[Federal Register Volume 88, Number 109 (Wednesday, June 7, 2023)]
[Proposed Rules]
[Pages 37186-37194]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-11861]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-106228-22]
RIN 1545-BQ61


Malta Personal Retirement Scheme Listed Transaction

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 that would 
identify transactions that are the same as, or substantially similar 
to, certain Malta personal retirement scheme transactions as listed 
transactions, a type of reportable transaction. Material advisors and 
participants in these listed transactions would be required to file 
disclosures with the IRS and be subject to penalties for failure to 
disclose. These proposed regulations would affect participants in these 
transactions as well as material advisors. This document also provides 
notice of a public hearing on the proposed regulations.

DATES: Written or electronic comments must be received by August 7, 
2023. A public hearing on this proposed regulation has been scheduled 
for September 21, 2023, at 10 a.m. EST. Requests to speak and outlines 
of topics to be discussed at the public hearing must be received by 
August 7, 2023. If no outlines are received by August 7, 2023, the 
public hearing will be cancelled. Requests to attend the public hearing 
must be received by 5 p.m. EST on September 19, 2023. The public 
hearing will be made accessible to people with disabilities. Requests 
for special assistance during the public hearing must be received by 5 
p.m. EST on September 18, 2023.

ADDRESSES: Commenters are strongly encouraged to submit public comments 
electronically via the Federal eRulemaking Portal at https://www.regulations.gov (indicate IRS and REG-106228-22) by following the 
online instructions for submitting comments. Requests for a public 
hearing must be submitted as prescribed in the ``Comments and Requests 
for a Public Hearing'' section. Once submitted to the Federal 
eRulemaking Portal, comments cannot be edited or withdrawn. The 
Department of the Treasury (Treasury Department) and the IRS will 
publish for public availability any comments submitted to the IRS's 
public docket. Send paper submissions to: CC:PA:LPD:PR (REG-106228-22), 
Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin 
Station, Washington, DC 20044.

Comments and Public Hearing

    Before these proposed amendments to the regulations are adopted as 
final regulations, consideration will be given to comments regarding 
the notice of proposed rulemaking that are submitted timely to the IRS 
as prescribed in the preamble under the ADDRESSES section. The Treasury 
Department and the IRS request comments on all aspects of the proposed 
regulations. All comments will be made available at https://www.regulations.gov. Once submitted to the Federal eRulemaking Portal, 
comments cannot be edited or withdrawn.
    A public hearing has been scheduled for September 21, 2023, 
beginning at 10 a.m. EST, in the Auditorium at the Internal Revenue 
Building, 1111 Constitution Avenue NW, Washington, DC. Due to building 
security procedures, visitors must enter at the Constitution Avenue 
entrance. In addition, all visitors must present photo identification 
to enter the building. Because of access restrictions, visitors will 
not be admitted beyond the immediate entrance area more than 30 minutes 
before the hearing starts. Participants may alternatively attend the 
public hearing by telephone.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments at the hearing must submit an outline of 
the topics to be discussed and the time to be devoted to each topic by 
August 7, 2023. A period of 10 minutes will be allotted to each person 
for 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. 
If no outline of the topics to be discussed at the hearing is received 
by August 7, 2023, the public hearing will be cancelled. If the public 
hearing is cancelled, a notice of cancellation of the public hearing 
will be published in the Federal Register.

[[Page 37187]]

    Individuals who want to testify in person at the public hearing 
must send an email to [email protected] to have your name added to 
the building access list. The subject line of the email must contain 
the regulation number REG-106228-22 and the language TESTIFY In Person. 
For example, the subject line may say: Request to TESTIFY In Person at 
Hearing for REG-106228-22.
    Individuals who want to testify by telephone at the public hearing 
must send an email to [email protected] to receive the telephone 
number and access code for the hearing. The subject line of the email 
must contain the regulation number REG-106228-22 and the language 
TESTIFY Telephonically. For example, the subject line may say: Request 
to TESTIFY Telephonically at Hearing for REG-106228-22.
    Individuals who want to attend the public hearing in person without 
testifying must also send an email to [email protected] to have 
your name added to the building access list. The subject line of the 
email must contain the regulation number REG-106228-22 and the language 
ATTEND In Person. For example, the subject line may say: Request to 
ATTEND Hearing In Person for REG-106228-22. Requests to attend the 
public hearing must be received by 5 p.m. EST on September 19, 2023.
    Individuals who want to attend the public hearing by telephone 
without testifying must also send an email to [email protected] to 
receive the telephone number and access code for the hearing. The 
subject line of the email must contain the regulation number REG-
106228-22 and the language ATTEND Hearing Telephonically. For example, 
the subject line may say: Request to ATTEND Hearing Telephonically for 
REG-106228-22. Requests to attend the public hearing must be received 
by 5 p.m. EST on September 19, 2023.
    Hearings will be made accessible to people with disabilities. To 
request special assistance during a hearing please contact the 
Publications and Regulations Branch of the Office of Associate Chief 
Counsel (Procedure and Administration) by sending an email to 
[email protected] (preferred) or by telephone at (202) 317-6901 
(not a toll-free number) by September 18, 2023.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
W. Shawver Adams at (202) 317-5132; concerning submissions of comments 
or requests for a public hearing, Vivian Hayes at (202) 317-6901 (not 
toll-free numbers) or by email at [email protected] (preferred).

SUPPLEMENTARY INFORMATION: 

Background

    This document contains proposed additions to 26 CFR part 1 (Income 
Tax Regulations) under section 6011 of the Internal Revenue Code 
(Code). The additions identify certain transactions that are ``listed 
transactions'' for the purposes of section 6011. This regulation would 
also affect reporting requirements under section 6111 and list 
maintenance requirements under section 6112.

