Part III. — Internal Revenue Bulletin 2008-18

Supplemental Guidance Under the Preparer Penalty Provisions of the Small Business and Work Opportunity Tax Act of 2007

Notice 2008–46

This notice provides guidance regarding implementation of the tax return preparer penalty provisions under section 6694 of the Internal Revenue Code, as amended by the Small Business and Work Opportunity Tax Act of 2007, Pub. L. No. 110–28, 121 Stat. 190, by adding certain returns and documents supplementing Exhibits 1, 2, and 3 of Notice 2008–13, 2008–3 I.R.B. 282.

A. Returns and Claims for Refund Subject to 6694 Penalty

Notice 2008–13 describes categories of returns and other documents to which section 6694 could apply. Notice 2008–13 provides that, solely for purposes of section 6694, a return or claim for refund includes the tax returns listed in Exhibit 1 or a claim for refund with respect to any such return. The notice further provides that a

person who for compensation prepares all or a substantial portion of any of the tax returns listed on Exhibit 1 is a tax return preparer who is subject to section 6694.

Notice 2008–13 also provides that solely for purposes of section 6694, an information return or document listed on Exhibit 2 that includes information that is or may be reported on a taxpayer’s tax return or claim for refund is a return to which section 6694 could apply if the information reported constitutes a substantial portion of that taxpayer’s tax return or claim for refund. A person who for compensation prepares any of the information returns or documents listed on Exhibit 2, which return or document does not report a tax liability but affects an entry or entries on a tax return and constitutes a substantial portion of the tax return or claim for refund that does report a tax liability, is a tax return preparer who is subject to section 6694. Notice 2008–13 also provides that solely for purposes of section 6694, a document listed on Exhibit 3 that includes information that is or may be reported on a taxpayer’s tax return or claim for refund (and that constitutes a substantial portion of such tax return or claim for refund) will

not subject the preparer to a penalty under section 6694(a). A document listed on Exhibit 3, however, may subject the preparer to a willful or reckless conduct penalty under section 6694(b) if the information reported on the document constitutes a substantial portion of the tax return or claim for refund and is prepared willfully in any manner to understate the liability of tax on a tax return or claim for refund, or in reckless or intentional disregard of rules or regulations. A person who for compensation prepares all or a substantial portion of any of the documents listed on Exhibit 3 is not a tax return preparer subject to section 6694(a) unless the document was prepared willfully in any manner to understate the liability of tax on a tax return or claim for refund or in reckless or intentional disregard of rules or regulations.

Notice 2008–13 also provides that the Treasury Department and the Internal Revenue Service may add or remove forms or documents from any of the categories or exhibits to Notice 2008–13 in future guidance. Accordingly, the following returns and documents are added to Exhibits 1, 2, and 3 of Notice 2008–13:

Exhibit 1 — Tax Returns Reporting Tax Liability

(1) Form 1040–C, U.S. Departing Alien Income Tax Return;

(2) Form 1040NR, U.S. Nonresident Alien Income Tax Return;

(3) Form 1040NR–EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents;

(4) Form 1041–N, U.S. Income Tax Return for Electing Alaska Native Settlement Trusts;

(5) Form 1041–QFT, U.S. Income Tax Return for Qualified Funeral Trusts;

(6) Form 1120–FSC, U.S. Income Tax Return of a Foreign Sales Corporation;

(7) Form 1120–H, U.S. Income Tax Return for Homeowners Associations;

(8) Form 1120–L, U.S. Life Insurance Company Income Tax Return;

(9) Form 1120–ND, Return for Nuclear Decommissioning Funds and Certain Related Persons;

(10) Form 1120–PC, U.S. Property and Casualty Insurance Company Income Tax Return;

(11) Form 1120–POL, U.S. Income Tax Return for Certain Political Organizations;

(12) Form 1120–REIT, U.S. Income Tax Return for Real Estate Investment Trusts;

(13) Form 1120–RIC, U.S. Income Tax Return for Regulated Investment Companies;

(14) Form 1120–SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B);

(15) Form 1040–SS, U.S. Self-Employment Tax Return (Incuding the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico);

2008–18 I.R.B. 868 May 5, 2008

(16) Form 2438, Undistributed Capital Gains Tax Return;

(17) Form 8288, U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests;

(18) Form 8752, Required Payment or Refund Under Section 7519; and

(19) Form 8804, Annual Return for Partnership Withholding Tax (Section 1446) .

Exhibit 2 — Information Returns That Report Information That is or May be Reported on Another Tax Return That May Subject a Tax Return Preparer to the Section 6694(a) Penalty if the Information Reported Constitutes a Substantial Portion of the Other Tax Return

(1) Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts;

(2) Form 3520–A, Annual Information Return of Foreign Trust With a U.S. Owner (Under section 6048(b));

(3) Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations;

(4) Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business (Under Sections 6038A and 6038C of the Internal Revenue Code);

(5) Form 8805, Foreign Partner’s Information Statement of Section 1446 Withholding Tax;

(6) Form 8858, Information Return of U.S. Persons With Respect To Foreign Disregarded Entities; and

(7) Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships .

Exhibit 3 — Forms That Would Not Subject a Tax Return Preparer to the Section 6694(a) Penalty Unless Prepared Willfully in any Manner to Understate the Liability of Tax on a Return or Claim for Refund or in Reckless or Intentional Disregard of Rules or Regulations

(1) Form 8288–A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests; and

(2) Form 8288–B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests .

EFFECTIVE DATE

This notice is effective as of April 16, 2008.

EFFECT ON OTHER DOCUMENTS

Notice 2008–13, 2008–3 I.R.B. 282, is supplemented.

CONTACT INFORMATION

The principal authors of this notice are Matthew S. Cooper and Michael E. Hara of the Office of Associate Chief Counsel (Procedure and Administration). For further information regarding this notice, contact Mr. Cooper at (202) 622–4940 or Mr. Hara at (202) 622–4910 (not toll-free calls).

Public Comment Invited on Recommendations for 2008–2009 Guidance Priority List

Notice 2008–47

The Department of Treasury and Internal Revenue Service invite public comment on recommendations for items that should be included on the 2008–2009 Guidance Priority List.

The Treasury Department’s Office of Tax Policy and the Service use the Guidance Priority List each year to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. The 2008–2009 Guidance Priority List will establish the guidance that the Treasury Department and the Service intend to issue from July 1, 2008, through June 30, 2009. The Treasury Department and the Service recognize the importance of public input to formulate a Guidance Priority List that focuses resources on guidance

items that are most important to taxpayers and tax administration. Published guidance plays an important role in increasing voluntary compliance by helping to clarify ambiguous areas of the tax law.

As is the case whenever significant legislation is enacted, the Treasury Department and the Service have continued to dedicate substantial resources during the current plan year to published guidance projects necessary to implement the provisions of the American Jobs Creation Act of 2004, Pub. L. No. 108–357, 118 Stat. 1418, which was enacted on October 22, 2004; the Energy Policy Act of 2005, Pub. L. No. 109–58, 119 Stat. 594, which was enacted on August 8, 2005; the Gulf Opportunity Zone Act of 2005, Pub. L. No. 109–135, 119 Stat. 2577, which was enacted on December 21, 2005; the Tax Increase Prevention and Reconciliation Act of 2005, Pub. L. No. 109–222, 120 Stat. 345, which was enacted on May 17, 2006; the Pension Protection Act of 2006, Pub. L. No. 109–280, 120 Stat. 780, which was enacted on August 17, 2006; the Tax Relief

May 5, 2008 869 2008–18 I.R.B.

Taxpayers should send written comments to:

Internal Revenue Service Attn: CC:PA:LPD:PR

(Notice 2008–47) Room 5203 P.O. Box 7604 Ben Franklin Station Washington, D.C. 20044

or hand deliver comments Monday through Friday between the hours of 8 a.m. and 4 p.m. to:

Courier’s Desk Internal Revenue Service Attn: CC:PA:LPD:PR

(Notice 2008–47) 1111 Constitution Avenue, N.W. Washington, D.C. 20224

Alternatively, taxpayers may submit comments electronically via e-mail to the following address: Notice.Comments@irscounsel.treas.gov . Taxpayers should include “Notice 2008–47” in the subject line. All comments will be available for public inspection and copying in their entirety.

For further information regarding this notice, contact Henry Schneiderman of the Office of Associate Chief Counsel (Procedure and Administration) at (202) 622–3400 (not a toll-free call).

and Health Care Act of 2006, Pub. L. No. 109–432, 120 Stat. 2921, which was enacted on December 20, 2006; the Mortgage Forgiveness Debt Relief Act of 2007, Pub. L. No. 110–142, 121 Stat. 1803, which was enacted on December 20, 2007; and the Economic Stimulus Act of 2008, Pub. L. No. 110–185, 122 Stat. 613, which was enacted on February 13, 2008. The Treasury Department and the Service will continue to evaluate the priority of each guidance project in light of the above-mentioned tax legislation and other developments occurring during the 2008–2009 plan year. In reviewing recommendations and selecting projects for inclusion on the 2008–2009 Guidance Priority List, the Treasury Department and the Service will consider the following:

Whether the recommended guidance resolves significant issues relevant to many taxpayers;
Whether the guidance may be appropriate for enhanced public involvement through the process described in Notice 2007–17, 2007–12 I.R.B. 748;
Whether the recommended guidance promotes sound tax administration;
Whether the recommended guidance can be drafted in a manner that will enable taxpayers to easily understand and apply the guidance;
Whether the Service can administer the recommended guidance on a uniform basis; and
Whether the recommended guidance reduces controversy and lessens the burden on taxpayers or the Service.

Taxpayers may submit recommendations for guidance at any time during the year. Please submit recommendations by May 31, 2008, for possible inclusion on the original 2008–2009 Guidance Priority List. The Treasury Department and the Service plan to update the 2008–2009 Guidance Priority List periodically to reflect additional guidance that the Treasury Department and the Service intend to publish during the plan year. The periodic updates allow the Treasury Department and the Service to respond to the need for additional guidance that may arise during the plan year. Recommendations for guidance received after May 31, 2008, will be reviewed for inclusion in the next periodic update.

Taxpayers are not required to submit recommendations for guidance in any particular format. Taxpayers should, however, briefly describe the recommended guidance and explain the need for the guidance. In addition, taxpayers may include an analysis of how the issue should be resolved. It would be helpful if taxpayers suggesting more than one guidance project prioritize the projects by order of importance. If a large number of projects are being suggested, it also would be helpful if the projects were grouped in terms of high, medium or low priority.

2008–18 I.R.B. 870 May 5, 2008