This notice announces that the Treasury Department and the IRS intend to issue regulations under new section 1446(f) regarding the disposition of a partnership interest that is not publicly traded. This notice also provides interim guidance that taxpayers may rely on pending the issuance of regulations.

This notice impacts U.S. multinational enterprise groups that are required to file a Form 8975 and Schedule A (Form 8975) (Country-by-Country Report) (i.e., those that have more than $850M in revenue in the prior reporting period) and that have more than 50 percent of their revenues attributable to contracts with the Department of Defense or other U.S. governmental intelligence or security agencies. Such specified national security contractors may file their Country-by-Country Report in the modified manner described in the notice.

These proposed regulations will narrow the scope of the current summons interview regulations by excluding certain non-government attorneys from receiving summoned books, papers, records, or other data, or from participating in the interview of a witness summoned by the IRS to provide testimony under oath. An attorney who is not an officer or employee of the United States may not be hired by the IRS to perform these activities unless the attorney is hired by the IRS as a specialist in foreign, state, or local law, including tax law, or in non-tax substantive law that is relevant to an issue in the examination, such as patent law, property law, or environmental law, or is hired for knowledge, skills, or abilities other than providing legal services as an attorney.

Revocation of IRC 501(c)(3) Organizations for failure to meet the code section requirements. Contributions made to the organizations by individual donors are no longer deductible under IRC 170(b)(1)(A).

This notice provides additional guidance regarding the implementation of section 965 of the Internal Revenue Code as amended by “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”, P.L. 115–97, which was enacted on December 22, 2017.

This notice announces that the Department of the Treasury and the Internal Revenue Service (IRS) intend to issue proposed regulations providing guidance to assist taxpayers in complying with section 163(j) of the Internal Revenue Code (Code), as amended on December 22, 2017, by “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” P.L. 115–97 (the Act). This notice further describes certain of the rules that those proposed regulations will include to provide taxpayers with interim guidance as more comprehensive guidance is developed. The rules described in this notice apply only for purposes of determining the limitation on deductions for interest expense under section 163(j), as amended by the Act.

This notice announces that the Treasury Department and the IRS intend to issue regulations under new section 1446(f) regarding the disposition of a partnership interest that is not publicly traded. This notice also provides interim guidance that taxpayers may rely on pending the issuance of regulations.

Fringe benefits aircraft valuation formula. For purposes of section 1.61–21(g) of the Income Tax Regulations, relating to the rule for valuing non-commercial flights on employer-provided aircraft, the Standard Industry Fare Level (SIFL) cents-per-mile rates and terminal charge in effect for the first half of 2018 are set forth.

These final regulations provide rules addressing the allocation of the credit for increasing research activities to corporations and trades or businesses under common control. These final regulations also contain rules relating to the allocation of the railroad track maintenance credit and the election for a reduced research credit.

This notice announces that the Treasury Department and the IRS intend to issue regulations under new section 1446(f) regarding the disposition of a partnership interest that is not publicly traded. This notice also provides interim guidance that taxpayers may rely on pending the issuance of regulations.

For purposes of the taxation of fringe benefits under section 61 of the Internal Revenue Code, section 1.61–21(g) of the Income Tax Regulations provides a rule for valuing noncommercial flights on employer-provided aircraft. Section 1.61–21(g)(5) provides an aircraft valuation formula to determine the value of such flights. The value of a flight is determined under the base aircraft valuation formula (also known as the Standard Industry Fare Level formula or SIFL) by multiplying the SIFL cents-per-mile rates applicable for the period during which the flight was taken by the appropriate aircraft multiple provided in section 1.61–21(g)(7) and then adding the applicable terminal charge. The SIFL cents-per-mile rates in the formula and the terminal charge are calculated by the Department of Transportation and are reviewed semi-annually.

The following chart sets forth the terminal charge and SIFL mileage rates:

The principal author of this revenue ruling is Kathleen Edmondson of the Office of Associate Chief Counsel (Tax Exempt/Government Entities). For further information regarding this revenue ruling, contact Ms. Edmondson at (202) 317-6798 (not a toll-free number).

Internal Revenue Service (IRS), Treasury.

Final regulations and removal of temporary regulations.

This document contains final regulations relating to the allocation of the credit for increasing research activities (research credit) to corporations and trades or businesses under common control (controlled groups). This document also contains final regulations relating to the allocation of the railroad track maintenance credit and the election for a reduced research credit.

Effective date: These regulations are effective on April 2, 2018.

Applicability date: For dates of applicability, see §§ 1.41–6(j), 1.45G–1(g), and 1.280C–4(c).

James Holmes, at (202) 317-4137; (not a toll-free number).

The principal author of these regulations is James Holmes, Office of the Associate Chief Counsel (Passthroughs and Special Industries). However, other personnel from the Treasury Department and the IRS participated in their development.

* * * * *

This notice announces that the Department of the Treasury (“Treasury Department”) and the Internal Revenue Service (“IRS”) intend to issue regulations in connection with section 965 of the Internal Revenue Code (“Code”) as amended by “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” P.L. 115–97 (the “Act”), which was enacted on December 22, 2017. For prior guidance issued under section 965, see Notice 2018–07, 2018–4 I.R.B. 317; Notice 2018–13, 2018–6 I.R.B. 341; and Rev. Proc. 2018–17, 2018–9 I.R.B. 384. In addition, this notice announces relief from estimated tax penalties in connection with the amendment of section 965 and the repeal of section 958(b)(4) by the Act.

Section 2 of this notice provides background on section 965 and other relevant provisions of the Code. Section 3 of this notice describes regulations that the Treasury Department and the IRS intend to issue in connection with section 965 and announces the IRS’s intent to modify certain form instructions as a result of section 965. Section 4 of this notice describes a modification that the Treasury Department and the IRS intend to make with respect to regulations under section 965 that were described in section 3.04(a) of Notice 2018–13. Section 5 of this notice provides guidance under section 962 in connection with section 965. Section 6 of this notice provides guidance concerning the application of the estimated tax rules in sections 6654 and 6655 and a waiver from the penalty imposed under those sections with respect to estimated taxes in connection with section 965 and the repeal of section 958(b)(4). Section 7 of this notice describes the effective dates of the regulations and other guidance described in this notice, as well as a clarification to the effective date provided in section 6 of Notice 2018–13 for the rule described in section 5.01 of Notice 2018–13. Section 8 of this notice requests comments and provides contact information.

