Internal Revenue Bulletin 2016-33 (PDF rendition): IRS Announcements

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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.
SPECIAL ANNOUNCEMENT
Notice 2016–48, page 235.
This Notice explains how the IRS will implement the changes to
the Individual Taxpayer Identification Number (ITIN) program
resulting from the enactment of the Protecting Americans from
Tax Hikes Act of 2015 (PATH Act).
INCOME TAX
REG–103058–16, page 238.
These proposed regulations (REG–103058–16) address vari-
ous issues under section 6055, including identifying the health
insurance issuer as the reporting entity for catastrophic health
coverage enrolled in through the Health Insurance Marketplace
and clarifying the circumstances when reporting is not required
of individuals who are covered by more than one plan or
program that is minimum essential coverage. In addition, these
proposed regulations modify the taxpayer identification num-
ber (TIN) solicitation requirements that section 6055 reporting
entities must follow to qualify for relief from penalties for a
failure to report a TIN.
REG–131418–14, page 248.
This document contains proposed regulations that relate to the
education tax credit under section 25A, the information report-
ing requirements under section 6050S and implements amend-
ments under the Trade Preferences Extension Act of 2015
(TPEA) and the Protecting Americans from Tax Hikes Act of
2015 (PATH).
Announcement 2016–27, page 238.
Announcement 2016–27 provides guidance to jurisdictions
that are treated as if they have an IGA in effect and FFIs located
in those jurisdictions. Each jurisdiction that is treated as if it has
an IGA in effect and that wishes to be continue to be treated as
if it has an IGA in effect must provide the Treasury Department,
by December 31, 2016, with a detailed explanation of why the
jurisdiction has not yet brought the IGA into force and provide
a step-by-step plan that the jurisdiction intends to follow in
order to sign the IGA (if it has not been signed) and bring the
IGA into force, including expected dates for achieving each
step. Treasury will then evaluate the submission and determine
whether the jurisdiction will continue to be treated as if it has an
IGA in effect. If a jurisdiction ceases to be treated as if it has an
IGA in effect, an FFI in that jurisdiction will no longer be able to
rely on the IGA to be treated as complying with and exempt
from withholding under, FATCA. Such FFIs generally will have to
enter into FFI Agreements in order to comply with their FATCA
obligations, unless the FFIs qualify for an exemption under the
FATCA regulations.
Notice 2016–48, page 235.
This Notice explains how the IRS will implement the changes to
the Individual Taxpayer Identification Number (ITIN) program
resulting from the enactment of the Protecting Americans from
Tax Hikes Act of 2015 (PATH Act).
T.D. 9779, page 233.
Section 83 addresses the income tax consequences of prop-
erty transferred in connection with the performance of ser-
vices. Section 83(b) permits the service provider to elect to
include in gross income, as compensation for services, the fair
market value of substantially nonvested property at the time of
transfer. This election is made by filing a written statement with
the Internal Revenue Service no later than 30 days after the
date that the property is transferred. These final regulations
eliminate the regulatory requirement that a copy of a § 83(b)
election be submitted with the taxpayer’s income tax return for
the taxable year in which the property is transferred.
Finding Lists begin on page ii.
Bulletin No. 2016–33
August 15, 2016

EMPLOYEE PLANS
T.D. 9779, page 233.
Section 83 addresses the income tax consequences of prop-
erty transferred in connection with the performance of ser-
vices. Section 83(b) permits the service provider to elect to
include in gross income, as compensation for services, the fair
market value of substantially nonvested property at the time of
transfer. This election is made by filing a written statement with
the Internal Revenue Service no later than 30 days after the
date that the property is transferred. These final regulations
eliminate the regulatory requirement that a copy of a § 83(b)
election be submitted with the taxpayer’s income tax return for
the taxable year in which the property is transferred.
ADMINISTRATIVE
Notice 2016–48, page 235.
This Notice explains how the IRS will implement the changes to
the Individual Taxpayer Identification Number (ITIN) program
resulting from the enactment of the Protecting Americans from
Tax Hikes Act of 2015 (PATH Act).

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the 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
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all
substantive 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 published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal practices and procedures that affect the rights and duties
of taxpayers are published.
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
taxpayers or technical advice to Service field offices, identify-
ing details 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
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching 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
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Sec-
retary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last 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 last Bulletin of each semiannual period.
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.
August 15, 2016Bulletin No. 2016–33

Part I. Rulings and Decisions Under the Internal Revenue Code
of 1986
T.D. 9779
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Property Transferred in
Connection with the
Performance of Services
AGENCY: Internal Revenue Service, De-
partment of Treasury.
ACTION: Final regulations.
SUMMARY: This document contains fi-
nal regulations relating to property trans-
ferred in connection with the performance
of services. These final regulations affect
certain taxpayers who receive property
transferred in connection with the perfor-
mance of services and make an election to
include the value of substantially non-
vested property in income in the year of
transfer.
DATES:Effective Date: These regula-
tions are effective on July 26, 2016.
Applicability Date: For dates of
applicability, see § 1.83–2(g).
FOR FURTHER INFORMATION CON-
TACT: Thomas Scholz or Michael
Hughes at (202) 317-5600 (not a toll-free
number).
SUPPLEMENTARY INFORMATION:
Background
Section 83 of the Internal Revenue
Code (Code) addresses the tax conse-
quences of a transfer of property in con-
nection with the performance of services.
Section 83(a) of the Code provides gener-
ally that the excess of the fair market
value of the transferred property (deter-
mined without regard to any restriction
other than a restriction which by its terms
will never lapse) as of the first time that
the transferee’s rights in the property are
transferable or are not subject to a sub-
stantial risk of forfeiture, whichever oc-
curs earlier, over the amount (if any) paid
for the property is included in the service
provider’s gross income for the taxable
year which includes such time. Section
83(b) and § 1.83–2(a) permit the service
provider to elect to include in gross in-
come, as compensation for services, the
excess (if any) of the fair market value of
the property at the time of transfer over
the amount (if any) paid for the property.
Under section 83(b)(2), an election under
section 83(b) must be made in accordance
with the regulations thereunder. Under
§ 1.83–2(c), the election must be filed
with the IRS no later than 30 days after
the date on which the property is trans-
ferred, and a copy of the election must be
submitted with the taxpayer’s income tax
return for the taxable year in which the
property is transferred.
On July 17, 2015, the Department of
the Treasury (Treasury) and the Internal
Revenue Service (IRS) published a notice
of proposed rulemaking (REG–135524–
14) in theFederal Register(137 FR
42439) under section 83 of the Code elim-
inating the requirement that a copy of a
section 83(b) election be submitted with
the taxpayer’s income tax return for the
taxable year in which the property is
transferred. Treasury and the IRS received
no comments responding to the notice of
proposed rulemaking. No public hearing
was requested and no public hearing was
held. Treasury and the IRS now adopt the
proposed regulations as final regulations
without modification.
Explanation of Provisions
These final regulations remove the sec-
ond sentence in § 1.83–2(c) of the existing
regulations, which requires that a taxpayer
submit a copy of a section 83(b) election
with the taxpayer’s tax return for the year
in which the property subject to the elec-
tion was transferred. Accordingly, under
these final regulations, a taxpayer is no
longer required to file a copy of a section
83(b) election with the taxpayer’s income
tax return.
Taxpayers are reminded of their gen-
eral recordkeeping responsibilities pursu-
ant to section 6001 of the Code, and more
specifically of the need to keep records
that show the basis of property owned by
the taxpayer. Taxpayers must maintain
sufficient records to show the original cost
of the property and to support the tax
treatment of the property transfer reported
on the taxpayers’ returns. Taxpayers must
keep these records as long as they may be
needed for the administration of any pro-
vision of the Code. Generally, this means
records that support items shown on a
return must be retained until the period of
limitations for that return expires. See sec-
tion 6501 of the Code. A copy of any
section 83(b) election made with respect
to property must be kept until the period
of limitations expires for any return with
respect to which the income inclusion or
basis of the property is relevant.
Applicability Date
These regulations apply to property
transferred on or after January 1, 2016.
For transfers of property on or after Jan-
uary 1, 2015 and prior to January 1, 2016,
the preamble to the proposed regulations
provides that taxpayers may rely on the
guidance in the proposed regulations
(which is identical to the guidance con-
tained in these final regulations).
Effect on Other Documents
Rev. Proc. 2012–29 (IRB 2012–28, 49)
states that a taxpayer making a section
83(b) election must submit a copy of the
election with his or her tax return for the
taxable year in which such property was
transferred. Effective as of July 26, 2016,
Rev. Proc. 2012–29 is revoked, in part, to
the extent it requires, inconsistent with
these final regulations, a taxpayer to sub-
mit a copy of a section 83(b) election with
his or her income tax return.
Statement of Availability of IRS
Documents
Rev. Proc. 2012–29 is published in the
Internal Revenue Bulletin (or Cumulative
Bulletin) and is available from the Super-
intendent of Documents, U.S. Govern-
ment Printing Office, Washington, DC
20402, or by visiting the IRS website at
http://www.irs.gov.
Bulletin No. 2016–33August 15, 2016
233

Special Analyses
Certain IRS regulations, including this
one, are exempt from the requirements of
Executive Order 12866, as supplemented
and reaffirmed by Executive Order 13563.
Therefore, a regulatory impact assessment
is not required. It also has been deter-
mined that section 553(b) of the Admin-
istrative 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 on small entities,
the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to
section 7805(f) of the Code, these regula-
tions have been submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on their
impact on small business.
Drafting Information
The principal authors of these final reg-
ulations are Thomas Scholz and Michael
Hughes, Office of the Associate Chief
Counsel (Tax Exempt and Government
Entities). However, other personnel from
the IRS and the Treasury participated in
their development.
List of Subjects 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR Part 1 is
amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
Part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805* * *
Par. 2. Section 1.83–2 is amended by
revising paragraph (c) and adding para-
graph (g) to read as follows:
§ 1.83–2 Election to include in gross
income in year of transfer.
* * * * *
(c)Manner of making election.The
election referred to in paragraph (a) of this
section is made by filing one copy of a
written statement with the internal reve-
nue office with which the person who
performed the services files his return.
* * * * *
(g)Effective/applicability date. Para-
graph (c) of this section applies to prop-
erty transferred on or after January 1,
2016.
John M. Dalrymple,
Deputy Commissioner for
Services and Enforcement.
Approved: April 20, 2016.
Mark J. Mazur,
Assistant Secretary of the
Treasury (Tax Policy).
(Filed by the Office of the Federal Register on July 25, 2016,
8:45 a.m., and published in the issue of the Federal Register
for July 26, 2016, 81 F.R. 48707)
August 15, 2016Bulletin No. 2016–33
234

Part III. Administrative, Procedural, and Miscellaneous
Implementation of PATH
Act ITIN Provisions
Notice 2016–48
Section 203 of the Protecting Ameri-
cans from Tax Hikes Act of 2015 (PATH
Act), Pub. L. 114–113,div. Q,enacted on
December 18, 2015, modified section
6109 of the Internal Revenue Code, and in
so doing, made significant changes to the
Individual Taxpayer Identification Num-
ber (ITIN) program. This notice explains
those changes, how the Internal Revenue
Service (IRS) will implement the changes,
and the potential consequences to taxpay-
ers who do not renew an ITIN when re-
quired by the PATH Act. Finally, this
notice requests comments regarding the
ITIN program and Certified Acceptance
Agents (CAAs).
BACKGROUND
Section 6109 permits the IRS to issue
identifying numbers for tax purposes (tax-
payer identification numbers) and to re-
quest information to issue such numbers.
Generally, an individual’s taxpayer iden-
tification number is a social security num-
ber (SSN); however, some individuals are
ineligible to receive an SSN but still need
a taxpayer identification number for U.S.
tax purposes.
An ITIN is a nine-digit tax processing
number issued by the IRS that is format-
ted like an SSN, NNN-NN-NNNN. Each
ITIN begins with the number 9 and has
fourth and fifth digit ranges from 50–65,
70–88, 90–92, and 94–99. The IRS is-
sues ITINs to individuals who are re-
quired to have a U.S. taxpayer identifica-
tion number for U.S. tax purposes but who
do not have, and are not eligible to obtain,
an SSN from the Social Security Admin-
istration (SSA). The PATH Act made
changes to the ITIN program.
ITIN Application Process
The basic process for applying for an
ITIN will not change as a result of the
PATH Act. Individuals apply for an ITIN
by submitting Form W–7,Application for
IRS Individual Taxpayer Identification
Number, (Form W–7SP for the Spanish
language version). Most taxpayers must
submit their Form W–7 with the tax return
for which the ITIN is needed. Both do-
mestic and foreign applicants may submit
their Form W–7, tax return, and the re-
quired documentation by mail to the ITIN
Operation Unit in Austin, Texas. Original
documents or certified copies of docu-
ments from the issuing agency are the
only acceptable documentation, except for
a few very limited exceptions.
Under the PATH Act, in-person appli-
cations may be submitted to an employee
of the IRS authorized to review and accept
applications or to a community-based cer-
tified acceptance agent approved by the
IRS. Individuals who apply in person,
other than dependents, will receive their
documentation back once the in-person
application is completed. Currently, all
IRS employees authorized to review and
accept applications are located in the
United States. The IRS is reviewing the
new law and considering how to imple-
ment the new provision for community-
based certified acceptance agents. Until
further guidance is issued, all applicants
may continue to submit their application
package (i.e., Form W–7 and supporting
documentation) to CAAs for review under
existing procedures (see https://www.irs.
gov/individuals/acceptance-agent-program).
Applicants may also submit their applica-
tion packet in person at an IRS Taxpayer
Assistance Center. Not all locations pro-
vide this service and many do so only by
appointment. Taxpayers should first check
https://www.irs.gov/uac/tac-locations-where-
in-person-document-verification-is-provided
to find a location that has employees au-
thorized to review and accept applica-
tions, and if applicable, make an appoint-
ment before visiting.
See the Instructions for Form W–7 and
https://www.irs.gov/individuals/additional-
itin-information for more detailed infor-
mation regarding the application process
for an ITIN.
Certain ITINs will need to be renewed
beginning in 2017
Prior to the PATH Act, a taxpayer ap-
plied for and received an ITIN only once.
The ITIN remained in effect unless the
taxpayer applied for and received an SSN.
On June 30, 2014, the IRS announced in
News Release IR 2014–76 that it would
deactivate ITINs that had not been used
on a tax return in five consecutive years.
That deactivation process had not yet be-
gun at the time the PATH Act was enacted
and, as a result of the PATH Act, is now
obsolete. Under the PATH Act, certain
ITINs will no longer be in effect unless
they are renewed.
Under the PATH Act, any ITIN that is
not used on a federal tax return for three
consecutive tax years, either as the ITIN
of an individual who files the return or as
the ITIN of a dependent included on a
return, will expire on December 31 of the
third consecutive tax year of nonuse. For
example, an individual applied for and
received an ITIN in 2015 that is used in
2015 on the individual’s 2014 federal in-
come tax return. If the individual does not
file or is not claimed as a dependent on a
tax return in 2016, 2017, and 2018, the
ITIN will expire on December 31, 2018.
This rule applies to all ITINs regardless of
when the ITIN was issued.
For ITINs issued before 2013, the
PATH Act provides that ITINs will no
longer be in effect according to the fol-
lowing schedule, unless the ITIN has al-
ready expired due to nonuse for three con-
secutive years as described above:
•ITINs issued before 2008 will remain
in effect until January 1, 2017.
•ITINs issued in 2008 will remain in
effect until January 1, 2018.
•ITINs issued in 2009 or 2010 will re-
main in effect until January 1, 2019.
•ITINs issued in 2011 or 2012 will re-
main in effect until January 1, 2020.
HOW TO RENEW AN ITIN
ITINs that have not been used in the
last three consecutive years
ITINs that have expired due to nonuse
in the last three consecutive years, as de-
scribed above, may be renewed anytime
starting October 1, 2016 by submitting a
Form W–7 and required documentation.
These individuals may renew their ITIN
without having to attach a tax return to the
Bulletin No. 2016–33August 15, 2016
235

Form W–7. Filers should use the most
recent revision of the Form W–7 and
check the box that says “renewal.” Filers
should follow the instructions on the Form
W–7 and include all the information and
documentation required by the instruc-
tions except for the requirement to attach
Form W–7 to a tax return. Alternatively,
individuals may choose to wait to submit
their Form W-7 with their return. Once the
Form W–7 renewal application is ap-
proved, the individual’s ITIN will again
be effective, and the individual can con-
tinue to use the same ITIN. The applicant
will receive a letter from the IRS stating
that the application has been approved.
Once renewed, an ITIN will remain in
effect unless it is not used on a tax return
for three consecutive years.
ITINs issued prior to January 1, 2013
and currently in use
ITINs issued prior to January 1, 2013
that have been used on a tax return in the
last three consecutive years are set to ex-
pire based on a multi-year schedule. Un-
der the PATH Act, this schedule is based
on the date that an ITIN was issued. How-
ever, many ITIN holders may not know
when their ITIN was issued and previ-
ously had no reason to keep a record of
the date an ITIN was issued. To simplify
the renewal process and allow for the ef-
fective administration of the program, the
IRS will administer the renewal of ITINs
on a schedule that is different from the
schedule in the PATH Act. The IRS will
renew ITINs based upon the fourth and
fifth digits (middle digits) in the ITIN.
ITINs that contain the middle digits of 78
or 79 will no longer be in effect beginning
January 1, 2017. The expiration and re-
newal schedules for ITINs with middle
digits other than 78 or 79 will be an-
nounced in future guidance.
Beginning this summer, the IRS will
send a Letter 5821 to individuals holding
ITINs with the middle digits of 78 or 79 if
the ITIN was used for a taxpayer or a
dependent on a U.S. income tax return in
any of the last three consecutive tax years
informing them that they may submit a
Form W–7 with original or certified doc-
uments to renew their ITINs. The Letter
5821 will be sent to the address used on
the most recent income tax return on
which the ITIN appears or the most re-
cently updated address for the taxpayer
who filed the tax return provided to the
IRS by the taxpayer or the U.S. Postal
Service.
An individual with an ITIN that con-
tains the middle digits of 78 or 79 who is
sent a Letter 5821 may submit a Form
W–7 and required documentation to re-
new their ITIN starting October 1, 2016.
These individuals may renew their ITIN
without having to attach Form W–7 to a
tax return. Filers should use the most re-
cent revision of Form W–7 and check the
box that says “renewal.” To expedite pro-
cessing, filers should include a copy of
Letter 5821. Filers should follow the In-
structions for Form W–7 and Letter 5821
and include all the information and docu-
mentation required by the instructions ex-
cept for the requirement to attach Form
W–7 to a tax return. The IRS anticipates
that for applications mailed to the IRS
under this process, documents will be re-
turned to the applicant within 60 days
from the date the application was re-
ceived. Alternatively, individuals who are
sent a Letter 5821 may choose to wait to
submit their Form W–7 with their tax re-
turn. Once a Form W–7 renewal applica-
tion is approved, the individual’s ITIN
will again be effective, and the individual
can continue to use the same ITIN.
To reduce the burden on taxpayers, the
IRS will accept Forms W–7 from each
member of a family in a single family
submission starting October 1, 2016, if at
least one of the family members is re-
quired to renew an ITIN because the mid-
dle digits are 78 or 79 and that family
member received a Letter 5821. For this
purpose, family members include the filer,
the filer’s spouse, and any dependents
claimed on the filer’s return.
ITINs with middle digits other than 78
or 79 that have been in use within the last
three consecutive tax years should not be
renewed and require no immediate action
from the ITIN holder. The IRS will ac-
cept, and individuals should continue to
file, tax returns using these existing ITINs.
The IRS will provide information about
the expiration schedule and renewal pro-
cess for the remaining ITINs issued before
2013 in future guidance and expects the
expiration and renewal process for the re-
maining ITINs to be completed over mul-
tiple years.
What May Happen if an ITIN is not
Renewed
Once renewed, an ITIN will remain in
effect unless it is not used on a tax return
for three consecutive years. The issuance
date of a renewed ITIN is the date the
ITIN was originally issued, not the re-
newal date. Some individuals may not be
aware that their ITIN has expired or that
they must renew an expired ITIN. Returns
filed by these individuals will be accepted
by the IRS; however, there may be a delay
in processing these returns, and certain
credits, such as the Child Tax Credit and
the American Opportunity Tax Credit,
may not be allowed unless the ITIN is
renewed. This could result in a reduced
refund or additional penalties and interest.
The IRS will notify these filers about the
delay and any reduction in refunds and
credits claimed and will inform them
about the need to file Form W–7 to renew
their ITIN.
HOLDERS OF EXPIRED ITINS WHO
HAVE OR BECOME ELIGIBLE FOR
AN SSN
An individual with an expired ITIN
who has or becomes eligible for an SSN
should not renew the ITIN. Instead, those
individuals who already have an SSN
should write a letter to the IRS or visit a
local IRS office explaining that they now
have an SSN and that they want all their
tax records combined under their SSN.
Details about what to include with the
letter and where to mail it can be found at
www.irs.gov/Individuals/Additional-ITIN-
Information. Those individuals who are el-
igible to obtain an SSN should obtain one
from the SSA and then follow the instruc-
tions above. Visit the SSA website at
www.ssa.gov, for information on how to
apply for an SSN.
USE OF AN ITIN SOLELY ON AN
INFORMATION RETURN
An individual whose expired ITIN is
used only on information returns filed and
furnished by third parties, such as Forms
1099, is not required to renew the ITIN.
ITINs may continue to be used for infor-
August 15, 2016Bulletin No. 2016–33
236

mation return purposes regardless of
whether they have expired for individual
income tax return filing purposes. If the
individual is later required to file a tax
return, however, the individual’s ITIN
will have to be renewed at that time. Ad-
ditionally, the third parties who file and
furnish information returns with an ex-
pired payee ITIN will not be subject to
information return penalties under sec-
tions 6721 or 6722 solely because the
ITIN is expired.
REQUEST FOR COMMENTS
Further guidance on other issues re-
garding the ITIN program will be forth-
coming. The Treasury Department and the
IRS request comments and recommenda-
tions regarding the ITIN program. Specif-
ically, the Treasury Department and the
IRS request comments on the following
issues:
1. The eligibility requirements that
should be established for organizations or
individuals applying to be community-
based certified acceptance agents and ways
to increase the number of community-based
certified acceptance agents in a manner that
will minimize the risk of fraud and non-
compliance.
2. Additional guidance that would be
beneficial in administering the implemen-
tation of section 203 of the PATH Act.
How to Submit Comments
Taxpayers may mail comments to:
Internal Revenue Service
Attn: CC:PA:LPD:PR (Notice 2016–48)
Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, D.C. 20044
or hand deliver comments Monday
through Friday between the hours of 8
a.m. and 4 p.m. to:
Courier’s Desk
Internal Revenue Service
Attn: CC:PA:LPD:PR (Notice 2016–48)
1111 Constitution Ave., N.W.
Washington, D.C. 20224
Alternatively, taxpayers may submit
comments electronically via the Federal
eRulemaking Portal at www.regulations-
.gov (type IRS–2016–0032 in the search
field on the regulations.gov homepage to
find this notice and submit comments). All
comments submitted by the public in re-
sponse to this notice will be available for
public inspection and copying in their
entirety.
DRAFTING INFORMATION
The principal author of this notice is
Michael Hara of the Office of the Associ-
ate Chief Counsel (Procedure and Admin-
istration). For further information about
this notice, call 1-800-908-9982.
Bulletin No. 2016–33August 15, 2016
237

