Federal Register / Vol. 72, No. 149 / Friday, August 3, 2007 / Rules and Regulations 43157 

material advisor will not be considered 

to have complied with the list 

maintenance provisions in section 6112 

and this section. A material advisor 

must make the list or each component 

of the list available to the IRS within the 

period prescribed in section 6708 or 

published guidance relating to section 

6708. 

(2) Claims of privilege. Each material 

advisor who is required to maintain a 

list with respect to a reportable 

transaction, must still maintain the list 

pursuant to the requirements of this 

section even if a person asserts a claim 

of privilege with respect to the 

information specified in paragraph 

(b)(3)(iii)(B) of this section. 

(f) Designation agreements. If more 

than one material advisor is required to 

maintain a list of persons for a 

reportable transaction, in accordance 

with paragraph (b) of this section, the 

material advisors may designate by 

written agreement a single material 

advisor to maintain the list or a portion 

of the list. The designation of one 

material advisor to maintain the list 

does not relieve the other material 

advisors from their obligation to furnish 

the list to the IRS in accordance with 

paragraph (e)(1) of this section, if the 

designated material advisor fails to 

furnish the list to the IRS in a timely 

manner. A material advisor is not 

relieved from the requirement of this 

section because a material advisor is 

unable to obtain the list from any 

designated material advisor, any 

designated material advisor did not 

maintain a list, or the list maintained by 

any designated material advisor is not 

complete. 

(g) Effective/applicability date. In 

general, this section applies to 

transactions with respect to which a 

material advisor makes a tax statement 

under § 301.6111–3 on or after August 3, 

2007. However, this section applies to 

transactions of interest entered into on 

or after November 2, 2006, with respect 

to which a material advisor makes a tax 

statement under § 301.6111–3 on or 

after November 2, 2006. Otherwise, the 

rules that apply before August 3, 2007 

are contained in § 301.6112–1 in effect 

prior to August 3, 2007 (see 26 CFR part 

301 revised as of April 1, 2007), and see 

also Notice 2004–80 (2004–50 IRB 963); 

Notice 2005–17 (2005–8 IRB 606); and 

Notice 2005–22 (2005–12 IRB 756) (see 

§ 601.601(d)(2)). 

Kevin M. Brown, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: July 25, 2007. 

Eric Solomon, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 07–3787 Filed 7–31–07; 11:22 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 301 

[TD 9351] 

RIN 1545–BE26 

AJCA Modifications to the Section 

6111 Regulations 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document contains final 

regulations under section 6111 of the 

Internal Revenue Code that provide the 

rules relating to the disclosure of 

reportable transactions by material 

advisors. These regulations affect 

material advisors responsible for 

disclosing reportable transactions under 

section 6111 and material advisors 

responsible for keeping lists under 

section 6112. 

DATES: Effective Date: These regulations 

are effective August 3, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Charles D. Wien, Michael H. Beker, or 

Tolsun N. Waddle, 202–622–3070 (not a 

toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

This document contains final 

regulations that amend 26 CFR part 301 

by providing rules relating to the 

disclosure of reportable transactions by 

material advisors under section 6111. 

The American Jobs Creation Act of 

2004, Public Law 108–357 (118 Stat. 

1418), (AJCA) was enacted on October 

22, 2004. Section 815 of the AJCA 

amended section 6111 to require each 

material advisor with respect to any 

reportable transaction to make a return 

(in such form as the Secretary may 

prescribe) setting forth: (1) Information 

identifying and describing the 

transaction; (2) information describing 

any potential tax benefits expected to 

result from the transaction; and (3) such 

other information as the Secretary may 

prescribe. Section 6111(a), as amended, 

also provides that the return must be 

filed not later than the date specified by 

the Secretary. Section 6111(b)(1), as 

amended, provides a definition for the 

term material advisor and includes as 

part of that definition a requirement that 

the material advisor derive certain 

threshold amounts of gross income that 

the Secretary may prescribe. The AJCA 

amendments to section 6111 also 

authorize the Secretary to prescribe 

regulations that provide: (1) That only 

one person shall be required to meet the 

requirements of section 6111(a) in cases 

in which two or more persons would 

otherwise be required to meet such 

requirements; (2) exemptions from the 

requirements of section 6111; and (3) 

rules as may be necessary or appropriate 

to carry out the purposes of section 

6111. Section 815 of the AJCA is 

effective for transactions with respect to 

which material aid, assistance, or advice 

is provided after October 22, 2004. 

