irb 2015-35 (rev. august 31, 2015) · the irs mission provide america’s taxpayers top-quality...

HIGHLIGHTSOF THIS ISSUEThese synopses are intended only as aids to the reader inidentifying the subject matter covered. They may not berelied upon as authoritative interpretations.

INCOME TAX

REG–132075–14, page 288.The proposed regulations would remove the automatic exten-sion of time to file certain information returns (Form W–2G,1042–S, 1094–C, 1095–B, 1095–C, 1097 series, 1098 se-ries, 1099 series, 3921, 3922, 5498 series, and 8027) andremove the opportunity to seek a second 30 day extension oftime to file.

Announcement 2015–22, page 288.Announcement 2015–22 informs that the IRS will not assertthat an individual whose personal information may have beencompromised in a data breach must include in gross incomethe value of the identity protection services provided by theorganization that experienced the data breach. Additionally, theIRS will not assert that an employer providing identity protec-tion services to employees whose personal information mayhave been compromised in a data breach of the employer’s (oremployer’s agent or service provider’s) recordkeeping systemmust include the value of the identity protection services in theemployees’ gross income and wages.

Notice 2015–56, page 235.Notice 2015–56 informs claimants about the federal income taxtreatment of credits under § 6426(c) and (d) that are paid in cashunder the one-time claim submission process of section 160(e) ofthe Tax Increase Prevention Act of 2014 and implemented byNotice 2015–3. Specifically, a claimant must reduce its incometax deduction for (or cost of goods sold deduction attributable to)§ 4081 excise taxes (or, if applicable, § 4041 excise taxes) foreach calendar quarter during 2014 by the amount of the§ 6426(c) credit (or, if applicable, § 6426(d) credit) for fuelmixtures sold or used during that calendar quarter.

T.D. 9729, page 221.This treasury decision (T.D.) provides rules for determining ataxable beneficiary’s basis in a term interest in a charitable

remainder trust upon a sale or other disposition of all interestsin the trust to the extent that basis consists of a share ofadjusted uniform basis. The T.D. provides that a taxable ben-eficiary’s assignable share of uniform basis upon the sale orexchange of the taxable beneficiary’s term interest does notinclude the charitable remainder trust’s undistributed net cap-ital gains or net ordinary income.

T.D. 9730, page 223.These temporary regulations remove the automatic extensionof time to file information returns on forms in the W–2 series(except Form W–2G) and remove the opportunity to seek asecond 30-day extension of time to file.

EXCISE TAX

Notice 2015–52, page 227.Section 4980I was added to the Code by the Affordable CareAct and applies to taxable years beginning after December 31,2017. Notice 2015–52 is the second notice concerning§ 4980I and it is intended to supplement Notice 2015–16concerning § 4980I, issued on February 23, 2015. Notice2015–52 addresses additional issues under § 4980I, includingthe identification of the taxpayer who may be liable for theexcise tax, employer aggregation, exclusion from the cost ofapplicable coverage amounts attributable to the excise tax, theage and gender adjustment to the dollar limit, the allocation ofthe tax among the applicable taxpayers, and the payment ofthe applicable tax. In this notice, Treasury and the IRS invitecomments on the issues addressed in this notice and on anyother issues under § 4980I. After considering the commentson both notices, Treasury and IRS intend to issue proposedregulations under § 4980I.

(Continued on the next page)

Finding Lists begin on page ii.

Bulletin No. 2015–35August 31, 2015

ADMINISTRATIVE

Rev. Proc. 2015–40, page 236.This document updates the procedures for requesting assis-tance from the U.S. competent authority under the provisionsof an income, estate, or gift tax treaty to which the UnitedStates is a party. Rev. Proc. 2006–54, 2006–2 C.B. 1035, ismodified and superseded. Rev. Proc. 2003–40, 2003–1 C.B.1044, is modified. Rev. Rul. 92–75, 1999–2 C.B. 197, isclarified. Rev. Proc. 2015–41, 2015–35 I.R.B., is amplified.

Rev. Proc. 2015–41, page 263.The revenue procedure provides guidance on the process ofrequesting and obtaining an advance pricing agreement(“APA”) and information on the administration of APAs. Therevenue procedure updates and supersedes Rev. Proc.2006–9, as modified by Rev. Proc. 2008–31, which is alsosuperseded.

The IRS MissionProvide America’s taxpayers top-quality service by helpingthem understand and meet their tax responsibilities and en-force the law with integrity and fairness to all.

IntroductionThe Internal Revenue Bulletin is the authoritative instrument ofthe Commissioner of Internal Revenue for announcing officialrulings and procedures of the Internal Revenue Service and forpublishing Treasury Decisions, Executive Orders, Tax Conven-tions, legislation, court decisions, and other items of generalinterest. It is published weekly.

It is the policy of the Service to publish in the Bulletin allsubstantive rulings necessary to promote a uniform applicationof the tax laws, including all rulings that supersede, revoke,modify, or amend any of those previously published in theBulletin. All published rulings apply retroactively unless other-wise indicated. Procedures relating solely to matters of internalmanagement are not published; however, statements of inter-nal practices and procedures that affect the rights and dutiesof taxpayers are published.

Revenue rulings represent the conclusions of the Service onthe application of the law to the pivotal facts stated in therevenue ruling. In those based on positions taken in rulings totaxpayers or technical advice to Service field offices, identify-ing details and information of a confidential nature are deletedto prevent unwarranted invasions of privacy and to comply withstatutory requirements.

Rulings and procedures reported in the Bulletin do not have theforce and effect of Treasury Department Regulations, but theymay be used as precedents. Unpublished rulings will not berelied on, used, or cited as precedents by Service personnel inthe disposition of other cases. In applying published rulings andprocedures, the effect of subsequent legislation, regulations,court decisions, rulings, and procedures must be considered,and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unlessthe facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.This part includes rulings and decisions based on provisions ofthe Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.This part is divided into two subparts as follows: Subpart A, TaxConventions and Other Related Items, and Subpart B, Legisla-tion and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.To the extent practicable, pertinent cross references to thesesubjects are contained in the other Parts and Subparts. Alsoincluded in this part are Bank Secrecy Act Administrative Rul-ings. Bank Secrecy Act Administrative Rulings are issued bythe Department of the Treasury’s Office of the Assistant Sec-retary (Enforcement).

Part IV.—Items of General Interest.This part includes notices of proposed rulemakings, disbar-ment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index forthe matters published during the preceding months. Thesemonthly indexes are cumulated on a semiannual basis, and arepublished in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

August 31, 2015 Bulletin No. 2015–35

Part I. Rulings and Decisions Under the Internal Revenue Codeof 198626 CFR 1.1014–5 Gain or loss.26 CFR 1.1001–1 Computation of gain or loss.

T.D. 9729

DEPARTMENT OF THETREASURYInternal Revenue Service26 CFR Part 1

Basis in Interests inTax-Exempt Trusts

AGENCY: Internal Revenue Service (IRS),Treasury.

ACTION: Final regulations.

SUMMARY: This document contains fi-nal regulations that provide rules for de-termining a taxable beneficiary’s basis ina term interest in a charitable remaindertrust (CRT) upon a sale or other disposi-tion of all interests in the trust to theextent that basis consists of a share ofadjusted uniform basis. The final regula-tions affect taxable beneficiaries of CRTs.

DATES: Effective date: These final regu-lations are effective on August 12, 2015.

Applicability date: These final regula-tions apply to sales and other dispositionsof interests in CRTs occurring on or afterJanuary 16, 2014, except for sales or dis-positions occurring pursuant to a bindingcommitment entered into before January16, 2014.

FOR FURTHER INFORMATIONCONTACT: Allison R. Carmody at (202)317-5279 (not a toll-free number).

Background

This document contains amendmentsto 26 CFR part 1. On October 31, 2008,the Treasury Department and the IRS pub-lished Notice 2008–99 (2008–47 IRB1194) to designate a transaction and sub-stantially similar transactions as Transac-tions of Interest under § 1.6011–4(b)(6)of the Income Tax Regulations and to askfor public comments on how the transac-tions might be addressed in publishedguidance. After studying the transactionand comments received from the public in

response to Notice 2008–99, the TreasuryDepartment and the IRS filed a notice ofproposed rulemaking (REG–154890–03)relating to basis in interests in tax-exempttrusts in the Federal Register on January16, 2014. No comments were receivedfrom the public in response to the noticeof proposed rulemaking. No public hear-ing was requested or held. The proposedregulations are adopted without change bythis Treasury decision.

Explanation of Provisions

These final regulations provide a spe-cial rule for determining the basis in cer-tain CRT term interests in transactions towhich section 1001(e)(3) applies. Suchtransactions are those in which the sale orother disposition of the CRT term interestis part of a transaction in which all inter-ests in the CRT are transferred. In thesecases, these final regulations provide thatthe basis of a term interest of a taxablebeneficiary is the portion of the adjusteduniform basis assignable to that interestreduced by the portion of the sum of thefollowing amounts assignable to that in-terest: (1) the amount of undistributed netordinary income described in section664(b)(1); and (2) the amount of undis-tributed net capital gain described in sec-tion 664(b)(2). These final regulations donot affect the CRT’s basis in its assets butrather are for the purpose of determining ataxable beneficiary’s gain arising from atransaction described in section 1001(e)(3).The rules in these final regulations are lim-ited in application to charitable remainderannuity trusts and charitable remainder uni-trusts as defined in section 664.

Effect on Other Documents

Notice 2008–99 provides that, whenthe Treasury Department and the IRShave gathered enough information tomake an informed decision as to whetherthis transaction is a tax avoidance type oftransaction, the Treasury Department andthe IRS may take one or more actions,including removing the transaction fromthe transactions of interest category inpublished guidance, designating the trans-

action as a listed transaction, or providinga new category of reportable transaction.Because the Treasury Department and theIRS believe that these final regulationsaddress the proper tax treatment of thetransaction described in Notice 2008–99,transactions that are the same as, or sub-stantially similar to, transactions de-scribed in Notice 2008–99 are no longerconsidered “transactions of interest,” ef-fective for transactions entered into on orafter January 16, 2014. However, the“transaction of interest” identification fortransactions that are the same as, or sub-stantially similar to, the transaction de-scribed in Notice 2008–99 continues toapply for transactions entered into beforeJanuary 16, 2014, and to transactions en-tered into on or after January 16, 2014,pursuant to a binding commitment enteredinto before January 16, 2014. For exam-ple, disclosure and other obligations undersections 6011, 6111, and 6112 continue toapply for these transactions entered intobefore January 16, 2014, and to transac-tions entered into on or after January 16,2014, pursuant to a binding commitmententered into before January 16, 2014.

Effective/Applicability Date

These final regulations apply to salesand other dispositions of interests in CRTsoccurring on or after January 16, 2014,except for sales or dispositions occurringpursuant to a binding commitment enteredinto before January 16, 2014. However,the fact that a sale or disposition occurred,or a binding commitment to complete asale or disposition was entered into, be-fore January 16, 2014, does not precludethe IRS from applying legal argumentsavailable to the IRS before issuance ofthese final regulations in order to contestthe claimed tax treatment of such a trans-action.

Availability of IRS Documents

The IRS notice cited in this preamble ispublished in the Internal Revenue Bulletinand is available at the IRS website athttp://www.irs.gov or the Superintendent

Bulletin No. 2015–35 August 31, 2015221

of Documents, U.S. Government PrintingOffice, Washington, D.C., 20402.

Special Analyses

Certain IRS regulations, including thisone, are exempt from the requirements ofExecutive Order 12866, as supplementedand reaffirmed by Executive Order 13563.Therefore, a regulatory impact assessmentis not required. It also has been deter-mined that section 553(b) of the Admin-istrative Procedure Act (5 U.S.C. chapter5) does not apply to these final regula-tions, and the Regulatory Flexibility Act(5 U.S.C. chapter 6) does not apply tothese final regulations because the finalregulations do not impose a collection ofinformation on small entities. Therefore, aRegulatory Flexibility Analysis is not re-quired. Pursuant to section 7805(f) of theInternal Revenue Code, the notice of pro-posed rulemaking preceding this regula-tion was submitted to the Chief Counselfor Advocacy of the Small Business Ad-ministration for comment on its impact onsmall business.

Drafting Information

The principal author of these final reg-ulations is Allison R. Carmody of the Of-fice of Associate Chief Counsel (Pass-throughs and Special Industries). Otherpersonnel from the Treasury Departmentand the IRS participated in their develop-ment.

* * * * *

Adoption of Amendments to theRegulations

Accordingly, 26 CFR part 1 is amendedas follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation forpart 1 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *Par. 2. Section 1.1001–1, paragraph

(f)(4), is amended by removing the lan-guage “paragraph (c)” and adding “para-graph (d)” in its place.

Par. 3. Section 1.1014–5 is amended by:1. In paragraph (a)(1), first sentence,

removing the language “paragraph (b)”and adding “paragraph (b) or (c)” in itsplace.

2. Designating paragraph (c) as newly-designated paragraph (d) and adding para-graph (c).

3. In newly-designated paragraph (d),adding Example 7 and Example 8.

The additions read as follows:

§ 1.1014–5 Gain or loss.

* * * * *(c) Sale or other disposition of a term

interest in a tax-exempt trust—(1) In gen-eral. In the case of any sale or other dis-position by a taxable beneficiary of a terminterest (as defined in § 1.1001–1(f)(2)) ina tax-exempt trust (as defined in para-graph (c)(2) of this section) to which sec-tion 1001(e)(3) applies, the taxable bene-ficiary’s share of adjusted uniform basis,determined as of (and immediately be-fore) the sale or disposition of that inter-est, is—

(i) That part of the adjusted uniformbasis assignable to the term interest of thetaxable beneficiary under the rules ofparagraph (a) of this section reduced, butnot below zero, by

(ii) An amount determined by applyingthe same actuarial share applied in para-graph (c)(1)(i) of this section to the sumof—

(A) The trust’s undistributed net ordi-nary income within the meaning of section664(b)(1) and § 1.664–1(d)(1)(ii)(a)(1) forthe current and prior taxable years of thetrust, if any; and

(B) The trust’s undistributed net capitalgains within the meaning of section664(b)(2) and § 1.664–1(d)(1)(ii)(a)(2)for the current and prior taxable years ofthe trust, if any.

(2) Tax-exempt trust defined. For pur-poses of this section, the term tax-exempttrust means a charitable remainder annu-ity trust or a charitable remainder unitrustas defined in section 664.

(3) Taxable beneficiary defined. Forpurposes of this section, the term taxablebeneficiary means any person other thanan organization described in section170(c) or exempt from taxation under sec-tion 501(a).

(4) Effective/applicability date. Thisparagraph (c) and paragraph (d) Example7 and Example 8 of this section apply tosales and other dispositions of interests intax-exempt trusts occurring on or after

January 16, 2014, except for sales or dis-positions occurring pursuant to a bindingcommitment entered into before January16, 2014.

(d) * * *Example 7. (a) Grantor creates a charitable re-

mainder unitrust (CRUT) on Date 1 in whichGrantor retains a unitrust interest and irrevocablytransfers the remainder interest to Charity. Grantor isan individual taxpayer subject to income tax. CRUTmeets the requirements of section 664 and is exemptfrom income tax.

(b) Grantor’s basis in the shares of X stock usedto fund CRUT is $10x. On Date 2, CRUT sells the Xstock for $100x. The $90x of gain is exempt fromincome tax under section 664(c)(1). On Date 3,CRUT uses the $100x proceeds from its sale of theX stock to purchase Y stock. On Date 4, CRUT sellsthe Y stock for $110x. The $10x of gain on the saleof the Y stock is exempt from income tax undersection 664(c)(1). On Date 5, CRUT uses the $110xproceeds from its sale of Y stock to buy Z stock. OnDate 5, CRUT’s basis in its assets is $110x andCRUT’s total undistributed net capital gains are$100x.

(c) Later, when the fair market value of CRUT’sassets is $150x and CRUT has no undistributed netordinary income, Grantor and Charity sell all oftheir interests in CRUT to a third person. Grantorreceives $100x for the retained unitrust interest,and Charity receives $50x for its interest. Becausethe entire interest in CRUT is transferred to thethird person, section 1001(e)(3) prevents section1001(e)(1) from applying to the transaction.Therefore, Grantor’s gain on the sale of the re-tained unitrust interest in CRUT is determinedunder section 1001(a), which provides that Grant-or’s gain on the sale of that interest is the excessof the amount realized, $100x, over Grantor’sadjusted basis in the interest.

(d) Grantor’s adjusted basis in the unitrust in-terest in CRUT is that portion of CRUT’s adjusteduniform basis that is assignable to Grantor’s in-terest under § 1.1014 –5, which is Grantor’s actu-arial share of the adjusted uniform basis. In thiscase, CRUT’s adjusted uniform basis in its soleasset, the Z stock, is $110x. However, paragraph(c) of this section applies to the transaction.Therefore, Grantor’s actuarial share of CRUT’sadjusted uniform basis (determined by applyingthe factors set forth in the tables contained in§ 20.2031–7 of this chapter) is reduced by anamount determined by applying the same factorsto the sum of CRUT’s $0 of undistributed netordinary income and its $100x of undistributed netcapital gains.

(e) In determining Charity’s share of the adjusteduniform basis, Charity applies the factors set forth inthe tables contained in § 20.2031–7 of this chapter tothe full $110x of basis.

Example 8. (a) Grantor creates a charitable re-mainder annuity trust (CRAT) on Date 1 in whichGrantor retains an annuity interest and irrevocablytransfers the remainder interest to Charity. Grantor isan individual taxpayer subject to income tax. CRATmeets the requirements of section 664 and is exemptfrom income tax.


(b) Grantor funds CRAT with shares of X stockhaving a basis of $50x. On Date 2, CRAT sells theX stock for $150x. The $100x of gain is exemptfrom income tax under section 664(c)(1). On Date3, CRAT distributes $10x to Grantor, and uses theremaining $140x of net proceeds from its sale ofthe X stock to purchase Y stock. Grantor treats the$10x distribution as capital gain, so that CRAT’sremaining undistributed net capital gains amountdescribed in section 664(b)(2) and § 1.664 –1(d) is$90x.

(c) On Date 4, when the fair market value ofCRAT’s assets, which consist entirely of the Ystock, is still $140x, Grantor and Charity sell all oftheir interests in CRAT to a third person. Grantorreceives $126x for the retained annuity interest, andCharity receives $14x for its remainder interest. Be-cause the entire interest in CRAT is transferred to thethird person, section 1001(e)(3) prevents section1001(e)(1) from applying to the transaction. There-fore, Grantor’s gain on the sale of the retained an-nuity interest in CRAT is determined under section1001(a), which provides that Grantor’s gain on thesale of that interest is the excess of the amountrealized, $126x, over Grantor’s adjusted basis in thatinterest.

(d) Grantor’s adjusted basis in the annuity in-terest in CRAT is that portion of CRAT’s adjusteduniform basis that is assignable to Grantor’s in-terest under § 1.1014 –5, which is Grantor’s actu-arial share of the adjusted uniform basis. In thiscase, CRAT’s adjusted uniform basis in its soleasset, the Y stock, is $140x. However, paragraph(c) of this section applies to the transaction. There-fore, Grantor’s actuarial share of CRAT’s adjusteduniform basis (determined by applying the factorsset forth in the tables contained in § 20.2031–7 ofthis chapter) is reduced by an amount determinedby applying the same factors to the sum ofCRAT’s $0 of undistributed net ordinary incomeand its $90x of undistributed net capital gains.

(e) In determining Charity’s share of the adjusteduniform basis, Charity applies the factors set forth inthe tables contained in § 20.2031–7 of this chapter todetermine its actuarial share of the full $140x ofbasis.

John DalrympleDeputy Commissioner for

Services and Enforcement.

Approved: July 13, 2015.

Mark J. MazurAssistant Secretary of the

Treasury (Tax Policy).

(Filed by the Office of the Federal Register on August 11,2015, 8:45 a.m., and published in the issue of the FederalRegister for August 12, 2015, 80 F.R. 48249)

26 CFR 1.6081–8T:

T.D. 9730

DEPARTMENT OF THETREASURYInternal Revenue Service26 CFR Part 1

Extension of Time to FileCertain Information Returns

AGENCY: Internal Revenue Service (IRS),Treasury.

ACTION: Final and temporary regulations.

SUMMARY: This document contains fi-nal and temporary regulations that removethe automatic extension of time to fileinformation returns on forms in the W–2series (except Form W–2G). The tempo-rary regulations allow only a single 30-day non-automatic extension of time tofile these information returns. Thesechanges are being implemented to accel-erate the filing of forms in the W–2series (except Form W–2G) so they areavailable earlier in the filing season foruse in the IRS’s identity theft and refundfraud detection processes. In addition,the temporary regulations update the listof information returns subject to therules regarding extensions of time tofile. The temporary regulations affecttaxpayers who are required to file theaffected information returns and need anextension of time to file. The substanceof the temporary regulations is includedin the proposed regulations set forth inthe notice of proposed rulemaking onthis subject in the Proposed Rules sec-tion in this issue of the Internal Reve-nue Bulletin.

DATES: Effective date: These regulationsare effective on July 1, 2016.

Applicability date: For dates of appli-cability, see § 1.6081–8T(g) and (h).

FOR FURTHER INFORMATIONCONTACT: Jonathan R. Black, (202)317-6845 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

This document contains amendmentsto 26 CFR part 1 under section 6081 of the

Internal Revenue Code (Code) regardingextensions of time to file certain informa-tion returns. Effective for filing season2017, this document removes § 1.6081–8and adds new § 1.6081–8T. Section1.6081–8 will remain in effect for filingseason 2016. Section 1.6081–8 currentlyprovides an automatic 30–day extensionof time to file information returns onforms in the W–2 series (including FormsW–2, W–2AS, W–2G, W–2GU, andW–2VI), 1095 series, 1098 series, 1099series, and 5498 series, and on Forms1042–S and 8027, and allows an addi-tional 30-day non-automatic extension oftime to file those information returns incertain cases.

The temporary regulations § 1.6081–8Tare substantially identical to the regulations§ 1.6081–8 that will be removed, exceptthat the temporary regulations: (1) add in-formation returns on forms in the 1097 se-ries and Forms 1094–C, 3921, and 3922 tothe list of information returns with proce-dures prescribed by regulations for the ex-tension of time to file; (2) remove informa-tion returns on forms in the W–2 series(except Form W–2G) from the list of infor-mation returns eligible for the automatic 30-day extension of time to file, and insteadprovide a single 30-day non-automatic ex-tension of time to file those informationreturns; and (3) clarify that the proceduresfor requesting an extension of time to file inthe case of forms in the 1095 series apply toinformation returns on Forms 1095–B and1095–C, but not 1095–A.

The due dates imposed by statute, regu-lation, or form instruction for filing informa-tion returns on forms in the W–2 series,1097 series, 1098 series, and 1099 series,and Forms 1094–C (when filed as a stand-alone information return), 1095–B, 1095–C,3921, 3922, and 8027 on paper are eitherFebruary 28 or the last day of February ofthe calendar year following the calendaryear for which the information is being re-ported. The due date for filing these infor-mation returns electronically is March 31 ofthe calendar year following the calendaryear for which the information is being re-ported. The information returns on forms inthe 5498 series and the Form 1042–S,whether filed on paper or electronically, aredue March 15 and May 31, respectively, ofthe calendar year following the calendaryear for which the information is being


reported. All of these information returnsare filed with the IRS, except for informa-tion returns on forms in the W–2 series(other than Form W–2G), which are filedwith the Social Security Administration. Fil-ers who fail to timely and accurately filethese information returns may be subject topenalties under section 6652 (regarding fail-ure to file certain information returns), sec-tion 6693 (regarding failure to report oncertain tax-favored accounts or annuities),or section 6721 (regarding failure to timelyand accurately file information returns de-fined by section 6724(d)(1)).

Section 6081(a) generally provides thatthe Secretary may grant a reasonable ex-tension of time, not to exceed 6 months,for filing any return, declaration, state-ment, or other document required by Title26 or by regulation. The regulations undersection 6081 generally provide rules forextensions of time to file returns. The reg-ulations under § 1.6081–8 provide spe-cific rules for extensions of time to filecertain information returns.

Under § 1.6081–8(a), a person re-quired to file certain information returns(the filer), or the person transmitting thereturn for the filer (the transmitter), cancurrently receive an automatic 30-day ex-tension of time to file those informationreturns. A filer or transmitter obtains anautomatic 30-day extension of time to fileby submitting a Form 8809, “Applicationfor Extension of Time to File InformationReturns,” to the IRS on or before the duedate of the information return.

Section 1.6081–8(d) also currentlyprovides that a filer or transmitter thatobtains an automatic 30-day extension oftime to file may request an additional 30-day extension of time to file by submittinga second Form 8809 on or before the datethat the automatic 30-day extension oftime to file expires. That additional 30-dayextension of time to file under § 1.6081–8(d) is not automatically granted by theIRS. Unlike requests to obtain an auto-matic 30-day extension of time to file un-der § 1.6081–8(a), a filer or transmitterthat requests an additional 30-day exten-sion of time to file under § 1.6081–8(d) isrequired to sign the Form 8809 under pen-alties of perjury and include an explana-tion of why an additional extension oftime to file is needed. No further exten-

sions of time to file are permitted under§ 1.6081–8.

Employers eligible to file informationreturns on forms in the W–2 series on anexpedited basis under § 31.6071(a)–1(a)(3)(ii) are not eligible to obtain theautomatic 30-day extension of time tofile those information returns under§ 1.6081– 8 because they received anautomatic extension of time to file in-formation returns on forms in the W–2series under Rev. Proc. 96 –57 (1996 –2CB 389), see § 601.601(d)(2)(ii)(b) ofthis chapter.

A filer or transmitter seeking an exten-sion of time to furnish statements to re-cipients is required to separately requestan extension of time to furnish the state-ments under rules applicable to thosestatements.

Explanation of Provisions

The IRS uses third-party informationreturns to increase voluntary compliance,verify accuracy of tax returns, improvecollection of taxes, and combat fraud, in-cluding fraudulent refund claims filed byunscrupulous preparers and individualsusing the stolen identities of legitimatetaxpayers. Identity theft and refund fraudis a persistent and evolving threat to thenation’s tax system. It places an enormousburden on the United States Government,with the most painful and immediate im-pact being on the victims whose personalinformation is used to commit the crimeand the most pervasive impact being anerosion of public confidence in the taxsystem.

Identity thieves often electronically filetheir fraudulent refund claims early in thetax filing season, using fictitious wage andother information of legitimate taxpayers.Unscrupulous preparers also electroni-cally file early in the tax filing season,over-claiming deductions and credits andunderreporting income for unwitting, aswell as complicit, taxpayers. In manycases, the IRS is unable to verify the wageand other information reported on tax re-turns filed before April 15th, in part be-cause the IRS does not receive the infor-mation returns reporting this informationuntil later in the filing season.

Although paper information returns aregenerally due to be filed by February 28 orthe last day of February of the calendar

year following the calendar year for whichthe information is reported, an extensionof time to file under § 1.6081–8 maycurrently extend the due date until the endof March or, if a non-automatic extensionis also granted, the end of April. Similarly,although electronically-filed informationreturns are generally due by March 31 ofthe calendar year following the calendar yearfor which the information is reported, an ex-tension of time to file under § 1.6081–8 mayextend the due date until the end of April or, ifa non-automatic extension is also granted, theend of May.

Receipt of information returns earlierin the filing season will improve the IRS’sability to identify fraudulent refund claimsand stop the refunds before they are paid.The United States Government Account-ability Office (GAO) has cited the IRS’sreceipt of information returns late in thefiling season as a contributing factor inpayment of fraudulent refunds due toidentity theft and preparer misconduct.See GAO Report GAO–14–633, IdentityTheft, Additional Actions Could Help IRSCombat the Large, Evolving Threat ofRefund Fraud. Removing the automatic30-day extension of time to file is an af-firmative step to accelerate the filing ofinformation returns so they are availableearlier in the filing season for use in theIRS’s refund fraud detection processes.

Over the next several years, the IRSintends to remove the 30-day automaticextension of time to file certain informa-tion returns. Under § 1.6081–8T, whichwill not be effective until the 2017 filingseason, the first information returns sub-ject to these new rules are informationreturns on forms in the W–2 series (exceptForm W–2G). These information returnsare particularly helpful to the IRS foridentifying fraudulent identity theft refundclaims and preventing their payout. This isbecause a significant portion of most tax-payers’ income and withholding informa-tion is reported on Forms W–2. FormsW–2 are also a major source of the falseincome and withholding that is reportedby identity thieves and unscrupulous pre-parers. Having access to Forms W–2 ear-lier in the filing season will improve theIRS’s ability to conduct pre-refund match-ing and identify incidences of identitytheft and tax refund fraud.


Accordingly, § 1.6081–8T provides asingle 30-day non-automatic extension oftime to file information returns on formsin the W–2 series (except Form W–2G)due in 2017 that the IRS may, in its dis-cretion, grant if the IRS determines that anextension of time to file is warrantedbased on the filer’s or transmitter’s expla-nation attached to the Form 8809 signedunder the penalties of perjury. The IRSanticipates that it will grant the non-automatic extension of time to file only inlimited cases where the filer’s or transmit-ter’s explanation demonstrates that an ex-tension of time to file is needed as a resultof extraordinary circumstances or catas-trophe, such as a natural disaster or firedestroying the books and records a filerneeds for filing the information returns. Ifthe IRS does not grant the extension oftime to file, information returns filed aftertheir due dates are not timely filed, regard-less of whether the application for exten-sion of time to file was filed timely.

The IRS intends to eventually removethe automatic 30-day extension of time tofile the other forms listed in § 1.6081–8Tand replace it with a single non-automatic30-day extension of time to file. There-fore, proposed regulations set forth in thenotice of proposed rulemaking on thissubject in the Proposed Rules section inthis issue of the Internal Revenue Bulle-tin would remove the automatic 30-dayextension of time to file these other infor-mation returns. As currently drafted, theproposed regulations would affect infor-mation returns due January 1 of the cal-endar year beginning after the date of pub-lication of final regulations in the FederalRegister, but the preamble to those pro-posed regulations provides that final reg-ulations will not be effective any earlierthan the 2018 filing season.

Treasury and the IRS request com-ments on the appropriate timing of theremoval of the automatic extension oftime to file information returns covered by§ 1.6081–8T, such as Form 1042–S, in-cluding whether special transitional con-siderations should be given for any cate-gory or categories of forms or filersrelative to other forms or filers. Pleasefollow the instructions in the “Commentsand Requests for Public Hearing” sec-tion in the notice of proposed rulemak-ing accompanying these temporary reg-

ulations in this issue of the InternalRevenue Bulletin.

Section 1.6081–8T also updates the listof information returns that are currentlycovered by § 1.6081–8. Forms 3921 and3922 are being added to § 1.6081–8Tbecause these forms have been includedon Form 8809 since the June 2009 revi-sion, which coincided with the revision ofthe regulations requiring those forms un-der section 6039. See TD 9470 (74 FR59087) November 17, 2009. Forms in the1097 series are being added because theyhave similarly been included on Form8809 since the September 2010 revision,which coincided with the publication ofthe notice requiring the filing of the onlyactive form in the 1097 series, Notice2010–28 (2010–15 IRB 541).

In addition, the Form 1094–C is beingadded to the list of forms in § 1.6081–8T.In most cases the Form 1094–C is filed asa mere transmittal with the Form 1095–Cand, therefore, the due date of the Form1094–C is the same as the Form 1095–C,including extensions. However, in certaincases, the Form 1094–C is filed as astand-alone information return. See TD9661, (79 FR 13231) March 10, 2014.When Form 1094–C is filed as a stand-alone information return, it is subject tothe same rules regarding extensions oftime to file as other information returns.Accordingly, Form 1094–C has beenadded to the list of forms subject to ex-tension under § 1.6081–8T.

Section 1.6081–8T also replaces thegeneral reference to the forms in the 1095series that was added to § 1.6081–8 onMarch 10, 2014, by TD 9660 (79 FR13220) with specific references to Forms1095–B and 1095–C. Form 1095–A wasnot intended to be included in § 1.6081–8,because the timing rules for filing theForm 1095–A are governed by § 1.36B–5.See TD 9663 (79 FR 26113) May 7, 2014.

Special Analyses

Certain IRS regulations, including thisone, are exempt from the requirements ofExecutive Order 12866, as supplementedand reaffirmed by Executive Order 13563.Therefore, a regulatory assessment is notrequired. It has also been determined thatsection 553(b) of the Administrative Pro-cedure Act (5 U.S.C. chapter 5) does notapply to these regulations.

Pursuant to the Regulatory FlexibilityAct (5 U.S.C. chapter 6), it is herebycertified that this regulation will not havea significant economic impact on a sub-stantial number of small entities. As statedin this preamble, these regulations removethe automatic 30-day extension of time tofile information returns on Forms in theW–2 series (except for Form W–2G).Starting in filing season 2017, filers andtransmitters may request only one 30-dayextension of time to file Form W–2 bytimely submitting a Form 8809, includingan explanation of the reasons for request-ing the extension and signed under pen-alty of perjury. Although the regulationmay potentially affect a substantial num-ber of small entities, the economic impacton these entities is not expected to besignificant because filers who are unableto timely file as a result of extraordinarycircumstances or catastrophe may con-tinue to obtain a 30-day extension throughthe Form 8809 process. The form takesapproximately 20 minutes to prepare andsubmit to the IRS. Pursuant to section7805(f) of the Code, these regulationshave been submitted to the Chief Counselfor Advocacy of the Small Business Ad-ministration for comment on their impacton small business.


The principal author of these regula-tions is Jonathan R. Black of the Office ofthe Associate Chief Counsel (Procedureand Administration).

* * * * *

Adoptions of Amendments to theRegulations

Accordingly, 26 CFR part 1 is amendedas follows:


Paragraph 1. The authority citation forpart 1 continues to read as follows:

Authority: 26 U.S.C. 7805 * * *Par. 2. Section 1.6081–8 is revised to

read as follows:

§ 1.6081–8 Automatic extension of timeto file certain information returns.

[Reserved]. For further guidance, see§ 1.6081–8T(a) through (g).


Par. 3. Section 1.6081–8T is added toread as follows:

§ 1.6081–8T Extension of time to filecertain information returns (temporary).

(a) Information returns on Form W–2G,1042–S, 1094–C, 1095–B, 1095–C, 1097series, 1098 series, 1099 series, 3921, 3922,5498 series, or 8027—(1) Automatic exten-sion of time to file. A person required to filean information return (the filer) on FormW–2G, 1042–S, 1094–C, 1095–B, 1095–C,1097 series, 1098 series, 1099 series, 3921,3922, 5498 series, or 8027 will be allowedone automatic 30-day extension of time tofile the information return beyond the duedate for filing it if the filer or the persontransmitting the information return for thefiler (the transmitter) files an application inaccordance with paragraph (c)(1) of thissection.

(2) Non-automatic extension of time tofile. One additional 30-day extension oftime to file an information return on aform listed in paragraph (a)(1) of this sec-tion may be allowed if the filer or trans-mitter submits a request for the additionalextension of time to file before the expi-ration of the automatic 30-day extensionof time to file. No extension of time to filewill be granted under this paragraph (a)(2)unless the filer or transmitter has first ob-tained an automatic extension of time tofile under paragraph (a)(1) of this section.To request the additional 30-day exten-sion of time to file, the filer or transmittermust satisfy the requirements of para-graph (c)(2) of this section. No additionalextension of time to file will be allowedfor an information return on a form listedin paragraph (a)(1) of this section pursu-ant to § 1.6081–1 beyond the extensionsof time to file provided by paragraph(a)(1) of this section and this paragraph(a)(2).

(b) Information returns on forms in theW–2 series (except Form W–2G). Exceptas provided in paragraph (f) of this sec-tion, the filer or transmitter of an informa-tion return on forms in the W–2 series(except Form W–2G) may only requestone non-automatic 30-day extension oftime to file the information return beyondthe due date for filing it. To make such arequest, the filer or transmitter must sub-mit an application for an extension of timeto file in accordance with paragraph (c)(2)of this section. No additional extension oftime to file will be allowed for informa-tion returns on forms in the W–2 seriespursuant to § 1.6081–1 beyond the 30-dayextension of time to file provided by thisparagraph (b).

(c) Requirements—(1) Automatic ex-tension of time to file. To satisfy this para-graph (c)(1), an application must—

(i) Be submitted on Form 8809, “Re-quest for Extension of Time to File Infor-mation Returns,” or in any other manneras may be prescribed by the Commis-sioner; and

(ii) Be filed with the Internal RevenueService office designated in the applica-tion’s instructions on or before the duedate for filing the information return.

(2) Non-automatic extension of time tofile. To satisfy this paragraph (c)(2), a fileror transmitter must—

(i) Submit a complete application onForm 8809, or in any other manner pre-scribed by the Commissioner, including adetailed explanation of why additionaltime is needed;

(ii) File the application with the Inter-nal Revenue Service in accordance withforms, instructions, or other appropriateguidance on or before the due date forfiling the information return (for purposesof paragraph (a)(2) of this section, deter-mined with regard to the extension of time

to file under paragraph (a)(1) of this sec-tion); and

(iii) Sign the application under penal-ties of perjury.

(d) Penalties. See sections 6652, 6693,and 6721 through 6724 for failure to com-ply with information reporting require-ments on information returns described inthis section.

(e) No effect on time to furnish state-ments. An extension of time to file aninformation return under this section doesnot extend the time for furnishing a state-ment to the person with respect to whomthe information is required to be reported.

(f) Form W–2 filed on expedited basis.This section does not apply to an informa-tion return on a form in the W–2 series ifthe procedures authorized in Rev. Proc.96–57 (1996–2 CB 389) (or a successorrevenue procedure) allow an automaticextension of time to file the informationreturn. See § 601.601(d)(2)(ii)(b) of thischapter.

(g) Effective/applicability date. Thissection applies to requests for extensionsof time to file information returns dueafter December 31, 2016.

(h) Expiration date. The applicabilityof this section expires on August 10,2018.

John Dalrymple,Deputy Commissioner for


Approved: July 31, 2015

Mark J. Mazur,Assistant Secretary of the

Treasury (Tax Policy).



Part III. Administrative, Procedural, and MiscellaneousSection 4980I—Excise Taxon High Cost Employer-Sponsored HealthCoverage

Notice 2015–52

Section I: PURPOSE AND OVERVIEW

Section II: BACKGROUND

Section III: PERSONS LIABLE FORTHE § 4980I EXCISE TAX

Section IV: EMPLOYERAGGREGATION

Section V: COST OF APPLICABLECOVERAGE

Section VI: AGE AND GENDERADJUSTMENT TO THE DOLLARLIMIT

Section VII: NOTICE AND PAYMENT

Section VIII: REQUEST FORCOMMENTS

Section IX: RELIANCE

Section X: DRAFTINGINFORMATION

I. PURPOSE AND OVERVIEW

This notice is intended to continue theprocess of developing regulatory guidanceregarding the excise tax on high costemployer-sponsored health coverage under§ 4980I of the Internal Revenue Code(Code). Section 4980I, which was added tothe Code by the Affordable Care Act,1 ap-plies to taxable years beginning after De-cember 31, 2017. Under this provision, ifthe aggregate cost of applicable employer-sponsored coverage (applicable coverage)provided to an employee exceeds a statutorydollar limit (dollar limit), which is adjustedannually, the excess benefit is subject to a 40percent excise tax.

On February 23, 2015, the Departmentof the Treasury (Treasury) and the Inter-nal Revenue Service (IRS) issued Notice

2015–16, 2015–10 IRB 732, which de-scribes potential approaches regarding anumber of issues under § 4980I that maybe incorporated into future regulations.Notice 2015–16 addresses issues primar-ily relating to (1) the definition of appli-cable coverage, (2) the determination ofthe cost of applicable coverage, and (3)the application of the dollar limit to thecost of applicable coverage to determineany excess benefit subject to the excisetax. Treasury and IRS invited commentson the issues addressed in that notice andon any other issues under § 4980I.

This notice is intended to supplementNotice 2015–16 by addressing additionalissues under § 4980I, including the iden-tification of the taxpayers who may beliable for the excise tax, employer aggre-gation, the allocation of the tax among theapplicable taxpayers, and the payment ofthe applicable tax. This notice also ad-dresses further issues regarding the cost ofapplicable coverage that were not ad-dressed in Notice 2015–16. Treasury andIRS invite comments on these issues andany other issues under § 4980I. After con-sidering the comments on both notices,Treasury and IRS intend to issue proposedregulations under § 4980I. The proposedregulations will provide further opportu-nity for comment, including an opportu-nity to comment on the issues addressedin the preceding notices.

This notice includes the following sec-tions:

II. BACKGROUND

Section 4980I(a) imposes a 40 percentexcise tax on any “excess benefit” pro-vided to an employee, and § 4980I(b)provides that an excess benefit is the ex-cess, if any, of the aggregate cost of ap-plicable coverage of the employee for themonth over the applicable dollar limit forthe employee for the month.2

Section 4980I(c)(1) provides that eachcoverage provider must pay the excise taxon its applicable share of the excess ben-

efit with respect to an employee for anytaxable period.

Section 4980I(c)(2) defines the “cover-age provider” as (A) the health insuranceissuer, in the case of applicable coverageunder a group health plan that provideshealth insurance coverage, (B) the em-ployer, in the case of applicable coverageunder an arrangement in which the em-ployer makes contributions described in§ 106(b) or (d) (health savings accounts(HSAs) and Archer medical savings ac-counts (Archer MSAs)), and (C) the per-son that administers the plan benefits, inthe case of any other applicable coverage.Section 4980I(f)(6) provides that the term“person that administers the plan benefits”includes the plan sponsor if the plan spon-sor administers benefits under the plan.Section 4980I(f)(7) provides that the term“plan sponsor” has the meaning givensuch term in § 3(16)(B) of the EmployeeRetirement Income Security Act of 1974(ERISA).

Section 4980I(c)(3) defines a coverageprovider’s applicable share of an excessbenefit for any taxable period as theamount which bears the same ratio tothe amount of such excess benefit as (A)the cost of applicable coverage providedby the provider to the employee duringthat period, bears to (B) the aggregate costof all applicable coverage provided to theemployee by all coverage providers dur-ing that period.

Section 4980I(c)(4)(A) provides thateach employer must calculate for each tax-able period the amount of the excess benefitsubject to the excise tax and the applicableshare of such excess benefit for each cover-age provider. Section 4980I(c)(4)(A) furtherprovides that each employer must notify, atsuch time and in such manner as the Secre-tary may prescribe, the Secretary and eachcoverage provider of the amount so deter-mined for the provider.

Section 4980I(c)(4)(B) provides a spe-cial rule for multiemployer plans underwhich the plan sponsor of the multiem-ployer plan (as defined in § 414(f)) is

1The “Affordable Care Act” refers to the Patient Protection and Affordable Care Act (enacted March 23, 2010, Pub. L. No. 111–148), as amended by the Health Care and EducationReconciliation Act of 2010 (enacted March 30, 2010, Pub. L. No. 111–152), and as further amended by the Department of Defense and Full-Year Continuing Appropriations Act, 2011(enacted April 15, 2011, Pub. L. No. 112–10).

