SECTION 2. BACKGROUND

Almost all U.S. income tax treaties contain a limitation on benefits article. A resident of a Contracting State must satisfy one of the enumerated tests set forth in that article to be entitled to U.S. treaty benefits with respect to an item of income, profit or gain. The U.S. competent authority will not make a determination on whether or not a resident of a Contracting State meets the conditions of one of these enumerated tests. However, if a resident of a Contracting State does not meet one of the tests, most limitation on benefits articles authorize the U.S. competent authority to make a discretionary determination that the resident be entitled to some or all of the benefits of the income tax treaty. Rev. Proc. 2002–52, Procedures for Obtaining Competent Authority Assistance, currently sets forth rules for requesting a discretionary determination under a limitation on benefits provision of an income tax treaty. Section 3.08 of Rev. Proc. 2002–52.

Section 14 of Rev. Proc. 2002–52 currently provides that user fees are not required as a condition to requesting competent authority assistance, including requests for a discretionary determination pursuant to section 3.08. The Internal Revenue Service has recently determined that user fees are appropriate for this limited

type of request for competent authority assistance. The rules for these user fees are set forth below and will be incorporated into the next update of Rev. Proc. 2002–52.