Section 3.04(a) of Notice 2018–13 announced that the Treasury Department and the IRS intend to issue regulations providing that, for purposes of calculating the net accounts receivable of a specified foreign corporation, the term “accounts receivable” means receivables described in section 1221(a)(4), and the term “accounts payable” means payables arising from the purchase of property described in section 1221(a)(1) or 1221(a)(8) or the receipt of services from vendors or suppliers. The Treasury Department and the IRS have determined that it is appropriate to exclude any receivable or payable with an initial term of one year or more for purposes of calculating a specified foreign corporation’s net accounts receivable. Cf. section 965(c)(3)(B)(iii)(IV) (short-term obligations). Accordingly, the Treasury Department and the IRS intend to issue regulations providing that the terms “accounts receivable” and “accounts payable” will include only receivables or payables with a term of less than one year.

As discussed in section 3.05(b) of this notice, if a domestic pass-through entity is a United States shareholder that has a section 965(a) inclusion amount with respect to section 958(a) stock in a DFIC, a domestic pass-through owner of such entity is subject to net income tax on its share of the section 965(a) inclusion amount. The Treasury Department and the IRS intend to issue regulations clarifying that a domestic pass-through owner who is an individual (including, as provided in § 1.962–2(a), a trust or estate) and a United States shareholder with respect to a DFIC may make an election under section 962 with respect to the individual’s share of the section 965(a) inclusion amount of a domestic pass-through entity with respect to such DFIC. However, an individual who is not a United States shareholder of a DFIC is not permitted to make an election under section 962 with respect to the individual’s share of a section 965(a) inclusion amount of a domestic pass-through entity with respect to such DFIC notwithstanding the rules in section 3.05(b) and (c) of this notice. See section 962(b). The regulations will clarify that the same principles apply to inclusions under section 951(a) other than by reason of section 965.

If an individual elects to have the provisions of section 962 apply for a taxable year, the tax imposed on amounts included in the individual’s gross income under section 951(a) (directly by reason of owning section 958(a) stock or indirectly by reason of being a domestic pass-through owner), including by reason of section 965, is an amount equal to the tax that would be imposed under section 11 if the amounts were received by a domestic corporation. In addition, § 1.962–1(b)(1)(i) provides that a deduction of a United States shareholder does not reduce the amount included in gross income under section 951(a) for purposes of computing the amount of tax that would be imposed under section 11.

The Treasury Department and the IRS have determined that in the case of a taxpayer making an election under section 962, Congress intended for the section 965(c) deduction (which is generally available to United States shareholders of DFICs, including individuals) to be allowed with respect to the tax imposed under section 11 rather than under section 1. See H.R. Rep. No. 115–466, at 620 (2017) (Conf. Rep.). Pursuant to the grant of authority under section 965(o), the Treasury Department and the IRS intend to modify § 1.962–1(b)(1)(i) to provide that, in computing the amount of tax due as a result of a section 962 election, the section 965(c) deduction may be taken into account. Specifically, the regulations will provide that “taxable income” as used in section 11 shall be reduced by the section 965(c) deduction. These regulations will not apply to any other deductions, and therefore existing § 1.962–1(b)(1)(i) will continue to provide that “taxable income” as used in section 11 shall not be reduced by any other deductions. Any section 965(c) deduction allowed in determining “taxable income” as used in section 11 for purposes of computing the tax due as a result of a section 962 election will not also be allowed for purposes of determining an individual’s actual taxable income.

Example. (i) Facts. USI, a United States citizen, owns 10% of the capital and profits of USPRS, a domestic partnership that has a calendar year taxable year, the remainder of which is owned by foreign persons unrelated to USI or USPRS. USPRS owns all of the stock of FS, a foreign corporation that is a CFC with a calendar year U.S. taxable year. USPRS has a section 965(a) inclusion amount with respect to FS of $1,000 and is allowed a section 965(c) deduction of $700. FS has no post-1986 foreign income taxes (as defined in section 902(c)(1) as in effect before the date of the enactment of the Act). USI makes a valid election under section 962 for 2017.

(ii) Analysis. USI’s “taxable income” described in § 1.962–1(b)(1)(i) equals $100 (USI’s distributive share of USPRS’s section 965(a) inclusion amount) minus $70 (USI’s distributive share of USPRS’s allowable section 965(c) deduction), or $30. No other deductions are allowed in determining this amount. USI’s tax on such amount will be equal to the tax imposed under section 11 as if $30 were received by a domestic corporation. USI cannot deduct $70 for purposes of determining USI’s taxable income that is subject to tax under section 1.

Section 965 is effective for the last taxable years of foreign corporations that begin before January 1, 2018, and with respect to United States shareholders, for the taxable years in which or with which such taxable years of the foreign corporations end. The Treasury Department and the IRS intend to provide that the regulations and instructions described in sections 3, 4, 5, and 6 of this notice are effective beginning for the first taxable year of a foreign corporation (and with respect to United States shareholders, the taxable years in which or with which such taxable years of the foreign corporations end) to which section 965 applies. Before the issuance of the regulations and instructions described in this notice, taxpayers may rely on the rules described in sections 3, 4, 5, and 6 of this notice.

This notice also clarifies one of the effective dates described in section 6 of Notice 2018–13, which provided that taxpayers could rely on the rules described in section 5.01 of Notice 2018–13 with respect to the last taxable year of foreign corporations beginning before January 1, 2018, and for the taxable years of United States shareholders in which or with which such taxable years of foreign corporations end, pending the issuance of further guidance. Taxpayers may rely on section 5.01 of Notice 2018–13 with respect to the last taxable year of foreign corporations beginning before January 1, 2018, and each subsequent year of such foreign corporations, and for the taxable years of United States shareholders in which or with which such taxable years of foreign corporations end, pending the issuance of further guidance (the application of which will be prospective).

The Treasury Department and the IRS request comments on the rules described in this notice. The Treasury Department and the IRS expect to issue additional guidance under section 965, and the Treasury Department and the IRS request comments on what additional guidance should be issued to assist taxpayers in applying section 965.

Written comments may be submitted to the Office of Associate Chief Counsel (International), Attention: Leni C. Perkins, Internal Revenue Service, IR–4579, 1111 Constitution Avenue, NW, Washington, DC 20224. Alternatively, taxpayers may submit comments electronically to Notice.comments@irscounsel.treas.gov. Comments will be available for public inspection and copying.