2See sections III and IV of Notice 2015–16 for background on the provisions of § 4980I related to the definition of applicable coverage and the calculation of the excess benefit (includingthe calculation of the aggregate cost of the applicable coverage and determination of the applicable dollar limit).


responsible for making the calculationsand for providing the notice.

Section 4980I(f)(8) provides that theterm “taxable period” means the calendaryear or such shorter period as the Secre-tary may prescribe. Section 4980I(f)(8)further provides that the Secretary mayprescribe different taxable periods for em-ployers of varying sizes.

Section 4980I(f)(9) provides that allemployers treated as a single employerunder subsection (b), (c), (m), or (o) of§ 414 are treated as a single employer.

Section 4980I(f)(10) provides a cross-reference to § 275(a)(6) for the denial of adeduction for the tax imposed by § 4980I.Section 275(a)(6) provides that no deduc-tion is allowed for the taxes imposed bychapters 41, 42, 43, 44, 45, 46 and 54 ofthe Code. Section 4980I is located inchapter 43 of the Code, and therefore nodeduction is allowed for the payment oftax under § 4980I.

III. PERSONS LIABLE FOR THE§ 4980I EXCISE TAX

A. Coverage Provider

Section 4980I(c)(1) provides that thecoverage provider is liable for any appli-cable excise tax. The identity of the cov-erage provider depends on the type ofcoverage provided. Under the statute, inthe case of applicable coverage providedunder an insured group health plan, thecoverage provider is the health insuranceissuer. With respect to coverage under anHSA or an Archer MSA, the coverageprovider is the employer. For all otherapplicable coverage, the coverage pro-vider is “the person that administers theplan benefits.”

B. Person That Administers the PlanBenefits

Section 4980I does not define the term“person that administers the plan bene-fits.” Section 4980I(f)(6) provides that theterm “person that administers the planbenefits” includes the plan sponsor if theplan sponsor administers benefits underthe plan, which indicates that the plan

sponsor of a self-insured arrangementmay be, but is not always, the person thatadministers benefits under the plan. Theterm, “person that administers the planbenefits,” is not used elsewhere in theCode, nor is it used elsewhere in the Af-fordable Care Act or in ERISA or thePublic Health Service Act, both of whichwere amended by the Affordable CareAct. Because the term “person that admin-isters the plan benefits” is not used inother statutory contexts, Treasury and IRSare considering two alternative ap-proaches to determining the identity of theperson that administers the plan benefits.3

Under either approach, it is anticipatedthat the person that administers the planbenefits will generally be an entity, ratherthan an individual, but for purposes of thediscussion below, the relevant entity orindividual is referred to as a “person.”

Under one approach, the person thatadministers the plan benefits would bethe person responsible for performing theday-to-day functions that constitutethe administration of plan benefits, such asreceiving and processing claims for bene-fits, responding to inquiries, or providinga technology platform for benefits infor-mation. Treasury and IRS anticipate thatthis person generally would be a third-party administrator for benefits that areself-insured, except in the rare circum-stance in which the employer or plansponsor performs these functions, or ownsthe person that performs these functions.Comments are requested on the types ofadministrative functions that should beconsidered under this approach when de-termining the person that administers theplan benefits. Comments are also re-quested on whether the person that admin-isters the plan benefits could be easilyidentified in most instances under this ap-proach, or whether the identity of the per-son that administers the plan benefitswould often be unclear because, for ex-ample, multiple parties (such as a phar-macy benefit administrator and a medicalclaims benefit administrator) perform therelevant functions with respect to a benefitpackage for which a single cost of appli-

cable coverage will be determined as dis-cussed in section IV.C of Notice 2015–16(concerning potential approaches for de-termining the cost of applicable cover-age). In addition, Treasury and IRS re-quest comments on any other concernsthis approach would raise.

Under the second approach that Trea-sury and IRS are considering, the personthat administers the plan benefits wouldbe the person that has the ultimate author-ity or responsibility under the plan or ar-rangement with respect to the administra-tion of the plan benefits (including finaldecisions on administrative matters), re-gardless of whether that person routinelyexercises that authority or responsibility.For purposes of this second approach, therelevant types of administrative mattersover which the person that administersplan benefits would have ultimate author-ity or responsibility could include eligibil-ity determinations, claims administration,and arrangements with service providers(including the authority to terminate ser-vice provider contracts). Treasury and IRSanticipate that the person with such ulti-mate administrative authority or responsi-bility under the plan or arrangementwould be identifiable based on the termsof the plan documents and often wouldnot be the person that performs the day-to-day routine administrative functionsunder the plan. Comments are requestedon whether the person that administers theplan benefits would be easy to identifyunder this second approach in most cir-cumstances or whether multiple partieshave ultimate authority or responsibilityfor the different relevant administrativematters with respect to the same benefitpackage, and whether in most instancesthis approach would identify an appropri-ate person as the person that administersthe plan benefits. Comments are requestedon any other issues this approach wouldraise.

Comments are invited on the applica-tion of these approaches to collectivelybargained multiemployer health plans.

3The Department of Health and Human Services (HHS) recently issued regulations defining a category of self-administered, self-insured plans for purposes of applicability of the fee, imposedby § 1341 of the Affordable Care Act, which funds the Transitional Reinsurance Program. The definition in these HHS regulations focuses on the party directly responsible for claimsadministration and plan enrollment. See Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2015; Final Rule, 79 Fed. Reg. 13744, 13772–75(March 11, 2014). Section 4980I of the Code and § 1341 of the Affordable Care Act are provisions with no common statutory language. Accordingly, it is not anticipated that the definitionof the person that administers the plan benefits for § 4980I purposes will align with the definition for self-insured self-administered plans in the HHS regulations.


IV. EMPLOYER AGGREGATION

Section 4980I(f)(9) provides generallythat, for purposes of § 4980I, all employ-ers treated as a single employer undersubsections (b), (c), (m), or (o) of § 414are treated as a single employer. Treasuryand IRS invite comments on the practicalchallenges presented by the application ofthose aggregation rules to § 4980I. In par-ticular, Treasury and IRS request com-ments on the application of these em-ployer aggregation rules to the: (1)identification of the applicable coveragetaken into account as made available byan employer (§ 4980I(d)(1)(A)); (2) iden-tification of the employees taken into ac-count for the age and gender adjustment(§ 4980I(b)(3)(C)(iii)), and the adjustmentfor employees in high risk professions orwho repair and install electrical or telecom-munications lines (§ 4980I(b)(3)(C)(iv)); (3)identification of the taxpayer responsible forcalculating and reporting the excess benefit(§ 4980I(c)(4)(A)); and (4) identification ofthe employer liable for any penalty for fail-ure to properly calculate the tax imposedunder § 4980I (§ 4980I(e)(1)(B)).

V. COST OF APPLICABLECOVERAGE

A. Taxable Period

Taxable period is defined under§ 4980I(f)(8) to mean the calendar year orsuch shorter period as the Secretary mayprescribe. The section provides that theSecretary may have different taxable pe-riods for employers of varying sizes. Trea-sury and IRS anticipate that the taxableperiod will be the calendar year for alltaxpayers.

B. Determination Period

To calculate the amount of any excisetax that a coverage provider may oweunder § 4980I for a taxable period, anemployer must determine the extent, ifany, to which the cost of applicable cov-erage provided to an employee during anymonth of the taxable period exceeds thedollar limit. The employer then must no-tify both IRS and the coverage provider ofthe amount of the excess benefit, and the

tax must be paid by the coverage provider.Accordingly, Treasury and IRS anticipatethat employers will be required to determinethe cost of applicable coverage providedduring a taxable year sufficiently soon afterthe end of that taxable year to enable cov-erage providers to pay any applicable tax ina reasonably timely manner.

Section 4980I(d)(2)(A) provides thatthe cost of applicable coverage is to bedetermined using rules “similar to therules of section 4980B(f)(4)” regardingthe determination of the COBRA applica-ble premium. Section IV.C of Notice2015–16 invited comments on potentialapproaches to determining the cost of ap-plicable coverage. Treasury and IRS nowinvite further comments on any issuesraised by the anticipated need to deter-mine the cost of applicable coverage for ataxable period reasonably soon after theend of that taxable period.

Treasury and IRS anticipate that thepotential timing issues are likely to bedifferent for insured plans and self-insuredplans, and will also be different for HSAs,Archer MSAs, health flexible spending ar-rangements (FSAs),4 and health reimburse-ment arrangements (HRAs). In the case ofself-insured plans, for example, if the cost ofapplicable coverage is determined based ona period ending at or before the beginning ofthe applicable calendar year, then the nec-essary information should be available tothe employer relatively soon after the appli-cable calendar year ends to permit it to cal-culate any excess benefit for each employeeand allocate any excess benefit among cov-erage providers. In contrast, if the cost ofapplicable coverage is determined based ona period ending during or at the end of theapplicable calendar year, the cost may bedeterminable only after the end of both theapplicable calendar year and a subsequentrun-out period during which employees maysubmit claims for reimbursement. In thatcase, an employer will need additional timeto compute the cost of applicable coveragebefore it can calculate any excess benefit foreach employee and allocate any excess ben-efit among coverage providers.

In addition, experience-rated arrange-ments may provide for payments to bemade to or from an insurance companyafter the end of a coverage period that

relate to the coverage provided during thatcoverage period. In other instances, theequivalent of those types of paymentsmay be made through a premium discountfor the next coverage period. Commentsare requested on how those payments ordiscounts may be reflected in the cost ofapplicable coverage, including commentson any administrative issues that mightarise if, for purposes of determining thecost of applicable coverage, the paymentsor discounts are attributed back to theoriginal period of coverage (for which thetaxable year might have ended) ratherthan accounted for during the period ofcoverage in which the amounts are paid orthe discount applied. In addition, com-ments are requested on how employers areaddressing these payments or discountscurrently for purposes of determining CO-BRA applicable premiums. Taking intoaccount the potential approaches to thedetermination of the cost of applicablecoverage outlined in Notice 2015–16, aswell as other issues with timing implica-tions, Treasury and IRS request commentson the processes expected to be involvedin calculating and allocating any excessbenefit and the time period necessary tocomplete these processes.

C. Exclusion from Cost of ApplicableCoverage of Amounts Attributable tothe Excise Tax

As discussed in section III of this no-tice, the excise tax will be paid by thehealth insurance issuer for insured cover-age and by the “person that administersthe plan benefits” (which may, in someinstances, be the employer) in the case ofself-insured coverage. It is expected that,if a person other than the employer is thecoverage provider liable for the excise tax,that person may pass through all or part ofthe amount of the excise tax to the em-ployer in some instances. If the coverageprovider does pass through the excise taxand receives reimbursement for the tax (theexcise tax reimbursement), the excise taxreimbursement will be additional taxable in-come to the coverage provider. Because§ 4980I(f)(10) provides that the excise tax isnot deductible, the coverage provider willexperience an increase in taxable income

4All references in this notice to flexible spending arrangements refer only to health flexible spending arrangements.


(that is not offset by a deduction) by reasonof the receipt of the excise tax reimburse-ment. As a result, it is anticipated that theamount the coverage provider passesthrough to the employer may include notonly the excise tax reimbursement, but alsoan amount to account for the additional in-come tax the coverage provider will incur(the income tax reimbursement).

In determining the cost of applicablecoverage subject to the excise tax,§ 4980I(d)(2)(A) provides that “any por-tion of the cost of such coverage which isattributable to the tax imposed under thissection shall not be taken into account.”This indicates that the excise tax reim-bursement should be excluded from thecost of applicable coverage, and it is an-ticipated that future regulations will re-flect this interpretation.

Treasury and IRS are also consideringwhether some or all of the income taxreimbursement could be excluded fromthe cost of applicable coverage. However,Treasury and IRS are concerned that amethodology for excluding an incometax reimbursement may not be adminis-trable, given the potential variability oftax rates and other factors among differ-ent coverage providers and potential dif-ficulties in determining and excludingthe reimbursement amount. Nonethe-less, comments are requested on admin-istrable methods for exclusion of theincome tax reimbursement.

Because it may not be feasible to ex-clude amounts that are not separatelybilled, Treasury and IRS anticipate thatcoverage providers would be permitted toexclude the amount of any excise tax re-imbursement or income tax reimburse-ment only if it is separately billed andidentified as attributable to the cost of theexcise tax. Separately billed amounts inexcess of the excise tax reimbursement orthe income tax reimbursement (as deter-mined in the manner discussed in sectionV.D below) could not be excluded fromthe cost of applicable coverage (and,therefore, would be treated as part of thecost of applicable coverage). Commentsare requested on any practical issues orlegal barriers to passing through any or allof these amounts or to separately identi-fying these amounts, such as federal ratingrules or state insurance law.

Coverage providers generally will notknow the amount of any excise tax duewith respect to applicable coverage pro-vided for a taxable period (discussed insection V.A above) until after the end ofthe taxable period. As a result, Treasuryand IRS expect that, as a practical matter,the coverage provider generally will beunable to bill for the excise tax reimburse-ment or the income tax reimbursementuntil the excise tax is paid by the coverageprovider. However, comments are re-quested on whether there are alternativeapproaches that might allow for earlier

billing of the amount but that would notgive rise to undue administrative com-plexity or difficulty.

D. Income Tax ReimbursementFormula

If Treasury and IRS conclude that anincome tax reimbursement can be ex-cluded from the cost of coverage, it isanticipated that the amount of the incometax reimbursement would be determinedusing a formula commonly used to calcu-late “tax gross-ups.” As mentioned previ-ously, a coverage provider that passes theexcise tax through to another party willhave additional taxable income as a resultof receipt of the excise tax reimbursement.If a coverage provider then also passesthrough the amount of the income tax dueon the excise tax reimbursement, the re-imbursement of that additional amountwill further increase the taxable income ofthe coverage provider, and the coverageprovider will owe additional income taxdue to that reimbursement as well. Theformula would take these additional taxesinto account in determining the amount ofthe income tax reimbursement. Under theformula, the amount of the income taxreimbursement that would be excludablefrom the cost of applicable coveragewould be:

[amount of tax]

Income Tax Reimbursement � - [amount of tax]

(1 – [marginal tax rate])

In this formula, the “amount of tax” isthe excise tax rate multiplied by the initialexcess benefit calculated without regard toany portion of the cost of applicable cov-erage that the coverage provider identifiesas arising from an excise tax reimburse-ment or an income tax reimbursement. Forexample, if the cost of applicable cover-age without regard to the tax is $2,500 inexcess of the dollar limit, a coverage pro-vider would owe $1,000 as a § 4980Iexcise tax ($2,500 times the 40 percentrate). If the coverage provider’s marginal

tax rate is 20 percent,5 the formula woulddivide $1,000 (the amount of the excisetax) by .8 (1–0.2), which equals $1,250;and then subtract $1,000 (the amount ofthe excise tax), which equals $250($1,250 – $1,000). Accordingly, the in-come tax reimbursement on an excise taxof $1,000 paid by a coverage providerwith a marginal tax rate of 20 percentwould be $250.

If it is determined that an income taxreimbursement can be excluded from thecost of applicable coverage, Treasury and

IRS are considering two possible ap-proaches for applying the formula de-scribed above. The first approach woulduse the coverage provider’s actual mar-ginal tax rate in the formula. This ap-proach could provide greater flexibility totaxpayers, but also could create adminis-trative difficulties for IRS, coverage pro-viders, and employers due to the extendedtime needed to determine a taxpayer’smarginal tax rate for any year, changes ina coverage provider’s marginal tax ratefrom year to year (including potential ret-

5If the coverage provider were not subject to income tax on the excise tax reimbursement (for example, because it is a tax-exempt organization described in § 501(c) that is not subject tounrelated business income tax on the reimbursement under § 511), its marginal tax rate on the reimbursement would be zero, producing an income tax reimbursement amount of zero underthe formula.


roactive changes due to amended returns,audits, or other circumstances), and thefact that a coverage provider’s marginaltax rate is generally determined for itsfiscal year, which may not be the same asthe calendar year taxable period for whichthe cost of applicable coverage is deter-mined. This approach could also create anadditional administrative burden in casesin which multiple coverage providers areliable for tax for coverage offered by agiven employer. Comments are requestedon whether there are workable solutions tothese administrative challenges that wouldpermit Treasury and IRS to implementsuch an approach.

The second approach would prescribe,for purposes of applying the income taxreimbursement formula in a manner that isadministrable, a standard marginal taxrate6 based on typical marginal tax ratesapplicable to different types of health in-surance issuers. It is anticipated that theprescribed rates would reflect an approx-imately representative marginal rate thatwould be less than the statutory maximumrate. The prescribed rate for an insurerwould be used in the income tax reim-bursement formula rather than the cover-age provider’s actual marginal tax rate.While more administrable, this approachmay not permit some taxpayers to excludefrom the cost of applicable coverage thetotal income tax reimbursement, butwould permit other taxpayers to excludefrom the cost of applicable coverage morethan the total income tax reimbursement.Comments are requested on how thesestandard marginal tax rates might be de-termined, how many such rates might ap-ply (for example, one for each of two orthree categories of insurers) and for whattypes of insurers, and how this approachwould affect particular segments of tax-payers.

E. Allocation of Contributions toHSAs, Archer MSAs, FSAs, HRAs

Applicable coverage under § 4980I(d)(1)(A) is “coverage under any grouphealth plan made available to the em-ployee by an employer which is exclud-able from the employee’s gross incomeunder section 106, or would be so exclud-

able if it were employer-provided cover-age (within the meaning of such section106).” Applicable coverage includes cov-erage under certain HSAs, Archer MSAs,FSAs, or HRAs.

Section 4980I(a) imposes an excise taxequal to 40 percent of the excess benefit ifan employee is covered under any appli-cable coverage of an employer at any timeduring a taxable period and there is anyexcess benefit with respect to the cover-age. Under § 4980I(b)(1), an excess ben-efit means, with respect to any applicablecoverage made available by an employerto an employee during any taxable period,the sum of the excess amounts determinedfor months during the taxable period. Un-der § 4980I(b)(2), the excess amount de-termined for any month is the excess (ifany) of (A) the aggregate cost of the ap-plicable coverage of the employee for themonth over (B) an amount equal to 1/12of the dollar limit for the calendar year inwhich the month occurs.

Section 4980I(d)(2)(D) provides that ifthe cost of applicable coverage is deter-mined on other than a monthly basis, thecost is allocated to months in a taxableperiod on such basis as the Secretary mayprescribe.

Treasury and IRS are considering anapproach under which contributions toaccount-based plans would be allocatedon a pro-rata basis over the period towhich the contribution relates (generally,the plan year), regardless of the timing ofthe contributions during the period. Trea-sury and IRS anticipate that this allocationrule would apply to HSAs, Archer MSAs,FSAs, and HRAs that are applicable cov-erage. For example, if an employer con-tributes an amount to an HSA for an em-ployee for a plan year, that contributionwould be allocated ratably to each calen-dar month of the plan year, regardless ofwhen the employer actually contributesthe amount to the HSA. Similarly, if anemployee elects to contribute to an FSAfor a plan year, the employee’s total con-tributions would be allocated ratably toeach calendar month of the plan year,even though the entire amount contributedfor the plan year would be available toreimburse qualified medical expenses on

the first day of the plan year. Commentsare requested on this approach as well asalternative approaches.

F. Cost of Applicable Coverage underFSAs with Employer Flex Credits

Section 4980I(d)(2)(B) provides that inthe case of applicable coverage consistingof coverage under an FSA, the cost ofapplicable coverage is equal to the sum of(i) the amount of any contributions madeunder a salary reduction election, plus (ii)the cost of applicable coverage under thegenerally applicable rules for determiningthe cost of applicable coverage with re-spect to any reimbursement under the ar-rangement in excess of the contributionsmade under the salary reduction agree-ment. Thus, the cost of applicable coverageof an FSA for any plan year would be thegreater of the amount of an employee’s sal-ary reduction or the total reimbursementsunder the FSA.

Under this general rule, in determiningthe portion of the cost of applicable cov-erage attributable to non-elective flexcredits contributed to an FSA by an em-ployer (either in combination with em-ployee salary reduction contributions orwithout), the cost of the non-elective flexcredit would be the amount that is actuallyreimbursed in excess of the employee’ssalary reduction election for that planyear. For example, if an employee electsto make a salary reduction contribution toan FSA in the amount of $1,000 for a planyear and the employer makes a non-elective flex credit in the amount of $500available to the employee under the FSAfor that plan year, but the employee onlyhas $1,200 in medical expenses reim-bursed under the FSA for that plan year,the cost of applicable coverage for theFSA for the plan year would be $1,200(comprised of the $1,000 salary reductionplus the additional $200 in reimburse-ments attributable to the non-elective flexcredit provided by the employer) ratherthan the full $1,500 elected or availablefor the FSA for the plan year.

Under this rule, the cost of applicablecoverage of the FSA would not be knownuntil some point in time after the end ofthe taxable year. With respect to amounts

6If an approach using a standard marginal tax rate were adopted, the standard marginal tax rate would not be available to coverage providers that are not subject to income tax on the excisetax reimbursement.


carried over to a subsequent year, this rulewould take such amounts into account in alater year if the reimbursements in thesubsequent year exceeded the amount ofemployee salary reduction in the subse-quent year.

To avoid the double counting associ-ated with taking salary deferral amountsthat are carried over from one year toanother year into account in determiningthe cost of coverage in both the year ofcontribution and the subsequent year,which would be the result under the gen-eral rule outlined above, Treasury and IRSare considering providing a safe harbor.Under this safe harbor, the cost of appli-cable coverage for the plan year would bethe amount of an employee’s salary reduc-tion without regard to carry-over amounts.Unused amounts that are carried forwardwould be taken into account when initiallyfunded by salary reduction but would bedisregarded when used to reimburse ex-penses in a later year. For example, if anemployee elected to reduce his salary by$1,200 to contribute to an FSA in a givenyear, the FSA’s cost of applicable cover-age in that year would be $1,200 even ifsome or all of the $1,200 was not used toreimburse expenses in that year. Accord-ingly, if that same employee carried over$500 of unused funds that were used toreimburse expenses in the second year,and elected no new salary reduction forthe second year, the FSA’s cost of appli-cable coverage in the second year wouldbe $0.

The possible safe harbor describedabove would be limited to cases in whichnon-elective flex credits are not availablefor use in the FSA. To address situationsin which non-elective flex credits areavailable under a cafeteria plan that in-cludes an FSA, Treasury and IRS are con-sidering a variation on the safe harbor thatwould allow an FSA with non-electiveflex credits to be valued under the safeharbor described in the preceding para-graph in certain situations.

Under some cafeteria plan arrange-ments, an employee may elect to deferamounts to the cafeteria plan that exceedthe § 125(i) limit for FSAs (for 2015,$2,550), and the employer may offer ad-ditional non-elective flex credits. Theseamounts may be allocated to pay for var-ious benefits available under the cafeteria

plan, such as reimbursements under anFSA, dependent care assistance, andhealth insurance. The possible variationon the safe harbor would provide that anFSA could be treated as funded solely bysalary reduction if the amount elected bythe employee for the FSA were less thanor equal to the maximum amount permit-ted by § 125(i). For example, if an em-ployee with a $1,000 non-elective flexcredit available reduces salary by an ad-ditional $5,000 under a cafeteria plan andallocates $2,550 to the FSA, the FSAwould be treated as funded solely by sal-ary reduction. As a result, the cost ofapplicable coverage would be $2,550. Un-der the safe harbor proposal, the salaryreduction taken into account would becounted only in the year an amount waselected for the FSA and, therefore, wouldbe disregarded in later years if amountswere carried over. Comments are re-quested on the allocation of FSA amountsbetween non-elective flex credits and sal-ary reduction when the total election forthe FSA exceeds the maximum salary re-duction amount permitted by § 125(i).

Treasury and IRS request commentsconcerning whether these potential ap-proaches are administrable. In addition,comments are requested generally on thepotential safe harbors described above andon any other issues arising from the val-uation of FSAs.

G. Inclusion in Applicable Coverageof Self-Insured Coverage Includible inIncome under § 105(h)

Section 4980I(d)(1)(A) defines appli-cable coverage to include coverage underany group health plan made available tothe employee by an employer that is ex-cludable from the employee’s gross in-come under § 106 (or would be so exclud-able if it were employer-sponsoredcoverage).

Section 106 excludes employer-providedcoverage under an accident or health planfrom an employee’s gross income. For anemployee who then receives reimburse-ment for medical expenses of the em-ployee or his family under an employer-provided accident or health plan, § 105further excludes those reimbursementamounts from the employee’s income. Inthe case of reimbursements paid to ahighly-compensated individual under a

self-insured plan that discriminates in fa-vor of highly compensated individuals,however, § 105(h) provides that the ex-clusion does not apply to the extent thatthe amounts constitute an “excess reim-bursement.” The amount of the excessreimbursement is included in the grossincome of the highly compensated indi-viduals.

Section 6051(a)(14) requires employ-ers to report on the Form W–2, Wage andTax Statement (Form W–2), the aggregatecost of applicable coverage as defined in§ 4980I(d)(1). Notice 2012–9, 2012–4IRB 315, currently permits employers toreduce the amount reported on the FormW–2 by any excess reimbursement in-cluded in gross income by application of§ 105(h).

Although excess reimbursements cur-rently can be excluded from the cost re-ported on the Form W–2, Treasury andIRS do not believe such amounts reducethe cost of applicable coverage subject totax under § 4980I. It is the coverage (ex-cludable from income under § 106), andnot the resulting benefit (excludable fromincome under § 105), that is applicablecoverage under § 4980I, and it is the costof that coverage that is compared to thedollar limit to determine the amount ofany excise tax under § 4980I. Inclusion ofexcess reimbursements in an employee’sincome does not reduce the cost of appli-cable coverage subject to tax under§ 4980I. Treasury and IRS anticipate thatNotice 2012–9 will be modified in thefuture to make excess reimbursementssubject to reporting under § 6051(a)(14)and that the forms and instructions will bemodified to reflect this change. Taxpayersshould continue to follow Notice 2012–9until modification of that notice is issued.

VI. AGE AND GENDERADJUSTMENT TO THE DOLLARLIMIT

Section 4980I(b)(3) provides two base-line per-employee dollar limits for 2018($10,200 for self-only coverage and$27,500 for other than self-only coverage)but also provides that various adjustments,discussed in section V.C of Notice 2015–16, will apply to increase these amounts.As stated in Notice 2015–16, Treasuryand IRS intend to include rules regard-ing these adjustments in proposed regu-


lations and have invited comments onthe application and adjustment of thedollar limits.

One of these adjustments, set forth at§ 4980I(b)(3)(C)(iii), provides for an in-crease in the dollar limits based on the ageand gender characteristics of all employ-ees of an employer. In accordance withthe statute, no downward adjustments canoccur (that is, the statute does not providefor any decrease in the dollar limits basedon age and gender). Specifically, the ad-justment increases the dollar limit by anamount equal to the excess of the pre-mium cost of the Blue Cross/Blue Shieldstandard benefit option under the FederalEmployees Health Benefits Plan (FEHBPstandard option) if priced for the age andgender characteristics of all employees ofan individual’s employer (the employer’spremium cost), over the premium cost forproviding this coverage if priced for theage and gender characteristics of the na-tional workforce (the national premiumcost). Section 4980I(b)(3)(C)(iii)(II)(aa)provides that the adjustment is based on“the type of coverage provided such in-dividual in such taxable period.” Inother words, the age and gender adjust-ment is determined separately for self-only coverage and other than self-onlycoverage.

While rating based on age and genderin the individual and small group marketis subject to certain restrictions under theAffordable Care Act, the actual cost ofapplicable coverage generally differsbased on age and gender. On average,older individuals have higher health coststhan younger individuals, and, on average,younger women have higher health coststhan younger men. Consequently, someemployers may have higher health coststhan other employers under identical ben-efit plans due to the age and gender char-acteristics of their workforce. In determin-ing the effect that the age and gendercharacteristics of a workforce have onpremium rates, it is not sufficient to sim-ply compare the average age and genderof an employer’s workforce to the averageage and gender of the national workforce.Rather, the premium rate depends on thedistribution of men and women in differ-ent age groups.

A. Determination of Age and GenderDistribution

To compare the employer’s premiumcost with the national premium cost, itwill be necessary to establish the age andgender characteristics of the nationalworkforce. To determine the age and gen-der distribution of the national workforce,Treasury and IRS are considering usingthe Current Population Survey as summa-rized in Table A–8a, Employed Personsand Employment-Population Ratios byAge and Sex, Seasonally Adjusted (TableA–8a), published annually by the Depart-ment of Labor Bureau of Labor Statistics.This publication provides the number ofindividuals participating in the labor forceby five-year age-bands (up to age 75 andover) and the ratio of male to femaleworkers in each age-band. Treasury andIRS request comments on whether TableA–8a and the Current Population Surveymore generally is an appropriate sourceof data for the age and gender charac-teristics of the national workforce forpurposes of § 4980I and whether othersources of data for the age and gendercharacteristics of the national workforceshould be considered.

To determine the age and gender char-acteristics of a particular employer’s pop-ulation, Treasury and IRS are consideringa requirement that an employer use thefirst day of the plan year as a snapshotdate for determining the composition ofits employee population. In other words,an employer would be required to deter-mine the age and gender of each employeeas of the first day of the plan year and thatdistribution of age and gender character-istics would apply for purposes of the ageand gender adjustment. Comments are re-quested on the administrability of this ap-proach, whether it is likely to result in arepresentative age and gender distribu-tion, and whether employers should bepermitted to choose a different date otherthan the first day of the plan year to de-termine the age and gender characteristicsof its employees. If employers were per-mitted to choose a different date, it isanticipated that the employer would notbe permitted to vary the date from onetaxable year to the next. To the extent thatcommenters recommend that employersbe permitted to use a date other than the

first day of the plan year, Treasury andIRS ask that the commenters address whypermitting the use of a different date willresult in a more accurate representation ofthe age and gender characteristics of anemployer’s workforce, whether flexibilityin determining the snapshot date is sus-ceptible to abuse, and any administrabilityissues associated with requiring a specificdate or permitting flexibility in the choiceof date.

B. Development of Age and GenderAdjustment Tables

Treasury and IRS anticipate that IRSwill formulate and publish adjustment ta-bles to facilitate and simplify the calcula-tion of the age and gender adjustment. Thefollowing approach is being consideredfor the development of these tables andthe calculation of the age and gender ad-justment. All adjustments and calculationswould be determined separately for self-only coverage and for other than self-onlycoverage.

1. Determination of average cost forFEHPB coverage. The average cost ofapplicable coverage under the FEHBP(FEHBP average cost) would be deter-mined by aggregating all claims expensesof the FEHBP standard option and divid-ing the total by the number of coverageunits. Each employee policyholder wouldbe a coverage unit.

2. Determination of average cost foreach age and gender group. Claims ex-pense data would be sorted into groups,separating the population into male andfemale coverage units and further separat-ing each gender population into multi-year age-bands. For example, the dollaramount of claims for all male individualsbetween the ages of 30 and 34 would beadded together. The dollar amount ofclaims for each group would then be di-vided by the number of coverage units inthat age and gender group to yield theaverage cost for that group (group averagecost). A group average cost would be cal-culated in this way for each of the age andgender groups.

3. Determination of group ratios. Eachgroup average cost would be divided bythe FEHBP average cost to establish theratio (group ratio) of the group averagecost to the FEHBP average cost. Thegroup ratio would be expressed as a frac-


tion or percentage and would be deter-mined periodically, but less frequentlythan annually.

4. Determination of group premiumcost. The group ratio would be multipliedby the most recent annual premium cost ofthe FEHBP standard option to determinethe annual premium cost for each age andgender group (group premium cost). Thedollar amounts representing each grouppremium cost would then be used to pop-ulate the adjustment tables, to be pub-lished annually.

5. Determination of national premiumcost. To determine the national premiumcost, each group premium cost would bemultiplied by the fraction of employees inthe national workforce who are in thatgroup. The product of each of these cal-culations would be added together to yieldthe national premium cost, which wouldbe a single dollar amount that would bepublished annually.

6. Determination of the employer’spremium cost. Each employer would de-termine the fraction of its employees whoare in each age and gender group. Theemployer would then multiply the grouppremium cost from the relevant adjust-ment table by the fraction of its employeesin each group. The product of each ofthese calculations would be added to-gether to yield the employer’s premiumcost, which would be a single dollaramount.

7. Determination of adjustment. Theemployer’s premium cost would then becompared to the national premium cost. Ifthe employer’s premium cost exceeds thenational premium cost, the excess dollaramount would be added to the dollar limitfor that employer for purposes of deter-mining the amount of any excess benefit.

With respect to step one, two differentapproaches are under consideration. Oneapproach would rely on actual claims datafrom the FEHBP standard option. An al-ternative approach would rely on nationalclaims data reflecting plans with a designsimilar to that of the FEHBP standard

option. It is anticipated that only one ap-proach will be adopted and that it will beapplied in a uniform manner.

Treasury and IRS seek comments on thisapproach to the age and gender adjustment,including the alternative approaches tostep one and whether the approach to theage and gender adjustment should takeinto account the age rating scale adoptedin regulations for the individual and smallgroup market.

VII. NOTICE AND PAYMENT

A. Notice of Calculation of ApplicableShare of Excess Benefit

Section 4980I(c)(4)(A) imposes a noti-fication requirement on the employer.Specifically, that section requires the em-ployer to calculate for each taxable periodthe amount of the excess benefit subject tothe tax imposed by § 4980I(a) and theapplicable share of that excess benefit foreach coverage provider, and to notify theSecretary and each coverage provider ofthe amount so determined for each cover-age provider at the time and in the manneras the Secretary may prescribe.

Treasury and IRS are considering boththe form in which that information mustbe provided to the various coverage pro-viders and IRS, and the time at which thatinformation must be provided. Commentsare requested on the administrative andother issues raised by this notice require-ment, taking into account that this processmay be affected by the rules governing theperiod over which the cost of applicablecoverage is determined as discussed insection V.B of this notice.

Treasury and IRS anticipate that calcu-lation errors that affect the cost of appli-cable coverage may, in some instances,affect multiple coverage providers due tothe allocation of the tax. Comments areinvited on how instances of reallocationmight be mitigated or avoided.

B. Payment of the § 4980I Excise Tax

Section 4980I(c)(1) provides that eachcoverage provider is liable for the excisetax on its applicable share of the excessbenefit with respect to an employee forany taxable period, but does not specifythe time and manner in which the excisetax is paid. Treasury and IRS are consid-ering designating the filing of Form 720,Quarterly Federal Excise Tax Return, asthe appropriate method for the payment ofthe tax. Although Form 720 generally isfiled quarterly, under this approach a par-ticular quarter of the calendar year wouldbe designated for the use of Form 720 topay the excise tax under § 4980I.7

VIII. REQUEST FOR COMMENTS

Treasury and IRS invite comments onthe issues addressed in this notice and onany other issues under § 4980I. This in-cludes an invitation to submit furthercomments on issues addressed in Notice2015–16. For example, in response to No-tice 2015–16, some commenters ex-pressed concern about coordination be-tween the excise tax under § 4980I and theassessable payments under § 4980H.8

Comments are invited on the circum-stances in which the interaction betweenthe provisions of § 4980H and § 4980Imay raise concerns and on whether andhow these provisions might be coordi-nated consistent with the statutory re-quirements of these provisions and in amanner that is administrable for employ-ers and the IRS.

Although many comments submittedin response to Notice 2015–16 are notreflected in this notice, those commentsare under consideration. Those commentsand comments responding to this noticewill be used to inform proposed regula-tions that will be issued in the future forfurther public notice and comment.

Public comments should be submittedno later than October 1, 2015. Commentsshould include a reference to Notice

7This procedure is used for payment of the fee imposed on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans to help fund thePatient-Centered Outcomes Research Institute. The fee is required to be reported only once a year on the second quarter Form 720 and paid by its due date, July 31. See Fees on HealthInsurance Policies and Self-Insured Plans for the Patient-Centered Outcomes Research Trust Fund, 77 Fed. Reg. 72721, 72726–27 (December 6, 2012) and the Form 720 and accompanyinginstructions.

8Generally, under § 4980H, an applicable large employer that fails to offer to its full-time employees health coverage that is affordable and provides minimum value (as defined in§ 36B(c)(2)(C)(ii)) may be subject to an assessable payment if a full-time employee enrolls in a qualified health plan for which the employee receives a premium tax credit. Commentershave noted that health coverage providing no more than minimum value (or only slightly more than minimum value) may exceed the applicable dollar limit under § 4980I in certaincircumstances.


2015–52. Send submissions to CC:PA:LP-D:PR (Notice 2015–52), Room 5203, Inter-nal Revenue Service, P.O. Box 7604, BenFranklin Station, Washington, DC 20044.Submissions may be hand delivered Mon-day through Friday between the hours of 8a.m. and 4 p.m. to CC:PA:LPD:PR (Notice2015–52), Courier’s Desk, Internal RevenueService, 1111 Constitution Avenue, NW,Washington, DC 20044, or sent electroni-cally, via the following e-mail address:[email protected] include “Notice 2015–52” in thesubject line of any electronic communica-tion. All material submitted will be avail-able for public inspection and copying.

IX. RELIANCE

This notice does not provide guidanceunder § 4980I upon which taxpayers mayrely. No inference should be drawn fromany provision of this notice concerningany provision of § 4980I other than thoseaddressed in this notice or concerning anyother section of the Affordable Care Act.

X. DRAFTING INFORMATION

The principal author of this notice isKaren Levin of the Office of AssociateChief Counsel (Tax Exempt and Govern-ment Entities). For further information re-garding this notice contact Ms. Levin at(202) 317-5500 (not a toll-free number).

Income tax treatment of2014 fuel credits allowableunder section 6426(c) andsection 6426(d)

Notice 2015–56

PURPOSE

This notice informs claimants aboutthe federal income tax treatment of creditsunder § 6426(c) and (d) of the InternalRevenue Code that are paid in cash underthe one-time claim submission process ofsection 160(e) of the Tax Increase Preven-tion Act of 2014 (Act), Pub. L. No. 113–295, 128 Stat. 4023, and implemented byNotice 2015–3, 2015–6 I.R.B. 583. Spe-cifically, a claimant must reduce its in-come tax deduction for (or cost of goodssold deduction attributable to) § 4081 ex-

cise taxes for each calendar quarter during2014 by the amount of the § 6426(c)credit for a biodiesel mixture sold or usedduring that calendar quarter. Similarly, aclaimant must reduce its income tax de-duction for (or cost of goods sold deduc-tion attributable to) § 4041 excise taxesfor each calendar quarter during 2014 bythe amount of the § 6426(d) credit foralternative fuel sold or used during thatcalendar quarter.

BACKGROUND

Section 6426(a) and (c) allows ablender of a biodiesel (including renew-able diesel) mixture to claim a credit(biodiesel mixture credit) against its taxliability under § 4081, relating to the taximposed on taxable fuel. Specifically,§ 6426(c)(1) and (c)(2) provides that thebiodiesel mixture credit is the product of$1.00 and the number of gallons of biodie-sel used by the claimant in producing anybiodiesel mixture for sale or use in a tradeor business of the claimant.

Section 6426(a) and (d) allows a claim-ant that sells or uses alternative fuel as a fuelin a motor vehicle or motorboat, or in avi-ation, to claim a credit (alternative fuelcredit) against the claimant’s excise tax lia-bility under § 4041, relating to the tax im-posed on diesel fuel and alternative fuel.Section 6426(d)(1) provides that the alter-native fuel credit is the product of 50 centsand the number of gallons of an alternativefuel or gasoline gallon equivalents of a non-liquid alternative fuel sold by the claimantfor use as a fuel in a motor vehicle or mo-torboat, sold by the taxpayer for use in avi-ation, or so used by the claimant.

Any excess credit under the biodieselmixture credit or alternative fuel creditmay be claimed as a payment under§ 6427(e) or as a refundable income taxcredit under § 34. Generally, the excisetaxes imposed by §§ 4041 and 4081 arereported on Form 720, Quarterly FederalExcise Tax Return, and § 6426 credits areclaimed on Schedule C (Form 720),Claims. A claimant must first apply thebiodiesel mixture credit against its § 4081tax liability and the alternative fuel creditagainst its § 4041 tax liability by makingthe claim on Form 720 or Form 720X. Tothe extent the claim exceeds a claimant’s§ 4081 or § 4041 tax liability, the claimantmay file a claim for payment of that ex-

cess amount pursuant to § 6427(e) usingForm 8849, Claim for Refund of ExciseTaxes, and attaching Schedule 3 (Form8849), Certain Fuel Mixtures and the Al-ternative Fuel Credit.

The Code provisions authorizing thebiodiesel mixture credit and the alternativefuel credit expired for sales and uses afterDecember 31, 2013 (September 30, 2014, inthe case of any sale or use involving lique-fied hydrogen). In the Act, which wassigned into law on December 19, 2014,Congress retroactively reinstated the biodie-sel mixture credit and the alternative fuelcredit for sales and uses during 2014. Spe-cifically, section 160(a)(1) of the Act pro-vides that § 6426(c)(6) is amended by strik-ing “December 31, 2013,” and inserting“December 31, 2014.” Similarly, section160(b)(1) of the Act provides that§ 6426(d)(5) is amended by striking “De-cember 31, 2013,” and inserting “December31, 2014.” Section 160(d)(1) of the Act pro-vides that the amendments to § 6426(c) and(d) apply to fuel sold or used after Decem-ber 31, 2013.

Section 160(e) of the Act required issu-ance of guidance providing for a one-timesubmission of claims under § 6426(c) and (d)(including any payment under § 6427(e))covering periods during 2014. Pursuant tothis statutory mandate, the IRS issued No-tice 2015–3, which provides procedures tomake a one-time claim for payment of thecredits and payments allowable under§§ 6426(c), 6426(d), and 6427(e) forbiodiesel (including renewable diesel)mixtures and alternative fuels sold or usedduring calendar year 2014 (referred to inNotice 2015–3 as the 2014 biodiesel andalternative fuel incentives). These stream-lined procedures require that claimantssubmit all claims for 2014 biodiesel andalternative fuel incentives on a singleForm 8849. For example, under Notice2015–3, a biodiesel mixture claimantwhose § 4081 tax liability exceeds its§ 6426(c) biodiesel mixture credit (andwould therefore not be eligible for a§ 6427(e) payment) must still use Form8849 to make a § 6426(c) claim. That theclaimant receives a payment of the§ 6426(c) credit as opposed to a creditagainst its excise tax liability does notchange the underlying character of theclaim from a § 6426(c) claim for credit toa § 6427(e) claim for payment.


Claimants have requested clarificationregarding the proper accounting period(s)for reducing the income tax deduction foror the cost of goods sold deduction attrib-utable to —

(i) the amount of the 2014 calendaryear biodiesel mixture credit claimedagainst § 4081 excise taxes; and

(ii) the amount of the 2014 calendaryear alternative fuel credit claimed against§ 4041 excise taxes.

