52784 Federal Register / Vol. 73, No. 177 / Thursday, September 11, 2008 / Rules and Regulations 

FDC date State City Airport FDC No. Subject 

08/19/08 ...... IL Chicago ............................ Chicago-O’Hare Intl ............................... 8/3952 RNAV (GPS) Z RWY 22L, ORIG 

08/20/08 ...... IL Chicago ............................ Chicago-O’Hare Intl ............................... 8/4091 ILS OR LOC RWY 14R, AMDT 

30; ILS RWY 14R (CAT II), 

AMDT 30; ILS RWY 14R (CAT 

III), AMDT 30 

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29 

08/20/08 ...... MD Salisbury ........................... Salisbury-Ocean City Wicomico Regional.8/4188 ILS RWY 32, AMDT 6 

07/08/08 ...... UT Salt Lake City ................... Salt Lake City Intl ................................... 8/4753 RNAV (GPS) RWY 17, ORIG 

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07/10/08 ...... VA Richmond ......................... Chesterfield County ............................... 8/6327 RNAV (GPS) RWY 33, ORIG 

07/24/08 ...... FM Pohnpei Island .................. Pohnpei Intl ............................................ 8/9241 NDB/DME RWY 9, AMDT 4. 

THIS NOTAM PUBLISHED IN 

TL08–19 IS HEREBY RESCINDED IN ITS ENTIRETY 

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TL08–19 IS HEREBY RESCINDED IN ITS ENTIRETY 

[FR Doc. E8–20445 Filed 9–10–08; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 301 

[TD 9425] 

RIN 1545–BF62 

Section 6707A and the Failure To 

Include on Any Return or Statement 

any Information Required To Be 

Disclosed Under Section 6011 With 

Respect to a Reportable Transaction 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Temporary regulations. 

SUMMARY: This document contains 

temporary regulations regarding the 

imposition of penalties under section 

6707A of the Internal Revenue Code 

(Code) for the failure to include on any 

return or statement any information 

required to be disclosed under section 

6011 with respect to a reportable 

transaction. The text of the temporary 

regulations also serves as the text of the 

proposed regulations set forth in the 

notice of proposed rulemaking on this 

subject in the Proposed Rules section of 

this issue of the Federal Register. 

DATES: Effective Date: These regulations 

are effective on September 11, 2008. 

Applicability Date: For dates of 

applicability, see § 301.6707A–1T(f). 

FOR FURTHER INFORMATION CONTACT: 

Matthew Cooper, (202) 622–4940 (not a 

toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

This document contains amendments 

to 26 CFR part 301 under section 6707A 

of the Code. Section 6707A was added 

to the Code by section 811 of the 

American Jobs Creation Act of 2004, 

Public Law 108–357 (118 Stat. 1418) 

(AJCA), enacted on October 22, 2004. 

Section 6707A provides a monetary 

penalty for the failure to include on any 

return or statement any information 

required to be disclosed under section 

6011 with respect to a reportable 

transaction. The penalty applies to 

returns and statements the due date for 

which is after October 22, 2004, and 

which were not filed before that date. 

The amount of the section 6707A 

penalty for failure to include 

information required under section 6011 

with respect to a reportable transaction, 

other than a listed transaction, is 

$10,000 in the case of an individual, 

and $50,000 in any other case. If the 

failure is with respect to a listed 

transaction, the penalty is increased to 

$100,000 in the case of an individual, 

and $200,000 in any other case. 

Section 6707A(d)(1) grants the 

Commissioner authority to rescind all or 

a portion of any penalty imposed under 

section 6707A if (1) the violation relates 

to a reportable transaction that is not a 

listed transaction and (2) rescission of 

the penalty would promote compliance 

with the requirements of the Code and 

effective tax administration. Section 

6707A(d)(2) provides that the 

Commissioner’s determination whether 

to rescind the penalty may not be 

reviewed in any judicial proceeding. 

Rev. Proc. 2007–21, 2007–1 CB 613, 

provides the procedures to follow to 

request rescission of all or any portion 

of a penalty assessed under section 

6707A with respect to a reportable 

transaction other than a listed 

transaction. 

Section 6707A(e) requires a person 

that is required to file periodic reports 

under section 13 or 15(d) of the 

Securities Exchange Act of 1934, or 

consolidated reports with another 

person, to disclose in those reports for 

the periods specified by the Secretary, 

the requirement to pay the penalties set 

forth in section 6707A(e)(2) (for 

example, certain penalties under section 

6662(h) and penalties under sections 

6662A(c), 6707A(b)(2), or 6707A(e)). 

