Td 8719 / Reg-209837-96

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 42.—Low-Income Housing
Credit

Rev. Rul. 97–25
In Rev. Rul. 90–60, 1990–2 C.B. 3,
the Internal Revenue Service provided
guidance to taxpayers concerning the
general methodology used by the Treasury Department in computing the bond
factor amounts used in calculating the
amount of bond considered satisfactory
by the Secretary under § 42(j)(6) of the
Internal Revenue Code. It further announced that the Secretary would pub-

Low-income housing credit; satisfactory bond; “bond factor” amounts
for the period April through June
1997. This ruling announces the
monthly bond factor amounts to be used
by taxpayers who dispose of qualified
low-income buildings or interests therein
during the period April through June
1997.

lish in the Internal Revenue Bulletin a
table of ‘‘bond factor’’ amounts for
dispositions occurring during each calendar month.
This revenue ruling provides in Table
1 the bond factor amounts for calculating the amount of bond considered
satisfactory under § 42(j)(6) for dispositions of qualified low-income buildings
or interests therein during the period
April through June 1997.

Table 1
Rev. Rul. 97–25
Monthly Bond Factor Amounts for Dispositions Expressed
As a Percentage of Total Credits
Calendar Year Building Placed in Service
or, if Section 42(f)(1) Election Was Made,
the Succeeding Calendar Year
Month of
Disposition

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

Apr ’97
May ’97
Jun ’97

79.00
78.77
78.55

81.35
81.11
80.88

83.91
83.66
83.42

86.90
86.64
86.40

90.40
90.13
89.87

94.39
94.09
93.81

98.50
98.18
97.88

102.45
102.11
101.79

106.31
105.95
105.61

110.36
109.98
109.64

112.52
112.52
112.52

For a list of bond factor amounts
applicable to dispositions occurring during other calendar years, see the following revenue rulings: Rev. Rul. 90–60,
1990–2 C.B. 3, for dispositions occurring during calendar years 1987, 1988,
and 1989; Rev. Rul. 90–88, 1990–2 C.B.
7, for dispositions occurring during calendar year 1990; Rev. Rul. 91–67,
1991–2 C.B. 13, for dispositions occurring during calendar year 1991; Rev.
Rul. 92–101, 1992–2 C.B. 9, for dispositions occurring during calendar year
1992; Rev. Rul 93–83, 1993–2 C.B. 6,
for dispositions occurring during calendar year 1993; Rev. Rul. 94–71, 1994–2
C.B. 4, for dispositions occurring during
calendar year 1994; Rev. Rul. 95–83,
1995–2 C.B. 8, for dispositions occurring during calendar year 1995; Rev.
Rul. 96–16, 1996–1 C.B. 3, for dispositions occurring during the period January through March 1996; Rev. Rul.
96–33, 1996–27 I.R.B. 4, for dispositions occurring during the period April
through June 1996; Rev. Rul. 96–45,
1996–39 I.R.B. 5, for dispositions occurring during the period July through
September 1996; Rev. Rul. 96–59,
1996–50 I.R.B. 4, for dispositions occurring during the period October
through December 1996; and Rev. Rul.
97–16, 1997–13 I.R.B. 4, for disposi-

tions occurring during the period January through March 1997.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Jack Malgeri of the Office of
Assistant Chief Counsel (Passthroughs
and Special Industries). For further information regarding this revenue ruling,
contact Mr. Malgeri at (202) 622–3040
(not a toll-free call).
Section 446.—General Rule for
Methods of Accounting
26 CFR 1.446–1: General rule for methods of
accounting.

T.D. 8719
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 301 and 601
Requirements Respecting the
Adoption or Change of Accounting
Method; Extensions of Time to
Make Elections

procedure for requesting a change in
accounting method and to the standards
for granting an extension of time to
request a change in accounting method.
The regulations provide for a longer
period of time for filing an application
for change in accounting method with
the Commissioner. The regulations also
provide that an extension of time to file
an application for change in accounting
method will be granted only in unusual
and compelling circumstances. The
regulations affect taxpayers requesting a
change in method of accounting for
federal income tax purposes. The text of
these temporary regulations also serves
as the text of REG–209837–96 and
REG–105299–97, page 8.
DATES: These regulations are effective
May 15, 1997.
For dates of applicability of these
regulations, see §§ 1.446–1T(e)(3)(iii),
301.9100–1T(h) and 601.204T(e) of
these regulations.
FOR FURTHER INFORMATION CONTACT: Cheryl L. Oseekey at (202)
622–4970 (not a toll-free number).

AGENCY: Internal Revenue Service
(IRS), Treasury.

SUPPLEMENTARY INFORMATION:

ACTION: Temporary regulations.

Background

SUMMARY: This document contains
temporary regulations relating to the

This document contains amendments
to the Regulations on Income Taxes (26

4

CFR part 1), the Regulations on Procedure and Administration (26 CFR part
301), and the Statement of Procedural
Rules (26 CFR part 601) relating to the
requirements for changes in method of
accounting and extensions of time to
make elections. Proposed and temporary
regulations relating to extensions of time
to make elections were published in the
Federal Register for June 27, 1996 (61
FR 29714 and 61 FR 33365). These
regulations extend the time for filing an
application for change in accounting
method under § 1.446–1(e)(3)(i) and
amend §§ 301.9100–1T and 301.9100–
3T to provide that an extension of time
to file an application for change in
accounting method beyond the year provided in these regulations will be
granted only in unusual and compelling
circumstances.
Explanation of Provisions
Section 446(e) requires that a taxpayer obtain the Commissioner’s consent before changing a method of accounting. Sections 1.446–1(e)(3)(i) and
601.204(b) require the taxpayer to file a
Form 3115, Application for Change in
Accounting Method, with the Commissioner within the first 180 days of the
taxable year in which the taxpayer desires to make the change. Sections
301.9100–1T and 301.9100–3T provide
limited relief for extending the time to
file a Form 3115 (not to exceed 90 days
from the deadline for filing the Form
3115 except in unusual and compelling
circumstances).
Sections
1.446–1(e)(3)(i)
and
601.204(b) are amended to provide that
a taxpayer must file a Form 3115 with
the Commissioner during the taxable
year in which the taxpayer desires to
make the change in method of accounting. Taxpayers are encouraged to file the
Form 3115 as early as possible during
the year of change to provide the IRS
adequate time to process the application
prior to the original due date of the
taxpayer’s return.
In addition, §§ 301.9100–1T and
301.9100–3T are amended to provide
that an extension of time to file a Form
3115 (i.e., beyond the taxable year) will
only be granted in unusual and compelling circumstances.

Special Analyses
It has been determined that this Treasury decision is not a significant regulatory action as defined in EO 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. Sections
1.446–1(e)(3)(i) and 601.204(b) require
a taxpayer to file a Form 3115, Application for Change in Accounting
Method, with the Commissioner within
the first 180 days of the taxable year in
which the taxpayer desires to make the
change. The temporary regulations in
this document, §§ 1.446–1T(e)(3)(i) and
601.204T(b), merely extend the time for
filing the Form 3115 and, therefore, do
not contain a new collection of information. Thus, because the regulations do
not impose a collection of information
on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the
Internal Revenue Code, these temporary
regulations will be submitted to the
Chief Counsel for Advocacy of the
Small Business Administration for comment on their impact on small business.
Drafting Information
The principal author of these regulations is Cheryl L. Oseekey of the Office
of Assistant Chief Counsel (Income Tax
and Accounting). However, other personnel from the IRS and Treasury Department participated in their development.
*

*

*

*

Adoption of Amendments to the Regulations
Accordingly, 26 CFR parts 1, 301,
and 601 are amended as follows:

§ 1.446–1T General rule for methods of
accounting (temporary).
(a) through (d) [Reserved] For further
guidance, see § 1.446–1(a) through (d).
(e) Requirement respecting the adoption or change of accounting method.
(1) and (2) [Reserved] For further
guidance, see § 1.446–1 (e)(1) and (2).
(3)(i)(A) [Reserved] For further
guidance, see § 1.446–1(e)(3)(i).
(B) For any Form 3115 filed on or
after May 15, 1997, permission to
change a taxpayer’s method of accounting will not be granted unless the taxpayer agrees to the Commissioner’s prescribed terms and conditions for
effecting the change, including the taxable year or years in which any adjustment necessary to prevent amounts from
being duplicated or omitted is to be
taken into account.
(ii) and (iii) [Reserved] For further
guidance, see § 1.446–1(e)(3) (ii) and
(iii).
PART 301—PROCEDURE AND ADMINISTRATION
Par. 4. The authority citation for part
301 continues to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 5. In § 301.9100–1T, paragraph
(h) is amended by adding a sentence at
the end of the paragraph to read as
follows:
§ 301.9100–1T Extensions of time to
make elections (temporary).
*

*

*

*

*

(h) * * * In addition, § 301.9100–
3T(c)(2)(i) is effective for any Form
3115 filed on or after May 15, 1997.
Par. 6. In § 301.9100–3T, paragraph
(c)(2)(i) is revised to read as follows:

PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as
follows:
Authority: 26 U.S.C. 7805. * * *
Par. 2. Section 1.446–1, paragraph
(e)(3)(i) is amended by adding a sentence at the end of the paragraph to read
as follows:
§ 1.446–1 General rule for methods of
accounting.
*

These amendments are effective for
Forms 3115 filed on or after May 15,
1997.