Part IV. Items of General Interest
Update on Jurisdictions
Treated as If They Have an
IGA in Effect
Announcement 2016–27
I. BACKGROUND
In 2012, the U.S. Department of the
Treasury (Treasury) released Model 1 and
Model 2 intergovernmental agreements
(IGAs) to facilitate implementation of the
Foreign Account Tax Compliance Act
(FATCA). Notice 2013–43 (2013–31
I.R.B.113) provides that a jurisdiction that
has signed but not yet brought into force
an IGA is treated as if it has an IGA in
effect as long as the jurisdiction is taking
the steps necessary to bring the IGA into
force within a reasonable period of time.
Announcement 2014–17 (2014–18 I.R.B.
1001) and Announcement 2014–38
(2014–51 I.R.B. 951) provide that juris-
dictions treated as if they have an IGA in
effect also include jurisdictions that, be-
fore November 30, 2014, had reached an
agreement in substance with the United
States on the terms of an IGA as long as
the jurisdiction continues to demonstrate
firm resolve to sign the IGA as soon as
possible. Notice 2015–66 (2015–41
I.R.B. 541) announced that foreign finan-
cial institutions (FFIs) in partner jurisdic-
tions with a signed or “agreed in sub-
stance” Model 1 IGA that had not entered
into force as of September 30, 2015,
would continue to be treated as complying
with, and not subject to withholding un-
der, FATCA so long as the partner juris-
diction continues to demonstrate firm re-
solve to bring the IGA into force and any
information that would have been report-
able under the IGA on September 30,
2015, is exchanged by September 30,
2016, together with any information that
is reportable under the IGA on September
30, 2016.
An FFI that is resident in, or organized
under the laws of, a jurisdiction that is
treated as if it has an IGA in effect is
permitted to register on the FATCA reg-
istration website and to certify to a with-
holding agent its status as an FFI covered
by an IGA. Jurisdictions that are treated as
if they have an IGA in effect, even though
the IGA is not yet signed, are treated as if
they have in effect the relevant model
provisions.
The list of jurisdictions treated as if
they have an IGA in effect (the “IGA
List”) may be found at https://www.
treasury.gov/resource-center/tax-policy/
treaties/Pages/FATCA.aspx. As of the
date of publication of this Announcement,
the United States has signed IGAs with 83
jurisdictions; of those IGAs, 61 are in force.
The United States has also reached agree-
ments in substance with 30 jurisdictions.
II. EVALUATION OF JURISDICTIONS
TREATED AS IF THEY HAVE AN IGA
IN EFFECT
This Announcement provides that, on
January 1, 2017, Treasury will begin up-
dating the IGA List to provide that certain
jurisdictions that have not brought their
IGA into force will no longer be treated as
if they have an IGA in effect. Each juris-
diction with an IGA that is not yet in force
and that wishes to continue to be treated
as having an IGA in effect must provide to
Treasury by December 31, 2016, a de-
tailed explanation of why the jurisdiction
has not yet brought the IGA into force and
a step-by-step plan that the jurisdiction
intends to follow in order to sign the IGA
(if it has not yet been signed) and bring
the IGA into force, including expected
dates for achieving each step. In evaluat-
ing whether a jurisdiction will continue to
be treated as if it has an IGA in effect,
Treasury will consider whether: (1) the
jurisdiction has submitted the explanation
and plan (with dates) described above;
and (2) that explanation and plan, as well
as the jurisdiction’s prior course of con-
duct in connection with IGA discussions,
show that the jurisdiction continues to
demonstrate firm resolve to bring its IGA
into force. With respect to the timing of
the exchange of prior year information
upon entry into force of a Model 1 IGA,
Treasury does not intend to find FFIs to be
in significant non-compliance with the
IGA as long as any information for prior
years is exchanged before the next Sep-
tember 30th after the obligation under the
IGA to exchange information has taken
effect.
Jurisdictions that are initially deter-
mined to have demonstrated firm resolve
to bring an IGA into force will not retain
that status indefinitely. For example, fail-
ure to adhere to the expected timeline set
out in the jurisdiction’s explanation could
result in a determination that the jurisdic-
tion is no longer demonstrating firm re-
solve to bring its IGA into force and there-
fore will no longer be treated as if it has an
IGA in effect.
In order to provide notice to FFIs, a
jurisdiction will not cease to be treated as
having an IGA in effect until at least 60
days after the jurisdiction’s status on the
IGA List is updated. FFIs in a jurisdiction
that ceases to be treated as if it has an IGA
in effect will no longer be able to rely on
the IGA to be treated as complying with,
and exempt from withholding under,
FATCA. Unless they qualify for an ex-
emption under the FATCA regulations,
such FFIs generally will have to enter into
FFI Agreements (see https://www.irs.gov/
businesses/corporations/fatca-foreign-
financial-institution-registration-tool) in order
to comply with their FATCA obligations,
including reporting information to the IRS
and withholding pursuant to the terms of
the FFI Agreement.
III. DRAFTING INFORMATION
The principal author of this notice is
Michael Kaercher of the Office of Asso-
ciate Chief Counsel (International). For
further information regarding this notice,
contact Mr. Kaercher at (202) 317-6942
(not a toll-free number).
Notice of Proposed
Rulemaking
Information Reporting of
Catastrophic Health
Coverage and Other Issues
Under Section 6055
REG–103058–16
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
August 15, 2016Bulletin No. 2016–33
238

SUMMARY: This document contains
proposed regulations relating to informa-
tion reporting of minimum essential cov-
erage under section 6055 of the Internal
Revenue Code (Code). Health insurance
issuers, certain employers, and others that
provide minimum essential coverage to
individuals must report to the IRS infor-
mation about the type and period of cov-
erage and furnish related statements to
covered individuals. These proposed reg-
ulations affect health insurance issuers,
employers, governments, and other per-
sons that provide minimum essential cov-
erage to individuals.
DATES: Written or electronic comments
and requests for a public hearing must be
received by October 3, 2016.
ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG–103058–16), Room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand-
delivered Monday through Friday be-
tween the hours of 8 a.m. and 4 p.m. to
CC:PA:LPD:PR (REG–103058–16), Cou-
rier’s Desk, Internal Revenue Service,
1111 Constitution Avenue, NW, Wash-
ington, DC 20224, or sent electronically
via the Federal eRulemaking Portal at
http://www.regulations.gov (IRS REG–
103058–16).
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations under section 6055, John B.
Lovelace, (202) 317-7006; concerning the
proposed regulations under section 6724,
Hollie Marx, (202) 317-6844; concerning
the submission of comments, Regina
Johnson, (202) 317-6901 (not toll-free
numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information con-
tained in this notice of proposed rulemak-
ing has been submitted to the Office of
Management and Budget in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)). Comments on
the collection of information should be
sent to theOffice of Management and
Budget,Attn: Desk Officer for the De-
partment of the Treasury, Office of Infor-
mation and Regulatory Affairs, Washing-
ton, DC 20503, with copies to the
Internal Revenue Service,Attn: IRS Re-
ports Clearance Officer, SE:W:CAR:MP:
T:T:SP, Washington, DC 20224. Com-
ments on the collection of information
should be received by October 3, 2016.
Comments are specifically requested con-
cerning:
Whether the proposed collection of in-
formation is necessary for the proper per-
formance of the functions of the IRS, in-
cluding whether the information will have
practical utility;
How the quality, utility, and clarity of
the information to be collected may be
enhanced;
How the burden of complying with the
proposed collection of information may
be minimized, including through the ap-
plication of automated collection tech-
niques or other forms of information tech-
nology; and
Estimates of capital or start-up costs and
costs of operation, maintenance, and pur-
chase of services to provide information.
The collection of information in these
proposed regulations is in § 1.6055–1.
The collection of information will be used
to determine whether an individual has
minimum essential coverage under sec-
tion 1501(b) of the Patient Protection and
Affordable Care Act (26 U.S.C.
5000A(f)). The collection of information
is required to comply with the provisions
of section 6055. The likely respondents
are health insurers, self-insured employers
or other sponsors of self-insured health
plans, and governments that provide min-
imum essential coverage.
The burden for the collection of infor-
mation contained in these proposed regu-
lations will be reflected in the burden on
Form 1095–B, Health Coverage, or an-
other form that the IRS designates, which
will request the information in the pro-
posed regulation.
An agency may not conduct or spon-
sor, and a person is not required to re-
spond to, a collection of information un-
less it displays a valid control number
assigned by the Office of Management
and Budget.
Background
Under section 5000A, individuals must
for each month have minimum essential
coverage, qualify for a health coverage
exemption, or make an individual shared
responsibility payment with their income
tax returns. Section 6055 provides that all
persons who provide minimum essential
coverage to an individual must report cer-
tain information to the IRS that identifies
covered individuals and the period of cov-
erage, and must furnish a statement to the
covered individuals containing the same
information. The information reported un-
der section 6055 allows individuals to es-
tablish, and the IRS to verify, that the
individuals were covered by minimum es-
sential coverage for months during the
year.
Information returns under section 6055
generally are filed using Form 1095–B. A
separate and distinct health coverage-
related reporting requirement under sec-
tion 6056 requires that certain large em-
ployers report information on Form
1095–C, Employer-Provided Health In-
surance Offer and Coverage. Self-insured
employers required to file Form 1095–C
use Part III of that form, rather than Form
1095–B, to report information required
under section 6055 for individuals en-
rolled in the self-insured employer-
sponsored coverage. These proposed reg-
ulations provide guidance under section
6055 only, which relates to Form 1095–B
and Form 1095–C, Part III. These pro-
posed regulations do not affect informa-
tion reporting under section 6056 on Form
1095–C, Parts I and II.
Under section 5000A(f)(1), various
types of health plans and programs are
minimum essential coverage, including:
(1) specified government-sponsored pro-
grams such as Medicare Part A, the Med-
icaid program under Title XIX of the So-
cial Security Act (42 U.S.C. 1936 and
following sections), the Children’s Health
Insurance Program under Title XXI of the
Social Security Act (42 U.S.C. 1397aa
and following sections) (CHIP), the TRI-
CARE program under chapter 55 of Title
10, U.S.C., health care programs for vet-
erans and other individuals under chapter
17 or 18 of Title 38 U.S.C., coverage for
Peace Corps volunteers under 22 U.S.C.
2504(e), and coverage under the Nonap-
propriated Fund Health Benefits Program
under section 349 of Public Law 103–337,
(2) coverage under an eligible employer-
sponsored plan, (3) coverage under a plan
Bulletin No. 2016–33August 15, 2016
239

in the individual market (such as a quali-
fied health plan offered through an Af-
fordable Insurance Exchange (Exchange,
also known as a Marketplace)), (4) cover-
age under a grandfathered health plan, and
(5) other coverage recognized as mini-
mum essential coverage by the Secretary
of Health and Human Services, in coordi-
nation with the Secretary of the Treasury.
Undersection5000A(f)(3)and§1.5000A–
2(g) of the Income Tax Regulations, cov-
erage that consists solely of excepted ben-
efits described in section 2791(c)(1),
(c)(2), (c)(3), or (c)(4) of the Public
Health Service Act (42 U.S.C. 300gg–
91(c)), and the regulations under that sec-
tion, is not minimum essential coverage.
Section 1.5000A–2(b)(2) lists government-
sponsored programs that provide limited
benefits and which are not minimum essen-
tial coverage.
Under section 5000A(f)(4), an individ-
ual who is a bona fide resident of a United
States possession for a month is treated as
having minimum essential coverage for
that month.
Notice 2015–68, 2015–41 I.R.B. 547,
provides guidance on various issues under
section 6055. In Notice 2015–68, the
Treasury Department and the IRS stated
that they intend to propose regulations
under section 6055 addressing certain of
these issues and requested comments.
Comments were requested about the ap-
plication of the reasonable cause rules un-
der section 6724 to section 6055 report-
ing, in particular as applied to taxpayer
identification number (TIN) solicitation
and reporting.
Persons Required To Report
Under § 1.6055–1(c)(1)(iii), the exec-
utive department or agency of the govern-
mental unit that provides coverage under a
government-sponsored program is the re-
porting entity for government-sponsored
minimum essential coverage. Section
1.6055–1(c)(3)(i) specifically provides
that the State agency that administers the
Medicaid or CHIP program, respectively,
must report government-sponsored cover-
age under section 6055. Notice 2015–68
provides that Medicaid and CHIP agen-
cies in U.S. possessions or territories are
not required to report Medicaid and CHIP
coverage because an individual eligible
for that coverage is generally a bona fide
resident of the possession or territory who
is deemed to have minimum essential cov-
erage under section 5000A(f)(4) and,
therefore, does not require reporting under
section 6055 to verify compliance with
section 5000A.
In general, under § 1.6055–1(c)(1)(ii)
the reporting entity for coverage under a
self-insured group health plan is the plan
sponsor. Section 1.6055–1(c)(2) provides
rules for identifying which entity is the
plan sponsor of a self-insured group
health plan for purposes of section 6055.
For this purpose, the employer is the plan
sponsor of a self-insured group health
plan established by a single employer (de-
termined without aggregating related en-
tities under section 414). If the plan or
arrangement is established or maintained
by more than one employer (including a
Multiple Employer Welfare Arrangement
(as defined in section 3(40) of the Em-
ployee Retirement Income Security Act of
1974 (ERISA)), and the plan is not a mul-
tiemployer plan (as defined in section
3(37) of ERISA), each participating em-
ployer is a plan sponsor with respect to
that employer’s employees. For a self-
insured group health plan or arrangement
that is a multiemployer plan, the plan
sponsor is the association, committee,
joint board of trustees, or other similar
group of representatives of the parties
who establish or maintain the plan. For a
self-insured group health plan or arrange-
ment maintained solely by an employee
organization, the plan sponsor is the em-
ployee organization.
The existing regulations at § 1.6055–
1(d)(2) provide that no reporting is re-
quired for minimum essential coverage
that provides benefits in addition or as a
supplement to other coverage that is min-
imum essential coverage if the primary
and supplemental coverage have the same
plan sponsor or the coverage supplements
government-sponsored minimum essen-
tial coverage. Notice 2015–68 explained
that this rule had proven to be confusing,
and, accordingly, the Treasury Depart-
ment and the IRS intended to propose
regulations providing that (1) if an indi-
vidual is covered by multiple minimum
essential coverage plans or programs pro-
vided by the same provider, reporting is
only required for one of the plans or pro-
grams; and (2) reporting generally is not
required for an individual’s minimum es-
sential coverage to the extent that the in-
dividual is eligible for that coverage only
if the individual is also covered by other
minimum essential coverage for which
section 6055 reporting is required.
Information Required To Be Reported
Under section 6055(b) and § 1.6055–
1(e)(1), providers of minimum essential
coverage must report to the IRS (1) the
name, address, and employer identifica-
tion number (EIN) of the reporting entity
required to file the return; (2) the name,
address, and TIN, or date of birth if a TIN
is not available, of the responsible indi-
vidual (except that a reporting entity may,
but is not required to, report the TIN of a
responsible individual not enrolled in the
coverage); (3) the name and TIN, or date
of birth if a TIN is not available, of each
individual who is covered under the pol-
icy or program; and (4) the months of
coverage for each covered individual.
1
Section 1.6055–1(b)(11) provides that the
responsible individual includes a primary
insured, employee, former employee, uni-
formed services sponsor, parent, or other
related person named on an application
who enrolls one or more individuals, in-
cluding him or herself, in minimum essen-
tial coverage.
In addition, under § 1.6055–1(e)(2), for
coverage provided by a health insurance
issuer through a group health plan, infor-
mation returns must report (1) the name,
address, and EIN of the employer main-
taining the plan, and (2) any other infor-
mation that the Secretary requires for ad-
ministering the credit under section 45R
1
The Affordable Care Act also added section 6056, which requires that applicable large employers file and furnish statements containing information related to offers of coverage, if any,
made to each full-time employee. To complete these statements properly, employers must have each employee’s TIN. In accordance with the requirements of a different Code section (section
3402(f)(2)(A)), employers should have already sought each employee’s TIN in advance of the deadline for filing and furnishing statements required under section 6056. Therefore, the TIN
solicitation rules in these proposed regulationsonly applyto information reporting under section 6055 (which in the case of an applicable large employer providing coverage under a
self-insured plan, includes information reporting on Form 1095–C, Part III).
August 15, 2016Bulletin No. 2016–33
240

(relating to the tax credit for employee
health insurance expenses of small em-
ployers).
A reporting entity that fails to comply
with the filing and statement furnishing
requirements of section 6055 may be sub-
ject to penalties for failure to file timely a
correct information return (section 6721)
or failure to furnish timely a correct state-
ment (section 6722). See section 6724(d);
see also § 1.6055–1(h)(1). These penalties
may be waived if the failure is due to
reasonable cause and is not due to willful
neglect. See section 6724(a). In particular,
under § 301.6724–1(a)(2) of the Proce-
dure and Administration Regulations pen-
alties are waived if a reporting entity dem-
onstrates that it acted in a responsible
manner and that the failure is due to sig-
nificant mitigating factors or events be-
yond the reporting entity’s control. For
purposes of section 6055 reporting, if the
information reported on a return is incom-
plete or incorrect as a result of a change in
circumstances (such as a retroactive
change in coverage), a failure to timely
file or furnish a corrected document is a
failure to file a correct return or furnish a
correct statement under sections 6721 and
6722. See § 1.6055–1(h)(2).
In general, under § 301.6724–1(e) a
person will be treated as acting in a re-
sponsible manner if the person properly
solicits a TIN but does not receive it. For
this purpose, proper solicitation of a TIN
involves an initial solicitation and two
subsequent annual solicitations. In gen-
eral, an initial solicitation is made when
the relationship between the reporting en-
tity and the taxpayer is established. If the
reporting entity does not receive the TIN,
the first annual solicitation is generally
required by December 31 of the year in
which the relationship with the taxpayer
begins (January 31 of the following year if
the relationship begins in December).
Generally, if the TIN is still not provided,
a second annual solicitation is required by
December 31 of the following year. Sim-
ilar rules applying to filers who file or
furnish information reports with incorrect
TINs are in § 301.6724–1(f).
The preamble to the section 6055 reg-
ulations (T.D. 9660, 79 FR 13220) pro-
vides short-term relief from reporting pen-
alties for 2015 coverage. Specifically, the
IRS will not impose penalties under sec-
tions 6721 and 6722 on reporting entities
that can show that they have made good
faith efforts to comply with the informa-
tion reporting requirements. This relief
applies to incorrect or incomplete infor-
mation, including TINs or dates of birth,
reported on a return or statement.
Explanation of Provisions and
Summary of Comments
1.Reporting of Catastrophic Plans
Under § 1.36B–5(a), Exchanges must
report to the IRS information relating to
qualified health plans in which individuals
enroll through the Exchange. Under sec-
tion 36B(c)(3)(A), the term qualified
health plan has the same meaning as de-
fined in section 1301 of the Affordable
Care Act except that it does not include a
catastrophic plan described in section
1302 of the Affordable Care Act. Thus,
Exchanges are not required to report on
catastrophic coverage. Section 1.6055–
1(d) provides that health insurance issuers
need not report on coverage in a qualified
health plan in the individual market en-
rolled in through an Exchange, because
that information is generally reported by
Exchanges pursuant to § 1.36B–5. Thus,
currently neither the Exchanges nor health
insurance issuers are responsible for re-
porting coverage under a catastrophic
plan.
Effective administration of section
5000A generally requires reporting of all
minimum essential coverage, including
catastrophic plans in which individuals
enroll through an Exchange. Accordingly,
Notice 2015–68 indicated that the Trea-
sury Department and the IRS intended to
propose regulations under section 6055 to
narrow the relief provided to issuers in
§ 1.6055–1(d) by requiring issuers of cat-
astrophic plans to report catastrophic plan
coverage on Form 1095–B, effective for
coverage in 2016 and returns and state-
ments filed and furnished in 2017. Con-
sistent with Notice 2015–68, the proposed
regulations include this requirement but,
to allow reporting entities sufficient time
to implement these reporting require-
ments, are proposed to be effective for
coverage in 2017 and returns and state-
ments filed and furnished in 2018.
Notice 2015–68 indicated that health
insurance issuers could voluntarily report
on 2015 catastrophic coverage (on returns
and statements filed and furnished in
2016) and were encouraged to do so. No-
tice 2015–68 further provided that an is-
suer that reports on 2015 catastrophic cov-
erage will not be subject to penalties for
these returns. Given the 2017 effective
date for reporting of catastrophic coverage
provided in these proposed regulations,
health insurance issuers similarly may
voluntarily report on 2016 catastrophic
coverage (on returns and statements filed
and furnished in 2017) and are encour-
aged to do so. An issuer that reports on
2016 catastrophic coverage will not be
subject to penalties for these returns.
2.Reporting of Coverage under
Basic Health Programs
Section 1331 of the Affordable Care
Act allows states to establish a Basic
Health Program to provide an additional
healthcare coverage option to certain in-
dividuals not eligible for Medicaid. See 42
CFR Part 600. The Basic Health Program
is designated as minimum essential cov-
erage under 42 CFR 600.5.
Section 5000A(f) does not identify
the Basic Health Program as a government-
sponsored program, but it closely resem-
bles government-sponsored coverage such
as Medicaid and CHIP. Accordingly, No-
tice 2015–68 indicated that the state
agency that administers the Basic Health
Program is the entity that must report that
coverage under section 6055. Consistent
with Notice 2015–68, these proposed reg-
ulations provide that the State agency ad-
ministering coverage under the Basic
Health Program is required to report that
coverage under section 6055.
3.Truncated TINs
Section 6055(b) and § 1.6055–1(e)
require that health insurance issuers and
carriers reporting coverage under insured
group health plans report information
about the employer sponsoring the plan,
including the employer’s EIN, to the IRS.
Section 6055(c) and § 1.6055–1(g) require
that health insurance issuers and carriers
reporting information to the IRS furnish a
statement to a taxpayer providing infor-
mation about the filer and the covered
individuals. Section 301.6109–4(b)(1)
Bulletin No. 2016–33August 15, 2016
241

