us-irs-announcements-irb-2003-12-pdf•Internal Revenue Bulletin 2003-12 (PDF rendition): IRS Announcements
Internal Revenue Bulletin 2003-12 (PDF rendition): IRS Announcements
us-irs-announcements-irb-2003-12-pdfInternal Revenue Bulletin 2003-12 (PDF rendition): IRS AnnouncementsGuidance
Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.
HIGHLIGHTS OF THIS ISSUE These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations. INCOME TAX T.D. 9043, page 611. Final regulations under section 874 of the Code relate to the dis- allowance of deductions and credits for nonresident alien indi- viduals and foreign corporations that fail to file a timely U.S. income tax return. T.D. 9045, page 610. Final regulations under section 32 of the Code were published in the Federal Register on March 13, 1980. Due to subsequent statutory amendments in the applicable tax law, substantial por- tions of the regulations are no longer in conformity with cur- rent legislative provisions. These regulations remove and amend portions of the existing regulations to conform with statutory changes. REG–104385–01, page 634. Proposed regulations under section 168 of the Code provide guid- ance on the normalization requirements applicable to electric utili- ties that benefit (or have benefitted) from accelerated depreciation methods or from the investment tax credit permitted under pre- 1991 law. A public hearing is scheduled for June 25, 2003. EMPLOYEE PLANS Notice 2003–17, page 633. Weighted average interest rate update.The weighted aver- age interest rate for March 2003 and the resulting permissible range of interest rates used to calculate current liability for pur- poses of the full funding limitation of section 412(c)(7) of the Code are set forth. Announcement 2003–16, page 641. This document contains corrections to final regulations (T.D. 9021, 2002–51 I.R.B. 973) relating to loans made from a quali- fied employer plan to plan participants or beneficiaries. ADMINISTRATIVE T.D. 9046, page 614. Final regulations provide the disclosure requirements relating to reportable transactions under section 6011 of the Code, the reg- istration requirements for confidential corporate tax shelters un- der section 6111(d), and the list maintenance requirements under section 6112. Bulletin No. 2003–12 March 24, 2003 Announcements of Disbarments and Suspensions begin on page 637. Finding Lists begin on page ii. The IRS Mission Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all. Introduction The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rul- ings and procedures of the Internal Revenue Service and for pub- lishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general inter- est. It is published weekly and may be obtained from the Super- intendent of Documents on a subscription basis. Bulletin contents are consolidated semiannually into Cumulative Bulletins, which are sold on a single-copy basis. It is the policy of the Service to publish in the Bulletin all sub- stantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All pub- lished rulings apply retroactively unless otherwise indicated. Pro- cedures relating solely to matters of internal management are not published; however, statements of internal practices and pro- cedures that affect the rights and duties of taxpayers are pub- lished. Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpay- ers or technical advice to Service field offices, identifying de- tails and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be re- lied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and pro- cedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Ser- vice personnel and others concerned are cautioned against reach- ing the same conclusions in other cases unless the facts and circumstances are substantially the same. The Bulletin is divided into four parts as follows: Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986. Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Legisla- tion and Related Committee Reports. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these sub- jects are contained in the other Parts and Subparts. Also in- cluded in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the De- partment of the Treasury’s Office of the Assistant Secretary (En- forcement). Part IV.—Items of General Interest. This part includes notices of proposed rulemakings, disbar- ment and suspension lists, and announcements. The first Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the first Bulletin of the succeeding semiannual pe- riod, respectively. The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate. For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. March 24, 20032003–12 I.R.B. Part I. Rulings and Decisions Under the Internal Revenue Code of 1986 Section 32.—Earned Income 26 CFR 1.32–2: Earned income credit for taxable years beginning after December 31, 1978. T.D. 9045 DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 Earned Income Credit for Taxable Years Beginning After December 31, 1978 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final regulations. SUMMARY: This document contains fi- nal regulations relating to the earned in- come credit. The regulations reflect changes in the law since the existing regulations were published in theFederal Registeron March 13, 1980. Due to subsequent statu- tory changes in the applicable tax law, sub- stantial portions of the regulations are no longer in conformity with current law. Ac- cordingly, portions of the existing regula- tions are removed. These regulations apply to individual taxpayers claiming the earned income credit. DATES:Effective Date:These regulations are effective, March 6, 2003. FOR FURTHER INFORMATION CON- TACT: Shoshanna Tanner at (202) 622– 6080 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background This document contains amendments to the Income Tax Regulations (26 CFR Part 1) under section 32 of the Internal Rev- enue Code (Code). Section 32 allows a re- fundable credit to low-income taxpayers who meet certain income and eligibility re- quirements. Section 43 (the predecessor of section 32) was added to the Code by the Tax Reduction Act of 1975 (Public Law 94– 12, 89 Stat. 26) and made permanent by the Revenue Act of 1978 (Public Law 95– 600, 92 Stat. 2763). Final regulations (T.D. 7683, 1980–1, C.B. 3 [45 FR 16174]) un- der section 43 were published in theFed- eral Registeron March 13, 1980. Section 43 was redesignated as section 32 by the Tax Reform Act of 1984 (Public Law 98– 369, 98 Stat. 494). Section 1.43–2 was re- designated as §1.32–2 in Treasury Decision 8448 (1992–2 C.B. 21 [57 FR 54919]) on November 23, 1992. Section 1.32–2(b)(2) of the existing regu- lations refers to section 143 for an expla- nation of the term “married individual.” The provisions of section 143 were reenacted as section 7703 by the Tax Reform Act of 1986 (Public Law 99–514, 100 Stat. 2085). In addition, portions of the existing regu- lations are inconsistent with changes made by the Omnibus Budget Reconciliation Act of 1990 (Public Law 101–508, 104 Stat. 1388), the Economic Growth and Tax Re- lief Reconciliation Act of 2001 (Public Law 107–16, 115 Stat. 38), and various other leg- islative enactments. Explanation of Provisions To comport with the redesignation of section 43 to section 32 and §§1.43–2 to 1.32–2, these final regulations replace ref- erences to section 43 with references to sec- tion 32. Similarly, these regulations replace the references to section 143 in §1.32– 2(b)(2) with references to section 7703. These regulations also remove the incon- sistent provisions in the existing regula- tions. Special Analyses It has been determined that these final regulations are not a significant regula- tory action as defined in Executive Order 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. Because no no- tice of proposed rulemaking is required, the provisions of the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply. Pursu- ant to section 7805(f), these regulations were submitted to the Chief Counsel for Advocacy of the Small Business Admin- istration for comment on their impact on small business. Drafting Information The principal author of these regula- tions is Shoshanna Tanner of the Office of Division Counsel/Associate Chief Coun- sel (Tax Exempt and Government Enti- ties). However, other personnel from the IRS and Department of Treasury partici- pated in their development. ***** Adoption of Amendments to the Regulations Accordingly, 26 CFR Part 1 is amended as follows: PART 1—INCOME TAXES Paragraph 1. The authority for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805*** Par. 2. Section 1.32–2 is amended as follows: 1. Paragraphs (a), (b)(1), (c)(1), and (d) are removed and reserved. 2. Paragraphs (b)(2), (b)(3), (c)(2), and (e)(2) are revised. The revisions read as follows: §1.32–2 Earned income credit for taxable years beginning after December 31, 1978. (a) [Reserved]. (b)***(1) [Reserved]. (2)Married individuals.No credit is al- lowed by section 32 in the case of an eli- gible individual who is married (within the meaning of section 7703 and the regula- tions thereunder) unless the individual and spouse file a single return jointly (a joint return) for the taxable year (see section 6013 and the regulations thereunder relating to joint returns of income tax by husband and wife). The requirements of the preceding sentence do not apply to an eligible indi- vidual who is not considered as married un- der section 7703(b) and the regulations thereunder (relating to certain married in- dividuals living apart). (3)Length of taxable year.No credit is allowed by section 32 in the case of a tax- able year covering a period of less than 12 months. However, the rule of the preced- ing sentence does not apply to a taxable year closed by reason of the death of the eligible individual. 2003–12 I.R.B.610March 24, 2003 (c)***(1) [Reserved]. (2)Earned income.For purposes of this section, earned income is computed with- out regard to any community property laws which may otherwise be applicable. Earned income is reduced by any net loss in earn- ings from self-employment. Earned in- come does not include amounts received as a pension, an annuity, unemployment com- pensation, or workmen’s compensation, or an amount to which section 871(a) and the regulations thereunder apply (relating to in- come of nonresident alien individuals not connected with United States business). (d) [Reserved]. (e)***(1)***. (2)Reconciliation of payments advanced and credit allowed.Any additional amount of tax under paragraph (e)(1) of this sec- tion is not treated as a tax imposed by chap- ter 1 of the Internal Revenue Code for purposes of determining the amount of any credit (other than the earned income credit) allowable under part IV, subchapter A, chap- ter 1 of the Internal Revenue Code. David A. Mader, Assistant Deputy Commissioner of Internal Revenue. Approved February 11, 2003. Pamela F. Olson, Assistant Secretary of the Treasury. (Filed by the Office of the Federal Register on March 5, 2003, 8:45 a.m., and published in the issue of the Federal Regis- ter for March 6, 2003, 68 F.R. 10655) Section 874.—Allowance of Deductions and Credits 26 CFR 1.874–1: Allowance of deductions and credits to nonresident alien individuals. T.D. 9043 DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 Disallowance of Deductions and Credits for Failure to File Timely Return AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final regulations and removal of temporary regulations. SUMMARY: This document contains fi- nal regulations relating to the disallow- ance of deductions and credits for nonresident alien individuals and foreign corporations (collectively, foreign taxpay- ers) that fail to file a timely U.S. income tax return. The regulations affect foreign taxpayers that fail to file a return by the ap- propriate deadlines. DATES:Effective Date:These regulations are effective March 10, 2003. Applicability Date:For dates of appli- cability, see§§1.874–1(b)(4) and 1.882– 4(a)(3)(iv) of these regulations. FOR FURTHER INFORMATION CON- TACT: Nina E. Chowdhry, (202) 622–3880 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background This document contains amendments to 26 CFR part 1. On January 29, 2002, fi- nal and temporary regulations (T.D. 8981, 2002–7 I.R.B. 496 [67 FR 4173]) relat- ing to the disallowance of deductions and credits for foreign taxpayers that fail to file a timely U.S. income tax return under sec- tions 874 and 882 of the Internal Rev- enue Code (Code) were published in the Federal Register. A notice of proposed rulemaking (REG–107100–00, 2002–7 I.R.B. 529 [67 FR 4217]) cross-referencing the temporary regulations was also pub- lished in theFederal Register. No pub- lic hearing was requested or held. No written or electronic comments respond- ing to the notice of proposed rulemaking were received. The proposed regulations are adopted by this Treasury decision, and the corresponding temporary regulations are re- moved. Special Analyses It has been determined that this Trea- sury decision is not a significant regula- tory action as defined in Executive Order 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 the regulations do not impose a collection of information requirement on small enti- ties, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Therefore, a Regulatory Flexibility Analysis is not re- quired. Pursuant to section 7805(f) of the Code, the notice of proposed rulemaking preceding these regulations was submit- ted to the Chief Counsel for Advocacy of the Small Business Administration for com- ment on its impact on small businesses. Drafting Information The principal author of these regula- tions is Nina Chowdhry of the Office of As- sociate Chief Counsel (International). However, other personnel from the IRS and Treasury Department participated in their development. ***** Adoption of Amendments to the Regulations Accordingly, 26 CFR part 1 is amended as follows: PA RT 1—INCOME TAXES Paragraph 1. The authority citation for part 1 is amended by removing the en- tries for“Section 1.874–1T”and“Sec- tion 1.882–4T”and adding entries in numerical order to read in part as follows: Authority: 26 U.S.C. 7805*** Section 1.874–1 also issued under 26 U.S.C. 874.*** Section 1.882–4 also issued under 26 U.S.C. 882(c).*** Par. 2. Section 1.874–1, paragraphs (b)(2) through (b)(4) are revised to read as follows: §1.874–1 Allowance of deductions and credits to nonresident alien individuals. ***** (b)*** (2)Waiver.The filing deadlines set forth in paragraph (b)(1) of this section may be waived if the nonresident alien individual establishes to the satisfaction of the Com- missioner or his or her delegate that the in- dividual, based on the facts and circumstances, acted reasonably and in good faith in failing to file a U.S. income tax re- turn (including a protective return (as de- scribed in paragraph (b)(6) of this section)). For this purpose, a nonresident alien indi- vidual shall not be considered to have acted reasonably and in good faith if the indi- March 24, 20036112003–12 I.R.B. vidual knew that he or she was required to file the return and chose not to do so. In addition, a nonresident alien individual shall not be granted a waiver unless the indi- vidual cooperates in determining his or her U.S. income tax liability for the taxable year for which the return was not filed. The Commissioner or his or her delegate shall consider the following factors in determin- ing whether the nonresident alien indi- vidual,basedonthefactsand circumstances, acted reasonably and in good faith in failing to file a U.S. income tax return— (i) Whether the individual voluntarily identifies himself or herself to the Inter- nal Revenue Service as having failed to file a U.S. income tax return before the Inter- nal Revenue Service discovers the failure to file; (ii) Whether the individual did not be- come aware of his or her ability to file a protective return (as described in para- graph (b)(6) of this section) by the dead- line for filing the protective return; (iii) Whether the individual had not pre- viously filed a U.S. income tax return; (iv) Whether the individual failed to file a U.S. income tax return because, after ex- ercising reasonable diligence (taking into ac- count his or her relevant experience and level of sophistication), the individual was unaware of the necessity for filing the re- turn; (v) Whether the individual failed to file a U.S. income tax return because of inter- vening events beyond the individual’s con- trol; and (vi) Whether other mitigating or exac- erbating factors existed. (3)Examples.The following examples illustrate the provisions of paragraph (b). In all examples, A is a nonresident alien in- dividual and uses the calendar year as A’s taxable year. The examples are as follows: Example 1. Nonresident alien individual dis- closes own failure to file.In Year 1, A became a lim- ited partner with a passive investment in a U.S. limited partnership that was engaged in a U.S. trade or busi- ness. During Year 1 through Year 4, A incurred losses with respect to A’s U.S. partnership interest. A’s for- eign tax advisor incorrectly concluded that because A was a limited partner and had only losses from A’s partnership interest, A was not required to file a U.S. income tax return. A was aware neither of A’s obli- gation to file a U.S. income tax return for those years nor of A’s ability to file a protective return for those years. A had never filed a U.S. income tax return be- fore. In Year 5, A began realizing a profit rather than a loss with respect to the partnership interest and, for this reason, engaged a U.S. tax advisor to handle A’s responsibility to file U.S. income tax returns. In pre- paring A’s U.S. income tax return for Year 5, A’s U.S. tax advisor discovered that returns were not filed for Year 1 through Year 4. Therefore, with respect to those years for which applicable filing deadlines in para- graph (b)(1) of this section were not met, A would be barred by paragraph (a) of this section from claim- ing any deductions that otherwise would have given rise to net operating losses on returns for these years, and that would have been available as loss carryfor- wards in subsequent years. At A’s direction, A’sU.S. tax advisor promptly contacted the appropriate ex- amining personnel and cooperated with the Internal Revenue Service in determining A’s income tax li- ability, for example, by preparing and filing the ap- propriate income tax returns for Year 1 through Year 4 and by making A’s books and records available to an Internal Revenue Service examiner. A has met the standard described in paragraph (b)(2) of this sec- tion for waiver of any applicable filing deadlines in paragraph (b)(1) of this section. Example 2. Nonresident alien individual refuses to cooperate.Same facts as inExample 1, except that while A’s U.S. tax advisor contacted the appropri- ate examining personnel and filed the appropriate in- come tax returns for Year 1 through Year 4, A refused all requests by the Internal Revenue Service to pro- vide supporting information (for example, books and records) with respect to those returns. Because A did not cooperate in determining A’s U.S. tax liability for the taxable years for which an income tax return was not timely filed, A is not granted a waiver as de- scribed in paragraph (b)(2) of this section of any ap- plicable filing deadlines in paragraph (b)(1) of this section. Example 3. Nonresident alien individual fails to file a protective return.Same facts as inExample 1, except that in Year 1 through Year 4, A also con- sulted a U.S. tax advisor, who advised A that it was uncertain whether U.S. income tax returns were nec- essary for those years and that A could protect A’s right subsequently to claim the loss carryforwards by fil- ing protective returns under paragraph (b)(6) of this section. A did not file U.S. income tax returns or pro- tective returns for those years. A did not present evi- dence that intervening events beyond A’s control prevented A from filing an income tax return, and there were no other mitigating factors. A has not met the standard described in paragraph (b)(2) of this sec- tion for waiver of any applicable filing deadlines in paragraph (b)(1) of this section. Example 4. Nonresident alien with effectively con- nected income.In Year 1, A, a computer program- mer, opened an office in the United States to market and sell a software program that A had developed out- side the United States. A had minimal business or tax experience internationally, and no such experience in the United States. Through A’s personal efforts, U.S. sales of the software produced income effectively con- nected with a U.S. trade or business. A, however, did not file U.S. income tax returns for Year 1 or Year 2. A was aware neither of A’s obligation to file a U.S. income tax return for those years, nor of A’s ability to file a protective return for those years. A had never filed a U.S. income tax return before. In November of Year 3, A engaged U.S. counsel in connection with licensing software to an unrelated U.S. company. U.S. counsel reviewed A’s U.S. activities and advised A that A should have filed U.S. income tax returns for Year 1 and Year 2. A immediately engaged a U.S. tax advisor who, at A’s direction, promptly contacted the appropriate examining personnel and cooperated with the Internal Revenue Service in determining A’sin- come tax liability, for example, by preparing and fil- ing the appropriate income tax returns for Year 1 and Year 2 and by making A’s books and records avail- able to an Internal Revenue Service examiner. A has met the standard described in paragraph (b)(2) of this section for waiver of any applicable filing deadlines in paragraph (b)(1) of this section. Example 5. IRS discovers nonresident alien’s fail- ure to file.In Year 1, A, a computer programmer, opened an office in the United States to market and sell a software program that A had developed out- side the United States. Through A’s personal ef- forts, U.S. sales of the software produced income effectively connected with a U.S. trade or business. A had extensive experience conducting similar busi- ness activities in other countries, including making the appropriate tax filings. A, however, was aware nei- ther of A’s obligation to file a U.S. income tax re- turn for those years, nor of A’s ability to file a protective return for those years. A had never filed a U.S. income tax return before. Despite A’s exten- sive experience conducting similar business activi- ties in other countries, A made no effort to seek advice in connection with A’s U.S. tax obligations. A failed to file either U.S. income tax returns or protective re- turns for Year 1 and Year 2. In November of Year 3, an Internal Revenue Service examiner asked A for an explanation of A’s failure to file U.S. income tax re- turns. A immediately engaged a U.S. tax advisor, and cooperated with the Internal Revenue Service in de- termining A’s income tax liability, for example, by pre- paring and filing the appropriate income tax returns for Year 1 and Year 2 and by making A’s books and records available to the examiner. A did not present evidence that intervening events beyond A’s control prevented A from filing a return, and there were no other mitigating factors. A has not met the standard described in paragraph (b)(2) of this section for waiver of any applicable filing deadlines in paragraph (b)(1) of this section. Example 6. Nonresident alien with prior filing his- tory.A began a U.S. trade or business in Year 1 as a sole proprietorship. A’s tax advisor filed the appro- priate U.S. income tax returns for Year 1 through Year 6, reporting income effectively connected with A’s U.S. trade or business. In Year 7, A replaced this tax ad- visor with a tax advisor unfamiliar with U.S. tax law. A did not file a U.S. income tax return for any year from Year 7 through Year 10, although A had effec- tively connected income for those years. A was aware of A’s ability to file a protective return for those years. In Year 11, an Internal Revenue Service examiner con- tacted A and asked for an explanation of A’s failure to file income tax returns after Year 6. A immedi- ately engaged a U.S. tax advisor and cooperated with the Internal Revenue Service in determining A’sin- come tax liability, for example, by preparing and fil- ing the appropriate income tax returns for Year 7 through Year 10 and by making A’s books and records available to the examiner. A did not present evi- dence that intervening events beyond A’s control pre- vented A from filing a return, and there were no other mitigating factors. A has not met the standard de- scribed in paragraph (b)(2) of this section for waiver of any applicable filing deadlines in paragraph (b)(1) of this section. (4)Effective date.Paragraphs (b)(2) and (3) of this section are applicable to open 2003–12 I.R.B.612March 24, 2003 years for which a request for a waiver is filed on or after January 29, 2002. ***** §1.874–1T [Removed] Par. 3. Section 1.874–1T is removed. Par. 4. Section 1.882–4, paragraphs (a)(3)(ii) through (a)(3)(iv) are revised to read as follows: §1.882–4 Allowance of deductions and credits to foreign corporations. (a)*** (3)*** (ii) The filing deadlines set forth in para- graph (a)(3)(i) of this section may be waived if the foreign corporation estab- lishes to the satisfaction of the Commis- sioner or his or her delegate that the corporation, based on the facts and circum- stances, acted reasonably and in good faith in failing to file a U.S. income tax return (including a protective return (as described in paragraph (a)(3)(vi) of this section)). For this