[Federal Register Volume 73, Number 177 (Thursday, September 11, 2008)]
[Rules and Regulations]
[Pages 52784-52788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-21161]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[TD 9425]
RIN 1545-BF62
Section 6707A and the Failure To Include on Any Return or
Statement any Information Required To Be Disclosed Under Section 6011
With Respect to a Reportable Transaction
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Temporary regulations.
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SUMMARY: This document contains temporary regulations regarding the
imposition of penalties under section 6707A of the Internal Revenue
Code (Code) for the failure to include on any return or statement any
information required to be disclosed under section 6011 with respect to
a reportable transaction. The text of the temporary regulations also
serves as the text of the proposed regulations set forth in the notice
of proposed rulemaking on this subject in the Proposed Rules section of
this issue of the Federal Register.
DATES: Effective Date: These regulations are effective on September 11,
2008.
Applicability Date: For dates of applicability, see Sec.
301.6707A-1T(f).
FOR FURTHER INFORMATION CONTACT: Matthew Cooper, (202) 622-4940 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to 26 CFR part 301 under section
6707A of the Code. Section 6707A was added to the Code by section 811
of the American Jobs Creation Act of 2004, Public Law 108-357 (118
Stat. 1418) (AJCA), enacted on October 22, 2004. Section 6707A provides
a monetary penalty for the failure to include on any return or
statement any information required to be disclosed under section 6011
with respect to a reportable transaction. The penalty applies to
returns and statements the due date for which is after October 22,
2004, and which were not filed before that date.
The amount of the section 6707A penalty for failure to include
information required under section 6011 with respect to a reportable
transaction, other than a listed transaction, is $10,000 in the case of
an individual, and $50,000 in any other case. If the failure is with
respect to a listed transaction, the penalty is increased to $100,000
in the case of an individual, and $200,000 in any other case.
Section 6707A(d)(1) grants the Commissioner authority to rescind
all or a portion of any penalty imposed under section 6707A if (1) the
violation relates to a reportable transaction that is not a listed
transaction and (2) rescission of the penalty would promote compliance
with the requirements of the Code and effective tax administration.
Section 6707A(d)(2) provides that the Commissioner's determination
whether to rescind the penalty may not be reviewed in any judicial
proceeding. Rev. Proc. 2007-21, 2007-1 CB 613, provides the procedures
to follow to request rescission of all or any portion of a penalty
assessed under section 6707A with respect to a reportable transaction
other than a listed transaction.
Section 6707A(e) requires a person that is required to file
periodic reports under section 13 or 15(d) of the Securities Exchange
Act of 1934, or consolidated reports with another person, to disclose
in those reports for the periods specified by the Secretary, the
requirement to pay the penalties set forth in section 6707A(e)(2) (for
example, certain penalties under section 6662(h) and penalties under
sections 6662A(c), 6707A(b)(2), or 6707A(e)). Rev. Proc. 2005-51, 2005-
2 CB 296, which was amplified by Rev. Proc. 2007-25, 2007-1 CB 761,
describes the reports on which the disclosures must be made, the
information that must be disclosed, and the deadlines by which persons
must make the disclosures on the reports to avoid additional penalties
under section 6707A(e). If the person fails to disclose the requirement
to pay the penalties, then section 6707A(e) requires that the failure
be treated as a failure to disclose a listed transaction to which an
additional section 6707A penalty applies. Because a penalty imposed
under section 6707A(e) is treated as a penalty imposed with respect to
a listed transaction, the penalty is not subject to rescission.
To implement the pertinent provisions of the AJCA, the Treasury
Department and the IRS proposed amendments to the rules relating to the
disclosure of reportable transactions by taxpayers under section 6011
(see Prop. Treas. Reg. Sec. 1.6011-4, 2006-49 IRB 1049) and finalized
those proposed regulations in TD 9350 (72 FR 43146) published on August
3, 2007.
