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IRS Tax Help - Material Advisor Disclosure Requirement - IRS section 6111
Notice 2007-85 , I.R.B. 2007-45, October 16, 2007.
[ Code Sec. 6111]
Material advisors: Form of disclosure statement:
Disclosures due October 31, 2007. --
Due to the unavailability of Form 8918, Material Advisor Disclosure Statement, a material advisor required to file a completed Form 8918 by October 31, 2007, may satisfy the disclosure requirement of Reg. §301.6111-3(d) by filing Form 8264, Application for Registration of a Tax Shelter, instead.
Reportable transactions disclosed on Form 8264 should be disclosed in the manner described in Notices 2004-80, 2004-2 CB 963, and 2005-22, 2005-1 CB 756. Form 8918 is expected to be published soon. In the event Form 8918 is published before the October 31 due date, advisors may use either Form 8918 or Form 8264. However, unless instructed otherwise by the IRS, material advisors must still use Form 8918 (or its successor) for disclosures required to be filed after October 31, 2007.
This notice provides guidance to material advisors required to file a disclosure statement by October 31, 2007, under §301.6111-3 of the Procedure and Administration Regulations.BACKGROUNDOn August 3, 2007, the Internal Revenue Service and Treasury Department published final regulations under §301.6111-3 in the Federal Register (72 FR 43157) providing the rules relating to the disclosure of reportable transactions by material advisors under section 6111 of the Internal Revenue Code. See T.D. 9351. In general, these regulations apply to transactions with respect to which a material advisor makes a tax statement on or after August 3, 2007. However, these regulations apply to transactions of interest entered into on or after November 2, 2006, with respect to which a material advisor makes a tax statement on or after November 2, 2006.
The regulations provide that each material advisor, with respect to any reportable transaction, must file a return as described in §301.6111-3(d). Section 301.6111-3(d) provides that each material advisor required to file a disclosure statement under §301.6111-3 must file a completed Form 8918 "Material Advisor Disclosure Statement" (or successor form). The Form 8918 must be filed with the Office of Tax Shelter Analysis (OTSA) by the last day of the calendar month that follows the end of the calendar quarter in which the advisor became a material advisor with respect to the reportable transaction or in which the circumstances necessitating an amended disclosure occur.Prior to the publication of the final regulations, material advisors were required to disclose reportable transactions on Form 8264 "Application for Registration of a Tax Shelter." Notice 2004-80, 2004-50 I.R.B. 963, and Notice 2005-22, 2005-12 I.R.B. 756, described the manner in which the Form 8264 was to be completed.INTERIM PROVISION
The next due date for disclosures by material advisors is October 31, 2007. As of the date of release of this notice, Form 8918 has not yet been published. The IRS anticipates that the Form 8918 will be published soon.Due to the unavailability of Form 8918, a material advisor required to file a completed Form 8918 by October 31, 2007, will be treated as satisfying the disclosure requirement of §301.6111-3(d) if the material advisor files Form 8264 instead. If Form 8918 is published on or before October 31, 2007, material advisors may choose to use either Form 8918 or Form 8264 for disclosures required to be filed by October 31, 2007. For disclosures required to be filed after October 31, 2007, material advisors must use Form 8918 (or successor form) unless instructed otherwise by the IRS. Reportable transactions disclosed on the Form 8264 should be disclosed in the manner described in Notice 2004-80 and Notice 2005-22.
This notice is effective October 16, 2007, the date this notice was released to the public.DRAFTING INFORMATIONThe principal author of this notice is Charles D. Wien of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice contact Charles D. Wien at 202-622-3070 (not a toll-free call).
§301.6111-3. Disclosure of reportable transactions
(a) In general. --Each material advisor, as defined in paragraph (b) of this section, with respect to any reportable transaction, as defined in §1.6011-4(b) of this chapter, must file a return as described in paragraph (d) of this section by the date described in paragraph (e) of this section.
(b) Material advisor
(1) In general. --A person is a material advisor with respect to a transaction if the person provides any material aid, assistance, or advice with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction, and directly or indirectly derives gross income in excess of the threshold amount as defined in paragraph (b)(3) of this section for the material aid, assistance, or advice. The term transaction includes all of the factual elements relevant to the expected tax treatment of any investment, entity, plan or arrangement, and includes any series of steps carried out as part of a plan.
(2) Material aid, assistance, or advice
(i) In general. --Except as provided in paragraph (b)(5) of this section, a person provides material aid, assistance, or advice with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any transaction if the person makes or provides a tax statement to or for the benefit of --
(A) A taxpayer who either is required to disclose the transaction under §§1.6011-4, 20.6011-4, 25.6011-4, 31.6011-4, 53.6011-4, 54.6011-4, or 56.6011-4 of this chapter because the transaction is a listed transaction or a transaction of interest, or would have been required to disclose the transaction under §§1.6011-4, 20.6011-4, 25.6011-4, 31.6011-4, 53.6011-4, 54.6011-4, or 56.6011-4 of this chapter if the transaction had become a listed transaction or a transaction of interest within the period of limitations in §1.6011-4(e) of this chapter;
(B) A taxpayer who the potential material advisor knows is or reasonably expects to be required to disclose the transaction under §1.6011-4 of this chapter because the transaction is or is reasonably expected to become a transaction described in §1.6011-4(b)(3) through (5) or (7) of this chapter;
(D) A material advisor who the potential material advisor knows is or reasonably expects to be required to disclose the transaction under this section because the transaction is or is reasonably expected to become a transaction described in §1.6011-4(b)(3) through (5) or (7) of this chapter.
