the grouping of the $100 with the $30 loss. The IRS
approves Partnership's modification request and places the $100 of
income and the $30 loss into the subgrouping in the residual grouping
under the rules described in Sec. 301.6225-1(c)(5). Under Sec.
301.6225-1(e), because the two adjustments are in one subgrouping, they
are netted together, resulting in a total netted partnership adjustment
of $70 ($100 plus -$30) and an imputed underpayment of $28 ($70 x 40
percent). After modification, none of the adjustments is an adjustment
that does not result in an imputed underpayment under Sec. 301.6225-
1(f) because the $30 loss is now netted with the $100 of income in a net
positive adjustment for the residual grouping.
(g) Applicability date--(1) In general. Except as provided in
paragraph (g)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017, and ending after August
12, 2018. Notwithstanding the preceding sentence, paragraph
(d)(2)(vi)(B) of this section applies to taxable years ending on or
after November 20, 2020.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable year beginning after November 2, 2015, and
before January 1, 2018, for which a valid election under Sec. 301.9100-
22 is in effect.
[T.D. 9844, 84 FR 6539, Feb. 27, 2019, as amended by T.D. 9969, 87 FR
75491, Dec. 9, 2022]
Sec. 301.6225-3 Treatment of partnership adjustments that do
not result in an imputed underpayment.
(a) In general. Partnership adjustments (as defined in Sec.
301.6241-1(a)(6)) that do not result in an imputed underpayment (as
described in Sec. 301.6225-1(f)) are taken into account by a
partnership in the adjustment year (as defined in Sec. 301.6241-
1(a)(1)) in accordance with paragraph (b) of this section.
(b) Treatment of adjustments by the partnership--(1) In general.
Except as described in paragraphs (b)(2) through (7) of this section, a
partnership adjustment that does not result in an imputed underpayment
is taken into account as part of non-separately stated income or loss
for the adjustment year depending on whether the adjustment is to a
partnership-related item that is an item of income or loss.
(2) Separately stated items. In the case of a partnership adjustment
to partnership-related item that is required to be separately stated
under section 702, the adjustment is taken into account by the
partnership in the adjustment year
[[Page 271]]
as a reduction in such separately stated item or as an increase in such
separately stated item depending on whether the adjustment is a
reduction or an increase to the separately stated item.
(3) Credits. In the case of an adjustment to a partnership-related
item that is reported or could be reported by a partnership as a credit
on the partnership's return for the reviewed year (as defined in Sec.
301.6241-1(a)(8)), the adjustment is taken into account by the
partnership in the adjustment year as a separately stated item.
(4) Reallocation adjustments. A partnership adjustment that
reallocates a partnership-related item to or from a particular partner
or partners that also does not result in an imputed underpayment
pursuant to Sec. 301.6225-1(f) is taken into account by the partnership
in the adjustment year as a separately stated item or a non-separately
stated item, as required by section 702. Except as provided in forms,
instructions, and other guidance prescribed by the Internal Revenue
Service (IRS), the portion of an adjustment allocated under this
paragraph (b)(4) is allocated to adjustment year partners (as defined in
Sec. 301.6241-1(a)(2)) who are also reviewed year partners (as defined
in Sec. 301.6241-1(a)(9)) with respect to whom the amount was
reallocated.
(5) Adjustments taken into account by partners as part of the
modification process. If, as part of modification under Sec. 301.6225-
2, a relevant partner (as defined in Sec. 301.6225-2(a)) takes into
account a partnership adjustment that does not result in an imputed
underpayment, and the IRS approves the modification, such partnership
adjustment is not taken into account by the partnership in the
adjustment year in accordance with Sec. 301.6225-1(a).
(6) Effect of election under section 6226. If a partnership makes a
valid election under Sec. 301.6226-1 with respect to an imputed
underpayment, a partnership adjustment that does not result in an
imputed underpayment and that is associated with such imputed
underpayment as described in Sec. 301.6225-1(g) is taken into account
by the reviewed year partners in accordance with Sec. 301.6226-3 and is
not taken into account under this section.
(7) Adjustments taken into account previously by partners. If, prior
to the mailing of a notice of administrative proceeding by the IRS or
the filing of an administrative adjustment request by the partnership, a
partner has previously taken into account an adjustment that does not
result in an imputed underpayment that would have been taken into
account under this section, such partnership adjustment is not taken
into account by such partner.
(8) Adjustments to items that are not items of income, gain, loss,
deduction, or credit. The partnership takes into account an adjustment
that does not result in an imputed underpayment that resulted from an
adjustment to an item that is not an item of income, gain, loss,
deduction, or credit by adjusting the item on its adjustment year return
but only to the extent the item would appear on the adjustment year
return without regard to the adjustment. If the item is already
reflected on the partnership's adjustment year return as an item that is
not an item of income, gain, loss, deduction, or credit, or in any year
between the reviewed year and the adjustment year, a partnership should
not create a new item in the amount of the adjustment on the
partnership's adjustment year return.
(c) Treatment of adjustment year partners. The rules under
subchapter K of chapter 1 of the Internal Revenue Code with respect to
the treatment of partners apply in the case of adjustments taken into
account by the partnership under this section.
(d) Examples. The following examples illustrate the rules of this
section. For purposes of these examples, unless otherwise provided, each
partnership is subject to the provisions of subchapter C of chapter 63
of the Internal Revenue Code, each partnership and its relevant partners
are calendar year taxpayers, all relevant partners are U.S. persons
(unless otherwise stated), the highest rate of income tax in effect for
all taxpayers is 40 percent for all relevant periods, and no partnership
requests modification.
(1) Example 1. For all of Partnership's 2019, 2020, and 2021
partnership taxable
[[Page 272]]
years, Partnership has two equal partners, A and B. The IRS initiates an
administrative proceeding with respect to Partnership's 2019 partnership
taxable year. The IRS mails a notice of proposed partnership adjustment
(NOPPA) to Partnership for the 2019 partnership taxable year proposing a
recharacterization adjustment, changing a $100 ordinary loss to a $100
long term capital loss. Under Sec. 301.6225-1, this recharacterization
adjustment results in two adjustments: A $100 increase to ordinary
income (positive adjustment) and a -$100 decrease in long term capital
gain (negative adjustment). Under Sec. 301.6225-1(b), the $100 positive
adjustment is the total netted partnership adjustment, which is
multiplied by the highest rate of 40 percent, resulting in a $40 imputed
underpayment. Under Sec. 301.6225-1(f), the -$100 negative adjustment
is an adjustment that does not result in an imputed underpayment and is
taken into account in accordance with this section. On March 1, 2021,
the IRS mails a notice of final partnership adjustment (FPA), and
because Partnership does not file a petition for readjustment with
respect to the FPA, the adjustments are finally determined in 2021, and
the adjustment year is determined to be 2021 pursuant to Sec. 301.6241-
1(a)(1). Pursuant to paragraph (a) of this section, Partnership takes
into account the -$100 adjustment that does not result in an imputed
underpayment on its 2021 partnership return. In addition to the -$100
adjustment to partnership's 2019 taxable year taken into account under
this section, Partnership has an additional $300 in long term capital
gain reportable in its 2021 taxable year. The -$100 negative adjustment
and the $300 long term capital gain are Partnership's only long term
capital gains and losses for its 2021 taxable year. Because the -$100
net negative adjustment is an adjustment to long term capital gain,
which is a separately stated item under section 702(a)(2), the -$100
negative adjustment must be taken into account in accordance with
paragraph (b)(2) of this section. Partnership includes both the -$100
negative adjustment and the $300 in long term capital gain as separately
stated items on its 2021 tax return.
(2) Example 2. The facts are the same as in Example 1 in paragraph
(d)(1) of this section, except that the IRS proposes a reallocation
adjustment instead of a recharacterization adjustment. The IRS
determines that the -$100 ordinary loss that the Partnership allocated
equally to A and B should instead all be allocated all to A. The IRS
mails a NOPPA for the 2019 partnership taxable year proposing a
reallocation adjustment resulting in a $50 increase in ordinary loss
allocated to A (negative adjustment) and a $50 decrease in ordinary loss
allocated to B (positive adjustment). Because the adjustments are the
result of a reallocation, they are placed in separate subgroupings
pursuant to Sec. 301.6225-1(d). Because the adjustments are in
different subgroupings, the adjustments are not netted under Sec.
301.6225-1(e), resulting in a net negative adjustment of -$50 allocated
to A and a net positive adjustment of $50 to B. Pursuant to Sec.
301.6225-1(b), the total netted partnership adjustment includes the $50
net positive adjustment, and the imputed underpayment is $20 ($50 total
netted partnership adjustment x 40 percent). Pursuant to Sec. 301.6225-
1(f), the -$50 net negative adjustment is an adjustment that does not
result in an imputed underpayment and is taken into account in
accordance with this section. On March 1, 2021, the IRS mails an FPA,
and because Partnership does not file a petition for readjustment with
respect to the FPA, the adjustments are finally determined in 2021, and
the adjustment year is determined to be 2021 pursuant to Sec. 301.6241-
1(a)(1). Pursuant to paragraph (a) of this section, Partnership takes
into account the -$50 adjustment that does not result in an imputed
underpayment on its 2021 partnership return. In addition to the -$50 net
negative adjustment to partnership's 2019 taxable year taken into
account under this section, Partnership also has an additional $300 in
ordinary income reportable in its 2021 taxable year unrelated to the
administrative proceeding with respect to Partnership's 2019 partnership
taxable year. Because the -$50 net negative adjustment is due to a
reallocation, the adjustment must be taken into account under paragraph
(b)(4) of this section.
[[Page 273]]
Because the net negative adjustment was determined to have been entirely
allocable to A, and because A was a reviewed year partner and is also an
adjustment year partner, the net negative adjustment is taken into
account by Partnership by allocating the entire adjustment to A on its
2021 tax return. The -$50 negative adjustment does not reduce the $300
in ordinary income.
(3) Example 3. On its partnership return for the 2020 taxable year,
Partnership placed Asset into service, reporting that Asset, a non-
depreciable asset, had a basis of $100. During an administrative
proceeding with respect to Partnership's 2020 taxable year, the IRS
determines that Asset has a basis of $90 instead of $100. The IRS also
determines that Partnership has a negative adjustment to credits of $4.
There are no other adjustments for Partnership's 2020 taxable year.
Under Sec. 301.6225-1(d)(2)(iii), the adjustment to the basis of an
asset is not an adjustment that is a decrease in an item of income, a
partnership adjustment treated under paragraph Sec. 301.6225-1(d)(2)(i)
as a decrease in an item of income, or an increase in an item of credit.
Therefore, the $10 adjustment to the basis of Asset is treated as a $10
positive adjustment. The IRS determines that the net negative adjustment
to credits should be taken into account as part of the calculation of
the imputed underpayment. The total netted partnership adjustment is
$10, which, after applying the highest rate and decreasing the product
by the $4 adjustment to credits results in an imputed underpayment of
$0. Accordingly, both adjustments are adjustments that do not result in
an imputed underpayment under Sec. 301.6225-1(f). The adjustment year
is 2022 and Partnership still owns Asset. Under paragraph (b)(8) of this
section, Partnership takes into account the $10 adjustment to Asset on
its 2022 return by reducing its basis in Asset by $10. The reduction in
the basis of Asset does not require Partnership to recognize income or
gain in situations where income or gain is not otherwise recognized.
(4) Example 4. On its partnership return for the 2020 taxable year,
Partnership reports a recourse liability of $1,000. During an
administrative proceeding with respect to Partnership's 2020 taxable
year, the IRS determines that the liability is a nonrecourse liability
instead of a recourse liability. The IRS also determines that
Partnership has a negative adjustment to credits of $400. There are no
other adjustments for Partnership's 2020 taxable year. Under Sec.
301.6225-1(d), the adjustment to the liability is not an adjustment to
an item of income. Therefore, the $1,000 change to the liability is
treated as two $1,000 positive adjustments (a $1,000 decrease to
nonrecourse liabilities and a $1,000 increase to recourse liabilities).
The IRS determines that the adjustment to nonrecourse liabilities should
be treated as zero for purposes of calculating the imputed underpayment
under Sec. 301.6225-1(b)(4). The IRS also determines that the net
negative adjustment to credits should be taken into account as part of
the calculation of the imputed underpayment. The total netted
partnership adjustment is $1,000, which, after applying the highest rate
and decreasing the product by the $400 adjustment to credits results in
an imputed underpayment of $0. Accordingly, both adjustments are
adjustments that do not result in an imputed underpayment under Sec.
301.6225-1(f). Partnership pays off the entire liability in 2021. The
adjustment year is 2022. Under paragraph (b)(8) of this section, the
liability no longer appears on the return due to the satisfaction of the
liability in the 2021 taxable year. Accordingly, no adjustment is made
to Partnership's 2022 return as a result of the adjustment to the
liability. If, instead of satisfying the entire $1,000 liability in
2021, Partnership made a payment of $500 towards the liability, on its
2022 return, Partnership would change the character of the $500
liability on its 2022 return to be a nonrecourse liability.
(5) Example 5. The facts are the same facts as the facts in
paragraph (d)(3) (Example 3) except that Partnership has two equal
partners--A and B--both of whom are individuals. After Partnership
receives a notice of proposed partnership adjustment containing the $4
negative adjustment to credits and the $10 adjustment to Asset,
Partnership requests modification under Sec. 301.6225-2(d)(2) and (e)
based on A filing an
[[Page 274]]
amended return. On her amended return, A takes into account her share of
the adjustments which is a $2 negative adjustment to credits and a $5
adjustment to Asset. Based on A's facts and circumstances, A does not
have any tax impact as a result of the adjustment to Asset so her
amended return only reflects a tax impact from the additional $2 in
credits. Because A filed an amended return, the imputed underpayment is
recalculated without the portion of the adjustments allocable to A. In
this case, the total netted partnership adjustment is $5, which, after
applying the highest rate and decreasing the product by the $2
adjustment to credits results in an imputed underpayment of $0.
Accordingly, both adjustments (the $10 adjustment to Asset and the $4
adjustment to credits) are adjustments that do not result in an imputed
underpayment under paragraph (f) of this section. The adjustment year is
2022 and Partnership still owns Asset. Under paragraph (b)(8) of this
section, Partnership takes into account the $10 adjustment to Asset on
its 2022 return by reducing its basis in Asset by $10. The reduction in
the basis of Asset does not require Partnership to recognize income or
gain in situations where income or gain is not otherwise recognized.
(e) Applicability date--(1) In general. Except as provided in
paragraph (e)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017, and ending after August
12, 2018. Notwithstanding the preceding sentence, paragraphs (b)(8) and
(d)(3) through (d)(5) of this section apply to taxable years ending on
or after November 20, 2020.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable year beginning after November 2, 2015, and
before January 1, 2018, for which a valid election under Sec. 301.9100-
22 is in effect.
[T.D. 9844, 84 FR 6547, Feb. 27, 2019, as amended by T.D. 9969, 87 FR
75492, Dec. 9, 2022]
Sec. 301.6226-1 Election for an alternative to the payment
of the imputed underpayment.
(a) In general. A partnership may elect under this section an
alternative to the payment by the partnership of an imputed underpayment
determined under section 6225. In addition, a partnership making a valid
election under paragraph (c) of this section is no longer liable for the
imputed underpayment (as defined in Sec. 301.6241-1(a)(3)) to which the
election applies. If a notice of final partnership adjustment (FPA)
mailed under section 6231 includes more than one imputed underpayment
(as described in Sec. 301.6225-1(g)), a partnership may make an
election under this section with respect to one or more imputed
underpayments included in the FPA.
(b) Effect of election--(1) Reviewed year partners. If a partnership
makes a valid election under this section with respect to any imputed
underpayment, the reviewed year partners (as defined in Sec. 301.6241-
1(a)(9)) must take into account their share of the partnership
adjustments (as defined in Sec. 301.6241-1(a)(6)) that are associated
with that imputed underpayment and are liable for any tax, penalties,
additions to tax, additional amounts, and interest as described in Sec.
301.6226-3. See Sec. 301.6226-2(f) regarding the determination of each
reviewed year partner's share of the partnership adjustments, including
the effect of any modification approved by the Internal Revenue Service
(IRS) under Sec. 301.6225-2.
(2) Partnership. A partnership making a valid election under this
section is not liable for the imputed underpayment to which the election
applies (and no assessment of tax, levy, or proceeding in any court for
the collection of such imputed underpayment may be made against such
partnership). Any adjustments that do not result in an imputed
underpayment described in Sec. 301.6225-1(f) that are associated with
an imputed underpayment (as described in Sec. 301.6225-1(g)) for which
an election under this section is made are not taken into account by the
partnership in the adjustment year (as defined in Sec. 301.6241-
1(a)(1)) and instead each reviewed year partners' share of the
adjustments determined in accordance with Sec. 301.6226-2(f) must be
included on the statement described in Sec. 301.6226-2.
(c) Time, form, and manner for making the election--(1) In general.
An election under this section is valid only if all of the provisions of
this section and
[[Page 275]]
Sec. 301.6226-2 (regarding statements filed with the IRS and furnished
to reviewed year partners) are satisfied. An election under this section
is valid until the IRS determines that the election is invalid. An
election under this section may only be revoked with the consent of the
IRS.
(2) Time for making the election. An election under this section
must be filed within 45 days of the date the FPA is mailed by the IRS.
The time for filing such an election may not be extended.
(3) Form and manner of the election--(i) In general. An election
under this section must be signed by the partnership representative and
filed in accordance with forms, instructions, and other guidance
prescribed by the IRS and include the information specified in paragraph
(c)(3)(ii) of this section.
(ii) Contents of the election. An election under this section must
include the following correct information--
(A) The name, address, and taxpayer identification number (TIN) of
the partnership;
(B) The taxable year to which the election relates;
(C) A copy of the FPA to which the election relates;
(D) In the case of an FPA that includes more than one imputed
underpayment, identification of the imputed underpayment to which the
election applies;
(E) The name and TIN (or alternative form of identification as
prescribed by forms, instructions, or other guidance) of each reviewed
year partner of the partnership;
(F) The current or last address of each reviewed year partner that
is known to the partnership; and
(G) Any other information prescribed by the IRS in forms,
instructions, and other guidance.
(d) Determining an election is invalid. The IRS may determine an
election to be invalid without first notifying the partnership or
providing the partnership an opportunity to correct any failure to
satisfy all of the provisions of this section and Sec. 301.6226-2. If
an election under this section is determined by the IRS to be invalid,
the IRS will notify the partnership and the partnership representative
within 30 days of the determination that the election is invalid and the
reason for the determination that the election is invalid. If the IRS
makes a determination that an election under this section is invalid,
section 6225 applies with respect to the imputed underpayment as if the
election was never made, the IRS may assess the imputed underpayment
against the partnership (without regard to the limitations under section
6232(b)), and the partnership must pay the imputed underpayment under
section 6225 and any penalties and interest under section 6233. The IRS
may not determine that an election is invalid based on errors timely
corrected by the partnership in accordance with Sec. 301.6226-2(d).
(e) Binding nature of statements. The election under this section,
which includes filing and furnishing statements described in Sec.
301.6226-2, are actions of the partnership under section 6223 and,
unless determined otherwise by the IRS, the partner's share of the
adjustments and the applicability of any penalties, additions to tax,
and additional amounts as set forth in the statement are binding on the
partner pursuant to section 6223. Accordingly, a partner may not treat
any partnership-related items (as defined in Sec. 301.6241-1(a)(6)(ii))
reflected on a statement described in Sec. 301.6226-2 on the partner's
return inconsistently with how those items are treated on the statement
that is filed with the IRS. See Sec. 301.6222-1(c)(2) (regarding
partnership-related items the treatment of which a partner is bound to
under section 6223).
(f) Coordination with section 6234 regarding judicial review.
Nothing in this section affects the rules regarding judicial review of a
partnership adjustment. Accordingly, a partnership that makes an
election under this section is not precluded from filing a petition
under section 6234(a). See Sec. 301.6226-2(b)(3)(iii).
(g) Applicability date--(1) In general. Except as provided in
paragraph (g)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017, and ending after August
12, 2018.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable year beginning after November
[[Page 276]]
2, 2015, and before January 1, 2018, for which a valid election under
Sec. 301.9100-22 is in effect.
[T.D. 9844, 84 FR 6548, Feb. 27, 2019]
Sec. 301.6226-2 Statements furnished to partners and
filed with the IRS.
(a) In general. A partnership that makes an election under Sec.
301.6226-1 must furnish to each reviewed year partner (as defined in
Sec. 301.6241-1(a)(9)) and file with the Internal Revenue Service (IRS)
a statement that includes the items required by paragraphs (e) and (f)
of this section with respect to each reviewed year partner's share of
partnership adjustments (as defined in Sec. 301.6241-1(a)(6))
associated with the imputed underpayment for which an election under
Sec. 301.6226-1 is made. The statements furnished to the reviewed year
partners under this section are in addition to, and must be filed and
furnished separate from, any other statements required to be filed with
the IRS and furnished to partners, including any statements under
section 6031(b). A separate statement under this section must be
furnished to each reviewed year partner with respect to each reviewed
year (as defined in Sec. 301.6241-1(a)(8)) subject to an election under
Sec. 301.6226-1. A failure to furnish a correct statement in accordance
with this section is subject to penalty under section 6722. See section
6724(d)(2).
(b) Time and manner for furnishing the statements to partners--(1)
In general. The statements described in paragraph (a) of this section
must be furnished to the reviewed year partners no later than 60 days
after the date all of the partnership adjustments to which the statement
relates are finally determined. The partnership adjustments are finally
determined upon the later of:
(i) The expiration of the time to file a petition under section
6234; or
(ii) If a petition under section 6234 is filed, the date when the
court's decision becomes final.
(2) Address used for reviewed year partners. The partnership must
furnish the statements described in paragraph (a) of this section to
each reviewed year partner in accordance with the forms, instructions,
and other guidance prescribed by the IRS. If the partnership mails the
statement, it must mail the statement to the current or last address of
the reviewed year partner that is known to the partnership. If a
statement is returned to the partnership as undeliverable, the
partnership must undertake reasonable diligence to identify a correct
address for the reviewed year partner to which the statement relates
and, if a correct address is identified, mail the statement to the
reviewed year partner at the correct address.
(3) Examples. The following examples illustrate the rules of this
paragraph (b).
(i) Example 1. During Partnership's 2020 taxable year, A, an
individual, was a partner in Partnership and had an address at 123 Main
St. On February 1, 2021, A sells his interest in Partnership and informs
Partnership that A moved to 456 Broad St. On March 15, 2021, Partnership
mails A's statement under section 6031(b) for the 2020 taxable year to
456 Broad St. On June 1, 2023, A moves again but does not inform
Partnership of A's new address. In 2023, the IRS initiates an
administrative proceeding with respect to Partnership's 2020 taxable
year and mails a notice of final partnership adjustment (FPA) to
Partnership for that year that includes a single imputed underpayment.
Partnership makes a timely election under section 6226 in accordance
with Sec. 301.6226-1 with respect to the imputed underpayment and on
May 31, 2024, timely mails a statement described in paragraph (a) of
this section to A at 456 Broad St. Although the statement was mailed to
the last address for A that was known to Partnership, it is returned to
Partnership as undeliverable because unknown to Partnership, A had
moved. After undertaking reasonable diligence to obtain the correct
address of A, Partnership is unable to ascertain the correct address.
Therefore, pursuant to paragraph (b)(2) of this section, Partnership
properly furnished the statement to A when it mailed the statement to
456 Broad St.
(ii) Example 2. The facts are the same as in Example 1 in paragraph
(b)(3)(i) of this section, except that A lives at 789 Forest Ave during
all of 2024 and reasonable diligence would have revealed
[[Page 277]]
that 789 Forest Ave is the correct address for A, but Partnership did
not undertake such diligence. Because the statement was returned as
undeliverable and Partnership did not undertake reasonable diligence to
obtain the correct address for A, Partnership failed to properly furnish
the statement with respect to A pursuant to paragraph (b)(2) of this
section.
(iii) Example 3. Partnership is a calendar year taxpayer. The IRS
initiates an administrative proceeding with respect to Partnership's
2020 taxable year. On January 1, 2024, the IRS mails an FPA with respect
to the 2020 taxable year to Partnership that includes a single imputed
underpayment. Partnership makes a timely election under section 6226 in
accordance with Sec. 301.6226-1 with respect to the imputed
underpayment. Partnership timely files a petition for readjustment under
section 6234 with the Tax Court. The IRS prevails, and the Tax Court
sustains all of the adjustments in the FPA with respect to the 2020
taxable year. The time to appeal the Tax Court decision expires, and the
Tax Court decision becomes final on April 10, 2025. Under paragraph
(b)(1)(ii) of this section, the adjustments in the FPA are finally
determined on April 10, 2025, and Partnership must furnish the
statements described in paragraph (a) of this section to its reviewed
year partners and electronically file the statements with the IRS no
later than June 9, 2025. See paragraph (c) of this section for the rules
regarding filing the statements with the IRS.
(c) Time and manner for filing the statements with the IRS. No later
than 60 days after the date the partnership adjustments are finally
determined (as described in paragraph (b)(1) of this section), the
partnership must electronically file with the IRS the statements that
the partnership furnishes to each reviewed year partner under this
section, along with a transmittal that includes a summary of the
statements filed and such other information required in forms,
instructions, and other guidance prescribed by the IRS.
