[Federal Register Volume 72, Number 149 (Friday, August 3, 2007)]
[Rules and Regulations]
[Pages 43154-43157]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-3787]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 9352]
RIN 1545-BE28


AJCA Modifications to the Section 6112 Regulations

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations under section 6112 of 
the Internal Revenue Code that provide the rules relating to the 
obligation of material advisors to prepare and maintain lists with 
respect to reportable transactions. These regulations affect material 
advisors responsible for keeping lists under section 6112.

DATES: Effective Date: These regulations are effective August 3, 2007.

FOR FURTHER INFORMATION CONTACT: Charles D. Wien, Michael H. Beker, or 
Tolsun N. Waddle, 202-622-3070; (not a toll-free number).

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act

    The collections of information contained in this final regulation 
have been reviewed and approved by the Office of Management and Budget 
in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under 
control number 1545-1686. Responses to these collections of information 
are mandatory. An agency may not conduct or sponsor, and a person is 
not required to respond to, a collection of information unless the 
collection of information displays a valid OMB control number assigned 
by the Office of Management and Budget.
    The estimated annual burden per recordkeeper for the collection of 
information in Sec.  301.6112-1 is 100 hours and the estimated number 
of recordkeepers is 500.
    Comments concerning the accuracy of these burden estimates and 
suggestions

[[Page 43155]]

for reducing these burdens should be sent to Internal Revenue Service, 
Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 
20224, and to the Office of Management and Budget, Attn: Desk Officer 
for the Department of Treasury, Office of Information and Regulatory 
Affairs, Washington, DC 20503.
    Books and records relating to these collections 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 information are confidential, as required by 26 U.S.C. 6103.

Background

    This document contains final regulations that amend 26 CFR part 301 
by amending the rules relating to the list maintenance requirements of 
material advisors with respect to reportable transactions under section 
6112.
    The American Jobs Creation Act of 2004, Public Law 108-357 (118 
Stat. 1418), (AJCA) was enacted on October 22, 2004. Section 815 of the 
AJCA amended section 6112 to provide that each material advisor (as 
defined in section 6111, as amended by the AJCA) with respect to any 
reportable transaction is required to maintain a list (in such manner 
as the Secretary may by regulations prescribe) identifying each person 
with respect to whom the advisor acted as a material advisor with 
respect to the transaction, and containing other information as the 
Secretary may by regulations require. Section 815 of the AJCA is 
effective for transactions with respect to which material aid, 
assistance, or advice is provided after October 22, 2004. Prior to the 
amendments to section 6111 made by the AJCA, the definition of material 
advisor was in Sec.  301.6112-1 of the Procedure and Administration 
Regulations.
    On November 1, 2006, the IRS and Treasury Department issued a 
notice of proposed rulemaking and temporary and final regulations under 
sections 6011, 6111, and 6112 (REG-103038-05, REG-103039-05, REG-
103043-05, TD 9295) (the November 2006 regulations). The November 2006 
regulations were published in the Federal Register (71 FR 64488, 71 FR 
64496, 71 FR 64501, 71 FR 64458) on November 2, 2006.
    The IRS and Treasury Department received written public comments 
responding to the proposed regulations and held a public hearing 
regarding the proposed rules on March 20, 2007. After consideration of 
the comments received and comments made at the hearing, the proposed 
regulations are adopted as revised by this Treasury decision. These 
final regulations generally retain the provisions of the proposed 
regulations but include some modifications based on recommendations in 
the public comments.

Summary of Comments and Explanation of Provisions

Furnishing of Lists

    The proposed regulations provided that each material advisor must 
prepare and maintain a list for each reportable transaction. The 
proposed regulations also provided that each list must include three 
components: An itemized statement, a description of the transaction, 
and documents. Further, the proposed regulations provided that each 
material advisor responsible for maintaining a list must, upon written 
request by the IRS, make each component of the list available to the 
IRS by furnishing each component of the list to the IRS within 20 
business days from the day on which the request is provided. The 
proposed regulations stated that 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 to be on the 
list. If any component of the list is not in such form, the material 
advisor will not be considered to have complied with the list 
maintenance provisions of section 6112 and the regulations thereunder.
    Several commentators recommended that the proposed regulations 
should provide the IRS with flexibility to determine, based on the 
amount of information required, a production schedule that will be 
sufficient to avoid the imposition of penalties. Two commentators 
suggested providing a phased disclosure procedure. One commentator 
recommended that the 20 business days begin after the advisor had an 
adequate opportunity to gather the required information. Another 
commentator recommended amending the proposed regulations to provide a 
substantial compliance standard.
    The IRS and Treasury Department believe that providing the IRS the 
ability to determine an alternative production schedule will benefit 
both taxpayers and the IRS. These final regulations remove the language 
regarding the period for furnishing a list or the components of the 
list to the IRS because that period will be addressed in forthcoming 
published guidance under section 6708. In addition, an alternative 
schedule for furnishing the list or the components of the list will be 
addressed in published guidance under section 6708.

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 also has been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to these regulations. It is hereby 
certified that the collection of information in these regulations will 
not have a significant economic impact on a substantial number of small 
entities. This certification is based upon the fact that most of the 
information is already required to be reported under the current 
regulations; the clarifications and new information required by the 
final regulations add little or no new burden to the existing 
requirements. Therefore, 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, the notice of 
proposed rulemaking preceding these regulations was submitted to the 
Chief Counsel for Advocacy of the Small Business Administration for 
comment on its impact on small business.

Drafting Information

    The principal authors of these regulations are Charles D. Wien, 
Michael H. Beker, and Tolsun N. Waddle, Office of the Associate Chief 
Counsel (Passthroughs and Special Industries). However, other personnel 
from the IRS and Treasury Department participated in their development.

List of Subjects in 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 part 301 is amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

0
Paragraph 1. The authority citation for part 301 continues to read, in 
part, as follows:

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


0
Par. 2. Section 301.6112-1 is revised to read as follows:


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

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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 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 and/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;
    (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), 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), 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 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

[[Page 43157]]

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 to 
maintain the list or a portion of the list. The designation of one 
material advisor to maintain the list does not relieve the other 
material advisors from their obligation to furnish the list to the IRS 
in accordance with paragraph (e)(1) of this section, if the designated 
material advisor fails to furnish the list to the IRS in a timely 
manner. 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.
    (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. 
Otherwise, the rules that apply before August 3, 2007 are contained in 
Sec.  301.6112-1 in effect prior to August 3, 2007 (see 26 CFR part 301 
revised as of April 1, 2007), and see also Notice 2004-80 (2004-50 IRB 
963); Notice 2005-17 (2005-8 IRB 606); and Notice 2005-22 (2005-12 IRB 
756) (see Sec.  601.601(d)(2)).

Kevin M. Brown,
Deputy Commissioner for Services and Enforcement.
    Approved: July 25, 2007.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 07-3787 Filed 7-31-07; 11:22 am]
BILLING CODE 4830-01-P