87696 Federal Register / Vol. 88, No. 242 / Tuesday, December 19, 2023 / Rules and Regulations 

TABLE 7 TO APPENDIX TO PART 655, SUBPART F—DAYTIME COLOR SPECIFICATION LIMITS FOR NON-RETROREFLECTIVE

MATERIALS USED FOR COLORED PAVEMENTS

Color 

Chromaticity coordinates 

1 2 3 4 

x y x y x y x y 

Green ............................... 0.230 0.714 0.266 0.460 0.367 0.480 0.367 0.584 

Red ................................... 0.420 0.330 0.450 0.380 0.560 0.370 0.540 0.320 

[FR Doc. 2023–27178 Filed 12–18–23; 8:45 am] 

BILLING CODE 4910–22–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 1 and 301 

[TD 9984] 

RIN 1545–BN59 

De Minimis Error Safe Harbor 

Exceptions to Penalties for Failure To 

File Correct Information Returns or 

Furnish Correct Payee Statements 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations. 

SUMMARY: This document contains final 

regulations implementing statutory safe 

harbor rules that protect persons 

required to file information returns or to 

furnish payee statements from penalties 

under the Internal Revenue Code (Code) 

for failure to file correct information 

returns or furnish correct payee 

statements. The statutory safe harbor 

rules treat information returns and 

payee statements with erroneous dollar 

amounts as correct returns or statements 

for certain penalty purposes if the errors 

are de minimis in dollar amount. The 

final regulations also prescribe the time 

and manner in which a payee may elect 

not to have the statutory safe harbor 

rules apply. In addition, these final 

regulations update dollar amounts, 

definitions, and references in existing 

regulations relating to information 

return and payee statement penalties to 

reflect various statutory amendments to 

the Code that are not accounted for in 

the existing regulations. Finally, the 

final regulations provide rules relating 

to the reporting of basis of securities by 

brokers as this reporting relates to the de 

minimis error safe harbor rules. The 

final regulations affect persons required 

to either file information returns or to 

furnish payee statements (filers) and the 

recipients of payee statements (payees). 

DATES: 

Effective date: These regulations are 

effective on December 19, 2023. 

Applicability dates: For dates of 

applicability, see §§ 1.6045–1(d)(6)(ix) 

and (q), 301.6721–1(j), 301.6722–1(g), 

and 301.6724–1(o). 

FOR FURTHER INFORMATION CONTACT: 

Alexander Wu at (202) 317–6845 (not a 

toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

This document contains final 

regulations to amend the Income Tax 

Regulations (26 CFR part 1) under 

section 6045(g) of the Code and the 

Procedure and Administration 

Regulations (26 CFR part 301) under 

sections 6721, 6722, and 6724 of the 

Code. In particular, the final regulations 

implement two statutory safe harbors 

that except certain de minimis errors in 

reporting correct dollar amounts on 

information returns and payee 

statements from the penalty for failure 

to file correct information returns 

imposed by section 6721 and the 

penalty for failure to furnish correct 

payee statements imposed by section 

6722 (de minimis error safe harbor 

exceptions). The de minimis error safe 

harbor exceptions are found in sections 

6721(c)(3) and 6722(c)(3), which were 

added to the Code by section 202 of the 

Protecting Americans from Tax Hikes 

Act of 2015 (PATH Act), enacted as 

division Q of the Consolidated 

Appropriations Act, 2016, Public Law 

114–113, 129 Stat. 2242, 3076–78 

(2015). Under sections 6721(c)(3) and 

6722(c)(3), an error in a reported dollar 

amount generally is ‘‘de minimis’’ if the 

difference between any single amount 

reported in error and the correct amount 

required to be reported does not exceed 

$100. If such a difference is with respect 

to reporting an amount of tax withheld, 

the difference may not be more than 

$25. 

On October 17, 2018, the Department 

of the Treasury (Treasury Department) 

and the IRS published a notice of 

proposed rulemaking (REG–118826–16) 

in the Federal Register (83 FR 52726) 

containing proposed regulations to 

implement the de minimis error safe 

harbor exceptions, as well as to update 

dollar amounts, definitions, and 

references reflecting various statutory 

amendments to the Code that are not 

accounted for in provisions of existing 

regulations relating to information 

return and payee statement penalties 

(proposed regulations). The proposed 

regulations were issued following a 

notice announcing and describing 

regulations intended to be issued under 

sections 6721, 6722, and 6724. See 

Notice 2017–09, 2017–4 I.R.B. 542 

(January 23, 2017). 

The Treasury Department and the IRS 

received six written comments in 

response to the notice of proposed 

rulemaking. All of the written 

comments responding to the notice of 

proposed rulemaking are available at 

https://www.regulations.gov or upon 

request. Some comments merely 

expressed appreciation for the proposed 

regulations. No public hearing was 

requested or held. After consideration of 

the written comments, the proposed 

regulations are adopted as modified by 

this Treasury Decision. 

Summary of Comments and 

Explanation of Revisions 

This Summary of Comments and 

Explanation of Revisions section 

addresses the substantive comments in 

response to the notice of proposed 

rulemaking that disagreed with or 

requested clarification of the proposed 

regulations. See the Explanation of 

Provisions section of REG–118826–16 

for a detailed explanation of the 

proposed regulations. 

I. Effect of the Regulations on Tax 

Compliance 

One comment stated that the 

proposed regulations ‘‘will increase the 

amount of regulation we have when it 

comes to ‘failure to file cases’ in the 

US.’’ The comment did not describe 

how the proposed regulations would 

increase the amount of regulation 

applicable to ‘‘failure to file cases.’’ The 

Treasury Department and the IRS note 

that the regulations implement statutory 

provisions providing certain protections 

to filers and payees, and the amount of 


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regulation is only one of several factors 

that must be considered in 

implementing statutory provisions. The 

Treasury Department and the IRS 

further note that the safe harbor is 

generally intended to provide filers with 

relief from penalties that would 

otherwise accrue due to unintentional 

de minimis errors in reporting correct 

dollar amounts on information returns 

and payee statements. Accordingly, the 

final regulations do not adopt this 

comment. 

II. De minimis Error Safe Harbor 

Election 

A. Applying the Election to Individual 

Securities and Individual Accounts 

One comment requested a more 

efficient way to furnish correct payee 

statements generally. The commentator 

did not suggest a specific method for 

furnishing correct payee statements; 

nevertheless, the method for furnishing 

correct payee statements is beyond the 

scope of these regulations, which is 

limited to implementing the two de 

minimis error safe harbor exceptions 

and otherwise updating existing 

regulations for statutory changes. The 

final regulations therefore do not adopt 

this comment. 

One comment disagreed with 

providing filers the option to choose 

whether to correct de minimis errors. 

The comment also stated that the de 

minimis threshold was too high and 

disagreed with the de minimis error safe 

harbor exceptions applying on a ‘‘per 

security’’ rather than a ‘‘per account’’ 

basis. The Treasury Department and the 

IRS note that sections 6721(c)(3) and 

6722(c)(3) mandate the option for filers 

to choose whether to correct de minimis 

errors, subject to an election by a payee 

to override this option. Sections 

6721(c)(3)(A) and 6722(c)(3)(A) also 

mandate the de minimis thresholds with 

specificity. The final regulations reflect 

these statutory requirements. The 

Treasury Department and the IRS 

further note that the statutory de 

minimis error safe harbor exceptions 

apply on a ‘‘per statement’’ basis. 

Section 6722(c)(3)(A) expressly provides 

that the de minimis error safe harbor 

exceptions apply ‘‘with respect to any 

payee statement.’’ Further, section 

6722(c)(3)(B) provides that the de 

minimis error safe harbor exceptions 

‘‘shall not apply to any payee statement 

if the person to whom such statement is 

required to be furnished makes an 

election . . . with respect to such 

statement.’’ To the extent that a 

statement relates only to a single 

security, the statute applies, in effect, on 

a ‘‘per security’’ basis. The statute 

allows for this outcome, and the final 

regulations accord with the plain 

reading of the statute. 

One comment reiterated comments 

submitted in 2018 prior to the 

publication of the proposed regulations. 

This comment suggested that a payee’s 

election to override the de minimis error 

safe harbor exceptions should apply on 

an account-by-account basis, rather than 

on a statement-by-statement basis. The 

comment questioned whether it was 

Congress’s intent to require taxpayers to 

make separate elections for each payee 

statement. As stated in the preamble of 

the notice of proposed rulemaking, the 

comment’s suggested rule would 

significantly limit a payee’s options for 

making elections and is inconsistent 

with the statutory framework of sections 

6721 through 6724, which generally 

impose a penalty on a per statement (or 

return) basis. However, a payee need not 

decide on elections individually for 

each payee statement associated with a 

single account or filer but may elect as 

to all payee statements or any 

combination of payee statements, with 

the election lasting indefinitely by 

default. As recognized in the notice of 

proposed rulemaking, nothing in the 

Code prohibits filers from providing 

corrected statements regardless of the de 

minimis error safe harbor exceptions or 

payee election. Thus, in drafting the 

PATH Act, Congress was aware that 

filers could provide corrections on an 

account-wide basis once a payee made 

an election with respect to a single type 

of payee statement associated with that 

account. 

B. Potential for Inconsistencies in Basis 

Reporting 

A comment stated that the proposed 

regulations could cause inconsistencies 

in basis reporting that are contrary to 

congressional intent. The comment was 

specifically concerned with a situation 

in which a payee would elect to 

override the de minimis error safe 

harbor exceptions with respect to one 

form but not another corresponding 

form. For example, a payee could elect 

to override the safe harbor exception 

with respect to a Form 1099–DIV, 

Dividends and Distributions, but not 

elect to override the safe harbor 

exception with respect to a 

corresponding Form 1099–B, Proceeds 

From Broker and Barter Exchange 

Transactions, potentially resulting in 

inconsistently reported basis. 

The Treasury Department and the IRS 

have determined that the text of 

proposed § 1.6045–1(d)(6)(vii) should be 

amended to more clearly address this 

situation. Under the rule as modified by 

these final regulations, if a Form 1099– 

DIV is corrected because a payee elects 

to override the de minimis error safe 

harbor exceptions as applied to the 

Form 1099–DIV, then the adjusted basis 

reported on the corresponding Form 

1099–B must be based on and consistent 

with the corresponding corrected dollar 

amount shown on the corrected Form 

1099–DIV. After taking into account the 

corrected dollar amount shown on the 

corrected Form 1099–DIV, Form 1099– 

B should be corrected if there is an error 

on the Form 1099–B and that error is 

not de minimis. In any event, to avoid 

inconsistent reporting, the filer can 

always choose to correct the Form 

1099–B, or the payee can elect to 

override the de minimis safe harbor 

exceptions with respect to the Form 

1099–B. 

The Treasury Department and the IRS 

note that the fact that Congress enacted 

the de minimis error safe harbor 

exceptions indicates Congress was 

aware that there might be minor 

inconsistencies in basis reporting and 

that the de minimis error safe harbor 

exceptions apply only for certain 

penalty purposes. The de minimis error 

safe harbor exceptions have no effect on 

the operation of those provisions of the 

Code that apply to determine the basis 

of property, such as section 1012 of the 

Code. 

C. Effective Date of Payee Election 

Another comment requested the 

payee election be effective only on a 

prospective basis, citing administrative 

burden. The Treasury Department and 

the IRS note that the election is 

prospective in that a filer is required to 

furnish corrected statements after the 

date the election is made by the payee, 

and an election, once made, is in effect 

until revoked. Any administrative 

burden as described by the comment is 

limited because the payee must elect no 

later than the later of 30 days after the 

date on which the payee statement is 

required to be furnished to the payee, or 

October 15 of the calendar year, to 

receive a correct payee statement 

required to be furnished in that calendar 

year. As discussed in the preamble to 

the proposed regulations, administrative 

burden is but one factor that must be 

considered. A competing consideration 

is the flexibility that Congress provided 

for payees to elect out of the de minimis 

error safe harbor exceptions. The 

Treasury Department and the IRS have 

determined that the proposed rules 

reflect a reasonable balancing of these 

considerations. Thus, the final 

regulations do not adopt this suggestion. 


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III. Clarification of Items in the 

Proposed Regulations and Other 

Guidance 

Two comments requested clarification 

that the term ‘‘tax withheld’’ in 

proposed § 301.6722–1(d)(2) includes 

social security, Medicare, and 

Additional Medicare taxes. The 

definition in the proposed regulations 

referenced some of the more common 

types of taxes withheld but was not 

intended to be an exhaustive list of all 

Federal taxes considered to be ‘‘tax 

withheld.’’ The use of the term 

‘‘includes’’ in proposed § 301.6722– 

1(d)(2) is based on the definition of 

‘‘includes’’ in section 7701(c) of the 

Code, which provides that the term 

‘‘includes’’ when used in a definition 

‘‘shall not be deemed to exclude other 

things otherwise within the meaning of 

the term defined.’’ Nevertheless, to 

resolve any ambiguity as to whether the 

term ‘‘tax withheld’’ includes social 

security, Medicare, and Additional 

Medicare taxes, the final regulations 

generally adopt the text of proposed 

§ 301.6722–1(d)(2) but modify the 

definition of ‘‘tax withheld’’ by adding 

a reference to section 3102 of the Code 

in § 301.6722–1(d)(2). 

One comment requested clarification 

on whether different taxes withheld and 

reported separately on an information 

return or payee statement are 

considered separately in determining 

whether the de minimis threshold is 

reached. To illustrate, the comment 

asked if errors on an employee’s Form 

W–2, Wage and Tax Statement, in the 

amounts of $20 in Federal income tax 

withheld, $20 in Medicare tax withheld, 

and $7.41 in Additional Medicare tax 

withheld would be considered 

separately for de minimis threshold 

purposes. The definition of ‘‘de minimis 

error’’ in proposed § 301.6722–1(d)(2) 

refers to ‘‘any single amount in error.’’ 

Accordingly, if a payee statement does 

not require taxes withheld to be 

combined into a single amount for 

reporting purposes, then each single 

amount of tax required to be reported 

separately would be considered 

separately in determining whether an 

error is de minimis. To respond to the 

concern raised by this comment, the 

final regulations add new examples in 

§ 301.6722–1(d)(5)(iv) and (v) to 

illustrate this result and update the 

Table of Contents in § 301.6721–0 

relating to § 301.6722–1(d)(5). 

The comment also suggested that 

additional disclosures be provided in 

the General Instructions for Forms W– 

2 and W–3, Transmittal of Wage and 

Tax Statements. The comment correctly 

noted that the de minimis error safe 

harbor exceptions under sections 

6721(c)(3) and 6722(c)(3) apply only for 

information return and payee statement 

penalty purposes, and do not apply for 

other purposes, including the 

requirement to pay and report 

employment taxes on Form 941, 

Employer’s QUARTERLY Federal Tax 

Return. The comment suggested 

including a note of caution concerning 

the effect of incorrect information 

returns on other aspects of tax 

compliance. The Treasury Department 

and the IRS will consider revising the 

General Instructions for Forms W–2 and 

W–3. To respond to the concern raised 

by this comment, the final regulations 

add §§ 301.6721–1(e)(5) and 301.6722– 

1(d)(7), which state that the de minimis 

error safe harbor exceptions under 

sections 6721(c)(3) and 6722(c)(3) apply 

only for information return and payee 

statement penalty purposes, 

respectively, and not for other purposes, 

including requirements to pay and 

report taxes pursuant to provisions of 

the Code other than sections 6721 and 

6722. The final regulations also add 

§§ 301.6721–1(e)(4) and 301.6722– 

1(d)(6) to make clear that, regardless of 

whether the de minimis error safe 

harbor exceptions provide an exception 

for not filing or furnishing the corrected 

statement, a filer may voluntarily file (1) 

a corrected information return if the 

corresponding payee statement is 

furnished concurrently, or (2) a 

corrected payee statement may be 

furnished voluntarily if the 

corresponding information return is 

filed concurrently. 