(d) Correction of statements--(1) In general. A partnership corrects
an error in a statement furnished under paragraph (b) of this section or
filed under paragraph (c) of this section by filing the corrected
statement with the IRS in the manner prescribed in paragraph (c) of this
section and furnishing a copy of the corrected statement to the reviewed
year partner to whom the statement relates in accordance with the forms,
instructions, and other guidance prescribed by the IRS.
(2) Error discovered by partnership--(i) Discovery within 60 days of
statement due date. If a partnership discovers an error in a statement
within 60 days of the due date for furnishing the statements to partners
and filing the statements with the IRS (as described in paragraphs (b)
and (c) of this section and Sec. 301.6226-3(e)(3)(ii)), the partnership
must correct the error in accordance with paragraph (d)(1) of this
section and does not have to seek consent of the IRS prior to doing so.
(ii) Error discovered more than 60 days after statement due date. If
a partnership discovers an error more than 60 days after the due date
for furnishing the statements to partners and filing the statements with
the IRS (as described in paragraphs (b) and (c) of this section and
Sec. 301.6226-3(e)(3)(ii)), the partnership may only correct the error
after receiving consent of the IRS in accordance with the forms,
instructions, and other guidance prescribed by the IRS. The partnership
may not furnish corrected statements unless it receives consent of the
IRS to make the correction.
(3) Error discovered by the IRS. If the IRS discovers an error in
the statements furnished or filed under paragraphs (b) and (c) of this
section and Sec. 301.6226-3(e)(3) or the IRS cannot determine whether
the statements furnished or filed by the partnership are correct because
of a failure by the partnership to comply with any requirement under
this section or Sec. 301.6226-3(e), the IRS may require the partnership
to correct such errors in accordance with paragraph (d)(1) of this
section or to provide additional information as necessary. Failure by
the partnership to correct an error or to provide information when
required by the IRS may be treated by the IRS as a failure to properly
furnish correct
[[Page 278]]
statements to partners and file the correct statements with the IRS as
described in paragraphs (b) and (c) of this section or in Sec.
301.6226-3(e)(3). Whether the IRS requires the partnership to correct
any errors discovered by the IRS or provide additional information is
discretionary on the part of the IRS and the IRS is under no obligation
to require the partnership to provide additional information or to
correct any errors discovered or brought to the IRS's attention at any
time.
(4) Adjustments in the corrected statements taken into account by
the reviewed year partners. The adjustments included on a corrected
statement are taken into account by a reviewed year partner in
accordance with Sec. 301.6226-3 for the reporting year (as defined in
Sec. 301.6226-3(a)).
(e) Content of the statements. Each statement described in paragraph
(a) of this section must include the following correct information:
(1) The name and TIN (or alternative form of identification as
prescribed by forms, instructions, or other guidance) of the reviewed
year partner to whom the statement is being furnished;
(2) The current or last address of the reviewed year partner that is
known to the partnership;
(3) The reviewed year partner's share of items as originally
reported for the reviewed year to the partner on statements furnished to
the partner under section 6031(b) and, if applicable, section 6227;
(4) The reviewed year partner's share of partnership adjustments
determined under paragraph (f)(1) of this section;
(5) Modifications approved by the IRS with respect to the reviewed
year partner (or with respect to any indirect partner (as defined in
Sec. 301.6241-1(a)(4)) that holds its interest in the partnership
through its interest in the reviewed year partner);
(6) The applicability of any penalty, addition to tax, or additional
amount determined at the partnership level that relates to any
adjustments allocable to the reviewed year partner and the adjustments
to which the penalty, addition to tax, or additional amount relates, the
section of the Internal Revenue Code (Code) under which each penalty,
addition to tax, or additional amount is imposed, and the applicable
rate of each penalty, addition to tax, or additional amount determined
at the partnership level;
(7) The date the statement is furnished to the reviewed year
partner;
(8) The partnership taxable year to which the adjustments relate;
and
(9) Any other information required by forms, instructions, and other
guidance prescribed by the IRS.
(f) Determination of each partner's share of adjustments--(1)
Adjustments and other amounts--(i) In general. Except as described in
paragraph (f)(1)(ii) or (iii) or (f)(2) of this section, the adjustments
set forth in the statement described in paragraph (a) of this section
are reported to the reviewed year partner in the same manner as each
adjusted partnership-related item was originally allocated to the
reviewed year partner on the partnership return for the reviewed year.
(ii) Adjusted partnership-related item not reported on the
partnership's return for the reviewed year. Except as described in
paragraph (f)(1)(iii) of this section, if the adjusted partnership-
related item was not reported on the partnership return for the reviewed
year, each reviewed year partner's share of the adjustments must be
determined in accordance with how such partnership-related items would
have been allocated under rules that apply with respect to partnership
allocations, including under the partnership agreement.
(iii) Adjustments that specifically allocate items. If an adjustment
involves an allocation of a partnership-related item to a specific
partner or in a specific manner, including a reallocation of such an
item, the reviewed year partner's share of the adjustment set forth in
the statement is determined in accordance with the adjustment as finally
determined (as described in paragraph (b)(1) of this section).
(2) Treatment of modifications disregarded. Any modifications
approved by the IRS with respect to the reviewed year partner (or with
respect to any indirect partner that holds its interest in the
partnership through its interest in the reviewed year partner) under
Sec. 301.6225-2 are disregarded for purposes of determining each
partner's
[[Page 279]]
share of the adjustments under paragraph (f)(1) of this section.
(g) Coordination with other provisions under subtitle A of the
Code--(1) Statements furnished to qualified investment entities
described in section 860. If a reviewed year partner is a qualified
investment entity within the meaning of section 860(b) and the partner
receives a statement described in paragraph (a) of this section, the
partner may be able to avail itself of the deficiency dividend procedure
described in Sec. 301.6226-3(b)(4).
(2) Liability for tax under section 7704(g)(3). An election under
this section has no effect on a partnership's liability for any tax
under section 7704(g)(3) (regarding the exception for electing 1987
partnerships from the general rule that certain publicly traded
partnerships are treated as corporations).
(3) Adjustments subject to chapters 3 and 4 of the Code. A
partnership that makes an election under Sec. 301.6226-1 with respect
to an imputed underpayment must pay the amount of tax required to be
withheld under chapter 3 or chapter 4, if any, in accordance with Sec.
301.6241-6(b)(4).
(4) Liability for chapter 1 taxes and penalties. A partnership that
makes an election under Sec. 301.6226-1 with respect to an imputed
underpayment must pay any taxes, penalties, additions to tax, additional
amounts, or the amount of any adjustments to any imputed underpayment
calculated by the partnership that is determined under subchapter C of
chapter 63 for which the partnership is liable under chapter 1 of the
Code or subchapter C of chapter 63 at the time the partnership furnishes
statements to its partners in accordance with paragraph (b) of this
section. Any adjustments to such items are not included in the
statements the partnership furnishes to its partners or files with the
IRS under this section.
(h) Applicability date--(1) In general. Except as provided in
paragraph (h)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017, and ending after August
12, 2018. Notwithstanding the prior sentence, paragraph (g)(4) of this
section applies to taxable years ending on or after November 20, 2020.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable year beginning after November 2, 2015, and
before January 1, 2018, for which a valid election under Sec. 301.9100-
22 is in effect.
[T.D. 9844, 84 FR 6549, Feb. 27, 2019, as amended by T.D. 9969, 87 FR
75493, Dec. 9, 2022]
Sec. 301.6226-3 Adjustments taken into account by partners.
(a) Effect of taking adjustments into account on tax imposed by
chapter 1. Except as otherwise provided in this section, the tax imposed
by chapter 1 of the Internal Revenue Code (chapter 1 tax) for each
reviewed year partner (as defined in Sec. 301.6241-1(a)(9)) for the
taxable year that includes the date a statement was furnished in
accordance with Sec. 301.6226-2 (the reporting year) is increased by
the additional reporting year tax, or if the additional reporting year
tax is less than zero, decreased by such amount. The additional
reporting year tax is the aggregate of the correction amounts
(determined in accordance with paragraph (b) of this section). In
addition to being liable for the additional reporting year tax, a
reviewed year partner must also calculate and pay for the reporting year
any penalties, additions to tax, and additional amounts (as determined
under paragraph (d) of this section). Finally, a reviewed year partner
must also calculate and pay for the reporting year any interest (as
determined under paragraph (c) of this section).
(b) Determining the aggregate of the correction amounts--(1) In
general. For purposes of paragraph (a) of this section, the aggregate of
the correction amounts is the sum of the correction amounts described in
paragraphs (b)(2) and (3) of this section. A correction amount under
paragraph (b)(2) or (3) of this section may be less than zero, and any
correction amount that is less than zero may reduce any other correction
amount with the result that the aggregate of the correction amounts
under this paragraph (b)(1) may also be less than zero. However, nothing
in this section entitles any partner to a refund of chapter 1 tax to
which such partner is not entitled. See paragraphs (c) and (d) of this
section requiring a separate
[[Page 280]]
determination of interest and penalties, additions to tax, and
additional amounts on the correction amount for each applicable taxable
year (as defined in paragraph (c)(1) of this section) without regard to
the correction amount for any other applicable taxable year.
(2) Correction amount for the first affected year--(i) In general.
The correction amount for the taxable year of the partner that includes
the end of the reviewed year (the first affected year) is the amount by
which the reviewed year partner's chapter 1 tax would increase or
decrease for the first affected year if the partner's taxable income for
such year was recomputed by taking into account the reviewed year
partner's share of the partnership adjustments (as defined in Sec.
301.6241-1(a)(6)) reflected on the statement described in Sec.
301.6226-2 with respect to the partner.
(ii) Calculation of the correction amount for the first affected
year. The correction amount is the amount of chapter 1 tax that would
have been imposed for the first affected year if the items as adjusted
in the statement described in Sec. 301.6226-2 had been reported as such
on the return for the first affected year less the sum of:
(A) The amount of chapter 1 tax shown by the partner on the return
for the first affected year (which includes amounts shown on an amended
return for such year, including an amended return filed under section
6225(c)(2) by the reviewed year partner); plus
(B) Amounts not included in paragraph (b)(2)(ii)(A) of this section
but previously assessed or collected (including the amounts defined in
Sec. 1.6664-2(d) of this chapter and any amounts paid by the partner in
accordance with Sec. 301.6225-2); less
(C) The amount of rebates made (as defined in Sec. 1.6664-2(e) of
this chapter).
(iii) Formulaic expression of the correction amount for the first
affected year. The correction amount also may be expressed as--
Correction amount = A-(B + C-D)
Where:
A = the amount of chapter 1 tax that would have been imposed had the
items as adjusted been properly reported on the return for the
first affected year;
B = the amount shown as chapter 1 tax on the return for the first
affected year (taking into account amended returns);
C = amounts previously assessed or collected; and
D = the amount of rebates made.
(3) Correction amount for the intervening years--(i) In general. The
correction amount for all taxable years after the first affected year
and before the reporting year (the intervening years) is the aggregate
of the correction amounts determined for each intervening year.
Determining the correction amount for each intervening year is a year-
by-year determination. The correction amount for each intervening year
is the amount by which the reviewed year partner's chapter 1 tax for
such year would increase or decrease if the partner's taxable income for
such year was recomputed by taking into account any adjustments to tax
attributes (as defined in Sec. 301.6241-1(a)(10)) of the partner under
paragraph (b)(3) of this section.
(ii) Calculation of the correction amount for the intervening years.
The correction amount for each intervening year is the amount of chapter
1 tax that would have been imposed for the intervening year if any tax
attribute of the partner for the intervening year had been adjusted
after taking into account the reviewed year partner's share of the
adjustments for the first affected year as described in paragraph (b)(2)
of this section (and if any tax attribute of the partner for the
intervening year had been adjusted, after taking into account any
adjustments to tax attributes of the partner in any prior intervening
year(s)) exceeds less the sum of--
(A) The amount of chapter 1 tax shown by the partner on the return
for the intervening year (which includes amounts shown on an amended
return for such year, including an amended return filed under section
6225(c)(2) by a reviewed year partner); plus
(B) Amounts not included in paragraph (b)(3)(ii)(A) of this section
but previously or collected (including the amounts defined in Sec.
1.6664-2(d) of this chapter and any amounts paid by the partner in
accordance with Sec. 301.6225-2); less
[[Page 281]]
(C) The amount of rebates made (as defined in Sec. 1.6664-2(e) of
this chapter).
(iii) Formulaic expression of the correction amount for the
intervening years. The correction amount also may be expressed as--
Correction amount = A-(B + C-D)
Where:
A = the amount of chapter 1 tax that would have been imposed for the
intervening year;
B = the amount shown as chapter 1 tax on the return for the intervening
year (taking into account amended returns);
C = amounts previously assessed or collected; and
D = the amount of rebates made.
(4) Coordination of sections 860 and 6226. If a qualified investment
entity (QIE) within the meaning of section 860(b) receives a statement
described in Sec. 301.6226-2(a) and correctly makes a determination
within the meaning of section 860(e)(4) that one or more of the
adjustments reflected in the statement is an adjustment within the
meaning of section 860(d) with respect to that QIE for a taxable year,
the QIE may distribute deficiency dividends within the meaning of
section 860(f) for that taxable year and avail itself of the deficiency
dividend procedures set forth in section 860. If the QIE utilizes the
deficiency dividend procedures with respect to adjustments in a
statement described in Sec. 301.6226-2(a), the QIE may claim a
deduction for deficiency dividends against the adjustments furnished to
the QIE in the statement in calculating any correction amounts under
paragraphs (b)(2) and (3) of this section, and interest on such
correction amounts under paragraph (c) of this section, to the extent
that the QIE makes deficiency dividend distributions under section
860(f) and complies with all requirements of section 860 and the
regulations under part 1 of this chapter.
(c) Interest--(1) Interest on the correction amounts. Interest on
the correction amounts determined under paragraph (b) of this section is
the aggregate of all interest calculated for each applicable taxable
year in which there was a correction amount greater than zero at the
rate set forth in paragraph (c)(3) of this section. For each applicable
taxable year, interest on the correction amount is calculated from the
due date (without extension) of the reviewed year partner's return for
such applicable taxable year until the amount is paid. For purposes of
this paragraph (c)(1), the term applicable taxable year means the
reviewed year partner's taxable year affected by taking into account
adjustments as described in paragraph (b) of this section (for instance,
the first affected year and any intervening year in which there is a
correction amount greater than zero). For purposes of calculating
interest under this paragraph (c), a correction amount under paragraph
(b)(2) or (3) of this section for an applicable taxable year that is
less than zero does not reduce the correction amount for any other
applicable taxable year.
(2) Interest on penalties. Interest on any penalties, additions to
tax, or additional amounts determined under paragraph (d) of this
section is calculated at the rate set forth in paragraph (c)(3) of this
section from the due date (including any extension) of the reviewed year
partner's return for the applicable taxable year until the amount is
paid.
(3) Rate of interest. For purposes of paragraph (c) of this section,
interest is calculated using the underpayment rate under section
6621(a)(2) by substituting ``5 percentage points'' for ``3 percentage
points'' in section 6621(a)(2)(B).
(d) Penalties--(1) Applicability determined at the partnership
level. In the case of a partnership that makes an election under section
6226, the applicability of any penalty, addition to tax, and additional
amount that relates to an adjustment to any partnership-related item is
determined at the partnership level in accordance with section 6221(a).
The partnership's reviewed year partners are liable for such penalties,
additions to tax, and additional amounts as determined under paragraph
(d)(2) of this section.
(2) Amount calculated at partner level. A reviewed year partner
calculates the amount of any penalty, addition to tax, or additional
amount relating to the partnership adjustments taken into account under
paragraph (b)(1) of this section as if the correction amount were an
underpayment or understatement of the reviewed year partner for
[[Page 282]]
the first affected year or intervening year, as applicable. The
calculation of any penalty, addition to tax, or additional amount is
based on the characteristics of, and facts and circumstances applicable
to, the reviewed year partner for the first affected year or intervening
year, as applicable after taking into account the partnership
adjustments reflected on the statement. If after taking into account the
partnership adjustments in accordance with this section, the reviewed
year partner does not have an underpayment, or has an understatement
that falls below the applicable threshold for the imposition of a
penalty, no penalty is due from that reviewed year partner under this
paragraph (d)(2). For penalties in the case of a pass-through partner
that makes a payment under paragraph (e)(4) of this section, see
paragraph (e)(4)(iv) of this section.
(3) Partner-level defenses to penalties. A reviewed year partner
(including a pass-through partner (as defined in Sec. 301.6241-
1(a)(5))) claiming that a penalty, addition to tax, or additional amount
that relates to a partnership adjustment reflected on a statement
described in Sec. 301.6226-2 (or paragraph (e)(3) of this section) is
not due because of a partner-level defense must first pay the penalty
and file a claim for refund for the reporting year. Partner-level
defenses are limited to those that are personal to the reviewed year
partner (for example, a reasonable cause and good faith defense under
section 6664(c) that is based on the facts and circumstances applicable
to the partner).
(e) Pass-through partners--(1) In general. Except as provided in
paragraph (e)(6) of this section, if a pass-through partner is furnished
a statement described in Sec. 301.6226-2 (including a statement
described in paragraph (e)(3) of this section) with respect to
adjustments of a partnership that made an election under Sec. 301.6226-
1 (audited partnership), the pass-through partner must file with the IRS
a partnership adjustment tracking report in accordance with forms,
instructions, or other guidance prescribed by the IRS on or before the
due date described in paragraph (e)(3)(ii) of this section, and file and
furnish statements in accordance with paragraph (e)(3) of this section.
The pass-through partner must comply with paragraph (e) of this section
with respect to each statement furnished to the pass-through partner.
(2) Failure to file and furnish required documents--(i) Failure to
timely file and furnish statements. If any pass-through partner fails to
timely file and furnish correct statements in accordance with paragraph
(e)(3) of this section, the pass-through partner must compute and pay an
imputed underpayment, as well as any penalties, additions to tax,
additional amounts, and interest with respect to the adjustments
reflected on the statement furnished to the pass-through partner in
accordance with paragraph (e)(4) of this section. The IRS may assess
such imputed underpayment against such pass-through partner without
regard to the limitations under section 6232(b). See Sec. 301.6232-
1(c)(2). A failure to furnish statements in accordance with paragraph
(e)(3) of this section is treated as a failure to timely pay an imputed
underpayment required under paragraph (e)(4)(i) of this section, unless
the pass-through partner computes and pays an imputed underpayment in
accordance with paragraph (e)(4) of this section. See section 6651(i).
(ii) Failures relating to partnership adjustment tracking report.
Failure to timely file the partnership adjustment tracking report as
required in paragraph (e)(1) of this section, or filing such report
without showing the information required under paragraph (e)(1) of this
section, is subject to the penalty imposed by section 6698.
(3) Furnishing statements to partners--(i) In general. A pass-
through partner described in paragraph (e)(1) of this section must
furnish a statement that includes the items required by paragraph
(e)(3)(iii) of this section to each partner that held an interest in the
pass-through partner at any time during the taxable year of the pass-
through partner to which the adjustments in the statement furnished to
the pass-through partner relate (affected partner). The statements
described in this paragraph (e)(3) must be filed with the IRS by the due
date prescribed in paragraph (e)(3)(ii) of this section. Except as
otherwise provided
[[Page 283]]
in paragraphs (e)(3)(ii), (iii), and (v) of this section, the rules
applicable to statements described in Sec. 301.6226-2 are applicable to
statements described in this paragraph (e)(3).
(ii) Time for filing and furnishing the statements. In accordance
with forms, instructions, and other guidance prescribed by the IRS, the
pass-through partner must file with the IRS and furnish to its affected
partners the statements described in paragraph (e)(3) of this section no
later than the extended due date for the return for the adjustment year
(as defined in Sec. 301.6241-1(a)(1)) of the audited partnership. For
purposes of this section, the extended due date is the extended due date
under section 6081 regardless of whether the audited partnership is
required to file a return for the adjustment year or timely files a
request for an extension under section 6081.
(iii) Contents of statements. Each statement described in paragraph
(e)(3) of this section must include the following correct information--
(A) The name and taxpayer identification number (TIN) of the audited
partnership;
(B) The adjustment year of the audited partnership;
(C) The extended due date for the return for the adjustment year of
the audited partnership (as described in paragraph (e)(3)(ii) of this
section);
(D) The date on which the audited partnership furnished its
statements required under Sec. 301.6226-2(b);
(E) The name and TIN of the partnership that furnished the statement
to the pass-through partner if different from the audited partnership;
(F) The name and TIN of the pass-through partner;
(G) The pass-through partner's taxable year to which the adjustments
reflected on the statements described in paragraph (e)(3) of this
section relates;
(H) The name and TIN (or alternative form of identification as
prescribed by forms, instructions, or other guidance) of the affected
partner to whom the statement is being furnished;
(I) The current or last address of the affected partner that is
known to the pass-through partner;
(J) The affected partner's share of items as originally reported to
such partner under section 6031(b) and, if applicable, section 6227, for
the taxable year to which the adjustments reflected on the statement
furnished to the pass-through partner relate;
(K) The affected partner's share of partnership adjustments
determined under Sec. 301.6226-2(f)(1) as if the affected partner were
the reviewed year partner and the pass-through partner were the
partnership;
(L) Modifications approved by the IRS with respect to the affected
partner that holds its interest in the audited partnership through the
pass-through partner;
(M) The applicability of any penalties, additions to tax, or
additional amounts determined at the audited partnership level that
relate to any adjustments allocable to the affected partner and the
adjustments allocated to the affected partner to which such penalties,
additions to tax, or additional amounts relate, the section of the
Internal Revenue Code under which each penalty, addition to tax, or
additional amount is imposed, and the applicable rate of each penalty,
addition to tax, or additional amount; and
(N) Any other information required by forms, instructions, and other
guidance prescribed by the IRS.
(iv) Affected partner must take into account the adjustments. A
statement furnished to an affected partner in accordance with paragraph
(e)(3) of this section is treated as if it were a statement described in
Sec. 301.6226-2. An affected partner that is a pass-through partner
must take into account the adjustments reflected on such a statement in
accordance with this paragraph (e). An affected partner that is not a
pass-through partner must take into account the adjustments reflected on
such a statement in accordance with this section by treating references
to ``reviewed year partner'' as ``affected partner''. For purposes of
this paragraph (e)(3)(iv), an affected partner that is not a pass-
through partner takes into account the adjustments in accordance with
this section by determining its reporting year based on the date upon
which the audited partnership furnished its statements to its reviewed
year partners (as described in
[[Page 284]]
paragraph (a) of this section). No addition to tax under section 6651
related to any additional reporting year tax will be imposed if an
affected partner that is not a pass-through partner reports and pays the
additional reporting year tax within 30 days of the extended due date
for the return for the adjustment year of the audited partnership (as
described in paragraph (e)(3)(ii) of this section).
(v) Adjustments subject to chapters 3 and 4 of the Internal Revenue
Code. If a pass-through partner furnishes statements to its affected
partners in accordance with paragraph (e)(3) of this section, the pass-
through partner must comply with the requirements of Sec. 301.6241-
6(b)(4), and an affected partner must comply with the requirements of
paragraph (f) of this section. For purposes of applying both Sec.
301.6241-6(b)(4) and paragraph (f) of this section, as appropriate,
references to the ``partnership'' should be replaced with references to
the ``pass-through partner''; references to the ``reviewed year
partner'' should be replaced with references to the ``affected
partner''; references to the statement required under paragraph (a) of
this section and its due date should be replaced with references to the
statement required under paragraph (e)(3) of this section and its due
date described in paragraph (e)(3)(ii) of this section; references to
the ``reporting year'' should be read in accordance with paragraph
(e)(3)(iv) of this section; and references to the partnership return
should be read as references to the return for the adjustment year of
the audited partnership as described in paragraph (e)(3)(ii) of this
section.
(4) Pass-through partner pays an imputed underpayment--(i) In
general. If a pass-through partner described in paragraph (e)(1) of this
section does not furnish statements in accordance with paragraph (e)(3)
of this section, the pass-through partner must compute and pay an
imputed underpayment determined under paragraph (e)(4)(iii) of this
section. The pass-through partner must also pay any penalties, additions
to tax, additional amounts, and interest as determined under paragraph
(e)(4)(iv) of this section. A failure to timely pay an imputed
underpayment required under this paragraph (e)(4) is subject to penalty
under section 6651(i).
(ii) Time of payment. A pass-through partner must file a partnership
adjustment tracking report and compute and pay the imputed underpayment
and any penalties, additions to tax, additional amounts, and interest,
as described in paragraph (e)(4)(i) of this section, in accordance with
forms, instructions, and other guidance no later than the extended due
date for the return for the adjustment year of the audited partnership.
(iii) Computation of the imputed underpayment. The imputed
underpayment under paragraph (e)(4)(i) of this section is computed in
the same manner as an imputed underpayment under section 6225 and Sec.
301.6225-1, except that adjustments reflected on the statement furnished
to the pass-through partner under Sec. 301.6226-2 are treated as
partnership adjustments (as defined in Sec. 301.6241-1(a)(6)) for the
first affected year. Any modification approved by the IRS under Sec.