Sections 1.6011-4(a) and (d) generally require that a taxpayer file
a disclosure statement on Form 8886, ``Reportable
[[Page 52785]]
Transaction Disclosure Statement'' (or successor form) for each
reportable transaction in which the taxpayer participated. Section
1.6011-4(e)(1) provides that a disclosure statement for a reportable
transaction must be attached to the taxpayer's tax return for each
taxable year for which a taxpayer participates in a reportable
transaction. In addition, a disclosure statement for a reportable
transaction must be attached to each amended return that reflects a
taxpayer's participation in a reportable transaction. The taxpayer also
must send a copy of the disclosure statement to the IRS Office of Tax
Shelter Analysis (OTSA) at the same time that any disclosure statement
pertaining to a particular reportable transaction is first filed. If a
reportable transaction results in a loss that is carried back to a
prior year, the disclosure statement for the reportable transaction
must be attached to the taxpayer's application for tentative refund or
amended tax return for that prior year. If a taxpayer who is a partner
in a partnership, a shareholder in an S corporation, or a beneficiary
of a trust receives a timely Schedule K-1, ``Partner's Share of Income,
Deductions, Credits, etc.,'' less than 10 calendar days before the due
date of the taxpayer's return (including extensions) and, based on
receipt of the timely Schedule K-1, the taxpayer determines that the
taxpayer participated in a reportable transaction, the disclosure
statement will not be considered late if the taxpayer discloses the
reportable transaction by filing a disclosure statement with OTSA
within 60 calendar days after the due date of the taxpayer's return
(including extensions).
For transactions entered into after August 2, 2007, Sec. 1.6011-
4(e)(2)(i) provides that if a transaction becomes a listed transaction
or a transaction of interest after the filing of a taxpayer's tax
return (including an amended return) reflecting the taxpayer's
participation in the listed transaction or transaction of interest and
before the end of the period of limitations for assessment of tax for
any taxable year in which the taxpayer participated in the listed
transaction or transaction of interest, then a disclosure statement
must be filed with OTSA within 90 calendar days after the date on which
the transaction became a listed transaction or a transaction of
interest, regardless of whether the taxpayer participated in the
transaction in the year the transaction became a listed transaction or
a transaction of interest.
Published guidance identifying listed transactions or transactions
of interest involving estate, gift, employment, and certain excise
taxes will specify the manner in which taxpayers must disclose those
transactions. See Sec. Sec. 20.6011-4; 25.6011-4; 31.6011-4; 53.6011-
4; 54.6011-4; and 56.6011-4.
The Treasury Department and IRS issued Notice 2005-11, 2005-1 CB
493, providing interim guidance regarding the imposition and rescission
of penalties under section 6707A (see Sec. 601.601(d)(2)(ii)(b)).
Specifically, the notice stated that the IRS will impose a penalty
under section 6707A with respect to each failure to disclose a
reportable transaction within the time and in the form and manner
provided by section 6011 and the regulations thereunder. Accordingly, a
taxpayer would be subject to a penalty under section 6707A for: (1) The
failure to attach an appropriate reportable transaction disclosure
statement to an original or amended return; or (2) the failure to
provide a copy of an appropriate disclosure statement to OTSA, if
required, within the time and in the form and manner provided by
section 6011 and the regulations thereunder. A taxpayer that failed to
attach a reportable transaction disclosure statement to an original or
amended return and failed to provide a copy of a required disclosure
statement to OTSA would be subject to a single penalty under section
6707A.
Notice 2005-11 requested comments regarding the rules and standards
relating to section 6707A, including the factors that should be
considered in exercising the rescission authority under section
6707A(d) and how voluntary, but untimely disclosures (for example, if a
taxpayer failed to make a required disclosure upon filing a return, but
subsequently submits the required disclosure statement) should be
treated in applying the section 6707A penalty. Since then, many have
observed that there is little incentive for remedial action if a
complete but delinquent disclosure statement is penalized as harshly as
a complete failure to submit a disclosure statement. The Treasury
Department and the IRS are currently considering whether it would be
appropriate to publish a rule that would treat as timely a Form 8886
voluntarily filed prior to the date the IRS first contacts the taxpayer
concerning a tax examination for the taxable period in which the
taxpayer participated in the reportable transaction. Other appropriate
dates by which filings must be made to qualify for relief would be
considered as well. Comments are specifically requested on the
necessity and appropriateness of publishing guidance addressing this
issue.
