# Bulletin No. 2023–26

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URL: https://www.frixlaw.com/law-library/documents/agency%3Airs%3A9fba99b2ccb8d107

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

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)
(C) of the Internal Revenue Code for calendar year 2022.
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

1

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)
(C) for calendar year 2022 is $93.97.
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
T
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

1
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.

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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

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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
2

“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);
see also CIC Services, LLC v. IRS, 2022
WL 985619 (E.D. Tenn. March 21, 2022),
as modified by 2022 WL 2078036 (E.D.
Tenn. June 2, 2022) (Notice 2016-66,
identifying a transaction of interest).
The Treasury Department and the IRS
disagree with the Sixth Circuit’s decision
in Mann Construction and the subsequent
decisions that have applied that reasoning to find other IRS notices invalid and
are continuing to defend the validity of
notices identifying transactions as listed
transactions in circuits other than the
Sixth Circuit. At the same time, however,
to avoid any confusion and ensure consistent enforcement of the tax laws throughout the nation, the Treasury Department
and the IRS are issuing these proposed
regulations to identify certain transactions involving Malta pension plans as
listed transactions for purposes of all relevant provisions of the Code and Treasury
Regulations, including section 6707A and
§1.6011-4(b)(2).
The Treasury Department and the IRS
believe that transactions involving a Malta
personal retirement scheme described
in the proposed regulations, and substantially similar transactions involving
a retirement arrangement established in
Malta, unless specifically excepted, are
tax avoidance transactions and should be

Treasury’s Technical Explanation to Article 3(2) of the Treaty states:
Paragraph 2 provides that in the application of the Convention, any term used but not defined in the Convention will have the meaning that it has under the law of the Contracting State
whose tax is being applied, unless the context requires otherwise, or the competent authorities have agreed on a different meaning pursuant to Article 25 (Mutual Agreement Procedure).


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June 26, 2023

identified as listed transactions for purposes of §1.6011-4 and sections 6111 and
6112. Under the proposed regulations,
participants involved in such transactions
and their material advisors would need to
comply with the information reporting and
collection requirements under §1.6011-4
and sections 6111 and 6112. Failure to do
so could result in penalties as described in
sections II and III of the Background section of this preamble.
Explanation of Provisions
I. Malta Personal Retirement Scheme
Transaction
Proposed §1.6011-12(a) provides that,
except as provided in proposed §1.601112(b)(2), a transaction that is the same
as, or substantially similar to, a Malta
personal retirement scheme transaction
(described in proposed §1.6011-12(b)
(1)) is a listed transaction for purposes of
§1.6011-4 and sections 6111 and 6112. A
transaction is a Malta personal retirement
scheme transaction as described in proposed §1.6011-12(b)(1) if a U.S. citizen
or a U.S. resident alien directly or indirectly (1) transfers (within the meaning of
§1.679-3 or §1.684-2) cash or other property to, or receives a distribution from, a
personal retirement scheme established
under Malta’s Retirement Pension Act
of 2011 (a “Malta personal retirement
scheme”), and (2) takes the position on
a U.S. Federal income tax return that (a)
income earned or gain realized by the
Malta personal retirement scheme is not
includible in income on a current basis
for U.S. Federal income tax purposes by
reason of the Treaty, or (b) a distribution
from a Malta personal retirement scheme
attributable to earnings or gains of the
scheme that have not been included in
income for U.S. Federal income tax purposes is exempt from U.S. taxation by reason of the Treaty. Proposed §1.6011-12(b)
(1). Indirect transfers include transfers to a
Malta personal retirement scheme by any
person (intermediary) to whom a U.S. person transfers property if such transfer is
made pursuant to a plan one of the principal purposes of which is the avoidance of
United States tax. See, e.g., §1.679-3(c).
For example, assume in Year 1
Taxpayer A, a U.S. citizen or a U.S.

June 26, 2023

resident alien directly or indirectly transfers cash and appreciated property to a
Malta personal retirement scheme. In Year
2 the Malta personal retirement scheme
sells Taxpayer A’s contributed property
at a gain. On a U.S. income tax return
for Year 2, Taxpayer A does not include
the gain realized by the scheme, because,
according to Taxpayer A, such gain is
exempt from U.S. taxation under Articles
18 and 1(5)(a) of the Treaty. Taxpayer A
has engaged in a Malta personal retirement scheme transaction as described in
proposed §1.6011-12(b)(1). Unless the
exception described in proposed §1.601112(b)(2) applies, the transaction is a listed
transaction for purposes of §1.6011-4 and
sections 6111 and 6112. Taxpayer A and
any material advisor with respect to the
listed transaction are therefore subject
to the information reporting and collection of information requirements under
§1.6011-4 and sections 6111 and 6112,
respectively, as described in sections I
through III of the Background section
of this preamble. Taxpayer A must also
comply with U.S. information reporting requirements including, for example,
requirements under section 6048.
Under §1.6011-4(c)(3)(i)(E), Taxpayer
A is a participant in a listed transaction for
each year in which Taxpayer A’s tax return
reflects tax consequences or a tax strategy
of a Malta personal retirement scheme
transaction as described in proposed
§1.6011-12(b)(1). Thus, continuing with
the example in the preceding paragraph,
if Taxpayer A receives a distribution from
the Malta personal retirement scheme in
Year 3, but does not include the distribution in income under Articles 17(1)(b) and
1(5)(a) of the Treaty, Taxpayer A will have
participated in a Malta personal retirement
scheme transaction as described in proposed §1.6011-12(b)(1) in each of Year 2
and Year 3.
A transaction is not substantially similar to a Malta personal retirement scheme
transaction unless it involves the Treaty
and a retirement arrangement established
in Malta. The Treasury Department and
the IRS are aware that taxpayers may
attempt to use transactions similar to the
Malta personal retirement scheme transaction in other jurisdictions to achieve a similar tax avoidance outcome. The Treasury
Department and the IRS are therefore

