[Federal Register: August 3, 2007 (Volume 72, Number 149)]
[Rules and Regulations]
[Page 43154-43157]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03au07-6]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[TD 9352]
RIN 1545-BE28
AJCA Modifications to the Section 6112 Regulations
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final regulations under section 6112 of
the Internal Revenue Code that provide the rules relating to the
obligation of material advisors to prepare and maintain lists with
respect to reportable transactions. These regulations affect material
advisors responsible for keeping lists under section 6112.
DATES: Effective Date: These regulations are effective August 3, 2007.
FOR FURTHER INFORMATION CONTACT: Charles D. Wien, Michael H. Beker, or
Tolsun N. Waddle, 202-622-3070; (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collections of information contained in this final regulation
have been reviewed and approved by the Office of Management and Budget
in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under
control number 1545-1686. Responses to these collections of information
are mandatory. An agency may not conduct or sponsor, and a person is
not required to respond to, a collection of information unless the
collection of information displays a valid OMB control number assigned
by the Office of Management and Budget.
The estimated annual burden per recordkeeper for the collection of
information in Sec. 301.6112-1 is 100 hours and the estimated number
of recordkeepers is 500.
Comments concerning the accuracy of these burden estimates and
suggestions
[[Page 43155]]
for reducing these burdens should be sent to Internal Revenue Service,
Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC
20224, and to the Office of Management and Budget, Attn: Desk Officer
for the Department of Treasury, Office of Information and Regulatory
Affairs, Washington, DC 20503.
Books and records relating to these collections of information must
be retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns and
tax information are confidential, as required by 26 U.S.C. 6103.
Background
This document contains final regulations that amend 26 CFR part 301
by amending the rules relating to the list maintenance requirements of
material advisors with respect to reportable transactions under section
6112.
The American Jobs Creation Act of 2004, Public Law 108-357 (118
Stat. 1418), (AJCA) was enacted on October 22, 2004. Section 815 of the
AJCA amended section 6112 to provide that each material advisor (as
defined in section 6111, as amended by the AJCA) with respect to any
reportable transaction is required to maintain a list (in such manner
as the Secretary may by regulations prescribe) identifying each person
with respect to whom the advisor acted as a material advisor with
respect to the transaction, and containing other information as the
Secretary may by regulations require. Section 815 of the AJCA is
effective for transactions with respect to which material aid,
assistance, or advice is provided after October 22, 2004. Prior to the
amendments to section 6111 made by the AJCA, the definition of material
advisor was in Sec. 301.6112-1 of the Procedure and Administration
Regulations.
On November 1, 2006, the IRS and Treasury Department issued a
notice of proposed rulemaking and temporary and final regulations under
sections 6011, 6111, and 6112 (REG-103038-05, REG-103039-05, REG-
103043-05, TD 9295) (the November 2006 regulations). The November 2006
regulations were published in the Federal Register (71 FR 64488, 71 FR
64496, 71 FR 64501, 71 FR 64458) on November 2, 2006.
The IRS and Treasury Department received written public comments
responding to the proposed regulations and held a public hearing
regarding the proposed rules on March 20, 2007. After consideration of
the comments received and comments made at the hearing, the proposed
regulations are adopted as revised by this Treasury decision. These
final regulations generally retain the provisions of the proposed
regulations but include some modifications based on recommendations in
the public comments.
Summary of Comments and Explanation of Provisions
Furnishing of Lists
The proposed regulations provided that each material advisor must
prepare and maintain a list for each reportable transaction. The
proposed regulations also provided that each list must include three
components: An itemized statement, a description of the transaction,
and documents. Further, the proposed regulations provided that each
material advisor responsible for maintaining a list must, upon written
request by the IRS, make each component of the list available to the
IRS by furnishing each component of the list to the IRS within 20
business days from the day on which the request is provided. The
proposed regulations stated that each component of the list must be
furnished to the IRS in a form that enables the IRS to determine
without undue delay or difficulty the information required to be on the
list. If any component of the list is not in such form, the material
advisor will not be considered to have complied with the list
maintenance provisions of section 6112 and the regulations thereunder.
