SECTION 2. INTERIM RULES

Under the authority of section 7654(e), an income tax return filed with the U.S. Virgin Islands by a U.S. citizen or resident alien (USVI Form 1040) will be deemed to be a U.S. income tax return of that individual for purposes of section 6501(a), provided that the individual is a covered person. The term “covered person” means a U.S. citizen or resident alien who takes the position that he or she is a bona fide resident of the U.S. Virgin Islands, files USVI Form 1040 with the U.S. Virgin Islands, and has less than $75,000 of gross income for the taxable year. For purposes of this notice, gross income means the total amount of income from whatever source derived, before any exclusions or deductions (for example, disregarding any appli

cable U.S. Virgin Islands tax benefits authorized under section 934(b)). Gross income does not include income of the individual’s spouse.

For example, assume that C, a U.S. citizen and calendar year taxpayer who has less than $75,000 of gross income for 2006, takes the position that he is a bona fide resident of the U.S. Virgin Islands and files USVI Form 1040 for 2006 on March 12, 2007 with the U.S. Virgin Islands. C does not file Form 1040, U.S. Individual Income Tax Return (U.S. Form 1040), with the IRS. C is a covered person. Under these circumstances, the 3-year period of limitations under section 6501(a) will expire on April 15, 2010, and the IRS will make no further assessment of income tax for A’s 2006 taxable year after that date except as otherwise authorized by section 6501. With respect to a U.S. citizen or resident alien who takes the position that he or she is a bona fide resident of the U.S. Virgin Islands for a taxable year but who has gross income of $75,000 or more (referred to as a non-covered person), a U.S. Form 1040 filed by the non-covered person with the IRS, on which the non-covered person reports no gross income and no taxable income, will be treated as an income tax return described in section 6501(a).

This notice imposes a new annual information reporting requirement under section 7654 for non-covered persons. The Treasury Department and the IRS intend to issue a new form titled Bona Fide Resi- dence-Based Return Position for purposes of this new information reporting requirement. Until this form is issued, a non-covered person will meet the information reporting requirement by attaching a statement to U.S. Form 1040 reporting no gross income and no taxable income. The statement should be titled “Bona Fide Residence-Based Return Position” and must set forth the following information.

1. The non-covered person’s name, social security number, and address as reported on U.S. Form 1040.

2. A statement affirming the non-covered person’s bona fide residence in the U.S. Virgin Islands as defined in Treas. Reg. § 1.937–1(b) and a brief summary of the facts on which it is based.

3. An affirmation that the non-covered person has properly filed a U.S. Virgin Islands individual income tax return, a statement of the total tax liability reported on USVI Form 1040, and the amount of gross income reported on such return (adding back any applicable territorial tax benefits authorized under section 934(b)).

4. The following declaration signed and dated by the individual: “Under penalties of perjury, I declare that I have examined this statement and the accompanying attachments and to the best of my knowledge and belief, they are true, correct, and complete.”

For example, assume that on March 12, 2007, N, a U.S. citizen and calendar year taxpayer with at least $75,000 of gross income for 2006, files U.S. Form 1040 (2006) with the IRS, taking the position that he does not have any gross income or taxable income for U.S. income tax purposes (as reported on lines 22 and 43, respectively) under section 932(c)(4). N attaches a Bona Fide Residence-Based Return Position statement. As a result of filing U.S. Form 1040, the 3-year period of limitations under section 6501(a) will expire on April 15, 2010, and the IRS will make no further assessment of income tax for N’s 2006 taxable year after that date except as otherwise authorized by section 6501. U.S. Forms 1040 with attached Bona Fide Residence-Based Return Position statements must be filed with the Internal Revenue Service Center, P.O. Box 331 Drop Point S–607, Bensalem, PA 19020–8517. Failure to file the Bona Fide Residence-Based Position statement is subject to a penalty under section 6688. If a non-covered person and his or her spouse filed a joint USVI Form 1040, then they may file a jointly executed U.S. Form 1040 but must attach a separate Bona Fide Residence-Based Return Position statement for each spouse who is a non-covered person.