Rev. Proc. 2005–51, 2005–2 CB 296, 

which was amplified by Rev. Proc. 

2007–25, 2007–1 CB 761, describes the 

reports on which the disclosures must 

be made, the information that must be 

disclosed, and the deadlines by which 

persons must make the disclosures on 

the reports to avoid additional penalties 

under section 6707A(e). If the person 

fails to disclose the requirement to pay 

the penalties, then section 6707A(e) 

requires that the failure be treated as a 

failure to disclose a listed transaction to 

which an additional section 6707A 

penalty applies. Because a penalty 

imposed under section 6707A(e) is 

treated as a penalty imposed with 

respect to a listed transaction, the 

penalty is not subject to rescission. 

To implement the pertinent 

provisions of the AJCA, the Treasury 

Department and the IRS proposed 

amendments to the rules relating to the 

disclosure of reportable transactions by 

taxpayers under section 6011 (see Prop. 

Treas. Reg. § 1.6011–4, 2006–49 IRB 

1049) and finalized those proposed 

regulations in TD 9350 (72 FR 43146) 

published on August 3, 2007. 

Sections 1.6011–4(a) and (d) generally 

require that a taxpayer file a disclosure 

statement on Form 8886, ‘‘Reportable 


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Federal Register / Vol. 73, No. 177 / Thursday, September 11, 2008 / Rules and Regulations 52785 

Transaction Disclosure Statement’’ (or 

successor form) for each reportable 

transaction in which the taxpayer 

participated. Section 1.6011–4(e)(1) 

provides that a disclosure statement for 

a reportable transaction must be 

attached to the taxpayer’s tax return for 

each taxable year for which a taxpayer 

participates in a reportable transaction. 

In addition, a disclosure statement for a 

reportable transaction must be attached 

to each amended return that reflects a 

taxpayer’s participation in a reportable 

transaction. The taxpayer also must 

send a copy of the disclosure statement 

to the IRS Office of Tax Shelter Analysis 

(OTSA) at the same time that any 

disclosure statement pertaining to a 

particular reportable transaction is first 

filed. If a reportable transaction results 

in a loss that is carried back to a prior 

year, the disclosure statement for the 

reportable transaction must be attached 

to the taxpayer’s application for 

tentative refund or amended tax return 

for that prior year. If a taxpayer who is 

a partner in a partnership, a shareholder 

in an S corporation, or a beneficiary of 

a trust receives a timely Schedule K–1, 

‘‘Partner’s Share of Income, Deductions, 

Credits, etc.,’’ less than 10 calendar days 

before the due date of the taxpayer’s 

return (including extensions) and, based 

on receipt of the timely Schedule K–1, 

the taxpayer determines that the 

taxpayer participated in a reportable 

transaction, the disclosure statement 

will not be considered late if the 

taxpayer discloses the reportable 

transaction by filing a disclosure 

statement with OTSA within 60 

calendar days after the due date of the 

taxpayer’s return (including extensions). 

For transactions entered into after 

August 2, 2007, § 1.6011–4(e)(2)(i) 

provides that if a transaction becomes a 

listed transaction or a transaction of 

interest after the filing of a taxpayer’s 

tax return (including an amended 

return) reflecting the taxpayer’s 

participation in the listed transaction or 

transaction of interest and before the 

end of the period of limitations for 

assessment of tax for any taxable year in 

which the taxpayer participated in the 

listed transaction or transaction of 

interest, then a disclosure statement 

must be filed with OTSA within 90 

calendar days after the date on which 

the transaction became a listed 

transaction or a transaction of interest, 

regardless of whether the taxpayer 

participated in the transaction in the 

year the transaction became a listed 

transaction or a transaction of interest. 

Published guidance identifying listed 

transactions or transactions of interest 

involving estate, gift, employment, and 

certain excise taxes will specify the 

manner in which taxpayers must 

disclose those transactions. See 

§§ 20.6011–4; 25.6011–4; 31.6011–4; 

53.6011–4; 54.6011–4; and 56.6011–4. 