Several commentators recommended that the proposed regulations
should provide the IRS with flexibility to determine, based on the
amount of information required, a production schedule that will be
sufficient to avoid the imposition of penalties. Two commentators
suggested providing a phased disclosure procedure. One commentator
recommended that the 20 business days begin after the advisor had an
adequate opportunity to gather the required information. Another
commentator recommended amending the proposed regulations to provide a
substantial compliance standard.
The IRS and Treasury Department believe that providing the IRS the
ability to determine an alternative production schedule will benefit
both taxpayers and the IRS. These final regulations remove the language
regarding the period for furnishing a list or the components of the
list to the IRS because that period will be addressed in forthcoming
published guidance under section 6708. In addition, an alternative
schedule for furnishing the list or the components of the list will be
addressed in published guidance under section 6708.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these regulations. It is hereby
certified that the collection of information in these regulations will
not have a significant economic impact on a substantial number of small
entities. This certification is based upon the fact that most of the
information is already required to be reported under the current
regulations; the clarifications and new information required by the
final regulations add little or no new burden to the existing
requirements. Therefore, a Regulatory Flexibility Analysis under the
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required.
Pursuant to section 7805(f) of the Internal Revenue Code, the notice of
proposed rulemaking preceding these regulations was submitted to the
Chief Counsel for Advocacy of the Small Business Administration for
comment on its impact on small business.
Drafting Information
The principal authors of these regulations are Charles D. Wien,
Michael H. Beker, and Tolsun N. Waddle, Office of the Associate Chief
Counsel (Passthroughs and Special Industries). However, other personnel
from the IRS and Treasury Department participated in their development.
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
0
Accordingly, 26 CFR part 301 is amended as follows:
PART 301--PROCEDURE AND ADMINISTRATION
0
Paragraph 1. The authority citation for part 301 continues to read, in
part, as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 301.6112-1 is revised to read as follows:
Sec. 301.6112-1 Material advisors of reportable transactions must
keep lists of advisees, etc.
(a) In general. Each material advisor, as defined in Sec.
301.6111-3(b), with
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respect to any reportable transaction, as defined in Sec. 1.6011-4(b)
of this chapter, shall prepare and maintain a list in accordance with
paragraph (b) of this section and shall furnish such list to the
Internal Revenue Service (IRS) in accordance with paragraph (e) of this
section.
(b) Preparation and maintenance of lists--(1) In general. A
separate list must be prepared and maintained for each reportable
transaction. However, one list must be maintained for substantially
similar transactions. A list must be maintained in a form that enables
the IRS to determine without undue delay or difficulty the information
required in paragraph (b)(3) of this section. The Commissioner in his
discretion may provide in published guidance a form or method for
maintaining and/or furnishing the list.
(2) Persons required to be included on lists. A material advisor is
required to maintain a list identifying each person with respect to
whom the advisor acted as a material advisor with respect to the
reportable transaction. However, a material advisor is not required to
identify a person on the list if the person entered into a listed
transaction or a transaction of interest more than 6 years before the
transaction was identified in published guidance as a listed
transaction or a transaction of interest.
(3) Contents. Each list must include the three components described
in paragraph (b)(3)(i), (ii), and (iii) of this section.
(i) Statement. An itemized statement containing the following
information--
(A) The name of each reportable transaction, the citation to the
published guidance number identifying the transaction if the
transaction is a listed transaction or a transaction of interest, and
the reportable transaction number obtained under section 6111;
(B) The name, address, and TIN of each person required to be
included on the list;
(C) The date on which each person required to be included on the
list entered into each reportable transaction, if known by the material
advisor;
(D) The amount invested in each reportable transaction by each
person required to be included on the list, if known by the material
advisor;
(E) A summary or schedule of the tax treatment that each person is
intended or expected to derive from participation in each reportable
transaction; and
(F) The name of each other material advisor to the transaction, if
known by the material advisor.
(ii) Description of the transaction. A detailed description of each
reportable transaction that describes both the tax structure of the
transaction and the purported tax treatment of the transaction.