301.6225-2 with respect to the pass-through partner (including any
modifications with respect to a relevant partner (as defined in Sec.
301.6225-2(a)) that holds its interest in the audited partnership
through its interest in the pass-through partner) reflected on the
statement furnished to the pass-through partner under Sec. 301.6226-2
(or paragraph (e)(3) of this section) is taken into account in
calculating the imputed underpayment under this paragraph (e)(4)(iii).
Any modification that was not approved by the IRS under Sec. 301.6225-2
may not be taken into account in calculating the imputed underpayment
under this paragraph (e)(4)(iii).
(iv) Penalties and interest--(A) Penalties. A pass-through partner
must compute and pay any applicable penalties, additions to tax, and
additional amounts on the imputed underpayment calculated under
paragraph (e)(4)(iii) of this section as if such amount were an imputed
underpayment for the pass-through partner's first affected year. See
Sec. 301.6233(a)-1(c).
[[Page 285]]
(B) Interest. A pass-through partner must pay interest on the
imputed underpayment calculated under paragraph (e)(4)(iii) of this
section in accordance with paragraph (c) of this section as if such
imputed underpayment were a correction amount for the first affected
year.
(v) Adjustments that do not result in an imputed underpayment.
Adjustments taken into account under paragraph (e)(4) of this section
that do not result in an imputed underpayment (as defined in Sec.
301.6225-1(f)) are taken into account by the pass-through partner in
accordance with Sec. 301.6225-3 in the taxable year of the pass-through
partner that includes the date the imputed underpayment required under
paragraph (e)(4)(i) of this section is paid. If, after making the
computation described in paragraph (e)(4)(iii) of this section, no
imputed underpayment exists and therefore no payment is required under
paragraph (e)(4)(i) of this section, the adjustments that did not result
in an imputed underpayment are taken into account by the pass-through
partner in accordance with Sec. 301.6225-3 in the taxable year of the
pass-through partner that includes the date the statement described in
Sec. 301.6226-2 (or paragraph (e)(3) of this section) is furnished to
the pass-through partner.
(vi) Coordination with chapters 3 and 4. If a pass-through partner
pays an imputed underpayment described in paragraph (e)(4)(i) of this
section, Sec. 301.6241-6(b)(3) applies to the pass-through partner by
substituting ``pass-through partner'' for ``partnership'' where Sec.
301.6241-6(b)(3) refers to the partnership that pays the imputed
underpayment.
(5) Treatment of pass-through partners that are not partnerships--
(i) S corporations. For purposes of this paragraph (e), an S corporation
is treated as a partnership and its shareholders are treated as
partners.
(ii) Trusts and estates. Except as provided in paragraph (g) of this
section, for purposes of paragraph (e) of this section, a trust and its
beneficiaries, and an estate and its beneficiaries are treated in the
same manner as a partnership and its partners.
(6) Pass-through partners subject to chapter 1 tax. A pass-through
partner that is subject to tax under chapter 1 of the Code on the
adjustments (or a portion of the adjustments) reflected on the statement
furnished to such partner under Sec. 301.6226-2 (or paragraph (e)(3) of
this section) takes the adjustments into account under this paragraph
(e)(6) when the pass-through partner calculates and pays the additional
reporting year tax as determined under paragraph (b) of this section and
furnishes statements to its partners in accordance with paragraph (e)(3)
of this section. Notwithstanding the prior sentence, a pass-through
partner is only required to include on a statement under paragraph
(e)(3) of this section the adjustments that would be required to be
included on statements furnished to owners or beneficiaries under
sections 6037 and 6034A, as applicable, if the pass-through partner had
correctly reported the items for the year to which the adjustments
relate. If the pass-through partner fails to comply with the
requirements of this paragraph (e)(6), the pass-through partner must
compute and pay an imputed underpayment, as well as any penalties,
additions to tax, additional amounts, and interest with respect to the
adjustments reflected on the statement furnished to such partner in
accordance with paragraph (e)(4) of this section.
(f) Partners subject to withholding under chapters 3 and 4. A
reviewed year partner that is subject to withholding under Sec.
301.6241-6(b)(4) must file an income tax return for the reporting year
to report its additional reporting year tax and its share of any
penalties, additions to tax, additional amounts, and interest
(notwithstanding any filing exception in Sec. 1.6012-1(b)(2)(i) or
Sec. 1.6012-2(g)(2)(i) of this chapter). The amount of tax paid by a
partnership under Sec. 301.6241-6(b)(4) is allowed as a credit under
section 33 to the reviewed year partner to the extent that the tax is
allocable to the reviewed year partner (within the meaning of Sec.
1.1446-3(d)(2) of this chapter) or is actually withheld from the
reviewed year partner (within the meaning of Sec. 1.1464-1(a) or Sec.
1.1474-3 of this chapter). The credit is allowed against the reviewed
year partner's income tax liability for its reporting year. The reviewed
year partner must substantiate the credit by attaching the applicable
Form 1042-S, Foreign
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Person's U.S. Source Income Subject to Withholding, or Form 8805,
Foreign Partner's Information Statement of Section 1446 Withholding Tax,
to its income tax return for the reporting year, as well as satisfying
any other requirements prescribed by the IRS in forms and instructions.
(g) Treatment of disregarded entities and wholly-owned grantor
trusts. In the case of a reviewed year partner that is a wholly-owned
entity disregarded as separate from its owner for Federal income tax
purposes in the reviewed year or a trust that is wholly owned by only
one person in the reviewed year, whether the grantor or another person,
and where the trust reports the owner's information to payors under
Sec. 1.671-4(b)(2)(i)(A) of this chapter and that is furnished a
statement described in Sec. 301.6226-2 (or paragraph (e)(3) of this
section), the owner of the disregarded entity or wholly-owned grantor
trust must take into account the adjustments reflected on that statement
in accordance with this section as if the owner were the reviewed year
partner.
(h) Examples. The following examples illustrate the rules of this
section. For purposes of these examples, unless otherwise stated, each
partnership is subject to subchapter C of chapter 63 of the Code, each
partnership and partner has a calendar year taxable year, no
modifications are requested by any partnership under Sec. 301.6225-2,
no penalties, additions to tax, or additional amounts are determined at
the partnership level, all persons are U.S. persons, the highest rate of
income tax in effect for is 40 percent for all relevant periods, the
highest rate of income tax in effect for corporations is 20 percent for
all relevant periods, and the highest rate of tax for individuals for
capital gains is 15 percent for all relevant periods.
(1) Example 1. On its partnership return for the 2020 tax year,
Partnership reported ordinary income of $1,000 and charitable
contributions of $400. On June 1, 2023, the IRS mails a notice of final
partnership adjustment (FPA) to Partnership for Partnership's 2020 year
disallowing the charitable contribution in its entirety and determining
that a 20 percent accuracy-related penalty under section 6662(b) applies
to the disallowance of the charitable contribution, and setting forth a
single imputed underpayment with respect to such adjustments.
Partnership makes a timely election under section 6226 in accordance
with Sec. 301.6226-1 with respect to the imputed underpayment in the
FPA for Partnership's 2020 year and files a timely petition in the Tax
Court challenging the partnership adjustments. The Tax Court determines
that Partnership is not entitled to any of the claimed $400 in
charitable contributions and upholds the applicability of the penalty.
The decision regarding Partnership's 2020 tax year becomes final on
December 15, 2025. Pursuant to Sec. 301.6226-2(b), the partnership
adjustments are finally determined on December 15, 2025. On February 2,
2026, Partnership files the statements described under Sec. 301.6226-2
with the IRS and furnishes to partner A, an individual who was a partner
in Partnership during 2020, a statement described in Sec. 301.6226-2. A
had a 25 percent interest in Partnership during all of 2020 and was
allocated 25 percent of all items from Partnership for that year. The
statement shows A's share of ordinary income reported on Partnership's
return for the reviewed year of $250 and A's share of the charitable
contribution reported on Partnership's return for the reviewed year of
$100. The statement also shows an adjustment to A's share of the
charitable contribution, a reduction of $100 resulting in $0 charitable
contribution allocated to A from Partnership for 2020. In addition, the
statement reports that a 20 percent accuracy-related penalty under
section 6662(b) applies. A must pay the additional reporting year tax as
determined in accordance with paragraph (b) of this section, in addition
to A's penalties and interest. A computes his additional reporting year
tax as follows. First, A determines the correction amount for the first
affected year (the 2020 taxable year) by taking into account A's share
of the partnership adjustment (-$100 reduction in charitable
contribution) for the 2020 taxable year. A determines the amount by
which his chapter 1 tax for 2020 would have increased or decreased if
the $100 adjustment to the charitable contribution from Partnership were
taken into
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account for that year. There is no adjustment to tax attributes in A's
intervening years as a result of the adjustment to the charitable
contribution for 2020. Therefore, A's aggregate of the correction
amounts is the correction amount for 2020, A's first affected year. In
addition to the aggregate of the correction amounts being added to the
chapter 1 tax that A owes for 2026, the reporting year, A must calculate
a 20 percent accuracy-related penalty on A's underpayment attributable
to the $100 adjustment to the charitable contribution, as well as
interest on the correction amount for the first affected year and the
penalty determined in accordance with paragraph (c) of this section.
Interest on the correction amount for the first affected tax year runs
from April 15, 2021, the due date of A's 2020 return (the first affected
tax year) until A pays this amount. In addition, interest runs on the
penalty from April 15, 2021, the due date of A's 2020 return for the
first affected year until A pays this amount. On his 2026 income tax
return, A must report the additional reporting year tax determined in
accordance with paragraph (b) of this section, which is the correction
amount for 2020, plus the accuracy-related penalty determined in
accordance with paragraph (d) of this section, and interest determined
in accordance with paragraph (c) of this section on the correction
amount for 2020 and the penalty.
(2) Example 2. On its partnership return for the 2020 tax year,
Partnership reported an ordinary loss of $500. On June 1, 2023, the IRS
mails an FPA to Partnership for the 2020 taxable year determining that
$300 of the $500 in ordinary loss should be recharacterized as a long-
term capital loss. Partnership has no long-term capital gain for its
2020 tax year. The FPA for Partnership's 2020 tax year reflects an
adjustment of an increase in ordinary income of $300 (as a result of the
disallowance of the recharacterization of $300 from ordinary loss to
long-term capital loss) and an imputed underpayment related to that
adjustment, as well as an adjustment of an additional $300 in long-term
capital loss for 2020 which does not result in an imputed underpayment
under Sec. 301.6225-1(f). Partnership makes a timely election under
section 6226 in accordance with Sec. 301.6226-1 with respect to the
imputed underpayment in the FPA and does not file a petition for
readjustment under section 6234. Accordingly, under Sec. 301.6226-
1(b)(2) and Sec. 301.6225-3(b)(6), the adjustment year partners (as
defined in Sec. 301.6241-1(a)(2)) do not take into account the $300
long-term capital loss that does not result in an imputed underpayment.
Rather, the $300 long-term capital loss is taken into account by the
reviewed year partners. The time to file a petition expires on August
30, 2023. Pursuant to Sec. 301.6226-2(b), the partnership adjustments
become finally determined on August 31, 2023. On September 30, 2023,
Partnership files with the IRS statements described in Sec. 301.6226-2
and furnishes statements to all of its reviewed year partners in
accordance with Sec. 301.6226-2. One partner of Partnership in 2020, B
(an individual), had a 25 percent interest in Partnership during all of
2020 and was allocated 25 percent of all items from Partnership for that
year. The statement filed with the IRS and furnished to B shows B's
allocable share of the ordinary loss reported on Partnership's return
for the 2020 taxable year as $125. The statement also shows an
adjustment to B's allocable share of the ordinary loss in the amount of
-$75, resulting in a corrected ordinary loss allocated to B of $50 for
taxable year 2020 ($125 originally allocated to B less $75 which is B's
share of the adjustment to the ordinary loss). In addition, the
statement shows an increase to B's share of long-term capital loss in
the amount of $75 (B's share of the adjustment that did not result in
the imputed underpayment with respect to Partnership). B must pay the
additional reporting year tax as determined in accordance with paragraph
(b) of this section. B computes his additional reporting year tax as
follows. First, B determines the correction amount for the first
affected year (the 2020 taxable year) by taking into account B's share
of the partnership adjustments (a $75 reduction in ordinary loss and an
increase of $75 in long-term capital loss) for the 2020 taxable year. B
determines the amount by which his chapter 1 tax for 2020 would have
increased or decreased if the $75 adjustment to ordinary loss and the
$75
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adjustment to long-term capital loss from Partnership were taken into
account for that year. Second, B determines if there is any increase or
decrease in chapter 1 tax for any intervening year as a result of the
adjustment to the ordinary and capital losses for 2020. B's aggregate of
the correction amounts is the correction amount for 2020, B's first
affected year plus any correction amounts for any intervening years. B
is also liable for any interest on the correction amount for the first
affected year and for any intervening year as determined in accordance
with paragraph (c) of this section.
(3) Example 3. On its partnership return for the 2020 tax year,
Partnership, a domestic partnership, reported U.S. source dividend
income of $2,000. On June 1, 2023, the IRS mails an FPA to Partnership
for Partnership's 2020 year increasing the amount of U.S. source
dividend income to $4,000 and determining that a 20 percent accuracy-
related penalty under section 6662(b) applies to the increase in U.S.
source dividend income. Partnership makes a timely election under
section 6226 in accordance with Sec. 301.6226-1 with respect to the
imputed underpayment in the FPA for Partnership's 2020 year and does not
file a petition for readjustment under section 6234. The time to file a
petition expires on August 30, 2023. Pursuant to Sec. 301.6226-2(b),
the partnership adjustments become finally determined on August 31,
2023. On September 30, 2023, Partnership files the statements described
under Sec. 301.6226-2 with the IRS and furnishes to partner C, a
nonresident alien individual who was a partner in Partnership during
2020 (and remains a partner in Partnership in 2023), a statement
described in Sec. 301.6226-2. C had a 50 percent interest in
Partnership during all of 2020 and was allocated 50 percent of all items
from Partnership for that year. The statement shows C's share of U.S.
source dividend income reported on Partnership's return for the reviewed
year of $1,000 and an adjustment to U.S. source dividend income of
$1,000. In addition, the statement reports that a 20 percent accuracy-
related penalty under section 6662(b) applies. Under Sec. 301.6241-
6(b)(4)(i), because the additional $1,000 in U.S. source dividend income
allocated to C is an amount subject to withholding (as defined in Sec.
301.6241-6(b)(2)), Partnership must pay the amount of tax required to be
withheld on the adjustment. See Sec. Sec. 1.1441-1(b)(1) and 1.1441-
5(b)(2)(i)(A) of this chapter. Under Sec. 301.6241-6(b)(4)(ii),
Partnership may reduce the amount of withholding tax it must pay because
it has valid documentation from 2020 that establishes that C was
entitled to a reduced rate of withholding in 2020 on U.S. source
dividend income of 10 percent pursuant to a treaty. Partnership
withholds $100 of tax from C's distributive share, remits the tax to the
IRS, and files the necessary return and information returns required by
Sec. 1.1461-1 of this chapter. On his 2023 return, C must report the
additional reporting year tax determined in accordance with paragraph
(b) of this section, the accuracy-related penalty determined in
accordance with paragraph (d) of this section, and interest determined
in accordance with paragraph (c) of this section on the correction
amount for the first affected year, the correction amount for any
intervening year, and the penalty. Under paragraph (f) of this section,
C may claim the $100 withholding tax paid by Partnership pursuant to
Sec. 301.6241-6(b)(4)(i) as a credit under section 33 against C's
income tax liability on his 2023 return.
(4) Example 4. On its partnership return for the 2020 tax year,
Partnership reported ordinary income of $100 and a long-term capital
gain of $40. Partnership had four equal partners during the 2020 tax
year: E, F, G, and H, all of whom were individuals. On its partnership
return for the 2020 tax year, the entire long-term capital gain was
allocated to partner E and the ordinary income was allocated to all
partners based on their equal (25 percent) interest in Partnership. The
IRS initiates an administrative proceeding with respect to Partnership's
2020 taxable year and determines that the long-term capital gain should
have been allocated equally to all four partners and that Partnership
should have recognized an additional $10 in ordinary income. On June 1,
2023, the IRS mails an FPA to Partnership reflecting the reallocation of
the $40 long-term capital gain so that F, G, and H each have $10
increase
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in long-term capital gain and E has a $30 reduction in long-term capital
gain for 2020. In addition, the FPA reflects the partnership adjustment
increasing ordinary income by $10. The FPA reflects a general imputed
underpayment with respect to the increase in ordinary income and a
specific imputed underpayment with respect to the increase in long-term
capital gain allocated to F, G, and H. In addition, the FPA reflects a
$30 partnership adjustment that does not result in an imputed
underpayment, that is, the reduction of $30 in long-term capital gain
with respect to E that is associated with the specific imputed
underpayment in accordance with Sec. 301.6225-1(g)(2)(iii)(B).
Partnership makes a timely election under section 6226 in accordance
with Sec. 301.6226-1 with respect to the specific imputed underpayment
relating to the reallocation of long-term capital gain. Partnership does
not file a petition for readjustment under section 6234. The time to
file a petition expires on August 30, 2023. Pursuant to Sec. 301.6226-
2(b), the partnership adjustments become finally determined on August
31, 2023. Partnership timely pays the general imputed underpayment that
resulted from the partnership adjustment to ordinary income. On
September 30, 2023, Partnership files with the IRS statements described
in Sec. 301.6226-2 and furnishes statements to its partners reflecting
their share of the partnership adjustments as finally determined in the
FPA that relate to the specific imputed underpayment, that is, the
reallocation of long-term capital gain. The statements for F, G, and H
each reflect a partnership adjustment of an additional $10 of long-term
capital gain for 2020. The statement for E reflects a partnership
adjustment of a reduction of $30 of long-term capital gain for 2020.
Because E, F, G, and H are all individuals, all partners must report the
additional reporting year tax as determined in accordance with paragraph
(b) of this section in the partners' reporting year, which is 2023. They
compute their additional reporting year tax as follows. First, they
determine the correction amount for the first affected year (the 2020
taxable year) by taking into account their share of the partnership
adjustments for the 2020 taxable year. They each determine the amount by
which their chapter 1 tax for 2020 would have increased or decreased if
the adjustment to long-term capital gain from Partnership were taken
into account for that year. Second, they determine if there is any
increase or decrease in chapter 1 tax for any intervening year as a
result of the adjustment to the long-term capital gain for 2020. Their
aggregate of the correction amounts is the sum of the correction amount
for 2020, their first affected year and any correction amounts for any
intervening years. They are also liable for any interest on the
correction amount for the first affected year and for any intervening
year as determined in accordance with paragraph (c) of this section.
(5) Example 5. On its partnership return for the 2020 taxable year,
Partnership reported a long-term capital loss of $500. During an
administrative proceeding with respect to Partnership's 2020 taxable
year, the IRS mails a notice of proposed partnership adjustment (NOPPA)
in which it proposes to disallow $200 of the reported $500 long-term
capital loss, the only adjustment. Accordingly, the imputed underpayment
reflected in the NOPPA is $80 ($200 x 40 percent). F, a C corporation
partner with a 50 percent interest in Partnership, received 50 percent
of all long-term capital losses for 2020. As part of the modification
process described in Sec. 301.6225-2(d)(2), F files an amended return
for 2020 taking into account F's share of the partnership adjustment
($100 reduction in long-term capital loss) and pays the tax owed for
2020, including interest. Also as part of the modification process, F
also files amended returns for 2021 and 2022 and pays additional tax
(and interest) for these years because the reduction in long-term
capital loss for 2020 affected the tax due from F for 2021 and 2022. See
Sec. 301.6225-2(d)(2). The reduction of the long-term capital loss in
2020 did not affect any other taxable year of F. This is the only
modification requested. The IRS approves the modification with respect
to F and on June 1, 2023, mails an FPA to Partnership for Partnership's
2020 year reflecting the partnership adjustment reducing the
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long-term capital loss in the amount of $200. The FPA also reflects the
modification to the imputed underpayment based on the amended returns
filed by F taking into account F's share of the reduction in the long-
term capital loss. Therefore, the imputed underpayment in the FPA is $40
($100 x 40 percent). Partnership makes a timely election under section
6226 in accordance with Sec. 301.6226-1 with respect to the imputed
underpayment in the FPA for Partnership's 2020 year and files a timely
petition in the Tax Court challenging the partnership adjustments. The
Tax Court upholds the determinations in the FPA and the decision
regarding Partnership's 2020 tax year becomes final on December 15,
2025. Pursuant to Sec. 301.6226-2(b), the partnership adjustments are
finally determined on December 15, 2025. On February 1, 2026,
Partnership files the statements described under Sec. 301.6226-2 with
the IRS and furnishes to its partners statements reflecting their shares
of the partnership adjustment. The statement issued to F reflects F's
share of the partnership adjustment for Partnership's 2020 taxable year
as finally determined by the Tax Court. The statement shows F's share of
the long-term capital loss adjustment for the reviewed year of $100, as
well as the $100 long-term capital loss taken into account by F as part
of the amended return modification. Accordingly, in accordance with
paragraph (b) of this section, when F computes its correction amounts
for the first affected year (the 2020 taxable year) and the intervening
years (the 2021 through 2026 taxable years), F computes any increase or
decrease in chapter 1 tax for those years using the returns for the
2020, 2021, and 2022 taxable years as amended during the modification
process and taking into account any chapter 1 tax paid with those
amended returns. F also takes into account the interest paid with F's
amended returns when determining the interest under paragraph (c) of
this section that must be paid in the reporting year.
(6) Example 6. Partnership has two equal partners for the 2020 tax
year: M (an individual) and J (a partnership). For the 2020 tax year, J
has two equal partners--K and L--both individuals. On June 1, 2023, the
IRS mails an FPA to Partnership for Partnership's 2020 year increasing
Partnership's ordinary income by $500,000 and asserting an imputed
underpayment of $200,000. Partnership makes a timely election under
section 6226 in accordance with Sec. 301.6226-1 with respect to the
imputed underpayment in the FPA for Partnership's 2020 year and does not
file a petition for readjustment under section 6234. The time to file a
petition expires on August 30, 2023. Pursuant to Sec. 301.6226-2(b),
the partnership adjustments become finally determined on August 31,
2023. Therefore, Partnership's adjustment year is 2023, the due date of
the adjustment year return is March 15, 2024 and the extended due date
for the adjustment year return is September 16, 2024. On October 12,
2023, Partnership timely files with the IRS statements described in
Sec. 301.6226-2 and timely furnishes statements to its partners
reflecting their share of the partnership adjustments as finally
determined in the FPA. The statements to M and J each reflect a
partnership adjustment of $250,000 of ordinary income. M takes her share
of the adjustments reflected on the statements furnished by Partnership
into account on M's return for the 2023 tax year in accordance with
paragraph (b) of this section. On April 1, 2024, J files the adjustment
tracking report and files and furnishes statements to K and L reflecting
each partner's share of the adjustments reflected on the statements
Partnership furnished to J. K and L must take their share of adjustments
reflected on the statements furnished by J into account on their returns
for the 2023 tax year in accordance with paragraph (b) of this section
by treating themselves as reviewed year partners for purposes of
paragraph (b).
(7) Example 7. On its partnership return for the 2020 tax year,
Partnership reported that it placed Asset, which had a depreciable basis
of $210,000, into service in 2020 and depreciated Asset over 5 years,
using the straight-line method. Accordingly, Partnership claimed
depreciation of $42,000 in each year related to Asset. Partnership has
two equal partners for the 2020 tax year: M (a partnership) and N (an S
corporation). For the 2020 tax year, N
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has one shareholder, O, who is an individual. On June 1, 2023, the IRS
mails an FPA to Partnership for Partnership's 2020 year. In the FPA, the
IRS determines that Asset should have been depreciated over 7 years
instead of 5 years and adjusts the depreciation for the 2020 tax year to
$30,000 instead of $42,000 resulting in a $12,000 adjustment. This
adjustment results in an imputed underpayment of $4,800 ($12,000 x 40
percent). Partnership makes a timely election under section 6226 in
accordance with Sec. 301.6226-1 with respect to the imputed
underpayment in the FPA for Partnership's 2020 year and does not file a
petition for readjustment under section 6234. The time to file a
petition expires on August 30, 2023. Pursuant to Sec. 301.6226-2(b),
the partnership adjustments become finally determined on August 31,
2023. On October 12, 2023, Partnership timely files with the IRS
statements described in Sec. 301.6226-2 and furnishes statements to its
partners reflecting their share of the partnership adjustments as
finally determined in the FPA. The statements to M and N reflect a
partnership adjustment of $6,000 of ordinary income for the 2020 tax
year. On February 1, 2024, N takes the adjustments into account under
paragraph (e)(3) of this section by filing a partnership adjustment
tracking report and furnishing a statement to O reflecting her share of
the adjustments reported to N on the statement it received from
Partnership. M does not furnish statements and instead chooses to
calculate and pay an imputed underpayment under paragraph (e)(4) of this
section equal to $1,200 ($6,000 x 40 percent) on the adjustments
reflected on the statement it received from Partnership plus interest on
the amount calculated in accordance with paragraph (e)(4)(iv)(B) of this
section. On her 2023 return, O properly takes the adjustments into
account under this section. Therefore, O reports and pays the additional
reporting year tax determined in accordance with paragraph (b) of this
section, which is the correction amount for 2020 plus any correction
amounts for 2021 and 2022 (if the adjustments in 2020 resulted in any
changes to the tax attributes of O in those years), and pays interest
determined in accordance with paragraph (c) of this section on the
correction amounts for each of those years.