provides that the TIN of a person other
than the filer, including an EIN, may be
truncated on statements furnished to re-
cipients unless, among other reasons, such
truncation is otherwise prohibited by stat-
ute or regulations. Thus, under § 1.6055–
1(g)(3) of the existing regulations, a re-
cipient’s TIN may appear in the form of
an IRS truncated taxpayer identification
number (TTIN) on a statement furnished
to the recipient. These proposed regula-
tions amend the existing regulations to
clarify that a TTIN is not an alternative
identifying number; rather, it is one of the
ways that a TIN may appear, subject to the
rules in § 301.6109–4(b)(1).
Existing regulations do not address
whether health insurance issuers and car-
riers are permitted to truncate a sponsor-
ing employer’s EIN on statements fur-
nished to taxpayers. Notice 2015–68
advised that the Treasury Department and
the IRS intended to propose regulations to
clarify that the EIN of the employer spon-
soring the plan may be truncated to appear
as an IRS TTIN on statements health in-
surance issuers and carriers furnish to tax-
payers. Consistent with Notice 2015–68,
the proposed regulations clarify that the
EIN of the employer sponsoring the plan
may be truncated to appear as an IRS
TTIN on statements health insurance issu-
ers and carriers furnish to taxpayers. Sec-
tion 301.6109–4(b)(2)(ii) prohibits using
TTINs if, among other things, a statute
specifically requires the use of an EIN.
While section 6055(b)(2)(A) requires that
the information return filed with the IRS
includes the employer’s EIN, and section
6055(c)(1)(B) requires that the statement
furnished to a taxpayer includes the infor-
mation required to be shown on the infor-
mation return with respect to such indi-
vidual, the statute does not require that the
full EIN appear on the statement furnished
to taxpayers and the employer’s EIN may
be truncated to appear in the form of an
IRS TTIN.
4.Plans for Which Reporting is Not
Required
Information reporting under section
6055(a) is generally required of every per-
son who provides minimum essential cov-
erage to an individual during the year. In
certain instances where the reporting
would be duplicative, the existing regula-
tions allow the person who provides sup-
plemental coverage to forgo information
reporting. This supplemental coverage
rule in § 1.6055–1(d)(2) was intended to
eliminate duplicate reporting of an indi-
vidual’s minimum essential coverage un-
der circumstances when there is reason-
able certainty that the provider of the
“primary” coverage will report. This rule
has proven to be confusing.
The Treasury Department and the
IRS indicated in Notice 2015–68 that reg-
ulations would be proposed to replace the
existing rules. Accordingly, the proposed
regulations provide that (1) if an individ-
ual is covered by more than one minimum
essential coverage plan or program pro-
vided by the same reporting entity, report-
ing is required for only one of the plans or
programs; and (2) reporting is not re-
quired for an individual’s minimum es-
sential coverage to the extent that the in-
dividual is eligible for that coverage only
if the individual is also covered by other
minimum essential coverage for which
section 6055 reporting is required. As in
Notice 2015–68, the proposed regulations
provide that the second rule applies to
eligible employer-sponsored coverage
only if the supplemental coverage is of-
fered by the same employer that offered
the eligible employer-sponsored coverage
for which section 6055 reporting is re-
quired. These rules apply month by month
and individual by individual.
Thus, under the proposed regula-
tions, applying the first rule, if for a month
an individual is enrolled in a self-insured
group health plan provided by an em-
ployer and also is enrolled in a self-
insured health reimbursement arrange-
ment (HRA) provided by the same
employer, the reporting entity (the em-
ployer) is required to report only one type
of coverage for that individual. If an em-
ployee is covered under both self-insured
arrangements for some months of the year
but retires or otherwise drops coverage
under the non-HRA group health plan and
is covered only under the HRA for other
months, the employer must report cover-
age under the HRA for the months after
the employee retires or drops the non-
HRA coverage.
Applying the second rule, reporting
is not required for minimum essential cov-
erage for a month if that coverage is of-
fered only to individuals who are also
covered by other minimum essential cov-
erage, including Medicare, TRICARE,
Medicaid, or certain employer-sponsored
coverage, for which reporting is required.
In these arrangements, the program for
which reporting is required represents the
primary coverage while the other mini-
mum essential coverage is supplemental
to the primary plan.
Under the application of the second
rule to eligible employer-sponsored cov-
erage, if an employer offers both an in-
sured group health plan and an HRA for
which an employee is eligible if enrolled
in the insured group health plan, and an
employee enrolls in both, the employer is
not required to report the employee’s cov-
erage under the HRA. However, if an em-
ployee is enrolled in his or her employer’s
HRA and in a spouse’s non-HRA group
health plan, the employee’s employer is
required to report for the HRA, and the
employee’s spouse’s employer (or the
health insurance issuer or carrier, if
the plan is insured) is required to report
for the non-HRA group health plan cov-
erage. The proposed regulations clarify
that, for purposes of this rule, an employer
is treated as offering minimum essential
coverage that is offered by another em-
ployer with whom the employer is treated as
a single employer under section 414(b), (c),
(m), or (o).
Separately, Notice 2015–68 also
stated that, because Medicaid and CHIP
coverage provided by the governments of
American Samoa, the Commonwealth of
the Northern Mariana Islands, Guam,
Puerto Rico, and the U.S. Virgin Islands is
generally made available only to individ-
uals who are treated as having minimum
essential coverage under section
5000A(f)(4) (and, therefore, do not need
section 6055 reporting to verify minimum
essential coverage), the Medicaid and
CHIP agencies in those U.S. possessions
or territories are not required to report that
coverage under section 6055. Consistent
with that rule, the proposed regulations
provide that reporting under section 6055
is not required with respect to Medicaid
and CHIP agencies in U.S. possessions or
territories.
August 15, 2016Bulletin No. 2016–33
242

5.TIN Solicitation
Information reporting under section
6055 is subject to the penalty provisions
of sections 6721 and 6722 for failure to
file timely a correct information return or
failure to furnish timely a correct state-
ment to the individual. See § 1.6055–1(h).
The penalties may be waived under sec-
tion 6724(a) if the failure is due to rea-
sonable cause and not due to willful ne-
glect; that is, if a reporting entity
demonstrates that it acted in a responsible
manner and that the failure is due to sig-
nificant mitigating factors or events be-
yond the reporting entity’s control. See
§ 301.6724–1(a)(2). Under § 301.6724–
1(e), in cases of a missing TIN, the report-
ing entity is treated as acting in a respon-
sible manner in soliciting a TIN if the
reporting entity makes (1) an initial solic-
itation when an account is opened or a
relationship is established, (2) a first an-
nual solicitation by December 31 of the
year the account is opened (or January 31
of the following year if the account is
opened in December), and (3) a second
annual solicitation by December 31 of the
year following the year in which the account
is opened. Similar rules apply regarding in-
correct TINs under § 301.6724–1(f). The
rules in § 301.6724–1(e) and (f) were issued
prior to the enactment of section 6055 and
apply to most forms of information report-
ing.
Comments received in response to
the first notice of proposed rulemaking
(REG–132455–11) under section 6055,
published in theFederal Register(78 FR
54986) on September 9, 2013, raised con-
cerns about the application of the TIN
solicitation rules to section 6055 report-
ing. Accordingly, Notice 2015–68 pro-
vided that, pending the issuance of addi-
tional guidance, reporting entities will not
be subject to penalties for failure to report
a TIN if they comply with the require-
ments of § 301.6724–1(e) with the fol-
lowing modifications: (1) the initial solic-
itation is made at an individual’s first
enrollment or, if already enrolled on Sep-
tember 17, 2015, the next open season, (2)
the second solicitation (the first annual
solicitation) is made at a reasonable time
thereafter, and (3) the third solicitation
(the second annual solicitation) is made
by December 31 of the year following the
initial solicitation. Notice 2015–68 also
requested comments on the application of
the reasonable cause rules under section
6724 to section 6055 reporting.
In response to the request for com-
ments in Notice 2015–68, one commenter
requested that the proposed regulations
include detailed rules tailored to TIN so-
licitation for information returns required
by section 6055. This commenter ex-
pressed concern that, because the current
rules were designed primarily to apply to
financial relationships, they are difficult to
apply to section 6055 reporting, particu-
larly the rules for demonstrating that the
filer acted in a responsible manner as de-
scribed in § 301.6724–1(e) and (f). The
Treasury Department and the IRS agree
with the commenter that some modifica-
tion to the rules in § 301.6724–1(e) is
warranted to account for the differences
between information reporting under sec-
tion 6055 and information reporting under
other provisions of the Code. Accord-
ingly, the Treasury Department and the
IRS propose regulations to provide spe-
cific TIN solicitation rules for section
6055 reporting. Until final regulations are
released, reporting entities may rely on
these proposed rules and Notice 2015–68.
The preamble below also includes some
additional transition rules that apply to
reporting entities in certain situations.
Section 301.6724–1(e)(1)(i) pro-
vides that an initial TIN solicitation must
occur when an account (which includes
accounts, relationships, and other transac-
tions) is opened. Section 301.6724–1(e)
does not define the term “opened” for this
purpose. Commenters requested clarifica-
tion as to how the term “opened” should
be interpreted for purposes of reporting
under section 6055. In the context of fi-
nancial accounts, an account is generally
considered opened on the first day it is
available for use by its owner. In most
cases, this would be shortly after the ap-
plication to open that account is received,
and this day would be no earlier than the
day the application was received. Health
coverage does not work in the same way.
In some cases, the first effective date of
health coverage is before the day the ap-
plication was received, making it imprac-
tical to solicit TINs before the coverage
takes effect. In other cases, the effective
date of coverage may be months after the
day the application was received. To ac-
count for this different timing, the pro-
posed regulations provide that, for pur-
poses of section 6055 reporting, an
account is considered “opened” on the
date the filer receives a substantially com-
plete application for new coverage or to
add an individual to existing coverage.
Accordingly, health coverage providers
may generally satisfy the requirement for
the initial solicitation by requesting en-
rollees’ TINs as part of the application for
coverage.
To address differences in the way
financial accounts and health coverage are
opened, the proposed regulations also
change the timing of the first annual so-
licitation (the second solicitation overall)
with respect to missing TINs. Under
§ 301.6724–1(e)(1)(ii), a first annual so-
licitation must be made by December 31
of the year the account is opened (or by
January 31 of the following calendar year
if the account is opened in December).
The timing of the first annual solicitation
is dictated by the need to have accurate
reporting of information to taxpayers and
the IRS in preparation for the filing of an
income tax return. Accounts, relation-
ships, and other transactions may be
opened or begun throughout the year, and
may remain active indefinitely. It is ben-
eficial to the IRS, filers, and taxpayers in
the context of accounts, relationships, and
other transactions to have a single dead-
line for the first annual solicitation at the
end of the calendar year (or January if the
account is opened in December).
By contrast, health coverage is gen-
erally offered on an annual basis. While
individuals may, depending on their cir-
cumstances, enroll in coverage at any
point during the year, many covered indi-
viduals enroll in coverage during the open
enrollment period, which is in advance of
the beginning of the coverage year. The
most common coverage year is the calen-
dar year and many individuals enroll late
each year for coverage the following year.
For such individuals, requiring the first
annual solicitation (the second solicitation
overall) by December 31 of the year in
which the application is received is earlier
than is necessary (because reporting is not
due until more than a year later) and co-
incides with the end of a plan year, which
is already the busiest time of year for
Bulletin No. 2016–33August 15, 2016
243

coverage providers. To address these con-
siderations, the proposed regulations re-
quire that the first annual solicitation be
made no later than seventy-five days after
the date on which the account was
“opened” (i.e., the day the filer received
the substantially complete application for
coverage), or, if the coverage is retroac-
tive, no later than the seventy-fifth day
after the determination of retroactive cov-
erage is made. The deadline for the second
annual solicitation (third solicitation over-
all) remains December 31 of the year fol-
lowing the year the account is opened as
required by § 301.6724–1(e)(1)(iii).
As noted above, taxpayers may rely
on these proposed regulations and on No-
tice 2015–68 until final regulations are
published. To provide additional relief
and ensure that the requirements for the
first annual and second annual solicita-
tions may be satisfied with respect to in-
dividuals already enrolled in coverage, an
additional rule is provided. Under this
rule, if an individual was enrolled in cov-
erage on any day before July 29, 2016, the
account is considered opened on July 29,
2016. Accordingly, reporting entities have
satisfied the requirement for the initial so-
licitation with respect to already enrolled
individuals so long as they requested en-
rollee TINs either as part of the applica-
tion for coverage or at any other point
before July 29, 2016. The deadlines for
the first and second annual solicitations
are set by reference to the date the account
is opened. Thus, the rule above that treats
all accounts for individuals currently en-
rolled in coverage for which a TIN has not
been provided as opened on July 29, 2016,
provides additional time for the annual
solicitations as well. Specifically, consis-
tent with Notice 2015–68, the first annual
solicitation should be made at a reason-
able time after July 29, 2016. For this
purpose, a reporting entity that makes the
first annual solicitation within 75 days of
the initial solicitation will be treated as
having made the second solicitation
within a reasonable time. Reporting enti-
ties that have not made the initial solici-
tation before July 29, 2016 should comply
with the first annual solicitation require-
ment by making a solicitation within a
reasonable time of July 29, 2016. Notice
2015–68 also provided that a reporting
entity is deemed to have satisfied the ini-
tial, first annual, and second annual solic-
itations for an individual whose coverage
was terminated prior to September 17,
2015, and taxpayers may continue to rely
on this rule as well.
Section 301.6724–1(e)(1)(v) pro-
vides that the initial and first annual solic-
itations relate to failures on returns filed
for the year in which the account is
opened (meaning that showing reasonable
cause with respect to the year the account
is opened generally requires making the
initial and first annual solicitations in the
year the account is opened). Because these
proposed regulations provide that an ac-
count is considered opened for section
6055 purposes when a substantially com-
plete application for that account is re-
ceived, an account would, in some cases,
be considered open in a year prior to the
year for which coverage is actually effec-
tive and for which reporting is required.
This would occur, for example, when a
reporting entity receives an application
during open enrollment for coverage ef-
fective as of the first day of the next
coverage year. To ensure that reporting
entities that make the initial solicitation
and first annual solicitation are eligible for
relief for the first year for which reporting
is required, the proposed regulations pro-
vide that, for purposes of reporting under
section 6055, the initial and first annual
solicitations relate to failures on returns
required to be filed for the year that in-
cludes the day that is the first effective
date of coverage for a covered individual.
Similarly, § 301.6724–1(e)(1)(v) provides
that the second annual solicitation relates
to failures on returns filed for the year
immediately following the year in which
the account is opened and succeeding cal-
endar years (meaning that showing rea-
sonable cause with respect to years after
the account is opened generally requires
making the second annual solicitation dur-
ing the year following the year the ac-
count is opened). As with the initial and
first annual solicitations, the existing rule
under § 301.6724–1(e)(1)(v) could pro-
vide relief for the wrong year when com-
bined with the proposed definition of ac-
count opening under section 6055.
Accordingly, the proposed regulations
provide that the second annual solicitation
relates to failures on returns filed for the
year immediately following the year to
which the first annual solicitation relates,
and succeeding calendar years.
In contrast to missing TINs, the Trea-
sury Department and the IRS do not rec-
ognize a similar need to modify the exist-
ing first annual solicitation rules for
incorrect TINs in § 301.6724–1(f)(1)(ii).
As with many other types of information
reports, information reports of health cov-
erage are generally filed after the end of
the tax year, and thus, it is only after the
tax year that a filer would generally re-
ceive notice of an incorrect TIN. Because
the end of the tax year typically corre-
sponds with the end of the coverage year,
there is no reason to distinguish the timing
of the correction of incorrect TINs for
health coverage from all other types of
accounts for which information reporting
is required. Consequently, the proposed
regulations do not alter the rules for in-
correct TINs in § 301.6724–1(f)(1)(ii)
and (iii) as applied to information report-
ing under section 6055. However, as with
the rules regarding missing TINs under
§ 301.6724–1(e)(1)(ii), the rules regard-
ing incorrect TINs in § 301.6724–
1(f)(1)(i) make reference to the time an
account is “opened.” Accordingly, the
proposed regulations, which provides that
for purposes of section 6055 reporting an
account is considered “opened” at the
time the filer receives an application for
new coverage or to add an individual to
existing coverage, also applies for pur-
poses of the initial solicitation for incor-
rect TINs in § 301.6724–1(f)(1)(i).
2
a.Application of the TIN Solicitation
Rules to “Responsible Individuals” and
“Covered Individuals”
A commenter requested clarification
that the initial and annual solicitations of
§ 301.6724–1(e)(1)(i) and (ii) need be
made only to the responsible individual
for all individuals covered under a single
policy. The commenter further suggested
2
A filer of the information return required under § 1.6055–1 may receive an error message from the IRS indicating that a TIN and name provided on the return do not match IRS records.
An error message is neither a Notice 972CG, Notice of Proposed Civil Penalty, nor a requirement that the filer must solicit a TIN in response to the error message.
August 15, 2016Bulletin No. 2016–33
244

that TIN solicitations made to a responsi-
ble individual be treated as TIN solicita-
tions made to all individuals named on the
responsible individual’s policy.
Under § 1.6055–1(e)(1)(ii) and (iii),
filers must report the TIN of each covered
individual (who, under § 301.6721–
1(g)(5), are also “payees”), and § 1.6055–
1(g)(1) requires that the TIN of each cov-
ered individual be shown on statements
furnished to the responsible individual.
Current § 1.6055–1(g)(1) provides that,
for purposes of the penalties under section
6722, the furnishing of a statement to the
responsible individual is treated as the fur-
nishing of a statement to a covered indi-
vidual. This rule is intended to allow re-
porting entities to satisfy the section 6722
requirements for all covered individuals
by furnishing the required statement only
to the responsible individual. The Trea-
sury Department and the IRS also intend
for a similar rule to apply to the TIN
solicitation rules under the section 6724
regulations. To clarify that this is how
these rules apply, the proposed regulations
expressly provide that TIN solicitations
(both initial and annual) made to the re-
sponsible individual for a policy or plan
are treated as TIN solicitations of every
covered individual on the policy or plan
for purposes of § 301.6724–1(e)(1) and
(f)(1). The filer does not need to make
separate solicitations from the responsible
individual for each covered individual nor
does it need to separately solicit the TINs
of each covered individual by contacting
each covered individual directly. How-
ever, we decline to adopt the commenter’s
suggestion that a TIN solicitation made to
a responsible individual be treated as a
TIN solicitation made to all individuals
named on that responsible individual’s
policy at any time, including those indi-
viduals added to a policy after the TIN
solicitations. When a new individual is
added to a policy, the coverage provider
establishes a relationship with that indi-
vidual. The individual is new to the filer,
and it is the filer’s responsibility to solicit
that individual’s TIN. Accordingly, to
qualify for the penalty waiver, filers must
solicit TINs for each individual added to a
policy under the procedures outlined in
§ 301.6724–1(e)(1)(i) and (f)(1)(i); how-
ever, any other individual for whom the
filer already has a TIN or already has
solicited a TIN the prescribed amount of
times need not be solicited again regard-
less of what changes take place during the
filer’s coverage of that individual.
b.Different Forms of TIN Solicitations
A commenter to Notice 2015–68 re-
quested that the provision of renewal ap-
plications to enrollees be permitted to sat-
isfy the annual solicitation requirement
for purposes of § 301.6724–1(e)(1)(ii)
and (iii) and (f)(1)(ii) and (iii) if those
renewal applications request TINs from
covered individuals. Under current law,
TIN requests may be made in a number of
different formats. The provision of a re-
newal application that requests TINs for
all covered individuals satisfies the annual
solicitation provisions of § 301.6724–
1(e)(1)(ii) and (iii) and (f)(1)(ii) and (iii) if
it is sent by the deadline for those annual
solicitations. Thus, no changes to the reg-
ulations are necessary for renewal appli-
cations to satisfy the annual solicitation
requirement.
The same commenter requested that
the requirement in § 301.6724–
1(e)(2)(i)(B) to provide the responsible
individual with a Form W–9 should be
eliminated. The commenter was con-
cerned that this requirement imposes bur-
dens on responsible individuals that make
it less likely that they will respond to a
TIN solicitation. Section 301.6724–
1(e)(2)(i)(B) requires that an annual solic-
itation include a “Form W–9 or an accept-
able substitute . . .” Thus, the existing
regulations do not require that Form W–9
be sent. Filers are allowed to request TINs
on an acceptable substitute for Form W–9,
which includes a renewal application or
other request for a TIN. Thus, this com-
ment is not adopted.
This commenter also requested that the
requirement in § 301.6724–1(e)(2)(i)(C)
that annual solicitations include a return
envelope be eliminated, and, if not elimi-
nated, that clarification be provided as to
how this requirement applies to multiple
TINs. Existing regulations include this re-
quirement because individuals are more
likely to comply with a TIN solicitation if
that solicitation includes a return enve-
lope. We see no reason that the require-
ment to include a return envelope, which
exists for other information reporting pro-
visions, should be removed for reporting
under section 6055. Thus, the proposed
regulations do not adopt this comment.
However, filers may request more than
one TIN at the same time and do not need
to send separate envelopes with each re-
quest. For example, on a renewal applica-
tion requesting the TINs for all covered
individuals, filers need only provide one
return envelope for that application or re-
quest.
c.Solicitations by Employers
A commenter requested that employers
be permitted to make TIN solicitations on
behalf of filers. The commenter offered
that employers are frequently in a better
position than coverage providers to re-
quest TINs from the employers’ employ-
ees and the employees’ dependents, and,
for practical reasons, it would make sense
to allow employers to step in the shoes of
the coverage provider for purposes of
making the solicitations under § 301.6724–
1(e)(1) and (f)(1).
Under existing regulations, actions
taken by employers may satisfy the re-
quirement for making an initial or annual
TIN solicitation. Employers may, for ex-
ample, provide their employees with ap-
plications for health coverage. If these
applications request that the applicants
provide TINs for all individuals to be cov-
ered, the coverage provider has made an
initial solicitation for these individuals’
TINs.
The commenter further requested that a
filer that arranges to have an employer
take on responsibility for the TIN solici-
tations be treated as having met the pen-
alty waiver requirements of § 301.6724–
1(e)(1) and (f)(1). Under existing
regulations, qualifying for a penalty
waiver requires that the solicitations actu-
ally be made. To avoid creating a less
stringent standard in cases where an em-
ployer is acting on the filer’s behalf, the
proposed regulations do not adopt the
commenter’s proposal.
d.Electronic TIN Solicitations
A commenter requested that filers be
permitted to make annual TIN solicita-
tions by electronic means if the responsi-
ble individual has consented to the receipt
Bulletin No. 2016–33August 15, 2016
245

