SECTION 3. GENERAL CONDITIONS

UNDER WHICH THIS PROCEDURE APPLIES

.01 General. The coordination agreements provide generally that when, by reason of inconsistent positions taken by the IRS and a possession tax agency, a taxpayer is or would be subject to inconsistent tax treatment by the two jurisdictions, the Director, International (LMSB) and the designated possession tax official shall seek to avoid double taxation. In particular, but not by way of limitation, the parties may exchange views to reach agreement on: (a) the same allocation of income, deductions, credits, or allowances between related persons; (b) the same determination of residency of a particular taxpayer, and (c) the same determination of the source of particular items of income and allocation and apportionment of expense. See section 9 of this revenue procedure, which prescribes protective measures to be taken by the taxpayer and any concerned related person with respect to U.S. and possession tax agencies. See also section 12.02 of this revenue procedure for circumstances in which competent authority assistance may be denied.

.02 Requirements of a Coordination Agreement. There is no authority for the U.S. competent authority to provide relief from U.S. tax or to provide other assistance due to taxation arising under the tax laws of the possession or the United States, unless such authority is granted by the Code or a coordination agreement.

.03 Applicable Standards in Allocation Cases. With respect to requests for competent authority assistance involving the allocation of income and deductions between a U.S. taxpayer and a related person, the U.S. competent authority and its counter

part in the possession will be guided by the arm’s length standard consistent with the regulations under section 482 of the Code. When negotiating mutual agreements on the allocation of income and deductions, the U.S. competent authority will take into account all of the facts and circumstances of the particular case and the purpose of the coordination agreement to avoid double taxation.

.04 Who Can File Requests for Assis- tance. The U.S. competent authority will consider requests for assistance from U.S. persons, as defined in section 7701(a)(30) of the Code. For purposes of this revenue procedure, a U.S. person is referred to as “the taxpayer.” Non-U.S. persons generally must present their initial request for assistance to the relevant possession tax agency. As noted in section 12.02 of this revenue procedure, there are circumstances in which the U.S. competent authority will not pursue assistance.

.05 Closed Cases. A case previously closed after examination shall not be reopened in order to make an adjustment unfavorable to the taxpayer unless the exceptional circumstances described in Rev. Proc. 2005–32, 2005–23 I.R.B. 1206 (providing procedures for reopening cases if fraud, substantial error, or certain other circumstances are present), are present. The U.S. competent authority may, but is not required to, accept a taxpayer’s request for competent authority consideration that will require the reopening of a case closed after examination.

.06 Possession Initiated Competent Au- thority Request. When the competent authority of a possession refers a request from a possession taxpayer to the U.S. competent authority for consultation under the mutual agreement procedure, the U.S. competent authority generally will require the U.S. related taxpayer (in the case of an allocation of income or deductions between related persons) or may require the possession taxpayer (in other cases) to file a request for competent authority assistance under this revenue procedure.

.07 Requests Relating to Residence Is- sues. U.S. competent authority assistance may be available to taxpayers seeking to clarify their residency status in the United States. Generally, competent authority assistance is limited to situations where resolution of a residency issue is necessary in order to avoid double taxation. A re

2006–20 I.R.B. 902 May 15, 2006

and other relevant material submitted to the possession tax agency;

(15) a copy of the possession tax returns for the year or years in question;

(16) a statement whether the federal tax return of the taxpayer and, when applicable, the tax return of a relevant related person, for the year or years in question were examined, or are being examined;

(17) a statement whether a credit for a possession tax paid was claimed on the taxpayer’s federal tax return for the tax year or years in question and, if a credit was claimed, whether the credit was claimed for all or part of the possession tax paid or accrued with respect to the particular item that is the subject of the request for assistance;

(18) if applicable, powers of attorney with respect to the taxpayer;

(19) if the jurisdiction of an issue is with an Appeals office, a summary of prior discussions of the issue with that office and contact information regarding the Appeals officer handling the issue; also, if appropriate, a statement whether the taxpayer is requesting the Simultaneous Appeals procedure as provided in section 8 of this revenue procedure;

(20) in a separate section, include the statement and information required by section 9.02 of this revenue procedure if the request is to serve as a protective claim;

(21) on a separate document, a statement that the taxpayer consents to the disclosure to the possession tax agency (with the name of the possession specifically stated) and that possession tax agency’s staff, of any or all of the items of information set forth or enclosed in the request for U.S. competent authority assistance within the limits contained in the coordination agreement under which the taxpayer is seeking relief. The taxpayer may request, as part of this statement, that its trade secrets not be disclosed to a possession tax agency. This statement must be dated and signed by a person having authority to sign the taxpayer’s federal tax returns and is required to facilitate the administrative handling of the request by the U.S. competent authority for purposes of the recordkeeping requirements of section 6103(p) of the Code. Failure to provide such a statement will not prevent the U.S. competent authority from disclosing information under the terms of a coordination agreement. See section 6103(k)(4) of the

related person with respect to U.S. and possession tax agencies. See also section 7.06 of this revenue procedure for rules relating to accelerated issue resolution and competent authority assistance.

