Bulletin No. 2023–26

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HIGHLIGHTS

OF THIS ISSUE

Bulletin No. 2023–26

June 26, 2023

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

ADMINISTRATIVE

Notice 2023-42, page 1085.

This notice provides relief from the addition to tax under §

6655 of the Internal Revenue Code (Code) in connection with

the application of the new corporate alternative minimum tax

(CAMT), as added to Code by the enactment of § 10101 of

Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly referred to as the Inflation Reduction Act of 2022 (IRA).

INCOME TAX

Notice 2023-46, page 1086.

This notice publishes the inflation adjustment factor for the

carbon oxide sequestration credit under § 45Q for calendar

year 2023. The inflation adjustment factor is used to determine the amount of the credit allowable under § 45Q for

taxpayers that make an election under § 45Q(b)(3) to have

the dollar amounts applicable under § 45Q(a)(1) or (2) apply.

Notice 2023-49, page 1087.

This notice publishes the reference price under § 45K(d)(2)

The reference price applies in determining the amount of the

enhanced oil recovery credit under § 43, the marginal well

production credit for qualified crude oil production under §

45I, and the applicable percentage under § 613A to be used

in determining percentage depletion in the case of oil and

natural gas produced from marginal properties.

Finding Lists begin on page ii.

REG-110412-23, page 1098.

This notice of proposed rulemaking contains proposed

rules concerning the low-income communities bonus energy

investment credit program established pursuant to the

Inflation Reduction Act of 2022. Applicants investing in certain solar and wind powered-electricity generation facilities

may apply for an allocation of environmental justice solar and

wind capacity limitation to increase the amount of an energy

investment credit for the taxable year in which the facility is

placed in service. This document describes proposed definitions and requirements that would be applicable for the

program allocating the calendar year 2023 capacity limitation, which also would inform guidance applicable for future

program years. The proposed rules would affect applicants

seeking allocations of environmental justice solar and wind

capacity limitation.

INCOME TAX, TAX CONVETIONS

REG-106228-22, page 1088.

This NPRM contains proposed regulations that would identify

transactions that are the same as, or substantially similar

to, certain Malta personal retirement scheme transactions as

listed transactions, a type of reportable transaction. Material

advisors and participants in these listed transactions would

be required to file disclosures with the IRS and be subject

to penalties for failure to disclose. These proposed regulations would affect participants in these transactions as well

as material advisors.

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and

enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

for the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

June 26, 2023

Bulletin No. 2023–26

Part III

Relief from Certain

Additions to Tax

for Corporation’s

Underpayment of

Estimated Income Tax

under Section 6655

Notice 2023-42

SECTION 1. OVERVIEW

This notice provides relief from the

addition to tax under § 6655 of the Internal

Revenue Code (Code)1 in connection with

the application of the new corporate alternative minimum tax (CAMT), as added

to the Code by the enactment of § 10101

of Public Law 117-169, 136 Stat. 1818

(August 16, 2022), commonly referred

to as the Inflation Reduction Act of 2022

(IRA).

SECTION 2. BACKGROUND

.01 CAMT under the IRA. Section

10101 of the IRA amended § 55 to impose

the new CAMT based on the “adjusted

financial statement income” (AFSI) of

an applicable corporation for taxable

years beginning after December 31, 2022.

Pursuant to § 59(k)(1), in general, a corporation is an applicable corporation subject

to the CAMT for a taxable year if it meets

the average annual AFSI test for one or

more taxable years that (i) are before that

taxable year and (ii) end after December

31, 2021 (Applicable Corporation).

Section 55(a) provides that, for the taxable year of an Applicable Corporation,

the amount of CAMT imposed by § 55

equals the excess (if any) of (i) the tentative minimum tax for the taxable year,

over (ii) the sum of the regular tax, as

defined in section § 55(c), for the taxable

year plus the tax imposed under § 59A.

Section 55(b)(2)(A) provides that, in the

case of an Applicable Corporation, the

tentative minimum tax for the taxable

year is the excess of (i) 15 percent of AFSI

for the taxable year (as determined under

§ 56A), over (ii) the CAMT foreign tax

credit for the taxable year (as determined

under § 59(l)). In the case of any corporation that is not an Applicable Corporation,

§ 55(b)(2)(B) provides that the tentative

minimum tax for the taxable year is zero.

See section 2.01 of Notice 2023-7, 2023-7

I.R.B. 390, for a general description of

the CAMT. Notice 2023-7 announced that

the Department of the Treasury (Treasury

Department) and the Internal Revenue

Service (IRS) intend to issue forthcoming

proposed regulations addressing the application of the CAMT and provided interim

guidance that taxpayers may rely on until

the issuance of the forthcoming proposed

regulations. Notice 2023-20, 2023-10

I.R.B. 523, provided additional interim

guidance that is intended to clarify further

the application of the CAMT.

.02 Estimated taxes. Section 6655(c)

and (d)(1)(A) generally provide that, in the

case of a corporation, estimated income tax

is required to be paid in four installments

and the amount of any required installment is 25 percent of the required annual

payment. Generally, under § 6655(d)

(1)(B), the required annual payment is

the lesser of two amounts described in

§ 6655(d)(1)(B)(i) and (ii). The amount

described in § 6655(d)(1)(B)(i) is 100

percent of the tax shown on the return for

the taxable year. The amount described in

§ 6655(d)(1)(B)(ii) is 100 percent of the

tax shown on the taxpayer’s return for

the preceding taxable year, so long as the

preceding taxable year was a full twelve

months long and the return for such year

showed a liability for tax. However, pursuant to § 6655(d)(2), in the case of a large

corporation (as defined under § 6655(g)

(2)), the amount described in § 6655(d)

(1)(B)(ii) may be applied only for purposes of determining the first installment

payment, while the amount described in

§ 6655(d)(1)(B)(i) must be applied for

purposes of determining the required

annual payment. Under § 6655(e), the

amount of the required installment is the

annualized income installment or adjusted

seasonal installment for those taxpayers

who establish that such amount is lower

than 25 percent of the required annual

payment determined under § 6655(d).

Section 6655(a) imposes an addition to

tax for failure to make a sufficient and

timely payment of estimated income tax.