Explanation of Provisions
These temporary regulations provide rules reflecting the AJCA
enactment of the section 6707A penalty for the failure to include on
any return or statement any information required to be disclosed under
section 6011 with respect to a reportable transaction.
These temporary regulations provide that a taxpayer may incur a
separate penalty under section 6707A with respect to each reportable
transaction that the taxpayer was required, but failed, to disclose
within the time and in the form and manner required under Sec. 1.6011-
4(d) and (e) or as stated in other published guidance. A taxpayer who
is required to disclose a reportable transaction on a Form 8886 (or
successor form) filed with a return, amended return, or application for
tentative refund and who also is required to disclose the transaction
on a Form 8886 (or successor form) with OTSA, is subject to only a
single section 6707A penalty for failure to make either one or both of
those disclosures. Additionally, these temporary regulations define
``reportable transaction'' and ``listed transaction'' by reference to
the regulations under section 6011.
These temporary regulations restate the existing authority of the
Secretary to prescribe the procedures to request rescission of a
section 6707A penalty with respect to a nonlisted reportable
transaction by revenue procedure or other guidance published in the
Internal Revenue Bulletin. Rev. Proc. 2007-21 describes the procedures
for requesting rescission of a penalty assessed under section 6707A,
including the deadline by which a person must request rescission; the
information the person must provide in the rescission request; the
factors that weigh in favor of and against granting rescission; where
the person must submit the rescission request; and the rules governing
requests for additional information from the person requesting
rescission.
These temporary regulations adopt factors mentioned in the
legislative history to section 6707A that the Commissioner (or the
Commissioner's delegate) should take into account during the
determination whether to rescind all or a portion of any penalty
imposed under section 6707A. See H.R. Conf. Rep. No. 755, 108th Cong.,
2d Sess. at 599 (2004). Factors that these regulations identify as
weighing in favor of rescission reflect circumstances that suggest that
sustaining assessment of the penalty is against equity and good
conscience.
[[Page 52786]]
These temporary regulations generally adopt the list of factors
stated in Rev. Proc. 2007-21. One additional factor these regulations
identify as weighing in favor of granting rescission is whether the
penalty assessed is disproportionately larger than the tax benefit
received. The factors identified in these temporary regulations do not
represent an exclusive list, and no single factor will be determinative
of whether to grant rescission in any particular case. Rather, the
Commissioner (or the Commissioner's delegate) will consider and weigh
all relevant factors, regardless of whether the factor is included in
this list.
Because it is the policy of the IRS to administer penalties in a
manner that promotes voluntary compliance with the tax laws, it will
weigh heavily in favor of rescission if a taxpayer voluntarily files
the form required under section 6011: (i) Prior to the date the IRS
first contacts the taxpayer (including contacts by the IRS with any
partnership in which the taxpayer is a partner, any S corporation in
which the taxpayer is a shareholder, or any trust in which the taxpayer
is a beneficiary) concerning a tax examination for the tax period in
which the taxpayer participated in the reportable transaction; and (ii)
other circumstances suggest that the taxpayer did not delay filing an
untimely but properly completed Form 8886 until after the IRS had taken
steps to identify the taxpayer's participation in the reportable
transaction in question. See IRS Policy Statement 20-1 (June 29, 2004).
The temporary regulations mirror Rev. Proc. 2007-21 in providing
that a rescission request is not the appropriate forum to contest
whether the elements necessary to support a penalty under section 6707A
exist. That question is for the examining agent, the IRS Appeals
Division, and the courts. A rescission determination is based on the
premise that a violation of section 6707A exists but, nonetheless, the
penalty should be rescinded (or abated). Accordingly, the temporary
regulations provide that the Commissioner (or the Commissioner's
delegate) will not consider whether the taxpayer in fact failed to
comply with section 6011. Furthermore, the temporary regulations
provide that the Commissioner (or the Commissioner's delegate) will not
take into consideration doubt as to liability for, or collectibility
of, the penalties in determining whether to rescind the penalty.