The principal author of this notice is Ms. Perkins of the Office of Associate Chief Counsel (International). For further information regarding this notice, contact Ms. Perkins at (202) 317-6934 (not a toll-free number).

This notice announces that the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) intend to issue proposed regulations providing guidance to assist taxpayers in complying with section 163(j) of the Internal Revenue Code (Code), as amended on December 22, 2017, by “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” P.L. 115–97 (the Act). This notice further describes certain of the rules that those proposed regulations will include to provide taxpayers with interim guidance as more comprehensive guidance is developed. The rules described in this notice apply only for purposes of determining the limitation on deductions for interest expense under section 163(j), as amended by the Act. Before the issuance of the regulations described in this notice, taxpayers may rely on the rules described in sections 3 through 7 of this notice.

Prior to the Act, section 163(j) disallowed a deduction for disqualified interest paid or accrued by a corporation in a taxable year if two threshold tests were satisfied. The first threshold test was satisfied if the payor’s debt-to-equity ratio exceeded 1.5 to 1.0 (safe harbor ratio). The second threshold test was satisfied if the payor’s net interest expense exceeded 50 percent of its adjusted taxable income (generally, taxable income computed without regard to deductions for net interest expense, net operating losses, domestic production activities under section 199, depreciation, amortization, and depletion). Disqualified interest for this purpose included interest paid or accrued to: (1) related parties when no Federal income tax was imposed with respect to such interest; (2) unrelated parties in certain instances in which a related party guaranteed the debt; or (3) a real estate investment trust (REIT) by a taxable REIT subsidiary of that REIT. Interest amounts disallowed for any taxable year under section 163(j) prior to the Act were treated as interest paid or accrued in the succeeding taxable year and could be carried forward indefinitely. In addition, any excess limitation (i.e., the excess, if any, of 50 percent of the adjusted taxable income of the payor over the payor’s net interest expense) could be carried forward three years.

Prior to the Act, section 163(j)(6)(C) provided that “[a]ll members of the same affiliated group (within the meaning of section 1504(a)) shall be treated as 1 taxpayer.” In addition, section 163(j)(9)(B) provided the Secretary with the authority to issue regulations providing for adjustments in the case of corporations that are members of an affiliated group as may be appropriate for carrying out the purposes of section 163(j). The Report of the Committee on the Budget, House of Representatives, House Report 101–247 at 1248 (Sept. 20, 1989) noted that “[i]n cases where a group of commonly controlled U.S. corporations would constitute an affiliated group but for the inclusion within the group of one or more entities other than includible corporations (as defined in section 1504(b)), the committee intends for the regulations to treat all U.S. corporations that are members of such a group as a single taxpayer where such treatment is appropriate in order to carry out the purposes of the bill or to prevent avoidance of the purposes of the bill.”

Proposed regulations under section 163(j) were issued on June 18, 1991 (Proposed Regulations). 56 FR 27907 (June 18, 1991). The Proposed Regulations contained affiliation rules for section 163(j) purposes (the super-affiliation rules). In particular, proposed § 1.163(j)–5(a)(2) contained a rule that would treat all members of an affiliated group (as defined in section 1504(a)) as one taxpayer for purposes of section 163(j), without regard to whether such affiliated group files a consolidated return pursuant to section 1501. The Proposed Regulations also contained rules in proposed § 1.163(j)–5(a)(3) under which, for purposes of section 163(j), if at least 80 percent of the total voting power and total value of the stock of an includible corporation (as defined in section 1504(b)) is owned, directly or indirectly, by another includible corporation, the first corporation would be treated as a member of an affiliated group that includes the other corporation and its affiliates.

Section 163(j) was amended by the Act to provide new rules limiting the deduction of business interest expense for taxable years beginning after December 31, 2017. See Section 13301(a) of the Act. For any taxpayer to which section 163(j) applies, section 163(j)(1) now limits the taxpayer’s annual deduction for business interest expense to the sum of: (1) the taxpayer’s business interest income (as defined in section 163(j)(6)) for the taxable year; (2) 30 percent of the taxpayer’s adjusted taxable income (as defined in section 163(j)(8)) for the taxable year; and (3) the taxpayer’s floor plan financing interest (as defined in section 163(j)(9)) for the taxable year. The limitation in section 163(j) applies to all taxpayers, except for certain taxpayers that meet the gross receipts test in section 448(c), and to all trades or businesses, except certain trades or businesses listed in section 163(j)(7). Section 163(j)(2), as amended by the Act, provides that the amount of any business interest not allowed as a deduction for any taxable year as a result of the limitation in section 163(j)(1) is treated as business interest paid or accrued in the next taxable year and may be carried forward. Section 163(j), as amended by the Act, does not provide for the carryforward of any excess limitation. Section 163(j)(6)(C), which treated an affiliated group as one taxpayer, and section 163(j)(9)(B), which authorized the super-affiliation rules, were removed by the Act and no equivalent provisions are included in section 163(j), as amended by the Act.

The Conference Report to Accompany H.R. 1, Report 115–466 (Dec. 15, 2017) (the Conference Report) states in a footnote describing the House Bill that “. . .a corporation has neither investment interest nor investment income within the meaning of section 163(d). Thus, interest income and interest expense of a corporation is properly allocable to a trade or business, unless such trade or business is otherwise explicitly excluded from the application of the provision.” See Conference Report footnote 688, at 386. Nothing in the Conference Report’s description of the Senate Amendment or the Conference Agreement is inconsistent with this approach. The Conference Report also notes, in the description of the House Bill, that “[i]n the case of a group of affiliated corporations that file a consolidated return, the limitation applies at the consolidated tax return filing level.” See Conference Report at 386. Nothing in the Conference Report’s description of the Senate Amendment or the Conference Agreement is inconsistent with this approach. However, there is no mention in the Conference Report of applying section 163(j) to affiliated groups (within the meaning of section 1504(a)) that do not file a consolidated return.

Prior to the Act, C corporation taxpayers that could not deduct all of their interest expense under section 163(j)(1)(A) could carry their disallowed disqualified interest forward to the succeeding taxable year under section 163(j)(1)(B). Such interest was treated as paid or accrued in the succeeding taxable year. Similarly, under section 163(j)(2), as amended by the Act, taxpayers that cannot deduct all of their business interest because of the limitation in section 163(j)(1) may carry their disallowed business interest forward to the succeeding taxable year, and such interest is treated as business interest paid or accrued in the succeeding taxable year.

