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]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 9352]
RIN 1545-BE28


AJCA Modifications to the Section 6112 Regulations

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

-----------------------------------------------------------------------

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
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