[Federal Register Volume 63, Number 174 (Wednesday, September 9, 1998)]
[Proposed Rules]
[Pages 48144-48148]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23881]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-118966-97]
RIN 1545-AV69


Information Reporting With Respect to Certain Foreign 
Partnerships

AGENCY: Internal Revenue Service (IRS), Treasury.

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

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SUMMARY: This document contains proposed regulations under section 6038 
of the Internal Revenue Code providing information reporting 
requirements for certain United States persons holding interests in 
controlled foreign partnerships. The proposed regulations reflect 
changes to the law made by the Taxpayer Relief Act of 1997. These 
proposed regulations would provide guidance to United States persons 
who must file such a return. This document also provides notice of a 
public hearing on these proposed regulations.

DATES: Written comments must be received by November 9, 1998. Outlines 
of topics to be discussed at the public hearing scheduled for November 
10, 1998, at 10 a.m., must be received by October 20, 1998.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-118966-97), room 
5226, Internal Revenue Service, POB 7604, Ben Franklin Station, 
Washington, DC 20044. In the alternative, submissions may be hand 
delivered between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R 
(REG-118966-97), Courier's Desk, Internal Revenue Service, 1111 
Constitution Avenue NW., Washington, DC. Alternatively, taxpayers may 
submit comments electronically via the Internet by selecting the ``Tax 
Regs'' option on the IRS Home Page, or by submitting comments directly 
to the IRS Internet site at http://www.irs.ustreas.gov/prod/tax__regs/
comments.html.
    A public hearing has been scheduled to be held in room 2615, 
Internal Revenue Building, 1111 Constitution Avenue NW., Washington, 
DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Victoria Scotto Balacek, 202-622-3860; concerning submissions and 
requests for a hearing, Michael Slaughter, 202-622-7190 (not toll-free 
numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in this notice of proposed 
rulemaking has been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)). Comments on the collection of information should be 
sent to the Office of Management and Budget, Attention: Desk Officer 
for the Department of the Treasury, Office of Information and 
Regulatory Affairs, Washington, DC 20503, with copies to the Internal 
Revenue Service, Attention: IRS Reports Clearance Officer OP:FS:FP, 
Washington, DC 20224. Comments on the collection of information must be 
received by November 9, 1998. Comments are specifically requested on:
    Whether the proposed collection of information is necessary for the 
proper performance of the functions of the IRS, including whether the 
information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
collection of information (see below);

[[Page 48145]]

    How the quality, utility, and clarity of the information to be 
collected may be enhanced;
    How the burden of complying with the proposed collection of 
information may be minimized, including through the application of 
automated collection techniques or other forms of information 
technology; and
    Estimates of the capital or start-up costs of operation, 
maintenance, and purchase of services to provide information.
    The collection of information in these regulations is in 
Sec. 1.6038-3. This information is required by the IRS to identify 
foreign partnerships which are controlled by United States persons and 
verify amounts reported by the partners. The collection of information 
is mandatory. The likely respondents will be individuals and businesses 
or other for-profit organizations.
    The burden of complying with the proposed collection of information 
required to be reported on Form 8865 is reflected in the burden for 
Form 8865.
    The burden of complying with the proposed collection of information 
in Sec. 1.6038-3(c)(3) is as follows:
    Estimated total annual reporting burden: 250 hours.
    Estimated annual burden per respondent: .25 hours to 1 hour, with 
an average of .5 hours.
    Estimated number of respondents: 500.
    Estimated frequency of responses: Annually.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background

Taxpayer Relief Act of 1997

    In the Taxpayer Relief Act of 1997 (TRA 1997), Public Law 105-34 
(111 Stat. 983 (1997)), Congress significantly modified the information 
reporting requirements with respect to foreign partnerships under 
sections 6038, 6038B and 6046A (and also amended section 6501(c)(8) to 
provide that the statute of limitations on the assessment of tax under 
sections 6038, 6038B and 6046A does not expire until three years after 
the information required under those sections is reported). These 
regulations under section 6038 are being proposed along with 
regulations under sections 6038B (reporting of certain transfers to 
foreign partnerships) and 6046A (reporting of certain ownership 
interests in foreign partnerships). The IRS is also developing a 
comprehensive form (Form 8865) for reporting under all of these 
provisions. A draft version of the form will be issued for public 
comment while the proposed regulations are outstanding.

