Revenue Procedure 2004-21

Part III. Administrative, Procedural, and Miscellaneous
26 CFR 1.1441–5: Withholding on payments to partnerships, trusts and estates.

Amendment to Final
Agreement for Withholding
Foreign Partnerships and
Withholding Foreign Trusts
and Additional Guidance for
Qualified Intermediaries under
Rev. Proc. 2003–64
Rev. Proc. 2004–21
SECTION 1. PURPOSE AND SCOPE
This revenue procedure modifies the
final withholding foreign partnership
(“WP”) and withholding foreign trust
(“WT”) agreements, contained in Rev.
Proc. 2003–64, 2003–32 I.R.B. 306,
by expanding the availability of certain
simplified documentation, reporting,
and withholding procedures. This revenue procedure also makes a conforming
change to the portion of the Qualified Intermediary (“QI”) withholding agreement
(the “QI agreement”) contained in Rev.
Proc. 2003–64.
SECTION 2. BACKGROUND
Rev. Proc. 2003–64 contains the WP
and WT agreements described in Treasury Regulation § 1.1441–5(c)(2)(ii) and
(e)(5)(v) and sets forth the application
procedures for entering into such agreements. Rev. Proc. 2003–64 also amends
the QI agreement, contained in Rev. Proc.
2000–12, 2000–1 C.B. 387, to add new
Section 4A.
Section 10.01 of the WP and WT agreements and new Section 4A.01 of the QI
agreement provide generally that a QI,
WP, or WT may apply simplified documentation, reporting, and withholding
procedures to a foreign trust or foreign
partnership if certain conditions are met
(the “Joint Account Provision”). Currently a QI, WP, or WT may apply the
Joint Account Provision only if, among
other things, the foreign partnership or
trust receives from the QI, WP, or WT less
than $200,000 of reportable amounts for a
calendar year (the “$200,000 cap”).

2004-14 I.R.B.

The IRS and Treasury have received
comments seeking an expansion of the
Joint Account Provision. The comments
indicated that expanding the availability of the Joint Account Provision by
eliminating the $200,000 cap would facilitate compliance by QIs, WPs, and WTs
with their documentation, reporting, and
withholding obligations with respect to
foreign partnerships and foreign simple
and grantor trusts. After considering these
comments, the IRS and Treasury have concluded that expanding the availability of
the Joint Account Provision by eliminating
the $200,000 cap would be consistent with
the objectives of the underlying reporting
and withholding regimes.
SECTION 3. EXPANSION OF JOINT
ACCOUNT PROVISION
Appendices 1, 2, and 3 of Rev. Proc.
2003–64, containing the WP and WT
agreements and new Section 4A of the QI
agreement, respectively, are amended as
follows. In Appendices 1 and 2, the first
paragraph of Section 10.01 of the WP and
WT agreements are amended by inserting “and” before “(iii)” and by deleting
“and (iv) the total reportable amounts distributed to, and included in the distributive
share of, the partnership or trust for the
calendar year do not exceed $200,000.” In
Appendix 3, the first paragraph of Section
4A.01 of the QI agreement is amended by
inserting “and” before “(iii)” and by deleting “and (iv) the total reportable amounts
that QI has paid to accounts of the partnership or trust that are covered by the QI
agreement do not exceed $200,000 for the
calendar year.”
SECTION 4. EFFECTIVE DATE
The modifications to Rev.
Proc
2003–64 made by this revenue procedure are effective as of July 10, 2003, the
effective date of Rev. Proc. 2003–64.
Pursuant to Section 12.02 of the QI agreement, and Section 11.02 of the WP and WT
agreements, these amendments apply to
all existing QI, WP, and WT agreements.
These amendments will be incorporated
into the text of all QI, WP, and WT agreements entered into on or after the date this
revenue procedure is released.

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As described in section 1.01 of Rev.
Proc. 2003–64, a WP or WT agreement
entered into during a calendar year may
be made effective as of the first day of
that calendar year. With the changes made
by this revenue procedure, some foreign
partnerships and trusts may wish to act as
WPs or WTs beginning in 2003. Therefore, upon request, the IRS will execute
WP and WT agreements with terms beginning on January 1, 2003, even if the application to enter into a WP or WT agreement was or is received after December 31,
2003, provided that the IRS receives the
completed application on or before June
30, 2004.
SECTION 5. REQUEST FOR
COMMENTS
Section 4A.02 of the QI agreement and
Section 10.02 of the WP and WT agreements allow the QI, WP, or WT to use
simplified documentation, reporting, and
withholding procedures if, among other
things, the QI, WP, or WT is a general
partner of the partnership or a trustee of
the trust (the “related-party requirement”).
The IRS and Treasury are reviewing the
related-party requirement and solicit comments as to whether it presents difficulties
for taxpayers considering participation in
the QI, WP, or WT programs, and, if so, the
reasons for such difficulties. Comments
also are requested regarding the possibility
of eliminating the requirement or modifying it to address any such difficulties, while
ensuring consistency with the objectives of
the underlying reporting and withholding
regimes.
More generally, the IRS and Treasury
remain committed to the QI, WP, and WT
programs and are continuing to review
them to ensure their optimal effectiveness. Therefore, comments are requested
regarding additional ways the programs’
current rules and forms of agreement could
be improved in a manner that is consistent with the objectives of the underlying
reporting and withholding regimes.
SECTION 6. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2003–64, 2003–32 I.R.B.
306, is modified.