I. Overview of the Reportable Transaction Regime

    Section 6011(a) generally provides that, when required by 
regulations prescribed by the Secretary, ``any person made liable for 
any tax imposed by this title or with respect to the collection 
thereof, shall make a return or statement according to the forms and 
regulations prescribed by the Secretary. Every person required to make 
a return or statement shall include therein the information required by 
such forms or regulations.''
    On February 28, 2000, the Treasury Department and the IRS issued a 
series of temporary regulations (TD 8877; TD 8876; TD 8875) and cross-
referencing notices of proposed rulemaking (REG-103735-00; REG-110311-
00; REG-103736-00) under sections 6011, 6111, and 6112. The temporary 
regulations and cross-referencing notices of proposed rulemaking were 
published in the Federal Register (65 FR 11205, 65 FR 11269; 65 FR 
11215, 65 FR 11272; 65 FR 11211, 65 FR 11271) on March 2, 2000 (2000 
Temporary Regulations). The 2000 Temporary Regulations were modified 
several times before March 4, 2003, the date on which the Treasury 
Department and the IRS, after providing notice and opportunity for 
public comment and considering the comments received, published final 
regulations (TD 9046) in the Federal Register (68 FR 10161) under 
sections 6011, 6111, and 6112 (2003 Final Regulations). The 2000 
Temporary Regulations and 2003 Final Regulations consistently provided 
that reportable transactions include listed transactions and that a 
listed transaction is a transaction that is the same as or 
substantially similar to one of the types of transactions that the IRS 
has determined to be a tax avoidance transaction and identified by 
notice, regulation, or other form of published guidance as a listed 
transaction.
    As part of the American Jobs Creation Act of 2004 (AJCA), Public 
Law 108-357, 118 Stat. 1418 (October 22, 2004), Congress added sections 
6707A, 6662A, and 6501(c)(10) to the Code and revised sections 6111, 
6112, 6707, and 6708 of the Code. See sections 811-812 and 814-817 of 
the ACJA. The AJCA's legislative history explains that Congress 
incorporated in the statute the method that the Treasury Department and 
the IRS had been using to identify reportable transactions, and 
provided incentives, via penalties, to encourage taxpayer compliance 
with the new disclosure reporting obligations. As the Committee on Ways 
and Means explained in its report accompanying H.R. 4520, which became 
the AJCA:

    The Committee believes that the best way to combat tax shelters 
is to be aware of them. The Treasury Department, using the tools 
available, issued regulations requiring disclosure of certain 
transactions and requiring organizers and promoters of tax-
engineered transactions to maintain customer lists and make these 
lists available to the IRS. Nevertheless, the Committee believes 
that additional legislation is needed to provide the Treasury 
Department with additional tools to assist its efforts to curtail 
abusive transactions. Moreover, the Committee believes that a 
penalty for failing to make the required disclosures, when the 
imposition of such penalty is not dependent on the tax treatment of 
the underlying transaction ultimately being sustained, will provide 
an additional incentive for taxpayers to satisfy their reporting 
obligations under the new disclosure provisions.

House Report 108-548(I), 108th Cong., 2nd Sess. 2004, 2004 WL 1380512, 
at 261 (June 16, 2004) (House Report).
    In Footnote 232 of the House Report, the Committee on Ways and 
Means notes that the statutory definitions of ``reportable 
transaction'' and ``listed transaction'' were intended to incorporate 
the pre-AJCA regulatory definitions, while providing the Secretary with 
leeway to make changes to those definitions:

    The provision states that, except as provided in regulations, a 
listed transaction means a reportable transaction, which is the same 
as, or substantially similar to, a transaction specifically 
identified by the Secretary as a tax avoidance transaction for 
purposes of section 6011. For this purpose, it is expected that the 
definition of ``substantially similar'' will be the definition used 
in Treas. Reg. sec. 1.6011-4(c)(4). However, the Secretary may 
modify this definition (as well as the definitions of ``listed 
transaction'' and ``reportable transactions'') as appropriate.

Id. at 261 n.232.
    Section 6707A(c)(1) defines a ``reportable transaction'' as ``any 
transaction with respect to which information is required to be 
included with a return or statement because, as determined under 
regulations prescribed under section 6011, such transaction is of a 
type which the Secretary determines as having a

[[Page 37188]]

potential for tax avoidance or evasion.'' A ``listed transaction'' is 
defined by section 6707A(c)(2) as ``a reportable transaction which is 
the same as, or substantially similar to, a transaction specifically 
identified by the Secretary as a tax avoidance transaction for the 
purposes of section 6011.''
    Section 6111(a), as revised by the AJCA, provides that each 
material advisor with respect to any reportable transaction shall make 
a return setting forth: (1) information identifying and describing the 
transaction, (2) information describing any potential tax benefits 
expected to result from the transaction, and (3) such other information 
as the Secretary may prescribe. Such return must be filed not later 
than the date specified by the Secretary. Section 6111(b)(2) provides 
that a reportable transaction has the meaning given to such term by 
section 6707A(c).
    Section 6112(a), as revised by the AJCA, provides that each 
material advisor with respect to any reportable transaction (as defined 
in section 6707A(c)) must (whether or not required to file a return 
under section 6111 with respect to such transaction) maintain a list 
(1) identifying each person with respect to whom such advisor acted as 
a material advisor and (2) containing such other information as the 
Secretary may by regulations require.
    On August 3, 2007, the Treasury Department and the IRS published 
final regulations in the Federal Register (72 FR 43146, 72 FR 43157, 72 
FR 43154) under sections 6011, 6111, and 6112, modifying the rules 
relating to the disclosure of reportable transactions by participants 
in reportable transactions under section 6011, the disclosure of 
reportable transactions by material advisors under section 6111, and 
the list maintenance requirements of material advisors with respect to 
reportable transactions under section 6112 in response to the changes 
in the AJCA.