Consistent with the approach of section 163(j)(1)(B) prior to the Act and section 163(j)(2), as amended by the Act, the Treasury Department and the IRS intend to issue regulations clarifying that taxpayers with disqualified interest disallowed under prior section 163(j)(1)(A) for the last taxable year beginning before January 1, 2018, may carry such interest forward as business interest to the taxpayer’s first taxable year beginning after December 31, 2017. The regulations will also clarify that business interest carried forward will be subject to potential disallowance under section 163(j), as amended by the Act, in the same manner as any other business interest otherwise paid or accrued in a taxable year beginning after December 31, 2017.

The regulations will also address the interaction of section 163(j) with section 59A, relating to the tax on base erosion payments of taxpayers with substantial gross receipts, which was added by section 14401 of the Act. The regulations will provide that business interest carried forward from a taxable year beginning before January 1, 2018, will be subject to section 59A in the same manner as interest paid or accrued in a taxable year beginning after December 31, 2017, and will clarify how section 59A applies to that interest. Thus, for example, if interest paid or accrued by a taxpayer to a foreign person that is a related party as defined in section 59A(g) is carried forward to a taxable year beginning after December 31, 2017, and a deduction is otherwise allowable under Chapter 1 of the Code for such interest, then the interest is treated as a base erosion payment described in section 59A(d)(1) and is subject to the rules under section 59A(c)(3).

In addition, the regulations will provide rules for the allocation of business interest from a group treated as affiliated under the super-affiliation rules applicable to section 163(j) prior to the Act to taxpayers under section 163(j), as amended.

Prior to the Act, section 163(j)(2)(B)(ii) also allowed a corporation that was subject to the limitation in section 163(j)(1) to add to its annual limitation any “excess limitation carryforward” from the prior year, as defined in section 163(j)(2)(B)(ii). Section 163(j), as amended by the Act, does not have a provision that would allow an excess limitation carryforward. Thus, the Treasury Department and the IRS intend to issue regulations clarifying that no amount previously treated as an excess limitation carryforward may be carried to taxable years beginning after December 31, 2017.

For further information regarding carryforwards generally, contact Zachary King or Charles Gorham at (202) 317-7003 (not a toll-free number). For further information regarding the interaction of sections 59A and 163(j), contact Sheila Ramaswamy or Steve Jensen at (202) 317-6938 (not a toll-free number).

Consistent with congressional intent as reflected in the Conference Report, the Treasury Department and the IRS intend to issue regulations clarifying that, solely for purposes of section 163(j), as amended by the Act, in the case of a taxpayer that is a C corporation, all interest paid or accrued by the C corporation on indebtedness of such C corporation will be business interest within the meaning of section 163(j)(5), and all interest on indebtedness held by the C corporation that is includible in gross income of such C corporation will be business interest income within the meaning of section 163(j)(6). The regulations described in the foregoing sentence will not apply to a corporation that is an S corporation as defined in section 1361(a)(1). Regulations also will address whether and to what extent interest paid, accrued, or includible in gross income by a non-corporate entity such as a partnership in which a C corporation holds an interest is properly characterized, to such C corporation, as business interest within the meaning of section 163(j)(5) or business interest income within the meaning of section 163(j)(6).

For further information regarding this issue, contact John B. Lovelace at (202) 317-4723 (not a toll-free number).

Consistent with congressional intent as reflected in the Conference Report, the Treasury Department and the IRS intend to issue regulations clarifying that the limitation in section 163(j)(1) on the amount allowed as a deduction for business interest applies at the level of the consolidated group (as defined in § 1.1502–1(h)). Thus, for example, a consolidated group’s taxable income for purposes of calculating adjusted taxable income (as defined in section 163(j)(8)) will be its consolidated taxable income (as determined under § 1.1502–11), and intercompany obligations (as defined in § 1.1502–13(g)(2)(ii)) will be disregarded for purposes of determining the limitation in section 163(j)(1).

Regulations also will address other issues concerning the application of section 163(j) to consolidated groups, including: the allocation of the section 163(j)(1) limitation among group members; the treatment of disallowed interest deduction carryforwards when a member leaves the group; the treatment of disallowed interest deduction carryforwards of a member that joins the group, including whether such carryforwards are subject to a separate return limitation year (SRLY) limitation (see §§ 1.1502–15, 1.1502–21(c), and 1.1502–22(c)); the application of § 1.1502–32 (providing rules for adjusting the basis of the stock of a subsidiary owned by another member) to disallowed interest deductions; and the application of section 163(j) to a consolidated group with one or more members that conduct a trade or business described in section 163(j)(7)(A)(ii), (iii), or (iv), as amended by the Act, or whose members hold an interest in a non-corporate entity such as a partnership that conducts such a trade or business. The Treasury Department and the IRS anticipate that such regulations will not include a general rule treating an affiliated group that does not file a consolidated return as a single taxpayer for purposes of section 163(j), as amended by the Act.

For further information regarding this issue, contact John B. Lovelace at (202) 317-4723 (not a toll-free number).

The Treasury Department and the IRS intend to issue regulations clarifying that the disallowance and carryforward of a deduction for a C corporation’s business interest expense under section 163(j), as amended by the Act, will not affect whether or when such business interest expense reduces earnings and profits of the payor C corporation.

For further information regarding this issue, contact John B. Lovelace at (202) 317-4723 (not a toll-free number).

Section 163(j)(4) requires that the annual limitation on the deduction for business interest expense be applied at the partnership level and that any deduction for business interest be taken into account in determining the non-separately stated taxable income or loss of the partnership. Although section 163(j)(4) is applied at the partnership level with respect to the partnership’s indebtedness, section 163(j) may also be applied at the partner level in certain circumstances. The Treasury Department and the IRS intend to issue regulations providing that, for purposes of calculating a partner’s annual deduction for business interest under section 163(j)(1), a partner cannot include the partner’s share of the partnership’s business interest income for the taxable year except to the extent of the partner’s share of the excess of (i) the partnership’s business interest income over (ii) the partnership’s business interest expense (not including floor plan financing). Additionally, the Treasury Department and the IRS intend to issue regulations providing that a partner cannot include such partner’s share of the partnership’s floor plan financing interest in determining the partner’s annual business interest expense deduction limitation under section 163(j). Such regulations are intended to prevent the double counting of business interest income and floor plan financing interest for purposes of the deduction afforded by section 163(j) and are consistent with general principles of Chapter 1 of the Code. Similar rules will apply to any S corporation and its shareholders.

