Revenue Procedure 2020-7
Internal Revenue Service
2020-1 I.R.B. 281
   
   
   
 26 CFR 601.201: Rulings and determination letters.    
     
 Rev. Proc. 2020-7    
     
 SECTION 1. PURPOSE    
     
This revenue procedure updates Rev. Proc. 2019-7, 2019-1 I.R.B. 268, by providing a current list of those areas of the Internal Revenue Code under the  jurisdiction  of  the  Associate  Chief  Counsel  (International) relating to matters on which the Internal Revenue Service will not issue letter rulings or determination  letters.   
   
 SECTION 2. BACKGROUND AND SCOPE OF APPLICATION.01 Background   
   
In the interest of sound tax administration, the Service answers inquiries from individuals and organizations regarding their status for tax purposes and the tax effects of their acts or transactions before the filing of returns or reports that are required by the Internal Revenue Code. There are, however, areas where the Service will not issue letter rulings or determination letters, either because the issues are inherently factual or for other reasons. These areas are set forth in sections 3 and 4 of this revenue procedure.   
     
Section 3 lists areas in which letter  rulings and determination letters will not be issued under any  circumstances.   
     
Section 4 lists areas in which they will not ordinarily be issued; in these areas, unique and compelling reasons may justify issuing a letter ruling or determination letter. A taxpayer who plans to request a letter ruling or determination letter in an area described in Section 4 should contact (by telephone or in writing) the Office of Associate Chief Counsel (International) (hereinafter "the Office") prior to making such request and discuss with the Office the unique and compelling reasons that the taxpayer believes justify issuing such letter ruling or determination letter. While not required, a written submission is encouraged since it will enable Office personnel to arrive more quickly at an understanding of the unique facts of each case. A taxpayer who contacts the Office by telephone may be requested to provide a written submission. The Service may provide a general information letter in response to inquiries in areas on either list. These lists are not all-inclusive. Future  revenue  procedures  may  add  or  delete items. The Service may also decline to rule on an individual case for reasons peculiar to that case, and such decision will not be announced in the Internal Revenue Bulletin. See Rev. Proc. 2020-1, Section 6.02..02 Scope of  Application   
   
This revenue procedure does not preclude the submission of requests for technical  advice  to  the  Office  from  other  offices of the  Service.   
   
 SECTION 3. AREAS IN WHICH RULING OR DETERMINATION LETTERS WILL NOT BE ISSUED.01 Specific Questions and  Problems   
   
(1) Section 861.--Income from Sources Within the United States.--A method for determining the source of a pension payment to a nonresident alien individual from a trust under a defined benefit plan that is qualified under § 401(a) if the proposed method is inconsistent with §§ 4.01, 4.02, and 4.03 of Rev. Proc. 200437, 2004-1 C.B. 1099.   
     
(2) Section 862.--Income from Sources Without the United States.--A method for determining the source of a pension payment to a nonresident alien individual from a trust under a defined benefit plan that is qualified under § 401(a) if the proposed method is inconsistent with §§ 4.01, 4.02, and 4.03 of Rev. Proc. 200437, 2004-1 C.B. 1099.   
     
(3) Section 871(g).--Special Rules for Original Issue Discount.--Whether a  debt instrument having original issue discount within the meaning of § 1273 is not an original issue discount obligation within the meaning of § 871(g)(1)(B)(i) when the instrument is payable 183 days or less from  the  date  of  original  issue  (without  regard to the period held by the  taxpayer).   
     
(4) Section 894.--Income Affected by Treaty.--Whether a person that is a resident of a foreign country and derives income from the United States is entitled to benefits under the United States income tax treaty with that foreign country pursuant to the limitation on benefits article. However, the Service may rule regarding the legal interpretation of a particular  provision within the relevant limitation on benefits  article.   
     
(5) Section 954.--Foreign Base Company Income.--The effective rate of tax that a foreign country will impose on income.   
     
(6) Section 954.--Foreign Base Company Income.-- Whether the facts and circumstances  evince  that  a  controlled  foreign corporation makes a substantial contribution through the activities of its employees to the manufacture,  production, or construction of the personal property sold within the meaning of §  1.954-3(a)(4)(iv).   
     
(7) Section 7701(b).--Definition of Resident Alien and Nonresident Alien.-- Whether an alien individual is a nonresident of the United States, including whether the individual has met the requirements of the substantial presence  test or exceptions to the substantial presence test. However, the Service may rule regarding  the  legal  interpretation  of  a  particular provision of § 7701(b) or the regulations  thereunder..02 General  Areas.   
   
