Part III – Administrative, Procedural, and Miscellaneous Listed Transactions and Transactions of Interest

1

Part III – Administrative, Procedural, and Miscellaneous

Listed Transactions and Transactions of Interest

Announcement 2023-11

The identification of “listed transactions”—transactions that the Internal Revenue

Service (IRS) has determined to be abusive tax avoidance transactions within the

meaning of § 1.6011-4(b)(2) of the Income Tax Regulations—and “transactions of

interest”—transactions that the IRS has determined have the potential for tax avoidance

or evasion within the meaning of § 1.6011-4(b)(6)—is an important tool in combatting

the use of abusive tax avoidance transactions. Since 2000, the IRS has identified more

than 30 of these transactions by publishing a notice or other subregulatory guidance as

provided in § 1.6011-4. One of these notices, Notice 2016-66, 2016-47 I.R.B. 745 (as

modified by Notice 2017-8, 2017-3 I.R.B. 423), identified certain micro-captive

transactions as transactions of interest.

Recent court decisions have held that the IRS’s longstanding practice of issuing

notices to identify listed transactions and transactions of interest does not comply with

the Administrative Procedure Act (APA), 5 U.S.C. 551-559. On March 3, 2022, the U.S.

Court of Appeals for the Sixth Circuit issued an order holding that Notice 2007-83, 2007-

2 C.B. 960, which identified certain trust arrangements as listed transactions, violated

the APA because the notice was issued without following the notice-and-comment

procedures required by section 553 of the APA. Mann Construction v. United States, 27

2

F.4th 1138, 1147 (6th Cir. 2022). Subsequently, the U.S. District Court for the Eastern

District of Tennessee, which is located in the Sixth Circuit, vacated Notice 2016-66 on

the ground that the IRS failed to comply with the APA’s notice-and-comment

procedures, viewing the analysis in Mann Construction as controlling. 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)

.S. District Court for the Eastern

District of Tennessee, which is located in the Sixth Circuit, vacated Notice 2016-66 on

the ground that the IRS failed to comply with the APA’s notice-and-comment

procedures, viewing the analysis in Mann Construction as controlling. 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). The Court also held that the IRS acted arbitrarily

and capriciously, based on the administrative record. On November 9, 2022, the U.S.

Tax Court, in a reviewed decision with two judges dissenting, relied on Mann

Construction in holding that Notice 2017-10, 2017-4 I.R.B. 544, which identifies certain

syndicated conservation easements as listed transactions, is invalid because it was

issued without following notice-and-comment rulemaking procedures. See Green

Valley Investors, LLC v. Commissioner, 159 T.C. No. 5 (2022). See also Green Rock,

LLC v. IRS, 2023 WL 1478444 (N.D. AL., February 2, 2023).

The Department of the Treasury (Treasury Department) and the IRS disagree

with the recent court decisions holding that listed transactions cannot be identified by

notice or other subregulatory guidance. However, the Treasury Department and IRS

will no longer take the position that transactions of interest can be identified without

complying with APA notice-and-comment procedures. Accordingly, the IRS is

obsoleting Notice 2016-66 (as modified by Notice 2017-8), and will not enforce the

disclosure requirements or penalties that are dependent upon the procedural validity of

Notice 2016-66. Consistent with this determination, the Treasury Department and the

IRS are today issuing proposed regulations that identify certain micro-captive

transactions as transactions of interest. The proposed regulations also identify certain

3

other micro-captive transactions as listed transactions

sure requirements or penalties that are dependent upon the procedural validity of

Notice 2016-66. Consistent with this determination, the Treasury Department and the

IRS are today issuing proposed regulations that identify certain micro-captive

transactions as transactions of interest. The proposed regulations also identify certain

3

other micro-captive transactions as listed transactions.

