Revenue Procedure 2001-20

Voluntary Compliance on Alien Withholding Program
Rev. Proc- 2 0 01-20
Offer to rcsulvc issues arising korn certain tar. withholding, and repilrting obligations of public and other nut-fur-profit colleges
and unibers1tie-s with respect to payments to alier~individuais.

TABLE OF CONTENTS
SEIITION I . GENERAL
-01 Backgrvund,
.02 Applicable law.
03 DcJnit~ans.
.04 Summary of YCAP.
,135No waiver oje..rciye lax, FICA, or other tux ohliguriirns.

-06Requtp.\tfnr

comments.

SEC. 2. ELIGIBLE ORCiAMZAT1ONS
0 1 Eligible Omanizations.
.02 Ot-ganizarion.~current/y under examination.

SEC. 3. TAX AND WITHHOLDTNG OBLIGATIONS SURJECX TO VCAP

SEC. 4. SLTBMISSION PROCEDURES
.U 1 In general
.02 Rcquired in/urmnlion.
.03 Required d o c u m m l ~ .
.MStgnaiures.
.05Power qrArfornqy rpquiremenls
.06 Penlrly of perjury slaramcnr.
07 Marked Idter.

08 Mailing addrrs,s.
SEC 5. PROCESSING OF VCAP REQUESTS
.O1 Inadequre or incomplere xubmissinn or ~ ' q u t i ufur
t
additional hformation.
.02 Derertnrning fax Iiiibrli~y.
.03 Rmiew ofEIigiblc Organization i compIiance procedures.
-0.1 Uther trrx liubilities or isuue.~.
.05 Yerr~cufron.

.06Acknowledgmenr letter.
07 Farllrre to reach re.qolution.

08 dpp/icubi/ihm
of$$ 6103 and 6110.
.09 Conferences.
SEC. 6. EFFECT1 VE DATE AND SUNSET DATE

SEC. 7 PAPERWORK REDUCTION ACT

SEC'. 8 URAITING INFORMATION

and universities, and their charitablt afliliates, with respcct to the payment, with.
Buckgmund. This
Proce+ holding, and reporting of certain taxes due
describes Ihc
Villuntilry Com~llmce
on payn~entsmade to alien individuals.
un
The Internal Revenue Service
to certain ~Sm-yi,~'')will bcgi, VCAP as a tempo("VCAP")j which is
other not-fur-~rufit
fary and experimental propram. Sec sec-

SECTION L GENERAL

February 26, 2001

738

tion 6 of this revenue prucedure for the
effective date and sunst$ date of VCAP.
See section 2 of this revenue procedm
h r the organizations that arc cligiblz tu
participate tn VCAP (eligible organizations). See section 3 of this revenue procedure for the taxes, including excise

2001-9 I.R.B.

and thc withholding and reporting
obligations covered by VCAP
.02 Applicuhlr luw. The objective of
VCAP i s 10 enhance voluntary compliance among public and other not-for-profit cotleges and universtties, and their afilated charitable organizations, m h n g
paynlents of wages, gants, schularships,
and other mcornc to alien individuals.
Generaily, income receivcd by a nonresident alien individual kom sources wiLbin
the United States is subject to tax urtdcr
871(a) of Ihe Internal Revenue Code
("C'ude") unless an exceptLon applies.
l k c h x is imposed, generally on the gross
amount of income, at a 30-percenl ale if
the ~ n c o ~ nise not effectively cunnected
with the co~rductof a t r d e or business in
ihe United Sutcs or at a 14-percentrate irl
thc case of income from certain scholarl;l~ips. fellowships and grants. Sechun
144 1 of the C d r : q u i r e s any person who
pays incomc subject to tax under $ 871(a)
of the C'odc to a nonresident alien individual to deduct and widlhold the 30% (or
14%) tax from the gross amount paid.
The rate of tax, and therefore withholding,
may be reduced or eliminated under an
income tax treaty. A withholding apent
may rely on a claim of treaty benefit if the
rlonresident alien individual has funiished
appropriatedocumentation. Sct. 9 1.1441
-6 v f the Lnmme Tax Regulations. See
dso IRS Publicat~on51 5, Mthholdinp of
KIA on Nonresident .4lienu and Foreign
Corporalromr. and IRS Publication 901,
U.S. Tux Trpaliu.
Section 87 1(b) of the C d e imposcs a
graduated rate of tax on a nonresident
a11rn individual's incomc that is effectively connected with the mdividual'sconduct
uf a trade or business in the United Slates.
This provision is relevant to income
edmed for personal services because,
under 4 864(b) of the Code, the perfortliance of personal services in Ihc United
States 1s cunsidered to be h e conduct of a
trade u r business withln tht. United States.
Further, under $ 8 7 1 ~ ~of) the Codc, a
nunresident alie~rindividual with a spzcllicd nurtimmigrant status who i s a participarit in certain exchange or trammg programs 1s treated as bcmg engaged in a
taxes,