In response to the AJCA, the IRS and 

Treasury Department issued interim 

guidance on section 6111 in Notice 

2004–80 (2004–2 CB 963); Notice 2005–

17 (2005–1 CB 606); Notice 2005–22 

(2005–1 CB 756); and Notice 2006–6 

(2006–5 IRB 385) (see § 601.601(d)(2)). 

On November 1, 2006, the IRS and 

Treasury Department issued a notice of 

proposed rulemaking and temporary 

and final regulations under sections 

6011, 6111, and 6112 (REG–103038–05, 

REG–103039–05, REG–103043–05, TD 

9295) (the November 2006 regulations). 

The November 2006 regulations were 

published in the Federal Register (71 

FR 64488, 71 FR 64496, 71 FR 64501, 

71 FR 64458) on November 2, 2006. 

The IRS and Treasury Department 

received written public comments 

responding to the proposed regulations 

and held a public hearing regarding the 

proposed rules on March 20, 2007. After 

consideration of the comments received 

and comments made at the hearing, the 

proposed regulations are adopted as 

revised by this Treasury decision. These 

final regulations generally retain the 

provisions of the proposed regulations 

but include some modifications based 

on recommendations in the public 

comments. 

Summary of Comments and 

Explanation of Provisions 

Nine written comments were received 

in response to the NPRM. All comments 

were considered and are available for 

public inspection upon request. 

Reportable Transaction Number 

The proposed regulations provide that 

a material advisor must provide a 

reportable transaction number to all 


rmajette on PROD1PC64 with RULES
43158 Federal Register / Vol. 72, No. 149 / Friday, August 3, 2007 / Rules and Regulations 

taxpayers and material advisors to 

whom the material advisor makes or 

provides tax statements. Many 

commentators commented that the 

requirement to provide the reportable 

transaction number to all taxpayers and 

material advisors to whom the material 

advisor makes or provides tax 

statements is overly broad and 

suggested, instead, that the reportable 

transaction number only be required to 

be furnished to those for whom the 

taxpayer acted as a material advisor. 

One commentator recommended that 

the regulation be amended to remove 

the obligation to provide a reportable 

transaction number. Another 

commentator recommended that a 

material advisor should be required to 

provide the reportable transaction 

number to taxpayers only in the case of 

marketed transactions. The 

commentator also commented that in a 

purely one-on-one, non-abusive 

transaction, the use of the reportable 

transaction number may infringe upon 

the attorney-client relationship. 

The IRS and Treasury Department 

attempted to balance the need for 

disclosure of reportable transactions 

with the resulting burden imposed upon 

taxpayers. The IRS and Treasury 

Department do not believe that 

requiring a material advisor to provide 

a reportable transaction number to 

certain taxpayers and material advisors 

imposes an undue burden upon 

taxpayers in light of the benefit to tax 

administration. However, the IRS and 

Treasury Department recognize that 

requiring the reportable transaction 

number to be provided to all persons for 

whom the material advisor made a tax 

statement may be unnecessary. 

Therefore, these final regulations state 

that a material advisor is required to 

provide a reportable transaction number 

to all taxpayers and material advisors 

for whom the material advisor acts as a 

material advisor. 

Material Advisor Fee Threshold 

Language 

The proposed regulations provide, in 

general, that a lower threshold amount 

of gross income applies in the case of a 

reportable transaction when 

substantially all of the tax benefits are 

provided to natural persons (looking 

through any partnerships, S 

corporations, or trusts). The IRS and 

Treasury Department received 

comments asking for clarification of the 

term ‘‘substantially all of the tax 

benefits.’’

The final regulations provide that the 

determination of whether the lower 

threshold amount applies is based on 

the facts and circumstances. Generally, 

unless the facts and circumstances 

prove otherwise, if 70 percent or more 

of the tax benefits from a reportable 

transaction are provided to natural 

persons (looking through any 

partnerships, S corporations, or trusts) 

then substantially all of the tax benefits 

will be considered to be provided to 

natural persons. 