*

Par. 3. Section 1.446–1T is added to
read as follows:

*

*

*

*

(e)(3) * * * For any Form 3115 filed
on or after May 15, 1997, see § 1.446–
1T(e)(3)(i)(B).

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§ 301.9100–3T Other extensions (temporary).
*

*

*

*

*

(c) * * *
(2) * * *
(i) Subject to the procedure described
in § 1.446–1T(e)(3)(i) of this chapter
(requiring the advance written consent
of the Commissioner);
*

*

*

*

*

PART 601—STATEMENT OF PROCEDURAL RULES
Par. 7. The authority citation for part
601 continues to read as follows:

Authority: 26 U.S.C. 301 and 552,
unless otherwise noted.
Par. 8. Section 601.204, paragraph (b)
is amended by adding a sentence at the
end of the paragraph to read as follows:
§ 601.204 Changes in accounting periods and in methods of accounting.
*

*

*

*

*

(b) * * * For any Form 3115 filed on
or after May 15, 1997, see § 601.204T(b)(2).
Par. 9. Section 601.204T is added to
read as follows:
§ 601.204T Changes in accounting periods and in methods of accounting (temporary).
(a) [Reserved] For further guidance,
see § 601.204(a).
(b) Methods of accounting. (1) [Reserved] For further guidance, see
§ 601.204(b).
(2) For any Form 3115 filed on or
after May 15, 1997, application for
permission to change the method of
accounting employed shall be made on
Form 3115 and filed with the Commissioner during the taxable year in which
the taxpayer desires to make the change
in method of accounting. Permission to
change the method of accounting will
not be granted unless the taxpayer and
the Commissioner agree to the terms
and conditions under which the change
will be effected.
(c) and (d) [Reserved] For further
guidance, see § 601.204(c) and (d).
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved May 2, 1997.
Donald C. Lubick,
Assistant Secretary of the Treasury.
(Filed by the Office of the Federal Register on
May 14, 1997, 8:45 a.m., and published in the
issue of the Federal Register for May 15, 1997, 62
F.R. 26740)

Section 2652.—Other Definitions
26 CFR 26.2652–1: Transferor defined; other
definitions.

T.D. 8720
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 26
Generation-Skipping Transfer Tax
AGENCY: Internal Revenue Service
(IRS), Treasury

ACTION: Final Regulations.
SUMMARY: This document contains
final regulations relating to the
generation-skipping transfer (GST) tax
regulations under chapter 13 of the
Internal Revenue Code (Code). This
document amends the final regulations
under section 2652 and is necessary to
provide guidance to taxpayers so that
they may comply with chapter 13 of the
Code.
DATES: This regulation is effective on
May 20, 1997.
For dates of applicability of these
regulations, see Effective Date under
Supplementary Information.
FOR FURTHER INFORMATION CONTACT: James F. Hogan, (202) 622–3090
(not a toll-free number),
SUPPLEMENTARY INFORMATION:
Background
On December 27, 1995, the IRS published final regulations in the Federal
Register (60 FR 66898 [T.D. 8644 C.B.
200]) under sections 2611, 2612, 2613,
2632, 2641, 2642, 2652, 2653, 2654,
and 2663. On June 12, 1996, a notice of
proposed
rulemaking
deleting
§ 26.2652–1(a)(4) and two related examples was published in the Federal
Register (61 FR 29714 [PS–22–96,
1996–33 I.R.B. 15]). No comments responding to the notice of proposed
rulemaking were received, and no public
hearing was requested or held. The final
regulations are adopted as proposed.
Explanation of Provision
Section 2652(a)(1) provides generally,
that the term transferor means—(A) in
the case of any property subject to the
tax imposed by chapter 11, the decedent,
and (B) in the case of any property
subject to the tax imposed by chapter
12, the donor. An individual is treated as
transferring any property with respect to
which the individual is the transferor.
Under § 26.2652–1(a)(2), a transfer is
subject to Federal gift tax if a gift tax is
imposed under section 2501(a) and is
subject to Federal estate tax if the value
of the property is includible in the
decedent’s gross estate determined under
section 2031 or section 2103. Under
§ 26.2652–1(a)(4), the exercise of a
power of appointment that is not a
general power of appointment is also
treated as a transfer subject to Federal
estate or gift tax by the holder of the

6

power if the power is exercised in a
manner that may postpone or suspend
the vesting, absolute ownership, or
power of alienation of an interest in
property for a period, measured from the
date of the creation of the trust, extending beyond any specified life in being at
the date of creation of the trust plus a
period of 21 years plus, if necessary, a
reasonable period of gestation.
The purpose of the rule in
§ 26.2652–1(a)(4) was to impose the
GST tax when it may not otherwise
have applied. It was never intended to
(nor could it) prevent the application of
the tax pursuant to the statutory provisions that apply based on the original
taxable transfer. To eliminate any uncertainty concerning the proper application
of the GST tax, the regulations under
section 2652(a) are clarified by eliminating § 26.2652–1(a)(4) and Example 9
and Example 10 in § 26.2652–1(a)(6)
from the regulations.
Effective Date
These amendments apply to transfers
to trusts on or after June 12, 1996.
Special Analyses
It has been determined that this Treasury Decision is not a significant regulatory action as defined in EO 12866.
Therefore, a regulatory assessment is not
required. It has also been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations and, because these regulations do not impose a
collection of information on small entities, the Regulatory Flexibility Act (5
U.S.C. chapter 6) does not apply. Therefore, a Regulatory Flexibility Analysis 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 Small
Business Administration for comment on
its impact on small business.
Drafting Information
The principal author of this regulation
is James F. Hogan, Office of the Chief
Counsel, IRS. Other personnel from the
IRS and Treasury Department participated in its development.
*

*

*

*

*

Amendments to the Regulations
Accordingly, 26 CFR part 26 is
amended as follows:

PART 26—GENERATION-SKIPPING
TRANSFER TAX REGULATIONS UNDER THE TAX REFORM ACT OF
1986
Paragraph 1. The authority citation for
part 26 continues to read, in part, as
follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2 Section 26.2652–1 is amended
as follows:
1. Paragraph (a)(4) is removed and
paragraphs (a)(5) and (a)(6) are redesignated as paragraphs (a)(4) and (a)(5),
respectively.
2. In newly designated paragraph
(a)(5), Examples 9 and 10 are removed

and Example 11 is redesignated as Example 9.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved May 1, 1997.
Donald C. Lubick,
Assistant Secretary of the Treasury.
(Filed by the Office of the Federal Register on
May 19, 1997, 8:45 a.m., and published in the
issue of the Federal Register for May 20, 1997, 62
F.R. 27496)

Section 6012.—Persons Required
To Make Returns of Income
26 CFR 1.6012–5: Composite return in lieu of
specified form.
General procedures are provided to inform those
who participate in the Magnetic Media/Electronic
Filing Program for Form 1040NR, of their obligations to the Internal Revenue Service, taxpayers,
and other participants. See Rev. Proc. 97–28,
page 9.

Section 6061.—Signing of Returns
and Other Documents
26 CFR 1.6061–1: Signing of returns and other
documents by individuals.
General procedures are provided to inform those
who participate in the Magnetic Media/Electronic
Filing Program for Form 1040NR, of their obligations to the Internal Revenue Service, taxpayers,
and other participants. See Rev. Proc. 97–28,
page 9.