(1) The prospective application of the estate tax to the property or the estate of a living person, except that rulings may be issued on any international issues in a ruling request accepted pursuant to § 5.06 of Rev. Proc. 2020-1, in this  Bulletin.   
     
(2) Whether reasonable cause exists under Subtitle F (Procedure and Administration) of the  Code.   
     
(3) Whether a proposed transaction would subject a taxpayer to criminal penalties.   
     
(4) Any area where the ruling request does not comply with the requirements of Rev. Proc.  2020-1.   
     
(5) Any area where the same issue is the subject of the taxpayer's pending request for competent authority assistance under a United States tax  treaty.   
     
(6) A "comfort" ruling will not be issued  with  respect  to  an  issue  that  is  clearly and adequately addressed by statute, regulations, decisions of a court, tax treaties, revenue rulings, or revenue procedures absent extraordinary circumstances  (e.g., a request for a ruling required by a governmental regulatory authority in order to effectuate the transaction).   
     
(7) Any frivolous issue, as that term is defined in § 6.10 of Rev. Proc. 2020-1.   
   
 SECTION 4. AREAS IN WHICH RULING OR DETERMINATION LETTERS  WILL  NOT  ORDINARILY BE  ISSUED.01 Specific Questions and  Problems   
   
(1) Section  367(a).--Transfers  of  Property  from  the  United  States.--  Whether  an oil or gas working interest is transferred from the United States for use in the active conduct of a trade or business for purposes of § 367(a)(3); and whether any other property is so transferred, where the determination requires extensive factual inquiry.   
     
(2) Section  367(a).--Transfers  of  Property from the United States.--Whether a transferred corporation subject to a gain recognition agreement under § 1.367(a) 8 has disposed of substantially all of its assets.   
     
(3) Section 367(b).--Other Transfers.--Whether and the extent to which regulations under § 367(b) apply to an exchange involving foreign corporations, unless  the  ruling  request  presents  a  significant  legal  issue  or  subchapter  C  rulings  are requested in the context of the  exchange.   
     
(4) Section 864.--Definitions and Special Rules.--Whether a taxpayer is engaged in a trade or business within the United States, and whether income is effectively connected with the conduct of a trade or business within the  United States; whether an instrument is a security as defined  in  §  1.864-2(c)(2);  whether  a  taxpayer effects transactions in the United  States in stocks or securities under § 1.864-2(c) (2); whether an instrument or item is a commodity as defined in § 1.864-2(d) (3); and for purposes of § 1.864-2(d)(1) and (2), whether a commodity is of a  kind customarily dealt in on an organized  commodity exchange, and whether a transaction  is  of  a  kind  customarily  consummated at such  place.   
     
(5) Section 871.--Tax on Nonresident Alien Individuals.-- Whether a payment constitutes portfolio interest under § 871(h);  whether  an  obligation  qualifies  for any of the components of portfolio interest such as being in registered form; and whether the income earned on contracts that do not qualify as annuities or life insurance contracts because of the limitations imposed by § 72(s) and § 7702(a) is portfolio interest as defined in § 871(h).   
     
(6) Section 881.--Tax on Income of Foreign Corporations Not Connected  with United States Business.--Whether the income  earned  on  contracts  that  do  not  qualify as annuities or life insurance contracts because of the limitations imposed by § 72(s) and § 7702(a) is portfolio interest  as defined in §  881(c).   
     
(7) Section 892.--Income of Foreign Governments and of International  Organizations.--Whether income derived by  foreign governments and international organizations from sources within the United States is excluded from gross income and exempt from taxation and any underlying issue related to that  determination.   
     
(8) Section 893.--Compensation of Employees of Foreign Governments and International  Organizations.--Whether wages, fees, or salary of an employee of a foreign government or of an international organization received as compensation  for official services to such government  or  international organization is  excluded  from gross income and exempt from taxation and any underlying issue related to that determination.   
     
(9) Section 894.--Income Affected by Treaty.--Whether the income received by an individual in respect of services rendered to a foreign government or a political subdivision or a local authority thereof is exempt from federal income  tax or withholding under any of the United States income tax treaties which contain provisions applicable to such  individuals.   
     
(10) Section 894.--Income Affected by  Treaty.--Whether  a  taxpayer  has  a  permanent establishment in the United  States for purposes of any United States income tax treaty and whether income is attributable to a permanent establishment in the United  States.   
     
(11) Section 894.--Income Affected by Treaty.--Whether certain persons will be considered liable to tax under the laws of a foreign country for purposes of determining if such persons are residents within the meaning of any United States income tax treaty. But see Rev. Rul. 200059, 2000-2 C.B. 593.   
     
