Part III. Administrative, Procedural, and Miscellaneous

Voluntary Withholding on Dividends and Other Distributions by Alaska Native Corporations

Notice 2013–77

PURPOSE

Under this Notice, dividends and other distributions made by an Alaska Native Corporation to its shareholders are eligible for voluntary withholding under section 3402(p)(3)(B) of the Internal Revenue Code (Code) and § 31.3402(p)–1T of the Employment Tax Regulations.

BACKGROUND

The Alaska Native Claims Settlement Act (ANCSA), 43 U.S.C. § 1601, et seq, was enacted as a means to resolve the issue of aboriginal land claims in Alaska. See 43 U.S.C. § 1601. The ANCSA required the division of Alaska into geographic regions and the incorporation of a Regional Corporation for each region. 43 U.S.C. §§ 1606(a) and (d). The ANCSA also authorized the incorporation of other corporations, including Village Corporations, Urban Corporations, and Group Corporations. 43 U.S.C. § 1607. Alaska Native Corporation (ANC) means any Regional, Village, Urban, or Group Corporation. 43 U.S.C. § 1602(m). ANCs are incorporated under the laws of Alaska to conduct business for profit, and are expressly authorized to promote the health, education, and welfare of their shareholders. 43 U.S.C. §§ 1606(d) and (r). To achieve these goals, the ANCSA authorizes the issuance of stock in ANCs to Natives as defined in 43 U.S.C. § 1602(b). The ANCSA permits the Native shareholders to receive dividends and other distributions from the ANCs. 43 U.S.C. §§ 1606(g) and (h)(1)(A)(ii).

Section 3402(p) of the Code allows for voluntary income tax withholding agreements in certain circumstances. Under section 3402(p)(3)(B), the Secretary may prescribe regulations to allow income tax withholding from any payment which the Secretary finds that withholding would be appropriate if the person making and the person receiving the payment agree to the

withholding. The agreement must be in the form and manner that the Secretary prescribes. For purposes of the income tax withholding provisions and the related procedural provisions in subtitle F of the Code, payments made during the period for which a voluntary withholding agreement is in effect are treated as if they were wages paid by an employer to an employee.

The Internal Revenue Service (IRS) has become aware that ANCs and their shareholders may benefit from the ability to enter into voluntary withholding agreements. Specifically, expanding the use of voluntary withholding agreements to dividends and other distributions made by an ANC to its shareholders will permit the shareholders to use the withholding regime (rather than the estimated tax payment process) to meet their tax payment obligations on a timely basis, will minimize the risk of underpayment of taxes, and will achieve administrative simplification for the shareholders and the IRS.

Section 31.3402(p)–1T(c), which is effective on November 27, 2013, allows the Secretary to describe payments subject to voluntary withholding agreements in guidance to be published in the Internal Revenue Bulletin (IRB). The temporary regulations also provide that the requirements regarding the form and duration of the authorized voluntary withholding agreements will be provided in the IRB guidance issued regarding specific types of payments. This Notice is guidance meeting the requirements of § 31.3402(p)–1T(c).

ANC PAYMENTS SUBJECT TO VOLUNTARY WITHHOLDING

An ANC and any shareholder of the ANC may enter into an agreement for voluntary withholding under section 3402(p)(3)(B). Thus, dividends and other distributions paid by an ANC to a shareholder will be subject to voluntary income tax withholding under section 3402(p)(3)(B) if the shareholder requests the withholding and the ANC agrees to withhold.

The IRS designates Form W–4V, Vol- untary Withholding Request, as the form a shareholder of an ANC should use to request income tax withholding from dividends or other distributions made to the

shareholder by an ANC. Accordingly, a shareholder of an ANC who desires to enter into a voluntary withholding agreement under section 3402(p)(3)(B) should furnish the ANC with a completed Form W–4V. The shareholder should select the applicable percentage of withholding from those specified on line 6 of the Form W–4V (currently, 7 percent, 10 percent, 15 percent, or 25 percent). The furnishing of a completed Form W–4V constitutes a request for withholding.

The IRS intends to revise Form W–4V to specifically reflect the withholding authorized by this Notice. In the interim, shareholders of an ANC may use the current Form W–4V available at www.irs.gov annotated as appropriate, or any other written instrument containing the necessary information.

