[Federal Register Volume 72, Number 129 (Friday, July 6, 2007)]
[Rules and Regulations]
[Pages 36869-36871]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-12903]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 301

[TD 9335]
RIN 1545-BG19


Disclosure Requirements With Respect to Prohibited Tax Shelter 
Transactions

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

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SUMMARY: This document contains temporary regulations under section 
6033(a)(2) of the Internal Revenue Code (Code) that provide rules 
regarding the form, manner and timing of disclosure obligations with 
respect to prohibited tax shelter transactions to which tax-exempt 
entities are parties. These temporary regulations affect a broad array 
of tax-exempt entities, including charities, state and local government 
entities, Indian Tribal governments and employee benefit plans, as well 
as entity managers of these entities. This action is necessary to 
implement section 516 of the Tax Increase Prevention and Reconciliation 
Act of 2005. The text of the temporary regulations also serves as the 
text of the proposed regulations set forth in the Proposed Rules 
section in this issue of the Federal Register.

DATES: Effective Date: These regulations are effective on July 6, 2007.
    Applicability Date: For dates of applicability, see Sec.  1.6033-
5T(g).

FOR FURTHER INFORMATION CONTACT: Galina Kolomietz, (202) 622-6070, or 
Michael Blumenfeld, (202) 622-1124 (not toll-free numbers). For 
questions specifically relating to qualified pension plans, individual 
retirement accounts, and similar tax-favored savings arrangements, 
contact Dana Barry, (202) 622-6060 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    The Tax Increase Prevention and Reconciliation Act of 2005, Public 
Law 109-222 (120 Stat. 345) (TIPRA), enacted on May 17, 2006, defines 
certain transactions as prohibited tax shelter transactions and imposes 
excise taxes and disclosure requirements with respect to prohibited tax 
shelter transactions to which a tax-exempt entity is a party. TIPRA 
creates new section 4965 and amends sections 6033(a)(2) and 6011(g) of 
the Code. The amended section 6033(a)(2) requires every tax-exempt 
entity to which section 4965 applies that is a party to a prohibited 
tax shelter transaction to disclose to the IRS (in such form and manner 
and at such time as determined by the Secretary) the following 
information: (a) That such entity is a party to the prohibited tax 
shelter transaction; and (b) the identity of any other party to the 
transaction which is known to the tax-exempt entity. The amended 
section 6011(g) requires any taxable party to a prohibited tax shelter 
transaction to disclose by statement to any tax-exempt entity to which 
section 4965 applies that is a party to such transaction that such 
transaction is a prohibited tax shelter transaction.
    On July 11, 2006, the IRS released Notice 2006-65 (2006-31 IRB 
102), which alerted taxpayers to the new provisions. On February 7, 
2007, the IRS released Notice 2007-18 (2007-9 IRB 608), which provided 
interim guidance regarding the circumstances under which a tax-exempt 
entity will be treated as a party to a prohibited tax shelter 
transaction for purposes of sections 4965, 6033(a)(2) and 6011(g) and 
regarding the allocation to various periods of net income and proceeds

[[Page 36870]]

attributable to a prohibited tax shelter transaction, including amounts 
received prior to the effective date of the section 4965 tax. See Sec.  
601.601(d)(2)(ii)(b).
    These temporary regulations are being issued concurrently with 
proposed regulations under sections 4965, 6033(a)(2) and 6011(g) 
published elsewhere in the Federal Register.

Explanation of Provisions

    These temporary regulations contain rules concerning disclosure 
requirements imposed by section 6033(a)(2) on tax-exempt entities that 
are parties to prohibited tax shelter transactions. Proposed 
regulations providing rules concerning disclosure requirements under 
section 6033(a)(2) are being issued concurrently with these temporary 
regulations.

Effective Date

    These temporary regulations are applicable with respect to 
transactions entered into by a tax-exempt entity after May 17, 2006.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 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 regulations. For the 
applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6), 
refer to the Special Analyses section of the preamble to the cross-
referencing notice of proposed rulemaking published in the Proposed 
Rules section in this issue of the Federal Register. Pursuant to 
section 7805(f) of the Code, these regulations have been submitted to 
the Chief Counsel for Advocacy of the Small Business Administration for 
comment on their impact on small business.

Drafting Information

    The principal authors of these regulations are Galina Kolomietz and 
Dana Barry, Office of Division Counsel/Associate Chief Counsel (Tax 
Exempt and Government Entities). However, other personnel from the IRS 
and the Treasury Department participated in their development.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

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

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR parts 1 and 301 are amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

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

0
Par. 2. Section 1.6033-5T is added to read as follows:


Sec.  1.6033-5T  Disclosure by tax-exempt entities that are parties to 
certain reportable transactions (temporary).