SECTION 3. ESTIMATED TAXES

.01 Waiver of addition to tax. In light

of challenges associated with determining

whether a corporation is an Applicable

Corporation and the amount of a corporation’s CAMT liability under § 55 for a

taxable year that begins after December

31, 2022, and before January 1, 2024

(Covered CAMT Year), and in the interest

of sound tax administration, the IRS will

waive the addition to tax under § 6655

with respect to a corporation’s CAMT liability under § 55 for any Covered CAMT

Year. Accordingly, for a corporation’s

Covered CAMT Year, the corporation’s

required installments of estimated tax

need not include amounts attributable to

its CAMT liability under § 55 to prevent

the imposition of an addition to tax under

§ 6655. If a corporation fails to timely pay

its CAMT liability under § 55 when due,

other sections of the Code may apply;

for example, additions to tax could be

imposed under § 6651 if payment of the

CAMT liability is not made by the due

date (without regard to any extension) of

the corporation’s return.

.02 Instructions to be modified. The

instructions to Form 2220, Underpayment

of Estimated Tax by Corporations, will

be modified, as necessary, to clarify that

no addition to tax will be imposed under

§ 6655 based on a corporation’s failure to make estimated tax payments of

its CAMT liability under § 55 for any

Covered CAMT Year, and that a taxpayer

may exclude such amounts when calculating the amount of its required annual

payment on Form 2220. If necessary, the

modified instructions will be posted on

https://www.irs.gov.

Unless otherwise specified, all “section” or “§” references are to sections of the Code.

Bulletin No. 2023–26

1085

June 26, 2023

.03 Instructions to avoid penalty

notice. Affected taxpayers must still file

Form 2220 with their Federal income

tax return, even if they owe no estimated

tax penalty. The Form 2220 must be

completed without including the CAMT

liability from Schedule J of Form 1120,

U.S. Corporation Income Tax Return

(or other appropriate line of the corporation’s income tax return in the Form

1120 series). Affected taxpayers must

also include an amount of estimated tax

penalty on Line 34 of their Form 1120

(or other appropriate line of the corporation’s income tax return in the Form

1120 series), even if that amount is zero.

Failure to follow these instructions could

result in affected taxpayers receiving a

penalty notice that will require an abatement request to apply the relief provided

by this notice.

SECTION 4. APPLICABILITY

DATES

The waiver of the addition to tax

imposed by § 6655 described in section

3.01 of this notice applies for any Covered

CAMT Year.

SECTION 5. DRAFTING AND

CONTACT INFORMATION

The principal author of this notice

is David Bergman of the Office of the

Associate Chief Counsel (Procedure and

Administration). Other personnel from the

Treasury Department and the IRS participated in its development. For further information, please contact David Bergman at

(202) 317-6845 (not a toll-free number).

Credit for Carbon Oxide

Sequestration 2023

Section 45Q Inflation

Adjustment Factor

Notice 2023-46

SECTION 1. PURPOSE

This notice publishes the inflation

adjustment factor for the credit for carbon

June 26, 2023

oxide sequestration under § 45Q of the

Internal Revenue Code (§ 45Q credit)

for calendar year 2023. The inflation

adjustment factor is used to determine

the amount of the credit allowable under

§ 45Q for taxpayers that make an election under § 45Q(b)(3) to have the dollar

amounts applicable under § 45Q(a)(1) or

(2) apply.

SECTION 2. BACKGROUND

Section 45Q was added to the Code

by § 115 of the Energy Improvement and

Extension Act of 2008, enacted as Division

B of Pub. L. 110-343, 122 Stat. 3765, 3829

(October 3, 2008), to provide a credit

for the sequestration of carbon dioxide.

Section 45Q was amended by § 1131 of

the American Recovery and Reinvestment

Tax Act of 2009, enacted as Division B of

Pub. L. 111-5, 123 Stat 115 (February 17,

2009), § 41119 of the Bipartisan Budget

Act of 2018 (BBA), Pub. L. No. 115-123

(February 9, 2018), § 121 of the Taxpayer

Certainty and Disaster Tax Relief Act

of 2020, enacted as Division EE of

the Consolidated Appropriations Act,

2021, Pub. L. 116-260, 134 Stat. 3051

(December 27, 2020), and § 13104 of Pub.

L. 117-169, 136 Stat. 1818 (August 16,

2022), commonly known as the Inflation

Reduction Act (IRA).

Section 45Q(a)(1) allows a credit of

$20 per metric ton of qualified carbon

oxide (i) captured by the taxpayer using

carbon capture equipment which is originally placed in service at a qualified

facility before the date of the enactment

of BBA, (ii) disposed of by the taxpayer

in secure geological storage, and (iii) not

used by the taxpayer as a tertiary injectant

in a qualified enhanced oil or natural gas

recovery project.

Section 45Q(a)(2) allows a credit of

$10 per metric ton of qualified carbon

oxide (i) captured by the taxpayer using

carbon capture equipment which is originally placed in service at a qualified

facility before the date of the enactment

of BBA, and (ii) either (I) used by the

taxpayer as a tertiary injectant in a qualified enhanced oil or natural gas recovery

project and disposed of by the taxpayer in

secure geological storage or (II) utilized

by the taxpayer in a manner described in

§ 45Q(f)(5).

1086

Section 45Q(b)(3) provides that, for

purposes of determining the carbon oxide

sequestration credit under this section,

a taxpayer may elect to have the dollar

amounts applicable under § 45Q(a)(1)

or (2) apply in lieu of the dollar amounts

applicable under § 45Q(a)(3) or (4) for

each metric ton of qualified carbon oxide

which is captured by the taxpayer using

carbon capture equipment which is originally placed in service at a qualified facility on or after the date of the enactment of

the Bipartisan Budget Act of 2018.

Under § 45Q(f)(7), for taxable years

beginning in a calendar year after 2009,

the dollar amounts contained in § 45Q(a)

(1) and (2) must be adjusted for inflation

by multiplying such dollar amount by the

inflation adjustment factor for such calendar year determined under § 43(b)(3)(B),

determined by substituting “2008” for

“1990.”

Section 43(b)(3)(B) defines the term

“inflation adjustment factor” as, with

respect to any calendar year, a fraction the

numerator of which is the GNP implicit

price deflator for the preceding calendar

year and the denominator of which is the

GNP implicit price deflator for 1990. For

purposes of § 45Q(f)(7), for the 2022 calendar year, the inflation adjustment factor

is a fraction the numerator of which is

the GNP implicit price deflator for 2022

(127.194) and the denominator of which

is the GNP implicit price deflator for 2008

(94.421).