II. Disclosure of Reportable Transactions by Participants and Penalties 
for Failure To Disclose

    Section 1.6011-4(a) provides that every taxpayer that has 
participated in a reportable transaction within the meaning of Sec.  
1.6011-4(b) and who is required to file a tax return must file a 
disclosure statement within the time prescribed in Sec.  1.6011-4(e).
    Section 1.6011-4(d) and (e) provide that the disclosure statement--
Form 8886, Reportable Transaction Disclosure Statement (or successor 
form)--must be attached to the taxpayer's tax return for each taxable 
year for which a taxpayer participates in a reportable transaction. A 
copy of the disclosure statement must be sent to the IRS's Office of 
Tax Shelter Analysis (OTSA) at the same time that any disclosure 
statement is first filed by the taxpayer pertaining to a particular 
reportable transaction.
    Reportable transactions include listed transactions, confidential 
transactions, transactions with contractual protection, loss 
transactions, and transactions of interest. See Sec.  1.6011-4(b)(2) 
through (6). Consistent with the definitions previously provided in the 
2000 Temporary Regulations and later in the 2003 Final Regulations as 
promulgated in 2007, Sec.  1.6011-4(b)(2) continues to define a listed 
transaction as a transaction that is the same as or substantially 
similar to one of the types of transactions that the IRS has determined 
to be a tax avoidance transaction and identified by notice, regulation, 
or other form of published guidance as a listed transaction.
    Section 1.6011-4(c)(4) provides that a transaction is 
``substantially similar'' if it is expected to obtain the same or 
similar types of tax consequences and 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 disclosure. 
For example, a transaction may be substantially similar to a listed 
transaction even though it may involve different entities or use 
different Code provisions.
    Section 1.6011-4(c)(3)(i)(A) provides that a taxpayer has 
participated in a listed transaction if the taxpayer's tax return 
reflects tax consequences (including an exclusion from gross income) or 
a tax strategy described in the published guidance that lists the 
transaction under Sec.  1.6011-4(b)(2). A taxpayer also has 
participated in a listed transaction if the taxpayer knows or has 
reason to know that the taxpayer's tax benefits are derived directly or 
indirectly from tax consequences or a tax strategy described in 
published guidance that lists a transaction under Sec.  1.6011-4(b)(2). 
Published guidance may identify other types or classes of persons that 
will be treated as participants in a listed transaction. Published 
guidance may also identify types or classes of persons that will not be 
treated as participants in a listed transaction.
    Section 1.6011-4(e)(2)(i) provides that if a transaction becomes a 
listed transaction after the filing of a taxpayer's tax return 
reflecting the taxpayer's participation in the listed transaction and 
before the end of the period of limitations for assessment for any 
taxable year in which the taxpayer participated in the listed 
transaction, then a disclosure statement must be filed with OTSA within 
90 calendar days after the date on which the transaction becomes a 
listed transaction. This requirement extends to an amended return and 
exists regardless of whether the taxpayer participated in the 
transaction in the year the transaction became a listed transaction. 
The Commissioner may also determine the time for disclosure of listed 
transactions in the published guidance identifying the transaction.
    Participants required to disclose these transactions under Sec.  
1.6011-4 who fail to do so are subject to penalties under section 
6707A. Section 6707A(b) provides that the amount of the penalty is 75 
percent of the decrease in tax shown on the return as a result of the 
reportable transaction (or which would have resulted from such 
transaction if such transaction were respected for Federal tax 
purposes), subject to minimum and maximum penalty amounts. The minimum 
penalty amount is $5,000 in the case of a natural person and $10,000 in 
any other case. For a listed transaction, the maximum penalty amount is 
$100,000 in the case of a natural person and $200,000 in any other 
case.
    Additional penalties may also apply. In general, section 6662A 
imposes a 20 percent accuracy-related penalty on any understatement (as 
defined in section 6662A(b)(1)) attributable to an adequately disclosed 
reportable transaction. If the taxpayer has a requirement to disclose 
participation in the reportable transaction but does not adequately 
disclose the transaction in accordance with the regulations under 
section 6011, the taxpayer is subject to an increased penalty rate 
equal to 30 percent of the understatement. See section 6662A(c). 
Section 6662A(b)(2) provides that section 6662A applies to any item 
which is attributable to any listed transaction and any reportable 
transaction (other than a listed transaction) if a significant purpose 
of such transaction is the avoidance or evasion of Federal income tax.
    Participants required to disclose listed transactions who fail to 
do so are also subject to an extended period of limitations under 
section 6501(c)(10). That section provides that the time for assessment 
of any tax with respect to the transaction shall not expire before the 
date that is one year after the earlier of the date the participant 
discloses the

[[Page 37189]]

transaction or the date a material advisor discloses the participation 
pursuant to a written request under section 6112(b)(1)(A).

III. Disclosure of Reportable Transactions by Material Advisors and 
Penalties for Failure To Disclose

    Section 301.6111-3(a) of the Procedure and Administration 
Regulations provides that each material advisor with respect to any 
reportable transaction, as defined in Sec.  1.6011-4(b), must file a 
return as described in Sec.  301.6111-3(d) by the date described in 
Sec.  301.6111-3(e).
    Section 301.6111-3(b)(1) provides that 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 Sec.  301.6111-
3(b)(3) for the material aid, assistance, or advice. Under Sec.  
301.6111-3(b)(2)(i) and (ii), a person provides material aid, 
assistance, or advice if the person provides a tax statement, which 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).
    Material advisors must disclose transactions on Form 8918, Material 
Advisor Disclosure Statement, (or successor form) as provided in Sec.  
301.6111-3(d) and (e). Section 301.6111-3(e) provides that the material 
advisor's disclosure statement for a reportable transaction must be 
filed with the OTSA by the last day of the month that follows the end 
of the calendar quarter in which the advisor becomes a material advisor 
with respect to a reportable transaction or in which the circumstances 
necessitating an amended disclosure statement occur. The disclosure 
statement must be sent to the OTSA at the address provided in the 
instructions for Form 8918 (or successor form).
    Section 301.6111-3(d)(2) provides that 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 Sec.  
301.6111-3(b). 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.
    Additionally, material advisors must prepare and maintain lists 
identifying each person with respect to whom the advisor acted as a 
material advisor with respect to the reportable transaction in 
accordance with Sec.  301.6112-1(b) and furnish such lists to the IRS 
in accordance with Sec.  301.6112-1(e).
    Section 6707(a) provides that a material advisor who fails to file 
a timely disclosure, or files an incomplete or false disclosure 
statement, is subject to a penalty. Pursuant to section 6707(b)(2), for 
listed transactions, the penalty is the greater of (A) $200,000 or (B) 
50 percent of the gross income derived by such person with respect to 
aid, assistance, or advice which is provided with respect to the listed 
transaction before the date the return is filed under section 6111.
    A material advisor may also be subject to a penalty under section 
6708 for failing to maintain a list under section 6112(a) and failing 
to make the list available upon written request to the Secretary in 
accordance with section 6112(b) within 20 business days after the date 
of such request. Section 6708(a) provides that the penalty is $10,000 
per day for each day of the failure after the 20th day. However, no 
penalty will be imposed with respect to the failure on any day if such 
failure is due to reasonable cause.

IV. Malta Personal Retirement Schemes

    Under U.S. Federal income tax law, individual savings arrangements 
are not entitled to tax-favored treatment available for pension or 
retirement arrangements if they do not meet the requirements for an 
individual retirement account (IRA) described in section 408 or a Roth 
IRA described in section 408A. The tax-favored treatment for an IRA or 
Roth IRA includes the deductibility (in many cases) of contributions to 
an IRA, tax deferral on the earnings of the IRA or Roth IRA, and 
exclusion from income for qualified distributions from a Roth IRA. IRAs 
and Roth IRAs are subject to certain requirements, such as a 
requirement that an individual's contributions, other than certain 
rollovers, are restricted to cash and limited by reference to an 
individual's earned income (including, in the case of spousal IRAs, a 
spouse's earned income). In addition, a distribution from an IRA (or a 
distribution from a Roth IRA that is not a qualified distribution) is 
generally subject to a 10% additional tax if paid before the IRA owner 
attains age 59\1/2\.
    Malta's personal retirement schemes were enacted as part of the 
Retirement Pensions Act of 2011 and implemented by regulations in 
2015.\1\ They are tax-favored savings arrangements in Malta that allow 
individuals or their employers to contribute assets to a trust or other 
investment vehicle for such individuals' benefit. In contrast to U.S. 
tax-favored individual savings arrangements, there is no requirement 
that contributions be limited by reference to income earned from 
employment or self-employment activities, no limitation on contribution 
amounts, and no restriction on the types of assets (such as securities) 
that may be contributed. Distributions, which may begin when an 
individual member is 50 but must start no later than age 75, may be 
exempt from Maltese income tax if the individual elects to receive 
initial and additional cash lump sum distributions.
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    \1\ Act No. XVI of 2011, as amended by Act No. XX of 2013, and 
amended by Act No. XXVI of 2018; Ch. 514 (Retirement Pensions Act). 
Pension Rules for Personal Retirement Schemes Issued in Terms of the 
Retirement Pensions Act, 2011, were issued on January 7, 2015, and 
effective January 1, 2015.
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    Absent treaty relief, U.S. citizens and U.S. resident aliens who 
establish a foreign individual retirement trust or other individual 
retirement arrangement are generally required to take into account the 
arrangement's income on a current basis, even if there has been no 
distribution from the arrangement. See, e.g., section 671. Under 
section 894(a), the Code applies to a taxpayer with due regard to any 
treaty obligations of the United States. Pursuant to the saving clause 
in Article 1, paragraph 4, of the Convention Between the Government of 
the United States of America and the Government of Malta for the 
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with 
Respect to Taxes on Income, signed at Valetta, August 8, 2008 
(``Treaty''), the United States retains its right to tax the income of 
its citizens and residents (as determined under Article 4 (Resident) of 
the Treaty) as if there were no Treaty between the United States and 
Malta. Notwithstanding the saving clause, U.S. citizens and U.S. 
resident aliens may claim an exemption from U.S. income tax in 
accordance with the Treaty if they qualify for an exception to the 
saving