The Treasury Department and IRS 

issued Notice 2005–11, 2005–1 CB 493, 

providing interim guidance regarding 

the imposition and rescission of 

penalties under section 6707A (see 

§ 601.601(d)(2)(ii)(b)). Specifically, the 

notice stated that the IRS will impose a 

penalty under section 6707A with 

respect to each failure to disclose a 

reportable transaction within the time 

and in the form and manner provided 

by section 6011 and the regulations 

thereunder. Accordingly, a taxpayer 

would be subject to a penalty under 

section 6707A for: (1) The failure to 

attach an appropriate reportable 

transaction disclosure statement to an 

original or amended return; or (2) the 

failure to provide a copy of an 

appropriate disclosure statement to 

OTSA, if required, within the time and 

in the form and manner provided by 

section 6011 and the regulations 

thereunder. A taxpayer that failed to 

attach a reportable transaction 

disclosure statement to an original or 

amended return and failed to provide a 

copy of a required disclosure statement 

to OTSA would be subject to a single 

penalty under section 6707A. 

Notice 2005–11 requested comments 

regarding the rules and standards 

relating to section 6707A, including the 

factors that should be considered in 

exercising the rescission authority 

under section 6707A(d) and how 

voluntary, but untimely disclosures (for 

example, if a taxpayer failed to make a 

required disclosure upon filing a return, 

but subsequently submits the required 

disclosure statement) should be treated 

in applying the section 6707A penalty. 

Since then, many have observed that 

there is little incentive for remedial 

action if a complete but delinquent 

disclosure statement is penalized as 

harshly as a complete failure to submit 

a disclosure statement. The Treasury 

Department and the IRS are currently 

considering whether it would be 

appropriate to publish a rule that would 

treat as timely a Form 8886 voluntarily 

filed prior to the date the IRS first 

contacts the taxpayer concerning a tax 

examination for the taxable period in 

which the taxpayer participated in the 

reportable transaction. Other 

appropriate dates by which filings must 

be made to qualify for relief would be 

considered as well. Comments are 

specifically requested on the necessity 

and appropriateness of publishing 

guidance addressing this issue. 

Explanation of Provisions 

These temporary regulations provide 

rules reflecting the AJCA enactment of 

the section 6707A penalty for the failure 

to include on any return or statement 

any information required to be disclosed 

under section 6011 with respect to a 

reportable transaction. 

These temporary regulations provide 

that a taxpayer may incur a separate 

penalty under section 6707A with 

respect to each reportable transaction 

that the taxpayer was required, but 

failed, to disclose within the time and 

in the form and manner required under 

§ 1.6011–4(d) and (e) or as stated in 

other published guidance. A taxpayer 

who is required to disclose a reportable 

transaction on a Form 8886 (or 

successor form) filed with a return, 

amended return, or application for 

tentative refund and who also is 

required to disclose the transaction on 

a Form 8886 (or successor form) with 

OTSA, is subject to only a single section 

6707A penalty for failure to make either 

one or both of those disclosures. 

Additionally, these temporary 

regulations define ‘‘reportable 

transaction’’ and ‘‘listed transaction’’ by 

reference to the regulations under 

section 6011. 

These temporary regulations restate 

the existing authority of the Secretary to 

prescribe the procedures to request 

rescission of a section 6707A penalty 

with respect to a nonlisted reportable 

transaction by revenue procedure or 

other guidance published in the Internal 

Revenue Bulletin. Rev. Proc. 2007–21 

describes the procedures for requesting 

rescission of a penalty assessed under 

section 6707A, including the deadline 

by which a person must request 

rescission; the information the person 

must provide in the rescission request; 

the factors that weigh in favor of and 

against granting rescission; where the 

person must submit the rescission 

request; and the rules governing 

requests for additional information from 

the person requesting rescission. 

These temporary regulations adopt 

factors mentioned in the legislative 

history to section 6707A that the 

Commissioner (or the Commissioner’s 

delegate) should take into account 

during the determination whether to 

rescind all or a portion of any penalty 

imposed under section 6707A. See H.R. 

Conf. Rep. No. 755, 108th Cong., 2d 

Sess. at 599 (2004). Factors that these 

regulations identify as weighing in favor 

of rescission reflect circumstances that 

suggest that sustaining assessment of the 

penalty is against equity and good 

conscience. 


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52786 Federal Register / Vol. 73, No. 177 / Thursday, September 11, 2008 / Rules and Regulations 

These temporary regulations generally 

adopt the list of factors stated in Rev. 