Section 45Q(g), as amended by

§ 13104(f) of the IRA, provides that in

the case of any carbon capture equipment

placed in service before the date of the

enactment of BBA, the credit under § 45Q

shall apply with respect to qualified carbon oxide captured using such equipment

before the earlier of January 1, 2023, and

the end of the calendar year in which the

Secretary of the Treasury or her delegate,

in consultation with the Administrator of

the Environmental Protection Agency,

certifies that, during the period beginning after October 3, 2008, a total of

75,000,000 metric tons of qualified carbon oxide have been taken into account in

accordance with (i) § 45Q(a), as in effect

on the day before the date of the enactment of BBA, and (ii) § 45Q(a)(1) and

(2). Notice 2022-38 provided that 2022

was the final calendar year for which a

Bulletin No. 2023–26

taxpayer may claim a § 45Q credit under

§ 45Q(a)(1) and (2) for qualified carbon

oxide that is captured by carbon capture

equipment originally placed in service

at a qualified facility before the date of

enactment of the Bipartisan Budget Act of

2018. Therefore, the inflation adjustment

amounts in section 3 of this notice only

apply if a taxpayer elects under § 45Q(b)

(3) to apply the dollar amounts applicable

under § 45Q(a)(1) or (2) in lieu of the dollar amounts applicable under § 45Q(a)(3)

or (4).

SECTION 3. INFLATION

ADJUSTMENT FACTOR

The inflation adjustment factor for

calendar year 2023 is 1.3471. The § 45Q

credit for calendar year 2023 is $26.94 per

metric ton of qualified carbon oxide under

§ 45Q(a)(1) and $13.47 per metric ton of

qualified carbon oxide under § 45Q(a)(2).

SECTION 4. DRAFTING

INFORMATION

The principal author of this notice is

Maggie Stehn of the Office of Associate

Chief Counsel (Passthroughs & Special

Industries). For further information

regarding this notice contact Maggie

Stehn at (202) 317-6853 (not a toll-free

number).

2022 Section 45K(d)(2)(C)

Reference Price

Notice 2023-49

SECTION 1. PURPOSE

This notice publishes the reference

price under § 45K(d)(2)(C) of the Internal

Revenue Code for calendar year 2022.

The credit period for the nonconventional

source production credit under § 45K

ended on December 31, 2013, for facilities producing coke or coke gas (other

than from petroleum based products).

However, the reference price continues

to apply in determining the amount of

Bulletin No. 2023–26

the enhanced oil recovery credit under

§ 43, the marginal well production credit

for qualified crude oil production under

§ 45I, and the applicable percentage under

§ 613A to be used in determining percentage depletion in the case of oil and natural

gas produced from marginal properties.

SECTION 2. BACKGROUND

Section 45K(d)(2)(C) provides that the

term “reference price” means, with respect

to a calendar year, the Secretary’s estimate

of the annual average wellhead price per

barrel for all domestic crude oil the price

of which is not subject to regulation by the

United States.

Section 43(a) provides that, for purposes of § 38, the enhanced oil recovery

credit for any taxable year is an amount

equal to 15 percent of the taxpayer’s qualified enhanced oil recovery costs for such

taxable year.

Section 43(b)(1) provides that the

amount of enhanced oil recovery credit

for any taxable year shall be reduced by

an amount which bears the same ratio to

the amount of such credit (determined

without regard to this paragraph) as - (A)

the amount by which the reference price

for the calendar year preceding the calendar year in which the taxable year begins

exceeds $28, bears to (B) $6. Section

43(b)(2) provides that the term “reference

price” means, with respect to any calendar

year, the reference price determined for

such calendar year under § 45K(d)(2)(C).

Section 45I(a) provides that, for purposes of § 38, the marginal well production credit for any taxable year is an

amount equal to the product of the credit

amount and the qualified crude oil production and the qualified natural gas production which is attributable to the taxpayer.

Section 45I(b)(1) provides that for

crude oil production, the amount of the

marginal well production credit is $3 per

barrel of qualified crude oil production.

Section 45I(b)(2) provides that the $3

amount under § 45I(b)(1) shall be reduced

(but not below zero) by an amount which

bears the same ratio to such amount

(determined without regard to this paragraph) as – (i) the excess (if any) of the

applicable reference price over $15, bears

1087

to (ii) $3. The applicable reference price

for a taxable year is the reference price of

the calendar year preceding the calendar

year in which the taxable year begins.

Section 45I(b)(2)(C) provides that for

qualified crude oil production the term

“reference price” means, with respect

to any calendar year, the reference price

determined under § 45K(d)(2)(C).

Section 613A(c)(6)(A) provides, in

general, that the allowance for depletion

under § 611 shall be computed in accordance with § 613 with respect to - (i) so

much of the taxpayer’s average daily marginal production of domestic crude oil as

does not exceed the taxpayer’s depletable

oil quantity (determined without regard

to paragraph (3)(A)(ii)), and (ii) so much

of the taxpayer’s average daily marginal

production of domestic natural gas as

does not exceed the taxpayer’s depletable

natural gas quantity (determined without

regard to paragraph (3)(A)(ii)), and the

applicable percentage shall be deemed to

be specified in subsection (b) of § 613 for

purposes of subsection (a) of that section.

Section 613A(c)(6)(C) provides that

the term “applicable percentage” means

the percentage (not greater than 25 percent) equal to the sum of - (i) 15 percent,

plus (ii) 1 percentage point for each whole

dollar by which $20 exceeds the reference price for crude oil for the calendar

year preceding the calendar year in which

the taxable year begins. For purposes of

this paragraph, the term “reference price”

means, with respect to any calendar year,

the reference price determined for such

calendar year under § 45K(d)(2)(C).

SECTION 3. REFERENCE PRICE

The reference price under § 45K(d)(2)

SECTION 4. DRAFTING

INFORMATION

The principal author of this notice

is Alan W. Tilley of the Office of

Associate Chief Counsel (Passthroughs

& Special Industries). For further information regarding this notice, contact Mr.

Tilley on (202) 317-6853 (not a toll-free

number).

June 26, 2023

Part IV

Notice of Proposed

Rulemaking

Malta Personal Retirement

Scheme Listed Transaction

REG-106228-22

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Notice of proposed rulemaking

and notice of public hearing.