Material Advisor Disclosure of the 

Identity of Other Material Advisors 

The proposed regulations provide that 

a material advisor who is required to file 

a disclosure statement must also 

disclose the identity of other material 

advisors. Two commentators 

recommended that these final 

regulations be amended to provide that 

a material advisor must provide the 

identity of other material advisors only 

if the material advisor has actual 

knowledge of such other material 

advisors. 

After carefully considering the 

recommendation by the commentators, 

these final regulations provide that a 

material advisor must provide the 

identities of any material advisor(s) who 

the material advisor knows or has 

reason to know acted as a material 

advisor with respect to the transaction. 

Designation Agreements 

The proposed regulations provide that 

if more than one material advisor is 

required to disclose a reportable 

transaction under section 6111, the 

material advisors may designate by 

written agreement a single material 

advisor to disclose the transaction. The 

designation of one material advisor to 

disclose the transaction does not relieve 

the other material advisors of their 

obligation to disclose the transaction to 

the IRS in accordance with section 

6111, if the designated material advisor 

fails to disclose the transaction to the 

IRS in a timely manner. One 

commentator recommended that a good 

faith participation in a designation 

agreement be treated as if the nondesignated material advisor has satisfied 

the advisor’s obligations under section 

6111 and/or section 6112. The 

commentator also suggested that if the 

previous recommendation is not 

adopted, that these final regulations 

prohibit designation agreements 

entirely. 

These final regulations do not adopt 

the recommendation of the 

commentator. The purpose of the 

designation agreement language is to 

reduce the burden on material advisors 

in complying with the disclosure and 

list maintenance regulations while 

balancing the need of the IRS and 

Treasury Department to receive the 

necessary information described in 

sections 6111 and 6112. The designation 

agreement allows material advisors, if 

they choose, to have one material 

advisor comply with the disclosure and 

list maintenance obligations rather than 

multiple advisors maintaining 

duplicative lists. Inherent in the 

language is the assumption that the 

designated material advisor will comply 

with the requirements. Absolving the 

non-designated material advisors from 

the obligations listed in sections 6111 

and 6112 for good faith designation 

agreements would require the IRS to 

determine whether the designation 

agreement was entered into in good 

faith and would increase the burdens on 

tax administration. 

Form 8271 

Before the enactment of the AJCA, 

section 6111 provided that tax shelter 

organizers were required to provide 

investors in tax shelters the registration 

number for the tax shelter. Section 

301.6111–1T, Q&A 55, requires 

investors to report the registration 

number of the tax shelter to the IRS on 

Form 8271, ‘‘Investor Reporting of Tax 

Shelter Registration Number’’, and 

attach the Form 8271 to any return on 

which any deduction, loss, credit, or 

other tax benefit attributable to the tax 

shelter is claimed. Because only a few 

investors must still file Form 8271 for 

pre-AJCA section 6111 tax shelters and 

because the IRS already is aware of 

these transactions, the IRS and Treasury 

Department have decided that investors 

are no longer required to file Forms 

8271 otherwise due on or after August 

3, 2007. The Form 8271 will be 

obsoleted. However, these final 

regulations continue to require that 

material advisors must provide the 

reportable transaction number to all 

taxpayers and material advisors for 

whom the material advisor acts as a 

material advisor. 

Special Analyses 

It has been determined that this 

Treasury decision is not a significant 

regulatory action as defined in 

Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

also has been determined that section 

553(b) of the Administrative Procedure 

Act (5 U.S.C. chapter 5) does not apply 

to these regulations, and because these 

regulations do not impose a collection 

of information on small entities, the 

provisions of the Regulatory Flexibility 

Act (5 U.S.C. chapter 35) do not apply. 

The return referenced in these 

regulations will be made available for 

public comment in accordance with the 

Paperwork Reduction Act of 1995 (44 


rmajette on PROD1PC64 with RULES
Federal Register / Vol. 72, No. 149 / Friday, August 3, 2007 / Rules and Regulations 43159 

U.S.C. chapter 35). Pursuant to section 

7805(f) of the Internal Revenue Code, 

the notice of proposed rulemaking 

preceding these regulations was 

submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on its 

impact on small business. 

