Part III. Administrative, Procedural, and Miscellaneous

Relief From Certain Low-Income Housing Credit Requirements Due to Hurricane Charley and Hurricane Frances

Notice 2004–66

The Internal Revenue Service is suspending certain income limitation requirements under § 42 of the Internal Revenue Code for certain low-income housing credit properties in Florida as a result of the devastation caused by Hurricane Charley and Hurricane Frances. This relief is being granted pursuant to the Service’s authority under § 42(n) and § 1.42–13(a) of the Income Tax Regulations.

BACKGROUND

On August 13, 2004, and September 4, 2004, respectively, the President declared major disasters for the State of Florida as a result of Hurricane Charley and Hurricane Frances. These declarations were made under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, Title 42 U.S.C. 5121–5206 (2000 & Supp. I 2001). Subsequently, the Federal Emergency Management Agency (FEMA) designated counties for Individual Assistance.

The State of Florida has requested that the Service allow owners of low-income housing credit projects to provide temporary housing in vacant units to individuals displaced (displaced individuals) because their homes were destroyed or damaged as a result of the devastation caused by Hurricane Charley and Hurricane Frances. The State of Florida has further requested that the temporary housing of the displaced individuals in low-income units without regard to income not cause the owners to lose low-income housing credits.

SUSPENSION OF INCOME LIMITATION

Because of the widespread damage to housing caused by the hurricanes, the Service has determined that it is appropriate to temporarily suspend certain income limitation requirements under § 42 for qualified low-income housing projects in the

State of Florida that are beyond the first year of the credit period under § 42(f)(1). The suspension will apply to low-income housing projects, approved by the Florida Housing Finance Corporation, in which vacant units are rented to individuals displaced by Hurricane Charley or Hurricane Frances. The Florida Housing Finance Corporation will determine the appropriate period of temporary housing for each project, not to extend beyond September 30, 2005. During the temporary housing period established by the Florida Housing Finance Corporation, the status of a vacant unit (that is, market rate or low-income for purposes of § 42) that becomes temporarily occupied by a displaced individual remains the same as the unit’s status before the displaced individual moves in. Displaced individuals temporarily occupying vacant units will not be treated as low-income tenants under § 42(i)(3)(A)(ii) (a low-income unit that was vacant before the effective date of this notice will continue to be treated as a vacant low-income unit even if it houses a displaced individual and a market rate unit that was vacant before the effective date of this notice will continue to be treated as a vacant market rate unit even if it houses a displaced individual). Thus, the fact that a vacant unit becomes occupied by a displaced individual will not affect the building’s applicable fraction under § 42(c)(1)(B) for purposes of determining the building’s qualified basis, nor will it affect the 20–50 test or 40–60 test of § 42(g)(1). If the income of occupants in low-income units exceeds 140 percent of the applicable income limitation, the temporary occupancy of a unit by a displaced individual will not cause application of the available unit rule under § 42(g)(2)(D)(ii). In addition, the project owner is not responsible during the temporary housing period to make attempts to rent to low-income individuals the low-income units housing displaced individuals. All other rules and requirements of § 42 will continue to apply.

At the end of the temporary housing period established by the Florida Housing Finance Corporation, the applicable income limitations contained in § 42(g)(1), the available unit rule under § 42(g)(2)(D)(ii),

and the requirement to make reasonable attempts to rent vacant units to low-income individuals resume. The suspension of income limitations is subject to the requirements listed below.

REQUIREMENTS FOR SUSPENSION OF INCOME LIMITATIONS

To qualify for the suspension of income limitations, the project owner must meet all of the following requirements:

(1) Major Disaster Area

The displaced individual must have resided in a Florida county designated for Individual Assistance by FEMA as a result of Hurricane Charley or Hurricane Frances.

(2) Approval of Florida Housing Finance Corporation

The project owner must obtain approval from the Florida Housing Finance Corporation to obtain the relief described in this notice. The Florida Housing Finance Corporation will determine the appropriate period of temporary housing for each project, not to extend beyond September 30, 2005.