[[Page 37190]]

clause provided under paragraph 5 of Article 1.
    Articles 17(1)(b) and 18 of the Treaty, are both listed as 
exceptions to the saving clause. These provisions may permit U.S. 
citizens and U.S. resident aliens an exemption from U.S. income tax on 
(1) ``pensions and other similar remuneration'' arising in Malta to the 
extent such pensions or remuneration would be exempt from tax under 
Maltese law if the beneficial owner were a resident of Malta (Article 
17(1)(b)), and (2) income earned by a ``pension fund'' established in 
Malta until such income is distributed (Article 18). As explained in 
Treasury's Technical Explanation to the Treaty, Article 17 applies 
generally to ``distributions from pensions and other similar 
remuneration beneficially owned by a resident of a Contracting State in 
consideration of past employment . . .'', whereas Article 18 applies to 
income of a ``pension fund established in the other Contracting State . 
. . .'' Paragraph (1)(k) of Article 3 of the Treaty defines the term 
``pension fund'' for purposes of the Treaty. In the case of Malta, a 
pension fund is a licensed fund or scheme subject to tax only on income 
derived from immovable property situated in Malta, and as relevant 
here, operated principally to ``administer or provide pension or 
retirement benefits . . . .''
    On December 27, 2021, the IRS published in the Internal Revenue 
Bulletin a Competent Authority Arrangement (the ``CAA'') between the 
United States and Malta. I.R.B. 2021-52, Ann. 2021-19. In the CAA, the 
U.S. and Maltese competent authorities agreed that individual 
retirement arrangements established under Malta's Retirement Pensions 
Act of 2011 are not considered ``pension funds'' for purpose of 
relevant provisions of the Treaty. The CAA also confirmed that 
distributions from these types of arrangements are not ``pensions or 
other similar remuneration'' in consideration of past employment for 
purposes of paragraph 1(b) of Article 17. The CAA ``reflects the 
original intent [of the United States and Malta] regarding the 
definition of `pension fund' for purposes of the Treaty.''
    In addition to the income tax consequences associated with a U.S. 
taxpayer's transactions with or interest in a Malta personal retirement 
scheme, information reporting requirements also apply. Section 6048 
generally requires annual information reporting of a U.S. person's 
transfers of money or other property to, ownership of, and 
distributions from, foreign trusts. Section 6677 imposes penalties on a 
U.S. person for failing to comply with section 6048. See also Notice 
97-34, 1997-1 C.B. 422. Under section 6048(d)(4), the Secretary may 
suspend or modify any requirement under section 6048 if the United 
States has no significant tax interest in obtaining the required 
information. The Treasury Department and the IRS have previously issued 
guidance providing that reporting is not required under section 
6048(a), (b), and (c) for certain U.S. citizen and resident individuals 
with respect to their transactions with, and ownership of, certain tax-
favored foreign retirement trusts and certain tax-favored foreign 
nonretirement savings trusts, as described in Revenue Procedure 2020-
17, 2020-12 I.R.B. 539. Malta personal retirement schemes are not 
eligible for this relief from section 6048 reporting because 
contributions to these arrangements are not limited to income earned 
from the performance of services, subject to a certain annual or 
lifetime limit, or subject to a limit based on a percentage of the 
participant's earned income. See Section 5.03 of Rev. Proc. 2020-17. 
Section 6048 information reporting is provided on Form 3520, Annual 
Return To Report Transactions With Foreign Trusts and Receipt of 
Certain Foreign Gifts, and Form 3520-A, Annual Information Return of 
Foreign Trust With a U.S. Owner (Under section 6048(b)).
    Section 6038D may also apply to a U.S. person's interest in a Malta 
personal retirement scheme. Under section 6038D, a specified person, 
which includes a U.S. citizen or resident alien, must report any 
interest in a specified foreign financial asset provided that the 
aggregate value of all such assets exceeds certain thresholds. See 
Sec.  1.6038D-2(a). Section 6038D(d) imposes a penalty for failing to 
comply. Section 6038D information reporting is provided on Form 8938, 
Statement of Specified Foreign Financial Assets. A specified person who 
is required to report information under section 6038D on Form 8938 may 
also be required to report similar identifying information under 
section 6048 on Form 3520 or Form 3520-A.

V. Tax Avoidance Transactions Using Malta Personal Retirement Schemes

    The Treasury Department and the IRS are aware of transactions in 
which a U.S. citizen or a U.S. resident alien misconstrues the pension 
provisions of the Treaty to claim an exemption from U.S. income tax on 
earnings in and distributions from personal retirement schemes 
established under the laws of Malta. E.g., IR-2022-113. Typically, the 
transaction is intended to permanently avoid U.S. tax on (1) the built-
in-gain of appreciated property transferred to personal retirement 
schemes established in Malta, (2) income earned by and accumulated in 
such schemes, and/or (3) distributions from such schemes. The U.S. 
individuals who participate in these transactions generally lack any 
connection to Malta other than their participation in these 
arrangements. These individuals also may fail to comply with their U.S. 
information reporting requirements, including under section 6048.
    In this transaction, the taxpayer (Taxpayer A), a U.S. citizen or a 
U.S. resident alien, establishes a personal retirement scheme under 
Malta's Retirement Pension Act of 2011. In Year 1, Taxpayer A transfers 
cash, appreciated property (annuities, securities, digital assets, 
partnership interests, etc.), or a combination thereof, to the scheme 
without recognizing gain on the transfer under section 684(b). In Year 
2 or later, Taxpayer A takes the position on a U.S. income tax return 
that the income earned by the scheme (including gain on the sale or 
other disposition of appreciated property initially transferred to the 
scheme) is exempt from U.S. tax under Articles 18 and 1(5)(a) of the 
Treaty because the scheme is a ``pension fund'' for purposes of the 
Treaty. In Year 3 or later, Taxpayer A receives a distribution from the 
scheme and takes the position on a U.S. income tax return that such 
distributions are exempt from U.S. tax by reason of Articles 17(1)(b) 
and 1(5)(a) of the Treaty. Additionally, Taxpayer A may not comply with 
U.S. information reporting requirements related to these transactions, 
including under section 6048.
    The taxpayer's positions in these transactions are incorrect. 
First, the Treaty benefits claimed with respect to personal retirement 
schemes established in Malta are not available because these schemes 
are not ``pension funds,'' and their distributions are not ``pensions 
or other similar remuneration,'' as explained in the CAA. Second, under 
Article 3(2) of the Treaty, the undefined terms ``pension'' and 
``retirement'' are interpreted according to the tax law of the United 
States, which is the country that is applying the Treaty.\2\ Under U.S. 
law applicable to individual retirement