Drafting Information 

The principal authors of these 

regulations are Charles D. Wien, 

Michael H. Beker, and Tolsun N. 

Waddle, Office of the Associate Chief 

Counsel (Passthroughs and Special 

Industries). However, other personnel 

from the IRS and Treasury Department 

participated in their development. 

List of Subjects in 26 CFR Part 301 

Employment taxes, Estate taxes, 

Excise taxes, Gift taxes, Income taxes, 

Penalties, Reporting and recordkeeping 

requirements. 

Adoption of Amendments to the 

Regulations 

■ Accordingly, 26 CFR part 301 is 

amended as follows: 

PART 301—PROCEDURE AND 

ADMINISTRATION 

■ Paragraph 1. The authority citation 

for part 301 is amended by adding 

entries in numerical order to read, in 

part, as follows: 

Authority: 26 U.S.C. 7805 * * * 

Section 301.6111–3 also issued under 26 

U.S.C. 6111. 

■ Par. 2. Section 301.6111–3 is added to 

read as follows: 

§ 301.6111–3 Disclosure of reportable 

transactions. 

(a) In general. Each material advisor, 

as defined in paragraph (b) of this 

section, with respect to any reportable 

transaction, as defined in § 1.6011–4(b) 

of this chapter, must file a return as 

described in paragraph (d) of this 

section by the date described in 

paragraph (e) of this section. 

(b) Material advisor—(1) In general. A 

person is a material advisor with respect 

to a transaction if the person provides 

any material aid, assistance, or advice 

with respect to organizing, managing, 

promoting, selling, implementing, 

insuring, or carrying out any reportable 

transaction, and directly or indirectly 

derives gross income in excess of the 

threshold amount as defined in 

paragraph (b)(3) of this section for the 

material aid, assistance, or advice. The 

term transaction includes all of the 

factual elements relevant to the 

expected tax treatment of any 

investment, entity, plan or arrangement, 

and includes any series of steps carried 

out as part of a plan. 

(2) Material aid, assistance, or 

advice—(i) In general. Except as 

provided in paragraph (b)(5) of this 

section, a person provides material aid, 

assistance, or advice with respect to 

organizing, managing, promoting, 

selling, implementing, insuring, or 

carrying out any transaction if the 

person makes or provides a tax 

statement to or for the benefit of—

(A) A taxpayer who either is required 

to disclose the transaction under 

§§ 1.6011–4, 20.6011–4, 25.6011–4, 

31.6011–4, 53.6011–4, 54.6011–4, or 

56.6011–4 of this chapter because the 

transaction is a listed transaction or a 

transaction of interest, or would have 

been required to disclose the transaction 

under §§ 1.6011–4, 20.6011–4, 25.6011–

4, 31.6011–4, 53.6011–4, 54.6011–4, or 

56.6011–4 of this chapter if the 

transaction had become a listed 

transaction or a transaction of interest 

within the period of limitations in 

§ 1.6011–4(e) of this chapter; 

(B) A taxpayer who the potential 

material advisor knows is or reasonably 

expects to be required to disclose the 

transaction under § 1.6011–4 of this 

chapter because the transaction is or is 

reasonably expected to become a 

transaction described in § 1.6011–4(b)(3) 

through (5) or (7) of this chapter; 

(C) A material advisor who is required 

to disclose the transaction under this 

section because it is a listed transaction 

or a transaction of interest; or 

(D) A material advisor who the 

potential material advisor knows is or 

reasonably expects to be required to 

disclose the transaction under this 

section because the transaction is or is 

reasonably expected to become a 

transaction described in § 1.6011–4(b)(3) 

through (5) or (7) of this chapter. 

(ii) Tax statement—(A) In general. A 

tax statement is any statement 

(including another person’s statement), 

oral or written, that relates to a tax 

aspect of a transaction that causes the 

transaction to be a reportable 

transaction as defined in § 1.6011–

4(b)(2) through (7) of this chapter. A tax 

statement under this section includes 

tax result protection that insures some 

or all of the tax benefits of a reportable 

transaction. 