INCOME TAX TREATMENT OF 2014FUEL CREDITS UNDER § 6426(C)AND (D)

The Act retroactively reinstatedthrough December 31, 2014, the biodieselmixture credit and the alternative fuelcredit. See § 160(c) and (d) of the Act and§ 6426(c)(6) and (d)(5). As a result, thesecredits are treated as if they never expired.Claimants determine their 2014 calendaryear biodiesel mixture credit and alternativefuel credit by reference to the sale or use ofa biodiesel mixture or alternative fuel during2014. See § 6426(c)(1) and (d)(1).

Consequently, for federal income taxpurposes, a claimant must reduce its—

(i) § 4081 excise tax liability for eachcalendar quarter during the 2014 calendaryear by its biodiesel mixture credit attrib-utable to a biodiesel mixture sold or usedduring that calendar quarter; and

(ii) § 4041 excise tax liability for eachcalendar quarter during the 2014 calendaryear by its alternative fuel credit attribut-able to alternative fuels sold or used dur-ing the calendar quarter.

The reductions apply whether or notthe claimant’s taxable year ended beforethe Act was signed into law on December19, 2014. This is because Congress re-stored the credits retroactively; therefore,a claimant must treat the credits as if theynever expired. The statute’s proceduralmandate, under section 160(e) of the Act,of a one-time submission of claims pro-cess does not affect the substantive federalincome tax treatment of these credits.

The following examples illustrate theapplication of the income tax treatment inthe context of the biodiesel mixture credit,but the principles in the example applyequally to the alternative fuel credit:

Example 1. B is a calendar year taxpayer. Duringeach calendar quarter of 2014, B’s § 4081 excise taxliability was $25, for a total of $100 for 2014. In

addition, during each calendar quarter of 2014 Bproduced a biodiesel mixture using 20 gallons ofbiodiesel. B produced the biodiesel mixture for saleor use in its trade or business. B claims the biodieselmixture credit on Form 8849 pursuant to Notice2015–3, and is allowed an $80 biodiesel mixturecredit for 2014 ($80 � 20 gallons of biodiesel usedto produce a mixture x $1.00/gallon credit x 4 quar-ters). B must apply the $80 credit against B’s $100§ 4081 excise tax liability. Thus, for federal incometax purposes, B’s § 4081 excise tax liability for 2014is $20. Therefore, B’s federal income tax deduction(or cost of goods sold, where applicable) attributableto § 4081 excise taxes for 2014 is $20.

Example 2. C is a taxpayer with a tax year endingMarch 31. During each calendar quarter of its tax yearending March 31, 2014, C’s § 4081 excise tax liabilitywas $25. In addition, during each calendar quarter ofthat tax year, C produced a biodiesel mixture using 20gallons of biodiesel. C produced the biodiesel mixturefor sale or use in its trade or business. C claims a $60biodiesel mixture credit on Schedule C of the Forms720 that C files for the last three calendar quarters of2013 ($60 � 20 gallons of biodiesel used to produce amixture x $1.00/gallon credit x 3 quarters). C alsoclaims the biodiesel mixture credit on Form 8849 pur-suant to Notice 2015–3. For the first calendar quarter of2014 C produces a biodiesel mixture using 20 gallonsof biodiesel. Therefore, C is allowed a $20 biodieselmixture credit for the first calendar quarter of 2014($20 � 20 gallons of biodiesel used to produce amixture x $1.00/gallon credit x 1 quarter). C’s biodieselmixture credit for its taxable year ending March 31,2014 equals $80 ($60 of credit in the last three calendarquarters of 2013 and $20 in the first calendar quarter of2014). C must apply the $80 credit against C’s $100§ 4081 excise tax liability. Thus, for federal income taxpurposes, C’s § 4081 excise tax liability for its tax yearending March 31, 2014 is $20. Therefore, C’s federalincome tax deduction (or cost of goods sold, whereapplicable) attributable to § 4081 excise taxes for its taxyear ending March 31, 2014 is $20.

EFFECT ON OTHER DOCUMENTS

This notice amplifies Notice 2015–3 byproviding that, for federal income tax pur-poses, a claimant reduces its § 4081 excisetax liability by the amount of 2014 excisetax credit allowable under § 6426(c) and its§ 4041 excise tax liability by the amount of2014 excise tax credit allowable under§ 6426(d), in determining its deduction forthose excise taxes or its cost of goods solddeduction attributable to those excise taxes.

DRAFTING INFORMATION

The principal author of this notice isShareen S. Pflanz of the Office of AssociateChief Counsel (Income Tax & Accounting).For further information regarding this no-tice, contact Shareen S. Pflanz on (202) 317-4718 (not a toll-free number).

26 CFR 601.201: Rulings and determination letters.

Rev. Proc. 2015–40

SECTION 1. PURPOSE,BACKGROUND, RULES OFCONSTRUCTION, ANDDEFINITIONS

SECTION 2. SCOPE AND GENERALAPPLICATION

SECTION 3. PROCEDURES FORFILING COMPETENT AUTHORITYREQUESTS

SECTION 4. ACAP ANDANCILLARY ISSUES

SECTION 5. SMALL CASECOMPETENT AUTHORITYREQUESTS

SECTION 6. COORDINATION OFTHE COMPETENT AUTHORITYPROCESS WITH U.S.ADMINISTRATIVE AND JUDICIALPROCEEDINGS

SECTION 7. ACKNOWLEDGMENTOF RECEIPT AND DENIAL OFASSISTANCE

SECTION 8. CONSULTATIONS ANDRELATED ACTIONS BY THE U.S.COMPETENT AUTHORITY

SECTION 9. RESULTS OFCOMPETENT AUTHORITY CASE

SECTION 10. ARBITRATION

SECTION 11. PROTECTIVE CLAIMS

SECTION 12. TREATYNOTIFICATIONS

SECTION 13. REQUESTS FORRULINGS

SECTION 14. USER FEES

SECTION 15. EFFECT ON OTHERDOCUMENTS

SECTION 16. EFFECTIVE DATE

SECTION 17. PAPERWORKREDUCTION ACT

SECTION 18. DRAFTINGINFORMATION

APPENDIX



.01 Purpose and Background. Thisrevenue procedure provides guidance onthe process of requesting and obtainingassistance under U.S. tax treaties from theU.S. competent authority, acting throughthe Advance Pricing and Mutual Agree-ment Program and the Treaty Assistanceand Interpretation Team of the DeputyCommissioner (International), LargeBusiness & International Division of theInternal Revenue Service. This revenueprocedure updates and supersedes Rev.Proc. 2006–54, 2006–2 C.B. 1035, and isbeing issued concurrently with Rev. Proc.2015–41, 2015–35 I.R.B. 263, which pro-vides guidance with respect to advancepricing agreements.

A proposed version of this revenueprocedure was released for public com-ment in Notice 2013–78, 2013–50 I.R.B.633. This final revenue procedure is is-sued following consideration of all publiccomments received by the IRS and theTreasury Department. This revenue pro-cedure also reflects modifications basedon continuing internal monitoring of theadministrative procedures of the U.S.competent authority to ensure that the ad-ministration of U.S. tax treaties is consis-tently principled, effective, and efficient.

The principal differences between thisfinal revenue procedure and the proposedversion in Notice 2013–78 may be sum-marized as follows:

(1) This revenue procedure limits thescope of requests to which mandatory pre-filing procedures apply to requests involv-ing taxpayer-initiated positions. See sec-tion 3.02.

(2) To ensure that taxpayers havebroad access to the U.S. competent au-thority to resolve disputes under U.S. taxtreaties, taxpayers will not be requiredunder this revenue procedure to expand

the scope of a competent authority requestto include interrelated issues as a condi-tion of receiving competent authority as-sistance. Taxpayers may still be requiredto provide information that will allow theU.S. competent authority to evaluate theappropriateness of the relief sought underthe applicable U.S. tax treaty in light ofthe taxpayer’s positions on interrelated is-sues. See section 2.04.

(3) This revenue procedure clarifiesthat the U.S. competent authority mayconsult with taxpayers with respect to cer-tain additional issues that may arise inconnection with competent authority re-quests, such as issues relevant to the de-termination of foreign tax credits and re-patriation payments. See sections 2.03 and4.02(2).

(4) This revenue procedure providesadditional guidance on requesting dis-cretionary determinations under the lim-itation on benefits articles of U.S. taxtreaties, including time frames for tax-payers to provide notification of mate-rial changes in fact or law and the intro-duction of a triennial statementprocedure to maintain a favorable grantof discretionary benefits. See section3.06(2).

(5) Consistent with the objective ofproviding taxpayers with broad access tothe U.S. competent authority to resolvedisputes under U.S. tax treaties, the U.S.competent authority will not condition as-sistance on the taxpayer’s notification ofthe U.S. competent authority, or on ob-taining its concurrence, with respect tosigning a standard Form 870 with IRSExamination. Similarly, a taxpayer willnot be required to obtain the U.S. compe-tent authority’s agreement prior to enter-ing into a closing agreement or similaragreement with IRS Examination, but inthese cases the assistance provided by theU.S. competent authority will be limitedto seeking correlative relief from the for-eign competent authority, thus potentially

not eliminating double taxation. See sec-tion 6.03.

(6) This revenue procedure providesadditional information about the processfollowed by the U.S. competent authorityin conducting its review under the simul-taneous appeals procedure. See section6.04(2).

(7) This revenue procedure clarifiesand refines the bases on which the U.S.competent authority may decline to accepta competent authority request or maycease providing assistance, consistentwith U.S. tax treaty policy that taxpayersshould have broad access to the U.S. com-petent authority to resolve instances oftaxation not in accordance with the appli-cable U.S. tax treaty. See section 7.02.

(8) This revenue procedure increasesthe user fee for requests for discretionaryLOB relief from $27,500 to $37,000. Thisincrease is implemented in two phases.First, the user fee will increase to $32,500for requests filed on or after October 30,2015 and prior to September 30, 2016.The fee will further increase to $37,000for requests filed on or after September30, 2016. See section 14.02.

(9) This revenue procedure substan-tially restructures the proposed guidancein Notice 2013–78 to improve clarity,readability, and organization.

.02 Section References. Unless indi-cated by context or otherwise, section ref-erences are to the sections of this revenueprocedure.

.03 Deadline References. If a deadlineunder this revenue procedure falls on aSaturday, Sunday, or legal holiday in theDistrict of Columbia, the deadline is ex-tended to the next succeeding day that isnot a Saturday, Sunday, or legal holiday inthe District of Columbia.

.04 Definitions. For purposes of thisrevenue procedure, the following termshave the meanings set forth in this section.


ACAP Accelerated competent authority procedure (see section 4.01)

ACAP request A request to include ACAP years in a competent authority case

ACAP years Taxable years subsequent to competent authority years for which tax returns havebeen filed and that are covered by an ACAP request or are eligible for ACAP

Ancillary issue A competent authority issue, such as repatriation payments (see section 4.02(2)),interest on refunds and deficiencies, and penalties, that arises out of a competentauthority resolution of another, underlying competent authority issue

APA An advance pricing agreement within the meaning of Rev. Proc. 2015–41

APA process The steps involved in the process of reaching an APA, as described in Rev. Proc.2015–41

APA request A request for an APA filed under Rev. Proc. 2015–41

APMA The Advance Pricing and Mutual Agreement Program, a representative office ofthe U.S. competent authority and one of the divisions of TPO

Applicant A taxpayer making a discretionary LOB request

Arbitration treaty A U.S. tax treaty in which the mutual agreement procedure article includes aprovision for mandatory arbitration of certain competent authority cases(see section 10)

Bilateral APA A bilateral APA as defined in Rev. Proc. 2015–41

Code The Internal Revenue Code of 1986 (26 U.S.C.), as amended

Competent authority case A case initiated by a competent authority request involving one or morecompetent authority issues

Competent authority issue An issue that can be resolved by the U.S. competent authority, typically under themutual agreement procedure agreement article of a U.S. tax treaty

Competent authority process All steps in the process of initiating and resolving a competent authority case,including steps in relation to pre-filing procedures

Competent authority request A request for assistance of the U.S. competent authority filed under this revenueprocedure

Competent authority resolution The resolution of competent authority issues constituting a competent authoritycase, reached either (i) between the U.S. competent authority and one or moreforeign competent authority(ies) (as reflected in a signed mutual agreement andany additional agreements or understandings achieved through the competent au-thority process) or (ii) through arbitration

Competent authority year A taxable year for which a tax return has been filed and in which a competentauthority issue has arisen that is the subject of a competent authority case

Controlled group The group of controlled taxpayers (as defined in Treas. Reg. § 1.482–1(i)) ofwhich the taxpayer filing the competent authority request is a member

Discretionary LOB request A request that the U.S. competent authority grant certain discretionary treatybenefits to an applicant that does not qualify for those benefits under the relevantLOB provisions of a U.S. tax treaty

Foreign competent authority The competent authority of a treaty country

Foreign pension fund A pension fund that is a resident of a treaty country

Foreign-initiated action A foreign-initiated adjustment, or another action by or on behalf of the taxauthority of a treaty country (such as withholding), that gives rise to a competentauthority issue or makes it likely that a competent authority issue will arise

Foreign-initiated adjustment A proposed or final adjustment made by the tax authority of a treaty country tothe taxable income of a taxpayer

FTC issue An issue relating to the determination of foreign tax credits, including thefollowing: (1) whether a credit, deduction, or exclusion may be given under thelaw of a treaty country regarding income tax due in the treaty country on accountof income tax paid in the United States; (2) whether a credit or deduction may begiven regarding U.S. income tax due, on account of income tax paid in a treatycountry; and (3) the extent to which remedies for reducing tax liability underforeign law (including, in appropriate cases, a request for competent authorityassistance, litigation, or both) are “effective and practical” within the meaning ofTreas. Reg. § 1.901–2(e)(5) and Rev. Rul. 92–75, 1992–2 C.B. 197 (see section 2.03)


Global trading arrangement Any arrangement involving multiple associated enterprises or business unit(s) of anenterprise that operate in more than one country and that trade or deal insecurities and/or other financial products, either on their own behalf or on behalf ofclients, including functions ancillary to the foregoing activities

Intangible development arrange-ment

Any arrangement for sharing the costs and risks of developing intangibles,including a cost sharing arrangement (or arrangement treated as such) as defined inTreas. Reg. § 1.482–7 or a qualified cost sharing arrangement (or arrangement treatedas such) as defined in Treas. Reg. § 1.482–7A (collectively, a “CSA”); and an ar-rangement (other than a CSA) for which the principles, methods, comparability, andreliability considerations set forth in Treas. Reg. § 1.482–7 are relevant in deter-mining the best method, under Treas. Reg. § 1.482–4(g) or Treas. Reg. § 1.482–9(m)(3), as appropriately adjusted in light of the differences in facts and circum-stances between such an arrangement and a CSA. See also Treas. Reg. § 1.482–1(b)(2)(iii)

IRM Internal Revenue Manual

IRS Internal Revenue Service

IRS Examination The function(s) within the IRS responsible for examining federal tax and informa-tion returns and ascertaining the correctness of any return for purposes ofdetermining the tax liability of taxpayers

LB&I IRS Large Business & International Division

LOB Limitation on benefits

Multilateral APA A multilateral APA as defined in Rev. Proc. 2015–41

Non-U.S.-initiated action A foreign-initiated action or a taxpayer-initiated position

Pension plan request A competent authority request in which the taxpayer requests a determination thata foreign pension plan “generally corresponds” to a pension plan recognized fortax purposes in the United States

Pre-filing conference A conference held with the U.S. competent authority before a competent authorityrequest is filed

Pre-filing memorandum A memorandum or similar paper submitted to the U.S. competent authority beforea competent authority request is filed

Primary adjustment An adjustment falling under the associated enterprises article of a U.S. tax treaty,or an analogous adjustment made pursuant to a taxpayer-initiated position, that isthe subject of a competent authority case

Protective claim A contingent claim filed with the U.S. competent authority as described in section11

Regulations U.S. Treasury regulations promulgated under the Code

SAP review The review of a competent authority issue by the U.S. competent authority withthe assistance of IRS Appeals under the simultaneous appeals procedure. Seesection 6.04(2)

TAIT The Treaty Assistance and Interpretation Team, a representative office of the U.S.competent authority, which reports directly to the Assistant Deputy Commissioner(International), LB&I

Taxpayer A U.S. person, as defined in section 7701(a)(30) of the Code, or a non-U.S.person eligible to seek competent authority assistance when permitted by theapplicable U.S. tax treaty

Taxpayer-initiated position A competent authority issue that results from inconsistent positions taken by ataxpayer with respect to its tax liability in the United States and in a treatycountry that were not adopted in response to a proposed or actual adjustmentmade by the IRS or a foreign tax authority, such as (i) inconsistent positions withregard to the same transaction taken on an original U.S. return and an equivalentfiling with a foreign tax authority and (ii) a revised position taken on an amendedU.S. return or equivalent filing with a foreign tax authority that creates inconsistentpositions between the U.S. return and an equivalent filing with a foreign tax authority

Tentative competent authorityresolution

A proposed competent authority resolution that is reached by the respective staffs ofthe U.S. competent authority and a foreign competent authority and that is subject toapproval by the respective competent authorities before becoming a competentauthority resolution


TPO Transfer Pricing Operations, which reports to the Deputy Commissioner(International), LB&I

Treaty country A country other than the United States that has a U.S. tax treaty in force

Treaty notification The notification to a competent authority, required under certain U.S. tax treaties, thata request for competent authority assistance has been made to the other competentauthority (see section 12)

U.S. competent authority The Deputy Commissioner (International), LB&I, the Assistant Deputy Commissioner(International), LB&I, and each other IRS official performing competent authorityfunctions pursuant to applicable delegation orders

U.S.-initiated action A U.S.-initiated adjustment, or another action by or on behalf of the IRS (such aswithholding), that results in a competent authority issue

U.S.-initiated adjustment A proposed or final adjustment made by the IRS to the taxable income of a taxpayer

U.S. return A federal tax return filed with the IRS pursuant to the Code

U.S. tax treaty A convention governing income, estate, or gift taxes to which the United States is aparty and that has entered into force, together with its protocols, exchanges ofdiplomatic notes, memoranda of understanding, and competent authority arrangements


.01 Administration of U.S. Tax Treaties.

(1) The U.S. Competent Authority. U.S.tax treaties designate the Secretary of theTreasury or his delegate as the competentauthority with respect to the United States.The Secretary of the Treasury has delegatedthat authority through the Commissioner ofthe IRS to the Deputy Commissioner (Inter-national), LB&I. The authority to act onbehalf of the Deputy Commissioner (Inter-national), LB&I as the U.S. competent au-thority has been delegated to the AssistantDeputy Commissioner (International),LB&I. See Treasury Order 150–10 and Del-egation Order 4–12 (Rev. 2), IRM 1.2.43(or successor delegation order). Authority toact as the U.S. competent authority withregard to certain competent authority issueshas been delegated to the directors of TPOand APMA. The U.S. competent authorityhas authority to apply the provisions of U.S.tax treaties. The U.S. competent authorityendeavors to do so in a manner that is con-sistent with U.S. tax treaty obligations andthat secures the appropriate tax bases of theUnited States and its treaty partners, pre-vents fiscal evasion, and provides taxpay-ers broad access to competent authorityassistance in accordance with consider-ations of principled, effective, and effi-cient tax administration. The U.S. com-petent authority also has authority tointerpret the provisions of U.S. tax trea-ties, but only with the concurrence of

the Associate Chief Counsel (Interna-tional).

(2) Mutual Agreement Procedure Arti-cles. The mutual agreement procedure ar-ticles of U.S. tax treaties grant taxpayersthe right to request the assistance of theU.S. competent authority when the tax-payer believes that the actions of theUnited States or a treaty country result orwill result in the taxpayer being subject totaxation not in accordance with the appli-cable U.S. tax treaty. This situation typi-cally arises as a result of U.S.- or foreign-initiated adjustments resulting from anexamination, but can arise from otherU.S.- or foreign-initiated actions (such aswithholding of tax by a withholdingagent) or from a taxpayer-initiated posi-tion. The U.S. competent authority willendeavor to resolve competent authorityissues arising under the mutual agreementprocedure articles of U.S. tax treatiesthrough consultations with the applicableforeign competent authority(ies) but insome cases may resolve such issues uni-laterally (see, e.g., section 8.02). There isno authority for the U.S. competent au-thority to provide relief with respect toU.S. tax or to provide other assistancerelated to taxation arising under the taxlaws of a foreign country or the UnitedStates unless such authority is granted bya treaty. The grant of such authority by themutual agreement procedure articles ofU.S. tax treaties is separate from and inaddition to the authority under such arti-cles for the U.S. competent authority to

consult generally with foreign competentauthorities to resolve difficulties or doubtsregarding treaty interpretation or applica-tion, irrespective of whether the consulta-tion relates to a current matter involving aspecific taxpayer.

(3) Roles of APMA and TAIT. The U.S.competent authority conducts the compe-tent authority process through two offices,APMA and TAIT. APMA has primaryresponsibility for cases arising under thebusiness profits and associated enterprisesarticles of U.S. tax treaties. An example ofa competent authority issue handled byAPMA is the double tax that could beincurred as a result of an allocation madeby the IRS under section 482 of the Codeor by a foreign tax authority under anequivalent provision in its domestic law.TAIT has primary responsibility for casesarising under all other articles of U.S. taxtreaties. TAIT also has primary responsi-bility for cases arising under U.S. tax trea-ties with respect to estate and gift taxes.APMA and TAIT each can consider casesarising under the permanent establishmentarticles of U.S. tax treaties, and both of-fices will coordinate and collaborate onsuch cases and on any other cases as ap-propriate.

.02 U.S. Territories. This revenue pro-cedure pertains only to requests for assis-tance arising under U.S. tax treaties. Forprocedures for requesting assistance of theU.S. competent authority in addressing in-consistencies in tax treatment by the IRS


and a U.S. territory, see Rev. Proc. 2006–23, 2006–1 C.B. 900.

.03 Informal Consultations with Tax-payers.The U.S. competent authority isavailable for informal consultations withtaxpayers (including consultations inwhich the taxpayer chooses to be anony-mous) regarding any competent authorityissue. Any informal advice provided bythe U.S. competent authority through suchconsultations is advisory only and is notbinding on the IRS. The U.S. competentauthority also is available for informalconsultations on issues that arise in con-nection with competent authority issues,even where such issues are not themselvescompetent authority issues. For example,a taxpayer may consult the U.S. compe-tent authority on FTC issues, which maycover, when appropriate, considerationssurrounding administrative or other stepsthat may be available to the taxpayer inthe foreign jurisdiction. See Treas. Reg.§ 1.901–2(e)(5) and Rev. Rul. 92–75.

.04 Scope of Competent AuthorityCases.

(1) In General. In every case it accepts,the U.S. competent authority will en-deavor to reach a competent authority res-olution on the competent authority issuefor which the taxpayer seeks assistance.However, depending on the facts and cir-cumstances of the particular case, the U.S.competent authority may determine dur-ing the competent authority process that itcannot reach a competent authority reso-lution consistent with principled, effec-tive, and efficient tax administration un-less it evaluates the relief sought by thetaxpayer under the U.S. tax treaty in lightof whether such relief, together with thetaxpayer’s position(s) on interrelated is-sues, would yield consistent and appropri-ate results. Such circumstances may arise,for example, when the competent author-ity issues identified in the competent author-ity request are more reliably evaluated to-gether with other issues identified by theU.S. competent authority. See, e.g., Treas.Reg. §§ 1.482–1(f)(2)(i), 1.482–7(g)(2)(iv).For specific examples of interrelated issues,see section 2.04(2). The U.S. competent au-thority will endeavor as early as possible inthe competent authority process to identifyany interrelated issues and require addi-

tional information on (see section 2.04(3)),or request an expansion of the competentauthority request to include (see section2.04(4)), such issue(s).

(2) Examples of Interrelated Issues.

(a) Assume that a competent authorityrequest is made on a competent authorityissue concerning a company’s ongoing li-cense of intangible property to a secondcompany in the same controlled group,and the intangible property covered by thelicense had been sold in an earlier year bythe second company (the licensee) to thefirst company (the licensor). In such a case,the U.S. competent authority may considerthe assumptions underlying the valuation ofthe intangible property when it was previ-ously sold in evaluating the ongoing license.

(b) Assume that a competent authorityrequest is made on a competent authorityissue concerning the compensation forservices provided by one company to asecond company in the same controlledgroup, and the services provided by thefirst company require using intangible prop-erty that the first company had transferred inan earlier year to the second company aspart of a business restructuring. In such acase, in evaluating the compensation for theservices, the U.S. competent authority mayconsider the valuation done in connectionwith the business restructuring and whetherany inconsistency in the valuations is ex-plained by particular circumstances.

(c) If a competent authority issue pre-sented by a taxpayer involves the valua-tion of a platform contribution transactionin a cost-sharing arrangement underTreas. Reg. § 1.482–7, the U.S. competentauthority also may consider whether theintangible development costs incurredpursuant to the arrangement were properlyshared.

(d) Assume that the taxpayer presents acompetent authority issue concerningsales of goods from a manufacturer in atreaty country to a U.S. distributor in thesame controlled group, and the U.S. dis-tributor resells most of the goods to an-other distributor in a second country(which may or may not be a treaty coun-try) that is in the same controlled group. Inevaluating the price that the U.S. distrib-utor should have paid to the manufacturer,the U.S. competent authority may exam-

ine the price that the U.S. distributor re-ceived for its resale.

(e) Further examples of interrelated is-sues would include the same competentauthority issue in ACAP years, other in-terrelated competent authority issues incompetent authority years and ACAPyears, and the competent authority issueor interrelated issues in competent author-ity or ACAP years concerning a treatycountry other than that named in the com-petent authority request or concerning anon-treaty country.

(3) Requirement to Provide Informa-tion on Interrelated Issues. During thecompetent authority process, the U.S.competent authority may require the tax-payer to provide information on the posi-tion(s) it has taken on interrelated issues.The U.S. competent authority will en-deavor to identify any interrelated issuesas early as possible in the competent au-thority process. Nevertheless, the taxpayershould be prepared throughout the com-petent authority process to provide infor-mation on interrelated issues. See section3.05(3).

(4) Request to Expand the Scope of aCompetent Authority Request to IncludeInterrelated Competent Authority Is-sues. The U.S. competent authority mayrequest, in writing, that the taxpayeramend its competent authority request toinclude interrelated competent authorityissues that the U.S. competent authorityidentifies. The U.S. competent authorityalso may recommend that the taxpayerfile a bilateral or multilateral APA re-quest to cover the competent authorityissue(s) and the identified interrelatedcompetent authority issues (see section2.05). If the taxpayer declines to amendits competent authority request, the U.S.competent authority will still endeavorto reach a competent authority resolu-tion, but it will take into account thetaxpayer’s position(s) on interrelated is-sues in determining the extent to whichit will provide relief for the competentauthority issue(s) in the competent au-thority request.

(5) Closed Cases. The U.S. competentauthority will not request that the scope ofa competent authority case be expandedso as to reopen a case closed after exam-ination unless one or more of the circum-stances described in Rev. Proc. 2005–32,


2005–1 C.B. 1206 (e.g., fraud, substantialerror, or certain other circumstances) arepresent. The U.S. competent authoritymay, however, take into account positionsthat the taxpayer took on interrelated is-sues in taxable years that are closed.

.05 Coordination between CompetentAuthority and APA Processes. Competentauthority issues may be similar, or recur,over successive audit cycles. Taxpayers,the IRS, and foreign tax authorities maywant to use competent authority resolu-tions as a framework for managing suchsimilar or recurring competent authorityissues. APMA will encourage (but willnot formally request or require) taxpayersto extend competent authority resolutionsforward into APAs. Also, APMA mayrequest or encourage that taxpayers ex-pand their APA requests to cover compe-tent authority or ACAP years. For furtherdiscussion of the relationships betweenthe competent authority and APA pro-cesses, see Rev. Proc. 2015–41.

.06 Contact with U.S. Competent Au-thority during Competent Authority Pro-cess. The U.S. competent authority gener-ally holds in-person meetings with mostforeign competent authorities. Thesemeetings are typically scheduled severalmonths in advance. In addition, the U.S.competent authority frequently communi-cates with foreign competent authoritiesabout competent authority cases outsideof scheduled in-person meetings. In orderto facilitate reaching a competent author-ity resolution, the taxpayer should remainin contact with its assigned U.S. compe-tent authority representative throughoutthe competent authority process, particu-larly when a tentative competent authorityresolution has been reached (see sections9.02 and 9.03).

.07 Taxpayer Role in the CompetentAuthority Process.

(1) In General. The taxpayer can facil-itate the competent authority process byensuring that both competent authoritiesreceive complete, accurate, and timely in-formation on the factual and legal issuesunderlying the competent authority re-quest. The taxpayer also may assist thecompetent authorities by offering con-structive, principled proposals for theterms of a competent authority resolutionat appropriate points in the competent au-

thority process. Nevertheless, the taxpayermust recognize the fundamental principlethat the competent authority process isconducted between two or more govern-ments. Thus, the taxpayer must recognizethat it will not be directly involved in thenegotiations between the competent au-thorities.

(2) Presentations to Competent Au-thorities. Subject to the arbitration provi-sions of U.S. tax treaties, the U.S. compe-tent authority will allow a taxpayer areasonable opportunity to present and sup-plement its views of the relevant facts andarguments, both in writing and orally, be-fore and after discussions with the foreigncompetent authority have commenced.The competent authorities may invite orrequest the taxpayer to make a presenta-tion to both competent authorities jointly,particularly where the competent authori-ties seek clarification of the issues or factsin fact-intensive, unusual, or complexcases. Taxpayers also may request the op-portunity to make such a joint presenta-tion during the competent authority pro-cess. However, the U.S. competentauthority will consult with the foreigncompetent authority on whether to acceptthe request, and if so, on appropriate con-tent for the presentation.

.08 Withdrawal of Request. A taxpayercan withdraw its competent authority re-quest at any time, either in full or withrespect to particular competent authorityissues. If the taxpayer withdraws its com-petent authority request with respect toparticular competent authority issues, theU.S. competent authority, in turn, will de-cide whether to continue to provide com-petent authority assistance with regard toany competent authority issues that re-main. For any issues no longer under con-sideration by the U.S. competent author-ity, the U.S. competent authority willreturn jurisdiction to the relevant office(s)within the IRS. See section 6.02.

SECTION 3. PROCEDURES FORFILING COMPETENT AUTHORITYREQUESTS

.01 In General. This section sets forththe general procedures and requirementsfor filing competent authority requests.This section also addresses pre-filing pro-cedures. Unless otherwise indicated, theprocedures and requirements of this sec-

tion apply to all types of competent au-thority requests. Detailed instructions onpreparing competent authority requestsspecific to APMA or TAIT are set forth inthe Appendix to this revenue procedure.With regard to any competent authorityrequest, the U.S. competent authority willprovide assistance only after the request iscomplete, either as initially filed or assupplemented (see section 3.05(1)). For adiscretionary LOB request, the taxpayeralso must pay the correct user fee (seesections 3.06(2)(f) and 14) after the U.S.competent authority has accepted the re-quest. Taxpayers should note that someU.S. tax treaties contain specific timingrequirements for competent authority re-quests (e.g., requiring taxpayers to submita treaty notification within a specifiedtime frame; see section 12). Any specificrequirement set forth in the applicableU.S. tax treaty takes precedence over anyconflicting provision in this revenue pro-cedure. Taxpayers also should be awarethat making certain agreements with theIRS or a foreign tax authority may pre-clude or limit access to the competentauthority process (see sections 6.03,6.04, and 7.02(3)). Further, taxpayersare advised to take such actions as arenecessary to preserve whatever rightsthey may have available under domesticlaw in either the United States or thetreaty country if the U.S. competent au-thority ultimately denies competent au-thority assistance (see section 7.02) or acompetent authority resolution is notreached.

.02 Pre-filing Procedures.

(1) In General. For a competent au-thority request that involves a taxpayer-initiated position, the taxpayer must fol-low the mandatory pre-filing proceduresdescribed in section 3.02(2). For a com-petent authority request that does not in-volve a taxpayer-initiated position, thereis no mandatory pre-filing procedure, andtaxpayers are not required to contact theU.S. competent authority before filing acompetent authority request. However,even when the mandatory pre-filing pro-cedures are not applicable, taxpayers maybenefit from attending a pre-filing confer-ence under the optional pre-filing proce-dure of section 3.02(3). The U.S. compe-tent authority has found that a pre-filing


conference can facilitate the competentauthority process when the competent au-thority issues presented by the taxpayerare complex, large in amount, novel, orlikely to involve interrelated issues. Com-mon types of cases for which the U.S.competent authority generally recom-mends that a pre-filing conference be heldare listed in section 3.02(4). Even in suchcases, however, the U.S. competent au-thority may advise the taxpayer that apre-filing conference is unnecessary.

(2) Mandatory Pre-filing Proceduresfor Taxpayer-initiated Positions. A tax-payer must submit a pre-filing memoran-dum prior to filing a competent authorityrequest if the proposed competent author-ity issues will involve a taxpayer-initiatedposition. The pre-filing memorandummust identify the taxpayer, explain thefactual and legal basis of the taxpayer-initiated position, and describe any admin-istrative, legal, or other procedural stepsundertaken in the applicable treaty coun-try (including whether the foreign tax au-thority has accepted an income tax returnreflecting the taxpayer-initiated positionfor which the taxpayer seeks competentauthority assistance) and any communica-tions with the foreign competent authorityregarding the position. The degree of de-tail and content of the pre-filing memo-randum must be appropriate to the stage,size, and complexity of the competent au-thority issues underlying the proposedcompetent authority request. The pre-filing memorandum must propose at leastthree possible dates for a pre-filing con-ference, each at least two weeks after thedate that the pre-filing memorandum issubmitted. The U.S. competent authoritywill decide whether to hold a pre-filingconference with the taxpayer, taking intoaccount any views expressed by the tax-payer in the pre-filing memorandum as tothe advisability of such a conference. Thepre-filing memorandum also must list thename and contact information for the tax-payer’s point of contact and, if necessary,provide a Form 2848, Power of Attorneyand Declaration of Representative, autho-rizing the point of contact to represent thetaxpayer, or a Form 8821, Tax Informa-tion Authorization, authorizing the pointof contact to inspect or receive confiden-tial tax information about the taxpayer.Two printed copies and one electronic

copy of the pre-filing memorandum mustbe submitted to APMA or TAIT, as ap-propriate. The taxpayer may supplementthe pre-filing memorandum with such ma-terials as drawings, slides, and spread-sheets.

(3) Optional Pre-filing Procedures. Fora competent authority request that doesnot involve a taxpayer-initiated position,the taxpayer may request a pre-filing con-ference on either a named or anonymousbasis. The U.S. competent authority pre-fers that pre-filing conferences be held ona named basis to facilitate a more in-formed understanding of the proceduraland substantive issues that could ariseduring the competent authority process.The U.S. competent authority may deter-mine that a pre-filing conference is notnecessary. If the U.S. competent authorityagrees to a request for a pre-filing confer-ence made on a named basis, the taxpayerwill be required to provide a point ofcontact and, if necessary, a Form 2848authorizing the point of contact to repre-sent the taxpayer or a Form 8821 autho-rizing the point of contact to inspect orreceive confidential tax information aboutthe taxpayer. The U.S. competent author-ity may require the taxpayer to submitpre-filing written materials as a prerequi-site to holding a conference or to consid-ering the taxpayer’s request for a confer-ence. Any such materials should describesuch issues in a degree of detail appropri-ate to their size, stage of resolution, andprocedural and substantive complexity.

(4) Competent Authority Issues forwhich Optional Pre-filing Conference IsRecommended. The following are exam-ples of circumstances for which a pre-filing conference is generally recom-mended to better facilitate the competentauthority process:

(a) a foreign-initiated adjustment thatexceeds $50 million for all competent au-thority years combined;

(b) a competent authority issue that islikely to involve interrelated issues (seesection 2.04(2));

(c) an intangible development arrange-ment;

(d) a business restructuring;(e) a global trading arrangement;(f) an unincorporated branch, pass-

through entity, hybrid entity, or entity dis-regarded for U.S. tax purposes;

(g) a discretionary LOB request; or(h) a competent authority issue that has

arisen outside the context of an examina-tion, for example through the withholdingof tax by a withholding agent or a rulingor promulgation issued by a foreign taxauthority.

(5) Statements during Pre-filing Con-ference. Statements or representations,whether oral or written, made by the U.S.competent authority in connection with amandatory or optional pre-filing confer-ence are informal only and are not bindingon the IRS (see section 2.03).

.03 Persons Eligible to File CompetentAuthority Requests. Whether a taxpayer iseligible to file a competent authority re-quest is determined by reference to theU.S. tax treaty under which competentauthority assistance is sought. Taxpayerswho are eligible to file a request for assis-tance from the U.S. competent authoritymay do so only in accordance with thisrevenue procedure.

.04 Time for Filing a CompetentAuthority Request.

(1) In General. Subject to the provi-sions of section 3.04(3), taxpayers are en-couraged to file a competent authority re-quest promptly after a competentauthority issue arises or is likely to arise.Certain U.S. tax treaties may require that acompetent authority request or a treatynotification be filed within a certain timelimit (see generally sections 11 and 12).

(2) Effect of Expiration of DomesticTime Limits. The prior expiration of timelimits prescribed by domestic law in theUnited States or the treaty country will notby itself prevent the consideration of acompetent authority request by the U.S.competent authority, provided that (a) theapplicable treaty permits waiver of do-mestic procedural barriers to implementa-tion of a competent authority resolution(see section 11.01) and (b) the proceduralrequirements under the applicable treaty(including time limits for notification) aresatisfied (see section 12.01).

(3) Timing of Competent Authority Re-quest Concerning U.S.-Initiated Actions.For a competent authority issue that arisesfrom an examination by the IRS, the U.S.competent authority will not accept acompetent authority request before theIRS has communicated the amount of the


proposed adjustment in writing to the tax-payer, e.g., with a Form 5701, Notice ofProposed Adjustment, or a Form 4549,Income Tax Examination Changes. For acompetent authority issue that arises fromother actions undertaken by or on behalfof the IRS (such as the withholding of taxby a withholding agent), the U.S. compe-tent authority will not accept a competentauthority request before such other actionoccurs.

.05 Content and Form of CompetentAuthority Request.

(1) In General. The U.S. competentauthority will provide assistance only af-ter the taxpayer has filed a complete com-petent authority request. The Appendixsets forth the required contents of a com-plete competent authority request, pre-scribes the order in which the contentsmust be presented, and provides informa-tion and instructions on other administra-tive matters relevant to filing the request.With regard to requests for assistancefrom APMA, see section 2 of the Appen-dix. With regard to requests for assistancefrom TAIT, see section 3 of the Appendix.

(2) Related Requests Submitted to For-eign Competent Authority. A competentauthority request filed with the U.S. com-petent authority must include a descrip-tion or discussion of any related requestsfor assistance submitted to the foreigncompetent authority, together with a thor-ough, informative explanation of any ma-terial differences between the competentauthority request filed under this revenueprocedure and the request filed with theforeign competent authority. The U.S.competent authority may request that thetaxpayer provide a full or partial copy ofthe corresponding request submitted to theforeign competent authority. See gener-ally the Appendix.

(3) Additional Requested and Submit-ted Items. The required information, doc-uments, and analyses identified in the Ap-pendix may not be exhaustive of the itemsthe U.S. competent authority needs toevaluate the competent authority request,including possible interrelated issues (seesection 2.04(3)). Similarly, the foreigncompetent authority may request addi-tional information during the competentauthority process. In general, the taxpayershould be prepared throughout the com-

petent authority process to provide eachcompetent authority with the same infor-mation, documents, and analyses at ap-proximately the same time, regardless ofwhether such information, documents, oranalyses are provided in response to arequest from a competent authority or aresubmitted voluntarily by the taxpayer insupport of its competent authority request.The U.S. competent authority will workwith the taxpayer and the foreign compe-tent authority to establish procedures forefficient distribution of information, doc-uments, and analyses submitted during thecompetent authority process.

(4) Corrected and Updated Informa-tion. After filing the competent authorityrequest, the taxpayer must promptly cor-rect or remedy any material errors orany material omissions in the competentauthority request or in supplementalsubmissions. The taxpayer also mustsubmit any information or documentsdiscovered or created during the compe-tent authority process that would be ma-terial to the competent authority pro-cess. The taxpayer must timely notifythe U.S. competent authority of all ma-terial changes and updates to informa-tion previously submitted in connectionwith the competent authority request.

.06 Requirements and ProceduresApplicable to Specific Types ofCompetent Authority Requests.

(1) Competent Authority Requests In-volving Residency. U.S. competent au-thority assistance may be available to dualresident taxpayers (taxpayers resident inboth the United States and the treaty coun-try) seeking to determine their sole resi-dence under the treaty. The U.S. compe-tent authority will accept a competentauthority request concerning a question ofresidency under a U.S. tax treaty only ifboth (a) the resolution of the residencyissue is necessary to avoid double taxationor to determine the applicability of a ben-efit under the treaty, and (b) the issuerequires consultation with the foreigncompetent authority to ensure consistenttreatment under the applicable U.S. taxtreaty. The U.S. competent authority willnot unilaterally resolve a question of res-idency.

(2) Discretionary LOB Requests.

(a) No Determination If ApplicantMeets Objective Test. Most U.S. tax trea-ties contain an LOB article that enumer-ates objective tests to determine whether aresident of a treaty country is entitled tobenefits under the applicable U.S. taxtreaty. Most LOB articles provide that aresident may be granted treaty benefits atthe discretion of the U.S. competent au-thority if the resident does not qualify forthose benefits under the relevant objectivetests. The U.S. competent authority willnot issue a determination regardingwhether an applicant satisfies an objectiveLOB test. In addition, the U.S. competentauthority will not accept a discretionaryLOB request if the applicant as a part ofits request does not represent that, andexplain why, it does not qualify for therequested benefits under the relevant LOBprovisions. See the Appendix for the ad-ditional information applicants are re-quired to provide in discretionary LOBrequests. The U.S. competent authoritytypically will not exercise its discretion incircumstances described in section3.06(2)(e).

(b) Sole Authority to Grant Discretion-ary Benefits. The U.S. competent author-ity in its sole discretion may grant benefitsunder the discretionary provision of anLOB article in an applicable U.S. taxtreaty. A decision by the U.S. competentauthority not to grant discretionary bene-fits is final and not subject to administra-tive review. An applicant that does notqualify for the requested benefits underthe relevant LOB provisions of the appli-cable U.S. tax treaty may not claim thosetreaty benefits, either at source or througha refund claim, unless it has received afavorable determination from the U.S.competent authority exercising its discre-tion to grant benefits.