SUMMARY: This document contains

proposed regulations that would identify

transactions that are the same as, or substantially similar to, certain Malta personal retirement scheme transactions as

listed transactions, a type of reportable

transaction. Material advisors and participants in these listed transactions would

be required to file disclosures with the

IRS and be subject to penalties for failure

to disclose. These proposed regulations

would affect participants in these transactions as well as material advisors. This

document also provides notice of a public

hearing on the proposed regulations.

DATES: Written or electronic comments

must be received by August 7, 2023. A

public hearing on this proposed regulation has been scheduled for September 21,

2023, at 10 a.m. EST. Requests to speak

and outlines of topics to be discussed at

the public hearing must be received by

August 7, 2023. If no outlines are received

by August 7, 2023, the public hearing will

be cancelled. Requests to attend the public hearing must be received by 5 p.m.

EST on September 19, 2023. The public

hearing will be made accessible to people with disabilities. Requests for special

assistance during the public hearing must

be received by 5 p.m. EST on September

18, 2023.

ADDRESSES: Commenters are strongly

encouraged to submit public comments

electronically via the Federal eRulemaking Portal at https://www.regulations.gov

June 26, 2023

(indicate IRS and REG-106228-22) by

following the online instructions for submitting comments. Requests for a public

hearing must be submitted as prescribed

in the “Comments and Requests for a

Public Hearing” section. Once submitted

to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The

Department of the Treasury (Treasury

Department) and the IRS will publish for

public availability any comments submitted to the IRS’s public docket. Send paper

submissions to: CC:PA:LPD:PR (REG106228-22), room 5203, Internal Revenue

Service, P.O. Box 7604, Ben Franklin

Station, Washington, DC 20044.

Comments and Public Hearing

Before these proposed amendments to

the regulations are adopted as final regulations, consideration will be given to comments regarding the notice of proposed

rulemaking that are submitted timely to

the IRS as prescribed in the preamble

under the ADDRESSES section. The

Treasury Department and the IRS request

comments on all aspects of the proposed

regulations. All comments will be made

available at https://www.regulations.gov.

Once submitted to the Federal eRulemaking Portal, comments cannot be edited or

withdrawn.

A public hearing has been scheduled

for September 21, 2023, beginning at 10

a.m. EST, in the Auditorium at the Internal

Revenue Building, 1111 Constitution

Avenue, NW., Washington, DC. Due to

building security procedures, visitors

must enter at the Constitution Avenue

entrance. In addition, all visitors must

present photo identification to enter the

building. Because of access restrictions,

visitors will not be admitted beyond

the immediate entrance area more than

30 minutes before the hearing starts.

Participants may alternatively attend the

public hearing by telephone.

The rules of 26 CFR 601.601(a)(3)

apply to the hearing. Persons who wish

to present oral comments at the hearing

must submit an outline of the topics to be

discussed and the time to be devoted to

each topic by August 7, 2023. A period of

1088

10 minutes will be allotted to each person

for making comments. An agenda showing the scheduling of the speakers will

be prepared after the deadline for receiving outlines has passed. Copies of the

agenda will be available free of charge

at the hearing. If no outline of the topics

to be discussed at the hearing is received

by August 7, 2023 the public hearing

will be cancelled. If the public hearing is

cancelled, a notice of cancellation of the

public hearing will be published in the

Federal Register.

Individuals who want to testify in

person at the public hearing must send

an email to publichearings@irs.gov to

have your name added to the building

access list. The subject line of the email

must contain the regulation number REG106228-22 and the language TESTIFY In

Person. For example, the subject line may

say: Request to TESTIFY In Person at

Hearing for REG-106228-22.

Individuals who want to testify by

telephone at the public hearing must send

an email to publichearings@irs.gov to

receive the telephone number and access

code for the hearing. The subject line

of the email must contain the regulation

number REG-106228-22 and the language

TESTIFY Telephonically. For example, the subject line may say: Request to

TESTIFY Telephonically at Hearing for

REG-106228-22.

Individuals who want to attend the

public hearing in person without testifying must also send an email to publichearings@irs.gov to have your name added to

the building access list. The subject line

of the email must contain the regulation

number REG-106228-22 and the language

ATTEND In Person. For example, the

subject line may say: Request to ATTEND

Hearing In Person for REG-106228-22.

Requests to attend the public hearing must

be received by 5 p.m. EST on September

19, 2023.

Individuals who want to attend the public hearing by telephone without testifying

must also send an email to publichearings@irs.gov to receive the telephone

number and access code for the hearing.

The subject line of the email must contain

the regulation number REG-106228-22

Bulletin No. 2023–26

and the language ATTEND Hearing

Telephonically. For example, the subject line may say: Request to ATTEND

Hearing Telephonically for REG-10622822. Requests to attend the public hearing must be received by 5 p.m. EST on

September 19, 2023.

Hearings will be made accessible to

people with disabilities. To request special assistance during a hearing please

contact the Publications and Regulations

Branch of the Office of Associate Chief

Counsel (Procedure and Administration)

by sending an email to publichearings@

irs.gov (preferred) or by telephone at

(202) 317-6901 (not a toll-free number)

by September 18, 2023.

FOR FURTHER INFORMATION

CONTACT: Concerning the proposed

regulations, W. Shawver Adams at (202)

317-5132; concerning submissions of

comments or requests for a public hearing,

Vivian Hayes at (202) 317-6901 (not tollfree numbers) or by email at publichearings@irs.gov (preferred).

SUPPLEMENTARY INFORMATION:

Background

This document contains proposed

additions to 26 CFR part 1 (Income Tax

Regulations) under section 6011 of the

Internal Revenue Code (Code). The additions identify certain transactions that are

“listed transactions” for the purposes of

section 6011. This regulation would also

affect reporting requirements under section 6111 and list maintenance requirements under section 6112.

I. Overview of the Reportable

Transaction Regime

Section 6011(a) generally provides

that, when required by regulations prescribed by the Secretary, “any person made

liable for any tax imposed by this title or

with respect to the collection thereof, shall

make a return or statement according to

the forms and regulations prescribed by

the Secretary. Every person required to

make a return or statement shall include

therein the information required by such

forms or regulations.”