Additionally, these temporary regulations restate the existing
authority of the Secretary to prescribe by revenue procedure or other
guidance published in the Internal Revenue Bulletin the manner in which
taxpayers must disclose the requirement to pay certain penalties on
reports filed with the Securities and Exchange Commission. Rev. Procs.
2005-51 and 2007-25 are the current published guidance items that
provide these disclosure rules and remain effective until further
guidance is issued in the form of regulations or other guidance that
explicitly supersedes these two documents.
Effect on Other Documents
The temporary regulations supersede Notice 2005-11.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these regulations. The temporary
regulations are necessary to promote taxpayers' immediate compliance
with the regulations recently finalized under section 6011 and to
provide for regulatory relief in appropriate circumstances, including
the additional taxpayer favorable factor of whether the penalty
assessed is disproportionately larger than the tax benefit received.
For applicability of the Regulatory Flexibility Act (5 U.S.C. chapter
6), refer to the Special Analyses section of the preamble to the cross-
referenced notice of proposed rulemaking published in the Proposed
Rules section in this issue of the Federal Register. Pursuant to
section 7805(f) of the Code, these regulations have been submitted to
the Chief Counsel for Advocacy of the Small Business Administration for
comment on their impact on small business.
Drafting Information
The principal author of these regulations is Matthew Cooper of the
Office of the Associate Chief Counsel (Procedure and Administration).
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
Amendments to the Regulations
0
Accordingly, 26 CFR part 301 is amended as follows:
PART 301--PROCEDURE AND ADMINISTRATION
0
Paragraph 1. The authority citation for part 301 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 301.6707A-1T is added to read as follows:
Sec. 301.6707A-1T Failure to include on any return or statement any
information required to be disclosed under section 6011 with respect to
a reportable transaction.
(a) In general. Any person who fails to include on any return or
statement any information required to be disclosed under section 6011
with respect to a reportable transaction may be subject to a monetary
penalty. The penalty for failure to include information with respect to
a reportable transaction, other than a listed transaction, is $10,000
in the case of a natural person, and $50,000 in any other case. The
penalty for failure to include information with respect to a listed
transaction is $100,000 in the case of a natural person, and $200,000
in any other case. The section 6707A penalty is in addition to any
other penalty that may be imposed.
(b) Definitions--(1) Reportable transaction. The term ``reportable
transaction'' is defined in Sec. 1.6011-4(b)(1) of this chapter.
(2) Listed transaction. The term ``listed transaction'' is defined
in section 6707A(c) of the Code and Sec. 1.6011-4(b)(2) of this
chapter.
(c) Assessment of the penalty--(1) In general. The Internal Revenue
Service (IRS) may assess a penalty under section 6707A with respect to
each failure to disclose a reportable transaction within the time and
in the form and manner provided by Sec. 1.6011-4(d) and (e) of this
chapter or pursuant to the time, form, and manner stated in other
published guidance. A taxpayer who is required to disclose a reportable
transaction with a return, amended return, or application for tentative
refund and who also is required to disclose the transaction on a Form
8886, ``Reportable Transaction Disclosure Statement'' (or successor
form), filed with the IRS Office of Tax Shelter Analysis (OTSA), is
subject to only a single section 6707A penalty for failure to make
either one or both of those disclosures. If section 6011 and the
regulations thereunder require a disclosure statement to be filed at
the time that a return is filed, the disclosure statement is considered
to be timely filed if it is filed at the same time as the return, even
if the return is filed untimely after its due date.
[[Page 52787]]
(2) Examples. The rules of paragraph (c)(1) of this section are
illustrated by the following examples:
Example 1. Taxpayer T is required to attach a Form 8886 to its
return for the 2007 taxable year and to send a copy of the Form 8886
to OTSA at the time it files its return. Taxpayer T fails to attach
the Form 8886 to its return and fails to send a copy of the Form
8886 to OTSA. Taxpayer T is subject to a single penalty under
section 6707A for failure to disclose because Taxpayer T failed to
comply with the disclosure requirements of section 6011. A penalty
under section 6707A also would apply if Taxpayer T had failed to
comply with only one of the two requirements.