Finally, proposed § 301.6724–1(g) 

proposed to update the questions and 

answers in § 301.6724–1(g) regarding 

the due diligence safe harbor as in effect 

on October 12, 2018, the date the 

proposed regulations were published in 

the Federal Register. The proposed 

changes updated the existing 

regulations to remove outdated 

references and to make numerous 

conforming amendments to reflect the 

addition and redesignation of 

paragraphs. No comments were received 

in response to the proposed changes to 

§ 301.6724–1(g). Nevertheless, the final 

regulations make non-substantive 

formatting changes to convert the 

outmoded questions and answers into 

more clearly stated rules. 

Applicability Dates 

The proposed regulations provided 

that the regulations generally would 

apply with respect to information 

returns required to be filed and payee 

statements required to be furnished on 

or after January 1 of the calendar year 

immediately following the date of 

publication of a Treasury decision 

adopting these rules as final regulations 

in the Federal Register. 

However, the proposed regulations 

provided that proposed § 301.6724–1(h) 

would apply with respect to information 

returns required to be filed and payee 

statements required to be furnished on 

or after January 1, 2017. The final 

regulations generally adopt the 

applicability dates proposed in the 

proposed regulations. However, because 

Notice 2017–09 was released to the 

public on January 4, 2017, the final 

regulations postpone the applicability 

date of § 301.6724–1(h) by providing 

that § 301.6724–1(h) applies with 

respect to information returns required 

to be filed and payee statements 

required to be furnished after January 4, 

2017. 

Effect on Other Documents 

These final regulations under sections 

6045(g), 6721, 6722, and 6724 supersede 

Notice 2017–09 with respect to 

information returns required to be filed 

and payee statements required to be 

furnished on or after January 1, 2024. 

Special Analyses 

I. Regulatory Planning and Review 

Pursuant to the Memorandum of 

Agreement, Review of Treasury 

Regulations under Executive Order 

12866 (June 9, 2023), tax regulatory 

actions issued by the IRS are not subject 

to the requirements of section 6 of 

Executive Order 12866, as amended. 

Therefore, a regulatory impact 

assessment is not required. 

II. Regulatory Flexibility Act 

Pursuant to the Regulatory Flexibility 

Act (5 U.S.C. chapter 6), it is hereby 

certified that the regulations will not 

have a significant economic impact on 

a substantial number of small entities. 

Accordingly, a regulatory flexibility 

analysis is not required. These 

regulations implement the de minimis 

error safe harbor exceptions in sections 

6721(c)(3) and 6722(c)(3) to the sections 

6721 and 6722 penalties. Pursuant to 

section 6722(c)(3)(B), these regulations 

also provide for the time and manner for 

elections by payees that the de minimis 

error safe harbor exceptions not apply, 

including optional notifications by filers 

to provide for an alternative reasonable 

manner for the election. Finally, these 

regulations provide rules for revocations 

by payees of elections and record 

retention rules. 

Although these regulations may affect 

a substantial number of small entities, 

the economic impact on these entities is 

not significant. The de minimis error 


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safe harbor exceptions are expected to 

reduce the burden on all filers, 

including small entities, to file corrected 

information returns and furnish 

corrected payee statements because of 

de minimis errors. In those cases where 

payees opt to make a voluntary election 

for the de minimis error safe harbor 

exceptions to not apply to a payee 

statement, the expense of making the 

voluntary election will be borne by the 

payees, some of which may be small 

entities. However, any expense to make 

this voluntary election is expected to be 

minimal and therefore not have a 

significant economic impact. 

Filers that are small entities receiving 

elections may incur costs in processing 

the elections, including initial costs in 

implementing systems or modifying 

existing systems to process elections, 

and subsequently in time incurred 

administering these systems. However, 

because section 6722(c)(3)(B) provides 

for a payee election, such costs flow 

from the statute regardless of these 

regulations. The Code and regulations 

have long required the filing of 

information returns and the furnishing 

of payee statements by filers. 

Accordingly, systems for filing 

information returns and furnishing 

payee statements are already in 

existence. Any costs incurred pursuant 

to these regulations in modifying those 

systems are not expected to be 

significant. These regulations provide 

clarity regarding the election process, 

which is expected to result in a more 

streamlined process for correcting payee 

statements. 

Similarly, in those cases where payees 

opt to make a voluntary revocation of a 

prior voluntary election, the expense of 

making the voluntary revocation will be 

borne by the payees, some of which may 

be small entities. Any expense to make 

a voluntary revocation of a prior 

voluntary election is expected to be 

minimal and therefore not have a 

significant economic impact. Filers that 

are small entities receiving revocations 

will benefit from the resulting 

applicability of the de minimis error 

safe harbor exceptions, resulting in 

reduced burden to file corrected 

information returns and furnish 

corrected payee statements because of 

de minimis errors. Filers that are small 

entities receiving revocations may incur 

costs in processing the revocations 

similar to those incurred in processing 

elections; however, it is expected that 

systems implementing payee elections 

can be modified with minimal 

additional cost to account for 

revocations in addition to elections. 

Filers that are small entities choosing to 

provide the optional notification to 

payees regarding an alternative 

reasonable manner for making the 

election may incur costs in providing 

the notification. However, it is expected 

that filers will only provide optional 

notifications if they have determined 

that any cost in providing the 

notification is offset by a resulting 

economic benefit to the filer, such as a 

more cost-efficient election system. The 

record retention rules may also increase 

expenses for filers that are small 

entities; however, any added expenses 

are expected to be minimal given 

existing record retention systems. 

Pursuant to section 7805(f), the notice 

of proposed rulemaking preceding these 

final regulations was submitted to the 

Chief Counsel for Advocacy of the Small 

Business Administration for comment 

on its impact on small businesses. No 

comments were received from the Chief 

Counsel for Advocacy of the Small 

Business Administration. 

III. Paperwork Reduction Act 

The collection of information 

contained in these final regulations has 

been reviewed and approved by the 

Office of Management and Budget in 

accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 

3507(d)) under control number 1545– 

2301. 

The collection of information in these 

final regulations is in § 301.6722– 

1(d)(3)(iii) regarding the payee election, 

(d)(3)(v)(B) regarding the filer 

notification, (d)(3)(vii) regarding the 

payee revocation, and (d)(4) regarding 

record retention. The information in 

final regulations § 301.6722–1(d)(3)(iii) 

and (vii) will be used by payees to make 

and revoke elections and by filers to 

determine whether they are required to 

furnish corrected payee statements to 

payees and file corrected information 

returns with the IRS to avoid 

application of penalties under sections 

6721 and 6722 of the Code. The 

information under final regulation 

§ 301.6722–1(d)(3)(v)(B) will be used to 

give filers and payees flexibility in 

establishing reasonable alternative 

manners for elections. And the 

information in final regulation 

§ 301.6722–1(d)(4) will be used by the 

IRS to determine whether filers are 

subject to penalties under sections 6721 

and 6722. The collection of information 

in final regulations § 301.6722– 

1(d)(3)(iii) regarding the payee election, 

(d)(3)(v)(B) regarding the filer 

notification, and (d)(3)(vii) regarding the 

payee revocation is voluntary to obtain 

a benefit. The collection of information 

in final regulation § 301.6722–1(d)(4) 

regarding record retention is mandatory. 

The likely respondents are individuals, 

state or local governments, farms, 

business or other for-profit institutions, 

nonprofit institutions, and small 

businesses or organizations. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a valid control 

number assigned by the Office of 

Management and Budget. 

Books or records relating to a 

collection of information must be 

retained as long as their contents may 

become material in the administration 

of any internal revenue law. Generally, 

tax returns and tax return information 

are confidential, as required by 26 

U.S.C. 6103. 

IV. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

requires that agencies assess anticipated 

costs and benefits and take certain other 

actions before issuing a final rule that 

includes any Federal mandate that may 

result in expenditures in any one year 

by a state, local, or tribal government, in 

the aggregate, or by the private sector, of 

$100 million (updated annually for 

inflation). This rule does not include 

any Federal mandate that may result in 

expenditures by state, local, or tribal 

governments, or by the private sector in 

excess of that threshold. 

V. Executive Order 13132: Federalism 

E.O. 13132 (Federalism) prohibits an 

agency from publishing any rule that 

has federalism implications if the rule 

either imposes substantial, direct 

compliance costs on state and local 

governments, and is not required by 

statute, or preempts state law, unless the 

agency meets the consultation and 

funding requirements of section 6 of the 

E.O. This rule does not have federalism 

implications and does not impose 

substantial direct compliance costs on 

state and local governments or preempt 

state law within the meaning of the E.O. 

VI. Congressional Review Act 

Pursuant to the Congressional Review 

Act (5 U.S.C. 801 et seq.), the Office of 

Information and Regulatory Affairs has 

designated this rule as not a major rule 

as defined by 5 U.S.C. 804(2). 

Drafting Information 

The principal author of these 

regulations is Alexander Wu of the 

Office of the Associate Chief Counsel 

(Procedure and Administration). 

However, other personnel from the 

Treasury Department and the IRS 

participated in the development of the 

regulations. 


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Statement of Availability 

The IRS Notices and Revenue 

Procedures cited in this Treasury 

Decision are published in the Internal 

Revenue Bulletin (or Cumulative 

Bulletin) and are available from the 

Superintendent of Documents, U.S. 

Government Publishing Office, 

Washington, DC 20402, or by visiting 

the IRS website at https://www.irs.gov. 

List of Subjects 

26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

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, the Treasury Department 

and the IRS amend 26 CFR parts 1 and 

301 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 1.6045–1 is amended 

by: 

■ 1. Redesignating paragraph (d)(6)(vii) 

as paragraph (d)(6)(viii); 

■ 2. Adding a new paragraph (d)(6)(vii); 

■ 3. In newly redesignated paragraph 

(d)(6)(viii), designating Examples 1 

through 4 as paragraphs (d)(6)(viii)(A) 

through (D), respectively; 

■ 4. Redesignating newly designated 

paragraphs (d)(6)(viii)(A)(i) through (iii) 

as paragraphs (d)(6)(viii)(A)(1) through 

(3), respectively; 

■ 5. In newly designated paragraph 

(d)(6)(viii)(B), removing the language 

‘‘Example 1’’ and adding ‘‘paragraph 

(d)(6)(viii)(A)(1) of this section 

(Example 1)’’ in its place; 

■ 6. Redesignating newly designated 

paragraphs (d)(6)(viii)(C)(i) and (ii) as 

paragraphs (d)(6)(viii)(C)(1) and (2); 

■ 7. Adding paragraph (d)(6)(ix); and 

■ 8. Revising paragraphs (k)(4), (l), and 

(q). 

The additions and revisions read as 

follows: 

§ 1.6045–1 Returns of information of 

brokers and barter exchanges. 

* * * * * 

(d) * * * 

(6) * * * 

(vii) Treatment of de minimis errors. 

For purposes of this section, a 

customer’s adjusted basis generally 

must be determined by treating any 

incorrect dollar amount that is not 

required to be corrected by reason of 

section 6721(c)(3) or 6722(c)(3) as the 

correct amount. However, if a broker, 

upon identifying a dollar amount as 

incorrect, voluntarily or is required to 

file a corrected information return and 

furnish the corresponding corrected 

payee statement showing the correct 

dollar amount, then regardless of any 

provision under section 6721 or 6722, 

the adjusted basis for purposes of this 

section must be based on and consistent 

with the correct dollar amount as 

reported on the corrected information 

return and corrected payee statement. 

* * * * * 

(ix) Applicability date. Paragraph 

(d)(6)(vii) of this section applies with 

respect to information returns required 

to be filed and payee statements 

required to be furnished on or after 

January 1, 2024. 

* * * * * 

(k) * * * 

(4) Cross-reference to penalty. For 

provisions for failure to furnish timely 

a correct payee statement, see 

§ 301.6722–1 of this chapter (Procedure 

and Administration Regulations). See 

§ 301.6724–1 of this chapter for the 

waiver of a penalty if the failure is due 

to reasonable cause and is not due to 

willful neglect. 

(l) Use of magnetic media or 

electronic form. See § 301.6011–2 of this 

chapter for rules relating to filing 

information returns on magnetic media 

or in electronic form and for rules 

relating to waivers granted for undue 

hardship. A broker or barter exchange 

that fails to file a proper Form 1099 

electronically, when required, may be 

subject to a penalty under section 6721 

for each such failure. See paragraph (j) 

of this section. 

* * * * * 

(q) Applicability dates. Except as 

otherwise provided in paragraphs 

(d)(6)(ix), (m)(2)(ii), and (n)(12)(ii) of 

this section, and in this paragraph (q), 

this section applies on or after January 

6, 2017. Paragraphs (k)(4) and (l) of this 

section apply with respect to 

information returns required to be filed 

and payee statements required to be 

furnished on or after January 1, 2024. 

(For rules that apply after June 30, 2014, 

and before January 6, 2017, see 26 CFR 

1.6045–1, as revised April 1, 2016.) 

PART 301—PROCEDURE AND 

ADMINISTRATION 

■ Par. 3. The authority citation for part 

301 continues to read in part as follows: 

Authority: 26 U.S.C. 7805. 

* * * * * 

■ Par. 4. Section 301.6721–0 is 

amended by: 

■ 1. Revising the introductory text and 

the entries for § 301.6721–1(b)(6) and 

(d)(4); 

■ 2. Redesignating the entries for 

§ 301.6721–1(e), (e)(1) and (2), (f), (f)(1) 

through (6), (g), and (g)(1) through (6) as 

entries for § 301.6721–1(f), (f)(1) and (2), 

(g), (g)(1) through (6), (h), and (h)(1) 

through (6), respectively; 

■ 3. Adding entries for § 301.6721–1(e), 

(e)(1) through (5), (i), and (j); 

■ 4. Redesignating the entries for 

§ 301.6722–1(d) and (d)(1) through (3) as 

the entries for § 301.6722–1(e) and (e)(1) 

through (3); 

■ 5. Adding entries for § 301.6722–1(d), 

(d)(1) through (7), (e)(4), (f), and (g); 

■ 6. In the entry for § 301.6724–1(c)(4), 

removing ‘‘Internal Revenue Service’’ 

and adding ‘‘IRS’’ in its place; 

■ 7. Revising the entry for § 301.6724– 

1(h); 

■ 8. Removing the entries for 

§ 301.6724–1(h)(1) and (2); and 

■ 9. Adding an entry for § 301.6724– 

1(o). 

The additions and revisions read as 

follows: 

§ 301.6721–0 Table of Contents. 

In order to facilitate the use of 

§§ 301.6721–1 through 301.6724–1, this 

section lists the paragraph headings 

contained in these sections. 

§ 301.6721–1 Failure to file correct 

information returns. 

* * * * * 

(b) * * * 

(6) Applications to returns not due on 

January 31, February 28, or March 15. 

* * * * * 

(d) * * * 

(4) Nonapplication to returns not due on 

January 31, February 28, or March 15. 

(e) Safe harbor exception for certain de 

minimis errors. 

(1) In general. 

(2) Definition of de minimis error. 

(3) Election to override the safe harbor 

exception. 

(4) Voluntary corrections. 

(5) Limitations on applicability. 

* * * * * 

(i) Adjustment for inflation. 

(j) Applicability date. 

§ 301.6722–1 Failure to furnish correct 

payee statements. 

* * * * * 

(d) Safe harbor exception for certain de 

minimis errors. 

(1) In general. 

(2) Definition of de minimis error. 

(3) Election to override the safe harbor 

exception. 

(4) Record retention. 

(5) Examples. 


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(6) Voluntary corrections. 

(7) Limitations on applicability. 

(e) * * * 

(4) Filer. 

(f) Adjustment for inflation. 

(g) Applicability date. 

* * * * * 

§ 301.6724–1 Reasonable cause. 

* * * * * 

(h) Reasonable cause safe harbor after 

election under section 6722(c)(3)(B). 

* * * * * 

(o) Applicability date. 