7

Part III. Administrative, Procedural, and Miscellaneous
Notice of Proposed Rulemaking

SUPPLEMENTARY INFORMATION:

Comments and Public Hearing

Requirements Respecting the
Adoption or Change of Accounting
Method; Extensions of Time To
Make Elections

Background

Before these proposed regulations are
adopted as final regulations, consideration will be given to any comments
that are submitted timely to the IRS (a
signed original and eight (8) copies if
the comments are written). All comments will be available for public inspection and copy. A public hearing may
be scheduled if requested in writing by
a person that timely submits comments.
If a public hearing is scheduled, notice
of the date, time, and place for the
hearing will be published in the Federal
Register.

REG–209837–96; REG–105299–97
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking by cross-reference to temporary
regulations.
SUMMARY: In T.D. 8719, page 4, the
IRS is issuing temporary regulations
relating to the procedure for requesting
a change in accounting method and to
the standards for granting an extension
of time to request a change in accounting method. The regulations provide for
a longer period of time for filing an
application for change in accounting
method with the Commissioner. The
regulations also provide that an extension of time to file an application for
change in accounting method will be
granted only in unusual and compelling
circumstances. The regulations affect
taxpayers requesting a change in method
of accounting for federal income tax
purposes. The text of those temporary
regulations also serves as the text of
these proposed regulations.
DATES: Written comments must be received by August 13, 1997.
ADDRESSES: Send submissions to:
CC:DOM:CORP:R (REG–209837–96
and REG–105299–97), room 5228, Internal Revenue Service, POB 7604, Ben
Franklin Station, Washington, DC
20044. Submissions may be hand delivered between the hours of 8 a.m. and 5
p.m. to: CC:DOM:CORP:R (REG–
209837–96 and REG–105299–97), Courier’s Desk, Internal Revenue Service,
1111 Constitution Avenue NW, Washington, DC. Taxpayers may also submit
comments electronically via the internet
by selecting the ‘‘Tax Regs’’ option on
the IRS Home Page, or by submitting
comments directly to the IRS internet
site at http://www.irs.ustreas.gov/prod/
tax_regs/comments.html.
FOR FURTHER INFORMATION CONTACT: Cheryl L. Oseekey, (202) 622–
4970 (not a toll-free number).

Temporary regulations T.D. 8719
amend Regulations on Income Taxes (26
CFR part 1), the Regulations on Procedure and Administration (26 CFR part
301), and the Statement of Procedural
Rules (26 CFR part 601) relating to the
requirements for changes in method of
accounting and extensions of time to
make elections. Proposed and temporary
regulations relating to extensions of time
to make elections were published in the
Federal Register for June 27, 1996 (61
FR 29714 and 61 FR 33365). These
regulations extend the time for filing an
application for change in accounting
method under § 1.446–1(e)(3)(i) and
amend §§ 301.9100–1T and 301.9100–
3T to provide that an extension of time
to file an application for change in
accounting method will be granted only
in unusual and compelling circumstances.
The text of those temporary regulations also serves as the text of these
proposed regulations. The preamble to
the temporary regulations explains the
rules provided by the regulations.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant regulatory action as defined in EO
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. Sections 1.446–1(e)(3)(i)
and 601.204(b) require a taxpayer to file
a Form 3115, Application for Change in
Accounting Method, with the Commissioner within the first 180 days of the
taxable year in which the taxpayer desires to make the change. The proposed
regulations in this document merely extend the time for filing the Form 3115
and, therefore, do not contain a new
collection of information. Thus, because
the regulations do not impose a collection of information on small entities, the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to
section 7805(f) of the Internal Revenue
Code, this notice of proposed rulemaking will be submitted to the Chief
Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.

8

Drafting Information
The principal author of these regulations is Cheryl L. Oseekey of the Office
of Assistant Chief Counsel (Income Tax
and Accounting). However, other personnel from the IRS and Treasury Department participated in their development.
*

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*

*

*

Proposed Amendments to the Regulations
Accordingly, 26 CFR parts 1, 301,
and 601 are proposed to be amended as
follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as
follows:
Authority: 26 U.S.C. 7805. * * *
Par. 2. Section 1.446–1 is amended by
revising paragraph (e)(3)(i) to read as
follows:
§ 1.446–1 General rule for methods of
accounting.
[The text of proposed paragraph
(e)(3)(i) is the same as the text in
§ 1.446–1T(e)(3)(i) published in T.D.
8719.]
PART 301—PROCEDURE AND ADMINISTRATION
Par. 3. The authority citation for part
301 continues to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 4. In § 301.9100–1, paragraph
(h) is added to read as follows:
§ 301.9100–1 Extensions of time to
make elections.
[The text of proposed paragraph (h) is
the same as the text of § 301.9100–

1T(h) published June 27, 1996, at 61 FR
33368, and amended in T.D. 8719.]
Par. 5. In proposed § 301.9100–3,
published June 27, 1996, at 61 FR
33409, paragraph (c)(2)(i) is revised to
reads as follows:
§ 301.9100–3 Other extensions.
[The text of proposed paragraph
(c)(2)(i) is the same as the text in
§ 301.9100–3T(c)(2)(i) published in
T.D. 8719.]
PART 601—STATEMENT OF PROCEDURAL RULES
Par. 6. The authority citation for part
601 continues to read as follows:
Authority: 26 U.S.C. 301 and 552.
***
Par. 7. In § 601.204, paragraph (b) is
revised to read as follows:
§ 601.204 Changes in accounting periods and in methods of accounting.
[The text of proposed paragraph (b) is
the same as the text in § 601.204T(b)
published in T.D. 8719.]
Margaret Milner Richardson,
Commissioner of Internal Revenue.
(Filed by the Office of the Federal Register on
May 14, 1997, 8:45 a.m., and published in the
issue of the Federal Register for May 15, 1997, 62
F.R. 26755)
26 CFR 601.602 : Tax forms and instructions.
(Also Part I, §§ 6012, 6061; 1.6012–5, 1.6061–1.)

Rev. Proc. 97–28
CONTENTS
SECTION 1. PURPOSE
SECTION 2. BACKGROUND AND
CHANGES
SECTION 3. 1040NR PROGRAM
PARTICIPANTS—DEFINITIONS
SECTION 4. ACCEPTANCE INTO
THE 1040NR PROGRAM
SECTION 5. RESPONSIBILITIES OF
A 1040NR FILER
SECTION 6. PENALTIES
SECTION 7. FORM 8453–NR, U.S.
NONRESIDENT ALIEN INCOME
TAX DECLARATION FOR MAGNETIC MEDIA FILING
SECTION 8.
INFORMATION A
1040NR FILER MUST PROVIDE
TO THE TAXPAYER
SECTION 9. DIRECT DEPOSIT OF
REFUNDS
SECTION 10. BALANCE DUE RETURNS

SECTION 11. ADVERTISING STANDARDS FOR 1040NR FILERS AND
FINANCIAL INSTITUTIONS
SECTION 12. MONITORING AND
SUSPENSION OF A 1040NR FILER
SECTION 13. ADMINISTRATIVE REVIEW PROCESS FOR DENIAL OF
PARTICIPATION IN THE 1040NR
PROGRAM
SECTION 14. ADMINISTRATIVE REVIEW PROCESS FOR SUSPENSION FROM THE 1040NR PROGRAM
SECTION 15. EFFECT ON OTHER
DOCUMENTS
SECTION 16. EFFECTIVE DATE
SECTION 17. PROJECT OFFICE INFORMATION
SECTION 1. PURPOSE
This revenue procedure informs those
who participate in the 1997 Magnetic
Media/Electronic Filing Program for
Form 1040NR, U.S. Nonresident Alien
Income Tax Return (‘‘1040NR Program’’), of their obligations to the Internal Revenue Service, taxpayers, and
other participants. This revenue procedure updates Rev. Proc. 96–35, 1996–1
C.B. 721.
SECTION 2. BACKGROUND AND
CHANGES
.01 Section 1.6012–5 of the Income
Tax Regulations provides that the Commissioner may authorize the use, at the
option of a person required to make a
return, of a composite return in lieu of
any form specified in 26 CFR Part 1
(Income Tax), subject to the conditions,
limitations, and special rules governing
the preparation, execution, filing, and
correction thereof as the Commissioner
may deem appropriate.
.02 For purposes of this revenue procedure, a magnetically or electronically
filed Form 1040NR is a composite return consisting of data submitted on
magnetic tape, floppy disk, or via modem (the ‘‘data portion’’), and certain
paper documents (the ‘‘paper portion’’).
The paper portion of the return consists
of a Form 8453–NR, U.S. Nonresident
Alien Income Tax Declaration for Magnetic Media Filing, and other paper
documents that cannot be filed magnetically or electronically. Form 8453–NR
must be received by the Service before
any composite return is complete (see
section 5.07 of this revenue procedure).
A composite return must contain the
same information that a return filed