of information concerning his or her cov-
erage in the same electronic format in
which the annual solicitation is made. IRS
Publication 1586, Reasonable Cause Reg-
ulations and Requirements for Missing
and Incorrect Name/TINs (including in-
structions for reading CD/DVDs), pro-
vides that filers may establish an elec-
tronic system for payees (including
covered individuals) to receive and re-
spond to TIN solicitations, provided cer-
tain listed requirements are met. IRS Pub-
lication 1586 can be found at
www.irs.gov/forms-pubs. Because filers
are already able to solicit TINs electroni-
cally, it is unnecessary to address the com-
menter’s recommendation for electronic
TIN solicitations with these proposed
regulations.
Proposed Effective/Applicability Date
These regulations are generally pro-
posed to apply for taxable years ending
after December 31, 2015, and may be
relied on for calendar years ending after
December 31, 2013.
The only exception is the rules in sec-
tion 1 of this preamble relating to report-
ing of coverage under catastrophic plans.
Those rules are proposed to apply for cal-
endar years beginning after December 31,
2016. Health insurance issuers may vol-
untarily report on 2015 and 2016 cata-
strophic coverage (on returns and state-
ments filed and furnished in 2016 and
2017 respectively). An issuer that reports
on 2015 and/or 2016 catastrophic cover-
age will not be subject to penalties for
these returns.
In addition, until these the proposed
regulations are finalized, taxpayers may
continue to rely on the rules provided in
Notice 2015–68.
Special Analyses
Certain IRS regulations, including this
one, are exempt from the requirements of
Executive Order 12866, as supplemented
and reaffirmed by Executive Order 13563.
Therefore, a regulatory impact 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.
It is hereby certified that these regula-
tions will not have a significant economic
impact on a substantial number of small
entities. This certification is based on the
fact that the information collection re-
quired under these regulations is imposed
under section 6055. Consistent with the
statute, the proposed regulations require a
person that provides minimum essential
coverage to an individual to file a return
with the IRS reporting certain information
and to furnish a statement to the respon-
sible individual who enrolled an individ-
ual or family in the coverage. These reg-
ulations primarily provide the method of
filing and furnishing returns and state-
ments under section 6055. Moreover, the
proposed regulations attempt to minimize
the burden associated with this collection
of information by limiting reporting to the
information that the IRS will use to verify
minimum essential coverage and adminis-
ter tax credits.
Based on these facts, a Regulatory
Flexibility Analysis under the Regulatory
Flexibility Act (5 U.S.C. chapter 6) is not
required.
Pursuant to section 7805(f), this notice
of proposed rulemaking will be submitted
to the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on its impact on small business.
Statement of Availability of IRS
Documents
IRS Revenue Procedures, Revenue
Rulings notices, notices and other guid-
ance cited in this preamble are published
in the Internal Revenue Bulletin (or Cu-
mulative Bulletin) and are available from
the Superintendent of Documents, U.S.
Government Printing Office, Washington,
DC 20402, or by visiting the IRS website
at http://www.irs.gov.
Comments and Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any comments that are
submitted timely to the IRS as prescribed
in this preamble under the “Addresses”
heading. The Treasury Department and
the IRS request comments on all aspects
of the proposed rules. All comments will
be available for public inspection at www.
regulations.gov or upon request. A public
hearing will be scheduled if requested in
writing by any person that timely submits
written comments. If a public hearing is
scheduled, notice of the date, time, and
place for the public hearing will be pub-
lished in theFederal Register.
Drafting Information
The principal author of these proposed
regulations is John B. Lovelace of the
Office of Associate Chief Counsel (In-
come Tax and Accounting). However,
other personnel from the IRS and the
Treasury Department participated in the
development of the regulations.
* * * * *
Proposed Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and 301
are proposed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805* * *
Par. 2. Section 1.6055–1 is amended by:
1. Adding paragraphs (b)(13) and (14).
2. Redesignating paragraph (c)(1)(iv)
as (c)(1)(v) and adding a new paragraph
(c)(1)(iv).
3. Revising paragraphs (d)(1) and (2).
4. Redesignating paragraph (d)(3) as
(d)(5) and adding a new paragraph (d)(3).
5. Adding paragraphs (d)(4) and (6).
6. Revising paragraph (g)(3).
7. Revising paragraph (h)(1).
8. Adding paragraph (h)(3).
9. Revising paragraph (j).
The revisions and additions read as fol-
lows:
§ 1.6055–1 Information reporting for
minimum essential coverage.
* * * * *
(b) * * *
(13)Catastrophic plan. The term cata-
strophic plan has the same meaning as in
section 1302(e) of the Affordable Care
Act (42 U.S.C. 18022(e)).
(14)Basic health program. The term
basic health program means a basic health
program established under section 1331 of
August 15, 2016Bulletin No. 2016–33
246

the Affordable Care Act (42 U.S.C.
18051).
(c) * * *
(1) * * *
(iv) The state agency that administers a
Basic Health Program;
* * * * *
(d)Reporting not required—(1)Qual-
ified health plans. Except for coverage
under a catastrophic plan, a health insur-
ance issuer is not required to file a return
or furnish a report under this section for
coverage in a qualified health plan in the
individual market enrolled in through an
Exchange.
(2)Duplicative coverage. If an individ-
ual is covered for a month by more than
one minimum essential coverage plan or
program provided by the same reporting
entity, reporting is required for only one
of the plans or programs for that month.
(3)Supplemental coverage. Reporting
is not required for minimum essential cov-
erage of an individual for a month if that
individual is eligible for that coverage
only if enrolled in other minimum essen-
tial coverage for which section 6055 re-
porting is required and is not waived un-
der this paragraph (d)(3). This paragraph
(d)(3) applies with respect to eligible
employer-sponsored coverage only if the
supplemental coverage is offered by the
same employer that offered the eligible
employer-sponsored coverage for which
reporting is required. For this purpose, an
employer is treated as offering minimum
essential coverage offered by any other
person that is a member of a controlled
group of entities under section 414(b) or
(c), an affiliated service group under sec-
tion 414(m), or an entity in an arrange-
ment described under section 414(o) of
which the employer is also a member.
(4)Certain coverage provided by Ter-
ritories and Possessions. The agencies
that administer Medicaid and the Chil-
dren’s Health Insurance Program in
American Samoa, the Commonwealth of
the Northern Mariana Islands, Guam,
Puerto Rico, and the United States Virgin
Islands are not required to report that cov-
erage under section 6055.
* * * * *
(6)Examples. The following examples
illustrate the rules of this paragraph (d).
Example 1. Upon being hired, Taxpayer A enrolls
in a self-insured major medical group health plan and a
health reimbursement arrangement (HRA), both of-
fered by A’s employer, V. Both the group health plan
and the HRA are minimum essential coverage, and V is
the reporting entity for both. Because V is the reporting
entity for both the self-insured major medical group
health plan and the HRA, under paragraph (d)(2) of this
section V must report under paragraph (a) of this sec-
tion for either its self-insured major medical group
health plan or its HRA for A for the months in which
A is enrolled in both plans.
Example 2. Taxpayer B is enrolled in an insured
employer-sponsored group health plan offered by B’s
employer, W. B is also covered by an HRA offered by
W. Under the terms of the HRA, B is eligible for the
HRA because B is enrolled in W’s insured employer-
sponsored group health plan. W’s insured employer-
sponsored group health plan is minimum essential cov-
erage and, under paragraphs (a) and (c)(1)(i) of this
section, the issuer of the insured employer-sponsored
group health plan must report coverage under the plan.
Therefore, for the months in which B is enrolled in both
plans, under paragraph (d)(3) of this section, W does
not need to report the HRA for B because the issuer is
required to report on coverage for B in the insured
employer-sponsored group health plan offered by W
for those months.
Example 3. Taxpayer C enrolls in a Medicare
Savings Program administered by X, a state Medicaid
agency, which provides financial assistance with Medi-
care Part A premiums. Only individuals enrolled in
Medicare Part A are offered coverage in this Medicare
Savings Program. Medicare Part A is government-
sponsored minimum essential coverage and, under
paragraphs (a) and (c)(1)(iii) of this section, Medicare
must report coverage under the program. Therefore,
under paragraph (d)(3) of this section, X does not need
to report under paragraph (a) of this section for C’s
coverage under the Medicare Savings Program.
Example 4. Taxpayer E obtains a Medicare supple-
mental insurance (Medigap) policy that provides finan-
cial assistance with costs not covered by Medicare Part
A from Z, a health insurance issuer. Only individuals
enrolled in Medicare Part A are offered coverage under
this Medigap policy. Medicare Part A is minimum
essential coverage and, under paragraphs (a) and
(c)(1)(iii) of this section, Medicare is required to report
E’s coverage under Medicare Part A. Therefore, under
paragraph (d)(3) of this section, Z does not need to
report E’s coverage under the Medigap policy.
Example 5. Taxpayer F is covered by an HRA
offered by F’s employer, P. F is also enrolled in a
non-HRA group health plan that is self-insured and
sponsored by F’s spouse’s employer, Q. P and Q are
not treated as one employer under section 414(b),
(c), (m), or (o). Under the terms of the HRA, F is
eligible for the HRA only because F is enrolled in a
non-HRA group health plan, which in this case is the
group health plan offered by Q. However, because
the HRA and the non-HRA group health plan are
offered by different employers, paragraph (d)(3) of
this section does not apply. Accordingly, under para-
graphs (a) and (c)(2)(i)(A) of this section, P must
report F’s enrollment in the HRA, and Q must report
F’s (and F’s spouse’s) enrollment in the non-HRA
group health plan.
* * * * *
(g) * * *
(3)Form of the statement. A statement
required under this paragraph (g) may be-
made either by furnishing to the responsible
individual a copy of the return filed with the
Internal Revenue Service or on a substitute
statement. A substitute statement must in-
clude the information required to be shown
on the return filed with the Internal Revenue
Service and must comply with requirements
in published guidance (see § 601.601(d)(2)
of this chapter) relating to substitute state-
ments. An individual’s identifying number
may be truncated to appear in the form of an
IRS truncated taxpayer identification num-
ber (TTIN) on the statement furnished to the
responsible individual. The identifying
number of the employer may also be trun-
cated to appear in the form of a TTIN on the
statement furnished to the responsible indi-
vidual. For provisions relating to the use of
TTINs, see § 301.6109–4 of this chapter
(Procedure and Administration Regula-
tions).
* * * * *
(h) * * *(1)In general. For provisions
relating to the penalty for failure to file
timely a correct information return re-
quired under section 6055, see section
6721 and the regulations under that sec-
tion. For provisions relating to the penalty
for failure to furnish timely a correct state-
ment to responsible individuals required
under section 6055, see section 6722 and
the regulations under that section. See sec-
tion 6724, and the regulations thereunder,
and paragraph (h)(3) of this section for
provisions relating to the waiver of pen-
alties if a failure to file or furnish timely or
accurately is due to reasonable cause and
not due to willful neglect.
* * * * *
(3)Application of section 6724 waiver of
penalties to section 6055 reporting—(i)In
general. Paragraphs (e) and (f) of
§ 301.6724–1 of this chapter, as modified
by this paragraph (h)(3), apply to reasonable
cause waivers of penalties under sections
6721 and 6722 for failure to file timely or
accurate information returns or to furnish
individual statements required to be filed or
furnished under section 6055.
(ii)Account opened. For purposes of
section 6055 reporting and the solicitation
rules contained in paragraphs (i), (ii), (iii),
and (v) of § 301.6724–1(e)(1) of this
chapter and paragraph (i) of § 301.6724–
Bulletin No. 2016–33August 15, 2016
247

1(f)(1) of this chapter, an account is con-
sidered opened at the time the reporting
entity receives a substantially complete
application for coverage (including an ap-
plication to add an individual to existing
coverage) from or on behalf of an individ-
ual for whom the reporting entity does not
already provide coverage.
(iii)First annual solicitation deadline
for missing TINs. In lieu of the deadline
for the first annual solicitation contained
in paragraph (ii) of § 301.6724–1(e)(1) of
this chapter, the first annual solicitation
must be made on or before the seventy-
fifth day after the date on which an ac-
count is opened (or, in the case of retro-
active coverage, the seventy-fifth day after
the determination of retroactive coverage
is made). The period from the date on
which the reporting entity receives an ap-
plication for coverage to the last day on
which the first annual solicitation may be
made is the first annual solicitation period.
(iv)Failures to which a solicitation
relates—(A)Missing TIN. For purposes
of reporting under section 6055 and the
solicitation rules contained in paragraph
(1) of § 301.6724–1(e) of this chapter, the
initial and first annual solicitations relate
to failures on returns required to be filed
for the year which includes the first effec-
tive date of coverage for a covered indi-
vidual. The second annual solicitation re-
lates to failures on returns filed for the
year immediately following the year to
which the first annual solicitation relates
and for succeeding calendar years.
(B)Incorrect TIN. For purposes of re-
porting under section 6055 and the solic-
itation rules contained in paragraph (i) of
§ 301.6724–1(f)(1) of this chapter, the
initial solicitation relates to failures on
returns required to be filed for the year
which includes the first effective date of
coverage for a covered individual.
(v)Solicitations made to responsible in-
dividual. For purposes of reporting under
section 6055 and the solicitation rules con-
tained in § 301.6724–1(e) and (f) of this
chapter, an initial or annual solicitation made
to the responsible individual is treated as a
solicitation made to a covered individual.
* * * * *
(j)Applicability date—(1) Except as
provided in paragraphs (j)(2) and (3) of
this section, this section applies for calen-
dar years ending after December 31, 2014.
(2) Paragraphs (b)(14), (c)(1)(v), (d)(2)
through (6), and (g)(3) of this section ap-
ply to calendar years ending after Decem-
ber 31, 2015. Paragraphs (d)(2), (d)(3),
and (g)(3) of § 1.6055–1 as contained in
26 CFR part 1 edition revision as of April
1, 2016, apply to calendar years ending
after December 31, 2014 and beginning
before January 1, 2016.
(3) Paragraphs (b)(13) and (d)(1) of
this section apply to calendar years begin-
ning after December 31, 2016. Paragraph
(d)(1) of § 1.6055–1 as contained in 26
CFR part 1 edition revised as of April 1,
2016, applies to calendar years ending
after December 31, 2015 and beginning
before January 1, 2017.
PART 301 — PROCEDURE AND
ADMINISTRATION
Par. 3. The authority for part 301 con-
tinues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 4. Section 301.6724–1 is amended
by adding a sentence to the end of para-
graph (e)(1)(vi)(A) to read as follows:
§ 301.6724–1 Reasonable cause.
* * * * *
(e) * * *
(1) * * *
(vi)Exceptions and limitations. (A)* *
* See § 1.6055–1(h)(3) of this chapter,
which provides rules on the time, form,
and manner in which a TIN must be pro-
vided for information returns required to
be filed and individual statements required
to be furnished under section 6055.
* * * * *
John Dalrymple,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on July 29, 2016,
11:15 a.m., and published in the issue of the Federal Reg-
ister for August 2, 2016, 81 F.R. 50671)
Notice of Proposed
Rulemaking and Notice of
Public Hearing
Reporting for Qualified
Tuition and Related
ExpensesEducation Tax
Credits
REG–131418–14
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains
proposed regulations that revise the rules
for reporting qualified tuition and related
expenses under section 6050S on a Form
1098–T, “Tuition Statement,” and con-
forms the regulations to the changes made
to section 6050S by the Protecting Amer-
icans from Tax Hikes Act of 2015. This
document also seeks to amend the regula-
tions on the education tax credits under
section 25A generally as well as to con-
form the regulations to changes made to
section 25A by the Trade Preferences Ex-
tension Act of 2015 and the Protecting
Americans from Tax Hikes Act of 2015.
The proposed regulations affect certain
higher educational institutions required to
file Form 1098–T and taxpayers eligible
to claim an education tax credit. This doc-
ument also provides notice of a public
hearing on these proposed regulations.
DATES: Written or electronic comments
must be received by October 31, 2016.
Outlines of topics to be discussed at the
public hearing scheduled for November
30, 2016 must be received by October 31,
2016.
ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG–131418–14), room
5203, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand-
delivered Monday through Friday be-
tween the hours of 8:00 a.m. and 4:00
p.m. to CC:PA:LPD:PR (REG–131418–
14), Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue, NW.,
Washington, DC 20224. Alternatively,
taxpayers may submit comments electron-
August 15, 2016Bulletin No. 2016–33
248

ically via the Federal eRulemaking Portal
at www.regulations.gov (IRS REG–
131418–14).
FOR FURTHER INFORMATION CON-
TACT: Concerning the proposed regula-
tions, Gerald Semasek of the Office of
Associate Chief Counsel (Procedure and
Administration) for the proposed regula-
tions under sections 6050S and 6724,
(202) 317-6845, and Sheldon Iskow of the
Office of Associate Chief Counsel (In-
come Tax and Accounting) for the pro-
posed regulations under section 25A,
(202) 317-4718; concerning the submis-
sion of comments and requests for a pub-
lic hearing, Regina Johnson, (202) 317-
6901 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information con-
tained in this notice of proposed rulemak-
ing has been approved by the Office of
Management and Budget through Form
1040 (OMB No. 1545-0074), Form 8863
(OMB No. 1545-0074) and Form 1098–T
(OMB No. 1545-1574) in accordance with
the Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)). Notice and an opportu-
nity to comment on the proposed changes
to burden hours for the forms related to
this proposed rule will be published in a
separate notice in theFederal Register.
Background
This document contains proposed reg-
ulations to amend the Income Tax Regu-
lations (26 CFR part 1) under section 25A
of the Internal Revenue Code (Code) and
the Procedure and Administration Regu-
lations (26 CFR Part 301) under section
6050S, to reflect the amendments to sec-
tions 25A and 6724 under the Trade Pref-
erences Extension Act of 2015 (Public
Law 114–27 (129 Stat. 362 (2015))
(TPEA) and the amendments to sections
25A and 6050S under the Protecting
Americans from Tax Hikes Act of 2015
(Public Law 114–113 (129 Stat. 2242
(2015)) (PATH). Furthermore, the docu-
ment contains proposed regulations to
amend the Income Tax Regulations under
section 25A to update the definition of
qualified tuition and related expenses in
§ 1.25A–2(d) to reflect the changes made
by the American Recovery and Reinvest-
ment Act of 2009 (Public Law 111–5 (123
Stat. 115) (ARRA)), to clarify the prepay-
ment rule in § 1.25A–5(e), and to clarify
the rule for refunds in § 1.25A–5(f).
1. Section 25A-Education Tax Credits
The Taxpayer Relief Act of 1997 (Pub-
lic Law 105–34 (111 Stat. 788) (TRA
’97)) added section 25A to provide stu-
dents and their families with two new
nonrefundable tax credits to help pay for
college (education tax credits). Pursuant
to TRA ‘97, section 25A allowed eligible
taxpayers to claim either the Hope Schol-
arship Credit or the Lifetime Learning
Credit (LLC) for qualified tuition and re-
lated expenses paid during the taxable
year for an academic period beginning
during the taxable year. In general, either
the student or the parent who claims a
dependency exemption for the student
may claim a credit for the student’s qual-
ified tuition and related expenses. Section
25A(f)(1) defines “qualified tuition and
related expenses” as tuition and fees re-
quired for enrollment or attendance at an
eligible educational institution (institu-
tion). Section 25A(f)(2) generally defines
an “eligible educational institution” as an
institution described in the Higher Educa-
tion Act of 1965 that is eligible to partic-
ipate in federal college financial aid pro-
grams. Section 25A(g)(4) provides that
amounts paid during the taxable year for
enrollment during an academic period be-
ginning within the first three months of
the following taxable year are treated as
amounts paid for an academic period be-
ginning during the taxable year. Section
25A(g)(5) provides that no credit is al-
lowed for any expenses for which a de-
duction is allowed under another provi-
sion of the Code.
Final regulations under section 25A
were published in theFederal Register
(67 FR 78687) on December 26, 2002.
Section 1.25A–2(d)(1) of these regula-
tions defines “qualified tuition and related
expenses” to mean tuition and fees re-
quired for the enrollment or attendance of
a student for courses of instruction at an
institution. Section 1.25A–2(d)(2)(i) pro-
vides that only fees required to be paid to
the institution as a condition of the stu-
dent’s enrollment or attendance at the in-
stitution are treated as qualified tuition
and related expenses for purposes of sec-
tion 25A. Under this rule, fees for books,
supplies, and equipment used in a course
of study are required fees only if the fees
must be paid to the institution for the
enrollment or attendance of the student at
the institution. See § 1.25A–2(d)(2)(ii). In
addition, § 1.25A–5(e)(1) provides that an
education tax credit is allowed only for
payments of qualified tuition and related
expenses for an academic period begin-
ning in the same taxable year as the year
the payment is made. Section 1.25A–
5(e)(2) provides that qualified tuition and
related expenses paid during one taxable
year for an academic period beginning in
the first three months of the taxable year
following the taxable year in which the
payment is made will be treated as paid
for an academic period beginning in the
same taxable year as the year the payment
is made (prepayment rule).
Section 1.25A–5(f) provides rules for
refunds of qualified tuition and related
expenses. If qualified tuition and related
expenses are paid and a refund of
these expenses is received in the same
taxable year, qualified tuition and related
expenses for the taxable year are reduced
by the amount of the refund. Section
1.25A–5(f)(1). If a taxpayer receives a
refund of qualified tuition and related ex-
penses in the current taxable year (current
year) that were paid in the prior taxable
year (prior year) before the taxpayer files
his/her federal income tax return for the
prior year, the taxpayer reduces the qual-
ified tuition and related expenses for the
prior year by the refund amount. Section
1.25A–5(f)(2). However, if the taxpayer
receives the refund after filing his/her fed-
eral income tax return for the prior year,
the taxpayer must increase the tax im-
posed for the current year by the recapture
amount. Section 1.25A–5(f)(3)(i). The re-
capture amount is calculated in the man-
ner provided in § 1.25A–5(f)(3)(ii). Sec-
tions 1.25A–5(f)(4) and (f)(5) provide that
refunds of loan proceeds and receipt of
excludable educational assistance are
treated as refunds for purposes of
§ 1.25A–5(f)(1), (2), and (3), as appropri-
ate.
In 2009, ARRA enacted section
25A(i), which expanded the Hope Schol-
arship Credit with the American Opportu-
Bulletin No. 2016–33August 15, 2016
249