[[Page 37191]]

arrangements, Malta personal retirement schemes are neither 
``pensions'' nor do they provide ``retirement benefits'' for purposes 
of the Treaty. Maltese law does not condition the tax benefits it 
provides for these arrangements upon reasonably analogous requirements 
of U.S. law. Those requirements include that an individual's 
contributions to an individual retirement arrangement (other than 
qualified rollovers from a pension or retirement arrangement that is 
tax-favored under the same country's laws) must be made in cash and 
must be based on income earned from employment or self-employment 
activities. See sections 219, 408, and 408A. Third, in appropriate fact 
patterns, the transaction viewed as a whole may be disregarded under 
relevant judicial doctrines, including the step-transaction doctrine, 
the substance-over-form doctrine, and the assignment of income 
doctrine, in order to give effect to the general purpose of the Treaty 
to mitigate double taxation but not improperly create instances of non-
taxation, especially in cases in which the person establishing the 
retirement arrangement has no other connection to the treaty 
jurisdiction.
---------------------------------------------------------------------------

    \2\ Treasury's Technical Explanation to Article 3(2) of the 
Treaty states:
    Paragraph 2 provides that in the application of the Convention, 
any term used but not defined in the Convention will have the 
meaning that it has under the law of the Contracting State whose tax 
is being applied, unless the context requires otherwise, or the 
competent authorities have agreed on a different meaning pursuant to 
Article 25 (Mutual Agreement Procedure).
---------------------------------------------------------------------------

VI. Purpose of Proposed Regulation

    On March 3, 2022, the Sixth Circuit issued an order in Mann 
Construction v. United States, 27 F.4th 1138, 1147 (6th Cir. 2022), 
holding that Notice 2007-83, 2007-2 C.B. 960, which identified certain 
trust arrangements claiming to be welfare benefit funds and involving 
cash value life insurance policies as listed transactions, violated the 
Administrative Procedure Act (APA), 5 U.S.C. 551-559 because the notice 
was issued without following the notice-and-comment procedures required 
by section 553 of the APA. The Sixth Circuit concluded that Congress 
did not clearly express an intent to override the notice-and-comment 
procedures required by section 553 of the APA when it enacted the AJCA. 
Id. at 1148. The Sixth Circuit reversed the decision of the district 
court, which held that Congress had authorized the IRS to identify 
listed transactions without notice and comment. See Mann Construction, 
Inc. v. United States, 539 F.Supp.3d 745, 763 (E.D. Mich. 2021).
    Relying on the Sixth Circuit's analysis in Mann Construction, three 
district courts and the Tax Court have concluded that IRS notices 
identifying listed transactions were improperly issued because they 
were issued without following the APA's notice and comment procedures. 
See Green Rock, LLC v. IRS, 2023 WL 1478444 (N.D. AL., February 2, 
2023) (Notice 2017-10); GBX Associates, LLC, v. United States, 
1:22cv401 (N.D. Ohio, Nov. 14, 2022) (same); Green Valley Investors, 
LLC, et al. v. Commissioner, 159 T.C. No. 5 (Nov. 9, 2022) (same); see 
also CIC Services, LLC v. IRS, 2022 WL 985619 (E.D. Tenn. March 21, 
2022), as modified by 2022 WL 2078036 (E.D. Tenn. June 2, 2022) (Notice 
2016-66, identifying a transaction of interest).
    The Treasury Department and the IRS disagree with the Sixth 
Circuit's decision in Mann Construction and the subsequent decisions 
that have applied that reasoning to find other IRS notices invalid and 
are continuing to defend the validity of notices identifying 
transactions as listed transactions in circuits other than the Sixth 
Circuit. At the same time, however, to avoid any confusion and ensure 
consistent enforcement of the tax laws throughout the nation, the 
Treasury Department and the IRS are issuing these proposed regulations 
to identify certain transactions involving Malta pension plans as 
listed transactions for purposes of all relevant provisions of the Code 
and Treasury Regulations, including section 6707A and Sec.  1.6011-
4(b)(2).
    The Treasury Department and the IRS believe that transactions 
involving a Malta personal retirement scheme described in the proposed 
regulations, and substantially similar transactions involving a 
retirement arrangement established in Malta, unless specifically 
excepted, are tax avoidance transactions and should be identified as 
listed transactions for purposes of Sec.  1.6011-4 and sections 6111 
and 6112. Under the proposed regulations, participants involved in such 
transactions and their material advisors would need to comply with the 
information reporting and collection requirements under Sec.  1.6011-4 
and sections 6111 and 6112. Failure to do so could result in penalties 
as described in sections II and III of the Background section of this 
preamble.

