AJCA Modifications to the Section 6112 Regulations, 43154-43157 [07-3787]
Download as PDF
43154
Federal Register / Vol. 72, No. 149 / Friday, August 3, 2007 / Rules and Regulations
PART 31—EMPLOYMENT TAXES AND
COLLECTION OF INCOME TAX AT THE
SOURCE
I Par. 8. The authority citation for part
31 continues to read, in part, as follows:
PART 54—PENSION EXCISE TAXES
entered into on or after November 2,
2006.
Par. 12. The authority citation for part
54 continues to read, in part, as follows:
Kevin M. Brown,
Deputy Commissioner for Services and
Enforcement.
Approved: July 25, 2007.
Eric Solomon,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 07–3786 Filed 7–31–07; 11:22 am]
I
Authority: 26 U.S.C. 7805 * * *
Par. 13. Section 54.6011–4 is revised
to read as follows:
I
Authority: 26 U.S.C. 7805 * * *
I Par. 9. Section 31.6011–4 is revised to
read as follows:
§ 31.6011–4 Requirement of statement
disclosing participation in certain
transactions by taxpayers.
§ 54.6011–4 Requirement of statement
disclosing participation in certain
transactions by taxpayers.
(a) In general. If a transaction is
identified as a listed transaction or a
transaction of interest as defined in
§ 1.6011–4 of this chapter by the
Commissioner in published guidance
(see § 601.601(d)(2)(ii)(b) of this
chapter), and the listed transaction or
transaction of interest involves an
employment tax under chapters 21
through 25 of subtitle C of the Internal
Revenue Code, the transaction must be
disclosed in the manner stated in such
published guidance.
(b) Effective/applicability date. This
section applies to listed transactions
entered into on or after January 1, 2003.
This section applies to transactions of
interest entered into on or after
November 2, 2006.
(a) In general. If a transaction is
identified as a listed transaction or a
transaction of interest as defined in
§ 1.6011–4 of this chapter by the
Commissioner in published guidance
(see § 601.601(d)(2)(ii)(b) of this
chapter), and the listed transaction or
transaction of interest involves an excise
tax under chapter 43 of subtitle D of the
Internal Revenue Code (relating to
qualified pension, etc., plans) the
transaction must be disclosed in the
manner stated in such published
guidance.
(b) Effective/applicability date. This
section applies to listed transactions
entered into on or after January 1, 2003.
This section applies to transactions of
interest entered into on or after
November 2, 2006.
PART 53—FOUNDATION AND SIMILAR
EXCISE TAXES
PART 56—PUBLIC CHARITY EXCISE
TAXES
Par. 10. The authority citation for part
53 continues to read, in part, as follows:
I
I
Par. 14. The authority citation for part
56 continues to read, in part, as follows:
Authority: 26 U.S.C. 7805 * * *
Authority: 26 U.S.C. 7805 * * *
Par. 11. Section 53.6011–4 is revised
to read as follows:
I
rmajette on PROD1PC64 with RULES
§ 53.6011–4 Requirement of statement
disclosing participation in certain
transactions by taxpayers.
§ 56.6011–4 Requirement of statement
disclosing participation in certain
transactions by taxpayers.
(a) In general. If a transaction is
identified as a listed transaction or a
transaction of interest as defined in
§ 1.6011–4 of this chapter by the
Commissioner in published guidance
(see § 601.601(d)(2)(ii)(b) of this
chapter), and the listed transaction or
transaction of interest involves an excise
tax under chapter 42 of subtitle D of the
Internal Revenue Code (relating to
private foundations and certain other
tax-exempt organizations), the
transaction must be disclosed in the
manner stated in such published
guidance.
(b) Effective/applicability date. This
section applies to listed transactions
entered into on or after January 1, 2003.
This section applies to transactions of
interest entered into on or after
November 2, 2006.
VerDate Aug<31>2005
15:45 Aug 02, 2007
Jkt 211001
Par. 15. Section 56.6011–4 is revised
to read as follows:
I
(a) In general. If a transaction is
identified as a listed transaction or a
transaction of interest as defined in
§ 1.6011–4 of this chapter by the
Commissioner in published guidance
(see § 601.601(d)(2) of this chapter), and
the listed transaction or transaction of
interest involves an excise tax under
chapter 41 of subtitle D of the Internal
Revenue Code (relating to public
charities), the transaction must be
disclosed in the manner stated in such
published guidance.
(b) Effective date. This section applies
to listed transactions entered into on or
after January 1, 2003. This section
applies to transactions of interest
PO 00000
Frm 00024
Fmt 4700
Sfmt 4700
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[TD 9352]
RIN 1545–BE28
AJCA Modifications to the Section
6112 Regulations
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:
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 § 301.6112–1 is 100
hours and the estimated number of
recordkeepers is 500.