(3) Certifications and Recordkeeping

To comply with the requirements of § 1.42–5, project owners are required to maintain and certify certain information concerning each displaced individual, specifically: name, address, social security number, and a statement signed under penalties of perjury by the displaced individual that, because of damage to the individual’s home in a Florida county designated for Individual Assistance by FEMA as a result of Hurricane Charley or Hurricane Frances, the individual requires temporary housing. The owner must also certify the date the individual began temporary occupancy and the date the project will discontinue providing temporary housing as established by the Florida Housing Finance Corporation. The certifications and recordkeeping for displaced individuals must be maintained as part of the annual compliance monitoring process with the Florida Housing Finance Corporation.

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are individuals, businesses, and nonprofit institutions.

The estimated total annual recordkeeping burden is 750 hours.

The estimated annual burden per recordkeeper is approximately 15 minutes. The estimated number of recordkeepers is 3,000. Books or records relating to a collection of information must be retained as long as their contents may become material to the administration of the 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 notice is Jack Malgeri of the Office of the Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this notice, contact Mr. Malgeri at (202) 622–3040 (not a toll-free call).

(4) Rent Restrictions

Rent for the low-income units housing displaced individuals must not exceed the existing rent-restricted rates for the lowincome units established under § 42(g)(2).

(5) Protection of Existing Tenants

Existing tenants in occupied low-income units cannot be evicted or have their tenancy terminated as a result of efforts to provide temporary housing for displaced individuals.

EFFECTIVE DATE

This notice is effective August 13, 2004 (the date of the President’s major disaster declaration as a result of Hurricane Charley).

PAPERWORK REDUCTION ACT

The collection of information contained in this notice 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 1545–1907.

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 in this notice is in the section titled “REQUIREMENTS FOR SUSPENSION OF INCOME LIMITATIONS,” under “ (3) Cer- tifications and Recordkeeping .” This information is required to enable the Service and the Florida Housing Finance Corporation to verify that the individuals obtaining temporary housing in approved low-income housing projects are displaced from their homes in a Florida county designated for Individual Assistance by FEMA as a result of Hurricane Charley and Hurricane Frances. This information will be used in the Florida Housing Finance Corporation’s compliance monitoring process. The collection of information is required to obtain a benefit. The likely respondents

26 CFR 1.1441–7: Offer to resolve issues arising from certain tax, withholding, and reporting obligations of U.S. withholding agents with respect to payments to foreign persons.

Rev. Proc. 2004–59

TABLE OF CONTENTS

SECTION 1 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679

.01 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679 .02 Applicable law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679 .03 Summary of the Section 1441 VCP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679 .04 No effect on or applicability to other obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680

SECTION 2 ELIGIBLE WITHHOLDING AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680

.01 Eligible withholding agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680 .02 Withholding agents currently under examination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680

SECTION 3 TAX, WITHHOLDING, AND REPORTING OBLIGATIONS SUBJECT TO THE SECTION 1441

VCP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680 .01 Disclosures and representations of withholding agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680 .02 Failures subject to the Section 1441 VCP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680

SECTION 4 SUBMISSION PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680

.01 In general. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680 .02 Required information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680 .03 Required documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681 .04 Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681 .05 Power of attorney requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681 .06 Penalty of perjury statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681 .07 Marked letter and marked envelope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681 .08 Mailing address. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681

2004–42 I.R.B. 678 October 18, 2004

SECTION 5 PROCESSING OF SECTION 1441 VCP REQUESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681

.01 Inadequate or incomplete submission or request for additional information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681 .02 Determining tax liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681 .03 Review of withholding agent’s corrective procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681 .04 Other tax liabilities or issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681 .05 Verification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681 .06 Acknowledgment letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 682 .07 Failure to reach resolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 682 .08 Applicability of sections 6103 and 6110. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 682 .09 Conferences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 682

SECTION 6 EFFECTIVE DATE AND SUNSET DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 682

SECTION 7 PAPERWORK REDUCTION ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 682

SECTION 8 CONTACT INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 682

whom it makes payments by obtaining documentation from them and may withhold at a reduced rate on payments to foreign persons only if the foreign person has furnished the required documentation. See § 1.1441–1 et seq. of the Income Tax Regulations. See also IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Corporations .