trade or business wilhin the United Statcs
(regardless of whether he i s actuiilly so
engaged) wirll regard tu inconrc derived in

conncc!ion with that exchilngr or training
program. A nonrcsidcnt alien individual's

2001-9 I.R.B.

ments wich regard to any employee.
(However, see 4 4 3121(b)(10) and
3 12 l(b)(lYj of the Code for certain t ~ x cxernpt wages.) In addition, VCAP does
nol affect any othet obligations of the taxpay cr or the Service that are not within the
scope o f this revmue prwedure ur ~ h c
acknowledgment described in section
5.06 of this revenue prtlcedure.
1s subject to wage rrporting under chapter
-06Requrbxt for cornmetits. Because
61 of the Code (~.e., on Fom 931 and
nature of VCAP,
Form W-21, and such individual's nun- of tlw experimc~~tai
wage income is subject to reporting undcr the Service welcomes comments on the
fi I . 146 1 --I(c)(2) of the Inconle Tax format and operation u f this program,
suggestions
regarding
Rcgulations (i .e.. on Form 1042 and Form including
1042-5).
Additionally, taxes may be whether the program should be expandimposed on wages paid to alien individu- ed to cover other organizations, such as
als un&r 99 3101 and 3111 of the Code proprietary colleges and universities
and other educational organizations,
(social security and Medicare taxes).
.03 Dejinin'onu. For purposes of ttus not llsted in section 2 o f this revenue
revenue procedure, the following detini- procedure. or other types of defects not
listed in section 3 of t h ~ srevenue protions apply:
( I ) Thetm"alienintlivid~mzansan cedure. The Service also welcomes
indviduai who is nut a citizen or n nationat suggestions regarding possible stank dardized correction rnelhods for spcciof the United States. Sm 9 1.1-l(c) of t
fied dekcts that could be appropriately
Incunle Tax Regulations.
(2) Thc tam "midentalien" means an addressed under VCAP. Any modificaalien itdividual described in 4 7701 @)(I )(A) tions will be made only by announcements, reveriue procedures, notices or
of the Code.
(3) The t e r m "nonresident alien" oihw guidance published in the Internal
Comments on
means an alien individua1 descnhed in Revcnue Bullctin.
VCAP should be n~atledto:
g 7701(h)(I )(B) o f the C d c .
.W Summary of YCAP. Organizations
Internal Revenue Service
that request consideration under VCAP
Attention: T:E0:RA:T:G (VCAP)
agrcc to ( I ) identify those areas in which
11 11 Constitution Avmw, N.W.
they are not in compliance mth tax, withWashington, D.C. 20224
hulding, and rqorting ubligations on payComments m
y also bz sent electxoninlents w alien individuals; (2) compute cally v i a the L n t m e t to *TWGE-EOand pay any tax due; and (3) institute [email protected].
ccdures and p~licieswhich will assure
compliance in the future with the organi- SEC. 2. ELIGIBLE ORGANEATIONS
zat~on'stax. withholding, and reporting
obligations. Organizations will ~ c e i v e .01 EIigibk Organizations. Except as
aysurance that their proposed procedures provlkd in section 2.02, an organization
and policies relating to tax, withholding, IS ellgtble fm VCAP (an ''elig~bleorganiand reponitlg obligations applicable to tahon") kf it is:
(1) Acullcge or university descnbrd m
alicn individuals ate acceptable to the
9
170(b)(l)(A)(u)
of the Code h a t is:
Service, and the Service generally will not
(a)
Exempt
from
tax under 5 SOl(a) of
impose penaltits for identified undcrpay men&or Jcfrciencies, if the liability is due the Code as an organmition described in
to reason~blecause. See sections 5.02(3) # SO l(c)(3); or
(b) An aEency or instrumentality OF any
and 5.06 of this revenue ptucedure.
government
or any pol~i~cal
~ubdivisiun
05 No war vcr u/' excise tux. FiC:A, or
hereo
of,
or
that
1s
owned
or
operated
by a
VCAP
does
not
olher tax uhligntions.
govemrnent
w
m
y
political
subdivisiun
waive or reduce any applicable tax and
does nut alter an employer's obligations rhercof, or by an agency or insbumentalito sar~sfy a n y applicable Fedrral ty of one or more govcmments or pul~tical
Insurance Contributions Act (FICA) or subdivulons (a "State college clr mivcrsiFederal income tax withholding require- ty"); or
effectively connected services mcorne