nity Tax Credit (AOTC) for taxable years
beginning after 2008. The definition of
“qualified tuition and related expenses”
for purposes of the AOTC is broader than
the definition of qualified tuition and re-
lated expenses for the Hope Scholarship
Credit and the LLC because it includes
expenses paid for course materials. See
section 25A(i)(3).
2. Section 222–Deduction for Qualified
Expenses
Section 431(a) of the Economic
Growth and Tax Relief Reconciliation Act
of 2001, Public Law 107–16 (115 Stat.
38) added section 222, which generally
allows a deduction for qualified tuition
and related expenses paid by a taxpayer
during the taxable year subject to certain
dollar and income limitations. Section
222(b) provides that no deduction is al-
lowed if the taxpayer claims an education
tax credit for the student.
3. Section 6050S-Information Reporting
for Eligible Educational Institutions
TRA ’97 also added section 6050S to
require eligible educational institutions to
file information returns and to furnish
written statements to assist taxpayers and
the IRS in determining whether a taxpayer
is eligible for an education tax credit un-
der section 25A, as well as other educa-
tion tax benefits. These returns and state-
ments are made on Form 1098–T,
“Tuition Statement.” Prior to the enact-
ment of PATH, section 6050S(b)(2)(B)(i)
permitted institutions to report either the
aggregate amount of payments received or
the aggregate amount billed for qualified
tuition and related expenses during the
calendar year for individuals enrolled for
any academic period. Institutions also
must report the aggregate amount of
scholarships or grants received for an in-
dividual’s costs of attendance that the in-
stitution administered and processed
during the calendar year. See section
6050S(b)(2)(B)(ii). Section 6050S(b)(2)
(B)(iii) requires that institutions must sep-
arately report adjustments (that is, refunds
of payments or reductions in charges)
made during the calendar year to qualified
tuition and related expenses that were re-
ported in a prior calendar year and that
institutions also must separately report ad-
justments (that is, refunds or reductions)
made during the calendar year to scholar-
ships that were reported in a prior calen-
dar year. Section 6050S(b)(2)(D) requires
that the information return include other
information as the Secretary may pre-
scribe.
In addition, sections 6050S(a)(2) and
(a)(3) require any person engaged in a
trade or business of making payments to
any individual under an insurance agree-
ment as reimbursements or refunds of
qualified expenses (an insurer) or who re-
ceives from any individual $600 or more
of interest during the calendar year on
qualified education loans to file informa-
tion returns and to furnish written infor-
mation statements. Section 6050S(b)(2)
provides that these information returns
must contain the name, address, and TIN
of any individual with respect to whom
these payments were made or received,
the aggregate amount of reimbursements
or refunds (or similar amounts paid to
such individuals during the calendar year
by an insurer), the aggregate amount of
interest received for the calendar year
from the individual, and such other infor-
mation as the Secretary may prescribe.
Section 6050S(d) provides that every
person required to make a return under
section 6050S(a) must furnish a written
statement to each individual whose name
is set forth on the return showing the
name, address, and phone number of the
person required to make the return and
the amounts described in section
6050S(b)(2)(B). For taxable years begin-
ning after June 29, 2015, all of the infor-
mation required by section 6050S(b)(2),
not just the amounts, must be included on
the written statement. The written state-
ment must be furnished by January 31 of
the year following the year for which the
return is required to be made.
Final regulations under section 6050S
were published in theFederal Register
(67 FR 77678) in the same Treasury De-
cision as the final regulations for section
25A on December 19, 2002. The section
6050S regulations provide exceptions to
the reporting requirements for educational
institutions for students who are nonresi-
dent aliens, for noncredit courses, for cer-
tain billing arrangements, and in cases
where qualified tuition and related ex-
penses are paid entirely with scholarships
or grants. These regulations also set forth
the specific information that institutions
must report to the IRS, as well as infor-
mation that the institution must include
with the statement furnished to the stu-
dent. These regulations also include re-
quirements regarding the time and manner
for soliciting the student’s TIN.
4. Sections 6721, 6722 and 6724-
Information Reporting Penalties and
Penalty Relief
Section 6721 imposes a penalty on an
eligible educational institution that fails to
timely file correct information returns
with the IRS. Section 6722 imposes a
penalty on an educational institution that
fails to timely furnish correct written
statements to the student. Generally, the
penalty under section 6721 and section
6722 is $100 per failure, with an annual
maximum penalty of $1.5 million. The
penalty is increased to $250 per failure
and the annual maximum penalty is in-
creased to $3 million for returns required
to be filed and statements required to be
made after December 31, 2015. However,
section 6724(a) provides that the penalty
under section 6721 or 6722 may be
waived if it is shown that the failure was
due to reasonable cause and not due to
willful neglect.
Section 301.6724–1(a)(2) provides
that the penalty is waived for reasonable
cause only if the filer establishes that: (1)
either there are significant mitigating fac-
tors with respect to the failure or that the
failure arose from events beyond the fil-
er’s control and (2) the filer acted in a
responsible manner both before and after
the failure. In the case of a missing or
incorrect TIN, § 301.6724–1(d)(2) pro-
vides that the filer acted in a responsible
manner if the filer satisfies the solicitation
requirements in § 301.6724–1(e) (regard-
ing a missing TIN) or (f) (regarding an
incorrect TIN).
Section 1.6050S–1(e)(3) provides that
the rules regarding reasonable cause under
§ 301.6724–1 do not apply in the case of
failure to include a correct TIN on a Form
1098–T. Instead, § 1.6050S–1(e)(3) pro-
vides special rules for institutions to es-
tablish reasonable cause for a failure to
include a correct TIN on Form 1098–T.
August 15, 2016Bulletin No. 2016–33
250

Section 1.6050S–1(e)(3)(i) provides
that reasonable cause for a failure to in-
clude a correct TIN on the Form 1098–T
may be established if (1) the failure arose
from events beyond the institution’s con-
trol, such as a failure of the individual to
furnish a correct TIN, and (2) the institu-
tion acted in a responsible manner before
and after the failure. Section 1.6050S–
1(e)(3)(ii) provides that if the institution
does not have the student’s correct TIN in
its records, acting in a responsible manner
means making a single solicitation for the
TIN by December 31 of the calendar year
for which the payment is made, the
amount is billed, or a reimbursement is
made. Section 1.6050S–1(e)(3)(iii) also
provides for the manner by which an ed-
ucational institution should request the in-
dividual’s TIN. The solicitation must be
done in writing and must clearly notify the
individual that the law requires the indi-
vidual to furnish a TIN so that it may be
included on an information return filed by
the institution. The solicitation may be
made on Form W–9S, “Request for Stu-
dent’s or Borrower’s Taxpayer Identifica-
tion Number and Certification,” or the in-
stitution may develop its own form and
incorporate it into other forms customarily
used by the institution, such as financial
aid forms. In the instance that an institu-
tion does not have a student’s TIN in its
records and the student does not provide
the TIN in response to a solicitation de-
scribed in § 1.6050S–1(e), the institution
must file and furnish the Form 1098–T,
leaving the space for the TIN blank.
5. TPEA Amendments to Sections 25A,
222 and 6724
Section 804(a) of TPEA amended sec-
tion 25A by adding a new subparagraph
(g)(8), which provides that, for taxable
years beginning after June 29, 2015, ex-
cept as provided by the Secretary, a tax-
payer may not claim an education tax
credit under section 25A unless the tax-
payer receives a statement furnished by an
eligible educational institution that con-
tains all of the information required in
section 6050S(d)(2) (that is, the recipi-
ent’s copy of the Form 1098–T). Section
804(b) similarly amends section 222(d) to
provide that, for taxable years beginning
after June 29, 2015, except as provided by
the Secretary, a taxpayer may not claim a
deduction for qualified tuition and related
expenses unless the taxpayer receives the
recipient’s copy of the Form 1098–T. For
purposes of both the education tax credit
and the deduction, a taxpayer who claims
a student as a dependent will be treated as
receiving the statement if the student re-
ceives the statement.
Section 805 of TPEA amends section
6724 by adding a new subsection (f),
which provides that no penalty will be
imposed under section 6721 or 6722
against an eligible educational institution
solely by reason of failing to include the
individual’s TIN on a Form 1098–T or
related statement if the institution contem-
poraneously certifies under penalties of
perjury in the form and manner prescribed
by the Secretary that it has complied with
the standards promulgated by the Secre-
tary for obtaining the individual’s TIN.
The provision applies to returns required
to be made and statements required to be
furnished after December 31, 2015.
6. PATH Amendments to Sections 25A,
222 and 6050S
a. AOTC permanent and section 222
extended
Section 102(a) of PATH amends sec-
tion 25A(i) to make the AOTC permanent.
Section 153(a) of PATH amends section
222(e) to retroactively extend the deduc-
tion for qualified tuition and related ex-
penses for taxable years beginning after
December 31, 2014, and ending on or
before December 31, 2016.
b. Amendments to section 25A
Section 206(a)(2) of PATH amends
section 25A(i) to provide that the AOTC
is not allowed if the student’s TIN and the
TIN of the taxpayer claiming the credit is
issued after the due date for filing the
return for the taxable year. Pursuant to
section 206(b)(1), this amendment is ef-
fective for returns (including an amended
return) filed after December 18, 2015.
Section 206(b)(2) of PATH provides,
however, that this amendment does not
apply to any return (other than an amend-
ment to any return) for a taxable year that
includes the date of enactment of PATH
(December 18, 2015) if the return is filed
on or before the due date for such return.
Section 211(a) of PATH amends sec-
tion 25A(i) to provide that the AOTC is
not allowed if the return does not include
the employer identification number (EIN)
of any institution to which the qualified
tuition and related expenses were paid
with respect to the student. This amend-
ment is effective for taxable years begin-
ning after December 31, 2015.
c. Amendments to section 6050S
Section 211(b) of PATH amends sec-
tion 6050S(b)(2) to require eligible edu-
cational institutions and insurers to report
their EIN on the return and statement.
This amendment is effective for expenses
paid after December 31, 2015, for educa-
tion furnished in academic periods begin-
ning after such date.
Section 212 of PATH amends section
6050S(b)(2)(B)(i) to eliminate the option
for eligible educational institutions to re-
port aggregate qualified tuition and related
expenses billed for the calendar year. Ac-
cordingly, for expenses paid after Decem-
ber 31, 2015, for education furnished in
academic periods beginning after such
date, eligible educational institutions are
required to report aggregate payments of
qualified tuition and related expenses re-
ceived during the calendar year.
Explanation of Provisions
1. Changes to Implement TPEA and
PATH
a. Changes to section 25A and
section 222
Both TPEA and PATH add new re-
quirements for claiming education tax
benefits. Under TPEA, the student is re-
quired to receive a Form 1098–T in order
to claim the LLC or the AOTC or claim
the deduction under section 222. Under
PATH, the ability to claim the AOTC is
further limited. First, the taxpayer can
claim the AOTC only if the taxpayer in-
cludes, on his/her return for which the
credit is claimed, the EIN of any educa-
tional institution to which qualified tuition
and related expenses are paid. Second,
the taxpayer can claim the AOTC only if
the TIN of the student and the TIN of the
Bulletin No. 2016–33August 15, 2016
251

taxpayer, on the return for which the
credit is claimed, are issued on or before
the due date of the original return.
i. Form 1098–T requirement under
TPEA
Form 1098–T assists taxpayers in de-
termining whether they are eligible to
claim education tax credits under section
25A or the deduction for qualified tuition
and related expenses under section 222.
However, before TPEA, there was no re-
quirement that the taxpayer (or the tax-
payer’s dependent if the taxpayer’s depen-
dent is the student) receive a Form
1098–T to claim these tax benefits.
Section 804 of TPEA changes the re-
quirements for a taxpayer to claim educa-
tion tax benefits under section 25A or
section 222. For qualified tuition and re-
lated expenses paid during taxable years
beginning after June 29, 2015, TPEA pro-
vides that, unless the Secretary provides
otherwise, a taxpayer must receive a Form
1098–T to claim either a credit under
section 25A or a deduction under section
222.
The proposed regulations reflect these
changes. Specifically, the proposed regu-
lations add a new paragraph (f) to
§ 1.25A–1 to require that for taxable years
beginning after June 29, 2015, unless an
exception applies, no education tax credit
is allowed unless the taxpayer (or the tax-
payer’s dependent) receives a Form
1098–T. However, the proposed regula-
tions explain that the amount reported on
the Form 1098–T may not reflect the total
amount of qualified tuition and related
expenses that the taxpayer has paid during
the taxable year because certain expenses
are not required to be reported on the
Form 1098–T. For example, under
§ 1.25A–2(d)(3), expenses for course ma-
terials paid to a vendor other than an eli-
gible educational institution are eligible
for the AOTC. However, because these
expenses are not paid to an eligible edu-
cational institution, these expenses are not
required to be reported on a Form
1098–T. Accordingly, a taxpayer who
meets the requirements in § 1.25A–1(f)
regarding the Form 1098–T requirement
to claim the credit and who can substan-
tiate payment of qualified tuition and re-
lated expenses may include these unre-
ported expenses in the computation of the
amount of the education tax credit allow-
able for the taxable year even though the
expenses are not reported on a Form
1098–T.
Proposed § 1.25A–1(f)(2)(i) provides
an exception to the Form 1098–T require-
ment in § 1.25A–1(f)(1) if the student has
not received a Form 1098–T by the later
of (a) January 31 of the taxable year fol-
lowing the taxable year to which the ed-
ucation credit relates or (b) the date the
federal income tax return claiming the ed-
ucation tax credit is filed. This exception
only applies if the taxpayer or taxpayer’s
dependent (i) has requested, in the manner
prescribed in publications, forms and in-
structions, or published guidance, the eli-
gible educational institution to furnish the
Form 1098–T after January 31 of the year
following the taxable year to which the
education tax credit relates but on or be-
fore the date the return is filed claiming
the education tax credit, and (ii) has co-
operated fully with the eligible educa-
tional institution’s efforts to obtain infor-
mation necessary to furnish the statement.
Proposed § 1.25A–1(f)(2)(ii) provides
that the receipt of a Form 1098–T is not
required if the reporting rules under sec-
tion 6050S and related regulations provide
that the eligible educational institution is
exempt from providing a Form 1098–T to
the student (for example, non-credit
courses). Proposed § 1.25A–1(f)(2)(iii)
also provides that the IRS may provide
additional exceptions in published guid-
ance of general applicability, see
§ 601.601(d)(2). The proposed regulations
under § 1.25A–1(f) apply to education tax
credits claimed for taxable years begin-
ning after June 29, 2015.
Until the proposed regulations under
§§ 1.25A–1(f) and 1.6050S–1(a) are pub-
lished in theFederal Registeras final
regulations, a taxpayer (or the taxpayer’s
dependent) (other than a non-resident
alien) who does not receive a Form
1098–T because its institution is exempt
from furnishing a Form 1098–T under
current § 1.6050S–1(a)(2) may claim an
education tax credit under section 25A(a)
if the taxpayer (1) is otherwise qualified,
(2) can demonstrate that the taxpayer (or
the taxpayer’s dependent) was enrolled at
an eligible educational institution, and (3)
can substantiate the payment of qualified
tuition and related expenses. Section
804(b) of TPEA also amends section 222
to require a Form 1098–T to claim a de-
duction for qualified tuition and related
expenses for taxable years beginning after
June 29, 2015. Rules similar to those in
proposed § 1.25A–1(f), including the ex-
ceptions, apply for purposes of section
222.
ii. Identification requirements for
AOTC under PATH
Section 206(a)(2) of PATH amends
section 25A(i) to provide that the AOTC
is not allowed if the student’s TIN or the
TIN of the taxpayer claiming the credit is
issued after the due date for filing the
return for the taxable year. This amend-
ment is generally effective for any return
or amended return filed after December
18, 2015. The proposed regulations reflect
this change. Specifically, the proposed
regulations add new § 1.25A–1(e)(2)(i),
which provides that, for any federal in-
come tax return (including an amended
return) filed after December 18, 2015, no
AOTC is allowed unless the student’s TIN
and the taxpayer’s TIN are issued on or
before the due date (including an exten-
sion, if timely requested) for filing the
return for that taxable year.
Section 211 of PATH amends section
25A(i) to provide that the AOTC is not
allowed unless the taxpayer’s return in-
cludes the EIN of any institution to which
the qualified tuition and related expenses
were paid with respect to the student. The
proposed regulations reflect this change
by adding new § 1.25A–1(e)(2)(ii).
b. Changes to section 6050S
reporting to conform with TPEA 1098–T
requirement
i. Exceptions to reporting requirement
and clarifying changes
Currently, the regulations under sec-
tion 6050S include exceptions to report-
ing. For instance, under § 1.6050S–
1(a)(2)(i), institutions are not required to
file a Form 1098–T with the IRS or pro-
vide a Form 1098–T to a nonresident
alien, unless the individual requests a
Form 1098–T. Under § 1.6050S–
1(a)(2)(ii), institutions are not required to
report information with respect to courses
August 15, 2016Bulletin No. 2016–33
252

for which no academic credit is awarded.
In addition, reporting is not required with
respect to individuals whose qualified tu-
ition and related expenses are paid en-
tirely with scholarships under § 1.6050S–
1(a)(2)(iii) or individuals whose qualified
tuition and related expenses are paid un-
der a formal billing arrangement under
§ 1.6050S–1(a)(2)(iv).
The exceptions in §§ 1.6050S–
1(a)(2)(i), (iii), and (iv) to reporting on
Form 1098–T are inconsistent with the
TPEA, which generally requires a student
to receive a Form 1098–T from the edu-
cational institution to claim a section 25A
education credit. With these exceptions, a
significant number of taxpayers claiming
the credit will not have a Form 1098–T,
which would frustrate the explicit purpose
of TPEA. Therefore, the proposed regula-
tions remove these exceptions.
Removal of the exceptions in
§§ 1.6050S–1(a)(2)(i), (iii), and (iv) also
assists students. Students to whom these
exceptions apply are deprived of impor-
tant information that they need to deter-
mine their eligibility for education tax
credits. The Form 1098–T provides stu-
dents with the amount of tuition paid (or
billed for calendar year 2016 only), the
amount of scholarships and grants that the
institution administered and processed,
and an indication of whether the student
was enrolled at least a half time for an
academic period. Students who do not re-
ceive a Form 1098–T cannot use the in-
formation that would be provided on the
form to assist them in determining the
proper amount of education credits they
may claim. Further, removal of these ex-
ceptions will improve the IRS’s ability to
use the Form 1098–T to verify whether
taxpayers should be allowed the education
tax benefits that are claimed. In addition,
removal of these exceptions would im-
prove the IRS’s ability to determine
whether the institutions are complying
with their reporting obligations.
The proposed regulations would not
remove the exception to reporting under
§ 1.6050S–1(a)(2)(ii) for courses for
which no academic credit is awarded.
Treasury and the IRS understand that in
many cases fees for these courses are
charged outside of the financial systems
used for students who are taking courses
for credit. In addition, given that non-
credit courses would not be eligible for
the AOTC (or Hope Credit) and would
only be eligible for the LLC if the student
is taking the course to acquire or improve
job skills, reporting expenses paid for
non-credit courses could cause confusion
and unintended non-compliance.
Treasury and the IRS believe that stu-
dents benefit from receipt of the Form
1098–T because the information on the
form assists the student in determining
eligibility for education tax benefits that
make higher education more affordable.
Reporting that does not provide useful
information to students and the IRS, how-
ever, unduly burdens institutions and the
IRS and could confuse students about
whether they are eligible to claim educa-
tion tax benefits. Therefore, Treasury and
the IRS are asking for comments regard-
ing exceptions to the reporting under sec-
tion 6050S. Specifically, comments are
requested regarding the exception to re-
porting for students who are nonresident
aliens, including how an institution deter-
mines that a student is a nonresident alien
and experience administering the existing
exception. Comments are also requested
regarding whether the exception for non-
credit courses should be retained, and if
so, whether there should be any changes
to the exception.
The proposed regulations also revise
the information that institutions are re-
quired to report on the Form 1098–T in an
effort to provide more precise information
for students to use when determining eli-
gibility for and the amount of an educa-
tion tax credit and for the IRS to use to
verify compliance with the requirements
for claiming the education tax credits. For
instance, the current regulations under
§ 1.6050S–1(b)(2)(ii)(D) require that the
Form 1098–T include an indication of
whether amounts reported relate to an ac-
ademic period that begins in the first three
months of the next calendar year pursuant
to the prepayment rule in § 1.25A–5(e)(2).
The proposed regulations revise this sec-
tion to include a requirement that the
amount paid that relates to an academic
period that begins in the first three months
of the next calendar year be specifically
stated on the Form 1098–T. This will
assist the IRS in identifying credits
claimed in two years for the same quali-
fied tuition and related expenses.
In addition, the proposed regulations
add a new paragraph (I) to § 1.6050S–
1(b)(2)(ii) to require the institution to in-
dicate the number of months that a student
was a full-time student during the calen-
dar year. The proposed regulations also
add to that paragraph a definition of what
constitutes a month. This information will
assist the IRS in determining whether a
parent properly claimed the student as a
dependent and, therefore, properly
claimed the credit for the student’s quali-
fied tuition and related expenses. See
§ 1.25A–1(f) for rules relating to claiming
the credit in the case of a dependent.
The proposed regulations clarify
§ 1.6050S–1(b)(2)(v) regarding the rules
for determining the amount of payments
received for qualified tuition and related
expenses. This clarification is intended to
provide a uniform rule for all institutions
to determine whether a payment received
by an institution should be reported on a
Form 1098–T as qualified tuition and re-
lated expenses in the current year. Under
the proposed rule, payments received dur-
ing a calendar year are treated first as
payments of qualified tuition and related
expenses up to the total amount billed by
the institution for qualified tuition and re-
lated expenses for enrollment during the
calendar year and then as payments of
expenses other than qualified tuition and
related expenses for enrollment during the
calendar year. A similar rule applies in the
case of payments received during the cal-
endar year with respect to enrollment in
an academic period beginning during the
first three months of the next calendar
year. In that case, the payments received
by the institution with respect to the
amount billed for enrollment in an aca-
demic period beginning during the first
three months of the next calendar year are
treated as payments of qualified tuition
and related expenses for the calendar year
in which the payments are received. Ex-
amples have been added to § 1.6050S–
1(b)(2)(vii) to illustrate these rules. Trea-
sury and the IRS request comments
regarding these rules, including alterna-
tive approaches and recommendations for
addressing other issues that should be
covered by these rules.
The proposed regulations also revise
§ 1.6050S–1(c)(1)(iii) regarding the in-
structions accompanying the Form
Bulletin No. 2016–33August 15, 2016
253