.03 Summary of the Section 1441 VCP. The Section 1441 VCP applies only to tax and reporting obligations that relate to Forms 1042 and 1042-S. It does not apply to tax and reporting obligations that relate to Forms 945 and 1099 except to the extent that correction of a failure to document U.S. persons or misclassification of U.S. and foreign persons requires filing or correction of those forms. The Section 1441 VCP does not provide substantive determinations about a payment (such as the amount, timing, character, or source of such a payment) concerning whether or to what extent it was an amount subject to withholding. A withholding agent that requests consideration under the Section 1441 VCP agrees to (1) identify those areas in which it is not in compliance with tax, withholding, and reporting obligations on payments to foreign persons; (2) pay any tax, interest, and penalties (all as determined by the IRS) due to satisfy its outstanding tax, withholding, and reporting obligations; and (3) institute corrective procedures that will ensure compliance in the future with the withholding agent’s tax, withholding, and reporting obligations. The IRS will not impose penalties for identified underpayments or deficiencies if such underpayments or deficiencies are due to reasonable cause. See section 5.02(3) of this revenue procedure. The IRS

SECTION 1 GENERAL

.01 Background. This revenue procedure describes the Section 1441 Voluntary Compliance Program (the “Section 1441 VCP”), which is available to certain withholding agents with respect to the withholding, payment, and reporting of certain taxes due on payments to foreign persons. “Payments” includes both actual and deemed payments.

In Treasury Decision 8734, 1997–2 C.B. 109 [62 F.R. 53387], the Treasury Department and the Internal Revenue Service (the “IRS”) issued comprehensive regulations (the “final regulations”) under chapter 3 (sections 1441–1464) and subpart G of Subchapter A of chapter 61 (sections 6041–6050S) of the Internal Revenue Code. The final regulations were amended by T.D. 8804, 1999–1 C.B. 793

[63 F.R. 72183], T.D. 8856, 2000–1 C.B. 298 [64 F.R. 73408], T.D. 8881, 2000–1 C.B. 1158 [65 F.R. 32152], and T.D. 9023, 2002–2 C.B. 955 [67 F.R. 70310]. The final regulations generally were effective January 1, 2001. In addition, in Notice 2001–4, 2001–1 C.B. 267, Notice 2001–11, 2001–1 C.B. 464, and Notice 2001–43, 2001–2 C.B. 72, the IRS and Treasury provided clarification and guidance regarding certain aspects of the final regulations.

Financial institutions have commented that they have expended significant effort to implement the final regulations. This effort has involved ongoing documentation of account holders and major systems and procedural changes. As part of this effort, financial institutions have been identifying tax deficiencies and failures in their systems and have come forward to the IRS to

disclose and resolve issues arising from the effort to implement the final regulations. To provide consistent treatment with respect to withholding agents, this revenue procedure formalizes a program for disclosure and resolution of these implementation issues.

The IRS is initiating the Section 1441 VCP as a temporary program. See section 6 of this revenue procedure for the effective date and sunset date of the program. See section 2 of this revenue procedure for the withholding agents that are eligible to participate in the program. See section 3 of this revenue procedure for the tax, withholding, and reporting obligations covered by the Section 1441 VCP.