(ii) Tax statement
(A) In general. --A tax statement is any statement (including another person's statement), oral or written, that relates to a tax aspect of a transaction that causes the transaction to be a reportable transaction as defined in §1.6011-4(b)(2) through (7) of this chapter. A tax statement under this section includes tax result protection that insures some or all of the tax benefits of a reportable transaction.
(B) Confidential transactions. --A statement relates to a tax aspect of a transaction that causes it to be a confidential transaction if the statement concerns a tax benefit related to the transaction and either the taxpayer's disclosure of the tax treatment or tax structure of the transaction is limited in the manner described in §1.6011-4(b)(3) of this chapter by or for the benefit of the person making the statement, or the person making the statement knows the taxpayer's disclosure of the tax structure or tax aspects of the transaction is limited in the manner described in §1.6011-4(b)(3) of this chapter.
(C) Transactions with contractual protection. --A statement relates to a tax aspect of a transaction that causes it to be a transaction with contractual protection if the statement concerns a tax benefit related to the transaction and either --
(1) The taxpayer has the right to a full or partial refund of fees paid to the person making the statement or the fees are contingent in the manner described in §1.6011-4(b)(4) of this chapter; or
(2) The person making the statement knows or has reason to know that the taxpayer has the right to a full or partial refund of fees (described in §1.6011-4(b)(4)(ii) of this chapter) paid to another if all or part of the intended tax consequences from the transaction are not sustained or that fees (as described in §1.6011-4(b)(4)(ii) of this chapter) paid by the taxpayer to another are contingent on the taxpayer's realization of tax benefits from the transaction in the manner described in §1.6011-4(b)(4) of this chapter.
(D) Loss transactions. --A statement relates to a tax aspect of a transaction that causes it to be a loss transaction if the statement concerns an item that gives rise to a loss described in §1.6011-4(b)(5) of this chapter.
(A) Capacity as an employee. --A material advisor generally does not include a person who makes a tax statement solely in the person's capacity as an employee, shareholder, partner or agent of another person. Any tax statement made by that person will be attributed to that person's employer, corporation, partnership or principal. However, a person shall be treated as a material advisor if that person forms or avails of an entity with the purpose of avoiding the rules of section 6111 or 6112 or the penalties under section 6707 or 6708.
(B) Post-filing advice. --A person will not be considered to be a material advisor with respect to a transaction if that person does not make or provide a tax statement regarding the transaction until after the first tax return reflecting tax benefit(s) of the transaction is filed with the IRS. However, this exception does not apply to a person who makes a tax statement with respect to the transaction if it is expected that the taxpayer will file a supplemental or amended return reflecting additional tax benefits from the transaction.
(C) Publicly filed statements. --A tax statement with respect to a transaction that includes only information about the transaction contained in publicly available documents filed with the Securities and Exchange Commission no later than the close of the transaction will not be considered a tax statement to or for the benefit of a person described in paragraph (b)(2) of this section.
(3) Gross income derived for material aid, assistance, or advice
(i) Threshold amount
(A) In general. --The threshold amount of gross income is $50,000 in the case of a reportable transaction substantially all of the tax benefits from which are provided to natural persons (looking through any partnerships, S corporations, or trusts). For all other transactions, the threshold amount is $250,000.
(B) Listed transactions and transactions of interest. --For listed transactions described in §§1.6011-4, 20.6011-4, 25.6011-4, 31.6011-4, 53.6011-4, 54.6011-4, or 56.6011-4 of this chapter, the threshold amounts in paragraph (b)(3)(i)(A) of this section are reduced from $50,000 to $10,000 and from $250,000 to $25,000. For transactions of interest described in §§1.6011-4, 20.6011-4, 25.6011-4, 31.6011-4, 53.6011-4, 54.6011-4, or 56.6011-4 of this chapter, the threshold amounts in paragraph (b)(3)(i)(A) of this section may be reduced as identified in the published guidance describing the transaction.
(D) Substantially all of the tax benefits. --For purposes of this section, the determination of whether substantially all of the tax benefits from a reportable transaction are provided to natural persons is made based on all the facts and circumstances. Generally, unless the facts and circumstances prove otherwise, if 70 percent or more of the tax benefits from a reportable transaction are provided to natural persons (looking through any partnerships, S corporations, or trusts) then substantially all of the tax benefits will be considered to be provided to natural persons.