(c) Scope. The applicant must specifi-cally identify the benefits of the treaty forwhich it is requesting a discretionary deter-mination. The requested benefits must bespecifically supported by the facts presentedin the applicant’s request, and the requestmust not present a hypothetical transaction.The U.S. competent authority may grant allthe requested benefits or may grant onlycertain benefits. For instance, it may grantbenefits only with respect to a particular


item of income. Further, the U.S. competentauthority may establish conditions on thebenefits, such as setting time limits on theduration of any relief granted.

(d) Exercise of Discretion. In general,if the applicant’s case is accepted, all factsand circumstances may be considered inevaluating whether discretionary LOB re-lief should be granted. To obtain a favor-able determination, the applicant mustdemonstrate to the satisfaction of the U.S.competent authority that it does not qual-ify for the requested benefits under therelevant LOB provisions of the applicableU.S. tax treaty, that the applicant has asubstantial nontax nexus to the treatycountry, and that, if benefits are granted,neither the applicant nor its direct or indi-rect owners will use the treaty in a mannerinconsistent with its purposes. By way ofexample, but not limitation, the U.S. com-petent authority may take into account thecountries of residence of the applicant’sowners, changes in the ownership struc-ture of the applicant and its U.S. opera-tions, and the history of the applicant’strade or business activities in its countryof residence and in the United States, in-cluding its customer base, capital assets,employees, income, and sources of sup-ply. A substantial nontax nexus to thetreaty country cannot be established by anintent to take advantage of favorable do-mestic laws of the treaty country, includ-ing the existence of a network of tax trea-ties.

(e) Areas in Which Discretion Will NotTypically be Exercised. By way of exam-ple, but not limitation, the U.S. competentauthority typically will not exercise itsdiscretion to grant benefits where:

(i) the applicant or any of its affiliatesis subject to a special tax regime in itscountry of residence with respect to theclass of income for which benefits aresought. An example of such a regime forinterest income is one that allows a no-tional interest deduction with respect toequity in the residence country;

(ii) no or minimal tax would be im-posed on the item of income in both thecountry of residence of the applicant andthe country of source, taking into accountboth domestic law and the treaty provision(“double non-taxation”). For example,double non-taxation would occur if a pay-ment under a hybrid instrument was ex-

empt from withholding and generated adeduction in the country of source, whilebeing treated as income exempt from taxin the country of residence of the appli-cant; or

(iii) the applicant bases its requestsolely on the fact that it is a direct orindirect subsidiary of a publicly tradedcompany resident in a third country andthe relevant withholding rate provided inthe tax treaty between the United Statesand the country of residence of the appli-cant is not lower than the correspondingwithholding rate in the tax treaty betweenthe United States and the country of resi-dence of the parent company or any inter-mediate owner.

(f) User Fee. Applicants filing a discre-tionary LOB request for an initial deter-mination, a renewal of a favorable deter-mination issued prior to the effective dateof this revenue procedure, or a supple-mental determination must remit the userfee as provided in section 14 as well ascomply with the instructions set forth inthe Appendix.

(g) Material Change and SupplementalDetermination. An applicant that obtains afavorable determination with respect to adiscretionary LOB request must notifyTAIT within 90 days after becomingaware of any material change in fact orlaw with respect to such request. Exam-ples of material changes in fact may in-clude changes in the ownership structure,assets, or activities of the applicant orrelevant related entities. Examples of ma-terial changes in law may include the en-actment of a special tax regime that ma-terially affects the applicant’s tax liability.Unless TAIT indicates otherwise, a grantof discretionary LOB benefits terminatesupon the occurrence of a material changein law or fact. After notification of a ma-terial change, TAIT either will advise theapplicant that the original determination isstill in effect or will instruct the applicantto seek a supplemental determination. If asupplemental determination is required,no benefits will be allowed until TAIThas issued such supplemental determi-nation. If a supplemental determinationis issued, benefits may, to the extentconsistent with the applicable U.S. taxtreaty, be granted retroactively to thedate of material change in law or fact asdetermined in the sole discretion of the

U.S. competent authority. The fact thatan applicant previously received a fa-vorable determination will not, by itself,preclude the U.S. competent authorityfrom considering all relevant facts andcircumstances, including facts and cir-cumstances that were not previouslyconsidered, in determining whether togrant the requested benefits.

(h) Triennial Statement. An applicantthat receives a favorable discretionaryLOB determination must file a triennialstatement to keep that determination inforce. The statement must declare that (i)there has not been a material change withrespect to any relevant facts as set forth inthe discretionary LOB request (or in anysupplemental requests, submissions (in-cluding past triennial statements), or oralrepresentations made with respect to thatrequest), (ii) there has not been a mate-rial change in law relevant to the bene-fits being sought, and (iii) the applicantis not claiming any benefits differentfrom those granted. The triennial state-ment must contain the following decla-ration: “Under penalties of perjury, Ideclare that I have examined this state-ment and accompanying documents, ifany, and that, to the best of my knowl-edge and belief, this statement containsall relevant information relating to thetriennial reporting requirement, and thatthe representations in this statement aretrue, correct, and complete.” The state-ment also must include any other repre-sentations or items that the U.S. compe-tent authority may instruct the applicantto include. The applicant must file thefirst triennial statement with TAIT nolater than three years from the date ofthe letter notifying the applicant of theU.S. competent authority’s determina-tion to grant discretionary benefits, or bysuch other date to which the U.S. com-petent authority and the applicant mayagree. The applicant must file each ad-ditional triennial statement with TAITno later than three years after the mostrecent triennial statement, or by suchother date to which the U.S. competentauthority and the applicant may agree.The U.S. competent authority will re-view each triennial statement and notifythe applicant if any information must beclarified or supplemented. Any requestthe applicant receives to clarify or sup-


plement information in a triennial state-ment does not constitute an examinationor the commencement of an examinationfor purposes of section 7605(b) or anyother provision of the Code. Failure totimely file a triennial statement will re-sult in a termination of the grant ofdiscretionary benefits from the due dateof the triennial statement.

(3) Pension Plan Requests

(a) In General. Several U.S. tax treatiescontain provisions relating to contribu-tions to foreign pension funds. Underthese provisions, if certain requirementsare satisfied, individuals who perform ser-vices in the United States as employees(and in some cases as independent con-tractors) are allowed to deduct or excludecontributions to a foreign pension fund incomputing their U.S. taxable income.Some of these U.S. tax treaties also allowU.S. citizens who live and work in thetreaty country to claim deductions or ex-clusions for U.S. tax purposes for contri-butions to a foreign pension fund. Manyof these U.S. tax treaties allow U.S. em-ployers a deduction on their U.S. returnsfor contributions to a foreign pension fundon behalf of employees who perform ser-vices in the United States.

(b) Contents of Request. The U.S. taxtreaties described in section 3.06(3)(a)provide that benefits are not available un-less the U.S. competent authority has de-termined that the foreign pension plan“generally corresponds” to a pension planrecognized for tax purposes in the UnitedStates. In some cases, the treaty negotia-tors or the competent authorities haveagreed that certain plans generally corre-spond to a plan recognized for tax pur-poses in the other country. In other cases,however, it will be necessary for an em-ployer, a plan trustee, or an individualplan participant to request a competentauthority determination on whether a par-ticular plan “generally corresponds.” Anemployer, plan trustee, or individual planparticipant seeking such a determinationmust file a pension plan request accordingto the instructions set forth in the Appen-dix.

SECTION 4. ACAP ANDANCILLARY ISSUES

.01 Accelerated Competent AuthorityProcedure.

(1) In General. Under ACAP, a tax-payer may request that the terms of acompetent authority resolution for a giventaxable period be extended to cover sub-sequent taxable periods for which it hasfiled tax returns. In appropriate cases, theU.S. competent authority may request thatthe taxpayer expand the scope of its com-petent authority request to include ACAPyears, even if the taxpayer has not filed anACAP request (see generally section2.04).

(2) Format and Timing of ACAP Re-quests. A taxpayer may include an ACAPrequest in its competent authority request(see the Appendix) or in a separate writtensubmission provided to the U.S. compe-tent authority after the taxpayer has filedits competent authority request but beforea tentative competent authority resolutionis reached between the U.S. and foreigncompetent authorities. See section 8.02. Ataxpayer that seeks to file an ACAP re-quest after it has filed the competent au-thority request may obtain instructions onthe format, content, and timing of theACAP request by contacting the taxpay-er’s assigned U.S. competent authorityrepresentative. Among the items that willbe required in the ACAP request is thetaxpayer’s waiver of its right to writtennotification from the Secretary under sec-tion 7605(b) of the Code of the need formore than one inspection of its books ofaccount and records for taxable years cov-ered by the ACAP request (see section2.02, Tab 2, of the Appendix). The tax-payer is responsible for timely filing anACAP request and should not rely on theU.S. competent authority to notify the tax-payer of the expected timing of a tentativecompetent authority resolution.

.02 Ancillary Issues.

(1) In General. The mutual agreementprocedure article in most U.S. tax treatiesprovides that the U.S. competent authoritymay consult with the foreign competentauthority to reach agreement on ancillaryissues, such as the application of the pro-visions of domestic law regarding penal-

ties, fines, and interest. In cases where theapplicable U.S. tax treaty authorizes theU.S. competent authority to do so, thetaxpayer may request, either in its compe-tent authority request or in a supplementalsubmission, that the competent authoritiesdiscuss certain ancillary issues and thatany competent authority resolution in-clude agreement on such ancillary issues.If the U.S. competent authority either de-clines to consult with the foreign compe-tent authority about, or fails to reach anagreement on, an ancillary issue, then thecontrolling provisions of domestic lawwill apply to that issue.

(2) Competent Authority Repatriation.Competent authority repatriation may beaddressed as an ancillary issue in a com-petent authority resolution. When a com-petent authority resolution makes a pri-mary adjustment to income, deductions,credits, allowances, basis or any otheritem or element affecting taxable incomebetween two members of a controlledgroup, the competent authority resolutionmight also include competent authorityrepatriation as a means to conform theiraccounts to reflect the primary adjustment.Repatriation payments are described gen-erally in Rev. Proc. 99–32, 1999–2 C.B.296, as comprising certain types of pay-ments and prepayment offsets made withrespect to the amount of a primary adjust-ment. Competent authority repatriation al-lows for specific treatment of repatriationpayments between the two members. Con-sistent with the principles of section4.02(1), only repatriation payments ad-dressed in the competent authority resolu-tion will be covered by competent author-ity repatriation.

(a) Requirements for Competent Au-thority Repatriation. The U.S. competentauthority will consider competent author-ity repatriation in a competent authoritycase only if:

(i) no person (whether or not a “UnitedStates taxpayer” within the meaning ofRev. Proc. 99–32) that will make or re-ceive repatriation payments would bebarred from making or receiving repatria-tion payments under the principles of sec-tion 3.01 or 3.03 of Rev. Proc. 99–32;

(ii) the request for competent authorityrepatriation is explicitly set forth in thecompetent authority request or in a sup-plemental written submission filed with


the U.S. competent authority prior to atentative competent authority resolutionbeing reached;

(iii) the primary adjustment giving riseto the application for competent authorityrepatriation is included in the competentauthority resolution; and

(iv) there has been no closing action(within the meaning of section 5.01(1) ofRev. Proc. 99–32) taken on the primaryadjustment.

(b) Decision on Competent AuthorityRepatriation. The U.S. competent author-ity has sole discretion to agree to or de-cline a request for competent authorityrepatriation or a request as to the specificterms of such treatment. In no event willthe U.S. competent authority grant com-petent authority repatriation if (i) the U.S.competent authority terminates assistancewith respect to the competent authorityrequest pursuant to section 7.02, (ii) thecompetent authority request involves is-sues that previously were decided in liti-gation (see section 6.05(2)) or covered bya closing agreement or other similaragreement (see section 6.03(2)), or (iii)the taxpayer rejects the competent author-ity resolution.

(c) Terms and Effect of Competent Au-thority Repatriation. When a competentauthority resolution includes competentauthority repatriation for a particular tax-able year, that treatment of repatriationpayment(s) replaces the treatment of therepatriation payments that otherwisewould be available for that taxable yearunder Rev. Proc. 99–32. To the extent the

taxpayer does not make repatriation pay-ments of the primary adjustment for thetaxable year under the terms specified,there will be consequences as providedin the competent authority resolution or,if not specified in the competent author-ity resolution, as provided by the Codeand the relevant domestic law of thetreaty country. The terms of the compe-tent authority repatriation reached in thecompetent authority resolution may re-flect a prevailing practice with a treatypartner as well as circumstances specificto a particular case, and may include,among other things, a waiver of inter-company interest on repatriation pay-ments made within a certain timeperiod.

(d) Treatment of Repatriation Pay-ments in Absence of Competent AuthorityRepatriation. In the absence of competentauthority repatriation, the provisions ofthe Code and the regulations will governthe availability and tax consequences ofrepatriation payments. In such cases, theprovisions of Rev. Proc. 99–32 or succes-sor guidance governing the election avail-able to qualifying taxpayers regarding thetreatment of repatriation payments are notchanged by this revenue procedure. Seealso Rev. Proc. 2015–41, section 7.01(2).

SECTION 5. SMALL CASECOMPETENT AUTHORITYREQUESTS

.01 In General. The U.S. competentauthority will endeavor to minimize ad-ministrative burdens on taxpayers filing

small case competent authority requests(as described in section 5.02). A taxpayerthat seeks an exemption from the usualcompetent authority request content re-quirements of section 3 with respect to asmall case competent authority requestshould contact TAIT or APMA, as appro-priate. Even if the U.S. competent author-ity initially agrees to abbreviate the usualcompetent authority request requirements,the U.S. competent authority may subse-quently require the taxpayer to supple-ment its competent authority request withany or all of the information required un-der section 3, as well as any other infor-mation or documents the U.S. competentauthority determines is needed to evaluatethe request.

.02 Eligibility.

(1) Excluded Requests. A competentauthority request does not qualify as asmall case competent authority request ifit (a) arises from a taxpayer-initiated po-sition, (b) is a discretionary LOB request,or (c) is a pension plan request filed by aperson other than an individual plan par-ticipant.

(2) Dollar Thresholds. Except as pro-vided in section 5.02(1), a competent au-thority request will qualify as a small casecompetent authority request if the sum ofthe U.S.- and foreign-initiated adjust-ments does not exceed the following dol-lar thresholds for all of the competentauthority years combined:

Type of Taxpayer Threshold of Proposed Adjustment(s)

Corporation/Partnership $5,000,000

Other (including individual) $1,000,000

SECTION 6. COORDINATION OFTHE COMPETENT AUTHORITYPROCESS WITH U.S.ADMINISTRATIVE AND JUDICIALPROCEEDINGS

.01 In General. This section discussescoordination of the competent authorityprocess with administrative and judicialproceedings associated with U.S.-initiatedactions. Specific guidance is also providedon when the scope of assistance of the

U.S. competent authority may be limitedand the circumstances under which accessto the U.S. competent authority may bedenied with respect to U.S.-initiated ac-tions.

.02 Exclusive Jurisdiction within theIRS. The U.S. competent authority willassume exclusive jurisdiction within theIRS over all competent authority issues ina competent authority request that it hasaccepted. Any further administrative ac-

tion by the IRS (e.g., assessment and col-lection procedures) with respect to thecompetent authority issues in the compe-tent authority case will be suspended un-less the U.S. competent authority instructsotherwise. Standard administrative proce-dures will continue to apply to issues overwhich the U.S. competent authority hasnot assumed jurisdiction. If the U.S. com-petent authority decides to cease provid-ing assistance regarding a competent au-


thority issue (see section 7.02), the U.S.competent authority will return jurisdic-tion over the issue to the relevant office(s)within the IRS. See also sections 2.08 and9.03.

.03 Coordination with IRSExamination.

(1) Form 870 Waivers. The U.S. com-petent authority will not reject a taxpay-er’s competent authority request solelybecause the taxpayer previously signed aForm 870, Waiver of Restrictions on As-sessment and Collection of Deficiency inTax and Acceptance of Overassessment,with IRS Examination that covers compe-tent authority issues for which the tax-payer is requesting assistance. If the U.S.competent authority accepts the compe-tent authority request, it will endeavor toreach a competent authority resolutionwith the foreign competent authority. Thisparagraph is intended to apply only tostandard Form 870 waivers. Taxpayers areadvised to contact the U.S. competent au-thority to determine the effect of signing anon-standard Form 870 waiver.

(2) Closing Agreements and SimilarAgreements. The U.S. competent author-ity will not reject a taxpayer’s competentauthority request solely because the tax-payer previously executed a closingagreement, a Form 870–AD, Offer toWaive Restrictions on Assessment andCollection of Tax Deficiency and to Ac-cept Overassessment, or other similaragreement with IRS Examination thatcovers competent authority issues forwhich the taxpayer is requesting assis-tance. However, if the U.S. competent au-thority accepts the competent authority re-quest, the U.S. competent authority willendeavor only to obtain a correlative ad-justment from the applicable treaty coun-try and will not undertake any actions thatwould change the determination of tax-able income set forth in the agreement.Taxpayers therefore should be aware thatin these situations, as well as in situationswhere a treaty country takes a similar po-sition with respect to issues resolved un-der its domestic laws, relief from doubletaxation may be jeopardized.

(3) Alternative Dispute Resolution. TheU.S. competent authority will not reject ataxpayer’s competent authority requestsolely because the taxpayer has previously

pursued resolution of its competent au-thority issue through an alternative dis-pute resolution program that is under thejurisdiction of IRS Examination (e.g., theFast Track Settlement Program as setforth in Rev. Proc. 2003–40, 2003–1 C.B.1044). If a resolution is reached throughsuch a program, the taxpayer’s access toU.S. competent authority assistance willbe determined in accordance with sections6.03(1) and 6.03(2). If, however, the tax-payer has pursued resolution of its com-petent authority issue through an alterna-tive dispute resolution program that isunder the jurisdiction of IRS Appeals, theU.S. competent authority will decline toaccept the taxpayer’s competent authorityrequest. See section 6.04. Taxpayers thatare uncertain as to whether an issue wouldbe considered under the jurisdiction ofIRS Appeals in an alternative dispute res-olution program are advised to contact theU.S. competent authority to determine theapplication of this paragraph before pur-suing a resolution of the issue through theprogram.

.04 Coordination with IRS Appeals.

(1) In General. There are two officeswithin the IRS to which a taxpayer maypresent a U.S.-initiated action for admin-istrative review of competent authority is-sues: IRS Appeals and the U.S. competentauthority. Competent authority issues ac-cepted for consideration by the U.S. com-petent authority are not subject to the con-current jurisdiction of IRS Appeals (seesection 6.02). However, a taxpayer mayrequest SAP review as described in sec-tion 6.04(2), which is a review of a com-petent authority issue under the jurisdic-tion of the U.S. competent authority withthe assistance of IRS Appeals. For a com-petent authority issue that is initially un-der the jurisdiction of IRS Appeals, theU.S. competent authority will decline toprovide assistance unless the taxpayer, inaccordance with the requirements of sec-tion 6.04(3), effectively severs the issuefrom its protest and then timely files aU.S. competent authority request with re-spect to the issue. This revenue proceduredoes not limit the ability of a taxpayer toobtain IRS Appeals review of a competentauthority issue that remains after the com-petent authority process has concluded.See section 6.04(4).

(2) SAP Review.

(a) In General. The simultaneous ap-peals procedure is an optional aspect ofthe competent authority process wherebyIRS Appeals works jointly with the U.S.competent authority and the taxpayer to-ward the development of the U.S. compe-tent authority’s position on an underlyingU.S.-initiated adjustment prior to the U.S.competent authority’s consultations withthe foreign competent authority. The pro-cedure is intended to facilitate the U.S.competent authority’s unilateral consider-ation of a resolution of the competent au-thority issue before it presents a positionon the issue to the foreign competent au-thority. SAP review will be initiated onlyupon a request by a taxpayer in accor-dance with section 6.04(2)(b).

(b) Requesting SAP Review. A tax-payer may request SAP review as part ofits competent authority request or in aseparate written submission filed no laterthan 60 days after the taxpayer receivesnotification that the U.S. competent au-thority has accepted its competent author-ity request (see section 2, Part 3.1 of theAppendix; see also section 1.03 for therule applicable to deadlines). Before fil-ing its competent authority request, ataxpayer may request a pre-filing con-ference with the U.S. competent author-ity to discuss SAP review by followingthe procedures set forth in section 3.02.SAP review may be requested for one ormore competent authority issues in thecompetent authority request. Any com-petent authority issues for which thetaxpayer has not sought SAP review willbe handled by the U.S. competent au-thority under the standard competent au-thority process.

(c) Actions with Respect to SAP ReviewRequest. The U.S. competent authority inits sole discretion will decide whether toaccept the taxpayer’s request for SAPreview after consulting with IRS Ap-peals and after considering whether SAPreview would unduly burden tax admin-istration, including the competent au-thority process. The U.S. competent au-thority may choose to accept SAPreview with respect to only certain com-petent authority issues.


(d) Conduct of SAP Review.

(i) In General. If the U.S. competentauthority accepts a request for SAP re-view, it will notify the taxpayer and coor-dinate with both the taxpayer and IRSAppeals on process and time frame. Themanner in which SAP review is conductedwill be determined by the U.S. competentauthority on a case-by-case basis afterconsulting with IRS Appeals. In general,IRS Appeals will begin SAP review byreviewing the positions previously takenon the competent authority issues by IRSExamination and the taxpayer and con-sulting with the taxpayer and the U.S.competent authority. IRS Appeals willconduct its review and consultations inaccordance with standard IRS Appealspractices except that the U.S. competentauthority will participate in meetings heldbetween IRS Appeals and the taxpayer.IRS Appeals and the U.S. competent au-thority will consult on whether other ex-ceptions to standard IRS Appeals prac-tices may be appropriate in a given case.

(ii) Positions in SAP Review not Bind-ing. The U.S. competent authority willconsider the points raised in SAP reviewbefore deciding upon the position it willpresent to the foreign competent authority.Any discussions with respect to positionstaken in SAP review, whether written ororal, are not binding on the taxpayer, theU.S. competent authority, or IRS Appeals.The IRS will not ask a taxpayer to enterinto a written agreement based on a posi-tion developed through SAP review as aprerequisite to pursuing any competentauthority resolution.

(iii) Termination of SAP Review byIRS. At any point during SAP review, theU.S. competent authority in its sole dis-cretion may terminate SAP review withregard to one or more competent authorityissues after consulting with IRS Appeals.The standard competent authority processwill then apply to any issues removedfrom SAP review. The U.S. competentauthority will inform the taxpayer of nextsteps in the competent authority process(and in SAP review for any issues thatremain in SAP review). Upon terminationof SAP review, a taxpayer may withdrawits competent authority request for any ofthe competent authority issues for which it

initially sought assistance (see section2.08).

(iv) Withdrawal from SAP Review byTaxpayer. At any point during SAP re-view, the taxpayer may withdraw its re-quest for SAP review with regard to oneor more competent authority issues. TheU.S. competent authority, in turn, will de-cide whether to continue SAP review forany competent authority issues the tax-payer chooses to retain in SAP review.The standard competent authority processwill then apply to any competent authorityissues removed from SAP review.

(3) Severing Issues from Protest Filedwith IRS Appeals.

(a) In General. A taxpayer that initiallypresents a competent authority issue toIRS Appeals may still request U.S. com-petent authority assistance if, and only if,it satisfies the following conditions: (a)the taxpayer files its competent authorityrequest no later than 60 days after itsopening conference with IRS Appeals(see section 1.03 for the rule applicable todeadlines); (b) the competent authority re-quest shows that the taxpayer has properlysevered the competent authority issuefrom the issues in its protest that willremain under the jurisdiction of IRS Ap-peals; (c) the taxpayer has not invoked analternative dispute resolution program un-der the jurisdiction of IRS Appeals withrespect to the competent authority issue;and (d) the taxpayer has not executed withIRS Appeals a Form 870–AD, a closingagreement, or any other similar agreementconcerning such competent authority is-sue. If the U.S. competent authority ac-cepts the request, it will assume exclusivejurisdiction over the competent authorityissues that it has accepted. Standard IRSAppeals procedures will continue to applyto any other issues over which IRS Ap-peals retains jurisdiction. The U.S. com-petent authority will not accept a compe-tent authority request concerning acompetent authority issue that the tax-payer has not properly severed from theissues within the jurisdiction of IRS Ap-peals in accordance with this section (seesection 7.02(3)(d)). In deciding whether tosever issues pursuant to this section, tax-payers should bear in mind that forgoingU.S. competent authority assistance mayadversely affect the availability of the for-

eign tax credit. See Treas. Reg. § 1.901–2(e)(5) and Rev. Rul. 92–75, 1992–2 C.B.197.

(b) Deadline for Competent AuthorityIssues Identified During IRS Appeals Con-sideration. If, during the course of review-ing the taxpayer’s issues and after the60-day period provided in section6.04(3)(a) has commenced, the IRS Ap-peals representative determines that a po-tential competent authority issue existsthat had not been identified by IRS Exam-ination, the deadline for filing the compe-tent authority request under the provisionsof section 6.04(3)(a) will be 60 days afterthe date the taxpayer is first notified that apotential competent authority issue exists.

(c) Consideration of Competent Au-thority Request. The U.S. competent au-thority will consider, in accordance withthis revenue procedure, a competent au-thority request that includes one or moreissues severed from an Appeals protest.The U.S. competent authority may acceptthe competent authority request as tosome or all of the severed issues. If theU.S. competent authority accepts the com-petent authority request with respect toonly particular severed issues, the U.S.competent authority will assume jurisdic-tion over only those severed issues, andIRS Appeals procedures will continue toapply to the other severed issues. Thetaxpayer may request SAP review pursu-ant to section 6.04(2)(b) with respect tocompetent authority issues severed fromthe IRS Appeals protest, and the U.S.competent authority will consider whetherto accept the request for SAP review con-sistent with the general principles set forthin section 6.04(2)(c).

(4) Subsequent Review by IRS Appeals.Nothing in this revenue procedure limitsthe ability of a taxpayer to obtain IRSAppeals review of a competent authorityissue set forth in its competent authorityrequest if, with respect to that competentauthority issue, (a) the U.S. competentauthority rejects the request or terminatesthe competent authority process, (b) thetaxpayer withdraws its request for compe-tent authority assistance, (c) the compe-tent authorities do not reach a competentauthority resolution, or (d) the taxpayerdoes not accept the terms of the competentauthority resolution.


(5) Transition Rule for Cases Underthe Jurisdiction of IRS Appeals. If, prior tothe effective date of this revenue proce-dure, either (a) the IRS has issued a 30-day letter notifying a taxpayer of the rightto request IRS Appeals consideration of acompetent authority issue or (b) the com-petent authority issue is before IRS Ap-peals, the procedures and time frames setforth in section 7.02 of Rev. Proc.2006-54 will apply to such competent au-thority issue.

.05 Coordination with Litigation.

(1) In General. The U.S. competentauthority will not accept or continue toconsider a taxpayer’s competent authorityrequest regarding (a) any competent au-thority issue and taxable period desig-nated for litigation with respect to thesame taxpayer, or (b) any competent au-thority issue and taxable period that arepending in a U.S. federal court and thatwere under IRS Appeals jurisdiction withrespect to the same taxpayer before thecommencement of the litigation (see gen-erally sections 6.04 and 7.02(3)(d)). Inother cases where a taxpayer has made acompetent authority request with respectto a taxable period involved in pendinglitigation concerning the federal tax liabil-ity of the taxpayer, the U.S. competentauthority may accept, or continue to con-sider, the competent authority request af-ter consulting with the Associate ChiefCounsel (International). During the com-petent authority process, a taxpayer maybe asked to join the IRS in a motion tosever any competent authority issues, de-lay trial, or stay proceedings pending theoutcome of the taxpayer’s competent au-thority case. The Associate Chief Counsel(International) will coordinate the filingof any such motion on behalf of the IRSwith, as appropriate, Division Counsel,the Department of Justice, and the tax-payer. Final decision on severing issues,delaying trial, or staying proceedingsrests with the court. If the court denies amotion to sever competent authority is-sues, delay trial, or stay proceedings, theU.S. competent authority will terminateany ongoing consideration of the com-petent authority request (see generallysection 7.02(3)(d)).

(2) Effect of Judicial Determinationsand Litigation Settlements. A taxpayermay file a competent authority requestwith respect to a U.S. federal court’s finaldetermination of its tax liability, but onlyfor the purpose of seeking correlative re-lief from a foreign competent authority.Such final determinations include litigationsettlements with the Office of Chief Counselor the Department of Justice. If it acceptssuch a request, the U.S. competent authoritywill seek correlative relief from the foreigncompetent authority only for the amount ofsuch final determination and will not autho-rize competent authority repatriation.

SECTION 7. ACKNOWLEDGMENTOF RECEIPT AND DENIAL OFASSISTANCE

.01 In General. The U.S. competentauthority will acknowledge to the tax-payer in writing that it has received thetaxpayer’s competent authority request.The acknowledgment will indicatewhether the competent authority request iscomplete and whether the U.S. competentauthority accepts the competent authorityrequest. The acknowledgment also willprovide the name and contact informationof the assigned U.S. competent authorityrepresentative(s) and any supplemental in-structions (e.g., payment of the user fee inthe case of a discretionary LOB requestthat has been accepted (see section14.02)). The U.S. competent authoritywill notify the foreign competent author-ity when a competent authority requesthas been accepted.

.02 Denial and Termination of Assis-tance. The U.S. competent authority maydecline to accept a competent authorityrequest or may cease providing assistanceat any point after the competent authorityprocess has commenced. The U.S. com-petent authority will notify and, as appro-priate, consult with the relevant foreigncompetent authority before taking suchaction. Circumstances in which the U.S.competent authority may decline to accepta competent authority request or maycease providing assistance include, but arenot limited to, the following:

(1) The taxpayer has failed to complywith the procedural requirements set forthin this revenue procedure, such as thoselisted in section 2.04, section 3, and theAppendix, after having been provided rea-

sonable opportunity to correct (if possi-ble) or remedy any deficiencies in its com-petent authority request or in its othersubmissions during the competent author-ity process.

(2) The taxpayer is not eligible for thetreaty benefit or for the assistance re-quested according to a plain reading of theU.S. tax treaty (such as by failing to be aresident of either contracting state).

(3) The taxpayer’s conduct before orafter filing its competent authority requesthas undermined or has been prejudicial tothe competent authority process, includ-ing but not limited to conduct that hassignificantly impeded the ability of (a)IRS Examination, the U.S. competent au-thority, or any other part of the IRS, or theforeign tax authority, to adequately exam-ine the competent authority issues forwhich assistance has been requested or (b)the U.S. or foreign competent authority toundertake substantive consideration ofand resolve the competent authority case.Examples of such conduct include:

(a) The taxpayer agreed to or acqui-esced in a foreign-initiated adjustment, orentered into a unilateral APA with a for-eign tax authority, involving significantlegal or factual issues in a manner thatimpeded the U.S. competent authorityfrom engaging in full and fair consulta-tions with the foreign competent authorityon the competent authority issues.

(b) The taxpayer entered into a unilateralAPA with the IRS when the competent au-thority issue could reasonably and practi-cally have been covered if the taxpayer hadinstead pursued a bilateral APA (see Rev.Proc. 2015–41, section 2.02(4)(d)).

(c) The taxpayer rejected a request toextend the period of limitations for assess-ment of tax for taxable periods (includingACAP years) covered by the competentauthority request.

(d) The taxpayer has failed to complywith the provisions of sections 6.03, 6.04,and 6.05 governing coordination betweenthe competent authority process and ad-ministrative and judicial proceedings orhas pursued its rights within such pro-ceedings and within the competent author-ity process in a way that has underminedor is prejudicial to the competent authorityprocess.

(e) The taxpayer has presented newmaterial information or evidence during


the competent authority process that rea-sonably could have been presented to IRSExamination during the examination ofthe taxable years covered by the compe-tent authority request.

(f) In competent authority requests orcompetent authority cases involvingtaxpayer-initiated positions, the taxpayerfailed to request the assistance of the for-eign competent authority and the U.S.competent authority in a timely manner inrelation to the taxable year for which re-lief is sought, or the taxpayer otherwisehas pursued competent authority assis-tance in a way that has undermined orprejudiced the competent authority pro-cess or has impeded the U.S. or foreigncompetent authority from engaging in fulland fair consultations on the competentauthority issue(s).

.03 No Review of Denial of CompetentAuthority Request for Assistance. TheU.S. competent authority’s decision as towhether a competent authority request iscomplete, or to deny, suspend, or termi-nate assistance, is final and not subject toadministrative review. See also section3.06(2)(b) regarding denial of discretion-ary LOB relief.

SECTION 8. CONSULTATIONS ANDRELATED ACTIONS BY THE U.S.COMPETENT AUTHORITY

.01 Non-U.S.-Initiated Actions. In gen-eral, the U.S. competent authority willevaluate a competent authority request in-volving a non-U.S.-initiated action on thebasis of the justifications for the actionprepared by the foreign tax authority orforeign competent authority (or, in thecase of a taxpayer-initiated position, onthe basis of the justifications for the posi-tion given by the taxpayer) and the anal-yses of such justifications prepared by thetaxpayer or other IRS offices. The U.S.competent authority typically will engagein consultations with the foreign compe-tent authority on the justification for, andappropriate extent of, correlative reliefthat it may provide. In cases involvingforeign-initiated actions, the U.S. compe-tent authority may grant correlative reliefwithout such consultations if it is satisfiedon the basis of its own review and assess-ment that the foreign-initiated action isjustified under the U.S. tax treaty (e.g., theaction represents a reasonable application

of the arm’s length standard in a transferpricing case).

.02 U.S.-Initiated Actions. In general,the U.S. competent authority will evaluatea competent authority request involving aU.S.-initiated action in light of justifica-tions for the action developed by IRS Ex-amination, views received through SAPreview, if any, and any analyses of theaction prepared by the taxpayer or otherIRS offices. If the action appears to bejustified and the U.S. competent authoritydetermines that it is not itself able to ar-rive at a satisfactory resolution of thecompetent authority issues (e.g., by with-drawing an adjustment in part or in full),then the U.S. competent authority will be-gin consultations with the foreign compe-tent authority.

SECTION 9. RESULTS OFCOMPETENT AUTHORITY CASE

.01 In General. This section discussespossible outcomes of the competent au-thority process and the steps to close acompetent authority case. The outcome ofmost competent authority cases will be acompetent authority resolution that pro-vides the taxpayer with complete or par-tial relief from taxation not in accordancewith the U.S. tax treaty. If the U.S. andforeign competent authorities are unableto reach a competent authority resolution,the competent authority case may be eli-gible for resolution through arbitration un-der the terms of the applicable U.S. taxtreaty (see generally section 10).

.02 Presentation of Tentative Compe-tent Authority Resolution to Taxpayer. Ifthe U.S. and foreign competent authoritiesreach a tentative competent authority res-olution, it will be presented to the tax-payer for consideration. Whether the ten-tative competent authority resolution isconveyed to the taxpayer in writing or byother means will depend upon the stage,size, and complexity of the competent au-thority case. The taxpayer will be givenadequate opportunity to respond affirma-tively as to whether the taxpayer acceptsor rejects the terms. However, the compe-tent authorities may deem the taxpayer tohave rejected the tentative competent au-thority resolution if the taxpayer does nottimely accept it. Subject to any applicabledisclosure constraints, the competent au-thorities may respond to questions that the

taxpayer asks about the positions andviews of the competent authorities under-lying the tentative competent authorityresolution, including specific questionsabout computations and similar aspects ofimplementing its terms. Resolution ofsuch questions may require further con-sultations between the competent author-ities. The purpose of such consultations isto address the implementation of the ten-tative competent authority resolution, notto renegotiate the underlying agreement.

.03 Rejection of Tentative CompetentAuthority Resolution. If the taxpayer re-jects the tentative competent authority res-olution (either by notifying the U.S. orforeign competent authority or by failingto timely accept it) and either the U.S. orforeign competent authority is unwillingto consult further, then the U.S. competentauthority will formally close the case. Thetaxpayer may then pursue all domesticremedies otherwise available to it withrespect to the competent authority issue(s)in the United States or the treaty country.If there are multiple competent authorityissues covered by the tentative competentauthority resolution, the taxpayer, subjectto the consent of the competent authori-ties, may accept the agreement reached onone or more competent authority issueswhile rejecting an agreement on other is-sues covered by the tentative competentauthority resolution. Generally, if the tax-payer accepts a tentative resolution of acompetent authority issue, it must acceptthe resolution of that issue for all of thecovered years (including ACAP years ifapplicable). Where appropriate, the com-petent authorities may permit the taxpayerto accept the resolution only for particularyears (e.g., for competent authority yearsbut not ACAP years). To the extent thatthe taxpayer rejects the competent author-ity resolution, the U.S. competent author-ity will return jurisdiction over the com-petent authority issue(s) to the relevantoffices within the IRS.

.04 Implementation of Competent Au-thority Resolution. If the taxpayer acceptsthe terms of the tentative competent au-thority resolution, the U.S. competent au-thority will proceed to formally close thecase. The U.S. competent authority willnot recognize a competent authority reso-lution as being final and binding on theIRS until the tentative competent author-


ity resolution has been reviewed and ap-proved within the office of the U.S. com-petent authority and the competentauthority case has been formally closed byboth competent authorities. Once the com-petent authority resolution has been final-ized, the U.S. competent authority willdirect the relevant offices within the IRSto begin implementing its terms. To theextent authorized under the applicableU.S. tax treaty, the competent authorityresolution will be implemented notwith-standing any time limits or other proce-dural limitations under the Code and reg-ulations. When appropriate, the IRS mayrequest that the taxpayer execute a closingagreement reflecting the terms of the com-petent authority resolution. See Rev. Proc.68–16, 1968–1 C.B. 770 (as modified byRev Proc. 94–67, 1994–2 C.B. 800).

SECTION 10. ARBITRATION

.01 In General. In arbitration treaties,the mutual agreement procedure articlerequires that the competent authorities re-fer certain competent authority cases tomandatory arbitration in the event directconsultation does not lead to a competentauthority resolution within a prescribedtime period. The mutual agreement proce-dure article in arbitration treaties sets forthdetailed rules regarding the resolution ofcases that are eligible for arbitration asprescribed by the relevant treaty. This sec-tion addresses general procedural issuesassociated with mandatory arbitration thatis undertaken as part of the competentauthority process. Taxpayers should con-sult the mutual agreement procedure arti-cle under the applicable U.S. tax treaty todetermine whether it is an arbitrationtreaty and the extent to which mandatoryarbitration applies under such treaty.

.02 Commencement Date and the Be-ginning of Arbitration Proceedings. De-termining the “commencement date” un-der an arbitration treaty is importantbecause arbitration proceedings begin af-ter a specified time period, typically twoyears, following the commencement dateunless both competent authorities agree toa different date. In general, the com-mencement date for a case is the earliestdate on which the information necessaryto undertake substantive consideration fora competent authority resolution has beenreceived by both competent authorities.

The U.S. competent authority generallytakes the position that it has received allinformation necessary to undertake sub-stantive consideration for a competentauthority resolution only when it hasreceived a complete competent authorityrequest as described in this revenue pro-cedure. The U.S. competent authoritywill notify the taxpayer as to the com-mencement date once it has been estab-lished by the U.S. and foreign compe-tent authorities.

.03 Non-disclosure Agreement. The ar-bitration proceedings will not begin be-fore the date by which both competentauthorities have received properly exe-cuted non-disclosure agreements from allconcerned persons (as defined in the ap-plicable arbitration treaty), their autho-rized representatives, and their agents.The U.S. competent authority will providethe taxpayer and all concerned personswith a form for the non-disclosure agree-ment.

.04 Notification of Unsuitability for Ar-bitration. Arbitration treaties allow bothcompetent authorities to agree, at any timeprior to the start of an arbitration proceed-ing, that a particular case is not suitablefor arbitration. The U.S. competent au-thority will notify the taxpayer of anysuch determination.

.05 Taxpayer Participation. The tax-payer may submit its analysis and view ofthe case to the arbitration panel throughthe U.S. competent authority to the extentpermitted under the applicable arbitrationtreaty.

.06 Notification of Arbitration Panel’sDetermination. The U.S. competent au-thority will notify the taxpayer of the ar-bitration panel’s determination. If the tax-payer accepts the arbitration panel’sdetermination, its terms will constitute acompetent authority resolution.

.07 Other Taxpayer Rights. If a tax-payer rejects the determination of an arbi-tration panel, does not accept the determi-nation within the deadline mandatedunder the applicable arbitration treaty, orhas been notified that a case has beendetermined not to be suitable for arbitra-tion, then upon closure of the competentauthority case, the taxpayer may pursueany rights that remain available under do-mestic law in either the United States orthe treaty country.

SECTION 11. PROTECTIVE CLAIMS

.01 In General. Most U.S. tax treatiesprovide that competent authority resolu-tions are to be implemented by the UnitedStates and the treaty country notwith-standing any time limits or other proce-dural limitations under the domestic lawof either country. A minority of U.S. taxtreaties may not allow the U.S. competentauthority to waive such limitations. Fur-ther, in any particular case, domestic bar-riers may be waived only if a competentauthority request is accepted and a com-petent authority resolution is reached. Forthese reasons, and because circumstancesnot under the control of the taxpayer orthe U.S. or foreign competent authoritymay impede the implementation of a com-petent authority resolution, it is advisableas a general matter for the taxpayer or amember of the taxpayer’s controlledgroup to take protective measures underapplicable domestic law to increase thelikelihood that a competent authority res-olution in its competent authority case canbe implemented in both treaty countriesand to protect any rights of access to al-ternative remedies outside of the compe-tent authority process from being barredby administrative, legal, or proceduralbarriers. This section sets forth proceduresand guidelines for taking such protectivemeasures.

.02 Protective Claims ProceduresGenerally.

(1) In General. A taxpayer may make aprotective claim to protect its right to apotential credit or refund in the event thata competent authority resolution isreached and to retain its rights of access toany alternative remedies available outsideof the competent authority process underthe Code or regulations. A protectiveclaim is distinct from a treaty notification(see section 12) and does not affect thenotification deadline under a given treaty,even though a protective claim andtreaty notification may initially be madein the same submission and may be up-dated annually in the same notification(see section 12.05).

(2) Timing of Protective Claims. Gen-erally, a taxpayer should consider makinga protective claim when it has reason tobelieve that an action of a tax authority


has resulted or is likely to result in acompetent authority issue. However, itmay be advisable to make a protectiveclaim at earlier times, for example, whenthe claim concerns a recurring competentauthority issue or when the taxpayer isotherwise aware that an adjustment islikely for a given taxable year. The U.S.competent authority is not responsible forensuring that the taxpayer has filed a validprotective claim timely.

(3) IRC § 6402 Requirements. To be avalid protective claim for credit or refundfor purposes of this revenue procedure,the claim must be in writing and meet therequirements of section 6402 of the Codeand the regulations thereunder, other thanthe requirement in Treas. Reg.§ 301.6402–3 to file the claim on theappropriate form. Accordingly, a protec-tive claim must, at a minimum, (a) fullyadvise the IRS of the grounds on whichthe credit or refund is claimed, (b) containsufficient facts to apprise the IRS of theexact basis of the claim, (c) describe andidentify the contingencies affecting theclaim, (d) state the year for which theclaim is being made, (e) be verified bywritten declaration made under penaltiesof perjury, and (f) be filed before the ex-piration of the applicable period of limi-tation to which the claim relates.

