Rev. Proc. 77-9

Section 1. Purpose.

This Revenue Procedure sets forth the procedures of the Internal Revenue Service pertaining to the issuance of determinations under section 999(d) of the Internal Revenue Code of 1954, relating to whether a particular operation of a person, or of a member of a controlled group (within the meaning of section 993(a)(3)) that includes that person, constitutes participation in or cooperation with an international boycott as defined in section 999(b)(3).

Sec. 2. Background and General Information.

.01 Sections 1061 through 1064, and 1066(a) of the Tax Reform Act of 1976 (Pub. L. No. 94-455, 94th Cong., 2d Sess. (October 4, 1976) [1976-3 C.B. (Vol. 1) 125]) (the Act) deny certain benefits of the foreign tax credit, deferral of earnings of foreign subsidiaries, and domestic international sales corporation (DISC) to a person, if that person, or a member of a controlled group (within the meaning of section 993(a)(3) of the Code) that includes that person, or a foreign corporation of which a member of the controlled group is a United States shareholder, agrees to participate in or cooperate with an international boycott.

.02 Generally, the provisions of the Act relating to the denial of such benefits are effective with respect to participation in or cooperation with an international boycott after November 3, 1976.

.03 In the case of operations that constitute participation in or cooperation with an international boycott and that are carried out in accordance with the terms of a binding contract entered into before September 2, 1976, the provisions of the Act apply to such participation or cooperation after December 31, 1977.

.04 Section 999(d) of the Code, added by the Act, provides, in part, that upon a request made by the taxpayer, the Secretary of the Treasury or the Secretary's delegate shall issue a determination with respect to whether a particular operation of a person, or a member of a controlled group that includes such person, constitutes participation in or cooperation with an international boycott.

.05 In Treasury News Release WS-1156, dated November 4, 1976, the Treasury issued guidelines relating to the anti-boycott provisions of the Act [1976-2 C.B. 628]. The guidelines were also published in 41 FR 49923 on November 11, 1976. In those guidelines and in IR-1697, dated November 16, 1976, procedures for obtaining a determination under section 999(d) of the Code were announced. Pending the issuance of final regulations, determinations under section 999(d) will be made by the National Office of the Service concerning issues specifically addressed in published Treasury guidelines. If an issue arises that is not specifically addressed in published guidelines, the National Office will not make a determination until it has brought the issue to the attention of the Assistant Secretaries of the Treasury for International Affairs and for Tax Policy and a new or modified guideline that specifically addresses the issue is published by the Secretary.

.06 The National Office will issue taxpayer requested determinations with respect to whether a particular operation of a person or of a member of a controlled group that includes that person constitutes participation in or cooperation with an international boycott. However, the National Office will issue determinations only with respect to operations that occurred after, or are contemplated to occur after:

(1) December 31, 1977, or

(2) November 3, 1976, but before December 31, 1977, provided that the operations are not carried out in accordance with the terms of a binding contract entered into before September 2, 1976.

Determinations in advance of an operation will be issued only in those circumstances that are of such a nature that an advance determination is possible and appropriate. The National Office may defer issuing determinations until after the close of the taxable year, even though the determination requests are made either before the particular operation is commenced or before the end of the taxable year.

.07 Section 3 of this Revenue Procedure sets forth the procedures for requesting determinations under section 999(d) of the Code of issues not present in the return of a person (or a member of a controlled group that includes that person) that is under active examination or audit by a district office or is being considered by a regional appellate division. The effects of determinations issued pursuant to a request made under section 3 are set forth in section 9. Section 4 of this Revenue Procedure sets forth the procedures for requesting determinations under section 999(d) of issues present in the return of a person (or a member of a controlled group that includes that person) that is under active examination or audit by a district office. The effects of determinations issued pursuant to a request made under section 4 are set forth in section 10. Section 5 of this Revenue Procedure sets forth the procedures for requesting determinations under section 999(d) of issues present in a return of a person (or a member of a controlled group that includes that person) that is being considered by a regional appellate division. The procedures set forth in sections 6, 7, 8 and 11 are applicable to determinations requested under both sections 3 and 4 of this Revenue Procedure.

.08 Nothing in this Revenue Procedure will preclude a District Director from requesting technical advice, in accordance with the procedures set forth in Rev. Proc. 73-8, 1973-1 C.B. 754, on the District Director's own initiative on any issue under the anti-boycott provisions of the Act.

