SECTION 6. MONTHLY CLOSING OF

THE BOOKS

If, at the end of any calendar month, an eligible partnership has a monthly closing election in effect, then, with respect to each partner, the partnership must close its books as described in § 1.706–1(c)(2) as if each partner had sold its entire interest in the partnership on the last day of that month. Each partner must include

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under § 171, any market or original issue discount, and capital gain or loss.

.04 Nominee and Beneficial Ownership Reporting .

(1) If an eligible electing partnership complies with the requirements of sections 8.02 and 8.03 of this revenue procedure, the nominee reporting requirements of § 6031(c) and the regulations thereunder do not apply. In place of those requirements, the partnership and the partners must comply with this section 8.04. See § 1.6001–1(a) and (e) for rules that apply to recordkeeping requirements.

(2) Any person on whose behalf another person holds as a nominee an interest in an eligible partnership (a beneficial owner), other than a beneficial owner for which the relevant advisor or manager agrees to comply with section 8.04(3) of this revenue procedure, shall notify the partnership of its beneficial ownership status and provide the partnership with:

(a) its name, address, and taxpayer identification number and the name, address, and taxpayer identification number of its nominee; and

(b) the name of the partnership, its CUSIP number or other information sufficient to identify the partnership interest, and the amount of the partnership interest.

(3) In the case of a group of RICs that is managed or advised by a common, or affiliated, manager or advisor (the manager), the manager may elect to be responsible for collecting, retaining, and providing the Service upon demand the beneficial ownership information. To make such an election, the manager must provide each eligible partnership in which any of the RICs has an equity interest a statement indicating that it is responsible for collecting, retaining, and providing the Service upon demand the beneficial ownership information that otherwise would be required to be provided directly to the eligible partnerships by the beneficial owners. In addition, the manager must provide the partnership with:

(a) its name, address, and taxpayer identification number and contact information for the person from whom the Service can request beneficial ownership information; and

(b) the name of the partnership, its CUSIP number or other information sufficient to identify the partnership interests,

(2) Identification of the partnership by name, address, and EIN;

(3) The name, title, address, and phone number of the contact person from whom partners, beneficial owners, middlemen, and the Internal Revenue Service may request information about the partnership;

(4) The issue date of the partnership interests and the CUSIP (Committee on Uniform Securities Identification Procedures) number or other identification of each class of partnership interest;

(5) A statement that the entity’s governing documents expressly provide that the entity is making a monthly closing election; and

(6) The effective month of the election and the start-up date of the partnership. See section 4.05(1) of this revenue procedure for a definition of the start-up date.

.02 Annual Filing Requirements . (1) Elimination of Annual Filing Re- quirements . A partnership is not required to file a Form 1065, U.S. Return of Part- nership Income, or to issue Schedules K–1 (Form 1065) to its partners for any taxable year if the following requirements are satisfied:

(a) The partnership’s monthly closing election is effective for the partnership’s entire taxable year;

(b) The partnership makes the initial filing described in section 8.01 of this revenue procedure;

(c) A written partnership agreement (or other governing document) provides that (i) the entity and its partners will comply with the reporting requirements of sections 8.02 and 8.03, and 8.04 of this revenue procedure in lieu of complying with the requirements of § 6031(a) through (d), and,

(ii) all partners consent to such reporting; and

(d) The partnership complies with the requirements of sections 8.03 and 8.04 of this revenue procedure.

(2) Effect of Elimination of Annual Fil- ing Requirement . An entity that is not required to file a partnership return under this revenue procedure is not required to file a partnership return under § 6031(a) and, as a result, is not a partnership as defined under § 6231(a)(1). Consequently, the entity and its members will not be subject to the provisions of subchapter C of chapter 63. An abbreviated Form 1065 used to make

the initial filing described in section 8.01 of this revenue procedure is not considered to be a partnership return for purposes of § 6233.

(3) Monthly Closing Election Effective for Portion of Taxable Year . A partnership that makes a monthly closing election that is effective after the first day of its taxable year must comply with the partnership reporting rules of § 6031(a) for that taxable year (but is still permitted to close its books on a monthly basis). If the partnership also makes the initial filing described in section 8.01 of this revenue procedure by the due date for its return for the first full taxable year during which the monthly closing election is in effect, then the partnership qualifies for elimination of annual filing requirements under section 8.01 of this revenue procedure for subsequent taxable years.