.03 Making Protective Claim inCompetent Authority Request orSeparate Letter.

(1) In General. A protective claim forcredit or refund filed under this revenueprocedure may be made in either of thefollowing ways: (a) including the claim ina competent authority request; or (b) filinga letter specifically stating that a protec-tive claim is being made pursuant to thisrevenue procedure in relation to an issueon which the taxpayer may eventually re-quest competent authority assistance. Inconjunction with either of these methods,the taxpayer may, but is not required to,use the form specified in Treas. Reg.§ 301.6402–3. To make a protective claimwithin a competent authority request, seesection 2.02, Tab 3 of the Appendix.There may be situations in which a tax-payer will be unable to submit a compe-tent authority request before the applica-ble period of limitations expires. In suchsituations, a separate protective claim in

the form of a letter should be filed. Forexample, a letter would be appropriatewhen (a) a foreign tax authority is consid-ering, but has not yet proposed, an adjust-ment, (b) a foreign tax authority has pro-posed an adjustment but administrative orjudicial remedies are expected to be pur-sued in the treaty country before a com-petent authority request is filed, or (c) orthe terms of the applicable treaty requirethat notification of a claim be made withina certain time, independent of any actionby a tax authority.

(2) Manner of Filing Separate Letter.If the protective claim is made in a sepa-rate letter, the subject of the letter shouldstate, “Protective Claim Pursuant to Sec-tion 11 of Rev. Proc. 2015–40.” In theletter, the taxpayer must declare that it ismaking a protective claim prior to filing apotential competent authority request re-garding the anticipated competent author-ity issue(s) set forth in the letter. The letteralso must contain the information de-scribed in section 11.02(3). A subsequentcompetent authority request that relates toa protective claim made in the form of aletter must refer to such letter (see section11.04). The taxpayer may combine multi-ple years and issues into a single protec-tive claim (or annual notification) as longas all of the required claim information isprovided with respect to each year andissue (see section 11.05). One printedcopy and one electronic copy of the pro-tective claim letter must be submitted toAPMA or TAIT, as appropriate. The tax-payer may include a second printed copyof the letter, together with a self-addressedstamped envelope. Upon receipt of theprotective claim letter, the U.S. competentauthority will date stamp the secondprinted copy and return it to the taxpayerfor its records. The electronic copy of theprotective claim letter must follow therules for media and format of electronicsubmissions described in section 2.03(3)of the Appendix. If a taxpayer filing aprotective claim letter is under examina-tion by the IRS, or if an examination be-gins after the letter is filed, the taxpayermust send a copy of the letter to the IRSoffice conducting the examination. A tem-plate of a letter suitable for making aprotective claim may be obtained by con-tacting APMA or TAIT, as appropriate.

.04 Effect of Protective Claim. A pro-tective claim made in the form of a letteror a competent authority request that com-plies with the provisions of this revenueprocedure will meet the filing require-ments for a valid claim for credit or refundunder section 6402 of the Code and theregulations thereunder with respect to thecompetent authority issues set forth in theclaim, so long as the letter or request isfiled before the expiration of the applica-ble statutory period of limitations for fil-ing claims for credit or refund under theCode.

.05 Annual Notification Requirementand Additional Protective Claims.

(1) Annual Notification. After initiallyfiling a protective claim letter with respectto a given taxable year and before filing itscompetent authority request, the taxpayermust annually notify the U.S. competentauthority as to whether it may still file acompetent authority request with regard tothe taxable year for which the protectiveclaim was filed. The annual notificationmust be filed following the close of eachtaxable year ending after the taxable yearin which the taxpayer filed the protectiveclaim but no later than the date on whichthe taxpayer timely files a tax return forsuch taxable year (see section 1.03 for therule applicable to deadlines). The annualnotification, which must be filed in theform of a letter, must (a) be titled “AnnualNotification of Protective Claim,” (b) ref-erence the initial protective claim and re-state the taxable year for which that claimwas made, (c) contain a declaration thatthe taxpayer is providing its annual noticeof protective claim pursuant to this sectionand that it is requesting that its protectiveclaim for that taxable year remain active,and (d) where appropriate, update or oth-erwise correct the information set forth inthe protective claim or any subsequent an-nual notifications. The annual notificationmust be filed in the same place and manneras an initial protective claim letter. The tax-payer may include a second printed copy ofthe annual notification letter, together with aself-addressed stamped envelope, which theU.S. competent authority will date stampand return to the taxpayer for its records.The U.S. competent authority may deny as-sistance to a taxpayer that fails to providethe annual notification with regard to the


taxable year for which the annual notifica-tion was required.

(2) Additional Protective Claims. Ataxpayer that is filing an annual notifica-tion for a given taxable year pursuant tosection 11.05(1) may include in its letteran additional protective claim(s) for a sub-sequent taxable year(s) and an additionalannual notification(s) for a subsequenttaxable year(s). In addition to includingthe information required by section11.05(1) for the annual notification for aprior claim, the taxpayer’s letter must in-clude all of the information required bysection 11.03(2) for any new protectiveclaim in order to constitute a valid protec-tive claim. In whatever manner such ini-tial protective claims or annual notifica-tions are consolidated pursuant to thissection, the submission must clearly statein its title the purposes for which it is toserve. In accordance with section11.03(2), the taxpayer may include a sec-ond printed copy of the letter, which theU.S. competent authority will date stampand return to the taxpayer for its records.

SECTION 12. TREATYNOTIFICATIONS

.01 In General. A number of U.S. taxtreaties provide that a mutual agreementunder the mutual agreement procedure ar-ticle of the treaty shall be implementednotwithstanding any time or other proce-dural limitations in the domestic law ofthe parties to the treaties, provided thatcertain notification requirements are satis-fied. For example, if a formal request forcompetent authority assistance has beensubmitted to the competent authority ofone country, but not the other, then noticegenerally must be provided to the compe-tent authority of the other country withinthe number of years specified in the treaty.See, e.g., United States-Canada IncomeTax Convention (1980), Article XXVI(2).A taxpayer seeking assistance of the for-eign competent authority under such atreaty with regard to a foreign-initiatedadjustment must ensure that a treaty noti-fication is received by the U.S. competentauthority within the time set forth in thetreaty.

.02 Manner of Notification to U.S.Competent Authority. For purposes of thisrevenue procedure, a treaty notification tothe U.S. competent authority may be

made either as a part of a taxpayer’s com-petent authority request (see section 2.02,Tab 3 of the Appendix) or by letter to theU.S. competent authority. If a letter isused, one printed copy and one electroniccopy of the letter must be submitted toAPMA or TAIT, as appropriate. The tax-payer may include a second printed copyof the letter, together with a self-addressedstamped envelope. Upon receipt of thetreaty notification letter, the U.S. compe-tent authority will date stamp the secondprinted copy and return it to the taxpayerfor its records. The electronic copy of thetreaty notification letter must follow therules for media and format of electronicsubmissions described in section 2.03 ofthe Appendix. A template of a letter suit-able for making a treaty notification maybe obtained by contacting the U.S. com-petent authority.

.03 Notification of Foreign CompetentAuthority. With regard to a U.S.-initiatedadjustment under a U.S. tax treaty with anotification requirement, the taxpayermust ensure that a notification is receivedby the foreign competent authority withinthe time set forth in the treaty. The noti-fication should be made in accordancewith any applicable procedures prescribedby the treaty country. The U.S. competentauthority is not responsible for notifying aforeign competent authority that it has re-ceived a competent authority request.

.04 Annual Notification Requirement.After initially filing a treaty notification inthe form of a letter and before filing itscompetent authority request, the taxpayermust annually notify the U.S. competentauthority until a complete competent au-thority request has been filed. The annualnotification must be submitted to APMAor TAIT as appropriate following theclose of each taxable year ending after thetaxable year in which the taxpayer submit-ted the treaty notification but no later thanthe date on which the taxpayer timely filesa tax return for such taxable year (seesection 1.03 for the rule applicable todeadlines). The annual update must betitled “Treaty Notification Annual Updateunder Section 12 of Rev. Proc. 2015–40.”The annual update must refer to priortreaty notifications.

.05 Consolidation of Protective Claimand Treaty Notification. The taxpayermay consolidate an initial protective claim

and an initial treaty notification into asingle letter or in a competent authorityrequest. A template of a letter suitable forconsolidating an initial protective claimand treaty notification may be obtained bycontacting APMA or TAIT, as appropri-ate. The taxpayer also may consolidate anannual protective claim notification andannual treaty notification in a single letter.In whatever manner such initial or annualnotifications are consolidated, the title ofthe submission must clearly indicate thedual function of the submission as a pro-tective claim and treaty notification (seesection 11.05).

SECTION 13. REQUESTS FORRULINGS

.01 In General. Requests for advancerulings regarding the interpretation of aU.S. tax treaty, as distinguished fromcompetent authority requests under thisrevenue procedure, must be submitted tothe Associate Chief Counsel (Interna-tional) according to the provisions of theapplicable revenue procedure governingsuch submissions. See Rev. Proc. 2015–1,2015–1 I.R.B. 1, and Rev. Proc. 2015–7,2015–1 I.R.B. 231.

.02 Foreign Tax Rulings. Neither theU.S. competent authority nor any otheroffice within the IRS will issue an ad-vance ruling on the effect of the provi-sions of a U.S. tax treaty on the applica-tion of the domestic tax laws of a treatycountry.


.01 In General. Except as otherwiseprovided in this section, no user fee isrequired for a competent authority re-quest.

.02 Requests for Discretionary LOBRelief. A $32,500 user fee is required forall requests for discretionary LOB reliefas described in section 3.06(2) filed on orafter October 30, 2015 and prior to Sep-tember 30, 2016. A $37,000 user fee isrequired for all requests for discretionaryLOB relief as described in section 3.06(2)filed on or after September 30, 2016. SeeRev. Proc. 2015–1 (and successor guid-ance). The fee must be paid as specified insection 14.03, as supplemented by instruc-tions set forth in the acknowledgment pro-vided to the applicant as described in sec-


tion 7.01. The fee will apply regardless ofwhether the request is for an initial deter-mination, a renewal of a favorable deter-mination issued prior to the effective dateof this revenue procedure, or a supple-mental determination. If a competent au-thority request requires discretionary LOBrelief for two or more entities, a separateuser fee will be charged for each entity.

.03 Timing of User Fee Charge. Within30 days of receipt of a complete submis-sion for a request for discretionary LOBrelief, the U.S. competent authority willnotify the applicant whether it accepts orrejects the request for assistance. No userfee will be charged unless and until theU.S. competent authority notifies the ap-plicant that it formally accepts the request.If the U.S. competent authority acceptsthe request, the taxpayer must pay theapplicable user fee or fees electronicallyusing the Pay.gov website within 60 daysof the notification of the acceptance (seesection 1.03 for the rule applicable todeadlines). Upon receipt of the user fee,the U.S. competent authority will com-mence analysis of the case.

.04 Refund of User Fee. In general, auser fee will not be refunded once the U.S.competent authority accepts a request forconsideration and the user fee is paid. Forexample, the IRS will not refund the userfee if the request for a discretionary de-termination is withdrawn by the applicantor if the applicant fails to submit addi-tional information as requested by theU.S. competent authority. A user fee maybe refunded, however, if (a) a higher userfee is paid than is required, or (b) takinginto account all the facts and circum-stances, including the IRS’s resources de-voted to the request, the U.S. competentauthority declines to rule and, in its solediscretion, decides a refund is appropriate.


Rev. Proc. 2006–54, 2006–2 C.B.1035, is modified and superseded by thisrevenue procedure. Rev. Proc. 2003–40,2003–1 C.B. 1044, is modified. Rev. Rul.92–75, 1999–2 C.B. 197, is clarified. Rev.Proc. 2015–41, 2015–35 I.R.B. 263, isamplified. References in this revenue pro-cedure to Rev. Proc. 99–32 will be treatedas references to the corresponding provi-sions of Rev. Proc. 65–17, 1965–1 C.B.

833, as modified, amplified, and clarifiedfrom time to time, for taxable years be-ginning before August 24, 1999.


Except as otherwise provided in thissection, this revenue procedure is effec-tive for competent authority requests filedon or after October 30, 2015. The triennialstatement requirement set forth in section3.06(2)(h) is effective for discretionaryLOB determinations issued on or afterAugust 31, 2015.


The collection of information con-tained in this revenue procedure has beenreviewed and approved by the Office ofManagement and Budget in accordancewith the Paperwork Reduction Act (44U.S.C. § 3507) under control number1545-2044.

An agency may not conduct or sponsor,and a person is not required to respond to, acollection of information unless the collec-tion of information displays a valid controlnumber.

The collection of information in thisrevenue procedure is in sections 3.02(2),3.05, 3.06(2), 4.01, 4.02(2), 5.01, 6.04(2),9.03, 11.03, 11.05, 12.04, and 12.05 andin the Appendix. This information is re-quired, and will be used, to evaluate andprocess the request for competent author-ity assistance. The likely respondents areindividuals or business or other for-profitinstitutions.

The estimated total annual reportingand/or recordkeeping burden is 9,000hours.

The estimated annual burden per re-spondent/recordkeeper is 30 hours. Theestimated number of respondents and/orrecordkeepers is 300.

The estimated annual frequency of re-sponses is on occasion.

Books or records relating to a collec-tion of information must be retained aslong as their contents may become mate-rial in the administration of any internalrevenue law. Generally, tax returns andtax return information are confidential, asrequired by section 6103 of the Code.


The principal author of this revenueprocedure is John Hughes of the Office ofthe Deputy Commissioner (International),LB&I. However, other personnel from theTreasury Department and the IRS (includ-ing the Office of the Associate ChiefCounsel (International)) participated in itsdevelopment. For further information re-garding this revenue procedure, contacteither Mr. Hughes at (202) 515-4307 orAlan S. Williams at (202) 317-6941 (nottoll-free calls). For further information oncompetent authority issues or on filingcompetent authority requests or other as-pects of the competent authority process,contact APMA or TAIT; see the contactinformation provided in sections 2.04 and3.05(2) of the Appendix.

APPENDIX

This Appendix sets forth instructionson preparing and filing a competent au-thority request. Unless the U.S. competentauthority has explicitly instructed the tax-payer otherwise, the competent authorityrequest must be prepared and filed accord-ing to the instructions provided in thisAppendix. The U.S. competent authoritymay reject a competent authority requestthat does not comply with these instruc-tions. See section 7.02(1) of the revenueprocedure.

Competent authority requests must befiled with the office (APMA or TAIT) thathas primary responsibility for the subjectof the request (see section 2.01(3) of therevenue procedure). In cases of doubt, thetaxpayer should consult APMA or TAIT.Section 1 of this Appendix provides in-structions and requirements applicable toall competent authority requests, while theother sections of this Appendix provideinstructions for filing specific types ofcompetent authority requests.

SECTION 1. INSTRUCTIONS ANDREQUIREMENTS APPLICABLE TOALL COMPETENT AUTHORITYREQUESTS

.01 In General. A competent authorityrequest consists of a request letter andattachments. The contents of the requestletter vary by the type of competent au-


thority request, but generally consist ofinformation about the taxpayer and aboutthe competent authority issues involved inthe request. The contents of the attach-ments vary by type of competent authorityrequest, but generally consist of requiredauthorizations, disclosures, consents, andnotifications.

.02 Complete Request Requirement.The taxpayer must provide a completecompetent authority request. In order to becomplete, the competent authority requestmust follow the instructions set forth inthis Appendix. If the taxpayer believes arequired item is not applicable to its com-petent authority request, this must beshown as “N/A” or “Not Applicable” (asopposed to being left blank). If the tax-payer maintains that it is unable to provide

the required item or seeks an exception tothe filing requirement, it must provide astatement of its reasons for not providingthe item or its basis for the exception itseeks (as opposed to leaving the entryblank). The U.S. competent authority maypermit exceptions to the filing require-ments in this Appendix on a case-by-casebasis. See also the rules in section 5.01governing small case competent authorityrequests.

SECTION 2. INSTRUCTIONS ANDREQUIREMENTS APPLICABLE TOCOMPETENT AUTHORITYREQUESTS FILED WITH APMA

.01 Request Letter.

(1) Process. The request letter forAPMA must be addressed to the Deputy

Commissioner (International), LB&I atthe address provided in section 2.04 ofthis Appendix. An original of the requestletter, signed and dated by a person havingauthority to sign the taxpayer’s U.S. re-turns, must be included in one of the threerequired printed copies of the competentauthority request (see section 2.04 of thisAppendix).

(2) Content. The request letter mustcontain an introductory statement that thetaxpayer seeks assistance of the U.S. com-petent authority. The letter then must fol-low the structure shown below and mustcontain or respond to each of the requiredstatements, descriptions, explanations,and other information listed.

Contents of Request Letter for APMA

Part 1: Identifying Information and Summary of Issues and Proceedings

1.1 Identifying information: Provide the following information for the taxpayer filing the competent authority request:

a. Name;

b. Address and phone number;

c. Countries of residence for purposes of the treaty;

d. U.S. taxpayer identification number or foreign taxpayer identification number; and

e. Names and countries of incorporation or residence of all members of the controlled group whose taxable incomeswould be affected by a competent authority resolution being reached in the competent authority case

1.2 Authorizations and contacts: Provide names and contact information for the following:

a. All individuals authorized by a Form 2848, Power of Attorney and Declaration of Representative, to represent thetaxpayer in connection with the competent authority request;

b. All individuals authorized by a Form 8821, Tax Information Authorization, to inspect or receive confidential taxinformation about the taxpayer in connection with the competent authority request; and

c. The individual(s) who will serve as the taxpayer’s point(s) of contact for the U.S competent authority

1.3 IRS office: Provide the following information:

a. For competent authority issues arising from U.S.-initiated adjustments, identify the IRS office that made the ad-justment and provide the name of and contact information for the taxpayer’s IRS Examination team manager; and

b. For competent authority issues not arising from U.S.-initiated adjustments, identify the IRS office having exami-nation jurisdiction over the taxpayer or U.S. members of the controlled group and provide the name of and con-tact information for the taxpayer’s IRS Examination team manager if the taxpayer is under examination when thecompetent authority request is filed

1.4 Treaty(ies): Identify the U.S. tax treaty(ies) and articles under which the request is being filed

1.5 Summary of competent authority issues: Provide a summary of the competent authority issues for which assistance isbeing requested

1.6 Years and amounts: Provide the taxable years and amounts at issue, presented in both U.S. dollars and foreign cur-rency, together with the exchange rate(s) that was used for currency conversion during the applicable taxable years



1.7 Taxpayer proceedings: Provide:

a. a summary of relevant U.S. and foreign judicial and administrative proceedings involving the taxpayer or othermembers of the controlled group, that are relevant to the competent authority issues for which assistance is beingrequested (including all information related to notifications provided to the treaty country(ies)); and

b. a summary of all other U.S. judicial proceedings that concern the taxpayer’s federal tax liability for any taxableperiod involved in the competent authority request

1.8 Other proceedings: To the extent known, provide a summary of any relevant foreign judicial and public administra-tive proceedings not involving the taxpayer or members of the controlled group but concerning an issue similar tothe competent authority issue for which the competent authority request is being filed

1.9 Statutes of limitations: Provide the expiration dates of applicable statutes of limitations in both the United States andthe treaty country(ies) for the taxable years covered by the competent authority request

Part 2. Competent Authority Issues

2.1 Competent authority issues: Provide a thorough, informative explanation of the competent authority issues for whichassistance is requested, including but not limited to descriptions or discussions of:

a. The relevant transactions, activities, or other circumstances surrounding the competent authority issues for whichassistance is requested;

b. The taxpayer’s understanding of the legal basis for each U.S.-initiated action, foreign-initiated action, or taxpayer-initiated position giving rise to the competent authority issues;

c. The taxpayer’s view on the justification for assistance under the applicable U.S. tax treaty(ies); and

d. The content of any related requests for assistance submitted to the foreign competent authority, together with anexplanation of any material differences between the competent authority request filed under the revenue procedureand the request filed with the foreign competent authority

2.2 Prior or current U.S. competent authority assistance: State whether or not each competent authority issue set forthin the competent authority request is the same or similar to an issue considered in a prior or current competent au-thority or APA request covering the same or other taxable years, and, if so, summarize the terms of any resolutionof the issue by the U.S. competent authority

2.3 Pre-filing information: Provide the following information:

a. Whether a pre-filing memorandum was filed; and

b. Whether a pre-filing conference was held and, if so, the date of and attendees at the conference

Part 3. Assistance Requested and Required Statements

3.1 Coordination with other proceedings: Provide the following information:

a. Whether the taxpayer entered into a previous agreement with IRS Examination as described in section 6.03 of therevenue procedure;

b. For any competent authority issue for which assistance is being requested that has been under the jurisdiction ofIRS Appeals pursuant to a protest, the date of any opening conference with IRS Appeals and evidence showingthat the taxpayer has properly severed the competent authority issue from the issues in its protest that will remainunder the jurisdiction of IRS Appeals (see section 6.04(3)(a) of the revenue procedure); and

c. Whether the taxpayer seeks SAP review, and if so, for which issues

3.2 ACAP years: Provide the following information:

a. Whether the taxpayer requests ACAP and, if so, the ACAP years proposed to be covered;

b. Whether the taxpayer does not seek to apply the competent authority resolution to one or more ACAP years and itsreasons for not requesting ACAP (such as the transactions at issue not having occurred in subsequent taxable years); and

c. Whether the taxpayer has filed a bilateral or multilateral APA request pursuant to Rev. Proc. 2015–41 that proposes to coverone or more issues covered by the competent authority request and, if so, whether it included a rollback request for ACAPyears in its APA request

3.3 Ancillary issues: List the ancillary issues (if any) the taxpayer requests be addressed in the competent authority resolution, e.g.,competent authority repatriation



3.4 Attachments not included: List any required competent authority request attachments that the taxpayer has not in-cluded in its competent authority request, together with explanations as to why such items are not included (e.g.,“N/A”)

.02 Attachments. A competent authority request filed with APMA also must include the following attachments after the requestletter, separated and ordered as indicated in this section.

Attachments to Competent Authority Requests for APMA

Tab 1 Authorization form: Include a properly executed Form 2848, Power of Attorney and Declaration of Representa-tive, or Form 8821, Tax Information Authorization

Tab 2 ACAP requests: If the taxpayer is requesting ACAP, provide a statement that the taxpayer agrees to the following:

a. The inspection of books of account or records under ACAP will not preclude or impede (under section 7605(b) ofthe Code or any administrative provision adopted by the IRS) a later examination of a return or inspection ofbooks of account or records for any taxable period covered in the ACAP request; and

b. The IRS need not comply with any applicable procedural restrictions (e.g., providing notice under section 7605(b)of the Code) before beginning such later examination or inspection

Tab 3 Protective claim and treaty notification: If applicable, provide the following information:

a. A statement that the competent authority request is to serve as a protective claim pursuant to section 11 of therevenue procedure, together with the information described in section 11.02(3); and

b. A statement that the competent authority request is to provide treaty notification pursuant to section 12 of the rev-enue procedure

Tab 4 Consent to disclosure: Include a declaration, dated and signed by a person having authority to sign the taxpayer’sfederal tax returns, that the taxpayer consents to the disclosure of the contents of the competent authority request –other than trade secrets, if the taxpayer so requests – to the applicable foreign competent authority(ies) within thelimits contained in the U.S. tax treaty(ies) governing the competent authority request

Tab 5 “Penalties of perjury” declaration: Include the following “penalties of perjury” declaration:

Under penalties of perjury, I declare that I have examined this request, including accompa-nying documents, and, to the best of my knowledge and belief, the facts presented in sup-port of the competent authority request are true, correct, and complete.

The declaration must be dated and signed by the person(s) on whose behalf the request is being made and not by thetaxpayer’s representative. The person signing for a corporate taxpayer must be an authorized officer of the taxpayerhaving personal knowledge of the facts. The person signing for a trust, an estate, or a partnership must be a trustee,an executor, or a partner, respectively, who has personal knowledge of the facts

Tab 6 Written notice of adjustment: Provide the following information:

a. For U.S.-initiated adjustments, a copy of the written notice of the adjustment, (e.g., the Form 5701 or Form 4549,and any related attachments received from IRS Examination); or

b. For foreign-initiated adjustments: (1) an English translation of any official notice(s) of the adjustment totaxable income reported in the treaty country(ies) upon which the competent authority request is based; and (2) acopy of the official notice(s) of such adjustment(s) in the original language

Tab 7 Information or documents in a foreign language: List any information or documents in a foreign language that aresubmitted to a foreign tax authority or foreign competent authority in connection with, or that are otherwise relevantto, the competent authority request and for which a full translation in English is not provided

Tab 8 Transfer pricing documentation and related information: Provide the following information:

a. A copy of documentation prepared pursuant to section 6662 of the Code or other documentation analyzing thecompetent authority issues for the taxable years covered by the competent authority request;

b. Financial data prepared for official statutory, regulatory, or other reporting purposes for the taxpayer’scontrolled group (whether a corporate parent is a U.S. person or not) for all taxable years covered by the compe-tent authority request;


Attachments to Competent Authority Requests for APMA

c. Income statements and balance sheets, segmented as necessary to demonstrate the effect of the competentauthority issue(s) on taxable income for the taxpayer and the members of the controlled group whose taxableincomes would be affected by a competent authority resolution being reached in the taxpayer’s competentauthority case, for all taxable years covered by the competent authority request and, as applicable, for thethree taxable years ending before and the three taxable years ending after the years covered by thecompetent authority request; and

d. Covered issue diagrams, as described in Exhibit 11 listed in the Appendix to Rev. Proc. 2015–41

Tab 9 Pre-filing submissions: Include any pre-filing memoranda or other materials submitted prior to the competentauthority request

Tab 10 Optional e-mail memorandum of understanding: At the taxpayer’s option, an executed memorandum of understand-ing in the form prescribed by APMA (as may be posted on the APMA website or otherwise available by contactingAPMA) permitting APMA to communicate with the taxpayer’s authorized representatives through encrypted e-mail

.03 Manner of Filing CompetentAuthority Request with APMA.

(1) In General. The taxpayer must pro-vide five (5) copies of its competent au-thority request for APMA as follows: one(1) original, bound printed submissioncontaining signed originals of the requestletter and attachments; two (2) bound pho-tocopies of the contents of the originalprinted submission; and two (2) electroniccopies of the contents of the originalprinted submission on CD or flash drive orsimilar acceptable electronic storage me-dium. All five (5) copies of the competentauthority request must be filed withAPMA at the address set forth in section2.04.

(2) Format of Printed Copies. Eachprinted copy may be filed in one or morebound volumes. The attachments must betabbed and identified and ordered as pre-sented in section 2.02 of this Appendix. Ifan attachment is not applicable to thecompetent authority request, a statementto this effect must be included in the rel-evant tabbed attachment.

(3) Content and Format of ElectronicCopies.

(a) Content. The electronic copies ofthe competent authority request must con-tain (1) the request letter, with all requiredstatements, declarations, explanations,documents, information, data, and allother requested materials, and (2) all re-quired attachments. The attachmentsshould consist of separate electronic filesnamed in a manner that corresponds to thetab numbers and descriptions presented insection 2.02 of this Appendix. If an at-tachment is not applicable to the compe-tent authority request, a statement to thiseffect must be included in the electronicfile.

(b) Format. Suitable formats for thedocuments in the electronic copy includeMicrosoft Word, Excel, PowerPoint, andAdobe Portable Document Format. Anydocument that is readily available in Mi-crosoft Word, Excel, or PowerPoint for-mat should be provided in that formatrather than, or in addition to, Adobe Por-table Document Format. Documents pre-sented in Excel format to APMA must beprovided with formulas and internal cell

linkages intact. For some competent au-thority requests, including those that arecomplex, the taxpayer may choose addi-tionally to provide, or APMA may requirethe taxpayer to provide, a bookmarkedAdobe Portable Document Format filethat includes the entire contents of theAPA request.

.04 Address and Other Contact Infor-mation for APMA. Competent authorityrequests filed with APMA must be sent tothe following address.

Deputy Commissioner (International)Large Business and International

DivisionInternal Revenue Service1111 Constitution Avenue, N.W.Washington, D.C. 20224SE:LB:IN:ADCI:TPO:APMA:

M3–370(Attention: APMA)

All mail should be sent to this mailingaddress, including regular mail, expressmail, overnight mail, and mail sent byUSPS, FedEx, UPS, or any other carrier.Additional contact information for APMAis as follows.

Telephone Telephone numbers are available through the“contact us” link on the APMA website

Website www.irs.gov/Businesses/Corporations/APMAOffice Location 801 Ninth Street, N.W.

Washington, D. C. 20001(Mail not accepted at office location)


SECTION 3. INSTRUCTIONS ANDREQUIREMENTS APPLICABLE TOCOMPETENT AUTHORITYREQUESTS FILED WITH TAIT

.01 In General. Competent authorityrequests filed with TAIT should followthe instructions and requirements on con-tent and structure of competent authorityrequests filed with APMA, except as mod-ified by this section. Requests filed withTAIT do not need to include the materiallisted under Tab 8 found in section 2.02 ofthis Appendix. Applicants seeking discre-tionary LOB relief and pension plan de-terminations should provide the additionalinformation described in sections 3.03 and3.04 of this Appendix. Applicants seeking

to file a request concerning Article XIII(8)of the U.S.-Canada Treaty should alsoconsult Rev. Proc. 98–21, 1998–1 C.B.585. With regard to this and other aspectsof filing a competent authority requestwith TAIT, the taxpayer may contactTAIT for further information prior to fil-ing its competent authority request. If acompetent authority request does not arisethrough the mutual agreement article of aU.S. tax treaty and is neither a discretion-ary LOB request nor a pension plan re-quest, the taxpayer should consult withTAIT. See section 3.05(2) of this Appen-dix for information on how to contactTAIT.

.02 Case presented by foreign compe-tent authority. If a case is presented by a

foreign competent authority and no corre-sponding competent authority request hasbeen filed with TAIT in accordance withthe revenue procedure, TAIT may requirethat the relevant U.S. taxpayer, if any (or,if none, the foreign person) file a compe-tent authority request in accordance withthe revenue procedure.

.03 Requirements for DiscretionaryLOB Requests. In addition to followingthe requirements in section 2.02 of thisAppendix as modified by section 3.01, anapplicant filing a discretionary LOB re-quest also must include an additional sec-tion in its request letter addressing thefollowing:

Part 4: Additional Information for Discretionary LOB Requests

4.1 Information necessary for identification and discretionary LOB request review:

a. Statement about the type(s) of benefits requested (e.g., dividends, interest, royalties, or branch profits) andthe relevant treaty provision(s) and amount of income at issue;

b. Date on which the applicant requests that the determination become effective; and

c. Statement as to whether the applicant made a previous request and the ultimate disposition of that request

4.2 Applicant’s organization information:

a. Narrative description of the business activities of the applicant’s U.S., foreign, and group holdings that de-scribes the ownership structure and any recent restructurings in ownership and the purposes therefor relevantto the applicant and its ultimate owner(s), including the tax reasons for the use of any hybrid entities in thestructure;

b. In the case of a country that applies a territorial or exemption system for relieving double taxation on in-come or gain attributable to an office or branch in a third country, whether the applicant conducts businessin the United States through such an office or branch, and if so, the name of the country in which the officeor branch is located, the type of income or gain derived by the office or branch, and the applicable rate oftax applied to that income in that third jurisdiction;

c. Name, address, contact telephone number, and U.S. taxpayer identification number of U.S. entities related tothe applicant from whom income covered by the request was or will be received;

d. A chart stating i) the name and country of tax residence or organization of the applicant and every entity orindividual in its chain of ownership up to, and including, its ultimate beneficial owners; ii) the classificationof each such entity under the tax law of the country in which it is organized and the United States (e.g.,corporation, pension or other tax-exempt entity, or partnership); iii) whether each entity is fiscally transpar-ent or opaque (i.e., non-transparent) under U.S. and foreign tax law; and iv) a description of the amount andtype of ownership interests (e.g., preferred stock, common stock, or membership interests) held in each en-tity;

e. Description of the control and business relationships between the applicant and relevant persons for theyears in issue, including any changes in such relationships prior to the date of the request; and

f. Description of the relevant transactions, activities, or other circumstances involved in the matter covered bythe request


Part 4: Additional Information for Discretionary LOB Requests

4.3 Additional applicant information:

a. Analysis of why the applicant does not qualify for the requested benefits under the relevant LOB provisions(e.g., (i) if the company fails the base erosion test because it pays more than half of its gross income in theform of deductible expenses to persons not authorized by the treaty, including an explanation as to the rea-sons for making payments to such persons, (ii) if a company is engaged in the active conduct of a trade orbusiness in its country of residence, an explanation of what specifically prevents the company from meetingthe active trade or business test in the treaty, (iii) if the applicant’s parent was recently delisted from a rec-ognized stock exchange and why, (iv) if the applicant’s parent is publicly traded on a stock exchange notrecognized under the treaty);

b. Explanation of the non-tax business reasons why the applicant was formed or maintained in the particulartreaty country (e.g., that the country is the source of raw materials, the customer base is located in thecountry, substantial functions of the company’s business are located in the country, a substantial amount ofservices are performed in the country, or rents or royalties are derived from such country), and an explana-tion for any recent changes in these reasons;

c. Detailed description of the facts and circumstances that demonstrate that the applicant has a sufficient rela-tionship or nexus to the treaty country;

d. Analysis of any relevant factor for determining whether to grant a request for discretionary LOB relief, asindicated, for example, by the applicable U.S. tax treaty and Treasury Department Technical Explanation tothe U.S. tax treaty;

e. Statement from the applicant as to whether any entity in the ownership chain between the applicant and thepublicly held entity (including the publicly held entity) is a nominee, agent, or otherwise a conduit, and ifso, why it is arranged in that manner;

f. A statement whether the applicant received any tax rulings or tax concessions issued to the applicant by thecountry in which it is organized, and a statement of whether the applicant otherwise benefits from a specialtax regime in that country, and a description of the benefits;

g. Statement from the applicant whether an examination by any tax authority has been or is currently in pro-cess that is related to the benefit covered by the request;

h. Whether a request for an APA has been or is anticipated to be made with respect to the income that is cov-ered by the request;

i. Statement listing each entity between the applicant and the ultimate owners and indicating whether eachsuch entity meets the base erosion component of the ownership base erosion test of the treaty;

j. If the requested treaty benefits relate to dividends, a description of the capital structure of the applicant andof the U.S. entity paying the dividends, including details about each class of shares and associated rights(e.g., voting, conversion, and dividend rate), the period during which the structure was in effect, and anyreorganizations in the United States or of the applicant abroad, including change of residence;

k. If the requested treaty benefits relate to interest, a general description of the terms of indebtedness, themethod used to calculate interest, and the existence of embedded options or other derivative structures;whether the debt is registered or in bearer form; whether it is publicly traded and, if so, on which exchange;whether it is held by a hedge fund or other type of investment vehicle; and whether the ultimate owners areknown to the applicant;

l. If the requested treaty benefits relate to royalties, a description of the intangible property generating theroyalty payments, when the applicant gained the rights to this property, and the terms of the royaltyagreement;

m. In the case of an applicant that is a hybrid entity, or that owns an interest in a hybrid entity through whichit derives income, profit, or gain with respect to which it seeks treaty benefits, a detailed explanation ofwhy the applicant derives the income in accordance with the relevant treaty provisions;

n. Statement of the applicant’s effective global tax rate;

o. Statement of the extent to which deductible payments are made outside the ordinary course of the appli-cant’s business;

p. Detailed description of the tax treatment in the other contracting state if discretion is granted, includingsource and character; and

q. Statement of understanding that if the request for discretionary LOB relief is accepted by the U.S. compe-tent authority the applicant is required to remit the user fee as provided by section 14 of the revenue proce-dure


In addition, a discretionary LOB request must contain the four additional attachments listed in the following table, separately tabbed:

Additional Attachments for Discretionary LOB Requests

Tab 11 Financial statements, if available, for the years in issue of the applicant and any U.S. branch or related entitythat paid or will pay income to the applicant during the period covered by the request

Tab 12 Annual reports of any publicly traded shareholder that directly or indirectly owns stock in the applicant for theyears in issue, and an English translation, if available, of any similar filings with securities regulators reflectingthe structure or transaction that is the subject of the request for the years in issue, if applicable

Tab 13 English translations of all tax rulings or tax concessions issued to the applicant by the country in which it isorganized

Tab 14 If the applicant has requested a certification from its country of residence regarding entitlement to the benefitsof the treaty, where applicable, a copy of all correspondence from the treaty country

.04 Instructions and Requirements Ap-plicable to Pension Plan Requests. For apension plan request, in addition to fol-lowing the instructions and requirementsin section 2.02 of this Appendix, as mod-

ified by section 3.01, the taxpayer alsomust include an additional section (Part 4)in its request letter explaining why theforeign pension plan should be deemed to“generally correspond” to a pension plan

recognized for tax purposes in the UnitedStates. In addition, a pension plan requestmust contain the three additional attach-ments listed in the following table, sepa-rately tabbed:

Additional Attachments for Pension Plan Requests

Tab 11 Copies of the Plan Documents (translated into English). For this purpose, the Plan Documents includesthe plan itself, the trust agreement, the summary plan description or similar document provided to planparticipants, and any other document that will assist the U.S. competent authority in making its determination

Tab 12 If the plan at issue relates to another plan of the employer, copies of the Plan Documents (as described above)for that other plan (translated into English)

Tab 13 Copies of all applicable statutory provisions that govern the foreign pension plan (translated into English)

.05 Manner of Filing Competent Authority Request with TAIT.

(1) Format. The taxpayer must provide two copies of its competent authority request in the same manner and format as filingrequests to APMA as described in section 2.03 of this Appendix, except as otherwise permitted by TAIT for small casecompetent authority requests (see section 5 of the revenue procedure). One copy must be an original printed submissioncontaining signed originals of the request letter and attachments. One copy must be an electronic copy of the contents of theoriginal printed submission on CD or flash drive or similar acceptable electronic storage medium.

(2) Address and Other Contact Information for TAIT. Competent Authority requests filed with TAIT must be sent to the followingaddress.

Deputy Commissioner (International)Large Business and International DivisionInternal Revenue Service1111 Constitution Avenue, N.W.Washington, D.C. 20224SE:LB:IN:ADCI:TAIT:M4–365(Attention: TAIT)

All mail should be sent to this mailing address, including regular mail, express mail, overnight mail, and mail sent by USPS,FedEx, UPS, or any other carrier. Additional contact information is as follows.

Telephone 202-515-4476Website http://lmsb.irs.gov/international/dir_treaty/index.aspOffice Location 801 Ninth Street, N.W.

Washington, D. C. 20001(Mail not accepted at office location)


Internal Revenue Code § 482: Allocation of incomeand deductions among taxpayers

Rev. Proc. 2015–41



SECTION 3. PROCEDURES FORFILING APA REQUESTS

SECTION 4. ACTIONS ON APAREQUESTS

SECTION 5. COORDINATION WITHREV. PROC. 2015–40 ANDROLLBACKS

SECTION 6. LEGAL EFFECT OF ANAPA

SECTION 7. ADMINISTERING ANAPA

SECTION 8. RENEWING AN APA

SECTION 9. DISCLOSURE





APPENDIX. APA REQUESTREQUIREMENTS


.01 Purpose and Background. Thisrevenue procedure provides guidance onthe process of requesting and obtainingadvance pricing agreements from the Ad-vance Pricing and Mutual Agreement pro-gram (“APMA”), a constituent office ofthe U.S. competent authority, within theoffice of the Deputy Commissioner Inter-national, Large Business & InternationalDivision. This revenue procedure alsoprovides guidance on administration ofexecuted APAs. This revenue procedureupdates and supersedes Rev. Proc.

2006–9, 2006–1 C.B. 278, as modified byRev. Proc. 2008–31, 2008–1 C.B. 1133,which is also superseded. This revenue pro-cedure is being released in conjunction withRev. Proc. 2015–40, 2015–35 I.R.B. 236,which provides procedures and guidance onthe process of requesting assistance from theU.S. competent authority under the provi-sions of U.S. tax treaties.

A proposed version of this revenueprocedure was released for public com-ment in Notice 2013–79, 2013–2 C.B.653. This revenue procedure is issued fol-lowing consideration of all public com-ments received by the IRS and the Trea-sury Department and also reflects thecontinuing internal monitoring and modi-fications of APMA’s administrative pro-cedures to ensure that the administrationof APAs is consistently principled, effec-tive, and efficient.

The principal differences between thisfinal revenue procedure and the proposedversion in Notice 2013–79 may be sum-marized as follows:

(1) This revenue procedure clarifiesthat if APMA requires, as a condition ofcontinuing with the APA process, that thetaxpayer expand the proposed scope of itsAPA request to cover interrelated matters(interrelated issues in the same years, cov-ered issues or interrelated issues in otheryears, and covered issues or interrelatedissues in the same or other years as ap-plied to other countries), APMA will doso with due regard to considerations ofprincipled, effective, and efficient tax ad-ministration and only after considering theviews of the taxpayer and the applicableforeign competent authority. Further,APMA will communicate to the taxpayerany concerns about interrelated mattersand possible scope expansion as early aspossible. Examples are provided of inter-related matters. See section 2.02(4).

(2) In the interest of efficient tax ad-ministration, rollback years may be for-mally covered within an APA. A rollbackwill be included in an APA when a roll-back is either requested by the taxpayerand approved after coordination and col-laboration between APMA and other of-fices within the IRS or, in some cases, isrequired by APMA, after coordination andcollaboration with other offices within theIRS, as a condition of beginning or con-

tinuing the APA process. See sections2.02(4)(c), 3.03(2), 3.08, and 5.02.

(3) This revenue procedure providesexpanded guidance as to when an APArequest will be considered complete. Seesection 3.03(3).

(4) The required contents of APA re-quests that were specified in the Appendixof the proposed revenue procedure havebeen refined but generally retained, whichAPMA continues to view as necessary toconduct informed and efficient evalua-tions of APA requests.

(5) As stated in Notice 2013–79, tax-payers are required to execute consentagreements to extend the period of limi-tations for assessment of tax for each yearof the proposed APA term, and the re-quired consent could be either general orrestricted. This revenue procedure ex-pressly provides that APMA will coordi-nate and collaborate with other officeswithin the IRS and with the taxpayer onthe type of consent the taxpayer will beinstructed to execute, which, if restricted,will follow standardized language pro-vided by APMA. This revenue procedurealso provides that in certain cases, onlygeneral consents will be used. See section2.03(3).

(6) This revenue procedure increasesthe user fees for APA requests and pro-vides that total user fees may be reducedfor multiple APA requests filed by thesame controlled group within a sixty-dayperiod. See section 3.03(2) of the Appen-dix.