purpose, a foreign corporation shall not be considered to have acted reasonably and in good faith if it knew that it was required to file the return and chose not to do so. In addition, a foreign corporation shall not be granted a waiver unless it cooperates in the process of determining its income tax li- ability for the taxable year for which the re- turn was not filed. The Commissioner or his or her delegate shall consider the follow- ing factors in determining whether the for- eign corporation, based on the facts and circumstances, acted reasonably and in good faith in failing to file a U.S. income tax return— (A) Whether the corporation voluntar- ily identifies itself to the Internal Rev- enue Service as having failed to file a U.S. income tax return before the Internal Rev- enue Service discovers the failure to file; (B) Whether the corporation did not be- come aware of its ability to file a protec- tive return (as described in paragraph (a)(3)(vi) of this section) by the deadline for filing a protective return; (C) Whether the corporation had not pre- viously filed a U.S. income tax return; (D) Whether the corporation failed to file a U.S. income tax return because, after ex- ercising reasonable diligence (taking into ac- count its relevant experience and level of sophistication), the corporation was un- aware of the necessity for filing the re- turn; (E) Whether the corporation failed to file a U.S. income tax return because of inter- vening events beyond its control; and (F) Whether other mitigating or exac- erbating factors existed. (iii) The following examples illustrate the provisions of this section. In all examples, FC is a foreign corporation and uses the cal- endar year as its taxable year. The examples are as follows: Example 1. Foreign corporation discloses own fail- ure to file.In Year 1, FC became a limited partner with a passive investment in a U.S. limited partnership that was engaged in a U.S. trade or business. During Year 1 through Year 4, FC incurred losses with respect to its U.S. partnership interest. FC’s foreign tax direc- tor incorrectly concluded that because it was a lim- ited partner and had only losses from its partnership interest, FC was not required to file a U.S. income tax return. FC’s management was aware neither of FC’s obligation to file a U.S. income tax return for those years, nor of its ability to file a protective return for those years. FC had never filed a U.S. income tax re- turn before. In Year 5, FC began realizing a profit rather than a loss with respect to its partnership in- terest and, for this reason, engaged a U.S. tax advi- sor to handle its responsibility to file U.S. income tax returns. In preparing FC’s income tax return for Year 5, FC’s U.S. tax advisor discovered that returns were not filed for Year 1 through Year 4. Therefore, with respect to those years for which applicable filing dead- lines in paragraph (a)(3)(i) of this section were not met, FC would be barred by paragraph (a)(2) of this sec- tion from claiming any deductions that otherwise would have given rise to net operating losses on returns for those years, and that would have been available as loss carryforwards in subsequent years. At FC’s direc- tion, its U.S. tax advisor promptly contacted the ap- propriate examining personnel and cooperated with the Internal Revenue Service in determining FC’s in- come tax liability, for example, by preparing and fil- ing the appropriate income tax returns for Year 1 through Year 4 and by making FC’s books and records available to an Internal Revenue Service examiner. FC has met the standard described in paragraph (a)(3)(ii) of this section for waiver of any applicable filing dead- lines in paragraph (a)(3)(i) of this section. Example 2. Foreign corporation refuses to coop- erate. Same facts as inExample 1,except that while FC’s U.S. tax advisor contacted the appropriate ex- amining personnel and filed the appropriate income tax returns for Year 1 through Year 4, FC refused all requests by the Internal Revenue Service to provide supporting information (for example, books and records) with respect to those returns. Because FC did not cooperate in determining its U.S. tax liability for the taxable years for which an income tax return was not timely filed, FC is not granted a waiver as de- scribed in paragraph (a)(3)(ii) of this section of any applicable filing deadlines in paragraph (a)(3)(i) of this section. Example 3. Foreign corporation fails to file a pro- tective return.Same facts as inExample 1,except that in Year 1 through Year 4, FC’s tax director also con- sulted a U.S. tax advisor, who advised FC’s tax di- rector that it was uncertain whether U.S. income tax returns were necessary for those years and that FC could protect its right subsequently to claim the loss carryforwards by filing protective returns under para- graph (a)(3)(vi) of this section. FC did not file U.S. income tax returns or protective returns for those years. FC did not present evidence that intervening events beyond FC’s control prevented it from filing an in- come tax return, and there were no other mitigating factors. FC has not met the standard described in para- graph (a)(3)(ii) of this section for waiver of any ap- plicable filing deadlines in paragraph (a)(3)(i) of this section. Example 4. Foreign corporation with effectively connected income.In Year 1, FC, a technology com- pany, opened an office in the United States to mar- ket and sell a software program that FC had developed outside the United States. FC had minimal business or tax experience internationally, and no such expe- rience in the United States. Through FC’s direct ef- forts, U.S. sales of the software produced income effectively connected with a U.S. trade or business. FC, however, did not file U.S. income tax returns for Year 1 or Year 2. FC’s management was aware nei- ther of FC’s obligation to file a U.S. income tax re- turn for those years, nor of its ability to file a protective return for those years. FC had never filed a U.S. in- come tax return before. In January of Year 4, FC en- gaged U.S. counsel in connection with licensing software to an unrelated U.S. company. U.S. coun- sel reviewed FC’s U.S. activities and advised FC that it should have filed U.S. income tax returns for Year 1 and Year 2. FC immediately engaged a U.S. tax ad- visor who, at FC’s direction, promptly contacted the appropriate examining personnel and cooperated with the Internal Revenue Service in determining FC’s in- come tax liability, for example, by preparing and fil- ing the appropriate income tax returns for Year 1 and Year 2 and by making FC’s books and records avail- able to an Internal Revenue Service examiner. FC has met the standard described in paragraph (a)(3)(ii) of this section for waiver of any applicable filing dead- lines in paragraph (a)(3)(i) of this section. Example 5. IRS discovers foreign corporation’s failure to file.In Year 1, FC, a technology com- pany, opened an office in the United States to mar- ket and sell a software program that FC had developed outside the United States. Through FC’s direct ef- forts, U.S. sales of the software produced income ef- fectively connected with a U.S. trade or business. FC had extensive experience conducting similar busi- ness activities in other countries, including making the appropriate tax filings. However, FC’s management was aware neither of FC’s obligation to file a U.S. in- come tax return for those years, nor of its ability to file a protective return for those years. FC had never filed a U.S. income tax return before. Despite FC’s extensive experience conducting similar business ac- tivities in other countries, it made no effort to seek advice in connection with its U.S. tax obligations. FC failed to file either U.S. income tax returns or pro- tective returns for Year 1 and Year 2. In January of Year 4, an Internal Revenue Service examiner asked FC for an explanation of FC’s failure to file U.S. in- come tax returns. FC immediately engaged a U.S. tax advisor, and cooperated with the Internal Revenue Ser- vice in determining FC’s income tax liability, for ex- ample, by preparing and filing the appropriate income tax returns for Year 1 and Year 2 and by mak- March 24, 20036132003–12 I.R.B. ing FC’s books and records available to the examiner. FC did not present evidence that intervening events beyond its control prevented it from filing a return, and there were no other mitigating factors. FC has not met the standard described in paragraph (a)(3)(ii) of this section for waiver of any applicable filing dead- lines in paragraph (a)(3)(i) of this section. Example 6. Foreign corporation with prior fil- ing history.FC began a U.S. trade or business in Year 1. FC’s tax advisor filed the appropriate U.S. in- come tax returns for Year 1 through Year 6, report- ing income effectively connected with FC’s U.S. trade or business. In Year 7, FC replaced its tax advisor with a tax advisor unfamiliar with U.S. tax law. FC did not file a U.S. income tax return for any year from Year 7 through Year 10, although it had effectively con- nected income for those years. FC’s management was aware of FC’s ability to file a protective return for those years. In Year 11, an Internal Revenue Ser- vice examiner contacted FC and asked its chief fi- nancial officer for an explanation of FC’s failure to file U.S. income tax returns after Year 6. FC imme- diately engaged a U.S. tax advisor and cooperated with the Internal Revenue Service in determining FC’s in- come tax liability, for example, by preparing and fil- ing the appropriate income tax returns for Year 7 through Year 10 and by making FC’s books and records available to the examiner. FC did not present evidence that intervening events beyond its control pre- vented it from filing a return, and there were no other mitigating factors. FC has not met the standard de- scribed in paragraph (a)(3)(ii) of this section for waiver of any applicable filing deadlines in paragraph (a)(3)(i) of this section. (iv) Paragraphs (a)(3)(ii) and (iii) of this section are applicable to open years for which a request for a waiver is filed on or after January 29, 2002. ***** §1.882–4T [Removed] Par. 5. Section 1.882–4T is removed. David A. Mader, Assistant Deputy Commissioner of Internal Revenue. Approved January 17, 2003. Pamela F. Olson, Assistant Secretary of the Treasury. (Filed by the Office of the Federal Register on March 7, 2003, 8:45 a.m., and published in the issue of the Federal Regis- ter for March 10, 2003, 68 F.R. 11313) Section 6011.—General Requirement of Return, Statement, or List 26 CFR 1.6011–4: Requirement of statement disclosing participation in certain transactions by taxpayers. T.D. 9046 DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1, 20, 25, 31, 53, 54, 56, 301, and 602 Tax Shelter Regulations AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final regulations. SUMMARY: These regulations finalize the rules relating to the filing by certain tax- payers of a disclosure statement with their federal tax returns under section 6011(a), the rules relating to the registration of con- fidential corporate tax shelters under sec- tion 6111(d), and the rules relating to the list maintenance requirements under sec- tion 6112. These regulations affect taxpay- ers participating in reportable transactions, persons responsible for registering confi- dential corporate tax shelters, and organiz- ers and sellers of potentially abusive tax shelters. DATES:Effective Date:These regulations are effective February 28, 2003. Applicability Date:For dates of appli- cability, see§1.6011–4(h),§20.6011–4(b), §25.6011–4(b),§31.6011–4(b),§53.6011– 4(b),§54.6011–4(b),§56.6011–4(b), §301.6111–2(h), and§301.6112–1(j). FOR FURTHER INFORMATION CON- TACT: Tara P. Volungis or Charlotte Chyr, 202–622–3070 (not a toll-free number). SUPPLEMENTARY INFORMATION: Paperwork Reduction Act The collections of information contained in these final regulations have been re- viewed and approved by the Office of Man- agement and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control numbers 1545–1685, 1545– 1687, and 1545–1686. Responses to these collections of information are mandatory. Form 8886,“Reportable Transaction Dis- closure Statement”, reflects the collection of information relating to the disclosure of reportable transactions for the regulations under§1.6011–4, and was approved by OMB under control number 1545–1800. Form 8264,“Application for Registration of a Tax Shelter”, reflects the collection of information relating to the registration of tax shelters for the regulations under §301.6111–2 and§301.6111–1T, and was approved by OMB under control number 1545–0865. An agency may not conduct or spon- sor, and a person is not required to re- spond to, a collection of information unless the collection of information displays a valid OMB control number assigned by the Of- fice of Management and Budget. The estimated annual burden per respondent/recordkeeper for the collec- tion of information in§1.6011–4 will be re- flected on Form 8886. The estimated annual burden for the collection of information in Form 8886 is 3,770 hours and the esti- mated number of respondents/recordkeepers is 500. The estimated annual burden per respondent/recordkeeper for the collec- tion of information in§301.6111–2isre- flected on Form 8264. The estimated annual burden for the collection of information in Form 8264 is 14,382 hours and the esti- mated number of respondents/recordkeepers is 350. The estimated annual burden per re- cordkeeper for the collection of informa- tion in§301.6112–1 is 100 hours and the estimated number of recordkeepers is 500. Comments concerning the accuracy of these burden estimates and suggestions for reducing these burdens should be sent to the Internal Revenue Service,Attn: IRS Re- ports Clearance Officer, W:CAR:MP:T:T: SP, Washington, DC 20224, and to the Office of Management and Budget,Attn: Desk Officer for the Department of the Treasury, Office of Information and Regu- latory Affairs, Washington, DC 20503. Books and records relating to these col- lections of information must be retained as long as their contents may become mate- rial in the administration of any internal rev- enue law. Generally, tax returns and tax return information are confidential, as re- quired by 26 U.S.C. 6103. Background This document amends 26 CFR part 1 to provide rules relating to the disclosure of reportable transactions by certain tax- payers on their federal tax returns under sec- tion 6011, and also amends 26 CFR parts 20, 25, 31, 53, 54, and 56 to provide rules for purposes of estate, gift, employment, and pension and exempt organizations excise 2003–12 I.R.B.614March 24, 2003 taxes requiring the disclosure of listed trans- actions by certain taxpayers on their fed- eral tax returns under section 6011. This document amends 26 CFR part 301 to pro- vide rules regarding the registration of con- fidential corporate tax shelters under section 6111(d) and rules relating to the list main- tenance requirements under section 6112. On February 28, 2000, the IRS issued temporary and proposed regulations re- garding sections 6011, 6111, and 6112 (T.D. 8877, 2000–1 C.B. 747, REG–103735– 00, 2000–1 C.B. 770; T.D. 8876, 2000–1 C.B. 753, REG–110311–98, 2000–1 C.B. 767; T.D. 8875, 2000–1 C.B. 761, REG– 103736–00, 2000–1 C.B. 768) (the Febru- ary 2000 regulations). The February 2000 regulations were published in theFed- eral Register(65 FR 11205, 65 FR 11269; 65 FR 11215, 65 FR 11272; 65 FR 11211, 65 FR 11271) on March 2, 2000. On Au- gust 11, 2000, the IRS issued temporary and proposed regulations modifying the rules under sections 6011, 6111, and 6112 (T.D. 8896, 2000–2 C.B. 249, REG–103735– 00, REG–110311–98, REG–103736–00, 2000–2 C.B. 258) (the August 2000 regu- lations). The August 2000 regulations were published in theFederal Register(65 FR 49909, 65 FR 49955) on August 16, 2000. On August 2, 2001, the IRS issued tem- porary and proposed regulations modify- ing the rules under sections 6011 and 6111 (T.D. 8961, 2001–2 C.B. 194, REG– 103735–00, REG–110311–98, REG– 103736–00, 2001–2 C.B. 204) (the August 2001 regulations). The August 2001 regu- lations were published in theFederal Reg- ister(66 FR 41133, 66 FR 41169) on August 7, 2001. On June 14, 2002, the IRS issued temporary and proposed regula- tions modifying the rules under sections 6011 and 6111 (T.D. 9000, 2002–28 I.R.B. 87, REG–103735–00, REG–110311–98, 2002–28 I.R.B. 109) (the June 2002 regu- lations). The June 2002 regulations were published in theFederal Register(67 FR 41324, 67 FR 41362) on June 18, 2002. On October 17, 2002, the IRS issued tempo- rary and proposed regulations modifying the rules under sections 6011, 6111, and 6112 (T.D. 9017, 2002–45 I.R.B. 815, REG– 103735–00, REG–154117–02, REG– 154116–02, REG–154115–02, REG– 154429–02, REG–154423–02, REG– 154426–02, REG–110311–98, 2002–45 I.R.B. 832; T.D. 9018, 2002–45 I.R.B. 823, REG–103736–00, 2002–45 I.R.B. 834) (the October 2002 regulations). The October 2002 regulations were published in theFed- eral Register(67 FR 64799, 67 FR 64840; 67 FR 64807, 67 FR 64842) on October 22, 2002. On December 11, 2002, and on Janu- ary 7, 2003, the IRS and Treasury Depart- ment held a public hearing on these regulations. Written and electronic com- ments responding to the temporary regu- lations and the notices of proposed rulemaking were received. After consider- ation of all the statements and comments, the proposed regulations are adopted as amended by this Treasury decision, and the corresponding temporary regulations are re- moved. The revisions are discussed be- low. Explanation and Summary of Comments 1.In General These regulations finalize the rules for disclosure of reportable transactions, reg- istration of confidential corporate tax shel- ters, and list maintenance of potentially abusive tax shelters. Sections 20.6011–4, 25.6011–4,31.6011–4,53.6011–4, 54.6011–4, 56.6011–4, and 301.6111–2 fi- nalize each corresponding proposed regu- lation with few, if any, changes. Sections 1.6011–4 and 301.6112–1 modify and fi- nalize each corresponding proposed regu- lation. The IRS and Treasury Department re- ceived numerous comments relating to the October 2002 temporary regulations re- garding disclosure under§1.6011–4T and list maintenance under§301.6112–1T. All comments were reviewed thoroughly. In particular, the IRS and Treasury Depart- ment reviewed the commentators’sug- gested clarifications to the rules pertaining to loss transactions and transactions with a significant book-tax difference, and to the rules pertaining to who must disclose trans- actions under section 6011. The IRS and Treasury Department also focused specifi- cally on the comments relating to the rules pertaining to material advisors and the rules pertaining to the persons who must be in- cluded on lists under section 6112. In re- sponse to the commentators’suggested clarifications, the final regulations have been revised to tailor more narrowly the scope of the transactions for which disclosure and maintenance of information under sec- tions 6011 and 6112 is required. The ma- jor changes to the regulations are described below. 2.Section 6011—Participants The definition of participation has been clarified in the final regulations. Report- ing of transactions by RICs and reporting of certain leasing transactions have been ex- cluded from the requirements under §1.6011–4, provided that the transactions are not listed transactions. 3.Section 6011—Confidential Transactions A confidential transaction is a transac- tion that is offered under conditions of con- fidentiality. The regulations generally provide a presumption of non-confidentiality if the taxpayer receives written authoriza- tion to disclose the tax treatment and tax structure of the transaction. Some com- mentators suggested the following changes to the regulations: (1) clarification regard- ing when the written authorization to dis- close has to be effective, (2) clarification regarding whether proprietary transactions are confidential if there is a written autho- rization to disclose, and (3) an exception for certain merger and acquisition transac- tions. In response to those comments, the IRS and Treasury Department have made modifications to the factors for a confiden- tial transaction in the final regulation. The final regulations delete the clarifi- cation, under the definition of a confiden- tial transaction for purposes of both section 6011 and section 6111, that a privilege held by the taxpayer does not cause a transac- tion to be confidential. The IRS and Trea- sury Department believe that this clarification is not necessary because the attorney-client privilege (or the confiden- tiality privilege of section 7525(a)) does not affect whether a transaction is confiden- tial. A claim of privilege does not restrict the taxpayer’s ability to disclose the tax treatment or tax structure of a transac- tion. 4.Section 6011—Transactions with Contractual Protection Commentators indicated that it is inap- propriate to require the reporting of a trans- action for which the taxpayer obtains tax insurance. Other commentators suggested that the contractual protection factor would require the reporting of numerous non- abusive types of transactions, such as le- gitimate business transactions with tax indemnities or rights to terminate the trans- March 24, 20036152003–12 I.R.B. action in the event of a change in tax law. In response to these comments, the IRS and Treasury Department changed the focus of the contractual protection factor to whether fees are refundable or contingent. How- ever, if it comes to the attention of the IRS and Treasury Department that other types of contractual protection, including tax in- surance or tax indemnities, are being used to facilitate abusive transactions, changes to the regulations will be considered. 5.Section 6011—Loss Transactions Many commentators suggested that the loss transaction factor was over broad and would require disclosure of a significant number of transactions occurring in the or- dinary course of business. In response to these comments, exceptions to the loss transaction factor will be issued in sepa- rate published guidance. 6.Section 6011—Transactions with a Significant Book-Tax Difference The IRS and Treasury Department re- ceived many comments on the use of U.S. GAAP, the manner in which gross assets are to be calculated, and the potential exclu- sion of items for purposes of the book- tax difference factor. In response, the final regulations revise the book-tax difference factor to provide that if a taxpayer in the ordinary course of its business keeps books on a basis other than U.S. GAAP and does not use U.S. GAAP for any purpose, then the taxpayer may determine the treatment of a book item by using the books main- tained by the taxpayer, provided the books are kept on the same basis consistently from year to year. In addition, the final regula- tions increase the requisite gross asset amount to $250 million or more and specify that the amount of gross assets is deter- mined by ascertaining whether the gross as- sets equaled or exceeded $250 million for book purposes at the end of any financial accounting period that ends with or within the entity’s taxable year in which the trans- action occurs. In response to comments that the scope of the book-tax difference factor was over broad, the IRS and Treasury Department have revised the exceptions to this factor. The exceptions to the book-tax difference factor have been removed from the regu- lations and will be issued in separate pub- lished guidance. 7.Section 6011—Form 8886 Taxpayers will disclose reportable trans- actions under the final regulations on Form 8886. Reportable transactions entered into on or after January 1, 2003, and prior to February 28, 2003, for which the taxpayer does not choose to apply the final regula- tions, may be disclosed on Form 8886 or as provided in§1.6011–4T(c) as published in theFederal Register(67 FR 41324) on June 18, 2002. Form 8886 will allow tax- payers to aggregate substantially similar transactions on one form for disclosure pur- poses. 