(ii) Gross income derived directly or indirectly for the material aid, assistance, or advice. --In determining the amount of gross income a person derives directly or indirectly for material aid, assistance, or advice, all fees for a tax strategy or for services for advice (whether or not tax advice) or for the implementation of a reportable transaction are taken into account. Fees include consideration in whatever form paid, whether in cash or in kind, for services to analyze the transaction (whether or not related to the tax consequences of the transaction), for services to implement the transaction, for services to document the transaction, and for services to prepare tax returns to the extent return preparation fees are unreasonable in light of all of the facts and circumstances. A fee does not include amounts paid to a person, including an advisor, in that person's capacity as a party to the transaction. For example, a fee does not include reasonable charges for the use of capital or the sale or use of property. The IRS will scrutinize carefully all of the facts and circumstances in determining whether consideration received in connection with a reportable transaction constitutes gross income derived directly or indirectly for aid, assistance, or advice. For purposes of this section, the threshold amount must be met independently for each transaction that is a reportable transaction and aggregation of fees among transactions is not required.
(4) Date a person becomes a material advisor
(i) In general. --A person will be treated as becoming a material advisor when all of the following events have occurred (in no particular order) --
(ii) Determining if the taxpayer entered into the transaction. --Material advisors, including those who cease providing services before the time the transaction is entered into, must make reasonable and good faith efforts to determine whether the event described in paragraph (b)(4)(i)(C) of this section has occurred.
(iii) Listed transactions and transactions of interest. --If a transaction that was not a reportable transaction is identified as a listed transaction or a transaction of interest in published guidance after the occurrence of the events described in paragraph (b)(4)(i) of this section, the person will be treated as becoming a material advisor on the date the transaction is identified as a listed transaction or a transaction of interest.
(5) Other persons designated as material advisors. --Published guidance may identify other types or classes of persons as material advisors.
(1) Reportable transaction. --The term reportable transaction is defined in §1.6011-4(b)(1) of this chapter.
(2) Listed transaction. --The term listed transaction is defined in §1.6011-4(b)(2) of this chapter. See also §§20.6011-4(a), 25.6011-4(a), 31.6011-4(a), 53.6011-4(a), 54.6011-4(a), or 56.6011-4(a) of this chapter.
(3) Derive. --The term derive means receive or expect to receive.
(4) Person. --The term person means any person described in section 7701(a)(1), including an affiliated group of corporations that join in the filing of a consolidated return under section 1501.
(5) Substantially similar. --The term substantially similar is defined in §1.6011-4(c)(4) of this chapter.
(6) Tax. --The term tax means Federal tax.
(7) Tax benefit. --A tax benefit includes deductions, exclusions from gross income, nonrecognition of gain, tax credits, adjustments (or the absence of adjustments) to the basis of property, status as an entity exempt from Federal income taxation, and any other tax consequences that may reduce a taxpayer's Federal tax liability by affecting the amount, timing, character, or source of any item of income, gain, expense, loss, or credit.
(8) Tax return. --The term tax return means a Federal tax return and a Federal information return.
(9) Tax structure. --The tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed Federal tax treatment of the transaction.
(10) Tax treatment. --The tax treatment of a transaction is the purported or claimed Federal tax treatment of the transaction.
(11) Taxpayer. --The term taxpayer is defined in §1.6011-4(c)(1) of this chapter.
(12) Tax result protection. --The term tax result protection includes insurance company and other third party products commonly described as tax result insurance.
(13) Transaction of interest. --The term transaction of interest is defined in §1.6011-4(b)(6) of this chapter. See also §§20.6011-4(a), 25.6011-4(a), 31.6011-4(a), 53.6011-4(a), 54.6011-4(a), or 56.6011-4(a) of this chapter.
(d) Form and content of material advisor's disclosure statement
(1) In general. --A material advisor required to file a disclosure statement under this section must file a completed Form 8918, "Material Advisor Disclosure Statement" (or successor form) in accordance with this paragraph (d) and the instructions to the form. To be considered complete, the information provided on the form must describe the expected tax treatment and all potential tax benefits expected to result from the transaction, describe any tax result protection with respect to the transaction, and identify and describe the transaction in sufficient detail for the IRS to be able to understand the tax structure of the reportable transaction and the identity of any material advisor(s) whom the material advisor knows or has reason to know acted as a material advisor as defined in paragraph (b) of this section with respect to the transaction. An incomplete form containing a statement that information will be provided upon request is not considered a complete disclosure statement. A material advisor may file a single form for substantially similar transactions. An amended form must be filed if information previously provided is no longer accurate, if additional information that was not disclosed becomes available, or if there are material changes to the transaction. A material advisor is not required to file an additional form for each additional taxpayer that enters into the same or substantially similar transaction. If the form is not completed in accordance with the provisions in this paragraph (d) and the instructions to the form, the material advisor will not be considered to have complied with the disclosure requirements of this section.