(7) This revenue procedure substan-tially restructures the proposed guidancein Notice 2013–79 to improve clarity,readability, and organization.

.02 Section References and DefinedTerms. Unless indicated by context or oth-erwise, section references are to the sec-tions of this revenue procedure.

.03 Deadline References. If a deadlineunder this revenue procedure falls on aSaturday, Sunday, or a legal holiday in theDistrict of Columbia, the deadline is ex-tended to the next succeeding day that isnot a Saturday, Sunday, or legal holiday inthe District of Columbia.

.04 Definitions. As used in this revenueprocedure, certain acronyms and otherterms have the meanings set forth in thissection.


Abbreviated APA request An APA request in which information, documents, or content required for a completeAPA request has been truncated or omitted, per explicit authorization from APMA (seesection 3.04(2))

ACAP Accelerated competent authority procedure (see section 4.01 of Rev. Proc. 2015–40)

ACAP request A request filed under section 4.01 of Rev. Proc. 2015–40 to include ACAP years in acompetent authority case

ACAP years Taxable years covered by an ACAP request or that are eligible for ACAP

Ancillary issue An issue eligible for coverage by an APA, such as the repatriation of funds (see section7.01), interest on refunds and deficiencies, and penalties with respect to U.S.-initiatedadjustments, that arises out of the resolution of another, underlying covered issue

APA An advance pricing agreement

APA annual report The report prepared by the taxpayer for each APA year demonstrating the taxpayer’scompliance with the covered method(s) and APA terms and conditions

APA primary adjustment An adjustment made by a taxpayer to its results, as shown in its books and records foran APA year and/or reflected in its U.S. return for an APA year, in order to make itsreported taxable income consistent with the application of the covered method(s) (seesection 7.01)

APA process The series of formal or informal steps described in this revenue procedure or estab-lished by the APA team during the course of its evaluation of an APA request that areinvolved in reaching an APA, including steps relating to pre-filing conferences andmemoranda

APA request A request for a unilateral, bilateral, or multilateral APA submitted under this revenueprocedure

APA team The IRS team assembled to process an APA request

APA team leader The taxpayer’s primary point of contact within the IRS during the APA process

APA term The time period consisting of all APA years

APA terms and conditions The terms and conditions of the APA, including (but not limited to) the APA years,operational and compliance provisions, critical assumptions, and record-keeping andannual reporting responsibilities

APA year A taxable year covered by an APA

APMA The Advance Pricing and Mutual Agreement Program, a representative office of theU.S. competent authority and one of the divisions of TPO

Arbitration treaty A U.S. tax treaty in which the mutual agreement procedure article includes a provisionfor mandatory arbitration of certain cases, as described in section 10 of Rev. Proc.2015–40

Back year In relation to an APA, any taxable year ending before the first prospective year; and inrelation to a proposed APA, any taxable year ending before the first prospective year asproposed by the taxpayer in its APA request or as determined by APMA, as applicable

Bilateral APA An APA in which the covered issue(s), covered method(s), and APA terms and condi-tions are premised on an underlying competent authority resolution reached between theU.S. competent authority and a foreign competent authority

Bilateral APA request A request for a bilateral APA submitted under this revenue procedure

Closed filed year A filed year for which the period of limitations for assessment of tax has expired in theUnited States

Code The Internal Revenue Code of 1986 (26 U.S.C.), as amended

Competent authority case A competent authority case, as defined in Rev. Proc. 2015–40, modified for purposes ofthis revenue procedure to include the consideration of a bilateral or multilateral APArequest

Competent authority issue A competent authority issue, as defined in Rev. Proc. 2015–40, in one or more compe-tent authority years, which includes issues raised by a bilateral or multilateral APA re-quest


Competent authorityprocess

The competent authority process, as defined in Rev. Proc. 2015–40, modified for pur-poses of this revenue procedure to include the APA process with regard to a bilateral ormultilateral APA request

Competent authority re-quest

A competent authority request, as defined in Rev. Proc. 2015–40, modified for purposesof this revenue procedure to include a bilateral or multilateral APA request

Competent authority reso-lution

A competent authority resolution, as defined in Rev. Proc. 2015–40, modified for pur-poses of this revenue procedure to include a resolution by the U.S. competent authorityand foreign competent authority(ies) (or through arbitration) of covered issue(s) in acase initiated by a bilateral or multilateral APA request under this revenue procedure,as appropriate

Competent authority year A competent authority year, as defined in Rev. Proc. 2015–40, modified for purposes ofthis revenue procedure to include proposed APA years of a bilateral or multilateralAPA request

Controlled group The group of controlled taxpayers, within the meaning of the term set forth in Treas.Reg. § 1.482–1(i), of which the taxpayer filing the APA request is a member

Coverable issues The issues eligible to be covered by an APA, including (1) issues arising under section482 of the Code, (2) other issues for whose resolution transfer pricing principles arerelevant, which in a particular case could include (a) issues arising under section 367(d)of the Code, (b) competent authority issues arising under the business profits and asso-ciated enterprises articles of U.S. tax treaties, and (c) the determination of the incomeeffectively connected with the conduct of a trade or business within the United States,and (3) ancillary issues

Covered group The U.S.- and non-U.S. taxpayers within a controlled group, including the taxpayer fil-ing the APA request, whose intercompany transactions or other business activities arewithin the scope of the covered issue(s)

Covered issue diagrams Diagrams, charts, tables, or similar representations, as described more fully in the Ap-pendix, that depict the structure and value chain of the proposed covered group as theyrelate to the proposed covered issue(s) and (if applicable) interrelated issues

Covered issue(s) The coverable issue(s) that is (are) covered by the APA

Covered method(s) The transfer pricing method(s) or other method(s) set forth in the APA for resolving thecovered issues

Critical assumption A fact whose continued existence is identified in an APA as being material to the reli-ability of the APA’s covered methods; such fact may be related to the taxpayer, a thirdparty, an industry, or business and economic conditions

Dollar file request An APA request filed in accordance with the provisions of section 3.03(3)(b)

Effective date of an APA The first date on which the APA has been executed by both the IRS and the taxpayer

Filed year A taxable year for which the taxpayer has filed its U.S. return, determined by referenceto the stage in the APA process at which the characterization as filed or not filed isrelevant

Foreign competent author-ity

The competent authority of a treaty country

Global trading arrange-ment

Any arrangement involving multiple associated enterprises or the business unit(s) of anenterprise that operate in more than one country and that trade or deal in securitiesand/or other financial products, either on their own behalf or on behalf of clients, in-cluding functions ancillary to the foregoing activities

Intangible developmentarrangement

Any arrangement for sharing the costs and risks of developing intangibles, including acost sharing arrangement (or an arrangement treated as such) as defined in Treas. Reg.§ 1.482–7 or a qualified cost sharing arrangement (or an arrangement treated as such)as defined in Treas. Reg. § 1.482–7A (collectively, a “CSA”); and an arrangement(other than a CSA) for which the principles, methods, comparability, and reliabilityconsiderations set forth in Treas. Reg. § 1.482–7 are relevant in determining the bestmethod, under Treas. Reg. § 1.482–4(g) or Treas. Reg. § 1.482–9(m)(3), as appropri-ately adjusted in light of the differences in the facts and circumstances between sucharrangement and a CSA. See also Treas. Reg. § 1.482–1(b)(2)(iii)

IRS Internal Revenue Service


IRS Examination The function(s) within the IRS responsible for examining federal tax and informationreturns for purposes of determining tax liability

LB&I IRS Large Business & International Division

Multilateral APA An APA in which the covered issue(s), covered method(s), and APA terms and condi-tions are premised on one or more underlying competent authority resolutions reachedbetween the U.S. competent authority and more than one foreign competent authority

Multilateral APA request A request for a multilateral APA submitted under this revenue procedure

OECD Guidelines The transfer pricing guidelines promulgated by the Organisation for Economic Coopera-tion and Development

Open filed year A filed year for which the period of limitations for assessment of tax has not expired inthe United States

Opening conference Typically, the first meeting between the taxpayer and an APA team after an APA re-quest has been submitted

Pre-filing conference A conference held with APMA before an APA request is filed (see section 3.02)

Pre-filing memorandum A memorandum or similar paper submitted to APMA before an APA request is filed(see section 3.02)

Pre-filing requirements The requirements regarding pre-filing memoranda and pre-filing conferences set forth insection 3.02

Protective claim A contingent claim filed with the U.S. competent authority as described in section 11 ofRev. Proc. 2015–40 and section 3.06

Prospective year An APA year that is described as a prospective year in section 3.03(2)

Rev. Proc. 2006–9 Rev. Proc. 2006–9, 2006–1 C.B. 278

Rev. Proc. 2015–40 Rev. Proc. 2015–40, 2015–35 I.R.B. 236

Rollback The application (with appropriate modifications, if necessary) of the covered method(s)to specific back years (see sections 2.02(4)(c) and 5.02)

Rollback request A request for a rollback submitted under this revenue procedure

Rollback year An APA year that is described as a rollback year in section 3.03(2)

SAP review The review of a competent authority issue by the U.S. competent authority with theassistance of IRS Appeals under the simultaneous appeals procedure described in sec-tion 6.04 of Rev. Proc. 2015–40

Small case APA user fee The user fee required for APA requests that meet the criteria set forth in section 3.04 ofthe Appendix

Taxpayer Unless the context indicates otherwise, the member of the covered group that is either aU.S. person, as defined in section 7701(a)(30) of the Code, or a non-U.S. person that isexpected to file one or more U.S. returns during the proposed APA years that will re-flect the treatment of covered issues. However, if such a member of the covered groupis a member of a consolidated group other than the common parent (as defined inTreas. Reg. § 1.1502–1), then the common parent, rather than that member of the con-solidated group, is considered to be the “taxpayer.” Further, if there is more than oneentity that satisfies the preceding definition of “taxpayer,” then the term “taxpayer” re-fers collectively to all such entities.

TPO Transfer Pricing Operations, the director of which reports to the Deputy Commissioner(International), LB&I

Treaty country A country other than the United States that has a U.S. tax treaty in force

U.S. competent authority The Deputy Commissioner (International), LB&I, the Assistant Deputy Commissioner(International), and each other IRS official performing competent authority functionspursuant to applicable delegation orders (see section 2.01 of Rev. Proc. 2015–40)

U.S. return A federal income tax return filed with the IRS pursuant to the Code

U.S. tax treaty A convention governing income, estate, or gift taxes to which the United States is aparty and that has entered into force, together with its implementing protocols, ex-changes of diplomatic notes, memoranda of understanding, and competent authorityarrangements


U.S.-initiated adjustment A proposed or final adjustment made by the IRS to the taxable income of a taxpayer

Unilateral APA An APA in which the covered issue(s), covered method(s), and APA terms and condi-tions are not premised upon an underlying competent authority resolution

Unilateral APA request A request to enter into a unilateral APA under this revenue procedure


.01 Contact Information. APMA maybe contacted with general or specific ques-tions about this revenue procedure by oneof the means identified in the Appendix.Unless otherwise instructed by APMA,any item (e.g., an APA request or a pre-filing memorandum) that the taxpayer ei-ther is required or chooses to file withAPMA must be sent to APMA at theaddress listed in the Appendix.

.02 Principles of Administering APAs.

(1) In February 2012, the IRS estab-lished APMA to oversee its APA programand to act as the representative office ofthe U.S. competent authority responsiblefor handling competent authority casesarising under the business profits and as-sociated enterprises articles of U.S. taxtreaties. APMA also has shared responsi-bility for cases arising under the perma-nent establishment articles of U.S. taxtreaties. See section 2.01(3) of Rev. Proc.2015–40. In accordance with its mission,APMA endeavors to administer the pro-grams within its jurisdiction in a mannerthat is consistent with U.S. tax treaty ob-ligations and that secures the appropriatetax bases of the United States and itstreaty partners, prevents fiscal evasion,promotes consistency and reasonablenessin outcomes, and provides taxpayers ac-cess to competent authority assistance andto the APA process in accordance withconsiderations of principled, effective,and efficient tax administration.

(2) APMA’s APA program provides avoluntary process whereby the IRS andtaxpayers may resolve transfer pricing is-sues and issues for which transfer pricingprinciples may be relevant in a principledand cooperative manner on a prospectivebasis. Ancillary issues such as interest andpenalties may also be resolved, but only tothe extent to which APMA has authorityunder the Code or under a U.S. tax treaty

to resolve the issues. The APA processincreases the efficiency of tax administra-tion by encouraging taxpayers to comeforward and present all the facts necessaryfor a proper evaluation of their proposedcovered issues and to work towards a res-olution of such issues in a spirit of open-ness and cooperation. The voluntary andprospective nature of the APA processlessens the burden of compliance by giv-ing taxpayers greater certainty regardingcovered issues and promotes the princi-pled resolution of these issues by allowingfor their discussion and resolution in ad-vance, before the consequences of suchresolution are fully known to either tax-payers or the IRS. As such, the APA pro-cess is intended to address issues that areongoing in nature or have already arisen(or, based on firm commitments, are ex-pected to arise). Conversely, the APA pro-cess is not available for addressing hypo-thetical or merely contemplated issues. Inparticular, the taxpayer will not be permit-ted to use the APA process to obtain anadvance view of the IRS’s likely treat-ment of particular transactions (for exam-ple, business restructurings or intangibledevelopment arrangements) the taxpayermay be considering.

(3) The APMA Director, directly or bydelegation, may take any action – not con-trary to statute, regulation, or treaty – nec-essary to carry out the intent of this revenueprocedure. Such actions include, but are notlimited to, declining to initiate or suspend-ing or terminating the APA process (seesection 4.02(1)) and modifying the applica-tion of provisions contained in this revenueprocedure in particular cases (for example,regarding time limits). Such actions are notsubject to administrative review.

(4) Scope of APAs(a) In General. A taxpayer’s APA re-

quest will include one or more coveredissues, as applied to certain proposed tax-able years, and (in the case of bilateral andmultilateral APA requests) involving oneor more foreign competent authorities. In

evaluating the taxpayer’s request, in somecases APMA may also need to consideradditional, interrelated issues, additionaltaxable years (including potential rollbackyears, see sections 2.02(4)(c) and 5.02), oradditional treaty countries (collectively,“interrelated matters”) in order to reach aresolution that is in the interest of princi-pled, effective, and efficient tax adminis-tration. APMA will endeavor to commu-nicate to the taxpayer any concern aboutinterrelated matters, and any possible needto expand the scope of the APA (as dis-cussed below), as early as possible in theAPA process. APMA may do so, for ex-ample, when the taxpayer’s proposed cov-ered issues are most reliably evaluatedtogether with other issues. See Treas. Reg.§§ 1.482–1(f)(2)(i), 1.482–7(g)(2)(iv).For specific examples of interrelated mat-ters, see section 2.02(4)(b). In cases re-quiring consideration of interrelated mat-ters, APMA will endeavor to reach aresolution of the taxpayer’s proposed cov-ered issues, but only to the extent thatsuch resolution is consistent with thetreatment of the identified interrelatedmatters. Further, after considering the viewsof the taxpayer and (if applicable) the for-eign competent authority(ies) in such cases,APMA may decide that it is not in theinterest of principled, effective, and efficienttax administration to reach a resolution onthe taxpayer’s proposed covered issueswithout also reaching a resolution on suchidentified interrelated matters. In these cir-cumstances APMA may condition its ac-ceptance, continued consideration, or reso-lution of an APA request upon theagreement of the taxpayer (and, if applica-ble, of the foreign competent authority(ies))to expand the scope of the APA.

(b) Examples of Interrelated Matters.APMA will always consider the taxpay-er’s particular facts and circumstances andthe scope of the covered issue(s) as pro-posed in the APA request before decidingthat interrelated matters also need to beconsidered. However, it is possible to


identify some common fact patterns inwhich APMA will be more likely to sodecide.

(i) Assume that the taxpayer proposesto cover a company’s license of intangibleproperty in certain years to a second com-pany in the same controlled group, whenthat intangible property had been sold inan earlier year by the second company(the licensee) to the first company (thelicensor). In such a case, APMA mightconsider that the ongoing license shouldbe evaluated in a manner consistent withthe evaluation performed for the previoussale (for example, using the same under-lying assumptions unless there were spe-cific reasons why certain assumptionswould have changed in the interim).

(ii) The taxpayer might propose tocover the compensation for services pro-vided by one company to a second com-pany in the same controlled group, whenproviding the services requires using in-tangible property that had been transferredin an earlier year from the first companyto the second company as part of a busi-ness restructuring. In such a case, APMAmight seek to ensure that the services arevalued in a manner consistent with thevaluation done in connection with the re-structuring, in the absence of some factualreason why the valuations should not beconsistent.

(iii) In evaluating a platform contribu-tion transaction (“PCT”) in a cost sharingarrangement under Treas. Reg. § 1.482–7,APMA might also consider whether theintangible development costs in that ar-rangement are being properly shared.

(iv) Assume that the taxpayer makes abilateral APA request to cover sales ofgoods from a manufacturer in a treatycountry to a U.S. distributor that is in thesame controlled group, when the U.S. dis-tributor, in turn, resells most of thesegoods to a distributor in another country(which may or may not be a treaty coun-try) that is in the same controlled group.Before agreeing to a price that the U.S.distributor should pay to the manufac-turer, APMA might consider the price thatthis distributor receives for its resale.

(v) Other examples of types of APArequests that could involve interrelatedmatters are listed among those for which apre-filing memorandum is required in sec-tion 3.02(4), such as cases involving

transactions within a global trading ar-rangement or involving hybrid entities orentities disregarded for U.S. tax purposes.

(c) Rollbacks; Coordination betweenAPAs and Competent Authority Cases. AnAPA is primarily a means to resolve cov-erable issues for prospective years (as de-fined in section 3.03(2)). However, anAPA can also be “rolled back” to coverone or more earlier taxable years. Whenrollback years are included, the APA termwill then comprise both rollback years andprospective years (see sections 3.03(2)and 3.08). Rollback years are defined insection 3.03(2), and rollbacks are furtherdiscussed in section 5.02. Rollback yearsneed not be, but typically are, the subjectof an ongoing or anticipated competentauthority case under Rev. Proc. 2015–40.In recognition of these connections,APMA views APAs and competent au-thority resolutions under Rev. Proc.2015–40 as being two interconnectedmeans by which taxpayers can manageand address transfer pricing and othercross-border tax issues for which transferpricing principles may be relevant. Ac-cordingly, APMA will endeavor to ad-dress APA requests and competent au-thority requests under Rev. Proc. 2015–40in a way that will achieve substantive andprocedural consistency between the APAprocess and the competent authority pro-cess under Rev. Proc. 2015–40, and thatwill provide resolution and certaintyacross taxable years for taxpayers and theIRS. For example, when warranted bysimilarity of facts and circumstancesacross taxable years, APMA will encour-age and in some cases require (see section2.02(4)(a)) a taxpayer to expand the scopeof its APA request to include a rollbackwhen a comprehensive resolution of cov-erable issues would further the interests ofprincipled, effective, and efficient tax ad-ministration. Conversely, when a taxpayerthat has sought APMA’s assistance for acompetent authority case under Rev. Proc.2015–40, APMA may request (but willnot require) that the taxpayer also pursueACAP to extend the competent authorityresolution from that case to cover one ormore of its ACAP years (see section 2.04of Rev. Proc. 2015–40). In such cases,APMA may also encourage (but will notformally request or require) the taxpayerto further extend the competent authority

resolution into an APA as a means ofobtaining certainty in future taxable years(see section 2.05 of Rev. Proc. 2015–40).The relationship between APAs, compe-tent authority cases under Rev. Proc.2015– 40, and ACAP is addressed inmore detail in section 5 and in Rev.Proc. 2015– 40.

(d) Preference for Bilateral and Multi-lateral APAs. APMA’s interest in coordi-nating APAs and competent authoritycases under Rev. Proc. 2015–40 is alsoreflected in its preference for bilateral andmultilateral APAs over unilateral APAs.To minimize taxpayer and governmentaluncertainty and administrative cost, bilat-eral and multilateral APAs are generallypreferable to unilateral APAs. If a tax-payer requests a unilateral APA to coverany issue that could be covered under abilateral or multilateral APA under theapplicable tax treaty(ies), the taxpayermust explain in a pre-filing memorandum(see section 3.02(4)) why it believes that aunilateral APA is appropriate to cover thatissue. The taxpayer might state, for exam-ple, that it believes that there is no APAprocess with the treaty country, or that thetaxpayer’s proposed covered issues in-volve so many treaty countries that thetaxpayer believes that bilateral APAs or amultilateral APA would be impractical.After taking into account the taxpayer’sviews expressed in the memorandum (andin a pre-filing conference if one is held,see section 3.02), APMA will inform thetaxpayer whether it will accept a unilateralAPA request. APMA may reject a taxpay-er’s unilateral APA request for variousreasons, particularly when accepting itwould contravene procedures and prac-tices established with particular treatypartners. Further, even if APMA and ataxpayer sign a unilateral APA, APMAmight subsequently decline to consider acompetent authority request for an issuethat could reasonably and practically havebeen covered if the taxpayer had insteadpursued a bilateral or multilateral APA.See section 7.02 of Rev. Proc. 2015–40.This would particularly be the case whenAPMA has already expended resourcesand fully considered the taxpayer’s argu-ments in reaching a unilateral APA andwhen a reasonably foreseeable outcome ofthe competent authority case would be areduction in U.S. taxable income beyond


the level to which APMA and the tax-payer had agreed in the unilateral APA. Inthe same vein, under the example de-scribed in section 2.02(4)(b)(iv), if thetaxpayer is unwilling to expand the scopeof the APA request to include the compe-tent authority of a second treaty country,and APMA nevertheless is willing toreach an APA, APMA might subsequentlydecline to consider a MAP request con-cerning the resale of the goods to thedistributor in that second treaty country.In deciding whether to pursue a bilateralor multilateral APA rather than a unilat-eral APA, or to expand the scope of theAPA request to include the competent au-thority of a second treaty country, taxpay-ers should bear in mind that a failure totimely request competent authority assis-tance may adversely affect the availabilityof the foreign tax credit. See Treas. Reg.§ 1.901–2(e)(5) and Rev. Rul. 92–75,1992–2 C.B. 197.

(5) APMA is available for informalconsultations with taxpayers within oroutside of the APA process. Such consul-tations may address potential covered is-sues, and the APA process in general.Statements or representations, whetheroral or written, made by APMA in con-nection with such consultations are infor-mal only and are not binding on the IRS.Such consultations may be by telephone,written, and/or in person. Such consulta-tions may relate to taxpayers whose iden-tities remain anonymous to APMA, and insuch cases may include participation of ataxpayer’s officers or employees on ananonymous basis.

.03 General Requirements forInitiating and Continuing the APAProcess.

(1) To initiate the APA process, thetaxpayer must (i) meet the pre-filing re-quirements set forth in section 3.02, asapplicable, (ii) submit a complete APArequest, as explained in section 3.04(1),and (iii) pay the correct user fee, as de-scribed in section 3.05 and as instructed inthe Appendix.

(2) Throughout the APA process, thetaxpayer must supplement its APA re-quest and provide updated information inaccordance with sections 3.09 and 3.10.

(3) Throughout the APA process, thetaxpayer and the IRS will execute consent

agreements as necessary to extend the pe-riod of limitations for assessment of taxfor each proposed APA year (includingboth proposed prospective years and pro-posed rollback years). Each required con-sent agreement will be either general orrestricted, as specified in this section. Arestricted consent will not be appropriatefor a proposed APA year for which anissue other than the proposed covered is-sues is under ongoing or potential exam-ination by the IRS.

(a) Requirement for APA Request. Asof the date the APA request is filed, theremaining period of limitations for assess-ment of tax for each proposed APA yearmust be at least two years. If the remain-ing period of limitations for a proposedAPA year is less than two years from suchdate, then the request must contain anexecuted general consent to extend theperiod of limitations for assessment of taxfor the proposed APA year(s) to at leasttwo years.

(b) Ongoing Requirement. For eachproposed APA year, as the APA processprogresses, the taxpayer must submit ex-ecuted consents to the IRS to extend theperiod of limitations for assessment of taxas specified in this section 2.03(3)(b). Anexecuted consent must be submitted nolater than twelve months before the end ofthe remaining period of limitations. Un-less the taxpayer is otherwise instructedby APMA, each such consent must extendsuch period by at least one year. In mostcases, the taxpayer should submit a gen-eral consent for this purpose. However, ifthere are no issues other than the proposedcovered issues under examination by theIRS for a proposed APA year, then thetaxpayer may request a restricted consentunder this ongoing requirement. Requestsfor restricted consents must be made inwriting no later than fifteen months beforethe end of the remaining period of limita-tions, and include the taxpayer’s views onwhy a restricted consent is appropriate inlight of its circumstances. APMA willthen coordinate and collaborate with otheroffices within the IRS and inform the tax-payer of the type of consent to be exe-cuted (general or restricted). Any re-stricted consent will be on a formprovided by APMA.

(4) An APA request, and an APA, mustbe signed by each entity that comes within

the definition of “taxpayer” in section1.04. Any requirement in this revenueprocedure applicable to the “taxpayer” isapplicable to each such entity, except asagreed between APMA and the taxpayer.

SECTION 3. PROCEDURES FORFILING APA REQUESTS

.01 General. This section sets forthprocedures, rules, and guidelines relevantto filing an APA request. This section alsoaddresses the taxpayer’s obligations be-fore and after filing the request. Instruc-tions on preparing and filing an APA re-quest are also set forth in the Appendix.

.02 Pre-filing Requirements andRequests for Pre-filing Guidance.

(1) General. In the interest of makingthe APA process effective and efficient,APMA invites, and in some cases re-quires, the taxpayer to meet with APMAin a pre-filing conference prior to filingthe APA request. For the same reason,APMA invites, and sometimes requires,the taxpayer to submit a pre-filing mem-orandum prior to filing the APA request.Pre-filing requirements are set forth insections 3.02(3) through 3.02(7).

(2) APA Requests Eligible for SmallCase APA User Fee. The pre-filing re-quirements set forth in sections 3.02(3)through 3.02(7) do not apply to APA re-quests that are eligible for the small caseAPA user fee. A taxpayer that seeks to filesuch an APA request may submit thesmall case APA user fee together with acomplete APA request, or may first con-tact APMA to discuss filing an abbrevi-ated APA request or to discuss any otherprocedural or substantive issue.

(3) Requesting Pre-filing Conferences.A taxpayer that wishes to hold a pre-filingconference with APMA must submit itsrequest as part of a mandatory pre-filingmemorandum filed pursuant to section3.02(4) or an optional pre-filing memoran-dum filed pursuant to section 3.02(5).

(4) Mandatory Pre-filing Memoranda.A pre-filing memorandum that identifiesthe taxpayer must be filed if:

(a) the taxpayer wishes to file a unilat-eral APA request to cover an issue thatcould be covered under a bilateral or mul-tilateral APA under the pertinent tax trea-ty(ies) (see section 2.02(4)(d));


(b) the taxpayer seeks permission tofile an abbreviated APA request pursuantto section 3.04(2); or

(c) the covered issue(s) proposed bythe taxpayer will, or could reasonably beexpected to, involve any of the following:(i) the license or other transfer of intangi-bles in connection with, or the develop-ment of intangibles under, an intangibledevelopment arrangement, (ii) a globaltrading arrangement, (iii) a business re-structuring, or the use of intangibleswhose ownership changed as a result of abusiness restructuring, or (iv) unincorpo-rated branches, pass-through entities, hy-brid entities, or entities disregarded forU.S. tax purposes.

This section is not intended to limitanonymous informal consultations withAPMA as described in section 2.02(5).For example, a taxpayer might engage ininformal consultations as described in sec-tion 2.02(5), including submitting ananonymous memorandum, and subse-quently file a pre-filing memorandum thatidentifies the taxpayer and otherwise sat-isfies the requirements for a mandatorypre-filing memorandum.

(5) Optional Pre-filing Memoranda. Ataxpayer may voluntarily submit a pre-filing memorandum in cases other thanthose set forth in section 3.02(4). Al-though not required, APMA generally rec-ommends that a pre-filing memorandumbe submitted for APA requests that maypresent novel or complex substantive orprocedural issues, and APA requests forwhich APMA could reasonably have con-cerns regarding interrelated matters (seesection 2.02(4)). Optional pre-filing mem-oranda may be submitted on an anony-mous basis. APMA generally recom-mends, however, that optional pre-filingmemoranda be provided on a named basisso as to facilitate a more informed under-standing of the procedural and substantiveissues that may arise during the APA pro-cess.

(6) Contents of Pre-filing Memoran-dum. A mandatory pre-filing memoran-dum must have a length and content ap-propriate to the size and complexity of thecovered issue(s) proposed by the taxpayer,and must be primarily in memorandumform but may be accompanied by dia-grams, slides, spreadsheets, and similarsupporting materials. An optional pre-

filing memorandum must have a lengthand content appropriate to the substantiveor procedural issues the taxpayer wishesto raise with APMA, and may be in aformat chosen by the taxpayer. Whethermandatory or optional, a pre-filing mem-orandum must also do the following:

(a) State whether the taxpayer seeks apre-filing conference and, if so, the issuesthe taxpayer wishes to discuss;

(b) Propose at least three possible datesfor a pre-filing conference that normallywould be at least two weeks after the datethat the pre-filing memorandum is submit-ted, if either the pre-filing memorandum ismandatory (whether or not the taxpayerseeks a pre-filing conference, which mightbe required by APMA) or the pre-filingmemorandum is optional and the taxpayerseeks a pre-filing conference;

(c) Include covered issue diagrams ifthe pre-filing memorandum is mandatory;

(d) If mandatory and if submitted pur-suant to sections 3.02(4)(b) and 3.04(2)(a)to seek permission to file an abbreviatedAPA request, must (i) specify any infor-mation, documents, or other materials thetaxpayer proposes to omit from its APArequest, (ii) present the taxpayer’s argu-ments that the information, documents, orother materials the taxpayer proposes toomit from its APA request are not neces-sary for APMA’s evaluation of the APArequest, including if applicable the tax-payer’s arguments that the applicable law,facts and circumstances, economic condi-tions, proposed covered issue(s) andmethod(s), and other factors relevant tothe proposed APA years are substantiallythe same as those relevant to the currentAPA or the competent authority resolu-tion as the case may be (see sections 5.01and 8), and (iii) in the case of a proposedrenewal APA, summarize in a table theresults and adjustments under the currentAPA, in absolute and (as applicable) per-centage terms (e.g., operating margin),with comparison to any arm’s lengthpoints or ranges specified in the APA, andalso summarize any proposed changes interms from the current APA;

(e) List the name and contact informa-tion for the taxpayer’s point of contactand, unless the pre-filing memorandum issubmitted on an anonymous basis, pro-vide, as necessary, a Form 2848 authoriz-ing the point of contact to represent the

taxpayer in connection with the APA re-quest or a Form 8821 authorizing thepoint of contact to inspect or receive con-fidential tax information about the tax-payer in connection with the APA request;and

(f) Identify all open back years of thetaxpayer and which of such years, if any,are under examination by the IRS.

(7) Place for Submission of Pre-filingMemorandum. Two printed copies andone electronic copy of the pre-filing mem-orandum must be submitted to APMA atthe address provided in section 4 of theAppendix. The electronic copy of the pre-filing memorandum must follow the rulesfor media and format of electronic sub-missions described in section 2 of the Ap-pendix.

(8) Actions Taken with Respect to Pre-filing Conferences and Memoranda.

(a) APMA will notify the taxpayerwhether it will accept or decline the tax-payer’s request to hold a pre-filing confer-ence. APMA may also require a pre-filingconference to follow a mandatory pre-filing memorandum even if the taxpayerdid not request a conference. If APMAdecides to hold a pre-filing conference, theconference will address procedural andsubstantive issues pertinent to the APArequest. During the conference, the tax-payer should be prepared to discuss therelevant facts and circumstances sur-rounding the issue(s), method(s), andterms and conditions it proposes to coverin the APA, and (if applicable) the tax-payer’s justification for its request to filean abbreviated APA request. If APMAdecides against holding a pre-filing con-ference, it will direct the taxpayer to pro-ceed with its APA request (see section3.04(2) regarding the situation in whichthe taxpayer has sought permission to filean abbreviated APA request).

(b) Unless the taxpayer has submitted amandatory pre-filing memorandum pursu-ant to section 3.02(4), which requiresidentification of the taxpayer, or has oth-erwise identified the taxpayer, a pre-filingconference may be held on an anonymousbasis. APMA generally recommends,however, that pre-filing conferences beheld on a named basis to facilitate a moreinformed discussion of procedural andsubstantive issues that may arise duringthe APA process.


(9) Informal Advice in Pre-filing Con-ference. Statements or representationsmade by APMA in a pre-filing conferenceare informal and are, therefore, not bind-ing on the IRS (see section 2.02(5)).

.03 Time for Filing.

(1) In General. APAs are intended toapply primarily to prospective years, asdefined in section 3.03(2). APMA nor-mally expects an APA request to be filedearly enough such that the proposed APAterm would cover at least five prospectiveyears (see section 3.08). This section 3.03gives rules applicable to filing deadlinesand determinations. These rules referencesection 3.04, which provides guidance onthe content and form of complete APArequests.

(2) Prospective Years, Rollback Years,and Filing Deadline of Complete APA Re-quest. An APA term will comprise pro-spective years and rollback years (if any).Except as provided in section 3.03(2)(b), aprospective year is a taxable year in anAPA term (or a requested APA term) forwhich the taxpayer has filed a completeAPA request, or an APA request that isconsidered complete (see section 3.03(3)),as of a date that is no later than the appli-cable return date (as defined in section3.03(2)(a)) for that taxable year. AnyAPA year, or proposed APA year, endingbefore the first prospective year will be arollback year (see generally section 5.02).Depending on the taxable years that thetaxpayer proposes be covered by the APAterm and depending upon the date thatAPMA considers the taxpayer’s APA re-quest to be complete, the first prospectiveyear of the APA may or may not be thesame as what is proposed by the taxpayer.For example, the taxpayer may file itsAPA request intending that a certain tax-able year be the first prospective year ofthe APA. If, however, APMA determinesthe APA request is not complete as of theapplicable return date for that taxableyear, then the taxable year the taxpayerintended to be the first prospective yearwill be considered to be a proposed roll-back year. APMA will determine whichproposed APA year will be the first pro-spective year according to the provisionsof this section.

(a) Applicable Return Date. If the tax-payer timely files its U.S. return for a

taxable year, the applicable return date forthat year is the later of (i) the actual filingdate, and (ii) the U.S. return’s due dateprescribed by statute without regard toextensions. If the taxpayer does not timelyfile its U.S. return for a taxable year, theapplicable return date for that year is theU.S. return’s due date prescribed by stat-ute without regard to extensions.

(b) Special Filing Deadline Rule forBilateral and Multilateral APA Re-quests. An additional filing deadline ap-plies in the case of bilateral and multi-lateral APA requests. In order to bettercoordinate the timing of discussions onbilateral and multilateral APAs with for-eign competent authorities, the taxpayershould file a complete bilateral or mul-tilateral APA request (or be consideredto have filed such a complete requestunder section 3.03(3)) no later than 60days after a corresponding bilateral ormultilateral request proposing to coversubstantially the same coverable is-sue(s) and APA years has been filedwith a foreign competent authority. Forthis purpose, the filing of a correspond-ing request with a foreign competentauthority shall be understood to meanthe filing of a substantive request withthat foreign competent authority ratherthan the mere filing of a notice of intentto file a substantive request. If the tax-payer does not meet the deadline forfiling stated in this section 3.03(2)(b),then the first APA year that otherwisewould be a prospective year under therules of this section 3.03(2) will be con-sidered to be a rollback year. If thetaxpayer misses that deadline by morethan one year, then the first two or moreAPA years (as determined by APMA inits discretion) that otherwise would beprospective years under the rules of thissection 3.03(2) will be considered to berollback years.

(3) Date as of Which APA RequestConsidered Complete.

(a) In General. In certain cases, a com-plete APA request will be considered tobe filed on a date earlier than the date onwhich it is actually filed. Specifically, thecuring of certain deficiencies in an APArequest could relate back to the originalfiling date (see section 3.04(1)). The cur-ing of an incorrect user fee could in ex-ceptional cases relate back to the original

date of payment (see section 3.05). Thefiling of an APA request will in certaincases relate back to the date on which theuser fee was paid (see section 3.03(3)(b)).More than one of these provisions justcited could apply in combination to thesame APA request. For example, a com-plete APA request could be considered tohave been filed by a particular date if (i)the user fee is paid by that date, (ii) anAPA request is filed within the 120-dayperiod specified in section 3.03(3)(b), and(iii) that APA request is not completewhen filed, but prompt supplementation tocure minor deficiencies as specified insection 3.04(1) renders the APA requestcomplete. As stated in section 3.04(1),APMA’s decision of whether, and when,an APA request is complete or consideredcomplete is not subject to administrativereview.

(b) “Dollar File” Requests. For pur-poses of this section, APMA will considera complete APA request as having beenfiled by a particular date if (i) the correctuser fee is paid (within the meaning ofsection 7502(a) of the Code) by such date,and (ii) a complete APA request is filedwithin 120 days of such date. APMA mayagree to extend such 120-day period by 30days for good cause if the taxpayer re-quests such an extension before the 120-day period expires.

.04 Content and Form of CompleteAPA Requests.

(1) In General. The Appendix setsforth the required contents of an APArequest, identifies the order in which suchcontents should be presented, and pro-vides information and instructions onother administrative matters relevant tofiling a request. APMA will consider anAPA request to be complete if it (1) isaccompanied by payment of the correctuser fee as specified in section 3.05, (2)contains all the information required bythe Appendix (subject to any exceptionsagreed to by APMA), and (3) proposescovered methods that provide a reason-able basis on which to consider resolutionof the proposed covered issues. For thispurpose, a subsequent remedy of minordeficiencies, made promptly under the cir-cumstances, will relate back to the time oforiginal filing. In exceptional circum-stances, APMA may also allow a subse-


quent remedy of substantial deficiencies,made promptly under the circumstances,to relate back to the time of original filing.(Regarding deficiencies in the payment ofthe user fee, see section 3.05(3).) APMA’sdecision of whether, and when, a com-plete APA request is filed or consideredfiled is not subject to administrative re-view. Any questions about filing an APArequest not addressed in this section or insection 2 should be directed to APMA.

(2) Abbreviated APA Requests. Thetaxpayer must obtain prior permissionfrom APMA to file an abbreviated APArequest. An abbreviated APA request thatthe taxpayer files without such permissionwill not be considered a complete APArequest under this section 3.04. An abbre-viated APA request might be appropriatefor expansion of a competent authorityrequest under Rev. Proc. 2015–40 intoAPA years under the circumstances de-scribed in section 5.01(2), for APA re-newals under the circumstances describedin section 8, in certain circumstances forAPA requests eligible for the small caseuser fee as specified in section 3.04 of theAppendix, and in other, exceptional cir-cumstances. In evaluating the taxpayer’srequest to file an abbreviated APA re-quest, APMA will consider that in mostcases it can most efficiently process anAPA request when the APA request itselfcontains all documents reasonably neededto evaluate that request, even if some ofthose documents have been submitted be-fore to the IRS. Before requesting permis-sion to file an abbreviated APA request,the taxpayer should consider whether thedocuments that it proposes to omit fromthe APA request could alternatively beprovided as exhibits to that request.

(a) Abbreviated APA Requests Not El-igible for Small Case APA User Fee. Torequest permission to file an abbreviatedAPA request that is not eligible for thesmall case APA user fee as specified insection 3.04 of the Appendix, the taxpayermust file a pre-filing memorandum as de-scribed in sections 3.02(4) and 3.02(6)(d).After reviewing the pre-filing memoran-dum and (if applicable) holding a pre-filing conference (see section 3.02(8)(a)),APMA will inform the taxpayer eitherthat APMA will accept an abbreviatedAPA request (in which case APMA willinstruct the taxpayer on the content of the

request), or that APMA will require acomplete APA request.

(b) Abbreviated APA Requests Eligiblefor Small Case APA User Fee. To requestpermission to file an abbreviated APA re-quest that is eligible for the small caseAPA user fee, the taxpayer may contactAPMA informally to discuss the proposedcontents of the request. After discussionwith the taxpayer and consideration of anywritten material submitted by the tax-payer, APMA will inform the taxpayereither that APMA will accept an abbrevi-ated APA request (in which case APMAwill instruct the taxpayer on the content ofthe request), or that APMA will require acomplete APA request.

(3) Any information submitted by ataxpayer in connection with its APA re-quest must be true, correct, and complete(see the Appendix). All exhibits and doc-uments included in or referred to in theAPA request must be explained, as neces-sary, in sufficient detail to make their con-tents readily understandable. Such an ex-planation might include, for example,definitions of terms used, explanations ofthe goal and flow of calculations, thesources of data, and the identity of a doc-ument’s creator and the purpose for whichit was created.

.05 User Fees.

(1) The user fee requirements and rulesof application are set forth in the Appen-dix. A taxpayer that seeks a decision onthe user fee applicable to its APA requestmust contact APMA informally or submita pre-filing memorandum.

(2) The taxpayer must pay the applica-ble user fee no later than the date it filesthe APA request. User fees must be paidthrough the Pay.gov website.

(3) APMA will notify the taxpayer if ithas paid less than the correct user fee. Insuch a case, the taxpayer has the option ofmaking up the difference or withdrawingits APA request and receiving a refund ofthe amount it has paid. In exceptionalcases, APMA may allow the remedy ofthe insufficient user fee to relate back tothe date that the insufficient user fee waspaid for purposes of determining when acomplete APA request is considered to befiled (see section 3.03(3)).

.06 APA Request as Protective Claim.For proposed covered issues, a protective

claim for credit or refund may be made byincluding the claim in a bilateral or mul-tilateral APA request. To be a valid pro-tective claim for credit or refund, the pro-tective claim must fulfill the requirementsof section 11.02(3) of Rev. Proc. 2015–40. See section 11 of Rev. Proc. 2015–40and the Appendix. For purposes of theannual notification requirement of section11.05 of Rev. Proc. 2015–40, a protectiveclaim included in a bilateral or multilat-eral APA request shall be deemed to becontinuously filed for as long as the sub-ject matter of that claim is under consid-eration by APMA as part of that APArequest.

.07 Effect of Filing. The submission ofa complete APA request, updated and sup-plemented in accordance with the require-ments of this section 3, will be a factortaken into account in determining whetherthe taxpayer has met the documentationrequirements of Treas. Reg. § 1.6662–6(d)(2)(iii) for the proposed APA years.Submission of a complete APA requestdoes not, in itself, suspend examination orenforcement proceedings. AlthoughAPMA will coordinate within the IRS tominimize duplicative requests in conduct-ing its due diligence, the taxpayer remainsobligated to respond to information docu-ment requests issued, and according todeadlines set, by other IRS offices in anyexamination or enforcement proceedings.

