SECTION 1. PURPOSE AND

BACKGROUND

.01 Purpose . This revenue procedure explains the procedures by which taxpayers may obtain assistance from the U.S. competent authority under the provisions of a tax treaty to which the United States is a party. This revenue procedure updates and supersedes Rev. Proc. 2002–52, 2002–2 C.B. 242.

.02 Background . The U.S. competent authority assists taxpayers with respect to matters covered in the mutual agreement procedure provisions of tax treaties. A tax treaty generally permits taxpayers to request competent authority assistance when they consider that the actions of the United States, the treaty country, or both, result or will result in taxation that is contrary to the provisions of the treaty. For example, tax treaties generally permit taxpayers to request assistance in order to relieve economic double taxation arising from an allocation under section 482 of the Internal Revenue Code (the “Code”) or an equivalent provision under the laws of a treaty country. Competent authority assistance may also be available with respect to issues specifically dealt with in other provisions of a treaty. For example, many tax treaties contain provisions permitting competent authorities to resolve issues of fiscal residence or allowing a competent authority to make a discretionary determination that a taxpayer is entitled to the benefits of a treaty under specific limitation on benefits provisions. See sections 3.07 and 3.08 of this revenue procedure. The Deputy Commissioner (International), Large and Mid-Size Business Division, acts as the U.S. competent authority in administering the operating provisions of tax treaties, including reaching mutual agreements

in specific cases, and in interpreting and applying tax treaties. In interpreting and applying tax treaties, the Deputy Commissioner (International), Large and Mid-Size Business Division, acts only with the concurrence of the Associate Chief Counsel (International). See Delegation Order 4–12 (formerly DO–114, Rev. 13), Internal Revenue Manual (“IRM”), Part 1 Organization, Finance and Management, Chapter 2 Servicewide Policies and Authorities, Section 43 Delegation of Authorities for the Examining Process (IRM 1.2.43), http://www.irs.gov/irm/part1/ ch02s10.html#d0e33677 .

.03 Changes . Although most of the changes made by this revenue procedure to Rev. Proc. 2002–52 are minor edits for organization, accuracy, readability, or updating of citations to cross-referenced guidance, substantive changes have also been made and may be summarized as follows:

(1) Sections 3.04, 3.08 and 7.06 have been revised to clarify standards for acceptance of requests for competent authority assistance.

(2) Sections 3.08, 4.04 and 5.03 have been revised to clarify signature requirements for requests for determinations regarding limitation on treaty benefits.

(3) Section 4.04 has been revised to provide for filing copies of submissions on electronic media.

(4) Sections 4.05 and 5.03 have been revised to provide additional detail regarding information to be submitted with requests for competent authority assistance.

(5) Sections 7.02 and 7.05 have been revised to clarify current practices regarding coordination with IRS Appeals.

(6) Section 7.06 has been revised to clarify the coordination of the accelerated competent authority procedure with requests for Advance Pricing Agreements.

December 4, 2006 1037 2006–49 I.R.B.

facts and circumstances of the particular case and the purpose of the treaty, which is 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, and from non-U.S. persons as permitted under an applicable tax treaty. As noted in section 12.02 of this revenue procedure, there are circumstances in which the U.S. competent authority will not pursue assistance. For purposes of this revenue procedure, except where the context otherwise requires, the term “taxpayer” refers to the person requesting competent authority assistance.

.05 Closed Cases . A case previously closed after examination will not be reopened in order to make an adjustment unfavorable to the taxpayer except in the presence of an exceptional circumstance 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). 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 Foreign Initiated Competent Au- thority Request . When a foreign competent authority refers a request from a foreign person 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 person (in the case of an allocation of income or deductions between related persons) or may require the foreign person (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. Examples include cases in which taxpayers believe that they are erroneously treated as non-U.S. residents by treaty countries or cases where taxpayers are treated as dual residents despite the objective tie-breaker provisions contained in the applicable treaties. Generally, competent authority assistance is limited to situations where resolution of a residency

mine whether relief may be available in their particular case. If, after examining the applicable treaty, a taxpayer is unsure whether relief is available, the taxpayer should contact competent authority. This revenue procedure is not intended to limit any specific treaty provisions relating to competent authority matters.

.02 Requests for Assistance . In general, requests by taxpayers for competent authority assistance must be submitted in accordance with this revenue procedure. However, where a treaty or other published administrative guidance provides specific procedures for requests for competent authority assistance, those procedures will apply, and the provisions of this revenue procedure will not apply to the extent inconsistent with such procedures. Taxpayers may consult the “Tax Information for International Businesses” and “Competent Authority Agreements” pages at www.irs.gov for links to a variety of agreements and other documents that may modify the procedures set forth in this revenue procedure.

.03 General Process . If a taxpayer’s request for competent authority assistance is accepted, the U.S. competent authority generally will consult with the appropriate foreign competent authority and attempt to reach a mutual agreement that is acceptable to all parties. The U.S. competent authority also may initiate competent authority negotiations in any situation deemed necessary to protect U.S. interests. Such a situation may arise, for example, when a taxpayer fails to request competent authority assistance after agreeing to a U.S. or foreign tax assessment that is contrary to the provisions of an applicable tax treaty or for which correlative relief may be available.

.04 Failure to Request Assistance . Failure to request competent authority assistance or to take appropriate steps as necessary to maintain the availability of the remedy may cause a denial of part or all of any foreign tax credits claimed. See Treas. Reg. §1.901–2(e)(5)(i). See also section 9 of this revenue procedure concerning protective measures and section 11 of this revenue procedure concerning the determination of creditable foreign taxes.