Section 6038

    Prior to TRA 1997, reporting in respect of foreign partnerships was 
governed by section 6031 of the Internal Revenue Code (Code). 
Regulations had been proposed, but never finalized, that would have 
required reporting by foreign partnerships where United States persons 
were allocated 25 percent or more of certain items. Section 1141 of TRA 
1997, amended section 6031 to provide that a foreign partnership is 
required to file an annual return of partnership income (Form 1065) 
only if the partnership has gross income from sources within the United 
States, or gross income that is effectively connected with the conduct 
of a U.S. trade or business. Section 1142 of TRA 1997, amended section 
6038 to require information reporting by certain United States persons 
with direct or indirect interests in controlled foreign partnerships. 
Thus, these changes moved the statutory authority to require annual 
reporting on a foreign partnership because of the ownership interests 
of United States persons from section 6031 to section 6038, and moved 
the reporting obligation in respect of foreign partnerships from the 
partnership to the partner level.

Explanation of Provisions

    Section 6038 requires certain United States persons that own 
interests in controlled foreign partnerships to provide information 
with respect to the interests as prescribed by the Secretary. The 
proposed regulations implement the statute by requiring taxpayers to 
furnish the IRS with annual information.

Reporting Requirements

    The proposed regulations implement the rules of section 6038 by 
requiring a United States person that controls a foreign partnership to 
file an annual information return with respect to the foreign 
partnership (Form 8865). Pursuant to section 6038(e)(3), the proposed 
regulations define control as direct or indirect ownership of more than 
a 50-percent interest in the partnership. The constructive ownership 
rules of section 267(c) (other than paragraph (3)) are applied to 
determine ownership interests (taking into account that such rules 
refer to corporations and not to partnerships).
    A 50-percent interest in a partnership is defined as an interest 
equal to 50 percent of the capital interest, 50 percent of the profits 
interest, or, exercising the regulatory authority under section 
6038(e)(3)(A)(ii), an interest to which 50 percent of the deductions or 
losses are allocated. Defining control by reference to losses or 
deductions, as well as capital and profits, is appropriate, because a 
partner with a greater than 50-percent allocation of these items has a 
level of control sufficient to provide a significant amount of 
information about the partnership. Furthermore, in the case of such 
allocations, certain information is required to ensure that the rules 
of Code provisions such as section 704(b) (determination of 
distributive share) are being followed.
    To relieve taxpayers of unnecessary filing burdens, the regulations 
provide exceptions from the general rule that a controlling partner 
must provide information to the IRS on Form 8865. If more than one 
United States person is required to report as a controlling partner, 
then one such controlling partner may file the required information in 
lieu of all such partners having to file separately. However, a 
controlling partner with respect only to losses or deductions may only 
satisfy this requirement if there are no controlling partners with 
respect to capital or profits. The controlling partners not required to 
file, must file the statement required by the regulations with their 
tax return indicating that the filing requirement will be met by 
another person and identifying that person.
    Pursuant to section 6038(a)(5), the proposed regulations provide 
that each United States person that owns at least a 10-percent interest 
in a foreign partnership that is controlled by United States persons 
holding at least 10-percent interests must file an annual information 
return with respect to the partnership. In accordance with the statute, 
however, such 10-percent partners will not be required to report such 
information where there is a United States person that is a controlling 
partner. The proposed regulations define a 10-percent interest in a 
partnership as an interest equal to 10 percent of the capital or 
profits interest, and an interest to which 10 percent of the deductions 
or losses are allocated.

[[Page 48146]]

    Because no one United States person controls the partnership, Form 
8865 will require less information to be reported than it will for 
controlling United States partners, and will be more similar to the 
information contained in Schedule K-1 to Form 1065. If there is a 
controlling partner (and, thus, any other 10-percent partners are not 
required to file), the controlling partner must, generally, file the 
information that would otherwise have been required from such 10-
percent partners.