.08 APA Term. The APA term willcomprise all of the prospective years androllback years (if any) covered by theAPA. In its APA request, the taxpayermust propose a term for the APA that isappropriate to the proposed covered is-sue(s) and to the commercial factors sur-rounding the taxpayer’s industry andline(s) of business. Although the appropri-ate APA term will be determined on acase-by-case basis, an APA request typi-cally should propose at least five prospec-tive years, unless the taxpayer states acompelling reason to include fewer years.Additionally, in the interest of principled,effective, and efficient tax administration,APMA typically will seek to set the APAterm so there are at least three unexpiredyears (i.e., years that have not yet ended)remaining in the APA term upon the ex-ecution of the APA (in the case of a uni-lateral APA) or upon the execution of theunderlying competent authority resolution


(in the case of a bilateral or multilateralAPA). APMA may require that the tax-payer agree to extend the APA term inorder to achieve that goal. In the case of abilateral or multilateral APA, any pro-posed term extension will be coordinatedwith the relevant foreign competent au-thority(ies).

.09 Requested and Supplemental Items.

(1) The information, documents, andmaterials required for APA requests thatare identified in the Appendix might notexhaust the items an APA team needs toevaluate a given APA request. If the APAteam determines that it needs additionalinformation to analyze the APA request,the taxpayer will be asked, and therebyrequired, to provide such information. Thetaxpayer (or, as the case may be, relatedforeign taxpayers) must respond similarlyto requests made by a foreign competentauthority, as applicable. The APA teamwill endeavor to present focused, targetedrequests for additional information. To theextent possible, the APA team will requestinformation that the taxpayer would belikely to maintain in its normal course ofbusiness or information that is readily ac-cessible or could be produced withoutplacing undue burdens on the taxpayer. Inthis regard, the APA team will discuss andconsider reasons offered by the taxpayerto modify the request or to provide other,but still responsive, information to thatwhich was requested.

(2) In general, the taxpayer should beprepared to provide both (or all) compe-tent authorities with any written re-sponses, analyses, or other documents thatit provides to one competent authority,whether such materials are provided inresponse to a request from a competentauthority or are submitted voluntarily bythe taxpayer in support of its APA request.In the interest of minimizing administra-tive burdens, the APA team will workwith the taxpayer during the APA processas necessary to find efficient proceduresfor disseminating such materials to thecompetent authorities, such as using in-dexes to catalogue the materials thathave been provided to each competentauthority.

.10 Corrected and UpdatedInformation.

(1) After the APA request is filed, anymaterial errors or material omissions inthe APA request or in supplemental sub-missions must be promptly corrected orremedied.

(2) The taxpayer must timely notifyAPMA of all material changes and up-dates to information previously submittedin connection with the APA request. Thetaxpayer must also submit any informa-tion or documents discovered or createdduring the APA process that are materialto the APA request.

(3) Any financial data that are pro-duced in connection with the APA requestduring the APA process, and that relate tothe application of the proposed coveredmethods to the proposed covered issues,must be updated annually or on a schedulethat is mutually acceptable to the taxpayerand to APMA. In addition, the APA re-quest must be supplemented with a dem-onstration of the application of the pro-posed covered method(s) to the actualfinancial results of the applicable mem-bers of the proposed covered group foreach taxable year completed while theAPA request is pending. Such a supple-mental submission must be providedwithin 180 days of the close of the tax-payer’s taxable year, or by a date that ismutually acceptable to the taxpayer and toAPMA. APMA recognizes that additionaltime may be appropriate if the coveredmethods require data from foreign partiesthat have different taxable years than thetaxpayer. APMA may, at its discretion,grant an extension or modify these re-quirements if the taxpayer provides writ-ten notification before the date the supple-mental submission would otherwise bedue.

.11 Withdrawing the Request. The tax-payer may withdraw its APA request atany time before it executes the APA.APMA generally will not refund user feesif the taxpayer withdraws its APA requestafter APMA has begun its due diligence.

SECTION 4. ACTIONS ON APAREQUESTS

.01 Decision Letter and Contact Infor-mation. APMA will notify the taxpayer inwriting that it has received the APA re-

quest. The letter will also provide thename and contact information of the APAteam leader to whom the request has beenassigned. In addition, the letter will: (1)state that the request is complete and thatthe APA process will proceed (and, ifapplicable, that the taxpayer must takecertain administrative or procedural stepspertaining to the APA request), (2) statethat the request is provisionally acceptedbut that the APA process will not proceeduntil specified deficiencies in the requesthave been addressed, or (3) state that therequest is rejected and describe the cir-cumstances, if any, under which the re-quest might be accepted.

.02 Denial or Discontinuation of theAPA Process.

(1) APMA may decline to enter into orcontinue with the APA process, either atthe outset by rejecting the APA request orby terminating or suspending the APAprocess after it has accepted the APA re-quest. APMA may take such actions if, forexample, any of the circumstances de-scribed in, or similar to those described in,section 7.02 of Rev. Proc. 2015–40 arepresent, including failure to include thematerials required by this revenue proce-dure in the APA request (see section 3) orthe materials requested by the APA teamduring the APA process. APMA also willterminate the APA process for a requestedunilateral APA if agreement cannot bereached on the APA’s terms. For re-quested bilateral and multilateral APAs,APMA may terminate the APA process ifa competent authority resolution is notreached; however, in some cases APMAand the taxpayer might then agree to ex-ecute a unilateral APA.

(2) If APMA declines to continue withthe APA process after the process hasbegun, APMA will determine whether torefund the taxpayer’s user fee. APMA willbase its decision on various consider-ations, including the extent of the duediligence and analysis the APA team hadundertaken before further assistance is de-nied.

(3) APMA’s decision to decline to ini-tiate, or to suspend or terminate, the APAprocess is not subject to administrativereview.


.03 Initial Stages of APA Process.

(1) The APA team leader will contactthe taxpayer once APMA has determinedthat the APA request is complete and thatthe APA process should continue. In mostcases, the next step in the APA process isto hold an opening conference. However,depending on its experience and familiar-ity with the proposed covered issue(s) andmethod(s) and other aspects of the APArequest, the APA team may determine thatan opening conference is not needed. Gen-erally, the APA team will forego an open-ing conference only if it has no substantialdisagreement with what the APA requestproposes. If the APA team decides to holdan opening conference, the APA teamleader will work with the taxpayer to set adate for the conference. The APA teammay request that the taxpayer provide re-sponses to specific questions from theAPA team about the APA request beforethe opening conference or at the openingconference. The APA team leader may setor agree to a due date before the openingconference for such responses and maypostpone the opening conference if theresponses are not provided by that date.

(2) An opening conference is intendedto facilitate the APA team’s understand-ing of the facts and circumstances under-lying the taxpayer’s proposed covered is-sue(s), covered method(s), and terms andconditions. The opening conference mayalso involve a discussion of the taxpayer’sreasons for its selection of its proposedcovered method(s). The APA team mayalso explore matters potentially interre-lated with the proposed covered issuesand discuss the possibility of includingadditional coverable issues, treaty coun-tries, or years in the APA (see section2.02(4)). At the opening conference, thetaxpayer should be prepared to discuss theAPA request in detail and to respond asfully as possible to questions about thefacts and the proposals. In many cases, thediscussion will focus on the taxpayer’sresponses to the APA team’s questionsprovided in advance of the opening con-ference (see section 4.03(1)).

(3) The opening conference may alsocover procedural matters, includingwhether a case plan will facilitate theAPA team’s evaluation of the taxpayer’sAPA request, and, if so, at what point in

the APA process it may be useful for theAPA team to adopt a case plan. Ordinar-ily, a case plan will be adopted to facilitateefficient processing of the taxpayer’s APArequest. With or without a case plan, theAPA team will endeavor to move throughthe APA process efficiently, given thescope and complexity of the proposedAPA and the due diligence and analysisthe APA team needs to undertake. In pre-paring a case plan, the APA team and thetaxpayer will discuss milestones, whichwill depend on the nature of the coveredissue(s), the quality of the APA requestand any responses already provided by thetaxpayer, and the further due diligenceand analysis required. The time estimatesfor these milestones as reflected in a caseplan are subject to revision. The time re-quired to achieve milestones can be af-fected by various factors including (a) thequality and timeliness of information pro-vided by the taxpayer, (b) the need toconsider interrelated matters (see section2.04(4)), (c) the emergence of unantici-pated issues (for example, because of achange in the facts), (d) in the case ofbilateral or multilateral APA requests,when the foreign competent authority(ies)are prepared to discuss the case, and (e)the ease with which an agreement can bereached with the taxpayer for unilateralAPA requests or with the foreign compe-tent authority(ies) for bilateral and multi-lateral APA requests.

.04 Evaluation and PresentationStage of APA Process for Bilateral andMultilateral APA Requests.

(1) In evaluating a bilateral or multilat-eral APA request, the APA team will con-sider requests from, and may invite orrequire, the taxpayer to make presenta-tions jointly to the APA team and to theforeign competent authority(ies). The pro-vision of such information simultaneouslyto all competent authorities could facili-tate efficient case processing. The APAteam will consult as needed with the for-eign competent authority(ies) as to its in-terest in joint presentations, and will no-tify the taxpayer accordingly.

(2) During the APA process, the APAteam may also request teleconferences orin-person meetings with the taxpayer todiscuss questions or concerns the APAteam may have about the taxpayer’s APA

request, or to discuss the APA team’sprovisional views on the request or as-pects of the request. The APA team mayalso invite the taxpayer to provide writtenresponses to memoranda discussing suchissues. For example, the APA team mayinvite the taxpayer to respond to questionsor concerns the APA team has about thediscount rate the taxpayer has chosen for adiscounted cash flow analysis and to pro-vide its comments regarding a differentdiscount rate that the APA team considersa viable alternative. Depending on thecase, the APA team may simultaneouslyprovide such invitation to the taxpayerand a copy to the foreign competent au-thority(ies) and invite the taxpayer to di-rect its responses to both the foreign com-petent authority(ies) and the APA team.

(3) The APA team may reach a point inthe APA process when it prepares to for-mally present its view on the APA requestto the foreign competent authority(ies). Atthis point, the APA team will convey thesubstance of its views to the taxpayer,generally in a paper or memorandum hav-ing a length, content, and format appro-priate to the scope and duration of theAPA process and to the size and complex-ity of the proposed covered issue(s) andmethod(s) and other relevant facts andcircumstances surrounding the case. Insome cases, the APA team may presentthe paper or memorandum to the taxpayerfor its comment before the APA teamformally presents its views to the foreigncompetent authority(ies). In other cases,the APA team may issue the paper ormemorandum simultaneously to the tax-payer and to the foreign competent au-thority(ies). The taxpayer would then beinvited to provide its comments to boththe APA team and the foreign competentauthority(ies) for their discussion and con-sideration towards reaching a competentauthority resolution. The decision as towhich approach is taken is within the dis-cretion of the APA team.

(4) The APA team will then endeavorwith the foreign competent authority(ies)to reach a competent authority resolutionthat will underlie the APA that will beexecuted between the taxpayer and theIRS. The mutual agreement procedure ar-ticle in arbitration treaties requires that thecompetent authorities refer certain casesto mandatory arbitration in the event di-


rect discussion between the competent au-thorities does not lead to a mutual agree-ment within a prescribed time period.Taxpayers requesting bilateral or multilat-eral APAs should consult the mutualagreement procedure article under the ap-plicable U.S. tax treaty to determinewhether it is an arbitration treaty and theextent to which mandatory arbitration ap-plies to cases initiated by bilateral or mul-tilateral APA requests under such treaty.See section 10 of Rev. Proc. 2015–40.

.05 Evaluation and PresentationStage of APA Process for UnilateralAPA Requests.

Many of the steps involved in the eval-uation and presentation stage of the APAprocess as applied to unilateral APA re-quests are similar to those relating to bi-lateral and multilateral APA requests. Forexample, at various points the APA teammay invite the taxpayer to respond, eitherorally or in writing, as appropriate, to itsquestions or concerns about, or provi-sional views on, the APA request. Theprimary difference is that, in the case of aunilateral APA request, the APA team andthe taxpayer will proceed directly to final-ize an APA after the APA team has com-pleted its due diligence and evaluation ofthe APA request and the APA team andthe taxpayer have agreed to the APA’scovered issue(s), covered method(s), andterms and conditions.

.06 Execution of Agreement.

With regard to either a unilateral APAor a bilateral or multilateral APA, theagreement will become effective on thedate when it is has been executed by boththe IRS and each entity included withinthe definition of the taxpayer in section1.04, and the APA then will have effect asprovided therein. When an APA’s coveredgroup includes a member of a consoli-dated group other than the common parent(as defined in Treas. Reg. § 1.1502–1), thecommon parent must sign the APA asprovided in Treas. Reg. § 1.1502–77. Theperson who signs an APA for a corpora-tion must be an authorized officer of thatcorporation, have personal knowledge ofthe APA’s covered issue(s), coveredmethod(s), and terms and conditions, per-form duties not limited to obtaining letter

rulings or determination letters from theIRS or entering into APAs, and have au-thorization to sign that corporation’s in-come tax return pursuant to section 6062of the Code. An APA for a non-corporatetaxpayer must be signed by an individualwho has personal knowledge of theAPA’s covered issue(s), covered meth-od(s), and terms and conditions, and whois authorized to sign that taxpayer’s in-come tax return pursuant to section 6061or 6063 of the Code, as applicable. In thecase of a partnership, APMA may addi-tionally require that some or all partnerssign the APA. Any questions about therequired signatory or signatories of anAPA should be directed to the APA teamleader.

.07 Not an Examination. APMA’sevaluation of the APA request will notconstitute an examination or inspection ofthe taxpayer’s books and records undersection 7605(b) or other provisions of theCode.

SECTION 5. COORDINATION WITHREV. PROC. 2015–40 ANDROLLBACKS

.01 Extension of a CompetentAuthority Resolution under Rev. Proc.2015–40 to an APA.

(1) Under Rev. Proc. 2015–40, APMAmay propose that a taxpayer pursueACAP to extend a competent authorityresolution in its competent authority caseto one or more ACAP years. APMA mayalso discuss with the taxpayer the possi-bility of extending the competent author-ity resolution forward into an APA.

(2) A request to extend a competentauthority resolution under Rev. Proc.2015–40 forward into an APA may bemade either by filing a complete APArequest, or by filing an abbreviated APArequest with APMA’s permission pursu-ant to section 3.04(2). An abbreviatedAPA request might be appropriate pro-vided that the taxpayer establishes that theapplicable law, facts and circumstances,economic conditions, proposed coveredissue(s) and method(s), and other relevantfactors surrounding the taxpayer’s pro-posed APA years are reasonably expectedto be substantially the same as such fac-tors surrounding the years in its competentauthority case under Rev. Proc. 2015–40.

.02 Rollbacks.

(1) An APA is primarily a means toresolve coverable issues for prospectiveyears. However, an APA may apply thecovered methods (with appropriate modi-fications, if necessary) to one or moreearlier, rollback years. (See generally, sec-tion 3.03.) Typically the taxpayer requestsa rollback, but APMA may also consider arollback even in the absence of a taxpay-er’s request.

(2) A rollback request generally shouldbe included in the taxpayer’s APA request(see the Appendix). APMA may, in itsdiscretion, consider a later written requestfor a rollback.

(3) Whether included in the APA re-quest or in a subsequent written request,the rollback request must include the samekind of information regarding the pro-posed rollback years that is required to besubmitted regarding the proposed pro-spective years.

(4) After coordinating and collaborat-ing with other offices within the IRS,APMA will inform the taxpayer whetherits rollback request has been accepted forconsideration. Except in unusual circum-stances, APMA will not agree to cover aclosed filed year with a rollback of a uni-lateral APA request. For a rollback that isrequested in conjunction with a bilateralor multilateral APA request, APMA will(i) agree to cover an open filed year onlyif it would agree to accept a competentauthority or ACAP request covering suchyear (see section 7.02 of Rev. Proc. 2015–40), and (ii) agree to cover a closed filedyear only if it would agree to accept acompetent authority or ACAP requestcovering such year and only if the appli-cable U.S. tax treaty(ies) allows the cor-responding competent authority resolutionto be implemented in that filed year.

(5) Regardless of whether the taxpayerpursues a rollback request, APMA re-serves the right to coordinate with appli-cable IRS offices to pursue a rollback toany or all of the taxpayer’s open backyears. In general, APMA will considertaking such action where there is suffi-cient similarity in relevant facts and cir-cumstances across the proposed prospec-tive years and the taxpayer’s open backyears. APMA will inform the taxpayer inwriting, either before the APA process


begins or at any time during the APA pro-cess, whether it will pursue a rollback andthe back years it will seek to cover. If thetaxpayer refuses to accept a rollback, andafter considering the taxpayer’s reasons forthe refusal, APMA may decline to initiatethe APA process or may suspend or termi-nate the process if it has already begun (seesection 2.02(4)(a)). Even if APMA does notrequire a rollback, APMA might still condi-tion its agreement to an APA on the APA’sterms being consistent with the tax treat-ment of issues in what might otherwise havebeen one or more rollback years (see section2.02(4)(a)).

(6) A rollback request submitted inconnection with a bilateral or multilateralAPA request is subject to the provisionsregarding coordination with IRS Appealsset forth in section 6.04 of Rev. Proc.2015–40, and is subject to the require-ment that the taxpayer submit a waiver ofex parte communication (see Appendix,section 1.03, Exhibit 4).

(7) A taxpayer’s rollback request sub-mitted in connection with a bilateral ormultilateral APA request and involving ataxable period and issue that are eitherdesignated for litigation, in litigation, orthe subject of a judicial determination orlitigation settlement, or involving a tax-able period for which the taxpayer other-wise is in litigation concerning its federaltax liability will be governed by the pro-visions regarding coordination set forth insection 6.05 of Rev. Proc. 2015–40.

SECTION 6. LEGAL EFFECT OF THEAPA

.01 Binding Agreement. An APA is abinding agreement between the taxpayerand the IRS.

.02 Effect of Compliance. If the taxpayercomplies with the APA terms and condi-tions, the IRS will not contest the applica-tion of the covered method(s) to the coveredissue(s) of the APA except as provided inthis revenue procedure. The taxpayer re-mains otherwise subject to U.S. income taxlaws and applicable U.S. tax treaties.

.03 Scope of Agreement. Except as oth-erwise provided in this section, an APAwill have no legal effect except with re-spect to the taxpayer, taxable years, andissues to which the APA specifically re-lates. If a covered issue is the transfer ofintangible property (which does not con-

stitute a platform contribution transactionas defined in Treas. Reg. § 1.482–7(b)(1)(ii)) within the meaning of Treas.Reg. § 1.482–4, the APA may providethat such transfer will not be subject toperiodic adjustments, during or after theAPA term, under Treas. Reg. § 1.482–4(f)(2) or (6). If a covered issue is a plat-form contribution transaction, the APAmay provide that such transaction will notbe treated as a Trigger PCT within themeaning of Treas. Reg. § 1.482–7(i)(6)(i)for purposes of making periodic adjust-ments, during or after the APA term, un-der Treas. Reg. § 1.482–7(i)(6).

.04 Use as Evidence. Unless providedotherwise by written agreement or regula-tions, the IRS and the taxpayer may notintroduce the APA or non-factual oral andwritten representations made in conjunc-tion with the APA request as evidence inany judicial or administrative proceedingregarding any tax year, issue, or personnot covered by the APA. This paragraphdoes not preclude the IRS and the tax-payer from agreeing to roll back theAPA’s covered method(s), or the IRS’suse of any non-factual material otherwisediscoverable or obtained other than in theAPA process merely because the partiesconsidered the same or similar material inthe APA process.

.05 Use as Admissions. Unless providedotherwise by written agreement or regula-tions, the IRS and the taxpayer may notintroduce a proposed, cancelled, or revokedAPA, or any non-factual oral or written rep-resentations or submissions made during theAPA process, as an admission by the otherparty, in any judicial or administrative pro-ceeding regarding any taxable year of therequested APA term. This paragraph doesnot preclude the IRS’s use of any non-factual material otherwise discoverable orobtained other than in the APA processmerely because APMA and the taxpayerconsidered the same or similar material inthe APA process.

SECTION 7. ADMINISTERING THEAPA

.01 Reporting of Income, APAPrimary Adjustments, ConformingAdjustments, and Repatriation of Funds.

(1) Reporting of Income and APA Pri-mary Adjustments. The taxpayer’s report-

ing of income, deductions, credits, allow-ances, basis, or any other item or elementaffecting taxable income during the APAterm must clearly reflect the application ofthe covered method(s) to the covered is-sue(s). In some cases, such reporting foran APA year will require an adjustment tothe amounts shown in the taxpayer’sbooks and records for that APA yearand/or to the amounts reflected on a U.S.return (APA primary adjustment). An“APA primary adjustment” for an APAyear must be reported (a) on a timely-filedU.S. return for such APA year, (b) on anamended U.S. return for such APA yearthat is filed within 120 days of the APA’seffective date, or (c) by an alternativemeans that is specified in the APA. Man-ners (b) and (c) in the previous sentenceare permitted only if the original U.S.return for such APA year is timely filed nolater than 60 days after the APA’s effec-tive date. For an APA year for which thetaxpayer reports an adjustment undermanner (b) or (c), the computation of anyrequired estimated tax installments for thetaxable year will not take into account theAPA primary adjustment and any relatedadjustments (see section 7.01(2)). Further,for such an APA year, the taxpayer willnot be subject to the failure to pay penal-ties under sections 6651 and 6655 of theCode, or the failure to make timely de-posit of taxes penalty under section 6656of the Code, by reason of the APA pri-mary adjustment and any related adjust-ments.

(2) Conforming Adjustments and Repa-triation of Funds. This section 7.01(2) ap-plies only to APA primary adjustmentsthat arise from applying a covered methodthat addresses the allocation of income,deductions, credits, allowances, basis, orany other item or element affecting tax-able income between members of a con-trolled group. (Such allocation generallywould be governed for U.S. tax purposesby section 482 or 367(d) of the Code, asmodified by any applicable treaty provi-sion.) Thus, this section 7.01(2) would notapply, for example, to APA primary ad-justments attributable to a U.S. permanentestablishment of a foreign corporation.

(a) Need for Conforming Adjustments;Payment of Funds. For an APA primaryadjustment, a further adjustment is neededto conform the accounts of the affected


members of the controlled group (con-forming adjustment). In some cases the“conforming adjustment” can be accom-plished by a payment of funds betweenthe affected members; such payment isreferred to as a repatriation of funds whenthe affected members are in differentcountries.

(b) Application of Rev. Proc. 99–32.Rev. Proc. 99–32, 1999–2 C.B. 296, orsuccessor guidance, will govern the repa-triation of funds to conform the accountsfollowing an APA primary adjustment,unless the competent authority repatria-tion specified in section 7.01(2)(c) appliesto that APA primary adjustment.

(c) Competent Authority Repatriation.For bilateral and multilateral APAs,APMA will apply the rules and principlesset forth in section 4.02 of Rev. Proc.2015–40 governing competent authorityrepatriation to determine the terms of anyrepatriation of funds to conform the ac-counts following an APA primary adjust-ment, if competent authority repatriationis agreed to as part of the competent au-thority resolution underlying the APA.APMA will not include competent author-ity repatriation as part of the competentauthority resolution unless the followingtwo conditions are satisfied: (i) no person(whether or not a “United States taxpayer”within the meaning of Rev. Proc. 99–32or successor guidance) that will make orreceive repatriation payments would bebarred from making or receiving repatria-tion payments under the principles of sec-tion 3.01 or 3.03 of Rev. Proc. 99–32 orsuccessor guidance, and (ii) the taxpayerexplicitly requests competent authority re-patriation in its APA request, or in a sup-plemental written submission filed withAPMA prior to a tentative competent au-thority resolution being reached.

(d) Implementation in APA. Whetherunilateral, bilateral, or multilateral, theAPA will specify the terms of conformingadjustments, including, but not limited to,the terms of any repatriation of funds.

(e) Documentation in annual reports.The taxpayer must document how theconforming adjustment for any APA pri-mary adjustment is made, including therelevant amounts, timing, and manner ofall payments and deemed payments, andmust disclose these facts in the APA an-nual report for the APA year to which the

APA primary adjustment relates (see sec-tion 7.02).

.02 Annual Reports.

(1) An APA annual report must be filedfor each APA year. The report must dem-onstrate the taxpayer’s compliance withthe APA terms and conditions, includingthe amount of any APA primary adjust-ment for a given APA year. The reportmust also include all other items requiredby the APA and should disclose any pend-ing requests to renew, modify, or cancelthe APA. In addition, the report mustidentify and correct any materially false,incorrect, or incomplete information sub-mitted during the APA process that thetaxpayer discovers during the APA year.

(2) The taxpayer must file annual re-ports on or before the later of (i) thefifteenth day of the twelfth month follow-ing the close of the APA year, and (ii) 90days after the effective date of the APA.APMA may agree to alternative filingdates if requested by the taxpayer. Forbilateral and multilateral APAs, APMAmay require the taxpayer to simultane-ously file a copy of the annual report withthe applicable foreign competent authori-ty(ies).

(3) The taxpayer must file one originalannual report containing a signed originalof the “penalties of perjury” declaration,one printed copy of the contents of theoriginal annual report, and one electroniccopy of the contents of the original annualreport. The taxpayer must file all threecopies of the annual report with APMA atthe address set forth in the Appendix. Theelectronic copy of the annual report mustfollow the rules for media and format ofelectronic submissions described in theAppendix. Upon request, the taxpayermust file additional printed copies.

(4) The taxpayer will be notified if it isnecessary to clarify or complete the infor-mation submitted in the annual report. Thetaxpayer must supply the additional infor-mation by the date specified in the notice.

(5) Any request that the taxpayer re-ceives to clarify or complete informationin an annual report is not an examinationor the commencement of an examinationof the taxpayer for purposes of section7605(b) of the Code or any other provi-sion of the Code.

(6) The taxpayer must amend its an-nual report within 45 days after becomingaware of any information that is materi-ally incomplete or incorrect or of any in-correct application of the covered meth-od(s) presented in the report.

(7) APMA may, at its discretion, grantan extension to submit the annual report ifthe taxpayer provides written notificationof its request before the due date andexplains the circumstances necessitatingthe extension.

(8) The annual report must contain thefollowing declarations, as applicable:

Under penalties of perjury, I declarethat I have examined this annualreport including accompanying doc-uments, and, to the best of myknowledge and belief, this annualreport contains all the relevant factsrelating to the annual reporting re-quirements pursuant to the APA,and such facts are true, correct, andcomplete.[If applicable: An adjustment toconform taxable income and otherrelevant items to reflect the resultsreported herein has been reported toIRS Examination.][If applicable: An amended incometax return to conform taxable in-come and other relevant items toreflect the results reported herein[has been] [will be] filed with theappropriate Internal Revenue Ser-vice Center.]

(9) The taxpayer must sign the decla-ration(s) according to the instructions inthe Appendix regarding perjury state-ments.

(10) Failure to file an annual report thatis timely, complete, and accurate may begrounds for canceling or revoking theAPA under section 7.06.

.03 Examination.

(1) With respect to the covered is-sue(s), the IRS will not reconsider thecovered method(s) but will instead limitthe examination of a taxpayer’s incometax return in any given APA year to, andmay require that the taxpayer establish,the following: (i) the taxpayer’s compli-ance with the APA terms and conditions,(ii) the accuracy of the APA annual re-port’s material representations, and (iii)the correctness of the supporting data and


computations used to apply the coveredmethod(s).

(2) The IRS may audit and proposeadjustments to the taxpayer’s results asdetermined under the APA’s coveredmethod(s) without affecting the APA’svalidity or applicability. The taxpayermay agree with the proposed adjustmentsin the same manner as any other adjust-ment, in which case the IRS will assessany resulting additional tax or refund anyresulting overpayment of tax accordingly.If it does not agree with the proposedadjustment, the taxpayer may contest itthrough available administrative and judi-cial procedures. The taxpayer must in-clude the audit adjustments as finally de-termined for the purpose of applying thecovered method(s), and must then makeany resulting APA primary adjustments.

.04 Record Retention.

(1) The taxpayer must maintain booksand records that are sufficiently detailed toverify that it has complied with the APAterms and conditions. The taxpayer’scompliance with this paragraph fulfills therecord-keeping requirements of sections6038A and 6038C of the Code as appliedto the covered issue(s).

(2) Upon examination of the coveredissue(s), IRS may request that the tax-payer submit additional information ortranslate specific documents within 30days. The IRS may extend this period forgood cause. The fact that a non-U.S. ju-risdiction may impose a penalty upon thetaxpayer or other person for disclosingany such requested material will not con-stitute reasonable cause for noncompli-ance with the IRS’s request.

.05 Revising the APA.

(1) An APA may be revised by agree-ment of the parties, and any such revisionis effective upon the date of the executionof the revision. APMA may agree to re-vise an APA in lieu of canceling or revok-ing it.

(2) If APMA is willing to agree to arevision proposed by the taxpayer to abilateral or multilateral APA, it will seekthe consent of the applicable foreign com-petent authority(ies) with respect to therevision. If the U.S. and foreign compe-tent authority(ies) agree to such revision,

or agree to another revision acceptable tothe taxpayer, then APMA will agree withthe taxpayer to revise the APA. If the U.S.and foreign competent authority(ies) can-not so agree, the APA remains in forcewithout revision. However, in some casesAPMA and the taxpayer may then agree,for U.S. domestic purposes, to (i) revisethe APA with respect to one or more APAyears, or (ii) cancel the APA as of a spe-cific date.

.06 Revoking or Canceling the APA.

(1) APMA may revoke an APA due tofraud or malfeasance (as those terms areused in section 7121 of the Code), ordisregard (as that term is used in sections6662(b)(1) and (c) of the Code) by thetaxpayer in connection with the APA, in-cluding, but not limited to, fraud, malfea-sance, or disregard involving (i) materialfacts in the request or subsequent submis-sions (including an annual report) or (ii)lack of good faith compliance with theAPA terms and conditions.

(2) APMA may cancel an APA due tothe taxpayer’s misrepresentation, mistakewith respect to a material fact, failure tostate a material fact, failure to file a timelyannual report, or lack of good faith com-pliance with the APA terms and condi-tions.

(3) Unless the parties agree to revisethe APA, APMA will cancel an APA inthe event of a failure of a critical assump-tion or a material change in governingcase law, statute, regulation, or applicabletreaty.

(4) For purposes of this section 7.06(1)and (2), APMA will consider facts mate-rial if, for example, knowledge of the factscould reasonably have resulted in an APAwith significantly different terms and con-ditions. With respect to annual reports,APMA will consider facts material if, forexample, knowledge of the facts wouldhave resulted in (a) a materially differentallocation of income, deductions, or cred-its than those reported in the annual re-port, or (b) the failure to meet a criticalassumption.

(5) APMA may waive cancellation ifthe taxpayer can show good faith and rea-sonable cause and agrees to make all ad-justments proposed to correct for the mis-representation, mistake regarding a

material fact, failure to state a materialfact, or noncompliance.

(6) If APMA revokes an APA, the re-vocation relates back to the first day of thefirst APA year. The IRS may (a) deter-mine deficiencies in income taxes and ad-ditions thereto, (b) deny relief under Rev.Proc. 99–32 or successor guidance, (c)allow the taxpayer relief under Rev. Proc.99–32 or successor guidance, but deter-mine the interest on any account receiv-able established under section 4.01 ofRev. Proc. 99–32 or successor guidancewithout mutual agreement or correlativerelief, (d) revoke the APA as an “egre-gious case” under Rev. Rul. 80–231,1980–2 C.B. 219, to deny the taxpayer aforeign tax credit, and (e) deny a requestfor relief submitted under Rev. Proc.2015–40. APMA will seek to coordinatethese or any other actions concerning therevocation of a bilateral or multilateralAPA with the foreign competent authori-ty(ies).

(7) APMA’s cancellation of an APAgenerally is effective as of the beginningof the taxable year in which the criticalassumption failed or the beginning of thetaxable year to which the misrepresenta-tion, mistake regarding a material fact,failure to state a material fact, or noncom-pliance relates. If, however, the cancella-tion results from a change in case law,statute, regulation, U.S. tax treaty, or co-ordination agreement, the cancellationgenerally is effective at the beginning ofthe year that contains the effective date ofthe change in case law, statute, regulation,U.S. tax treaty, or coordination agree-ment.

(8) For periods following the effectivedate of the cancellation, the APA has nofurther force and effect with respect to theIRS and the taxpayer for U.S. income taxpurposes. APMA will seek to coordinateany action concerning the cancellation ofa bilateral or multilateral APA with theforeign competent authority(ies).

.07 Change in Case Law, Statute, Reg-ulation, or Treaty. If controlling U.S. caselaw, statutes, regulations, or treatieschange the federal income tax treatmentof any matter covered by the APA, thenew case law, statute, regulation, or treatyprovision supersedes any inconsistentterms and conditions of the APA.


SECTION 8. RENEWING THE APA

.01 General. A request to renew a cur-rent APA may be made either by filing acomplete APA request or by filing an ab-breviated APA request with APMA’s per-mission pursuant to section 3.04(2). Anabbreviated APA request might be appro-priate if the taxpayer can establish to AP-MA’s satisfaction that the applicable law,facts and circumstances, economic condi-tions, proposed covered issue(s) andmethod(s), and other relevant factors sur-rounding the current APA are reasonablyexpected to be substantially the same asthose in the proposed renewal APA years.

.02 Timing. Taxpayers are encouragedto file a request to renew a current APA atleast nine months before the expiration ofthe final APA year.

SECTION 9. DISCLOSURE

.01 Confidentiality. An APA, any back-ground information relating to an APA,and the taxpayer’s APA request and anysupplementary materials submitted inconjunction with the APA request are re-turn information and are confidential. Seesections 6103, 6105, 894, and 7852(d) ofthe Code.

.02 Not “Written Determinations.” AnAPA, any background information relat-ing to an APA, an APA request, and anysupplementary materials submitted inconjunction with the APA request are not“written determinations” and are not opento public inspection. See section 6110 ofthe Code.

.03 Statutory Report. The Secretarymust prepare an annual report for publicdisclosure. See section 521(b) of theTicket to Work and Work Incentives Im-provement Act of 1999, Pub. L. 106–170,113 Stat. 1860, 1925. That report includesspecifically designated information con-cerning all APAs, in a form that does notidentify taxpayers, their trade secrets, orproprietary or confidential business or fi-nancial information.

.04 Exchange of Information. APAs,annual reports, and factual informationcontained in APA requests are subject toexchange of information under U.S. taxtreaties or U.S. income tax informationexchange agreements in accordance withthe terms of such treaties and agreements(including terms regarding relevancy,

confidentiality, and the protection of tradesecrets). In cases in which the exchange ofinformation would be discretionary, infor-mation may be exchanged to the extentconsistent with principled, effective, andefficient tax administration and the prac-tices of the relevant foreign competentauthority(ies), including where relevantthe existence and application by the for-eign competent authority(ies) of rulessimilar to those described in sections 6.04and 6.05.


Rev. Procs. 2006–9, 2006–1 C.B. 278,and 2008–31, 2008–1 C.B. 1133, aremodified and superseded by this revenueprocedure. Rev. Proc. 2015–40, 2015–35I.R.B. 236 is amplified.

SECTION 11. EFFECTIVE DATEAND TRANSITION RULE

.01 General. This revenue procedurewill apply to all APA requests filed underthis revenue procedure. An APA requestfiled after August 31, 2015 may instead befiled under Rev. Proc. 2006–9 only if asubstantially complete APA request isfiled under that revenue procedure no laterthan December 29, 2015. For purposes ofthis section, the 120-day allowance in sec-tion 4.07(2) of Rev. Proc. 2006–9 shallnot apply in determining the date onwhich a substantially complete APA re-quest is considered filed under Rev. Proc.2006–9. APA requests filed on or beforeDecember 29, 2015 should clearly stateunder which revenue procedure they arefiled.

.02 Rollbacks. Rev. Proc. 2006–9 isretroactively amended so that rollbacks(within the meaning of section 8 of Rev.Proc. 2006–9) may be implemented andgiven legal effect in an APA (within themeaning of Rev. Proc. 2006–9 as modi-fied by Rev. Proc. 2008–31, 2008–1 C.B.1133). This retroactive amendment ap-plies to any APA governed by Rev. Proc.2006–9 that includes such a rollback.


The collection of information con-tained in this revenue procedure has beenreviewed and approved by the Office of

Management and Budget in accordancewith the Paperwork Reduction Act (44U.S.C. 3507) under control number1545-1503.

An agency may not conduct or spon-sor, and a person is not required to re-spond to, a collection of information un-less the collection of information displaysa valid control number.

The collection of information in thisrevenue procedure is in sections 3.02,3.04, 3.06, 3.09, 3.10, 4.04, 4.05, 5.01,5.02, 7.02, 7.04 and 8.01 and in the Ap-pendix. This information is required, andwill be used, to provide the IRS sufficientinformation to evaluate and process theAPA request or to determine whether thetaxpayer is in compliance with the termsand conditions of an APA. APMA willuse this information to evaluate the pro-posed covered method(s) and the taxpay-er’s compliance with the terms and con-ditions of any APA to which it is a party.The collection of information is requiredto obtain an APA. The likely respondentsare business or other for-profit institu-tions.

The estimated total annual reportingand/or recordkeeping burden is 10,900hours.

The estimated average burden for anAPA pre-filing memorandum (and, if ap-plicable, pre-filing conference) is 10hours, the estimated average burden for anAPA request is 60 hours, and the esti-mated average burden for preparation ofan annual report by a party to an APA is15 hours. The estimated number of re-spondents and/or recordkeepers is 390.

The estimated annual frequency of re-sponses is one request or report per yearper applicant or party to an APA, exceptthat a taxpayer requesting an APA mayalso submit a pre-filing memorandum(and, if applicable, attend a pre-filing con-ference).

Books or records relating to a collec-tion of information must be retained aslong as their contents may become mate-rial in the administration of any internalrevenue law. Generally, tax returns andtax return information are confidential, asrequired by section 6103 of the Code.



The principal authors of this documentare John Hughes and Robert Weissler ofthe Office of the Deputy Commissioner(International), LB&I, and Angela Hol-land of the Office of the Associate ChiefCounsel (International). For further infor-mation regarding this revenue procedure,please contact Mr. Hughes at (202) 515-4307 or Ms. Holland at (202) 317-6939(not toll free numbers).

APPENDIXAPA REQUEST REQUIREMENTS

This Appendix sets forth instructionson preparing and filing an APA request.Unless APMA has explicitly instructedthe taxpayer in writing to file an abbrevi-ated APA request pursuant to section3.04(2) of the revenue procedure, theAPA request must be prepared and sub-mitted according to the instructions pro-vided in this Appendix. APMA may rejectan APA request that does not comply withthese instructions.

An APA request that is not an abbre-viated APA request will provide the infor-mation specified below. An APA request,whether or not abbreviated, should alsoinclude any additional material that thetaxpayer believes is important to facilitatethe APA team’s evaluation of the request.The level of detail required in the APA

request will depend on the facts and cir-cumstances of each case and will be gov-erned by relevancy and materiality con-siderations (keeping in mind that the APArequest should provide enough informa-tion to allow the reader to concur that amatter is not relevant or material). Theinformation in the APA request should betailored to the facts relating to the pro-posed covered group, the proposed cov-ered issue(s), and relevant legal authority.It should also take into account discus-sions with APMA in any pre-filing mem-orandum or pre-filing conference.

Section 1 of this Appendix addressesthe required content of APA requests.Section 2 sets forth instructions on sub-mitting printed and electronic copies ofAPA requests. Section 3 presents instruc-tions on paying user fees for APA re-quests. Section 4 provides addresses andcontact information.

SECTION 1. CONTENT OFCOMPLETE APA REQUESTS

.01 General. An APA request must in-clude a request letter followed by the ex-hibits presented in the order as listed inthis section. This section contains cross-references to parts of the request letter(e.g., PART 2.1) and to particular exhibits(e.g., Exhibit 3). The required exhibitsmay be followed by any other exhibits thetaxpayer believes are necessary or usefulto facilitate APMA’s review of its APA

request. An original of the request letter,signed and dated by the taxpayer or thetaxpayer’s authorized representative, mustbe included in one of the three requiredprinted copies of the APA request (seesection 2 of this Appendix). If the taxpay-er’s authorized representative signs theoriginal of the request letter, the taxpayerand authorized representative must satisfythe relevant instructions on signatures inRev. Proc. 2005–1, 2005–1 I.R.B. 1 orsuccessor guidance. The request letter andthe exhibits must contain or respond to therequired statements, descriptions, expla-nations, and other requested information.If the taxpayer believes a required item isnot applicable to its APA request, thismust be shown as “N/A” or “Not Appli-cable” (as opposed to being left blank). Ifthe taxpayer maintains that it is unable toprovide the required item or seeks an ex-ception to the filing requirement, it mustprovide a statement of its reasons for notproviding the item or its basis for theexception it seeks (as opposed to leavingthe entry blank). APMA may permit ex-ceptions to the filing requirements in thisAppendix on a case-by-case basis.

.02 Request Letter. The request lettermust be presented according to the in-structions and structure set forth below,and must include a table of contents giv-ing the page on which each part and sub-part begins.

