SECTION 3. SCOPE

.01 Eligible taxpayers . This revenue procedure applies to taxpayers under the jurisdiction of LMSB that desire to resolve through a PFA issues that otherwise may be the subject of a post-filing examination.

.02 Eligible taxable years . (1) Current, past, and future taxable years . An eligible taxpayer may request a PFA for the current taxable year, any prior taxable year for which the original return is not yet due (taking into account any extensions of time to file) and is not yet filed and, except in the case of a PFA provided under section 3.09(2), for a limited number of future taxable years.

(2) Agreements for future taxable years . Agreements for future taxable years are limited to four taxable years beyond the current taxable year.

.03 Eligible issues generally . (1) Factual issues and well-established law . The Service will consider entering into a PFA on any issue that requires either a determination of facts or the application of well-established legal principles to known facts.

(2) Issues that involve a methodology . The Service also will, in general, consider entering into a PFA regarding a methodology used by a taxpayer to determine the appropriate amount of an item of income, allowance, deduction, or credit.

(3) Issues under the jurisdiction of other Service divisions . The Service will consider entering into a PFA on an issue under the jurisdiction of an operating division of the Service other than LMSB, but only with the concurrence of that operating division.

.04 Relationship of eligible issues to el- igible taxable years . An issue also must relate to an eligible taxable year or years in order to be an eligible issue

.05 Eligible domestic and eligible international issues require coordination and consultation with Associate Chief Counsel .

There is no list of eligible domestic and international issues. Any domestic or international issue that requires either a determination of facts or application of wellestablished legal principles to known facts and that is not excluded under section 3.08 or section 3.09 of this revenue procedure is likely suitable for a PFA.

The Service may, in its sole discretion, refuse to address an issue in a PFA based on considerations of sound tax administration. Before any decision is made to proceed with the taxpayer’s request for a PFA, the Service must coordinate and consult with the Associate Chief Counsel having subject matter jurisdiction over any issue proposed to be determined by a PFA. As part of this coordination and consultation, the Associate Chief Counsel may consider whether the issue is more appropriately resolved by a letter ruling or other form of written advice from the Offices of the Associates Chief Counsel, as described in Rev. Proc. 2004–1, 2004–1 I.R.B. 1, or its successors, and whether the issue is currently one with respect to which the Service will never, or will not ordinarily, issue a letter ruling. See Rev. Proc. 2004–3, 2004–1 I.R.B. 114, Rev. Proc. 2004–7, 2004–1 I.R.B. 237, and their successors.

.06 Eligible international issues re- quiring Associate Chief Counsel (Inter- national) concurrence in execution . This subsection lists specific international issues that are likely suitable for a PFA, but also require that the Associate Chief Counsel (International) concur with the acceptance of the issue into the PFA Program and execution of the PFA. Even though an issue in a particular case appears on this list, the Service may, in its sole discretion, refuse to address that issue based on considerations of sound tax administration. The eligible issues are:

(1) whether a unit of the taxpayer’s trade or business is a qualified business unit within the meaning of section 989(a) and the regulations promulgated under that section;

(2) whether the taxpayer is engaged in a trade or business within the United States (excluding questions under section 864(b)(2)); (3) the amount of gross income that is effectively connected with the conduct by the taxpayer of a trade or business within the United States;

(4) factual determinations concerning the extent to which, under section 882(c), deductions are connected with income that is effectively connected with the taxpayer’s conduct of a trade or business within the United States; and

(5) whether the taxpayer has a permanent establishment in the United States for

January 10, 2005 313 2005–2 I.R.B.

taxpayer may request and the Service may enter into a PFA with respect to the amount of the section 481(a) adjustment and the implementation of the change in method of accounting in accordance with the terms and conditions of the consent agreement and Rev. Proc. 97–27. A PFA under this provision may only apply to the taxable year of change and may not apply to any other taxable years, except that a determination of the amount of the section 481(a) adjustment under section 11.01(2) of Rev. Proc. 97–27, or a successor, shall apply to any other taxable year for which such amount is taken into account ( i.e., any spread period). A PFA under this provision may not be entered into with respect to a change in method of accounting requested pursuant to automatic consent procedures, such as Rev. Proc. 2002–9.

.10 Definition of taxpayer . For purposes of section 3 of this revenue procedure, any reference to the taxpayer also includes a related taxpayer and any predecessor of the taxpayer or a related taxpayer. A related taxpayer is one related within the meaning of section 267 or a member of an affiliated group within the meaning of section 1504 that includes the taxpayer. A predecessor is an entity for whose tax liability the taxpayer or a related taxpayer is or was primarily or secondarily liable.