■ Par. 5. Section 301.6721–1 is 

amended by: 

■ 1. Revising paragraphs (a)(1) and 

(b)(1) and (2); 

■ 2. In paragraph (b)(3), removing 

‘‘Internal Revenue Service’’ and adding 

‘‘IRS’’ in its place; 

■ 3. Revising paragraph (b)(5) 

introductory text and (b)(5)(i) and (ii); 

■ 4. Adding paragraph (b)(6); 

■ 5. Revising paragraphs (c)(1), 

(c)(2)(iii), and (c)(3) introductory text; 

■ 6. In paragraph (c)(3), designating 

Examples 1 through 3 as paragraphs 

(c)(3)(i) through (iii), respectively; 

■ 7. In newly designated paragraphs 

(c)(3)(i) through (iii), removing ‘‘Internal 

Revenue Service’’ and adding ‘‘IRS’’ in 

its place; 

■ 8. In newly designated paragraph 

(c)(3)(ii), removing the language ‘‘the 

error’’ and adding ‘‘The error’’ in its 

place; 

■ 9. Revising paragraph (d); 

■ 10. Redesignating paragraphs (e), (f), 

(g), and (h) as paragraphs (f), (g), (h), and 

(j), respectively; 

■ 11. Adding a new paragraph (e); 

■ 12. Revising newly redesignated 

paragraphs (f)(1) and (g)(1); 

■ 13. In newly redesignated paragraph 

(g)(3)(iii), removing ‘‘Internal Revenue 

Service’’ and adding ‘‘IRS’’ in its place; 

■ 14. Revising newly redesignated 

paragraphs (g)(4) through (6), (h)(1), and 

(h)(2)(x) and (xi); 

■ 15. Adding paragraphs (h)(2)(xii); 

■ 16. Revising newly redesignated 

paragraphs (h)(3)(xvii), (xviii), (xxiv), 

and (xxv); 

■ 17. Adding paragraphs (h)(3)(xxvi) 

and (xxvii); 

■ 18. Revising newly redesignated 

paragraphs (h)(4) and (6); 

■ 19. Adding paragraph (i); and 

■ 20. Revising newly redesignated 

paragraph (j). 

The revisions and additions read as 

follows: 

§ 301.6721–1 Failure to file correct 

information returns. 

(a) * * * 

(1) General rule. A penalty of $250 is 

imposed for each information return (as 

defined in section 6724(d)(1) and 

paragraph (h) of this section) with 

respect to which a failure (as defined in 

section 6721(a)(2) and paragraph (a)(2) 

of this section) occurs. No more than 

one penalty will be imposed under this 

paragraph (a)(1) with respect to a single 

information return even though there 

may be more than one failure with 

respect to such return. The total amount 

imposed on any person for all failures 

during any calendar year with respect to 

all information returns will not exceed 

$3,000,000. See paragraph (b) of this 

section for a reduction in the penalty if 

the failures are corrected within 

specified periods. See paragraph (c) of 

this section for an exception to the 

penalty for inconsequential errors or 

omissions. See paragraph (d) of this 

section for an exception to the penalty 

for a de minimis number of failures. See 

paragraph (e) of this section for a safe 

harbor exception for certain de minimis 

errors. See paragraph (f) of this section 

for lower limitations to the $3,000,000 

maximum penalty. See paragraph (g) of 

this section for higher penalties if a 

failure is due to intentional disregard of 

the requirement to file timely correct 

information returns. See paragraph (i) of 

this section for inflation adjustments to 

penalty amounts. See § 301.6724–1(a)(1) 

for waiver of the penalty for a failure 

that is due to reasonable cause. 

* * * * * 

(b) * * * 

(1) Correction within 30 days. The 

penalty imposed under section 6721(a) 

for a failure to file timely or for a failure 

to include correct information will be 

$50 in lieu of $250 if the failure is 

corrected on or before the 30th day after 

the required filing date (corrected 

within 30 days). The total amount 

imposed on a person for all failures 

during any calendar year that are 

corrected within 30 days will not 

exceed $500,000. 

(2) Correction after 30 days but on or 

before August 1. The penalty imposed 

under section 6721(a) for a failure to file 

timely or for a failure to include correct 

information will be $100 in lieu of $250 

if the failure is corrected after the 30- 

day period described in paragraph (b)(1) 

of this section but on or before August 

1 of the year in which the required filing 

date occurs (corrected after 30 days but 

on or before August 1). See paragraph 

(b)(6) of this section for an exception to 

the provisions of this paragraph (b)(2) 

for returns that are not due on January 

31, February 28, or March 15. The total 

amount imposed on a person for all 

failures during any calendar year 

corrected after 30 days but on or before 

August 1 will not exceed $1,500,000. 

* * * * * 

(5) Examples. The provisions of 

paragraphs (a) and (b)(1) through (4) of 

this section may be illustrated by the 

following examples. These examples do 

not take into account any possible 

application of the de minimis exception 

under paragraph (d) of this section, the 

safe harbor exception for certain de 

minimis errors under paragraph (e) of 

this section, the lower small business 

limitations under paragraph (f) of this 

section, the penalty for intentional 

disregard under paragraph (g) of this 

section, adjustments for inflation under 

paragraph (i) of this section, or the 

reasonable cause waiver under 

§ 301.6724–1(a): 

(i) Example 1. Corporation R fails to 

file timely 23,000 Forms 1099–MISC, 

Miscellaneous Information, for the 2023 

calendar year. Of the forms filed, 5,000 

are filed with correct information within 

30 days, and 18,000 after 30 days but on 

or before August 1, 2024. For the same 

year R fails to file timely 400 Forms 

1099–INT, Interest Income, which R 

eventually files on September 28, 2024, 

after the period for reduction of the 

penalty has elapsed. R is subject to a 

penalty of $100,000 for the 400 forms 

that were not filed by August 1 ($250 × 

400 = $100,000), $1,500,000 for the 

18,000 forms filed after 30 days ($100 × 

18,000 = $1,800,000, limited to 

$1,500,000 under paragraph (b)(2) of 

this section), and $250,000 for the 5,000 

forms filed within 30 days ($50 × 5,000 

= $250,000), for a total penalty of 

$1,850,000. 

(ii) Example 2. Corporation T fails to 

file timely 14,000 Forms 1099–MISC for 

the 2023 calendar year. T files the 

14,000 Forms 1099–MISC on September 

3, 2024. Because T does not correct the 

failure by August 1, 2024, T is subject 

to a penalty of $3,000,000, the 

maximum penalty under paragraph (a) 

of this section. Without the limitation of 

paragraph (a) of this section, T would be 

subject to a $3,500,000 penalty ($250 × 

14,000 = $3,500,000). 

* * * * * 

(6) Application to returns not due on 

January 31, February 28, or March 15. 

For returns that are not due on January 

31, February 28, or March 15 (for 

example, a Form 8300, Report of Cash 

Payments Over $10,000 Received in a 

Trade or Business), the penalty is $50 if 

the failure is corrected within 30 days. 

If the failure is corrected after 30 days, 

the penalty is $250 rather than $100. 

There is no period during which the 

penalty is reduced to $100 under 

paragraph (b)(2) of this section. 

(c) * * * 

(1) In general. An inconsequential 

error or omission is not considered a 


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failure to include correct information. 

For purposes of this paragraph (c)(1), 

the term inconsequential error or 

omission means any failure that does 

not prevent or hinder the IRS from 

processing the return, from correlating 

the information required to be shown on 

the return with the information shown 

on the payee’s tax return, or from 

otherwise putting the return to its 

intended use. See paragraph (h)(5) of 

this section for the definition of payee. 

(2) * * * 

(iii) Any monetary amounts, except as 

provided in paragraph (e) of this 

section. The IRS may, by administrative 

pronouncement, specify other types of 

errors or omissions that are never 

inconsequential. 

(3) Examples. The provisions of this 

paragraph (c) may be illustrated by the 

following examples, which do not take 

into account any possible application of 

the penalty for intentional disregard 

under paragraph (g) of this section or 

the reasonable cause waiver under 

§ 301.6724–1(a): 

* * * * * 

(d) Exception for a de minimis 

number of failures—(1) Requirements. 

The penalty under paragraph (a) of this 

section is not imposed for a de minimis 

number of failures to include correct 

information if the filer corrects such 

failures on or before August 1 of the 

year in which the required filing date 

occurs. See paragraph (d)(4) of this 

section for special rules relating to 

returns that are not due on January 31, 

February 28, or March 15. 

(2) Calculation of the de minimis 

exception. The number of returns to 

which the de minimis exception in this 

paragraph (d) applies for any calendar 

year will not exceed the greater of 10 or 

one-half of one percent of the total 

number of all information returns the 

filer is required to file during the year. 

If the number of returns on which the 

filer fails to include correct information 

exceeds the number of returns to which 

the de minimis exception applies, the 

de minimis exception applies to those 

returns that will afford the filer the 

greatest reduction in penalty. The de 

minimis exception applies to failures to 

include correct information that exist 

after the application (if any) of the safe 

harbor exception for certain de minimis 

errors under paragraph (e) of this 

section and after the application (if any) 

of the waiver for reasonable cause under 

section 6724(a) and § 301.6724–1. 

Returns to which the de minimis 

exception applies are treated as having 

been originally filed with correct 

information. 

(3) Examples. The provisions of this 

paragraph (d) may be illustrated by the 

following examples. In each of the 

examples, the failures to file and to 

include correct information are subject 

to penalty under paragraph (a) of this 

section. The examples do not take into 

account any possible application of the 

safe harbor exception for certain de 

minimis errors under paragraph (e) of 

this section, the lower small business 

limitations under paragraph (f) of this 

section, the penalty for intentional 

disregard under paragraph (g) of this 

section, any adjustment for inflation 

under paragraph (i) of this section, or 

the reasonable cause waiver under 

§ 301.6724–1(a). 

(i) Example 1. Corporation T files 

timely 10,000 Forms 1099–INT, Interest 

Income, for 2023 by February 28, 2024. 

The 10,000 forms are all the information 

returns that T is required to file during 

the 2024 calendar year. Of the forms 

filed, 70 contained incorrect 

information. T corrects the failures on 

July 12, 2024. No penalty is imposed for 

50 of the failures (that is, the greater of 

10 or .005 × 10,000 = 50) even though 

the total failures, 70, exceed the number 

to which the de minimis exception may 

apply. The $100 penalty under 

paragraph (b)(2) of this section is 

imposed, in lieu of $250, for the 

remaining 20 failures, which were 

corrected after 30 days but before 

August 1, resulting in a total penalty of 

$2,000 ($100 × 20 = $2,000). 

(ii) Example 2. Corporation U files 

timely 9,500 Forms 1099–INT for 2023 

by February 28, 2024. Fifty of these 

returns contain incorrect information 

with respect to which U files correct 

information on August 1, 2024. U also 

files 500 Forms 1099–INT for 2023 on 

August 30, 2024, after the required filing 

date. The 10,000 returns are all the 

information returns that U is required to 

file during the 2024 calendar year. The 

calculation of the de minimis exception 

is based on the 10,000 returns required 

to be filed during the 2024 calendar year 

even though 500 of the returns filed 

during the year were not filed timely. 

Therefore, the number of failures for 

which the de minimis exception applies 

is 50, and accordingly no penalty is 

imposed for the 50 Forms 1099–INT that 

were corrected on August 1. However, 

the $250 penalty under paragraph (a)(1) 

of this section is imposed for each 

failure to file timely (that is, the de 

minimis exception does not apply to 

this penalty for failure to file timely), 

resulting in a total penalty of $125,000 

($250 × 500 = $125,000). 

(iii) Example 3. Corporation V files 

timely 9,950 Forms 1099–INT for 2023 

by February 28, 2024. However, V fails 

to file timely 50 of its Forms 1099–INT. 

The 10,000 returns are all the 

information returns that V is required to 

file during the 2024 calendar year. Upon 

discovering the error, V files the 50 

returns within 30 days of February 28, 

2024. The 50 returns are complete and 

correct except that V fails to include the 

taxpayer identification numbers of the 

payees on the returns. V files corrected 

returns on August 1, 2024. Absent 

application of the de minimis exception, 

the penalty imposed for the failure to 

include correct information would be 

$5,000 ($100 × 50 = $5,000). Because the 

incorrect returns are corrected on 

August 1, the 50 forms are treated under 

the de minimis exception as originally 

filed with correct information, and 

therefore no penalty is imposed under 

paragraph (a) of this section for the 

failure to include correct information. 

Nevertheless, the penalty under 

paragraph (a) of this section is imposed 

for the failure to file timely the 50 

returns because the de minimis 

exception does not apply to the penalty 

for the failure to file timely. Hence, a 

penalty of $2,500 ($50 × 50 = $2,500) is 

imposed. 

(iv) Example 4. Corporation W files 

timely 100 Forms 1099–DIV and files an 

additional 50 Forms 1099–DIV late, but 

within 30 days of February 28, 2024. 

These are all the information returns 

that W was required to file during the 

2024 calendar year. W discovers errors 

on 10 of the returns that were filed 

timely, and on 5 of the returns that were 

filed late. W corrects all the errors on 

August 1, 2024. The de minimis 

exception applies to 10 of the corrected 

returns. The exception will be allocated 

to the 10 returns that were filed timely 

with incorrect information, because that 

allocation is most favorable to W (that 

is, applying the exception to a return 

filed late with incorrect information 

would save W $50, by reducing the 

penalty on that return from $100 to $50, 

but applying the exception to a return 

filed timely would save W $100, by 

reducing the penalty on that return from 

$100 to $0). (See paragraph (b)(4) of this 

section.) 

(4) Nonapplication to returns not due 

on January 31, February 28, or March 

15. The exception for a de minimis 

number of failures provided in 

paragraph (d)(1) of this section does not 

apply to failures with respect to returns 

that are not due on January 31, February 

28, or March 15 (for example, Forms 

8300 reporting certain cash payments of 

$10,000 or more). Nevertheless, the 

returns that are not due on January 31, 

February 28, or March 15 are included 

in the total number of all information 

returns that the filer is required to file 

during a year for purposes of calculating 

the number of the returns subject to the 


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de minimis exception under paragraph 

(d)(2) of this section. 

(e) Safe harbor exception for certain 

de minimis errors—(1) In general. 

Except as provided in paragraph (e)(3) 

or (g)(4) of this section, the penalty 

under section 6721(a) and paragraph (a) 

of this section is not imposed for a 

failure described in section 

6721(a)(2)(B) and paragraph (a)(2)(ii) of 

this section (failure to include correct 

information on information return) if 

the failure relates to an incorrect dollar 

amount and is a de minimis error. If the 

safe harbor in this paragraph (e) applies 

to an information return and the 

information return was otherwise 

correct and timely filed, no correction is 

required and, for purposes of this 

section, the information return is treated 

as having been filed with all of the 

correct required information. 

(2) Definition of de minimis error. For 

the definition of de minimis error, see 

§ 301.6722–1(d)(2). 

(3) Election to override the safe harbor 

exception. The safe harbor exception 

provided for by paragraph (e)(1) of this 

section does not apply to any 

information return if the incorrect dollar 

amount that would qualify as a de 

minimis error for purposes of this 

paragraph (e) relates to an amount with 

respect to which an election has been 

made (and has not been revoked) under 

section 6722(c)(3)(B) and § 301.6722– 

1(d)(3). See § 301.6722–1(d)(3) for 

additional rules relating to the election 

under section 6722(c)(3)(B) and 

§ 301.6722–1(d)(3), including rules 

relating to the revocation of the election 

and the inapplicability of the election to 

certain information. See § 301.6724–1(h) 

for rules relating to waiver of the section 

6721 penalty in cases where the safe 

harbor exception provided for by 

paragraph (e)(1) of this section does not 

apply because of an election under 

§ 301.6722–1(d)(3). 

(4) Voluntary corrections. Regardless 

of whether the de minimis error safe 

harbor in this paragraph (e) provides an 

exception for not filing a particular 

corrected information return, the 

corrected information return may be 

filed voluntarily if a corresponding 

payee statement reflecting the 

information shown on the corrected 

information return is concurrently 

furnished to the payee. 

(5) Limitations on applicability. The 

safe harbor exception provided for by 

paragraph (e)(1) of this section applies 

only for the purposes of information 

return penalties under section 6721. 