April 5, 2004

SECTION 7. CONTACT
INFORMATION
For further information regarding this
revenue procedure, contact Ethan Atticks,
Carl Cooper, or Valerie Mark Lippe at
(202) 622–3840 (not a toll-free call).

April 5, 2004

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2004-14 I.R.B.

Part IV. Items of General Interest
Notice of Proposed
Rulemaking; Notice of
Proposed Rulemaking
by Cross-Reference to
Temporary Regulations;
Notice of Public Hearing;
and Partial Withdrawal of
Proposed Regulations
Depreciation of MACRS
Property That is Acquired in
a Like-Kind Exchange or As
a Result of an Involuntary
Conversion
REG–106590–00,
REG–138499–02
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking;
notice of proposed rule making by crossreference to temporary regulations; notice
of public hearing; and partial withdrawal
of proposed regulations.
SUMMARY: In this issue of the Bulletin,
the IRS is issuing temporary regulations
(T.D. 9115) relating to the depreciation of
property subject to section 168 of the Internal Revenue Code (MACRS property).
Specifically, the temporary regulations
provide guidance on how to depreciate
MACRS property acquired in a like-kind
exchange under section 1031 or as a result
of an involuntary conversion under section
1033 when both the acquired and relinquished property are subject to MACRS in
the hands of the acquiring taxpayer. The
text of those temporary regulations also
serves as the text of these proposed regulations. This document also provides notice
of a public hearing on these proposed
regulations and a partial withdrawal of
proposed regulations (REG–138499–02,
2003–37 I.R.B. 541) published July 21,
2003.
DATES: Written or electronic comments
must be received by May 30, 2004. Outlines of topics to be discussed at the public
hearing scheduled for June 3, 2004, at 10
a.m. must be received by May 13, 2004.

2004-14 I.R.B.

ADDRESSES: Send submissions to
CC:PA:LPD:PR (REG–106590–00), room
5203, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washington, DC 20044. Alternatively, submissions may be hand-delivered Monday
through Friday between the hours of 8
a.m. and 4 p.m. to CC:PA:LPD:PR
(REG–106590–00), Courier’s Desk, Internal Revenue Service, 1111 Constitution
Ave., NW, Washington, DC, or sent electronically, via the IRS Internet site at
http://www.irs.gov/regs. The public hearing will be held in the Auditorium, Internal
Revenue Building, 1111 Constitution Avenue, NW, Washington DC.

ministrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations
and, because these regulations do not impose on small entities a collection of information requirement, 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,
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.

FOR
FURTHER
INFORMATION
CONTACT: Concerning the proposed
regulations, Charles J. Magee, (202)
622–3110; concerning submissions of
comments, the hearing, and/or to be placed
on the building access list to attend the
hearing, Robin Jones, (202) 622–7180
(not toll-free numbers).

Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written comments
(a signed original and eight (8) copies)
or electronic comments that are submitted timely to the IRS. The IRS and Treasury Department specifically request comments on the clarity of the proposed rules
and how they may be made easier to understand. All comments will be available
for public inspection and copying.
A public hearing has been scheduled for
June 3, 2004, beginning at 10 a.m. in the
Auditorium of the Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all
visitors must present photo identification
to enter the building. Because of access
restrictions, visitors will not be admitted
beyond the immediate entrance area more
than 30 minutes before the hearing starts.
For information about having your name
placed on the building access list to attend
the hearing, see the FOR FURTHER INFORMATION CONTACT section of this
preamble.
The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to
present oral comments at the hearing must
submit an outline of the topics to be discussed and the time to be devoted to each
topic (signed original and eight (8) copies)
by May 13, 2004. A period of 10 minutes
will be allotted to each person for making
comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has

SUPPLEMENTARY INFORMATION:
Background
Temporary regulations in this issue of
the Bulletin amend 26 CFR part 1 relating to section 168 of the Internal Revenue Code (Code). The temporary regulations provide guidance under section 168
on how to depreciate MACRS property acquired in a like-kind exchange under section 1031 or as a result of an involuntary
conversion under section 1033 when both
the acquired and relinquished property are
subject to MACRS in the hands of the acquiring taxpayer. The text of those regulations also serves as the text of these proposed regulations. The preamble to the
temporary regulations explains the temporary regulations and these proposed regulations.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the Ad-

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Comments and Public Hearing

April 5, 2004