9

completely on paper contains. See section 7 of this revenue procedure for
procedures for completing Form 8453–
NR.
.03 The Magnetic Media Project Office (‘‘Project Office’’, see section 17 of
this revenue procedure for the address
and telephone numbers) will periodically
issue a list of the forms and schedules
that can be magnetically or electronically filed.
.04 A Form 1040NR with a zero
balance, balance due, or refund due may
be magnetically or electronically filed.
.05 A Form 1040NR cannot be filed
magnetically or electronically after December 5, 1997, notwithstanding the fact
that the taxpayer has been granted an
extension to file beyond that date. Form
2688, Application for Additional Extension of Time To File U.S. Individual
Income Tax Return, cannot be filed
magnetically or electronically.
.06 An amended tax return cannot be
filed magnetically or electronically. A
taxpayer must file an amended tax return on paper in accordance with the
instructions for Form 1040X, Amended
U.S. Individual Income Tax Return.
.07 Upon request, the Project Office
will provide technical information (file
specifications, record layouts, and testing procedures) for filing Form 1040NR
magnetically or electronically.
.08 This revenue procedure updates
Rev. Proc. 96–35, which applied to the
1040NR Program for the 1996 filing
season. The updates include changes in
the 1040NR Program for the 1997 filing
season, clarifications of prior 1040NR
Program statements, and additional guidance derived from other Service documents that relate to the 1040NR Program. Some of the updates are:
(1) a Service Bureau may submit
returns directly to the Service (section
3.02);
(2) in certain circumstances, a letter may be submitted in lieu of a revised
Form MAR–8980 (section 4.03);
(3) a nonparticipating 1040NR
Filer may be dropped from the 1040NR
Program (section 4.06);
(4) a 1040NR Filer may not base a
fee for the magnetic or electronic transmission of a Form 1040NR using any
amount from the return (section 5.04);
(5) the time period for a 1040NR
Filer to notify the Service that it is
discontinuing its participation in the
1040NR Program is extended to 30 days
(section 5.06);

(6) the duties of a 1040NR Return
Originator are clarified (sections 5.11,
5.12, 5.13, and 5.14);
(7) the duties of a 1040NR Transmitter are clarified (section 5.17);
(8) a 1040NR Filer, financial institution, or any other entity associated
with the magnetic or electronic filing of
a return must not put its address on
Form 8453–NR or anywhere in the data
portion of the return (section 7.01);
(9) procedures for corrections to
Form 8453–NR are clarified (section
7.02);
(10) a 1040NR Return Originator
must advise taxpayers that refund status
information is available on TeleTax (section 8.05);
(11) information a 1040NR Filer
must provide regarding a taxpayer’s address of record is clarified (section
8.06);
(12) information a 1040NR Return
Originator must provide regarding direct
deposit is clarified (section 9.04);
(13) the two-year periods for denial and suspension are modified and
clarified (sections 12.07 and 12.08);
(14) the time and method to respond to a proposed letter of denial and
a denial letter are clarified (sections
13.03 and 13.06); and
(15) the time and method to respond to a proposed suspension letter
and a suspension letter are clarified
(sections 14.02 and 14.05).
SECTION 3. 1040NR PROGRAM
PARTICIPANTS—DEFINITIONS
.01 After acceptance into the 1040NR
Program, as described in section 4 of
this revenue procedure, a participant is
referred to as a ‘‘1040NR Filer.’’
.02 A 1040NR Filer is categorized as
follows:
(1) 1040NR RETURN ORIGINATOR. A ‘‘1040NR Return Originator’’
is: (a) a ‘‘1040NR Return Preparer’’
who prepares tax returns, including
Forms 8453–NR, for taxpayers who intend to have their returns magnetically
or electronically filed; and/or (b) a
‘‘1040NR Return Collector’’ who accepts completed tax returns, including
Forms 8453–NR, from taxpayers who
intend to have their returns magnetically
or electronically filed.
(2) SERVICE BUREAU. A ‘‘Service Bureau’’ receives tax return information on any media from a 1040NR
Return Originator, formats the return
information, and either (a) sends back
the return information to the 1040NR

Return Originator, (b) forwards the return information to a Transmitter, or (c)
submits the composite tax return directly
to the Service.
(3) SOFTWARE DEVELOPER. A
‘‘Software Developer’’ develops software for the purposes of (a) formatting
returns according to the Service’s magnetic or electronic return filing specifications; and/or (b) filing returns magnetically or electronically directly with
the Service. A Software Developer may
also sell its software.
(4) TRANSMITTER. A ‘‘Transmitter’’ accepts a 1040NR composite tax
return from a 1040NR Return Originator
or Service Bureau and submits the return directly to the Service.
.03 The 1040NR Filer categories are
not mutually exclusive. For example, a
1040NR Return Originator can, at the
same time, be considered a Transmitter,
Software Developer, or Service Bureau
depending on the function(s) performed.
SECTION 4. ACCEPTANCE INTO
THE 1040NR PROGRAM
.01 Except as provided in sections
4.02 and 4.03 of this revenue procedure,
a 1040NR Filer that has actively participated in the 1996 1040NR Program
does not have to reapply to participate
in the 1997 1040NR Program. (See
section 4.06 of this revenue procedure
for a definition of active participation.)
However, a 1040NR Filer that intends to
function as a Transmitter or a Software
Developer in the 1997 1040NR Program
must first successfully complete the testing described in section 4.04 of this
revenue procedure. In addition, section
4.05 of this revenue procedure provides
for the Service’s issuance of credentials
necessary for participation in the 1997
1040NR Program.
.02 Applicants and 1040NR Filers
must file a new Form MAR–8980, Application for Electronic/Magnetic Media
Filing of Form 1040NR, with the
Project Office if:
(1) the applicant has never actively
participated in the 1040NR Program;
(2) the applicant has previously
been denied participation in the 1040NR
Program; or
(3) the applicant has been suspended from the 1040NR Program. Applications described in this section 4.02
may be submitted at any time during the
year.
.03 To participate in the 1997
1040NR Program, a 1040NR Filer in the
1996 1040NR Program must submit to

10

the Project Office either a revised Form
MAR–8980, or a letter containing the
same information contained in the revised Form MAR–8980, if there is any
change to the following information:
(1) the Firm name or Doing Business As (DBA) name;
(2) the business or mailing address;
(3) the contact person’s name or
telephone number; or
(4) the 1040NR Filer category.
Revised applications described in this
section 4.03 must be submitted within
30 days of the change(s) reflected on
the revised Form MAR–8980 or in the
letter.
.04 A 1040NR Filer may not submit
tax returns under the 1040NR Program
until 30 days after it has successfully
completed the necessary testing administered by the Project Office.
.05 The Service will issue credentials
to eligible applicants for the 1997
1040NR Program, as well as 1040NR
Filers that do not have to reapply pursuant to section 4.01, 4.02, or 4.03 of this
revenue procedure (provided they have
first satisfactorily completed the testing
described in section 4.04 of this revenue
procedure if they intend to function as a
Transmitter or Software Developer). No
one may participate in the 1040NR
Program for the 1997 filing season
without the following credentials:
(1) a letter of acceptance into the
1040NR Program for the 1997 filing
season; and
(2) a Magnetic Tape 1040NR Filer
Identification Number (MTFIN).
.06 A 1040NR Filer will not be considered to have actively participated in
the 1996 1040NR Program unless the
Service received and accepted magnetically or electronically filed returns containing the 1040NR Filer’s MTFIN during the 1996 filing season. The Service
will notify an inactive 1040NR Filer
that it may be dropped from the
1040NR Filing Program and explain
what steps the 1040NR Filer needs to
take to participate in the program.
.07 The following reasons may result
in rejection of an application to participate in the 1040NR Program (this list is
not all-inclusive):
(1) conviction of any criminal offense under the revenue laws of the
United States, or of any offense involving dishonesty or breach of trust;
(2) failure to timely and accurately
file tax returns, including returns indicating that no tax is due;
(3) failure to timely pay any tax
liabilities;