(2) Reportable transaction number. --The IRS will issue to a material advisor a reportable transaction number with respect to the disclosed reportable transaction. Receipt of a reportable transaction number does not indicate that the disclosure statement is complete, nor does it indicate that the transaction has been reviewed, examined, or approved by the IRS. Material advisors must provide the reportable transaction number to all taxpayers and material advisors for whom the material advisor acts as a material advisor as defined in paragraph (b) of this section. The reportable transaction number must be provided at the time the transaction is entered into, or, if the transaction is entered into prior to the material advisor receiving the reportable transaction number, within 60 calendar days from the date the reportable transaction number is mailed to the material advisor.
(e) Time of providing disclosure. --The material advisor's disclosure statement for a reportable transaction must be filed with the Office of Tax Shelter Analysis (OTSA) by the last day of the month that follows the end of the calendar quarter in which the advisor became a material advisor with respect to the reportable transaction or in which the circumstances necessitating an amended disclosure statement occur. The disclosure statement must be sent to OTSA at the address provided in the instructions for Form 8918 (or a successor form).
(f) Designation agreements. --If more than one material advisor is required to disclose a reportable transaction under this section, the material advisors may designate by written agreement a single material advisor to disclose the transaction. The transaction must be disclosed by the last day of the month following the end of the calendar quarter that includes the earliest date on which a material advisor who is a party to the agreement became a material advisor with respect to the transaction as described in paragraph (b)(4) of this section. The designation of one material advisor to disclose the transaction does not relieve the other material advisors of their obligation to disclose the transaction to the IRS in accordance with this section, if the designated material advisor fails to disclose the transaction to the IRS in a timely manner.
(g) Protective disclosures. --If a potential material advisor is uncertain whether a transaction must be disclosed under this section, the advisor may disclose the transaction in accordance with the requirements of this section and comply with all the provisions of this section, and indicate on the disclosure statement that the disclosure statement is being filed on a protective basis. The IRS will not treat disclosure statements filed on a protective basis any differently than other disclosure statements filed under this section. For a protective disclosure to be effective, the advisor must comply with the regulations under this section and §301.6112-1 by providing to the IRS all information requested by the IRS under these sections.
(h) Rulings. --If a potential material advisor requests a ruling as to whether a specific transaction is a reportable transaction on or before the date that disclosure would otherwise be required under this section, the Commissioner in his discretion may determine that the submission satisfies the disclosure rules under this section for that transaction if the request fully discloses all relevant facts relating to the transaction which would otherwise be required to be disclosed under this section. The potential obligation of the person to disclose the transaction under this section (or to maintain or furnish the list under §301.6112-1) will not be suspended during the period that the ruling request is pending.
(i) Effective/applicability date
(1) In general. --This section applies to transactions with respect to which a material advisor makes a tax statement on or after August 3, 2007. However, this section applies to transactions of interest entered into on or after November 2, 2006 with respect to which a material advisor makes a tax statement under §301.6111-3 on or after November 2, 2006. Paragraph (h) of this section applies to ruling requests received on or after November 1, 2006. Otherwise, the rules that apply with respect to transactions entered into before August 3, 2007 are contained in Notice 2004-80 (2004-50 IRB 963); Notice 2005-17 (2005-8 IRB 606); and Notice 2005-22 (2005-12 IRB 756)(see §601.601(d)(2)(ii)(b) in effect prior to August 3, 2007.
[Reg. §301.6111-3.]
 [T.D. 9351, 7-31-2007
of Reportable Transactions: Interim guidance, American Jobs Creation Act of 2004 (P.L. 108-357)The guidance contained in Notice 2005-22 will be superseded by Proposed Reg. §301.6111-3 (see ¶37,002.08.The IRS has provided additional interim guidance to material advisors who are required, with regard to any reportable transaction, to file Form 8264, Application for Registration of a Tax Shelter, with respect to that transaction. The interim guidance states that material advisors should not modify Form 8264 but should complete the form as if it had been modified as indicated in Notice 2004-80, I.R.B. 2004-50, 963. A person will be treated as becoming a material advisor when three events have taken place: (1) the material advisor makes a tax statement, (2) the material advisor receives, or expects to receive, the minimum fees with respect to the reportable transaction and (3) the transaction is entered into by the taxpayer. The guidance also extends the time for filing Form 8264 so that, for a person who becomes a material advisor after October 22, 2004, and on or before March 31, 2005, the form must be filed on or before April 30, 2005.