(8) Example 8. On its partnership return for the 2020 tax year,
Partnership reported $1,000 of ordinary loss. Partnership has two equal
partners for the 2020 tax year: P and Q, both S corporations. For the
2020 tax year, P had one shareholder, R, an individual. For the 2020 tax
year, Q had two shareholders, S and T, both individuals. On June 1,
2023, the IRS mails an FPA to Partnership for Partnership's 2020 year
determining $500 of the $1,000 of ordinary loss should be
recharacterized as $500 of long-term capital loss and $500 of the
ordinary loss should be disallowed. The FPA asserts an imputed
underpayment of $400 ($1,000 x 40 percent) with respect to the $1,000
reduction to ordinary loss and reflecting an adjustment that does not
result in an imputed underpayment of a $500 capital loss. Partnership
makes a timely election under section 6226 in accordance with Sec.
301.6226-1 with respect to the imputed underpayment in the FPA for
Partnership's 2020 year and does not file a petition for readjustment
under section 6234. The time to file a petition expires on August 30,
2023. Pursuant to Sec. 301.6226-2(b), the partnership adjustments
become finally determined on August 31, 2023. On October 12, 2023,
Partnership timely files with the IRS statements described in Sec.
301.6226-2 and furnishes statements to its partners reflecting their
share of the partnership adjustments as finally determined in the FPA.
The statements to P and Q each reflect a partnership adjustment of $500
increase in ordinary income and a $250 increase in capital loss in
accordance with Sec. 301.6225-3(b)(6). P takes the adjustments into
account under paragraph (e)(3) of this section by timely filing a
partnership adjustment tracking report and furnishing a statement to R.
Q timely filed a partnership adjustment tracking report, but chooses not
to furnish statements and instead must calculate and pay an imputed
underpayment under paragraph (e)(4) of this section as well as interest
on the imputed underpayment determined under paragraph (e)(4)(iv)(B) of
this section. After applying the rules set forth in Sec. 301.6225-1, Q
calculates the imputed underpayment that it is required to
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pay of $200 ($500 adjustment to ordinary income x 40 percent). Q also
has one adjustment that does not result in an imputed underpayment--the
$250 increase to capital loss. Pursuant to paragraph (e)(1) of this
section, Q files the partnership adjustment tracking report and pay the
amounts due under paragraph (e)(4) of this section by September 15,
2024, the extended due date of Partnership's return for the adjustment
year, 2023. Pursuant to paragraph (e)(4)(v) of this section, on its 2024
return, the year in which Q made its payment of the imputed
underpayment, Q reports and allocates the $250 capital loss to its
shareholders for its 2024 taxable year as a capital loss as provided in
Sec. 301.6225-3.
(9) Example 9. On its partnership return for the 2020 tax year,
Partnership reported a $1,000 long-term capital gain on the sale of
Stock. Partnership has two equal partners for the 2020 tax year: U (an
individual) and V (a partnership). For the 2020 tax year, V has two
equal partners: W (an individual) and X (a partnership). For the 2020
tax year, X has two equal partners: Y and Z, both of which are C
corporations. On June 1, 2023, the IRS mails a NOPPA to Partnership for
Partnership's 2020 year proposing a $500 increase in the long-term
capital gain from the sale of Stock and an imputed underpayment of $200
($500 x 40 percent). On July 17, 2023, Partnership timely submits a
request to modify the rate used in calculating the imputed underpayment
under Sec. 301.6225-2(d)(4). Partnership submits sufficient information
demonstrating that $375 of the $500 adjustment is allocable to
individuals (50 percent of the $500 adjustment allocable to U and 25
percent of the $500 adjustment allocable to W) and the remaining $125 is
allocable to C corporations (the indirect partners Y and Z). The IRS
approves the modification and the imputed underpayment is reduced to
$81.25 (($375 x 15 percent) + ($125 x 20 percent)). See Sec. 301.6225-
2(b)(3). No other modifications are requested. On February 28, 2024, the
IRS mails an FPA to Partnership for Partnership's 2020 year determining
a $500 increase in the long-term capital gain on the sale of Stock and
asserting an imputed underpayment of $81.25 after taking into account
the approved modifications. Partnership makes a timely election under
section 6226 in accordance with Sec. 301.6226-1 with respect to the
imputed underpayment in the FPA for Partnership's 2020 year and does not
file a petition for readjustment under section 6234. The time to file a
petition expires on May 28, 2024. Pursuant to Sec. 301.6226-2(b), the
partnership adjustments become finally determined on May 29, 2024. On
July 26, 2024, Partnership timely files with the IRS statements
described in Sec. 301.6226-2 and furnishes statements to its partners
reflecting their share of the partnership adjustments as finally
determined in the FPA. The statements to U and V each reflect a
partnership adjustment of a $250 increase in long-term capital gain. V
timely files the adjustment tracking report but fails to furnish
statements and therefore must calculate and pay an imputed underpayment
under paragraph (e)(4) of this section as well as interest on the
imputed underpayment determined under paragraph (e)(4)(iv)(B) of this
section. On February 3, 2025, V pays an imputed underpayment of $43.75
(($125 x 20 percent for the adjustments allocable to X) + ($125 x 15
percent for the adjustments allocable to W)) which takes into account
the rate modifications approved by the IRS with respect to Y and Z. V
must also pay any interest on the amount as determined in accordance
with paragraph (e)(4)(iv)(B) of this section. V must file the adjustment
tracking report and pay the amounts due under paragraph (e)(4) of this
section no later than September 15, 2025, the extended due date of
Partnership's return for the 2024 year, which is the adjustment year.
(i) Applicability date--(1) In general. Except as provided in
paragraph (i)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017, and ending after August
12, 2018.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable year beginning after November 2, 2015, and
before January 1, 2018, for which a valid election under Sec. 301.9100-
22 is in effect.
[T.D. 9844, 84 FR 6551, Feb. 27, 2019]
[[Page 293]]
Sec. 301.6226(a)-1 Principal place of business of partnership.
(a) In general. The principal place of a partnership's business for
purposes of determining the appropriate district court in which a
petition for a readjustment of partnership items may be filed is its
principal place of business as of the date the petition is filed.
(b) Example. The provisions of paragraph (a) of this section may be
illustrated by the following example:
Example. The principal place of Partnership A's business on the day
that the notice of the final partnership administrative adjustment was
mailed to A's tax matters partner was Cincinnati, Ohio. However, by the
day on which a petition seeking judicial review of that adjustment was
filed, A had moved its principal place of business to Louisville,
Kentucky. For purposes of section 6226(a)(2), A's principal place of
business is Louisville.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6226(a)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50553, Oct. 4, 2001]
Sec. 301.6226(b)-1 5-percent group.
(a) In general. All members of a 5-percent group shall join in
filing any petition for judicial review. The designation of a partner as
a representative of a notice group does not authorize that partner to
file a petition for a readjustment of partnership items on behalf of the
notice group.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6226(b)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50553, Oct. 4, 2001]
Sec. 301.6226(e)-1 Jurisdictional requirement for bringing
an action in District Court or United States Court of Federal Claims.
(a) Amount to be deposited--(1) In general. The jurisdictional
amount that the filing partner (or, in the case of a petition filed by a
5-percent group, each member of the group, or, for civil actions
beginning on or after April 2, 2002, in the case of a petition filed by
a pass-thru partner, each indirect partner holding an interest through
the pass-thru partner) shall deposit is the amount by which the tax
liability of the partner would be increased if the treatment of the
partnership items on the partner's return were made consistent with the
treatment of partnership items on the partnership return, as adjusted by
the notice of final partnership administrative adjustment. The partner
is not required to pay other outstanding liabilities in order to deposit
a jurisdictional amount.
(2) Example. The provisions of paragraph (a)(1) of this section may
be illustrated by the following example:
Example. A files a petition for readjustment of partnership items in
the United States Court of Federal Claims. A's tax liability would be
increased by $4,000 if partnership items on A's return were conformed to
the partnership return, as adjusted by the notice of final partnership
administrative adjustment. A has an unpaid liability of $10,000
attributable to nonpartnership items. A is required to deposit $4,000 in
order to satisfy the jurisdictional requirement.
(b) Deposit taken into account in computing interest. The amount
deposited is treated as a payment of tax for purposes of chapter 67 of
the Internal Revenue Code (relating to interest).
(c) Deposit generally not treated as payment of tax. Except as
provided in paragraph (b) of this section, an amount deposited under
section 6226(e) shall not be treated as a payment of tax. Thus, the
Internal Revenue Service may proceed against the depositor for a
deficiency based on nonpartnership items without regard to this deposit.
(d) Amount deposited may be applied against assessment. If the
restriction on assessment provided under section 6225(a) lapses with
respect to a deficiency attributable to partnership items for a
partnership taxable year while an amount is on deposit under section
6226(e) in connection with a petition relating to those items, the
Internal Revenue Service may apply the amount deposited against any such
deficiency that is assessed.
(e) Effective date. Except as otherwise provided in paragraph (a)(1)
of this section, this section is applicable to civil actions beginning
on or after October 4, 2001. For civil actions beginning prior
[[Page 294]]
to October 4, 2001, see Sec. 301.6226(e)-1T contained in 26 CFR part 1,
revised April 1, 2001.
[T.D. 8965, 66 FR 50554, Oct. 4, 2001]
Sec. 301.6226(f)-1 Scope of judicial review.
(a) In general. A court reviewing a notice of final partnership
administrative adjustment has jurisdiction to determine all partnership
items for the taxable year to which the notice relates and the proper
allocation of such items among the partners. Thus, the review is not
limited to the items adjusted in the notice. In addition, the court has
jurisdiction in the partnership-level proceeding to determine any
penalty, addition to tax, or additional amount that relates to an
adjustment to a partnership item. However, the court does not have
jurisdiction in the partnership-level proceeding to consider any
partner-level defenses to any penalty, addition to tax, or additional
amount that relates to an adjustment to a partnership item. See section
6230(c)(4) and Sec. 301.6221-1(c) and (d).
(b) Example. The provisions of paragraph (a) of this section may be
illustrated by the following example:
Example. The Internal Revenue Service issues a notice of final
partnership administrative adjustment with respect to Partnership ABC in
which the only item adjusted is depreciation. A petition for judicial
review of that notice is filed. During the judicial proceeding, a
partner of ABC, in accordance with the applicable court rules, raises an
issue relating to the treatment of intangible drilling costs. The court
reviewing the notice has jurisdiction to determine the intangible
drilling cost issue in addition to the depreciation issue.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6226(f)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50554, Oct. 4, 2001]
Sec. 301.6227-1 Administrative adjustment request by partnership.
(a) In general. A partnership may file a request for an
administrative adjustment with respect to any partnership-related item
(as defined in Sec. 301.6241-1(a)(6)(ii)) for any partnership taxable
year. When filing an administrative adjustment request (AAR), the
partnership must determine whether the adjustments requested in the AAR
result in an imputed underpayment in accordance with Sec. 301.6227-2(a)
for the reviewed year (as defined in Sec. 301.6241-1(a)(8)). If the
adjustments requested in the AAR result in an imputed underpayment, the
partnership must take the adjustments into account under the rules
described in Sec. 301.6227-2(b) unless the partnership makes an
election under Sec. 301.6227-2(c), in which case each reviewed year
partner (as defined in Sec. 301.6241-1(a)(9)) must take the adjustments
into account in accordance with Sec. 301.6227-3. If the adjustments
requested in the AAR are adjustments described in Sec. 301.6225-1(f)(1)
that do not result in an imputed underpayment (as determined under Sec.
301.6227-2(a)), such adjustments must be taken into account by the
reviewed year partners in accordance with Sec. 301.6227-3. A partner
may not make a request for an administrative adjustment of a
partnership-related item except in accordance with Sec. 301.6222-1 or
if the partner is doing so on behalf of the partnership in the partner's
capacity as the partnership representative designated under section
6223. In addition, a partnership may not file an AAR solely for the
purpose of changing the designation of a partnership representative or
changing the appointment of a designated individual. See Sec. 301.6223-
1 (regarding designation of the partnership representative). When the
partnership changes the designation of the partnership representative
(or appointment of the designated individual) in conjunction with the
filing of an AAR in accordance with Sec. 301.6223-1(e), the change in
designation (or appointment) is treated as occurring prior to the filing
of the AAR. For rules regarding a notice of change to the amount of
creditable foreign tax expenditures see paragraph (g) of this section.
(b) Time for filing an AAR. An AAR may only be filed by a
partnership with respect to a partnership taxable year after a
partnership return for that taxable year has been filed with the
Internal Revenue Service (IRS). A partnership may not file an AAR with
respect to a partnership taxable year more
[[Page 295]]
than three years after the later of the date the partnership return for
such partnership taxable year was filed or the last day for filing such
partnership return (determined without regard to extensions). Except as
provided in Sec. 301.6231-1(f), an AAR (including a request filed by a
partner in accordance with Sec. 301.6222-1) may not be filed for a
partnership taxable year after a notice of administrative proceeding
with respect to such taxable year has been mailed by the IRS under
section 6231.
(c) Form and manner for filing an AAR--(1) In general. An AAR by a
partnership, including any required statements, forms, and schedules as
described in this section, must be filed with the IRS in accordance with
the forms, instructions, and other guidance prescribed by the IRS, and
must be signed under penalties of perjury by the partnership
representative (as described in Sec. Sec. 301.6223-1 and 301.6223-2).
(2) Contents of AAR filed with the IRS. A partnership must include
the information described in this paragraph (c)(2) when filing an AAR
with the IRS. In the case of a failure by the partnership to provide the
information described in this paragraph (c)(2), the IRS may, but is not
required to, invalidate an AAR or readjust any items that were adjusted
on the AAR. An AAR filed with the IRS must include--
(i) The adjustments requested;
(ii) If a reviewed year partner is required to take into account the
adjustments requested under Sec. 301.6227-3, statements described in
paragraph (e) of this section, including any transmittal with respect to
such statements required by forms, instructions, and other guidance
prescribed by the IRS; and
(iii) Other information prescribed by the IRS in forms,
instructions, or other guidance.
(d) Copy of statement furnished to reviewed year partners in certain
cases. If a reviewed year partner is required to take into account
adjustments requested in an AAR under Sec. 301.6227-3, the partnership
must furnish a copy of the statement described in paragraph (e) of this
section to the reviewed year partner to whom the statement relates in
accordance with the forms, instructions and other guidance prescribed by
the IRS. If the partnership mails the statement, it must mail the
statement to the current or last address of the reviewed year partner
that is known to the partnership. The statement must be furnished to the
reviewed year partner on the date the AAR is filed with the IRS.
(e) Statements--(1) Contents. Each statement described in this
paragraph (e) must include the following correct information:
(i) The name and TIN of the reviewed year partner to whom the
statement is being furnished;
(ii) The current or last address of the partner that is known to the
partnership;
(iii) The reviewed year partner's share of items as originally
reported on statements furnished to the partner under section 6031(b)
and, if applicable, section 6227;
(iv) The reviewed year partner's share of the adjustments as
described under paragraph (e)(2) of this section;
(v) The date the statement is furnished to the partner;
(vi) The partnership taxable year to which the adjustments relate;
and
(vii) Any other information required by forms, instructions, and
other guidance prescribed by the IRS.
(2) Determination of each partner's share of adjustments--(i) In
general. Except as provided in paragraphs (e)(2)(ii) and (iii) of this
section, each reviewed year partner's share of the adjustments requested
in the AAR is determined in the same manner as each adjusted
partnership-related item was originally allocated to the reviewed year
partner on the partnership return for the reviewed year. If the
partnership pays an imputed underpayment under Sec. 301.6227-2(b) with
respect to the adjustments requested in the AAR, the reviewed year
partner's share of the adjustments requested in the AAR only includes
any adjustments that did not result in the imputed underpayment, as
determined under Sec. 301.6227-2(a).
(ii) Adjusted partnership-related item not reported on the
partnership's return for the reviewed year. Except as provided in
paragraph (e)(2)(iii) of this section, if the adjusted partnership-
related item was not reported on the partnership return for the reviewed
[[Page 296]]
year, each reviewed year partner's share of the adjustments must be
determined in accordance with how such items would have been allocated
under rules that apply with respect to partnership allocations,
including under the partnership agreement.
(iii) Allocation adjustments. If an adjustment involves allocation
of a partnership-related item to a specific partner or in a specific
manner, including a reallocation of an item, the reviewed year partner's
share of the adjustment requested in the AAR is determined in accordance
with the AAR.
(f) Administrative proceeding for a taxable year for which an AAR is
filed. Within the period described in section 6235, the IRS may initiate
an administrative proceeding with respect to the partnership for any
partnership taxable year regardless of whether the partnership filed an
AAR with respect to such taxable year and may adjust any partnership-
related item, including any partnership-related item adjusted in an AAR
filed by the partnership. The amount of an imputed underpayment
determined by the partnership under Sec. 301.6227-2(a)(1), including
any modifications determined by the partnership under Sec. 301.6227-
2(a)(2), may be re-determined by the IRS.
(g) Notice requirement and partnership adjustments required as a
result of a foreign tax redetermination. For special rules applicable
when an adjustment to a partnership related item (as defined in section
6241(2)) is required as part of a redetermination of U.S. tax liability
under section 905(c) and Sec. 1.905-3(b) of this chapter as a result of
a foreign tax redetermination (as defined in Sec. 1.905-3(a) of this
chapter), see Sec. 1.905-4(b)(2)(ii) of this chapter.
(h) Applicability date--(1) In general. Except as provided in
paragraph (h)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017, and ending after August
12, 2018.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable year beginning after November 2, 2015, and
before January 1, 2018, for which a valid election under Sec. 301.9100-
22 is in effect.
[T.D. 9844, 84 FR 6558, Feb. 27, 2019, as amended by T.D. 9922, 85 FR
72074, Nov. 12, 2020]
Sec. 301.6227-2 Determining and accounting for adjustments
requested in an administrative adjustment request by the partnership.
(a) Determining whether adjustments result in an imputed
underpayment--(1) Determination of an imputed underpayment. The
determination of whether adjustments requested in an administrative
adjustment request (AAR) result in an imputed underpayment in the
reviewed year (as defined in Sec. 301.6241-1(a)(8)) and the
determination of the amount of any imputed underpayment is made in
accordance with the rules under Sec. 301.6225-1.
(2) Modification of imputed underpayment for purposes of this
section. A partnership may apply modifications to the amount of an
imputed underpayment determined under paragraph (a)(1) of this section
using only the provisions under Sec. 301.6225-2(d)(3) (regarding tax-
exempt partners), Sec. 301.6225-2(d)(4) (regarding modification of
applicable tax rate), Sec. 301.6225-2(d)(5) (regarding specified
passive activity losses), Sec. 301.6225-2(d)(6)(ii) (regarding
limitations or restrictions in the grouping of adjustments), Sec.
301.6225-2(d)(7) (regarding certain qualified investment entities),
Sec. 301.6225-2(d)(9) (regarding tax treaty modifications), or as
provided in forms, instructions, or other guidance prescribed by the IRS
with respect to AARs. The partnership may not modify an imputed
underpayment resulting from adjustments requested in an AAR except as
described in this paragraph (a)(2). When applying modifications to the
amount of an imputed underpayment under this paragraph (a)(2):
(i) The partnership is not required to seek the approval from the
Internal Revenue Service (IRS) prior to applying modifications to the
amount of any imputed underpayment under paragraph (a)(1) of this
section reported on the AAR; and
(ii) As part of the AAR filed with the IRS in accordance with forms,
instructions, and other guidance prescribed by the IRS, the partnership
must--
(A) Notify the IRS of any modification;
(B) Describe the effect of the modification on the imputed
underpayment;
[[Page 297]]
(C) Provide an explanation of the basis for such modification; and
(D) Provide documentation to support the partnership's eligibility
for the modification.
(b) Adjustments resulting in an imputed underpayment taken into
account by the partnership--(1) In general. Except in the case of a
valid election under paragraph (c) of this section, a partnership must
pay any imputed underpayment (as determined under paragraph (a) of this
section) resulting from the adjustments requested in an AAR on the date
the partnership files the AAR. For the rules applicable to the
partnership's expenditure for an imputed underpayment, as well as any
penalties and interest paid by the partnership with respect to an
imputed underpayment, see Sec. 301.6241-4.
(2) Penalties and interest. The IRS may impose a penalty, addition
to tax, and additional amount with respect to any imputed underpayment
determined under this section in accordance with section 6233(a)(3)
(penalties determined from the reviewed year). In addition, the IRS may
impose a penalty, addition to tax, and additional amount with respect to
a failure to pay any imputed underpayment on the date an AAR is filed in
accordance with section 6233(b)(3) (penalties with respect to the
adjustment year return). Interest on an imputed underpayment is
determined under chapter 67 of the Internal Revenue Code for the period
beginning on the date after the due date of the partnership return for
the reviewed year (as defined in Sec. 301.6241-1(a)(8)) (determined
without regard to extension) and ending on the date the AAR is filed.
See Sec. 301.6233(a)-1(b). In the case of any failure to pay an imputed
underpayment on the date the AAR is filed, interest is determined in
accordance with section 6233(b)(2) and Sec. 301.6233(b)-1(c).
(3) Coordination with chapters 3 and 4 of the Internal Revenue
Code--(i) Coordination when partnership pays an imputed underpayment. If
a partnership pays an imputed underpayment resulting from adjustments
requested in an AAR under paragraph (b)(1) of this section, the rules in
Sec. 301.6241-6(b)(3) apply to treat the partnership as having paid the
amount required to be withheld under chapter 3 or chapter 4 (as defined
in Sec. 301.6241-6(b)(2)).
(ii) Coordination when partnership elects to have adjustments taken
into account by reviewed year partners. If a partnership elects under
paragraph (c) of this section to have its reviewed year partners take
into account adjustments requested in an AAR, the rules in Sec.
301.6226-2(g)(3) apply to the partnership, and the rules in Sec.
301.6226-3(f) apply to the reviewed year partners that take into account
the adjustments pursuant to Sec. 301.6227-3.
(c) Election to have adjustments resulting in an imputed
underpayment taken into account by reviewed year partners. In lieu of
paying an imputed underpayment under paragraph (b) of this section, the
partnership may elect to have each reviewed year partner (as defined in
Sec. 301.6241-1(a)(9)) take into account the adjustments requested in
the AAR that are associated with such imputed underpayment in accordance
with Sec. 301.6227-3. A partnership makes an election under this
paragraph (c) at the time the AAR is filed in accordance with the forms,
instructions, and other guidance prescribed by the IRS. If the
partnership makes a valid election in accordance with this paragraph
(c), the partnership is not liable for, nor required to pay, the imputed
underpayment to which the election relates. Rather, each reviewed year
partner must take into account their share of the adjustments requested
in the AAR that are associated with such imputed underpayment in
accordance with Sec. 301.6227-3. If an election is made under this
paragraph (c) with respect to an imputed underpayment, modifications
applied under paragraph (a)(2) of this section to such imputed
underpayment are disregarded and all adjustments requested in the AAR
that are associated with such imputed underpayment must be taken into
account by each reviewed year partner in accordance with Sec. 301.6227-
3.
(d) Adjustments not resulting in an imputed underpayment. If any
adjustments requested in an AAR are adjustments that do not result in an
imputed underpayment (as determined under paragraph (a) of this
section), the partnership must furnish statements to each reviewed year
partner and file such
[[Page 298]]
statements with the IRS in accordance with Sec. 301.6227-1. Each
reviewed year partner must take into account its share of the
adjustments that do not result in an imputed underpayment requested in
the AAR in accordance with Sec. 301.6227-3.
(e) Applicability date--(1) In general. Except as provided in
paragraph (e)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017, and ending after August
12, 2018.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable year beginning after November 2, 2015, and
before January 1, 2018, for which a valid election under Sec. 301.9100-
22 is in effect.
[T.D. 9844, 84 FR 6559, Feb. 27, 2019]
Sec. 301.6227-3 Adjustments requested in an administrative
adjustment request taken into account by reviewed year partners.
(a) In general. Each reviewed year partner (as defined in Sec.
301.6241-1(a)(9)) is required to take into account its share of
adjustments requested in an administrative adjustment request (AAR) that
either do not result in an imputed underpayment (as described in Sec.
301.6225-1(f)(1)) or are associated with an imputed underpayment for
which the partnership makes an election under Sec. 301.6227-2(c). Each
reviewed year partner receiving a statement furnished in accordance with
Sec. 301.6227-1(d) must take into account adjustments reflected in the
statement in the reviewed year partner's taxable year that includes the
date the statement is furnished (reporting year) in accordance with
paragraph (b) of this section.