Example 2. Same as Example 1, except that Taxpayer T also
subsequently files an amended return for 2007 that reflects Taxpayer
T's participation in the reportable transaction. Taxpayer T fails to
attach a Form 8886 to the amended return as required by Sec.
1.6011-4(e)(1) of this chapter. Taxpayer T is subject to an
additional penalty under section 6707A for failing to disclose a
reportable transaction.
Example 3. In November 2009, Taxpayer U participates in a
reportable transaction resulting in a loss that is carried back to
2008. Taxpayer U fails to attach a Form 8886 to its 2008 amended
return claiming the loss carryback. Section 1.6011-4(e)(1) of this
chapter requires Taxpayer U to attach a Form 8886 to its amended
return for the 2008 taxable year. Taxpayer U is subject to a penalty
under section 6707A.
Example 4. Taxpayer P participates in a non-listed reportable
transaction and is required to attach a Form 8886 to its return for
the 2008 taxable year that is due on March 16, 2009. Taxpayer P
timely files its return but fails to attach the Form 8886 to its
return. After the due date of Taxpayer P's return and without an
extension of time to file, Taxpayer P files an amended return
relating to the 2008 taxable year to which Taxpayer P attaches the
Form 8886. Taxpayer P is subject to a penalty under section 6707A
for failure to disclose because Taxpayer P failed to comply with the
disclosure requirements of section 6011 by not attaching a Form 8886
to its return for the 2008 taxable year that was timely filed on or
before the due date of March 16, 2009. A penalty under section 6707A
also would apply if Taxpayer P had failed to attach a Form 8886 to
its amended return. Taxpayer P, nevertheless, may file a complete
and proper Form 8886 and request in writing rescission of the
penalties assessed within 30 days after the date the IRS sends
notice and demand for payment of the penalties in accordance with
Rev. Proc. 2007-21. The filing of the untimely Form 8886 will weigh
heavily in favor of rescission provided that Taxpayer P files the
Form 8886 prior to the date the IRS first contacts the taxpayer
concerning a tax examination for the 2008 taxable year and there are
no other circumstances that suggest that Taxpayer P delayed filing
the Form 8886 until after the IRS had taken steps to identify
Taxpayer P's participation in the reportable transaction in
question.
Example 5. Shareholder V, a shareholder in an S Corporation,
receives a timely Schedule K-1 ``Partner's Share of Income,
Deductions, Credits, etc.,'' on April 10, 2009, and determines that
she is required to attach a Form 8886 to her individual income tax
return for the 2008 taxable year. Shareholder V fails to attach the
Form 8886 to her 2008 individual income tax return but files a
proper and complete Form 8886 with OTSA on June 12, 2009. Section
1.6011-4(e)(1) of this chapter provides that if a taxpayer who is a
partner in a partnership, a shareholder in an S corporation, or a
beneficiary of a trust receives a timely Schedule K-1 less than 10
calendar days before the due date of the taxpayer's return
(including extensions) and, based on receipt of the timely Schedule
K-1, the taxpayer determines that the taxpayer participated in a
reportable transaction, the disclosure statement will not be
considered late if the taxpayer discloses the reportable transaction
by filing a disclosure statement with OTSA within 60 calendar days
after the due date of the taxpayer's return (including extensions).
Accordingly, Shareholder V is not subject to a penalty under section
6707A for failure to disclose.