.09 For purposes of sections 3.08 and 6.02 of this Revenue Procedure, a determination is a ruling. Thus, the amendments to the Statement of Procedural Rules, 26 CFR 601, published in the Federal Register on November 5, 1976, 41 FR 48740, and Rev. Proc. 76-29, 1976-2 C.B. 646, are applicable. A determination is also a ruling for purposes of section 7805(b) of the Code.

.10 For purposes of this Revenue Procedure, any reference to District Director or district office also includes, where appropriate, the Office of the Director, Office of International Operations.

Sec. 3. Requests For Determinations Under Section 999(d) of Issues Not Present in a Return Under Active Examination or Audit or Under Consideration By a Regional Appellate Division.

.01 Sections 3.02 through 3.15 of this Revenue Procedure set forth the procedures under which a request should be made of the National Office for determinations under section 999(d) of the Code with respect to issues not present in the return of a person (or a member of a controlled group that includes that person) that is under active examination or audit by a district office or is being considered by a regional appellate division.

.02 A request for a determination is to be submitted in duplicate if (1) more than one issue is presented in the request or (2) a closing agreement is requested with respect to the issue presented.

.03 Each request for a determination must contain a complete statement of all relevant facts relating to the operation. Such facts include names, addresses, and taxpayer identifying numbers of all interested parties; the location of the district office that has or will have audit jurisdiction over the return or report of each party; a full and precise statement of the business reasons for the operation; and a carefully detailed description of the operation. In addition, copies of all contracts, wills, deeds, agreements, instruments, and other documents involved in the transaction must be submitted with the request. Original documents should not be submitted because documents and exhibits become a part of the Service file that cannot be returned. Relevant facts reflected in documents submitted must be included in the taxpayer's statement and not merely incorporated by reference, and must be accompanied by an analysis of their bearing on the issue or issues, specifying the pertinent provisions. The request must contain a statement whether, to the best of the knowledge of the taxpayer or the taxpayer's representative, the identical issue is being considered by any field office of the Service in connection with an active examination or audit of a tax return of the taxpayer (or a member of the controlled group that includes the taxpayer) already filed or is being considered by a regional appellate division. Where the request pertains to only one step of a larger integrated operation, the facts, circumstances, etc., must be submitted with respect to the entire operation.

.04 As an alternative procedure for requesting determinations on prospective operations, the taxpayer may submit a summary statement of the facts it considers controlling the issue, in addition to the complete statement required for a determination by section 3.03 above. Assuming agreement with the taxpayer's summary statement, the Service will use it as the basis for the determination. Any taxpayer wishing to adopt this procedure should submit with the request for determination:

(1) A complete statement of facts relating to the operation, together with related documents, as required by section 3.03 above; and

(2) A summary statement of the facts that the taxpayer believes should be controlling in reaching the requested conclusion. Where the taxpayer's statement of controlling facts is accepted, the determination will be based on these facts and only this statement will ordinarily be incorporated in the determination. It is emphasized, however, that:

(a) This procedure for a "two-part" determination request is elective with the taxpayer and is not to be considered a required substitute for the regular procedures contained in this Revenue Procedure;

(b) Taxpayer's rights and responsibilities are the same under the "two-part" determination request procedure as those provided in this Revenue Procedure; and

(c) The Service reserves the right to make the determination on the basis of a more complete statement of facts it considers controlling and to seek further information in developing facts and restating them for determination purposes.

.05 The taxpayer must state its views as to whether the proposed or prospective operation constitutes participation in or cooperation with an international boycott and must furnish a statement of relevant authorities to support such views.

.06 A request by or for a taxpayer must be signed by the taxpayer or the taxpayer's authorized representative. If the request is signed by a representative of the taxpayer, or if the representative is to appear before the Service in connection with the request, the representative must be:

(1) an attorney who is a member in good standing of the bar of the highest court of any State, possession, territory, Commonwealth, or the District of Columbia, and who files with the Service a written declaration that such attorney is currently qualified as an attorney and is authorized to represent the principal;

(2) a certified public accountant who is duly qualified to practice in any State, possession, territory, Commonwealth, or the District of Columbia, and who files with the Service a written declaration that such accountant is currently qualified as a certified public accountant and is authorized to represent the principal; or