Proc. 2007–21. One additional factor 

these regulations identify as weighing in 

favor of granting rescission is whether 

the penalty assessed is 

disproportionately larger than the tax 

benefit received. The factors identified 

in these temporary regulations do not 

represent an exclusive list, and no 

single factor will be determinative of 

whether to grant rescission in any 

particular case. Rather, the 

Commissioner (or the Commissioner’s 

delegate) will consider and weigh all 

relevant factors, regardless of whether 

the factor is included in this list. 

Because it is the policy of the IRS to 

administer penalties in a manner that 

promotes voluntary compliance with 

the tax laws, it will weigh heavily in 

favor of rescission if a taxpayer 

voluntarily files the form required under 

section 6011: (i) Prior to the date the IRS 

first contacts the taxpayer (including 

contacts by the IRS with any 

partnership in which the taxpayer is a 

partner, any S corporation in which the 

taxpayer is a shareholder, or any trust in 

which the taxpayer is a beneficiary) 

concerning a tax examination for the tax 

period in which the taxpayer 

participated in the reportable 

transaction; and (ii) other circumstances 

suggest that the taxpayer did not delay 

filing an untimely but properly 

completed Form 8886 until after the IRS 

had taken steps to identify the 

taxpayer’s participation in the 

reportable transaction in question. See 

IRS Policy Statement 20–1 (June 29, 

2004). 

The temporary regulations mirror Rev. 

Proc. 2007–21 in providing that a 

rescission request is not the appropriate 

forum to contest whether the elements 

necessary to support a penalty under 

section 6707A exist. That question is for 

the examining agent, the IRS Appeals 

Division, and the courts. A rescission 

determination is based on the premise 

that a violation of section 6707A exists 

but, nonetheless, the penalty should be 

rescinded (or abated). Accordingly, the 

temporary regulations provide that the 

Commissioner (or the Commissioner’s 

delegate) will not consider whether the 

taxpayer in fact failed to comply with 

section 6011. Furthermore, the 

temporary regulations provide that the 

Commissioner (or the Commissioner’s 

delegate) will not take into 

consideration doubt as to liability for, or 

collectibility of, the penalties in 

determining whether to rescind the 

penalty. 

Additionally, these temporary 

regulations restate the existing authority 

of the Secretary to prescribe by revenue 

procedure or other guidance published 

in the Internal Revenue Bulletin the 

manner in which taxpayers must 

disclose the requirement to pay certain 

penalties on reports filed with the 

Securities and Exchange Commission. 

Rev. Procs. 2005–51 and 2007–25 are 

the current published guidance items 

that provide these disclosure rules and 

remain effective until further guidance 

is issued in the form of regulations or 

other guidance that explicitly 

supersedes these two documents. 

Effect on Other Documents 

The temporary regulations supersede 

Notice 2005–11. 

Special Analyses 

It has been determined that this 

Treasury decision is not a significant 

regulatory action as defined in 

Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

also has been determined that section 

553(b) of the Administrative Procedure 

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

to these regulations. The temporary 

regulations are necessary to promote 

taxpayers’ immediate compliance with 

the regulations recently finalized under 

section 6011 and to provide for 

regulatory relief in appropriate 

circumstances, including the additional 

taxpayer favorable factor of whether the 

penalty assessed is disproportionately 

larger than the tax benefit received. For 

applicability of the Regulatory 

Flexibility Act (5 U.S.C. chapter 6), refer 

to the Special Analyses section of the 

preamble to the cross-referenced notice 

of proposed rulemaking published in 

the Proposed Rules section in this issue 

of the Federal Register. Pursuant to 

section 7805(f) of the Code, these 

regulations have been submitted to the 

Chief Counsel for Advocacy of the Small 

Business Administration for comment 

on their impact on small business. 

Drafting Information 

The principal author of these 

regulations is Matthew Cooper of the 

Office of the Associate Chief Counsel 

(Procedure and Administration). 

List of Subjects in 26 CFR Part 301 

Employment taxes, Estate taxes, 

Excise taxes, Gift taxes, Income taxes, 

Penalties, Reporting and recordkeeping 

requirements. 

Amendments to the Regulations 

■ Accordingly, 26 CFR part 301 is 

amended as follows: 

PART 301—PROCEDURE AND 

ADMINISTRATION 

■ Paragraph 1. The authority citation 

for part 301 continues to read in part as 

follows: 

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

■ Par. 2. Section 301.6707A–1T is 

added to read as follows: 

§ 301.6707A–1T Failure to include on any 

return or statement any information 

required to be disclosed under section 6011 

with respect to a reportable transaction. 