(b) Adjustments taken into account by the reviewed year partner in
the reporting year--(1) In general. Except as provided in paragraph (c)
of this section, a reviewed year partner that is furnished a statement
described in paragraph (a) of this section must treat the statement as
if it were issued under section 6226(a)(2) and, on or before the due
date for the reporting year must report and pay the additional reporting
year tax (as defined in Sec. 301.6226-3(a)), if any, determined after
taking into account that partner's share of the adjustments requested in
the AAR in accordance with Sec. 301.6226-3. A reviewed year partner
may, in accordance with Sec. 301.6226-3(a), reduce chapter 1 tax for
the reporting year where the additional reporting year tax is less than
zero. For purposes of paragraph (b) of this section, the rule under
Sec. 301.6226-3(c)(3) (regarding the increased rate of interest) does
not apply. Nothing in this section entitles any partner to a refund of
tax imposed by chapter 1 of the Internal Revenue Code (chapter 1 tax) to
which such partner is not entitled. For instance, a partnership-partner
(as defined in Sec. 301.6241-1(a)(7)) may not claim a refund with
respect to its share of any adjustment.
(2) Examples. The following examples illustrate the rules of
paragraph (b) of this section.
(i) Example 1. In 2022, partner A, an individual, received a
statement described in paragraph (a) of this section from Partnership
with respect to Partnership's 2020 taxable year. Both A and Partnership
are calendar year taxpayers and A is not claiming any refundable tax
credit in 2020. The only adjustment shown on the statement is an
increase in ordinary loss. Taking into account the adjustment, A
determines that his additional reporting year tax for 2022 (the
reporting year) is -$100 (that is, a reduction of $100.) A's chapter 1
tax for 2022 (without regard to any additional reporting year tax) is
$150. Applying the rules in paragraph (b)(1) of this section, A's
chapter 1 tax for 2022 is reduced to $50 ($150 chapter 1 tax without
regard to the additional reporting year tax plus -$100 additional
reporting year tax).
(ii) Example 2. The facts are the same as in Example 1 in paragraph
(b)(2)(i) of this section, except A's chapter 1 tax for 2022 (without
regard to any additional reporting year tax) is $75. Applying the rules
in paragraph (b)(1) of this section, A's chapter 1 tax for 2022 is
reduced by the -$100 of additional reporting year tax. Accordingly, A's
chapter 1 tax for 2022 is -$25 ($75 chapter 1 tax without regard to any
additional reporting year tax plus -$100 of additional reporting year
tax), A owes no chapter 1 tax for 2022, and A may make a claim for
refund with respect to any overpayment.
[[Page 299]]
(c) Reviewed year partners that are pass-through partners--(1) In
general. Except as provided in paragraph (c) of this section, if a
statement described in paragraph (a) of this section (including a
statement described in this paragraph (c)(1)) is furnished to a reviewed
year partner that is a pass-through partner (as defined in Sec.
301.6241-1(a)(5)), the pass-through partner must take into account the
adjustments reflected on that statement in accordance with Sec.
301.6226-3(e) by treating the partnership that filed the AAR as the
partnership that made an election under Sec. 301.6226-1. A pass-through
partner that furnishes statements in accordance with Sec. 301.6226-
3(e)(3) must provide the information described in paragraph (c)(3) of
this section in lieu of the information described in Sec. 301.6226-
3(e)(3)(iii) on the statements the pass-through partner furnishes to its
partners. A pass-through partner that computes and pays an imputed
underpayment in accordance with Sec. 301.6226-3(e)(4)(iii) may not
apply any modifications to the amount of imputed underpayment. For
purposes of this paragraph (c)(1), the statement furnished to the pass-
through partner by the partnership filing the AAR is treated as if it
were a statement issued under section 6226(a)(2) and described in Sec.
301.6226-2.
(2) Adjustments that do not result in an imputed underpayment. If
adjustments on a statement received by the pass-through partner under
paragraph (a) or (c)(1) of this section do not result in an imputed
underpayment for the pass-through partner (as described in Sec.
301.6225-1(f)(1)), the pass-through partner must take the adjustments
that do not result in an imputed underpayment into account in accordance
with Sec. 301.6226-3(e)(3). The pass-through partner must take such
adjustments into account under this paragraph (c)(2) even in situations
where the pass-through partner pays an imputed underpayment in
accordance with Sec. 301.6226-3(e)(4)(iii). The pass-through partner
must provide the information described in paragraph (c)(3) of this
section in lieu of the information described in Sec. 301.6226-
3(e)(3)(iii) on the statements the pass-through partner furnishes to its
affected partners (as defined in Sec. 301.6226-3(e)(3)(i)).
(3) Contents of statements. Each statement described in paragraph
(c)(1) or (2) of this section must include the following correct
information--
(i) The name and taxpayer identification number (TIN) of the
partnership that filed the AAR with respect to the adjustments reflected
on the statements described in paragraph (c)(1) of this section;
(ii) The adjustment year (as defined in Sec. 301.6241-1(a)(1)) of
the partnership described in paragraph (c)(3)(i) of this section;
(iii) The extended due date for the return for the adjustment year
of the partnership described in paragraph (c)(3)(i) of this section (as
described in Sec. 301.6226-3(e)(3)(ii));
(iv) The date on which the partnership described in paragraph
(c)(3)(i) of this section furnished its statements required under Sec.
301.6227-1(d);
(v) The name and TIN of the partnership that furnished the statement
to the pass-through partner if different from the partnership described
in paragraph (c)(3)(i) of this section;
(vi) The name and TIN of the pass-through partner;
(vii) The pass-through partner's taxable year to which the
adjustments set forth in the statement described in paragraph (c)(1) of
this section relate;
(viii) The name and TIN of the affected partner to whom the
statement is being furnished;
(ix) The current or last address of the affected partner that is
known to the pass-through partner;
(x) The affected partner's share of items as originally reported to
such partner under section 6031(b) and, if applicable, section 6227, for
the taxable year to which the adjustments reflected on the statement
furnished to the pass-through partner relate;
(xi) The affected partner's share of partnership adjustments
determined under Sec. 301.6227-1(e)(2) as if the affected partner were
the reviewed year partner and the partnership were the pass-through
partner;
(xii) Any other information required by forms, instructions, and
other guidance prescribed by the IRS.
[[Page 300]]
(4) Affected partners must take into account the adjustments. A
statement furnished to an affected partner in accordance with paragraph
(c)(1) or (2) of this section is to be treated by the affected partner
as if it were a statement described in paragraph (a) of this section.
The affected partner must take into account its share of the adjustments
reflected on such a statement in accordance with this section by
treating references to ``reviewed year partner'' as ``affected
partner.'' When taking into account the adjustments as described in
Sec. 301.6226-3(e)(3)(iv), the rules under Sec. 301.6226-3(c)(3)
(regarding the increased rate of interest) do not apply.
(d) Applicability date--(1) In general. Except as provided in
paragraph (d)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017, and ending after August
12, 2018.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable year beginning after November 2, 2015, and
before January 1, 2018, for which a valid election under Sec. 301.9100-
22 is in effect.
[T.D. 9844, 84 FR 6560, Feb. 27, 2019]
Sec. 301.6227(c)-1 Administrative adjustment request by
the tax matters partner on behalf of the partnership.
(a) In general. A request for an administrative adjustment filed by
the tax matters partner on behalf of the partnership shall be filed on
the form prescribed by the Internal Revenue Service for that purpose in
accordance with that form's instructions. Except as otherwise provided
in that form's instructions, the request shall be--
(1) Filed with the service center where the original partnership
return was filed (but, if the notice described in section 6223(a)(1)
(beginning of an administrative proceeding) has already been mailed to
the tax matters partner, the statement should be filed with the Internal
Revenue Service office that mailed such notice);
(2) Signed by the tax matters partner; and
(3) Accompanied by revised schedules showing the effects of the
proposed changes on each partner and an explanation of the changes.
(b) Denied request for treatment as a substituted return remains
administrative adjustment request. An administrative adjustment request
filed by the tax matters partner on behalf of the partnership for which
substituted return treatment is requested but not granted remains an
administrative adjustment request. Thus, for example, the tax matters
partner may file suit under section 6228(a) if the Internal Revenue
Service fails to take timely action on the request.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6227(b)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50554, Oct. 4, 2001]
Sec. 301.6227(d)-1 Administrative adjustment request filed on behalf of a partner.
(a) In general. A request for an administrative adjustment on behalf
of a partner shall be filed on the form prescribed by the Internal
Revenue Service for that purpose in accordance with that form's
instructions. Except as otherwise provided in that form's instructions,
the request shall--
(1) Be filed in duplicate, the original copy filed with the
partner's amended income tax return (on which the partner computes the
amount by which the partner's tax liability should be adjusted if the
request is granted) and the other copy filed with the service center
where the partnership return is filed (but, if the notice described in
section 6223(a)(1) (beginning of an administrative proceeding) has
already been mailed to the tax matters partner, the statement should be
filed with the Internal Revenue Service office that mailed such notice);
(2) Identify the partner and the partnership by name, address, and
taxpayer identification number;
(3) Specify the partnership taxable year to which the administrative
adjustment request applies;
(4) Relate only to partnership items; and
(5) Relate only to one partnership and one partnership taxable year.
(b) Effective date. This section is applicable to partnership
taxable years
[[Page 301]]
beginning on or after October 4, 2001. For years beginning prior to
October 4, 2001, see Sec. 301.6227(c)-1T contained in 26 CFR part 1,
revised April 1, 2001.
[T.D. 8965, 66 FR 50555, Oct. 4, 2001]
Sec. 301.6229(b)-1 Extension by agreement.
(a) In general. Any partnership may authorize any person to extend
the period described in section 6229(a) with respect to all partners by
filing a statement to that effect with the service center where the
partnership return is filed (but, if the notice described in section
6223(a)(1) (beginning of an administrative proceeding) has already been
mailed to the tax matters partner, the statement should be filed with
the Internal Revenue Service office that mailed such notice). The
statement shall--
(1) Provide that it is an authorization for a person other than the
tax matters partner to extend the assessment period with respect to all
partners;
(2) Identify the partnership and the person being authorized by
name, address, and taxpayer identification number;
(3) Specify the partnership taxable year or years for which the
authorization is effective; and
(4) Be signed by all persons who were general partners (or, in the
case of an LLC, member-managers, as those terms are defined in Sec.
301.6231(a)(7)-2(b)) at any time during the year or years for which the
authorization is effective.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6229(b)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50555, Oct. 4, 2001]
Sec. 301.6229(b)-2 Special rule with respect to debtors in title 11 cases.
(a) In general. Notwithstanding any other law or rule of law, if an
agreement is entered into under section 6229(b)(1)(B), and the agreement
is signed by a person who would be the tax matters partner but for the
fact that, at the time that the agreement is executed, the person is a
debtor in a bankruptcy proceeding under title 11 of the United States
Code, such agreement shall be binding on all partners in the partnership
unless the Internal Revenue Service has been notified of the bankruptcy
proceeding in accordance with paragraph (b) of this section.
(b) Procedures for notifying the Internal Revenue Service of a
partner's bankruptcy proceeding. (1) The Internal Revenue Service shall
be notified of the bankruptcy proceeding of the tax matters partner in
accordance with the procedures set forth in Sec. 301.6223(c)-1.
(2) In addition to the information specified in Sec. 301.6223(c)-1,
notification that a person is (or was) a debtor in a bankruptcy
proceeding shall include the date the bankruptcy proceeding was filed,
the name and address of the court in which the bankruptcy proceeding
exists (or took place), the caption of the bankruptcy proceeding
(including the docket number or other identification number used by the
court), and the status of the proceeding as of the date of notification.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6229(b)-2T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50555, Oct. 4, 2001]
Sec. 301.6229(c)(2)-1 Substantial omission of income.
(a) Partnership return--(1) General rule. (i) If any partnership
omits from the gross income stated in its return an amount properly
includible therein and that amount is described in clause (i) of section
6501(e)(1)(A), subsection (a) of section 6229 shall be applied by
substituting ``6 years'' for ``3 years.''
(ii) For purposes of paragraph (a)(1)(i) of this section, the term
gross income, as it relates to a trade or business, means the total of
the amounts received or accrued from the sale of goods or services, to
the extent required to be shown on the return, without reduction for the
cost of those goods or services.
(iii) For purposes of paragraph (a)(1)(i) of this section, the term
gross income, as it relates to any income other than from the sale of
goods or services in a trade or business, has the
[[Page 302]]
same meaning as provided under section 61(a), and includes the total of
the amounts received or accrued, to the extent required to be shown on
the return. In the case of amounts received or accrued that relate to
the disposition of property, and except as provided in paragraph
(a)(1)(ii) of this section, gross income means the excess of the amount
realized from the disposition of the property over the unrecovered cost
or other basis of the property. Consequently, except as provided in
paragraph (a)(1)(ii) of this section, an understated amount of gross
income resulting from an overstatement of unrecovered cost or other
basis constitutes an omission from gross income for purposes of section
6229(c)(2).
(iv) An amount shall not be considered as omitted from gross income
if information sufficient to apprise the Commissioner of the nature and
amount of the item is disclosed in the return, including any schedule or
statement attached to the return.
(b) Effective/applicability date. This section applies to taxable
years with respect to which the period for assessing tax was open on or
after September 24, 2009.
[T.D. 9511, 75 FR 78898, Dec. 17, 2010]
Sec. 301.6229(e)-1 Information with respect to unidentified partner.
(a) In general. A partner who is not properly identified on the
partnership return (including an indirect partner) remains an
unidentified partner for purposes of section 6229(e) until identifying
information is furnished as provided in Sec. 301.6223(c)-1.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6229(e)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50555, Oct. 4, 2001]
Sec. 301.6229(f)-1 Special rule for partial settlement agreements.
(a) In general. If a partner enters into a settlement agreement with
the Internal Revenue Service with respect to the treatment of some of
the partnership items or partnership-level determinations of any
penalty, addition to tax, or additional amount in dispute for a
partnership taxable year, but one or more other partnership items or
determinations remain in dispute, the period of limitations for
assessing any tax attributable to the settled items shall be determined
as if such agreement had not been entered into.
(b) Other items remaining in dispute. Pursuant to section 6226(c), a
partner is a party to a partnership-level judicial proceeding with
respect to partnership items and partnership-level determinations of
penalties, additions to tax or additional amounts. When a partner
settles partnership items, the settled partnership items convert to
nonpartnership items under section 6231(b)(1)(C) and will not be subject
to any future or pending partnership-level proceeding pursuant to
section 6226(d)(1). The remaining unsettled partnership items, as well
as any unsettled penalty, addition to tax, or additional amount that
relates to an adjustment to a partnership item (regardless of whether
the partnership item to which it relates has been settled), however,
will remain subject to determination under partnership-level
administrative and judicial procedures. Consequently, any remaining
unsettled items, including any unsettled penalty, addition to tax, or
additional amount that relates to an adjustment to a partnership item,
will be deemed to remain in dispute. Thus, the period for assessing any
tax attributable to the settled items will be governed by the period for
assessing any tax attributable to the remaining unsettled items.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6229(f)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50555, Oct. 4, 2001]
Sec. 301.6230(b)-1 Request that correction not be made.
(a) In general. The request that a correction not be made under
section 6230(b)(2) shall be in writing and shall--
(1) State that it is a request that a correction not be made under
section 6230(b);
[[Page 303]]
(2) Identify the partnership and the partner filing the request by
name, address, and taxpayer identification number;
(3) Be signed by the partner filing the request; and
(4) Be filed with the Internal Revenue Service office that provided
the notice of the correction of the error.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6230(b)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50556, Oct. 4, 2001]
Sec. 301.6230(c)-1 Claim arising out of erroneous computation, etc.
(a) In general. A claim for refund under section 6230(c) shall state
the grounds for the claim and shall be filed with the service center
where the partner's return is filed.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6230(c)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50556, Oct. 4, 2001]
Sec. 301.6230(e)-1 Tax matters partner required to furnish names.
(a) In general. If a notice of the beginning of an administrative
proceeding is mailed to the tax matters partner with respect to any
partnership taxable year, the tax matters partner shall furnish to the
Internal Revenue Service office that issued the notice the name,
address, profits interest, and taxpayer identification number of each
person who was a partner in the partnership at any time during that
taxable year if that information was not provided on the partnership
return filed for that year.
(b) Revised or additional information. If the tax matters partner
discovers that any information furnished to the Internal Revenue Service
on the partnership return or under paragraph (a) of this section was
incorrect or incomplete, the tax matters partner shall furnish revised
or additional information to the Internal Revenue Service within 15 days
of discovering that the information furnished to the Internal Revenue
Service was incorrect or incomplete.
(c) Information required with respect to indirect partners. The
requirements of this section for identifying information apply with
respect to indirect partners to the extent that the tax matters partner
has such information.
(d) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6230(e)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50556, Oct. 4, 2001]
Sec. 301.6231-1 Notice of proceedings and adjustments.
(a) Notices to which this section applies. In the case of any
administrative proceeding under subchapter C of chapter 63 of the
Internal Revenue Code (subchapter C of chapter 63), including an
administrative proceeding with respect to an administrative adjustment
request (AAR) filed by a partnership under section 6227, the following
notices must be mailed to the partnership and the partnership
representative (as described in section 6223 and Sec. 301.6223-1)--
(1) Notice of any administrative proceeding initiated at the
partnership level with respect to an adjustment of any partnership-
related item (as defined in Sec. 301.6241-1(a)(6)(ii)) for any
partnership taxable year under subchapter C of chapter 63 (notice of
administrative proceeding (NAP));
(2) Notice of any proposed partnership adjustment resulting from an
administrative proceeding under subchapter C of chapter 63 (notice of
proposed partnership adjustment (NOPPA)); and
(3) Notice of any final partnership adjustment resulting from an
administrative proceeding under subchapter C of chapter 63 (notice of
final partnership adjustment (FPA)).
(b) Time for mailing notices--(1) Notice of proposed partnership
adjustment. A NOPPA is timely if it is mailed before the expiration of
the period for making adjustments under section 6235(a)(1) (including
any extensions under section 6235(b) and any special rules under section
6235(c)).
[[Page 304]]
(2) Notice of final partnership adjustment. An FPA may not be mailed
earlier than 270 days after the date on which the NOPPA is mailed unless
the partnership agrees, in writing, with the Internal Revenue Service
(IRS) to waive the 270-day period. See Sec. 301.6225-2(c)(3)(iii) for
the effect of a waiver under this paragraph (b)(2) on the 270-period for
requesting a modification under section 6225(c). See Sec. 301.6232-
1(d)(2) for the rules regarding a waiver of the limitations on
assessment under Sec. 301.6232-1(c).
(c) Last known address. A notice described in paragraph (a) of this
section is sufficient if mailed to the last known address of the
partnership representative and the partnership (even if the partnership
or partnership representative has terminated its existence).
(d) Notice mailed to partnership representative--(1) In general. A
notice described in paragraph (a) of this section will be treated as
mailed to the partnership representative if the notice is mailed to the
partnership representative that is reflected in the IRS records as of
the date the letter is mailed.
(2) No partnership representative in effect. In any case in which no
partnership representative designation is in effect in accordance with
Sec. 301.6223-1(f), a notice described in paragraph (a) of this section
mailed to ``PARTNERSHIP REPRESENTATIVE'' at the last known address of
the partnership satisfies the requirements of this section.
(e) Restrictions on additional FPAs after petition filed. The IRS
may mail more than one FPA to any partnership for any partnership
taxable year. However, except in the case of fraud, malfeasance, or
misrepresentation of a material fact, the IRS may not mail an FPA to a
partnership with respect to a partnership taxable year after the
partnership has filed a timely petition for readjustment under section
6234 with respect to an FPA issued with respect to such partnership
taxable year.
(f) Withdrawal of NAP or NOPPA. The IRS may, without consent of the
partnership, withdraw any NAP or NOPPA. Except as described in Sec.
301.6223-1(d)(2) and (e)(2), if the IRS withdraws a NAP or NOPPA under
this paragraph (f), the NAP or NOPPA is treated as if it were never
issued, and the withdrawn NAP or NOPPA has no effect for purposes of
subchapter C of chapter 63. For instance, if the IRS withdraws a NAP
with respect to a partnership taxable year, the limitation under Sec.
301.6222-1(c)(5) regarding inconsistent treatment, and the prohibition
under section 6227(c) on filing an AAR, after the mailing of a NAP no
longer applies with respect to such taxable year.
(g) Rescission of FPA. The IRS may, with the consent of the
partnership, rescind any FPA. An FPA that is rescinded is not an FPA for
purposes of subchapter C of chapter 63, and the partnership cannot bring
a proceeding under section 6234 with respect to such FPA.
(h) Applicability date--(1) In general. Except as provided in
paragraph (h)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017, and ending after August
12, 2018.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable year beginning after November 2, 2015, and
before January 1, 2018, for which a valid election under Sec. 301.9100-
22 is in effect.
[T.D. 9844, 84 FR 6561, Feb. 27, 2019]
Sec. 301.6231(a)(1)-1 Exception for small partnerships.
(a) In general. For purposes of the exception for small partnerships
under section 6231(a)(1)(B), the rules contained in this section shall
apply.
(1) 10 or fewer. The 10 or fewer limitation described in section
6231(a)(1)(B)(i) is applied to the number of natural persons, C
corporations, and estates of deceased partners that were partners at any
one time during the partnership taxable year. Thus, for example, a
partnership that at no time during the taxable year had more than 10
partners may be treated as a small partnership even if, because of
transfers of interests in the partnership, 11 or more natural persons, C
corporations, or estates of deceased partners owned interests in the
partnership for some portion of the taxable year. See section 1361(a)(2)
for the definition of a C corporation. For purposes of section
6231(a)(1)(B) and this section, a husband and wife (and their estates)
are treated as one person.
[[Page 305]]
(2) Pass-thru partner. The exception provided in section
6231(a)(1)(B) does not apply to a partnership for a taxable year if any
partner in the partnership during that taxable year is a pass-thru
partner as defined in section 6231(a)(9). For purposes of this paragraph
(a)(2), an estate shall not be treated as a pass-thru partner.
(3) Determination made annually. The determination of whether a
partnership meets the requirements for the exception for small
partnerships under section 6231(a)(1)(B) and this paragraph (a) shall be
made with respect to each partnership taxable year. Thus, a partnership
that does not qualify as a small partnership in one taxable year may
qualify as a small partnership in another taxable year if the
requirements for the exception under section 6231(a)(1)(B) and this
paragraph (a) are met with respect to that other taxable year.
(b) Election to have subchapter C of chapter 63 apply--(1) In
general. Any partnership that meets the requirements set forth in
section 6231(a)(1)(B) and paragraph (a) of this section (relating to the
exception for small partnerships) may elect under paragraph (b)(2) of
this section to have the provisions of subchapter C of chapter 63 of the
Internal Revenue Code apply with respect to that partnership.
(2) Method of election. A partnership shall make the election
described in paragraph (b)(1) of this section by attaching a statement
to the partnership return for the first taxable year for which the
election is to be effective. The statement shall be identified as an
election under section 6231(a)(1)(B)(ii), shall be signed by all persons
who were partners of that partnership at any time during the partnership
taxable year to which the return relates, and shall be filed at the time
(determined with regard to any extension of time for filing) and place
prescribed for filing the partnership return. However, for any
partnership taxable year for which the due date of the return
(determined without regard to extensions) is before January 2, 2002, the
partnership may file the statement described in the preceding sentence
on or before the date which is one year before the date specified in
section 6229(a) for the expiration of the period of limitations with
respect to that partnership (determined with regard to extensions of
that period under section 6229(b)).
(3) Years covered by election. The election shall be effective for
the partnership taxable year to which the return relates and all
subsequent partnership taxable years unless revoked with the consent of
the Commissioner.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(a)(1)-1T contained in 26
CFR part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50556, Oct. 4, 2001]
Sec. 301.6231(a)(2)-1 Persons whose tax liability is determined
indirectly by partnership items.
(a) Spouse filing joint return with individual holding a separate
interest--(1) In general. Except as otherwise provided in this paragraph
(a), a spouse who files a joint return with an individual holding a
separate interest in the partnership shall be treated as a partner for
purposes of subchapter C of chapter 63 of the Internal Revenue Code.
Thus, the spouse who files a joint return with a partner will be
permitted to participate in administrative and judicial proceedings.
(2) Counting rules. A spouse who files a joint return with an
individual holding a separate interest in the partnership shall not be
counted as a partner for purposes of applying section 6223(b) (relating
to special rules for partnerships with more than 100 partners) and
section 6231(a)(1)(B) (relating to the exception for small
partnerships).
(3) Notice rules--(i) In general. Except as provided in paragraph
(a)(3)(ii) of this section, for purposes of subchapter C of chapter 63
of the Internal Revenue Code, a spouse who files a joint return with an
individual holding a separate interest in the partnership shall be
treated as receiving any notice received by the individual holding the
separate interest.
(ii) Spouse identified on partnership return or by statement.
Paragraph (a)(3)(i) of this section shall not apply to a spouse who
files a joint return with an individual holding a separate interest in
the partnership if that spouse--
[[Page 306]]
(A) Is identified on the partnership return; or
(B) Is identified as a partner entitled to notice as provided in
Sec. 301.6223(c)-1(b).
(4) Conversion of partnership items--(i) Individual holding a
separate interest. A spouse who files a joint return with an individual
holding a separate interest in the partnership shall cease to be treated
as a partner in the partnership under paragraph (a)(1) of this section
upon the conversion of the partnership items of the individual holding
the separate interest in the partnership to nonpartnership items
pursuant to section 6231(b). If each spouse holds a separate interest in
the partnership, the previous sentence shall be applied separately with
respect to each partnership interest.