(4) Annual Reporting Required . Failure to qualify for the elimination of annual filing requirements under section 8.02(1) of this revenue procedure does not terminate the partnership’s monthly closing election. However, a partnership that fails to satisfy all of the requirements of section 8.02(1) of this revenue procedure is required to file a complete (not abbreviated) Form 1065 and to issue Schedules K–1 (Form 1065) to its partners as required by § 6031(a). A partnership that fails to file a Form 1065 or to issue Schedules K–1 as required is subject to the applicable penalties under §§ 6698 and 6722 for failure to file a partnership return and to furnish payee statements, as well as any other applicable penalties. Moreover, if a partnership is required to file a return under § 6031(a) but fails to do so, the period of limitations on assessment of tax attributable to items of that partnership remains open indefinitely under § 6229(a).

.03 Requests for Information . Within 45 days of a request by the Service or a partner (or a beneficial owner or a nominee of a beneficial owner), the partnership must make available all the information necessary to compute a partner’s taxable income, tax-exempt income, gain, loss, deduction, or credit, including sufficient information for a partner to determine the portion of the tax-exempt interest that may be subject to the alternative minimum tax and information regarding each partner’s share of any bond premium amortization

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SECTION 11 PAPERWORK REDUCTION ACT

The collection of information contained in this revenue procedure has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–1768. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

The collection of information is in section 8 of this revenue procedure. The collection of information is required to obtain a benefit, and is required to inform the Service which partnerships are making the monthly closing election. The likely respondents are businesses.

The estimated total annual reporting and recordkeeping burden is 500 hours.

The estimated annual burden per respondent/recordkeeper is 1/2 hour. The estimated number of respondents and recordkeepers is 1,000.

The estimated annual frequency of responses (used for reporting requirements only) is once.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

DRAFTING INFORMATION

The principal author of this revenue procedure is David A. Shulman of the Office of Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this revenue procedure, contact Mr. Shulman at (202) 622–3070 (not a toll-free call).

and the amount of the partnership interests.

SECTION 9 EFFECTIVE DATE AND TRANSITION RULES

.01 In General . This revenue procedure is effective on November 5, 2003.

.02 Grandfathering Rules . (1) If, prior to January 1, 2004, under the provisions of Rev. Proc. 2002–16 or Rev. Proc. 2002–68, a partnership made an effective Monthly Closing election and a partner consented to the election, then the partnership and the partner may continue to comply with either Rev. Proc. 2002–16 or Rev. Proc. 2002–68, as applicable, except that monthly statements are not required.

(2) Except as provided in section 9.02(4) of this revenue procedure, if, prior to January 1, 2004, under the provisions of Rev. Proc. 2002–16 or Rev. Proc. 2002–68, a partnership made an effective Monthly Closing election and a partner consented to the election and if the partnership and partner consistently report the transaction in a manner that is consistent with an election to be excluded from the provisions of subchapter K under § 761(a), then the Service will not challenge that treatment. If section 9.02(4) of this revenue procedure causes this paragraph (2) to cease to apply, the partner and partnership remain eligible for any relief described in paragraph (1) above that they are otherwise entitled to enjoy.

(3) Except as provided in section 9.02(4) of this revenue procedure, if a partnership’s start-up date is before January 1, 2004, the Service will not challenge the partnership’s or its partners’ tax treatment that is consistent with an election to be excluded from the provisions of subchapter K under § 761(a) for any taxable year during all of which the entity is an eligible partnership as defined in section 4.01 of this revenue procedure (without regard to section 4.01(4) of this revenue procedure). See section 4.05(1) of

this revenue procedure for the definition of a partnership’s start-up date.

(4) If, on or after January 1, 2005, a partnership acquires new assets, then, as of the first day of the month in which the new assets are acquired, the partnership is no longer eligible for the grandfathering rule provided in section 9.02(2) or (3) of this revenue procedure. For purposes of the preceding sentence, none of the following is treated as the acquisition of a new asset by the partnership:

(a) The receipt of payment (including temporary investment of that payment) on, or in respect of, a sale, redemption, or other disposition of an asset of the partnership;

(b) The receipt of a contribution in cash (including temporary investment of that cash) to fund expenses of the partnership described in section 4.03 of this revenue procedure or to fund distributions to partners in respect of accrued but unpaid taxexempt interest (including accrued but unpaid tax-exempt original issue discount); or

(c) The acquisition of an asset pursuant to a plan to keep the principal balance of the assets in the partnership stable by reinvesting principal payments.

(5) For purposes of section 9.02(4) of this revenue procedure)—

(a) An investment is temporary if it is held for 7 months or less; and

(b) If an asset was acquired with reasonable certainty it would be a temporary investment but, due to unforeseeable circumstances, it is held for more than 7 months, then, for purposes of section 9.02(4) of this revenue procedure, it is treated as acquired on the first day that it has been held for more than 7 months.

SECTION 10 EFFECT ON OTHER DOCUMENTS

Rev. Proc. 2002–68 is modified and superseded.

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