For further information regarding this issue, contact Meghan Howard at (202) 317-5279, Adrienne Mikolashek at (202) 317-6850, or Anthony McQuillen at (202) 317-6850 (not a toll-free number).

The Treasury Department and the IRS intend to withdraw the Proposed Regulations in connection with the issuance of proposed regulations under section 163(j), as amended by the Act.

The Treasury Department and the IRS request comments on the rules described in this notice. In addition, the Treasury Department and the IRS expect to issue regulations under section 163(j) providing guidance with respect to issues not described in this notice and request comments on what additional issues should be addressed by those regulations to assist taxpayers in applying section 163(j). Comments must be submitted by May 31, 2018. All comments received will be available for public inspection and copying.

Written comments responding to this notice should be mailed to:

Please include “Notice 2018–28” on the cover page.

Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to:

Submissions may also be sent electronically to the following e-mail address: Notice.Comments@irscounsel.treas.gov. Please include “Notice 2018–28” in the subject line.

The principal authors of this notice are Zachary King and Charles Gorham of the Office of the Associate Chief Counsel (Income Tax and Accounting). Other personnel from the Treasury Department and the IRS participated in its development. For further information regarding this notice, contact Mr. King or Mr. Gorham at (202) 317-7003 (not a toll-free number).

This notice announces that the Department of the Treasury (“Treasury Department”) and the Internal Revenue Service (“IRS”) intend to issue regulations under new section 1446(f) of the Internal Revenue Code (“Code”) regarding the disposition of a partnership interest that is not publicly traded. This notice also provides interim guidance that taxpayers may rely on pending the issuance of regulations. New section 1446(f) was added by section 13501 of “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” P.L. 115–97 (the “Act”), which was enacted on December 22, 2017. Section 13501 of the Act also added new section 864(c)(8).

In general, section 864(c)(8) provides that gain or loss from the sale, exchange, or other disposition of a partnership interest by a nonresident alien or foreign corporation is effectively connected with the conduct of a trade or business in the United States to the extent that the person would have had effectively connected gain or loss had the partnership sold all of its assets at fair market value. Section 864(c)(8) applies to sales, exchanges, or other dispositions occurring on or after November 27, 2017. See Rev. Rul. 91–32, 1991–1 C.B. 107, for the IRS’s position with respect to sales, exchanges, or other dispositions of an interest in a partnership by a nonresident alien individual or foreign corporation occurring before November 27, 2017.

In general, section 1446(f)(1) provides that if any portion of the gain on any disposition of an interest in a partnership would be treated under section 864(c)(8) as effectively connected with the conduct of a trade or business within the United States, then the transferee must deduct and withhold a tax equal to 10 percent of the amount realized on the disposition. Under an exception in section 1446(f)(2), however, withholding is generally not required if the transferor furnishes an affidavit to the transferee stating, among other things, that the transferor is not a foreign person.

Section 1446(f)(4) provides that if a transferee fails to withhold any amount required to be withheld under section 1446(f)(1), the partnership shall be required to deduct and withhold from distributions to the transferee a tax in an amount equal to the amount the transferee failed to withhold (plus interest under the Code on such amount).

Section 1446(f)(6) authorizes the Secretary to prescribe such regulations or other guidance as may be necessary to carry out the purposes of section 1446(f), including regulations providing for exceptions from the provisions of section 1446(f). Furthermore, section 1446(g) authorizes the Secretary to prescribe such regulations as may be necessary to carry out the purposes of section 1446 generally. Section 1446(f) applies to sales, exchanges, or other dispositions occurring after December 31, 2017.

On December 29, 2017, the Treasury Department and IRS advance released Notice 2018–08, 2018–7 I.R.B. 352 (“PTP Notice”). The PTP Notice suspended the requirement to withhold on dispositions of certain interests in publicly traded partnerships (“PTPs”) in response to stakeholder concerns that applying section 1446(f) to PTPs without guidance presented significant practical problems. The PTP Notice also requested comments on the implementation of section 1446(f), including whether a temporary suspension of section 1446(f) for partnership interests that are not publicly traded (“non-PTP interests”) was needed. Several comments were received.

Comments in response to the PTP Notice requested guidance minimizing the application of section 1446(f) until further guidance was issued, including suspension of section 1446(f) for non-PTP interests. This notice does not suspend the application of section 1446(f) for non-PTP interests in all cases, but does include guidance under section 1446(f) designed to allow for an effective and orderly implementation, including minimizing occasions of overwithholding. The rules in this notice (including section 6) that modify or suspend withholding under section 1446(f) do not affect the transferor’s tax liability under section 864(c)(8). See section 4.06 of this notice.

Comments stated that applying section 1446(f) to dispositions of non-PTP interests presents significant practical problems. Comments stated that a transferee is obligated to withhold with respect to dispositions occurring after December 31, 2017, but without forms, instructions or other guidance, it is unclear when or how to deposit the withheld amounts. To address this concern, section 5 of this notice provides interim guidance on reporting and paying over the amount required to be withheld under section 1446(f)(1). This guidance generally adopts the forms and procedures relating to withholding on dispositions of U.S. real property interests under section 1445 and the regulations thereunder.

Comments requested guidance on the procedures for the transferor to furnish an affidavit of non-foreign status to the transferee as described in section 1446(f)(2) to be relieved from withholding. Section 6.01 of this notice provides this guidance by generally adopting the rules in the section 1445 regulations for similar situations.

Section 1446(f) applies only when there is gain on a disposition of an interest in a partnership. To prevent withholding when no gain occurs on a disposition, section 6.02 of this notice provides that if a transferee receives a certification from a transferor that the disposition will not result in gain, then the transferee generally is not required to withhold under section 1446(f).

Comments requested relief from withholding obligations when the amount of effectively connected gain under section 864(c)(8) is zero or a small amount. One comment recommended a rule providing relief based on the value of the assets producing effectively connected income, modeled on § 1.1445–11T. Section 1.1445–11T provides an exception from the requirement that a transferee withhold on the transfer of an interest in a partnership that holds U.S. real property interests. The transferee is relieved from withholding under this exception if the partnership provides the transferee a statement certifying that fifty percent or more of the value of the gross assets does not consist of U.S. real property interests, or that ninety percent or more of the value of the gross assets of the partnership does not consist of U.S. real property interests plus cash or cash equivalents. Instead of adopting a rule based on the test in § 1.1445–11T, sections 6.03 and 6.04 of this notice provide two rules that relieve the transferee from withholding in circumstances similar to those described by the comments.

