SECTION 3. GENERAL CONDITIONS

UNDER WHICH THIS PROCEDURE APPLIES

.01 General . The exclusions, exemptions, deductions, credits, reductions in rate, and other benefits and safeguards provided by treaties are subject to conditions and restrictions that may vary in different treaties. Taxpayers should examine carefully the specific treaty provisions applicable in their cases to determine the nature and extent of treaty benefits or safeguards they are entitled to and the conditions under which such benefits or safeguards are available. 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 foreign tax authorities. See also section 12.02 of this revenue procedure for circumstances in which competent authority assistance may be denied.

.02 Requirements of a Treaty . 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 a foreign country or the United States, unless such authority is granted by a treaty. See also Rev. Proc. 2006–23, 2006–20 I.R.B. 900, for procedures for requesting the assistance of the IRS when a taxpayer is or may be subject to inconsistent tax treatment by the IRS and a U.S. possession tax agency.

.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 counterpart in the treaty country will be bound by the arm’s length standard provided by the applicable provisions of the relevant treaty. The U.S. competent authority will also be guided by the arm’s length standard consistent with the regulations under section 482 of the Code and the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations as published from time to time by the Organisation for Economic Co-operation and Development. When negotiating mutual agreements on the allocation of income and deductions, the U.S. competent authority will take into account all of the

2006–49 I.R.B. 1038 December 4, 2006

Internal Revenue Service, 1111 Constitution Avenue, NW, Routing: MA3–322A, Washington, D.C. 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 United States court, a copy of the request also must be filed with the Office of Associate Chief Counsel (International), Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, D.C. 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 U.S. competent authority assistance must be in the form of a letter addressed to the Deputy Commissioner (International), Large and Mid-Size Business Division. 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 competent authority assistance is being requested and must include the information described in section 4.05 of this revenue procedure. In addition to the original signed submission, a copy of the text of the request and any materials contemporaneously prepared in support of the request must also be submitted, in Adobe PDF or Microsoft Word format, in the form of a CD, DVD, or 3.5-inch diskette. See section 5 of this revenue procedure for requests involving small cases.

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

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

(2) the names, addresses, U.S. taxpayer identification number and foreign taxpayer identification number (if any) of the taxpayer and, if applicable, all related persons involved in the matter;

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

issue is necessary in order to avoid double taxation or to determine the applicability of a benefit under the treaty. Further, a request for assistance regarding a residency issue will be accepted only if it is established that the issue requires consultation with the foreign competent authority in order to ensure consistent treatment by the United States and the applicable treaty country. The U.S. competent authority does not issue unilateral determinations with respect to whether an individual is a resident of the United States or of a treaty country.

.08 Determinations Regarding Limita- tion on Benefits . Many treaties contain a limitation on benefits article that enumerates prescribed requirements that must be met to be eligible for benefits under the treaty. The U.S. competent authority will not issue determinations regarding a taxpayer’s status under one of the prescribed requirements in a limitation on benefits provision. However, certain treaties provide that the competent authority may, as a matter of discretion, determine the availability of treaty benefits where the prescribed requirements are not met. Requests for assistance in such cases should comply with this revenue procedure and any other specific procedures that may be issued from time to time. A request may be with respect to an initial discretionary determination, a renewal or a redetermination. The request should take the form of a letter as described in section 4.04 of this revenue procedure, except that if the requester does not file federal tax returns and cannot identify a person authorized to sign such returns, the letter may be dated and signed by any authorized representative or officer of the requester. Taxpayers who are requesting a discretionary determination under a limitation on benefits provision should include the user fee as described in Section 14 of this revenue procedure as well as the information described in Exhibit 4.60.3–3 of the Internal Revenue Manual (“IRM”), Part 4 Examining Process, Chapter 60 International Procedure, Section 3 Tax Treaty Related Matters (IRM 4.60.3), http://www.irs.gov/irm/part4/ ch45s03.html.