Example 6. In July 2008, Taxpayer W participates in Transaction
Z, a transaction that is not reportable as of April 15, 2009, the
date Taxpayer W files his individual income tax return for 2008. On
July 15, 2009, Transaction Z is identified as a transaction of
interest. Section 1.6011-4(e)(2)(i) of this chapter provides that if
a transaction that is not otherwise a reportable transaction becomes
a listed transaction or a transaction of interest after the taxpayer
has filed a tax return (including an amended return) reflecting the
taxpayer's participation in the listed transaction or transaction of
interest and before the end of the period of limitations for
assessment of tax for any taxable year in which the taxpayer
participated in the listed transaction or transaction of interest,
then a disclosure statement must be filed with OTSA within 90
calendar days after the date on which the transaction became a
listed transaction or transaction of interest, regardless of whether
the taxpayer participated in the transaction in the year the
transaction became a listed transaction or a transaction of
interest. Taxpayer W fails to file a Form 8886 with OTSA by October
13, 2009, 90 calendar days after the date that the transaction was
identified as a transaction of interest. Accordingly, Taxpayer W is
subject to a penalty under section 6707A.
Example 7. Taxpayer X is required to attach a Form 8886 to its
return for the 2008 taxable year with respect to participation in a
listed transaction. Taxpayer X attaches the Form 8886 to its return
in a timely manner. The Form 8886, however, does not describe any of
the potential tax benefits expected to result from this transaction
and states that information will be provided upon request. Because
the Form 8886 does not describe any of the potential tax benefits
expected to result from the transaction and merely provides that the
information will be provided upon request, the Form 8886 filed by
Taxpayer X is incomplete and does not satisfy the requirements set
forth in Sec. 1.6011-4(d) of this chapter. Taxpayer X is subject to
a penalty under section 6707A for failure to disclose in the
appropriate manner.
(d) Rescission authority--(1) In general. The Commissioner (or the
Commissioner's delegate) may rescind the section 6707A penalty if--
(i) The violation relates to a reportable transaction that is not a
listed transaction, and
(ii) Rescinding the penalty would promote compliance with the
requirements of the Code and effective tax administration.
(2) Requesting rescission. The Secretary may prescribe the
procedures for a taxpayer to request rescission of a section 6707A
penalty with respect to a reportable transaction other than a listed
transaction by publishing a revenue procedure or other guidance in the
Internal Revenue Bulletin.
(3) Factors that weigh in favor of granting rescission. In
determining whether rescission would promote compliance with the
requirements of the Code and effective tax administration, the
Commissioner (or the Commissioner's delegate) will take into account
the following list of factors that weigh in favor of granting
rescission. This is not an exclusive list and no single factor will be
determinative of whether to grant rescission in any particular case.
Rather, the Commissioner (or the Commissioner's delegate) will consider
and weigh all relevant factors, regardless of whether the factor is
included in this list.
(i) The taxpayer, upon becoming aware that it failed to disclose a
reportable transaction properly, filed a complete and proper, albeit
untimely, Form 8886 (or successor form). This factor will weigh heavily
in favor of rescission provided that--
(A) the taxpayer files the Form 8886 prior to the date the IRS
first contacts the taxpayer (including contacts by the IRS with any
partnership in which the taxpayer is a partner, any S corporation in
which the taxpayer is a shareholder, or any trust in which the taxpayer
is a beneficiary) concerning a tax examination for the tax period in
which the taxpayer participated in the reportable transaction; and
(B) other circumstances suggest that the taxpayer did not delay
filing an untimely but properly completed Form 8886 until after the IRS
had taken steps to identify the taxpayer's participation in the
reportable transaction in question.
(ii) The failure to disclose properly was due to an unintentional
mistake of fact that existed despite the taxpayer's reasonable attempts
to ascertain the correct facts with respect to the transaction.
(iii) The taxpayer has an established history of properly
disclosing other
[[Page 52788]]
reportable transactions and complying with other tax laws.
(iv) The taxpayer demonstrates that the failure to include on any
return or statement any information required to be disclosed under
section 6011 arose from events beyond the taxpayer's control.
(v) The taxpayer cooperates with the IRS by providing timely
information with respect to the transaction at issue that the
Commissioner (or the Commissioner's delegate) may request in
consideration of the rescission request. In considering whether a
taxpayer cooperates with the IRS, the Commissioner (or the
Commissioner's delegate) will take into account whether the taxpayer
meets the deadlines described in Rev. Proc. 2007-21 (or successor
document) (see Sec. 601.601(d)(2)(ii)(b) of this chapter) for
complying with requests for additional information.