.02 Place for Filing. The taxpayer must send all written requests for, or any inquiries regarding, competent authority assistance to the Director, International (LMSB), Attn: Office of Tax Treaty, Internal Revenue Service, 1111 Constitution Avenue, NW, Routing: MA3–322A, Washington, DC 20224.

.03 Additional Filing. In the case of U.S. initiated adjustments, the taxpayer also must file a copy of the request with the office of the IRS where the taxpayer’s case is pending. If the request is filed after the matter has been designated for litigation or while a suit contesting the relevant tax liability of the taxpayer is pending in a U.S. court, a copy of the request also must be filed with the Associate Chief Counsel (International), Internal Revenue Service, 1111 Constitution Avenue, NW, Rm. 4554, Washington, DC 20224, with a separate statement attached identifying the court where the suit is pending and the docket number of the action.

.04 Form of Request. A request for competent authority assistance must be in the form of a letter addressed to the Director, International. It must be dated and signed by a person having the authority to sign the taxpayer’s federal tax returns. The request must contain a statement that assistance is requested under the mutual agreement procedure with the possession and must include the information described in section 4.05 of this revenue procedure. See section 5 of this revenue procedure for requests involving small cases.

.05 Information Required. The following information shall be included in the request for competent authority assistance:

(1) a reference to the specific coordination agreement and the provisions therein pursuant to which the request is made;

(2) the name, address, U.S. taxpayer identification number, and possession tax identification number (if any) of the taxpayer and, if applicable, all related persons involved in the matter;

(3) if applicable, a description of the control and business relationships among the taxpayer and all relevant related persons for the years in issue, including any

changes in such relationships to the date of filing the request;

(4) a brief description of the issues for which competent authority assistance is requested, including a brief description of the relevant transactions, activities or other circumstances involved in the issues raised and the basis for the adjustment, if any;

(5) the years and amounts involved with respect to the issue;

(6) the IRS office which has made or is proposing to make the adjustment or, if known, the IRS office with examination jurisdiction over the taxpayer;

(7) an explanation of the nature of the relief sought or the action requested in the United States or in the possession with respect to the issues raised, including a statement as to whether the taxpayer wishes to avail itself of the relief provided under Rev. Proc. 99–32, 1999–2 C.B. 296, as indicated in section 10 of this revenue procedure;

(8) a statement whether the period of limitations for the years for which relief is sought has expired in the United States or in the possession;

(9) a statement of relevant U.S. and possession judicial or administrative proceedings which involve the taxpayer and all relevant related persons;

(10) to the extent known by the taxpayer, a statement of relevant possession judicial or public administrative proceedings which do not involve the taxpayer or related persons, but involve the same issue for which competent authority assistance is requested;

(11) a statement whether the request for competent authority assistance involves issues that are currently, or were previously, considered part of an Advance Pricing Agreement (APA) proceeding or other proceeding relevant to the issue under consideration in the United States or part of a similar proceeding in the possession;

(12) a statement whether the taxpayer or related person is entitled to any possession tax incentive or subsidy program benefits for the year or years in question;

(13) if bona fide residence in a possession is at issue, a statement of all facts and circumstances supporting such residence ( see Treas. Reg. § 1.937–1);

(14) a copy of any relevant correspondence received from the possession tax agency and copies of any briefs, protests,

May 15, 2006 903 2006–20 I.R.B.

ment process with respect to matters covered under a coordination agreement, including discussion of the proper time for filing, the practical aspects of obtaining relief and actions necessary to facilitate the proceedings. Similarly, after a matter is resolved by the competent authorities, a taxpayer may also request a conference with the U.S. competent authority to discuss the resolution.

.10 Copy to the Possessions. The taxpayer shall provide a copy of any request for competent authority assistance under this revenue procedure to the possession tax agency.