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considering whether transactions similar
to the Malta personal retirement scheme
transaction replicated in other jurisdictions should also be identified as listed
transactions and request comments on this
matter.
II. Exception
The Treasury Department and the IRS
are aware that the United Kingdom allows
tax-deferred transfers from its pension or
retirement schemes to certain “qualified
recognised overseas pension schemes”
(or QROPS), including Malta personal retirement schemes. The Treasury
Department and the IRS believe that certain U.S. individuals who may have transferred their foreign pension or retirement
arrangements to Malta personal retirement schemes in accordance with foreign
law and claimed an exemption from U.S.
income tax for earnings in or distributions from such schemes on U.S. Federal
income tax returns filed before the date
these proposed regulations are published
in the Federal Register should not be
treated as participating in a listed transaction described in proposed §1.6011-12(b)
(1) provided certain requirements are met.
Accordingly, proposed §1.6011-12(b)(2)
provides that if a U.S. citizen or resident
alien described in proposed §1.601112(b)(1)(i) takes a position described in
proposed §1.6011-12(b)(1)(ii) on a U.S.
Federal income tax return filed before June
6, 2023, such U.S. citizen or U.S. resident
alien will not be treated as participating in
a listed transaction for the taxable year to
which the U.S. Federal income tax return
relates provided that (1) such U.S. citizen or U.S. resident alien (the transferor)
established the Malta personal retirement
scheme with a transfer (or rollover) of a
pension or other retirement arrangement
established in a country other than Malta
or the United States (for example, a pension scheme established in the United
Kingdom), and in compliance with the
tax laws of such country, (2) the transferor was, when such pension or retirement arrangement was established and
such rollover occurred, a resident of the
other country under that country’s tax law,
including under Article 4 (Residency) of
such country’s income tax treaty with the
United States, if applicable (for example,

Bulletin No. 2023–26

a tax resident of the United Kingdom),
and (3) the transferor’s contributions to
such pension or retirement arrangement
consisted solely of cash in an amount that
bears a relationship to the transferor’s
income earned from the performance of
personal services. This exception does
not apply to a U.S. citizen or U.S. resident alien who takes a position described
in proposed §1.6011-12(b)(1)(ii) on a
U.S. Federal income tax return filed on
or after June 6, 2023, when U.S. citizens
or U.S. resident aliens who own foreign
pension or retirement arrangements and
their material advisors are on notice that
the Treasury Department and the IRS
have proposed identifying Malta personal
retirement scheme transactions as listed
transactions for purposes of §1.6011-4(b)
(2) and sections 6111 and 6112.
For example, assume Taxpayer B, a
U.S. citizen, was a resident of Country Y
when Taxpayer B established a Country Y
pension plan in compliance with Country
Y’s laws. Taxpayer B made cash contributions from wages to the Country Y pension plan. Taxpayer B, while a U.S. citizen
and resident of Country Y, transferred the
Country Y pension plan to a Malta personal
retirement scheme in accordance with
Country Y tax law. In Year 1, Taxpayer
B’s Malta personal retirement scheme
earned income. On Taxpayer B’s Year 1
U.S. Federal income tax return, which is
filed before June 6, 2023, Taxpayer B took
a position described in proposed §1.601112(b)(1)(ii). Under proposed §1.601112(b)(2), Taxpayer B would not be treated
as participating in a listed transaction with
respect to such year.
A U.S. citizen or U.S. resident alien
who is described in proposed §1.601112(b)(2), however, may be subject to
U.S. income tax as a result of the transfer
from a pension or retirement arrangement
established in a country other than Malta
to a Malta personal retirement scheme, as
well as U.S. information reporting requirements under, for example, section 6048(a)
and (c). See IRS INFO 2011-0096 (Dec.
30, 2011). U.S. citizens and U.S. residents
who are described in proposed §1.601112(b)(2) are subject to U.S. income tax on
income earned and gain realized by their
Malta personal retirement schemes, as
described in section IV of the Background
section of this preamble.

Bulletin No. 2023–26

III. Effect of Transaction Becoming a
Listed Transaction
Participants required to disclose these
transactions under §1.6011-4 who fail to
do so would be subject to penalties under
section 6707A. Participants required
to disclose these transactions under
§1.6011-4 who fail to do so would also
be subject to an extended period of limitations under section 6501(c)(10). Material
advisors required to disclose these transactions under section 6111 who fail to do
so would be subject to the penalty under
section 6707. Material advisors required
to maintain lists of investors under section 6112 who fail to do so (or who fail
to provide such lists when requested by
the IRS) would be subject to the penalty
under section 6708(a). In addition, the
IRS may impose other penalties on persons involved in these transactions or substantially similar transactions, including
accuracy-related penalties under section
6662 or section 6662A, the section 6694
penalty for understatements of a taxpayer’s liability by a tax return preparer, and
the section 6677 penalty for the failure to
timely report certain transactions with,
and ownership of, foreign trusts.
Taxpayers who have filed a tax
return (including an amended return
(or Administrative Adjustment Request
(AAR) for certain partnerships)) reflecting their participation in these transactions before [DATE THE FINAL
REGULATIONS ARE PUBLISHED
IN THE FEDERAL REGISTER] (the
finalization date) and who have not otherwise finalized a settlement agreement
with the IRS with respect to the transaction must disclose the transactions as
provided in §1.6011-4(d) and (e) provided that the period of limitations for
assessment of tax, including any applicable extensions, for any taxable year in
which the taxpayer participated in the
transaction has not ended on or before the
finalization date. Proposed §1.6011-12(b)
(3); see also §1.6011-4(e)(2)(i). Thus, for
example, taxpayers who participated in a
Malta personal retirement scheme transaction before the finalization date, but did
not comply with their foreign trust information reporting requirements under section 6048 with respect to such transaction,
have an open period of limitations for