(3) a person, other than an attorney or certified public accountant, enrolled to practice before the Service, and who files with the Service a written declaration that such person is currently enrolled (including in the declaration either such person's enrollment number or the expiration date of such person's enrollment card) and that such person is authorized to represent the principal. (See Treasury Department Circular No. 230. Revised, 1966-2 C.B. 1171, as amended, 1967-1 C.B. 433, and 1970-2 C.B. 644, for the rules on who may practice before the Service). The above requirements do not apply to an individual representing such individual's full-time employer, or to a bona fide officer, administrator, trustee, etc., representing a corporation, trust, estate, association, or organized group. An unenrolled preparer of a return (other than an attorney or certified public accountant referred to in clauses (1) and (2) above) who is not a full-time employee or a bona fide officer, administrator, trustee, etc., may not represent a taxpayer with respect to a determination. Any authorized representative, whether or not enrolled to practice, must also comply with the conference and practice requirements of the Statement of Procedural Rules. Forms 2848, Power of Attorney, and 2848-D, Authorization and Declaration, may be used with regard to determinations requested under this Revenue Procedure.

.07 A request for a determination under section 999(d) of the Code should be addressed to the Commissioner of Internal Revenue, Attention: T:C:C:3, Washington, D.C. 20224.

.08 Determinations issued to taxpayers under section 999(d) of the Code will be made open to public inspection under the procedures in section 6110, the regulations thereunder, and the Statement of Procedural Rules. Amendments to the Statement of Procedural Rules, 26 CFR Part 601, published in the Federal Register on November 5, 1976, 41 FR 48740, require a taxpayer requesting a ruling to make proposals concerning the deletions to be made, pursuant to section 6110(c), in the documents open to public inspection and to sign, under penalties of perjury, a declaration that the facts in the request are true, correct and complete.

.09 Any request for a determination that does not comply with all the provisions of this Revenue Procedure will be acknowledged by the National Office, and the requirements that have not been met will be pointed out. If a request for a determination lacks essential information, the taxpayer or the taxpayer's representative will be advised that if the information is not forthcoming within 30 days, the request will be closed. If the information is received after the request is closed, the request will be reopened and treated as a new request as of the date of the receipt of the essential information. Priority treatment of such request will be granted only in rare cases upon the approval of the Director, Corporation Tax Division.

.10 A taxpayer or a taxpayer's representative that desires an oral discussion of the issue or issues involved should indicate such desire in writing when filing the request or soon thereafter in order that the conference may be arranged at that stage of the consideration when it will be most helpful.

.11 It is the practice of the Service to process requests for determinations in regular order and as expeditiously as possible. Compliance with a request for consideration of a particular matter ahead of its regular order, or by a specified time, tends to delay the disposition of other matters. Requests for processing ahead of the regular order, made in writing in a separate request submitted with the request or subsequent thereto and showing clear need for such treatment, will be given consideration as the particular circumstances warrant. However, no assurance can be given that any letter will be processed by the time requested. For example, the scheduling of a closing date for a transaction or a meeting of the Board of Directors or shareholders of a corporation without due regard to the time it may take to obtain a determination will not be deemed sufficient reason for handling a request ahead of its regular order. Requests by telegram will be treated in the same manner as requests by letter. Determinations ordinarily will not be issued by telegram.

.12 The Assistant Commissioner (Technical) has primary responsibility for issuing determinations under section 999(d) of the Code.

.13 A taxpayer or its representative desiring to obtain information as to the status of its case may do so by contacting:

Group Chief, T:C:C:3:2: (202) 566-3261

.14 Determinations issued by the National Office will be furnished to the taxpayer and to the District Director having audit jurisdiction over the return or report of the taxpayer.

.15 When a taxpayer receives a determination prior to the filing of its return with respect to any operation that has been consummated and that is relevant to the return being filed, a copy of the determination should be attached to the return.

Sec. 4. Requests For Determinations Under Section 999(d) of Issues Present in a Return Under Active Examination or Audit.

.01 Sections 4.02 through 4.06 of this Revenue Procedure set forth the procedures under which a request should be made of the National Office for determinations under section 999(d) of the Code with respect to issues present in the return of a person (or a member of the controlled group that includes that person) that is under examination or audit by a district office.

.02 A request for a determination made pursuant to this section must be made in accordance with the procedures set forth in sections 3.03, 3.05 through 3.13 and 4.02 through 4.06 of this Revenue Procedure.

.03 The request for a determination under section 999(d) of the Code made pursuant to this section should be addressed to the Commissioner of Internal Revenue, Attention: T:C:C:3, Washington, D.C. 20224, but must be submitted to the examining officer or district conferee along with copies of all relevant materials. The taxpayer should submit to the examining officer or district conferee the number of copies of the relevant documents specified in section 3.02 of this Revenue Procedure, plus one additional copy for the use of the examining officer or district conferee. A determination request submitted to the examining officer or district conferee that does not comply with the provisions of this Revenue Procedure (other than the provisions of section 3.08) will be returned by the examining officer or district conferee for completion prior to sending it to the National Office for a determination. If a request for a determination lacks essential information, the taxpayer or the taxpayer's representative will be advised by the examining officer or the district conferee that if the information is not forthcoming within 30 days, the request will be returned to the taxpayer. If the request is returned to the taxpayer, it will be treated as a new request as of the date of the receipt of the essential information.