Exceptions to Filing Requirements

    The proposed regulations provide that certain United States persons 
that are indirect partners need not file under section 6038 so long as 
the United States person from whom ownership is attributed does file 
the information, and the indirect partner files a statement with its 
income tax return identifying the United States person that will meet 
the filing requirements.
    The reporting requirements of this section shall not apply in 
respect of any foreign partnership which is an eligible partnership 
described in Sec. 1.761-2(a) that has validly elected pursuant to 
Sec. 1.761-2(b)(2)(i) to be wholly excluded from the application of 
subchapter K. Nor shall the reporting requirements of these proposed 
regulations apply to any foreign partnership validly deemed to have 
wholly elected out of the provisions of subchapter K as specified in 
Sec. 1.761-2(b)(2)(ii). Taxpayers are reminded, however, that a 
precondition to being an ``electing-out'' partnership is that, as 
provided in Sec. 1.761-2(a)(1), ``[t]he members of such organization 
must be able to compute their income without the necessity of computing 
partnership taxable income.'' The IRS and Treasury are concerned that 
in certain cases the necessary books and records are not being 
maintained to allow verification that such computations can indeed be 
made without regard to the partnership. If it appears that, in the 
absence of a reporting requirement under this section, the members of 
the ``electing-out'' partnership cannot make such separate 
computations, this exception to the reporting requirements will be 
reconsidered.

Information Required

    The proposed regulations require certain United States persons to 
provide information relating to the foreign partnership on Form 8865 
(or successor form). The form will require controlling partners of 
foreign partnerships to report information concerning the income and 
assets of the partnership, certain transactions with the partnership, 
the names of the partners in the partnership, and other specified 
information. The form will require a partner holding at least a 10-
percent interest in a controlled foreign partnership (where there is no 
United States person that is a controlling partner) to report 
information with respect only to its own interest in the partnership.

Time and Place for Filing

    The proposed regulations require Form 8865 to be filed with the 
United States person's income tax return (including a partnership 
return of income) for the taxable year in which the partnership's 
annual accounting period ends. If required by the instructions to Form 
8865, a duplicate Form 8865 must also be filed.

Failure to Provide Information

    As described in section 6038(b), the proposed regulations provide 
that a failure to comply with the reporting requirements of section 
6038 will result in a penalty of $10,000 for each annual accounting 
period. Additional penalties apply for failure to comply after 
notification by the IRS, up to a total of $50,000 for each annual 
accounting period. Also, as provided in section 6038(c), the proposed 
regulations additionally provide a penalty of reducing the United 
States person's foreign tax credit (also with further penalties for 
continued failure to report after notification).

Effective Dates

    The proposed regulations would apply for annual accounting periods 
beginning after the date that these regulations are published as final 
regulations in the Federal Register.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in EO 12866. Therefore, 
a regulatory assessment is not required. It has also been determined 
that section 553(b) of the Administrative Procedure Act (5 U.S.C. 
chapter 5) does not apply to these proposed regulations. It is hereby 
certified that the collection of information contained in these 
proposed regulations will not have a significant economic impact on a 
substantial number of small entities. This certification is based on 
the fact that the amount of time required to complete the form and file 
the information required under these regulations is brief and will not 
have a significant impact on those small entities that are required to 
provide notification. Furthermore, the number of small entities that 
will be required to file the form is not significant. Accordingly, a 
Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 
U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the 
Internal Revenue Code, these regulations will be submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on their impact on small business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (preferably a 
signed original and eight (8) copies) that are submitted timely to the 
Internal Revenue Service. All comments will be made available for 
public inspection and copying.
    A public hearing has been scheduled for Tuesday, November 10, 1998, 
at 10 a.m., in room 2615, Internal Revenue Building, 1111 Constitution 
Avenue, NW., Washington, DC. Because of access restrictions, visitors 
will not be admitted beyond the Internal Revenue Building lobby more 
than 15 minutes before the hearing starts.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing.
    Persons that wish to present oral comments at the hearing must 
submit written comments by November 9, 1998 and an outline of the 
topics to be discussed (a signed original and eight (8) copies) by 
October 20, 1998.
    A period of 10 minutes will be allotted for each person making 
comments.
    An agenda showing the scheduling of the speakers will be prepared 
after the deadline for receiving outlines has passed. Copies of the 
agenda will be available free of charge at the hearing.
    Drafting Information. The principal author of this regulation is 
Victoria Scotto Balacek, Office of the Associate Chief Counsel 
(International). However, other personnel from the IRS and Treasury 
Department participated in its development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