[Full Text-Notice 2005-22]
The purpose of this notice is to clarify and modify Notice 2004-80, 2004-50 I.R.B. 963, to provide additional guidance for material advisors who are required to comply with §§6111 and 6112 of the Internal Revenue Code, as amended, and to grant an extension of time for material advisors to comply with the new filing requirements under §6111.BACKGROUNDSection 6111, as amended by the American Jobs Creation Act of 2004, P.L. 108-357, 118 Stat. 1418 (the Act), requires that each material advisor with respect to any reportable transaction make a return setting forth information identifying and describing the transaction and any potential tax benefits expected to result from the transaction no later than the date specified by the Secretary. Notice 2004-80 announced that the Internal Revenue Service and the Treasury Department intend to issue regulations providing rules under §6111.Notice 2004-80 also provides interim rules implementing the requirements of §6111 until the Secretary prescribes regulations. Under Notice 2004-80, each material advisor with respect to a reportable transaction must file a return on Form 8264, Application for Registration of a Tax Shelter, within 30 days after the date on which the person becomes a material advisor. Notice 2004-80 also provides transitional relief in the case of a person who becomes a material advisor after October 22, 2004, and on or before December 31, 2004, that allows the material advisor to file the return before February 1, 2005. Notice 2005-17, 2005-8 I.R.B. 606, released on January 28, 2005, grants additional transitional relief allowing a person who becomes a material advisor after October 22, 2004, and on or before January 29, 2005, to file the return before March 1, 2005.Since the issuance of Notice 2004-80, questions have arisen regarding the application of the interim rules to material advisors. In addition, Notice 2005-17 states that the Service and Treasury intend to provide further guidance on the issue of the date on which a person becomes a material advisor with respect to a reportable transaction (including whether the obligation of a material advisor arises only when a reportable transaction is entered into by a taxpayer). This notice provides additional interim rules that will apply until further guidance is issued and grants additional transitional relief.ADDITIONAL INTERIM PROVISIONS1. Completion of Form 8264Notice 2004-80 provides that each material advisor required under §6111, as amended, to file a return with respect to a reportable transaction must complete Parts I (except item 1(b)), IV, and V of Form 8264. In completing Form 8264, the form and instructions are to be read to apply, by substituting: (1) "reportable transaction" each place "tax shelter" or "confidential corporate tax shelter" appears; (2) "material advisor" each place "organizer" or "principal organizer" appears; and (3) "Date the material advisor became a material advisor with respect to the reportable transaction" in place of "Date an interest in the tax shelter was first offered for sale" in Part I, line 7, of the form.Questions have arisen whether a material advisor is required to modify the Form 8264 by striking or replacing lines or fields. A material advisor may not make modifications to the Form 8264. A material advisor must simply complete the form as if it had been modified to read as described in Notice 2004-80.2. Material Advisors and Transitional ReliefNotice 2004-80 provides that a material advisor who is required to file a return under §6111 must file the return within 30 days after the date on which the person becomes a material advisor. Notice 2004-80 provides that a material advisor is defined in §301.6112-1(c)(2). Notice 2004-80 also provides that a material advisor may file a single Form 8264 for substantially similar transactions. A material advisor is required to supplement information disclosed on Form 8264 if the information provided is no longer accurate, or if additional information that was not disclosed on Form 8264 becomes available.Questions have arisen regarding when a person becomes a material advisor. Section 301.6112-1(c)(2) defines a material advisor as a person who makes a tax statement and receives or expects to receive a minimum fee with respect to a reportable transaction. Section 301.6112-1(c)(2)(B) provides that a material advisor includes a person who makes a tax statement to or for the benefit of a taxpayer who the potential material advisor (at the time the transaction is entered into) knows is or reasonably expects to be required to disclose the transaction under §1.6011-4.Until further guidance is issued, a material advisor will be treated as becoming a material advisor under §6111 when all of the following events have occurred: (1) the material advisor makes a tax statement, (2) the material advisor receives (or expects to receive) the minimum fees, and (3) the transaction is entered into by the taxpayer. Material advisors, including those who cease providing services prior to the time the transaction is entered into, must make reasonable and good faith efforts to determine whether the taxpayer entered into the transaction.Moreover, the time for providing disclosure as provided in Notice 2004-80 is amended by this notice. Until further guidance is issued, a material advisor will meet its return filing obligation under §6111 if the Form 8264 is filed by the last day of the month that follows the end of the calendar quarter in which the advisor became a material advisor. Also, the transitional relief provided in Notice 2004-80 and Notice 2005-17 for disclosure of a transaction under §6111 is extended. Accordingly, if a person becomes a material advisor after October 22, 2004, and on or before March 31, 2005, that material advisor must file the return on or before April 30, 2005.Once a material advisor has filed a Form 8264 with respect to a transaction, the material advisor is not required to file an additional Form 8264 for each additional taxpayer that subsequently enters into the same transaction or to file a Form 8264 for a separate transaction that is the same as or substantially similar to the transaction for which the material advisor has filed