(12) Section 894.--Income Affected by Treaty.--Whether the income  received by a nonresident alien student or trainee for services performed for a university or other educational institution is exempt from federal income tax or withholding under any of the United States income tax treaties which contain provisions applicable to such nonresident alien students or trainees.   
     
(13) Section 894.--Income Affected by Treaty.--Whether the income received by a nonresident alien performing research or teaching as personal services for a university, hospital or other research institution is exempt from federal income tax  or  withholding  under  any  of  the  United States income tax treaties which contain provisions applicable to such nonresident alien teachers or  researchers.   
     
(14) Section 894.--Income Affected by Treaty.--Whether a foreign recipient of payments made by a United States person is ineligible to receive the benefits of a  United  States  tax  treaty  under  the  principles  of   Rev.   Rul.  89-110,  1989-2  C.B.  275.   
     
(15) Section 894.--Income Affected by Treaty.--Whether a recipient of payments is or has been a resident of a country for purposes of any United States tax treaty. Pursuant to § 1.884-5(f), however, the Service may rule whether a corporation representing that it is a resident of a country is a qualified resident thereof for purposes of §  884.   
     
(16) Section 894.--Income Affected by Treaty.--Whether an entity is treated as fiscally transparent by a foreign jurisdiction for purposes of § 894(c) and the regulations  thereunder.   
     
(17) Section 901.--Taxes of Foreign Countries and of Possessions of United States.--Whether  a  foreign  levy  meets  the requirements of a creditable tax under § 901.   
     
(18) Section 901.--Taxes of Foreign Countries and of Possessions of Unit ed States.--Whether a person claiming a credit has established, based on all of the relevant facts and circumstances, the amount (if any) paid by a dual capacity taxpayer under a qualifying levy that is not paid in exchange for a specific economic benefit. See §  1.901-2A(c)(2).   
     
(19) Section 903.--Credit for Taxes in Lieu of Income, Etc., Taxes.--Whether a foreign levy meets the requirements of a creditable tax under §  903.   
     
(20) Sections 954(d), 993(c).--Manufactured Product.--Whether a product is manufactured or produced for purposes  of § 954(d) and § 993(c).   
     
(21) Section 937.--Definition of Bona Fide Resident.--Whether an individual is a bona fide resident of American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands. However, the Service may rule regarding the legal interpretation of a particular  provision  of  §  937(a)  or  the  regulations  thereunder.   
     
(22) Section 956.--Investment of Earnings in United States Property.-- Whether a pledge of the stock of a controlled foreign corporation is an indirect pledge of the assets of that corporation. See §  1.956-2(c)(2).   
     
(23) Section 985.--Functional Curren cy.-- Whether a currency is the  functional currency of a qualified business  unit.   
     
(24) Section 989(a).--Qualified Business  Unit.--  Whether  a  unit  of  the  taxpayer's trade or business is a qualified business  unit.   
     
(25) Section 1058.--Transfers of Securities Under Certain Agreements.-- Whether the amount of any payment described in § 1058(b)(2) or the amount of any other payment made in connection with a transfer of securities described  in § 1058 is from sources within or without the United States; the character of such amounts; and whether the amounts constitute a particular kind of income for purposes of any United States income tax treaty.   
     
(26) Section 1059A.--Limitation on taxpayer's basis or inventory cost in  property imported from related persons.-- Whether a taxpayer's cost or inventory basis in property imported from a foreign affiliate will not be limited by § 1059A due to differences between customs valuation and tax  valuation.   
     
(27) Sections 1471, 1472, 1473, and 1474.--Taxes to Enforce Reporting on Certain Foreign Accounts.--Whether a taxpayer,  withholding  agent,  or  intermediary has properly applied the requirements of chapter 4 of the Internal Revenue Code (sections 1471 through 1474, also known as   "FATCA")   or  of  an  applicable  intergovernmental agreement to implement FAT CA.   
     
(28) Section 1503(d).--Dual Consolidated Loss.--Whether the income tax laws of a foreign country would deny any opportunity for the foreign use of a dual consolidated loss in the year in which the dual consolidated loss is incurred under § 1.1503(d)-3(e)(1); whether no possibility of foreign use exists under § 1.1503(d)-6(c)(1); whether an event presumptively constitutes a triggering event under § 1.1503(d)-6(e)(1)(i)-(ix); whether the presumption of a triggering event is rebutted under § 1.1503(d)-6(e)(2); and whether a domestic use agreement terminates under § 1.1503(d)-6(j)(1). The Service will also not ordinarily rule on the corresponding pro visions of prior regulations under §  1503(d).   
     
