Abatement of Penalty Produced by Reliance on Erroneous IRS Written Advice -- Final Regs Under Section 6404

 [4830-01]

 ACTION: Final regulations.

 SUMMARY: This document contains final regulations relating to the abatement of a portion of any penalty or addition to tax attributable to erroneous written advice furnished to a taxpayer by an officer or employee of the Internal Revenue Service, acting in such officer's or employee's official capacity. Changes to the applicable law were made by the Omnibus Taxpayer Bill of Rights provisions of the Technical and Miscellaneous Revenue Act of 1988. The regulations affect all taxpayers, and provide guidance regarding the definition of "advice" and the procedures that must be followed to obtain an abatement.

 EFFECTIVE DATE: The regulations are effective with respect to advice requested on or after January 1, 1989.

 FOR FURTHER INFORMATION CONTACT: Stephen J. Toomey of the Office of Assistant Chief Counsel, Income Tax and Accounting, Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, D.C. 20224, Attention: CC:CORP:R:T (IA-103-88), (202) 566-6320, not a toll-free call.

SUPPLEMENTARY INFORMATION:

PAPERWORK REDUCTION ACT

The collection of information requirements contained in this final regulation have been reviewed and approved by the Office of Management and Budget (OMB) in accordance with the requirements of the Paperwork Reduction Act (44 U.S.C. 3504(h)) under control number 1545-0024. The time estimates for the reporting and recordkeeping requirements contained in this regulation are included in the burden of Form 843.

 These estimates are an approximation of the average time expected to be necessary for a collection of information. They are based on such information as is available to the Internal Revenue Service. Individual respondents/recordkeepers may require greater or less time, depending on their particular circumstances.

 Comments concerning the accuracy of this burden estimate and suggestions for reducing this burden should be directed to the Internal Revenue Service, Attn: IRS Reports Clearance Officer T:FP, Washington, D.C. 20224, and to the Office of Management and Budget (1545-0024), Paperwork Reduction Project, Washington, D.C. 20503.

BACKGROUND

 This document contains final regulations under section 6404(f) of the Internal Revenue Code of 1986 (Code). Section 6404(f) was added by section 6229 of the Technical and Miscellaneous Revenue Act of 1988 (Pub. L. 100-647, 102 Stat. 3342). On May 16, 1989, the Federal Register published a notice of proposed rulemaking (54 FR 21073) proposing amendments to the Income Tax Regulations (26 CFR Part 301) under section 6404 by cross-reference to temporary regulations published the same day in the Federal Register (T.D. 8254; 54 FR 21055). The Internal Revenue Service did not receive any comments on the proposed regulations. No public hearing was requested or held. For this reason, the final regulations adopt the temporary regulations without any substantive changes.

SPECIAL ANALYSES

 It has been determined that these rules are not major rules as defined in Executive Order 12291. Therefore, a Regulatory Impact Analysis is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. Chapter 5) and the Regulatory Flexibility Act (5 U.S.C. Chapter 6) do not apply to these regulations, and, therefore, a final Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Internal Revenue Code, the notice of proposed rulemaking for the regulations was submitted to the Administrator of the Small Business Administration for comment on their impact on small business.

DRAFTING INFORMATION

 The principal author of these regulations is Stephen J. Toomey of the Office of Assistant Chief Counsel, Income Tax and Accounting, Internal Revenue Service. However, personnel from other offices of the Internal Revenue Service and Treasury Department participated in developing the regulation, on matters of both substance and style.

LIST OF SUBJECTS 26 CFR Part 301

Administrative practice and procedure, Bankruptcy, Courts, Crime, Disclosure of information, Employment taxes, Estate tax, Excise taxes, Filing requirements, Gift tax, Income taxes, Investigations, Law enforcement, Penalties, Pensions, Statistics, Taxes.

26 CFR Part 602

 Reporting and recordkeeping requirements.

Treasury Decision 8299

ADOPTION OF AMENDMENTS TO THE REGULATIONS

Accordingly, 26 CFR Parts 301 and 602 are amended as follows:

Paragraph 1. The authority for Part 301 is amended by removing the citation for section 301.6404-T and adding the following citation:

Authority: 26 U.S.C. 7805 * * * Section 301.6404-3 is also issued under 26 U.S.C. 6404(f)(3).

Par. 2. section 301.6404-0T is redesignated as section 301.6404-0 and is revised to read as follows:

SECTION 301.6404-0 TABLE OF CONTENTS.

This section lists the paragraphs contained in sections 301-6404-1 -- 301.6404-3.

SECTION 301.6404-1 ABATEMENTS.

SECTION 301.6404-2T DEFINITION OF MINISTERIAL ACT (TEMPORARY).

(a) In general.

(b) Ministerial act.

(1) Definition.

(2) Examples.

(c) Effective date.

SECTION 301.6404-3 ABATEMENT OF PENALTY OR ADDITION TO TAX ATTRIBUTABLE TO ERRONEOUS WRITTEN ADVICE OF THE INTERNAL REVENUE SERVICE.

(a) General rule.

(b) Requirements.

(1) In general.

(2) Advice was reasonably relied upon.

(i) In general.

(ii) Advice relating to a tax return.

(iii) Amended returns.

(iv) Advice not related to a tax return.

(v) Period of reliance.

(3) Advice was in response to written request.

(4) Taxpayer's information must be adequate and accurate.

(c) Definitions.

(1) Advice.

(2) Penalty and addition to tax.

(d) Procedures for abatement.

(e) Period for requesting abatement.

(f) Examples.

(g) Effective date.

Par. 3. Section 301.6404-3T is redesignated as section 301.6404-3. The title of that section is revised to read as follows:

SECTION 301.6404-3 ABATEMENT OF PENALTY OR ADDITION TO TAX ATTRIBUTABLE TO ERRONEOUS WRITTEN ADVICE OF THE INTERNAL REVENUE SERVICE.

* * *

Par. 4. The authority for Part 602 continues to read as follows:

Authority: 26 U.S.C. 7805

Par. 5. Section 602.101(c) is amended by inserting the following item in the appropriate place in the table:

 SECTION 301.6404-3                                 1545-0024