8.Section 6112 Commentators requested clarification on the definition of a material advisor and the threshold fee requirement. In response to those comments, the final regulations pro- vide that a person is a material advisor if the person is required to register a trans- action under section 6111, or the person re- ceives at least a minimum fee with respect to the transaction and makes a tax state- ment to certain taxpayers. In addition, the IRS and Treasury Department have clari- fied that fees are defined as all fees for ser- vices for advice (whether or not tax advice) or for the implementation of a transaction that is a potentially abusive tax shelter. In the final regulations, the IRS and Treasury Department have clarified that the procedures for asserting a privilege claim apply to information required to be main- tained in§301.6112–1(e)(3)(i)(I) that might be privileged. This change reflects the IRS and Treasury Department’s belief that the other information covered by these regu- lations is not privileged. These procedures neither expand nor contract the scope of items that may be privileged. Effective Date Regulations§§1.6011–4, 20.6011–4, 25.6011–4,31.6011–4,53.6011–4, 54.6011–4, 56.6011–4, 301.6111–2, and 301.6112–1 apply to transactions entered into on or after February 28, 2003. Special Analyses It has been determined that this Trea- sury decision is not a significant regula- tory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. It is hereby cer- tified that the collection of information in these regulations will not have a signifi- cant economic impact on a substantial num- ber of small entities. With regard to disclosure and registration, this certifica- tion is based upon the fact that the time re- quired to prepare or retain the disclosure or registration is not lengthy and will not have a significant impact on those small enti- ties that are required to provide disclo- sure or to register. With regard to list maintenance, this certification is based upon the fact that the number of respondents is small, those persons responsible for main- taining the list described in the regula- tions are principally sophisticated businesses, including accounting firms and law firms, and very few respondents, if any, are likely to be small businesses. Therefore, a Regu- latory Flexibility Analysis under the Regu- latory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking preceding these regu- lations was submitted to the Chief Coun- sel for Advocacy of the Small Business Administration for comment on their im- pact on small business. Drafting Information The principal authors of these regula- tions are Tara P. Volungis and Charlotte Chyr of the Office of the Associate Chief Counsel (Passthroughs and Special Indus- tries). However, other personnel from the IRS and Treasury Department participated in their development. ***** Adoption of Amendments to the Regulations Accordingly, 26 CFR parts 1, 20, 25, 31, 53, 54, 56, 301, and 602 are amended as follows: PA RT 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 1.6011–4 is added to read as follows: §1.6011–4 Requirement of statement disclosing participation in certain transactions by taxpayers. 2003–12 I.R.B.616March 24, 2003 (a)In general.Every taxpayer that has participated, as described in paragraph (c)(3) of this section, in a reportable transaction within the meaning of paragraph (b) of this section and who is required to file a tax re- turn must attach to its return for the tax- able year described in paragraph (e) of this section a disclosure statement in the form prescribed by paragraph (d) of this sec- tion. The fact that a transaction is a report- able transaction shall not affect the legal determination of whether the taxpayer’s treatment of the transaction is proper. (b)Reportable transactions—(1)In gen- eral.A reportable transaction is a transac- tion described in any of the paragraphs (b)(2) through (7) of this section. The term transactionincludes all of the factual ele- ments relevant to the expected tax treat- ment of any investment, entity, plan, or arrangement, and includes any series of steps carried out as part of a plan. There are six categories of reportable transactions: listed transactions, confidential transac- tions, transactions with contractual protec- tion, loss transactions, transactions with a significant book-tax difference, and trans- actions involving a brief asset holding pe- riod. (2)Listed transactions.A listed trans- action is a transaction that is the same as or substantially similar to one of the types of transactions that the Internal Revenue Service (IRS) has determined to be a tax avoidance transaction and identified by no- tice, regulation, or other form of published guidance as a listed transaction. (3)Confidential transactions—(i)In gen- eral.A confidential transaction is a trans- action that is offered to a taxpayer under conditions of confidentiality. A transac- tion is considered offered to a taxpayer un- der conditions of confidentiality if the taxpayer’s disclosure of the tax treatment or the tax structure of the transaction is lim- ited in any manner by an express or im- plied understanding or agreement with or for the benefit of any person who makes or provides a statement, oral or written, to the taxpayer (or for whose benefit a state- ment is made or provided to the taxpayer) as to the potential tax consequences that may result from the transaction, whether or not such understanding or agreement is le- gally binding. A transaction also will be considered offered to a taxpayer under con- ditions of confidentiality if the taxpayer knows or has reason to know that the tax- payer’s use or disclosure of information re- lating to the tax treatment or tax structure of the transaction is limited in any other manner (such as where the transaction is claimed to be proprietary or exclusive) for the benefit of any person, other than the tax- payer, who makes or provides a statement, oral or written, to the taxpayer (or for whose benefit a statement is made or provided to the taxpayer) as to the potential tax con- sequences that may result from the trans- action. All the facts and circumstances relating to the transaction will be consid- ered when determining whether a transac- tion is offered to a taxpayer under conditions of confidentiality, including the prior conduct of the parties. (ii)Exceptions—(A)Securities law.A transaction is not considered offered to a taxpayer under conditions of confidential- ity if disclosure of the tax treatment or tax structure of the transaction is subject to re- strictions reasonably necessary to comply with securities laws and such disclosure is not otherwise limited. (B)Mergers and acquisitions.In the case of a proposed taxable or tax-free acquisi- tion of historic assets of a corporation (other than an investment company, as defined in section 351(e), that is not publicly traded) that constitute an active trade or business the acquirer intends to continue, or a pro- posed taxable or tax-free acquisition of more than 50 percent of the stock of a corpora- tion (other than an investment company, as defined in section 351(e), that is not pub- licly traded) that owns historic assets used in an active trade or business the acquirer intends to continue, the transaction is not considered a confidential transaction un- der this paragraph (b)(3) if the taxpayer is permitted to disclose the tax treatment and tax structure of the transaction no later than the earlier of the date of the public an- nouncement of discussions relating to the transaction, the date of the public announce- ment of the transaction, or the date of the execution of an agreement (with or with- out conditions) to enter into the transac- tion. However, this exception is not available where the taxpayer’s ability to consult any tax advisor (including a tax ad- visor independent from all other entities in- volved in the transaction) regarding the tax treatment or tax structure of the transac- tion is limited in any way. (iii)Presumption.Unless the facts and circumstances indicate otherwise, a trans- action is not considered offered to a tax- payer under conditions of confidentiality if every person who makes or provides a statement, oral or written, to the taxpayer (or for whose benefit a statement is made or provided to the taxpayer) as to the po- tential tax consequences that may result from the transaction, provides express writ- ten authorization to the taxpayer in sub- stantially the following form:“the taxpayer (and each employee, representative, or other agent of the taxpayer) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to the taxpayer relating to such tax treatment and tax structure.”Ex- cept as provided in paragraph (b)(3)(ii) of this section, this presumption is available only in cases in which each written autho- rization permits the taxpayer to disclose the tax treatment and tax structure of the trans- action immediately upon commencement of discussions with the person providing the authorization and each written authoriza- tion is given no later than 30 days from the day the person providing the written au- thorization first makes or provides a state- ment to the taxpayer regarding the tax consequences of the transaction. A trans- action that is claimed to be exclusive or pro- prietary to any party other than the taxpayer will not be considered a confidential trans- action under this paragraph (b)(3) if writ- ten authorization to disclose is provided to the taxpayer in accordance with this para- graph (b)(3)(iii) and the transaction is not otherwise confidential. (4)Transactions with contractual protection—(i)In general.A transaction with contractual protection is a transac- tion for which the taxpayer or a related party (as described in section 267(b) or 707(b)) has the right to a full or partial re- fund of fees (as described in paragraph (b)(4)(ii) of this section) if all or part of the intended tax consequences from the trans- action are not sustained. A transaction with contractual protection also is a transac- tion for which fees (as described in para- graph (b)(4)(ii) of this section) are contingent on the taxpayer’s realization of tax benefits from the transaction. All the facts and circumstances relating to the trans- action will be considered when determin- March 24, 20036172003–12 I.R.B. ing whether a fee is refundable or contingent, including the right to reim- bursements of amounts that the parties to the transaction have not designated as fees or any agreement to provide services with- out reasonable compensation. (ii)Fees.Paragraph (b)(4)(i) of this sec- tion only applies with respect to fees paid by or on behalf of the taxpayer or a re- lated party to any person who makes or pro- vides a statement, oral or written, to the taxpayer or related party (or for whose ben- efit a statement is made or provided to the taxpayer or related party) as to the poten- tial tax consequences that may result from the transaction. (iii)Exceptions—(A)Termination of transaction.A transaction is not consid- ered to have contractual protection solely because a party to the transaction has the right to terminate the transaction upon the happening of an event affecting the taxa- tion of one or more parties to the transac- tion. (B)Previously reported transaction.If a person makes or provides a statement to a taxpayer as to the potential tax conse- quences that may result from a transac- tion only after the taxpayer has entered into the transaction and reported the conse- quences of the transaction on a filed tax re- turn, and the person has not previously received fees from the taxpayer relating to the transaction, then any refundable or con- tingent fees are not taken into account in determining whether the transaction has contractual protection. This paragraph (b)(4)(iii)(B) does not provide any sub- stantive rules regarding when a person may charge refundable or contingent fees with respect to a transaction. See Circular 230, 31 CFR Part 10, for the regulations gov- erning practice before the IRS. (5)Loss transactions—(i)In general.A loss transaction is any transaction result- ing in the taxpayer claiming a loss under section 165 of at least— (A) $10 million in any single taxable year or $20 million in any combination of taxable years for corporations; (B) $10 million in any single taxable year or $20 million in any combination of taxable years for partnerships that have only corporations as partners (looking through any partners that are themselves partner- ships), whether or not any losses flow through to one or more partners; or $2 mil- lion in any single taxable year or $4 mil- lion in any combination of taxable years for all other partnerships, whether or not any losses flow through to one or more part- ners; (C) $2 million in any single taxable year or $4 million in any combination of tax- able years for individuals, S corporations, or trusts, whether or not any losses flow through to one or more shareholders or ben- eficiaries; or (D) $50,000 in any single taxable year for individuals or trusts, whether or not the loss flows through from an S corporation or partnership, if the loss arises with re- spect to a section 988 transaction (as de- fined in section 988(c)(1) relating to foreign currency transactions). (ii)Cumulative losses.In determining whether a transaction results in a taxpayer claiming a loss that meets the threshold amounts over a combination of taxable years as described in paragraph (b)(5)(i) of this section, only losses claimed in the tax- able year that the transaction is entered into and the five succeeding taxable years are combined. (iii)Section 165 loss.(A) For purposes of this section, in determining the thresh- olds in paragraph (b)(5)(i) of this section, the amount of a section 165 loss is ad- justed for any salvage value and for any in- surance or other compensation received. See §1.165–1(c)(4). However, a section 165 loss does not take into account offsetting gains, or other income or limitations. For ex- ample, a section 165 loss does not take into account the limitation in section 165(d) (re- lating to wagering losses) or the limita- tions in sections 165(f), 1211, and 1212 (relating to capital losses). The full amount of a section 165 loss is taken into account for the year in which the loss is sustained, regardless of whether all or part of the loss enters into the computation of a net oper- ating loss under section 172 or a net capi- tal loss under section 1212 that is a carryback or carryover to another year. A section 165 loss does not include any por- tion of a loss, attributable to a capital loss carryback or carryover from another year, that is treated as a deemed capital loss un- der section 1212. (B) For purposes of this section, a sec- tion 165 loss includes an amount deduct- ible pursuant to a provision that treats a transaction as a sale or other disposition, or otherwise results in a deduction under sec- tion 165. A section 165 loss includes, for example, a loss resulting from a sale or ex- change of a partnership interest under sec- tion 741 and a loss resulting from a section 988 transaction. (6)Transactions with a significant book- tax difference—(i)In general.A transac- tion with a significant book-tax difference is a transaction where the amount for tax purposes of any item or items of income, gain, expense, or loss from the transac- tion differs by more than $10 million on a gross basis from the amount of the item or items for book purposes in any taxable year. For purposes of this determination, offset- ting items shall not be netted for either tax or book purposes. For purposes of this para- graph (b)(6), the amount of an item for book purposes is determined by applying U.S. generally accepted accounting prin- ciples (U.S. GAAP) for worldwide income. However, if a taxpayer, in the ordinary course of its business, keeps books for re- porting financial results to shareholders, creditors, or regulators on a basis other than U.S. GAAP, and does not maintain U.S. GAAP books for any purpose, then the tax- payer may determine the amount of a book item for purposes of this paragraph (b)(6) by using the books maintained by the tax- payer, provided the books are kept on the same basis consistently from year to year. Adjustments to any reserve for taxes are disregarded for purposes of determining the book-tax difference. (ii)Applicability—(A)In general.This paragraph (b)(6) applies only to— (1) Taxpayers that are reporting com- panies under the Securities Exchange Act of 1934 (15 USC 78a) and related busi- ness entities (as described in section 267(b) or 707(b)); or (2) Business entities that have $250 mil- lion or more in gross assets for book pur- poses at the end of any financial accounting period that ends with or within the enti- ty’s taxable year in which the transaction occurs (for purposes of this determina- tion, the assets of all related business en- tities (as defined in section 267(b) or 707(b)) must be aggregated). (B)Consolidated returns.For purposes of this paragraph (b)(6), in the case of tax- payers that are members of a group of af- filiated corporations filing a consolidated return, transactions solely between or among members of the group will be disregarded. Moreover, where two or more members of the group participate in a transaction that is not solely between or among members 2003–12 I.R.B.618March 24, 2003 of the group, items shall be aggregated (as if such members were a single taxpayer), but any offsetting items shall not be net- ted. (C)Foreign persons.In the case of a taxpayer that is a foreign person (other than a foreign corporation that is treated as a do- mestic corporation for federal tax purposes under section 269B, 953(d), 1504(d) or any other provision of the Internal Revenue Code), only assets that are U.S. assets un- der§1.884–1(d) shall be taken into ac- countforpurposesofparagraph (b)(6)(ii)(A)(2) of this section, and only transactions that give rise to income that is effectively connected with the conduct of a trade or business within the United States (or to losses, expenses, or deductions al- located or apportioned to such income) shall be taken into account for purposes of this paragraph (b)(6). (D)Owners of disregarded entities.In the case of an eligible entity that is disre- garded as an entity separate from its owner for federal tax purposes, items of income, gain, loss, or expense that otherwise are considered items of the entity for book pur- poses shall be treated as items of its owner, and items arising from transactions be- tween the entity and its owner shall be dis- regarded, for purposes of this paragraph (b)(6). (E)Partners of partnerships.In the case of a taxpayer that is a member or a part- ner of an entity that is treated as a part- nership for federal tax purposes, items of income, gain, loss, or expense that are al- locable to the taxpayer for federal tax pur- poses, but otherwise are considered items of the entity for book purposes, shall be treated as items of the taxpayer for pur- poses of this paragraph (b)(6). (7)Transactions involving a brief as- set holding period.A transaction involv- ing a brief asset holding period is any transaction resulting in the taxpayer claim- ing a tax credit exceeding $250,000 (in- cluding a foreign tax credit) if the underlying asset giving rise to the credit is held by the taxpayer for 45 days or less. For purposes of determining the holding pe- riod, the principles of sections 246(c)(3) and (c)(4) apply. Transactions resulting in a for- eign tax credit for withholding taxes or other taxes imposed in respect of a dividend that are not disallowed under section 901(k) (in- cluding transactions eligible for the excep- tion for securities dealers under section 901(k)(4)) are excluded from this para- graph (b)(7). (8)Exceptions—(i)In general.A trans- action will not be considered a reportable transaction, or will be excluded from any individual category of reportable transac- tion under paragraphs (b)(3) through (7) of this section, if the Commissioner makes a determination by published guidance that the transaction is not subject to the report- ing requirements of this section. The Com- missioner may make a determination by individual letter ruling under paragraph (f) of this section that an individual letter rul- ing request on a specific transaction or type of transaction satisfies the reporting re- quirements of this section with regard to that transaction or type of transaction for the tax- payer who requests the individual letter rul- ing. (ii)Special rule for RICs.For purposes of this section, a regulated investment com- pany (RIC) as defined in section 851 or an investment vehicle that is owned 95 per- cent or more by one or more RICs at all times during the course of the transaction are not required to disclose a transaction that is described in any of paragraphs (b)(3) through (7) of this section unless the trans- action is also a listed transaction. (iii)Special rule for lease transactions. For purposes of this section, leasing trans- actions of the type excepted from the reg- istration requirements under section 6111(d) of the Code and the list maintenance re- quirements under section 6112 as described in Notice 2001–18, 2001–1 C.B. 731 (see §601.601(d)(2) of this chapter), are ex- cluded from paragraphs (b)(3) through (7) of this section. (c)Definitions.For purposes of this sec- tion, the following terms are defined as follows: (1)Taxpayer.The termtaxpayermeans any person described in section 7701(a)(1), including S corporations. Except as other- wise specifically provided in this section, the termtaxpayeralso includes an affili- ated group of corporations that joins in the filing of a consolidated return under sec- tion 1501. (2)Corporation.When used specifi- cally in this section, the termcorporation means an entity that is required to file a re- turn for a taxable year on any 1120 series form, or successor form, excluding S cor- porations. (3)Participation—(i)In general—(A) Listed transactions.A taxpayer has partici- pated in a listed transaction if the taxpay- er’s tax return reflects tax consequences or a tax strategy described in the published guidance that lists the transaction under paragraph (b)(2) of this section. A tax- payer also has participated in a listed trans- action if the taxpayer knows or has reason to know that the taxpayer’s tax benefits are derived directly or indirectly from tax con- sequences or a tax strategy described in published guidance that lists a transaction under paragraph (b)(2) of this section. Pub- lished guidance may identify other types or classes of persons that will be treated as par- ticipants in a listed transaction. (B)Confidential transactions.A tax- payer has participated in a confidential transaction if the taxpayer’s tax return re- flects a tax benefit from the transaction and the taxpayer’s disclosure of the tax treat- ment or tax structure of the transaction is limited in the manner described in para- graph (b)(3) of this section. If a partner- ship’s, S corporation’s, or trust’s disclosure is limited, and the partner’s, sharehold- er’s, or beneficiary’s disclosure is not lim- ited, then the partnership, S corporation, or trust, and not the partner, shareholder, or beneficiary, has participated in the confi- dential transaction. (C)Transactions with contractual pro- tection.A taxpayer has participated in a transaction with contractual protection if the taxpayer’s tax return reflects a tax benefit from the transaction and, as described in paragraph (b)(4) of this section, the tax- payer has the right to the full or partial re- fund of fees or the fees are contingent. If a partnership, S corporation, or trust has the right to a full or partial refund of fees or has a contingent fee arrangement, and the partner, shareholder, or beneficiary does not individually have the right to the refund of fees or a contingent fee arrangement, then the partnership, S corporation, or trust, and not the partner, shareholder, or benefi- ciary, has participated in the transaction with contractual protection. (D)Loss transactions.A taxpayer has participated in a loss transaction if the tax- payer’s tax return reflects a section 165 loss and the amount of the section 165 loss equals or exceeds the threshold amount ap- plicable to the taxpayer as described in para- graph (b)(5)(i) of this section. If a taxpayer is a partner in a partnership, shareholder in March 24, 20036192003–12 I.R.B. an S corporation, or beneficiary of a trust and a section 165 loss as described in para- graph (b)(5) of this section flows through the entity to the taxpayer (disregarding net- ting at the entity level), the taxpayer has participated in a loss transaction if the tax- payer’s tax return reflects a section 165 loss and the amount of the section 165 loss that flows through to the taxpayer equals or ex- ceeds the threshold amounts applicable to the taxpayer as described in paragraph (b)(5)(i) of this section. For this purpose, a tax return is deemed to reflect the full amount of a section 165 loss described in paragraph (b)(5) of this section allocable to the taxpayer under this paragraph (c)(3)(i)(D), regardless of whether all or part of the loss enters into the computation of a net operating loss under section 172 or net capital loss under section 1212 that the taxpayer may carry back or carry over to another year. (E)Transactions with a significant book- tax difference.A taxpayer has participated in a transaction with a significant book- tax difference if the taxpayer’s tax treat- ment of an item from the transaction differs from the book treatment of that item as de- scribed in paragraph (b)(6) of this sec- tion. In determining whether a transaction results in a significant book-tax differ- ence for a taxpayer, differences that arise solely because a subsidiary of the tax- payer is consolidated with the taxpayer, in whole or in part, for book purposes, but not for tax purposes, are not taken into ac- count. (F)Transactions involving a brief as- set holding period.A taxpayer has partici- pated in a transaction involving a brief asset holding period if the taxpayer’s tax re- turn reflects items giving rise to a tax credit described in paragraph (b)(7) of this sec- tion. If a taxpayer is a partner in a part- nership, shareholder in an S corporation, or beneficiary of a trust and the items giv- ing rise to a tax credit described in para- graph (b)(7) of this section flow through the entity to the taxpayer (disregarding net- ting at the entity level), the taxpayer has participated in a transaction involving a brief asset holding period if the taxpayer’s tax return reflects the tax credit and the amount of the tax credit claimed by the taxpayer ex- ceeds $250,000. (G)Shareholders of foreign corpor- ations—(1)In general.A reporting share- holder of a foreign corporation partici- pates in a transaction described in para- graphs (b)(2) through (5) and (b)(7) of this section if the foreign corporation would be considered to participate in the transac- tion under the rules of this paragraph (c)(3) if it were a domestic corporation filing a tax return that reflects the items from the trans- action. A reporting shareholder partici- pates in a