(a) In general. Any person who fails 

to include on any return or statement 

any information required to be disclosed 

under section 6011 with respect to a 

reportable transaction may be subject to 

a monetary penalty. The penalty for 

failure to include information with 

respect to a reportable transaction, other 

than a listed transaction, is $10,000 in 

the case of a natural person, and 

$50,000 in any other case. The penalty 

for failure to include information with 

respect to a listed transaction is 

$100,000 in the case of a natural person, 

and $200,000 in any other case. The 

section 6707A penalty is in addition to 

any other penalty that may be imposed. 

(b) Definitions—(1) Reportable 

transaction. The term ‘‘reportable 

transaction’’ is defined in § 1.6011–

4(b)(1) of this chapter. 

(2) Listed transaction. The term 

‘‘listed transaction’’ is defined in section 

6707A(c) of the Code and § 1.6011–

4(b)(2) of this chapter. 

(c) Assessment of the penalty—(1) In 

general. The Internal Revenue Service 

(IRS) may assess a penalty under section 

6707A with respect to each failure to 

disclose a reportable transaction within 

the time and in the form and manner 

provided by § 1.6011–4(d) and (e) of this 

chapter or pursuant to the time, form, 

and manner stated in other published 

guidance. A taxpayer who is required to 

disclose a reportable transaction with a 

return, amended return, or application 

for tentative refund and who also is 

required to disclose the transaction on 

a Form 8886, ‘‘Reportable Transaction 

Disclosure Statement’’ (or successor 

form), filed with the IRS Office of Tax 

Shelter Analysis (OTSA), is subject to 

only a single section 6707A penalty for 

failure to make either one or both of 

those disclosures. If section 6011 and 

the regulations thereunder require a 

disclosure statement to be filed at the 

time that a return is filed, the disclosure 

statement is considered to be timely 

filed if it is filed at the same time as the 

return, even if the return is filed 

untimely after its due date. 


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Federal Register / Vol. 73, No. 177 / Thursday, September 11, 2008 / Rules and Regulations 52787 

(2) Examples. The rules of paragraph 

(c)(1) of this section are illustrated by 

the following examples: 

Example 1. Taxpayer T is required to 

attach a Form 8886 to its return for the 2007 

taxable year and to send a copy of the Form 

8886 to OTSA at the time it files its return. 

Taxpayer T fails to attach the Form 8886 to 

its return and fails to send a copy of the Form 

8886 to OTSA. Taxpayer T is subject to a 

single penalty under section 6707A for 

failure to disclose because Taxpayer T failed 

to comply with the disclosure requirements 

of section 6011. A penalty under section 

6707A also would apply if Taxpayer T had 

failed to comply with only one of the two 

requirements. 

Example 2. Same as Example 1, except that 

Taxpayer T also subsequently files an 

amended return for 2007 that reflects 

Taxpayer T’s participation in the reportable 

transaction. Taxpayer T fails to attach a Form 

8886 to the amended return as required by 

§ 1.6011–4(e)(1) of this chapter. Taxpayer T 

is subject to an additional penalty under 

section 6707A for failing to disclose a 

reportable transaction. 

Example 3. In November 2009, Taxpayer U 

participates in a reportable transaction 

resulting in a loss that is carried back to 

2008. Taxpayer U fails to attach a Form 8886 

to its 2008 amended return claiming the loss 

carryback. Section 1.6011–4(e)(1) of this 

chapter requires Taxpayer U to attach a Form 

8886 to its amended return for the 2008 

taxable year. Taxpayer U is subject to a 

penalty under section 6707A. 