may also bc subject to wihholding under
$ 1441 oftheCode(or$3402 ofthccode
for most income constituting wagesf.
With resped to reporting obligations, a
nonresident alien individual's effmtively
connected personal swviws income constituting wages under 6 3402 of the Code

February 26,2001

v~dunls($ 3101(a) and Q: 3101@) of the
Code);
( 3 ) Falure to withhold or pay thc correct atlluunt of incomc taxes on wages
paid to ulicn individuals (9 3402 of the
Code);
(4) Failure to withhold or pay the correct amount of income taxcs on scholarships, Fcllo~vshipsand pants paid to nonresident alien indvrduals ($9 1441-1464
of the Code);
(5) Fail~~re
to withheld or pay the curtect muunt v f hnts on compcnsatiun for
independent personal services paid to
nonresiden~alien individuals ($(j 144 1 -

section 5 of his revenue procedure.
(However, regarding the nun-assertion of
interest, x e section 5.02(2) of this revenue procedure.) In &cases mvoIv.
ing large liabilities ur underpayments, the
Service will consider the organizatiun's
proposal Tor payment of h e liab~lityor
underpayment in more than one installment, or will considex the organizall~n's
SBC 4. SUBMISSION PROCEDURES
posting of a cash bond under the pruce.01 I n general. Ln general, an elipbte dures outlined in Rev. Pruc. 84-58,
organization submits a request under 1 9 8 L 2 C.B. 501. See sectinn 5.02(4) of
VCAP rhrough a lctter to the Tax ihis revenue procedure.
(7) A detailed description of the methExemptlCovernn~ent Enti ties (TWGE)
office at haddress in seciion 4.08 ofthis ods for correcting the defects that the
revmue prrxedure The submission must organiznijon has hplemmted or proposes
contain h e information and docunierrta- to rmplement. Those methods must
tion described in sections 4.02 and 4.03 of ensure that the corrcct amount of taxes
lhis revenue prucedure. The Service will and withholding of taxes on payments to
not accept anonymous submissions under die11 Lildlviduala wit1 be withhold, paid
over, and reported to the Service on the
VCAP.
.02 Required information. The request proper form and in a timely manner.
(8) A statement signed by the eligible
for consideration under VCAP must conorganizaoon's
ufiiiicer ur aulhurized rcprctain h e following information:
(1) The name, address. and taxpayer sentative achowledging and agreeing that
idmtificatiun numkr of the eligible orga- the eligible organizalon's participation in
VCAP will not constitute an employment
nization.
(2) A description of the current adrnin. lax audit of the eligible organiz.liur~arid
isirative prwedures that thc eligible orga- will not provide a reasonable basis for nut
nization uses to determine tax, withhold- treating an individual as an empluyw
ing, and reportinr obligations regarding under 5 53U of the R~venueAct of 1978.
.03Required documents. The submispayments lo alien individuds.
(3) A description o f the defects in the sion must be accompanied by the followeligible organization's tax, withholding, in g documentation,
(I) In the case of a collcge ur universiand reporling procedures far paynlents to
alien individuals. how and why the ty, a copy o f the organization's determinadefects occurred, and the years affected tion letta indicating that it i s an organization described in $9 I70@)(I)(A](ii) and
by such defects.
(4) The number of alien individuals 501 (c)(3) of the Code, or sufficient docu.
affected and how the number was deter- mentation indicating that the organization
is a State college or university. In the case
mined.
( 5 ) The numbcr of any afiliated chari- of an affiliated charitable organization,
table organizations affected by the the organuation must providr: both a copy
defects, their names. addresses, and tax- of its detcrrninauon letter indicating that it
payer id~ntlficati~n
numb~rs.
is an organization described m 501(cI(3)
(6) A calculatiun of the tatal amount of of the Code and sufficient documentation
hdicathg its relationship a coUege or
taxes the eli~ihlevrgani7ai1un faded to
wdhhold, pay an&or report, not including universily that is itself an el~giblcoganiinterest and penalties, f o r b periods open ation.
(2) Copiw of workpapcrs or schedules
fur assessment ur c o l l ~ t i o nundct !he
provision.; nf hSQ l nf the Code. This that clearly explain the eligibje organizacalculatiun should take into account prop- tian's calculation of its correct tax liabilier])- substantiated adjustments under ty regarding payments to alim individuals
$9 1463 and 3403(d) of the Code. Thc (see seciiun 4.02(6) of this revenue procecligible organi7ation must agree tn pay dure). The workpapers or szhcdules
and remil all of ik additional bx due and should also show t r ~ which hpwitic tax
owing plus interest at the completion of returns and tax ~criods the liab~lity