Accordingly, this safe harbor exception 

applies to the reporting of amounts on 

information returns, including the 

reporting of the withholding of tax on 

information returns, but it does not 

apply for purposes of any underlying 

requirements to withhold or pay tax. 

Interest, penalties, and other additions 

to tax may be imposed under other 

sections for under-withholding or 

underpaying tax in any amount. 

(f) * * * 

(1) In general. If a person meets the 

gross receipts test (as defined in 

paragraph (f)(2) of this section) for any 

calendar year, the total amount of the 

penalty imposed on the person for all 

failures described in section 6721(a)(2) 

and paragraph (a)(2) of this section 

during the calendar year will not exceed 

$1,000,000. The total amount of the 

penalty imposed under paragraph (b)(1) 

of this section for failures corrected 

within 30 days will not exceed $175,000 

for the calendar year. The total amount 

of the penalty imposed under paragraph 

(b)(2) of this section for failures 

corrected after 30 days but on or before 

August 1 will not exceed $500,000 for 

the calendar year. 

* * * * * 

(g) * * * 

(1) Application of section 6721(e). If a 

failure is due to intentional disregard of 

the requirement to file timely or to 

include correct information on a return 

as described in paragraph (h) of this 

section, the amount of the penalty 

imposed under paragraph (a) of this 

section must be determined under 

paragraph (g)(4) of this section. 

* * * * * 

(4) Amount of the penalty. If one or 

more failures to file timely or to include 

correct information are due to 

intentional disregard of the requirement 

to file timely or to include correct 

information, then, with respect to each 

failure determined under this paragraph 

(g)— 

(i) Paragraphs (b), (d), (e), and (f) of 

this section will not apply; 

(ii) The $3,000,000 limitation under 

paragraph (a) of this section will not 

apply, and the penalty under this 

paragraph (g) will not be taken into 

account in applying the $3,000,000 

limitation (or any similar limitation 

under paragraph (b) or (f) of this section) 

to penalties not determined under this 

paragraph (g); 

(iii) The penalty imposed under 

paragraph (a) of this section will be 

$500 or, if greater, the statutory 

percentage; and 

(iv) The term statutory percentage 

means— 

(A) In the case of a return other than 

a return required under section 6045(a), 

6041A(b), 6050H, 6050I, 6050J, 6050K, 

6050L, or 6050V, 10 percent of the 

aggregate dollar amount of the items 

required to be reported correctly; 

(B) In the case of a return required to 

be filed by section 6045(a), 6050K, or 

6050L, 5 percent of the aggregate dollar 

amount of the items required to be 

reported correctly; 

(C) In the case of a return required to 

be filed under section 6050I(a), for any 

transaction (or related transactions), the 

greater of $25,000 or the amount of cash 

(within the meaning of section 6050I(d)) 

received in such transaction to the 

extent the amount of such cash does not 

exceed $100,000; or 

(D) In the case of a return required to 

be filed under section 6050V, 10 percent 

of the value of the benefit of any 

contract with respect to which 

information is required to be included 

on the return. 

(5) Computation of the penalty; 

aggregate dollar amount of the items 

required to be reported correctly. The 

aggregate dollar amount used in 

computing the penalty under this 

paragraph (g) is the amount that is not 

reported or is reported incorrectly. If the 

intentional disregard relates to a dollar 

amount, the statutory percentage is 

applied to the difference between the 

dollar amount reported and the amount 

required to be reported correctly. If the 

intentional disregard relates to any other 

item on the return, the statutory 

percentage is applied to the aggregate 

amount of items required to be reported 

correctly. In determining the aggregate 

amount of items required to be reported 

correctly, no item will be taken into 

account more than once. For example, if 

a filer willfully fails to file a Form 1099– 

INT, Interest Income, on which $800 of 

interest and $160 of Federal income tax 

withheld (that is, backup withholding) 

is required to be reported, only the $800 

amount is taken into account in 

computing the penalty. 

(6) Examples. The provisions of this 

paragraph (g) may be illustrated by the 

following examples, which do not take 

into account any adjustments for 

inflation under paragraph (i) of this 

section: 

(i) Example 1. On December 1, 2023, 

Automobile dealer P receives $55,000 

from an individual for the purchase of 

an automobile in a transaction subject to 

reporting under section 6050I. The 

individual presents documents to P that 

identify him as John Doe. However, P 

completes the Form 8300 (relating to 

cash payments over $10,000 received in 

a trade or business) and reflects the 

name of a cartoon character as the filer. 

Because P knew at the time of filing the 

Form 8300 that the filer’s name was not 

the name of the cartoon character, he 

willfully failed to include correct 

information as described under 

paragraph (g)(2) of this section. 


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Therefore, the penalty under paragraph 

(g)(4) of this section is imposed for the 

intentional disregard of the requirement 

to include correct information. The 

amount used in computing the penalty 

under paragraph (g)(5) of this section is 

$55,000 (that is, the amount required to 

be reported on the return with respect 

to which the payee is not correctly 

identified). The amount of the penalty 

determined under paragraph 

(g)(4)(iv)(C) of this section is $55,000 

(that is, the greater of $25,000 or the 

amount of cash received in the 

transaction up to $100,000). 

(ii) Example 2. On December 1, 2023, 

Individual B contacts his agent, F, to act 

as his intermediary in the purchase of 

an automobile. B gives F $20,000 and 

requests F to purchase the automobile in 

F’s name, which F does. F prepares the 

Form 8300 as required under section 

6050I, but in the area designated for the 

name of the filer, F writes confidential. 

Because F knew at the time the return 

was filed that it contained incomplete 

information, the penalty under 

paragraph (g)(4) of this section is 

imposed for the intentional disregard of 

the requirement to include correct 

information. The amount used in 

computing the penalty under paragraph 

(g)(5) of this section is $20,000 (that is, 

the amount required to be reported on 

the return with respect to which the 

payee is not correctly identified). The 

amount of the penalty determined under 

paragraph (g)(4)(iv)(C) of this section is 

$25,000 (that is, the greater of $25,000 

or the amount of cash received in the 

transaction up to $100,000). 

(iii) Example 3. Corporation M 

deliberately does not include $5,000 of 

dividends on a Form 1099–DIV, 

Dividends and Distributions, on which 

a total of $200,000 (including the $5,000 

dividends) is required to be reported 

under section 6042(a). Because the 

failure was deliberate, M’s failure is due 

to intentional disregard of the 

requirement to include correct 

information. Accordingly, the amount of 

the penalty imposed under paragraph 

(a) of this section is determined under 

paragraph (g)(4) of this section. Because 

the Form 1099–DIV is required to be 

filed under section 6042(a), under 

paragraph (g)(4)(iv)(A) of this section 

the amount of the penalty with respect 

to such failure is 10 percent of the 

aggregate dollar amount of the items 

that were required to be but that were 

not reported correctly. Under paragraph 

(g)(5) of this section, $5,000 is the 

difference between the dollar amount 

reported and the amount required to be 

reported correctly. Therefore, the 

amount of the penalty is $500 ($5,000 × 

0.10 = $500). 

(iv) Example 4. Form 8027, 

Employer’s Annual Information Return 

of Tip Income and Allocated Tips, 

requires certain large food and beverage 

establishments to report certain 

information with respect to tips. The 

form requires (among other things) that 

the establishment report its gross 

receipts from food and beverage 

operations. Establishment A, in 

intentional disregard of the information 

reporting requirement, reported gross 

receipts of $1,000,000, when the correct 

amount was $1,500,000. The 

significance of the gross receipts 

reporting requirement is that section 

6053(c)(3)(A) requires an establishment 

to allocate as tips among its employees 

the excess of 8 percent of its gross 

receipts over the aggregate amount 

reported by employees to the 

establishment as tips under section 

6053(a). A’s misstatement of its gross 

receipts caused A to show $80,000 on 

the Form 8027 as 8 percent of its gross 

receipts, rather than the correct amount 

of $120,000. A correctly reported the 

amount of tips reported to it by 

employees under section 6053(a) as 

$80,000. Thus, A reported the excess of 

8 percent of its gross receipts over tips 

reported to it as zero, rather than as the 

correct amount of $40,000. The 

requirement of reporting gross receipts 

is considered merely a step in the 

computation of the excess of 8 percent 

of gross receipts over tips reported to A 

under section 6053(a), so that the 

penalty for intentional disregard will be 

$4,000 (that is, 10 percent of the 

difference between the $40,000 required 

to be reported as the excess of 8 percent 

of gross receipts over tips reported 

under section 6053(a), and the zero 

amount actually reported). 

(h) * * * 

(1) Information return. For purposes 

of this section, the term information 

return has the same meaning as 

information return as defined in section 

6724(d)(1), including any statement 

described in paragraph (h)(2) of this 

section, any return described in 

paragraph (h)(3) of this section, and any 

other items described in paragraph 

(h)(4) of this section. 

(2) * * * 

(x) Section 408(i) (relating to reports 

with respect to individual retirement 

accounts or annuities on Form 1099–R, 

Distributions From Pensions, Annuities, 

Retirement or Profit-Sharing Plans, 

IRAs, Insurance Contracts, etc.); 

(xi) Section 6047(d) (relating to 

reports by employers, plan 

administrators, etc., on Form 1099–R); 

or 

(xii) Section 6035 (relating to basis 

information with respect to property 

acquired from decedents, generally 

Form 8971, Information Regarding 

Beneficiaries Acquiring Property From a 

Decedent, and the Schedule(s) A 

required to be filed along with it). 

(3) * * * 

(xvii) Section 1060(b) (relating to 

reporting requirements of transferors 

and transferees in certain asset 

acquisitions, generally reported on Form 

8594, Asset Acquisition Statement), or 

section 1060(e) (relating to information 

required in the case of certain transfers 

of interests in entities); 

(xviii) Section 4101(d) (relating to 

information reporting with respect to 

fuel oils); 

* * * * * 

(xxiv) Section 6055 (relating to 

information returns reporting minimum 

essential coverage); 

(xxv) Section 6056 (relating to 

information returns reporting on offers 

of health insurance coverage by 

applicable large employer members); 

(xxvi) Section 6050Y (relating to 

returns relating to certain life insurance 

contract transactions); or 

(xxvii) Section 6050Z (relating to 

reports relating to long-term care 

premium statements). 

(4) Other items. The term information 

return also includes any form, 

statement, or schedule required to be 

filed with the IRS under chapter 4 of the 

Internal Revenue Code (the Code) or 

with respect to any amount from which 

tax is required to be deducted and 

withheld under chapter 3 of the Code 

(or from which tax would be required to 

be so deducted and withheld but for an 

exemption under the Code or any treaty 

obligation of the United States), 

including but not limited to Form 1042– 

S, Foreign Person’s U.S. Source Income 

Subject to Withholding, or Form 8805, 

Foreign Partner’s Information Statement 

of Section 1446 Withholding Tax. 

* * * * * 

(6) Filer. For purposes of this section 

the term filer means a person that is 

required to file an information return as 

defined in paragraph (h)(1) of this 

section under the applicable 

information reporting section described 

in paragraphs (h)(2) through (4) of this 

section. 

(i) Adjustment for inflation. Each of 

the dollar amounts under paragraphs 

(a), (b), (f) (other than paragraph (f)(2)), 

and (g) of this section and section 

6721(a), (b), (d) (other than section 

6721(d)(2)(A)), and (e) will be adjusted 

for inflation pursuant to section 6721(f). 

(j) Applicability date. This section 

applies with respect to information 

returns required to be filed on or after 

January 1, 2024. See 26 CFR 301.6721– 


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Federal Register / Vol. 88, No. 242 / Tuesday, December 19, 2023 / Rules and Regulations 87705 

1, as revised April 1, 2023, for rules 

applicable prior to January 1, 2024. 

■ Par. 6. Section 301.6722–1 is 

amended by: 

■ 1. Revising paragraphs (a)(1), (a)(2)(ii), 

and (b)(2)(i); 

■ 2. In paragraphs (b)(2)(ii) and (iii), 

removing the comma at the end of each 

paragraph and adding a semicolon in its 

place; 

■ 3. In paragraphs (b)(2)(iii) and (iv), 

removing ‘‘Internal Revenue Service’’ 

and adding ‘‘IRS’’ in its place; 

■ 4. Revising paragraph (b)(3) 

introductory text; 

■ 5. In paragraph (b)(3), designating 

Examples 1 and 2 as paragraphs (b)(3)(i) 

and (ii); and 

■ 6. In newly designated paragraph 

(b)(3)(ii), removing the language 

‘‘Example 1’’ and adding ‘‘paragraph 

(d)(3)(i) of this section (Example 1)’’ in 

its place; 

■ 7. Revising paragraph (c)(1); 

■ 8. Redesignating paragraphs (c)(2)(i) 

through (iii) as paragraphs (c)(2)(ii) 

through (iv); 

■ 9. Adding a new paragraph (c)(2)(i); 

■ 10. Revising newly redesignated 

paragraphs (c)(2)(ii) and (iii); 

■ 11. Redesignating paragraphs (d) and 

(e) as paragraphs (e) and (g); 

■ 12. Adding a new paragraph (d); 

■ 13. Revising newly redesignated 

paragraphs (e)(1), (e)(2) introductory 

text, and (e)(2)(xxxiii) and (xxxiv); 

■ 14. Adding paragraphs (e)(2)(xxxv) 

through (xxxviii); 

■ 15. In newly designated paragraph 

(e)(3): 

■ i. Adding the language ‘‘or 4’’ after the 

language ‘‘chapter 3’’; 

■ ii. Removing the language ‘‘generally’’ 

and adding the language ‘‘including but 

not limited to’’ in its place; and 

■ iii. Removing the language ‘‘subject’’ 

and adding the language ‘‘Subject’’ in its 

place; 

■ 16. Adding paragraphs (e)(4) and (f); 

and 

■ 17. Revising newly redesignated 

paragraph (g). 

The revisions and additions read as 

follows: 

§ 301.6722–1 Failure to furnish correct 

payee statements. 

(a) * * * 

(1) General rule. A penalty of $250 is 

imposed for each payee statement (as 

defined in section 6724(d)(2) and 

paragraph (e)(2) of this section) with 

respect to which a failure (as defined in 

section 6722(a) and paragraph (a)(2) of 

this section) occurs. No more than one 

penalty will be imposed under this 

paragraph (a) with respect to a single 

payee statement even though there may 

be more than one failure with respect to 

such statement. However, the penalty 

will apply to failures on composite 

substitute payee statements as though 

each type of payment and other required 

information were furnished on separate 

statements. A composite substitute 

payee statement is a single document 

created by a filer to reflect several types 

of payments made to the same payee. 

The total amount imposed on any 

person for all failures during any 

calendar year with respect to all payee 

statements will not exceed $3,000,000. 

See section 6722(e) and paragraph (c) of 

this section for higher penalties if a 

failure is due to intentional disregard of 

the requirement to furnish timely 

correct payee statements. See paragraph 

(d) of this section for a safe harbor 

exception for certain de minimis errors. 

See paragraph (f) of this section for 

inflation adjustments to penalty 

amounts. See § 301.6724–1(a)(1) for a 

waiver of the penalty for a failure that 

is due to reasonable cause. 

(2) * * * 

(ii) A failure to include all of the 

information required to be shown on a 

payee statement or the inclusion of 

incorrect information (failure to include 

correct information). A failure to furnish 

timely includes a failure to furnish a 

written statement to the payee in a 

statement mailing as required under 

sections 6042(c), 6044(e), 6049(c), and 

6050N(b), as well as a failure to furnish 

the statement on a form acceptable to 

the Internal Revenue Service (IRS). 

Except as provided in paragraph (b) or 

(d) of this section, a failure to include 

correct information encompasses a 

failure to include the information 

required by applicable information 

reporting statutes or by any 

administrative pronouncements issued 

thereunder (such as regulations, revenue 

rulings, revenue procedures, or 

information reporting forms). 