On February 28, 2000, the Treasury

Department and the IRS issued a series of

Bulletin No. 2023–26

temporary regulations (TD 8877; TD 8876;

TD 8875) and cross-referencing notices

of proposed rulemaking (REG-10373500; REG-110311-00; REG-103736-00)

under sections 6011, 6111, and 6112. The

temporary regulations and cross-referencing notices of proposed rulemaking were

published in the Federal Register (65 FR

11205, 65 FR 11269; 65 FR 11215, 65

FR 11272; 65 FR 11211, 65 FR 11271)

on March 2, 2000 (2000 Temporary

Regulations). The 2000 Temporary

Regulations were modified several times

before March 4, 2003, the date on which

the Treasury Department and the IRS,

after providing notice and opportunity

for public comment and considering the

comments received, published final regulations (TD 9046) in the Federal Register

(68 FR 10161) under sections 6011, 6111,

and 6112 (2003 Final Regulations). The

2000 Temporary Regulations and 2003

Final Regulations consistently provided

that reportable transactions include listed

transactions and that a listed transaction is

a transaction that is the same as or substantially similar to one of the types of transactions that the IRS has determined to be

a tax avoidance transaction and identified

by notice, regulation, or other form of

published guidance as a listed transaction.

As part of the American Jobs Creation

Act of 2004 (AJCA), Public Law 108357, 118 Stat. 1418 (October 22, 2004),

Congress added sections 6707A, 6662A,

and 6501(c)(10) to the Code and revised

sections 6111, 6112, 6707, and 6708 of the

Code. See sections 811-812 and 814-817

of the ACJA. The AJCA’s legislative history explains that Congress incorporated

in the statute the method that the Treasury

Department and the IRS had been using to

identify reportable transactions, and provided incentives, via penalties, to encourage taxpayer compliance with the new

disclosure reporting obligations. As the

Committee on Ways and Means explained

in its report accompanying H.R. 4520,

which became the AJCA:

he Committee believes that the best

way to combat tax shelters is to be aware

of them. The Treasury Department,

using the tools available, issued regulations requiring disclosure of certain

transactions and requiring organizers and promoters of tax-engineered

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transactions to maintain customer

lists and make these lists available to

the IRS. Nevertheless, the Committee

believes that additional legislation

is needed to provide the Treasury

Department with additional tools to

assist its efforts to curtail abusive

transactions. Moreover, the Committee

believes that a penalty for failing to

make the required disclosures, when

the imposition of such penalty is not

dependent on the tax treatment of the

underlying transaction ultimately being

sustained, will provide an additional

incentive for taxpayers to satisfy their

reporting obligations under the new

disclosure provisions.

House Report 108-548(I), 108th Cong.,

2nd Sess. 2004, 2004 WL 1380512, at 261

(June 16, 2004) (House Report).

In Footnote 232 of the House Report,

the Committee on Ways and Means notes

that the statutory definitions of “reportable

transaction” and “listed transaction” were

intended to incorporate the pre-AJCA regulatory definitions, while providing the

Secretary with leeway to make changes to

those definitions:

The provision states that, except as

provided in regulations, a listed transaction means a reportable transaction,

which is the same as, or substantially

similar to, a transaction specifically

identified by the Secretary as a tax

avoidance transaction for purposes of

section 6011. For this purpose, it is

expected that the definition of “substantially similar” will be the definition

used in Treas. Reg. sec. 1.6011–4(c)(4).

However, the Secretary may modify

this definition (as well as the definitions

of “listed transaction” and “reportable

transactions”) as appropriate.

Id. at 261 n.232.

Section 6707A(c)(1) defines a “reportable transaction” as “any transaction with

respect to which information is required

to be included with a return or statement

because, as determined under regulations

prescribed under section 6011, such transaction is of a type which the Secretary

determines as having a potential for tax

avoidance or evasion.” A “listed transaction” is defined by section 6707A(c)

June 26, 2023

(2) as “a reportable transaction which is

the same as, or substantially similar to, a

transaction specifically identified by the

Secretary as a tax avoidance transaction

for the purposes of section 6011.”

Section 6111(a), as revised by the

AJCA, provides that each material advisor with respect to any reportable transaction shall make a return setting forth:

(1) information identifying and describing

the transaction, (2) information describing

any potential tax benefits expected to result

from the transaction, and (3) such other

information as the Secretary may prescribe. Such return must be filed not later

than the date specified by the Secretary.

Section 6111(b)(2) provides that a reportable transaction has the meaning given to

such term by section 6707A(c).

Section 6112(a), as revised by the

AJCA, provides that each material advisor with respect to any reportable transaction (as defined in section 6707A(c)) must

(whether or not required to file a return

under section 6111 with respect to such

transaction) maintain a list (1) identifying

each person with respect to whom such

advisor acted as a material advisor and (2)

containing such other information as the

Secretary may by regulations require.

On August 3, 2007, the Treasury

Department and the IRS published final

regulations in the Federal Register (72

FR 43146, 72 FR 43157, 72 FR 43154)

under sections 6011, 6111, and 6112,

modifying the rules relating to the disclosure of reportable transactions by participants in reportable transactions under

section 6011, the disclosure of reportable

transactions by material advisors under

section 6111, and the list maintenance

requirements of material advisors with

respect to reportable transactions under

section 6112 in response to the changes in

the AJCA.

II. Disclosure of Reportable Transactions

by Participants and Penalties for Failure

to Disclose

Section 1.6011-4(a) provides that

every taxpayer that has participated in a

reportable transaction within the meaning of §1.6011-4(b) and who is required

to file a tax return must file a disclosure

statement within the time prescribed in

§ 1.6011-4(e).

June 26, 2023

Section 1.6011-4(d) and (e) provide

that the disclosure statement - Form

8886, Reportable Transaction Disclosure

Statement (or successor form) - must be

attached to the taxpayer’s tax return for

each taxable year for which a taxpayer

participates in a reportable transaction.

A copy of the disclosure statement must

be sent to the IRS’s Office of Tax Shelter

Analysis (OTSA) at the same time that

any disclosure statement is first filed by

the taxpayer pertaining to a particular

reportable transaction.

Reportable transactions include listed

transactions, confidential transactions,

transactions with contractual protection, loss transactions, and transactions

of interest. See §1.6011-4(b)(2) through

(6). Consistent with the definitions previously provided in the 2000 Temporary

Regulations and later in the 2003 Final

Regulations as promulgated in 2007,

§1.6011-4(b)(2) continues to define a

listed transaction as a transaction that

is the same as or substantially similar to

one of the types of transactions that the

IRS has determined to be a tax avoidance

transaction and identified by notice, regulation, or other form of published guidance as a listed transaction.