Section 6.03 of this notice provides generally that, if a transferor certifies to a transferee that for each of the past three years the transferor’s effectively connected taxable income from the partnership was less than 25 percent of the transferor’s total income from the partnership, the transferee is not required to withhold. This rule is designed to provide a simple approach, obviating the need for the partnership to make the computation required by section 864(c)(8) or to otherwise provide information to the transferor or transferee at the time of the transaction. However, in certain cases transferees may not be able to obtain this certification, so section 6.04 of this notice provides a separate rule relieving a transferee of its withholding obligation under section 1446(f)(1) when the transferee receives a certification from the partnership that the partnership’s effectively connected gain under section 864(c)(8) would be less than 25 percent of the total gain on the deemed sale of all its assets. The Treasury Department and the IRS intend to provide future guidance that will reduce the threshold for withholding below 25 percent for both of these rules. Other limitations are also under consideration. The Treasury Department and the IRS expect that any such reduction in the threshold for withholding would be effective at the same time as guidance providing for withholding certificates or otherwise providing for withholding determined by reference to gain recognized under section 1446(f)(3).

A comment recommended guidance providing that no gain or loss be recognized under section 864(c)(8) in certain dispositions that would otherwise be considered nonrecognition transactions, provided that gain or loss is preserved. Specifically, the comment suggested alternative rules, one considering whether the gain or loss is preserved in the U.S. tax base, and the other considering whether the gain or loss is preserved in the hands of the transferee. The Treasury Department and the IRS are studying the appropriate treatment of nonrecognition transactions under section 864(c)(8), and comments are requested on this issue, including the relationship between nonrecognition transactions under sections 864(c)(8) and 897. See § 1.897–6T. Until this guidance is provided, section 6.05 of this notice provides that no withholding is required under section 1446(f) in a transaction in which no gain is recognized.

Section 1446(f)(1) applies to the amount realized on the disposition of a partnership interest. The amount realized includes a reduction in the transferor’s share of partnership liabilities and other liabilities to which the partnership interest is subject. See §§ 1.752–1(h) and 1.1001–2. Section 7 of this notice provides two rules for determining the amount of partnership liabilities that are included in the amount realized. Section 7.02 of this notice provides that a transferee may generally rely on a transferor’s most recently issued Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc., for purposes of determining the transferor’s share of partnership liabilities included in the amount realized for purposes of section 1446(f). Alternatively, section 7.03 provides that a transferee may generally rely on a certification from the partnership providing the amount of the transferor’s share of partnership liabilities.

Comments stated that when the amount realized includes a reduction in liabilities, the amount the transferee may be required to withhold could exceed the cash or other property the transferee pays to the transferor. Further, in some situations, a transferor may not provide any information to the transferee about its share of partnership liabilities, making a determination of the total amount realized difficult. To address these issues, section 8 of this notice provides that in certain cases, the total amount of withholding is generally limited to the total amount of cash and property to be transferred. The Treasury Department and the IRS expect that the exception in section 8 will not apply after guidance is issued providing for withholding certificates or otherwise providing for withholding determined by reference to gain recognized under section 1446(f)(3).

The comments also raised an issue relating to the determination of a transferor’s basis in its partnership interest. Section 731(a) provides that in the case of a distribution by a partnership to a partner, gain shall not be recognized to such partner, except to the extent that any money distributed exceeds the adjusted basis of such partner’s interest in the partnership immediately before the distribution. Any gain recognized under section 731(a) is considered gain from the sale or exchange of the partnership interest of the distributee partner. Thus, section 1446(f) applies in certain cases when a distribution of money (including marketable securities) results in gain under section 731. According to a comment, when a partnership distributes money, it may not know the distributee partner’s basis in its interest and, thus, may not know whether the distribution will cause the distributee partner to recognize gain. In response to this comment, section 9 of this notice provides that the partnership may generally rely on its books and records, or on a certification received from the distributee partner, to determine whether the distribution exceeds the partner’s basis.

Section 10 of this notice responds to requests for guidance on the interaction of section 1445 with section 1446(f).

The Treasury Department and the IRS are considering rules that would relieve a partnership of its obligation under section 1446(f)(4) if it provides the information required by a transferor and transferee to comply with the requirements under sections 864(c)(8) and 1446(f), including the certification described in section 6.04 of this notice, information on the calculation of the tax liability under section 864(c)(8) to the transferor, and information necessary to calculate the amount realized (including calculations relating to section 752) by the transferor. Section 11 of this notice provides that the withholding requirements described in section 1446(f)(4) will not apply until regulations or other guidance have been issued under that section.

.01 Effectively connected gain. The term “effectively connected gain” means the amount of net gain (if any) that would have been effectively connected with the conduct of a trade or business within the United States if the partnership had sold all of its assets at their fair market value as of the date of the transfer described in section 864(c)(8)(A).

.02 Transfer. The term “transfer” means any sale, exchange or other disposition.

.03 Transferor. The term “transferor” means any person that transfers a partnership interest, and includes a person that receives a distribution from a partnership.

.04 Transferee. The term “transferee” means any person that acquires a partnership interest by transfer, and includes a partnership that makes a distribution.

.05 Related person. The term “related person” is a person that is related within the meaning of section 267(b) or section 707(b)(1).

.01 U.S. taxpayer identification numbers (“U.S. TINs”). A certificate described in sections 6.02, 6.03, and 7.02 of this notice must include the transferor’s U.S. TIN to the extent that the transferor is required to have, or does have, a U.S. TIN. A transferee may rely on an otherwise valid certificate that does not include a U.S. TIN for the transferor unless the transferee knows that the transferor is required to have a U.S. TIN or that the transferor does in fact have a U.S. TIN. An affidavit of non-foreign status or Form W–9, Request for Taxpayer Identification Number and Certification, provided for purposes of section 6.01 of this notice must include a U.S. TIN in all cases.