(vi) Assessment of the penalty weighs against equity and good
conscience, including whether the penalty is disproportionate to the
tax benefit received and whether the taxpayer demonstrates that there
was reasonable cause for, and the taxpayer acted in good faith with
respect to, the failure to timely file or to include on any return any
information required to be disclosed under section 6011. An important
factor in determining reasonable cause and good faith is the extent of
the taxpayer's efforts to ensure that persons who prepared the
taxpayer's return were informed of the taxpayer's participation in the
reportable transactions. The presence of reasonable cause, however,
will not necessarily be determinative of whether to grant rescission.
(4) Absence of favorable factors weighs against rescission. The
absence of facts establishing the factors described in paragraph (d)(3)
of this section weighs against granting rescission. The absence of any
one of these factors, however, will not necessarily be determinative of
whether to grant rescission.
(5) Factors not considered. In determining whether to grant
rescission, the Commissioner (or the Commissioner's delegate) will not
consider doubt as to liability for, or collectibility of, the
penalties.
(e) Reports to the Securities and Exchange Commission (SEC)--(1) In
general. Under section 6707A(e), a taxpayer who is required to file
periodic reports under section 13 or 15(d) of the Securities Exchange
Act of 1934 (or is required to file consolidated reports with another
person) must disclose in periodic reports filed with the SEC the
requirement to pay each of the following penalties:
(i) The penalty imposed by section 6707A(a) in the amount of
$200,000 for failure to disclose a listed transaction.
(ii) The accuracy-related penalty imposed by section 6662A(a) at
the 30-percent rate determined under section 6662A(c) for a reportable
transaction understatement with respect to which the relevant facts
affecting the tax treatment of the reportable transaction were not
adequately disclosed in accordance with regulations prescribed under
section 6011.
(iii) The accuracy-related penalty imposed by section 6662(a) at
the 40-percent rate determined under section 6662(h) for a gross
valuation misstatement, if the taxpayer (but for the exclusionary rule
of section 6662A(e)(2)(C)(ii)) would have been subject to the accuracy-
related penalty under section 6662A(a) at the 30-percent rate
determined under section 6662A(c).
(iv) The penalty described in paragraph (e)(3) of this section for
failure to disclose in periodic reports filed with the SEC the
requirement to pay any of the penalties described in paragraphs
(e)(1)(i) through (iii) or (e)(3) of this section.
(2) Manner and content of disclosure. The Secretary may prescribe
the manner in which disclosure of the requirement to pay the penalties
identified in paragraph (e)(1) of this section must be made on reports
filed with the SEC, including identification of the specific SEC form
and section thereof in which the taxpayer must make the disclosure as
well as specification of the timing and contents of the disclosure, by
publishing a revenue procedure or other guidance in the Internal
Revenue Bulletin.
(3) Penalty for failure to disclose in SEC filings. Any taxpayer
who is required to file periodic reports under section 13 or 15(d) of
the Securities Exchange Act of 1934 (or is required to file
consolidated reports with another person) may be subject to a penalty
in the amount of $200,000 for each failure to disclose the requirement
to pay a penalty identified in paragraphs (e)(1)(i) through (e)(1)(iii)
of this section in the manner specified by revenue procedure or other
guidance published in the Internal Revenue Bulletin. The taxpayer also
may be subject to an additional penalty in the amount of $200,000 for
each failure to disclose a penalty arising under this section in the
manner specified by revenue procedure or other guidance published in
the Internal Revenue Bulletin. The penalty provided by this paragraph
is not subject to rescission as described in paragraph (d) of this
section.
(f) Effective/applicability date--(1) The rules of this section
apply to disclosure statements that are due after September 11, 2008.
(2) The applicability of this section expires on or before
September 9, 2011.
L.E. Stiff,
Deputy Commissioner for Services and Enforcement.
Approved: September 5, 2008.
Eric Solomon,
Assistant Secretary of the Treasury, (Tax Policy).
[FR Doc. E8-21161 Filed 9-10-08; 8:45 am]
BILLING CODE 4830-01-P