.04 After receipt of the determination request and relevant documents that meet the requirements of this Revenue Procedure, the examining officer or district conferee must indicate in writing to the taxpayer the extent, if any, to which such examining officer or district conferee may not be in complete agreement as to the facts and the specific points at issue. Every effort should be made to reach agreement as to the facts and the specific points at issue. If agreement cannot be reached, the examining officer or district conferee may submit to the National Office a statement of such examining officer's or district conferee's understanding as to the specific point or points at issue and a statement of position on the issues, citing precedents believed relevant to the case. If such a statement is submitted to the National Office, a copy of the statement must be submitted to the taxpayer at the time the statement is submitted to the National Office. The examining officer or district conferee must forward such determination request, statements, and all relevant documents to the National Office for determination within 30 days of receipt of the determination request and relevant documents that contain all essential information.

.05 The National Office may submit a proposed determination to the District Director for comment before issuing the determination to the taxpayer.

.06 Determinations issued pursuant to a request made under section 4 will be sent to both the taxpayer and the District Director.

Sec. 5. Requests for Determinations Under Section 999(d) of Issues Present in a Case Under Consideration by a Regional Appellate Division.

If a request is made for a determination under section 999(d) of the Code with respect to issues present in a case of a person (or a member of the controlled group that includes that person) under consideration by a regional appellate division, such division will immediately relinquish jurisdiction and return the entire case to the district office having audit jurisdiction over the return, for processing the taxpayer's request for a determination. All the procedures set forth in section 4, and all other procedures set forth in this Revenue Procedure that are applicable to determinations requested under section 4, shall apply. The case will remain with that district office until a determination has been made by the National Office.

Sec. 6. Conferences in the National Office.

.01 Except as otherwise provided herein, this section applies to determinations requested under both sections 3 and 4 of this Revenue Procedure.

.02 In accordance with Rev. Proc. 76-29, the taxpayer or the taxpayer's authorized representative will be contacted by a Service representative to informally discuss the procedural and substantive issues involved within 15 working days after receipt of the determination request by the National Office.

.03 If a conference has been requested, the taxpayer will be notified of the time and place of the conference. A conference is normally scheduled only when the Service deems it will be helpful in deciding the case or an adverse decision is indicated. If conferences are being arranged with respect to more than one request for a determination involving the same taxpayer, they will be so scheduled as to cause the least inconvenience to the taxpayer. The conference will be arranged by telephone, if possible, and must be held within 21 calendar days after contact has been made. Extensions of time will be granted only if justified in writing by the taxpayer and approved by the Chief, Corporation Tax Branch.

.04 A taxpayer is entitled, as a matter of right, to only one conference in the National Office unless one of the circumstances discussed in section 6.05 develops. This conference will be held by the office of the Assistant Commissioner (Technical). In appropriate cases involving a determination requested pursuant to section 4 of this Revenue Procedure, the examining officer or district conferee may also attend the conference to clarify the facts in the case. If more than one operation is to be discussed at the conference, the discussion will constitute a conference with respect to each operation. In order to promote a free and open discussion of the issues, the conference will usually be held after the National Office has had an opportunity to study the case. However, at the request of the taxpayer or its representative, the conference may be held at an earlier stage in the consideration of the case than the Service would ordinarily designate. No taxpayer has a "right to appeal the action of the Assistant Commissioner (Technical) to the Commissioner or to any other office of the Service, nor is a taxpayer entitled as a matter of right, to a separate conference in the Chief Counsel's office or the Treasury on a request for a determination.

.05 In the process of considering a determination proposed at a conference, it may appear that the final answer will involve a reversal of the determination proposed at the conference with a result less favorable to the taxpayer. Or it may appear that an adverse determination proposed at the conference will be approved, but on different grounds that those mentioned at the conference. Under either of these circumstances, the taxpayer or its representative will be invited another conference. The provisions of this Revenue Procedure limiting the number of conferences to which a taxpayer is entitled will not foreclose the invitation of a taxpayer to attend further conferences when, in the opinion of National Office personnel, such need arises. All additional conferences of the type discussed in this paragraph are held only at the invitation of the Service.