a Form 8264.Questions also have arisen regarding whether the tolling provisions of §1.6011-4(f) would apply to requests from a potential material advisor for a letter ruling. Until further guidance is issued, if the advisor submits a request for a letter ruling on or before the date the return under §6111 is due and fully discloses all relevant facts relating to the transaction, the obligation of the potential material advisor to disclose the transaction will be suspended as provided in §1.6011-4(f). However, a request for a letter ruling by a potential material advisor will not toll the disclosure provisions of §1.6011-4 for taxpayers who participate in the transaction. See §1.6011-4(f) for tolling provisions applicable to material advisors and taxpayers.Finally, questions have arisen regarding the nature of the statement relating to the financial accounting treatment of the item(s) giving rise to a significant book-tax difference described in §1.6011-4(b)(6). In addition, some practitioners have erroneously concluded that Notice 2004-80 was intended to exclude persons who do not provide accounting advice. The financial accounting statement described in Notice 2004-80 includes statements made by any material advisor, including accountants, lawyers, or investment advisors.3. Effective Date of Notice 2004-80Notice 2004-80 is effective for transactions with respect to which material aid, assistance, or advice is provided after October 22, 2004. Questions have arisen regarding the definition of material aid, assistance, or advice provided after October 22, 2004. For purposes of the disclosure required by §6111, disclosure is required for reportable transactions with respect to which a material advisor makes a tax statement (other than post-filing advice described in §301.6112-1(c)(2)(iv)(A)) after October 22, 2004, regardless of whether any portion of the fee was received before October 22, 2004, or whether the transaction was entered into before October 22, 2004. (For the timing of the disclosure, see Section 2 of this notice, above.)EFFECTIVE DATEThis notice is effective February 24, 2005, the date this notice was released to the public.EFFECT ON OTHER DOCUMENTSThis document clarifies and modifies Notice 2004-80 and Notice 2005-17.DRAFTING INFORMATIONThe principal author of this notice is Tara P. Volungis of the Office of the Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice contact Ms. Volungis at (202) 622-3080 (not a toll-free call).Notice 2005-22, I.R.B. 2005-12, 756, clarifying and modifying Notice 2005-17, I.R.B. 2005-8, 606 and Notice 2004-80, I.R.B. 2004-50, 963 (This guidance will be superseded by Proposed Reg. §301.6111-3 (see ¶37,002.08).Prior to Notice 2005-22, I.R.B. 2005-12, 756 above, the IRS extended the transitional relief in Notice 2004-80, I.R.B. 2004-50, 963, for filing Form 8264 in the case of a person who becomes a material advisor after October 22, 2004. A person who became a material advisor after October 22, 2004, and on or before January 29, 2005 was required to file Form 8264 before March 1, 2005.Notice 2005-17, I.R.B. 2005-8, 606, clarified and modified by Notice 2005-22, I.R.B. 2005-12, 756.Guidance is provided that reflects changes made by the American Jobs Creation Act of 2004 (P.L. 108-357) to the requirements for disclosure of reportable transactions by taxpayers and material advisors.
[Full Text-Notice 2004-80]
The purpose of this notice is to alert taxpayers to recent amendments to §§6111, 6112, and 6708 of the Internal Revenue Code. The notice announces that the Internal Revenue Service and the Treasury Department will issue regulations under §6111 and amend the regulations under §6112. The regulations under §6111 and §6112 will apply to transactions with respect to which material aid, assistance, or advice is provided after October 22, 2004. The Service and Treasury also will issue regulations under §6708 that will apply to written requests made after October 22, 2004, for investor lists required to be maintained under §6112. This notice provides guidance for material advisors who are required to comply with §§6111 and 6112, as amended, and who are potentially subject to penalty under §6708, as amended. This notice also invites comments from the public regarding rules and standards relating to §§6111, 6112, and 6708, as amended.BACKGROUND AND PRIOR LAWPrior to the recent amendments, §6111(a) required an organizer of a tax shelter to register the shelter with the Secretary not later than the day on which interests in the shelter were first offered for sale. Under former §6111(c), a tax shelter was defined as any investment with respect to which any person could reasonably infer from the representations made in connection with the offering for sale of interests that the tax shelter ratio for any investor as of the close of any of the first five years ending after the investment was offered for sale may have been greater than two to one and which was: (1) required to be registered under federal or state securities laws; (2) sold pursuant to an exemption from registration requiring the filing of a notice with a federal or state securities agency; or (3) a substantial investment (the aggregate amount which may have been offered for sale exceeded $250,000 and the expected involvement of at least five investors). Under former §6111(d), other entities, plans, arrangements or transactions could be treated as tax shelters for purposes of former §6111(a) if: (1) a significant purpose of the structure was the avoidance or evasion of federal income tax for a direct or indirect corporate participant; (2) the offer was made under conditions of confidentiality; and (3) the tax shelter promoter may have received fees in excess of $100,000 in the aggregate.THE AMERICAN JOBS CREATION ACT OF 2004The American Jobs Creation Act of 2004, P.L. 108-357, 118 Stat. 1418, (the Act) was enacted on October 22, 2004. Section 815 of the Act amended §6111 to require each material advisor with respect to any reportable transaction to make a return (in such form as the Secretary may prescribe) setting forth: (1) information identifying and describing the transaction; (2) information describing any potential tax benefits expected to result from