RS Announcement 2002-2
 
RS Announcement 2002-2, 2002-1 CB 304, December 21, 2001.
Announcement 2002-2
The
Internal Revenue Service (
IRS
) announces a disclosure initiative to encourage
taxpayers to disclose their tax treatment of tax
shelters and other items for which the imposition of
the accuracy-related penalty may be appropriate if
there is an underpayment of tax. If a taxpayer
discloses any item in accordance with the provisions
of this announcement before
April 23, 2002
, the
IRS
will waive the accuracy-related penalty under §6662(b)(1)
, (2), (3), and (4) for any underpayment of tax
attributable to that item.
This
disclosure initiative covers all items except items
resulting from a transaction that (1) did not in
fact occur, in whole or in part, but for which the
taxpayer claimed a tax benefit on its return; (2)
involved the taxpayer's fraudulent concealment of
the amount or source of any item of gross income;
(3) involved the taxpayer's concealment of its
interest in, or signature or other authority over a
financial account in a foreign country; (4) involved
the taxpayer's concealment of a distribution from, a
transfer of assets to, or that the taxpayer was a
grantor of a foreign trust; or (5) involved the
treatment of personal, household, or living expenses
as deductible trade or business expenses.
SCOPE OF THE WAIVER
Under
this disclosure initiative, the
IRS
will waive the accuracy-related penalty under §6662(b)
for that portion of an underpayment attributable to
the disclosed item and due to one or more of the
following: (1) negligence or disregard of rules or
regulations; (2) any substantial understatement of
income tax; (3) any substantial or gross valuation
misstatement under chapter 1 of the Code, except for
any portion of an underpayment attributable to a net
§482 transfer price adjustment, unless the
standards of §6662(e)(3)(B) regarding documentation
are met; and (4) any substantial overstatement of
pension liabilities.
Disclosure
under this initiative does not affect whether the
IRS
will impose, as appropriate, any other civil penalty
that may be applicable under the Code or will
investigate any associated criminal conduct or
recommend prosecution for violation of any criminal
statute.
PERIOD OF DISCLOSURE
The
IRS
will waive the accuracy-related penalty if the
taxpayer discloses the item before the earlier of
(1) the date the item or another item arising from
the same transaction is an issue raised during an
examination, or (2) April 23, 2002. For purposes of
this disclosure initiative, an item is an issue
raised during an examination if the person examining
the return (the examiner) communicates to the
taxpayer knowledge about the specific item or on or
before
December 21, 2001
, the examiner has made a request to the taxpayer
for information, and the taxpayer could not make a
complete response to that request without giving the
examiner knowledge of the specific item.
INFORMATION REQUIRED TO MAKE A DISCLOSURE
To
disclose an item under this initiative, a taxpayer
must provide the following:
(1)
A statement describing the material facts of the
item;
(2)
A statement describing the taxpayer's tax treatment
of the item;
(3)
The taxable years affected by the item;
(4)
If the taxpayer is a Coordinated Industry Case (CIC)
taxpayer, a statement that the taxpayer will agree
to address the disclosed item under the Accelerated
Issue Resolution process described in Rev. Proc.
94-67 , 1994-2 C.B. 800, if requested to do so by
the
IRS
;
(5)
The names and addresses of (a) any parties who
promoted, solicited, or recommended the taxpayer's
participation in the transaction underlying the item
and who had a financial interest, including the
receipt of fees, in the taxpayer's decision to
participate, and (b) if known to the taxpayer, any
parties who advised the promoter, solicitor or
recommender with respect to that transaction;
(6)
A statement agreeing to provide, if requested,
copies of all of the following:
(a)
All transactional documents, including agreements,
contracts, instruments, schedules, and, if the
taxpayer's participation in the transaction was
promoted, solicited or recommended by any other
party, all material received from that other party
or that party's advisor(s);
(b)
All internal documents or memoranda used by the
taxpayer in its decision-making process, including,
if applicable, information presented to the
taxpayer's board of directors; and
(c)
All opinions and memoranda that provide a legal
analysis of the item, whether prepared by the
taxpayer or a tax professional on behalf of the
taxpayer; and
(7)
A penalty of perjury statement that the person
signing the disclosure has examined the disclosure
and that to the best of that person's knowledge and
belief, the information provided as part of the
disclosure contains all relevant facts and is true,
correct, and complete. In the case of an individual
taxpayer, the declaration must be signed and dated
by the taxpayer, and not the taxpayer's
representative. In the case of a corporate taxpayer,
the declaration must be signed and dated by an
officer of the corporate taxpayer who has personal
knowledge of the facts. If the corporate taxpayer is
a member of an affiliated group filing consolidated
returns, a penalties of perjury statement also must
be signed, dated, and submitted by an officer of the
common parent of the group. The person signing for a
trust, a state law partnership, or a limited
liability company must be, respectively, a trustee,
general partner, or member-manager who has personal
knowledge of the facts. A stamped signature is not
permitted.
PROCEDURE FOR MAKING THE DISCLOSURE
A
CIC taxpayer must submit the disclosure information
to the assigned team manager and send a copy of the
information to the Office of Tax Shelter Analysis.
A
non-CIC taxpayer not under examination as of
December 21, 2001, must send the disclosure
information to the Office of Tax Shelter Analysis.
A
non-CIC taxpayer under examination as of December
21, 2001, must submit the disclosure information to
the examiner and send a copy of the information to
the Office of Tax Shelter Analysis.
The
address for the Office of Tax Shelter Analysis is
LM:PFTG:OTSA,
1111 Constitution Ave, NW
,
Washington
,
DC
20224
.
MISCELLANEOUS
The
IRS
is committed to considering and resolving disclosed
items promptly. A taxpayer's disclosure of an item
creates no inference that the taxpayer's tax
treatment of the item was improper or that the
accuracy-related penalty would apply if there is an
underpayment of tax. Furthermore, taxpayers that do
not disclose under this initiative are not prevented
from demonstrating that they satisfy the reasonable
cause exception under §6664(c) and the regulations
thereunder with respect to any portion of an
underpayment of tax.
PAPERWORK REDUCTION ACT
The
collection of information contained in this
announcement has been reviewed and approved by the
Office of Management and Budget in accordance with
the Paperwork Reduction Act (44 U.S.C. §3507 )
under control number 1545-1764. An agency may not
conduct or sponsor, and a person is not required to
respond to, a collection of information unless the
collection of information displays a valid OMB
control number.
The
collection of information in this announcement is in
the section titled INFORMATION REQUIRED TO MAKE A
DISCLOSURE. This information is required to assess
the item the taxpayer is disclosing under the
initiative. This information will be used to
determine whether the taxpayer has reported the
disclosed item properly for income tax purposes. The
collection of information is required to obtain the
benefit described in this announcement. The likely
respondents are businesses or other for-profit
institutions, small businesses or organizations, and
individuals.
The
estimated total annual reporting burden is 450
hours.
The
estimated annual burden per respondent varies from 2
hours to 4 hours, depending on individual
circumstances, with an estimated average of 3 hours.
The estimated number of respondents is 150.
The
estimated frequency of responses is one time per
respondent.
Books
or records relating to a collection of information
must be retained as long as their contents may
become material in the administration of any
internal revenue law. Generally tax returns and tax
return information are confidential, as required by
26 U.S.C. §6103 .
CONTACT INFORMATION
For
further information regarding this announcement,
contact Jozef Chilinski of the Office of Tax Shelter
Analysis at
(202)
283-8425
(not a toll-free call).
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