Example 4. Taxpayer P participates in a 

non-listed reportable transaction and is 

required to attach a Form 8886 to its return 

for the 2008 taxable year that is due on 

March 16, 2009. Taxpayer P timely files its 

return but fails to attach the Form 8886 to its 

return. After the due date of Taxpayer P’s 

return and without an extension of time to 

file, Taxpayer P files an amended return 

relating to the 2008 taxable year to which 

Taxpayer P attaches the Form 8886. Taxpayer 

P is subject to a penalty under section 6707A 

for failure to disclose because Taxpayer P 

failed to comply with the disclosure 

requirements of section 6011 by not attaching 

a Form 8886 to its return for the 2008 taxable 

year that was timely filed on or before the 

due date of March 16, 2009. A penalty under 

section 6707A also would apply if Taxpayer 

P had failed to attach a Form 8886 to its 

amended return. Taxpayer P, nevertheless, 

may file a complete and proper Form 8886 

and request in writing rescission of the 

penalties assessed within 30 days after the 

date the IRS sends notice and demand for 

payment of the penalties in accordance with 

Rev. Proc. 2007–21. The filing of the 

untimely Form 8886 will weigh heavily in 

favor of rescission provided that Taxpayer P 

files the Form 8886 prior to the date the IRS 

first contacts the taxpayer concerning a tax 

examination for the 2008 taxable year and 

there are no other circumstances that suggest 

that Taxpayer P delayed filing the Form 8886 

until after the IRS had taken steps to identify 

Taxpayer P’s participation in the reportable 

transaction in question. 

Example 5. Shareholder V, a shareholder 

in an S Corporation, receives a timely 

Schedule K–1 ‘‘Partner’s Share of Income, 

Deductions, Credits, etc.,’’ on April 10, 2009, 

and determines that she is required to attach 

a Form 8886 to her individual income tax 

return for the 2008 taxable year. Shareholder 

V fails to attach the Form 8886 to her 2008 

individual income tax return but files a 

proper and complete Form 8886 with OTSA 

on June 12, 2009. Section 1.6011–4(e)(1) of 

this chapter provides that if a taxpayer who 

is a partner in a partnership, a shareholder 

in an S corporation, or a beneficiary of a trust 

receives a timely Schedule K–1 less than 10 

calendar days before the due date of the 

taxpayer’s return (including extensions) and, 

based on receipt of the timely Schedule K–

1, the taxpayer determines that the taxpayer 

participated in a reportable transaction, the 

disclosure statement will not be considered 

late if the taxpayer discloses the reportable 

transaction by filing a disclosure statement 

with OTSA within 60 calendar days after the 

due date of the taxpayer’s return (including 

extensions). Accordingly, Shareholder V is 

not subject to a penalty under section 6707A 

for failure to disclose. 

Example 6. In July 2008, Taxpayer W 

participates in Transaction Z, a transaction 

that is not reportable as of April 15, 2009, the 

date Taxpayer W files his individual income 

tax return for 2008. On July 15, 2009, 

Transaction Z is identified as a transaction of 

interest. Section 1.6011–4(e)(2)(i) of this 

chapter provides that if a transaction that is 

not otherwise a reportable transaction 

becomes a listed transaction or a transaction 

of interest after the taxpayer has filed a tax 

return (including an amended return) 

reflecting the taxpayer’s participation in the 

listed transaction or transaction of interest 

and before the end of the period of 

limitations for assessment of tax for any 

taxable year in which the taxpayer 

participated in the listed transaction or 

transaction of interest, then a disclosure 

statement must be filed with OTSA within 90 

calendar days after the date on which the 

transaction became a listed transaction or 

transaction of interest, regardless of whether 

the taxpayer participated in the transaction 

in the year the transaction became a listed 

transaction or a transaction of interest. 

Taxpayer W fails to file a Form 8886 with 

OTSA by October 13, 2009, 90 calendar days 

after the date that the transaction was 

identified as a transaction of interest. 

Accordingly, Taxpayer W is subject to a 

penalty under section 6707A. 

Example 7. Taxpayer X is required to 

attach a Form 8886 to its return for the 2008 

taxable year with respect to participation in 

a listed transaction. Taxpayer X attaches the 

Form 8886 to its return in a timely manner. 

The Form 8886, however, does not describe 

any of the potential tax benefits expected to 

result from this transaction and states that 

information will be provided upon request. 

Because the Form 8886 does not describe any 

of the potential tax benefits expected to result 

from the transaction and merely provides 

that the information will be provided upon 

request, the Form 8886 filed by Taxpayer X 

is incomplete and does not satisfy the 

requirements set forth in § 1.6011–4(d) of this 

chapter. Taxpayer X is subject to a penalty 

under section 6707A for failure to disclose in 

the appropriate manner. 

(d) Rescission authority—(1) In 

general. The Commissioner (or the 

Commissioner’s delegate) may rescind 

the section 6707A penalty if—

(i) The violation relates to a reportable 

transaction that is not a listed 

transaction, and 

(ii) Rescinding the penalty would 

promote compliance with the 

requirements of the Code and effective 

tax administration. 