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assessments under section 6501(c)(8) and
therefore must file a disclosure statement
with OTSA within 90 calendar days after
the date on which the transaction becomes
a listed transaction.
In addition, material advisers have disclosure requirements with regard to transactions occurring in prior years. However,
notwithstanding §301.6111-3(b)(4)(i) and
(iii), material advisors are required to disclose only if they have made a tax statement on or after the date that is six years
before the date the regulations are published as final regulations in the Federal
Register.
The Treasury Department and the IRS
recognize that some taxpayers may have
filed tax returns taking the position that
they were entitled to the purported tax benefits of the types of transactions described
in these proposed regulations. Because the
IRS will take the position that taxpayers
are not entitled to the purported tax benefits of the listed transactions described
in the proposed regulations, taxpayers
should consider filing amended returns to
ensure that their transactions are disclosed
properly.
Proposed Applicability Date
Proposed §1.6011-12 would identify
certain Malta personal retirement scheme
transactions described in proposed
§1.6011-12(b)(1), except as described
in proposed §1.6011-12(b)(2), as listed
transactions effective as of the date of
publication in the Federal Register of a
Treasury decision adopting these regulations as final regulations.
Special Analyses
I. Regulatory Planning and Review -Economic Analysis
The Administrator of the Office of
Information and Regulatory Affairs
(OIRA), Office of Management and
Budget (OMB), has determined that this
proposed rule is not a significant regulatory action, as that term is defined in
section 3(f) of Executive Order 12866,
as amended. Therefore, OIRA has not
reviewed this proposed rule pursuant to
section 6(a)(3)(A) of Executive Order
12866 and April 11, 2018, Memorandum

June 26, 2023

of Agreement between the Treasury
Department and the OMB.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520) generally requires
that a Federal agency obtain the approval
of the OMB before collecting information
from the public, whether such collection
of information is mandatory, voluntary, or
required to obtain or retain a benefit.
The estimated number of taxpayers
impacted by these proposed regulations
ranges between 50 to 150 per year. No burden on these taxpayers would be imposed
by these proposed regulations. Instead,
the collection of information contained
in these proposed regulations is reflected
in the collection of information for Forms
8886 and 8918 that has been reviewed and
approved by the OMB in accordance with
the Paperwork Reduction Act (44 U.S.C.
3507(c)) under control numbers 15451800 and 1545-0865. Thus, the burden
estimates for the Forms 8886 and 8918
will be adjusted to reflect the taxpayers
impacted by these regulations. An agency
may not conduct or sponsor, and a person
is not required to respond to, a collection
of information unless the collection of
information displays a valid OMB control
number.
III. Regulatory Flexibility Act
When an agency issues a rulemaking
proposal, the Regulatory Flexibility Act
(5 U.S.C. chapter 6) (“RFA”) requires the
agency “to prepare and make available
for public comment an initial regulatory
flexibility analysis” that will “describe the
impact of the proposed rule on small entities.” See 5 U.S.C. 603(a). Section 605
of the RFA provides an exception to this
requirement if the agency certifies that the
proposed rulemaking will not have a significant economic impact on a substantial
number of small entities. A small entity is
defined as a small business, small nonprofit
organization, or small governmental jurisdiction. See 5 U.S.C. 601(3) through (6).
The Treasury Department and the IRS
do not expect that the proposed regulations will have a significant economic
impact on a substantial number of small

June 26, 2023

entities within the meaning of sections
601(3) through (6) of the RFA. The Malta
personal retirement scheme transaction
described in proposed §1.6011-12 only
applies to U.S. citizens and U.S. resident
individuals, and not entities. Therefore,
with respect to its impact on participants,
proposed §1.6011-12 will not impact
small entities.
The Treasury Department and the IRS
do not have information about which
entities engage in the advising of this
transaction, and therefore cannot accurately estimate the impact of proposed
§1.6011-12 on material advisors that are
small entities. However, the Treasury
Department and the IRS do not expect
proposed §1.6011-12 to impact a substantial number of small entities that may
advise on this transaction. As explained
in section III of the Background section
of this preamble, participants in these
transactions generally have no connection to Malta other than their participation in a Malta personal retirement
scheme primarily to avoid U.S. tax, and
to avoid detection, they may not comply
with their U.S. information reporting
requirements. This tax-avoidance motive
of potential clients who are U.S. persons,
combined with the necessary familiarity with, and access to, Malta’s pension
system and tax law in order to facilitate
the Malta personal retirement scheme
transaction, means that it is unlikely for
a substantial number of small entities to
engage in advising on these transactions.
The Treasury Department and the IRS
request comments from the public on
the number of small entities that may be
impacted and whether that impact will be
economically significant.

Guidance cited in this preamble is published in the Internal Revenue Bulletin and
is available from the Superintendent of
Documents, U.S. Government Publishing
Office, Washington, DC 20402, or by visiting the IRS website at https://www.irs.
gov.

IV. Section 7805(f)

Drafting Information

Pursuant to section 7805(f) of the Code,
the proposed regulations have been submitted to the Chief Counsel for Advocacy
of the Small Business Administration
for comment on their impact on small
businesses.

The principal authors of these regulations are Lara Banjanin and Tracy Villecco
of the Office of Associate Chief Counsel
(International). However, other personnel
from the Treasury Department and the
IRS participated in their development.

V. Unfunded Mandates Reform Act

List of Subjects in 26 CFR Part 1

Section 202 of the Unfunded Mandates
Reform Act of 1995 requires that agencies

Income taxes, Reporting and recordkeeping requirements.

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assess anticipated costs and benefits and
take certain other actions before issuing a
final rule that includes any Federal mandate that may result in expenditures in any
one year by a State, local, or Tribal government in the aggregate, or by the private
sector, of $100 million in 1995 dollars,
updated annually for inflation. The proposed regulations do not include any
Federal mandate that may result in expenditures by State, local, or Tribal governments or by the private sector in excess of
that threshold.
VI. Executive Order 13132: Federalism
Executive Order 13132 (“Federalism”)
prohibits an agency from publishing any
rule that has federalism implications
if the rule either imposes substantial,
direct compliance costs on State and
local governments, and is not required
by statute, or preempts State law unless
the agency meets the consultation and
funding requirements of section 6 of the
Executive order. The proposed regulations
do not have federalism implications, do
not impose substantial direct compliance
costs on State and local governments, and
do not preempt State law within the meaning of the Executive order.
Statement of Availability of IRS
Documents