(b) * * * 

(2) * * * 

(i) A dollar amount, except as 

provided in paragraph (d) of this 

section; 

* * * * * 

(3) Examples. The provisions of this 

paragraph (b) may be illustrated by the 

following examples, which do not take 

into account any possible application of 

the penalty for intentional disregard 

under paragraph (c) of this section, the 

safe harbor exception for certain de 

minimis errors under paragraph (d) of 

this section, or the reasonable cause 

waiver under § 301.6724–1(a): 

* * * * * 

(c) * * * 

(1) Application of section 6722(e). If a 

failure is due to intentional disregard of 

the requirement to furnish timely 

correct payee statements, the amount of 

the penalty must be determined under 

paragraph (c)(2) of this section. Whether 

a failure is due to intentional disregard 

of the requirement to furnish timely 

correct payee statements is based upon 

the facts and circumstances surrounding 

the failure. The facts and circumstances 

considered include those under 

§ 301.6721–1(g)(3), which will apply in 

determining whether a failure under 

this section is due to intentional 

disregard. 

(2) * * * 

(i) Paragraph (d) of this section will 

not apply; 

(ii) The $3,000,000 limitation under 

paragraph (a) of this section will not 

apply and the penalty under this 

paragraph (c)(2) will not be taken into 

account in applying the $3,000,000 

limitation to penalties not determined 

under this paragraph (c)(2); 

(iii) The penalty imposed under 

paragraph (a) of this section will be 

$500 or, if greater, the statutory 

percentage; and 

* * * * * 

(d) Safe harbor exception for certain 

de minimis errors—(1) In general. 

Except as provided in paragraphs (c) 

and (d)(3) of this section, the penalty 

under section 6722(a) and paragraph (a) 

of this section is not imposed for a 

failure described in section 

6722(a)(2)(B) and paragraph (a)(2)(ii) of 

this section (failure to include correct 

information on payee statement) if the 

failure relates to an incorrect dollar 

amount and is a de minimis error. If the 

safe harbor in this paragraph (d) applies 

to a payee statement and the payee 

statement was otherwise correct and 

timely furnished, no correction is 

required and, for purposes of this 

section, the payee statement is treated as 

having been furnished with all of the 

correct required information. 

(2) Definition of de minimis error. For 

purposes of this paragraph (d), an error 

in a dollar amount is de minimis if the 

difference between any single amount in 

error and the correct amount is not more 

than $100, and, if the difference is with 

respect to an amount of tax withheld, it 

is not more than $25. For purposes of 

this paragraph (d)(2), tax withheld 

includes any amount required to be 

shown on an information return or 

payee statement (as defined in section 

6724(d)(1) and (2), respectively) 

withheld under section 3102 or 3402, as 

well as any such amount required to be 

shown on such an information return or 

payee statement that is creditable under 

section 27, 31, 33, or 1474. 

(3) Election to override the safe harbor 

exception—(i) In general. Except as 


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provided in paragraphs (d)(3)(vi) and 

(vii) of this section, the safe harbor 

exception provided for by this 

paragraph (d) does not apply to any 

payee statement if the person to whom 

the statement is required to be furnished 

(the payee) makes an election that the 

safe harbor not apply with respect to the 

statement. 

(ii) Timing of election. The payee 

must elect no later than the later of 30 

days after the date on which the payee 

statement is required to be furnished to 

the payee, or October 15 of the calendar 

year, to receive a correct payee 

statement required to be furnished in 

that calendar year without having the 

safe harbor under paragraph (d)(1) of 

this section apply. The date of an 

election is the date the election is 

received by the filer. For purposes of 

this section, the provisions of section 

7502 relating to timely mailing treated 

as timely delivery apply in determining 

the date an election is considered to be 

received by the filer, treating delivery to 

the filer as if the filer were an agency, 

officer, or office under such section. The 

election will remain in effect for all 

subsequent years unless revoked under 

paragraph (d)(3)(vii) of this section. 

(iii) Manner for making the election. 

Except as provided in paragraph 

(d)(3)(v) of this section, the payee must 

make the election by delivering the 

election in writing to the filer. Except as 

provided in paragraph (d)(3)(v) of this 

section, the written election must be 

made in writing on paper. The payee 

may deliver the election in person, by 

mail by United States Postal Service, or 

by a designated delivery service as 

defined under section 7502(f)(2). If the 

filer has not otherwise provided an 

address under paragraph (d)(3)(v) of this 

section, the payee must send the written 

election to the filer’s address appearing 

on the payee statement furnished by the 

filer to the payee with respect to which 

the election is being made or as directed 

by that person upon appropriate inquiry 

by the payee. The written election must: 

(A) Clearly state that the payee is 

making the election; 

(B) Provide the payee’s name, address, 

and taxpayer identification number 

(TIN) (as defined in section 7701(a)(41) 

of the Internal Revenue Code) to the 

filer; 

(C) If the payee wants the election to 

apply only to specific types of 

statements, identify the type of payee 

statement(s) and account number(s), if 

applicable, to which the election applies 

(for example, Form 1099–DIV, 

Dividends and Distributions); and 

(D) Provide any other information 

required by the IRS in forms, 

instructions, or publications. 

(iv) Payee statements to which the 

election applies. An election by a payee 

under paragraph (d)(3)(i) of this section 

applies to all types of payee statements 

the filer is required to furnish to the 

payee, unless the payee specifies 

otherwise on the election under 

paragraph (d)(3)(iii)(C) of this section. 

(v) Reasonable alternative manner for 

making the election in cases of 

notification by the filer—(A) In general. 

If the filer satisfies the requirements of 

paragraph (d)(3)(v)(B) of this section, 

and provides for a reasonable alternative 

manner as described in paragraph 

(d)(3)(v)(E) of this section, a payee may 

decide to make the election under 

paragraph (d)(3)(i) of this section 

pursuant to that reasonable alternative 

manner. 

(B) Notification of payee of reasonable 

alternative manner for making election. 

The filer may elect to provide 

notification to the payee of a reasonable 

alternative manner to make the election 

under paragraph (d)(3)(i) of this section, 

as described in paragraph (d)(3)(v)(E) of 

this section. To provide a valid 

notification under this paragraph 

(d)(3)(v)(B), the filer must provide 

notification to the payee that: 

(1) Is in writing (either on paper or in 

electronic format); 

(2) Is timely provided to the payee 

under paragraph (d)(3)(v)(D) of this 

section; 

(3) Explains to the payee to whom 

that filer is required to furnish a payee 

statement of the payee’s ability to elect, 

under paragraph (d)(3)(i) of this section, 

that the safe harbor exceptions for de 

minimis errors not apply, and of the 

payee’s ability to choose to make the 

election using the default method under 

paragraph (d)(3)(iii) of this section; 

(4) Provides an address to which the 

payee may send an election under 

paragraphs (d)(3)(i) and (iii) of this 

section; 

(5) Provides any reasonable 

alternative manner or manners, as 

described in paragraph (d)(3)(v)(E) of 

this section, that the filer is making 

available for the payee to make the 

election under paragraph (d)(3)(i) of this 

section; and 

(6) Describes the information required 

for making the election described by 

paragraphs (d)(3)(iii)(A) through (D) of 

this section. Solely for purposes of the 

reasonable alternative manner, the 

notification may provide that some or 

all of the information described in 

paragraph (d)(3)(iii)(B) of this section is 

not required and may provide that the 

provision of an account number as 

referenced in paragraph (d)(3)(iii)(C) of 

this section is required if the payee 

decides to use the reasonable alternative 

manner for the election. 

(C) Notification of revocation 

procedures. A notification under this 

paragraph (d)(3)(v) may also provide the 

procedures for making a revocation of 

an election under paragraph (d)(3)(vii) 

of this section. Solely for purposes of 

the reasonable alternative manner, the 

notification may provide that some or 

all of the information described in 

paragraph (d)(3)(vii)(B) of this section is 

not required and may provide that the 

provision of an account number as 

referenced in paragraph (d)(3)(vii)(E) of 

this section is required if the payee 

decides to use a reasonable alternative 

manner for making a revocation. 

(D) Time for providing notification of 

reasonable alternative manner for 

making payee election. A notification 

under this paragraph (d)(3)(v) will be 

timely under paragraph (d)(3)(v)(B)(2) of 

this section if: 

(1) The notification is provided with, 

or at the time of, the furnishing of the 

payee statement; or 

(2) The filer previously provided a 

valid notification under paragraph 

(d)(3)(v) of this section to the payee 

with, or at the time of, the furnishing of 

a payee statement associated with a 

particular account, in which case 

notification will be considered to have 

been timely provided with respect to 

subsequent payee statements associated 

with that particular account. If the filer 

wishes to provide for a different 

reasonable alternative manner than a 

previous reasonable alternative manner, 

the filer must provide new notification 

in compliance with the timeliness rule 

of paragraph (d)(3)(v)(D)(1) of this 

section, and must accept payee elections 

under the previous reasonable 

alternative manner for a period of at 

least 60 days after the receipt of the new 

notification by the payee. 

(E) Reasonable alternative manner. A 

reasonable alternative manner described 

in a notification under paragraph 

(d)(3)(v)(B) of this section may include 

that a payee election under paragraph 

(d)(3)(i) of this section may be made 

electronically (for example, via email or 

website) or telephonically. The 

reasonable alternative manner may not 

impose any prerequisite, condition, or 

time limitation on, or otherwise limit, 

the payee’s ability to make an election 

under paragraph (d)(3)(iii) of this 

section, except as described in 

paragraphs (d)(3)(ii) and (iii) of this 

section; it may only offer a reasonable 

alternative manner or manners for 

making this election under this 

paragraph (d)(3)(v). 

(vi) Election not available for certain 

information. The election to override 


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Federal Register / Vol. 88, No. 242 / Tuesday, December 19, 2023 / Rules and Regulations 87707 

the safe harbor exception provided for 

by paragraph (d)(3)(i) of this section is 

not available with respect to 

information that may not be altered 

under specific information reporting 

rules. See, for example, § 1.6045–4(i)(5) 

of this chapter. 

(vii) Revocation of election. The payee 

may revoke a prior election by 

submitting a revocation to the filer. The 

effect of a revocation of a prior election 

is that the safe harbor for certain de 

minimis errors will apply to the payee 

statements that the payee identifies and 

that are furnished or are due to be 

furnished after the revocation is 

received. The revocation will remain in 

effect until the payee makes a valid and 

timely election under paragraph (d)(3)(i) 

of this section. The date of a revocation 

is the date the revocation is received by 

the filer. For purposes of this section, 

the provisions of section 7502 relating 

to timely mailing treated as timely 

delivery apply in determining the date 

a revocation is considered to be received 

by the filer, treating delivery to the filer 

as if the filer were an agency, officer, or 

office under section 7502. The 

revocation must be made in the same 

manner or manners described for 

making the election, that is pursuant to 

either paragraph (d)(3)(iii) or (v) of this 

section, as the payee chooses if 

paragraph (d)(3)(v) of this section is 

applicable. Except as provided under 

paragraph (d)(3)(v)(B)(6) of this section, 

the revocation must: 

(A) Clearly state that the payee is 

revoking the payee’s prior election; 

(B) Provide the payee’s name, address, 

and TIN to the filer; 

(C) Provide the name of the filer; 

(D) Identify the type of payee 

statement(s) (for example, Form 1099– 

DIV) to which the revocation applies; 

(E) Identify the account number(s), if 

applicable, to which the revocation 

applies; and 

(F) Provide any other information 

required by the IRS in forms, 

instructions or publications. 

(viii) Reasonable cause. See 

§ 301.6724–1(h) for rules relating to 

waiver of the section 6722 penalty in 

cases where the safe harbor exception 

provided for by paragraph (d)(1) of this 

section does not apply because of an 

election under paragraph (d)(3)(i) of this 

section. 

(4) Record retention. To facilitate 

proof of compliance with reporting and 

other obligations under the internal 

revenue laws, filers must retain records 

of any election or revocation by the 

payee under paragraph (d)(3)(i) or (vii) 

of this section, respectively, and any 

notification made under paragraph 

(d)(3)(v) of this section for as long as the 

contents of the election, revocation, or 

notification may be material in the 

administration of any internal revenue 

law. For rules regarding record 

retention, see section 6001 and 

§ 1.6001–1 of this chapter. For 

additional procedures applicable to 

record retention in the context of 

electronic storage, see Rev. Proc. 97–22, 

1997–1 C.B. 652, Rev. Proc. 98–25, 

1998–1 C.B. 689, and any subsequently 

published guidance. 

(5) Examples. The provisions of 

paragraphs (d)(1) through (4) of this 

section may be illustrated by the 

following examples, which do not 

address any possible application of the 

penalty for intentional disregard under 

paragraph (c) of this section or the 

reasonable cause waiver under 

§ 301.6724–1(a): 

(i) Example 1—(A) Facts. Filer W is 

required to file with the IRS by February 

28, 2024, and furnish to Payee E by 

February 15, 2024, Form 1099–B 

Proceeds From Broker and Barter 

Exchange Transactions, because W is a 

broker who sold stocks on behalf of E 

resulting in proceeds of $5,000 during 

calendar year 2023. W properly 

withheld an amount of $1,736 under 

applicable backup withholding rules 

because E failed to furnish E’s TIN to W. 

On the Form 1099–B, W reports as 

follows: Box 1d, Proceeds, $4,900; and 

Box 4, Federal income tax withheld, 

$1,761. W otherwise correctly and 

timely files and furnishes the Form 

1099–B. E does not make an election 

under paragraph (d)(3)(i) of this section. 

(B) Analysis. The safe harbor 

exception for de minimis errors 

provided for by paragraph (d)(1) of this 

section applies, because the differences 

between each of the amounts reported 

in error and the correct amounts are not 

more than the applicable limits. The 

error in the dollar amount reported in 

Box 1d, Proceeds, is de minimis because 

the difference between the amount in 

error ($4,900) and the correct amount 

($5,000) is not more than $100; it is 

exactly $100. The error in the dollar 

amount reported in Box 4, Federal 

income tax withheld, is de minimis 

because the $25 difference between the 

amount in error ($1,761) and the correct 

amount ($1,736) is not more than $25, 

the limit for an error with respect to an 

amount reported for tax withheld. 

(ii) Example 2—(A) Facts. The facts 

are the same as in paragraph (d)(5)(i)(A) 

of this section (Example 1), except that 

Filer W reports $1,710 as the amount in 

Box 4, Federal income tax withheld. 

(B) Analysis. The safe harbor 

exception for de minimis errors 

provided for by paragraph (d)(1) of this 

section does not apply because the Form 

1099–B contains a failure that is not a 

de minimis error. The difference 

between the amount in error ($1,710) 

and the correct amount ($1,736) is $26, 

which is more than the $25 limit for de 

minimis errors with respect to an 

amount reported for tax withheld. 

(iii) Example 3—(A) Facts. In 2024, 

Filer X provides Payee B with valid 

notification of a reasonable alternative 

manner under paragraph (d)(3)(v) of this 

section for making the payee election 

under paragraph (d)(3)(i) of this section. 

B timely elects pursuant to the 

reasonable alternative manner during 

2024. B elects the reasonable alternative 

manner with respect to all payee 

statements that X is required to furnish 

to B. In January 2025, X decides to 

provide for a different, but also valid, 

reasonable alternative manner; X 

provides notification of this different 

reasonable alternative manner to B, and 

B receives notification of this different 

reasonable alternative manner, pursuant 

to paragraph (d)(3)(v)(B) of this section, 

on January 16, 2025. B decides to revoke 

B’s prior election, with respect to the 

Forms 1099–DIV that X is required to 

furnish to B. 

(B) Analysis. Under paragraph 

(d)(3)(vii) of this section, Payee B may 

provide the revocation to Filer X in any 

of three different manners. First, B may 

provide the revocation to X in the same 

manner as if B were making an election 

under the default manner of paragraph 

(d)(3)(iii) of this section; B may do so at 

any time. Second, having received 

notification from X of the different 

reasonable alternative manner on 

January 16, 2025, B may provide the 

revocation to X in the same manner as 

if B were making an election under the 

different reasonable alternative manner 

pursuant to paragraph (d)(3)(v) of this 

section. Third, because X previously 

provided notification of a reasonable 

alternative manner (2024 alternative) 

before providing notification of a 

different reasonable alternative manner 

on January 16, 2025 (2025 alternative), 

B may provide the revocation to X in the 

same manner as if B were making an 

election under the previous reasonable 

alternative manner (2024 alternative); B 

may do so for a period of 60 days after 

January 16, 2025, pursuant to paragraph 

(d)(3)(v)(D)(2) of this section. 