the transaction; and (3) other information as the Secretary may prescribe. Section 6111(a), as amended, provides that the return must be filed not later than the date specified by the Secretary. Section 6111(b)(1) defines a material advisor and includes a requirement that the material advisor receive certain threshold amounts of gross income that the Secretary may prescribe.The amendments to §6111 authorize the Secretary to prescribe regulations that provide: (1) that only one person shall be required to meet the requirements of §6111(a) in cases in which two or more persons would otherwise be required to meet such requirements; (2) exemptions from the requirements of §6111; and (3) rules as may be necessary or appropriate to carry out the purposes of §6111.Section 815 of the Act also amended §6112 to provide that each material advisor (as defined in new §6111) with respect to any reportable transaction is required to maintain a list (in such manner as the Secretary may by regulations prescribe) identifying each person with respect to whom the advisor acted as a material advisor with respect to the transaction, and containing other information as the Secretary may by regulations require.Section 815 of the Act is effective for transactions with respect to which material aid, assistance, or advice is provided after October 22, 2004, the date of enactment of the Act.Section 817 of the Act amended §6708 to impose a penalty on a material advisor who fails to make available, within 20 business days after the date of a written request by the Secretary, a list required to be maintained under §6112(a). The new amount of the penalty is $10,000 for each day after the 20th day that the material advisor fails to provide the list. Section 6708(a)(2) provides a reasonable cause exception to the imposition of the penalty under §6708. Section 817 of the Act is effective for requests made after October 22, 2004, the date of the enactment of the Act.INTERIM PROVISIONSThe Service and Treasury intend to issue regulations providing rules under §§6111, 6112, and 6708, as amended. However, because the amendments to §§6111, 6112, and 6708 currently are effective, the Service and Treasury are providing the following interim rules implementing the requirements of §§6111, 6112, and 6708, as amended, until the Secretary prescribes regulations. The interim rules as adopted by this notice incorporate, in part, rules in the current regulations under §§6011, 6111, and 6112. These interim rules will apply until further guidance is issued.A. Disclosure by Material Advisors Under §6111 As indicated above, section 815 of the Act amended §6111 to require that each material advisor with respect to any reportable transaction make a return setting forth information identifying and describing the transaction and any potential tax benefits expected to result from the transaction no later than the date specified by the Secretary. Until further guidance is issued, the definition of a reportable transaction, the definition of a material advisor, and the requirements for filing a return under §6111 are as indicated below.1. Definition of Reportable TransactionFor purposes of new §6111(a), a "reportable transaction" is defined in §1.6011-4(b) of the Income Tax Regulations. In addition, the rules in §301.6112-1(b)(2) and (c)(2) (without regard to provisions relating to a transaction required to be registered under former §6111) will apply for purposes of determining whether a transaction is a reportable transaction with respect to a material advisor. Determinations made by public guidance pursuant to §1.6011-4(b)(8) that a transaction will not be considered a reportable transaction or will be excluded from a category of reportable transactions, including Rev. Proc. 2004-65 (relating to transactions with contractual protection), Rev. Proc. 2004-66 (relating to loss transactions), Rev. Proc. 2004-67 (relating to transactions with a significant book-tax difference), and Rev. Proc. 2004-68 (relating to transactions with a brief asset holding period) also will apply for purposes of new §§6111 and 6112.2. Definition of a Material AdvisorFor purposes of new §6111, a "material advisor" is defined in §301.6112-1(c)(2) of the Procedure and Administration Regulations. The existing rules under §301.6112-1(c)(2), (c)(3), and (d) (without regard to the provisions relating to a transaction required to be registered under former §6111), including the minimum fee amounts for listed transactions under §301.6112-1(c)(3)(ii), will apply for purposes of determining whether a person is a material advisor.In the case of a transaction with a significant book-tax difference described in §1.6011-4(b)(6), a person will be considered a material advisor with regard to the transaction for purposes of §§6111 and 6112 only if the person who makes a tax statement described in §301.6112-1(c)(2)(iii)(E) also makes a statement, oral or written, that relates to the financial accounting treatment of the item(s) that gives rise to a significant book-tax difference described in §1.6011-4(b)(6).3. Filing of Return Under §6111Until Form 8264, Application for Registration of a Tax Shelter, is revised, or a successor form is issued, for purposes of new §6111(a), a material advisor required to file a return with respect to a reportable transaction must complete Form 8264 in the following manner. A material advisor is required to complete only Parts I (except item 1(b)), IV, and V of Form 8264. In completing Form 8264, the form and instructions are to be read to apply, by substituting: (1) "reportable transaction" each place "tax shelter" or "confidential corporate tax shelter" appears; (2) "material advisor" each place "organizer" or "principal organizer" appears; and (3) "Date the material advisor became a material advisor with respect to the reportable transaction" in place of "Date an interest in the tax shelter was first offered for sale" in Part I, line 7, of the form. In Part IV, fees must be determined by applying the rules in §301.6112-1(c)(3)(iii) instead of the instructions. In Part V, the material advisor must identify the type of reportable transaction under §1.6011-4(b) that is being disclosed, and describe the facts of the