Announcement 2000-12

The Treasury Department and Internal Revenue Service issued three sets of temporary and proposed regulations requiring promoters to register confidential corporate tax shelters and to maintain lists of investors and requiring corporate taxpayers to disclose large transactions that have characteristics common to tax shelters. In addition, the Service has created an Office of Tax Shelter Analysis to serve as the focal point for efforts to gather and ana

2000–12 I.R.B. 835 March 20, 2000

lyze information relating to tax shelter activity and to coordinate appropriate responses. Together, these actions will enable the Service to more quickly and effectively address transactions used to claim tax benefits that are not properly allowable under the Internal Revenue Code.

See Internal Revenue Bulletin 2000–11, March 13, 2000, for the following temporary and proposed regulations: T.D. 8875, page 761; T.D. 8876, page 753; T.D. 8877, page 747; REG– 103736–00, page 768; REG–110311–98, page 767; REG–103735–00, page 770.

General Scope and Effect of New Disclosure Requirements

In general, the three regulations are designed to provide the Service with better information about tax shelters and other taxmotivated transactions through a combination of registration and information disclosure by promoters and tax return disclosure by corporate taxpayers. The regulations are intended to require disclosure of transactions that should be subject to careful scrutiny by the Service. The regulations are designed not to require disclosure of customary business transactions or transactions with tax benefits that the Service has no reasonable basis to challenge. The regulations do not alter substantive tax rules, and thus disclosure under the regulations does not affect the legal determination whether tax benefits claimed by taxpayers are allowable.

Registration of Tax Shelters by Promoters

The first set of regulations is issued under § 6111(d) of the Code as enacted by the Taxpayer Relief Act of 1997. These regulations require tax shelter promoters to register with the Service transactions (1) that have been structured for a significant purpose of tax avoidance or evasion, (2) that are offered to corporate participants under conditions of confidentiality, and (3) for which the tax shelter promoters may receive fees in excess of $100,000.

The promoter registration requirements apply to confidential corporate tax shelters offered for sale after today. In general, registration of a confidential corporate tax shelter is required not later than the day that the first offering for sale of interests in such shelter occurs. However, as a transition matter, no registration is required to be filed

until 180 days after today.

List Maintenance Requirements for Promoters

The second set of regulations, issued pursuant to § 6112 of the Code, requires promoters of corporate tax shelters to maintain lists of investors and copies of all offering materials and to make this information available for inspection by the Service upon request. These requirements apply to transactions that have been structured for a significant purpose of tax avoidance or evasion (as defined under § 6111(d)), whether or not offered under conditions of confidentiality and whether or not the promoter fees may exceed $100,000.

These new list maintenance requirements apply to interests in corporate tax shelters acquired by investors after today. However, as a transition matter, the Service will not ask to inspect lists or offering materials until 180 days after today.

Reporting Requirements for Corporate Taxpayers

The third set of regulations is issued pursuant to § 6011 of the Code and requires corporate taxpayers to disclose their participation in “reportable transactions” by attaching a short information statement to their income tax returns. In general, a separate statement will be required for each reportable transaction for each taxable year in which a corporation’s federal income tax liability is affected by its participation in such a transaction. For the first taxable year in which a statement is attached to a taxpayer’s return, a copy of the statement must be filed with the Service in Washington, D.C. All of the information required to complete the statement should be readily available to taxpayers at the time their returns are filed.

Disclosure is generally required only for transactions that are expected to reduce a taxpayer’s income tax liability by more than $5 million in a single taxable year or more than $10 million in multiple years and that have characteristics common to corporate tax shelters. However, these thresholds are lowered to $1 million and $2 million for certain transactions identified through published guidance as “listed transactions” (discussed below). Reporting generally is not required for

customary business transactions or transactions with tax benefits that the Service has no reasonable basis to challenge.

In general, disclosure is required only for reportable transactions entered into after today. However, disclosure is required for a listed transaction entered into on or before today if the tax benefits of the transaction are first claimed on a return filed after today.