.02 Penalties of perjury. For purposes of this notice, a certification signed under “penalties of perjury” must provide the following: “Under penalties of perjury I declare that I have examined the information on this document, and to the best of my knowledge and belief, it is true, correct, and complete.” Such a certification by an entity must further provide the following: “I further declare that I have authority to sign this document on behalf of [name of entity].”

.03 Authority to sign certifications. For purposes of this notice, a certification described in section 6, 7, or 9 of this notice from an entity must be signed by an individual who is an officer, director, general partner, or managing member of the entity, or, if the general partner or managing member of the entity is itself an entity, an individual who is an officer, director, general partner, or managing member of the entity that is the general partner or managing member.

.04 Retention period. A transferee that obtains and relies upon an affidavit or certification provided for in this notice must retain that document with its books and records for a period of five calendar years following the close of the last calendar year in which the entity relied upon the certification or as long as it may be relevant to the determination of the transferee’s withholding obligation under section 1446(f), whichever period is longer.

.05 Publicly traded partnerships. The rules in this notice do not apply to the transfer of a publicly traded interest in a publicly traded partnership (within the meaning of section 7704(b)).

.06 Applicability of Section 864(c)(8). The rules in this notice that modify or suspend withholding under section 1446(f) do not affect the transferor’s tax liability under section 864(c)(8).

The Treasury Department and the IRS have determined that, until regulations, other guidance, or forms and instructions have been issued under section 1446(f), transferees required to withhold under section 1446(f)(1) must use the rules in section 1445 and the regulations thereunder for purposes of reporting and paying over the tax, except as otherwise provided in this notice. See, e.g., § 1.1445–1(c). The forms specified in those rules include Form 8288, U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests, and Form 8288–A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests. The transferee must include the statement “Section 1446(f)(1) withholding” at the top of both the relevant Form 8288 and the relevant Form 8288–A. Except as provided in section 8 of this notice, the transferee must also enter the amount subject to withholding under section 1446(f)(1) on line 5b of Part I of the Form 8288 and on line 3 of Form 8288–A and enter the amount withheld on line 6 of Part I of Form 8288 and on line 2 of Form 8288–A. At this time, the IRS will not issue withholding certificates under section 1446(f)(3), such as those provided on Form 8288–B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests.

The rules for reporting and paying over amounts withheld and the rules regarding the contents of Form 8288 and Form 8288–A contained in § 1.1445–1(c) and (d) (such as the requirement to report and pay over withholding within 20 days of a transfer) apply to the submission of section 1446(f)(1) withholding. A transferee that is required to pay over a withholding tax under section 1446(f) is made liable for that tax under section 1461 (including any applicable penalties and interest). A person that is required, but fails, to pay over the withholding tax required by section 1446(f) may also be subject to civil and criminal penalties. Officers or other responsible persons of either an entity that is required to pay over the withholding tax or any other withholding agent may be subject to a civil penalty under section 6672. The Treasury Department and the IRS intend to issue regulations providing that with respect to any forms that were required to be filed, or amounts that were due, under section 1446(f) on or before May 31, 2018, no penalties or interest will be asserted if these forms are filed with, and such amounts are paid over to, the IRS on or before May 31, 2018.

The Treasury Department and the IRS intend to issue regulations providing that if the amount otherwise required to be withheld under section 1446(f) exceeds the amount realized less the decrease in the transferor partner’s share of partnership liabilities, then the amount of withholding required by section 1446(f)(1) is the amount realized less the decrease in the transferor partner’s share of partnership liabilities. In addition, if a transferee is unable to determine the amount realized because it does not have knowledge of the transferor partner’s share of partnership liabilities (and does not receive a certification described in section 7.02 or section 7.03 of this notice on which it can rely), then the amount of withholding required is the entire amount realized, determined without regard to the decrease in the transferor partner’s share of partnership liabilities. In both cases, the amount of withholding under section 1446(f) is generally the amount that the transferor would, but for the transferee remitting it as withholding under section 1446(f), receive from the transferee. A transferee may rely on this rule only if the transferee (1) is not the partnership in which the transferor is a partner, and (2) is not a related person to the transferor. A transferee applying this section 8 must check the box on line 5c of Part I of Form 8288 and include the amount withheld in the total reported on line 6, Part I of Form 8288 and line 2 of Form 8288–A.

The Treasury Department and the IRS intend to issue regulations providing that for purposes of section 1446(f)(1), if a partnership makes a distribution to a partner, the partnership may rely on its books and records, or on a certification received from the distributee partner, to determine whether the distribution exceeds the partner’s basis in its partnership interest, provided that the partnership does not know or have reason to know that its books and records, or the distributee partner’s certification, is incorrect and the partnership retains a record of the documentation relied upon to establish the partner’s basis for the period described in section 4.04 of this notice.

The Treasury Department and the IRS intend to issue regulations providing that a transferee that is otherwise required to withhold under section 1445(e)(5) or § 1.1445–11T(d)(1) with respect to the amount realized, as well as under section 1446(f)(1), will be subject to the payment and reporting requirements of section 1445 only, and not section 1446(f)(1), with respect to such amount. However, this rule applies only if the transferor has not obtained a withholding certificate that is provided for in the last sentence of § 1.1445–11T(d)(1). If the transferor has obtained such a withholding certificate, the transferee must withhold the greater of the amounts required under section 1445(e)(5) or section 1446(f)(1). Under these circumstances, a transferee that has complied with the withholding requirements under either section 1445(e)(5) or section 1446(f)(1), as applicable, will be deemed to satisfy the other withholding requirement.

The Treasury Department and the IRS intend to issue regulations providing that the withholding requirements in section 1446(f)(4) will not apply until regulations or other guidance have been issued under that section.

The Treasury Department and the IRS intend to issue regulations clarifying that if a transferor transfers an interest in a partnership (upper-tier partnership) that owns an interest (directly or indirectly) in another partnership (lower-tier partnership), and the lower-tier partnership would have effectively connected gain upon the deemed transaction described in section 864(c)(8)(B)(i)(I) that would be taken into account by the transferor at the time of the transfer of the interest in the upper-tier partnership, a portion of the gain recognized by the transferor is characterized as effectively connected gain. These regulations will require lower-tier partnerships to furnish information to their partners in order for their indirect partners to be able to comply with sections 864(c)(8) and 1446(f). See section 6031(b); § 1.6031(b)–1T.