1098–T that the institution must furnish to
students. The proposed regulations add a
new paragraph (D) to § 1.6050S–
1(c)(1)(iii) to require institutions to in-
clude a paragraph in the instructions in-
forming students that they may be able to
optimize their federal tax benefits by tak-
ing a portion of a scholarship or grant into
income. This new paragraph will alert stu-
dents about their ability to optimize their
federal education tax benefits by allocat-
ing all or a portion of their scholarship or
grant to pay the student’s actual living
expenses (if permitted by the terms of the
scholarship or grant) by including such
amounts in income on the student’s tax
return if the student is required to file a
return. By including such amounts in in-
come, the scholarship or grant is no longer
tax free, and the student is not required to
reduce qualified tuition and related ex-
penses by the amount paid with the now
taxable scholarship or grant. See section
25A(g)(2) and § 1.25A–5(c)(3) for rules
regarding allocation of scholarships and
grants between qualified tuition and re-
lated expenses and other expenses. Minor
revisions have also been made to the other
paragraphs required to be included in in-
structions, including addition of the name
of the form (Form 1098–T) on which
reporting occurs and specific identifica-
tion of Publication 970, “Tax Benefits for
Education,” as a resource for taxpayers.
The proposed regulations also provide
a definition of “administered and pro-
cessed” for purposes of determining
which scholarships and grants an institu-
tion is required to report on the Form
1098–T. The current regulations do not
have a definition of this term, and the lack
of a definition has resulted in uncertainty
and inconsistent reporting. The proposed
regulations resolve this by adding a defi-
nition of “administered and processed” to
§ 1.6050S–1(e)(1)(i). Under this defini-
tion, a scholarship or grant is administered
and processed by an institution if the in-
stitution receives payment of an amount
(whether by cash, check, or other means
of payment) that the institution knows or
reasonably should know, is a scholarship
or grant, regardless of whether the insti-
tution is named as the payee or a co-payee
of the amount and regardless of whether,
in the case of a payment other than in
cash, the student endorses the check or
other means of payment for the benefit of
the institution. Pell Grants are provided as
an example of a scholarship or grant that
is treated as administered and processed
by an institution.
ii. PATH eliminates option to report
amount billed
These proposed regulations also imple-
ment the amendment to section
6050S(b)(2)(B)(i) under PATH, which
eliminates the option for eligible educa-
tional institutions to report the aggregate
amount billed for qualified tuition and re-
lated expenses for expenses paid after De-
cember 31, 2015, for education furnished
in academic periods beginning after such
date. Eligible educational institutions
have informed the IRS that they cannot
implement the necessary changes in tech-
nology to enable reporting of aggregate
payments of qualified tuition and ex-
penses for the first year in which the stat-
utory amendment applies, calendar year
2016. Therefore, in Announcement 2016–
17, I.R.B. 2016–20, the IRS stated that it
will not impose penalties under section
6721 or 6722 against an eligible educa-
tional institution required to file 2016
Forms 1098–T solely because the institu-
tion reports the aggregate amount billed
for qualified tuition and expenses rather
than the aggregate payments of qualified
tuition and related expenses received.
Thus, for calendar year 2016, no penalties
will be imposed if an educational institu-
tion fails to implement the PATH’s
amendment to section 6050S(b)(2)(B)(i)
and continues to report the amount billed.
The proposed regulations reflect the
PATH amendment by eliminating the op-
tion to report the amount billed. These
regulations are proposed to be effective on
publication of final regulations in theFed-
eral Register.In the interim, the limited
penalty relief in Announcement 2016–17
will apply to allow educational institu-
tions to report the amount billed for cal-
endar year 2016.
iii. No change required to implement
EIN reporting requirement
Current regulations under § 1.6050S–
1(b)(2)(ii)(A) require that the eligible ed-
ucational institution report its name, ad-
dress, and TIN on the Form 1098–T.
Accordingly, the amendment to section
6050S(b)(2) by section 211(b) of PATH
requiring eligible educational institutions
and insurers to report their EIN does not
require a change to the regulations.
c. Changes to implement new section
6724(f)
Section 1.6050S–1(f)(4) of the pro-
posed regulations reflects the enactment
of section 6724(f) by section 805 of
TPEA. Under section 6724(f), the IRS
may not impose information reporting
penalties under section 6721 and section
6722 against an eligible educational insti-
tution for failure to include a correct TIN
on the Form 1098–T if the institution
certifies compliance with IRS standards
for soliciting TINs. Relief under section
6724(f) applies only to eligible educa-
tional institutions and does not apply to
insurers required to file Forms 1098–T
under section 6050S(a)(2).
The IRS generally sends penalty no-
tices to taxpayers who fail to file informa-
tion returns when required or who file
incorrect information returns. Filers seek-
ing penalty relief based on reasonable
cause must respond to the penalty notice
with a statement explaining how the filer
qualifies for relief. Under section 6724(f),
however, no penalty under section 6721 or
6722 is imposed in the first instance if the
educational institution contemporane-
ously makes a true and accurate certifica-
tion under penalties of perjury in such
form and manner as may be prescribed by
the Secretary that it complied with the
standards promulgated by the Secretary to
obtain the student’s TIN. Section 6724(f)
is effective for returns required to be filed
and statements required to be furnished
after December 31, 2015.
Standards for obtaining the student’s
TIN are set forth in § 1.6050S–1(e)(3)(ii)
and (iii) of the existing regulations. These
regulations are proposed to be redesig-
nated as § 1.6050S–1(f)(3)(ii) and (iii).
Under these standards, the institution does
not have to solicit a student’s TIN, but
may use the TIN that it has in its records.
If the institution does not have the stu-
dent’s correct TIN in its records, then it
must solicit the TIN in the time and man-
ner described in redesignated § 1.6050S–
August 15, 2016Bulletin No. 2016–33
254

1(f). To implement section 6724(f),
§ 1.6050S–1(f)(4) of the proposed regula-
tions has been added to provide that for
returns required to be filed and statements
required to be furnished after December
31, 2015, the IRS will not impose a pen-
alty against an institution under section
6721 or 6722 for failure to include the
student’s correct TIN on the return or
statement if the institution certifies to the
IRS under penalties of perjury in the form
and manner prescribed by the Secretary in
publications, forms and instructions, or
other published guidance at the time of
filing of the return that the institution
complied with the requirements in
§ 1.6050S–1(f)(3)(ii) and (iii). However,
the proposed regulations make clear that
the certification will not protect the insti-
tution from penalty if the IRS determines
subsequently that the requirements of
§ 1.6050S–1(f)(3)(ii) and (iii) were not
satisfied or if the failure to file correct
information returns relates to something
other than a failure to provide the correct
TIN for the student. In addition, a cross-
reference is proposed to be added to the
regulations under section 6724 to alert
taxpayers that the rules for penalty relief
for eligible educational institutions with
respect to reporting obligations under sec-
tion 6050S are contained in § 1.6050S–
1(f).
d.Penalty relief under section
6724(f) for calendar year 2015 Forms
1098–T
Section 6724(f) requires the IRS to de-
velop procedures enabling an eligible ed-
ucational institution to avoid imposition
of the section 6721 and section 6722 pen-
alty for failure to include a student’s cor-
rect TIN on the Form 1098–T by certify-
ing under penalties of perjury at the time
of filing or furnishing the form that the
institution complied with the IRS stan-
dards for obtaining a student’s TIN. In
Announcement 2016–03, I.R.B. 2016–4,
the IRS stated that it will not impose pen-
alties under section 6721 or 6722 against
an eligible educational institution required
to file Forms 1098–T for calendar year
2015 solely because the student’s TIN is
missing or incorrect.
2. Other Changes to Regulations Under
Section 25A and Section 6050S
The proposed regulations also update
and clarify the regulations under section
25A. The proposed regulations update
§ 1.25A–2(d) to reflect the changes made
by ARRA allowing students to claim the
AOTC for expenses paid for course ma-
terials (such as books, supplies, and
equipment) required for enrollment or at-
tendance, whether or not the course mate-
rials are purchased from the institution.
Prior to ARRA, the term “qualified tuition
and related expenses” included tuition and
fees, but did not include course materials,
such as books, unless the cost of these
materials was a fee that was required to be
paid to the institution as a condition of
attendance or enrollment. See section
25A(f)(1) and § 1.25A–2(d)(2)(ii).
When Congress enacted the AOTC in
2009, it expanded the definition of quali-
fied tuition and related expenses for pur-
poses of the AOTC to include expenses
paid for course materials. See H.R. Conf.
Rep. 111–16, 111
th
Cong., 1
st
Sess. p. 525
(February 29, 2009). Course materials are
qualified expenses only for the AOTC and
not for the LLC. See Tax Increase Preven-
tion Act of 2014 (Public Law 113–295,
128 Stat. 4010). The proposed regulations
update § 1.25A–2(d) to provide that, for
purposes of claiming the AOTC for tax
years beginning after December 31, 2008,
the definition of qualified tuition and re-
lated expenses includes not only tuition
and fees required for enrollment or atten-
dance at an eligible educational institu-
tion, but also expenses paid for course
materials needed for enrollment or atten-
dance at an eligible educational institu-
tion. Accordingly, after ARRA, for pur-
poses of claiming the Hope Scholarship
Credit and LLC, qualified tuition and re-
lated expenses continue to exclude the
cost of books, supplies, and equipment if
they can be purchased from any vendor.
However, for purposes of claiming the
AOTC, qualified tuition and related ex-
penses includes the cost of course materi-
als such as books, supplies and equipment
that is needed for meaningful attendance
or enrollment in a course of study,
whether or not the materials are purchased
from the institution. The proposed regula-
tions provide an example that illustrates
that for purposes of the AOTC qualified
tuition and related expenses includes the
cost of course material, including books,
even if a taxpayer purchases these mate-
rials from a vendor other than the institu-
tion.
In addition, the proposed regulations
add a new section under section 6050S to
eliminate uncertainty in the reporting re-
quirements that may result from these pro-
posed amendments to § 1.25A–2(d). Un-
der proposed § 1.6050S–1(a)(2)(i), an
institution is not required to report the
amount paid or billed for books, supplies,
and equipment unless the amount is a fee
that must be paid to the eligible educa-
tional institution as a condition of enroll-
ment or attendance under § 1.25A–
2(d)(2)(ii).
The proposed regulations also clarify
the example in § 1.25A–5(e)(2)(ii) regard-
ing the prepayment rule. Under § 1.25A–
5(e)(2)(i), if qualified tuition and related
expenses are paid during one taxable year
for an academic period that begins during
the first three months of the taxpayer’s
next taxable year (that is, in January, Feb-
ruary, or March of the next taxable year
for calendar year taxpayers), an education
tax credit is allowed for the qualified tu-
ition and related expenses only in the tax-
able year in which the taxpayer pays the
expenses. The Treasury Department and
the IRS are aware that there is some un-
certainty regarding the application of the
prepayment rule to amounts paid in the
prior year and the current year for an
academic period beginning during the cur-
rent year. The proposed regulations clarify
the proper treatment in this situation by
expanding the Example in § 1.25A–
5(e)(2)(ii) to illustrate that a student who
pays part of a semester’s tuition in Year 1,
and the remainder in Year 2, may claim a
credit for Year 1, for the portion of the
tuition paid in December Year 1 and a
separate credit for Year 2 for the portion
of the tuition paid in February Year 2.
The proposed regulations also clarify
the rules under § 1.25A–5(f) regarding a
refund of qualified tuition and related ex-
penses received from an eligible educa-
tional institution. The current regulations
do not address the situation where the
taxpayer receives a refund in the current
taxable year of qualified tuition and re-
lated expenses for an academic period be-
Bulletin No. 2016–33August 15, 2016
255

ginning in the current taxable year for
which payments were made during the
prior taxable year under the prepayment
rule and payments were made during the
current taxable year. To address this situ-
ation, the proposed regulations provide
that the taxpayer may allocate the refund
in any proportion to reduce qualified tu-
ition and related expenses paid in either
taxable year, except that the amount of the
refund allocated to a taxable year may not
exceed the qualified tuition and related
expenses paid in the taxable year for the
academic period to which the refund re-
lates. The sum of the amounts allocated to
each taxable year cannot exceed the
amount of the refund. The proposed reg-
ulations add an example to illustrate this
rule.
Proposed Effective and
Applicability Dates
These regulations are proposed to take
effect when published in theFederal
Registeras final regulations.
Statement of Availability of IRS
Documents
IRS published guidance cited in this
preamble is published in the Internal Rev-
enue Bulletin and is available from the
Superintendent of Documents, U.S. Gov-
ernment Publishing Office, Washington,
DC 20402, or by visiting the IRS website
at http://www.irs.gov.
Special Analyses
Certain IRS regulations, including this
one, are exempt from the requirements of
Executive Order 12866, as supplemented
and reaffirmed by Executive Order 13563.
Therefore, a regulatory impact assessment
is not required. It has also been deter-
mined that section 553(b) of the Admin-
istrative Procedure Act (5 U.S.C. chapter
5) does not apply to these regulations.
It is hereby certified that the collection
of information in this notice of proposed
rulemaking will not have a significant
economic impact on a substantial number
of small entities within the meaning of
section 601(6) of the Regulatory Flexibil-
ity Act (5 U.S.C. chapter 6). The type of
small entities to which the regulations
may apply are small eligible educational
institutions (generally colleges and uni-
versities eligible to receive federal finan-
cial aid for education under the Higher
Education Act of 1965). This certification
is based on the fact that few, if any, new
eligible educational institutions will be
subject to reporting and the changes made
by this notice of proposed rulemaking re-
quire little, if any, additional time for
compliance by institutions currently sub-
ject to reporting requirements. The collec-
tion of information in this regulation im-
plements the statute and should not
require eligible educational institutions to
collect information that is not already
maintained by the institution. Eligible ed-
ucational institutions have been subject to
information reporting under section
6050S since 1998, and the obligations un-
der the existing final regulations that are
the foundation for these proposed regula-
tions are already in place. Any additional
information returns required to be filed
under this notice of proposed rulemaking
should result in few, if any, new eligible
educational institutions being subject to
reporting that were not already required to
file Forms 1098–T. Only eligible educa-
tional institutions, not all educational in-
stitutions, are subject to these reporting
rules. For this purpose, an eligible educa-
tional institution means an institution de-
scribed in section 481 of the Higher Edu-
cation Act of 1965 (20 U.S.C. 1088) as in
effect on the date of enactment (August 5,
1997), and which is eligible to participate
in a program under title IV of such act
(generally colleges and universities whose
students are eligible to receive federal fi-
nancial aid for higher education). See sec-
tions 25A(f)(2) and 6050S(e). Further,
this notice of proposed rulemaking con-
tains modifications that should simplify
compliance and thereby reduce the time
needed to comply with the information
reporting obligations under section
6050S. Therefore, a Regulatory Flexibil-
ity Analysis under the Regulatory Flexi-
bility Act is not required. Pursuant to sec-
tion 7805(f) of the Code, this proposed
regulation has been submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its
impact on small businesses. The Internal
Revenue Service invites the public to
comment on this certification.
Comments and Requests for a
Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any comments that are
submitted timely to the IRS as prescribed
in this preamble under the “DATES” and
“ADDRESSES” headings. The Treasury
Department and the IRS request com-
ments on all aspects of the proposed rules.
All comments will be available at www.
regulations.gov or upon request.
A public hearing has been scheduled
for November 30, 2016 at 10:00 a.m. in
the IRS Auditorium, Internal Revenue
Service Building, 1111 Constitution Ave-
nue, NW, Washington, DC 20224. Due to
building security procedures, visitors
must enter at the Constitution Avenue en-
trance. In addition, all visitors must pres-
ent photo identification to enter the build-
ing. Because of access restrictions,
visitors will not be admitted beyond the
immediate entrance area more than 30
minutes before the hearing starts. For in-
formation about having your name placed
onto the building access list to attend the
hearing, see the “FOR FURTHER IN-
FORMATION CONTACT” section of
this preamble.
The rules of 26 CFR 601.601(a)(3) ap-
ply to the hearing. Persons who wish to
present oral comments at the hearing must
submit written or electronic comments by
October 16, 2016 and an outline of the
topics to be discussed and the time to be
devoted to each topic (a signed original
and eight (8) copies) by October 31, 2016.
A period of 10 minutes will be allotted to
each person for making comments. An
agenda showing the scheduling of speak-
ers will be prepared after the deadline for
receiving outlines has passed. Copies of
the agenda will be available free of charge
at the hearing.
Drafting Information
The principal author of these proposed
regulations is Gerald Semasek of the Of-
fice of Associate Chief Counsel (Proce-
dure and Administration) for the proposed
regulations under section 6050S and sec-
tion 6724 and Sheldon Iskow of the Office
of Associate Chief Counsel (Income Tax
and Accounting) for the proposed regula-
tions under section 25A.
August 15, 2016Bulletin No. 2016–33
256

* * * * *
Proposed Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and 301
are proposed to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.25A–0 is amended
by:
1. Revising the entry for § 1.25A–
1(e)(1) introductory text.
2. Adding entries for § 1.25A–1(e)(1),
(2), and (3).
3. Revising the entries for § 1.25A–1(f)
introductory text and (f)(2).
4. Adding entries for § 1.25A–1(f)(3)
and (4).
5. Revising the entries for § 1.25A–
1(g) and (h).
6. Adding an entry for § 1.25A–1(i).
7. Revising the entries for §§ 1.25A–
2(d)(3), (4), (5), and (6).
8. Adding entries for §§ 1.25A–2(d)(7)
and (e).
9. Revising the entry for § 1.25A–
5(f)(6).
10. Adding entries for §§ 1.25A–
5(f)(7) and (g).
The revisions and additions read as
follows:
§ 1.25A–0 Table of Contents.
* * * * *
§ 1.25A–1 Calculation of Education
Tax Credit and General Eligibility
Requirements
* * * * *
(e) Identification requirements.
(1) In general.
(2) Additional identification require-
ments for the American Opportunity Tax
Credit.
(i) TIN must be issued on or before the
due date of the original return.
(ii) Return must include the eligible
educational institution’s employer identi-
fication number (EIN).
(3) Applicability dates.
(f) Statement requirement.
* * * * *
(2) Exceptions.
(3) Transition rule.
(4) Applicability date.
(g) Claiming the credit in the case of a
dependent.
(h) Married taxpayers.
(i) Nonresident alien taxpayers and de-
pendents.
§ 1.25A–2 Definitions
* * * * *
(d) * * *
(3) Course materials for the American
Opportunity Tax Credit for taxable years
beginning after December 31, 2008.
(4) Personal expenses.
(5) Treatment of a comprehensive or
bundled fee.
(6) Hobby courses.
(7) Examples.
(e) Applicability date.
* * * * *
§ 1.25A–5 Special Rules Relating to
Characterization and Timing of
Payments
* * * * *
(f) * * *
(6) Treatment of refunds where quali-
fied tuition and related expenses paid in
two taxable years for the same academic
period.
(7) Examples.
(g) Applicability dates.
Par. 3. Section 1.25A–1 is amended by:
1. Revising paragraph (e).
2. Redesignating paragraphs (f), (g),
and (h) as paragraphs (g), (h), and (i),
respectively.
3. Adding a new paragraph (f).
4. In newly redesignated paragraph
(g)(2), removing the language “(f)” and
adding “(g)” in its place.
The revisions and additions read as fol-
lows:
§ 1.25A–1 Calculation of education tax
credit and general eligibility
requirements.
* * * * *
(e)Identification requirements—(1)In
general. No education tax credit is al-
lowed unless a taxpayer includes on the
federal income tax return claiming the
credit the name and the taxpayer identifi-
cation number (TIN) of the student for
whom the credit is claimed. For rules re-
lating to assessment for an omission of a
correct taxpayer identification number,
see section 6213(b) and (g)(2)(J).
(2)Additional identification require-
ments for the American Opportunity Tax
Credit (AOTC)—(i)TIN must be issued
on or before the due date of the original
return. For any federal income tax return
(including an amended return) filed after
December 18, 2015, no AOTC is allowed
unless the TIN of the student and the TIN
for the taxpayer claiming the credit are
issued on or before the due date, or the
extended due date if the extension request
is timely filed, for filing the return for the
taxable year for which the credit is
claimed.
(ii)Return must include the eligible
educational institution’s employer identi-
fication number (EIN). For taxable years
beginning after December 31, 2015, no
AOTC is allowed unless the taxpayer in-
cludes the EIN of each eligible educa-
tional institution to which qualified tuition
and related expenses were paid.
(3)Applicability dates. (i) Except as
provided in paragraphs (e)(3)(ii) and (iii)
of this section, this paragraph (e) applies
on or after December 26, 2002.
(ii) Paragraph (e)(2)(i) of this section
applies to federal income tax returns (in-
cluding amended returns) filed after De-
cember 18, 2015.
(iii) Paragraph (e)(2)(ii) of this section
applies to taxable years beginning after
December 31, 2015.
(f)Statement requirement—(1)In gen-
eral. Except as provided in paragraph
(f)(2) of this section, for taxable years
beginning after June 29, 2015, no educa-
tion tax credit is allowed unless the tax-
payer (or the taxpayer’s dependent) re-
ceives a statement furnished by an eligible
educational institution, as defined in
§ 1.25A–2(b), containing all of the infor-
mation required under § 1.6050S–1(b)(2).
The amount of qualified tuition and re-
lated expenses reported on the statement
furnished by an eligible educational insti-
tution may not reflect the total amount of
the qualified tuition and related expenses
paid during the taxable year for which a
taxpayer may claim an education tax
credit. A taxpayer that substantiates pay-
ment of qualified tuition and related ex-
Bulletin No. 2016–33August 15, 2016
257