1464 of the Code),

the Service's review or exanlinatim. See

(2)

An organization described in

5 5 U l (c)(3) of thc Code and exmpt

from

Income iaa under tj 501(a) hat is afiliaied with such a college ur univt;rsily.
An eligible organization ]nay apply for
VCAP with respect to any payments made
lo alien individuals.
.02 Organizaricrns currrnrly under

An urganlzation is not eligible for VCAP if the organizaticn is
under examination on thc dale of the pubI~catiun of this revenue procedure, or
comes under examination prior to submitting the ~nformaiio~l
required by section 4
of this revenue procedurz. For this purpose, an examinatlun IS treated as comtnencmg un the date the organization
re~eiv~xi
notificdtiun from the Service of
an impending examination or of an
impending mferxal for exanination. 'I'his
pmgrau is aIso not avaihble to any organization that has a case pending in
Appeals or in litigation on issues involvrng taxes or withholding obligat~ons
described in section 3 of this revenue procedurc.
examr'notinn.

SEC. 3. TAX, WITHHOLDMG, AND
REPORTING OBLIGATIONS
SUBJECT TO VCAP
The defevw for which an eligihle mga-

nization may make a submission under
VCAP are:
(I) Failure to pay the correct amount uf
social security and Medicare excise u x e s
~ n ~ p o s eon
d employers with r e s ~ dto
wages pard to alien individuals (9 3 11 1(a)
md 9 3 I l 1 (b)of h e Code);
( 2 ) Foilure to withhold or pay the correct amount of social security and

Medicare taxes imposed on employees
w ~ t hresped lo wages paid to alien indi-

February 26, 2001

(6) FaiIure to withhold OT pay the correct mount of a e s on royal~iesor other
t y ~ of
s taxable lncorne paid to nonresidmt alicn individunls (5s 141-1464 of
the Code);anti
(7j Failure to report the correct amount
of any or all of the taxes listed above
(g$ 1441-1464md 6 0 1 1 ofthe Ccdc).

74 0

rclaies.

