SECTION 12. ACTION BY U.S.

COMPETENT AUTHORITY

.01 Notification of Taxpayer. Upon receiving a request for assistance pursuant to this revenue procedure, the U.S. competent authority will notify the taxpayer whether the facts provide a basis for assistance.

.02 Denial of Assistance. The U.S. competent authority generally will not accept a request for competent authority assistance or will cease providing assistance to the taxpayer if:

(1) the taxpayer is not entitled to such assistance (for example, the facts do not indicate that inconsistent positions have been taken by the IRS and the possession tax agency, or the taxpayer lacks standing to challenge an issue ( see, e.g., section 2.05 of this revenue procedure) on which competent authority assistance was requested;

(2) the taxpayer is willing only to accept a competent authority agreement under conditions that are unreasonable or prejudicial to the interests of the U.S. Government;

(3) the taxpayer rejected the competent authority resolution of the same or similar issue in a prior case;

(4) the taxpayer does not agree that competent authority negotiations are a government-to-government activity that does not include the taxpayer’s participation in the negotiation proceedings;

(5) the taxpayer does not furnish upon request sufficient information to determine whether the applicable coordination agreement applies to the taxpayer’s facts and circumstances;

(6) the taxpayer was found to have acquiesced in a possession initiated adjustment that involved significant legal or factual issues that otherwise would be properly handled through the competent authority process and then unilaterally made a corresponding correlative adjustment or claimed an increased credit for a possession tax paid, without initially seeking U.S. competent authority assistance;

(7) the taxpayer: (i) fails to comply with this revenue procedure; (ii) failed to cooperate with the IRS during the examination of the periods in issue and such failure significantly impedes the ability of the U.S. competent authority to negotiate and con

May 15, 2006 909 2006–20 I.R.B.