Section 1.6011-4(c)(4) provides that a

transaction is “substantially similar” if it

is expected to obtain the same or similar

types of tax consequences and is either

factually similar or based on the same or

similar tax strategy. Receipt of an opinion regarding the tax consequences of the

transaction is not relevant to the determination of whether the transaction is the

same as or substantially similar to another

transaction. Further, the term substantially

similar must be broadly construed in favor

of disclosure. For example, a transaction

may be substantially similar to a listed

transaction even though it may involve

different entities or use different Code

provisions.

Section 1.6011-4(c)(3)(i)(A) provides that a taxpayer has participated in

a listed transaction if the taxpayer’s tax

return reflects tax consequences (including an exclusion from gross income) or

a tax strategy described in the published

guidance that lists the transaction under

§1.6011-4(b)(2). A taxpayer also has participated in a listed transaction if the taxpayer knows or has reason to know that the

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taxpayer’s tax benefits are derived directly

or indirectly from tax consequences or a

tax strategy described in published guidance that lists a transaction under §1.60114(b)(2). Published guidance may identify

other types or classes of persons that will

be treated as participants in a listed transaction. Published guidance may also identify types or classes of persons that will

not be treated as participants in a listed

transaction.

Section 1.6011-4(e)(2)(i) provides that

if a transaction becomes a listed transaction after the filing of a taxpayer’s tax

return reflecting the taxpayer’s participation in the listed transaction and before the

end of the period of limitations for assessment for any taxable year in which the

taxpayer participated in the listed transaction, then a disclosure statement must be

filed with OTSA within 90 calendar days

after the date on which the transaction

becomes a listed transaction. This requirement extends to an amended return and

exists regardless of whether the taxpayer

participated in the transaction in the year

the transaction became a listed transaction.

The Commissioner may also determine the

time for disclosure of listed transactions

in the published guidance identifying the

transaction.

Participants required to disclose these

transactions under §1.6011-4 who fail to

do so are subject to penalties under section 6707A. Section 6707A(b) provides

that the amount of the penalty is 75 percent of the decrease in tax shown on the

return as a result of the reportable transaction (or which would have resulted from

such transaction if such transaction were

respected for Federal tax purposes), subject to minimum and maximum penalty

amounts. The minimum penalty amount

is $5,000 in the case of a natural person

and $10,000 in any other case. For a listed

transaction, the maximum penalty amount

is $100,000 in the case of a natural person

and $200,000 in any other case.

Additional penalties may also apply.

In general, section 6662A imposes a 20

percent accuracy-related penalty on any

understatement (as defined in section

6662A(b)(1)) attributable to an adequately

disclosed reportable transaction. If the

taxpayer has a requirement to disclose

participation in the reportable transaction but does not adequately disclose the

Bulletin No. 2023–26

transaction in accordance with the regulations under section 6011, the taxpayer is

subject to an increased penalty rate equal

to 30 percent of the understatement. See

section 6662A(c). Section 6662A(b)(2)

provides that section 6662A applies to

any item which is attributable to any listed

transaction and any reportable transaction

(other than a listed transaction) if a significant purpose of such transaction is the

avoidance or evasion of Federal income

tax.

Participants required to disclose listed

transactions who fail to do so are also subject to an extended period of limitations

under section 6501(c)(10). That section

provides that the time for assessment of

any tax with respect to the transaction

shall not expire before the date that is one

year after the earlier of the date the participant discloses the transaction or the date a

material advisor discloses the participation

pursuant to a written request under section

6112(b)(1)(A).

III. Disclosure of Reportable

Transactions by Material Advisors and

Penalties for Failure to Disclose

Section 301.6111-3(a) of the Procedure

and Administration Regulations provides

that each material advisor with respect

to any reportable transaction, as defined

in §1.6011-4(b), must file a return as

described in §301.6111-3(d) by the date

described in §301.6111-3(e).

Section 301.6111-3(b)(1) provides that

a person is a material advisor with respect

to a transaction if the person provides any

material aid, assistance, or advice with

respect to organizing, managing, promoting, selling, implementing, insuring, or

carrying out any reportable transaction,

and directly or indirectly derives gross

income in excess of the threshold amount

as defined in §301.6111-3(b)(3) for the

material aid, assistance, or advice. Under

§301.6111-3(b)(2)(i) and (ii), a person

provides material aid, assistance, or advice

if the person provides a tax statement,

which is any statement (including another

person’s statement), oral or written, that

relates to a tax aspect of a transaction that

causes the transaction to be a reportable

transaction as defined in §1.6011-4(b)(2)

through (7).

Material advisors must disclose transactions on Form 8918, Material Advisor

Disclosure Statement, (or successor form)

as provided in §301.6111-3(d) and (e).

Section 301.6111-3(e) provides that the

material advisor’s disclosure statement for

a reportable transaction must be filed with

the OTSA by the last day of the month

that follows the end of the calendar quarter in which the advisor becomes a material advisor with respect to a reportable

transaction or in which the circumstances

necessitating an amended disclosure statement occur. The disclosure statement must

be sent to the OTSA at the address provided in the instructions for Form 8918 (or

successor form).

Section 301.6111-3(d)(2) provides

that the IRS will issue to a material advisor a reportable transaction number with

respect to the disclosed reportable transaction. Receipt of a reportable transaction

number does not indicate that the disclosure statement is complete, nor does

it indicate that the transaction has been

reviewed, examined, or approved by the

IRS. Material advisors must provide the

reportable transaction number to all taxpayers and material advisors for whom the

material advisor acts as a material advisor

as defined in §301.6111-3(b). The reportable transaction number must be provided

at the time the transaction is entered into,

or, if the transaction is entered into prior to

the material advisor receiving the reportable transaction number, within 60 calendar days from the date the reportable

transaction number is mailed to the material advisor.

Additionally, material advisors must

prepare and maintain lists identifying each

person with respect to whom the advisor

acted as a material advisor with respect

to the reportable transaction in accordance with §301.6112-1(b) and furnish

such lists to the IRS in accordance with

§301.6112-1(e).