2001-9 I.R,B,

( 3 ) Copies of the original Forms 941, addresses fur the mailing of VCAP sub945, 1042, if any, as filed that relate to the mksions.
above calculations.
[nternal Revenue Servicc
(4) Copies o f Forms 8233, 1001,
Roger Greening
W-XBEN, W-9, or sufficient infcnnation
Manager EPP
to support t u treaty claims.
11M
i Commerce Skeet
(5)In cases involving the failure to pay
MC: 49 IODAL
the correct arnouni o f social security and
Dallas, TX 75242
Medicare excise taxes imposed on
employers with !o respect wages paid 10 SEC. 5. PROCESSMG OF VCAP
alien individuals ($ 3 I 1 l(a) and 3 11l(b) REQUESTS
of the Code). and the failure lo wlthhold
-01 Inadequate or incomplerc suhm1.7or pay the correct amount ofsocial securision
or rcqueslfor additional ittformalion.
t y and Medicare taxes impused on
I
f
the
submission fails to comply with the
employees with respect to wages paid to
provisions
of this revenue procedure or
alien individuals(Q 3lOl(a)and Q: 3101(b)
of \he Code), a description of how Foms the Service requircs additional i n f o m W-2C will bc prepared and provided to tion, the Service representative assigned
a f f c c ~ d employees and the Sociai to the casc will contact the eligible organization or its representative and explain
Security Administration.
.04 Signatures. The submission must what is needed to complete the submisbe signed by an off~cerof the eligible sion. The organkation will have 90 busiorganization who is authorized to sign w ness days from the date of this contact to
h c eligible organization's authorized rep- providc the requested inform;liion. A n y
request for an extension of the 90-day
resenlatt ve.
.05 Power 01Aftorncy r e q u i ~ m e n t s . time period must be made prior tu expiraTo sign the submission or to appear before tim of the period, and must be approved
the Service in connection with the sub- by the TUG E Area Manager of the appromission, a rcpresentative must coniply priate TWGE Area Office, or his or her
with the requirements of section 9 of Rev. designated rcpresentative. If the requested information is not received within 90
Prw. 2001 4,2000-1 I.R.B. 135.
.06Penally ofperjur). sratement. The business days, or an agreemmt cannot bc
folluwing declaratiun niust accompany a reached on correction or administrative
VCAP submission and any factual infor- procedures, the matler will be closed, and
matiun suhm#ed after the original sub- the Service may consider the case Tor
mission or any change in the submission examination.
.02 Derwmining tax liability. Once the
at a later time: "Under penalties of perjury, L declare that I have ezamirred this Service accepts the submission under
submission, including accompahying VCAP, thc Service will analyze the eligidocurneats, and to the best of my ble organization's calculation of its tax
knowledge and belief, the facts present- liability regarding payments to alien indied in support of the VCAP request are viduals, and will analyze the accnmpanytrue, correct, and c~rnplete.~
The decla- ing workpapers, schedules, and returns
ration must be signed by Ihe cligible orgil- which support such calculation. The
n~zation's oBc.er, not thc organization's Scrvim will generally apply the following
approach to determine thc tax liability of
representative
-07 Marked Ietrer and marked r n w - an eligible organizal~on:
(1) Thc Service wilI normally allow tax
loyw The letter which transmitsthe rubmlsslun lo the Service must be niarkcd treaty benefits in the computation of any
"VC.4 P" in the upper right-hand comcr of adjustmetits to taxes and withholding of
the letter, and the envelope cuntaining the taxes on paymehb to nonresident alien
submission must be tilarked "VCAP" in individuals, even in the absence of Furms
the lower left-hmd corner of the envc- 8233, 1001, W-9, or W-8BEN if the eligible wganizatiim has acted in good faith
lop.
.OII Muillng address. The submission and provides sufficient information to
must be mailed to the address shown supporl the beaty claims.
(2) Interest on the eligible organiirabelow
T h e Service may issue an
announcement later which cuntaias othcr hen's underpayments will be due from the

2001-9 I.R.B.