Bulletin No. 2023–26

Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
part 1 as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
*****
Section 1.6011-12 also issued under 26
U.S.C. 6001 and 26 U.S.C. 6011 * * *
*****
Par. 2. Section 1.6011-12 is added to
read as follows:
§1.6011-12 Malta Personal Retirement
Scheme Listed Transaction.
(a) Malta personal retirement scheme
listed transaction. Transactions that are
the same as, or substantially similar to, a
transaction described in paragraph (b)(1)
of this section are identified as listed transactions for purposes of §1.6011-4(b)(2),
except as provided in paragraph (b)(2) of
this section. A transaction is not substantially similar unless it involves a retirement arrangement established in Malta
and the taxpayer takes a U.S. Federal
income tax return position based on the
income tax treaty between the United
States and Malta.
(b) Malta personal retirement scheme
transaction—(1) Transaction description.
A transaction is described in this paragraph (b)(1) if:
(i) A U.S. citizen or U.S. resident alien,
directly or indirectly-(A) Transfers (within the meaning of
§1.679-3 or §1.684-2) cash or other property to a personal retirement scheme established under Malta’s Retirement Pension
Act of 2011 (a “Malta personal retirement
scheme”), or
(B) Receives a distribution from a
Malta personal retirement scheme, and
(ii) A U.S. citizen or U.S. resident alien
described in paragraph (b)(1)(i) of this
section takes a position on a U.S. Federal
income tax return that--

Bulletin No. 2023–26

(A) Income earned or gain realized by
the Malta personal retirement scheme is
not includible on a current basis in income
for U.S. Federal income tax purposes by
reason of the income tax treaty between
the United States and Malta, or
(B) A distribution received from the
Malta personal retirement scheme attributable to earnings or gains that have not
been included in income for U.S. Federal
income tax purposes is exempt from U.S.
taxation by reason of the income tax treaty
between the United States and Malta.
(2) Exception. If a U.S. citizen or
U.S. resident alien described in paragraph (b)(1) of this section takes a position described in paragraph (b)(1)(ii) of
this section on a U.S. Federal income tax
return filed before June 6, 2023, such U.S.
citizen or U.S. resident alien will not be
treated as participating in a listed transaction under this section for the taxable
year to which the U.S. Federal income tax
return relates provided that—
(i) Such U.S. citizen or U.S. resident
alien (the transferor) established the Malta
personal retirement scheme with a transfer
(or rollover) of a pension or other retirement arrangement established in a country
other than Malta or the United States, and
in compliance with the tax laws of such
country;
(ii) The transferor was, when such
pension or retirement arrangement was
established and such rollover occurred, a
resident of the other country under that
country’s tax law, including under Article
4 (Residency) of such country’s income
tax treaty with the United States, if applicable; and
(iii) The transferor’s contributions to
such pension or retirement arrangement
consisted solely of cash in an amount that
bears a relationship to the transferor’s
income earned from the performance of
personal services.
The preceding sentence does not apply,
however, to any U.S. citizen or U.S. resident alien who takes a position described
in paragraph (b)(1)(ii) of this section on a
U.S. Federal income tax return filed on or
after June 6, 2023.
(3) Applicability date—(i) In general.
This section identifies transactions that
are the same as, or substantially similar to,

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the transaction described in paragraph (b)
(1) of this section, except as provided in
paragraph (b)(2) of this section, as listed
transactions for purposes of §1.6011-4(b)
(2) and sections 6111 and 6112 effective
[DATE OF PUBLICATION OF THE
FINAL REGULATIONS IN THE
FEDERAL REGISTER].
(ii) Obligations of participants with
respect to prior periods. Pursuant to
§1.6011-4(d) and (e), taxpayers who have
filed a tax return (including an amended
return) reflecting their participation in
these transactions prior to [DATE OF
PUBLICATION OF THE FINAL
REGULATIONS IN THE FEDERAL
REGISTER], who have not otherwise
finalized a settlement agreement with the
Internal Revenue Service with respect to
the transaction, must disclose the transactions as provided in §1.6011-4(d) and
(e) provided that the period of limitations
for assessment of tax for any taxable year
in which the taxpayer participated in the
transaction has not ended on or before
[DATE OF PUBLICATION OF THE
FINAL REGULATIONS IN THE
FEDERAL REGISTER].
(iii) Obligations of material advisors
with respect to prior periods. Material
advisors defined in §301.6111-3(b) of
this chapter who have previously made
a tax statement with respect to a transaction described in paragraph (b)(1) of this
section, except as provided in paragraph
(b)(2) of this section, have disclosure and
list maintenance obligations as described
in §§301.6111-3 and 301.6112-1 of this
chapter, respectively. Notwithstanding
§301.6111-3(b)(4)(i) and (iii) of this
chapter, material advisors are required
to disclose only if they have made a tax
statement on or after the date that is six
years before the date the regulations
are published as final regulations in the
Federal Register.
Douglas W. O’Donnell,
Deputy Commissioner for Services
and Enforcement.
(Filed by the Office of the Federal Register June 6,
2023, 8:45 a.m., and published in the issue of the
Federal Register for June 7, 2023, 88 FR 37186)

June 26, 2023

Notice of Proposed
Rulemaking
Additional Guidance on
Low-Income Communities
Bonus Credit Program
REG-110412-23
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document 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.
DATES: Written or electronic comments
must be received by June 30, 2023.
ADDRESSES: Stakeholders are strongly
encouraged to submit public comments
electronically. Submit electronic submissions via the Federal eRulemaking Portal
at https://www.regulations.gov (indicate
IRS and REG-110412-23) by following
the online instructions for submitting
comments. 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, whether
electronically or on paper, to the IRS’s

June 26, 2023

public docket. Send paper submissions
to: CC:PA:LPD:PR (REG-110412-23),
Room 5203, Internal Revenue Service,
P.O. Box 7604, Ben Franklin Station,
Washington, DC 20044.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
rules, Office of Associate Chief Counsel
(Passthroughs & Special Industries) at
(202) 317–6853 (not a toll-free number);
concerning submissions of written comments, Vivian Hayes at (202) 317-5306
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
I. Overview
Section 13103 of Public Law 117169, 136 Stat. 1818, 1921 (August 16,
2022), commonly known as the Inflation
Reduction Act of 2022 (IRA), added new
section 48(e) to the Internal Revenue
Code (Code) to increase the amount of
the energy investment credit determined
under section 48(a) (section 48 credit)
with respect to eligible property that is part
of a qualified solar and wind facility that
is awarded an allocation of environmental
justice solar and wind capacity limitation
(Capacity Limitation). This document
contains proposed definitions and rules
relating to the allocation of Capacity
Limitation for calendar year 2023 (2023
Capacity Limitation).
The amount of the energy investment
credit determined under the section 48
credit for a taxable year is generally calculated by multiplying the basis of each
energy property placed in service during
that taxable year by the energy percentage
(as defined in section 48(a)(2)). Section
48(e) increases the section 48 credit by
increasing the energy percentage used
to calculate the amount of the section
48 credit (section 48(e) Increase) in the
case of qualified solar and wind facilities that receive an allocation of Capacity
Limitation. The term “qualified solar and
wind facility” is defined in section 48(e)
(2) to mean any facility that (i) generates
electricity solely from a wind facility, solar
energy property, or small wind energy
property; (ii) has a maximum net output
of less than 5 megawatts (as measured in