The Treasury Department and the IRS continue to take the position that listed

transactions can be identified by notice or other subregulatory guidance because

Congress, in enacting the American Jobs Creation Act of 2004, exempted the

identification of such transactions from the APA’s notice-and-comment procedure. As

stated in Announcement 2022-28, 2022-52 I.R.B. 659 (Dec. 27, 2022), the Treasury

Department and IRS will continue to defend existing listing notices in cases in which

Mann Construction is not controlling precedent. Consistent with the aim expressed in

Announcement 2022-28 of avoiding confusion and preventing disruption of the IRS’s

ongoing efforts to identify and examine abusive tax shelters, the Treasury Department

and the IRS are following notice and comment procedures in identifying certain micro-

captive transactions as listed transactions in order to eliminate any confusion and

ensure that the IRS’s efforts to combat abusive tax shelters throughout the nation

continue undisrupted.

The Treasury Department and the IRS intend to finalize these regulations, after

due consideration of public comments, in 2023 and intend to issue proposed regulations

identifying additional listed transactions in the near future

listed transactions in order to eliminate any confusion and

ensure that the IRS’s efforts to combat abusive tax shelters throughout the nation

continue undisrupted.

The Treasury Department and the IRS intend to finalize these regulations, after

due consideration of public comments, in 2023 and intend to issue proposed regulations

identifying additional listed transactions in the near future.

Taxpayers should take note that, if a transaction becomes a listed transaction or

a transaction of interest after a taxpayer files a tax return (including an amended return)

reflecting the taxpayer’s participation in the transaction, § 1.6011-4(e)(2)(i) generally

requires the participant to file a disclosure statement (Form 8886, Reportable

Transaction Disclosure Statement) with the Office of Tax Shelter Analysis (OTSA) within

90 days of the transaction becoming a listed transaction or a transaction of interest if the

4

assessment limitations period remains open for any taxable year in which the taxpayer

participated in the transaction. Accordingly, any taxpayer who has participated in a

transaction in any year for which the assessment limitation period remains open when

the regulation identifying the transaction as a listed transaction or a transaction of

interest is finalized will have an obligation to disclose the transaction, unless otherwise

provided in the final regulations. Failure to disclose will subject the taxpayer to the

penalty under section 6707A of the Internal Revenue Code (Code). 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) of the Code

nalized will have an obligation to disclose the transaction, unless otherwise

provided in the final regulations. Failure to disclose will subject the taxpayer to the

penalty under section 6707A of the Internal Revenue Code (Code). 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) of the Code. That section provides that

the time for assessment of any tax with respect to the transaction will 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) of the Code.

Likewise, if a regulation identifying a transaction as a listed transaction or a

transaction of interest is finalized after the occurrence of the events described in

§ 301.6111-3(b)(4)(i) of the Procedure and Administration Regulations, a material

advisor will be treated as becoming a material advisor on the date the regulation is

finalized pursuant to § 301.6111-3(b)(4)(iii) (if not deemed a material advisor earlier

pursuant to a valid listing notice). A material advisor is required to file a Form 8918,

Material Advisor Disclosure Statement, with OTSA by the last day of the month that

follows the end of the calendar quarter in which the advisor became a material advisor

with respect to the transaction. See § 301.6111-3(d) and (e).

In addition, a material advisor must maintain a list identifying each person with

5

respect to whom the advisor acted as a material advisor with respect to a listed

transaction or transaction of interest, if the person advised by the material advisor

entered into the transaction within six years before the date the transaction was

identified as a listed transaction or transaction of interest in published guidance. See

§ 301.6112-1(b)(2).

DRAFTING INFORMATION

The principal author of this announcement is Stephanie W

rial advisor with respect to a listed

transaction or transaction of interest, if the person advised by the material advisor

entered into the transaction within six years before the date the transaction was

identified as a listed transaction or transaction of interest in published guidance. See

§ 301.6112-1(b)(2).

DRAFTING INFORMATION

The principal author of this announcement is Stephanie W. Chernoff of the Office

of the Associate Chief Counsel (Procedure & Administration). For further information

regarding this announcement, contact Stephanie W. Chernoff at (202) 317-5670 (not a

toll-free call).