(ii) Spouse who files a joint return with an individual holding a
separate interest in the partnership. A spouse who files a joint return
with an individual holding a separate interest in the partnership shall
cease to be treated as a partner in the partnership under paragraph
(a)(1) of this section upon the occurrence of an event that would
convert the partnership items of the spouse to nonpartnership items if
the spouse were the owner of a separate interest.
(iii) Examples. The following examples illustrate the application of
paragraph (a)(4) of this section:
Example 1. Husband owns a separate interest in ABC partnership and
files a joint return with Wife. Husband files for bankruptcy. Pursuant
to Sec. 301.6231(c)-7, upon filing for bankruptcy, the partnership
items of the debtor convert to nonpartnership items. Thus, Husband's
partnership items converted to nonpartnership items upon the filing of
Husband's bankruptcy petition. Pursuant to paragraph (a)(4)(i) of this
section, Wife is no longer treated as a partner of ABC partnership as of
the date the partnership items of Husband converted to nonpartnership
items.
Example 2. Wife owns a separate interest in XYZ partnership and
files a joint return with Husband. Husband files for bankruptcy. Because
the filing of the bankruptcy petition by Husband is an event that would
convert Husband's partnership items to nonpartnership items if Husband
were the owner of a separate interest, Husband shall no longer be
treated as a partner as of the filing of the bankruptcy petition.
Pursuant to paragraph (a)(4)(ii) of this section, the partnership items
of Wife are not affected by Husband's bankruptcy.
(5) Cross-reference. See Sec. 301.6231(a)(12)-1 for special rules
relating to spouses holding a joint interest in a partnership.
(b) Shareholder of C corporation. A shareholder of a C corporation
(as defined in section 1361(a)(2)) is not a partner in a partnership
merely because the C corporation is a partner in that partnership.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(a)(2)-1T contained in 26
CFR part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50557, Oct. 4, 2001]
Sec. 301.6231(a)(3)-1 Partnership items.
(a) In general. For purposes of subtitle F of the Internal Revenue
Code of 1954, the following items which are required to be taken into
account for the taxable year of a partnership under subtitle A of the
Code are more appropriately determined at the partnership level than at
the partner level and, therefore, are partnership items:
(1) The partnership aggregate and each partner's share of each of
the following:
(i) Items of income, gain loss, deduction, or credit of the
partnership;
(ii) Expenditures by the partnership not deductible in computing its
taxable income (for example, charitable contributions);
(iii) Items of the partnership which may be tax preference items
under section 57(a) for any partner;
(iv) Income of the partnership exempt from tax;
(v) Partnership liabilities (including determinations with respect
to the amount of the liabilities, whether the liabilities are
nonrecourse, and changes from the preceding taxable year); and
(vi) Other amounts determinable at the partnership level with
respect to partnership assets, investments, transactions and operations
necessary to enable the partnership or the partners to determine--
(A) The investment credit determined under section 46(a);
(B) Recapture under section 47 of the investment credit;
[[Page 307]]
(C) Amounts at risk in any activity to which section 465 applies;
(D) The depletion allowance under section 613A with respect to oil
and gas wells; and
(E) The application of section 751 (a) and (b);
(2) Guaranteed payments;
(3) Optional adjustments to the basis of partnership property
pursuant to an election under section 754 (including necessary
preliminary determinations, such as the determination of a transferee
partner's basis in a partnership interest); and
(4) Items relating to the following transactions, to the extent that
a determination of such items can be made from determinations that the
partnership is required to make with respect to an amount, the character
of an amount, or the percentage interest of a partner in the
partnership, for purposes of the partnership books and records or for
purposes of furnishing information to a partner:
(i) Contributions to the partnership;
(ii) Distributions from the partnership; and
(iii) Transactions to which section 707(a) applies (including the
application of section 707(b)).
(b) Factors that affect the determination of partnership items. The
term ``partnership item'' includes the accounting practices and the
legal and factual determinations that underlie the determination of the
amount, timing, and characterization of items of income, credit, gain,
loss, deduction, etc. Examples of these determinations are: The
partnership's method of accounting, taxable year, and inventory method;
whether an election was made by the partnership; whether partnership
property is a capital asset, section 1231 property, or inventory;
whether an item is currently deductible or must be capitalized; whether
partnership activities have been engaged in with the intent to make a
profit for purposes of section 183; and whether the partnership
qualifies for the research and development credit under section 30.
(c) Illustrations--(1) In general. This paragraph (c) illustrates
the provisions of paragraph (a)(4) of this section. The determinations
illustrated in this paragraph (c) that the partnership is required to
make are not exhaustive; there may be additional determinations that the
partnership is required to make which relate to a transaction listed in
paragraph (a)(4) of this section. The critical element is that the
partnership needs to make a determination with respect to a matter for
the purposes stated; failure by the partnership actually to make a
determination (for example, because it does not maintain proper books
and records) does not prevent an item from being a partnership item.
(2) Contributions. For purposes of its books and records, or for
purposes of furnishing information to a partner, the partnership needs
to determine:
(i) The character of the amount received from a partner (for
example, whether it is a contribution, a loan, or a repayment of a
loan);
(ii) The amount of money contributed by a partner;
(iii) The applicability of the investment company rules of section
721(b) with respect to a contribution; and
(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;
[[Page 308]]
(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)-1 Definition of affected item.
(a) In general. The term affected item means any item to the extent
such item is affected by a partnership item. It includes items unrelated
to the items reflected on the partnership return (for example, an item,
such as the threshold for the medical expense deduction under section
213, that varies if there is a change in an individual partner's
adjusted gross income).
(b) Basis in a partner's partnership interest. The basis of a
partner's partnership interest is an affected item to the extent it is
not a partnership item.
(c) At-risk limitation. The application of the at-risk limitation
under section 465 to a partner with respect to a loss incurred by a
partnership is an affected item to the extent it is not a partnership
item.
(d) Passive losses. The application of the passive loss rules under
section 469 to a partner with respect to a loss incurred by a
partnership is an affected item to the extent it is not a partnership
item.
(e) Penalty, addition to tax, or additional amount--(1) In general.
The term affected item includes any penalty, addition to tax, or
additional amount provided by subchapter A of chapter 68 of the Internal
Revenue Code of 1986 to the extent provided in this paragraph (e).
(2) Penalty, addition to tax, or additional amount without floor. If
a penalty, addition to tax, or additional amount that does not contain a
floor (that is, a threshold amount of underpayment or understatement
necessary before the imposition of the penalty, addition to tax, or
additional amount) is imposed on a partner as the result of an
adjustment to a partnership item, the term affected item shall include
the penalty, addition to tax, or additional amount computed with
reference to the portion
[[Page 309]]
of the underpayment that is attributable to the partnership item
adjustment(s) to which the penalty, addition to tax, or additional
amount applies.
(3) Penalty, addition to tax, or additional amount containing
floor--(i) Floor exceeded prior to adjustment. If a partner would have
been subject to a penalty, addition to tax, or additional amount that
contains a floor in the absence of an adjustment to a partnership item
(that is, the partner's understatement or underpayment exceeded the
floor even without an adjustment to a partnership item) the term
affected item shall include only the portion of the penalty, addition to
tax, or additional amount computed with reference to the partnership
item (or affected item) adjustments.
(ii) Floor not exceeded prior to adjustment. In the case of a
penalty, addition to tax, or additional amount that contains a floor, if
the taxpayer's understatement or underpayment does not exceed the floor
prior to an adjustment to a partnership item but does so after such
adjustment, the term affected item shall include the penalty, addition
to tax, or additional amount computed with reference to the entire
underpayment or understatement to which the penalty, addition to tax, or
additional amount applies.
(4) Examples. The provisions of this paragraph (e) may be
illustrated by the following examples:
Example 1. A, a partner of P, had an aggregate underpayment of
$1,000 of which $100 is attributable to an adjustment to partnership
items. A is negligent in reporting the partnership items. The accuracy-
related penalty under section 6662 for negligence computed with
reference to the $100 underpayment attributable to the partnership item
adjustments is an affected item.
Example 2. B, a partner of P, understated B's income tax liability
attributable to nonpartnership items by $6,000. An adjustment to a
partnership item resulting from a partnership proceeding increased B's
income tax by an additional $2,000. Prior to the adjustment, B would
have been subject to the accuracy-related penalty under section 6662 for
a substantial understatement of income tax with respect to the $6,000
understatement attributable to nonpartnership items. The portion of the
accuracy-related penalty under section 6662 computed with reference to
the $2,000 understatement attributable to partnership items to which the
accuracy-related penalty applies is an affected item. The portion of the
accuracy-related penalty under section 6662 computed with reference to
the $6,000 pre-existing understatement is not an affected item.
Example 3. C, a partner in partnership P, understated C's income tax
liability attributable to nonpartnership items by $4,000. As a result of
an adjustment to partnership items, that understatement is increased to
$10,000. Prior to the adjustment, C would not have been subject to the
accuracy-related penalty under section 6662 for a substantial
understatement of income tax. The accuracy-related penalty under section
6662 computed with reference to the entire $10,000 understatement to
which the accuracy-related penalty applies is an affected item.
(f) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(a)(5)-1T contained in 26
CFR part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50557, Oct. 4, 2001]
Sec. 301.6231(a)(6)-1 Computational adjustments.
(a) Changes in a partner's tax liability--(1) In general. A change
in the tax liability of a partner to properly reflect the treatment of a
partnership item under subchapter C of chapter 63 of the Internal
Revenue Code is made through a computational adjustment. A computational
adjustment includes a change in tax liability that reflects a change in
an affected item where that change is necessary to properly reflect the
treatment of a partnership item, or any penalty, addition to tax, or
additional amount that relates to an adjustment to a partnership item.
However, if a change in a partner's tax liability cannot be made without
making one or more partner-level determinations, that portion of the
change in tax liability attributable to the partner-level determinations
shall be made under the deficiency procedures (as described in
subchapter B of chapter 63 of the Internal Revenue Code), except for any
penalty, addition to tax, or additional amount that relates to an
adjustment to a partnership item.
(2) Affected items that do not require partner-level determinations.
Changes in a partner's tax liability with respect to affected items that
do not require partner-level determinations (such as the
[[Page 310]]
threshold amount of medical deductions under section 213 that changes as
the result of determinations made at the partnership level) are
computational adjustments that are directly assessed. When making
computational adjustments, the Internal Revenue Service may assume that
amounts the partner reported on the partner's individual return include
all amounts reported to the partner by the partnership (on the Schedule
K-1s attached to the partnership's original return), absent contrary
notice to the Internal Revenue Service (for example, a ``Notice of
Inconsistent Treatment'' pursuant to Sec. 301.6222(a)-2(c)). Such an
assumption by the Internal Revenue Service does not constitute a
partner-level determination. Moreover, substituting redetermined
partnership items for the partner's previously reported partnership
items (including partnership items included in carryover amounts) does
not constitute a partner-level determination where the Internal Revenue
Service otherwise accepts, for the sole purpose of determining the
computational adjustment, all nonpartnership items (including, for
example, nonpartnership item components of carryover amounts) as
reported.
(3) Affected items that require partner-level determinations.
Changes in a partner's tax liability with respect to affected items that
require partner-level determinations (such as a partner's at-risk amount
to the extent it depends upon the source from which the partner obtained
the funds that the partner contributed to the partnership) are
computational adjustments that are subject to the deficiency procedures.
Notwithstanding the preceding sentence, any penalty, addition to tax, or
additional amount that relates to an adjustment to a partnership item is
not subject to the deficiency procedures, but rather may be directly
assessed as part of the computational adjustment that is made following
the partnership proceeding, based on determinations in that proceeding,
regardless of whether any partner-level determinations may be required.
(b) Interest. A computational adjustment includes any interest due
with respect to any underpayment or overpayment of tax attributable to
adjustments to reflect properly the treatment of partnership items.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(a)(6)-1T contained in 26
CFR part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50558, Oct. 4, 2001]
Sec. 301.6231(a)(7)-1 Designation or selection of tax matters partner.
(a) In general. A partnership may designate a partner as its tax
matters partner for a specific taxable year only as provided in this
section. Similarly, the designation of a partner as the tax matters
partner for a specific taxable year may be terminated only as provided
in this section. If a partnership does not designate a general partner
as the tax matters partner for a specific taxable year, or if the
designation is terminated without the partnership designating another
general partner as the tax matters partner, the tax matters partner is
the partner determined under this section.
(b) Person who may be designated tax matters partner--(1) General
requirement. A person may be designated as the tax matters partner of a
partnership for a taxable year only if that person--
(i) Was a general partner in the partnership at some time during the
taxable year for which the designation is made; or
(ii) Is a general partner in the partnership as of the time the
designation is made.
(2) Limitation on designation of tax matters partner who is not a
United States person. If any United States person would be eligible
under paragraph (a) of this section to be designated as the tax matters
partner of a partnership for a taxable year, no person who is not a
United States person may be designated as the tax matters partner of the
partnership for that year without the consent of the Commissioner. For
the definition of United States person, see section 7701(a)(30).
(c) Designation of tax matters partner at time partnership return is
filed. The partnership may designate a tax matters partner for a
partnership taxable year on the partnership return for that
[[Page 311]]
taxable year in accordance with the instructions for that form.
(d) Certification by current tax matters partner of selection of
successor. If a partner properly designated as the tax matters partner
of a partnership for a partnership taxable year under this section
certifies that another partner has been selected as the tax matters
partner of the partnership for that taxable year, that other partner is
thereby designated as the tax matters partner for that year. The current
tax matters partner shall make the certification by filing with the
service center with which the partnership return is filed a statement
that--
(1) Identifies the partnership, the partner filing the statement,
and the successor tax matters partner by name, address, and taxpayer
identification number;
(2) Specifies the partnership taxable year to which the designation
relates;
(3) Declares that the partner filing the statement has been properly
designated as the tax matters partner of the partnership for the
partnership taxable year and that that designation is in effect
immediately before the filing of the statement;
(4) Certifies that the other named partner has been selected as the
tax matters partner of the partnership for that taxable year in
accordance with the partnership's procedure for making that selection;
and
(5) Is signed by the partner filing the statement.
(e) Designation by general partners with majority interest. The
partnership 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.
[[Page 312]]
(g) Designation of alternate tax matters partner. If an individual
is designated as the tax matters partner of a partnership under
paragraph (c), (d), (e), or (f) of this section, the document by which
that individual is designated may also designate an alternate tax
matters partner who will become tax matters partner upon the occurrence
of one or more of the events described in paragraph (l)(1) (i) or (ii)
of this section. The person designated as the alternate tax matters
partner becomes the tax matters partner as of the time the designation
of the tax matters partner is terminated under paragraph (l)(1) (i) or
(ii) of this section. The designation of a person as the alternate tax
matters partner shall have no effect in any other case.
(h) Prior designations superseded. A designation of a tax matters
partner for a partnership taxable year under paragraphs (d), (e), or (f)
of this section shall supersede all prior designations of a tax matters
partner for that year, including a prior designation of an alternate tax
matters partner under paragraph (g) of this section.
(i) Resignation of designated tax matters partner. A person
designated as the tax matters partner of a partnership under this
section may resign at any time by a written statement to that effect.
The statement shall specify the partnership taxable year to which the
resignation relates and shall identify the partnership and the tax
matters partner by name, address, and taxpayer identification number.
The statement shall also be signed by the resigning 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;
[[Page 313]]
(B) A subsequent designation under paragraph (d), (e), or (f) of
this section; or
(C) A revocation of the designation under paragraph (j) of this
section becomes effective.
(2) Actions by the tax matters partner before termination of
designation. The termination of the designation of a partner as the tax
matters partner under paragraph (l)(1) of this section does not affect
the validity of any action taken by that partner as tax matters partner
before the designation is terminated. For example, if that tax matters
partner had previously consented to an extension of the period for
assessments under section 6229(b)(1)(B), that extension remains valid
even after termination of the designation.
(m) Tax matters partner where no partnership designation made--(1)
In general. The tax matters partner for a partnership taxable year shall
be determined under this paragraph (m) if--
(i) The partnership has not designated a tax matters partner under
this section for that taxable year; or
(ii) The partnership has designated a tax matters partner under this
section for that taxable year, that designation has been terminated
under paragraph (l)(1) of this section, and the partnership has not made
a subsequent designation under this section for that taxable year.
(2) General partner having the largest profits interest is the tax
matters partner. The tax matters partner for any partnership taxable
year to which this paragraph (m) applies is the general partner having
the largest profits interest in the partnership at the close of 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
[[Page 314]]
have no profits interest in the partnership under paragraph (m)(3) of
this section (concerning termination of a designation under the largest-
profits-interest rule) because of the occurrence of one or more of the
events described in paragraphs (l)(1) (i) through (iv) of this section
(involving death, adjudication of incompetency, liquidation, and
conversion of partnership items to nonpartnership items).
(3) General partner with the largest profits interest is
disqualified. The general partner with the largest profits interest
determined under paragraph (m)(2) of this section--
(i) Has been notified of suspension from practice before the
Internal Revenue Service;
(ii) Is incarcerated;
(iii) Is residing outside the United States, its possessions, or
territories; or
(iv) Cannot be located or cannot perform the functions of a tax
matters partner for any reason, except that lack of cooperation with the
Internal Revenue Service by the general partner with the largest profits
interest is not a basis for finding that the partner cannot perform the
functions of a tax matters partner.
(p) Commissioner's selection of the tax matters partner--(1) When
the general partner with the largest profits interest is not apparent.
If it is impracticable under paragraph (o)(1) of this section to apply
the largest-profits-interest rule of paragraph (m)(2) of this section,
the Commissioner will select (in accordance with the notification
procedures set forth in paragraph (r) of this section) as the tax
matters partner any person who was a general partner at any time during
the taxable year under examination.
(2) When each general partner is deemed to have no profits interest
in the partnership. If it is impracticable under paragraph (o)(2) of
this section to apply the largest-profits-interest rule of paragraph
(m)(2) of this section, the Commissioner will select a partner
(including a general or limited partner) as the tax matters partner in
accordance with the criteria set forth in paragraph (q) of this section.
The Commissioner will notify both the partner selected and the
partnership of the selection, effective as of the date specified in the
notice. For regulations applicable on or after January 26, 1999
(reflecting statutory changes made effective July 22, 1998) and before
January 25, 2002, see Sec. 301.6231(a)(7)-1T(p)(2).
(2) When each general partner is deemed to have no profits interest
in the partnership. If it is impracticable under paragraph (o)(2) of
this section to apply the largest-profits-interest rule of paragraph
(m)(2) of this section, the Commissioner will select a partner
(including a general or limited partner) as the tax matters partner in
accordance with the criteria set forth in paragraph (q) of this section.
The Commissioner will notify, within 30 days of the selection, the
partner selected, the partnership, and all partners required to receive
notice under section 6223(a) of the selection of the tax matters
partner, effective as of the date specified in the notice.
(3) When the general partner with the largest profits interest is
disqualified--(i) In general. Except as otherwise provided in paragraph
(p)(3)(ii) of this section, if it is impracticable under paragraph
(o)(3) of this section to apply the largest-profits-interest rule of
paragraph (m)(2) of this section, the Commissioner will treat each
general partner who fits the criteria contained in paragraph (o)(3) of
this section as having no profits interest in the partnership for the
taxable year and will select (in accordance with the notification
procedures set forth in paragraph (r) of this section) a tax matters
partner from the remaining persons who were general partners at any time
during the taxable year.
(ii) Partner selected if no general partner may be selected. If all
general partners during the taxable year either are treated as having no
profits interest in the partnership for the taxable year under paragraph
(m)(3) of this section (concerning termination of a designation under
the largest-profits-interest rule) or are described in paragraph (o)(3)
of this section (general partner with the largest profits interest is
disqualified), the Commissioner will select a partner (including a
general or limited partner) as the tax matters partner in accordance
with the criteria
[[Page 315]]
set forth in paragraph (q) of this section. The Commissioner will notify
both the partner selected and the partnership of the selection,
effective as of the date specified in the notice.
(q) Criteria for selecting a partner as tax matters partner--(1) In
general. The Commissioner will select a partner as the tax matters
partner under paragraph (p) (2) or (3)(ii) of this section only if the
partner was a partner in the partnership at the close of the taxable
year under examination.
(2) Criteria to be considered. The Commissioner may consider the
following criteria in selecting a partner as the tax matters partner:
(i) The general knowledge of the partner in tax matters and the
administrative operation of the partnership.
(ii) The partner's access to the books and records of the
partnership.
(iii) The profits interest held by the partner.
(iv) The views of the partners having a majority interest in the
partnership regarding the selection.
(v) Whether the partner is a partner of the partnership at the time
the tax-matters-partner selection is made.
(vi) Whether the partner is a United States person (within the
meaning of section 7701(a)(30)).
(3) Limited restriction on subsequent designation of a tax matters
partner by the partnership. For purposes of paragraphs (p) (2) and
(3)(ii) of this section, the partnership cannot designate a partner who
is not a general partner to serve as tax matters partner in lieu of a
partner selected by the Commissioner.
(r) Notification of partnership--(1) In general. If the Commissioner
selects a tax matters partner under the provisions of paragraph (p)(1)
or (p)(3)(i) of this section, the Commissioner will notify, within 30
days of the selection, the partner selected, the partnership, and all
partners required to receive notice under section 6223(a) of the
selection of the tax matters partner, effective as of the date specified
in the notice.
(2) Limited opportunity for partnership to designate the tax matters
partner. (i) Before the Commissioner selects a tax matters partner under
paragraphs (p) (1) and (3)(i) of this section, the Commissioner will
notify the partnership by mail that, after 30 days from the date of the
notice, the Commissioner will make a determination that it is
impracticable to apply the largest-profits-interest rule of paragraph
(m)(2) of this section and will select the tax matters partner unless a
prior designation is made by the partnership. This delay in making the
determination will permit the partnership to designate a tax matters
partner under paragraph (e) of this section (designation by general
partners with a majority interest) or paragraph (f) of this section
(designation by partners with a majority interest under certain
circumstances), thereby avoiding a selection made by the Commissioner.
(ii) During the 30-day period and prior to a tax-matters-partner
designation by the partnership, the Commissioner will communicate with
the partnership by sending all correspondence or notices to ``The Tax
Matters Partner'' in care of the partnership at the partnership's
address.
(iii) Any subsequent designation of a tax matters partner by the
partnership after the 30-day period will become effective as provided
under paragraph (k)(2) of this section (concerning designations made
after a notice of beginning of administrative proceeding is mailed).
(s) Effective date. This section applies to all designations,
selections, and terminations of a tax matters partner occurring on or
after December 23, 1996, except for paragraphs (p)(2) and (r)(1), that
are applicable on or after October 4, 2001.
[T.D. 8698, 61 FR 67459, Dec. 23, 1996, as amended by T.D. 8808, 64 FR
3840, Jan. 26, 1999; T.D. 8965, 66 FR 50558, Oct. 4, 2001]
Sec. 301.6231(a)(7)-2 Designation or selection of tax matters
partner for a limited liability company (LLC).
(a) In general. Solely for purposes of applying section 6231(a)(7)
and Sec. 301.6231(a)(7)-1 to an LLC, only a member-manager of an LLC is
treated as a general partner, and a member of an LLC who is not a
member-manager is treated as a partner other than a general partner.
[[Page 316]]
(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)-1 Special rules relating to spouses.
(a) Spouses holding a joint interest--(1) In general. Except as
otherwise provided in this section, spouses holding a joint interest in
a partnership shall be treated as separate partners for purposes of
subchapter C of chapter 63 of the Internal Revenue Code. Thus, both
spouses may participate in administrative and judicial proceedings. The
term joint interest includes tenancies in common, joint tenancies,
tenancies by the entirety, and community property.
(2) Identification of joint interest. For purposes of this section,
an interest shall be treated as a joint interest in a partnership only
if both spouses are identified on the partnership return or are
identified as partners entitled to notice as provided in Sec.
301.6223(c)-1(b).
(3) Failure to identify both spouses as partners. If both spouses
are not identified as set forth in paragraph (a)(2) of this section,
then the partnership interest shall be treated as separately owned by
the identified spouse.
(4) Example. The following example illustrates the application of
paragraph (a)(3) of this section:
Example. Wife owns an interest in ABC Partnership and is identified
on the Schedule K-1 of the partnership return. Wife and Husband live in
a community property state. The partnership return of ABC partnership
does not identify Husband, and Husband is not identified as a partner
entitled to notice as provided in Sec. 301.6223(c)-1(b). Pursuant to
paragraph (a)(3) of this section, the partnership interest of Wife shall
be treated as separately owned by Wife.
(b) Notice and counting rules--(1) In general. Except as provided in
paragraph (b)(2) of this section, for purposes of applying section 6223
(relating to notice to partners of proceedings) and section
6231(a)(1)(B) (relating to the exception for small partnerships),
spouses holding a joint interest in a partnership shall be treated as
one partner. Except as provided in paragraph (b)(2) of this section, the
Internal Revenue Service or the tax matters partner may send any
required notice to either spouse.
(2) Identified spouse entitled to notice. For purposes of applying
section 6223 (relating to notice to partners of proceeding) for a
partnership taxable year, an individual who holds a joint interest in a
partnership with a spouse who is entitled to notice under section 6223
shall be entitled to receive separate notice under section 6223 if such
individual--
(i) Is identified as a partner on the partnership return for that
taxable year; or
(ii) Is identified as a partner entitled to notice as provided in
Sec. 301.6223(c)-1(b).