1098

alternating current); and (iii) is described
in at least one of four categories in section 48(e)(2)(A)(iii) (and in part II of this
Background).
As described in part III of this
Background, section 48(e)(4)(A) directs
the Secretary of the Treasury or her delegate (Secretary) to “provide procedures
to allow for an efficient allocation” of
Capacity Limitation to qualified solar
and wind facilities. Later this year, the
Treasury Department and the IRS expect
to issue details for the program applicable for the calendar year 2023 Capacity
Limitation, covering a comprehensive set
of procedures and rules for applicants.
The majority of the information regarding
the program’s details will be procedural
rules. Some of the information that the
Treasury Department and the IRS intend
to include, however, will provide more
substantive details that cover threshold
definitions and requirements that must be
established to make allocations efficiently
and effectively. Those aspects of the program’s details are the subject of this notice
of proposed rulemaking. The Treasury
Department and the IRS expect that final
guidance will be reflected in regulations.
II. Four Categories of Qualified Solar
and Wind Facilities
Depending on the category of the facility, an allocation of Capacity Limitation
may result in a section 48(e) Increase
equal to either 10 percentage points or 20
percentage points. Section 48(e)(1)(A)(i)
provides for a section 48(e) Increase of 10
percentage points for eligible property that
is located in a low-income community,
as defined in section 45D(e) (Category 1
facility), or on Indian land, as defined in
section 2601(2) of the Energy Policy Act
of 1992 (25 U.S.C. 3501(2)) (Category 2
facility). Section 48(e)(1)(A)(ii) provides
for a section 48(e) Increase of 20 percentage points for eligible property that is
part of a qualified low-income residential
building project (Category 3 facility) or
a qualified low-income economic benefit project (Category 4 facility). Under
section 48(e)(1)(A)(i), a Category 1 or
Category 2 facility that also qualifies as a
Category 3 or Category 4 facility is considered a Category 3 facility or Category
4 facility (as applicable).

Bulletin No. 2023–26

Section 48(e)(2)(B) provides that a
facility will be treated as part of a qualified low-income residential building
project if such facility is installed on a residential rental building which participates
in a covered housing program (as defined
in § 41411(a) of the Violence Against
Women Act of 1994 (34 U.S.C. 12491(a)
(3)), a housing assistance program administered by the Department of Agriculture
under title V of the Housing Act of 1949,
a housing program administered by a tribally designated housing entity (as defined
in § 4(22) of the Native American Housing
Assistance and Self-Determination Act
of 1996 (25 U.S.C. 4103(22)), or such
other affordable housing programs as the
Secretary may provide, and (ii) the financial benefits of the electricity produced
by such facility are allocated equitably
among the occupants of the dwelling units
of such building.
Section 48(e)(2)(C) provides that a
facility will be treated as part of a qualified low-income economic benefit project

if at least 50 percent of the financial benefits of the electricity produced by such
facility are provided to households with
income of less than 200 percent of the
poverty line (as defined in section 36B(d)
(3)(A) of the Code) applicable to a family of the size involved, or less than 80
percent of area median gross income (as
determined under section 142(d)(2)(B) of
the Code).
For a qualified low-income residential
building project and a qualified low-income economic benefit project, section
48(e)(2)(D) provides that electricity
acquired at a below-market rate will be
considered a financial benefit.
III. Overview of Low-Income
Communities Bonus Credit Program
Section 48(e)(4) directs the Secretary
to establish a program, within 180 days
of enactment of the IRA, to allocate
amounts of Capacity Limitation to qualified solar and wind facilities. Notice

2023-17, 2023-10 I.R.B. 505, established the program under section 48(e) to
allow amounts of Capacity Limitation to
be allocated to qualified solar and wind
facilities eligible for the section 48 credit
(Low-Income Communities Bonus Credit
Program).1 Under section 48(e)(4)(C),
the total annual Capacity Limitation that
may be allocated under the Low-Income
Communities Bonus Credit Program is
1.8 gigawatts of direct current capacity for
each of the calendar years 2023 and 2024.
Under section 48(e)(4)(D), if the annual
Capacity Limitation for any calendar year
exceeds the aggregate amount allocated
for such year, the excess is carried forward
to the next year, but not beyond calendar
year 2024.2
Consistent with Notice 2023-17, the
Treasury Department and the IRS propose
to reserve a portion of the total annual
Capacity Limitation of 1.8 gigawatts of
direct current capacity for each facility category for calendar year 2023 as
follows:

Category 1: Located in a Low-Income Community

700 megawatts

Category 2: Located on Indian Land

200 megawatts

Category 3: Qualified Low-Income Residential Building Project

200 megawatts

Category 4: Qualified Low-Income Economic Benefit Project

700 megawatts

The proposed rules in this document
would supplement the guidance provided
in Notice 2023-17 to outline the specific application procedures, additional
allocation criteria, and applicable definitions, among other information, necessary to submit an application to request
an allocation of the Capacity Limitation
for calendar year 2023 under the LowIncome Communities Bonus Credit
Program. The Treasury Department and
the IRS request comments on these proposed definitions and requirements. The
Treasury Department and the IRS also
request comment on whether these proposed definitions and requirements should
apply for purposes of the Low-Income