transaction described in paragraph (b)(6) of this section only if the foreign cor- poration would be considered to partici- pate in the transaction under the rules of this paragraph (c)(3) if it were a domestic cor- poration and the transaction reduces or eliminates an income inclusion that other- wise would be required under section 551, 951, or 1293. A reporting shareholder (and any successor in interest) is considered to participate in a transaction under this para- graph (c)(3)(i)(G) only for its first tax- able year with or within which ends the first taxable year of the foreign corporation in which the foreign corporation participates in the transaction, and for the reporting shareholder’s five succeeding taxable years. (2)Reporting shareholder.The termre- porting shareholdermeans a United States shareholder (as defined in section 551(a)) in a foreign personal holding company (as defined in section 552), a United States shareholder (as defined in section 951(b)) in a controlled foreign corporation (as de- fined in section 957), or a 10 percent share- holder (by vote or value) of a qualified electing fund (as defined in section 1295). (ii)Examples.The following examples illustrate the provisions of paragraph (c)(3)(i) of this section: Example 1.Notice 95–53, 1995–2 C.B. 334 (see §601.601(d)(2) of this chapter), describes a lease strip- ping transaction in which one party (the transferor) assigns the right to receive future payments under a lease of tangible property and receives consider- ation which the transferor treats as current income. The transferor later transfers the property subject to the lease in a transaction intended to qualify as a trans- ferred basis transaction, for example, a transaction de- scribed in section 351. The transferee corporation claims the deductions associated with the high basis property subject to the lease. The transferor’s and trans- feree corporation’s tax returns reflect tax positions de- scribed in Notice 95–53. Therefore, the transferor and transferee corporation have participated in the listed transaction. In the section 351 transaction, the trans- feror will have received stock with low value and high basis from the transferee corporation. If the transferor subsequently transfers the high basis/low value stock to a taxpayer in another transaction in- tended to qualify as a transferred basis transaction and the taxpayer uses the stock to generate a loss, and if the taxpayer knows or has reason to know that the tax loss claimed was derived indirectly from the lease strip- ping transaction, then the taxpayer has participated in the listed transaction. Accordingly, the taxpayer must disclose the transaction and the manner of the tax- payer’s participation in the transaction under the rules of this section. If a bank lends money to the transferor, transferee corporation, or taxpayer for use in their transactions, the bank has not participated in the listed transaction because the bank’s tax return does not reflect tax consequences or a tax strategy de- scribed in the listing notice (nor does the bank’stax return reflect a tax benefit derived from tax conse- quences or a tax strategy described in the listing no- tice), nor is the bank described as a participant in Notice 95–53. Example 2.XYZ is a limited liability company treated as a partnership for tax purposes. X, Y, and Z are members of XYZ. X is an individual, Y is an S corporation, and Z is a partnership. XYZ enters into a confidential transaction under paragraph (b)(3) of this section. X is bound by the confidentiality agree- ment, but Y and Z are not bound by the agreement. As a result of the transaction, XYZ, X, Y, and Z all reflect a tax benefit on their tax returns. Because XYZ’s and X’s disclosure of the tax treatment and tax structure are limited in the manner described in para- graph (b)(3) of this section and their tax returns re- flect a tax benefit from the transaction, both XYZ and X have participated in the confidential transaction. Nei- ther Y nor Z has participated in the confidential trans- action because they are not subject to the confidentiality agreement. Example 3.Partnership AB has gross assets with a book value of over $250 million. Partner A is an SEC reporting company and partner B is an individual. AB enters into a transaction that results in a book-tax dif- ference for AB of $25 million. The transaction is a reportable transaction for AB under paragraph (b)(6) of this section because the book-tax difference ex- ceeds $10 million. As a result of A’s partnership in- terest in AB and the allocation of items relating to the transaction to A, A has a book-tax difference of $11 million. The transaction is a reportable transaction for A under paragraph (b)(6) of this section because the $11 million book-tax difference exceeds $10 mil- lion. However, even though $14 million of the book- tax difference would be allocated to B, the transaction is not a reportable transaction for B under para- graph (b)(6) of this section because B, an individual, is not subject to paragraph (b)(6) of this section. Example 4.(i) P corporation, the parent corpora- tion of a group of corporations that file a consoli- dated tax return, owns 60% of the stock of T corporation. T files its own tax return and is not in- cluded as a member of the P group on the P group consolidated tax return. For book purposes, some or all of T’s income is included by the group of corpo- rations that includes P. T engages in a transaction that results in items of book income but does not result in items of income for tax purposes. P and T are SEC reporting companies. (ii) T participated in the transaction. T has no items of taxable income but has items of book income. If items from the transaction result in a book-tax dif- ference determined in accordance with paragraph (b)(6) of this section of $10 million in any single year, T will be required to file Form 8886. The P group did not participate in the transaction, and does not have a book- tax difference for purposes of paragraph (b)(6) of this section because, even if the P group included $10 mil- 2003–12 I.R.B.620March 24, 2003 lion in book income, the book tax difference arises solely because T is not part of P’s consolidated group for tax purposes. (iii) If the facts were changed so that P corpora- tion owned 80% of the stock of T and T was a mem- ber of the P consolidated group for tax purposes, the P group would be the taxpayer that participated in the transaction. If, in any single year, the transaction pro- duced items of income for book purposes of $10 mil- lion but no items of taxable income, P would be required to file Form 8886. This result would not change if T separately reported its items for book pur- poses, if P reported none of T’s items on its consoli- dated financial statements, or if the P consolidated financial statements included only part of a $10 mil- lion book-tax difference relating to items from T’s transaction. Example 5. Domestic corporations X and Y each own 50 percent of the voting stock of CFC, a con- trolled foreign corporation. X, Y, and CFC each use the calendar year as their taxable year. CFC is not en- gaged in the conduct of a trade or business within the United States and has no U.S. source income. Ac- cordingly, CFC is not required to file a U.S. federal income tax return.See§1.6012–2(g). Under para- graph (c)(3)(i)(G)(2) of this section, X and Y are re- porting shareholders with respect to CFC. CFC purchases a Euro-denominated bond on June 1, 2003, for 104,400,000 Euros. The bond matures on June 7, 2003, and CFC collects 104,500,000 Euros, equal to the bond’s 100,000,000 Euro face amount plus 5,000,000 Euros of accrued but unpaid interest, less a 10% foreign withholding tax of 500,000 Euros. The average dollar-Euro exchange rate for the year is $.80 = 1 Euro, so CFC adds $400,000 to its post-1986 for- eign income taxes pool as a result of the transac- tion.Seesections 986(a)(1) and 902(c)(2). Under paragraph (c)(3)(i)(G)(1) of this section, X and Y have each participated in a transaction involving a brief as- set holding period described in paragraph (b)(7) of this section for their taxable years 2003 through 2008 be- cause both X and Y are reporting shareholders of CFC, and CFC would have been considered to have par- ticipated in a reportable transaction if it were a do- mestic corporation. (4)Substantially similar.The termsub- stantially similarincludes any transaction that is expected to obtain the same or simi- lar types of tax consequences and that is ei- ther factually similar or based on the same or similar tax strategy. Receipt of an opin- ion regarding the tax consequences of the transaction is not relevant to the determi- nation of whether the transaction is the same as or substantially similar to another trans- action. Further, the termsubstantially simi- larmust be broadly construed in favor of disclosure. The following examples illus- trate situations where a transaction is the same as or substantially similar to a listed transaction under paragraph (b)(2) of this section. (Such transactions may also be re- portable transactions under paragraphs (b)(3) through (7) of this section.) The follow- ing examples illustrate the provisions of this paragraph (c)(4): Example 1. Notice 2000–44, 2000–2 C.B. 255 (see §601.601(d)(2) of this chapter), sets forth a listed trans- action involving offsetting options transferred to a part- nership where the taxpayer claims basis in the partnership for the cost of the purchased options but does not adjust basis under section 752 as a result of the partnership’s assumption of the taxpayer’s obli- gation with respect to the options. Transactions us- ing short sales, futures, derivatives or any other type of offsetting obligations to inflate basis in a partner- ship interest would be the same as or substantially similar to the transaction described in Notice 2000– 44. Moreover, use of the inflated basis in the part- nership interest to diminish gain that would otherwise be recognized on the transfer of a partnership asset would also be the same as or substantially similar to the transaction described in Notice 2000–44. Example 2.Notice 2001–16, 2001–1 C.B. 730 (see §601.601(d)(2) of this chapter), sets forth a listed trans- action involving a seller (X) who desires to sell stock of a corporation (T), an intermediary corporation (M), and a buyer (Y) who desires to purchase the assets (and not the stock) of T. M agrees to facilitate the sale to prevent the recognition of the gain that T would oth- erwise report. Notice 2001–16 describes M as a mem- ber of a consolidated group that has a loss within the group or as a party not subject to tax. Transactions uti- lizing different intermediaries to prevent the recog- nition of gain would be the same as or substantially similar to the transaction described in Notice 2001– 16. An example is a transaction in which M is a cor- poration that does not file a consolidated return but which buys T stock, liquidates T, sells assets of T to Y, and offsets the gain recognized on the sale of those assets with currently generated losses. (5)Tax.For purposes of this section, the termtaxmeans federal income tax. (6)Tax benefit.A tax benefit includes de- ductions, exclusions from gross income, nonrecognition of gain, tax credits, adjust- ments (or the absence of adjustments) to the basis of property, status as an entity ex- empt from federal income taxation, and any other tax consequences that may reduce a taxpayer’s federal income tax liability by affecting the amount, timing, character, or source of any item of income, gain, ex- pense, loss, or credit. (7)Tax return.For purposes of this sec- tion, the termtax returnmeans a federal in- come tax return and a federal information return. (8)Tax treatment.The tax treatment of a transaction is the purported or claimed federal income tax treatment of the trans- action. (9)Tax structure.The tax structure of a transaction is any fact that may be rel- evant to understanding the purported or claimed federal income tax treatment of the transaction. (d)Form and content of disclosure state- ment.The IRS will release Form 8886,“Re- portable Transaction Disclosure Statement” (or a successor form), for use by taxpay- ers in accordance with this paragraph (d). A taxpayer required to file a disclosure statement under this section must file a completed Form 8886 in accordance with the instructions to the form. The Form 8886 is the disclosure statement required under this section. The form must be attached to the appropriate tax returns as provided in paragraph (e) of this section. If a copy of a disclosure statement is required to be sent to the Office of Tax Shelter Analysis (OTSA) under paragraph (e) of this sec- tion, it must be sent to: Internal Revenue Service, LM:PFTG:OTSA, Large & Mid- Size Business Division,1111Constitu- tion Ave., NW, Washington, DC 20224, or to such other address as provided by the Commissioner. (e)Time of providing disclosure—(1)In general.The disclosure statement for a re- portable transaction must be attached to the taxpayer’s tax return for each taxable year for which a taxpayer participates in a re- portable transaction. In addition, a copy of the disclosure statement must be sent to OTSA at the same time that any disclo- sure statement is first filed with the tax- payer’s tax return. If a reportable transaction results in a loss which is carried back to a prior year, the disclosure statement for the reportable transaction must be attached to the taxpayer’s application for tentative re- fund or amended tax return for that prior year. In the case of a taxpayer that is a part- nership or S corporation, the disclosure statement for a reportable transaction must be attached to the partnership’sorScor- poration’s tax return for each taxable year in which the partnership or S corporation participates in the transaction under the rules of paragraph (c)(3)(i) of this section. (2)Special rules—(i)Listed transac- tions.If a transaction becomes a listed trans- action after the filing of the taxpayer’s final tax return reflecting either tax consequences or a tax strategy described in the published guidance listing the transaction (or a tax benefit derived from tax consequences or a tax strategy described in the published guidance listing the transaction) and be- fore the end of the statute of limitations pe- riod for that return, then a disclosure statement must be filed as an attachment to the taxpayer’s tax return next filed after the date the transaction is listed. (ii)Loss transactions.If a transaction be- comes a loss transaction because the losses March 24, 20036212003–12 I.R.B. equal or exceed the threshold amounts as described in paragraph (b)(5)(i) of this sec- tion, a disclosure statement must be filed as an attachment to the taxpayer’s tax re- turn for the first taxable year in which the threshold amount is reached and to any sub- sequent tax return that reflects any amount of section 165 loss from the transaction. (3)Multiple disclosures.The taxpayer must disclose the transaction in the time and manner provided for under the provisions of this section regardless of whether the tax- payer also plans to disclose the transac- tion under other published guidance, for example, Rev. Proc. 94–69, 1994–2 C.B. 804 (see§601.601(d)(2) of this chapter). (4)Example.The following example il- lustrates the application of this paragraph (e): Example.In January of 2004, F, a domestic cal- endar year corporation, enters into a transaction that is not a listed transaction when entered into and is not a transaction described in any of the paragraphs (b)(3) through (7) of this section. All the tax benefits from the transaction are reported on F’s 2004 tax return. On March 1, 2008, the IRS publishes a notice iden- tifying the transaction as a listed transaction de- scribed in paragraph (b)(2) of this section. Thus, upon issuance of the notice, the transaction becomes a re- portable transaction described in paragraph (b) of this section. The statute of limitations for F’s 2004 tax- able year is still open. F is required to file Form 8886 for the transaction as an attachment to F’s next filed federal income tax return and must send a copy of Form 8886 to OTSA. If F’s 2007 federal income tax return has not been filed on or before the date the Ser- vice identifies the transaction as a listed transaction, Form 8886 must be attached to F’s 2007 return and at that time a copy of Form 8886 must be sent to OTSA. (f)Rulings and protective disclosures— (1)Requests for ruling. A taxpayer may, on or before the date that disclosure would oth- erwise be required under this section, sub- mit a request to the IRS for a ruling as to whether a transaction is subject to the dis- closure requirements of this section. If the request fully discloses all relevant facts re- lating to the transaction, the potential ob- ligation of that taxpayer to disclose the transaction will be suspended during the pe- riod that the ruling request is pending and, if the IRS subsequently concludes that the transaction is a reportable transaction sub- ject to disclosure under this section, until the 60th day after the issuance of the rul- ing (or, if the request is withdrawn, 60 days after the date that the request is withdrawn). Furthermore, in that taxpayer’s individual ruling, the Commissioner in his discre- tion may determine that the submission sat- isfies the disclosure rules under this section for that particular transaction or type of transaction. (2)Protective disclosures.If a taxpayer is uncertain whether a transaction must be disclosed under this section, the taxpayer may disclose the transaction in accordance with the requirements of this section, and indicate on the disclosure statement that the taxpayer is uncertain whether the transac- tion is required to be disclosed under this section and that the disclosure statement is being filed on a protective basis. (3)Rulings on the merits of a transac- tion.If a taxpayer requests a ruling on the merits of a specific transaction on or be- fore the date that disclosure would other- wise be required under this section, and receives a favorable ruling as to the trans- action, the disclosure rules under this sec- tion will be deemed to have been satisfied by that taxpayer with regard to that trans- action, so long as the request fully dis- closes all relevant facts relating to the transaction which would otherwise be re- quired to be disclosed under this section. (g)Retention of documents.In accor- dance with the instructions to Form 8886, the taxpayer must retain a copy of all docu- ments and other records related to a trans- action subject to disclosure under this section that are material to an understand- ing of the tax treatment or tax structure of the transaction. The documents must be re- tained until the expiration of the statute of limitations applicable to the final taxable year for which disclosure of the transac- tion was required under this section. (This document retention requirement is in ad- dition to any document retention require- ments that section 6001 generally imposes on the taxpayer.) The documents may in- clude the following: marketing materials re- lated to the transaction; written analyses used in decision-making related to the trans- action; correspondence and agreements be- tween the taxpayer and any advisor, lender, or other party to the reportable transac- tion that relate to the transaction; docu- ments discussing, referring to, or demonstrating the purported or claimed tax benefits arising from the reportable trans- action; and documents, if any, referring to the business purposes for the reportable transaction. A taxpayer is not required to re- tain earlier drafts of a document if the tax- payer retains a copy of the final document (or, if there is no final document, the most recent draft of the document) and the fi- nal document (or most recent draft) con- tains all the information in the earlier drafts of the document that is material to an un- derstanding of the purported tax treatment or tax structure of the transaction. (h)Effective dates.This section applies to federal income tax returns filed after Feb- ruary 28, 2000. However, paragraphs (a) through (g) of this section apply to trans- actions entered into on or after February 28, 2003. All the rules in paragraphs (a) through (g) of this section may be relied upon for transactions entered into on or after Janu- ary 1, 2003, and before February 28, 2003. Otherwise, the rules that apply with re- spect to transactions entered into before February 28, 2003, are contained in §1.6011–4T in effect prior to February 28, 2003 (see 26 CFR part 1 revised as of April 1, 2002, 2002–28 I.R.B. 90, and 2002–45 I.R.B. 818 (see§601.601(d)(2) of this chap- ter)). §1.6011–4T [Removed] Par. 3. Section 1.6011–4T is removed. PA RT 2 0—ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16, 1954 Par. 4. The authority citation for part 20 continues to read in part as follows: Authority: 26 U.S.C. 7805*** Par. 5. Section 20.6011–4 is added to read as follows: §20.6011–4 Requirement of statement disclosing participation in certain transactions by taxpayers. (a)In general.If a transaction is iden- tified as alisted transactionas defined in §1.6011–4 of this chapter by the Commis- sioner in published guidance (see §601.601(d)(2) of this chapter), and the listed transaction involves an estate tax un- der chapter 11 of subtitle B of the Inter- nal Revenue Code, the transaction must be disclosed in the manner stated in such pub- lished guidance. (b)Effective date.This section applies to transactions entered into on or after Janu- ary 1, 2003. §20.6011–4T [Removed] Par. 6. Section 20.6011–4T is removed. 2003–12 I.R.B.622March 24, 2003 PA RT 2 5—GIFT TAX; GIFTS MADE AFTER DECEMBER 31, 1954 Par. 7. The authority citation for part 25 continues to read in part as follows: Authority: 26 U.S.C. 7805*** Par. 8. Section 25.6011–4 is added to read as follows: §25.6011–4 Requirement of statement disclosing participation in certain transactions by taxpayers. (a)In general.If a transaction is iden- tified as alisted transactionas defined in §1.6011–4 of this chapter by the Commis- sioner in published guidance (see §601.601(d)(2) of this chapter), and the listed transaction involves a gift tax un- der chapter 12 of subtitle B of the Inter- nal Revenue Code, the transaction must be disclosed in the manner stated in such pub- lished guidance. (b)Effective date.This section applies to transactions entered into on or after Janu- ary 1, 2003. §25.6011–4T [Removed] Par. 9. Section 25.6011–4T is removed. PA RT 3 1—EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT THE SOURCE Par. 10. The authority citation for part 31 continues to read in part as follows: Authority: 26 U.S.C. 7805*** Par. 11. Section 31.6011–4 is added to read as follows: §31.6011–4 Requirement of statement disclosing participation in certain transactions by taxpayers. (a)In general.If a transaction is iden- tified as alisted transactionas defined in §1.6011–4 of this chapter by the Commis- sioner in published guidance (see §601.601(d)(2) of this chapter), and the listed transaction involves an employment tax under chapters 21 through 25 of sub- title C of the Internal Revenue Code, the transaction must be disclosed in the man- ner stated in such published guidance. (b)Effective date. This section applies to transactions entered into on or after Janu- ary 1, 2003. §31.6011–4T [Removed] Par. 12. Section 31.6011–4T is removed. PA RT 5 3—FOUNDATION AND SIMILAR EXCISE TAXES Par. 13. The authority citation for part 53 continues to read as follows: Authority: 26 U.S.C. 7805 Par. 14. Section 53.6011–4 is added to read as follows: §53.6011–4 Requirement of statement disclosing participation in certain transactions by taxpayers. (a)In general.If a transaction is iden- tified as alisted transactionas defined in §1.6011–4 of this chapter by the Commis- sioner in published guidance (see §601.601(d)(2) of this chapter), and the listed transaction involves an excise tax un- der chapter 42 of subtitle D of the Inter- nal Revenue Code (relating to private foundations and certain other tax-exempt or- ganizations), the transaction must be dis- closed in the manner stated in such published guidance. (b)Effective date.This section applies to transactions entered into on or after Janu- ary 1, 2003. §53.6011–4T [Removed] Par. 15. Section 53.6011–4T is removed. PA RT 5 4—PENSION EXCISE TAXES Par. 16. The authority citation for part 54 continues to read in part as follows: Authority: 26 U.S.C. 7805*** Par. 17. Section 54.6011–4 is added to read as follows: §54.6011–4 Requirement of statement disclosing participation in certain transactions by taxpayers. (a)In general.If a transaction is iden- tified as alisted transactionas defined in §1.6011–4 of this chapter by the Commis- sioner in published guidance (see §601.601(d)(2) of this chapter), and the listed transaction involves an excise tax un- der chapter 43 of subtitle D of the Inter- nal Revenue Code (relating to qualified pension, etc., plans), the transaction must be disclosed in the manner stated in such published guidance. (b)Effective date.This section applies to transactions entered into on or after Janu- ary 1, 2003. §54.6011–4T [Removed] Par. 18. Section 54.6011–4T is removed. PA RT 5 6—PUBLIC CHARITY EXCISE TAXES Par. 19. The authority citation for part 56 continues to read in part as follows: Authority: 26 U.S.C. 7805*** Par. 20. Section 56.6011–4 is added to read as follows: §56.6011–4 Requirement of statement disclosing participation in certain transactions by taxpayers. (a)In general.If a transaction is iden- tified as alisted transactionas defined in §1.6011–4 of this chapter by the Commis- sioner in published guidance (see §601.601(d)(2) of this chapter), and the listed transaction involves an excise tax un- der chapter 41 of subtitle D of the Inter- nal Revenue Code (relating to public charities), the transaction must be disclosed in the manner stated in such published guid- ance. (b)Effective date.This section applies to transactions entered into on or after Janu- ary 1, 2003. §56.6011–4T [Removed] Par. 21. Section 56.6011–4T is removed. PART 301—PROCEDURE AND ADMINISTRATION Par. 22. The authority citation for part 301 continues to read in part as follows: Authority: 26 U.S.C. 7805*** Par. 23. Section 301.6111–2 is added as follows: §301.6111–2 Confidential corporate tax shelters. (a)In general.