(4) assessment of tax penalties;
(5) suspension/disbarment from
practice before the Service;
(6) other facts or conduct of a
disreputable nature that would reflect
adversely on the 1040NR Program;
(7) misrepresentation on an application;
(8) suspension or rejection from
the 1040NR Program in a prior year;
(9) unethical practices in return
preparation;
(10) stockpiling returns prior to official acceptance into the 1040NR Program (see section 5.10 of this revenue
procedure);
(11) knowingly and directly or indirectly employing or accepting assistance from any firm, organization, or
individual that is prohibited from applying to participate in the 1040NR Program (see section 12.07 of this revenue
procedure) or that is suspended from
participating in that Program (see section 12.08 of this revenue procedure).
This includes any individual whose actions resulted in the rejection or suspension of a corporation or a partnership
from the 1040NR Program; or
(12) knowingly and directly or indirectly accepting employment as an
associate, correspondent, or as a subagent from, or sharing fees with, any
firm, organization, or individual that is
prohibited from applying to participate
in the 1040NR Program (see section
12.07 of this revenue procedure) or that
is suspended from participating in that
Program (see section 12.08 of this revenue procedure). This includes any individual whose actions resulted in the
rejection or suspension of a corporation
or a partnership from the 1040NR Program.
SECTION 5. RESPONSIBILITIES OF
A 1040NR FILER
.01 To ensure that complete returns
are accurately and efficiently filed, a
1040NR Filer must comply with all
publications and notices of the Service.
Currently, these publications and notices
include:
(1) Procedures for Magnetic Media
Filing of U.S. Nonresident Alien Income
Tax Returns, Form 1040NR (available
from the Project Office);
(2) File Specifications and Record
Layouts for Magnetic Media Filing of
U.S. Nonresident Alien Income Tax Returns, Form 1040NR (available from the
Project Office); and

(3) Postings to the Electronic Filing System Bulletin Board (EFS Bulletin Board).
.02 A 1040NR Filer must maintain a
high degree of integrity, compliance,
and accuracy.
.03 A 1040NR Filer may accept returns for magnetic or electronic filing
only from a taxpayer or from a 1040NR
Return Originator.
.04 If a 1040NR Filer charges a fee
for the submission of a magnetically or
electronically filed tax return, the fee
may not be based on a percentage of the
refund amount or any other amount
from the tax return. A 1040NR Filer
may not charge a separate fee for Direct
Deposit. See section 9 of this revenue
procedure for a discussion of Direct
Deposit.
.05 A 1040NR Filer must submit a
revised Form MAR–8980 to the Project
Office within 30 days of when any of
the conditions or changes described in
section 4.03 of this revenue procedure
occur.
.06 A 1040NR Filer must notify the
Project Office within 30 days of discontinuing its participation in the 1040NR
Program. This does not preclude reapplication in the future.
.07 A 1040NR Filer must ensure that
the composite return is filed on or
before the due date of the tax return. A
composite return is not considered filed
until the data portion of the tax return is
acknowledged by the Service as accepted for processing and a completed
and signed Form 8453–NR is received
by the Service. However, if the data
portion of a return is successfully transmitted on or shortly before the due date
(see section 5.08 of this revenue procedure) and the 1040NR Filer complies
with section 7.01 of this revenue procedure, the return will be deemed timely
filed. If the data portion of a return is
transmitted on or shortly before the due
date but is ultimately rejected, the return
will be deemed timely filed if the
1040NR Filer and the taxpayer comply
with section 5.14 of this revenue procedure. In the case of a balance due
return, see section 10 of this revenue
procedure for instructions on how to
make a timely payment of tax.
.08 A 1040NR Filer must ensure that
the return for any individual is received
by the Service on or before:
(1) April 15 if the individual was
an employee and received wages subject
to U.S. federal income tax withholding;
or

11

(2) June 16 if the individual did
not receive such wages. However, section 2.05 of this revenue procedure
provides that a composite return cannot
be filed after December 5, 1997.
.09 A 1040NR Filer must ensure
against the unauthorized use of its
MTFIN. A 1040NR Filer must not transfer its MTFIN by sale, merger, loan,
gift, or otherwise to another entity.
.10 A 1040NR Filer is responsible for
ensuring that stockpiling does not occur.
Prior to official acceptance of the
1040NR Filer into the 1040NR Program,
stockpiling means collecting returns
from taxpayers. After official acceptance, stockpiling means:
(1) in the case of a 1040NR Return
Originator, waiting for more than three
calendar days after receiving the necessary information to submit a return to a
Transmitter, or
(2) in the case of a Transmitter,
waiting for more than ten calendar days
after receiving the necessary information
to submit a composite return to the
Service.
.11 A 1040NR Filer that functions as
a Return Originator must:
(1) comply with the procedures for
completing Form 8453–NR described in
section 7 of this revenue procedure;
(2) comply with the procedures described in section 10 of this revenue
procedure for handling a balance due
return;
(3) furnish the taxpayer with a
copy of the signed Form 8453–NR and,
in the case of a prepared or corrected
return, a copy of the paper portions of
the return;
(4) while returns are being filed,
retain and, if requested, make available
to the Service the following material at
the business address from which a return was accepted for magnetic or electronic filing:
(a) a copy of the signed Form
8453–NR, paper copies of Forms W–2,
Wage and Tax Statement, W–2G, Certain Gambling Winnings, 1099–R, Distributions From Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs,
Insurance Contracts, etc., and the paper
portion of the taxpayer’s return;
(b) a complete copy of the data
portion of the taxpayer’s return (may be
retained on computer media) that can be
readily and accurately converted into
magnetic or electronic data that the
Service can process; and
(c) the acknowledgement file received from the Service or from a
Transmitter;

(5) retain until the end of the calendar year in which a return was filed
and, if requested, make available to the
Service the materials described in section 5.11(4) of this revenue procedure,
at the business address from which a
return was accepted for magnetic or
electronic filing or from the contact
person named on Form MAR–8980.
.12 A 1040NR Return Originator who
is the paid preparer of a magnetically or
electronically filed Form 1040NR must
also retain for the prescribed amount of
time the materials described in
§ 1.6107–1(b) that are required to be
kept by an income tax return preparer.
.13 A 1040NR Return Originator must
identify the paid preparer (if any) in the
appropriate field of the data portion of
the return, in addition to ensuring that
the paid preparer signed Form 8453–
NR. If Form 8453–NR is not signed by
the paid preparer, the 1040NR Return
Originator must attach a copy of the
Form 1040NR originally signed by the
paid preparer. This copy must be
marked ‘‘COPY-DO NOT PROCESS’’
to prevent duplicate filings.
.14 If the data portion of a taxpayer’s
return is acknowledged as rejected by
the Service, and the reason for the
rejection cannot be rectified by making
nonsubstantive changes as described in
section 6.02(3) of this revenue procedure, the 1040NR Return Originator,
within 24 hours of receiving the rejection, must take all reasonable steps to
tell the taxpayer that the taxpayer’s
return has not been filed. If the taxpayer
chooses to have the data portion of the
return resubmitted magnetically or electronically, and the 1040NR Return
Originator successfully works with the
Project Office to correct the problems
causing the data portion of the return to
be rejected, the return will be accepted
as timely filed. A new Form 8453–NR
may be required (see section 7 of this
revenue procedure). However, even
when no new Form 8453–NR is required, the Transmitter must submit a
photocopy of the original Form
8453–NR with the rejected file or return
and mark the photocopy ‘‘Retransmitted.’’ If the Project Office determines
that the data portion of a return cannot
be accepted for processing or the taxpayer chooses not to have the rejected
data portion of the return resubmitted
magnetically or electronically, the taxpayer must file a paper return by the
later of:

(1) the due date (with regard to
any extensions of time to file) of the
return; or
(2) within ten calendar days after
the Service’s acknowledgement that the
return is rejected or notification that the
return cannot be retransmitted with an
explanation of why the return is being
filed after the due date.
A paper return filed in good faith under
any of these circumstances will be accepted as timely filed.
.15 A 1040NR Return Originator must
use the taxpayer’s address in the data
portion of the return. In addition, a
1040NR Return Originator must not put
its address as the taxpayer’s address in
the data portion of the return.
.16 A 1040NR Filer that functions as
a Service Bureau must:
(1) deliver all data portions of
composite returns to a Transmitter or
return them to the 1040NR Return
Originator who gave the data portions of
the returns to the Service Bureau within
three calendar days of receipt;
(2) retrieve the acknowledgement
file from the Transmitter within one
calendar day of receipt by the Transmitter;
(3) initiate the communication of
the acknowledgement file to the
1040NR Return Originator (whether related or not) within one work day of
retrieving the acknowledgement file;
(4) if the Service Bureau processes
Forms 8453–NR, send back to the
1040NR Return Originator any return
and Form 8453–NR that needs correction, unless the correction is described
in section 7.02(1) of this revenue procedure;
(5) accept tax return information
only from 1040NR Filers;
(6) include its MTFIN and the
1040NR Return Originator’s MTFIN
with all return information the Service
Bureau sends back to the 1040NR Return Originator, forwards to a Transmitter, or submits to the Service;
(7) retain each acknowledgement
file received from a Transmitter until the
end of the calendar year in which the
composite return was filed;
(8) if requested, serve as a contact
point between its client 1040NR Return
Originator and the Service; and
(9) if requested, provide the Service with a list of each client 1040NR
Return Originator.
.17 A 1040NR Filer that functions as
a Transmitter must:

12

(1) transmit all data portions of
composite returns within ten calendar
days of receipt;
(2) match the acknowledgement
file to the original transmission file and
initiate the communication of the
acknowledgement file to the 1040NR
Return Originator or the Service Bureau
(whether or not the 1040NR Return
Originator or the Service Bureau are
related to the Transmitter) within five
calendar days after receipt of the
acknowledgement file from the Service;
(3) retain an acknowledgement file
received from the Service until the end
of the calendar year in which the composite return was filed;
(4) immediately contact the Project
Office for further instructions if an
acknowledgement of acceptance for processing has not been received by the
Transmitter within 14 calendar days of
transmission, or if a Transmitter receives
an acknowledgement for a return that
was not transmitted on the designated
transmission;
(5) promptly correct any transmission error that causes a data portion of a
composite return to be rejected;
(6) contact the Project Office for
assistance if a data portion of a composite return has been rejected after three
transmission attempts; and
(7) ensure the security of all transmitted data.
.18 A Transmitter that provides transmission services to another 1040NR
Filer must, in addition to the items
covered in section 5.17 of this revenue
procedure, also:
(1) accept composite returns for
transmission to the Service only from an
accepted 1040NR Filer;
(2) provide each client with the
acknowledgement file for the data portion of the composite return within five
calendar days after receipt of the acknowledgment file from the Service;
and
(3) use its assigned MTFIN when
filing returns.
.19 A 1040NR Filer that functions as
a Software Developer must:
(1) promptly correct any software
error that causes a data portion of a
composite return to be rejected;
(2) promptly distribute any software correction made to its software
packages to all 1040NR Filers utilizing
these packages; and
(3) not incorporate into its software
a Service-assigned production password.
.20 In addition to the specific responsibilities described in this section, a

1040NR Filer must meet all the requirements in this revenue procedure to keep
the privilege of participating in the
1040NR Program.
SECTION 6. PENALTIES
.01 Penalties for Disclosure or Use of
Information.
(1) A 1040NR Filer, except a Software Developer, is a tax return preparer
(‘‘Preparer’’) under the definition of
§ 301.7216–1(b) of the Regulations on
Procedure and Administration. A
Preparer is subject to a criminal penalty
for disclosure or use of tax return
information, as described in § 301.7216–
1(a). In general, that regulation provides
that any preparer who discloses or uses
any tax return information for a purpose
other than preparing, assisting in preparing, or obtaining or providing services
in connection with the preparation of a
tax return is guilty of a misdemeanor. In
addition, § 6713 of the Internal Revenue Code provides for civil penalties
that may be assessed against a preparer
who makes an unauthorized disclosure
or use of tax return information.
(2) Under § 301.7216–2(h), disclosure of tax return information among
accepted 1040NR Filers for the purpose
of preparing a return is permissible. For
example, it is permissible for a 1040NR
Return Originator to pass on tax return
information to a Service Bureau and/or
a Transmitter for the purpose of having
the data portion of a composite return
formatted and filed with the Service.
However, if the tax return information is
disclosed or used in any other way, a
Service Bureau and or a Transmitter
may be guilty of a misdemeanor as
described in section 6.01(1) of this revenue procedure.
.02 Other Preparer Penalties.
(1) Preparer penalties may be asserted against an individual or firm who
meets the definition of an income tax
return preparer under §§ 7701(a)(36)
and 301.7701–15. Examples of preparer
penalties that may be asserted under
appropriate circumstances include, but
are not limited to, those set forth in
§§ 6694, 6695, and 6713.
(2) Under § 301.7701–15(d), 1040NR Return Collectors, Service Bureaus,
Software Developers, and Transmitters
are not income tax return preparers for
the purpose of assessing most preparer
penalties as long as their services are
limited to ‘‘typing, reproduction, or

other mechanical assistance in the
preparation of a return or claim for
refund.’’
(3) If a 1040NR Return Collector,
Service Bureau, Software Developer, or
Transmitter alters the return information
in a nonsubstantive way, this alteration
will be considered to come under the
‘‘mechanical assistance’’ exception described in § 301.7701–15(d)(1). A
nonsubstantive change is a correction or
change limited to a transposition error,
misplaced entry, spelling error, or arithmetic correction that falls within one of
the following tolerances:
(a) the Total Tax amount, Total
Payments amount, Refund amount, or
the Amount You Owe shown on Form
8453–NR differs from the corresponding
amount on the data portion of the
composite return by no more than $7;
(b) the Total Effectively Connected Income amount shown on Form
8453–NR differs from the corresponding
amount on the data portion of the
composite return by no more than $25;
or
(c) dropping cents and rounding
to whole dollars.
(4) If a 1040NR Return Collector,
Service Bureau, or Transmitter alters the
return information in a substantive way,
rather than having the taxpayer alter the
return, the 1040NR Return Collector,
Service Bureau, or Transmitter will be
considered to be an income tax return
preparer for purposes of § 7701(a)(36).
(5) If a 1040NR Return Collector,
Service Bureau, Transmitter, or the
product of a Software Developer, goes
beyond mechanical assistance, any of
these parties may be held liable for
income tax return preparer penalties.
Rev. Rul. 85–189, 1985–2 C.B. 341,
describes a situation where a Software
Developer was determined to be an
income tax return preparer and subject
to certain preparer penalties.
.03 In addition to the above specified
provisions, the Service reserves the right
to assert all appropriate civil and criminal penalties, including preparer,
nonpreparer, and disclosure penalties,
against a 1040NR Filer as warranted
under the circumstances.
SECTION 7. FORM 8453–NR, U.S.
NONRESIDENT ALIEN INCOME TAX
DECLARATION FOR MAGNETIC
MEDIA FILING
.01 Procedures for Completing Form
8453–NR.

13

(1) Form 8453–NR must be completed in accordance with the instructions for Form 8453–NR.
(2) The taxpayer’s name, address,
taxpayer identification number, tax return information, and direct deposit of
refund information in the data portion of
the composite return must be identical
to the information on the Form
8453–NR that the taxpayer signed and
provided for submission to the Service.
(3) A 1040NR Filer, a financial
institution, or any other entity associated
with the magnetic or electronic filing of
a taxpayer’s return must not put its
address on Form 8453–NR or anywhere
in the data portion of a return.
(4) After the composite return has
been prepared and before the return is
submitted, the taxpayer must verify the
information on the data portion of the
composite return and on Form 8453–
NR, and must sign Form 8453–NR.
(5) A 1040NR Filer must submit a
Form 8453–NR to the Project Office
with each magnetically or electronically
filed return. A single Form 8453–NR
(inscribed with the language ‘‘See attached Multiple Return Information Listing’’) may be used for a multiple return
filing if the person who signs Form
8453–NR has authorization, either by a
specific power of attorney or as a
responsible representative or agent under
§ 1.6012–3(b), to sign each of the returns included in the multiple return
filing. A person who makes a multiple
return filing must attach to Form
8453–NR an information page(s) titled
‘‘Form 8453–NR for Multiple Returns—
Tax Return Information Listing’’ at the
top of the pages(s). Below the title, the
multiple return 1040NR Filer must provide his or her name and address. The
next item on the page(s) must be a list
that includes every taxpayer’s name
control, taxpayer identification number,
and the information shown on lines one
through five on Form 8453–NR, for
each return included in a multiple return
filing.
(6) If a 1040NR Filer functions as
a 1040NR Return Originator, the
1040NR Filer must sign the 1040NR
Return Originator’s Declaration on Form
8453–NR.
(7) If the 1040NR Filer is also the
paid preparer, the 1040NR Filer must
check the ‘‘Paid Preparer’’ box and sign
the 1040NR Return Originator Declaration on Form 8453–NR.
.02 Corrections to Form 8453–NR.
(1) A new form 8453–NR is not
required for a nonsubstantive change. A