The Treasury Department and the IRS request comments on the rules to be issued under section 1446(f). In addition to requests for comments identified in the PTP Notice (which may also be applicable to non-PTP interests) and in section 2 of this notice, comments are requested concerning the following:

(i) rules for determining the amount realized, including when the amount of required withholding may exceed the proceeds of a sale of a partnership interest;

(ii) procedures for reducing the amount required to be withheld, such as (a) limiting the withholding to the tax on the gain recognized (if determinable) and (b) relieving identifiable historically compliant taxpayers from withholding;

(iii) credit and refund forms and processes, such as (a) forms of standardized documentation that could be used by transferors when claiming refunds or credits for the withholding to facilitate IRS’s evaluation of such claims, or (b) providing for an expedited refund procedure if a taxpayer can demonstrate substantial overwithholding;

(iv) rules implementing the requirement for a partnership to withhold under section 1446(f)(4) on distributions to a transferee that fails to withhold under section 1446(f)(1);

(v) rules that should apply under sections 864(c)(8), 897, 1445, and 1446(f) when a partner disposes of an interest in a partnership that holds both U.S. real property interests and other property used in the conduct of a trade or business in the United States; and

(vi) the calculation of the amount of gain or loss from the sale, exchange, or other disposition of a partnership interest that is effectively connected with the conduct of a trade or business in the United States by operation of section 864(c)(8).

Comments must be submitted by June 2, 2018. All comments received will be available for public inspection and copying.

Written comments responding to this notice should be mailed to:

Please include “Notice 2018–29” on the cover page.

Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to:

Alternatively, taxpayers may submit comments electronically to the following email address: Notice.comments@irscounsel.treas.gov. Please include “Notice 2018–29” in the subject line of any electronic submission.

The principal authors of this notice are Ronald M. Gootzeit of the Office of Associate Chief Counsel (International) and Kevin I. Babitz of the Office of Associate Chief Counsel (Passthroughs and Special Industries). However, other personnel from the Treasury Department and the IRS also participated in its development. For further information regarding this notice contact Mr. Gootzeit at 202.317.4953 (not a toll-free number).

This notice provides additional guidance concerning country-by-country (CbC) reporting requirements under section 6038 and § 1.6038–4. In consideration of the national security interests of the United States, this notice addresses modifications to the reporting requirement under § 1.6038–4 with respect to certain U.S. multinational enterprise (MNE) groups. The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) intend to amend § 1.6038–4 to incorporate the guidance described in this notice. Prior to the issuance of these amendments, U.S. MNE groups may rely on the provisions of section 3 of this notice.

On December 23, 2015, a notice of proposed rulemaking (REG–109822–15) relating to the furnishing of CbC reports by certain United States persons under section 6038 was published in the Federal Register (80 FR 79795). The preamble to the proposed regulations requested comments concerning the need for a national security exception to the CbC information reporting requirement. On June 30, 2016, the Treasury Department and the IRS published final regulations (TD 9773) requiring annual CbC reporting on Form 8975, Country-by-Country Report (CbC report), by certain United States persons that are ultimate parent entities of U.S. MNE groups that have annual revenue for the preceding reporting period of $850,000,000 or more. The final regulations do not provide a general exception for information that may relate to national security, but the preamble to the final regulations stated that the Department of Defense would continue to consider the national security implications of CbC reports in particular fact patterns. Based on subsequent consultations with the Department of Defense, the Treasury Department and the IRS have determined that national security interests require modifications to the reporting requirements for U.S. MNE groups that are specified national security contractors as defined in section 3.01 of this notice and that have a reporting requirement under § 1.6038–4.

The amendments to the regulations described in this notice shall apply to CbC reports and amended CbC reports filed after March 30, 2018.

The principal author of this notice is Melinda E. Harvey of the Office of Associate Chief Counsel (International). For further information regarding this notice contact Melinda E. Harvey (202) 317-6934 (not a toll-free number).

The Internal Revenue Service has revoked its determination that the organizations listed below qualify as organizations described in sections 501(c)(3) and 170(c)(2) of the Internal Revenue Code of 1986.

Generally, the IRS will not disallow deductions for contributions made to a listed organization on or before the date of announcement in the Internal Revenue Bulletin that an organization no longer qualifies. However, the IRS is not precluded from disallowing a deduction for any contributions made after an organization ceases to qualify under section 170(c)(2) if the organization has not timely filed a suit for declaratory judgment under section 7428 and if the contributor (1) had knowledge of the revocation of the ruling or determination letter, (2) was aware that such revocation was imminent, or (3) was in part responsible for or was aware of the activities or omissions of the organization that brought about this revocation.

If on the other hand a suit for declaratory judgment has been timely filed, contributions from individuals and organizations described in section 170(c)(2) that are otherwise allowable will continue to be deductible. Protection under section 7428(c) would begin on April 16, 2018 and would end on the date the court first determines the organization is not described in section 170(c)(2) as more particularly set for in section 7428(c)(1). For individual contributors, the maximum deduction protected is $1,000, with a husband and wife treated as one contributor. This benefit is not extended to any individual, in whole or in part, for the acts or omissions of the organization that were the basis for revocation.

Internal Revenue Service (IRS), Treasury.

Notice of proposed rulemaking.

This document contains proposed regulations to amend regulations under section 7602(a) of the Internal Revenue Code relating to administrative proceedings. Current regulations permit any person authorized to receive returns and return information under section 6103(n) and the regulations thereunder to receive and review summoned books, papers, and other data, and, in the presence and under the guidance of an IRS officer or employee, participate fully in the interview of a witness in a summons interview. These proposed regulations significantly narrow the scope of the current regulations by excluding non-government attorneys from receiving summoned books, papers, records, or other data or from participating in the interview of a witness summoned by the IRS to provide testimony under oath, with a limited exception. These proposed regulations affect taxpayers involved in a federal tax examination and other persons whose books and records or testimony are sought to be examined by the IRS under section 7602(a).

Written or electronic comments and requests for a public hearing must be received by June 26, 2018.

Send submissions to: CC:PA:LPD:PR (REG–132434–17), room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG–132434–17), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington D.C., or sent electronically via the Federal eRulemaking Portal at www.regulations.gov (IRS-REG-132434-17).

Concerning submission of comments, Regina Johnson, (202) 317-6901; concerning the proposed regulations, William V. Spatz at (202) 317-5461 (not toll-free numbers).

The principal author of these regulations is William V. Spatz of the Office of Associate Chief Counsel (Procedure and Administration).

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