transaction and the potential tax benefits expected to result from the transaction. Form 8264 must be signed under penalties of perjury. The form must be sent to the Internal Revenue Service Center, Ogden, UT 84201.A material advisor may file a single Form 8264 for substantially similar transactions. A material advisor is required to supplement information disclosed on Form 8264 if the information provided is no longer accurate, or if additional information that was not disclosed on Form 8264 becomes available.In addition, the following rules contained in §301.6111-1T will apply: (1) Q&A-3 and 50 regarding representations made to investors about disclosures under §6111; (2) Q&A-38 and 39 regarding designation agreements; (3) Q&A 49 regarding timely mailing; and (4) Q&A-51 through 57 regarding the furnishing of registration numbers and the reporting requirement on Form 8271, Investor Reporting of Tax Shelter Registration Number, or any successor form.4. Due Date of Return Under §6111Section 6111(a), as amended, provides that the Secretary may specify the date the return must be filed by a material advisor. A material advisor, as defined in §301.6112-1(c)(2), who is required to file a return under §6111 must file the return within 30 days after the date on which the person becomes a material advisor. However, if a person becomes a material advisor after October 22, 2004, and on or before December 31, 2004, that material advisor must file the return before February 1, 2005. If a person is required to disclose a reportable transaction under the provisions of §6111, as amended, and the person has registered the transaction under former §6111 prior to October 22, 2004, that registration will satisfy the disclosure requirements for the new provisions in §6111, provided that the material advisor amends the previous registration to reflect any information required under this notice.B. Maintenance of Lists by Material Advisors Under §6112 Section 815 of the Act amended §6112 to provide that each material advisor (as defined in new §6111(b)) with respect to any reportable transaction is required to maintain a list identifying each person with respect to whom the advisor acted as a material advisor with respect to the transaction. Section 817 of the Act amended §6708 to impose a penalty on a material advisor who fails to make a list available upon written request within 20 business days after the date of the request.For purposes of new §6112, the existing rules under §301.6112-1 (without regard to the provisions relating to a transaction required to be registered under former §6111) relating to the preparation, maintenance, retention, and furnishing of lists will apply to material advisors required to maintain lists with respect to a reportable transaction.For purposes of former §6112, §301.6112-1 will continue to apply to organizers and sellers (defined as material advisors in §301.6112-1(c)(2)) who are required to maintain lists under former §6112. Consequently, an organizer or seller under former §6112 must continue to maintain any list described in §301.6112-1(e) for the seven-year period described in §301.6112-1(f) even if such period expires after October 22, 2004.For purposes of §6708, the 20 business-day period within which a person must provide the list required to be maintained under §6112 shall begin on the first business day following the earlier of the date that the IRS: (1) mails a request for the list by certified or registered mail to the last known address of the material advisor required to maintain the list or (2) hand-delivers the written request in person. Business days include every calendar day other than Saturdays, Sundays, or legal holidays. For purposes of this notice, "legal holiday" shall have the same meaning provided in §7503.REQUEST FOR COMMENTSThe Service and Treasury intend to issue regulations implementing the requirements of §§6111, 6112, and 6708, as amended. The Service and Treasury continue to balance the benefits to the government of early and complete disclosure with the burden imposed on taxpayers and their representatives. The Service and Treasury invite interested persons to submit comments regarding the requirements of §§6111, 6112, and 6708, including comments on the definition of material advisor and comments on ways to reduce taxpayer burden and to improve disclosure. Comments on guidance under §§6111, 6112, or 6708, may be submitted to: CC:PA:LPD:PR (NOT-155984-04), Room 5203, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions also may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (NOT-155984-04), Couriers Desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC. Alternatively, taxpayers may submit electronic comments directly to the IRS e-mail address: notice.comments@irscounsel.treas.gov.
This notice is effective for transactions with respect to which material aid, assistance, or advice is provided after October 22, 2004. This notice is also effective for written requests made after October 22, 2004, for investor lists required to be maintained under §6112.DRAFTING INFORMATIONThe principal author of this notice is Tara P. Volungis of the Office of the Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice contact Ms. Volungis at (202) 622-3080 (not a toll free call).Notice 2004-80, I.R.B. 2004-50, 963, clarified and modified by Notice 2005-17, I.R.B. 2005-8, 606 and Notice 2005-22, I.R.B. 2005-12, 756.A material advisor required to file a completed Form 8918 by October 31, 2007, may satisfy the disclosure requirement of Reg. §301.6111-3(d) by filing Form 8264, Application for Registration of a Tax Shelter, instead. Reportable transactions disclosed on Form 8264 should be disclosed in the manner described in Notices 2004-80, 2004-2 CB 963, and 2005-22, 2005-1 CB 756. In the event Form 8918 is published before the October 31 due date, advisors may use either Form 8918 or Form 8264. However, unless instructed otherwise by the IRS, material advisors must still use Form 8918 (or its successor) for disclosures required to be filed after October 31, 2007.Notice 2007-85, I.R.B. 2007-45.
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Labels: IRS Tax Helps - Material Advisor Disclosure Requirement - IRS 6111