last dab prescribed
payment of the
taxes (determined wilhout regard to
VCAP or any cxtensiwn o l tune for payment) to the date on w h c h payment is
m e i v * provided, however, that interestfree adjustments o i underpayments o f cerlain employment taxes may be nbadc in
accordance with 9: 6205(a)( 1) uf the Cude,
Proposed Treas. Reg 6 3 1.6205- 1(b) and
(c), and Rev. Rul. 75-464, 1975-2 C.B
474.
(3) The Service will not ;~r;seriany
penalties on the eligible organization's
liability. if the organization's t i ~ l u r eto
withhold, pay, and report taxes as
described in section 1 uf this revenue p ~ o cedure, is due to rtasunable cause.
(4) In cetain cases involving large Iiabilities, Ule Service will conslder the cligible organization's proposal for payment
u f h e liability in more than one instdlment. See lntemal Revenue Manuat
(IRM) Handbook 4.3.2, Exam~nation
Collectibility Handbook, Chapter 4,
Installment Agreements (05-25-2000).
Applicants may also wlsh it> avail themselves of the procedures tor making a
d q o s i t in the nature o f a cash bond as
contained in Rev. Proc. 84-58, 1984-2
C.B. 50 1.
.03 R e v i m oj' Ehgible Urgonization
compliance pwuedure.~. The el~gible
organization must demonstrate to thc sal~sfaccionof the Service that it has irnplementcd (or it has plans fur implementing)
policies and procedures that ensure that
the correa amount of taxes and withholding of taxes on payments to alien individuals are repotled and paid over to the
Service on the proper forms and m a tme1y manner. The Service will rmiew h
eligible organization's policies and procedures to assure itself that h e policies and
procedures am reasonably likely lo bring
the organization into compl~ance on a
prospective basis. The Ssrvlce reserves
the right to prescnbc appropriate adnunistrative pmedwes, but w ~ l lftrst dlscus
the appropriateness of existing procedures
with the urgmizaticln. Where the C W G r i l
procedures, or proposed future ptwedures, are inadequate for complying with
the relevant tax, withhvlding, and reportlng requirements, the Scrvlce alsu
reserves the right to dcny relief under
VPAP.
.04 Other tax liahiliri~sor rsuvm. If
the Scrvice discovers an unrelated tax lia-