penses that are not reported on Form
1098–T, “Tuition Statement”, may in-
clude those expenses in computing the
amount of the education tax credit allow-
able for the taxable year.
(2)Exceptions. Paragraph (f)(1) of this
section does not apply—
(i) If the taxpayer or the taxpayer’s
dependent:
(A) Has not received such a statement
from an eligible educational institution re-
quired to furnish such statement under
section 6050S and the regulations there-
under as of January 31 of the year follow-
ing the taxable year to which the educa-
tion tax credit relates or the date the return
is filed claiming the education tax credit,
whichever is later;
(B) Has requested, in the manner pre-
scribed in forms, instructions, or in other
published guidance, the eligible educa-
tional institution to furnish the Form
1098–T after January 31 of the year fol-
lowing the taxable year to which the ed-
ucation tax credit relates but on or before
the date the return is filed claiming the
education tax credit; and
(C) Has cooperated fully with the eli-
gible educational institution’s efforts to
obtain information necessary to furnish
the statement;
(ii) If the eligible educational institu-
tion is not required to furnish a statement
to the student under section 6050S and the
regulations thereunder; or
(iii) As otherwise provided in pub-
lished guidance of general applicability,
see § 601.601(d)(2) of this chapter.
(3)Applicability date. Paragraph (f) of
this section applies to credits claimed for
taxable years beginning after June 29,
2015.
* * * * *
Par. 4. Section 1.25A–2 is amended by:
1. Revising paragraphs (d)(2)(i) and
(ii).
2. In paragraph (d)(2)(iii), removing
the language “(d)(3)” and adding “(d)(4)”
in its place.
3. Redesignating paragraphs (d)(3),
(4), (5), and (6) as paragraphs (d)(4), (5),
(6), and (7), respectively.
4. Adding a new paragraph (d)(3).
5. In newly redesignated paragraph
(d)(5), by removing the language “(d)(3)”
and adding “(d)(4)” in its place.
6. In newly redesignated paragraph
(d)(7), revisingExample 2, redesignating
Examples 3,4,5, and6, asExamples 4,5,
6, and7, and adding a newExample 3.
7. Adding paragraph (e).
The revisions and additions read as fol-
lows:
§ 1.25A—2 Definitions.
* * * * *
(d) * * * * *
(2)Required fees—(i)In general. Ex-
cept as provided in paragraphs (d)(3) and
(4) of this section, the test for determining
whether any fee is a qualified tuition and
related expense is whether the fee is re-
quired to be paid to the eligible educa-
tional institution as a condition of the stu-
dent’s enrollment or attendance at the
institution.
(ii)Books, supplies, and equipment.
For taxable years beginning before Janu-
ary 1, 2009, for purposes of the Hope
Scholarship Credit, and for taxable years
beginning after December 31, 1997, for
purposes of the Lifetime Learning Credit,
qualified tuition and related expenses in-
clude fees for books, supplies, and equip-
ment used in a course of study only if the
fees must be paid to the eligible educa-
tional institution for the enrollment or at-
tendance of the student at the institution.
For taxable years beginning after Decem-
ber 31, 2008, see paragraph (d)(3) of this
section for rules relating to books, sup-
plies and equipment for purposes of the
American Opportunity Tax Credit.
* * * * *
(3)Course materials for the American
Opportunity Tax Credit for taxable years
beginning after December 31, 2008. For
taxable years beginning after December
31, 2008, the term “qualified tuition and
related expenses” for purposes of the
American Opportunity Tax Credit under
section 25A(i) includes the amount paid
for course materials (such as books, sup-
plies, and equipment) required for enroll-
ment or attendance at an eligible educa-
tional institution. For this purpose,
“required for enrollment or attendance”
means that the course materials are
needed for meaningful attendance or en-
rollment in a course of study, regardless of
whether the course materials are pur-
chased from the institution.
* * * * *
(7) * * *
Example 2. First-year students attending College
W during 2008 are required to obtain books and
other materials used in its mandatory first-year cur-
riculum. The books and other reading materials are
not required to be purchased from College W and
may be borrowed from other students or purchased
from off-campus bookstores, as well as from College
W’s bookstore. College W bills students for any
books and materials purchased from College W’s
bookstore. The expenses paid for the first-year books
and materials purchased at College W’s bookstore
are not qualified tuition and related expenses because
under § 1.25A–2(d)(2)(ii) the books and materials
are not required to be purchased from College W for
enrollment or attendance at the institution. In addi-
tion, expenses paid for the first-year books and ma-
terials borrowed from other students or purchased
from vendors other than College W’s bookstore are
also not qualified tuition and related expenses be-
cause under § 1.25A–2(d)(2)(ii) the books and ma-
terials are not required to be purchased from College
W for enrollment or attendance at the institution.
Example 3. Assume the same facts asExample 2,
except that the books and materials are required for
first-year students attending College W during 2009.
Because the expenses are paid with respect to en-
rollment or attendance after 2008, § 1.25A–1(d)(3)
applies rather than § 1.25A–1(d)(2)(ii), if the tax-
payer claims the American Opportunity Tax Credit
under section 25A(i). Under § 1.25A–1(d)(3), ex-
penses for books and other course materials are
qualified tuition and related expenses for purposes of
the American Opportunity Tax Credit if they are
needed for meaningful attendance in the student’s
course of study at College W. Accordingly, if the
taxpayer claims the American Opportunity Tax
Credit for 2009, the expenses paid for the first-year
books and materials are qualified tuition and related
expenses. However, if the taxpayer claims the Life-
time Learning Credit for 2009 under section 25A(c),
§ 1.25A–2(d)(2)(ii) applies rather than § 1.25A–
1(d)(3). Accordingly, if the taxpayer claims the Life-
time Learning Credit, the expenses paid for the first-
year books and materials purchased at College W’s
bookstore are not qualified tuition and related ex-
penses because under § 1.25A–2(d)(2)(ii) the books
and materials are not required to be purchased from
College W for enrollment or attendance at the insti-
tution.
* * * * *
(e)Applicability date. (1) Except as
provided in paragraph (e)(2) of this sec-
tion, this section applies on or after De-
cember 26, 2002.
(2) Paragraphs (d)(2)(i), (d)(2)(ii),
(d)(3), andExamples 2and3of paragraph
(d)(7) of this section apply to qualified
tuition and related expenses paid, and ed-
ucation furnished in academic periods be-
ginning, on or after the date of publication
of the Treasury decision adopting these
rules as final regulations in theFederal
Register.However, taxpayers may apply
August 15, 2016Bulletin No. 2016–33
258

paragraphs (d)(2)(i), (d)(2)(ii), (d)(3), and
Examples 2and3of paragraph (d)(7) of
this section for taxable years beginning
after December 31, 2008, for which the
period of limitations on filing a claim for
credit or refund under section 6511 has
not expired.
Par. 5. Section 1.25A–5 is amended by:
1. In paragraph (e)(2)(ii), revising the
Example.
2. Redesignating paragraph (f)(6) as
paragraph (f)(7).
3. Adding a new paragraph (f)(6).
4. In newly redesignated paragraph
(f)(7), addingExample 4.
5. Adding paragraph (g).
The revisions and additions read as fol-
lows:
§ 1.25A–5 Special rules relating to
characterization and timing of payments.
* * * * *
(e) * * *
(2) * * *
(ii) * * *
Example. In December 2016, Taxpayer A, a cal-
endar year taxpayer who is not a dependent of an-
other taxpayer under section 151, receives a bill from
College Z for $5,000 for qualified tuition and related
expenses to attend College Z for the 2017 spring
semester, which begins in January 2017. This is the
first semester that Taxpayer A will attend College Z.
On December 15, 2016, Taxpayer A pays College Z
$1,000 in qualified tuition and related expenses for
the 2017 spring semester. On February 15, 2017,
Taxpayer A pays College Z the remaining $4,000
due for qualified tuition and related expenses for the
2017 spring semester. In August 2017, Taxpayer A
receives a bill from College Z for $7,000 for quali-
fied tuition and related expenses to attend College Z
for the 2017 fall semester, which begins in Septem-
ber 2017. Taxpayer A pays the entire $7,000 on
September 1, 2017. In December 2017, Taxpayer A
receives a bill from College Z for $7,000 for quali-
fied tuition and related expenses to attend for the
2018 spring semester. Taxpayer A pays $1,000 of
the 2018 spring semester bill on December 15, 2017
and $6,000 of that bill in February 15, 2018. Tax-
payer A does not enroll in an eligible educational
institution for the 2018 fall semester or the 2019
spring semester. Taxpayer A may claim an education
tax credit on Taxpayer A’s 2016 Form 1040 with
respect to the $1,000 taxpayer paid to College Z on
December 15, 2016 for the 2017 spring semester. On
Taxpayer A’s 2017 Form 1040, Taxpayer A may
claim an education credit with respect to the $12,000
Taxpayer A paid to College Z during 2017 ($4,000
paid on February 15, 2017 for the 2017 spring se-
mester, $7,000 paid on September 1, 2017, for the
2017 fall semester, and $1,000 paid on December 15,
2017, for the 2018 spring semester). On Taxpayer
A’s 2018 Form 1040, Taxpayer A may claim an
education credit with respect to the $6,000 taxpayer
paid to College Z on February 15, 2018.
* * * * *
(f) * * *
(6)Treatment of refunds where quali-
fied tuition and related expenses paid in
two taxable years for the same academic
period. If a taxpayer or someone other
than the taxpayer –
(i) Pays qualified tuition and related
expenses in one taxable year (prior tax-
able year) for a student’s enrollment or
attendance at an eligible educational insti-
tution during an academic period begin-
ning in the first three months of the tax-
payer’s next taxable year (subsequent
taxable year);
(ii) Pays qualified tuition and related
expenses in the subsequent taxable year
for the academic period beginning in the
first three months of the subsequent tax-
able year; and
(iii) Receives a refund of qualified tu-
ition and related expenses during the sub-
sequent taxable year for the academic pe-
riod beginning in the first three months of
the subsequent taxable year (including an
amount treated as a refund under para-
graph (f)(4) or (5) of this section), the
taxpayer may allocate the refund in any
proportion to qualified tuition and related
expenses paid in the prior taxable year
under paragraph (f)(2) or (3) of this sec-
tion or the subsequent taxable year under
paragraph (f)(1) of this section, except
that the amount of the refund allocated to
a taxable year may not exceed the quali-
fied tuition and related expenses paid dur-
ing the taxable year with respect to the
academic period beginning in the subse-
quent taxable year. The sum of the
amounts allocated to each taxable year
cannot exceed the amount of the refund.
(7) * * *
Example 4. In December 2016, Taxpayer D, a
calendar year taxpayer who is not a dependent of
another taxpayer under section 151, receives a bill
from University X for $2,000 for qualified tuition
and related expenses to attend University X as a
full-time student for the 2017 spring semester, which
begins in January 2017. In December 2016, D pays
$500 of qualified tuition and related expenses for the
2017 spring semester. In January 2017, D pays an
additional $1,500 of qualified tuition and related
expenses for the 2017 spring semester. Early in the
2017 spring semester, D withdraws from several
courses and no longer qualifies as a full-time student.
As a result of D’s change in status from a full-time
student to a part-time student, D receives a $750
refund from University X on February 16, 2017. D
has no other qualified tuition and related expenses
for 2017. Under paragraph (f)(6) of this section, D
may allocate all, or a portion, of the $750 refund to
reduce the $1,500 of qualified tuition and related
expenses paid in 2017 or D may also allocate a
portion of the $750 refund, up to $500, to reduce the
qualified tuition and related expenses paid in 2016
and allocate the remainder of the refund to reduce
the qualified tuition and related expenses paid in
2017.
(g)Applicability date. (1) Except as
provided in paragraph (g)(2) of this sec-
tion, this section applies on or after De-
cember 26, 2002.
(2) Paragraphs (e)(2)(ii), (f)(6), and
Example 4in paragraph (f)(7) of this sec-
tion apply to qualified tuition and related
expenses paid and education furnished in
academic periods beginning on or after
the date of publication of the Treasury
decision adopting these rules as final reg-
ulations in theFederal Register.How-
ever, taxpayers may apply paragraphs
(e)(2)(ii), (f)(6), andExample 4in para-
graph (f)(7) of this section in taxable years
for which the limitation on filing a claim
for credit or refund under section 6511 has
not expired.
Par. 6. Section 1.6050S–0 is amended
by:
1. Revising the entry for § 1.6050S–
1(a)(2)(i).
2. Removing the entries for § 1.6050S–
1(a)(2)(iii) and (iv).
3. Revising the entries for § 1.6050S–
1(b)(2) introductory text and (b)(2)(ii).
4. Revising the entry for § 1.6050S–
1(b)(3) introductory text.
5. Removing the entries for § 1.6050S–
1(b)(3)(iii), (iv) and (v).
6. Revising the entry for § 1.6050S–
1(b)(4).
7. Removing the entry for § 1.6050S–
1(b)(5).
8. Redesignating the entry for
§ 1.6050S–1(b)(6) as § 1.6050S–1(b)(5).
9. Adding entries for § 1.6050S–
1(c)(1)(i), (ii) and (iii).
10. Removing the entry for § 1.6050S–
1(c)(2)(ii).
11. Redesignating the entry for
§ 1.6050S–1(c)(2)(iii) as § 1.6050S–
1(c)(2)(ii).
12. Redesignating the entries for
§ 1.6050S–1(e) and § 1.6050S–1(f) as
§ 1.6050S–1(f) and § 1.6050S–1(g), re-
spectively.
13. Adding a new entry for § 1.6050S–
1(e).
Bulletin No. 2016–33August 15, 2016
259

14. Revising the newly redesignated
entry for § 1.6050S–1(f)(4).
15. Adding a new entry for § 1.6050S–
1(f)(5).
The revisions and additions to read
as follows:
§ 1.6050S–0 Table of contents.
* * * * *
§ 1.6050S–1 Information reporting for
qualified tuition and related expenses.
(a)* * *
(2) * * *
(i) No reporting of amounts for books,
supplies and equipment unless the amount
is a fee required to be paid to the institu-
tion.
(A) In general.
(B) Examples.
* * * * *
(b) * * *
(2) Information reporting requirements for
educational institutions for qualified tu-
ition and related expenses.
* * * * *
(ii) Information included on return.
(A) Name, address and TIN of institution
(B) Name address and TIN of individual
enrolled at institution
(C) Amount of payments of qualified tu-
ition and related expenses
(D) Indication of whether payments per-
tain to academic period commencing in
first three months of following calendar
year
(E) Amount of scholarships or grants
(F) Amount of reimbursements or refunds
pertaining to expenses reported in prior
year
(G) Amount of reductions of scholarships
or grants
(H) Statement of whether individual en-
rolled for at least half of normal full-time
work load
(I) Number of months during which indi-
vidual enrolled for normal full-time work-
load
(J) Statement of individual’s enrollment in
graduate-level program
(K) Any additional information required
by Form 1098–T or instructions
* * * * *
(3) Requirements for insurers.
* * * * *
(4) Time and place for filing return.
(i) In general.
(ii) Extensions of time.
* * * * *
(c) * * *
(1) * * *
(i) Required information.
(ii) Legend identifying statement as im-
portant tax information.
(iii) Instructions.
(A) Statement of payments made or reim-
bursements or refunds made.
(B) Statement regarding extent of individ-
ual’s eligibility for credit under section
25A.
(C) Statement regarding reduction in tax
credit due to grant or scholarship.
(D) Statement notifying individual of abil-
ity to allocate scholarship or grant.
(E) Statement notifying individual of con-
sequences of refunds, reimbursements, re-
ductions in tuition charges or grants or
scholarships for prior taxable year.
(F) Statement informing individual of
consequences of reimbursement or refund
by institution or insurer.
(G) Statement notifying individual to con-
sult forms and publications of IRS.
(H) Name, address and phone number of
educational institution or insurer.
* * * * *
(e) Definitions.
(1) Administered and processed.
(i) In general.
(ii) Examples.
(2) Cost of attendance.
(f) * * *
(4) No penalty imposed on eligible edu-
cational institutions that certify compli-
ance with paragraph (f)(3) of this section
at the time of filing the return.
(5) Failure to furnish TIN.
* * * * *
Par. 7. Section 1.6050S–1 is amended
by:
1. Revising paragraph (a)(2)(i) and re-
moving paragraphs (a)(2)(iii) and (iv).
2. Revising paragraphs (b)(1), (b)(2)(i),
and (b)(2)(ii)(D), (E), (G) and (H).
3.Redesignatingparagraphs
(b)(2)(ii)(I) and (J) as paragraphs
(b)(2)(ii)(J) and (K), respectively, and
adding a new paragraph (b)(2)(ii)(I).
4. Revising newly redesignated para-
graph (b)(2)(ii)(J).
5. Revising paragraphs (b)(2)(iv), (v),
(vi) andExample 1,2,3, and4in para-
graph (b)(2)(vii).
6. In paragraph (b)(2)(vii), addingEx-
ample 5and6.
7. Removing paragraph (b)(3) and re-
designating paragraphs (b)(4), (5) and (6)
as paragraphs (b)(3), (4) and (5), respec-
tively.
8. Revising newly redesignated para-
graph (b)(4)(i).
9. Removing newly redesignated para-
graph (b)(4)(ii) and further redesignating
paragraph (b)(4)(iii) as paragraph
(b)(4)(ii).
10. Revising paragraphs (c)(1)(iii)(A),
(B) and (C).
11.Redesignatingparagraphs
(c)(1)(iii)(D), (E), (F), and (G) as para-
graphs (c)(1)(iii)(E), (F), (G), and (H),
respectively.
12. Revising newly re-designated para-
graphs (c)(1)(iii)(E), (F), (G), and (H).
13. Adding a new paragraph
(c)(1)(iii)(D).
14. Revising paragraph (c)(2)(i).
15. Removing paragraph (c)(2)(ii) and
redesignating paragraph (c)(2)(iii) as
paragraph (c)(2)(ii).
16. Redesignating paragraphs (e) and
(f) as paragraphs (f) and (g), respectively.
17. Adding a new paragraph (e).
18. In newly redesignated paragraph
(f):
i. Revising paragraph (f)(3)(ii).
ii. In paragraph (f)(3)(iii), removing the
language “(e)(3)(iii)” and adding
“(f)(3)(iii)” in its place.
iii. Further redesignating paragraph (f)(4)
as paragraph (f)(5).
iv. Adding new paragraph (f)(4).
19. Revising newly redesignated para-
graph (g).
The revisions and additions read as fol-
lows:
§ 1.6050S–1 Information reporting for
qualified tuition and related expenses.
(a) * * *
(2) * * *
(i)No reporting of amounts for books,
supplies and equipment unless the amount
is a fee required to be paid to the institu-
tion—(A)In general. The information re-
porting requirements of this section do not
apply to amounts paid for books, supplies,
August 15, 2016Bulletin No. 2016–33
260

and equipment unless the amount is a fee
that must be paid to the eligible educa-
tional institution as a condition of enroll-
ment or attendance under § 1.25A–
2(d)(2)(ii).
(B)Examples. The following examples
illustrates the rules of this paragraph
(a)(2):
Example 1. First-year students at College W are
required to obtain books and other materials used in
its mandatory first-year curriculum. The books and
other materials are not required to be purchased from
College W and may be borrowed from other students
or purchased from off-campus bookstores, as well as
from College W’s bookstore. College W bills stu-
dents for any books and materials purchased from
College W’s bookstore. Because the first-year books
and materials may be purchased from any vendor,
the amount is not a fee that must be paid to the
eligible educational institution as a condition of en-
rollment or attendance and, therefore, is not subject
to reporting under paragraph (a)(2)(i) of this section.
No amount is reportable even if a first-year student
pays College W for the required books and other
materials purchased from College W’s bookstore.
Example 2. Assume the same facts asExample 1
of this paragraph (a)(2), except College W furnishes
the books and other materials to each first-year stu-
dent and the books may not be borrowed or pur-
chased from other sources. College W charges a
separate fee for books and materials to all first-year
students for these items as part of the bill required to
be paid to attend the institution. Under paragraph
(a)(2)(i) of this section, because the amount is a fee
that must be paid to the eligible educational institu-
tion as a condition of enrollment or attendance, the
fee, if paid by or on behalf of the student, must be
reported on the Form 1098–T as part of the qualified
tuition and related expenses.
* * * * *
(b)Requirement to file return—(1)In
general. Eligible educational institutions
must report the information described in
paragraph (b)(2) of this section, which
requires institutions to report, among
other information, the amount of pay-
ments received during the calendar year
for qualified tuition and related expenses.
Institutions must report separately adjust-
ments made during the calendar year that
relate to payments received for qualified
tuition and related expenses that were re-
ported for a prior calendar year. For pur-
poses of paragraph (b)(2) of this section,
an adjustment made to payments received
means a reimbursement or refund. Insur-
ers must report the information described
in paragraph (b)(3) of this section.
(2)Information reporting require-
ments—(i)In general. Except as provided
in paragraph (a)(2) of this section (regard-
ing exceptions where no information re-
porting is required), an eligible educa-
tional institution must file an information
return with the IRS on Form 1098–T,
“Tuition Statement,” with respect to each
individual enrolled (as determined in
paragraph (d)(1) of this section) for an
academic period beginning during the cal-
endar year (including an academic period
beginning during the first three months of
the next calendar year) or during a prior
calendar year and for whom a transaction
described in paragraph (b)(2)(ii)(C), (E),
(F), or (G) of this section is made during
the calendar year. An eligible educational
institution may use a substitute Form
1098–T if the substitute form complies
with applicable revenue procedures relat-
ing to substitute forms (see § 601.601(d)
(2) of this chapter).
(ii) * * *
(D) An indication by the institution
whether any payments received for qual-
ified tuition and related expenses reported
for the calendar year relate to an academic
period that begins during the first three
months of the next calendar year and the
amount of such payments;
(E) The amount of any scholarships or
grants for the payment of the individual’s
cost of attendance (as defined in para-
graph (e)(2) of this section) that the insti-
tution administered and processed (as de-
fined in paragraph (e)(1) of this section)
during the calendar year;
* * * * *
(G) The amount of any reductions to
the amount of scholarships or grants for
the payment of the individual’s cost of
attendance (as defined in paragraph (e)(2)
of this section) that were reported by the
eligible educational institution with re-
spect to the individual for a prior calendar
year;
(H) A statement or other indication
showing whether the individual was en-
rolled for at least half of the normal full-
time work load for the course of study the
individual is pursuing for at least one ac-
ademic period that begins during the cal-
endar year (see section 25A and the reg-
ulations thereunder for more information
regarding workload requirements);
(I) A statement or other indication
showing the number of months (for this
purpose, one day in a month is treated as
an entire month) during the calendar year
that the individual was enrolled for the
normal full-time workload for the course
of study the individual is pursuing at the
institution;
(J) A statement or other indication
showing whether the individual was en-
rolled in a program leading to a graduate-
level degree, graduate-level certificate, or
other recognized graduate-level educa-
tional credential, unless the student is en-
rolled in both a graduate-level program
and an undergraduate level program dur-
ing the same calendar year at the same
institution in which case no statement or
indication is required; and
* * * * *
(iv)Separate reporting of reimburse-
ments or refunds of payments of qualified
tuition and related expenses that were re-
ported for a prior calendar year. An in-
stitution must separately report on Form
1098–T any reimbursements or refunds
(as defined in paragraph (b)(2)(vi) of this
section) made during the current calendar
year that relate to payments of qualified
tuition and related expenses that were re-
ported by the institution for a prior calen-
dar year. Such reimbursements or refunds
are not netted against the payments re-
ceived for qualified tuition and related ex-
penses during the current calendar year.
(v)Payments received for qualified tu-
ition and related expenses determined.
For purposes of determining the amount
of payments received for qualified tuition
and related expenses during a calendar
year, payments received with respect to an
individual during the calendar year from
any source (except for any scholarship or
grant that, by its terms, must be applied to
expenses other than qualified tuition and
related expenses, such as room and board)
are treated first as payments of qualified
tuition and related expenses up to the total
amount billed by the institution for qual-
ified tuition and related expenses for en-
rollment during the calendar year, and
then as payments of expenses other than
qualified tuition and related expenses for
enrollment during the calendar year. Pay-
ments received with respect to an amount
billed for enrollment during an academic
period beginning in the first 3 months of
the following calendar year in which the
payment is made are treated as payment of
qualified tuition and related expenses in
the calendar year during which the pay-
ment is received by the institution. For
Bulletin No. 2016–33August 15, 2016
261