Communities Bonus Credit Program for
calendar year 2024 and the program to
be established under section 48E(h) for
calendar year 2025 and future years. The
Treasury Department and the IRS anticipate further evaluating the program for
2023 to determine what further guidance
may be helpful or necessary in the future.
Explanation of Proposed Rules
The proposed rules relate to specific
definitions and requirements regarding
the following topics: (1) the definition
of facility based on single project factors; (2) the definition of “in connection
with” to demonstrate what it means for

energy storage technology to be considered part of eligible property of the
qualified facility; (3) definitions of the
terms “financial benefit” and “electricity
acquired at a below market rate” under
section 48(e)(2)(D), as well as a manner
to apply such definitions, appropriately,
to Category 3 facilities that are part of
qualified low-income residential building
projects and Category 4 facilities that are
part of qualified economic benefit projects; (4) the definition of “located in” for
relevant geographic criteria; (5) a rule for
facilities placed in service prior to an allocation award; (6) reservations of Capacity
Limitation allocation for applicant facilities that meet certain Additional Selection

Notice 2023-17 describes several other definitions and requirements related to the Low-Income Communities Bonus Credit Program.
Section 13702(a) of the IRA also enacted section 48E(h), which generally provides for a program similar to the Low-Income Communities Bonus Credit Program for calendar years after
2024. Section 48E(i) directs the Secretary to issue guidance regarding the implementation of section 48E not later than January 1, 2025. Any excess Capacity Limitation from calendar year
2024 may be carried forward and applied to the Capacity Limitation for calendar year 2025 under new section 48E(h)(4)(D)(ii). The Treasury Department and the IRS anticipate that operation
of the Low-Income Communities Bonus Credit Program will inform the operation of the section 48E(h) program generally, as described in future guidance.
1
2

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1099

June 26, 2023

Criteria; (7) sub-reservations of Capacity
Limitation allocation for facilities built in
a low-income community; (8) application
materials demonstrating facility viability
in order to allow for an efficient allocation process; (9) documentation and attestations to be submitted when a facility is
placed in service; and (10) post-allocation
compliance including disqualification and
recapture of section 48(e) Increases.
I. Proposed Definitions and Requirements
A. Definition of Facility
The term “qualified solar and wind
facility” is defined in section 48(e)(2)
(A) to mean any facility that (i) generates electricity solely from a wind facility, solar energy property, or small wind
energy property; (ii) has a maximum net
output of less than 5 megawatts (as measured in alternating current); and (iii) is
described in at least one of the four categories described in section 48(e)(2)(A)
(iii) (Category 1, 2, 3, or 4). The Treasury
Department and the IRS are concerned
that some applicants may attempt to circumvent the less than 5-megawatt output
limitation provided in section 48(e)(2)(A)
(ii) by artificially dividing larger projects
into multiple facilities. To prevent applicants from dividing larger projects that
should be regarded as a single facility
under section 48(e)(2)(A), solely for the
purpose of the Low-Income Communities
Bonus Credit Program, the Treasury
Department and the IRS propose to aggregate into a single “qualified solar and
wind facility” multiple facilities or energy
properties of the same type (solar or wind)
that are operated as part of a single project
consistent with the single-project factors
provided in section 7.01(2)(a) of Notice
2018-59, 2018-28 I.R.B. 196 or section
4.04(2) of Notice 2013-29, 2013-20 I.R.B.
1085, as applicable.
Therefore, the Treasury Department
and the IRS propose to define a single
qualified solar or wind facility as any
facility that (i) generates electricity solely
from a wind facility, solar energy property, or small wind energy property; (ii)
that has a maximum net output of less than
5 megawatts (as measured in alternating
current); and (iii) that is described in at

June 26, 2023

least one of the four categories described
in section 48(e)(2)(A)(iii) (Category 1,
2, 3, or 4). In addition, for purposes of
determining allocations, administering the
program fairly, and avoiding abuse, the
Treasury Department and the IRS propose
that multiple solar or wind energy properties or facilities that are operated as part
of a single project would be aggregated
and treated as a single facility. Whether
multiple facilities or energy properties are
operated as part of a single project would
depend on the relevant facts and circumstances and would be evaluated based on
the factors provided in section 7.01(2)(a)
of Notice 2018-59 or section 4.04(2) of
Notice 2013-29, as applicable.
B. Energy Storage Technology Installed
in Connection with Solar and Wind
Facility
Section 48(e)(3) defines “eligible property” to mean energy property that (i) is
part of a wind facility described in section
45(d)(1) for which an election to treat
the facility as energy property was made
under section 48(a)(5) (wind facility), or
(ii) is solar energy property described in
section 48(a)(3)(A)(i) (solar energy property) or qualified small wind energy property described in section 48(a)(3)(A)(vi)
(small wind energy property), including
energy storage technology (as described
in section 48(a)(3)(A)(ix)) “installed in
connection with” such qualifying energy
property. The Treasury Department and
the IRS propose to define “installed in
connection with” for energy storage technology to demonstrate what is required
for such energy storage technology to be
considered eligible property under section 48(e)(3).
Under the proposed definition energy
storage technology would be “installed in
connection with” other eligible property if
both (1) the energy storage technology and
other eligible property are considered part
of a single qualified solar and wind facility because the energy storage technology
and other eligible property are owned by a
single legal entity, located on the same or
contiguous pieces of land, have a common
interconnection point, and are described
in one or more common environmental
or other regulatory permits; and (2) the

1100

energy storage technology is charged no
less than 50 percent by the other eligible
property. The Treasury Department and
the IRS also propose to add a safe harbor,
which would deem the energy storage
technology to be charged at least 50 percent by the facility if the power rating of
the energy storage technology (in kW) is
less than 2 times the capacity rating of the
connected wind facility (in kW alternating current) or solar facility (in kW direct
current).
C. Financial Benefits for Category 3 and
Category 4 Allocations
Section 48(e)(2)(D) provides that
“electricity acquired at a below market rate” will not fail to be taken into
account as a financial benefit. To clarify
this language, the Treasury Department
and the IRS propose definitions of the
terms “financial benefit” and “electricity
acquired at a below market rate” under
section 48(e)(2)(D), as well as a manner
to apply such definitions, appropriately, to
qualified low-income residential building
projects (section 48(e)(2)(B)) and qualified economic benefit projects (section
48(e)(2)(C)). The definitions and requirements would be different for an allocation
in Category 3 (section 48(e)(2)(B)) and
Category 4 (section 48(e)(2)(C)).
1. Financial Benefits for Qualified LowIncome Residential Building Projects
For a facility to be treated as part of a
qualified low-income residential building
project, section 48(e)(2)(B)(ii) provides
that the financial benefits of the electricity
produced by such facility must be allocated equitably among the occupants of
the dwelling units of a residential rental
building that participates in a covered
housing program or other affordable housing program (qualified residential property). The Treasury Department and the
IRS propose to reserve allocations under
this category exclusively for applicants
that would apply the financial benefits
requirement under Category 3 in the following manner.
The Treasury Department and the
IRS propose that financial benefit can be
demonstrated through net energy savings