(1) Under section 6111(d) and this section, a confidential corporate tax shelter is treated as a tax shelter subject to the requirements of sections 6111(a) and (b). (2) A confidential corporate tax shelter is any transaction— (i) A significant purpose of the struc- ture of which is the avoidance or evasion of federal income tax, as described in para- graph (b) of this section, for a direct or in- direct corporate participant; (ii) That is offered to any potential par- ticipant under conditions of confidential- ity, as described in paragraph (c) of this section; and March 24, 20036232003–12 I.R.B. (iii) For which the tax shelter promot- ers may receive fees in excess of $100,000 in the aggregate, as described in paragraph (d) of this section. (3) For purposes of this section, refer- ences to the termtransactioninclude all of the factual elements relevant to the ex- pected tax treatment of any investment, en- tity, plan, or arrangement, and include any series of steps carried out as part of a plan. For purposes of this section, the termsub- stantially similarincludes any transaction that is expected to obtain the same or simi- lar types of tax consequences and that is ei- ther factually similar or based on the same or similar tax strategy. Receipt of an opin- ion regarding the tax consequences of the transaction is not relevant to the determi- nation of whether the transaction is the same as or substantially similar to another trans- action. Further, the termsubstantially simi- larmust be broadly construed in favor of registration. For examples, see§1.6011– 4(c)(4) of this chapter. (4) A transaction described in paragraph (b) of this section is for a direct or an in- direct corporate participant if it is expected to provide federal income tax benefits to any corporation (U.S. or foreign) whether or not that corporation participates directly in the transaction. (b)Transactions structured for avoid- ance or evasion of federal income tax— (1)In general.The avoidance or evasion of federal income tax will be considered a significant purpose of the structure of a transaction if the transaction is described in paragraph (b)(2) or (3) of this section. How- ever, a transaction described in paragraph (b)(3) of this section need not be regis- tered if the transaction is described in para- graph (b)(4) of this section. For purposes of this section, federal income tax ben- efits include deductions, exclusions from gross income, nonrecognition of gain, tax credits, adjustments (or the absence of ad- justments) to the basis of property, status as an entity exempt from federal income taxation, and any other tax consequences that may reduce a taxpayer’s federal in- come tax liability by affecting the amount, timing, character, or source of any item of income, gain, expense, loss, or credit. (2)Listed transactions.A transaction is described in this paragraph (b)(2) if the transaction is the same as or substantially similar to one of the types of transactions that the Internal Revenue Service (IRS) has determined to be a tax avoidance transac- tion and identified by notice, regulation, or other form of published guidance as a listed transaction. If a transaction becomes a listed transaction after the date on which regis- tration would otherwise be required un- der this section, and if the transaction otherwise satisfies the confidentiality and fee requirements of paragraphs (a)(2)(ii) and (iii) of this section, registration shall in all events be required with respect to any in- terests in the transaction that are offered for sale after the transaction becomes a listed transaction. However, because a transac- tion identified as a listed transaction is gen- erally considered to have been structured for a significant tax avoidance purpose, such a transaction ordinarily will have been sub- ject to registration under this section be- fore becoming a listed transaction if the transaction previously satisfied the confi- dentiality and fee requirements of para- graphs (a)(2)(ii) and (iii) of this section. (3)Other tax-structured transactions.A transaction is described in this paragraph (b)(3) if it has been structured to produce federal income tax benefits that consti- tute an important part of the intended re- sults of the transaction and the tax shelter promoter (or other person who would be re- sponsible for registration under this sec- tion) reasonably expects the transaction to be presented in the same or substantially similar form to more than one potential par- ticipant, unless the promoter reasonably de- termines that— (i) The potential participant is expected to participate in the transaction in the or- dinary course of its business in a form con- sistent with customary commercial practice (a transaction involving the acquisition, dis- position, or restructuring of a business, in- cluding the acquisition, disposition, or other change in the ownership or control of an entity that is engaged in a business, or a transaction involving a recapitalization or an acquisition of capital for use in the tax- payer’s business, shall be considered a trans- action carried out in the ordinary course of a taxpayer’s business); and (ii) There is a generally accepted un- derstanding that the expected federal in- come tax benefits from the transaction (taking into account any combination of in- tended tax consequences) are properly al- lowable under the Internal Revenue Code for substantially similar transactions. There is no minimum period of time for which such a generally accepted understanding must exist. In general, however, a tax shel- ter promoter (or other person who would be responsible for registration under this section) cannot reasonably determine whether the intended tax treatment of a transaction has become generally accepted unless information relating to the tax treat- ment and tax structure of such transac- tions has been in the public domain (e.g., rulings, published articles, etc.) and widely known for a sufficient period of time (or- dinarily a period of years) to provide knowl- edgeable tax practitioners and the IRS reasonable opportunity to evaluate the in- tended tax treatment. The mere fact that one or more knowledgeable tax practitioners have provided an opinion or advice to the effect that the intended tax treatment of the transaction should or will be sustained, if challenged by the IRS, is not sufficient to satisfy the requirements of this paragraph (b)(3)(ii). (4)Excepted transactions.The avoid- ance or evasion of federal income tax will not be considered a significant purpose of the structure of a transaction if the trans- action is described in either paragraph (b)(4)(i), (ii), or (iii) of this section. (i) In the case of a transaction other than a transaction described in paragraph (b)(2) of this section, the tax shelter promoter (or other person who would be responsible for registration under this section) reason- ably determines that there is no reason- able basis under federal tax law for denial of any significant portion of the expected federal income tax benefits from the trans- action. This paragraph (b)(4)(i) applies only if the tax shelter promoter (or other per- son who would be responsible for regis- tration under this section) reasonably determines that there is no basis that would meet the standard applicable to taxpayers under§1.6662–3(b)(3) of this chapter un- der which the IRS could disallow any sig- nificant portion of the expected federal income tax benefits of the transaction. Thus, the reasonable basis standard is not satis- fied by an IRS position that would be merely arguable or that would constitute merely a colorable claim. However, the de- termination of whether the IRS would or would not have a reasonable basis for such a position must take into account the en- tirety of the transaction and any combina- tion of tax consequences that are expected to result from any component steps of the 2003–12 I.R.B.624March 24, 2003 transaction, must not be based on any un- reasonable or unrealistic factual assump- tions, and must take into account all relevant aspects of federal tax law, including the stat- ute and legislative history, treaties, admin- istrative guidance, and judicial decisions that establish principles of general application in the tax law (e.g.,Gregory v. Helvering,293 U.S. 465 (1935)). The de- termination of whether the IRS would or would not have such a reasonable basis is qualitative in nature and does not depend on any percentage or other quantitative as- sessment of the likelihood that the tax- payer would ultimately prevail if a significant portion of the expected tax ben- efits were disallowed by the IRS. (ii) The IRS makes a determination by published guidance that the transaction is not subject to the registration requirements of this section. (iii) The IRS makes a determination by individual ruling under paragraph (b)(5) of this section that a specific transaction is not subject to the registration requirements of this section for the taxpayer requesting the ruling. (5)Requests for ruling.If a tax shelter promoter (or other person who would be re- sponsible for registration under this sec- tion) is uncertain whether a transaction is properly classified as a confidential cor- porate tax shelter or is otherwise uncer- tain whether registration is required under this section, that person may, on or be- fore the date that registration would oth- erwise be required under this section, submit a request to the IRS for a ruling as to whether the transaction is subject to the reg- istration requirements of this section. If the request fully discloses all relevant facts re- lating to the transaction, that person’s po- tential obligation to register the transaction will be suspended during the period that the ruling request is pending and, if the IRS subsequently concludes that the transac- tion is a confidential corporate tax shelter subject to registration under this section, un- til the sixtieth day after the issuance of the ruling (or, if the request is withdrawn, sixty days from the date that the request is with- drawn). In the alternative, that person may register the transaction in accordance with the requirements of this section and ap- pend a statement to the Form 8264,“Ap- plication for Registration of a Tax Shelter,” which states that the person is uncertain whether the transaction is required to be registered as a confidential corporate tax shelter, and that the Form 8264 is being filed on a protective basis. (6)Example. The following example il- lustrates the application of paragraphs (b)(1) through (4) of this section. Assume, for pur- poses of the example, that the transaction is not the same as or substantially similar to any of the types of transactions that the IRS has identified as listed transactions un- der section 6111 and, thus, is not described in paragraph (b)(2) of this section. The ex- ample is as follows: Example.(i)Facts.Y has designed a combina- tion of financial instruments to be issued as a pack- age by corporations. The financial instruments are expected to be treated as equity for financial account- ing purposes and as debt giving rise to allowable in- terest deductions for federal income tax purposes. Y reasonably expects to present this method of raising capital to more than one potential corporate partici- pant. Assume that, because of the unusual nature of the combination of financial instruments, Y cannot con- clude either that the transaction represented by the fi- nancial instruments is in customary commercial form or that there is a generally accepted understanding that interest deductions are available to issuers of sub- stantially similar combinations of financial instru- ments. Further, assume that Y cannot reasonably determine that the IRS would have no reasonable ba- sis to deny the deductions. (ii)Analysis. The transaction represented by this combination of financial instruments is a transac- tion described in paragraph (b)(3) of this section. How- ever, if Y is uncertain whether this transaction is described in paragraph (b)(3) of this section, or is oth- erwise uncertain whether registration is required, Y may apply for a ruling under paragraph (b)(5) of this section, and Y will not be required to register the trans- action while the ruling is pending or for sixty days thereafter. (c)Conditions of confidentiality—(1)In general.All the facts and circumstances re- lating to the transaction will be consid- ered when determining whether an offer is made under conditions of confidentiality as described in section 6111(d)(2), including prior conduct of the parties. Pursuant to sec- tion 6111(d)(2)(A), if an offeree’s disclo- sure of the tax treatment or tax structure of the transaction is limited in any manner by an express or implied understanding or agreement with or for the benefit of any tax shelter promoter, an offer is considered made under conditions of confidentiality, whether or not such understanding or agree- ment is legally binding. The tax treatment of a transaction is the purported or claimed federal income tax treatment of the trans- action. The tax structure of a transaction is any fact that may be relevant to under- standing the purported or claimed federal income tax treatment of the transaction. Pur- suant to section 6111(d)(2)(B), an offer will also be considered made under conditions of confidentiality in the absence of any such understanding or agreement if any tax shel- ter promoter knows or has reason to know that the offeree’s use or disclosure of in- formation relating to the tax treatment or tax structure of the transaction is limited for the benefit of any person other than the of- feree in any other manner, such as where the transaction is claimed to be propri- etary or exclusive to the tax shelter pro- moter or any party other than the offeree. (2)Exceptions—(i)Securities law.An of- fer is not considered made under condi- tions of confidentiality if disclosure of the tax treatment or tax structure of the trans- action is subject to restrictions reason- ably necessary to comply with securities laws and such disclosure is not otherwise limited. (ii)Mergers and acquisitions.In the case of a proposed taxable or tax-free acquisi- tion of historic assets of a corporation (other than an investment company, as defined in section 351(e), that is not publicly traded) that constitute an active trade or business the acquirer intends to continue, or a pro- posed taxable or tax-free acquisition of more than 50 percent of the stock of a corpora- tion (other than an investment company, as defined in section 351(e), that is not pub- licly traded) that owns historic assets used in an active trade or business the acquirer intends to continue, the transaction is not considered offered under conditions of con- fidentiality under paragraph (c)(1) of this section if the offeree is permitted to dis- close the tax treatment and tax structure of the transaction no later than the earlier of the date of the public announcement of dis- cussions relating to the transaction, the date of the public announcement of the trans- action, or the date of the execution of an agreement (with or without conditions) to enter into the transaction. However, this ex- ception is not available where the offer- ee’s ability to consult any tax advisor (including a tax advisor independent from all other entities involved in the transac- tion) regarding the tax treatment or tax structure of the transaction is limited in any way. (3)Presumption.Unless facts and cir- cumstances indicate otherwise, an offer is not considered made under conditions of confidentiality if the tax shelter promoter provides express written authorization to March 24, 20036252003–12 I.R.B. each offeree permitting the offeree (and each employee, representative, or other agent of such offeree) to disclose to any and all per- sons, without limitation of any kind, the tax treatment and tax structure of the transac- tion, and all materials of any kind (includ- ing opinions or other tax analyses) that are provided to the offeree related to such tax treatment and tax structure. Except as pro- vided in paragraph (c)(2) of this section, this presumption is available only in cases in which each written authorization permits the offeree to disclose the tax treatment and tax structure of the transaction immediately upon commencement of discussions with the tax shelter promoter providing the au- thorization and each written authorization is given no later than 30 days from the day the tax shelter promoter commenced dis- cussions with the offeree. A transaction that is exclusive or proprietary to any party other than the offeree will not be considered of- fered under conditions of confidentiality if written authorization to disclose is pro- vided to the offeree in accordance with this paragraph (c)(3) and the transaction is not otherwise confidential. (d)Determination of fees.All the facts and circumstances relating to the transac- tion will be considered when determining the amount of fees, in the aggregate, that the tax shelter promoters may receive. For purposes of this paragraph (d), all consid- eration that tax shelter promoters may re- ceive is taken into account, including contingent fees, fees in the form of eq- uity interests, and fees the promoters may receive for other transactions as consider- ation for promoting the tax shelter. For ex- ample, if a tax shelter promoter may receive a fee for arranging a transaction that is a confidential corporate tax shelter and a sepa- rate fee for another transaction that is not a confidential corporate tax shelter, part or all of the fee paid with respect to the other transaction may be treated as a fee paid with respect to the confidential corporate tax shelter if the facts and circumstances in- dicate that the fee paid for the other trans- action is in consideration for the confidential corporate tax shelter. For purposes of de- termining whether the tax shelter promot- ers may receive fees in excess of $100,000, the fees from all substantially similar trans- actions are considered part of the same tax shelter and must be aggregated. (e)Registration—(1)Timefor registering—(i)In general.A tax shelter must be registered not later than the day on which the first offering for sale of inter- ests in the shelter occurs. An offer to par- ticipate in a confidential corporate tax shelter shall be treated as an offer for sale. If interests in a confidential corporate tax shelter were first offered for sale on or be- fore February 28, 2000, the first offer for sale of interests in the shelter that occurs after February 28, 2000, shall be consid- ered the first offer for sale under this sec- tion. (ii)Special rule.If a transaction be- comes a confidential corporate tax shelter (e.g., because of a change in the law or fac- tual circumstances, or because the trans- action becomes a listed transaction) subsequent to the first offering for sale af- ter February 28, 2000, and the transac- tion was not previously required to be registered as a confidential corporate tax shelter under this section, the transaction must be registered under this section if in- terests are offered for sale after the trans- action becomes a confidential corporate tax shelter. The transaction must be registered by the next offering for sale of interests in the shelter. If, subsequent to the first of- fering for sale, a transaction becomes a con- fidential corporate tax shelter because the transaction becomes a listed transaction on or after February 28, 2003, and the trans- action was not previously required to be registered as a confidential corporate tax shelter under this section, the transaction must be registered under this section within 60 days after the transaction becomes a listed transaction/confidential corporate tax shelter if any interests were offered for sale within the previous six years. (2)Procedures for registering.To reg- ister a confidential corporate tax shelter, the person responsible for registering the tax shelter must file Form 8264,“Application for Registration of a Tax Shelter.”(Form 8264 is also used to register tax shelters de- fined in section 6111(c).) Similar to the treatment provided under Q&A–22 and Q&A–48 of§301.6111–1T, transactions in- volving similar business assets and simi- lar plans or arrangements that are offered to corporate taxpayers by the same per- son or related persons are aggregated and considered part of a single tax shelter. How- ever, in contrast with the requirement of Q&A–48 of§301.6111–1T, the tax shel- ter promoter may file a single Form 8264 with respect to any such aggregated tax shelter, provided an amended Form 8264 is filed to reflect any material changes and to include any additional or revised writ- ten materials presented in connection with an offer to participate in the shelter. Fur- thermore, all transactions that are part of the same tax shelter and that are to be car- ried out by the same corporate participant (or one or more other members of the same affiliated group within the meaning of sec- tion 1504) must be registered on the same Form 8264. (f)Definition of tax shelter promoter.For purposes of section 6111(d)(2) and this sec- tion, the termtax shelter promoterincludes a tax shelter organizer and any other per- son who participates in the organization, management, or sale of a tax shelter (as those persons are described in section 6111(e)(1) and§301.6111–1T (Q&A–26 through Q&A–33) or any person related (within the meaning of section 267 or 707) to such tax shelter organizer or such other person. (g)Person required to register—(1)Ta x shelter promoters.The rules in section 6111 (a) and (e) and§301.6111–1T (Q&A–34 through Q&A–39) determine who is re- quired to register a confidential corporate tax shelter. A promoter of a confidential cor- porate tax shelter must register the tax shel- ter only if it is a person required to register under the rules in section 6111(a) and (e) and§301.6111–1T (Q&A–34 through Q&A–39). (2)Persons who discuss the transac- tion; all promoters are foreign persons— (i)In general.If all of the tax shelter promoters of a confidential corporate tax shelter are foreign persons, any person who discusses participation in the transaction must register the shelter under this sec- tion within 90 days after beginning such discussions. (ii)Exceptions.Registration by a per- son discussing participation in a transac- tion is not required if either— (A) The person does not participate, di- rectly or indirectly, in the shelter and no- tifies the tax shelter promoter in writing, within 90 days of beginning such discus- sions, that the person will not participate; or (B) Within 90 days after beginning such discussions, the person obtains and reason- ably relies on both— 2003–12 I.R.B.626March 24, 2003 (1) A written statement from one of the tax shelter promoters that such promoter has registered the tax shelter under this sec- tion; and (2) A copy of the registration. (iii)Determination of foreign status.For purposes of this paragraph (g)(2), a per- son must presume that all tax shelter pro- moters are foreign persons unless the person either— (A) Discusses participation in the tax shelter with a promoter that is a United States person; or (B) Obtains and reasonably relies on a written statement from one of the promot- ers that at least one of the promoters is a United States person. (iv)Discussion.Discussing participa- tion in a transaction includes discussing such participation with any person that con- veys the tax shelter promoter’s proposal. For purposes of this paragraph (g)(2), any per- son that participates directly or indirectly in a transaction will be treated as having discussed participation in the transaction not later than the date of the agreement to par- ticipate. Thus, a tax shelter participant will be treated as having discussed participa- tion in the transaction even if all discus- sions were conducted by an intermediary and the agreement to participate was made indirectly through another person acting on the participant’s behalf (for example, through an intermediary empowered to commit the participant to participate in the shelter). (v)Special rule for controlled entities. A person (first person) will be treated as participating indirectly in a confidential cor- porate tax shelter if a foreign person con- trolled by the first person participates in the shelter, and a significant purpose of the shel- ter is the avoidance or evasion of the first person’s federal income tax. For purposes of this paragraph (g)(2)(v), control of a for- eign corporation or partnership will be de- termined under the rules of section 6038(e)(2) and (3), except that such sec- tion shall be applied by substituting“10” for“50”each place it appears and“at least” for“more than”each place it appears. In addition, section 6038(e)(2) shall be ap- plied for these purposes without regard to the constructive ownership rules of sec- tion 318 and by treating stock as owned if it is owned directly or indirectly. Section 6038(e)(3) shall be applied for these pur- poses without regard to the last sentence of section 6038(e)(3)(B). Any beneficiary with a 10 percent or more interest in a foreign trust or estate shall be treated as control- ling that trust or estate for purposes of this paragraph (g)(2)(v). (vi)Other rules.