February 26, 2001

The estimated annual hequency of
responses is on occasion.
Books or records relating tu a collcc.08 Applicabilip of JJ dIO3 and 6110.
Thr: information received or generated by tim of information must bt: retained as
the Service under VCAP is subject to the long its lheir cvntents may becume materzuntidentiality requirements of 5 6103 of ial in the administration of any internal
the Code. The achowledgment letter is revenue law. Generally, tax returns and
tax return inromation arc confidential, as
no1 a written deternation letter within
S ~ r v i c crcstrvcs thc right to verify that
required by 26 U.S.C.fi 6103.
cclrrcc~ionshave h e n made to h e eligible the meaning of p 6 1 10 of the Code.
.U9 Conferencm. Ifthe Serviceinitialorganization's tax, withholding, and
reporting procedures on payments to allen ly determines Ibal it catlr,ot issue an SEC. 8. DRAFTMG INFOWLATION
individuals. \'erifl~aiion of such cwrcc. acknowledgmen~letter becatrw the parties
The principal aulhors of this rcvcnuc
tiotls does not cunstitute an examination cannot agree upon some correctiun or
procedure are Lowell 6 . Hancock of Lhc
of the book and rccords of the organiza- admmistrauve issue, the organizatton or
Office of Pre-Filing Services, and
tion. If thc Service determines that the Ihc ilrganrzation's representative may lx Virginia Richardson of the Tax
e l ~ g ~ borgu~izatiur~
le
l ~ a nu1
s u~lplemcnlcd gmntcd a canferencc with the Service, at
ExernptlGovernmu~t Enittics D i v i s i ~ n .
or dues not plan to implement the proper the Service's discretion and upon request For more in forrna tion concerning VCAP,
corrections and procedures, the case may by the organization or the organizatiun's
contact hlr. Hancock at (202) 874-1800 or
be considcred for examination. The representative. The conference can be
(330) 315-5421 (not toll-frce nurnkrs),
Service does not cuntrmplate upc~hirlg held cither in pcrson or by telephone. If a
Ms. Richardson at (202) 283-8938 ( l o t a
e.ranrtnatiuns on VCAP subnussions but conference is offered, the organization or
toll-free number), or Neil Shepherd of the
reserves the right to do so. If the Service its representative will be contacted by the Offire of the Associate Chief Counsel
decides to examine thc eligible organizii- S c n ~ c erepresenhijve.
(Tax Exempt and Government Entities) at
tim, h e emnknatlon will be cornmen~d
(202) 622-6040(not a toll-frcc number).
SEC.
6.
EFFECTIVE
DATE
AND
and completed as soon as possible, with
the ~l-rtenttonIn most cases that h e scope SUNSET DATE
of the examination s i l l be lin~itedto tax
VCAP is effective on February 26, 26 CFR 6fl1.601; Rule* mtd rrgrrlationr
and withhoihng obl~gationson payments 2001 It will be available for submissrons (Aho PartI, fflDDI. I J801-3. 1 137r-1)
tu a l ~ c nindividuals and related issues.
made on ar berom February 28,2002.
Rev. Proc. 2001-21
-06 Ac&nt)wledgmcnI letter.
If the
Service is satisficd at the conclusion of its SEC. 7. PAPERWORK WDUCTION
review that [he organization has insbtuted ACT
SECTION I. PURPOSE
pol~ciesand ptwedwzs which ensure t h a t
This revenue procedure provides an
The collectim of information contained
the correct aniounts of taxes on payments
to alien individuals are withheld, paid, in this revenue procedure have been election that will facilitate the substitua t d reponed to the Service on the propr reviewed aid approved by thc OfTica o f tion of newly issued deht instruments
fbrnis and in a timely manner, thm the Management and Budge in acccqdance with For outstanding debt instruments.
Service will issue to the eligible organiza- the Papwork R o d u k o n Ad (44 U.S.C. Ij Under the election, laxpaycrs can treat
a substitution of debt instruments, in
tiun an acknowledpnmt letter ~ndicating 3507)un&r control number 1545-1735.
An agency may no1 curduct UI sponsor, ccriain circumslances, as a realtzntinn
that based Upon its review, the eligible
to. event for federal income tax purposes
orgmizaticn i s at h i time in subsfaniial and a pmon is rmt requiredto -mid
cur~~pl~ance
wtth the tax, withholding, and a collection of information unless the col- even though i t does not result in a sigreporting obl~gationsgoverning payments lection of infurrnation displays a valid nificant modification under Q: 1.1001--3
o f the Income Tax Regulations (and.
to alien individuals. Once the organiw- control nwnkr.
The collections of infmnation con- therefore, is not otherwise an exchange
tion has received an acknowledgment Ictter at the completion of the VCAP taincd in this revenue procedure are in for purposes of 5 1.1001-]{a)). Under
process, and provided l)lat the ~rgmi7a- seaton 4.02 and section 4.03(2). This sectlon 4 of this revenue procedure,
t~oni r l fact cunlplies with the agreed upun infvrmation will enable dtc Scrvicc to taxpnycrs du not recognize any realized
withholding, p a y n ~ n tand reporting pro- dekrmine whether an organization quali- gain or loss on the date of thc substitucedures, the information submitied by the fies Tor V C M . The tikely rcspvnder~tsare tion. Instead, the gain or loss generally
orgmization tu the Service mQr VCAP public and other not-for-profit colleges is taken into account as income ur
will nut be used as the basis to initiate an and universities and certain utlier \;liariid- dcduclions uvcr thr: term u f rllc new
bility or exmption issue while considering the requtst, that issue will remain outside the scope uf the VCAP subrnissim
bzcausc it was not voluntarily brought
forward by the organir.ation.
05 Ven]icafion
As part uf Chz processing of the VCAP submission, ihe

prmedures, the Service may consider (he
case for examination.

-

exmiination ol' the organizatim~.
.07 Fuilurc. ro reach resoIutiun. If resolution m n o t be reached because suficicni infomation is not tinlely provided to
the Servic: or because agreement cannot
be rcnched on correction or administrative

February 26, 2001

blc urganirations.

The estimated tow1 annual reporting
burden is 346,500hours.
The estimated average m u a l burden
per respondent is 700 hours. The estimatEd number of rapondents is 495.

debt instruments.
This revenue procedure modifies and
supersedes Rev. Froc. 99- 18, t 999- L
C.B. 736, which, as modifi~dby Rev.

PKIC. 7000-29, 2000-28 1.R.B. 113,
applies to substitul~onsh a t occur on or