(iv) Example 4—(A) Facts. In 2024, 

Filer Y furnishes, as required, a Form 

W–2, Wage and Tax Statement, to Payee 

C for wages paid in 2023. The correct 

version of this Form W–2, without any 

errors, de minimis or otherwise, would 

have reported $15,200 of Federal 

income tax withheld, $6,200 of social 

security tax withheld, $1,450 of 

Medicare tax withheld, and $6,000 of 


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state income tax withheld. However, the 

Form W–2 that Y furnishes to C reports 

$15,180 of Federal income tax withheld, 

$6,180 of social security tax withheld, 

$1,430 of Medicare tax withheld, and 

$5,980 of state income tax withheld. 

The 2023 Form W–2 does not require 

reporting a sum total of tax withheld of 

all types. C does not make an election 

under paragraph (d)(3)(i) of this section. 

(B) Analysis. For each of the four 

amounts of tax withheld, the difference 

between the amount of tax withheld that 

is reported on the Form W–2 and the 

correct amount is $20. Under paragraph 

(d)(2) of this section, each of these errors 

is a de minimis error because each is 

with respect to an amount of tax 

withheld and is not more than $25. If 

there are no other errors on the Form 

W–2, the safe harbor exception for de 

minimis errors provided for by 

paragraph (d)(1) of this section applies. 

The amounts of tax withheld are not 

combined in determining whether an 

error constitutes a de minimis error, if 

a combined amount is not required to be 

reported on the payee statement. 

(v) Example 5—(A) Facts. In 2024, 

Filer Z furnishes, as required, a Form 

W–2 to Payee D for wages paid in 2023. 

The correct version of this Form W–2, 

without any errors, de minimis or 

otherwise, would have reported $15,200 

of Federal income tax withheld, $6,200 

of social security tax withheld, $1,450 of 

Medicare tax withheld, $6,000 of state 

income tax withheld, and no other taxes 

withheld. The Form W–2 that Z 

furnishes to D reports $15,170 of 

Federal income tax withheld, $6,220 of 

social security tax withheld, and the 

correct amount of Medicare tax 

withheld and state income tax withheld. 

(B) A single amount of tax withheld 

reported on the Form W–2, specifically 

the amount of Federal income tax 

withheld, differs from the correct 

amount by more than $25. Under 

paragraph (d)(2) of this section, this 

error is not a de minimis error. 

Therefore, the safe harbor exception for 

de minimis errors provided for by 

paragraph (d)(1) of this section does not 

apply. It is irrelevant that the sum total 

of taxes withheld reported on the Form 

W–2 ($28,840) differs from the correct 

total of taxes withheld ($28,850) by less 

than $25. 

(6) Voluntary corrections. Regardless 

of whether the de minimis error safe 

harbor in this paragraph (d) provides an 

exception for not furnishing a particular 

corrected payee statement, the corrected 

payee statement may be furnished 

voluntarily if a corresponding 

information return reflecting the 

information reported on the corrected 

payee statement is concurrently filed. 

(7) Limitations on applicability. The 

safe harbor exception provided for by 

paragraph (d)(1) of this section applies 

only for the purposes of payee statement 

penalties under section 6722. 

Accordingly, this safe harbor exception 

applies to the reporting of amounts on 

payee statements, including the 

reporting of the withholding of tax on 

payee statements, but does not apply for 

purposes of any underlying 

requirements to withhold or pay tax. 

Interest, penalties, and other additions 

to tax may be imposed under other 

sections for under-withholding or 

underpaying tax in any amount. 

(e) * * * 

(1) Payee. See § 301.6721–1(h)(5) for 

the definition of payee. 

(2) Payee statement. For purposes of 

this section the term payee statement 

has the same meaning as payee 

statement as defined by section 

6724(d)(2), including any statement 

required to be furnished under— 

* * * * * 

(xxxiii) Section 6055 (relating to 

information returns reporting minimum 

essential coverage); 

(xxxiv) Section 6056 (relating to 

information returns reporting on offers 

of health insurance coverage by 

applicable large employer members); 

(xxxv) Section 6035, other than a 

statement described in section 

6724(d)(1)(D), (relating to basis 

information with respect to property 

acquired from decedents, generally 

Schedule A of Form 8971, Information 

Regarding Beneficiaries Acquiring 

Property From a Decedent); 

(xxxvi) Section 6050Y(a)(2), 

6050Y(b)(2), or 6050Y(c)(2) (relating to 

certain life insurance contract 

transactions); 

(xxxvii) Section 6226(a)(2) (regarding 

statements relating to alternative to 

payment of imputed underpayment by a 

partnership) or under any other 

provision of this title that provides for 

the application of rules similar to 

section 6226(a)(2); or 

(xxxviii) Section 6050Z (relating to 

reports relating to long-term care 

premium statements). 

* * * * * 

(4) Filer. For purposes of this section 

the term filer means a person that is 

required to furnish a payee statement as 

defined in paragraph (e)(2) and (3) of 

this section under the applicable 

information reporting section described 

in paragraph (e)(2) and (3) of this 

section. 

(f) Adjustment for inflation. Each of 

the dollar amounts under paragraphs 

(a), (b), and (c) of this section and 

paragraphs (a), (b), (d)(1), and (e) of 

section 6722 will be adjusted for 

inflation pursuant to section 6722(f). 

(g) Applicability date. This section 

applies with respect to payee statements 

required to be furnished on or after 

January 1, 2024. See 26 CFR 301.6722– 

1, as revised April 1, 2023, for rules 

applicable prior to January 1, 2024. 

■ Par. 7.Section 301.6724–1 is amended 

by: 

■ 1. Revising paragraphs (a)(1) and 

(a)(2)(ii); 

■ 2. Designating the undesignated 

paragraph following paragraph (a)(2)(ii) 

as paragraph (a)(2)(iii) and revising 

newly designated paragraph (a)(2)(iii); 

■ 3. Revising paragraphs (b) 

introductory text and (b)(2)(i) and (ii); 

■ 4. Designating the undesignated 

paragraph following paragraph (b)(2)(ii) 

as paragraph (b)(3); 

■ 5. In paragraph (c)(1)(iii), adding 

‘‘(IRS)’’ after ‘‘Internal Revenue 

Service’’; 

■ 6. Revising paragraph (c)(3)(ii); 

■ 7. In paragraphs (c)(4) and (c)(6)(ii), 

removing ‘‘Internal Revenue Service’’ 

and adding ‘‘IRS’’ in its place; 

■ 8. Revising paragraphs (e)(1) 

introductory text and (e)(1)(i) and the 

first sentence of paragraph (e)(1)(vi)(A); 

■ 9. Removing paragraph (e)(1)(vi)(E); 

■ 10. Redesignating paragraphs 

(e)(1)(vi)(F) and (G) as paragraphs 

(e)(1)(vi)(E) and (F) and revising newly 

redesignated paragraphs (e)(1)(vi)(E) and 

(F); 

■ 11. In paragraphs (e)(2)(i)(A) and 

(e)(2)(ii)(C) and (E), removing ‘‘Internal 

Revenue Service’’ and adding ‘‘IRS’’ in 

its place; 

■ 12. Revising paragraphs (f)(1) 

introductory text and (f)(1)(i); 

■ 13. In paragraph (f)(1)(ii), removing 

‘‘Internal Revenue Service’’ and adding 

‘‘IRS’’ in its place; 

■ 14. Revising paragraphs (f)(5)(i) and 

(ii), (g), (h), (k), (m) introductory text, 

and (m)(1); 

■ 15. In paragraphs (m)(2) and (3), 

removing the comma at the end of the 

paragraphs and adding a semicolon in 

its place; 

■ 16. In paragraph (n), removing 

‘‘Internal Revenue Service’’ and adding 

‘‘IRS’’ in its place; and 

■ 17. Adding paragraph (o). 

The revisions and additions read as 

follows: 

§ 301.6724–1 Reasonable cause. 

(a) * * * 

(1) General rule. The penalty for a 

failure relating to an information 

reporting requirement as defined in 

paragraph (j) of this section is waived if 

the failure is due to reasonable cause 

and is not due to willful neglect. 

(2) * * * 


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(ii) The failure arose from events 

beyond the filer’s control (impediment), 

as described in paragraph (c) of this 

section. 

(iii) Moreover, the filer must establish 

that the filer acted in a responsible 

manner, as described in paragraph (d) of 

this section, both before and after the 

failure occurred. Thus, if the filer 

establishes that there are significant 

mitigating factors for a failure but is 

unable to establish that the filer acted in 

a responsible manner, the mitigating 

factors will not be sufficient to obtain a 

waiver of the penalty. Similarly, if the 

filer establishes that a failure arose from 

an impediment but is unable to 

establish that the filer acted in a 

responsible manner, the impediment 

will not be sufficient to obtain a waiver 

of the penalty. See paragraph (g) of this 

section for the reasonable cause safe 

harbor for persons who exercise due 

diligence. See paragraph (h) of this 

section for the reasonable cause safe 

harbor after an election under section 

6722(c)(3)(B) and § 301.6722–1(d)(3). 

(b) Significant mitigating factors. In 

order to establish reasonable cause 

under this paragraph (b), the filer must 

satisfy paragraph (d) of this section and 

must show that there are significant 

mitigating factors for the failure. See 

paragraph (c)(5) of this section for the 

application of this paragraph (b) to 

failures attributable to the actions of a 

filer’s agent. The applicable mitigating 

factors include, but are not limited to— 

* * * * * 

(2) * * * 

(i) Whether the filer has incurred any 

penalty under § 301.6721–1, 

§ 301.6722–1, or § 301.6723–1 in prior 

years for the failure; and 

(ii) If the filer has incurred any such 

penalty in prior years, the extent of the 

filer’s success in lessening its error rate 

from year to year. 

* * * * * 

(c) * * * 

(3) * * * 

(ii) The cost of filing on magnetic 

media or in electronic form was 

prohibitive as determined at least 45 

days before the due date of the returns 

(without regard to extensions); 

* * * * * 

(e) * * * 

(1) In general. A filer that is seeking 

a waiver for reasonable cause under 

paragraph (c)(6) of this section will 

satisfy paragraph (d)(2) of this section 

with respect to establishing that a 

failure to include a TIN on an 

information return resulted from the 

failure of the payee to provide 

information to the filer (that is, a 

missing TIN) only if the filer makes the 

initial and, if required, the annual 

solicitations described in this paragraph 

(e) (required solicitations). For purposes 

of this section, a number is treated as a 

missing TIN if the number does not 

contain nine digits or includes one or 

more alpha characters (a character or 

symbol other than an Arabic numeral) 

as one of the nine digits. A solicitation 

means a request by the filer for the 

payee to furnish a correct TIN. See 

paragraph (f) of this section for the rules 

that a filer must follow to establish that 

the filer acted in a responsible manner 

with respect to providing incorrect TINs 

on information returns. See paragraph 

(e)(1)(vi)(A) of this section for 

alternative solicitation requirements. 

See paragraph (g) of this section for the 

safe harbor due diligence rules. 

(i) Initial solicitation. An initial 

solicitation for a payee’s correct TIN 

must be made at the time an account is 

opened. The term account includes 

accounts, relationships, and other 

transactions. However, a filer is not 

required to make an initial solicitation 

under this paragraph (e)(1)(i) with 

respect to a new account if the filer has 

the payee’s TIN and uses that TIN for all 

accounts of the payee. For example, see 

§ 31.3406(h)–3(a) of this chapter. If the 

account is opened in person, the initial 

solicitation may be made by oral or 

written request, such as on an account 

creation document. If the account is 

opened by mail, telephone, or other 

electronic means, the TIN may be 

requested through such 

communications. If the account is 

opened by the payee’s completing and 

mailing an application furnished by the 

filer that requests the payee’s TIN, the 

initial solicitation requirement is 

considered met. If a TIN is not received 

as a result of an initial solicitation, the 

filer may be required to make additional 

solicitations (annual solicitations). 

* * * * * 

(vi) * * * 

(A) The solicitation requirements 

under this paragraph (e) do not apply to 

the extent an information reporting 

provision under which a return, as 

defined in paragraph (h) of § 301.6721– 

1, is filed provides specific 

requirements relating to the manner or 

the time period in which a TIN must be 

solicited. * * * 

* * * * * 

(E) A filer is not required to make 

annual solicitations by mail on accounts 

with respect to which the filer has an 

undeliverable address, that is, where 

other mailings to that address have been 

returned to the filer because the address 

was incorrect and no new address has 

been provided to the filer. 

(F) Except as provided in paragraphs 

(e)(1)(vi)(A) and (C) of this section, no 

more than two annual solicitations are 

required under this paragraph (e) in 

order for a filer to establish reasonable 

cause. 

* * * * * 

(f) * * * 

(1) In general. A filer that is seeking 

a waiver for reasonable cause under 

paragraph (c)(6) of this section will 

satisfy paragraph (d)(2) of this section 

with respect to establishing that a 

failure resulted from incorrect 

information provided by the payee or 

any other person (that is, inclusion of an 

incorrect TIN) on an information return 

only if the filer makes the initial and 

annual solicitations described in this 

paragraph (f). See paragraph (e)(1) of 

this section for the definition of the term 

solicitation. See paragraph (f)(5)(i) of 

this section for alternative solicitation 

requirements. See paragraph (g) of this 

section for the safe harbor due diligence 

rules. 

(i) Initial solicitation. An initial 

solicitation for a payee’s correct TIN 

must be made at the time the account is 

opened. The term account includes 

accounts, relationships, and other 

transactions. However, a filer is not 

required to make an initial solicitation 

under this paragraph (f)(1)(i) with 

respect to a new account if the filer has 

the payee’s TIN and uses that TIN for all 

accounts of the payee. For example, see 

§ 31.3406(h)–3(a) of this chapter. No 

additional solicitation is required after 

the filer receives the TIN unless the IRS 

or, in some cases, a broker notifies the 

filer that the TIN is incorrect. Following 

such notification the filer may be 

required to make an annual solicitation 

to obtain the correct TIN as provided in 

paragraphs (f)(1)(ii) and (iii) of this 

section. 

* * * * * 

(5) * * * 

(i) The solicitation requirements 

under this paragraph (f) do not apply to 

the extent that an information reporting 

provision under which a return, as 

defined in § 301.6721–1(h), is filed 

provides specific requirements relating 

to the manner or the time period in 

which a TIN must be solicited. In that 

event, the requirements of this 

paragraph (f) will be satisfied only if the 

filer complies with the manner and time 

period requirement under the specific 

information reporting provisions and 

this paragraph (f), to the extent 

applicable. 

(ii) An annual solicitation is not 

required to be made for a year under 

this paragraph (f) with respect to an 

account if no payments are made to the 


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account for such year or if no return as 

defined in § 301.6721–1(h) is required to 

be filed for the account for such year. 

* * * * * 

(g) Due diligence safe harbor—(1) In 

general. A filer may establish reasonable 

cause with respect to a failure relating 

to an information reporting requirement 

as described in paragraph (j) of this 

section if the filer exercises due 

diligence with respect to failures 

described in sections 6721 through 

6723. Paragraphs (g)(2) through (7) of 

this section provide special rules on the 

exercise of due diligence with respect to 

TINs for an exception to a penalty under 

sections 6721 through 6723 for— 

(i) A failure to provide a correct TIN 

on any— 

(A) Information return as defined in 

§ 301.6721–1(h); 

(B) Payee statement as defined in 

§ 301.6722–1(e)(2) and (3); or 

(C) Document as described in 

§ 301.6723–1(a)(4); or 

(ii) The failure merely to provide a 

TIN as described in § 301.6723– 

1(a)(4)(ii). 

(2) General rule. A filer is not subject 

to a penalty for failure to provide the 

payee’s correct TIN on an information 

return, if the payee has certified, under 

penalties of perjury, that the TIN 

provided to the filer was the payee’s 

correct TIN, and the filer included such 

TIN on the information return before 

being notified by the IRS (or a broker) 

that such TIN is incorrect. 