Bulletin No. 2023–26

as defined below. At least 50 percent of
the financial value of net energy savings would be required to be equitably
passed on to building occupants. This
requirement would recognize that not all
the financial value of the net energy savings can be passed on to building occupants because a certain percentage can
be assumed to be dedicated to lowering
the operational costs of energy consumption for common areas, which benefits
all building occupants. The Treasury
Department and the IRS propose to
reserve allocations under this category
exclusively for applicants that would
equitably pass on net energy savings by
distributing equal shares among the qualified residential property’s units that are
designated as low-income under the covered housing program, or by distributing
proportional shares based on each dwelling unit’s electricity usage.
This proposal accounts for the specific
nature of facilities serving low-income
residential buildings and facility ownership, as the facility may be third party
owned or commonly owned with the
building.
a. Facility and Qualified Residential
Property Have Same Ownership
In scenarios where the facility and the
qualified residential property have the
same ownership, the Treasury Department
and the IRS propose to define the financial
value of net energy savings as the financial value equal to the greater of: (1) 25
percent of the gross financial value of the
annual energy produced or (2) the gross
financial value of the annual energy produced minus the annual costs to operate
the facility. Gross financial value of the
annual energy produced is calculated as
the sum of (a) the total self-consumed
kilowatt-hours produced by the qualified solar and wind facility multiplied by
the applicable building’s metered price
of electricity and (b) the total exported
kilowatt-hours produced by the qualified
solar and wind facility multiplied by the
applicable building’s volumetric export
compensation rate for solar and wind

kilowatt-hours. The annual operating
costs are calculated as the sum of annual
debt service, maintenance, replacement
reserve, and other costs associated with
maintaining and operating the qualified
solar and wind facility.
If the facility and building are commonly owned, a signed benefits sharing
agreement between the building owner
and the tenants would be required. The
Treasury Department and the IRS request
comments on how to adjust definitions
of gross financial value to account for
scenarios in which building occupants
are compensating the facility owner for
energy services.
b. Facility and Qualified Residential
Property Have Different Ownership
In scenarios where the facility and the
qualified residential property have different ownership and the facility owner
enters into a power purchase agreement
or other contract for energy services with
the qualified residential property owner,
the Treasury Department and the IRS
propose to define net energy savings as
equal to the greater of: (1) 50 percent of
the financial value of the annual energy
produced by the facility which accrues
to the owner of the qualified residential
property in the form of utility bill credit
and/or cash payments for net excess generation or (2) the financial value of the
annual energy produced by the facility
which accrues to the owner of the qualified residential property in the form of
utility bill credit and/or cash payments
for net excess generation minus any payments made by the building owner to the
facility owner for energy services associated with the facility in a given year. In
these scenarios, the facility owner must
enter into an agreement with the building
owner for the building owner to distribute the savings to residents.
The Treasury Department and the IRS
request comments on how to adjust definitions of gross financial value to account
for scenarios in which building occupants
are compensating the facility owner for
energy services.

c. Impact of Metering on Delivery of
Financial Benefits
Regardless of ownership, residential
buildings may have master-metered or
sub-metered utilities. The financial benefits of the electricity produced by the
facility cannot be distributed to residents
in master-metered buildings in the same
manner as in sub-metered buildings and
is often administratively infeasible in certain sub-metered buildings. Therefore, the
Treasury Department and the IRS propose that for sub-metered buildings, the
tenants must receive the financial value
associated with utility bill savings in the
form of a credit on their utility bills. The
U.S. Department of Housing and Urban
Development (HUD) has issued guidance
for residents of sub-metered HUD-assisted
housing that participate in community
solar, providing an analysis of how community solar credits may affect utility
allowance and annual income for rent calculations.3 The Treasury Department and
the IRS propose that applicants follow the
HUD guidance and future HUD guidance
on this issue to ensure that tenants’ utility allowances and annual income for rent
calculations are not negatively impacted.
The Treasury Department and the IRS
are aware that in some States or jurisdictions it may not be administratively, or
legally, possible to apply utility bill savings on residents’ electricity bills. The
Treasury Department and the IRS request
comments on this issue and how financial
benefits, such as services and building
improvements, can be provided to residents in such residential buildings
For master-metered buildings, the
Treasury Department and the IRS propose that because residents do not have
individually metered utilities and do not
receive utility bills, the building owner
must pass on the savings through other
means, such as by providing certain benefits to the building residents beyond
those provided prior to the qualified solar
and wind facility being placed in service.
HUD has issued guidance for how residents of mastered-metered HUD-assisted
housing can benefit from owners’ sharing

U.S. Department of Housing and Urban Development, Treatment of Community Solar Credits on Tenant Utility Bills (July 2020): MF Memo re Community Solar Credits July 14 Draft
(hud.gov).
3

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June 26, 2023

financial benefits accrued from an investment in solar energy generation.4 The
Treasury Department and the IRS propose
that applicants follow the HUD guidance
and future HUD guidance on this issue to
ensure that tenants’ utility allowances and
annual income for rent calculations are
not negatively impacted.
2. Financial Benefits in Qualified LowIncome Economic Benefit Projects
For a facility to be treated as part of a
qualified low-income economic benefit
project, section 48(e)(2)(C) requires that
at least 50 percent of the financial benefits
of the electricity produced by the facility
be provided to qualifying low-income
households. To satisfy this standard, the
Treasury Department and the IRS propose
to require that the facility serves multiple households and at least 50 percent of
the facility’s total output is distributed to
qualifying low-income households under
section 48(e)(2)(C)(i) or (ii). In addition,
to further the overall goals of the program,
the Treasury Department and the IRS propose to reserve allocations under this category exclusively for applicants that would
provide at least a 20-percent bill credit
discount rate for all such low-income
households. The Treasury Department
and the IRS propose defining a “bill credit
discount rate” as the difference between
the financial benefit distributed to the
low-income household (including utility
bill credits, reductions in the low-income
household’s electricity rate, or other monetary benefits accrued by the household)
and the cost of participating in the program (including subscription payments
for renewable energy and any other fees or
charges), expressed as a percentage of the
financial benefit distributed to the low-income household. The bill credit discount
rate can be calculated by starting with the
financial benefit distributed to the low-income household, subtracting all payments
made by the low-income customer to the
facility owner and any related third parties as a condition of receiving that financial benefit, then dividing that difference