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


[[Page 48147]]


    Authority: 26 U.S.C. 7805 * * *

    Section 1.6038-3 is also issued under 26 U.S.C. 6038.* * *

    Par. 2. Section 1.6038-3 is added to read as follows:


Sec. 1.6038-3  Information returns required of United States persons 
with respect to foreign partnerships.

    (a) Persons required to make return--(1) Controlling partners. 
Every United States person that controls a foreign partnership must 
file an annual information return on Form 8865 ``Information Return of 
U.S. Persons With Respect To Certain Foreign Partnerships'' containing 
so much of the information described in paragraph (f) of this section, 
and such other information, as the form (or accompanying instructions) 
may prescribe. The information required to be filed by such controlling 
partner will include such information regarding any other United States 
persons that are 10-percent or greater partners in the foreign 
partnership as Form 8865 may require. (For exceptions to this rule, see 
paragraph (c) of this section.)
    (2) Certain 10-percent partners. Every United States person that 
holds a 10-percent or greater interest in a foreign partnership 
controlled by United States persons holding at least 10-percent 
interests must complete and file an annual information return on Form 
8865 containing so much of the information described in paragraph (f) 
of this section, and such other information, as the form (or 
accompanying instructions) may prescribe. (For exceptions to this rule, 
see paragraph (c) of this section.) However, no such person will be 
required to file under this section if a United States person is a 
controlling partner of such partnership.
    (3) Separate returns for each partnership. A United States person 
required to report under this paragraph (a) must file a separate annual 
information return for each foreign partnership with respect to which 
the person has a reporting obligation.
    (b) Ownership determinations--(1) Control. A person (or persons) is 
deemed to be in control of a partnership if that person (or persons) 
owns, directly or indirectly, more than a 50-percent interest in the 
partnership (a controlling partner).
    (2) 50-percent interest. A 50-percent interest in a partnership is 
an interest equal to 50 percent of the capital interest, 50 percent of 
the profits interest, or an interest to which 50 percent of the 
deductions or losses are allocated.
    (3) 10-percent interest. A 10-percent interest in a partnership is 
an interest equal to 10 percent of the capital interest, 10 percent of 
the profits interest, or an interest to which 10 percent of the 
deductions or losses are allocated.
    (4) Attribution rules. For purposes of determining an interest in a 
partnership, the rules of section 267(c) (other than section 267(c)(3)) 
apply (taking into account such rules refer to corporations and not to 
partnerships).
    (5) Determination of amount of interest. Whether a person has a 50-
percent interest, or a 10-percent interest, as described in paragraphs 
(b)(2) and (3) of this section, will be determined for each taxable 
year by reference to the agreement of the partners relating to such 
interests during the taxable year.
    (c) Exceptions when more than one partner is required to file 
duplicative information--(1) More than one controlling partner--(i) In 
general. If, with respect to the same foreign partnership for the same 
annual accounting period, more than one United States person is 
required to file an information return under paragraph (a)(1) of this 
section by reason of being a controlling partner, then in lieu of all 
such controlling partners making separate returns, only one return from 