(3) Due diligence defined for accounts 

opened and instruments acquired after 

December 31, 1983—(i) In general. For 

a filer of a reportable interest or 

dividend payment (other than in a 

window transaction) to be considered to 

have exercised due diligence in 

furnishing the correct TIN of a payee 

with respect to an account opened or an 

instrument acquired after December 31, 

1983 (that is, an account or instrument 

that is not a pre-1984 account nor a 

window transaction), the filer must use 

a TIN provided by the payee under 

penalties of perjury on information 

returns filed with the IRS. Therefore, if 

a filer permits a payee to open an 

account without obtaining the payee’s 

TIN under penalties of perjury and files 

an information return with the IRS with 

a missing or an incorrect TIN, the filer 

will be liable for the $250 penalty for 

the year with respect to which such 

information return is filed. However, in 

its administrative discretion, the IRS 

will not enforce the penalty with respect 

to a calendar year if the certified TIN is 

obtained after the account is opened and 

before December 31 of such year, 

provided that the filer exercises due 

diligence in processing such number, 

that is, the filer uses the same care in 

processing the TIN provided by the 

payee that a reasonably prudent filer 

would use in the course of the filer’s 

business in handling account 

information such as account numbers 

and balances. 

(ii) Notification of incorrect TIN. Once 

notified by the IRS (or a broker) that a 

number is incorrect, a filer is liable for 

the penalty for all prior years in which 

an information return was filed with 

that particular incorrect number if the 

filer has not exercised due diligence 

with respect to such years. A preexisting certified TIN does not 

constitute an exercise of due diligence 

after the IRS or a broker notifies the filer 

that the number is incorrect unless the 

filer undertakes the actions described in 

§ 31.3406(d)–5(d)(2)(i) of this chapter 

with respect to accounts receiving 

reportable payments described in 

section 3406(b)(1) and reported on 

information returns described in 

sections 6724(d)(1)(A)(i) through (iv). 

(iii) Inadvertent processing. A filer 

described in this paragraph (g)(3) is 

liable for the penalty if the filer obtained 

a certified TIN for a payee but 

inadvertently processed the TIN or 

name incorrectly on the information 

return unless the filer exercised that 

degree of care in processing the TIN and 

name and in furnishing it on the 

information return that a reasonably 

prudent filer would use in the course of 

the filer’s business in handling account 

information, such as account numbers 

and account balances. 

(4) Instruments not transferred with 

assistance of broker—(i) In general. If a 

filer files an information return with a 

missing or an incorrect TIN with respect 

to an instrument transferred without the 

assistance of a broker, the filer will be 

considered to have exercised due 

diligence with respect to a readily 

tradable instrument that is not part of a 

pre-1984 account with the filer if the 

filer records on its books a transfer in 

which the filer was not a party. This 

paragraph (g)(4)(i) applies until the 

calendar year in which the filer receives 

a certified TIN from the payee. 

(ii) Solicitation of TIN not required. A 

filer described in paragraph (g)(4)(i) of 

this section is not required to solicit the 

TIN of a payee of an account with a 

missing TIN in order to be considered 

as having exercised due diligence in a 

subsequent calendar year under the rule 

set forth in paragraph (g)(4)(i) of this 

section. 

(iii) Payee provides incorrect TIN. If a 

payee provides a TIN (whether or not 

certified) to a filer described in 

paragraph (g)(4)(i) of this section who 

records on its books a transfer in which 

it was not a party, the filer is considered 

to have exercised due diligence under 

the rule set forth in paragraph (g)(4)(i) 

of this section if the transfer is 

accompanied with a TIN provided that 

the filer uses the same care in 

processing the TIN provided by a payee 

that a reasonably prudent filer would 

use in the course of the filer’s business 

in handling account information, such 

as account numbers and account 

balances. Thus, a filer will not be liable 

for the penalty if the filer uses the TIN 

provided by the payee on information 

returns that it files, even if the TIN 

provided by the payee is later 

determined to be incorrect. However, a 

filer will not be considered as having 

exercised due diligence under 

paragraph (g)(4)(i) of this section after 

the IRS or a broker notifies the filer that 

the number is incorrect unless the filer 

undertakes the required additional 

actions described in paragraph (g)(2) of 

this section. 

(5) Filer incurred an undue 

hardship—(i) In general. A filer of a 

post-1983 account or instrument is not 

liable for a penalty under section 

6721(a) for filing an information return 

with a missing or an incorrect TIN if the 

IRS determines that the filer could have 

satisfied the due diligence requirements 

but for the fact that the filer incurred an 

undue hardship. An undue hardship is 

an extraordinary or unexpected event 

such as the destruction of records or 

place of business of the filer by fire or 

other casualty (or the place of business 

of the filer’s agent who under a preexisting written contract had agreed to 

fulfill the filer’s due diligence 

obligations with respect to the account 

subject to the penalty and there was no 

means for the obligations to be 

performed by another agent or the filer). 

Undue hardship will also be found to 

exist if the filer could have met the due 

diligence requirements only by 

incurring an extraordinary cost. 

(ii) Only IRS makes undue hardship 

determinations. A filer must obtain a 

determination from the IRS to establish 

that the filer satisfies the undue 

hardship exception to the penalty under 

section 6721(a) for the failure to include 

the correct TIN on an information return 

for the year with respect to which the 

filer is subject to the penalty. A 

determination of undue hardship may 

be established only by submitting a 

written statement to the IRS signed 

under penalties of perjury that sets forth 

all the facts and circumstances that 

make an affirmative showing that the 

filer could have satisfied the due 

diligence requirements but for the 

occurrence of an undue hardship. Thus, 


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the statement must describe the undue 

hardship and make an affirmative 

showing that the filer either was in the 

process of exercising or stood ready to 

exercise due diligence when the undue 

hardship occurred. A filer may request 

an undue hardship determination by 

submitting a written statement to the 

address provided with the notice 

proposing penalty assessment (for 

example, Notice 972CG) or the notice of 

penalty assessment (for example, CP15 

or CP215), or as otherwise directed by 

the IRS in forms, instructions, or 

publications. 

(6) Acquisitions of pre-1984 accounts 

or instruments—(i) In general. A pre1984 account or instrument of a filer 

that is exchanged for an account or 

instrument of another filer pursuant to 

a statutory merger of the other filer or 

the acquisition of the accounts or 

instruments of such filer is not 

transformed into a post-1983 account or 

instrument if the merger or acquisition 

occurs after December 31, 1983, because 

the exchange occurs without the 

participation of the payee. 

(ii) Establishing due diligence was 

exercised for accounts or instruments. 

The acquiring taxpayer described in this 

paragraph (g)(6) may rely upon the 

business records and past procedures of 

the merged filer or the filer whose 

accounts or instruments were acquired 

in order to establish that due diligence 

has been exercised on the acquired pre1984 and post-1983 accounts or 

instruments to avoid the penalty under 

section 6721(a) with respect to 

information returns that have been or 

will be filed. 

(7) Limited reliance on certain pre2001 rules. A filer may rely on the due 

diligence rules set forth in 26 CFR 

35a.9999–1, 35a.9999–2, and 35a.9999– 

3 in effect prior to January 1, 2001 (see 

26 CFR 35a.9999–1, 35a.9999–2, and 

35a.9999–3, revised April 1, 1999), 

solely for the definitions of terms or 

phrases used in this paragraph (g). 

(h) Reasonable cause safe harbor after 

election under section 6722(c)(3)(B). A 

filer may establish reasonable cause 

with respect to a failure relating to an 

information reporting requirement as 

described in paragraph (j) of this section 

under this paragraph (h) if the failure is 

a result of an election under § 301.6722– 

1(d)(3)(i) and the presence of a de 

minimis error or errors as described in 

sections 6721(c)(3) and 6722(c)(3) and 

§§ 301.6721–1(e) and 301.6722–1(d) on 

a filed information return or furnished 

payee statement. This paragraph (h) 

applies only if the safe harbor 

exceptions provided for by § 301.6721– 

1(e)(1) or § 301.6722–1(d)(1) would have 

applied, but for an election under 

§ 301.6722–1(d)(3)(i). To establish 

reasonable cause and not willful neglect 

under this paragraph (h), the filer must 

file a corrected information return or 

furnish a corrected payee statement, or 

both, as applicable, within 30 days of 

the date of the election under 

§ 301.6722–1(d)(3)(i). Where specific 

rules provide for additional time in 

which to furnish a corrected payee 

statement and file a corrected 

information return, the 30-day rule does 

not apply and the specific rules will 

apply. See for example §§ 31.6051–1(c) 

through (d) and 31.6051–2(b). If the filer 

rectifies the failure outside of this 30- 

day period, the determination of 

reasonable cause will be on a case-bycase basis. 

* * * * * 

(k) Examples. The provisions of this 

section may be illustrated by the 

following examples: 

(1) Example 1—(i) Facts. On August 1, 

2023, Individual A, an independent 

contractor, establishes a relationship 

(account) with Institution L, which pays 

A amounts reportable under section 

6041. When A opens the account L 

requests that A supply his TIN on the 

account creation document. A fails to 

provide his TIN. On October 2, 2023, L 

mails a solicitation for A’s TIN that 

satisfies the requirement of paragraph 

(e)(1)(ii) of this section. A does not 

provide a TIN to L during 2023. L timely 

files an information return subject to 

section 6721, that does not contain A’s 

TIN, for payments made during the 2023 

calendar year with respect to A’s 

account. A penalty is imposed on L, 

pursuant to § 301.6721–1(a)(2), for L’s 

failure to file a correct information 

return because A’s TIN was not shown 

on the return. The penalty will be 

waived, however, if L establishes that 

the failure was due to reasonable cause 

as defined in this section. 

(ii) Analysis. To establish reasonable 

cause under this section, L must satisfy 

both paragraphs (c)(6) and (d) of this 

section. The criteria for obtaining a 

waiver under paragraphs (c)(6) and (d) 

of this section are as follows: 

(A) L acted in a responsible manner 

in attempting to satisfy the information 

reporting requirement as described in 

paragraph (d) of this section; and 

(B) L demonstrates that the failure 

arose from events beyond L’s control, as 

described in paragraph (c)(6) of this 

section. 

(iii) Analysis (continued). Pursuant to 

paragraph (d)(2) of this section, L may 

demonstrate that it acted in a 

responsible manner only by complying 

with paragraph (e) of this section. 

Paragraph (e) of this section requires a 

filer to request a TIN at the time the 

account is opened (the initial 

solicitation) and, if the filer does not 

receive the TIN at that time, to solicit 

the TIN on or before December 31 of the 

year the account is opened (for accounts 

opened before December) or January 31 

of the following year (for accounts in the 

preceding December) (the annual 

solicitation). Because L has performed 

these solicitations within the time and 

in the manner prescribed by paragraph 

(e) of this section, L has acted in a 

responsible manner as described in 

paragraph (d) of this section. L satisfies 

paragraph (c)(6) of this section because 

under the facts, L can show that the 

failure was caused by A’s failure to 

provide a TIN, an event beyond L’s 

control. As a result, L has established 

reasonable cause under paragraph (a)(2) 

of this section. Therefore, the penalty 

imposed under § 301.6721–1(a)(2) for 

the failure on the 2023 information 

return is waived. See section 

3406(a)(1)(A), which requires L to 

impose backup withholding on 

reportable payments to A if L has not 

received A’s TIN. 

(2) Example 2—(i) Facts. On August 1, 

2023, Individual B opens an account 

with Bank M, which pays B interest 

reportable under section 6049. When B 

opens the account, M requests that B 

supply his TIN on the account creation 

document. B provides his TIN to M. On 

February 28, 2024, M includes the TIN 

that B provided on the Form 1099–INT, 

Interest Income, for the 2023 calendar 

year. In October 2024 the IRS, pursuant 

to section 3406(a)(1)(B), notifies M that 

the 2023 return filed for B contains an 

incorrect TIN. In April 2025 a penalty 

is imposed on M, pursuant to 

§ 301.6721–1(a)(2), for M’s failure to file 

a correct information return for the 2023 

calendar year, that is, the return did not 

contain B’s correct TIN. The penalty 

will be waived, however, if M 

establishes that the failure was due to 

reasonable cause as defined in this 

section. 

(ii) Analysis. To establish reasonable 

cause under this section, M must satisfy 

the criteria in both paragraphs (c)(6) and 

(d) of this section. Pursuant to 

paragraph (d)(2) of this section, M can 

demonstrate that it acted in a 

responsible manner only if M complies 

with paragraph (f) of this section. 

Paragraph (f) of this section requires a 

filer to request a TIN at the time the 

account is opened, an initial 

solicitation. Under paragraph (f)(4) of 

this section the initial solicitation 

relates to failures on returns filed for the 

year an account is opened. Because M 

performed the initial solicitation in 

2023 in the time and manner prescribed 


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in paragraph (f)(1)(i) of this section and 

reflected the TIN received from B on the 

2023 return as required by paragraph 

(f)(1)(iv) of this section, M has acted in 

a responsible manner as described in 

paragraph (d) of this section. M satisfies 

paragraph (c)(6) of this section because, 

under the facts, M can show that the 

failure was caused by B’s failure to 

provide a correct TIN, an event beyond 

M’s control. As a result, M has 

established reasonable cause under 

paragraph (a)(2) of this section. 

Therefore, the penalty imposed under 

§ 301.6721–1(a)(2) for the failure on the 

2023 information return is waived. See 

section 3406(a)(1)(B), which requires M 

to impose backup withholding on 

reportable payments to B if M has not 

received B’s correct TIN. 

(3) Example 3—(i) Table. 

TABLE 1 TO PARAGRAPH (k)(3)(i) 

2023 2/2024 10/2024 2/2025 

Account opened (solicits TIN) ........ 2023 return filed ........................... B-notice with respect to 2023 return.2024 return filed. 

4/2025 10/2025 2/2026 4/2026 

6721 penalty notice for 2023 return B-notice with respect to 2024 return.2025 return filed ........................... 6721 penalty notice for 2024. 

(ii) Facts. The facts are the same as in 

paragraph (k)(2)(i) of this section 

(Example 2). Under § 31.3406(d)– 

5(d)(2)(i) of this chapter and paragraph 

(f)(3) of this section, within 15 days of 

the October 2024 notification of the 

incorrect TIN from the IRS, M solicits 

the correct TIN from B. B fails to 

respond. M timely files the return for 

2024 with respect to the account setting 

forth B’s incorrect TIN. In October 2025 

the IRS notifies M, pursuant to section 

3406(a)(1)(B), that the 2024 return 

contains an incorrect TIN. In April 

2026, a penalty is imposed on M 

pursuant to § 301.6721–1(a)(2) for M’s 

failure to include B’s correct TIN on the 

return for 2024. The penalty will be 

waived, if M establishes that the failure 

was due to reasonable cause as defined 

in this section. 

(iii) Analysis. M must satisfy the 

reasonable cause criteria in paragraphs 

(c)(6) and (d) of this section. M may 

demonstrate that it acted in a 

responsible manner as required under 

paragraph (d) of this section only by 

complying with paragraph (f) of this 

section. Paragraph (f) of this section 

requires a filer to make an initial 

solicitation for a TIN when an account 

is opened. Further, a filer must make an 

annual solicitation for a TIN by mail 

within 15 business days after the date 

that the IRS notifies the filer of an 

incorrect TIN pursuant to section 

3406(a)(1)(B). M made the initial 

solicitation for the TIN in 2023 and, 

after being notified of the incorrect TIN 

in October 2024, the first annual 

solicitation within the time and manner 

prescribed by § 31.3406(d)–5(d)(2)(i) of 

this chapter and paragraphs (f)(1)(ii) and 

(f)(2) of this section. M acted in a 

responsible manner. M satisfies 

paragraph (c)(6) of this section because, 

under the facts, M can show that the 

failure was caused by B’s failure to 

provide his correct TIN, an event 

beyond M’s control. As a result M has 

established reasonable cause under 

paragraph (a)(2) of this section. 

