Writer Asks Treasury About Changes to Late Filing Penalties for Form 8833
Writer Asks Treasury About Changes to Late Filing Penalties for Form 8833
- AuthorsBoidman, Nathan
- Institutional AuthorsDavies Ward Phillips & Vineberg LLP
- Cross-Reference
- Code Sections
- Subject Area/Tax Topics
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2002-10559 (3 original pages)
- Tax Analysts Electronic Citation2002 TNT 85-24
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
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.
DAVIES WARP PHILLIPS & VINEBERG LLP
Per:
Nathan Boidman
cc.: Mr. Steven A. Musher, Esq., Deputy Associate Chief Counsel
(International)
Mrs. Nina E. Chowdhry, Esq., Attorney Advisor, Internal Revenue
Service
- AuthorsBoidman, Nathan
- Institutional AuthorsDavies Ward Phillips & Vineberg LLP
- Cross-Reference
- Code Sections
- Subject Area/Tax Topics
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2002-10559 (3 original pages)
- Tax Analysts Electronic Citation2002 TNT 85-24