(c) Conversion of partnership items--(1) In general. If spouses
holding a joint interest in a partnership are treated as separate
partners under this section, then section 6231(b) (relating to the
conversion of partnership items) shall be applied separately to each
spouse.
[[Page 317]]
(2) Example. The following example illustrates the application of
paragraph (c) of this section:
Example. Husband and Wife own a joint interest in XYZ Partnership.
The partnership return identifies both spouses on the Schedule K-1.
Under this section, each spouse is treated as a separate partner. If
Wife enters into a settlement agreement, Wife's partnership items
convert to nonpartnership items pursuant to section 6231(b)(1)(C).
Accordingly, Wife no longer has the right to participate in the
partnership proceeding subsequent to entering into the settlement
agreement. Pursuant to paragraph (c) of this section, however, the
partnership items of Husband are not affected by the conversion of the
partnership items of Wife, and Husband continues to have the right to
participate in the partnership proceeding. This result is the same
regardless of whether the partnership items are reported on a joint
return or on separate returns.
(d) Cross-reference. See Sec. 301.6231(a)(2)-1(a) for special rules
relating to spouses who file joint returns with individuals holding a
separate interest in a partnership.
(e) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(a)(12)-1T contained in 26
CFR part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50559, Oct. 4, 2001]
Sec. 301.6231(c)-1 Special rules for certain applications for
tentative carryback and refund adjustments based on partnership
losses, deductions, or credits.
(a) Application subject to this section. This section applies in the
case of an application under section 6411 (relating to tentative
carryback and refund adjustments) based on losses, deductions, or
credits of a partnership if the Commissioner, or the Commissioner's
delegate, determines, after review of the available relevant
information, that it is highly likely that a person described in section
6700(a)(1) made, with respect to the partnership--
(1) A gross valuation overstatement; or
(2) A false or fraudulent statement with respect to the tax benefits
to be secured by reason of holding an interest in the partnership that
would be subject to a penalty under section 6700 (relating to penalty
for promoting abusive tax shelters, etc.). This section applies only
with respect to an application based upon the original reporting on the
partner's income tax return of partnership losses, deductions, or
credits. Thus, this section does not apply to a request for
administrative adjustment under section 6227 through which a partner
seeks to change the partner's reporting of partnership items on the
partner's income tax return (or on an earlier request for administrative
adjustment).
(b) Determination of special enforcement area. In the case of an
application under section 6411 described in paragraph (a) of this
section, precluding an assessment under section 6225 that would be
permitted under section 6213(b)(3) (relating to assessments arising out
of tentative carryback or refund adjustments) with respect to any amount
applied, credited, or refunded as a result of the application may
encourage the proliferation of abusive tax shelter partnerships and make
the eventual collection of taxes due more difficult. Consequently, the
Secretary hereby determines that such applications present special
enforcement considerations within the meaning of section 6231(c)(1)(E).
(c) Assessment permitted under section 6213(b)(3). Notwithstanding
section 6225 (relating to restrictions on assessment with respect to
partnership items), an assessment that would be permitted under section
6213(b)(3) with respect to any amount applied, credited, or refunded as
a result of an application described in paragraph (a) of this section
may be made before there is a final partnership-level determination with
respect to the losses, deductions, or credits on which the application
is based. As provided in section 6213(b)(1), the Internal Revenue
Service shall mail notice of any such assessment to the partner filing
the application. The notice shall also inform the partner of the
partner's limited right to elect to treat items as nonpartnership items
as provided in paragraph (d) of this section.
(d) Limited right to elect to treat items as nonpartnership items--
(1) In general.
[[Page 318]]
A partner to whom the Internal Revenue Service mails a notice of
suspension of action on a refund claim under paragraph (c) of this
section may elect in accordance with this paragraph (d) to have all
partnership items for the partnership taxable year in which the losses,
deductions, or credits at issue arose treated as nonpartnership items.
(2) Time and place of making election. The election shall be made by
filing a statement with the Internal Revenue Service office that mailed
the notice of suspension. The statement may be filed at any time--
(i) After the date which is one year after the date on which the
partnership return was filed for the partnership taxable year in which
the items at issue arose; and
(ii) Before the date on which the Internal Revenue Service mails to
the tax matters partner the notice of final partnership administrative
adjustment for the partnership taxable year in which the items at issue
arose. For purposes of this paragraph (d)(2), a partnership return filed
before the last day prescribed by law for its filing (determined without
regard to extensions) shall be treated as filed on the last day.
(3) Contents of the statement. The statement shall--
(i) Be clearly identified as an election to have partnership items
treated as nonpartnership items because of notification of an assessment
under section 6213(b)(3);
(ii) Identify the partnership by name, address, and taxpayer
identification number;
(iii) Identify the partner making the election by name, address, and
taxpayer identification number;
(iv) Specify the partnership taxable year to which the election
applies; and
(v) Be signed by the partner making the election.
(e) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(c)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50559, Oct. 4, 2001]
Sec. 301.6231(c)-2 Special rules for certain refund claims
based on losses, deductions, or credits from abusive tax
shelter partnerships.
(a) Claims subject to this section. This section applies in the case
of a claim for credit or refund based on losses, deductions or credits
of a partnership if the Commissioner, or the Commissioner's delegate,
determines, after review of available relevant information, that it is
highly likely that a person described in section 6700(a)(1) made, with
respect to the partnership--
(1) A gross valuation overstatement; or
(2) A false or fraudulent statement with respect to the tax benefits
to be secured by reason of holding an interest in the partnership that
would be subject to a penalty under section 6700 (relating to penalty
for promoting abusive tax shelters, etc.). This section applies only
with respect to a claim that is based upon the partner's original
reporting on the partner's income tax return of partnership losses,
deductions, or credits. Thus, this section does not apply to a request
for administrative adjustment under section 6227 through which a partner
seeks to change the partner's reporting of partnership items on the
partner's income tax return (or on an earlier request for administrative
adjustment). For purposes of this section, any income tax return
requesting a credit or refund shall be treated as a claim for a credit
or refund.
(b) Determination of special enforcement area. Granting a claim for
credit or refund described in paragraph (a) of this section may
encourage the proliferation of abusive tax shelter partnerships and make
the eventual collection of taxes more difficult. Consequently, the
Secretary hereby determines that such claims present special enforcement
considerations within the meaning of section 6231(c)(1)(E).
(c) Action on refund claims suspended. In the case of a claim
described in paragraph (a) of this section, the Internal Revenue Service
may mail to the partner filing the claim a notice stating that no action
will be taken on the partner's claim until the completion of the
partnership-level proceedings. The notice shall also inform the partner
of
[[Page 319]]
the partner's limited right to elect to treat items as nonpartnership
items as provided in paragraph (d) of this section.
(d) Limited right to elect to treat items as nonpartnership items--
(1) In general. A partner to whom the Internal Revenue Service mails a
notice of suspension under paragraph (c) of this section may elect in
accordance with this paragraph (d) to have all partnership items for the
partnership taxable year in which the losses, deductions, or credits at
issue arose treated as nonpartnership items.
(2) Time and place of making election. The election shall be made by
filing a statement with the Internal Revenue Service office that mailed
the notice of suspension. The statement may be filed at any time--
(i) After the date which is one year after the date on which the
partnership return was filed for the partnership taxable year in which
the items at issue arose; and
(ii) Before the date on which the Internal Revenue Service mails to
the tax matters partner the notice of final partnership administrative
adjustment for the partnership taxable year in which the items at issue
arose. For purposes of this paragraph (d)(2), a partnership return filed
before the last day prescribed by law for its filing (determined without
regard to extensions) shall be treated as filed on the last day.
(3) Contents of the statement. The statement shall--
(i) Be clearly identified as an election to have partnership items
treated as nonpartnership items because of notification of suspension of
action on a refund claim;
(ii) Identify the partnership by name, address, and taxpayer
identification number;
(iii) Identify the partner making the election by name, address, and
taxpayer identification number;
(iv) Specify the partnership taxable year to which the election
applies; and
(v) Be signed by the partner making the election.
(e) Effective date. This section applies with respect to any claim
described in paragraph (a) of this section that is filed on or after
October 4, 2001. For claims filed prior to October 4, 2001, see Sec.
301.6231(c)-2T contained in 26 CFR part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50560, Oct. 4, 2001]
Sec. 301.6231(c)-3 Limitation on applicability of Sec.
Sec. 301.6231(c)-4 through 301.6231(c)-8.
(a) In general. A provision of Sec. Sec. 301.6231(c)-4 through
301.6231(c)-8 shall not apply with respect to partnership items arising
in a partnership taxable year if, as of the date on which those items
would otherwise begin to be treated as nonpartnership items under that
provision--
(1) A notice of final partnership administrative adjustment with
respect to those items has been mailed to the tax matters partner; and
(2) Either--
(i) The period during which an action with respect to that final
partnership administrative adjustment may be brought under section 6226
has expired and no such action has been brought; or
(ii) The decision of the court in an action brought under section
6226 with respect to that final partnership administrative adjustment
has become final.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(c)-3T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50560, Oct. 4, 2001]
Sec. 301.6231(c)-4 Termination and jeopardy assessment.
(a) In general. The treatment of items as partnership items with
respect to a partner against whom an assessment of income tax under
section 6851 (termination assessment) or section 6861 (jeopardy
assessment) is made will interfere with the effective and efficient
enforcement of the internal revenue laws. Accordingly, partnership items
of such a partner arising in any partnership taxable year ending with or
within the partner's taxable year for which an assessment of income tax
under section 6851 or 6861 is made shall be treated as nonpartnership
items as of the moment before such assessment is made.
[[Page 320]]
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(c)-4T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50561, Oct. 4, 2001]
Sec. 301.6231(c)-5 Criminal investigations.
(a) In general. The treatment of items as partnership items with
respect to a partner under criminal investigation for violation of the
internal revenue laws relating to income tax will interfere with the
effective and efficient enforcement of the internal revenue laws.
Accordingly, partnership items of such a partner arising in any
partnership taxable year ending on or before the last day of the latest
taxable year of the partner to which the criminal investigation relates
shall be treated as nonpartnership items as of the date on which the
partner is notified that the partner is the subject of a criminal
investigation and written notification is sent by the Internal Revenue
Service that the partner's partnership items shall be treated as
nonpartnership items. The partnership items of a partner who is notified
that the partner is the subject of a criminal investigation shall not be
treated as nonpartnership items under this section unless and until such
partner is sent written notification from the Internal Revenue Service
of such treatment.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(c)-5T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50561, Oct. 4, 2001]
Sec. 301.6231(c)-6 Indirect method of proof of income.
(a) In general. The treatment of items as partnership items with
respect to a partner whose taxable income is determined by use of an
indirect method of proof of income will interfere with the effective and
efficient enforcement of the internal revenue laws. Accordingly,
partnership items of such a partner arising in any partnership taxable
year ending on or before the last day of the taxable year of the partner
for which a deficiency notice based upon an indirect method of proof of
income is mailed to the partner shall be treated as nonpartnership items
as of the date on which that deficiency notice is mailed to the partner.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(c)-6T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50561, Oct. 4, 2001]
Sec. 301.6231(c)-7 Bankruptcy and receivership.
(a) Bankruptcy. The treatment of items as partnership items with
respect to a partner named as a debtor in a bankruptcy proceeding will
interfere with the effective and efficient enforcement of the internal
revenue laws. Accordingly, partnership items of such a partner arising
in any partnership taxable year ending on or before the last day of the
latest taxable year of the partner with respect to which the United
States could file a claim for income tax due in the bankruptcy
proceeding shall be treated as nonpartnership items as of the date the
petition naming the partner as debtor is filed in bankruptcy.
(b) Receivership. The treatment of items as partnership items with
respect to a partner for whom a receiver has been appointed in any
receivership proceeding before any court of the United States or of any
State or the District of Columbia will interfere with the effective and
efficient enforcement of the internal revenue laws. Accordingly,
partnership items of such a partner arising in any partnership taxable
year ending on or before the last day of the latest taxable year of the
partner with respect to which the United States could file a claim for
income tax due in the receivership proceeding shall be treated as
nonpartnership items as of the date a receiver is appointed in any
receivership proceeding before any court of the United States or of any
State or the District of Columbia.
(c) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4,
[[Page 321]]
2001, see Sec. 301.6231(c)-7T contained in 26 CFR part 1, revised April
1, 2001.
[T.D. 8965, 66 FR 50561, Oct. 4, 2001]
Sec. 301.6231(c)-8 Prompt assessment.
(a) In general. The treatment of items as partnership items with
respect to a partner on whose behalf a request for a prompt assessment
of tax under section 6501(d) is filed will interfere with the effective
and efficient enforcement of the internal revenue laws. Accordingly,
partnership items of such a partner arising in any partnership taxable
year ending with or within any taxable year of the partner with respect
to which a request for a prompt assessment of tax is filed shall be
treated as nonpartnership items as of the date that the request is
filed.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(c)-8T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50561, Oct. 4, 2001]
Sec. 301.6231(d)-1 Time for determining profits
interest of partners for purposes of sections 6223(b)
and 6231(a)(11).
(a) Partner owns interest at close of year. For purposes of section
6223(b) (relating to special rules for partnerships with more than 100
partners) and section 6231(a)(11) (relating to 5-percent groups), except
as otherwise provided in this section, the profits interest held by a
partner, directly or indirectly through one or more pass-thru partners,
in a partnership (the source partnership) to which subchapter C of
chapter 63 of the Internal Revenue Code applies shall be determined at
the close of the source partnership's taxable year.
(b) Partner does not own interest at close of year. If the entire
direct and indirect interest of a partner in a source partnership is
terminated by virtue of a disposition by such partner of such interest
(or by virtue of the disposition of an interest held by one or more
pass-thru partners through which the partner holds an interest), then
the profits interest of such partner in the source partnership shall be
measured as of the moment before the disposition causing such
termination. The preceding sentence shall not apply with respect to a
termination if subsequent to such termination and before the close of
the source partnership's taxable year the partner acquires a direct or
indirect interest in the source partnership.
(c) Disposition of last remaining portion of interest is disposition
of entire interest. If a partner (or a pass-thru partner through which a
partner holds an interest) makes several partial dispositions of an
interest in a source partnership during a taxable year of the source
partnership, paragraph (b) of this section will apply with respect to
the disposition which causes a termination of the partner's entire
direct and indirect interest in the source partnership.
(d) No profits interest in certain cases. If--
(1) The interest of a partner in a partnership is entirely disposed
of before the close of the taxable year of the partnership; and
(2) No items of the partnership for that taxable year are required
to be taken into account by the partner, then that partner has no
profits interest in the partnership for that taxable year.
(e) Examples. The provisions of this section may be illustrated by
the following examples. Assume in all examples that there have been no
reacquisitions prior to the close of the source partnership's taxable
year. The examples are as follows:
Example 1. B holds an interest in partnership P through T, a pass-
thru partner. P uses a fiscal year ending June 30 as P's taxable year; B
and T use the calendar year as the taxable year. As of the close of P's
taxable year ending June 30, 2002, T holds an interest in P and B holds
an interest in P through T. The profits interest held by B in P through
T for that year is determined as of June 30, 2002.
Example 2. Assume the same facts as in Example 1, except that B sold
the entire interest that B held in P through T on November 5, 2001. The
profits interest held by B in P through T for P's taxable year ending
June 30, 2002, is determined as of the moment before the sale on
November 5, 2001.
Example 3. C holds an interest in partnership P through T, a pass-
thru partner. C, P, and T all use the calendar year as the taxable year.
T disposes of T's interest in P on June 5, 2002. The profits interest
held by C in
[[Page 322]]
P through T for 2002 is determined as of the moment before the
disposition on June 5, 2002.
Example 4. Assume the same facts as in Example 3, except that C sold
C's entire interest in T (and, therefore, C's entire interest that C
held in P through T) on March 15, 2002. The profits interest held by C
in P through T for 2002 is determined as of the moment before the sale
on March 15, 2002.
Example 5. On January 1, 2002, D held a 2 percent profits interest
in partnership P. Both D and P use the calendar year as the taxable
year. On August 1, 2002, D transfers three-fourths of D's profits
interest in P to E. On September 1, 2002, D sells D's remaining .5
percent profits interest in P to F. For purposes of sections 6223(b) and
6231(a)(11), D had a .5 percent profits interest in P for 2002.
Example 6. Assume the same facts as in Example 5, except that on
January 1, 2002, D also held a 1 percent profits interest in partnership
P through T, a pass-thru partner which also uses the calendar year as
the taxable year. In addition to the sale to E on August 1, 2002, D sold
a portion of D's interest in T on December 1, 2002, such that after the
sale, D held a .2 percent profits interest in P through T. D made no
other transfers of interests in either P or T. For purposes of sections
6223(b) and 6231(a)(11), D had a .7 percent profits interest in P for
2002.
(f) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(d)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50562, Oct. 4, 2001]
Sec. 301.6231(e)-1 Effect of a determination with respect
to a nonpartnership item on the determination of a
partnership item.
(a) In general. The determination of an item after it has become a
nonpartnership item with respect to a partner is not controlling in the
determination of that item with respect to other partners. Thus, for
example, the determination by a court in a separate proceeding relating
to a partner that a certain partnership expenditure was deductible does
not bind either the Internal Revenue Service or the other partners in a
later partnership or other proceeding.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(e)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50562, Oct. 4, 2001]
Sec. 301.6231(e)-2 Judicial decision not a bar to certain adjustments.
(a) In general. A court decision with respect to a partner's income
tax liability attributable to nonpartnership items shall not be a bar to
further proceedings with respect to that partner's income tax liability
if that partner's partnership items become nonpartnership items after
the appropriate time to include such nonpartnership items in the earlier
court proceeding has passed. Thus, the Internal Revenue Service could
issue a later deficiency notice for the same taxable year with respect
to that partner or that partner could bring a refund suit with respect
to those items that have become nonpartnership items.
(b) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(e)-2T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50562, Oct. 4, 2001]
Sec. 301.6231(f)-1 Disallowance of losses and credits in certain cases.
(a) Application of section. This section applies if--
(1) A partnership, whether domestic or foreign, that is required to
file a return under section 6031 for a taxable year fails to file the
return within the time prescribed; and
(2) At any time after the close of that taxable year, either--
(i) The tax matters partner of that partnership resides outside the
United States; or
(ii) The books and records of that partnership are maintained
outside the United States.
(b) Computational adjustment permitted if return is not filed after
mailing of notice. Except as otherwise provided in paragraph (c) of this
section, if--
(1) This section applies with respect to a partnership for a
partnership taxable year;
(2) The Internal Revenue Service mails notice to a partner that the
losses and credits arising from that
[[Page 323]]
partnership for that year will be disallowed to that partner unless the
partnership files a return for that year within 60 days after the date
on which the notice is mailed; and
(3) The partnership fails to file a return for that year within that
60-day period, the Internal Revenue Service may, without conducting a
partnership-level proceeding, mail a notice of computational adjustment
to that partner to reflect the disallowance of any loss (including a
capital loss) or credit arising from that partnership for that year.
(c) Restriction on notices under paragraph (b) of this section.
Neither the notice referred to in paragraph (b)(2) of this section nor
the notice of computational adjustment referred to in paragraph (b) of
this section may be mailed on a day on which--
(1) The tax matters partner of the partnership resides within the
United States; and
(2) The books and records of the partnership are maintained within
the United States. Thus, if this section applies with respect to a
partnership for a taxable year solely because the tax matters partner of
that partnership resided outside the United States for a period after
the close of that taxable year and the tax matters partner later takes
up residence within the United States, no notice may be mailed under
paragraph (b) of this section while the tax matters partner resides
within the United States.
(d) No disallowance in certain circumstances. If the person to whom
the notice referred to in paragraph (b)(2) of this section is mailed
establishes to the satisfaction of the Internal Revenue Service--
(1) That the losses and credits arising from the partnership for the
year are proper; and
(2) That the partner has made a good faith effort to have the
partnership file the required return; the Internal Revenue Service may
allow the losses and credits in whole or in part.
(e) Effective date. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6231(f)-1T contained in 26 CFR
part 1, revised April 1, 2001.
[T.D. 8965, 66 FR 50563, Oct. 4, 2001]
Sec. 301.6232-1 Assessment, collection, and payment of
imputed underpayment.
(a) In general. An imputed underpayment determined under subchapter
C of chapter 63 of the Internal Revenue Code (Code) is assessed and
collected in the same manner as if the imputed underpayment were a tax
imposed by subtitle A of the Code for the adjustment year (as defined in
Sec. 301.6241-1(a)(1)) except that the deficiency procedures under
subchapter B of chapter 63 of the Code do not apply to an assessment of
an imputed underpayment. Accordingly, no notice under section 6212 is
required for, and the restrictions under section 6213 do not apply to,
the assessment of any imputed underpayment. See paragraph (c) of this
section for limitations on assessment and paragraph (d) of this section
for exceptions to restrictions on adjustments.
(b) Payment of the imputed underpayment. Upon receipt of notice and
demand from the Internal Revenue Service (IRS), an imputed underpayment
must be paid by the partnership at the place and time stated in the
notice. In the case of an adjustment requested in an administrative
adjustment request (AAR) under section 6227(b)(1) that is taken into
account by the partnership under Sec. 301.6227-2(b), payment of the
imputed underpayment is due on the date the AAR is filed. The IRS may
assess the amount of the imputed underpayment reflected on the AAR on
the date the AAR is filed. For interest with respect to an imputed
underpayment, see Sec. 301.6233(a)-1(b).
(c) Limitation on assessment--(1) In general. Except as otherwise
provided by this section or subtitle F of the Code (except for
subchapter B of chapter 63), no assessment of an imputed underpayment
may be made (and no levy or proceeding in any court for the collection
of an imputed underpayment may be made, begun, or prosecuted) before--
(i) The close of the 90th day after the day on which a notice of a
final partnership adjustment (FPA) under section 6231(a)(3) was mailed;
and
[[Page 324]]
(ii) If a petition for readjustment is filed under section 6234 with
respect to such FPA, the decision of the court has become final.
(2) Specified similar amount. The limitations under paragraph (c)(1)
of this section do not apply in the case of a specified similar amount
as defined in section 6232(f)(2).
(d) Exceptions to restrictions on adjustments and assessments--(1)
Adjustments treated as mathematical or clerical errors--(i) In general.
A notice to a partnership that, on account of a mathematical or clerical
error appearing on the partnership return or as a result of a failure by
a partnership-partner (as defined in Sec. 301.6241-1(a)(7)) to comply
with section 6222(a), the IRS has adjusted or will adjust partnership-
related items (as defined in Sec. 301.6241-1(a)(6)(ii)) to correct the
error or to make the items consistent under section 6222(a) and has
assessed or will assess any imputed underpayment (determined in
accordance with Sec. 301.6225-1) resulting from the adjustment is not
considered an FPA under section 6231(a)(3). A petition for readjustment
under section 6234 may not be filed with respect to such notice. The
limitations under section 6232(b) and paragraph (c) of this section do
not apply to an assessment under this paragraph (d)(1)(i). For the
definition of mathematical or clerical error generally, see section
6213(g)(2). For application of mathematical or clerical error in the
case of inconsistent treatment by a partner that fails to give notice,
see Sec. 301.6222-1(b).
(ii) Request for abatement--(A) In general. Except as provided in
paragraph (d)(1)(ii)(B) of this section, a partnership that is mailed a
notice described in paragraph (d)(1)(i) of this section may file with
the IRS, within 60 days after the date of such notice, a request for
abatement of any assessment of an imputed underpayment specified in such
notice. Upon receipt of the request, the IRS must abate the assessment.
Any subsequent assessment of an imputed underpayment with respect to
which abatement was made is subject to the provisions of subchapter C of
chapter 63 of the Code, including the limitations under paragraph (c) of
this section.
(B) Adjustments with respect to inconsistent treatment by a
partnership-partner. If an adjustment that is the subject of a notice
described in paragraph (d)(1)(i) of this section is due to the failure
of a partnership-partner to comply with section 6222(a), paragraph
(d)(1)(ii)(A) of this section does not apply, and abatement of any
assessment specified in such notice is not available. However, prior to
assessment, a partnership-partner that has failed to comply with section
6222(a) may correct the inconsistency by filing an administrative
adjustment request in accordance with section 6227 or filing an amended
partnership return and furnishing amended statements, as appropriate.
(iii) Partnerships that have an election under section 6221(b) in
effect. In the case of a partnership-partner that has an election under
section 6221(b) in effect for the reviewed year (as defined in Sec.
301.6241-1(a)(8)), any tax resulting from an adjustment due to the
partnership-partner's failure to comply with section 6222(a) may be
assessed with respect to the reviewed year partners (as defined in Sec.
301.6241-1(a)(9)) of the partnership-partner (or indirect partners of
the partnership-partner, as defined in Sec. 301.6241-1(a)(4)). Such tax
may be assessed in the same manner as if the tax were on account of a
mathematical or clerical error appearing on the reviewed year partner's
or indirect partner's return, except that the procedures under section
6213(b)(2) for requesting an abatement of such assessment do not apply.
