| Revenue Procedure 2006-26 |
May 22, 2006 |
User Fees Re Discretionary Determinations
Under Limitation on Benefits Provisions
of U.S. Income Tax Treaties
The purpose of this revenue procedure is to announce the introduction
of user fees for requests submitted to the U.S. competent authority for discretionary
determinations under limitation on benefits provisions of U.S. income tax
treaties. This revenue procedure modifies section 14 (Fees) of Rev. Proc.
2002-52, 2002-2 C.B. 242, and will be effective for such requests submitted
on or after May 4, 2006.
Almost all U.S. income tax treaties contain a limitation on benefits
article. A resident of a Contracting State must satisfy one of the enumerated
tests set forth in that article to be entitled to U.S. treaty benefits with
respect to an item of income, profit or gain. The U.S. competent authority
will not make a determination on whether or not a resident of a Contracting
State meets the conditions of one of these enumerated tests. However, if
a resident of a Contracting State does not meet one of the tests, most limitation
on benefits articles authorize the U.S. competent authority to make a discretionary
determination that the resident be entitled to some or all of the benefits
of the income tax treaty. Rev. Proc. 2002-52, Procedures for Obtaining Competent
Authority Assistance, currently sets forth rules for requesting a discretionary
determination under a limitation on benefits provision of an income tax treaty.
Section 3.08 of Rev. Proc. 2002-52.
Section 14 of Rev. Proc. 2002-52 currently provides that user fees are
not required as a condition to requesting competent authority assistance,
including requests for a discretionary determination pursuant to section 3.08.
The Internal Revenue Service has recently determined that user fees are appropriate
for this limited type of request for competent authority assistance. The
rules for these user fees are set forth below and will be incorporated into
the next update of Rev. Proc. 2002-52.
Effective May 4, 2006, a user fee of $15,000 will be charged for each
entity requesting a discretionary limitation on benefits determination. The
fee will apply regardless of whether the request is for: (1) an initial determination;
(2) a renewal of a previously issued determination; or (3) a supplemental
determination required, for example, if there is a material change in fact,
or the applicant seeks benefits with respect to a different type of income,
or requests a lower rate of withholding tax on dividends. If a request is
submitted that requires the competent authority to make a discretionary determination
for more than one entity, a separate fee will be charged for each entity.
.02 Acceptance of Request
A user fee will not be charged until the U.S. competent authority has
formally accepted the request for consideration. Requests should continue
to be submitted to the Director, International (LMSB), and include the information
required in section 3.08 of Rev. Proc. 2002-52. Within 30 days of receipt
of a complete submission, the U.S. competent authority will provide written
notice to the applicant as to whether the request will be accepted or rejected
for consideration. If a request is accepted, the applicant will be required
to mail a check or money order in the appropriate amount, along with a copy
of the written notice of acceptance to the IRS office identified below. The
check or money order should be payable to the United States Treasury. Substantive
consideration of a request for a discretionary determination will not begin
until the applicant has submitted the appropriate user fee.
The mailing address for the user fee is:
IRS/BFC
P.O. Box 9002
Beckley, WV 25802
In general, a user fee will not be refunded once the competent authority
accepts a request for consideration and the user fee is paid. For example,
the Service will not refund the user fee if the request for a discretionary
determination is withdrawn by the applicant, or if the applicant fails to
submit additional information as requested by the Competent Authority.
A user fee may be refunded, however, if:
-
A higher user fee is paid than is required; or
-
Taking into account all the facts and circumstances, including the Service’s
resources devoted to the request, the Competent Authority declines to rule
and, in his or her sole discretion, decides a refund is appropriate.
SECTION 4. EFFECT ON OTHER DOCUMENTS
Section 14 of Rev. Proc. 2002-52, 2002-2 C.B. 242, is modified accordingly.
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective May 4, 2006.
SECTION 6. DRAFTING INFORMATION
The principal author of this revenue procedure is Quyen P. Huynh of
the Office of Associate Chief Counsel (International). For further information
regarding this revenue procedure, contact Quyen P. Huynh at (202) 622-3880
(not a toll-free call).
Internal Revenue Bulletin 2006-21
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