.02 Applicable law. The objective of the Section 1441 VCP is to enhance voluntary compliance among certain withholding agents making payments of U.S.-source dividends, interest, rents, royalties, and other fixed or determinable, annual or periodical income (“FDAP income”) to foreign persons. Generally, FDAP income received by a foreign person from sources within the United States is subject to tax under section 871(a) or 881(a) of the Internal Revenue Code (the “Code”). The tax is imposed on the gross amount of income, generally at a 30-percent rate. Section 1441 of the Code requires any person who pays to a foreign person income subject to tax under section 871(a) or 881(a) to deduct and withhold the 30-percent tax from the gross amount paid. The rate of tax, and therefore the withholding obligation, may be reduced or eliminated under other provisions of the Code or under an applicable income tax treaty. A withholding agent is required to determine the status of the persons to

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tion described in sections 4.02 and 4.03 of this revenue procedure. The IRS will not accept anonymous submissions under the Section 1441 VCP.

.02 Required information. The request for consideration under the Section 1441 VCP must contain the following information:

(1) The name, address, and taxpayer identification number of the withholding agent.

(2) A description of the current procedures that the withholding agent uses to determine tax, withholding, and reporting obligations regarding payments to foreign persons.

(3) A description of the failures in the withholding agent’s tax, withholding, and reporting procedures for payments to foreign persons, how and why the failures occurred, and the years affected by such failures.

(4) The number of persons affected by such failures and how the number was determined.

(5) A calculation of the total amount of taxes the withholding agent failed to withhold, pay, and/or report, not including interest and penalties, for tax periods open for assessment or collection under the provisions of section 6501 of the Code. This calculation should take into account properly substantiated adjustments under section 1463 of the Code. The withholding agent must agree to report and remit all of its additional tax, interest, and penalties (all as determined by the IRS), at the completion of the IRS review. See section 5 of this revenue procedure. (However, regarding the reasonable-cause exception to penalties, see section 5.02(3) of this revenue procedure.) In certain cases involving large liabilities or underpayments, the IRS will consider the withholding agent’s proposal for payment of the liability or underpayment in more than one installment, or will consider the withholding agent’s posting of a cash bond under the procedures outlined in Rev. Proc. 84–58, 1984–2 C.B. 501. See section 5.02(4) of this revenue procedure. (6) A detailed description of the corrective procedures the withholding agent has implemented or will implement to ensure that payments to foreign persons will be subject to the correct amount of withholding and that withheld amounts will be paid

will provide the withholding agent with a written acknowledgment, as described in section 5.06 of this revenue procedure, if the IRS finds the withholding agent’s proposed procedures and policies relating to tax, withholding, and reporting obligations applicable to payments to foreign persons are acceptable.

.04 No effect on or applicability to other obligations. Subject to the limitations described below, the Section 1441 VCP applies to tax, withholding, and reporting obligations under sections 1441, 1442, 1443, and 1461 and related tax, withholding, and reporting obligations under sections 3406 and 6041 through 6050N that arise from adjustments under sections 1441, 1442, 1443, and 1461. The Section 1441 VCP does not apply to and does not affect any other tax or reporting obligation. In addition, the Section 1441 VCP does not apply to and does not affect any other obligations of the taxpayer or the IRS that are not within the scope of this revenue procedure.

SECTION 2 ELIGIBLE WITHHOLDING AGENTS

.01 Eligible withholding agents. Except as provided in section 2.02, a withholding agent is eligible for the Section 1441 VCP (an “eligible withholding agent”) if it is a withholding agent, as defined in § 1.1441–7(a)(1) of the Income Tax Regulations, that is not a “qualified intermediary,” a “withholding foreign partnership,” a “withholding foreign trust,” or an “eligible organization” as defined in section 2.01 of Rev. Proc. 2001–20, 2001–1 C.B. 738.

.02 Withholding agents currently under examination. A withholding agent is not eligible for the Section 1441 VCP if the withholding agent is under examination with respect to Form 1042 on the date of the publication of this revenue procedure, or if it comes under examination prior to submitting the information required by section 4 of this revenue procedure. For this purpose, an examination is treated as commencing on the date the withholding agent receives notification from the IRS of an impending examination or of an impending referral for examination. This program also is not available to any withholding agent that has a case pending in Appeals or in litigation on issues involving tax, withholding, or reporting

obligations described in section 3 of this revenue procedure.