(B) Confidential transactions. A 

statement relates to a tax aspect of a 

transaction that causes it to be a 

confidential transaction if the statement 

concerns a tax benefit related to the 

transaction and either the taxpayer’s 

disclosure of the tax treatment or tax 

structure of the transaction is limited in 

the manner described in § 1.6011–

4(b)(3) of this chapter by or for the 

benefit of the person making the 

statement, or the person making the 

statement knows the taxpayer’s 

disclosure of the tax structure or tax 

aspects of the transaction is limited in 

the manner described in § 1.6011–

4(b)(3) of this chapter. 

(C) Transactions with contractual 

protection. A statement relates to a tax 

aspect of a transaction that causes it to 

be a transaction with contractual 

protection if the statement concerns a 

tax benefit related to the transaction and 

either—

(1) The taxpayer has the right to a full 

or partial refund of fees paid to the 

person making the statement or the fees 

are contingent in the manner described 

in § 1.6011–4(b)(4) of this chapter; or 

(2) The person making the statement 

knows or has reason to know that the 

taxpayer has the right to a full or partial 

refund of fees (described in § 1.6011–

4(b)(4)(ii) of this chapter) paid to 

another if all or part of the intended tax 

consequences from the transaction are 

not sustained or that fees (as described 

in § 1.6011–4(b)(4)(ii) of this chapter) 

paid by the taxpayer to another are 

contingent on the taxpayer’s realization 

of tax benefits from the transaction in 

the manner described in § 1.6011–

4(b)(4) of this chapter. 

(D) Loss transactions. A statement 

relates to a tax aspect of a transaction 

that causes it to be a loss transaction if 

the statement concerns an item that 

gives rise to a loss described in 

§ 1.6011–4(b)(5) of this chapter. 

(E) [Reserved]. 

(iii) Special rules—(A) Capacity as an 

employee. A material advisor generally 

does not include a person who makes a 

tax statement solely in the person’s 

capacity as an employee, shareholder, 

partner or agent of another person. Any 

tax statement made by that person will 

be attributed to that person’s employer, 

corporation, partnership or principal. 

However, a person shall be treated as a 

material advisor if that person forms or 

avails of an entity with the purpose of 

avoiding the rules of section 6111 or 

6112 or the penalties under section 6707 

or 6708. 

(B) Post-filing advice. A person will 

not be considered to be a material 

advisor with respect to a transaction if 

that person does not make or provide a 

tax statement regarding the transaction 

until after the first tax return reflecting 

tax benefit(s) of the transaction is filed 

with the IRS. However, this exception 

does not apply to a person who makes 

a tax statement with respect to the 

transaction if it is expected that the 

taxpayer will file a supplemental or 

amended return reflecting additional tax 

benefits from the transaction. 


rmajette on PROD1PC64 with RULES
43160 Federal Register / Vol. 72, No. 149 / Friday, August 3, 2007 / Rules and Regulations 

(C) Publicly filed statements. A tax 

statement with respect to a transaction 

that includes only information about the 

transaction contained in publicly 

available documents filed with the 

Securities and Exchange Commission no 

later than the close of the transaction 

will not be considered a tax statement 

to or for the benefit of a person 

described in paragraph (b)(2) of this 

section. 

(3) Gross income derived for material 

aid, assistance, or advice—(i) Threshold 

amount—(A) In general. The threshold 

amount of gross income is $50,000 in 

the case of a reportable transaction 

substantially all of the tax benefits from 

which are provided to natural persons 

(looking through any partnerships, S 

corporations, or trusts). For all other 

transactions, the threshold amount is 

$250,000. 

(B) Listed transactions and 

transactions of interest. For listed 

transactions described in §§ 1.6011–4, 

20.6011–4, 25.6011–4, 31.6011–4, 

53.6011–4, 54.6011–4, or 56.6011–4 of 

this chapter, the threshold amounts in 

paragraph (b)(3)(i)(A) of this section are 

reduced from $50,000 to $10,000 and 

from $250,000 to $25,000. For 

transactions of interest described in 

§§ 1.6011–4, 20.6011–4, 25.6011–4, 

31.6011–4, 53.6011–4, 54.6011–4, or 

56.6011–4 of this chapter, the threshold 

amounts in paragraph (b)(3)(i)(A) of this 

section may be reduced as identified in 

the published guidance describing the 

transaction. 