Explanation of Provisions

I. Malta Personal Retirement Scheme Transaction

    Proposed Sec.  1.6011-12(a) provides that, except as provided in 
proposed Sec.  1.6011-12(b)(2), a transaction that is the same as, or 
substantially similar to, a Malta personal retirement scheme 
transaction (described in proposed Sec.  1.6011-12(b)(1)) is a listed 
transaction for purposes of Sec.  1.6011-4 and sections 6111 and 6112. 
A transaction is a Malta personal retirement scheme transaction as 
described in proposed Sec.  1.6011-12(b)(1) if a U.S. citizen or a U.S. 
resident alien directly or indirectly (1) transfers (within the meaning 
of Sec.  1.679-3 or Sec.  1.684-2) cash or other property to, or 
receives a distribution from, a personal retirement scheme established 
under Malta's Retirement Pension Act of 2011 (a ``Malta personal 
retirement scheme''), and (2) takes the position on a U.S. Federal 
income tax return that (a) income earned or gain realized by the Malta 
personal retirement scheme is not includible in income on a current 
basis for U.S. Federal income tax purposes by reason of the Treaty, or 
(b) a distribution from a Malta personal retirement scheme attributable 
to earnings or gains of the scheme that have not been included in 
income for U.S. Federal income tax purposes is exempt from U.S. 
taxation by reason of the Treaty. Proposed Sec.  1.6011-12(b)(1). 
Indirect transfers include transfers to a Malta personal retirement 
scheme by any person (intermediary) to whom a U.S. person transfers 
property if such transfer is made pursuant to a plan one of the 
principal purposes of which is the avoidance of United States tax. See, 
e.g., Sec.  1.679-3(c).
    For example, assume in Year 1 Taxpayer A, a U.S. citizen or a U.S. 
resident alien directly or indirectly transfers cash and appreciated 
property to a Malta personal retirement scheme. In Year 2 the Malta 
personal retirement scheme sells Taxpayer A's contributed property at a 
gain. On a U.S. income tax return for Year 2, Taxpayer A does not 
include the gain realized by the scheme, because, according to Taxpayer 
A, such gain is exempt from U.S. taxation under Articles 18 and 1(5)(a) 
of the Treaty. Taxpayer A has engaged in a Malta personal retirement 
scheme transaction as described in proposed Sec.  1.6011-12(b)(1). 
Unless the exception described in proposed Sec.  1.6011-12(b)(2) 
applies, the transaction is a listed transaction for purposes of Sec.  
1.6011-4 and sections 6111 and 6112. Taxpayer A and any material 
advisor with respect to the listed transaction are therefore subject to 
the information reporting and collection of information requirements 
under Sec.  1.6011-4 and sections 6111 and 6112, respectively, as 
described in sections I through III of the Background section of this 
preamble. Taxpayer A must also comply with U.S. information reporting 
requirements including, for example, requirements under section 6048.
    Under Sec.  1.6011-4(c)(3)(i)(E), Taxpayer A is a participant in a 
listed transaction for each year in which Taxpayer A's tax return 
reflects tax consequences or a tax strategy of a Malta personal 
retirement scheme transaction as described in proposed Sec.  1.6011-
12(b)(1). Thus, continuing with the example in the preceding paragraph, 
if Taxpayer A

[[Page 37192]]

receives a distribution from the Malta personal retirement scheme in 
Year 3, but does not include the distribution in income under Articles 
17(1)(b) and 1(5)(a) of the Treaty, Taxpayer A will have participated 
in a Malta personal retirement scheme transaction as described in 
proposed Sec.  1.6011-12(b)(1) in each of Year 2 and Year 3.
    A transaction is not substantially similar to a Malta personal 
retirement scheme transaction unless it involves the Treaty and a 
retirement arrangement established in Malta. The Treasury Department 
and the IRS are aware that taxpayers may attempt to use transactions 
similar to the Malta personal retirement scheme transaction in other 
jurisdictions to achieve a similar tax avoidance outcome. The Treasury 
Department and the IRS are therefore considering whether transactions 
similar to the Malta personal retirement scheme transaction replicated 
in other jurisdictions should also be identified as listed transactions 
and request comments on this matter.

II. Exception

    The Treasury Department and the IRS are aware that the United 
Kingdom allows tax-deferred transfers from its pension or retirement 
schemes to certain ``qualified recognised overseas pension schemes'' 
(or QROPS), including Malta personal retirement schemes. The Treasury 
Department and the IRS believe that certain U.S. individuals who may 
have transferred their foreign pension or retirement arrangements to 
Malta personal retirement schemes in accordance with foreign law and 
claimed an exemption from U.S. income tax for earnings in or 
distributions from such schemes on U.S. Federal income tax returns 
filed before the date these proposed regulations are published in the 
Federal Register should not be treated as participating in a listed 
transaction described in proposed Sec.  1.6011-12(b)(1) provided 
certain requirements are met. Accordingly, proposed Sec.  1.6011-
12(b)(2) provides that if a U.S. citizen or resident alien described in 
proposed Sec.  1.6011-12(b)(1)(i) takes a position described in 
proposed Sec.  1.6011-12(b)(1)(ii) on a U.S. Federal income tax return 
filed before June 6, 2023, such U.S. citizen or U.S. resident alien 
will not be treated as participating in a listed transaction for the 
taxable year to which the U.S. Federal income tax return relates 
provided that (1) such U.S. citizen or U.S. resident alien (the 
transferor) established the Malta personal retirement scheme with a 
transfer (or rollover) of a pension or other retirement arrangement 
established in a country other than Malta or the United States (for 
example, a pension scheme established in the United Kingdom), and in 
compliance with the tax laws of such country, (2) the transferor was, 
when such pension or retirement arrangement was established and such 
rollover occurred, a resident of the other country under that country's 
tax law, including under Article 4 (Residency) of such country's income 
tax treaty with the United States, if applicable (for example, a tax 
resident of the United Kingdom), and (3) the transferor's contributions 
to such pension or retirement arrangement consisted solely of cash in 
an amount that bears a relationship to the transferor's income earned 
from the performance of personal services. This exception does not 
apply to a U.S. citizen or U.S. resident alien who takes a position 
described in proposed Sec.  1.6011-12(b)(1)(ii) on a U.S. Federal 
income tax return filed on or after June 6, 2023, when U.S. citizens or 
U.S. resident aliens who own foreign pension or retirement arrangements 
and their material advisors are on notice that the Treasury Department 
and the IRS have proposed identifying Malta personal retirement scheme 
transactions as listed transactions for purposes of Sec.  1.6011-
4(b)(2) and sections 6111 and 6112.
    For example, assume Taxpayer B, a U.S. citizen, was a resident of 
Country Y when Taxpayer B established a Country Y pension plan in 
compliance with Country Y's laws. Taxpayer B made cash contributions 
from wages to the Country Y pension plan. Taxpayer B, while a U.S. 
citizen and resident of Country Y, transferred the Country Y pension 
plan to a Malta personal retirement scheme in accordance with Country Y 
tax law. In Year 1, Taxpayer B's Malta personal retirement scheme 
earned income. On Taxpayer B's Year 1 U.S. Federal income tax return, 
which is filed before June 6, 2023, Taxpayer B took a position 
described in proposed Sec.  1.6011-12(b)(1)(ii). Under proposed Sec.  
1.6011-12(b)(2), Taxpayer B would not be treated as participating in a 
listed transaction with respect to such year.
    A U.S. citizen or U.S. resident alien who is described in proposed 
Sec.  1.6011-12(b)(2), however, may be subject to U.S. income tax as a 
result of the transfer from a pension or retirement arrangement 
established in a country other than Malta to a Malta personal 
retirement scheme, as well as U.S. information reporting requirements 
under, for example, section 6048(a) and (c). See IRS INFO 2011-0096 
(Dec. 30, 2011). U.S. citizens and U.S. residents who are described in 
proposed Sec.  1.6011-12(b)(2) are subject to U.S. income tax on income 
earned and gain realized by their Malta personal retirement schemes, as 
described in section IV of the Background section of this preamble.