    (a) In general. Every tax-exempt entity (as defined in section 
4965(c)) shall file with the IRS on Form 8886-T, ``Disclosure by Tax-
Exempt Entity Regarding Prohibited Tax Shelter Transaction'' (or a 
successor form), in accordance with this section and the instructions 
to the form, a disclosure of--
    (1) Such entity's being a party (as defined in paragraph (b) of 
this section) to a prohibited tax shelter transaction (as defined in 
section 4965(e)); and
    (2) The identity of any other party (whether taxable or tax-exempt) 
to such transaction that is known to the tax-exempt entity.
    (b) Definition of tax-exempt party to a prohibited tax shelter 
transaction--(1) In general. For purposes of section 6033(a)(2), a tax-
exempt entity is a party to a prohibited tax shelter transaction if the 
entity--
    (i) Facilitates a prohibited tax shelter transaction by reason of 
its tax-exempt, tax indifferent or tax-favored status;
    (ii) Enters into a listed transaction and the tax-exempt entity's 
tax return (whether an original or an amended return) reflects a 
reduction or elimination of its liability for applicable Federal 
employment, excise or unrelated business income taxes that is derived 
directly or indirectly from tax consequences or tax strategy described 
in the published guidance that lists the transaction; or
    (iii) Is identified in published guidance, by type, class or role, 
as a party to a prohibited tax shelter transaction.
    (2) Published guidance may identify which tax-exempt entities, by 
type, class or role, will not be treated as a party to a prohibited tax 
shelter transaction for purposes of section 6033(a)(2).
    (c) Frequency of disclosure. A single disclosure is required for 
each prohibited tax shelter transaction.
    (d) By whom disclosure is made--(1) Tax-exempt entities referred to 
in section 4965(c)(1), (2) or (3). In the case of tax-exempt entities 
referred to in section 4965(c)(1), (2) or (3), the disclosure required 
by this section must be made by the entity.
    (2) Tax-exempt entities referred to in section 4965(c)(4), (5), (6) 
or (7). In the case of tax-exempt entities referred to in section 
4965(c)(4), (5), (6) or (7), including a fully self-directed qualified 
plan, IRA, or other savings arrangement, the disclosure required by 
this section must be made by the entity manager (as defined in section 
4965(d)(2)) of the entity.
    (e) Time and place for filing--(1) Tax-exempt entities described in 
paragraph (b)(1)(i) of this section--(i) In general. The disclosure 
required by this section shall be filed on or before May 15 of the 
calendar year following the close of the calendar year during which the 
tax-exempt entered into the prohibited tax shelter transaction.
    (ii) Subsequently listed transactions. In the case of subsequently 
listed transactions (as defined in section 4965(e)(2)), the disclosure 
required by this section shall be filed on or before May 15 of the 
calendar year following the close of the calendar year during which the 
transaction was identified by the Secretary as a listed transaction.
    (2) Tax-exempt entities described in paragraph (b)(1)(ii) of this 
section. The disclosure required by this section shall be filed on or 
before the date on which the first tax return (whether an original or 
an amended return) is filed which reflects a reduction or elimination 
of the tax-exempt entity's liability for applicable Federal employment, 
excise or unrelated business income taxes that is derived directly or 
indirectly from tax consequences or tax strategy described in the 
published guidance that lists the transaction.
    (3) Transition rule. If a tax-exempt entity entered into a 
prohibited tax shelter transaction after May 17, 2006 and before 
January 1, 2007, the disclosure required by this section shall be 
filed--
    (i) In the case of tax-exempt entities described in paragraph 
(b)(1)(i) of this section, on or before November 5, 2007;
    (ii) In the case of tax-exempt entities described in paragraph 
(b)(1)(ii) of this section, on or before the later of--
    (A) November 5, 2007; or
    (B) The date on which the first tax return (whether an original or 
an amended return) is filed which reflects a reduction or elimination 
of the tax-exempt entity's liability for applicable Federal employment, 
excise or unrelated business income taxes that is

[[Page 36871]]

derived directly or indirectly from tax consequences or tax strategy 
described in the published guidance that lists the transaction.
    (4) 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.
    (f) Penalty for failure to provide disclosure statement. See 
section 6652(c)(3) for penalties applicable to failure to disclose a 
prohibited tax shelter transaction in accordance with this section.
    (g) Effective date--(1) Applicability date. This section applies 
with respect to transactions entered into by a tax-exempt entity after 
May 17, 2006.
    (2) Expiration date. This section will expire on July 6, 2010.

PART 301--PROCEDURE AND ADMINISTRATION

0
Par. 3. The authority citation for part 301 continues to read in part 
as follows:

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


0
Par. 4. Section 301.6033-5T is added to read as follows:


Sec.  301.6033-5T  Disclosure by tax-exempt entities that are parties 
to certain reportable transactions (temporary).

    (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.  1.6033-5T of this chapter (Income 
Tax Regulations).
    (b) Effective date--(1) Applicability date. This section applies 
with respect to transactions entered into by a tax-exempt entity after 
May 17, 2006.
    (2) Expiration date. This section will expire on July 5, 2010.

 Kevin M. Brown,
Deputy Commissioner for Services and Enforcement.
    Approved: June 21, 2007.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. E7-12903 Filed 7-5-07; 8:45 am]
BILLING CODE 4830-01-P