(C) [Reserved]. 

(D) Substantially all of the tax 

benefits. For purposes of this section, 

the determination of whether 

substantially all of the tax benefits from 

a reportable transaction are provided to 

natural persons is made based on all the 

facts and circumstances. Generally, 

unless the facts and circumstances 

prove otherwise, if 70 percent or more 

of the tax benefits from a reportable 

transaction are provided to natural 

persons (looking through any 

partnerships, S corporations, or trusts) 

then substantially all of the tax benefits 

will be considered to be provided to 

natural persons. 

(ii) Gross income derived directly or 

indirectly for the material aid, 

assistance, or advice. In determining the 

amount of gross income a person 

derives directly or indirectly for 

material aid, assistance, or advice, all 

fees for a tax strategy or for services for 

advice (whether or not tax advice) or for 

the implementation of a reportable 

transaction are taken into account. Fees 

include consideration in whatever form 

paid, whether in cash or in kind, for 

services to analyze the transaction 

(whether or not related to the tax 

consequences of the transaction), for 

services to implement the transaction, 

for services to document the transaction, 

and for services to prepare tax returns 

to the extent return preparation fees are 

unreasonable in light of all of the facts 

and circumstances. A fee does not 

include amounts paid to a person, 

including an advisor, in that person’s 

capacity as a party to the transaction. 

For example, a fee does not include 

reasonable charges for the use of capital 

or the sale or use of property. The IRS 

will scrutinize carefully all of the facts 

and circumstances in determining 

whether consideration received in 

connection with a reportable transaction 

constitutes gross income derived 

directly or indirectly for aid, assistance, 

or advice. For purposes of this section, 

the threshold amount must be met 

independently for each transaction that 

is a reportable transaction and 

aggregation of fees among transactions is 

not required. 

(4) Date a person becomes a material 

advisor—(i) In general. A person will be 

treated as becoming a material advisor 

when all of the following events have 

occurred (in no particular order)—

(A) The person provides material aid, 

assistance or advice as described in 

paragraph (b)(2) of this section; 

(B) The person directly or indirectly 

derives gross income in excess of the 

threshold amount as described in 

paragraph (b)(3) of this section; and 

(C) The transaction is entered into by 

the taxpayer to whom or for whose 

benefit the person provided the tax 

statement, or in the case of a tax 

statement provided to another material 

advisor, when the transaction is entered 

into by a taxpayer to whom or for whose 

benefit that material advisor provided a 

tax statement. 

(ii) Determining if the taxpayer 

entered into the transaction. Material 

advisors, including those who cease 

providing services before the time the 

transaction is entered into, must make 

reasonable and good faith efforts to 

determine whether the event described 

in paragraph (b)(4)(i)(C) of this section 

has occurred. 

(iii) Listed transactions and 

transactions of interest. If a transaction 

that was not a reportable transaction is 

identified as a listed transaction or a 

transaction of interest in published 

guidance after the occurrence of the 

events described in paragraph (b)(4)(i) of 

this section, the person will be treated 

as becoming a material advisor on the 

date the transaction is identified as a 

listed transaction or a transaction of 

interest. 

(5) Other persons designated as 

material advisors. Published guidance 

may identify other types or classes of 

persons as material advisors. 

(c) Definitions. For purposes of this 

section, the following definitions apply: 

(1) Reportable transaction. The term 

reportable transaction is defined in 

§ 1.6011–4(b)(1) of this chapter. 

(2) Listed transaction. The term listed 

transaction is defined in § 1.6011–

4(b)(2) of this chapter. See also 

§§ 20.6011–4(a), 25.6011–4(a), 31.6011–

4(a), 53.6011–4(a), 54.6011–4(a), or 

56.6011–4(a) of this chapter. 

(3) Derive. The term derive means 

receive or expect to receive. 