SECTION 3 TAX, WITHHOLDING, AND REPORTING OBLIGATIONS SUBJECT TO THE SECTION 1441 VCP

.01 Disclosures and representations of withholding agent. The Section 1441 VCP allows a withholding agent to come forward voluntarily to disclose withholding deficiencies and reporting errors. The Section 1441 VCP does not provide substantive determinations about a payment (such as the amount, timing, character, or source of such a payment) concerning whether or to what extent it was an amount subject to withholding. The Section 1441 VCP will proceed based on the withholding agent’s disclosures and representations regarding, for example, the amount, timing, character, and source of payments, and the U.S. or foreign status of a beneficial owner. The issuance of an acknowledgment letter, as described in section 5.06 of this revenue procedure, is not a determination of the validity of those disclosures and representations, which remain subject to subsequent examination.

.02 Failures subject to the Section 1441 VCP. The failures for which an eligible withholding agent may make a submission under the Section 1441 VCP are:

(1) Failure to withhold or pay the correct amount of tax on dividends, interest, or other income that would properly be taken into account on Form 1042 and that is paid to foreign persons (sections 1441, 1442, and 1443); (2) Failure to withhold or pay the correct amount of backup withholding tax as the result of failure to document U.S. persons or misclassification of U.S. and foreign persons (section 3406); and

(3) Failure to correctly report information under section 1461 or, in the case of failures described in (2) above, sections 6041–6050N.

SECTION 4 SUBMISSION PROCEDURES

.01 In general. In general, a withholding agent submits a request under the Section 1441 VCP through a letter to the IRS at the address in section 4.08 of this revenue procedure. The submission must contain the information and documenta

2004–42 I.R.B. 680 October 18, 2004

date prescribed for payment of the taxes (determined without regard to the Section 1441 VCP or any extension of time for payment) to the date on which payment is received.

(3) The IRS will not assert any penalties on the withholding agent’s liability if the withholding agent’s failure to withhold, pay, and report is due to reasonable cause.

(4) In certain cases involving large liabilities, the IRS will consider the withholding agent’s proposal for payment of the liability in more than one installment. See Internal Revenue Manual (IRM) Handbook 4.20.4, Examination Collectibility Handbook. Applicants may also wish to avail themselves of the procedures for making a deposit in the nature of a cash bond as contained in Rev. Proc. 84–58, 1984–2 C.B. 501. .03 Review of withholding agent’s corrective procedures. The withholding agent must demonstrate to the satisfaction of the IRS that it has implemented (or that it has plans for implementing) the corrective procedures described in its submission under section 4.02(6). The IRS will review the corrective procedures to assure itself that these procedures are reasonably likely to bring the withholding agent into compliance on a prospective basis. The IRS will discuss with the withholding agent the effectiveness of its corrective procedures. The IRS reserves the right to require modifications to the corrective procedures or to require additional corrective procedures before it will issue an acknowledgment letter, as described in section 5.06 below. Where the IRS believes that the corrective procedures are not adequate to ensure compliance with the relevant tax, withholding, and reporting requirements, the IRS will not issue such an acknowledgment letter.

.04 Other tax liabilities or issues. If while considering the request the IRS discovers an unrelated tax liability that properly could have been the subject of the Section 1441 VCP submission but was not properly identified in the submission, that issue will remain outside the scope of the Section 1441 VCP.

.05 Verification. As part of the processing of the Section 1441 VCP submission, the IRS reserves the right to verify that corrections have been made to the withholding agent’s tax, withholding, and reporting

over and reported to the IRS on the proper forms in a timely manner.