(iii) Documents. The following documents--
(A) A copy of any designation agreement (as described in paragraph
(f) of this section) to which the material advisor is a party; and
(B) Copies of any additional written materials, including tax
analyses or opinions, relating to each reportable transaction that are
material to an understanding of the purported tax treatment or tax
structure of the transaction that have been shown or provided to any
person who acquired or may acquire an interest in the transactions, or
to their representatives, tax advisors, or agents, by the material
advisor or any related party or agent of the material advisor. However,
a material advisor is not required to retain earlier drafts of a
document provided the material advisor retains a copy of the final
document (or, if there is no final document, the most recent draft of
the document) and the final document (or most recent draft) contains
all the information in the earlier drafts of such document that is
material to an understanding of the purported tax treatment or the tax
structure of the transaction.
(c) Definitions. For purposes of this section, the following terms
are defined as:
(1) Material advisor. The term material advisor is defined in Sec.
301.6111-3(b).
(2) Reportable transaction. The term reportable transaction is
defined in Sec. 1.6011-4(b)(1) of this chapter.
(3) Listed transaction. The term listed transaction is defined in
Sec. 1.6011-4(b)(2) of this chapter. See also Sec. Sec. 20.6011-4(a),
25.6011-4(a), 31.6011-4(a), 53.6011-4(a), 54.6011-4(a), or 56.6011-4(a)
of this chapter.
(4) Substantially similar. The term substantially similar is
defined in Sec. 1.6011-4(c)(4) of this chapter.
(5) Person. The term person is defined in Sec. 301.6111-3(c)(4).
(6) Related party. A person is a related party with respect to
another person if such person bears a relationship to such other person
described in section 267(b) or 707(b).
(7) Tax. The term tax is defined in Sec. 301.6111-3(c)(6).
(8) Tax benefit. The term tax benefit is defined in Sec. 301.6111-
3(c)(7).
(9) Tax return. The term tax return is defined in Sec. 301.6111-
3(c)(8).
(10) Tax structure. The term tax structure is defined in Sec.
301.6111-3(c)(9).
(11) Tax treatment. The term tax treatment is defined in Sec.
301.6111-3(c)(10).
(12) Transaction of interest. The term transaction of interest is
defined in Sec. 1.6011-4(b)(6) of this chapter. See also Sec. Sec.
20.6011-4(a), 25.6011-4(a), 31.6011-4(a), 53.6011-4(a), 54.6011-4(a),
or 56.6011-4(a) of this chapter.
(d) Retention of lists. Each material advisor must maintain each
component of the list described in paragraph (b)(3) of this section in
a readily accessible form for seven years following the earlier of the
date on which the material advisor last made a tax statement relating
to the transaction, or the date the transaction was last entered into,
if known. If the material advisor required to prepare, maintain, and
furnish the list is a corporation, partnership, or other entity
(entity) that has dissolved or liquidated before completion of the
seven-year period, the person responsible under state law for winding
up the affairs of the entity must prepare, maintain and furnish each
component of the list on behalf of the entity, unless the entity
submits the list to the Office of Tax Shelter Analysis (OTSA) within 60
days after the dissolution or liquidation. If state law does not
specify any person as responsible for winding up the affairs, then each
of the directors of the corporation, the general partners of the
partnership, or the trustees, owners, or members of the entity are
responsible for preparing, maintaining and furnishing each component of
the list on behalf of the entity, unless the entity submits the list to
the OTSA within 60 days after the dissolution or liquidation. The
responsible person must also provide notice to OTSA of such dissolution
or liquidation within 60 days after the dissolution or liquidation. The
list and the notice provided to OTSA must be sent to: Internal Revenue
Service, OTSA Mail Stop 4915, 1973 North Rulon White Blvd., Ogden, Utah
84404, or to such other address as provided by the Commissioner.
(e) Furnishing of lists--(1) In general. Each material advisor
responsible for maintaining a list must, upon written request by the
IRS, make each component of the list described in paragraph (b)(3) of
this section available to the IRS. Each component of the list must be
furnished to the IRS in a form that enables the IRS to determine
without undue delay or difficulty the information required in paragraph
(b)(3) of this section. If any component of the list is not in a form
that enables the IRS to determine without undue delay or difficulty the
information required in paragraph (b)(3) of this section, the
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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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