purposes of this section, a payment in-
cludes any positive account balance (such
as any reimbursement or refund credited
to an individual’s account) that an institu-
tion applies toward current charges.
(vi)Reimbursements or refunds of pay-
ments for qualified tuition and related ex-
penses determined. For purposes of deter-
mining the amount of reimbursements or
refunds made of payments received for
qualified tuition and related expenses, any
reimbursement or refund made with re-
spect to an individual during a calendar
year (except for any refund of a scholar-
ship or grant that, by its terms, was re-
quired to be applied to expenses other
than qualified tuition and related ex-
penses, such as room and board) is treated
as a reimbursement or refund of payments
for qualified tuition and related expenses
up to the amount of any reduction in
charges for qualified tuition and related
expenses. For purposes of this section, a
reimbursement or refund includes
amounts that an institution credits to an
individual’s account, as well as amounts
disbursed to, or on behalf of, the individ-
ual.
(vii) * * *
Example 1. (i) Student A enrolls in University X
as a full-time student for the 2016 fall semester. In
early August 2016, University X sends a bill to
Student A for $16,000 for the 2016 fall semester
breaking out the current charges as follows: $10,000
for qualified tuition and related expenses and $6,000
for room and board. In late August 2016, Student A
pays $11,000 to University X, leaving a remaining
balance to be paid of $5,000. In early September
2016, Student A drops to half-time enrollment for
the 2016 fall semester but remains in on-campus
housing. In late September 2016, University X cred-
its $5,000 to Student A’s account, reflecting a $5,000
reduction in the $10,000 charge for qualified tuition
and related expenses as a result of dropping from
full-time to half-time status. No other transactions
occur with respect to Student A’s account with Uni-
versity X. In late September 2016, University X
applies the $5,000 credit toward Student A’s current
charges, eliminating any outstanding balance on Stu-
dent A’s account with University X.
(ii) Under paragraph (b)(2)(v) of this section, the
$11,000 payment is treated as a payment of qualified
tuition and related expenses up to the $10,000 billed
for qualified tuition and related expenses. Under
paragraph (b)(2)(vi) of this section, the $5,000 cred-
ited to the student’s account is treated as a reim-
bursement or refund of payments for qualified tuition
and related expenses because there is a reduction in
charges for qualified tuition and related expenses
equal to the $5,000 credit due to Student A dropping
to half-time for the 2016 fall semester. Under para-
graph (b)(2)(iii) of this section, the $10,000 payment
received for qualified tuition and related expenses
during 2016 is reduced by the $5,000 reimbursement
or refund of payments received for qualified tuition
and related expenses during 2016. Therefore, Uni-
versity X is required to report $5,000 of payments
received for qualified tuition and related expenses
during 2016 on a 2016 Form 1098–T.
Example 2. (i) The facts are the same as in
Example 1of this paragraph (b)(2)(vii), except that
Student A pays the full $16,000 in late August 2016.
In late September 2016, University X reduces the
tuition charges by $5,000 and issues a $5,000 refund
to Student A.
(ii) Under paragraph (b)(2)(v) of this section, the
$16,000 payment is treated as a payment of qualified
tuition and related expenses up to the $10,000 billed
for qualified tuition and related expenses. Under
paragraph (b)(2)(vi) of this section, the $5,000 re-
fund is treated as reimbursement or refund of pay-
ments for qualified tuition and related expenses be-
cause University X reduced the charges for qualified
tuition and related expenses equal to the $5,000
refund disbursed to the student due to dropping to
half-time for the 2016 fall semester. Under para-
graph (b)(2)(iii) of this section, the $10,000 payment
received for qualified tuition and related expenses
during 2016 is reduced by the $5,000 reimbursement
or refund of payments received for qualified tuition
and related expenses during 2016. Therefore, Uni-
versity X is required to report $5,000 of payments
received for qualified tuition and related expenses
during 2016 on a 2016 Form 1098–T.
Example 3. (i) The facts are the same as in
Example 1of this paragraph (b)(2)(vii), except that
Student A is enrolled full-time, and, in early Sep-
tember 2016, Student A decides to live at home with
her parents. In late September 2016, University X
adjusts Student A’s account to eliminate room and
board charges and issues a $1,000 refund to Student A.
(ii) Under paragraph (b)(2)(v) of this section, the
$11,000 payment is treated as a payment of qualified
tuition and related expenses up to the $10,000 billed
for qualified tuition and related expenses. Under
paragraph (b)(2)(vi) of this section, the $1,000 re-
fund is not treated as reimbursement or refund of
payments for qualified tuition and related expenses
because University X has reduced room and board
charges for the 2016 fall semester, rather than reduc-
ing charges for qualified tuition and related expenses
for the 2016 fall semester. Therefore, under para-
graph (b)(2)(iii) of this section, University X is re-
quired to report $10,000 of payments received for
qualified tuition and related expenses during 2016 on
a 2016 Form 1098–T.
Example 4. (i) Student B enrolls in College Y as
a full-time student for the 2017 spring semester. In
early December 2016, College Y sends a bill to
Student B for $16,000 for the 2017 spring semester
breaking out current charges as follows: $10,000 for
qualified tuition and related expenses and $6,000 for
room and board. In late December 2016, College Y
receives a payment of $16,000 from Student B. In
mid-January 2017, after the 2017 spring semester
classes begin, Student B drops to half-time enroll-
ment. In mid-January 2017, College Y credits Stu-
dent B’s account with $5,000, reflecting a $5,000
reduction in charges for qualified tuition and related
expenses, but does not issue a refund to Student B.
Thereafter, Student B’s account reflects a positive
balance of $5,000 due to the credit and there is no
other activity on Student B’s account until early
August when College Y sends a bill for $16,000 for
the 2017 fall semester breaking out the current
charges as follows: $10,000 for qualified tuition and
related expenses and $6,000 for room and board. In
early September 2017, College Y applies the $5,000
positive account balance (credit) toward Student B’s
$16,000 bill for the 2017 fall semester. In late Sep-
tember 2017, Student B pays $6,000 towards the
charges for the 2017 fall semester.
(ii) For calendar year 2016, under paragraph
(b)(2)(v) of this section, $10,000 of the $16,000
payment received by College Y in December 2016 is
treated as a payment of qualified tuition and related
expenses. Therefore, College Y is required to report
$10,000 of payments received for qualified tuition
and related expenses during 2016 on a 2016 Form
1098–T. In addition, College Y is required to indi-
cate that $10,000 of the payments reported on the
2016 Form 1098–T relate to an academic period that
begins during the first three months of the next
calendar year.
(iii) Under paragraph (b)(2)(vi) of this section,
the $5,000 credited to Student B’s account in Janu-
ary 2017 is treated as a reimbursement or refund of
qualified tuition and related expenses because there
is a reduction in charges for qualified tuition and
related expenses of $5,000 for the 2017 spring se-
mester. Under paragraph (b)(2)(iv) of this section,
however, this reduction is a reimbursement or refund
of qualified tuition and related expenses made during
2017 and, therefore, must be separately reported on
the 2017 Form 1098–T. The 2016 Form 1098–T
reporting $10,000 of qualified tuition and related
expenses for 2016 is unchanged.
(iv) Under paragraph (b)(2)(v) of this section, the
$5,000 positive account balance that is applied to-
ward charges for the 2017 fall semester is treated as
a payment made in 2017. Therefore, College Y re-
ceived total payments of $11,000 during 2017 (the
$5,000 credit plus the $6,000 payment). Under para-
graph (b)(2)(v) of this section, the $11,000 of total
payments made during 2017 are treated as a payment
of qualified tuition and related expenses up to the
$10,000 billed for qualified tuition and related ex-
penses for the 2017 fall semester. Therefore, for
2017, College Y is required to report $10,000 of
payments received for qualified tuition and related
expenses during 2017 and a $5,000 refund of pay-
ments of qualified tuition and related expenses re-
ported for 2016 on the 2017 Form 1098–T.
Example 5. (i) Student C enrolls in College Z as
a full-time student for the 2016 fall semester and the
2017 spring semester. Student C was not enrolled in,
and did not attend, any institution of higher educa-
tion prior to the 2016 fall semester. In August 2016,
College Z sends a bill to Student C for $11,000 for
the 2016 fall semester. In December 2016, College Z
sends a bill to Student C for $11,000 for the 2017
spring semester. Qualified tuition and related ex-
penses billed for each semester is $6,000 and room
and board billed for each semester is $5,000. In
September 2016, College Z receives a payment of
$11,000 which is applied toward the amount billed
for Student C’s attendance during the 2016 fall se-
mester. In December 2016, College Z receives a
payment of $4,500 which is applied toward the
August 15, 2016Bulletin No. 2016–33
262

amount billed for Student C’s attendance during the
2017 spring semester. In February 2017, College Z
receives a payment of $6,500, the remainder of the
amount billed for enrollment during the 2017 spring
semester.
(ii) On the 2016 Form 1098–T, College Z reports
the payment of $10,500 of qualified tuition and re-
lated expenses determined as follows: $6,000 for the
payment received in September 2016 with respect to
the amount billed for qualified tuition and related
expenses for the 2016 fall semester and $4,500 for
the payment received in December 2016 with respect
to the amount billed for qualified tuition and related
expenses for the 2017 spring semester. On the 2017
Form 1098–T, College Z reports the payment of
$1,500 of qualified tuition and related expenses re-
ceived in February 2017 with respect to the amount
billed for qualified tuition and related expenses for
the 2017 spring semester.
Example 6. The facts are the same asExample 5
of this paragraph (b)(2)(vii) except in January 2017
College Z receives payment of $11,000 for the entire
amount billed for the 2017 spring semester. On the
2016 Form 1098–T, College Z reports the payment
of $6,000 for the payment received in September
2016 with respect to the amount billed for qualified
tuition and related expenses for the 2016 fall semes-
ter. On the 2017 Form 1098–T, College Z reports the
payment of $6,000 of qualified tuition and related
expenses received in January 2017 with respect to
the amount billed for qualified tuition and related
expenses for the 2017 spring semester.
* * * * *
(4)Time and place for filing return–(i)
In general. Except as provided in para-
graph (b)(4)(ii) of this section, Form
1098–T must be filed on or before Febru-
ary 28 (March 31 if filed electronically) of
the year following the calendar year in
which payments were received for quali-
fied tuition or related expenses, or reim-
bursements, refunds, or reductions of such
amounts were made. An institution or in-
surer must file Form 1098–T with the IRS
according to the instructions for Form
1098–T.
* * * * *
(c) * * *
(1)* * *
(iii) * * *
(A) State that the statement reports to-
tal payments received by the institution
for qualified tuition and related expenses
during the calendar year, or the total re-
imbursements or refunds made by the in-
surer;
(B) State that, under section 25A and
the regulations thereunder, the taxpayer
may claim an education tax credit only
with respect to qualified tuition and re-
lated expenses actually paid during the
calendar year; and that the taxpayer may
not be able to claim an education tax
credit with respect to the entire amount of
payments received for qualified tuition
and related expenses reported on the Form
1098–T for the calendar year;
(C) State that the amount of any schol-
arships or grants reported on the Form
1098–T for the calendar year and other
similar amounts not reported on the Form
1098–T (because they are not adminis-
tered and processed by the eligible educa-
tional institution as defined in paragraph
(e)(1) of this section) that are allocated by
the student to pay qualified tuition and
related expenses may reduce the amount
of any allowable education tax credit for
the taxable year;
(D) State that even if the eligible edu-
cational institution applies scholarships or
grants reported on the Form 1098–T for
the calendar year to qualified tuition and
related expenses, the student may, for tax
purposes, be able to allocate all or a por-
tion of the scholarships or grants to ex-
penses other than qualified tuition and re-
lated expenses (and, therefore, forego
having to reduce the amount of the edu-
cation tax credit the student may claim) if
the terms of the scholarship or grant per-
mit it to be used for expenses other than
qualified tuition and related expenses and
the student includes the amount in income
on his federal income tax return.
* * * * *
(E) State that the amount of any reim-
bursements or refunds of payments re-
ceived, or reductions in charges, for qual-
ified tuition and related expenses, or any
reductions to the amount of scholarships
or grants, reported by the eligible educa-
tional institution with respect to the indi-
vidual for a prior calendar year on Form
1098–T may affect the amount of any
allowable education tax credit for the
prior calendar year (and may result in an
increase in tax liability for the year of the
refund);
(F) State that the amount of any reim-
bursements or refunds of qualified tuition
and related expenses reported on a Form
1098–T by an eligible educational insti-
tution or insurer may reduce the amount
of an allowable education tax credit for a
taxable year (and may result in an increase
in tax liability for the year of the refund);
(G) State that the taxpayer should refer
to relevant IRS forms and publications,
such as Publication 970, “Tax Benefits for
Education,” and should not refer to the
institution or the insurer, for explanations
relating to the eligibility requirements for,
and calculation of, any allowable educa-
tion tax credit; and
(H) Include the name, address, and
phone number of the information contact
of the eligible educational institution or
insurer that filed the Form 1098–T.
(2)Time and manner for furnishing
statement—(i)In general. Except as pro-
vided in paragraph (c)(2)(ii) of this sec-
tion, an institution or insurer must furnish
the statement described in paragraph
(c)(1) of this section to each individual for
whom it is required to file a return, on or
before January 31 of the year following
the calendar year in which payments were
received for qualified tuition and related
expenses, or reimbursements, refunds or
reductions of such amounts were made. If
mailed, the statement must be sent to the
individual’s permanent address or the in-
dividual’s temporary address if the insti-
tution or insurer does not know the indi-
vidual’s permanent address. If furnished
electronically, the statement must be fur-
nished in accordance with applicable reg-
ulations.
* * * * *
(e)Definitions. The following defini-
tions apply with respect to this section:
(1)Administered and processed—(i)In
general. A scholarship or grant is “admin-
istered and processed” by an eligible ed-
ucational institution if the institution re-
ceives payment of an amount (whether by
cash, check, or other means of payment)
that the institution knows or reasonably
should know, is a scholarship or grant,
regardless of whether the institution is
named payee or co-payee of such amount
and regardless of whether, in the case of a
payment other than in cash, the student
endorses the check or other means of pay-
ment for the benefit of the institution. For
instance, Pell Grants, described in the
Higher Education Act of 1965 (20 U.S.C.
1070), as amended, are administered and
processed by an institution in all cases.
(ii)Examples. The following examples
illustrate the definition in this paragraph
(e)(1):
Example 1. University M received a Pell Grant
on behalf of Student B, a student enrolled in a degree
program at University M. University M provides all
required notifications to and obtains all the necessary
Bulletin No. 2016–33August 15, 2016
263

paperwork from Student B and applies the Pell Grant
to Student B’s account. Because University M re-
ceived the Pell Grant and University M knows or
should know that the Pell Grant is a scholarship or
grant, under paragraph (e)(1)(i) of this section, the
Pell Grant is administered and processed by Univer-
sity M.
Example 2. University N receives a check from
Organization Y made out to Student C. University N
is not named as a payee on the check. The cover
letter accompanying the check provides University
N with sufficient information to reasonably know
that the check represents payment of a scholarship
that may be used to pay Student C’s qualified tuition
and related expenses. Under paragraph (e)(1)(i) of
this section, the scholarship from Organization Y is
administered and processed by University N. This is
the case even though University N is not named on
the check as a payee and regardless of whether
Student C endorses the check over to University N.
(2)Cost of attendance. The term “cost
of attendance” has the same meaning as
section 472 of the Higher Education Act
of 1965, 20 U.S.C. 1087ll.
(f) * * *
(3) * * *
(ii)Acting in a responsible manner. An
institution or insurer must request the TIN
of each individual for whom it is required
to file a return if it does not already have
a record of the individual’s correct TIN. If
the institution or insurer does not have a
record of the individual’s correct TIN,
then it must solicit the TIN in the manner
described in paragraph (f)(3)(iii) of this
section on or before December 31 of each
year during which it receives payments of
qualified tuition and related expenses or
makes reimbursements, refunds, or reduc-
tions of such amounts with respect to the
individual. If an individual refuses to pro-
vide his or her TIN upon request, the
institution or insurer must file the return
and furnish the statement required by this
section without the individual’s TIN, but
with all other required information. The
specific solicitation requirements of para-
graph (f)(3)(iii) of this section apply in
lieu of the solicitation requirements of
§ 301.6724–1(e) and (f) of this chapter for
the purpose of determining whether an
institution or insurer acted in a responsible
manner in attempting to obtain a correct
TIN. An institution or insurer that com-
plies with the requirements of this para-
graph (f)(3) will be considered to have
acted in a responsible manner within the
meaning of § 301.6724–1(d) of this chap-
ter with respect to any failure to include
the correct TIN of an individual on a
return or statement required by section
6050S and this section.
* * * * *
(4)No penalty imposed on eligible ed-
ucational institutions that certify compli-
ance with paragraph (f)(3) of this section
at the time of filing the return.In the case
of returns required to be filed and state-
ments required to be furnished after De-
cember 31, 2015, the IRS will not impose
a penalty against an eligible educational
institution under section 6721 or 6722 for
failure to include the individual’s correct
TIN on the return or statement if the in-
stitution makes a true and accurate certi-
fication to the IRS under penalties of per-
jury (in the form and manner prescribed
by the Secretary in publications, forms
and instructions, or other published guid-
ance) at the time of filing of the return that
the institution complied with the require-
ments in paragraphs (f)(3)(ii) and (iii) of
this section. Nothing in this paragraph
(f)(4) prevents the IRS from imposing a
penalty under section 6721or 6722 if after
the IRS receives the certification de-
scribed in this paragraph (f)(4) the IRS
determines that the requirements of para-
graph (f)(3) of this section are not satisfied
or the failure is unrelated to an incorrect
or missing TIN for the individual for
whom the institution is required to file a
return or statement.
* * * * *
(g)Applicability date. The rules in this
section apply to information returns re-
quired to be filed, and statements required
to be furnished, after December 31, 2003,
except that paragraphs (a)(2), (b)(1),
(b)(2)(i), (b)(2)(ii)(D), (E), and (G)
through (K), (b)(2)(iv) through (vii),
(b)(4)(i) and (ii), (c)(1)(iii)(B) through
(H), (e), and (f)(4) apply to information
returns required to be filed, and statements
required to be furnished, after the date of
publication of the Treasury decision
adopting these rules as final regulations in
theFederal Register.For information re-
turns required to be filed, and statements
required to be furnished, on or before the
date of publication of the Treasury deci-
sion adopting these rules as final regula-
tions in theFederal Register,§ 1.6050S–
1 (as contained in 26 CFR part 1, revised
April 2014) applies.
PART 301—PROCEDURE AND
ADMINISTRATION
Par. 8. The authority citation for part
301 continues to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 9. Section 301.6724–1 is amended
by adding a sentence at the end of para-
graph (a)(1) to read as follows:
§ 301.6724–1 Reasonable cause.
(a) * * *
(1) * * * For waiver in the case of
eligible educational institutions required
to report information under section 6050S
with respect to qualified tuition and re-
lated expenses, see § 1.6050S–1(f) of this
chapter.
* * * * *
John Dalrymple,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on July 29, 2016,
11:15 a.m., and published in the issue of the Federal Reg-
ister for August 2, 2016, 81 F.R. 50657)
August 15, 2016Bulletin No. 2016–33
264

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 ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, 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 pub-
lished ruling and points out an essential
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 published position. (Compare
with amplified 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 rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a 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 pe-
riod of time in separate rulings. If the new
ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
supersededdescribes a situation where the
substance of a previously published 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 superseded.
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 ma-
terial 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.—Statement 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.
Bulletin No. 2016–33August 15, 2016
i

Numerical Finding List
1
Bulletin 2016–27 through 2016–33
Action on Decision:
2016-01, 2016-16 I.R.B.580
2016-02, 2016-31 I.R.B.193
Announcements:
2016-21, 2016-27 I.R.B.8
2016-23, 2016-27 I.R.B.10
2016-24, 2016-30 I.R.B.170
2016-25, 2016-31 I.R.B.205
2016-27, 2016-33 I.R.B.238
Notices:
2016-40, 2016-27 I.R.B.4
2016-41, 2016-27 I.R.B.5
2016-42, 2016-29 I.R.B.67
2016-43, 2016-29 I.R.B.132
2016-44, 2016-29 I.R.B.132
2016-45, 2016-29 I.R.B.135
2016-46, 2016-31 I.R.B.202
2016-48, 2016-33 I.R.B.235
Proposed Regulations:
REG-102516-15, 2016-32 I.R.B.231
REG-103058-16, 2016-33 I.R.B.238
REG-109086-15, 2016-30 I.R.B.171
REG-101689-16, 2016-30 I.R.B.170
REG-123854-12, 2016-28 I.R.B.15
REG-134016-15, 2016-31 I.R.B.205
REG-131418-14, 2016-33 I.R.B.248
REG-147196-07, 2016-29 I.R.B.32
Revenue Procedures:
2016-37, 2016-29 I.R.B.136
2016-39, 2016-30 I.R.B.164
2016-40, 2016-32 I.R.B.228
2016-41, 2016-30 I.R.B.165
Revenue Rulings:
2016-17, 2016-27 I.R.B.1
2016-18, 2016-31 I.R.B.194
Treasury Decisions:
9773, 2016-29 I.R.B.56
9774, 2016-30 I.R.B.151
9775, 2016-30 I.R.B.159
9776, 2016-32 I.R.B.222
9778, 2016-31 I.R.B.196
9779, 2016-33 I.R.B.233
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2016–01 through 2016–26 is in Internal Revenue Bulletin
2016–26, dated June 27, 2016.
August 15, 2016Bulletin No. 2016–33
ii

Finding List of Current Actions on
Previously Published Items
1
Bulletin 2016–27 through 2016–33
Notices:
2013-1
Modified by
Notice 2016-41, 2016-27 I.R.B.5
2013-1
Superseded by
Notice 2016-41, 2016-27 I.R.B.5
Revenue Procedures:
2007-44
Clarified by
Rev. Proc. 2016-37, 2016-29 I.R.B.136
2007-44
Modified by
Rev. Proc. 2016-37, 2016-29 I.R.B.136
2007-44
Superseded by
Rev. Proc. 2016-37, 2016-29 I.R.B.136
2015-36
Modified by
Rev. Proc. 2016-37, 2016-29 I.R.B.136
2016-3
Modified by
Rev. Proc. 2016-40, 2016-32 I.R.B.228
2016-29
Modified by
Rev. Proc. 2016-39, 2016-30 I.R.B.164
Treasury Decisions:
2014-12
Modified by
T.D. 9776 2016-32 I.R.B.222
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2016–01 through 2016–26 is in Internal Revenue Bulletin
2016–26, dated June 27, 2016.
Bulletin No. 2016–33August 15, 2016
iii

INTERNAL REVENUE BULLETIN
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