(2) Requesting rescission. The 

Secretary may prescribe the procedures 

for a taxpayer to request rescission of a 

section 6707A penalty with respect to a 

reportable transaction other than a listed 

transaction by publishing a revenue 

procedure or other guidance in the 

Internal Revenue Bulletin. 

(3) Factors that weigh in favor of 

granting rescission. In determining 

whether rescission would promote 

compliance with the requirements of the 

Code and effective tax administration, 

the Commissioner (or the 

Commissioner’s delegate) will take into 

account the following list of factors that 

weigh in favor of granting rescission. 

This is not an exclusive list and no 

single factor will be determinative of 

whether to grant rescission in any 

particular case. Rather, the 

Commissioner (or the Commissioner’s 

delegate) will consider and weigh all 

relevant factors, regardless of whether 

the factor is included in this list. 

(i) The taxpayer, upon becoming 

aware that it failed to disclose a 

reportable transaction properly, filed a 

complete and proper, albeit untimely, 

Form 8886 (or successor form). This 

factor will weigh heavily in favor of 

rescission provided that—

(A) the taxpayer files the Form 8886 

prior to the date the IRS first contacts 

the taxpayer (including contacts by the 

IRS with any partnership in which the 

taxpayer is a partner, any S corporation 

in which the taxpayer is a shareholder, 

or any trust in which the taxpayer is a 

beneficiary) concerning a tax 

examination for the tax period in which 

the taxpayer participated in the 

reportable transaction; and 

(B) other circumstances suggest that 

the taxpayer did not delay filing an 

untimely but properly completed Form 

8886 until after the IRS had taken steps 

to identify the taxpayer’s participation 

in the reportable transaction in 

question. 

(ii) The failure to disclose properly 

was due to an unintentional mistake of 

fact that existed despite the taxpayer’s 

reasonable attempts to ascertain the 

correct facts with respect to the 

transaction. 

(iii) The taxpayer has an established 

history of properly disclosing other 


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52788 Federal Register / Vol. 73, No. 177 / Thursday, September 11, 2008 / Rules and Regulations 

reportable transactions and complying 

with other tax laws. 

(iv) The taxpayer demonstrates that 

the failure to include on any return or 

statement any information required to 

be disclosed under section 6011 arose 

from events beyond the taxpayer’s 

control. 

(v) The taxpayer cooperates with the 

IRS by providing timely information 

with respect to the transaction at issue 

that the Commissioner (or the 

Commissioner’s delegate) may request 

in consideration of the rescission 

request. In considering whether a 

taxpayer cooperates with the IRS, the 

Commissioner (or the Commissioner’s 

delegate) will take into account whether 

the taxpayer meets the deadlines 

described in Rev. Proc. 2007–21 (or 

successor document) (see 

§ 601.601(d)(2)(ii)(b) of this chapter) for 

complying with requests for additional 

information. 

(vi) Assessment of the penalty weighs 

against equity and good conscience, 

including whether the penalty is 

disproportionate to the tax benefit 

received and whether the taxpayer 

demonstrates that there was reasonable 

cause for, and the taxpayer acted in 

good faith with respect to, the failure to 

timely file or to include on any return 

any information required to be disclosed 

under section 6011. An important factor 

in determining reasonable cause and 

good faith is the extent of the taxpayer’s 

efforts to ensure that persons who 

prepared the taxpayer’s return were 

informed of the taxpayer’s participation 

in the reportable transactions. The 

presence of reasonable cause, however, 

will not necessarily be determinative of 

whether to grant rescission. 

(4) Absence of favorable factors 

weighs against rescission. The absence 

of facts establishing the factors 

described in paragraph (d)(3) of this 

section weighs against granting 

rescission. The absence of any one of 

these factors, however, will not 

necessarily be determinative of whether 

to grant rescission. 

(5) Factors not considered. In 

determining whether to grant rescission, 

the Commissioner (or the 

Commissioner’s delegate) will not 

consider doubt as to liability for, or 

collectibility of, the penalties. 

(e) Reports to the Securities and 

Exchange Commission (SEC)—(1) In 

general. Under section 6707A(e), a 

taxpayer who is required to file periodic 

reports under section 13 or 15(d) of the 

Securities Exchange Act of 1934 (or is 

required to file consolidated reports 

with another person) must disclose in 

periodic reports filed with the SEC the 

requirement to pay each of the following 

penalties: 

(i) The penalty imposed by section 

6707A(a) in the amount of $200,000 for 

failure to disclose a listed transaction. 