(A) For purposes of the registration requirements under section 6111(d)(3), it is presumed that the tax shel- ter promoters will receive fees in excess of $100,000 in the aggregate unless the per- son responsible for registering the tax shel- ter can show otherwise. (B) Any person treated as a tax shelter promoter under section 6111(d) solely by reason of being related (within the mean- ing of section 267 or 707) to a foreign pro- moter will be treated as a foreign promoter for purposes of this paragraph (g)(2). (h)Effective dates.This section applies to confidential corporate tax shelters in which any interests are offered for sale af- ter February 28, 2000. If an interest is sold after February 28, 2000, it is treated as of- fered for sale after February 28, 2000, un- less the sale was pursuant to a written binding contract entered into on or before February 28, 2000. However, paragraphs (a) through (g) of this section apply to confi- dential corporate tax shelters in which any interests are offered for sale on or after Feb- ruary 28, 2003, and to transactions de- scribed in paragraph (e)(1)(ii) of this section. The rules that apply to confidential corpo- rate tax shelters in which any interests are offered for sale after February 28, 2000, and before February 28, 2003, are contained in §301.6111–2T in effect prior to February 28, 2003 (see 26 CFR part 301 revised as of April 1, 2002, 2002–28 I.R.B 91, and 2002–45 I.R.B. 823 (see§601.601(d)(2) of this chapter)). §301.6111–2T [Removed] Par. 24. Section 301.6111–2T is re- moved. Par. 25. Section 301.6112–1 is added as follows: §301.6112–1 Requirement to prepare, maintain, and furnish lists with respect to potentially abusive tax shelters. (a)In general.Each organizer and seller, as described in paragraph (c) of this sec- tion, of a transaction that is a potentially abusive tax shelter, as described in para- graph (b) of this section, shall prepare and maintain a list of persons in accordance with paragraph (e) of this section and upon re- quest shall furnish such list to the Inter- nal Revenue Service (IRS) in accordance with paragraph (g) of this section. (b)Potentially abusive tax shelters.For purposes of this section, a potentially abu- sive tax shelter is any transaction that is a section 6111 tax shelter, as described in paragraph (b)(1) of this section, or that has a potential for tax avoidance or evasion, as described in paragraph (b)(2) of this sec- tion. The termtransactionincludes all of the factual elements relevant to the ex- pected tax treatment of any investment, en- tity, plan, or arrangement, and includes any series of steps carried out as part of a plan. (1)Transaction that is a section 6111 tax shelter.A section 6111 tax shelter is any transaction that is required to be regis- tered with the IRS under section 6111, re- gardless of whether that tax shelter is properly registered pursuant to section 6111. (2)Transaction that has a potential for tax avoidance or evasion—(i)In general. A transaction that has a potential for tax avoidance or evasion includes— (A) Any listed transaction as defined in §1.6011–4(b)(2) of this chapter that is sub- ject to disclosure under§§1.6011–4, 20.6011–4,25.6011–4,31.6011–4, 53.6011–4, 54.6011–4, or 56.6011–4 of this chapter; (B) Any transaction that a potential ma- terial advisor (at the time the transaction is entered into or an interest is acquired) knows is or reasonably expects will be- come a reportable transaction under §1.6011–4(b)(3) through (7) of this chap- ter; and (C) Any interest in a type of transac- tion that is transferred if the transferor knows or reasonably expects that the trans- feree will sell or transfer an interest in that type of transaction to another transferee (subsequent participant), and the type of transaction would be a listed transaction un- der§§1.6011–4, 20.6011–4, 25.6011–4, 31.6011–4, 53.6011–4, 54.6011–4, or 56.6011–4 of this chapter, or a transac- tion described in§1.6011–4(b)(3) through (7) of this chapter assuming that the rel- evant thresholds are met. (ii) The determination of whether a trans- action has the potential for tax avoidance or evasion does not depend upon whether the transaction is properly disclosed pur- suant to§§1.6011–4, 20.6011–4, 25.6011–4, 31.6011–4, 53.6011–4, 54.6011–4, or 56.6011–4 of this chapter. March 24, 20036272003–12 I.R.B. (iii) If a transaction becomes a poten- tially abusive tax shelter on or after Feb- ruary 28, 2003, because it is a listed transaction as defined in§1.6011–4 of this chapter and is subject to disclosure under §1.6011–4 of this chapter this section shall apply with respect to any such transac- tion entered into or any interest acquired therein after February 28, 2000 (includ- ing interests acquired before the transac- tion becomes a listed transaction). If a transaction becomes a listed transaction as defined in§1.6011–4 of this chapter and is subject to disclosure under§§20.6011–4, 25.6011–4,31.6011–4,53.6011–4, 54.6011–4, or 56.6011–4 of this chapter, this section shall apply with respect to any such transaction entered into or any interest ac- quired therein on or after January 1, 2003 (including interests acquired before the transaction becomes a listed transaction). (c)Organizer and seller—(1)In gen- eral.A person is an organizer of, or a seller of an interest in, a transaction that is a po- tentially abusive tax shelter if that person is a material advisor, as described in para- graph (c)(2) of this section, with respect to that transaction. (2)Material advisor—(i)In general.A person is a material advisor with respect to a transaction that is a potentially abusive tax shelter if the person is required to reg- ister the transaction under section 6111; or the person receives or expects to receive at least a minimum fee (as defined in para- graph (c)(3) of this section) with respect to the transaction, and the person makes a tax statement (as defined in paragraph (c)(2)(iii) of this section) to or for the benefit of— (A) A taxpayer who is required to dis- close the transaction under§§1.6011–4, 20.6011–4,25.6011–4,31.6011–4, 53.6011–4, 54.6011–4, or 56.6011–4 of this chapter because the transaction is a listed transaction or who would have been re- quired to disclose a listed transaction un- der§§1.6011–4, 20.6011–4, 25.6011–4, 31.6011–4, 53.6011–4, 54.6011–4, or 56.6011–4 of this chapter if the transac- tion had become a listed transaction within the statute of limitations period in§1.6011– 4(e)(2); (B) A taxpayer who the potential mate- rial advisor (at the time the transaction is entered into) knows is or reasonably ex- pects to be required to disclose the trans- action under§1.6011–4 because the transaction is or is reasonably expected to become a transaction described in§1.6011– 4(b)(3) through (7); (C) A person who is required to regis- ter the transaction under section 6111; or (D) A person who purchases (or other- wise acquires) an interest in a section 6111 tax shelter; (E) A transferee of an interest if the in- terest is described in paragraph (b)(2)(i)(C) of this section. (ii)Special rules.A material advisor gen- erally does not include a person who makes a tax statement solely in the person’s ca- pacity as an employee, shareholder, part- ner or agent of another person. Any tax statement made by that person will be at- tributed to that person’s employer, corpo- ration, partnership or principal. However, a person shall be treated as a material ad- visor if that person forms or avails of an entity with the purpose of avoiding the rules of section 6111 or 6112 or the penalties un- der section 6707 or 6708. (iii)Tax statement—(A)In general.A tax statement means any statement, oral or written, that relates to a tax aspect of a transaction that causes the transaction to be a reportable transaction as defined in §1.6011–4(b)(2) through (7) or a tax shel- ter as described in section 6111. (B)Confidential transactions.A tax statement relates to an aspect of a trans- action that causes it to be a confidential transaction if the statement concerns a tax benefit related to the transaction and ei- ther the taxpayer’s disclosure of the tax treatment or tax structure of the transac- tion is limited in the manner described in §1.6011–4(b)(3) of this chapter by or for the benefit of the person making the state- ment, or the person making the statement knows the taxpayer’s disclosure of the tax structure or tax aspects of the transaction is limited in the manner described in §1.6011–4(b)(3) of this chapter. (C)Transactions with contractual pro- tection.A tax statement relates to an as- pect of a transaction that causes it to be a transaction with contractual protection if the statement concerns a tax benefit related to the transaction and either— (1) The taxpayer has the right to a full or partial refund of fees paid to the per- son making the statement or if these fees are contingent in the manner described in §1.6011–4(b)(4) of this chapter; or (2) The person making the statement knows that the taxpayer has the right to a full or partial refund of fees (as described in§1.6011–4(b)(4)(ii)) paid to another if all or part of the intended tax consequences from the transaction are not sustained or that fees (as described in§1.6011–4(b)(4)(ii)) paid by the taxpayer to another are con- tingent on the taxpayer’s realization of tax benefits from the transaction in the man- ner described in§1.6011–4(b)(4) of this chapter. (D)Loss transactions.A tax statement relates to an aspect of a transaction that causes it to be a loss transaction if the state- ment concerns an item that gives rise to a loss described in§1.6011–4(b)(5) of this chapter. (E)Transactions with a significant book- tax difference.A tax statement relates to an aspect of a transaction that causes it to be a transaction with a significant book-tax dif- ference if the statement concerns an item that gives rise to a book-tax difference de- scribed in§1.6011–4(b)(6) of this chap- ter. (F)Transactions involving a brief as- set holding period.A tax statement re- lates to an aspect of a transaction involving a brief asset holding period if the state- ment concerns an item that gives rise to a tax credit described in§1.6011–4(b)(7) of this chapter. (iv)Exceptions—(A)Post-filing ad- vice.A person will not be considered to be a material advisor with respect to a trans- action if that person does not make or pro- vide a tax statement regarding the transaction until after the first tax return re- flecting tax benefit(s) of the transaction is filed with the IRS. (B)Publicly-filed statements.A tax state- ment with respect to a transaction that in- cludes only information about the transaction contained in publicly-available documents filed with the Securities and Ex- change Commission no later than the close of the transaction will not be considered a tax statement to or for the benefit of a per- son described in paragraph (c)(2)(i)(A) through (E) of this section. (3)Minimum fee—(i)In general.The minimum fee is $250,000 for a transac- tion if every person to whom or for whose benefit the potential material advisor makes or provides a tax statement with respect to the transaction is a corporation. The mini- mum fee is $50,000 for a transaction if any 2003–12 I.R.B.628March 24, 2003 person to whom or for whose benefit a po- tential material advisor makes or provides a tax statement with respect to the trans- action is a partnership or trust, unless all owners or beneficiaries are corporations (looking through any partners or benefi- ciaries that are themselves partnerships or trusts), in which case the minimum fee is $250,000. For all other transactions, the minimum fee is $50,000. For purposes of this paragraph (c)(3)(i), a corporation means a corporation other than an S corporation. (ii)Listed transactions.For listed trans- actions described in§§1.6011–4(b)(2), 20.6011–4(a), 25.6011–4(a), 31.6011–4(a), 53.6011–4(a), 54.6011–4(a), or 56.6011– 4(a) of this chapter, the minimum fees in paragraph (c)(3)(i) of this section are re- duced from $250,000 to $25,000 and from $50,000 to $10,000. (iii)Determination of fees.In determin- ing whether the minimum fee threshold is satisfied, all fees for services for advice (whether or not tax advice) or for the imple- mentation of a transaction that is a poten- tially abusive tax shelter are taken into account. For purposes of this section, the minimum fee threshold must be met inde- pendently for each transaction that is a po- tentially abusive tax shelter and aggregation of fees among transactions is not required. Fees for advice or implementation include consideration in whatever form paid, whether in cash or in kind, for services to analyze the transaction (whether or not re- lated to the tax consequences of the trans- action), for services to implement the transaction, for services to document the transaction, and for services to prepare tax returns to the extent return preparation fees are unreasonable in light of all of the facts and circumstances. The IRS will scruti- nize carefully all of the facts and circum- stancesindeterminingwhether consideration received in connection with a transaction that is a potentially abusive tax shelter constitutes fees for purposes of this section. (d)Definitions.For purposes of this sec- tion, the following terms are defined as follows: (1)Interest. The terminterestincludes, but is not limited to, any right to partici- pate in a transaction by reason of a part- nership interest, a shareholder interest, or a beneficial interest in a trust; any inter- est in property (including a leasehold in- terest); the entry into a leasing arrangement or a consulting, management or other agree- ment for the performance of services; or any interest in any other investment, entity, plan, or arrangement. The terminterestincludes any interest that purportedly entitles the di- rect or indirect holder of the interest to any tax consequence (including, but not lim- ited to, a deduction, loss, or adjustment to tax basis in an asset) arising from the trans- action. Aninterestalso includes informa- tion or services regarding the organization or structure of the transaction if the infor- mation or services are relevant to the po- tential tax consequences of the transaction. (2)Substantially similar.The termsub- stantially similarincludes any transaction that is expected to obtain the same or simi- lar types of tax consequences and that is ei- ther factually similar or based on the same or similar tax strategy. Receipt of an opin- ion regarding the tax consequences of the transaction is not relevant to the determi- nation of whether the transaction is the same as or substantially similar to another trans- action. Further, the termsubstantially simi- larmust be broadly construed in favor of list maintenance. (3)Person.The termpersonmeans any person described in section 7701(a)(1), in- cluding an affiliated group of corpora- tions that join in the filing of a consolidated return under section 1501. (4)Related party.A person is a related party with respect to another person if such person bears a relationship to such other person described in section 267 or 707. (5)Tax.For purposes of this section, the termtaxmeans federal tax. (6)Tax benefit.A tax benefit includes de- ductions, exclusions from gross income, nonrecognition of gain, tax credits, adjust- ments (or the absence of adjustments) to the basis of property, status as an entity ex- empt from federal income taxation, and any other tax consequences that may reduce a taxpayer’s federal tax liability by affect- ing the amount, timing, character, or source of any item of income, gain, expense, loss, or credit. (7)Tax return.For purposes of this sec- tion, the termtax returnmeans a federal tax return and a federal information return. (8)Tax treatment.The tax treatment of a transaction is the purported or claimed federal tax treatment of the transaction. (9)Tax structure.The tax structure of a transaction is any fact that may be rel- evant to understanding the purported or claimed federal tax treatment of the trans- action. (e)Preparation and maintenance of lists—(1)In general.A separate list of per- sons must be prepared and maintained for each transaction that is a potentially abu- sive tax shelter. However, one list must be maintained for substantially similar trans- actions that are potentially abusive tax shel- ters. A list may be maintained on paper, card file, magnetic media, or in any other form, provided the method of maintaining the list enables the IRS to determine without un- due delay or difficulty the information re- quired in paragraph (e)(3) of this section. (2)Persons required to be included on lists—(i)In general.A material advisor is required to list each person described in paragraphs (c)(2)(i)(A) through (D) of this section to whom (or for whose benefit) the material advisor makes or provides a tax statement with respect to a transaction that is a potentially abusive tax shelter. How- ever, a material advisor is not required to list a person described in paragraph (c)(2)(i)(A) of this section if that person en- tered into, or acquired an interest in, a listed transaction more than 6 years before the transaction was listed. (ii)Subsequent participant.A material advisor must list any subsequent partici- pant if the material advisor knows the iden- tity of that subsequent participant, and the material advisor knows that the subse- quent participant either entered into a trans- action that must be disclosed under §1.6011–4(b) of this chapter or sold or transferred to another subsequent partici- pant an interest in that type of transac- tion. (iii)Section 6111 registrant.A mate- rial advisor required to register a transac- tion under section 6111 also must list each person who purchases (or otherwise ac- quires) an interest in the transaction. (iv)Examples.The following examples illustrate the provisions of this section: Example 1. An investment firm provides a tax statement as to a type of transaction to three taxpayers: Corporation X, Corporation Y, and Corporation Z (all of which are C corporations). Each taxpayer agrees to pay the investment firm $300,000 in connection with the transaction, and each taxpayer engages in a sepa- rate transaction (transaction X, transaction Y, and trans- action Z, respectively). At the time the transactions are entered into, the investment firm knows or rea- sonably expects that the transactions will result in a single taxable year loss of $9 million for Corpora- tion X, $15 million for Corporation Y, and $12 mil- lion for Corporation Z. The transactions do not satisfy March 24, 20036292003–12 I.R.B. the definitions of a reportable transaction under §1.6011–4(b)(2), (3), (4), (6), or (7) of this chapter. (i)Transaction X.At the time transaction X is en- tered into, the investment firm does not know or rea- sonably expect that the transaction is a reportable transaction, because the $9 million loss associated solely with transaction X does not satisfy the $10 mil- lion threshold under§1.6011–4(b)(5) of this chapter (relating to loss transactions). Accordingly, transac- tion X is not a potentially abusive tax shelter. The in- vestment firm is not required to maintain a list with respect to transaction X. (ii)Transactions Y and Z.The investment firm sat- isfies the requirements for being a material advisor with respect to transaction Y and transaction Z. First, both of the transactions are potentially abusive tax shel- ters with respect to the investment firm because the investment firm knows, or reasonably expects, at the time the transactions are entered into, that the losses for each of Corporation Y and Z will exceed the $10 million threshold and, thus, the investment firm knows or reasonably expects that the transactions are or will become reportable transactions under§1.6011–4(b)(5) of this chapter (relating to loss transactions). Sec- ond, the investment firm provides a tax statement to Corporation Y and Corporation Z as to the transac- tions. Third, the investment firm receives $300,000 in connection with each transaction (viewed indepen- dently of each other and without regard to any other transaction), which exceeds the minimum fee with re- spect to each transaction ($250,000). Accordingly, the investment firm must maintain a list with respect to transactions Y and Z. Because transactions Y and Z are based on the same or similar tax strategy, trans- actions Y and Z are substantially similar transac- tions, and the investment firm must keep one list with respect to both transactions. The list must contain in- formation about Corporation Y and Corporation Z (see paragraph (e)(2)(i) of this section). Example 2.(i) Corporation M provides a tax state- ment to Corporation N (a C corporation) describing the potential loss from a type of transaction. Corpo- ration N pays Corporation M $300,000 for the infor- mation about that type of transaction. Corporation M knows that Corporation N will sell the information to Taxpayer O (a C corporation) and Taxpayer P (an in- dividual), and that Taxpayer O and Taxpayer P will participate in transactions of the type that Corpora- tion M described to Corporation N. Corporation N, in turn, provides a tax statement as to that type of transaction to Taxpayer O and Taxpayer P. Each tax- payer agrees to pay Corporation N $250,000 in con- nection with its transaction, and each taxpayer engages in a separate transaction (transaction O and transac- tion P, respectively). At the time the transactions are entered into, both Corporation M and Corporation N know that the transactions are or will become report- able transactions under§1.6011–4(b)(5) of this chap- ter. (ii) Corporation N is a material advisor with re- spect to transaction O and transaction P. First, at the time the transactions are entered into, Corporation N knows that the transactions are reportable transac- tions. Thus, the transactions are potentially abusive tax shelters. Second, Corporation N provides a tax state- ment to Taxpayer O and Taxpayer P as to the trans- actions. Third, Corporation N receives $250,000 in connection with transaction O and transaction P (each viewed independently of any other transaction), which equals or exceeds the minimum fee for those trans- actions ($50,000 and $250,000, respectively). Ac- cordingly, Corporation N must keep a list with respect to transaction O and transaction P. The list must con- tain information about Taxpayer P (see paragraph (e)(2)(i) of this section). Because transactions O and P are based on the same or similar tax strategy, trans- actions O and P are substantially similar transac- tions, and Corporation N must keep one list with respect to both transactions. The list must contain in- formation about Taxpayer O and Taxpayer P (see (e)(2)(i) of this section). (iii) Corporation M’s tax statement to Corpora- tion N constitutes a potentially abusive tax shelter un- der paragraph (b)(2)(C) of this section. Corporation M transferred information to Corporation N regard- ing the potential tax consequences of a type of trans- action that, if entered into and if the relevant thresholds are met, would be a reportable transaction described in§1.6011–4(b)(5). In addition, Corporation M knew that Corporation N would transfer that information to another person. Corporation M is a material advisor with respect to that potentially abusive tax shelter. Cor- poration M made a tax statement to Corporation N and Corporation M received $300,000 in connection with the potentially abusive tax shelter, which exceeds the minimum fee for that transaction ($250,000). Accord- ingly, Corporation M must keep a list with respect to that potentially abusive tax shelter. The list must con- tain information with respect to Corporation N (see paragraph (e)(2)(i) of this section). The list must also contain information about Taxpayer O and Taxpayer P because Corporation M knows the identity of Tax- payer O and Taxpayer P, and Corporation M knows that Taxpayer O and Taxpayer P entered into trans- action O and transaction P, respectively (see para- graph (e)(2)(ii) of this section). (3)Contents—(i)In general. Each list must contain the following information— (A) The name of each transaction that is a potentially abusive tax shelter and the registration number, if any, obtained un- der section 6111; (B) The TIN (as defined in section 7701(a)(41)), if any, of each transaction; (C) The name, address, and TIN of each person required to be on the list; (D) If applicable, the number of units (i.e., percentage of profits, number of shares, etc.) acquired by each person required to be included on the list, if known by the ma- terial advisor; (E) The date on which each person re- quired to be included on the list entered into each transaction, if known by the mate- rial advisor; (F) The amount invested in each trans- action by each person required to be in- cluded on the list, if known by the material advisor; (G) A detailed description of each trans- action that describes both the tax struc- ture and its expected tax treatment; (H) A summary or schedule of the tax treatment that each person is intended or ex- pected to derive from participation in each transaction, if known by the material ad- visor; (I) Copies of any additional written ma- terials, including tax analyses or opin- ions, relating to each transaction that are material to