Comments concerning the accuracy of
these burden estimates and suggestions
E:\FR\FM\03AUR1.SGM
03AUR1
Federal Register / Vol. 72, No. 149 / Friday, August 3, 2007 / Rules and Regulations
rmajette on PROD1PC64 with RULES
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 § 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
VerDate Aug<31>2005
15:45 Aug 02, 2007
Jkt 211001
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.
PO 00000
Frm 00025
Fmt 4700
Sfmt 4700
43155
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
Accordingly, 26 CFR part 301 is
amended as follows:
I
PART 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation
for part 301 continues to read, in part,
as follows:
I
Authority: 26 U.S.C. 7805 * * *
I Par. 2. Section 301.6112–1 is revised
to read as follows:
§ 301.6112–1 Material advisors of
reportable transactions must keep lists of
advisees, etc.
(a) In general. Each material advisor,
as defined in § 301.6111–3(b), with
E:\FR\FM\03AUR1.SGM
03AUR1
rmajette on PROD1PC64 with RULES
43156
Federal Register / Vol. 72, No. 149 / Friday, August 3, 2007 / Rules and Regulations
respect to any reportable transaction, as
defined in § 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
VerDate Aug<31>2005
15:45 Aug 02, 2007
Jkt 211001
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
§ 301.6111–3(b).
(2) Reportable transaction. The term
reportable transaction is defined in
§ 1.6011–4(b)(1) of this chapter.
(3) Listed transaction. The term listed
transaction is defined in § 1.6011–
4(b)(2) of this chapter. See also
§§ 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
§ 1.6011–4(c)(4) of this chapter.
(5) Person. The term person is defined
in § 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
§ 301.6111–3(c)(6).
(8) Tax benefit. The term tax benefit
is defined in § 301.6111–3(c)(7).
(9) Tax return. The term tax return is
defined in § 301.6111–3(c)(8).
(10) Tax structure. The term tax
structure is defined in § 301.6111–
3(c)(9).
PO 00000
Frm 00026
Fmt 4700
Sfmt 4700
(11) Tax treatment. The term tax
treatment is defined in § 301.6111–
3(c)(10).
(12) Transaction of interest. The term
transaction of interest is defined in
§ 1.6011–4(b)(6) of this chapter. See also
§§ 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
E:\FR\FM\03AUR1.SGM
03AUR1
rmajette on PROD1PC64 with RULES
Federal Register / Vol. 72, No. 149 / Friday, August 3, 2007 / Rules and Regulations
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 § 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 § 301.6111–3 on or
after November 2, 2006. Otherwise, the
rules that apply before August 3, 2007
are contained in § 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
VerDate Aug<31>2005
15:45 Aug 02, 2007
Jkt 211001
Notice 2005–22 (2005–12 IRB 756) (see
§ 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
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[TD 9351]
RIN 1545–BE26
AJCA Modifications to the Section
6111 Regulations
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:
SUMMARY: This document contains final
regulations under section 6111 of the
Internal Revenue Code that provide the
rules relating to the disclosure of
reportable transactions by material
advisors. These regulations affect
material advisors responsible for
disclosing reportable transactions under
section 6111 and 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:
Background
This document contains final
regulations that amend 26 CFR part 301
by providing rules relating to the
disclosure of reportable transactions by
material advisors under section 6111.
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 6111 to require each
material advisor with respect to any
reportable transaction to make a return
(in such form as the Secretary may
prescribe) 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
PO 00000
Frm 00027
Fmt 4700
Sfmt 4700
43157
prescribe. Section 6111(a), as amended,
also provides that the return must be
filed not later than the date specified by
the Secretary. Section 6111(b)(1), as
amended, provides a definition for the
term material advisor and includes as
part of that definition a requirement that
the material advisor derive certain
threshold amounts of gross income that
the Secretary may prescribe. The AJCA
amendments to section 6111 also
authorize the Secretary to prescribe
regulations that provide: (1) That only
one person shall be required to meet the
requirements of section 6111(a) in cases
in which two or more persons would
otherwise be required to meet such
requirements; (2) exemptions from the
requirements of section 6111; and (3)
rules as may be necessary or appropriate
to carry out the purposes of section
6111. Section 815 of the AJCA is
effective for transactions with respect to
which material aid, assistance, or advice
is provided after October 22, 2004.
In response to the AJCA, the IRS and
Treasury Department issued interim
guidance on section 6111 in Notice
2004–80 (2004–2 CB 963); Notice 2005–
17 (2005–1 CB 606); Notice 2005–22
(2005–1 CB 756); and Notice 2006–6
(2006–5 IRB 385) (see § 601.601(d)(2)).
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
Nine written comments were received
in response to the NPRM. All comments
were considered and are available for
public inspection upon request.
Reportable Transaction Number
The proposed regulations provide that
a material advisor must provide a
reportable transaction number to all
E:\FR\FM\03AUR1.SGM
03AUR1
Agencies
[Federal Register Volume 72, Number 149 (Friday, August 3, 2007)]
[Rules and Regulations]
[Pages 43154-43157]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-3787]
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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
[[Page 43156]]
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