by the financial benefit distributed to the
low-income household.
To ensure these requirements are met,
verification of households’ qualifying
low-income status is required. Applicants
are responsible for proof-of-income verification and would be required to submit
documentation upon placing the qualified solar and wind facility in service that
identifies each qualifying low-income
household, the output allocated to each
qualifying low-income household in kW,
and the method of income verification
utilized.
Applicants may use category eligibility or other income verification methods to qualify low-income households.
Categorical eligibility consists of obtaining proof of household participation in a
needs-based Federal5, State, Tribal, or utility program with income limits at or below
the qualifying income level for the specific
facility (qualifying program). State agencies (for example, state community solar/
wind program administrators) can also
provide verification of low-income status
if the State program’s income limits are at
or below the qualifying income level for
the qualified solar and wind facility. If a
household is not enrolled in a qualifying
program, additional income verification
methods can be used such as: paystubs,
tax returns, or income verification through
crediting agencies and commercial data
sources. Eligibility based on the applicant
(or contractors or subcontractors) collecting self-attestations is not permissible.

geographic area if 50 percent or more
of the facility’s nameplate capacity is in
a qualifying area. A facility’s nameplate
capacity percentage is determined by
dividing the nameplate capacity of the
facility’s energy-generating units that are
located in the qualifying area by the total
nameplate capacity of all the energy-generating units of the facility.
Nameplate capacity for an electricity generating unit means the maximum
electricity generating output that the unit
is capable of producing on a steady state
basis and during continuous operation
under standard conditions, as measured
by the manufacturer and consistent with
the definition provided in 40 CFR 96.202.
Energy-generating units that generate
direct current (DC) power before converting to alternating current (AC) (for
example, solar photovoltaic) should use
the nameplate capacity in DC, otherwise
the nameplate capacity in AC should be
used (for example, wind facilities). Where
applicable, the International Standard
Organization (ISO) conditions are used to
measure the maximum electricity generating output or usable energy capacity. The
nameplate capacity of any energy storage
technology installed in connection with
the qualified solar and wind facility does
not affect the assessment of the Nameplate
Capacity Test.
II. Proposed Program Requirements and
Structure

D. Location

A. Placed in Service Prior to Allocation
Award

A qualified solar and wind facility
is treated as “located in a low-income
community” or “on Indian Land” under
section 48(e)(2)(A)(iii)(I) or located in
a geographic area under the Additional
Selection Criteria (see part II.C) if the
facility satisfies the nameplate capacity
test (Nameplate Capacity Test).
Under the Nameplate Capacity Test, a
facility that has nameplate capacity (for
example, wind and solar facilities) is
considered located in or on the relevant

As stated in section 4.05 of Notice
2023-17, the Treasury Department and the
IRS propose that facilities placed in service prior to being awarded an allocation
of Capacity Limitation would not be eligible to receive an allocation. As described
in Notice 2023-17, one of the broad goals
of the Low-Income Communities Bonus
Credit Program is to increase adoption
of and access to renewable energy facilities in low-income and other communities with environmental justice concerns.

U.S. Department of Housing and Urban Development, Treatment of Solar Benefits in Mastered-metered Buildings (May 2023), MF_Memo_re_Community_Solar_Credits_in_MM_
Buildings.pdf (hud.gov)
5
Federal programs may include, but are not limited to: Medicaid, Low-Income Home Energy Assistance Program (LIHEAP), Weatherization Assistance Program (WAP), Supplemental
Nutrition Assistance Program (SNAP), Section 8 Project-Based Rental Assistance, and the Housing Choice Voucher Program.
4

June 26, 2023

1102

Bulletin No. 2023–26

Facilities that were placed in service
prior to the allocation process do not
increase adoption of and access to renewable energy facilities as compared to the
absence of the Low-Income Communities
Bonus Credit Program. Further, section
48(e)(4)(E)(i) provides that a facility must
be placed in service within four years
of receiving an allocation of Capacity
Limitation, supporting allocations to new
facilities that have not yet been placed
in service. Accordingly, the Treasury
Department and the IRS continue to
propose that facilities placed in service
prior to being awarded an allocation of
Capacity Limitation would not be eligible
to receive an allocation.
B. Selection Process
Under section 48(e)(4)(C), the total
annual Capacity Limitation is 1.8 gigawatts of direct current capacity for the
calendar year 2023 program. Section
4.02 of Notice 2023-17 specified how
the annual Capacity Limitation would be
allocated across the four facility categories in 2023: Located in a Low-Income
Community (Category 1), Located on
Indian Land (Category 2), Qualified
Low-Income Residential Building Project
(Category 3), and Qualified Low-Income
Economic Benefit Project (Category 4).
Section 4.07 of Notice 2023-17 provided
that applications would be accepted in a
phased approach for calendar year 2023,
during 60-day application windows.
Based on public feedback in response to
Notice 2023-17 and an updated assessment of operational capabilities set up to
administer the program, a new approach
is proposed.
The Treasury Department and the
IRS anticipate that the number of eligible applicants seeking an allocation may
exceed the total Capacity Limitation
allocation available to be allocated. The
Treasury Department and the IRS are
designing an application process that
both ensures that allocations are awarded
to facilities that advance the program
goals previously stated in Notice 202317 and facilitates an efficient allocation
process.

Accordingly, the Treasury Department
and the IRS propose an approach that
includes an initial application window
in which applications received by a certain time and date would be evaluated
together, followed with a rolling application process if Capacity Limitation is not
fully allocated after the initial application
window closes. Facilities that meet at least
one of the two categories of specified ownership and geographic criteria (Additional
Selection Criteria)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A9fba99b2ccb8d107. Public record. Not legal advice.