an understanding of the pur- ported tax treatment or tax structure of the transaction that have been shown or pro- vided to any person who acquired or may acquire an interest in the transactions, or to their representatives, tax advisors, or agents, by the material advisor or any related party or agent of the material advisor. How- ever, a material advisor is not required to retain earlier drafts of a document pro- vided the material advisor retains a copy of the final document (or, if there is no final document, the most recent draft of the docu- ment) and the final document (or most re- cent draft) contains all the information in the earlier drafts of such document that is material to an understanding of the pur- ported tax treatment or the tax structure of the transaction; and (J) For each person required to be on the list, if the interest in the transaction was not acquired from the material advisor main- taining the list, the name of the person from whom the interest was acquired. (ii) [Reserved]. (f)Retention of lists.Each material ad- visor must maintain the list described in paragraph (e) of this section for seven years following the earlier of the date on which the material advisor last made a tax state- ment relating to the transaction, or the date the transaction was entered into, if known. If the material advisor required to pre- pare, maintain, and furnish the list is a cor- poration, partnership, or other entity (entity) that has dissolved or liquidated before completion of the seven-year period, the person responsible under state law for wind- ing up the affairs of the entity must pre- pare, maintain and furnish the list on behalf of the entity, unless the entity submits the list to the Office of Tax Shelter Analysis (OTSA) within 60 days after the dissolu- tion or liquidation. If state law does not specify any person as responsible for wind- ing up the affairs, then each of the direc- tors of the corporation, the general partners of the partnership, or the trustees, own- ers, or members of the entity are respon- sible for preparing, maintaining and furnishing the list on behalf of the entity, unless the entity submits the list to the Of- 2003–12 I.R.B.630March 24, 2003 fice of Tax Shelter Analysis (OTSA) within 60 days after the dissolution or liquida- tion. The responsible person must also pro- vide notice to OTSA of such dissolution or liquidation within 60 days after the disso- lution or liquidation. The list and the no- tice provided to OTSA may be sent to: IRS LM:PFTG:OTSA, Large & Mid-Size Busi- ness Division, 1111Constitution Ave., NW, Washington, DC 20224, or to such other ad- dress as provided by the Commissioner. (g)Furnishing of lists—(1)In general. Each material advisor and person respon- sible for maintaining a list of persons must, upon written request by the IRS, furnish the list to the IRS within 20 days from the day on which the request is provided. The re- quest is not required to be in the form of an administrative summons. The list may be furnished to the IRS on paper, card file, magnetic media, or in any other form, pro- vided the method of furnishing the list en- ables the IRS to determine without undue delay or difficulty the information required in paragraph (e)(3) of this section. (2)Claims of privilege—(i) In any case in which an attorney or federally autho- rized tax practitioner within the meaning of section 7525 is required to maintain a list with respect to a transaction that is a po- tentially abusive tax shelter, and that per- son has a reasonable belief that information specified in paragraph (e)(3)(i)(I) required to be furnished under this paragraph (g) is protected by the attorney-client privilege or by the confidentiality privilege of section 7525(a), the attorney or federally autho- rized tax practitioner must still maintain the list of persons pursuant to the require- ments of this section. When the list is re- quested by the IRS, as provided in paragraph (g)(1) of this section, the mate- rial advisor may assert a privilege claim as to the information specified in paragraph (e)(3)(i)(I) subject to the requirements of this paragraph (g)(2). (ii) The claimed privilege must be sup- ported by a statement that is signed by the attorney or federally authorized tax prac- titioner under penalties of perjury, must identify and describe (as set forth in this paragraph (g)(2)) the nature of each docu- ment that is not produced which will al- low the IRS to determine the applicability of the privilege or protection claimed, with- out revealing the privileged information it- self, and must include the following representations with respect to each docu- ment for which the privilege is claimed— (A) Specifically represent that the in- formation was a confidential practitioner- client communication and, in the case of information which a federally authorized tax practitioner claims is privileged under sec- tion 7525, that the omitted information was not part of tax advice that constituted the promotion of the direct or indirect partici- pation of a corporation in any tax shelter (as defined in section 6662(d)(2)(C)(iii)); and (B) Specifically represent that to the best of such person’s knowledge and belief, that the person and all others in possession of the omitted information did not disclose the omitted information to any person whose receipt of such information would result in a waiver of the privilege. (iii) Identification and description of a document includes, but is not limited to— (A) The date appearing on such docu- ment or, if it has no date, the date or ap- proximate date that such document was created; (B) The general nature, description, and purpose of such document and the iden- tity of the person who signed such docu- ment, and, if it was not signed, the identity of each person who prepared it; and (C) The identity of each person to whom such document was addressed and the iden- tity of each person, other than such ad- dressee, to whom such document, or a copy thereof, was given or sent. (h)Designation agreements.If more than one material advisor is required to main- tain a list of persons, in accordance with paragraph (e) of this section, for a poten- tially abusive tax shelter, the material ad- visors may designate by written agreement a single material advisor to maintain the list or a portion of the list. The designation of one material advisor to maintain the list does not relieve the other material advi- sors from their obligation to furnish the list to the IRS in accordance with paragraph (g)(1) of this section, if the designated ma- terial advisor fails to furnish the list to the IRS in a timely manner. A material advi- sor is not relieved from the requirement of this section because a material advisor is unable to obtain the list from any desig- nated material advisor, any designated ma- terial advisor did not maintain a list, or the list maintained by any designated mate- rial advisor is not complete. (i)Procedure for obtaining rulings.A person may submit a request to the IRS for a ruling as to whether a specific transac- tion will be considered a potentially abu- sive tax shelter for purposes of this section and whether that person is a material ad- visor with respect to that transaction. If the request fully discloses all relevant facts re- lating to the transaction (including all facts relevant to the person’s relationship to such transaction), then the requirement to main- tain a list shall be suspended for that per- son during the period that the ruling request is pending and for 60 days thereafter; how- ever, if it is ultimately determined that the transaction is a potentially abusive tax shel- ter and that the person is a material advi- sor with respect to that transaction, the pendency of such a ruling request shall not affect the requirement to maintain the list, nor shall it affect the persons required to be included on the list (including persons who acquired interests in the potentially abusive tax shelter prior to and during the pendency of the ruling request), or the other information required to be included as part of the list. (j)Effective date.This section applies to any transaction that is a potentially abu- sive tax shelter entered into, or any inter- est acquired therein, on or after February 28, 2003. However, this section shall ap- ply to any transaction that was entered into, or in which an interest was acquired, af- ter February 28, 2000, if the transaction be- comes a potentially abusive tax shelter on or after February 28, 2003, because it is a listed transaction as defined in§1.6011–4 of this chapter, and is subject to disclo- sure under§1.6011–4 of this chapter. This section also shall apply to any transaction that was entered into, or in which an in- terest was acquired, after January 1, 2003, if the transaction becomes a listed trans- action as defined in§1.6011–4 of this chap- ter and is subject to disclosure under §§20.6011–4, 25.6011–4, 31.6011–4, 53.6011–4, 54.6011–4 or 56.6011–4 of this chapter. The rules in§301.6112–1T as con- tained in 2002–45 I.R.B. 826 (see §601.601(d)(2) of this chapter) apply only to a transaction entered into, or an inter- est acquired therein, on or after January 1, 2003, and before February 28, 2003, if the transaction is a listed transaction as de- fined in§1.6011–4 of this chapter or a sec- tion 6111 tax shelter. Otherwise, the rules that apply with respect to any transaction March 24, 20036312003–12 I.R.B. that is a potentially abusive tax shelter en- tered into, or any interest acquired therein, before January 1, 2003, are contained in §301.6112–1T in effect prior to January 1, 2003 (see 26 CFR part 301 revised as of April 1, 2002). Additionally, the IRS will not ask to inspect any list for a poten- tially abusive tax shelter that is entered into, or any interest acquired therein, on or af- ter January 1, 2003, until June 1, 2003, un- less the potentially abusive tax shelter is a listed transaction as defined in§1.6011–4 of this chapter or a transaction that is a sec- tion 6111 tax shelter. §301.6112–1T [Removed] Par. 26. Section 301.6112–1T is re- moved. PART 602—OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT Par. 27. The authority citation for part 602 continues to read as follows: Authority: 26 U.S.C. 7805. Par. 28. In§602.101, paragraph (b) is amended as follows: 1. The following entries to the table are removed: §602.101 OMB Control numbers. ***** (b)*** CFR part or section where identified and described Current OMB control No. ***** 1.6011–4T ................................................................................................................................................... 1545–1685 ***** 301.6111–2T ............................................................................................................................................... 1545–0865 1545–1687 301.6112–1T ............................................................................................................................................... 1545–0865 1545–1686 ***** 2. The following entries are added in nu- merical order to the table: §602.101 OMB Control numbers. ***** (b)*** CFR part or section where identified and described Current OMB control No. ***** 1.6011–4 ..................................................................................................................................................... 1545–1685 ***** 301.6111–2.................................................................................................................................................. 1545–0865 1545–1687 301.6112–1 ................................................................................................................................................. 1545–0865 1545–1686 ***** David A. Mader, Assistant Deputy Commissioner of Internal Revenue. Approved February 26, 2003. Pamela F. Olson, Assistant Secretary of the Treasury. (Filed by the Office of the Federal Register on February 28, 2003, 10:47 a.m., and published in the issue of the Federal Register for March 4, 2003, 68 F.R. 10161) 2003–12 I.R.B.632March 24, 2003 Part III. Administrative, Procedural, and Miscellaneous Weighted Average Interest Rate Update Notice 2003–17 Sections 412(b)(5)(B) and 412(l)(7)(C)(i) of the Internal Revenue Code provide that the interest rates used to calculate current liability for purposes of determining the full funding limitation under§412(c)(7) and the required contribution under§412(l) must be within a permissible range around the weighted average of the rates of interest on 30-year Treasury securities during the four- year period ending on the last day before the beginning of the plan year. Notice 88–73, 1988–2 C.B. 383, pro- vides guidelines for determining the weighted average interest rate and the re- sulting permissible range of interest rates used to calculate current liability for the pur- pose of the full funding limitation of §412(c)(7) of the Code. Section 417(e)(3)(A)(ii)(II) defines the applicable interest rate, which must be used for purposes of determining the minimum present value of a participant’s benefit un- der§417(e)(1) and (2), as the annual rate of interest on 30-year Treasury securities for the month before the date of distribution or such other time as the Secretary may by regulations prescribe. Section 1.417(e)– 1(d)(3) of the Income Tax Regulations pro- vides that the applicable interest rate for a month is the annual interest rate on 30- year Treasury securities as specified by the Commissioner for that month in revenue rulings, notices or other guidance pub- lished in the Internal Revenue Bulletin. The rate of interest on 30-year Trea- sury Securities for February 2003 is 4.81 percent. Pursuant to Notice 2002–26, 2002–15 I.R.B. 743, the Service has de- termined this rate as the monthly average of the daily determination of yield on the 30-year Treasury bond maturing in Febru- ary 2031. Section 405 of the Job Creation and Worker Assistance Act of 2002 amended §412(l)(7)(C) of the Code to provide that for plan years beginning in 2002 and 2003 the permissible range is extended to 120 percent. The following rates were determined for the plan years beginning in the month shown below. MonthYear Weighted Average 90% to 110% Permissible Range 90% to 120% Permissible Range March20035.494.94 to 6.034.94 to 6.58 Drafting Information The principal authors of this notice are Tony Montanaro and Paul Stern of the Em- ployee Plans, Tax Exempt and Govern- ment Entities Division. For further infor- mation regarding this notice, please con- tact the Employee Plans’taxpayer assis- tance telephone service at 1–877–829– 5500 (a toll-free number), between the hours of 8:00 a.m. and 6:30 p.m. Eastern time, Monday through Friday. Mr. Montanaro may be reached at 1–202–283–9714 and Mr. Stern may be reached at 1–202–283– 9703. The telephone numbers in the pre- ceding sentence are not toll-free. March 24, 20036332003–12 I.R.B. Part IV. Items of General Interest Notice of Proposed Rulemaking and Notice of Public Hearing Application of Normalization Accounting Rules to Balances of Excess Deferred Income Taxes and Accumulated Deferred Investment Tax Credits of Public Utilities Whose Generation Assets Cease to be Public Utility Property REG–104385–01 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemak- ing and notice of public hearing. SUMMARY: This document contains pro- posed regulations that provide guidance on the normalization requirements applicable to electric utilities that benefit (or have ben- efitted) from accelerated depreciation meth- ods or from the investment tax credit permitted under pre-1991 law. The pro- posed regulations permit a utility whose electricity generation assets cease to be pub- lic utility property to return to their rate- payers the normalization reserves for excess deferred income taxes (EDFIT) and accu- mulated deferred investment tax credits (ADITC) with respect to those assets. This document also provides notice of a pub- lic hearing on these proposed regulations. DATES: Written or electronic comments must be received by June 2, 2003. Re- quests to speak and outlines of topics to be discussed at the public hearing scheduled for June 25, 2003, at 10 a.m. must be re- ceived by June 2, 2003. ADDRESSES: Send submissions to: CC:PA:RU (REG–104385–01), room 5226, Internal Revenue Service, Post Office Box 7604, Ben Franklin Station,Washington, DC 20044. Submissions may be hand- delivered Monday through Friday between the hours of 8 a.m. and 5 p.m. to: CC:PA:RU (REG–104385–01), Courier’s Desk, Internal Revenue Service,1111Con- stitution Avenue, NW, Washington, DC. Al- ternatively, taxpayers may submit comments electronically by submitting comments di- rectly to the IRS Internet site at www.irs.gov/regs. The public hearing will be held in the Internal Revenue Building, 1111Constitution Avenue, NW, Washing- ton, DC. FOR FURTHER INFORMATION CON- TACT: Concerning the proposed regula- tions, David Selig, at (202) 622–3040; con- cerning submissions of comments, the hearing, or to be placed on the building ac- cess list to attend the hearing, Treena Garrett, at (202) 622–7190 (not toll-free numbers). SUPPLEMENTARY INFORMATION: Background This document contains proposed amendments to the Income Tax Regula- tions (26 CFR Part 1) relating to the nor- malization requirements of sections 168(f)(2) and 168(i)(9) of the Internal Rev- enue Code (Code), section 203(e) of the Tax Reform Act of 1986, Public Law 99–514 (100 Stat. 2146), and former section 46(f) of the Code. The proposed regulations re- spond to changes in the electric power in- dustry resulting from deregulation of electricity generation facilities. Section 168 of the Code permits the use of accelerated depreciation methods. Sec- tion 168(f)(2) provides, however, that ac- celerated depreciation is permitted with respect to public utility property only if the taxpayer uses a normalization method of ac- counting for ratemaking purposes. Under a normalization method of ac- counting, a utility calculates its ratemak- ing tax expense using depreciation that is no more accelerated than its ratemaking de- preciation (typically straight-line). In the early years of an asset’s life, this results in ratemaking tax expense that is greater than actual tax expense. The difference between the ratemaking tax expense and the ac- tual tax expense is added to a reserve (the accumulated deferred federal income tax re- serve, or ADFIT). The difference between ratemaking tax expense and actual tax ex- pense is not permanent and reverses in the later years of the asset’s life when the rate- making depreciation method provides larger depreciation deductions and lower tax ex- pense than the accelerated method used in computing actual tax expense. This accounting treatment prevents the immediate flowthrough to utility ratepay- ers of the reduction in current taxes result- ing from the use of accelerated depreciation. Instead, the reduction is treated as a de- ferred tax expense that is collected from current ratepayers through utility rates, and thus is available to utilities as cost-free in- vestment capital. When the accelerated method provides lower depreciation de- ductions in later years, only the ratemak- ing tax expense is collected from ratepayers and the difference between actual tax ex- pense and ratemaking tax expense is charged to ADFIT, depleting the utility’s stock of cost-free capital. Excess Deferred Income Tax The Tax Reform Act of 1986 reduced the highest corporate tax rate from 46 per- cent to 34 percent. The excess deferred fed- eral income tax (EDFIT) reserve is the balance of the deferred tax reserve imme- diately before the rate reduction over the balance that would have been held in the reserve if the 34 percent rate had been in effect for prior periods. The EDFIT re- serves were amounts that utilities had col- lected from ratepayers to pay future taxes that, as a result of the reduction in corpo- rate tax rates, would not have to be paid. Section 203(e) of the Tax Reform Act of 1986 specifies the manner in which the EDFIT reserve can be flowed through to ratepayers under a normalization method of accounting. It provides that the EDFIT re- serve may be reduced, with a correspond- ing reduction in the cost of service the utility collects from ratepayers, no more rap- idly than the EDFIT reserve would be re- duced under the average rate assumption method (ARAM). For taxpayers that did not have adequate data to apply the average rate assumption method, subsequent guidance permitted use of the reverse South Geor- gia method as an alternative. In general, both the average rate assumption method and the reverse South Georgia method spread the flowthrough of the EDFIT re- serve over the remaining lives of the prop- erty that gave rise to the excess. 2003–12 I.R.B.634March 24, 2003 Accumulated Deferred Investment Tax Credits (ADITC) Former section 46 of the Code simi- larly limited the ability of ratepayers to ben- efit from the investment tax credit determined under that section. Under former section 46(f)(2), an electing utility could flow through the investment credit rat- ably (that is, could reduce the cost of ser- vice collected from ratepayers by a ratable portion of the credit) over the investment’s regulatory life. The balance of the credit re- maining to be flowed through to ratepay- ers would be held in a reserve for accumulated deferred investment tax cred- its (ADITC). If the utility elected ratable flowthrough of the credit, the rate base (the amount on which the utility is permitted to collect a return from ratepayers) could not be reduced by reason of any portion of the credit. Deregulation of Generation Assets When the normalization provisions were added to the Internal Revenue Code, elec- tric utilities were vertically integrated to in- clude generation, transmission, and distribution functions. Accelerated depre- ciation, investment credits, and normaliza- tion enhanced the cash flow needed to acquire and construct new generation as- sets. Driven by changes in technology and economics, however, the electric industry has been undergoing substantial changes. Many utilities have been selling genera- tion assets to new entities that are not sub- ject to rate of return regulation and are becoming transmission and distribution (or distribution-only) companies. In many cases, the deregulation of generation assets is oc- curring before the EDFIT and ADITC re- serves associated with those assets have been flowed through to ratepayers. The Service has issued a number of pri- vate letter rulings holding that flowthrough of the EDFIT and ADITC reserves asso- ciated with an asset is not permitted after the asset’s deregulation, whether by dis- position or otherwise. These rulings were based on the principle that flowthrough is permitted only over the asset’s regulatory life and when that life is terminated by de- regulation no further flowthrough is per- mitted. After further consideration, the Service and Treasury have concluded that neither former section 46(f)(2) nor sec- tion 203(e) of the Tax Reform Act sug- gests that the EDFIT and ADITC reserves should not ultimately be flowed through to ratepayers. Instead, Congress provided a schedule for flowing through the reserves so that utilities would have the benefit of cost-free capital for a predictable period. The proposed regulations provide that utilities whose generation assets cease to be public utility property, whether by dispo- sition, deregulation, or otherwise, may con- tinue to flow through EDFIT and ADITC reserves associated with those assets with- out violating the normalization rules. The rate of flowthrough is limited, however, to the rate that would have been permitted if the assets had remained public utility prop- erty and the taxpayer had continued to use a normalization method of accounting (or ratable flowthrough of the credit) with re- spect to the assets. This result does not im- pose on utilities any burden unanticipated prior to deregulation and provides the flow- through originally anticipated by ratepay- ers, utility commissions, and utilities. Comments Requested In addition to comments relating to this notice of proposed rulemaking, comments are requested on the proper disposition of tax reserves (ADFIT, EDFIT, and ADITC) under the following set of facts. Regu- lated transmission assets from several pub- lic utilities (related or otherwise) are transferred to a utility partnership. This part- nership is created solely as a transmis- sion company. The transaction is subject to section 721 of the Code. The transmis- sion assets are public utility property be- fore the transfer and will be public utility property after the transfer. Is there a nor- malization violation if the deferred tax re- serves are transferred to the new transmission company’s regulated books and are considered in setting rates for the new transmission company? Alternatively, is there a normalization violation if the de- ferred tax reserves remain on the transfer- ors’regulated books and are considered in setting their rates? In addition, the proposed regulations do not address the treatment of deregulated as- sets under former section 46(f)(1) (relat- ing to the use of the investment credit to reduce the rate base of electing taxpay- ers). Comments are also requested on this issue. Proposed Effective Date The regulations are proposed to apply to property that becomes deregulated genera- tion property after March 4, 2003. In ad- dition, a utility may elect to apply the proposed rules to property that becomes de- regulated generation property on or be- fore March 4, 2003. The election is made by attaching a written statement to the