III. Effect of Transaction Becoming a Listed Transaction

    Participants required to disclose these transactions under Sec.  
1.6011-4 who fail to do so would be subject to penalties under section 
6707A. Participants required to disclose these transactions under Sec.  
1.6011-4 who fail to do so would also be subject to an extended period 
of limitations under section 6501(c)(10). Material advisors required to 
disclose these transactions under section 6111 who fail to do so would 
be subject to the penalty under section 6707. Material advisors 
required to maintain lists of investors under section 6112 who fail to 
do so (or who fail to provide such lists when requested by the IRS) 
would be subject to the penalty under section 6708(a). In addition, the 
IRS may impose other penalties on persons involved in these 
transactions or substantially similar transactions, including accuracy-
related penalties under section 6662 or section 6662A, the section 6694 
penalty for understatements of a taxpayer's liability by a tax return 
preparer, and the section 6677 penalty for the failure to timely report 
certain transactions with, and ownership of, foreign trusts.
    Taxpayers who have filed a tax return (including an amended return 
(or Administrative Adjustment Request (AAR) for certain partnerships)) 
reflecting their participation in these transactions before [DATE THE 
FINAL REGULATIONS ARE PUBLISHED IN THE FEDERAL REGISTER] (the 
finalization date) and who have not otherwise finalized a settlement 
agreement with the IRS with respect to the transaction must disclose 
the transactions as provided in Sec.  1.6011-4(d) and (e) provided that 
the period of limitations for assessment of tax, including any 
applicable extensions, for any taxable year in which the taxpayer 
participated in the transaction has not ended on or before the 
finalization date. Proposed Sec.  1.6011-12(b)(3); see also Sec.  
1.6011-4(e)(2)(i). Thus, for example, taxpayers who participated in a 
Malta personal retirement scheme transaction before the finalization 
date, but did not comply with their foreign trust information reporting 
requirements under section 6048 with respect to such transaction, have 
an open period of limitations for assessments under section 6501(c)(8) 
and therefore must file a disclosure statement with OTSA within 90 
calendar days after the date

[[Page 37193]]

on which the transaction becomes a listed transaction.
    In addition, material advisers have disclosure requirements with 
regard to transactions occurring in prior years. However, 
notwithstanding Sec.  301.6111-3(b)(4)(i) and (iii), material advisors 
are required to disclose only if they have made a tax statement on or 
after the date that is six years before the date the regulations are 
published as final regulations in the Federal Register.
    The Treasury Department and the IRS recognize that some taxpayers 
may have filed tax returns taking the position that they were entitled 
to the purported tax benefits of the types of transactions described in 
these proposed regulations. Because the IRS will take the position that 
taxpayers are not entitled to the purported tax benefits of the listed 
transactions described in the proposed regulations, taxpayers should 
consider filing amended returns to ensure that their transactions are 
disclosed properly.

Proposed Applicability Date

    Proposed Sec.  1.6011-12 would identify certain Malta personal 
retirement scheme transactions described in proposed Sec.  1.6011-
12(b)(1), except as described in proposed Sec.  1.6011-12(b)(2), as 
listed transactions effective as of the date of publication in the 
Federal Register of a Treasury decision adopting these regulations as 
final regulations.

Special Analyses

I. Regulatory Planning and Review--Economic Analysis

    The Administrator of the Office of Information and Regulatory 
Affairs (OIRA), Office of Management and Budget (OMB), has determined 
that this proposed rule is not a significant regulatory action, as that 
term is defined in section 3(f) of Executive Order 12866, as amended. 
Therefore, OIRA has not reviewed this proposed rule pursuant to section 
6(a)(3)(A) of Executive Order 12866 and April 11, 2018, Memorandum of 
Agreement between the Treasury Department and the OMB.

II. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) generally 
requires that a Federal agency obtain the approval of the OMB before 
collecting information from the public, whether such collection of 
information is mandatory, voluntary, or required to obtain or retain a 
benefit.
    The estimated number of taxpayers impacted by these proposed 
regulations ranges between 50 to 150 per year. No burden on these 
taxpayers would be imposed by these proposed regulations. Instead, the 
collection of information contained in these proposed regulations is 
reflected in the collection of information for Forms 8886 and 8918 that 
has been reviewed and approved by the OMB in accordance with the 
Paperwork Reduction Act (44 U.S.C. 3507(c)) under control numbers 1545-
1800 and 1545-0865. Thus, the burden estimates for the Forms 8886 and 
8918 will be adjusted to reflect the taxpayers impacted by these 
regulations. 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.

III. Regulatory Flexibility Act

    When an agency issues a rulemaking proposal, the Regulatory 
Flexibility Act (5 U.S.C. chapter 6) (``RFA'') requires the agency ``to 
prepare and make available for public comment an initial regulatory 
flexibility analysis'' that will ``describe the impact of the proposed 
rule on small entities.'' See 5 U.S.C. 603(a). Section 605 of the RFA 
provides an exception to this requirement if the agency certifies that 
the proposed rulemaking will not have a significant economic impact on 
a substantial number of small entities. A small entity is defined as a 
small business, small nonprofit organization, or small governmental 
jurisdiction. See 5 U.S.C. 601(3) through (6).
    The Treasury Department and the IRS do not expect that the proposed 
regulations will have a significant economic impact on a substantial 
number of small entities within the meaning of sections 601(3) through 
(6) of the RFA. The Malta personal retirement scheme transaction 
described in proposed Sec.  1.6011-12 only applies to U.S. citizens and 
U.S. resident individuals, and not entities. Therefore, with respect to 
its impact on participants, proposed Sec.  1.6011-12 will not impact 
small entities.
    The Treasury Department and the IRS do not have information about 
which entities engage in the advising of this transaction, and 
therefore cannot accurately estimate the impact of proposed Sec.  
1.6011-12 on material advisors that are small entities. However, the 
Treasury Department and the IRS do not expect proposed Sec.  1.6011-12 
to impact a substantial number of small entities that may advise on 
this transaction. As explained in section III of the Background section 
of this preamble, participants in these transactions generally have no 
connection to Malta other than their participation in a Malta personal 
retirement scheme primarily to avoid U.S. tax, and to avoid detection, 
they may not comply with their U.S. information reporting requirements. 
This tax-avoidance motive of potential clients who are U.S. persons, 
combined with the necessary familiarity with, and access to, Malta's 
pension system and tax law in order to facilitate the Malta personal 
retirement scheme transaction, means that it is unlikely for a 
substantial number of small entities to engage in advising on these 
transactions. The Treasury Department and the IRS request comments from 
the public on the number of small entities that may be impacted and 
whether that impact will be economically significant.