Part 1. Executive Summary

1.1 Identifying information: List the name, address, and taxpayer identification number(s) of each member of theproposed covered group and the Standard Industrial Classification (“SIC”) and the North American IndustryClassification System (“NAICS”) codes (number and code description) of the controlled group as reported onthe taxpayer’s most recently filed federal tax returns

1.2 Summary of APA request: Provide an executive summary of the content of the APA request that addresses thefollowing:

a. Whether the taxpayer proposes a unilateral APA or a bilateral or multilateral APA, and, if applicable, theU.S. tax treaty(ies) and treaty articles governing the APA request;

b. Whether the APA request proposes a renewal of an existing APA or the extension of a competent authorityresolution from competent authority or ACAP years into APA years;

c. The proposed prospective years and the proposed rollback years;

d. The proposed covered issue(s) and an estimated dollar value of such issue(s) in the proposed APA years;and

e. The proposed covered method(s), including, as applicable, the proposed tested party(ies), profit level indica-tor(s), and interquartile range(s)


Part 2. Administrative Information

2.1 Authorization: List the names of and contact information for all individuals authorized by a Form 2848 to rep-resent the taxpayer in connection with the APA request and all individuals authorized by a Form 8821 to in-spect or receive confidential tax information about the taxpayer in connection with the APA request, alongwith a designation as to which individual will serve as the point of contact for the APA team

2.2 IRS office: Identify the IRS office having examination jurisdiction over the taxpayer, together with the name ofand contact information for the taxpayer’s IRS Examination team manager if the taxpayer is under examinationwhen the APA request is filed

2.3 Filed years: Provide a table with the following information for each member of the proposed covered group:

a. All open filed years in the United States and the relevant treaty country(ies), whether or not such years arecurrently under examination by the IRS or a foreign tax authority;

b. The expiration dates of statutes of limitations for all open filed years in the United States and in therelevant treaty country(ies)

c. All open filed years in which a proposed covered issue or a substantially similar issue is under review byIRS Appeals or its equivalent in the relevant treaty country(ies); and

d. All open filed years in which an actual or proposed adjustment has been made by either the IRS or aforeign tax authority relating to the proposed covered issue(s) or to substantially similar issues

2.4 Request for SAP review: If applicable, include a statement that the APA request is intended to serve as arequest for SAP review for specified taxable years, pursuant to section 5.02(6) of the revenue procedure

2.5 Optional e-mail memorandum of understanding: At the taxpayer’s option, an executed memorandum ofunderstanding in the form prescribed by APMA (as may be posted on the APMA website or otherwiseavailable by contacting APMA) permitting APMA to communicate with the taxpayer’s authorizedrepresentatives through encrypted e-mail

Part 3. Proposed Covered Issue(s)

3.1 Pre-filing information: Provide the following information:

a. Whether a mandatory or optional pre-filing memorandum was filed; and

b. Whether a pre-filing conference was held and, if so, the date of and attendees at the conference

3.2 Rollback: Provide the following information:

a. If the taxpayer is seeking consideration of a rollback, list the proposed rollback years; and

b. If the taxpayer is not seeking consideration of a rollback, discuss the reasons as to why a rollback is notappropriate

3.3 Background on proposed covered group: Provide background on the following points, with reference to thecovered issue diagrams:

a. The general history of the business operations of the proposed covered group and of the controlled group;

b. The worldwide gross revenue of the controlled group in the most recent taxable year available;

c. The functional currency of each member of the proposed covered group;

d. For each member of the proposed covered group, any business line(s) that is (are) outside the scope of theproposed covered issue(s); and

e. The industry in which the proposed covered group operates, including discussion of relevant macroeco-nomic and other industry-wide factors affecting the proposed covered group, the commercial features of themarkets and geographical areas in which the proposed covered group operates, and the participants andcompetitors in the proposed covered group’s industry


3.4 Narrative with reference to proposed covered issues in covered issue diagrams: For each proposed coveredissue, provide a detailed discussion of the following, with reference to the covered issue diagrams in Exhibit 11:

a. The functions performed by each member of the proposed covered group in relation to the proposed covered issue;

b. The assets employed by each member of the proposed covered group in relation to the proposed covered issue;

c. The risks assumed by each member of the proposed covered group in relation to the proposed covered issue;

d. Transactional or commercial flows relating to the proposed covered issue(s) between and among members orbusiness units of the proposed covered group, between members or business units of the proposed covered groupand customers and other uncontrolled parties, and between members or business units of the proposed coveredgroup and members or business units of the controlled group outside of the proposed covered group;

e. Principal intercompany contracts or other agreements, written or otherwise, between and among members of theproposed covered group relating to the proposed covered issue(s); and

f. Unless the proposed covered method involves a profit split (within the meaning of Treas. Reg. § 1.482–6 orChapter II of the OECD Guidelines) between two or more members of the proposed covered group, the identityof the member of the controlled group that is proposed to be regarded as the principal in relation to the proposedcovered issue, whether or not it is a member of the proposed covered group

3.5 Narrative with reference to non-proposed covered issues in covered issue diagrams: For each issue that is not a pro-posed covered issue, but is an issue that APMA might reasonably consider in analyzing the proposed covered issuesunder the principles expressed in section 2.02(4)(a), a discussion of why in the interest of principled, effective, andefficient tax administration such issue need not be a covered issue, and of the extent to which such issue should beconsidered in the APA process

3.6 Rulings, determinations, and proceedings: Provide information on the following:

a. Current or expired rulings issued by a relevant foreign tax authority covering intercompany transactions or busi-ness activities of members of the proposed covered group that are similar to the proposed covered issue(s);

b. The terms of any competent authority resolution addressing intercompany transactions or business activities ofmembers of the proposed covered group that are similar to the proposed covered issue(s); and

c. Any judicial or administrative proceedings in the United States or in the relevant treaty country(ies) to which anymembers of the proposed covered group are or have been parties involving intercompany transactions or businessactivities that are similar to the proposed covered issue(s)

3.7 Ancillary issues: List the ancillary issues (if any) proposed to be covered by the APA

Part 4. Proposed Covered Method(s)

4.1 Selection and application of proposed covered method(s): Discuss the selection of the proposed covered method(s)with reference to the standards governing the selection of the “best method” under Treas. Reg. § 1.482–1(c) and, inthe case of bilateral or multilateral APA requests, the selection of the “most appropriate” method under Chapter I ofthe OECD Guidelines, and how overall that method is applied, including the definition of the tested party(ies)

4.2 Search and screening process: Describe the research and screening process and criteria used to identify and selectindependent comparable agreements or independent companies or other market data upon which the proposed cov-ered method is based, including the initial search universe, the qualitative and quantitative screens used to accept orreject potential comparable agreements or companies or other market data, the order in which different criteria were ap-plied, the precise specification of each criterion (including for example the precise way in which multiyear averages areused, or in which requirements are applied across multiple years), and the numbers of potential comparable agreements orcompanies or other market data accepted and rejected at the different stages of the search and screening process

4.3 Application of proposed covered method(s): Provide a detailed explanation of (a) the data and assumptions used and (b)any adjustments made to the selected proposed comparable agreements or results of independent companies or other mar-ket data, or to the results of the tested party, such as adjustments relating to: (i) product line segregations, (ii) differences inaccounting practices, (iii) differences in functions performed, assets employed, or risks assumed (especially noting workingcapital or other balance sheet adjustments made to the tested party(ies) or to the comparables and any differences betweensuch adjustments and the adjustments incorporated into the APA template (as may be posted on the APMA website orotherwise available by contacting APMA), (iv) volume or scale differences, or (v) differences in economic or market con-ditions


4.4 Demonstration of proposed covered method(s): Provide a table summarizing the results of applying the proposed coveredmethod(s) to the relevant members of the proposed covered group for (i) all proposed rollback years, (ii) the most recentthree back years, if they are not proposed rollback years (or as many such back years as have data available, if not allhave data available), (iii) the first proposed APA year, using actual data if available and otherwise using forecasted data,and (iv) other proposed APA years, using forecasted data, to the extent forecasts are available

4.5 Segmentation of financial results: If the proposed covered method(s) is (are) applied to a subset of the assets, liabilities,income, and expenses in the financial statements (see Exhibit 18), provide a segmentation of the financial statements anddescribe in detail (i) those items in the segmented financial statements that have been allocated or apportioned to the appli-cable proposed covered issue(s) and to other issues, and (ii) the method(s) of allocation or apportionment applied

Part 5. Proposed APA Terms and Conditions

5.1 Review of proposed APA: Provide a detailed discussion and explanation of the proposed APA terms and condi-tions as reflected in the draft APA submitted with the APA request (see Exhibit 15), noting, in particular, anyproposed APA terms and conditions that differ from the APA terms and conditions as reflected in the modelAPA (see Exhibit 15)

.03 Exhibits. The APA request mustalso include the following exhibits afterthe request letter, separated and ordered asindicated. Additional exhibits may be pro-vided as needed. The taxpayer should beprepared to translate, upon request, material

in exhibits that is presented in a foreignlanguage. While all of the exhibits mustbe included as part of a complete APArequest, certain exhibits are required to beproduced in both printed and electronicforms; other exhibits need be produced

only in electronic form (see section 2 ofthis Appendix). The description of Exhibit7, the “penalties of perjury” declaration, iswritten so as to accommodate such a decla-ration accompanying both an APA requestand a supplemental submission.

Exhibit 1 Contents of exhibits: Provide a table or similar comprehensive list of the exhibits submitted, indicatingthe form (printed, electronic, or both) in which they are submitted

Exhibit 2 Authorization form: Include a properly executed Form 2848 (Power of Attorney and Declaration ofRepresentative) for all individuals authorized to represent the taxpayer in connection with the APArequest or Form 8821 (Tax Information Authorization) for all individuals authorized to inspect or re-ceive confidential tax information about the taxpayer in connection with the APA request

Exhibit 3 Protective claim: In the case of a bilateral or multilateral APA request, provide a statement affirmingwhether the APA request is to serve as a protective claim pursuant to section 11 of Rev. Proc.2015–40 and, if so, include the information required by section 11.02(3) of Rev. Proc. 2015–40

Exhibit 4 Waiver of ex parte communication: If the APA request involves proposed rollback years in which theproposed covered issue(s) or a related issue is unresolved and under consideration by IRS Appeals,include a waiver, modeled on the following language, of the taxpayer’s right to be present duringcommunications between IRS Appeals and members of the APA team:

Waiver of Ex Parte Communication: [Name of taxpayer(s)] agrees to the par-ticipation of IRS Appeals in the consideration of this APA request and herebywaives its right to be present during, or to participate in, meetings relating tothe APA request or to be a party to discussions concerning the proposed cov-ered issue(s) between IRS Appeals and members of the APA team

Exhibit 5 Consent to disclosure: In the case of a bilateral or multilateral APA request, include a declaration, datedand signed by an authorized officer of the taxpayer having personal knowledge of the facts concerning theproposed covered issue(s), that the taxpayer consents to the disclosure of the contents of the APA request –other than trade secrets, if the taxpayer so requests – to the applicable foreign competent authority(ies)within the limits contained in the U.S. tax treaty(ies) governing the APA request

Exhibit 6 Consents regarding period of limitations: Any executed consents to extend the period of limitations forassessment of tax that are required under section 2.03(3)(a) of the revenue procedure

Exhibit 7 “Penalties of perjury” declaration: Include the following “penalties of perjury” declaration:


Under penalties of perjury, I declare that I have examined this [APA request] [sup-plemental submission relating to an APA request], including accompanying docu-ments, and, to the best of my knowledge and belief, the [APA request] [supple-mental submission] contains all the relevant facts relating to the [APA request][supplemental submission], and such facts are true, correct, and complete.

The declaration must be signed by the taxpayer on whose behalf the request is being made and not by thetaxpayer’s representative. The person signing for a corporate taxpayer must be an authorized officer of thetaxpayer who has personal knowledge of the facts, whose duties are not limited to obtaining letter rulingsor determination letters from the IRS or negotiating APAs, and who is authorized to sign the taxpayer’sincome tax return pursuant to section 6062 of the Code. The person signing for any non-corporate taxpayermust be an individual who has personal knowledge of the facts and who is authorized to sign in accor-dance with sections 6061 or 6063 of the Code, as applicable

Exhibit 8 User fee receipt: Include a copy of the receipt obtained after paying the required APA user fee (see section3 of this Appendix)

Exhibit 9 Documents submitted to foreign competent authorities: List all documents or written submissions providedto a foreign tax authority or foreign competent authority in connection with the APA request, either prior toor concurrently with the submission of the APA request to APMA, noting the documents or written sub-missions for which English translations are available and any documents or written submissions providedto a foreign tax authority or foreign competent authority in connection with the APA request that are notincluded in the APA request submitted to APMA

Exhibit 10 Pre-filing submissions: Include any pre-filing memoranda or other materials submitted in connection withthe APA request

Exhibit 11 Covered issue diagrams: Include diagrams, charts, or similar representations depicting the following infor-mation as it relates to the proposed covered issues and any interrelated matters that APMA might reason-ably consider in analyzing the proposed covered issues under the principles expressed in section 2.02(4)(a),each presented in a manner similar to and with a degree of detail no less than that presented in the dia-grams accompanying the case studies “Alpha” through “Foxtrot” in Joint Committee on Taxation, PresentLaw and Background Related to Possible Income Shifting and Transfer Pricing (JCX–37–10), July 20,2010 (available at www.jct.gov; see also APMA website):

a. The controlled group’s legal structure, with clear indications as to the members of the proposed coveredgroup;

b. The controlled group’s tax structure, with clear indications as to, among other items, ownership relation-ships and tax filing characterizations of members of the proposed covered group under the Code andunder applicable rules in the relevant treaty country(ies) (e.g., partnerships, branches, or disregarded en-tities);

c. The controlled group’s and proposed covered group’s business units or similar organizational divisionsas used for management purposes, together with a table, narrative, or other reconciliation showing therelationship between such business units and the legal entities comprising the controlled and proposedcovered groups;

d. The value chain of the proposed covered group, comprising commercial or transactional flows betweenand among members or business units of the proposed covered group, between members or businessunits of the proposed covered group and customers and other uncontrolled parties, and between mem-bers or business units of the proposed covered group and any other members or business units of thecontrolled group outside the proposed covered group; and

e. Organization or management charts identifying executive-level functional or occupational roles withinthe business units or within members of the proposed covered group that are relevant to the proposedcovered issue(s) (e.g., vice president of marketing for transactions involving sales of tangible goods),together with (i) the names of individuals occupying such executive-level functional roles at the time theAPA request is filed, and (ii) headcounts for the relevant business units or members of the proposedcovered group

Exhibit 12 APAs: Include a copy of the most recent APA, if any, that the taxpayer or another member of the proposedcovered group has entered into with (i) the IRS, and (ii) each involved foreign tax authority, concerningtransactions or other business activities within the scope of the proposed covered issue(s)


Exhibit 13 Selection process: Provide a table or similar report on the step-by-step results of applying criteria for select-ing comparable agreements or independent comparable companies or other market data, including a tableor matrix showing the reason(s) for rejecting agreements or independent companies or other market data(see PART 4.2)

Exhibit 14 Information on selected comparables: As applicable, include a detailed discussion of the contractual terms(within the meaning of Treas. Reg. § 1.482–1(d)(3)(ii)) of selected comparable agreements, including theform of consideration charged or paid, and for APA requests in which the proposed covered method(s)involve(s) an application of the comparable profits method (as defined in Treas. Reg. § 1.482–5) or thetransactional net margin method (as defined in the OECD Guidelines), include (i) unadjusted income state-ment data for the most recent five taxable years (or as many years as are available, if fewer than five yearsare available) and balance sheet data for the most recent six taxable years (or as many years as are avail-able, if fewer than six years are available) of the selected independent comparable companies, and (ii) (ifapplicable) the application to such financial data of any adjustments pursuant to the proposed coveredmethod(s) (see PARTS 4.3 and 4.4)

Exhibit 15 Proposed draft APA: Provide a proposed draft APA in a form substantially similar to APMA’s currentmodel APA (as may be posted on the APMA website or otherwise available by contacting APMA), to-gether with a “redline” version of the same showing the differences between the model APA and the pro-posed draft APA

Exhibit 16 Application of APA template: For APA requests in which the proposed covered method involves an appli-cation of the comparable profits method (as defined in Treas. Reg. § 1.482–5) or the transactional net mar-gin method (as defined in the OECD Guidelines), provide income statement data for the most recent fivetaxable years (or as many years as are available, if fewer than five years are available) and balance sheetdata for the most recent six taxable years (or as many years as are available, if fewer than six years areavailable) for the relevant member(s) of the proposed covered group, using the APA template (as may beposted on the APMA website or otherwise available by contacting APMA)

Exhibit 17 Federal income tax filings: Provide copies of the following federal income tax forms for each of the threemost recent filed years of the taxpayer:

a. Form 1120 or applicable equivalent;

b. Form 5471 (Information Return of U.S. Persons With Respect to Certain Foreign Corporations);

c. Form 5472 (Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign CorporationEngaged in a U.S. Trade or Business); and

d. Form 8858 (Information Return of U.S. Persons With Respect to Foreign Disregarded Entities)

Exhibit 18 Financial statements: Provide copies of financial statements, including full income statements, balancesheets, and cash flow statements (audited, if available, and in English, if available), for each relevant mem-ber of the proposed covered group for each of the most recent three back years and specify the accountingstandard used (e.g., U.S. GAAP)

Exhibit 19 Section 6662 documentation: Include a copy of the documentation prepared in consideration of section6662(e) of the Code (and, if applicable, a copy of similar documentation filed with or subject to request bythe relevant foreign tax authority(ies)) relating to intercompany transactions or business activities that arewithin the scope of the proposed covered issue(s) for each relevant member of the proposed covered groupfor each of the most recent three back years

Exhibit 20 Regulatory filings: Include a copy of the Form 10–K or similar annual SEC filing submitted for U.S. regu-latory purposes by the controlled group for each of the most recent three back years


Exhibit 21 APA annual reports: For renewal APA requests, provide all APA annual reports filed with APMA withrespect to the current APA

Exhibit 22 Intercompany agreements: Include copies of any written intercompany contracts or agreements between thetaxpayer and other members of the proposed covered group that are within the scope of the proposed cov-ered issue(s), with a statement of when each contract or agreement was actually executed, and a summaryof any oral intercompany agreements that are material to the proposed covered issues. For proposed APAsrelating to intangible development arrangements, these agreements or contracts would include, as applica-ble, documents forming or revising the intangible development arrangement and documents relating to useunder the intangible development arrangement of rights, resources, and capabilities owned by participantsor related non-participants.

SECTION 2. MANNER AND MEDIAOF APA REQUEST FILINGS

.01 General. The taxpayer must pro-vide copies of its APA request as fol-lows: one (1) original, bound printedsubmission containing signed originalsof the request letter and “penalties ofperjury” declaration and, as applicable,of the authorization forms, consent todisclosure, and e-mail authorization, to-gether with copies of all other requiredprinted information, two (2), as applica-ble, original signed consents to extendthe period of limitations for assessmentof tax that are required under section3.03(3) of the revenue procedure, placedin a separate, clearly labeled envelope,two (2) bound photocopies of the con-tents of the original printed submission,and three (3) electronic copies of thecontents of the original printed submis-sion, together with the requiredelectronic-only attachments, on CD orflash drive or similar acceptable elec-tronic storage medium. All of theseoriginals and copies of the APA requestmust be filed with APMA at the addressset forth in section 4 of this Appendix.Upon request, the taxpayer must provideadditional electronic copies and/orbound photocopies of the contents of theoriginal printed submission.

.02 Contents and Format of PrintedSubmissions. Each printed copy of theAPA request must contain (i) the requestletter, and (ii) Exhibits 1 through 15.The exhibits must be tabbed and orderedas presented in section 1 of this Appen-dix. If an exhibit is not applicable to theAPA request, a statement to this effectmust be included in the relevant tabbedsection. The original signed consents toextend the period of limitations for as-

sessment of tax should be individuallystapled as needed, with all such consentsbound together with a binder clip.

.03 Contents and Format ofElectronic Copies.

(1) The electronic copies of the APArequest must contain (i) the request let-ter, and (ii) Exhibits 1 through 22 andany additional exhibits. The exhibitsshould consist of separate electronicfiles named in a manner that corre-sponds to the exhibit numbers and de-scriptive captions presented in section 1of this Appendix. If an exhibit is notapplicable to the APA request, a state-ment to this effect must be included inthe electronic file.

(2) The electronic copies of the APArequest must include the request letter inboth Microsoft Word (“Word”) and inAdobe Portable Document (“.pdf”) for-mats. Exhibit 15 must be provided inWord format. All other exhibits readilyavailable in Word or Microsoft Excel(“Excel”) format should be provided inthose forms as applicable, instead of, or inaddition to, .pdf format.

(3) All electronic documents providedin conjunction with an APA request andthroughout the APA process must besearchable, unless the file is not readilyavailable in searchable form (e.g., a pho-tocopy of an intercompany agreement).

(4) All documents presented in Excelformat must be provided with formulasand internal cell references intact.

(5) For some APA requests (especiallycomplex APA requests), the taxpayer maychoose to additionally provide a book-marked .pdf file that includes the entirecontents of the APA request. In some

cases, APMA may require that the tax-payer provide such a file.


.01 General. User fees must be paidthrough the Pay.gov website. Instructionson making user fee payments are availableon the APMA website. APMA will notconsider an APA request complete, andwill hold the APA request in suspense,until the correct user fee is paid throughthe Pay.gov website.

.02 Separate Fees. Subject to the pro-visions of this section, a separate user feeis required for each APA request submit-ted by each controlled group. For thispurpose, a multilateral request is consid-ered to be a set of bilateral requests foreach country involved.

.03 Amounts.

(1) In General. The user fee amountsare as follows:

(a) $60,000 for each APA request, ex-cept as otherwise specified in this section;

(b) $35,000 for each request to renewan APA that does not propose a substan-tial expansion of the APA’s scope or asubstantial change in the covered meth-od(s) (other than updating of the resultsunder the covered method(s)), providedthat the pertinent facts remain substan-tially the same, unless such renewal iseligible for the small case APA user fee;

(c) $30,000 for each APA request eli-gible for the small case APA user fee; and

(d) $12,500 for each amendment to a cur-rent unilateral, bilateral, or multilateral APA.

(2) Multiple Requests. If multiple APArequests are filed by the same controlledgroup within a sixty-day period, the max-imum total fee charged will be $60,000,


plus $30,000 for each foreign competentauthority involved (if any) beyond the firsttwo.

.04 Small Case APA User FeeEligibility. An APA request is eligible forthe small case APA user fee only if all ofthe following apply: (i) the controlledgroup has sales revenues, within themeaning of Treas. Reg. § 1.482–5(d)(1),of less than $500 million in each of itsmost recent three back years, (ii) the ag-gregate value of the proposed covered is-sue(s) is not expected to exceed $50 mil-lion in any given year of the proposedAPA years, (iii) the aggregate value ofany transfer of rights in, or rights to use,intangibles is not expected to exceed $10million in any given year of the proposedAPA years, and (iv) no proposed coveredissue involves intangible property arising

from, or otherwise related to, an intangi-ble development arrangement.

.05 Fees for Amendments. For pur-poses of section 3.03 of this Appendix, anamendment includes coverage of addi-tional issues, material changes to a pro-posed covered method, and any other ma-terial additions or changes to the termsand conditions of the APA. APMA willnot impose this amendment fee if APMAor a foreign competent authority initiatesthe request to amend the proposed cov-ered issue(s) or method(s).

SECTION 4. ADDRESSES ANDCONTACT INFORMATION

Deputy Commissioner (International)Large Business and International

DivisionInternal Revenue Service1111 Constitution Avenue, N.W.Washington, D.C. 20224SE:LB:IN:TPO:APMA:M3–370(Attention: APMA)

All mail should be sent to this mailingaddress, including regular mail, expressmail, overnight mail, and mail sent byUSPS, FedEx, UPS, or any other carrier.Contact information for APMA and addi-tional information is as follows.

Telephone Telephone numbers are available through the “contact us”link on the APMA website

Website www.irs.gov/Businesses/Corporations/APMA

Headquarters 801 Ninth Street, N.W.Physical Location Washington, D. C. 20001

(Mail not accepted at this location)


Part IV. Items of General InterestFEDERAL TAX TREATMENTOF IDENTITY PROTECTIONSERVICES PROVIDED TODATA BREACH VICTIMS

Announcement 2015–22

Identity theft, also known as identityfraud, occurs when a person wrongfullyobtains and uses another person’s per-sonal information (for example, name, so-cial security number, or banking or creditaccount numbers) in a way that involvesfraud or deception, typically for economicgain. Identity theft is a growing problemin the United States. Identity theft hasbeen the number one consumer complaintto the Federal Trade Commission for fif-teen consecutive years. The Bureau ofJustice Statistics estimates that 16.6 mil-lion people were victims of identity theftin 2012, the latest year for which data isavailable. In addition, recent high-profiledata breaches at various organizationshave exposed many more millions of per-sons to the risk of identity theft.

Businesses, government agencies, andother organizations make significant ef-forts to secure the personal information oftheir customers and employees. Notwith-standing these efforts, a data breach of anorganization’s recordkeeping systems,whether due to computer “hacking” orotherwise, can expose this information toidentity thieves. In response to such databreaches, organizations often providecredit reporting and monitoring services,identity theft insurance policies, identityrestoration services, or other similar ser-vices (collectively “identity protectionservices”) to the customers, employees, orother individuals whose personal informa-tion may have been compromised as aresult of the data breach. These identityprotection services are intended to preventand mitigate losses due to identity theftresulting from the data breach.

Questions have been raised concerningthe taxability of identity protection ser-vices provided at no cost to customers,employees, or other individuals whosepersonal information may have been com-promised in a data breach. Existing guid-

ance does not specifically address thesequestions.

The IRS will not assert that an individ-ual whose personal information may havebeen compromised in a data breach mustinclude in gross income the value of theidentity protection services provided bythe organization that experienced the databreach. Additionally, the IRS will not as-sert that an employer providing identityprotection services to employees whosepersonal information may have been com-promised in a data breach of the employ-er’s (or employer’s agent or service pro-vider’s) recordkeeping system mustinclude the value of the identity protectionservices in the employees’ gross incomeand wages. The IRS will also not assertthat these amounts must be reported on aninformation return (such as Form W–2 orForm 1099–MISC) filed with respect tosuch individuals. This announcement doesnot apply to cash received in lieu of iden-tity protection services, or to identity pro-tection services received for reasons otherthan as a result of a data breach, such asidentity protection services received inconnection with an employee’s compen-sation benefit package. This announce-ment also does not apply to proceeds re-ceived under an identity theft insurancepolicy; the treatment of insurance recov-eries is governed by existing law.

The Treasury Department and the IRSrequest comments on whether organiza-tions commonly provide identity protec-tion services in situations other than as aresult of a data breach, and whether addi-tional guidance would be helpful in clar-ifying the tax treatment of the servicesprovided in those situations. Commentsshould be submitted in writing on or be-fore October 13, 2015 to the followingaddress:

Internal Revenue ServiceCC:PA:LPD:PR(Announcement 2015–22)P.O. Box 7604Ben Franklin StationWashington, DC 20044

Comments also may be sent electronicallyto [email protected] include �Announcement 2015–22” in

the subject line. All comments will be avail-able for public inspection.

The principal author of this announce-ment is Seoyeon Sharon Park of the Officeof Associate Chief Counsel (Income Tax& Accounting). For further informationregarding this announcement, contact Ms.Park at (202) 317-7006 (not a toll-freenumber).

Extension of Time to FileCertain InformationReturns

REG–132075–14

AGENCY: Internal Revenue Service(IRS), Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: In the Rules and Regula-tions section of this issue of the InternalRevenue Bulletin, the IRS is issuing tem-porary regulations that will remove theautomatic extension of time to file infor-mation returns on forms in the W–2 series(except Form W–2G). The temporary reg-ulations will allow only a single 30-daynon-automatic extension of time to filethese information returns. In addition, thetemporary regulations will update the listof information returns subject to the rulesregarding extensions of time to file. Theseproposed regulations incorporate the tem-porary regulations with respect to exten-sions of time to file information returns onforms in the W–2 series (except FormW–2G). In addition, these proposed regu-lations would remove the automatic 30-day extension of time to file all informa-tion returns listed in the temporaryregulation.

DATES: Written or electronic commentsand requests for a public hearing must bereceived by November 12, 2015.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–132075–14), room5203, Internal Revenue Service, P.O. Box7604, Ben Franklin Station, Washington,DC 20044. Submissions may be hand-delivered between the hours of 8 a.m. and4 p.m. to CC:PA:LPD:PR (REG–132075–


14), Courier’s Desk, Internal RevenueService, 1111 Constitution Avenue, NW.,Washington, DC, or sent via the FederaleRulemaking Portal at www.regulations.gov(IRS REG–132075–14).

FOR FURTHER INFORMATIONCONTACT: Concerning these proposedregulations, Jonathan R. Black, (202) 317-6845; concerning submissions of com-ments and/or requests for a hearing, Re-gina Johnson (202) 317-6901 (not toll-free numbers).

SUPPLEMENTARYINFORMATION:

Background and Explanation ofProvisions

Temporary regulations § 1.6081–8T inthe Rules and Regulations section of thisissue of the Internal Revenue Bulletinwill amend 26 CFR part 1 by removingthe automatic extension of time to fileinformation returns on forms in the W–2series (except Form W–2G), effective forfiling season 2017. The temporary regula-tions will allow only a single 30-day non-automatic extension of time to file theseinformation returns that the IRS may, inits discretion, grant if the IRS determinesthat an extension of time to file is war-ranted based on the filer’s or transmitter’sexplanation attached to a Form 8809,“Application for Extension of Time toFile Information Returns,” signed underpenalties of perjury. The temporary regu-lations will also add Forms 3921, 3922,1094–C, and forms in the 1097 series tothe list of information returns covered by§ 1.6081–8T(a) and clarify that Forms1095–B and 1095–C, but not Form1095–A, are covered by the rules in§ 1.6081–8T(a).

These proposed regulations would re-move the automatic 30-day extension oftime to file the information returns listedin § 1.6081–8T(a) and allow only a singlenon-automatic extension of time to file allinformation returns listed in § 1.6081–8T.

The IRS anticipates that, as describedin the temporary regulations with respectto forms in the W–2 series (other thanForms W–2G), under the proposed regu-lations, the IRS will grant the non-automatic 30-day extension of time to fileinformation returns listed in § 1.6081–8(a) only in limited cases where the filer’s

or transmitter’s explanation demonstratesthat an extension of time to file is neededas a result of extraordinary circumstancesor catastrophe, such as a natural disasteror fire destroying the books and records afiler needs for filing the information re-turns.

Treasury and the IRS request com-ments on the appropriate timing of theremoval of the automatic 30-day exten-sion of time to file information returnscovered by these proposed regulations,such as Form 1042–S, including whetherspecial transitional considerations shouldbe given for any category or categories offorms or filers relative to other forms orfilers. Although these regulations are pro-posed to be effective for requests for ex-tensions of time to file information returnsdue on or after January 1 of the calendaryear immediately following the date ofpublication of a Treasury decision adopt-ing these rules as final regulations in theFederal Register, removal of the auto-matic 30-day extension of time to file willnot apply to information returns (otherthan forms in the W–2 series exceptForms W–2G) due any earlier than Janu-ary 1, 2018. Please follow the instructionsin the “Comments and Requests for PublicHearing” portion of this preamble.

The temporary regulations affect tax-payers who are required to file informa-tion returns on forms in the W–2 series(except Forms W–2G) and need an exten-sion of time to file. These proposed regu-lations also affect taxpayers who need anextension of time to file any of the infor-mation returns listed in § 1.6081–8T(a).

The substance of the temporary regu-lations is incorporated in these proposedregulations. The preamble to the tempo-rary regulations explains these amend-ments. These proposed regulations wouldalso expand the rules in § 1.6081–8T(b)to the other information returns, which arelisted in § 1.6081–8T(a).

Proposed Effective/Applicability Date

The regulations, as proposed, wouldapply to requests for extensions of time tofile information returns due on or afterJanuary 1 of the calendar year immedi-ately following the date of publication of aTreasury decision adopting these rules asfinal regulations in the Federal Register.

Special Analyses

Certain IRS regulations, including thisone, are exempt from the requirements ofExecutive Order 12866, as supplementedand reaffirmed by Executive Order 13563.Therefore, a regulatory assessment is notrequired. It also has been determined thatsection 553(b) of the Administrative Pro-cedure Act (5 U.S.C. chapter 5) does notapply to these proposed regulations.

Pursuant to the Regulatory FlexibilityAct (5 U.S.C. chapter 6), it is herebycertified that this proposed rule, if ad-opted, would not have a significant eco-nomic impact on a substantial number ofsmall entities. As stated in this preamble,the proposed regulations would removethe automatic 30-day extension of time tofile certain information returns (FormW–2G, 1042–S, 1094–C, 1095–B,1095–C, 1097 series, 1098 series, 1099series, 3921, 3922, 5498 series, and 8027).Under the proposed regulations, filers andtransmitters would be permitted to requestonly one 30-day extension of time to filethese information returns by timely sub-mitting a Form 8809, including an expla-nation of the reasons for requesting theextension and signed under penalty of per-jury. Although the proposed regulationmay potentially affect a substantial num-ber of small entities, the economic impacton these entities is not expected to besignificant because filers who are unableto timely file as a result of extraordinarycircumstances or catastrophe may con-tinue to obtain a 30-day extension throughthe Form 8809 process, which takes ap-proximately 20 minutes to prepare andsubmit to the IRS. Pursuant to section7805(f) of the Internal Revenue Code, thisnotice of proposed rulemaking has beensubmitted to the Chief Counsel for Advo-cacy of the Small Business Administra-tion for comment on its impact on smallbusiness.

Comments and Requests for PublicHearing

Before these proposed regulations areadopted as final regulations, considerationwill be given to any comments that aresubmitted timely to the IRS as prescribedin the preamble under the “Addresses”heading. Treasury and the IRS requestcomments on all aspects of the proposed


regulations. All comments submitted willbe made available at www.regulations.govor upon request. A public hearing will bescheduled if requested in writing by anyperson that timely submits written com-ments. If a public hearing is scheduled,notice of the date, time, and place for thepublic hearing will be published in theFederal Register.


The principal author of these regula-tions is Jonathan R. Black of the Office ofthe Associate Chief Counsel (Procedureand Administration).

* * * * *

Proposed Amendments to theRegulations

Accordingly, 26 CFR part 1 is pro-posed to be amended as follows:


Paragraph 1. The authority citation forpart 1 continues to read as follows:

Authority: 26 U.S.C. 7805 * * *Par. 2. Section 1.6081–8 is revised to

read as follows:

§ 1.6081–8 Extension of time to filecertain information returns.

(a) In general. Except as provided inparagraph (e) of this section, a personrequired to file an information return (thefiler) on forms in the W–2 series (includ-

ing Forms W–2, W–2AS, W–2G,W–2GU, and W–2VI), 1097 series, 1098series, 1099 series, or 5498 series, or onForms 1042–S, 1094–C, 1095–B,1095–C, 3921, 3922, or 8027, or the per-son transmitting the information return forthe filer (the transmitter), may only re-quest one non-automatic 30-day extensionof time to file the information return be-yond the due date for filing it. To makesuch a request, the filer or transmitter mustsubmit an application for an extension oftime to file in accordance with paragraph(b) of this section. No additional extensionof time to file will be allowed pursuant to§ 1.6081–1 beyond the 30-day extensionof time to file provided by this paragraph.

(b) Requirements. To satisfy this para-graph (b), a filer or transmitter must—

(1) Submit a complete application onForm 8809, “Application for Extension ofTime to File Information Returns,” or inany other manner prescribed by the Com-missioner, including a detailed explana-tion of why additional time is needed;

(2) File the application with the Inter-nal Revenue Service in accordance withforms, instructions, or other appropriateguidance on or before the due date forfiling the information return; and

(3) Sign the application under penaltiesof perjury.

(c) Penalties. See sections 6652, 6693,and 6721 through 6724 for failure to com-ply with information reporting require-ments on information returns described inparagraph (a) of this section.

(d) No effect on time to furnish state-ments. An extension of time to file aninformation return under this section doesnot extend the time for furnishing a state-ment to the person with respect to whomthe information is required to be reported.

(e) Form W–2 filed on expedited basis.This section does not apply to an informa-tion return on a form in the W–2 series ifthe procedures authorized in Rev. Proc.96–57 (1996–2 CB 389) (or a successorrevenue procedure) allow an automaticextension of time to file the informationreturn. See § 601.601(d)(2)(ii)(b) of thischapter.

(f) Effective/applicability date. Thissection applies to requests for extensionsof time to file information returns due onor after January 1 of the calendar yearimmediately following the date of publi-cation of a Treasury decision adoptingthese rules as final regulations in the Fed-eral Register.

§ 1.6081–8T [Removed]

Par. 3. Section 1.6081–8T is removed.

John Dalrymple,Deputy Commissioner for




Definition of TermsRevenue rulings and revenue procedures(hereinafter referred to as “rulings”) thathave an effect on previous rulings use thefollowing defined terms to describe theeffect:

Amplified describes a situation whereno change is being made in a prior pub-lished position, but the prior position isbeing extended to apply to a variation ofthe fact situation set forth therein. Thus, ifan earlier ruling held that a principle ap-plied to A, and the new ruling holds thatthe same principle also applies to B, theearlier ruling is amplified. (Compare withmodified, below).

Clarified is used in those instanceswhere the language in a prior ruling isbeing made clear because the languagehas caused, or may cause, some confu-sion. It is not used where a position in aprior ruling is being changed.

Distinguished describes a situationwhere a ruling mentions a previously pub-lished ruling and points out an essentialdifference between them.

Modified is used where the substanceof a previously published position is beingchanged. Thus, if a prior ruling held that aprinciple applied to A but not to B, and thenew ruling holds that it applies to both A

and B, the prior ruling is modified becauseit corrects a published position. (Comparewith amplified and clarified, above).

Obsoleted describes a previously pub-lished ruling that is not considered deter-minative with respect to future transac-tions. This term is most commonly used ina ruling that lists previously published rul-ings that are obsoleted because of changesin laws or regulations. A ruling may alsobe obsoleted because the substance hasbeen included in regulations subsequentlyadopted.

Revoked describes situations where theposition in the previously published rulingis not correct and the correct position isbeing stated in a new ruling.

Superseded describes a situation wherethe new ruling does nothing more thanrestate the substance and situation of apreviously published ruling (or rulings).Thus, the term is used to republish underthe 1986 Code and regulations the sameposition published under the 1939 Codeand regulations. The term is also usedwhen it is desired to republish in a singleruling a series of situations, names, etc.,that were previously published over a pe-riod of time in separate rulings. If the newruling does more than restate the sub-

stance of a prior ruling, a combination ofterms is used. For example, modified andsuperseded describes a situation where thesubstance of a previously published rulingis being changed in part and is continuedwithout change in part and it is desired torestate the valid portion of the previouslypublished ruling in a new ruling that isself contained. In this case, the previouslypublished ruling is first modified and then,as modified, is superseded.

Supplemented is used in situations inwhich a list, such as a list of the names ofcountries, is published in a ruling and thatlist is expanded by adding further namesin subsequent rulings. After the originalruling has been supplemented severaltimes, a new ruling may be published thatincludes the list in the original ruling andthe additions, and supersedes all prior rul-ings in the series.

Suspended is used in rare situations toshow that the previous published rulingswill not be applied pending some futureaction such as the issuance of new oramended regulations, the outcome ofcases in litigation, or the outcome of aService study.

AbbreviationsThe following abbreviations in currentuse and formerly used will appear in ma-terial published in the Bulletin.

A—Individual.Acq.—Acquiescence.B—Individual.BE—Beneficiary.BK—Bank.B.T.A.—Board of Tax Appeals.C—Individual.C.B.—Cumulative Bulletin.CFR—Code of Federal Regulations.CI—City.COOP—Cooperative.Ct.D.—Court Decision.CY—County.D—Decedent.DC—Dummy Corporation.DE—Donee.Del. Order—Delegation Order.DISC—Domestic International Sales Corporation.DR—Donor.E—Estate.EE—Employee.E.O.—Executive Order.ER—Employer.

ERISA—Employee Retirement Income Security Act.EX—Executor.F—Fiduciary.FC—Foreign Country.FICA—Federal Insurance Contributions Act.FISC—Foreign International Sales Company.FPH—Foreign Personal Holding Company.F.R.—Federal Register.FUTA—Federal Unemployment Tax Act.FX—Foreign corporation.G.C.M.—Chief Counsel’s Memorandum.GE—Grantee.GP—General Partner.GR—Grantor.IC—Insurance Company.I.R.B.—Internal Revenue Bulletin.LE—Lessee.LP—Limited Partner.LR—Lessor.M—Minor.Nonacq.—Nonacquiescence.O—Organization.P—Parent Corporation.PHC—Personal Holding Company.PO—Possession of the U.S.PR—Partner.PRS—Partnership.

PTE—Prohibited Transaction Exemption.Pub. L.—Public Law.REIT—Real Estate Investment Trust.Rev. Proc.—Revenue Procedure.Rev. Rul.—Revenue Ruling.S—Subsidiary.S.P.R.—Statement of Procedural Rules.Stat.—Statutes at Large.T—Target Corporation.T.C.—Tax Court.T.D.—Treasury Decision.TFE—Transferee.TFR—Transferor.T.I.R.—Technical Information Release.TP—Taxpayer.TR—Trust.TT—Trustee.U.S.C.—United States Code.X—Corporation.Y—Corporation.Z—Corporation.

Bulletin No. 2015–35 August 31, 2015i

Numerical Finding List1

Bulletins 2015–27 through 2015–35

Announcements:

2015-17, 2015-28 I.R.B. 672015-18, 2015-33 I.R.B. 1982015-19, 2015-32 I.R.B. 1572015-21, 2015-34 I.R.B. 2352015-22, 2015-35 I.R.B. 288

Notices:

2015-43, 2015-29 I.R.B. 732015-46, 2015-28 I.R.B. 642015-47, 2015-30 I.R.B. 762015-48, 2015-30 I.R.B. 772015-49, 2015-30 I.R.B. 792015-50, 2015-30 I.R.B. 812015-51, 2015-31 I.R.B. 1332015-52, 2015-35 I.R.B. 2272015-53, 2015-33 I.R.B. 1902015-54, 2015-34 I.R.B. 2102015-55, 2015-34 I.R.B. 2172015-56, 2015-35 I.R.B. 235

Proposed Regulations:

REG-109370-10, 2015-33 I.R.B. 198REG-115452-14, 2015-32 I.R.B. 158REG-132075-14, 2015-35 I.R.B. 288REG-138526-14, 2015-28 I.R.B. 67REG-102648-15, 2015-31 I.R.B. 134REG-102837-15, 2015-27 I.R.B. 43

Revenue Procedures:

2015-34, 2015-27 I.R.B. 42015-36, 2015-27 I.R.B. 202015-38, 2015-34 I.R.B. 2202015-39, 2015-33 I.R.B. 1952015-40, 2015-35 I.R.B. 2362015-41, 2015-35 I.R.B. 263

Revenue Rulings:

2015-15, 2015-27 I.R.B. 12015-16, 2015-31 I.R.B. 1302015-18, 2015-34 I.R.B. 209

Treasury Decisions:

9723, 2015-31 I.R.B. 849726, 2015-31 I.R.B. 989727, 2015-32 I.R.B. 1549728, 2015-33 I.R.B. 1699729, 2015-35 I.R.B. 2219730, 2015-35 I.R.B. 223

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2015–01 through 2015–26 is in Internal Revenue Bulletin2015–26, dated June 29, 2015.

August 31, 2015 Bulletin No. 2015–35ii

Finding List of Current Actions onPreviously Published Items1

Bulletins 2015–27 through 2015–35

Notices:

2014-4Modified byNotice 2015-51, 2015-31 I.R.B. 133

Revenue Procedures:

1992-75Clarified byRev. Proc. 2015-40, 2015-35 I.R.B. 236

2003-40Modified byRev. Proc. 2015-40, 2015-35 I.R.B. 236


2006-9Superseded byRev. Proc. 2015-41, 2015-35 I.R.B. 263








2015-40Amplified byRev. Proc. 2015-41, 2015-35 I.R.B. 263

2015-41Amplified byRev. Proc. 2015-40, 2015-35 I.R.B. 236

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2015–01 through 2015–26 is in Internal Revenue Bulletin2015–26, dated June 29, 2015.

Bulletin No. 2015–35 August 31, 2015iii

INTERNAL REVENUE BULLETINThe Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue

Bulletins are available at www.irs.gov/irb/.

We Welcome Comments About the Internal Revenue BulletinIf you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we

would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page(www.irs.gov) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave.NW, IR-6230 Washington, DC 20224.

Internal Revenue ServiceWashington, DC 20224Official BusinessPenalty for Private Use, $300