utili- ty’s return for the tax year in which the pro- posed rules are published as final regulations. Special Analyses It has been determined that this notice of proposed rulemaking is not a signifi- cant regulatory action as defined in Ex- ecutive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Ad- ministrative Procedure Act (5 U.S.C. chap- ter 5) does not apply to these regulations and, because the regulations do not im- pose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. There- fore, a Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Admin- istration for comment on its impact on small business. Comments and Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any comments that are sub- mitted (in the manner described in the AD- DRESSES caption) timely to the IRS. All comments will be available for public in- spection and copying. Treasury and IRS specifically request comments on the clar- ity of the proposed regulations and how they may be made clearer and easier to un- derstand. A public hearing has been scheduled for June 25, 2003, at 10 a.m. in the Internal Revenue Building,1111Constitution Av- enue, NW, Washington, DC. Because of ac- cess restrictions, visitors will not be admitted beyond the Internal Revenue Building lobby more than 30 minutes be- fore the hearing starts. March 24, 20036352003–12 I.R.B. The rules of 26 CFR 601.601(a)(3) ap- ply to the hearing. Persons who wish to present oral com- ments at the hearing must submit com- ments and submit an outline of the topics to be discussed and the time to be devoted to each topic by June 2, 2003. A period of 10 minutes will be allot- ted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the dead- line for receiving outlines has passed. Cop- ies of the agenda will be available free of charge at the hearing. Drafting Information The principal author of these regula- tions is David Selig, Office of the Associ- ate Chief Counsel (Passthroughs and Special Industries), IRS. However, other person- nel from the IRS and Treasury Depart- ment participated in their development. ***** Proposed Amendments to the Regulations Accordingly, 26 CFR part 1 is proposed to be amended as follows: PA RT 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 1.46–6 is amended by adding paragraph (k) to read as follows: §1.46–6 Limitation in case of certain regulated companies. ***** (k) Treatment of accumulated deferred investment tax credits upon the deregula- tion of regulated generation assets—(1) Scope.This paragraph (k) provides rules for the application of former section 46(f)(2) of the Internal Revenue Code with respect to public utility property that is used in elec- tric generation and ceases, whether by dis- position, deregulation, or otherwise, to be public utility property (deregulated gen- eration property). (2)Amount of reduction.If public util- ity property of a taxpayer becomes deregu- lated generation property to which this section applies, the reduction in the tax- payer’s cost of service permitted under former section 46(f)(2) is equal to the amount by which the cost of service could be reduced under that provision if all such property had remained public utility prop- erty of the taxpayer and the taxpayer had continued to reduce its cost of service by a ratable portion of the credit with respect to such property. (3)Cross reference.See§1.168(i)–(3) for rules relating to the treatment of balances of excess deferred income taxes when utili- ties dispose of regulated generation as- sets. (4)Effective date—(i)General rule.This paragraph (k) applies to property that be- comes deregulated generation property af- ter March 4, 2003. (ii)Election for retroactive applica- tion.A utility may elect to apply this para- graph (k) to property that becomes deregulated generation property on or be- fore March 4, 2003. The election is made by attaching the statement“ELECTION UNDER§1.46–6(k)”to the taxpayer’s re- turn for the tax year in which this para- graph (k) is published as a final regulation. Par. 3. Section 1.168(i)–3 is added to read as follows: §1.168(i)–(3) Treatment of excess deferred income tax reserve upon disposition of regulated generation assets. (a)Scope.This section provides rules for the application of section 203(e) of the Tax Reform Act of 1986, Public Law 99–514 (100 Stat. 2146) with respect to public util- ity property that is used in electric genera- tion and ceases, whether by disposition, deregulation, or otherwise, to be public util- ity property (deregulated generation prop- erty). (b)Amount of reduction.If public util- ity property of a taxpayer becomes deregu- lated generation property to which this section applies, the reduction in the tax- payer’s excess tax reserve permitted un- der section 203(e) of the Tax Reform Act of 1986 is equal to the amount by which the reserve could be reduced under that pro- vision if all such property had remained public utility property of the taxpayer and the taxpayer had continued use of its nor- malization method of accounting with re- spect to such property. (c)Cross reference.See§1.46–6(k) for rules relating to the treatment of accumu- lated deferred investment tax credits when utilities dispose of regulated generation as- sets. (d)Effective date—(1)General rule.This section applies to property that becomes de- regulated generation property after March 4, 2003. (2)Election for retroactive applica- tion.A taxpayer may elect to apply this sec- tion to property that becomes deregulated generation property on or before March 4, 2003. The election is made by attach- ing the statement“ELECTION UNDER §1.168(i)–3”to the taxpayer’s return for the tax year in which this section is published as a final regulation. David Mader, Assistant Deputy Commissioner of Internal Revenue. (Filed by the Office of the Federal Register on March 3, 2003, 8:45 a.m., and published in the issue of the Federal Regis- ter for March 4, 2003, 68 F.R. 10190) 2003–12 I.R.B.636March 24, 2003 Announcement of Disciplinary Actions Involving Attorneys, Certified Public Accountants, Enrolled Agents, and Enrolled Actuaries—Suspensions, Censures, Disbarments, and Resignations Announcement 2003–15 Under Title 31, Code of Federal Regu- lations, Part 10, attorneys, certified pub- lic accountants, enrolled agents, and enrolled actuaries may not accept assistance from, or assist, any person who is under disbar- ment or suspension from practice before the Internal Revenue Service if the assistance relates to a matter constituting practice be- fore the Internal Revenue Service and may not knowingly aid or abet another person to practice before the Internal Revenue Ser- vice during a period of suspension, disbar- ment, or ineligibility of such other person. To enable attorneys, certified public ac- countants, enrolled agents, and enrolled ac- tuaries to identify persons to whom these restrictions apply, the Director, Office of Professional Responsibility will announce in the Internal Revenue Bulletin their names, their city and state, their profes- sional designation, the effective date of dis- ciplinary action, and the period of suspen- sion. This announcement will appear in the weekly Bulletin at the earliest practicable date after such action and will continue to appear in the weekly Bulletins for five suc- cessive weeks. Suspensions From Practice Before the Internal Revenue Service After Notice and an Opportunity for a Proceeding Under Title 31, Code of Federal Regu- lations, Part 10, after notice and an oppor- tunity for a proceeding before an administrative law judge, the following in- dividuals have been placed under suspen- sion from practice before the Internal Revenue Service: NameAddressDesignationEffective Date Cramer, GeorgeChicago, ILCPAJanuary 18, 2003 to January 17, 2005 Disbarments From Practice Before the Internal Revenue Service After Notice and an Opportunity for a Proceeding Under Title 31, Code of Federal Regu- lations, Part 10, after notice and an oppor- tunity for a proceeding before an administrative law judge, the following in- dividuals have been disbarred from prac- tice before the Internal Revenue Service: NameAddressDesignationEffective Date Whalley, Christopher J.Ellsworth, MEAttorneyJuly 28, 2002 Chapin, Frank L.Sandpoint, IDEnrolled AgentAugust 13, 2002 Engstrand Jr., Edward E.Minneapolis, MNCPANovember 2, 2002 Fisher, JoannaPortland, OREnrolled AgentNovember 15, 2002 March 24, 20036372003–12 I.R.B. Consent Suspensions From Practice Before the Internal Revenue Service Under Title 31, Code of Federal Regu- lations, Part 10, an attorney, certified pub- lic accountant, enrolled agent, or enrolled actuary, in order to avoid institution or con- clusion of a proceeding for his or her dis- barment or suspension from practice before the Internal Revenue Service, may offer his or her consent to suspension from such practice. The Director, Office of Profes- sional Responsibility, in his discretion, may suspend an attorney, certified public ac- countant, enrolled agent or enrolled actu- ary in accordance with the consent offered. The following individuals have been placed under consent suspension from prac- tice before the Internal Revenue Service: NameAddressDesignationDate of Suspension Kuhajda, BenPlainfield, ILCPAAugust 26, 2002 to August 24, 2005 Vaughn, James A.Albuquerque, NMCPAOctober 1, 2002 to September 29, 2004 McBroom, ByronManteca, CACPAOctober 21, 2002 to October 19, 2006 Jacobs, RobertPhiladelphia, PAAttorneyOctober 21, 2002 to April 20, 2006 Kwak, JongBeverly Hills, CAAttorneyOctober 22, 2002 to October 20, 2003 Smith Frank L.Brooksville, FLAttorneyNovember 1, 2002 to October 30, 2005 Schwartz, Kenneth J.Woodland Hills, CAAttorneyNovember 1, 2002 to February 27, 2006 Agulnick, Barry W.New York, NYAttorneyNovember 1, 2002 to April 29, 2004 O’Connor, Thomas P.Palos Park, ILCPANovember 1, 2002 to October 20, 2003 Brand, Joe A.Dundee, OHCPANovember 18, 2002 to November 16, 2004 Battino, StevenPlainview, NYCPANovember 25, 2002 to May 23, 2004 2003–12 I.R.B.638March 24, 2003 NameAddressDesignationDate of Suspension Chipman, KenFarmington, NMEnrolled AgentDecember 1, 2002 to November 29, 2003 Kirgis, Grant A.Rochester, MNCPADecember 1, 2002 to May 30, 2003 Welch, FrankStamford, CTCPAIndefinite from January 31, 2003 Pickens, ValerieSeattle, WACPAJanuary 1, 2003 to December 30, 2004 Kidd, Roger F.Philadelphia, PAAttorneyJanuary 20, 2003 to April 18, 2003 Sullivan, RaymondSonoma, CAAttorneyMarch 15, 2003 to November 14, 2003 Expedited Suspensions From Practice Before the Internal Revenue Service Under Title 31, Code of Federal Regu- lations, Part 10, the Director, Office of Pro- fessional Responsibility, is authorized to immediately suspend from practice be- fore the Internal Revenue Service any prac- titioner who, within five years from the date the expedited proceeding is instituted (1) has had a license to practice as an attorney, cer- tified public accountant, or actuary sus- pended or revoked for cause or (2) has been convicted of certain crimes. The following individuals have been placed under suspension from practice be- fore the Internal Revenue Service by vir- tue of the expedited proceeding provisions: NameAddressDesignationDate of Suspension Pirro, Anthony G.South Salem, NYCPAIndefinite from June 26, 2002 Scott, RogerBuffalo, NYAttorneyIndefinite from August 12, 2002 Patrick, GeorgeCheshire, CTCPAIndefinite from September 9, 2002 Rochon, Jason B.Lafayette, LAAttorneyIndefinite from September 9, 2002 March 24, 20036392003–12 I.R.B. NameAddressDesignationDate of Suspension Voccola, EdwardHingham, MAAttorneyIndefinite from October 18, 2002 Linn, Charles B.Croton-on-Hudson, NYAttorneyIndefinite from October 18, 2002 Lum, Eugene K.H.Long Beach, CAAttorneyIndefinite from October 18, 2002 Gwilliam, PeterLynn, MACPAIndefinite from October 28, 2002 Herlehy, Jon L.McHenry, ILCPAIndefinite from October 28, 2002 Herndon, HenryPikeville, NCCPAIndefinite from November 1, 2002 McCurry, ToddDurham, NCAttorneyIndefinite from November 25, 2002 Adams, James L.Breckenridge, COAttorneyIndefinite from November 25, 2002 Cloer, StewartPlano, TXAttorneyIndefinite from December 13, 2002 Caruso, RobertSaddle River, NJCPAIndefinite from December 16, 2002 Duru, Ike E.Atlanta, GAAttorneyIndefinite from January 10, 2003 Pelletier, Richard A.Bolton, CTCPAIndefinite from January 10, 2003 Austin, JackSteamboat Springs, COCPAIndefinite from January 10, 2003 Gibson, Brian M.Monroe, NYAttorneyIndefinite from January 10, 2003 2003–12 I.R.B.640March 24, 2003 NameAddressDesignationDate of Suspension Jackson, RobertMt. Juliet, TNAttorneyIndefinite from January 10, 2003 Tenzer, James L.East Meadow, NYAttorneyIndefinite from February 4, 2003 Resignations of Enrolled Agents Under Title 31, Code of Federal Regu- lations, Part 10, an enrolled agent, in or- der to avoid the institution or conclusion of a proceeding for his or her disbarment or suspension from practice before the Inter- nal Revenue Service, may offer his or her resignation as an enrolled agent. The Di- rector, Office of Professional Responsibil- ity, in his discretion, may accept the offered resignation. The Director, Office of Professional Re- sponsibility, has accepted offers of resig- nation as an enrolled agent from the following individuals: NameAddressDate of Resignation Korman, LindaLas Vegas, NVJanuary 23, 2003 Loans From a Qualified Employer Plan to Plan Participants or Beneficiaries; Correction Announcement 2003–16 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Corrections to final regulations. SUMMARY: This document contains cor- rections to final regulations (T.D. 9021, 2002–51 I.R.B. 973) that were published in theFederal Registeron Tuesday, Decem- ber 3, 2002 (67 FR 71821). This docu- ment contains final regulations relating to loans made from a qualified employer plan to plan participants or beneficiaries. DATES: This correction is effective De- cember 3, 2002. FOR FURTHER INFORMATION CON- TACT: Vernon S. Carter (202) 622–6060 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background The final regulations that are the sub- ject of these corrections are under section 72 of Internal Revenue Code. Need for Correction As published, the final regulations (T.D. 9021) contains errors that may prove to be misleading and are in need of clarifica- tion. Correction of Publication Accordingly, the publication of the fi- nal regulations (T.D. 9021), which is the subject of FR. Doc. 02–29204, is corrected as follows: §1.72(p)–1 [Corrected] 1. On page 71825, column 1, §1.72(p)–1, A–19, paragraph (a), last 2 lines in the paragraph, the language“of the In- ternal Revenue Code. See Q&A 16 of this section”, is corrected to read“of the Inter- nal Revenue Code. See Q&A–11 through Q&A–16 of this section”. 2. On page 71825, column 3, §1.72(p)–1, A–20, paragraph (a)(2), lines 4 and 5, the language“section (including paragraph (a)(3) of this Q&A 20 and the amount limitations”, is corrected to read “section (including the amount limitations”. 3. On page 71825, column 3, §1.72(p)–1, A–20, paragraph (a)(2), the last line of the paragraph, the language“re- placed loan.”, is corrected to read“replace- ment loan.”. Cynthia E. Grigsby, Chief, Regulations Unit, Associate Chief Counsel (Procedure and Administration). (Filed by the Office of the Federal Register on February 27, 2003, 8:45 a.m., and published in the issue of the Federal Reg- ister for February 28, 2003, 68 F.R. 9532) March 24, 20036412003–12 I.R.B. Definition of Terms Revenue rulings and revenue procedures (hereinafter referred to as“rulings”) that have an effect on previous rulings use the following defined terms to describe the effect: Amplifieddescribes a situation where no change is being made in a prior pub- lished position, but the prior position is being extended to apply to a variation of the fact situation set forth therein. Thus, if an earlier ruling held that a principle applied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare withmodified, below). Clarifiedis used in those instances where the language in a prior ruling is being made clear because the language has caused, or may cause, some confu- sion. It is not used where a position in a prior ruling is being changed. Distinguisheddescribes a situation where a ruling mentions a previously published ruling and points out an essen- tial difference between them. Modifiedis used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a pub- lished position. (Compare withamplified andclarified, above). Obsoleteddescribes a previously pub- lished ruling that is not considered deter- minative with respect to future transac- tions. This term is most commonly used in a ruling that lists previously published rulings that are obsoleted because of changes in law or regulations. A ruling may also be obsoleted because the sub- stance has been included in regulations subsequently adopted. Revokeddescribes situations where the position in the previously published rul- ing is not correct and the correct position is being stated in the new ruling. Supersededdescribes a situation where the new ruling does nothing more than restate the substance and situation of a previously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same position published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single ruling a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new ruling does more than restate the substance of a prior ruling, a combination of terms is used. For example,modified andsupersededdescribes a situation where the substance of a previously pub- lished ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously published ruling is first modified and then, as modified, is super- seded. Supplementedis used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original ruling has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the additions, and supersedes all prior rul- ings in the series. Suspendedis used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study. Abbreviations The following abbreviations in current use and formerly used will appear in material published in the Bulletin. A—Individual. Acq.—Acquiescence. B—Individual. BE—Beneficiary. BK—Bank. B.T.A.—Board of Tax Appeals. C—Individual. C.B.—Cumulative Bulletin. CFR—Code of Federal Regulations. CI—City. COOP—Cooperative. Ct.D.—Court Decision. CY—County. D—Decedent. DC—Dummy Corporation. DE—Donee. Del. Order—Delegation Order. DISC—Domestic International Sales Corporation. DR—Donor. E—Estate. EE—Employee. E.O.—Executive Order. ER—Employer. ERISA—Employee Retirement Income Security Act. EX—Executor. F—Fiduciary. FC—Foreign Country. FICA—Federal Insurance Contributions Act. FISC—Foreign International Sales Company. FPH—Foreign Personal Holding Company. F. R .—Federal Register. FUTA—Federal Unemployment Tax Act. FX—Foreign Corporation. G.C.M.—Chief Counsel’s Memorandum. GE—Grantee. GP—General Partner. GR—Grantor. IC—Insurance Company. I.R.B.—Internal Revenue Bulletin. LE—Lessee. LP—Limited Partner. LR—Lessor. M—Minor. Nonacq.—Nonacquiescence. O—Organization. P—Parent Corporation. PHC—Personal Holding Company. PO—Possession of the U.S. PR—Partner. PRS—Partnership. PTE—Prohibited Transaction Exemption. Pub. L.—Public Law. REIT—Real Estate Investment Trust. Rev. Proc.—Revenue Procedure. Rev. Rul.—Revenue Ruling. S—Subsidiary. S.P.R.—Statements of Procedural Rules. Stat.—Statutes at Large. T—Target Corporation. T.C.—Tax Court. T.D.—Treasury Decision. TFE—Transferee. TFR—Transferor. T.I.R.—Technical Information Release. TP—Taxpayer. TR—Trust. TT—Trustee. U.S.C.—United States Code. X—Corporation. Y—Corporation. Z—Corporation. 2003–12 I.R.B.iMarch 24, 2003 Numerical Finding List 1 Bulletins 2003–1 through 2003–11 Announcements: 2003–1, 2003–2 I.R.B.281 2003–2, 2003–3 I.R.B.301 2003–3, 2003–4 I.R.B.361 2003–4, 2003–5 I.R.B.396 2003–5, 2003–5 I.R.B.397 2003–6, 2003–6 I.R.B.450 2003–7, 2003–6 I.R.B.450 2003–8, 2003–6 I.R.B.451 2003–9, 2003–7 I.R.B.490 2003–10, 2003–7 I.R.B.490 2003–11, 2003–10 I.R.B.585 2003–12, 2003–10 I.R.B.585 2003–13, 2003–11 I.R.B.603 2003–14, 2003–11 I.R.B.603 2003–15, 2003–11 I.R.B.605 Notices: 2003–1, 2003–2 I.R.B.257 2003–2, 2003–2 I.R.B.257 2003–3, 2003–2 I.R.B.258 2003–4, 2003–3 I.R.B.294 2003–5, 2003–3 I.R.B.294 2003–6, 2003–3 I.R.B.298 2003–7, 2003–4 I.R.B.310 2003–8, 2003–4 I.R.B.310 2003–9, 2003–5 I.R.B.369 2003–10, 2003–5 I.R.B.369 2003–11, 2003–6 I.R.B.422 2003–12, 2003–6 I.R.B.422 2003–13, 2003–8 I.R.B.513 2003–14, 2003–8 I.R.B.515 2003–15, 2003–9 I.R.B.540 2003–16, 2003–10 I.R.B.575 Proposed Regulations: REG–209500–86, 2003–2 I.R.B.262 REG–116641–01, 2003–8 I.R.B.518 REG–125638–01, 2003–5 I.R.B.373 REG–126016–01, 2003–7 I.R.B.486 REG–126485–01, 2003–9 I.R.B.542 REG–103580–02, 2003–9 I.R.B.543 REG–124069–02, 2003–7 I.R.B.488 REG–138882–02, 2003–8 I.R.B.522 REG–139768–02, 2003–10 I.R.B.583 REG–151043–02, 2003–3 I.R.B.300 REG–164464–02, 2003–2 I.R.B.262 Revenue Procedures: 2003–1, 2003–1 I.R.B.1 2003–2, 2003–1 I.R.B.76 2003–3, 2003–1 I.R.B.113 2003–4, 2003–1 I.R.B.123 2003–5, 2003–1 I.R.B.163 2003–6, 2003–1 I.R.B.191 2003–7, 2003–1 I.R.B.233 2003–8, 2003–1 I.R.B.236 2003–9, 2003–8 I.R.B.516 2003–10, 2003–2 I.R.B.259 2003–11, 2003–4 I.R.B.311 Revenue Procedures—Continued: 2003–12, 2003–4 I.R.B.316 2003–13, 2003–4 I.R.B.317 2003–14, 2003–4 I.R.B.319 2003–15, 2003–4 I.R.B.321 2003–16, 2003–4 I.R.B.359 2003–17, 2003–6 I.R.B.427 2003–18, 2003–6 I.R.B.439 2003–19, 2003–5 I.R.B.371 2003–20, 2003–6 I.R.B.445 2003–21, 2003–6 I.R.B.448 2003–22, 2003–10 I.R.B.577 2003–23, 2003–11 I.R.B.599 2003–24, 2003–11 I.R.B.599 2003–25, 2003–11 I.R.B.601 Revenue Rulings: 2003–1, 2003–3 I.R.B.291 2003–2, 2003–2 I.R.B.251 2003–3, 2003–2 I.R.B.252 2003–4, 2003–2 I.R.B.253 2003–5, 2003–2 I.R.B.254 2003–6, 2003–3 I.R.B.286 2003–7, 2003–5 I.R.B.363 2003–8, 2003–3 I.R.B.290 2003–9, 2003–4 I.R.B.303 2003–10, 2003–3 I.R.B.288 2003–11, 2003–3 I.R.B.285 2003–12, 2003–3 I.R.B.283 2003–13, 2003–4 I.R.B.305 2003–14, 2003–4 I.R.B.302 2003–15, 2003–4 I.R.B.302 2003–16, 2003–6 I.R.B.401 2003–17, 2003–6 I.R.B.400 2003–18, 2003–7 I.R.B.467 2003–19, 2003–7 I.R.B.468 2003–20, 2003–7 I.R.B.465 2003–21, 2003–8 I.R.B.509 2003–22, 2003–8 I.R.B.494 2003–23, 2003–8 I.R.B.511 2003–24, 2003–10 I.R.B.557 2003–26, 2003–10 I.R.B.563 2003–27, 2003–11 I.R.B.597 2003–28, 2003–11 I.R.B.594 2003–29, 2003–11 I.R.B.587 Treasury Decisions: 9024, 2003–5 I.R.B.365 9025, 2003–5 I.R.B.362 9026, 2003–5 I.R.B.366 9027, 2003–6 I.R.B.413 9028, 2003–6 I.R.B.415 9029, 2003–6 I.R.B.403 9030, 2003–8 I.R.B.495 9031, 2003–8 I.R.B.504 9032, 2003–7 I.R.B.471 9033, 2003–7 I.R.B.483 9034, 2003–7 I.R.B.453 9035, 2003–9 I.R.B.528 9036, 2003–9 I.R.B.533 9037, 2003–9 I.R.B.535 9038, 2003–9 I.R.B.524 9039, 2003–10 I.R.B.561 9040, 2003–10 I.R.B.568 Treasury Decisions—Continued: 9041, 2003–8 I.R.B.510 9042, 2003–10 I.R.B.564 1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2002–26 through 2002–52 is in Internal Revenue Bulletin 2003–1, dated January 6, 2003. March 24, 2003ii2003–12 I.R.B. Finding List of Current Actions on Previously Published Items 2 Bulletins 2003–1 through 2003–11 Notices: 97–19 Modified by Rev. Proc. 2003–1, 2003–1 I.R.B.1 2001–26 Obsoleted by T.D. 9032, 2003–7 I.R.B.471 2001–46 Modified by Notice 2003–6, 2003–3 I.R.B.298 2001–69 Modified and superseded by Notice 2003–1, 2003–2 I.R.B.257 2002–27 Clarified by Notice 2003–3, 2003–2 I.R.B.258 2002–46 Modified by Notice 2003–10, 2003–5 I.R.B.369 Proposed Regulations: REG–209500–86 Corrected by Ann. 2003–6, 2003–6 I.R.B.450 REG–103829–99 Corrected by Ann. 2003–12, 2003–10 I.R.B.585 REG–126485–01 Withdrawn by REG–126485–01, 2003–9 I.R.B.542 REG–143321–02 Corrected by Ann. 2003–12, 2003–10 I.R.B.585 REG–164464–02 Corrected by Ann. 2003–6, 2003–6 I.R.B.450 Revenue Procedures: 83–23 Supplemented by Rev. Proc. 2003–21, 2003–6 I.R.B.448 84–37 Modified by Rev. Proc. 2003–1, 2003–1 I.R.B.1 93–38 Obsoleted by Rev. Proc. 2003–15, 2003–4 I.R.B.321 97–31 Modified by Rev. Proc. 2003–9, 2003–8 I.R.B.516 Revenue Procedures—Continued: 98–13 Obsoleted by T.D. 9032, 2003–7 I.R.B.471 2002–1 Superseded by Rev. Proc. 2003–1, 2003–1 I.R.B.1 2002–2 Superseded by Rev. Proc. 2003–2, 2003–1 I.R.B.76 2002–3 Superseded by Rev. Proc. 2003–3, 2003–1 I.R.B.113 2002–4 Superseded by Rev. Proc. 2003–4, 2003–1 I.R.B.123 2002–5 Superseded by Rev. Proc. 2003–5, 2003–1 I.R.B.163 2002–6 Superseded by Rev. Proc. 2003–6, 2003–1 I.R.B.191 2002–7 Superseded by Rev. Proc. 2003–7, 2003–1 I.R.B.233 2002–8 Superseded by Rev. Proc. 2003–8, 2003–1 I.R.B.236 2002–9 Modified and amplified by Rev. Proc. 2003–20, 2003–6 I.R.B.445 Rev. Rul. 2003–3, 2003–2 I.R.B.252 2002–22 Modified by Rev. Proc. 2003–3, 2003–1 I.R.B.113 2002–29 Modified by Rev. Proc. 2003–10, 2003–2 I.R.B.259 2002–52 Modified by Rev. Proc. 2003–1, 2003–1 I.R.B.1 2002–67 Supplemented by Ann. 2003–3, 2003–4 I.R.B.361 2002–75 Superseded by Rev. Proc. 2003–3, 2003–1 I.R.B.113 2003–3 Amplified by Rev. Proc. 2003–14, 2003–4 I.R.B.319 2003–7 Corrected by Ann. 2003–4, 2003–5 I.R.B396 Revenue Rulings: 53–131 Modified by Rev. Rul. 2003–12, 2003–3 I.R.B.283 57–190 Obsoleted by Rev. Rul. 2003–18, 2003–7 I.R.B.467 65–190 Revoked by Rev. Rul. 2003–3, 2003–2 I.R.B.252 69–372 Revoked by Rev. Rul. 2003–3, 2003–2 I.R.B.252 92–19 Supplemented in part by Rev. Rul. 2003–24, 2003–10 I.R.B.557 2003–2 Revoked by Rev. Rul. 2003–22, 2003–8 I.R.B.494 Treasury Decisions: 9002 Corrected by Ann. 2003–8, 2003–6 I.R.B.451 9022 Supplemented by Ann. 2003–7, 2003–6 I.R.B.450 Corrected by Ann. 2003–11, 2003–10 I.R.B.585 2 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2002–26 through 2002–52 is in Internal Revenue Bulletin 2003–1, dated January 6, 2003. 2003–12 I.R.B.iii*U.S. Government Printing Office: 2003—496–919/60075March 24, 2003
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