nonsubstantive change is limited to a
correction that does not exceed the
tolerances, described in section 7.02(2)
of this revenue procedure for arithmetic
errors, a transposition error, a misplaced
entry, or a spelling error. The incorrect
nonsubstantive information must be
neatly lined through on the Form
8453–NR and the correct data entered
next to the lined through entry. Also the
individual making the correction must
initial the correction.
(2) The tolerances for section
7.02(1) of this revenue procedure are:
(a) the ‘‘Total Effectively Connected Income’’ (Form 8453–NR, line 1)
differs from the amount on the data
portion of the composite return by more
than $25; or
(b) the ‘‘Total Tax’’ (Form
8453–NR, line 2), the ‘‘Refund’’ (Form
8453–NR, line 4), or the ‘‘Amount
Owed’’ (Form 8453–NR, line 5) differs
from the amount on the data portion of
the composite return by more than $7.
(3) If the 1040NR Return Originator makes a substantive change to the
data portion of the return after Form
8453–NR has been signed by the taxpayer, but before it is transmitted to the
Service, the 1040NR Return Originator
must have all the necessary parties described above sign a new Form
8453–NR that reflects the corrections
before the return is transmitted.
(4) Dropping cents and rounding to
whole dollars does not constitute a substantive change or alteration to the return unless the amount differs by more
than the above tolerances. All rounding
should be accomplished in accordance
with the instructions in the Form
1040NR tax package.
.03 If the Service determines that a
Form 8453–NR is missing, the 1040NR
Return Originator must provide the Service with a replacement. A 1040NR
Return Originator must also provide a
copy of the Form(s) W–2, W–2G,
1099R, and all other attachments to the
Form 8453–NR.
.04 If a substitute Form 8453–NR is
used, it must be approved by the Service
prior to use. See Rev. Proc. 96–48,
1996–39 I.R.B. 10.

return includes: (1) Form 8453–NR and
other paper documents that cannot be
magnetically or electronically transmitted, and (2) a printout of the data
portion of the composite return. See
section 2.02 of this revenue procedure.
The data portion of the composite return
can be contained on a replica of an
official form or on an unofficial form.
However, on an unofficial form, data
entries must be referenced to the line
numbers on an official form.
.02 The 1040NR Return Originator
must advise the taxpayer to retain a
complete copy of the return and any
supporting material.
.03 The 1040NR Return Originator
must advise the taxpayer that an
amended return, if needed, must be filed
as a paper return and mailed to the
Philadelphia Service Center.
.04 The 1040NR Return Originator
must, upon request, provide the taxpayer
with the date the data portion of the
taxpayer’s composite return was acknowledged as accepted for processing
by the Service.
.05 A 1040NR Return Originator must
advise taxpayers that they can call the
local IRS TeleTax number to inquire
about the status of their tax refund. The
1040NR Return Originator should also
advise taxpayers to wait at least three
weeks from the acceptance date of the
data portion of the composite return
before calling the TeleTax number.
.06 If a taxpayer chooses to use an
address other than his or her home
address on the return, the 1040NR Return Originator must inform the taxpayer
that the address on the data portion of
the composite return, once processed by
the Service, will be used to update the
taxpayer’s address of record. The Internal Revenue Service uses the taxpayer’s
address of record for various notices
that are required to be sent to a taxpayer’s ‘‘last known address’’ under the
Internal Revenue Code and for refunds
of overpayments of tax (unless otherwise specifically directed by the taxpayer, such as by Direct Deposit).

SECTION 8. INFORMATION A
1040NR FILER MUST PROVIDE TO
THE TAXPAYER

.01 The Service will ordinarily process a request for Direct Deposit but
reserves the right to issue a paper refund
check.
.02 The Service does not guarantee a
specific date by which a refund will be
directly deposited into the taxpayer’s
financial institution account. The taxpay-

.01 The 1040NR Return Originator
must furnish the taxpayer with a complete paper copy of the taxpayer’s return. A complete copy of the taxpayer’s

SECTION 9. DIRECT DEPOSIT OF
REFUNDS

14

er’s account must be with a financial
institution located in the United States.
.03 Neither the Service nor the Financial Management Service (FMS) is responsible for the misapplication of a
Direct Deposit that is caused by error,
negligence, or malfeasance on the part
of the taxpayer, 1040NR Filer, financial
institution, or any of their agents.
.04 A 1040NR Return Originator
must:
(1) advise taxpayers of the option
to receive their refund by paper check
or direct deposit;
(2) not charge a separate fee for
Direct Deposit;
(3) accept any Direct Deposit election to any eligible financial institution
designated by the taxpayer;
(4) ensure that the taxpayer is eligible to choose Direct Deposit;
(5) verify that the Direct Deposit
information requested on Part II of
Form 8453–NR was entered correctly
and that the information entered is the
information transmitted on the data portion of the composite return;
(6) caution the taxpayer that once a
data portion of a composite return has
been accepted for processing by the
Service:
(a) the Direct Deposit election
cannot be rescinded;
(b) the Routing Transit Number
(RTN) of the financial institution cannot
be changed; and
(c) the taxpayer’s account number cannot be changed; and
(7) advise the taxpayer that refund
information is available by calling the
IRS TeleTax number. See section 8.05
of this revenue procedure.
SECTION 10. BALANCE DUE
RETURNS
.01 A magnetically or electronically
filed balance due return is submitted to
the Philadelphia Service Center in the
same manner that a refund or zero
balance return is submitted. A balance
due return is not complete unless and
until the Service receives a Form
8453–NR completed and signed by the
taxpayer.
.02 A taxpayer who magnetically or
electronically files a balance due return
must make a full and timely payment of
any tax that is due. Failure to make full
payment of any tax that is due on or
before April 15, 1997 (for individuals
who were employees and received
wages subject to U.S. federal income
tax withholding), or June 16, 1997 (for

individuals who were not employees
receiving wages subject to U.S. federal
income tax withholding), will result in
the imposition of interest and may result
in the imposition of penalties.
SECTION 11. ADVERTISING
STANDARDS FOR 1040NR FILERS
AND FINANCIAL INSTITUTIONS
.01 A 1040NR Filer must comply
with the advertising and solicitation provisions of 31 C.F.R. Part 10 (Treasury
Department Circular No. 230). This circular prohibits the use or participation in
the use of any form of public communication containing a false, fraudulent,
misleading, deceptive, unduly influencing, coercive, or unfair statement or
claim. In addition, advertising must not
imply a special relationship with the
Service, FMS, or the Treasury Department. Any claims concerning faster refunds by virtue of magnetically or electronically filing returns must be
consistent with the language in official
Service publications.
.02 A 1040NR Filer must adhere to
all relevant federal, state, and local
consumer protection laws that relate to
advertising and soliciting.
.03 A 1040NR Filer must not use the
Service’s name, ‘‘Internal Revenue Service,’’ or ‘‘IRS’’ within a firm’s name.
.04 A 1040NR Filer must not use
improper or misleading advertising in
relation to the 1040NR Program (including the time frames for refunds).
.05 Use of Direct Deposit name and
logo.
(1) The name ‘‘Direct Deposit’’
will be used with initial capital letters or
all capital letters.
(2) The logo/graphic for Direct Deposit will be used whenever feasible in
advertising copy.
(3) The color or size of the Direct
Deposit logo/graphic may be changed
when used in advertising pieces.
.06 Advertising materials must not
carry the FMS, IRS, or other Treasury
seals.
.07 Advertising for a cooperative
1040NR return project (public/private
sector) must clearly state the names of
all cooperating parties.
.08 If a 1040NR Filer uses radio or
television broadcasting to advertise, the
broadcast must be pre-recorded. The
1040NR Filer must keep a copy of the
pre-recorded advertisement for a period
of at least 36 months from the date of
the last transmission or use.