(ii) The accuracy-related penalty 

imposed by section 6662A(a) at the 30- 

percent rate determined under section 

6662A(c) for a reportable transaction 

understatement with respect to which 

the relevant facts affecting the tax 

treatment of the reportable transaction 

were not adequately disclosed in 

accordance with regulations prescribed 

under section 6011. 

(iii) The accuracy-related penalty 

imposed by section 6662(a) at the 40- 

percent rate determined under section 

6662(h) for a gross valuation 

misstatement, if the taxpayer (but for the 

exclusionary rule of section 

6662A(e)(2)(C)(ii)) would have been 

subject to the accuracy-related penalty 

under section 6662A(a) at the 30- 

percent rate determined under section 

6662A(c). 

(iv) The penalty described in 

paragraph (e)(3) of this section for 

failure to disclose in periodic reports 

filed with the SEC the requirement to 

pay any of the penalties described in 

paragraphs (e)(1)(i) through (iii) or (e)(3) 

of this section. 

(2) Manner and content of disclosure. 

The Secretary may prescribe the manner 

in which disclosure of the requirement 

to pay the penalties identified in 

paragraph (e)(1) of this section must be 

made on reports filed with the SEC, 

including identification of the specific 

SEC form and section thereof in which 

the taxpayer must make the disclosure 

as well as specification of the timing 

and contents of the disclosure, by 

publishing a revenue procedure or other 

guidance in the Internal Revenue 

Bulletin. 

(3) Penalty for failure to disclose in 

SEC filings. Any taxpayer who is 

required to file periodic reports under 

section 13 or 15(d) of the Securities 

Exchange Act of 1934 (or is required to 

file consolidated reports with another 

person) may be subject to a penalty in 

the amount of $200,000 for each failure 

to disclose the requirement to pay a 

penalty identified in paragraphs (e)(1)(i) 

through (e)(1)(iii) of this section in the 

manner specified by revenue procedure 

or other guidance published in the 

Internal Revenue Bulletin. The taxpayer 

also may be subject to an additional 

penalty in the amount of $200,000 for 

each failure to disclose a penalty arising 

under this section in the manner 

specified by revenue procedure or other 

guidance published in the Internal 

Revenue Bulletin. The penalty provided 

by this paragraph is not subject to 

rescission as described in paragraph (d) 

of this section. 

(f) Effective/applicability date—(1) 

The rules of this section apply to 

disclosure statements that are due after 

September 11, 2008. 

(2) The applicability of this section 

expires on or before September 9, 2011. 

L.E. Stiff, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: September 5, 2008. 

Eric Solomon, 

Assistant Secretary of the Treasury, (Tax 

Policy). 

[FR Doc. E8–21161 Filed 9–10–08; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[Docket No. USCG–2008–0900] 

Safety Zone; Milwaukee Harbor, 

Milwaukee, WI 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of enforcement of 

regulation. 

SUMMARY: The Coast Guard will enforce 

the Milwaukee Harbor Safety Zone in 

Milwaukee Harbor from 8:30 p.m. 

through 8:45 p.m. on September 29, 

2008. This action is necessary to protect 

vessels and people from the hazards 

associated with fireworks displays. This 

safety zone will restrict vessel traffic 

from portions of the Captain of the Port 

Lake Michigan Zone. 

DATES: The regulation in 33 CFR 

165.935 will be enforced from 8:30 p.m. 

through 8:45 p.m. on September 29, 

2008. 

FOR FURTHER INFORMATION CONTACT: 

Petty Officer Eric Vogel, Prevention 

Department, Coast Guard Sector Lake 

Michigan, Milwaukee, WI at (414) 747–

7154. 

SUPPLEMENTARY INFORMATION: The Coast 

Guard will enforce Safety Zone, 

Milwaukee Harbor, Milwaukee, WI, 33 

CFR 165.935 for the following event: 

Milwaukee Brewers Rally Monday, on 

September 29, 2008, from 8:30 p.m. 

through 8:45 p.m. 

All vessels must obtain permission 

from the Captain of the Port or his 

designated representative to enter, move 

within, or exit the safety zone. Vessels 

and persons granted permission to enter 

the safety zone shall obey all lawful 

orders or directions of the Captain of the 


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