(7) A statement signed by the withholding agent or its authorized representative acknowledging and agreeing that the withholding agent’s participation in the section 1441 VCP will not constitute an audit of the withholding agent.

.03 Required documents. The submission must be accompanied by the following documentation:

(1) A statement that the withholding agent is an eligible withholding agent.

(2) Copies of workpapers or schedules that clearly explain the withholding agent’s calculation of its correct tax liability regarding payments to foreign persons (see section 4.02(5) of this revenue procedure). The workpapers or schedules should also show to which specific tax returns and tax periods the liability relates.

(3) Copies of the original Forms 1042 and 945, if any, as filed that relate to the above calculations.

.04 Signatures. The submission must be signed by the withholding agent or the withholding agent’s authorized representative.

.05 Power of attorney requirements. To sign the submission or to appear before the IRS in connection with the submission, a representative must comply with the requirements of section 9 of Rev. Proc. 2004–1, 2004–1 I.R.B. 1. .06 Penalty of perjury statement. The following declaration must accompany a Section 1441 VCP submission and any factual information submitted after the original submission or any change in the submission at a later time: “Under penalties of perjury, I declare that I have examined this submission, including accompanying documents, and to the best of my knowledge and belief, the facts presented in support of the Section 1441 VCP request are true, correct, and complete.” The declaration must be signed by the withholding agent, not the withholding agent’s representative (described in section 4.05 above).

.07 Marked letter and marked envelope. The letter which transmits the submission to the IRS must be marked “Section 1441 VCP” in the upper right-hand corner of the letter, and the envelope containing the submission must be marked “Section 1441 VCP” in the lower left-hand corner of the envelope.

.08 Mailing address. The submission must be mailed to the address shown below. The IRS may issue an announcement later which contains other addresses for the mailing of Section 1441 VCP submissions.

Internal Revenue Service 290 Broadway LMSB 12th Floor New York, NY 10007 ATTN: Section 1441 VCP Coordinator

SECTION 5 PROCESSING OF SECTION 1441 VCP REQUESTS

.01 Inadequate or incomplete submission or request for additional information. If the submission fails to comply with the provisions of this revenue procedure, or if the IRS requires additional information, the IRS representative assigned to the case will contact the withholding agent or its authorized representative and explain what is needed to complete the submission. The withholding agent will have 90 business days from the date of this contact to provide the requested information. Any request for an extension of the 90-day time period must be made prior to expiration of the period and must be approved by the Section 1441 VCP Coordinator or his or her designated representative. If the requested information is not received within 90 business days (plus any extension, if granted), the matter will be closed, and the IRS may consider the case for examination.

.02 Determining tax liability. Once the IRS accepts the submission under the Section 1441 VCP, the IRS will analyze the withholding agent’s calculation of its tax liability regarding payments to foreign persons and will analyze the accompanying workpapers, schedules, and returns that support such calculation. The IRS generally will apply the following approach to determine a withholding agent’s liability for tax, interest, and penalties:

(1) The IRS will normally allow reduced rates of withholding in the computation of any adjustments to taxes and withholding of taxes on payments to foreign persons if the withholding agent has properly documented the foreign persons and if the documentation relates to the time of payment.

(2) Interest on the withholding agent’s underpayments will be due from the last

October 18, 2004 681 2004–42 I.R.B.

of information are voluntary. The likely respondents are financial institutions and other businesses.

The estimated total annual reporting burden is 200,000 hours.

The estimated average annual burden per respondent is 400 hours. The estimated number of respondents is 500.

The estimated annual frequency of responses is on occasion.

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.

SECTION 8 CONTACT INFORMATION

For further information regarding the Section 1441 VCP contact the Section 1441 VCP Coordinator at (212) 298–2288 (not a toll-free number).

26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement; determination of correct tax liability. (Also, Part I, §§ 62, 162, 267, 274; 1.62–2, 1.162–17, 1.267(a)–1, 1.274–5.)

Rev. Proc. 2004–60