No request for withholding under section 3402(p)(3)(B) is effective as an agreement between an ANC and its shareholder until the ANC indicates to the shareholder that it accepts the request, whether by providing a written notice of acceptance or by commencing withholding. Under section 3403 of the Code, the ANC will be liable for any tax it is required to deduct and withhold pursuant to a voluntary withholding agreement. An agreement under section 3402(p)(3)(B) applies for such period as the ANC and its shareholder mutually agree upon or until either the ANC or the shareholder terminate the agreement by furnishing a signed written notice to the other. For purposes of the preceding sentence, a shareholder should submit a revised Form W–4V to the ANC to effectuate a termination.

EFFECTIVE DATE

This Notice applies on and after November 27, 2013.

DRAFTING INFORMATION

The principal author of this Notice is Linda L. Conway-Hataloski of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt & Government Entities). For questions regarding this Notice, contact Linda L. Conway-Hataloski at (202) 317-6798 (not a toll-free call).

December 9, 2013 632 Bulletin No. 2013–50

Proposed Revision of Procedures for Requesting Competent Authority Assistance Under Tax Treaties

Notice 2013–78

PURPOSE

This notice proposes a revenue procedure that would update and supersede Rev. Proc. 2006–54, 2006–2 C.B. 1035. The proposed

revenue procedure would provide guidance on requesting assistance from the U.S. competent authority, acting through the Advance Pricing and Mutual Agreement program and the Treaty Assistance and Interpretation Team, under the provisions of U.S. tax treaties. It would also provide guidance on determinations the U.S. competent authority may make on competent authority issues.

The proposed revenue procedure would substantially restate Rev. Proc. 2006–54 to improve clarity, readability, and organization. The proposed revenue

procedure also would reflect structural changes undertaken by the IRS since 2006, including the establishment of the Large Business & International Division, which currently includes the office of the U.S. competent authority, and of separate offices under the U.S. competent authority to handle taxpayer requests for different types of competent authority assistance.

Additionally, the proposed revenue procedure would effect a limited number of significant substantive changes. These changes may be summarized as follows:

Section of Proposed Update to Rev. Proc. Nature of Addition or Changes

2006–54

2.02 Clarifes that competent authority issues may arise as a result of taxpayer-initiated positions.

2.05 and 2.06 Makes clear that the offices of the U.S. competent authority are available, whether or not in the course of the mutual agreement process, for informal consultations on competent authority-related issues, including informal consultations regarding the steps necessary to achieve greater certainty that a foreign tax paid, or to be paid, will qualify as a compulsory payment for foreign tax credit purposes.

2.07 Recognizes that a mutual agreement case may arise where the U.S. competent authority notifies a foreign competent authority on a U.S.-initiated case raising competent authority issues. Further recognizes that the U.S. competent authority can expand the scope of a mutual agreement case to include additional treaty countries, competent authority issues, or taxable years.

2.10 Elaborates on potential interactions of requests for competent authority assistance and advance pricing agreements.

3.02 Provides new pre-filing procedures applicable to mutual agreement cases, including mandatory submission of a pre-fling memorandum in cases raising certain issues.

3.04 Clarifies that a request for competent authority assistance generally will not be accepted if barred by tax treaty provisions imposing time limits for seeking assistance.

3.05(1) Establishes an appendix listing standard specifications for the content of a request for competent authority assistance in various types of cases.

3.07 Specifies that the U.S. competent authority accepts requests for assistance with respect to certain foreign pension plan determinations.

3.08 Provides for e-mail communications between the U.S. competent authority and a taxpayer’s representative pursuant to a memorandum of understanding executed by the taxpayer.

4 Provides new streamlined procedures for invoking the accelerated competent authority procedure without consent of an offce conducting examinations.

5.01 Generally subjects small case requests to the same requirements as other requests, subject to case-bycase minimization of administrative burdens.

5.02 Increases dollar thresholds for small case qualification to $5,000,000 for a corporation or partnership and $1,000,000 for others.

6.01 Clarifes procedures for notifcation of receipt of a request for competent authority assistance.

6.02(2) Specifies an example of an unreasonable taxpayer condition to acceptance of a competent authority resolution, resulting in denial of assistance.

6.02(6)(b) – (d) States additional bases for denying U.S. competent authority assistance. and 6.02(8) – (12)

7 Describes various aspects of U.S. competent authority consultations and other actions once a request for assistance is filed, including consultation requirements in treaty limitation-on-benefits provisions, the possibility of requiring withdrawal of a U.S.-initiated adjustment, and taxpayer requests to make a joint presentation to the U.S. and foreign competent authorities.