(2) Partnership may waive limitations. A partnership may at any time
by a signed notice in writing filed with the IRS waive the limitations
under paragraph (c) of this section (whether or not an FPA under section
6231(a)(3) has been mailed by the IRS at the time of the waiver).
(e) Limit on amount of imputed underpayment where no proceeding is
begun. If no proceeding under section 6234 is begun with respect to an
FPA under section 6231(a)(3) before the close of the 90th day after the
day on which such FPA was mailed, the amount for which the partnership
is liable under section 6225 with respect to such FPA cannot
[[Page 325]]
exceed the amount determined in such FPA.
(f) Applicability date--(1) In general. Except as provided in
paragraph (f)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017, and ending after August
12, 2018.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable year beginning after November 2, 2015, and
before January 1, 2018, for which a valid election under Sec. 301.9100-
22 is in effect.
[T.D. 9844, 84 FR 6562, Feb. 27, 2019]
Sec. 301.6233-1 Extension to entities filing partnership returns.
(a) Entities filing a partnership return. Except as provided in
paragraph (c)(1) of this section, the provisions of subchapter C of
chapter 63 of the Internal Revenue Code (subchapter C) and the
regulations thereunder shall apply with respect to any taxable year of
an entity for which such entity files a partnership return as well as to
such entity's items for that taxable year and to any person holding an
interest in such entity at any time during that taxable year. Any final
partnership administrative adjustment or judicial determination
resulting from a proceeding under subchapter C with respect to such
taxable year may include a determination that the entity is not a
partnership for such taxable year as well as determinations with respect
to all items of the entity that would be partnership items, as defined
in section 6231(a)(3) and the regulations thereunder, if such entity had
been a partnership in such taxable year (including, for example, any
amounts taxable to an entity determined to be an association taxable as
a corporation). For example, a final determination under subchapter C
that an entity that filed a partnership return is an association taxable
as a corporation will serve as a basis for a computational adjustment
reflecting the disallowance of any loss or credit claimed by a purported
partner with respect to that entity.
(b) Partnership return filed but no entity found to exist. Paragraph
(a) of this section shall apply where a partnership return is filed for
a taxable year but it is determined that there is no entity for such
taxable year. For purposes of applying paragraph (a) of this section,
the partnership return shall be treated as if it were filed by an
entity. However, any final partnership administrative adjustment or
judicial determination resulting from a proceeding under subchapter C
with respect to such taxable year may also include a determination that
there is no entity for such taxable year.
(c) Exceptions. Paragraph (a) of this section shall not apply to--
(1) Entities for any taxable year in which such entity would be
excepted from the provisions of subchapter C of the Internal Revenue
Code under section 6231(a)(1)(B) and the regulations thereunder
(relating to the exception for small partnerships) if such entity were a
partnership for such taxable year; and
(2) Entities for any taxable year for which a partnership return was
filed for the sole purpose of making the election described in section
761(a).
(d) Effective dates. This section is applicable to partnership
taxable years beginning on or after October 4, 2001. For years beginning
prior to October 4, 2001, see Sec. 301.6233-1T contained in 26 CFR part
1, revised April 1, 2001.
[T.D. 8965, 66 FR 50563, Oct. 4, 2001]
Sec. 301.6233(a)-1 Interest and penalties determined from reviewed year.
(a) Interest and penalties with respect to the reviewed year. Except
to the extent provided in section 6226(c), in the case of a partnership
adjustment (as defined in Sec. 301.6241-1(a)(6)) for a reviewed year
(as defined in Sec. 301.6241-1(a)(8)), a partnership is liable for--
(1) Interest computed in accordance with paragraph (b) of this
section; and
(2) Any penalty, addition to tax, or additional amount as provided
under paragraph (c) of this section.
(b) Computation of interest with respect to partnership adjustments
for the reviewed year--(1) Interest on an imputed underpayment. The
interest imposed on an imputed underpayment resulting from partnership
adjustments for the reviewed year is the interest that would be imposed
under chapter 67 of the Internal Revenue Code (Code) if the imputed
underpayment were treated as
[[Page 326]]
an underpayment of tax for the reviewed year. The interest imposed on an
imputed underpayment under paragraph (b) of this section begins on the
day after the due date of the partnership return (without regard to
extension) for the reviewed year and ends on the earlier of--
(i) The date prescribed for payment (as described in Sec. 301.6232-
1(b));
(ii) The due date of the partnership return (without regard to
extension) for the adjustment year (as defined in Sec. 301.6241-
1(a)(1)); or
(iii) The date the imputed underpayment is fully paid.
(2) Interest on penalties with respect to the reviewed year. The
interest imposed on any penalties, additions to tax, and additional
amounts determined under paragraph (c) of this section is the interest
that would be imposed under chapter 67 of the Code treating the
partnership return for the reviewed year as the return of tax with
respect to which such penalty, addition to tax, or additional amount is
imposed.
(c) Penalties with respect to partnership adjustments for the
reviewed year--(1) In general. In accordance with section 6221(a), the
applicability of any penalties, additions to tax, and additional amounts
that relate to an adjustment to any partnership-related item for the
reviewed year is determined at the partnership level as if the
partnership had been an individual subject to tax imposed by chapter 1
of the Code for the reviewed year, and the imputed underpayment were an
actual underpayment of tax or understatement for such year. Nothing in
this paragraph (c)(1) affects the application of any penalty, addition
to tax, or additional amount that may apply to the partnership or to any
reviewed year partner (as defined in Sec. 301.6241-1(a)(9)) or to any
indirect partner (as defined in Sec. 301.6241-1(a)(4)) that is
unrelated to an adjustment to a partnership-related item under
subchapter C of chapter 63 of the Code. Except as provided in Sec.
301.6225-2(d), a partner-level defense (as described in Sec. 301.6226-
3(d)(3)) may not be raised in a proceeding of the partnership.
(2) Determination of the amount of accuracy-related penalty and
fraud penalty--(i) In general. The amount of any penalty under part II
of subchapter A of chapter 68 of the Code (accuracy-related or fraud
penalties) that relates to any partnership adjustment for the reviewed
year is determined in accordance with this paragraph (c)(2). If in
determining the imputed underpayment under Sec. 301.6225-1 (or Sec.
301.6225-2 in the case of modification), any grouping or subgrouping
contains a negative adjustment (as defined in Sec. 301.6225-
1(d)(2)(ii)) and at least one positive adjustment (as defined in Sec.
301.6225-1(d)(2)(iii)) that is subject to penalty, first apply the rules
for allocating negative adjustments in paragraph (c)(2)(iii) of this
section. Then, apply the rules in paragraph (c)(2)(ii) of this section
to calculate penalty amounts. If there are no negative adjustments, do
not apply the rules in paragraph (c)(2)(iii) of this section and instead
apply only the rules in paragraph (c)(2)(ii) of this section. For all
purposes under paragraph (c)(2) of this section, adjustments that do not
result in the imputed underpayment (as described in Sec. 301.6225-1(f))
and adjustments excluded from the determination of the imputed
underpayment under Sec. 301.6225-2(b)(2) are disregarded.
(ii) Calculating the portion of an imputed underpayment subject to
penalty and penalty amounts. To determine the portion of an imputed
underpayment subject to a penalty and the amount of a particular
penalty, apply the following steps to all adjustments subject to penalty
remaining after application of negative adjustments (as described in
paragraph (c)(2)(iii) of this section) and to all adjustments subject to
penalty contained in groupings or subgroupings that do not contain a
negative adjustment.
(A) For purposes of applying this paragraph (c)(2)(ii)(A), disregard
adjustments to credits or adjustments treated as adjustments to credits.
Total all adjustments to which a particular penalty was imposed and to
which the highest rate of tax in effect for the reviewed year under
section 1 or 11 was applied when calculating the imputed underpayment.
See Sec. 301.6225-1(b)(1)(iv).
[[Page 327]]
(B) Multiply the total in paragraph (c)(2)(ii)(A) of this section by
the highest rate of tax in effect for the reviewed year under section 1
or 11.
(C) If the imputed underpayment was modified in accordance with
Sec. 301.6225-2(b)(3), repeat the steps in paragraphs (c)(2)(ii)(A) and
(B) of this section for every tax rate applied in calculating the
imputed underpayment by substituting the applicable tax rate determined
under Sec. 301.6225-2(b)(3) for the highest rate of tax in effect for
the reviewed year under section 1 or 11.
(D) Total all amounts determined after completing the steps in
paragraphs (c)(2)(ii)(A) through (C) of this section.
(E) Adjust the amount calculated in paragraph (c)(2)(ii)(D) of this
section by:
(1) Increasing by the net adjustments subject to the penalty in the
credit grouping (as described in paragraph (c)(2)(iii)(C)(1) of this
section) after application of paragraph (c)(2)(iii)(A) of this section;
or
(2) Decreasing in accordance with the rules in paragraph
(c)(2)(iii)(C)(2) of this section by the amount of negative adjustments
in the credit grouping if, after application of paragraph (c)(2)(iii)(A)
of this section, only negative adjustments in the credit grouping
remain.
(3) The result after completing the calculation in paragraphs
(c)(2)(ii)(E)(1) and (2) of this section is the portion of the imputed
underpayment to which the particular penalty was imposed.
(F) Multiply the total calculated in paragraph (c)(2)(ii)(E) of this
section by the penalty rate applicable to the particular penalty. This
is the total penalty amount for adjustments to which the particular
penalty was imposed.
(iii) Allocating negative adjustments--(A) In general. Negative
adjustments offset positive adjustments within the same grouping or, if
the negative adjustment is in a subgrouping, within that same
subgrouping. For purposes of applying this paragraph (c)(2)(iii), all
adjustments to credits and adjustments treated as adjustments to credits
are treated as grouped in the credit grouping without regard to whether
the adjustments were subgrouped for purposes of Sec. 301.6225-1 (or
Sec. 301.6225-2 in the case of modification). Adjustments that do not
result in the imputed underpayment are disregarded as provided in
paragraph (c)(2) of this section. Negative adjustments are allocated in
accordance with the following rules:
(1) Negative adjustments are first applied to offset positive
adjustments to which no penalties have been imposed.
(2) Any amount of negative adjustments remaining after application
of paragraph (c)(2)(iii)(A)(1) of this section are applied to offset
adjustments to which a penalty has been imposed at the lowest penalty
rate.
(3) Any amount of negative adjustments remaining after application
of paragraph (c)(2)(iii)(A)(2) of this section are applied to offset
adjustments to which a penalty has been imposed at the next highest rate
in ascending order of rate until no amount of negative adjustments
remain or no positive adjustments to which a penalty has been imposed
remain.
(B) Allocation of negative adjustment within a penalty rate. The
Internal Revenue Service (IRS) may provide additional guidance regarding
the ordering or allocation of negative adjustments for purposes of
paragraph (c)(2)(iii)(A) of this section where more than one penalty is
imposed at the same penalty rate.
(C) Adjustments remaining after allocation of negative adjustments--
(1) In general. For purposes of paragraph (c)(2)(ii) of this section,
any positive adjustment to which a penalty has been imposed that has not
been fully offset by a negative adjustment after application of
paragraph (c)(2)(iii)(A) of this section is a net adjustment subject to
penalty remaining after allocation of negative adjustments.
(2) Additional rules regarding allocation of negative credit
amounts. If, after application of paragraph (c)(2)(iii)(A) of this
section, an amount of negative adjustments remain in the credit
grouping, the amount of remaining negative adjustments may reduce the
portion of the imputed underpayment that is subject to a penalty, but
not below zero, in accordance with the following rules:
(i) The amount of remaining negative adjustments in the credit
grouping are
[[Page 328]]
first applied to the portion of the imputed underpayment to which no
penalty has been imposed, as calculated in accordance with paragraph
(c)(2)(iii)(C)(3) of this section.
(ii) Any amount of negative adjustment in the credit grouping
remaining after application of paragraph (c)(2)(iii)(C)(2)(i) of this
section is applied to the portion of the imputed underpayment to which a
penalty has been imposed at the lowest penalty rate as calculated in
accordance with paragraph (c)(2)(ii) of this section.
(iii) Any amount of negative adjustments in the credit grouping
remaining after application of paragraph (c)(2)(iii)(C)(1)(ii) of this
section is applied to the portion of the imputed underpayment to which a
penalty has been imposed at the next highest rate in ascending order of
rate in accordance with paragraph (c)(2)(iii) of this section until no
negative amount remains.
(3) Calculating the portion of the imputed underpayment to which no
penalty was imposed before the application of negative adjustments to
credits. To determine the portion of the imputed underpayment that is
not subject to penalty for purposes of paragraph (c)(2)(iii)(C)(2)(i) of
this section, apply the rules in paragraphs (c)(2)(ii)(A) through (E) of
this section of this section but substitute adjustment to which no
penalty was imposed for adjustments to which a particular penalty was
imposed.
(iv) Special rules--(A) Fraud penalties under section 6663. If any
portion of an imputed underpayment is determined by the IRS to be
attributable to fraud, the entire imputed underpayment is treated as
attributable to fraud. This paragraph (c)(2)(iv)(A) does not apply to
any portion of the imputed underpayment the partnership establishes by a
preponderance of the evidence is not attributable to fraud.
(B) Substantial understatement penalty under section 6662(d)--(1) In
general. For purposes of application of the penalty under section
6662(d) (substantial understatement of income tax), the imputed
underpayment is treated as an understatement under section 6662(d)(2).
To determine whether an imputed underpayment treated as an
understatement under this paragraph (c)(2)(iv)(B)(1) is a substantial
understatement under section 6662(d)(1), the rules of section
6662(d)(1)(A) apply by treating the amount described in paragraph
(c)(2)(iv)(B)(2) of this section as the tax required to be shown on the
return for the taxable year under section 6662(d)(1)(A)(i).
(2) Amount of tax required to be shown on the return. The amount
described in this paragraph (c)(2)(iv)(B)(2) is the tax that would
result by treating the net income or loss of the partnership for the
reviewed year, reflecting any partnership adjustments as finally
determined, as taxable income described in section 1(c) (determined
without regard to section 1(h)).
(C) Reportable transaction understatement under section 6662A. For
purposes of application of the penalty under section 6662A (reportable
transaction understatement penalty), the portion of an imputed
underpayment attributable to an item described under section 6662A(b)(2)
is treated as a reportable transaction understatement under section
6662A(b).
(D) Reasonable cause and good faith. For purposes of determining
whether a partnership satisfies the reasonable cause and good faith
exception under section 6664(c) or (d) with respect to a penalty under
section 6662, section 6662A, or section 6663, the partnership is treated
as the taxpayer. See Sec. 1.6664-4 of this chapter. Accordingly, the
facts and circumstances taken into account to determine whether the
partnership has established reasonable cause and good faith are the
facts and circumstances applicable to the partnership.
(v) Examples. The following examples illustrate the rules of
paragraph (c) of this section. For purposes of these examples, each
partnership has a calendar taxable year, and the highest tax rate in
effect for all taxpayers is 40 percent for all relevant periods.
(A) Example 1. In an administrative proceeding with respect to
Partnership's 2018 partnership return, the IRS makes a positive
adjustment to ordinary income of $100. The $100 adjustment is due to
negligence or disregard of rules or regulations under section
[[Page 329]]
6662(c), and a 20-percent accuracy-related penalty applies under section
6662(a). The IRS also makes a positive adjustment to long-term capital
gain of $300, but no penalty applies with respect to that adjustment.
These are the only adjustments. The portion of the imputed underpayment
to which the 20-percent penalty applies is $40 ($100 x 40 percent), and
the penalty is $8 ($40 x 20 percent).
(B) Example 2. The facts are the same as in Example 1 in paragraph
(c)(2)(v)(A) of this section, except that the IRS makes a positive
adjustment to credits of $10. The adjustment to credits is due to
negligence or disregard of rules or regulations under section 6662(c),
and a 20-percent accuracy-related penalty applies under section 6662(a).
The portion of the imputed underpayment to which the 20-percent
accuracy-related penalty applies is $50 (($100 x 40 percent) + $10), and
the penalty is $10 ($50 x 20 percent).
(C) Example 3. The facts are the same as in Example 2 in paragraph
(c)(2)(v)(B) of this section, except that there is also a negative
adjustment to ordinary income of $50 that was subgrouped under Sec.
301.6225-1 with the $100 positive adjustment to ordinary. Because the
$50 negative adjustment to ordinary income was subgrouped under Sec.
301.6225-1 with the $100 positive adjustment to ordinary income, in
determining the portion of the imputed underpayment subject to penalty,
the $50 negative adjustment is applied to offset part of the $100
positive adjustment to ordinary income ($100-$50 = $50). Accordingly,
the portion of the imputed underpayment to which the 20-percent
accuracy-related penalty applies is $30 (($50 x 40 percent) + $10), and
the penalty is $6 ($30 x 20 percent).
(D) Example 4. The facts are the same as in Example 3 in paragraph
(c)(2)(v)(C) of this section, except that the $300 adjustment to long-
term capital gain is due to a gross valuation misstatement. A 40-percent
accuracy-related penalty under section 6662(a) and (h) applies to the
portion of the imputed underpayment attributable to the gross valuation
misstatement. The portion of the imputed underpayment to which the 20
percent accuracy-related penalty applies remains $30, and the 20-percent
accuracy-related penalty remains $6. The portion of the imputed
underpayment to which the 40-percent gross valuation misstatement
penalty applies is $120 ($300 x 40 percent), and the gross valuation
misstatement penalty is $48 ($120 x 40 percent). The total accuracy-
related penalty under section 6662(a) is $54.
(E) Example 5. Partnership has four equal partners during its 2019
taxable year: Two partners are partnerships, A and B; one partner is a
tax-exempt entity, C; and the fourth partner is an individual, D. In an
administrative proceeding with respect to Partnership's 2019 taxable
year, the IRS timely mails a notice of proposed partnership adjustment
(NOPPA) to Partnership for its 2019 taxable year proposing a single
partnership positive adjustment to Partnership's ordinary income by
$400,000. The $400,000 positive adjustment is due to negligence or
disregard of rules or regulations under section 6662(c). A 20-percent
accuracy-related penalty under section 6662(a) and (c) applies to the
portion of the imputed underpayment attributable to the negligence or
disregard of the rules or regulations. In the NOPPA, the IRS determines
an imputed underpayment of $160,000 ($400,000 x 40 percent) and that the
20-percent penalty applies to the entire imputed underpayment. The
penalty is $32,000 ($160,000 x 20 percent). Partnership requests
modification under Sec. 301.6225-2(d)(3) (regarding tax-exempt
partners) with respect to the amount of additional income allocated to
C, and the IRS approves the modification request. As a result,
Partnership's total netted partnership adjustment under Sec. 301.6225-
1(b)(2) is $300,000 ($400,000 less $100,000 allocable to C). The imputed
underpayment is $120,000 (($300,000) x 40 percent), and the penalty is
$24,000 ($120,000 x 20 percent).
(F) Example 6. The facts are the same as in Example 5 in paragraph
(c)(2)(v)(E) of this section, except in addition to the modification
with respect to C's tax-exempt status, Partnership requests a
modification under Sec. 301.6225-2(d)(2) (regarding amended returns)
with respect to the $100,000 of additional income allocated to D. In
accordance with the rules under
[[Page 330]]
Sec. 301.6225-2(d)(2), D files an amended return for D's 2019 taxable
year taking into account $100,000 of additional ordinary income. In
addition, in accordance with Sec. 301.6225-2(d)(2)(viii), D takes into
account on D's return the 20-percent accuracy-related penalty for
negligence or disregard of rules or regulations that relates to the
ordinary income adjustment. D's tax attributes for other taxable years
are not affected. The IRS approves the modification request. As a
result, Partnership's total netted partnership adjustment under Sec.
301.6225-1(b)(2) is $200,000 ($400,000 less $100,000 allocable to C and
$100,000 taken into account by D). The imputed underpayment, after
modification, is $80,000 ($200,000 x 40 percent), and the penalty is
$16,000 ($80,000 x 20 percent).
(d) Applicability date--(1) In general. Except as provided in
paragraph (d)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017, and ending after August
12, 2018.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable year beginning after November 2, 2015, and
before January 1, 2018, for which a valid election under Sec. 301.9100-
22 is in effect.
[T.D. 9844, 84 FR 6563, Feb. 27, 2019]
Sec. 301.6233(b)-1 Interest and penalties with respect to
the adjustment year return.
(a) Interest and penalties with respect to failure to pay imputed
underpayment on the date prescribed. In the case of any failure to pay
an imputed underpayment on the date prescribed for such payment (as
described in Sec. 301.6232-1(b)), a partnership is liable for--
(1) Interest as determined under paragraph (c) of this section; and
(2) Any penalty, addition to tax, or additional amount as determined
under paragraph (d) of this section.
(b) Imputed underpayments to which this section applies. This
section applies to the portion of an imputed underpayment determined by
the Internal Revenue Service (IRS) under section 6225(a)(1), or an
imputed underpayment resulting from adjustments requested by a
partnership in an administrative adjustment request under section 6227,
that is not paid by the date prescribed for payment under Sec.
301.6232-1(b).
(c) Interest. Interest determined under this paragraph (c) is the
interest that would be imposed under chapter 67 of the Internal Revenue
Code (Code) by treating any unpaid amount of the imputed underpayment as
an underpayment of tax imposed for the adjustment year (as defined in
Sec. 301.6241-1(a)(1)). The interest under this paragraph (c) begins on
the date prescribed for payment (as described in Sec. 301.6232-1(b))
and ends on the date payment of the imputed underpayment is made.
(d) Penalties. If a partnership fails to pay an imputed underpayment
by the date prescribed for payment (as described in Sec. 301.6232-
1(b)), section 6651(a)(2) applies to such failure, and any unpaid amount
of the imputed underpayment is treated as if it were an underpayment of
tax for purposes of part II of subchapter A of chapter 68 of the Code.
For purposes of this section, the penalty under 6651(a)(2) is applied by
treating the unpaid amount of the imputed underpayment as the unpaid
amount shown as tax on a return required under subchapter A of chapter
61 of the Code.
(e) Applicability date--(1) In general. Except as provided in
paragraph (e)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017, and ending after August
12, 2018.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable year beginning after November 2, 2015, and
before January 1, 2018, for which a valid election under Sec. 301.9100-
22 is in effect.
[T.D. 9844, 84 FR 6565, Feb. 27, 2019]
Sec. 301.6234-1 Judicial review of partnership adjustment.
(a) In general. Within 90 days after the date on which a notice of a
final partnership adjustment (FPA) under section 6231(a)(3) with respect
to any partnership taxable year is mailed, a partnership may file a
petition for a readjustment of any partnership adjustment (as defined in
Sec. 301.6241-1(a)(6)) reflected in the FPA for such taxable year
(without regard to whether an
[[Page 331]]
election under section 6226 has been made with respect to any imputed
underpayment (as defined in Sec. 301.6241-1(a)(3)) reflected in such
FPA) with--
(1) The Tax Court;
(2) The district court of the United States for the district in
which the partnership's principal place of business is located; or
(3) The Court of Federal Claims.
(b) Jurisdictional requirement for bringing action in district court
or Court of Federal Claims. A petition for readjustment under this
section with respect to any partnership adjustment may be filed in a
district court of the United States or the Court of Federal Claims only
if the partnership filing the petition deposits with the Internal
Revenue Service (IRS), on or before the date the petition is filed, the
amount of (as of the date of the filing of the petition) any imputed
underpayment (as shown on the FPA) and any penalties, additions to tax,
and additional amounts with respect to such imputed underpayment. If
there is more than one imputed underpayment reflected in the FPA, the
partnership must deposit the amount of each imputed underpayment to
which the petition for readjustment relates and the amount of any
penalties, additions to tax, and additional amounts with respect to each
such imputed underpayment.
(c) Treatment of deposit as payment of tax. Any amount deposited in
accordance with paragraph (b) of this section, while deposited, will not
be treated as a payment of tax for purposes of the Internal Revenue Code
(Code). Notwithstanding the preceding sentence, an amount deposited in
accordance with paragraph (b) of this section will be treated as a
payment of tax for purposes of chapter 67 of the Code (relating to
interest). Interest will be allowed and paid in accordance with section
6611.
(d) Effect of decision dismissing action. If an action brought under
this section is dismissed other than by reason of a rescission of the
FPA under section 6231(d) and Sec. 301.6231-1(g), the decision of the
court dismissing the action is considered as its decision that the FPA
is correct.
(e) Amount deposited may be applied against assessment. If the
limitations on assessment under section 6232(b) and Sec. 301.6232-1(c)
no longer apply with respect to an imputed underpayment for which a
deposit under paragraph (b) of this section was made, the IRS may apply
the amount deposited against any such imputed underpayment that is
assessed. In the case of a deposit made under this section that is in an
amount in excess of the amount assessed against the partnership (excess
deposit), a partnership may obtain a return of the excess deposit by
making a request in writing in accordance with forms, instructions, or
other guidance prescribed by the IRS.
(f) Applicability date--(1) In general. Except as provided in
paragraph (f)(2) of this section, this section applies to partnership
taxable years beginning after December 31, 2017, and ending after August
12, 2018.
(2) Election under Sec. 301.9100-22 in effect. This section applies
to any partnership taxable year beginning after November 2, 2015, and
before January 1, 2018, for which a valid election under Sec. 301.9100-
22 is in effect.
[T.D. 9844, 84 FR 6566, Feb. 27, 2019]