Therefore, the penalty imposed under 

§ 301.6721–1(a)(2) for the failure on the 

2024 return is waived due to reasonable 

cause. 

(4) Example 4—(i) Table. 

TABLE 2 TO PARAGRAPH (k)(4)(i) 

2023 2/2024 10/2024 2/2025 

Account opened (solicits TIN) ........ 2023 return filed ........................... B-notice with respect to 2023 return.2024 return filed. 

4/2025 10/2025 2/2026 4/2026 

6721 penalty notice for 2023 return B-notice with respect to 2024 return.2025 return filed ........................... 6721 penalty notice for 2024 return. 

(ii) Facts. The facts are the same as in 

paragraph (k)(3)(ii) of this section 

(Example 3). M timely solicits B’s TIN 

in October 2025, which B fails to 

provide. M files the return for 2025 with 

the incorrect TIN. In April 2027 the IRS 

informs M that the 2025 return contains 

an incorrect TIN. M does not solicit a 

TIN from B in 2026 and files a return 

for 2026 with B’s incorrect TIN. M seeks 

a waiver of the penalty under 

§ 301.6721–1(a)(2) for reasonable cause. 

(iii) Analysis. M must satisfy the 

reasonable cause criteria in paragraphs 

(c)(6) and (d) of this section. Because M 

made the initial and two annual 

solicitations as required by paragraph (f) 

of this section, M has demonstrated that 

it acted in a responsible manner and is 

not required to solicit B’s TIN in 2026. 

See paragraph (f)(5)(vi) of this section. 

M satisfies paragraph (c)(6) of this 

section because, under the facts, M can 

show that the failure was caused by B’s 

failure to provide his correct TIN, an 

event beyond M’s control. Therefore, M 

has established reasonable cause under 

paragraph (a)(2) of this section. 

(5) Example 5—(i) Facts. In 2023, 

Mortgage Finance Company N lends 

money to C to purchase property in a 

transaction subject to reporting under 

section 6050H. As part of the 

transaction, C gives N a promissory note 

providing for repayment of principal 

and the payment of interest. At the time 

C incurs the obligation N requests C’s 

TIN, as required under § 1.6050H–2(f) of 

this chapter. C fails to provide the TIN 

as required by § 1.6050H–2(f) of this 

chapter. N sends solicitations by mail in 

2023 and 2024 for the missing TIN, 

which C fails to provide. However, for 

2025 N fails to send the solicitation 

required by § 1.6050H–2(f) of this 

chapter. N files returns for the 2023, 

2024, and 2025 calendar years pursuant 

to section 6050H without C’s TIN. 


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(ii) Analysis. Although N made the 

initial and the first annual solicitations 

in 2023 and the second annual 

solicitation in 2024, N did not solicit the 

TIN in 2025 as required under section 

6050H, which requires continued 

annual solicitations until the TIN is 

obtained. Therefore, under paragraph 

(e)(1)(vi)(A) of this section the penalty 

imposed under § 301.6721–1(a) for the 

2025 information return is not waived. 

(6) Example 6—(i) Table. 

TABLE 3 TO PARAGRAPH (k)(6)(i) 

10/2023 2/2024 10/2024 2/2025 

Account opened. (solicits TIN) ....... 2023 return filed ........................... B-notice with respect to 2023 return.2024 return filed. 

4/2025 10/2025 2/2026 4/2026 

6721 penalty notice for 2023 return B-notice with respect to 2024 return.2025 return filed ........................... 6721 penalty notice for 2024 return. 

(ii) Facts. On October 2, 2023, 

Individual E opens an account with 

Institution R, which pays E amounts 

reportable under section 6049. When E 

opens the account, R requests that E 

supply his TIN on an account creation 

document, which E does. Pursuant to 

paragraph (f)(1)(iv) of this section, R 

uses the TIN furnished by E on the 

information return filed for the 2023 

calendar year. In October 2024 the IRS 

notifies R, pursuant to section 

3406(a)(1)(B), that the information 

return filed for E for the 2023 calendar 

year contained an incorrect TIN. At the 

time R receives this notification, E’s 

account contains the incorrect TIN. On 

December 31, 2024, R telephones E 

pursuant to paragraphs (f)(2) and 

(e)(2)(ii) of this section and receives 

different TIN information from E. R uses 

this information on the return that it 

files timely for E for the 2024 calendar 

year, that is, in February 2025. In April 

2025, the IRS notifies R, pursuant to 

§ 301.6721–1(a)(2), that the information 

return filed for the 2023 calendar year 

contains an incorrect TIN. The penalty 

will be waived, however, if R 

establishes the failure was due to 

reasonable cause as defined in this 

section. 

(iii) Analysis. To establish reasonable 

cause under this section, R must satisfy 

the criteria in both paragraphs (c)(6) and 

(d)(2) of this section. Pursuant to 

paragraph (d)(2) of this section, R can 

demonstrate that it acted in a 

responsible manner only if it complies 

with paragraph (f) of this section. R 

solicited E’s TIN at the time the account 

was opened (initial solicitation). Under 

paragraphs (d)(2) and (f)(4) of this 

section, the initial solicitation relates to 

failures on returns filed for the year in 

which an account is opened (that is, 

2023) and for subsequent years until the 

calendar year in which the filer receives 

a notification of an incorrect TIN 

pursuant to section 3406. Because E 

failed to provide the correct TIN upon 

request, the failure arose from events 

beyond R’s control as described in 

paragraph (c)(6) of this section. 

Therefore, the penalty with respect to 

the failure on the 2023 calendar year 

information return is waived due to 

reasonable cause. 

(7) Example 7—(i) Facts. The facts are 

the same as in paragraph (k)(6)(ii) of this 

section (Example 6). In April 2026 the 

IRS notifies R, pursuant to § 301.6721– 

1(a)(2), that the information return filed 

for the 2024 calendar year for E 

contained an incorrect TIN. 

(ii) Analysis. To establish reasonable 

cause for the failure under this section, 

R must satisfy the criteria in both 

paragraphs (c)(6) and (d)(2) of this 

section. Pursuant to paragraph (d)(2) of 

this section, R may establish that it 

acted in a responsible manner only by 

complying with paragraph (f) of this 

section. Pursuant to paragraph (f)(1)(ii) 

of this section, R must make an annual 

solicitation after being notified of an 

incorrect TIN if the payee’s account 

contains the incorrect TIN at the time of 

the notification. Paragraph (f)(3) of this 

section provides that if the filer is 

notified, pursuant to section 

3406(a)(1)(B), the time and manner of 

making an annual solicitation is that 

required under § 31.3406(d)–5(g)(1)(ii) 

of this chapter. Section 31.3406(d)– 

5(g)(1)(ii) of this chapter requires R to 

notify E by mail within 15 business days 

after the date of the notice from the IRS, 

which R failed to do. As a result, R has 

failed to act in a responsible manner 

with respect to the failure on the 2024 

information return, and the penalty will 

not be waived due to reasonable cause. 

(8) Example 8—(i) Facts. On January 

31, 2024, Institution Q timely furnishes 

Form 1099–MISC, Miscellaneous 

Information, to Individual F. Also on 

January 31, 2024, Q timely files a 

corresponding Form 1099–MISC with 

the IRS. On March 15, 2024, Q becomes 

aware of de minimis errors (within the 

meaning of § 301.6722–1(d)(2)) made on 

the Form 1099–MISC furnished to F and 

filed with the IRS. On March 20, 2024, 

F makes an election under § 301.6722– 

1(d)(3)(i) with respect to the Form 1099– 

MISC that Q furnished to F. Q furnishes 

a corrected Form 1099–MISC to F and 

files a corrected Form 1099–MISC with 

the IRS by April 19, 2024, which date 

is 30 days from March 20, 2024. 

(ii) Analysis. The election by F and 

the presence of de minimis errors on the 

Forms 1099–MISC make the penalties 

under sections 6721 and 6722 

applicable to Q. See §§ 301.6721–1(e)(3) 

and 301.6722–1(d)(3). Q, however, 

rectified the failures within 30 days of 

March 20, 2024, the date F made the 

election under § 301.6722–1(d)(3)(i) 

with respect to the Form 1099–MISC 

that Q furnished to F. Therefore, under 

paragraph (h) of this section, Q is 

considered to have established 

reasonable cause, and under section 

6724 and paragraph (a)(1) of this section 

the penalties under sections 6721 and 

6722 are waived. 

(9) Example 9—(i) Facts. The facts are 

the same as in paragraph (k)(8)(i) of this 

section (Example 8), except that Q does 

not become aware of de minimis errors 

made on the Form 1099–MISC 

furnished to F and filed with the IRS 

until June 26, 2024. Additionally, Q 

furnishes the corrected Form 1099– 

MISC to F and files the corrected Form 

1099–MISC with the IRS after June 26, 

2024, but by July 26, 2024, which date 

is 30 days from June 26, 2024. 

(ii) Analysis. As in the example in 

paragraph (k)(8) of this section, the 

election by F and the presence of de 

minimis errors on the Forms 1099– 

MISC make the penalties under sections 

6721 and 6722 applicable to Q. 

Additionally, because Q did not furnish 

a corrected Form 1099–MISC to F and 

file a corrected Form 1099–MISC with 

the IRS within 30 days of the date of F’s 

election under § 301.6722–1(d)(3)(i), 

paragraph (h) of this section does not 

apply. However, Q may be able to 

demonstrate reasonable cause under the 

provisions of paragraph (a) of this 


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section. As part of this demonstration, 

for example, Q may be able to 

demonstrate that Q acted in a 

responsible manner under paragraph 

(d)(1) of this section by rectifying the 

failure (that is, the de minimis errors) 

within 30 days of discovery. 

* * * * * 

(m) Procedure for seeking a waiver. In 

seeking an administrative determination 

that the failure was due to reasonable 

cause and not willful neglect, the filer 

must submit a written statement to the 

address provided with the notice 

proposing penalty assessment (for 

example, Notice 972CG) or the notice of 

penalty assessment (for example, CP15 

or CP215), or as otherwise directed by 

the IRS in forms, instructions or 

publications. The statement must— 

(1) State the specific provision under 

which the waiver is being requested, 

that is, paragraph (b) or under 

paragraphs (c)(2) through (6) or 

paragraph (h) of this section; 

* * * * * 

(o) Applicability dates—(1) In general. 

Except as provided in paragraphs (o)(2) 

and (3) of this section, this section 

applies with respect to information 

returns required to be filed and payee 

statements required to be furnished on 

or after January 1, 2024. See 26 CFR 

301.6724–1, as revised April 1, 2023, for 

rules applicable prior to January 1, 

2024, except as provided in paragraphs 

(o)(2) and (3) of this section. 

(2) Paragraph (g). Paragraph (g) of this 

section applies with respect to 

information returns as defined in 

section 6724(d)(1) required to be filed, 

payee statements as defined in section 

6724(d)(2) required to be furnished, and 

specified information as described in 

section 6724(d)(3) required to be 

reported on or after January 1, 2024. See 

26 CFR 301.6724–1(g), as revised April 

1, 2023, for rules applicable prior to 

January 1, 2024. 

(3) Paragraph (h). Paragraph (h) of 

this section applies with respect to 

information returns required to be filed 

and payee statements required to be 

furnished after January 4, 2017. 

Douglas W. O’Donnell, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: November 29, 2023. 

Lily L. Batchelder, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 2023–27283 Filed 12–18–23; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Office of Foreign Assets Control 

31 CFR Part 525 

Publication of Burma Sanctions 

Regulations Web General Licenses 3 

and 4 

AGENCY: Office of Foreign Assets 

Control, Treasury. 

ACTION: Publication of web general 

licenses. 

SUMMARY: The Department of the 

Treasury’s Office of Foreign Assets 

Control (OFAC) is publishing two 

general licenses (GLs) issued pursuant 

to the Burma Sanctions Regulations: 

GLs 3 and 4, each of which was 

previously made available on OFAC’s 

website. 

DATES: GLs 3 and 4 were issued on 

March 25, 2021. See SUPPLEMENTARY

INFORMATION for additional relevant 

dates. 

FOR FURTHER INFORMATION CONTACT: 

OFAC: Assistant Director for Licensing, 

202–622–2480; Assistant Director for 

Regulatory Affairs, 202–622–4855; or 

Assistant Director for Compliance, 202– 

622–2490. 

SUPPLEMENTARY INFORMATION: 

Electronic Availability 

This document and additional 

information concerning OFAC are 

available on OFAC’s website: https://

ofac.treasury.gov. 

Background 

On March 25, 2021, OFAC issued GLs 

3 and 4 to authorize certain transactions 

otherwise prohibited by Executive 

Order (E.O.) 14014 of February 10, 2021, 

‘‘Blocking Property With Respect to the 

Situation in Burma’’ (86 FR 9429, 

February 12, 2021). On June 1, 2021, 

OFAC incorporated the prohibitions of 

E.O. 14014 into the Burma Sanction 

Regulations, 31 CFR part 525. Each GL 

was made available on OFAC’s website 

(https://ofac.treasury.gov) when it was 

issued. GL 4 is now expired. The text of 

these GLs is provided below. 

OFFICE OF FOREIGN ASSETS CONTROL 

Executive Order 14014 of February 10, 

2021—Blocking Property With Respect to the 

Situation in Burma 

GENERAL LICENSE NO. 3 

Certain Transactions in Support of 

Nongovernmental Organizations’ Activities 

(a) Except as provided in paragraph (c) of 

this general license, all transactions and 

activities prohibited by Executive Order 

(E.O.) 14014 that are ordinarily incident and 

necessary to the activities described in 

paragraph (b) by nongovernmental 

organizations are authorized, including the 

processing and transfer of funds; payment of 

taxes, fees, and import duties; and purchase 

or receipt of permits, licenses, or public 

utility services. 

(b) The activities referenced in paragraph 

(a) of this general license are as follows: 

(1) Activities to support humanitarian 

projects to meet basic human needs in 

Burma, including drought and flood relief; 

food, nutrition, and medicine distribution; 

the provision of health services; assistance 

for vulnerable or displaced populations, 

including individuals with disabilities and 

the elderly; and environmental programs; 

(2) Activities to support democracy 

building in Burma, including activities to 

support rule of law, citizen participation, 

government accountability and transparency, 

human rights and fundamental freedoms, 

access to information, and civil society 

development projects; 

(3) Activities to support education in 

Burma, including combating illiteracy, 

increasing access to education, international 

exchanges, and assisting education reform 

projects; 

(4) Activities to support non-commercial 

development projects directly benefiting the 

people of Burma, including preventing 

infectious disease and promoting maternal/ 

child health, sustainable agriculture, and 

clean water assistance; and 

(5) Activities to support environmental and 

natural resource protection in Burma, 

including the preservation and protection of 

threatened or endangered species, 

responsible and transparent management of 

natural resources, and the remediation of 

pollution or other environmental damage. 

(c) This general license does not authorize 

any transactions or activities otherwise 

prohibited by E.O. 14014, or prohibited by 

any part of 31 CFR chapter V, statute, or 

other Executive order. 

Bradley T. Smith, 

Acting Director, 

Office of Foreign Assets Control. 

Dated: March 25, 2021 

OFFICE OF FOREIGN ASSETS CONTROL 

Executive Order 14014 of February 10, 

2021—Blocking Property With Respect to the 

Situation in Burma 

GENERAL LICENSE NO. 4 

Authorizing the Wind Down of Transactions 

Involving Myanmar Economic Corporation 

Limited and Myanma Economic Holdings 

Public Company Limited 

(a) Except as provided in paragraph (b) of 

this general license, all transactions and 

activities prohibited by Executive Order 

(E.O.) 14014 that are ordinarily incident and 

necessary to the wind down of transactions 

involving Myanmar Economic Corporation 

Limited (MEC), Myanma Economic Holdings 

Public Company Limited (MEHL), or any 

entity in which MEC or MEHL owns, 

whether individually or in the aggregate, 

directly or indirectly, a 50 percent or greater 

interest are authorized through 12:01 a.m. 

eastern daylight time, June 22, 2021. 


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