IV. Section 7805(f)

    Pursuant to section 7805(f) of the Code, the proposed regulations 
have been submitted to the Chief Counsel for Advocacy of the Small 
Business Administration for comment on their impact on small 
businesses.

V. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that agencies assess anticipated costs and benefits and take certain 
other actions before issuing a final rule that includes any Federal 
mandate that may result in expenditures in any one year by a State, 
local, or Tribal government in the aggregate, or by the private sector, 
of $100 million in 1995 dollars, updated annually for inflation. The 
proposed regulations do not include any Federal mandate that may result 
in expenditures by State, local, or Tribal governments or by the 
private sector in excess of that threshold.

VI. Executive Order 13132: Federalism

    Executive Order 13132 (``Federalism'') prohibits an agency from 
publishing any rule that has federalism implications if the rule either 
imposes substantial, direct compliance costs on State and local 
governments, and is not required by statute, or preempts State law 
unless the agency meets the consultation and funding requirements of 
section 6 of the Executive order. The proposed regulations do not have 
federalism implications, do not impose substantial direct compliance 
costs on State and local governments, and do not preempt State law 
within the meaning of the Executive order.

Statement of Availability of IRS Documents

    Guidance cited in this preamble is published in the Internal 
Revenue Bulletin and is available from the Superintendent of Documents, 
U.S.

[[Page 37194]]

Government Publishing Office, Washington, DC 20402, or by visiting the 
IRS website at https://www.irs.gov.

Drafting Information

    The principal authors of these regulations are Lara Banjanin and 
Tracy Villecco of the Office of Associate Chief Counsel 
(International). However, other personnel from the Treasury Department 
and the IRS participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, the Treasury Department and the IRS propose to amend 
26 CFR part 1 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 * * *
* * * * *
    Section 1.6011-12 also issued under 26 U.S.C. 6001 and 26 U.S.C. 
6011 * * *
* * * * *
0
Par. 2. Section 1.6011-12 is added to read as follows:


Sec.  1.6011-12  Malta Personal Retirement Scheme Listed Transaction.

    (a) Malta personal retirement scheme listed transaction. 
Transactions that are the same as, or substantially similar to, a 
transaction described in paragraph (b)(1) of this section are 
identified as listed transactions for purposes of Sec.  1.6011-4(b)(2), 
except as provided in paragraph (b)(2) of this section. A transaction 
is not substantially similar unless it involves a retirement 
arrangement established in Malta and the taxpayer takes a Federal 
income tax return position based on the income tax treaty between the 
United States and Malta.
    (b) Malta personal retirement scheme transaction--(1) Transaction 
description. A transaction is described in this paragraph (b)(1) if:
    (i) A U.S. citizen or U.S. resident alien, directly or indirectly--
    (A) Transfers (within the meaning of Sec.  1.679-3 or Sec.  1.684-
2) cash or other property to a personal retirement scheme established 
under Malta's Retirement Pension Act of 2011 (a ``Malta personal 
retirement scheme''), or
    (B) Receives a distribution from a Malta personal retirement 
scheme, and
    (ii) A U.S. citizen or U.S. resident alien described in paragraph 
(b)(1)(i) of this section takes a position on a U.S. Federal income tax 
return that--
    (A) Income earned or gain realized by the Malta personal retirement 
scheme is not includible on a current basis in income for U.S. Federal 
income tax purposes by reason of the income tax treaty between the 
United States and Malta, or
    (B) A distribution received from the Malta personal retirement 
scheme attributable to earnings or gains that have not been included in 
income for U.S. Federal income tax purposes is exempt from U.S. 
taxation by reason of the income tax treaty between the United States 
and Malta.
    (2) Exception. If a U.S. citizen or U.S. resident alien described 
in paragraph (b)(1) of this section takes a position described in 
paragraph (b)(1)(ii) of this section on a U.S. Federal income tax 
return filed before June 6, 2023, such U.S. citizen or U.S. resident 
alien will not be treated as participating in a listed transaction 
under this section for the taxable year to which the U.S. Federal 
income tax return relates provided that--
    (i) Such U.S. citizen or U.S. resident alien (the transferor) 
established the Malta personal retirement scheme with a transfer (or 
rollover) of a pension or other retirement arrangement established in a 
country other than Malta or the United States, and in compliance with 
the tax laws of such country;
    (ii) The transferor was, when such pension or retirement 
arrangement was established and such rollover occurred, a resident of 
the other country under that country's tax law, including under Article 
4 (Residency) of such country's income tax treaty with the United 
States, if applicable; and
    (iii) The transferor's contributions to such pension or retirement 
arrangement consisted solely of cash in an amount that bears a 
relationship to the transferor's income earned from the performance of 
personal services.
    The preceding sentence does not apply, however, to any U.S. citizen 
or U.S. resident alien who take a position described in paragraph 
(b)(1)(ii) of this section on a U.S. Federal income tax return filed on 
or after June 6, 2023.
    (3) Applicability date--(i) In general. This section identifies 
transactions that are the same as, or substantially similar to, the 
transaction described in paragraph (b)(1) of this section, except as 
provided in paragraph (b)(2) of this section, as listed transactions 
for purposes of Sec.  1.6011-4(b)(2) and sections 6111 and 6112 
effective [DATE OF PUBLICATION OF THE FINAL REGULATIONS IN THE FEDERAL 
REGISTER].
    (ii) Obligations of participants with respect to prior periods. 
Pursuant to Sec.  1.6011-4(d) and (e), taxpayers who have filed a tax 
return (including an amended return) reflecting their participation in 
these transactions prior to [DATE OF PUBLICATION OF THE FINAL 
REGULATIONS IN THE FEDERAL REGISTER], who have not otherwise finalized 
a settlement agreement with the Internal Revenue Service with respect 
to the transaction, must disclose the transactions as provided in Sec.  
1.6011-4(d) and (e) provided that the period of limitations for 
assessment of tax for any taxable year in which the taxpayer 
participated in the transaction has not ended on or before [DATE OF 
PUBLICATION OF THE FINAL REGULATIONS IN THE FEDERAL REGISTER].
    (iii) Obligations of material advisors with respect to prior 
periods. Material advisors defined in Sec.  301.6111-3(b) of this 
chapter who have previously made a tax statement with respect to a 
transaction described in paragraph (b)(1) of this section, except as 
provided in paragraph (b)(2) of this section, have disclosure and list 
maintenance obligations as described in Sec. Sec.  301.6111-3 and 
301.6112-1 of this chapter, respectively. Notwithstanding Sec.  
301.6111-3(b)(4)(i) and (iii) of this chapter, material advisors are 
required to disclose only if they have made a tax statement on or after 
the date that is six years before the date the regulations are 
published as final regulations in the Federal Register.

Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2023-11861 Filed 6-6-23; 8:45 am]
BILLING CODE 4830-01-P