Section 6707(a) provides that a material advisor who fails to file a timely disclosure, or files an incomplete or false

disclosure statement, is subject to a

penalty. Pursuant to section 6707(b)(2),

for listed transactions, the penalty is the

greater of (A) $200,000 or (B) 50 percent of the gross income derived by such

person with respect to aid, assistance, or

advice which is provided with respect to

the listed transaction before the date the

return is filed under section 6111.

A material advisor may also be subject

to a penalty under section 6708 for failing

to maintain a list under section 6112(a)

and failing to make the list available upon

written request to the Secretary in accordance with section 6112(b) within 20 business days after the date of such request.

Section 6708(a) provides that the penalty

is $10,000 per day for each day of the failure after the 20th day. However, no penalty

will be imposed with respect to the failure

on any day if such failure is due to reasonable cause.

IV. Malta Personal Retirement Schemes

Under U.S. Federal income tax law,

individual savings arrangements are not

entitled to tax-favored treatment available

for pension or retirement arrangements

if they do not meet the requirements for

an individual retirement account (IRA)

described in section 408 or a Roth IRA

described in section 408A. The tax-favored treatment for an IRA or Roth IRA

includes the deductibility (in many cases)

of contributions to an IRA, tax deferral on

the earnings of the IRA or Roth IRA, and

exclusion from income for qualified distributions from a Roth IRA. IRAs and Roth

IRAs are subject to certain requirements,

such as a requirement that an individual’s

contributions, other than certain rollovers,

are restricted to cash and limited by reference to an individual’s earned income

(including, in the case of spousal IRAs,

a spouse’s earned income). In addition,

a distribution from an IRA (or a distribution from a Roth IRA that is not a qualified distribution) is generally subject to a

10% additional tax if paid before the IRA

owner attains age 59½.

Malta’s personal retirement schemes

were enacted as part of the Retirement

Pensions Act of 2011 and implemented

by regulations in 2015.1 They are tax-favored savings arrangements in Malta that

Act No. XVI of 2011, as amended by Act No. XX of 2013, and amended by Act No. XXVI of 2018; Ch. 514 (Retirement Pensions Act). Pension Rules for Personal Retirement Schemes

Issued in Terms of the Retirement Pensions Act, 2011, were issued on January 7, 2015, and effective January 1, 2015.

Bulletin No. 2023–26

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June 26, 2023

allow individuals or their employers to

contribute assets to a trust or other investment vehicle for such individuals’ benefit.

In contrast to U.S. tax-favored individual

savings arrangements, there is no requirement that contributions be limited by

reference to income earned from employment or self-employment activities, no

limitation on contribution amounts, and

no restriction on the types of assets (such

as securities) that may be contributed.

Distributions, which may begin when an

individual member is 50 but must start

no later than age 75, may be exempt from

Maltese income tax if the individual elects

to receive initial and additional cash lump

sum distributions.

Absent treaty relief, U.S. citizens and

U.S. resident aliens who establish a foreign individual retirement trust or other

individual retirement arrangement are

generally required to take into account

the arrangement’s income on a current

basis, even if there has been no distribution from the arrangement. See, e.g., section 671. Under section 894(a), the Code

applies to a taxpayer with due regard to

any treaty obligations of the United States.

Pursuant to the saving clause in Article 1,

paragraph 4, of the Convention Between

the Government of the United States of

America and the Government of Malta for

the Avoidance of Double Taxation and the

Prevention of Fiscal Evasion with Respect

to Taxes on Income, signed at Valetta,

August 8, 2008 (“Treaty”), the United

States retains its right to tax the income

of its citizens and residents (as determined

under Article 4 (Resident) of the Treaty)

as if there were no Treaty between the

United States and Malta. Notwithstanding

the saving clause, U.S. citizens and U.S.

resident aliens may claim an exemption

from U.S. income tax in accordance with

the Treaty if they qualify for an exception

to the saving clause provided under paragraph 5 of Article 1.

Articles 17(1)(b) and 18 of the Treaty,

are both listed as exceptions to the saving

clause. These provisions may permit U.S.

citizens and U.S. resident aliens an exemption from U.S. income tax on (1) “pensions

and other similar remuneration” arising in

Malta to the extent such pensions or remuneration would be exempt from tax under

Maltese law if the beneficial owner were

a resident of Malta (Article 17(1)(b)), and

June 26, 2023

(2) income earned by a “pension fund”

established in Malta until such income

is distributed (Article 18). As explained

in Treasury’s Technical Explanation to

the Treaty, Article 17 applies generally

to “distributions from pensions and other

similar remuneration beneficially owned

by a resident of a Contracting State in

consideration of past employment. . .”,

whereas Article 18 applies to income of

a “pension fund established in the other

Contracting State . . . .” Paragraph (1)(k)

of Article 3 of the Treaty defines the term

“pension fund” for purposes of the Treaty.

In the case of Malta, a pension fund is a

licensed fund or scheme subject to tax

only on income derived from immovable

property situated in Malta, and as relevant

here, operated principally to “administer

or provide pension or retirement benefits

. . . .”

On December 27, 2021, the IRS published in the Internal Revenue Bulletin a

Competent Authority Arrangement (the

“CAA”) between the United States and

Malta. I.R.B. 2021-52, Ann. 2021-19. In

the CAA, the U.S. and Maltese competent

authorities agreed that individual retirement arrangements established under

Malta’s Retirement Pensions Act of 2011

are not considered “pension funds” for purpose of relevant provisions of the Treaty.

The CAA also confirmed that distributions

from these types of arrangements are not

“pensions or other similar remuneration”

in consideration of past employment for

purposes of paragraph 1(b) of Article 17.

The CAA “reflects the original intent [of

the United States and Malta] regarding the

definition of ‘pension fund’ for purposes

of the Treaty.”

In addition to the income tax consequences associated with a U.S. taxpayer’s

transactions with or interest in a Malta

personal retirement scheme, information reporting requirements also apply.

Section 6048 generally requires annual

information reporting of a U.S. person’s

transfers of money or other property to,

ownership of, and distributions from, foreign trusts. Section 6677 imposes penalties on a U.S. person for failing to comply

with section 6048. See also Notice 97-34,

1997-1 C.B. 422. Under section 6048(d)

(4), the Secretary may suspend or modify any requirement under section 6048

if the United States has no significant tax

1092

interest in obtaining the required information. The Treasury Department and

the IRS have previously issued guidance

providing that reporting is not required

under section 6048(a), (b), and (c) for certain U.S. citizen and resident individuals

with respect to their transactions with, and

ownership of, certain tax-favored foreign

retirement trusts and certain tax-favored

foreign nonretirement savings trusts, as

described in Revenue Procedure 202017, 2020-12 I.R.B. 539. Malta personal

retirement schemes are not eligible for

this relief from section 6048 reporting

because contributions to these arrangements are not limited to income earned

from the performance of services, subject to a certain annual or lifetime limit,

or subject to a limit based on a percentage of the participant’s earned income.