one of the controlling partners will be required. However, a return by 
a United States person that is a controlling partner by reason of an 
interest to which losses or deductions are allocated may only satisfy 
this exception if there is no United States person that is a 
controlling partner by reason of an interest in capital or profits.
    (ii) Manner of reporting. The return must be filed with the income 
tax return of the person making the return in the manner provided by 
Form 8865 and the accompanying instructions. The return must contain 
all of the information which would have been required to be reported by 
this section if separate information returns had been filed.
    (iii) Controlling partners not required to file. Those partners not 
required to file under paragraph (c)(1)(i) of this section must file 
the statement required by paragraph (c)(3) of this section.
    (2) Certain indirect owners excepted from furnishing information. 
Any United States person required to file an information return under 
this section need not furnish a return, if all of the following 
conditions are met--
    (i) The person does not directly own any interest in the foreign 
partnership;
    (ii) The person is required to file the information return solely 
by reason of attribution of ownership from a United States person under 
paragraph (b)(4) of this section; and
    (iii) The United States person from whom the ownership interest is 
attributed files all of the information required under this section.
    (3) Statement required. A United States person that does not 
furnish an information return under the provisions of paragraph (c)(1) 
or (2) of this section must file a statement with the person's income 
tax return--
    (i) Indicating that the filing requirement has been or will be 
satisfied;
    (ii) Identifying the person required to file the return;
    (iii) Identifying the IRS Service Center where the return is 
required to be filed; and
    (iv) Providing any additional information as Form 8865 and the 
accompanying instructions may require.
    (d) Reporting under this section not required of partnerships 
excluded from the application of subchapter --(1) Election to be wholly 
excluded. The reporting requirements of this section will not apply to 
any United States person in respect of an eligible partnership as 
described in Sec. 1.761-2(a) in which that United States person is a 
partner, if such partnership has validly elected to be excluded from 
all of the provisions of subchapter K of chapter 1 of the Internal 
Revenue Code in the manner specified in Sec. 1.761-2(b)(2)(i).
    (2) Deemed excluded. The reporting requirements of this section 
will not apply to any United States person in respect of an eligible 
partnership as described in Sec. 1.761-2(a) in which that United States 
person is a partner, if such partnership is validly deemed to have 
elected to be excluded from all of the provisions of subchapter K of 
chapter 1 of the Internal Revenue Code in accordance with the 
provisions of Sec. 1.761-2(b)(2)(ii).
    (e) Period covered by return. The information required under this 
section must be furnished for the annual accounting period of the 
foreign partnership ending with or within the United States person's 
taxable year. The partnership's annual accounting period is the annual 
period on the basis of which it regularly computes its income in 
keeping its books. (See section 706 for the partnership's taxable 
year.)
    (f) Contents of return. The return required to be filed under this 
section must contain information in such form or manner as Form 8865 
(and its accompanying instructions) prescribes with respect to each 
foreign partnership, including--
    (1) The name, address, and employer identification number, if any, 
of the partnership;