(4) Person. The term person means 

any person described in section 

7701(a)(1), including an affiliated group 

of corporations that join in the filing of 

a consolidated return under section 

1501. 

(5) Substantially similar. The term 

substantially similar is defined in 

§ 1.6011–4(c)(4) of this chapter. 

(6) Tax. The term tax means Federal 

tax. 

(7) Tax benefit. A tax benefit includes 

deductions, exclusions from gross 

income, nonrecognition of gain, tax 

credits, adjustments (or the absence of 

adjustments) to the basis of property, 

status as an entity exempt from Federal 

income taxation, and any other tax 

consequences that may reduce a 

taxpayer’s Federal tax liability by 

affecting the amount, timing, character, 

or source of any item of income, gain, 

expense, loss, or credit. 

(8) Tax return. The term tax return 

means a Federal tax return and a 

Federal information return. 

(9) Tax structure. The tax structure of 

a transaction is any fact that may be 

relevant to understanding the purported 

or claimed Federal tax treatment of the 

transaction. 

(10) Tax treatment. The tax treatment 

of a transaction is the purported or 

claimed Federal tax treatment of the 

transaction. 

(11) Taxpayer. The term taxpayer is 

defined in § 1.6011–4(c)(1) of this 

chapter. 

(12) Tax result protection. The term 

tax result protection includes insurance 

company and other third party products 

commonly described as tax result 

insurance. 

(13) Transaction of interest. The term 

transaction of interest is defined in 

§ 1.6011–4(b)(6) of this chapter. See also 

§§ 20.6011–4(a), 25.6011–4(a), 31.6011–

4(a), 53.6011–4(a), 54.6011–4(a), or 

56.6011–4(a) of this chapter. 

(d) Form and content of material 

advisor’s disclosure statement—(1) In 

general. A material advisor required to 


rmajette on PROD1PC64 with RULES
Federal Register / Vol. 72, No. 149 / Friday, August 3, 2007 / Rules and Regulations 43161 

file a disclosure statement under this 

section must file a completed Form 

8918, ‘‘Material Advisor Disclosure 

Statement’’ (or successor form) in 

accordance with this paragraph (d) and 

the instructions to the form. To be 

considered complete, the information 

provided on the form must describe the 

expected tax treatment and all potential 

tax benefits expected to result from the 

transaction, describe any tax result 

protection with respect to the 

transaction, and identify and describe 

the transaction in sufficient detail for 

the IRS to be able to understand the tax 

structure of the reportable transaction 

and the identity of any material 

advisor(s) whom the material advisor 

knows or has reason to know acted as 

a material advisor as defined in 

paragraph (b) of this section with 

respect to the transaction. An 

incomplete form containing a statement 

that information will be provided upon 

request is not considered a complete 

disclosure statement. A material advisor 

may file a single form for substantially 

similar transactions. An amended form 

must be filed if information previously 

provided is no longer accurate, if 

additional information that was not 

disclosed becomes available, or if there 

are material changes to the transaction. 

A material advisor is not required to file 

an additional form for each additional 

taxpayer that enters into the same or 

substantially similar transaction. If the 

form is not completed in accordance 

with the provisions in this paragraph (d) 

and the instructions to the form, the 

material advisor will not be considered 

to have complied with the disclosure 

requirements of this section. 

(2) Reportable transaction number. 

The IRS will issue to a material advisor 

a reportable transaction number with 

respect to the disclosed reportable 

transaction. Receipt of a reportable 

transaction number does not indicate 

that the disclosure statement is 

complete, nor does it indicate that the 

transaction has been reviewed, 

examined, or approved by the IRS. 

Material advisors must provide the 

reportable transaction number to all 

taxpayers and material advisors for 

whom the material advisor acts as a 

material advisor as defined in paragraph 

(b) of this section. The reportable 

transaction number must be provided at 

the time the transaction is entered into, 

or, if the transaction is entered into 

prior to the material advisor receiving 

the reportable transaction number, 

within 60 calendar days from the date 

the reportable transaction number is 

mailed to the material advisor. 

