SECTION 4. DOMESTIC

REINVESTMENT PLANS

.01 In General

A domestic reinvestment plan is a written plan prepared by the taxpayer that describes the planned investment in the United States of the amount of the dividend otherwise qualifying for the deduction under section 965(a) in reasonable detail and specificity. It may encompass more than one cash dividend from one or more CFCs. A taxpayer may adopt separate domestic reinvestment plans to apply to different cash dividends made during the taxable year to which it elects to apply section 965. Under section 965, amounts invested in the United States pursuant to the domestic reinvestment plan are not required to exceed investments made in prior years or investments that were planned by the taxpayer prior to the enactment of section 965.

.02 Procedural Requirements

Pursuant to section 965(b)(4)(A), a domestic reinvestment plan must be approved by the taxpayer’s president, chief executive officer, or an official exercising comparable authority over the taxpayer before the cash dividend to which it relates is paid. The taxpayer’s board of directors, management committee, executive committee, or the body which exercises similar authority over the taxpayer must subsequently approve the domestic reinvestment plan. Such approval may be granted after the payment of the dividend subject to the domestic reinvestment plan,

and no special meeting of the board or other body is required to grant this approval. Where the U.S. shareholder of a CFC is a member of a consolidated group within the meaning of §1.1502–1(h), the domestic reinvestment plan must be approved by the president, chief executive officer, or comparable official, and by the board of directors, management committee, executive committee, or similar body, of the common parent of the consolidated group. In such a case, the domestic reinvestment plan need not be separately approved by other members of the consolidated group, even if such members make permitted investments pursuant to such plan.

.03 Specificity

The domestic reinvestment plan must describe specific anticipated investments in the United States. The Treasury Department and the IRS do not intend to provide a template for a domestic reinvestment plan. The composition of a taxpayer’s domestic reinvestment plan may vary depending on the type of permitted investments contemplated by the plan (for example, research and development or capital improvements to plant and facility), the time period over which permitted investments will be made, and whether factors beyond the taxpayer’s control could affect its ability to make the contemplated investment. These and other relevant facts and circumstances should be taken into account in applying the reasonable specificity standard set forth in this notice.

In general, the domestic reinvestment plan must provide sufficient detail to enable the taxpayer to demonstrate upon examination that the expenditures that subsequently occur were of the kind that were in fact contemplated at the time of the adoption of such plan. Thus, a domestic reinvestment plan that merely recites the statutory language without further detail, or that merely refers generically to expenditures on whatever uses may be permitted for purposes of section 965, will not be considered to have met the statutory requirements.

The domestic reinvestment plan need not indicate precise dollar amounts expected to be incurred for each specific component of an investment, but must state the total dollar amount that will be

2005–6 I.R.B. 476 February 7, 2005

vestments pursuant to section 4 of this notice (and the dividend otherwise qualifies for the DRD under section 965(a)), but the U.S. shareholder in fact only makes $90x of the permitted investments provided for under the plan. In such a case, $10x of the $100x cash dividend does not qualify for the DRD under section 965(a); the remaining $90x qualifies for the DRD under section 965(a).