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Writer Asks Treasury About Changes to Late Filing Penalties for Form 8833

APR. 15, 2002

Writer Asks Treasury About Changes to Late Filing Penalties for Form 8833

DATED APR. 15, 2002
DOCUMENT ATTRIBUTES
  • Authors
    Boidman, Nathan
  • Institutional Authors
    Davies Ward Phillips & Vineberg LLP
  • Cross-Reference
    For a summary of T.D. 8981, see Tax Notes, Feb. 4, 2002, p. 579; for

    the full text, see Doc 2002-2358 (5 original pages), 2002 TNT 19-15 Database 'Tax Notes Today 2002', View '(Number',

    or H&D, Jan. 29, 2002, p. 1173.
  • Code Sections
  • Subject Area/Tax Topics
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2002-10559 (3 original pages)
  • Tax Analysts Electronic Citation
    2002 TNT 85-24
April 15, 2002

 

Ms. Barbara M. Angus, Esq.

 

International Tax Counsel

 

Department of the Treasury

 

1500 Pennsylvania Avenue, N.W.

 

Washington, D.C. 20220

 

 

And

 

 

Mr. John M. Staples, Esq.

 

Associate Chief Counsel (International)

 

Internal Revenue Service

 

1111 Constitution Avenue, N.W.

 

Washington, D.C. 20224

 

RE: PENALTIES UNDER CODE SECTION 6712 FOR LATE FILED CODE SECTION 6114 TREATY-BASED EXEMPTION CLAIMS

 

Dear Ms. Angus and Mr. Staples:

[1] In the fall of 2000, a group (of which this Firm was a member) submitted to the IRS a "Discussion Paper" dated August 2000 respecting "Suggested Revisions to the Income Tax Regulations Denying Deductions If a Taxpayer Fails To File an Income Tax Return".

[2] Although that Discussion Paper focused on issues arising under Internal Revenue Code sections 874(a) and 882(c)(2), it also dealt with concerns respecting IRC section 6114, dealing with the filing of an information return to disclose tax treaty positions taken by foreign taxpayers. In particular, in the latter context (and aside from a number of references, in the discussion respecting sections 874 and 882, to similar concerns arising with respect to section 6114) the Discussion Paper stated the following:

 

"Section 6114. Under section 6712, a taxpayer that fails to file an information return on Form 8833 is subject to a penalty equal to $10,000 (in the case of a corporation) 'on each such failure'. The term 'each such failure' has been interpreted in the regulations as per item rule, i.e., the penalty may be imposed for each separate payment or separate income item. The regulations specify that 'separate payments' or 'income returns' may mean payments or items of the same type (e.g., interest payments) received from the same ultimate payor (e.g., the obligor on the note), except where the IRS exercises its discretion to aggregate payments in one category. The application of this rule is unclear in many cases, but, for example, where a foreign company sells goods into the US, the rule could be interpreted as imposing a $10,000 penalty amount for such invoiced sale, or even such item listed on an invoice.

Again, the potential size of the penalty seems disproportionate with the goal, i.e., to create an incentive for foreign persons to notify the IRS that they are claiming the protection of an income tax treaty. For this reason, we suggest the two following changes:

i) Change the regulations to clarify that the penalty applies on an aggregate basis, i.e., $10,000 per trade or business, and

ii) Taxpayers that do not file a Form 8833 would be subject to the regular penalties without the possibility of a reasonable cause exception if they had no tax return position regarding the lack of a permanent establishment. If the taxpayer had a tax return position, the regular penalties would apply, subject to the reasonable cause exception."

 

[3] Given the cogency of the foregoing points respecting the recommended changes to Code section 6712, in respect of Code section 6114, it was with some disappointment, indeed surprise, that I read the proposed (and separate) temporary regulations, released in January, made pursuant to sections 874 and 882 and noted the absence of any proposals dealing with section 6712, in respect of Code section 6114.

[4] In light of the foregoing, at this juncture, I have two questions. Is it the intention of the Service and Treasury to address the concerns respecting Code section 6114 and, if so, is there a target date for releasing proposed or temporary regulations in respect thereof?

[5] Your views and comments respecting the foregoing would be appreciated.

Yours truly,

 

 

DAVIES WARP PHILLIPS & VINEBERG LLP

 

 

Per:

 

Nathan Boidman

 

NB-af/ehf

 

 

cc.: Mr. Steven A. Musher, Esq., Deputy Associate Chief Counsel

 

(International)

 

Mrs. Nina E. Chowdhry, Esq., Attorney Advisor, Internal Revenue

 

Service
DOCUMENT ATTRIBUTES
  • Authors
    Boidman, Nathan
  • Institutional Authors
    Davies Ward Phillips & Vineberg LLP
  • Cross-Reference
    For a summary of T.D. 8981, see Tax Notes, Feb. 4, 2002, p. 579; for

    the full text, see Doc 2002-2358 (5 original pages), 2002 TNT 19-15 Database 'Tax Notes Today 2002', View '(Number',

    or H&D, Jan. 29, 2002, p. 1173.
  • Code Sections
  • Subject Area/Tax Topics
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2002-10559 (3 original pages)
  • Tax Analysts Electronic Citation
    2002 TNT 85-24
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