[[Page 48148]]

    (2) The nature of the partnership's business and principal place 
where conducted;
    (3) The date of organization and country under whose laws the 
partnership was organized;
    (4) A balance sheet showing assets, liability, and capital of the 
partnership as of the end of the annual accounting period;
    (5) A summary of the outstanding ownership interests in the 
partnership;
    (6) A summary showing the total amount of transactions between the 
partnership and the person required to file the return, any other 
partnership or corporation controlled by that person, or any United 
States person owning at the time of the transaction at least a 10-
percent interest in the foreign partnership;
    (7) The amount of the partnership's foreign income taxes paid or 
accrued;
    (8) A statement of the partnership's income for the annual 
accounting period;
    (9) A statement of the partners distributive share items of income, 
gain, losses, deductions and credits; and
    (10) A statement of income, gain, losses, deductions and credits 
allocated to each United States person holding at least a 10-percent 
interest in the foreign partnership.
    (g) Method of reporting. Except as otherwise provided on Form 8865 
or the accompanying instructions, all amounts required to be furnished 
on the information return must be expressed in United States dollars 
with a statement of the exchange rates used. All statements required on 
or with Form 8865 pursuant to this section must be in the English 
language.
    (h) Time and place for filing return--(1) In general. Form 8865 
must be filed with the United States person's income tax return 
(including a partnership return of income) on or before the due date 
required by law (including extensions) of that return.
    (2) Duplicate return. If required by the instructions to Form 8865, 
a duplicate Form 8865 must also be filed.
    (i) Definition of United States person. The term United States 
person is defined in section 7701(a)(30).
    (j) Failure to comply with reporting requirement--(1) Dollar amount 
penalty--(i) In general. Any United States person required to file an 
information return under Section 6038 and paragraph (a) of this section 
that fails to comply (as defined in paragraph (j)(3) of this section) 
with the applicable reporting requirements of this section, must pay a 
penalty of $10,000 for each annual accounting period of each foreign 
partnership with respect to which the failure occurs.
    (ii) Increase in penalty. If a failure to comply with the 
applicable reporting requirements of section 6038 and this section 
continues for more than 90 days after the date on which the district 
director mails notice of the failure to the United States person 
required to file Form 8865, the person must pay an additional penalty 
of $10,000 for each 30-day period (or fraction thereof) during which 
the failure continues after the 90-day period has expired.
    (iii) Limitation. The additional penalty imposed on any United 
States person by section 6038(b)(2) and paragraph (j)(1)(ii) of this 
section is limited to a maximum of $50,000 for each partnership for 
each annual accounting period with respect to which the failure occurs.
    (2) Penalty of reducing foreign tax credit--(i) Effect on foreign 
tax credit. Failure to comply with the reporting requirements of 
section 6038 and this section may cause a reduction of foreign tax 
credits under section 901 (taxes of foreign countries and of 
possessions of the United States). In applying section 901 to a United 
States person for any taxable year within which its foreign 
partnership's annual accounting period ended, the amount of taxes paid 
(and deemed paid under sections 902 and 960) by the United States 
person will be reduced by 10 percent if the person fails to comply. 
However, no tax deemed paid under section 904(c) will be reduced under 
the provisions of this paragraph (j)(2)(i).
    (ii) Reduction for continued failure. If a failure to comply with 
the reporting requirements of section 6038 and this section continues 
for more than 90 days after the date on which the district director 
mails notice of the failure to the person required to file Form 8865, 
then the amount of the reduction in paragraph (j)(2)(i) of this section 
will be 10 percent, plus an additional 5 percent for each 3-month 
period (or fraction thereof) during which the failure continues after 
the 90-day period has expired.
    (iii) Limitation on reduction. The amount of the reduction under 
paragraph (j)(2)(ii) of this section for each failure to furnish 
information required under this section will not exceed the greater of 
$10,000, or the income of the foreign partnership for its annual 
accounting period with respect to which the failure occurs.
    (iv) Offset for dollar amount penalty imposed. The total amount of 
the reduction which, but for this paragraph (j)(2)(iv), may be made 
under this paragraph (j)(2) with respect to any separate failure, may 
not exceed the maximum amount of the reductions which may be imposed, 
reduced (but not below zero) by the dollar amount penalty imposed by 
paragraph (j)(1) of this section with respect to the failure.
    (3) Failure to comply. A failure to comply is separately determined 
for each foreign partnership for which a United States person has a 
reporting obligation. A failure to comply with the requirements of 
section 6038 includes--
    (i) The failure to report at the proper time and in the proper 
manner any information required to be reported under the rules of this 
section; or
    (ii) The provision of false or inaccurate information in purported 
compliance with the requirements of this section.
    (4) Reasonable cause limitation. The time prescribed for furnishing 
information under paragraph (h) of this section, and the beginning of 
the 90-day period after the district director mails notice under 
paragraphs (j) (1)(ii) and (2)(ii) of this section, will be treated as 
being not earlier than the last day on which reasonable cause existed 
for failure to furnish the information. The United States person may 
show reasonable cause by providing a written statement to the district 
director having jurisdiction of the person's return for the year of the 
transfer, setting forth the reasons for the failure to comply. Whether 
a failure to comply was due to reasonable cause will be determined by 
the district director under all facts and circumstances.
    (5) Statute of limitations. For exceptions to the limitations on 
assessment and collection in the event of a failure to provide 
information under section 6038, see section 6501(c)(8).
    (k) Effective date. This section applies to annual accounting 
periods of a partnership beginning on or after the date final 
regulations on this subject are published in the Federal Register.
Michael P. Dolan,
Deputy Commissioner of Internal Revenue.
[FR Doc. 98-23881 Filed 9-8-98; 8:45 am]
BILLING CODE 4830-01-P