See Section 5.03 of Rev. Proc. 2020-17.

Section 6048 information reporting is provided on Form 3520, Annual Return To

Report Transactions With Foreign Trusts

and Receipt of Certain Foreign Gifts, and

Form 3520-A, Annual Information Return

of Foreign Trust With a U.S. Owner

(Under section 6048(b)).

Section 6038D may also apply to a

U.S. person’s interest in a Malta personal

retirement scheme. Under section 6038D,

a specified person, which includes a U.S.

citizen or resident alien, must report any

interest in a specified foreign financial

asset provided that the aggregate value of

all such assets exceeds certain thresholds.

See §1.6038D-2(a). Section 6038D(d)

imposes a penalty for failing to comply.

Section 6038D information reporting is

provided on Form 8938, Statement of

Specified Foreign Financial Assets. A

specified person who is required to report

information under section 6038D on Form

8938 may also be required to report similar identifying information under section

6048 on Form 3520 or Form 3520-A.

V. Tax Avoidance Transactions Using

Malta Personal Retirement Schemes

The Treasury Department and the IRS

are aware of transactions in which a U.S.

citizen or a U.S. resident alien misconstrues the pension provisions of the Treaty

to claim an exemption from U.S. income

tax on earnings in and distributions from

personal retirement schemes established

Bulletin No. 2023–26

under the laws of Malta. E.g., IR-2022113. Typically, the transaction is intended

to permanently avoid U.S. tax on (1) the

built-in-gain of appreciated property

transferred to personal retirement schemes

established in Malta, (2) income earned by

and accumulated in such schemes, and/or

(3) distributions from such schemes. The

U.S. individuals who participate in these

transactions generally lack any connection to Malta other than their participation

in these arrangements. These individuals also may fail to comply with their

U.S. information reporting requirements,

including under section 6048.

In this transaction, the taxpayer

(Taxpayer A), a U.S. citizen or a U.S. resident alien, establishes a personal retirement scheme under Malta’s Retirement

Pension Act of 2011. In Year 1, Taxpayer

A transfers cash, appreciated property

(annuities, securities, digital assets, partnership interests, etc.), or a combination

thereof, to the scheme without recognizing

gain on the transfer under section 684(b).

In Year 2 or later, Taxpayer A takes the

position on a U.S. income tax return that

the income earned by the scheme (including gain on the sale or other disposition of

appreciated property initially transferred

to the scheme) is exempt from U.S. tax

under Articles 18 and 1(5)(a) of the Treaty

because the scheme is a “pension fund”

for purposes of the Treaty. In Year 3 or

later, Taxpayer A receives a distribution

from the scheme and takes the position on

a U.S. income tax return that such distributions are exempt from U.S. tax by reason of Articles 17(1)(b) and 1(5)(a) of the

Treaty. Additionally, Taxpayer A may not

comply with U.S. information reporting

requirements related to these transactions,

including under section 6048.

The taxpayer’s positions in these transactions are incorrect. First, the Treaty

benefits claimed with respect to personal

retirement schemes established in Malta

are not available because these schemes

are not “pension funds,” and their distributions are not “pensions or other similar remuneration,” as explained in the

CAA. Second, under Article 3(2) of the

Treaty, the undefined terms “pension” and

“retirement” are interpreted according to

the tax law of the United States, which is

the country that is applying the Treaty. 2

Under U.S. law applicable to individual

retirement arrangements, Malta personal

retirement schemes are neither “pensions”

nor do they provide “retirement benefits” for purposes of the Treaty. Maltese

law does not condition the tax benefits it

provides for these arrangements upon reasonably analogous requirements of U.S.

law. Those requirements include that an

individual’s contributions to an individual

retirement arrangement (other than qualified rollovers from a pension or retirement

arrangement that is tax-favored under

the same country’s laws) must be made

in cash and must be based on income

earned from employment or self-employment activities. See sections 219, 408, and

408A. Third, in appropriate fact patterns,

the transaction viewed as a whole may be

disregarded under relevant judicial doctrines, including the step-transaction doctrine, the substance-over-form doctrine,

and the assignment of income doctrine, in

order to give effect to the general purpose

of the Treaty to mitigate double taxation

but not improperly create instances of

non-taxation, especially in cases in which

the person establishing the retirement

arrangement has no other connection to

the treaty jurisdiction.

VI. Purpose of Proposed Regulation

On March 3, 2022, the Sixth Circuit

issued an order in Mann Construction v.

United States, 27 F.4th 1138, 1147 (6th

Cir. 2022), holding that Notice 2007-83,

2007-2 C.B. 960, which identified certain

trust arrangements claiming to be welfare

benefit funds and involving cash value life

insurance policies as listed transactions,

violated the Administrative Procedure

Act (APA), 5 U.S.C. 551-559 because the

notice was issued without following the

notice-and-comment procedures required

by section 553 of the APA. The Sixth

Circuit concluded that Congress did not

clearly express an intent to override the

notice-and-comment procedures required

by section 553 of the APA when it enacted

the AJCA. Id. at 1148. The Sixth Circuit

reversed the decision of the district court,

which held that Congress had authorized

the IRS to identify listed transactions

without notice and comment. See Mann

Construction, Inc. v. United States, 539

F.Supp.3d 745, 763 (E.D. Mich. 2021).

Relying on the Sixth Circuit’s analysis in Mann Construction, three district

courts and the Tax Court have concluded

that IRS notices identifying listed transactions were improperly issued because

they were issued without following the

APA’s notice and comment procedures.

See Green Rock, LLC v. IRS, 2023 WL

1478444 (N.D. AL., February 2, 2023)

(Notice 2017-10); GBX Associates, LLC,

v. United States, 1:22cv401 (N.D. Ohio,

Nov. 14, 2022) (same); Green Valley

Investors, LLC, et al. v. Commissioner,

159 T.C. No. 5 (Nov. 9, 2022) (same);