8.01 Specifies that the Simultaneous Appeals Procedure is the primary means for obtaining IRS Appeals and U.S. competent authority review of the same issue.

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8.02 Limits the time frame for invoking Simultaneous Appeals Procedure review to within 60 days after notifcation of acceptance of request for assistance.

9.01 Provides that the U.S. competent authority will not accept a request for assistance if the taxpayer has entered into a prior resolution with the IRS office conducting the taxpayer’s examination unless the U.S. competent authority agreed in writing to the prior resolution.

9.02 Provides, subject to a limited exception, that the U.S. competent authority will not accept a request for assistance if the taxpayer seeks IRS Appeals review of a competent authority issue.

9.03(1) Clarifies the procedures applicable to accepting, or continuing to consider, a request for U.S. competent authority assistance when a matter is pending in litigation.

10.01 and 10.04 Describes conditions for finality of resolutions reached by the U.S. competent authority and discusses notifcation to the taxpayer where no resolution is reached with respect to a foreign-initiated adjustment.

11 Restates and revises U.S. competent authority procedures with respect to repatriation payments made in the mutual agreement context.

12 Describes basic procedures applicable where a tax treaty contains a provision for mandatory arbitration.

14 Provides procedures applicable to required notifications under some treaties that a taxpayer has requested competent authority assistance of the other treaty partner.

16.02 Reflects that the amount of the user fee for requests for discretionary relief with respect to limitation on benefits has been increased to $27,500. See Rev. Proc. 2013–1, 2013–1 I.R.B. 1.

The IRS and the Treasury Department request comments on this proposed revenue procedure. Comments may be submitted in writing on or before March 10, 2014. Comments should be submitted to Internal Revenue Service, CC:PA: LPD:PR (Notice 2013–78), Room 5205, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044, or electronically to Notice.Comments@irscounsel.treas. gov . Please include ”Notice 2013–78” in the subject line of any electronic communications. Alternatively, comments may be hand delivered between the hours of 8:00 a.m. and 4:00 p.m. Monday to Friday to CC:PA:LPD:PR (Notice 2013–78), Courier’s Desk, Internal Revenue Service, 1111 Constitution Ave., NW, Washington, DC. All comments will be available for public inspection and copying.

Following the issuance of the revenue procedure proposed in this notice, the IRS

intends to update Rev. Proc. 2006–23, 2006–1 C.B. 900, which provides similar guidance in obtaining competent authority assistance with respect to the U.S. territories. The update to Rev. Proc. 2006–23 will be generally consistent with the provisions of such final revenue procedure.

The procedures for requesting competent authority assistance under tax treaties are proposed to be revised as follows:

Procedures for Requesting Competent Authority Assistance Under Tax Treaties 26 CFR 601.201: Rulings and determination letters. Rev. Proc. [2014–XX] SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECTION 2. PURPOSE, BACKGROUND, SCOPE, AND GENERAL APPLICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECTION 3. PROCEDURES FOR REQUESTING ASSISTANCE FROM THE U.S. COMPETENT AUTHORITY . . . . . . . . . SECTION 4. ACCELERATED COMPETENT AUTHORITY PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECTION 5. SMALL CASE MAP REQUESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECTION 6. NOTIFICATION OF RECEIPT AND DENIAL OF ASSISTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECTION 7. CONSULTATIONS AND OTHER ACTIONS BY THE U.S. COMPETENT AUTHORITY . . . . . . . . . . . . . . . . . SECTION 8. SIMULTANEOUS APPEALS PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECTION 9. INTERACTION AND COORDINATION WITH OTHER ADMINISTRATIVE AND JUDICIAL PROCEEDINGS . SECTION 10. RESULTS OF MAP CASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECTION 11. MAP REPATRIATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECTION 12. ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECTION 13. PROTECTIVE CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECTION 14. TREATY NOTIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECTION 15. REQUESTS FOR RULINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECTION 16. USER FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECTION 17. EFFECT ON OTHER DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECTION 18. EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECTION 19. PAPERWORK REDUCTION ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SECTION 20. DRAFTING INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 9, 2013 634 Bulletin No. 2013–50