(29) Section 2501.--Imposition of Tax.--Whether a partnership interest is intangible property for purposes of § 2501(a)(2) (dealing with transfers of intangible property by a nonresident not a citizen of the United States).   
     
(30) Section  7701.--Definitions.-- Whether an estate or trust is a foreign estate or trust for federal income tax purposes.   
     
(31) Section  7701.--Definitions.-- Whether an intermediate entity is a conduit entity under § 1.881-3(a)(4); whether a transaction is a  financing  transaction under § 1.881-3(a)(4)(ii); whether the participation of an intermediate entity in a financing arrangement is pursuant to a tax avoidance plan under § 1.881-3(b); whether an intermediate entity performs significant financing activities  under  § 1.881-3(b)(3)(ii); whether an unrelated intermediate entity would not have  participated in a financing arrangement on substantially the same terms under § 1.8813(c).   
     
(32) Section 7874.--Expatriated Entities and Their Foreign Parents.-- Wheth er, after the acquisition, the expanded affiliated group has substantial business activities in the foreign country in which, or under the law of which, the foreign entity is created or organized, when compared to the total business activities of  the expanded affiliated  group.   
     
(33) Section 7874.--Expatriated Entities and Their Foreign  Parents.--Whether a foreign corporation completes the direct or indirect acquisition of substantially all of  the  properties  held  directly  or  indirectly by a domestic corporation or substantially all of the properties constituting a trade or business of a domestic  partnership..02 General  Areas   
   
(1) Whether a taxpayer has a business purpose for a transaction or  arrangement.   
     
(2) Whether a taxpayer uses a correct North American Industry Classification System (NAICS) code or Standard Industrial Classification (SIC)  code.   
     
(3) Any  transaction  or  series  of  transactions  that  is  designed  to  achieve  a  different tax consequence or classification under U.S. tax law (including tax treaties) and the  tax  law  of  a  foreign  country,  where  the results of that different tax consequence or classification are inconsistent with the purposes of U.S. tax law (including tax treaties).   
     
(4)(a) Situations where a taxpayer or a related party is domiciled or organized in a foreign jurisdiction with which the United States does not have an effective mechanism for obtaining tax information with respect to civil tax examinations and criminal tax investigations, which would preclude the Service from obtaining information located in such jurisdiction that is relevant to the analysis or examination of the tax issues involved in the ruling request.   
     
(b) The provisions of subsection 4.02(4)(a)  above  shall  not  apply  if  the  taxpayer or affected related party (i)  consents to the disclosure of all relevant information requested by the Service in processing  the  ruling  request  or  in  the  course  of  an examination to verify the accuracy of the representations made and to otherwise  analyze or examine the tax issues involved in the ruling request, and (ii) waives all claims to protection of bank or commercial  secrecy  laws  in  the  foreign  jurisdiction with respect to the information requested by the Service. In the event the  taxpayer's or related party's consent to disclose relevant information or to waive protection  of bank or commercial secrecy is  determined by the Service to be ineffective or of no force and effect, then the Service may  retroactively rescind any ruling rendered in reliance on such  consent.   
     
(5) The federal tax consequences of proposed federal, state, local, municipal, or foreign legislation.   
     
(6)(a) Situations involving the interpretation of foreign law or foreign documents. The interpretation of a foreign law or foreign document means making a judgment about the import or effect of  the foreign law or document that goes  beyond its plain  meaning.   
     
(b) The Service, at its discretion, may consider rulings that involve the interpretation of foreign laws or foreign documents. In these cases, the Service may request information in addition to that  listed in § 7.01(2) and (6) of Rev. Proc. 2020-1, including a discussion of the implications of any authority believed to interpret the foreign law or foreign document, such as pending legislation, treaties, court decisions, notices or administrative decisions.   
     
(7) The treatment or effects of hook equity, as described in section 4.02(11) of Rev. Proc. 2020-3, in this Bulletin.   
   
 SECTION 5. EFFECT ON OTHER REVENUE PROCEDURES    
     
Rev. Proc. 2019-7 is superseded.   
     
 SECTION 6. EFFECTIVE DATE    
     
This revenue procedure is effective January 2, 2020.   
   
 SECTION 7. DRAFTING INFORMATION    
     
This revenue procedure was compiled by Paul S. Manning and Jorge M. Oben of the Office of Associate Chief Counsel (International). For further information regarding this revenue procedure contact Mr. Manning or Mr. Oben at (202) 3173800 (not a toll free  number).