(e) Time of providing disclosure. The 

material advisor’s disclosure statement 

for a reportable transaction must be filed 

with the Office of Tax Shelter Analysis 

(OTSA) by the last day of the month that 

follows the end of the calendar quarter 

in which the advisor became a material 

advisor with respect to the reportable 

transaction or in which the 

circumstances necessitating an amended 

disclosure statement occur. The 

disclosure statement must be sent to 

OTSA at the address provided in the 

instructions for Form 8918 (or a 

successor form). 

(f) Designation agreements. If more 

than one material advisor is required to 

disclose a reportable transaction under 

this section, the material advisors may 

designate by written agreement a single 

material advisor to disclose the 

transaction. The transaction must be 

disclosed by the last day of the month 

following the end of the calendar 

quarter that includes the earliest date on 

which a material advisor who is a party 

to the agreement became a material 

advisor with respect to the transaction 

as described in paragraph (b)(4) of this 

section. The designation of one material 

advisor to disclose the transaction does 

not relieve the other material advisors of 

their obligation to disclose the 

transaction to the IRS in accordance 

with this section, if the designated 

material advisor fails to disclose the 

transaction to the IRS in a timely 

manner. 

(g) Protective disclosures. If a 

potential material advisor is uncertain 

whether a transaction must be disclosed 

under this section, the advisor may 

disclose the transaction in accordance 

with the requirements of this section 

and comply with all the provisions of 

this section, and indicate on the 

disclosure statement that the disclosure 

statement is being filed on a protective 

basis. The IRS will not treat disclosure 

statements filed on a protective basis 

any differently than other disclosure 

statements filed under this section. For 

a protective disclosure to be effective, 

the advisor must comply with the 

regulations under this section and 

§ 301.6112–1 by providing to the IRS all 

information requested by the IRS under 

these sections. 

(h) Rulings. If a potential material 

advisor requests a ruling as to whether 

a specific transaction is a reportable 

transaction on or before the date that 

disclosure would otherwise be required 

under this section, the Commissioner in 

his discretion may determine that the 

submission satisfies the disclosure rules 

under this section for that transaction if 

the request fully discloses all relevant 

facts relating to the transaction which 

would otherwise be required to be 

disclosed under this section. The 

potential obligation of the person to 

disclose the transaction under this 

section (or to maintain or furnish the list 

under § 301.6112–1) will not be 

suspended during the period that the 

ruling request is pending. 

(i) Effective/applicability date—(1) In 

general. This section applies to 

transactions with respect to which a 

material advisor makes a tax statement 

on or after August 3, 2007. However, 

this section applies to transactions of 

interest entered into on or after 

November 2, 2006 with respect to which 

a material advisor makes a tax statement 

under § 301.6111–3 on or after 

November 2, 2006. Paragraph (h) of this 

section applies to ruling requests 

received on or after November 1, 2006. 

Otherwise, the rules that apply with 

respect to transactions entered into 

before August 3, 2007 are contained in 

Notice 2004–80 (2004–50 IRB 963); 

Notice 2005–17 (2005–8 IRB 606); and 

Notice 2005–22 (2005–12 IRB 756) (see 

§ 601.601(d)(2)(ii)(b) in effect prior to 

August 3, 2007. 

(2) [Reserved]. 

§ 301.6111–3T [Removed] 

■ Par. 3. Section 301.6111–3T is 

removed. 

Kevin M. Brown, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: July 25, 2007. 

Eric Solomon, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 07–3788 Filed 7–31–07; 11:22 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF DEFENSE 

Department of the Army 

32 CFR Part 571 

[Docket No. USA–2007–0017] 

RIN 0702–AA57 

Recruiting and Enlistments 

AGENCY: Department of the Army, DoD. 

ACTION: Final rule. 

SUMMARY: The Department of the Army 

has revised its regulation that prescribes 

policies and procedures concerning 

recruiting and enlistment into the 

Regular Army and its Reserve 

Components. 

DATES: Effective Date: September 4, 

2007. 

ADDRESSES: Deputy Chief of Staff, G–1, 

ATTN: DAPE-MPA, 300 Army 

Pentagon, Washington, DC 20310. 


rmajette on PROD1PC64 with RULES