.09 If a 1040NR Filer uses direct mail
or fax communications to advertise, the
1040NR Filer must retain a copy of the
actual mailing or fax, along with a list
or other description of the firms, organizations or individuals to whom the communication was mailed, faxed, or otherwise distributed for a period of at least
36 months from the date of the last
mailing, fax, or distribution.
.10 Acceptance to participate in the
1040NR Program does not imply endorsement by the Service or FMS of the
software or quality of services provided.
SECTION 12. MONITORING AND
SUSPENSION OF A 1040NR FILER
.01 The Service will monitor a
1040NR Filer for conformity with this
revenue procedure. The Service can immediately suspend, without notice, a
1040NR Filer from the 1040NR Program. However, in most circumstances,
a suspension from participation in the
1040NR Program is effective as of the
date of the letter informing the 1040NR
Filer of the suspension. Before suspending a 1040NR Filer, the Service may
issue a warning letter that describes
specific corrective action for deviations
from this revenue procedure.
.02 The Service will monitor the
timely receipt of Forms 8453–NR, as
well as their overall legibility.
.03 The Service will monitor the
quality of the 1040NR Filer’s submissions throughout the filing season. The
Service will also monitor data portions
of composite returns and tabulate rejections, errors, and other defects. If quality
deteriorates, the 1040NR Filer may receive a warning from the Service.
.04 The Service will monitor complaints about a 1040NR Filer and issue
a warning or suspension letter as appropriate.
.05 The Service reserves the right to
suspend the magnetic or electronic filing
privilege of any 1040NR Filer that violates any provision of this revenue procedure. Generally, the Service will advise a suspended 1040NR Filer
concerning the requirements for reacceptance into the 1040NR Program. The
following reasons may lead to a warning
letter and/or suspension of a 1040NR
Filer from the 1040NR Program (this
list is not all-inclusive):
(1) the reasons listed in section
4.07 of this revenue procedure;
(2) deterioration in the format of
individual submissions;

15

(3) unacceptable cumulative error
or rejection rate;
(4) untimely received, illegible, incomplete, missing, or unapproved substitute Forms 8453–NR;
(5) stockpiling returns at any time
while participating in the 1040NR Program;
(6) failure on the part of a Transmitter to initiate communication of the
acknowledgement files to clients within
five calendar days of receipt of the
acknowledgement files from the Service;
(7) significant complaints about a
1040NR Filer’s performance in the
1040NR Program;
(8) failure on the part of a 1040NR
Filer to ensure that no other entity uses
its assigned MTFIN;
(9) having more than one MTFIN
for the same business entity at the same
location (the business entity is generally
the entity that reports on its return the
income derived from magnetic or electronic filing), unless the Service has
issued more than one MTFIN to a
business entity;
(10) failure on the part of a
1040NR Filer to cooperate with the
Service’s efforts to monitor 1040NR
Filers and investigate filing abuse;
(11) failure on the part of a
1040NR Filer to properly use the
standard/non-standard W–2 indicator;
(12) failure on the part of a Service Bureau or a Transmitter to use its
assigned MTFIN when filing returns;
(13) failure on the part of the
Transmitter to include a Service Bureau’s MTFIN in the transmission of a
return submitted by a Service Bureau;
(14) failure on the part of a Service Bureau or a Transmitter to include
the 1040NR Return Originator’s MTFIN
as part of a return that the 1040NR
Return Originator submits to the Service
Bureau or the Transmitter;
(15) violation of the advertising
standards described in section 11 of this
revenue procedure;
(16) failure to maintain and make
available records as described in sections 5.11(3) and (4) of this revenue
procedure;
(17) accepting a tax return for
magnetic or electronic filing either directly or indirectly from a firm, organization, or individual (other than the
taxpayer who is submitting his or her
return) that is not in the 1040NR Program;

(18) submitting information on the
data portion of the composite return that
is not identical to the information on the
Form 8453–NR;
(19) failure to timely pay any applicable fees, as implemented by subsequent guidance; or
(20) failure to timely submit a revised Form MAR–8980 notifying the
Service of changes described in section
4.02 or 4.03 of this revenue procedure.
.06 The Service may list in the Internal Revenue Bulletin, district office listings, district office newsletters, on the
EFS Bulletin Board, or in other appropriate publications, the name of any
entity that is suspended from the
1040NR Program and the effective date
of that suspension.
.07 If an application for participation
in the 1040NR Program is denied, the
applicant is ineligible to submit a new
application for two years from the application date of the denied application.
.08 If a participant is suspended from
participating in the 1040NR Program,
the period of suspension includes the
remainder of the calendar year in which
the suspension occurs plus the next two
calendar years.
SECTION 13. ADMINISTRATIVE
REVIEW PROCESS FOR DENIAL OF
PARTICIPATION IN THE 1040NR
PROGRAM
.01 An applicant that has been denied
participation in the 1040NR Program
has the right to an administrative review.
During the administrative review process, the denial of participation remains
in effect.
.02 In response to the submission of a
Form MAR–8980, the Service will either (1) accept an applicant into the
1040NR Program, or (2) issue a proposed letter of denial that explains to
the applicant why the Service proposes
to reject the application to participate in
the 1040NR Program.
.03 An applicant that receives a proposed letter of denial may mail or
deliver, within 30 calendar days of the
date of the proposed letter of denial, a
written response to the Project Office.
The applicant’s response must address
the Project Office’s explanation for proposing the denial to participate.
.04 Upon receipt of an applicant’s
written response, the Project Office will
reconsider its proposed letter of denial.
The Project Office may (1) withdraw its

proposed letter of denial and admit the
applicant into the 1040NR Program, or
(2) finalize its proposed letter of denial
and issue it to the applicant.
.05 If an applicant receives a final
letter from the Project Office that denies
the applicant participation in the
1040NR Program, the applicant is entitled to an appeal, in writing, to the
Director of Practice.
.06 The appeal must be mailed or
delivered to the Project Office within 30
calendar days of the date of the denial
letter. An applicant’s written appeal must
contain a detailed explanation, with supporting documentation, of why the denial should be reversed. In addition, the
applicant must include a copy of the
applicant’s Form MAR–8980 and a copy
of the denial letter.
.07 The Project Office, upon receipt
of a written appeal to the Director of
Practice, will forward to the Director of
Practice its file on the applicant and the
materials described in section 13.06 that
the applicant has submitted to the
Project Office. The Project Office will
forward these materials to the Director
of Practice within 15 calendar days of
receipt of the applicant’s written appeal.
.08 Failure to respond within the
30-day periods described in sections
13.03 and 13.06 of this revenue procedure irrevocably terminates an applicant’s right to an administrative review
or appeal.

will either withdraw its proposed suspension letter and reinstate the 1040NR
Filer or finalize the proposed suspension
letter and issue it to the 1040NR Filer.
.04 If a 1040NR Filer receives a
suspension letter from the Project Office, the 1040NR Filer is entitled to an
appeal, in writing, to the Director of
Practice.
.05 The appeal must be mailed or
delivered to the Project Office within 30
calendar days of the date of the suspension letter. The 1040NR Filer’s written
appeal must contain detailed reasons,
with supporting documentation, for reversal of the suspension. In addition, the
1040NR Filer must include a copy of its
Form MAR–8980 and a copy of the
suspension letter.
.06 The Project Office, upon receipt
of a written appeal to the Director of
Practice, will forward to the Director of
Practice its file on the 1040NR Filer and
the material described in section 14.05
of this revenue procedure that the
1040NR Filer has submitted to the
Project Office. The Project Office will
forward these materials to the Director
of Practice within 15 calendar days of
the receipt of a 1040NR Filer’s written
request for appeal.
.07 Failure to appeal within the 30day period described in section 14.05 of
this revenue procedure irrevocably terminates a 1040NR Filer’s right to an
appeal.

SECTION 14. ADMINISTRATIVE
REVIEW PROCESS FOR
SUSPENSION FROM THE 1040NR
PROGRAM

SECTION 15. EFFECT ON OTHER
DOCUMENTS

.01 A 1040NR Filer that has been
suspended from participation in the
1040NR Program has the right to an
administrative review. During the administrative review process, the suspension remains in effect.
.02 If a 1040NR Filer receives a
proposed suspension letter, the 1040NR
Filer may mail or deliver, within 30
calendar days of the date of the proposed suspension letter, a detailed written explanation, with supporting documentation, of why the proposed
suspension letter should be withdrawn.
This written response should be sent to
the Project Office.
.03 Upon receipt of the 1040NR Filer’s written response, the Project Office
will reconsider its proposed suspension
of the 1040NR Filer. The Project Office

16

Rev. Proc. 96–35, 1996–1 C.B. 721,
is superseded.
SECTION 16. EFFECTIVE DATE
This revenue procedure is effective
May 23, 1997.
SECTION 17. PROJECT OFFICE
INFORMATION
All questions regarding this revenue
procedure should be directed to:
Internal Revenue Service
Philadelphia Service Center
ATTN: DP–115–Magnetic Media
Project Office
11601 Roosevelt Blvd.
Philadelphia, PA 19154
U.S.A.
The telephone number of this office is
(215) 516–7533 (not a toll-free number)
or 800–829–6945 (a toll-free number).