.06 It is the responsibility of the taxpayer to furnish to the National Office, within 21 calendar days after the conference, a written record of any additional data, line of reasoning, precedents, etc., that were proposed by the taxpayer and discussed at the conference but were not previously or adequately presented in writing. Extensions of time will be granted only if justified in writing by the taxpayer and approved by the Chief, Corporation Tax Branch. The additional material should be addressed to and sent to the National Office. In the case of a determination requested under section 4, a duplicate copy of the additional material must also be submitted to the National Office for forwarding to the appropriate examining officer or district conferee.

.07 In the case of a determination requested pursuant to section 4 of this Revenue Procedure, the examining officer or district conferee will be requested to give the additional material prompt attention. The examining officer or conferee may verify the additional facts and data and comment on it to the extent deemed appropriate.

Sec. 7. Withdrawal of Requests.

The taxpayer's request for a determination may be withdrawn at any time prior to the signing of the determination. However, in such a case, the National Office may furnish its views to the District Director whose office has or will have audit jurisdiction of the taxpayer's return or to the examining officer or district conferee. The District Director, the examining officer or district conferee will consider the information submitted in any current or subsequent audit or examination of the taxpayer's return. Even though a request is withdrawn, all correspondence and exhibits will be retained in the Service and will not be returned to the taxpayer.

Sec. 8. Oral Advice to Taxpayers.

.01 The Service will not issue determinations upon oral requests. Furthermore, National Office officials and employees ordinarily will not discuss a substantive tax issue with a taxpayer or a taxpayer's representative prior to the receipt of a written request for a determination since oral determinations are not binding on the Service. This should not be construed as preventing a taxpayer or a taxpayer's representative from inquiring whether the Service will rule on a particular question. In such cases, however, the name and identifying number must be disclosed. The Service will also discuss questions relating to procedural matters with regard to submitting a request for a determination, including the application of the provisions of sections 3 and 4 above to the particular case.

.02 A taxpayer may, of course, seek oral advice from a district office in the preparation of the taxpayer's return or report, pursuant to other established procedures. Such oral advice is advisory only and the Service is not bound to recognize it in the examination of the taxpayer's return.

Sec. 9. Effect of Determinations of Issues Not Present in a Return Under Active Examination or Audit or Under Consideration by a Regional Appellate Division.

.01 The procedures set forth in sections 9.02 through 9.09 of this Revenue Procedure apply to determinations issued pursuant to a request made under section 3.

.02 A taxpayer may not rely on a determination issued to another taxpayer. A determination, except to the extent incorporated in a closing agreement, may be revoked or modified at any time in the wise administration of the taxing statutes. See section 2.07 of Rev. Proc. 72-3, 1972-1 C.B. 698, for the effect of a closing agreement. If a determination is revoked or modified, the revocation or modification applies to all open years under the statutes, unless the Secretary or the Secretary's delegate exercises the discretionary authority under section 7805(b) of the Code to limit the retroactive effect of the revocation or modification. The manner in which the Secretary or the Secretary's delegate generally will exercise this authority is set forth in this section.

.03 As part of the determination of a taxpayer's liability, it is the responsibility of the District Director to ascertain whether any determination previously issued to the taxpayer has been properly applied. It should be determined whether the representations upon which the determination was based reflected an accurate statement of the material facts and whether the operation actually was carried out substantially as proposed. If, in the course of the determination of the tax liability, it is the view of the District Director that a determination previously issued to the taxpayer should be modified or revoked, the findings and recommendations of that office will be forwarded to the National Office for consideration prior to further action. Such reference to the National Office will be treated as a request for technical advice and the procedures of Rev. Proc. 73-8 will be followed. Otherwise, the determination is to be applied by the district office in its determination of the taxpayer's liability.

.04 Appropriate coordination with the National Office will be undertaken in the event that any field official having jurisdiction of a return or other matter proposes to reach a conclusion contrary to a determination previously issued or contemplated to be issued to the taxpayer.

.05 A determination found to be in error or not in accord with the current views of the Treasury may be modified or revoked by the National Office. Modification or revocation may be effected by a notice to the taxpayer to whom the determination originally was issued, or by a guideline or other statement published in the Internal Revenue Bulletin.

.06 Except in rare or unusual circumstances, the revocation or modification of a determination will not be applied retroactively with respect to the taxpayer to whom the determination was originally issued or to a taxpayer whose tax liability was directly involved in such determination if (1) there has been no misstatement or omission of material facts, (2) the facts subsequently developed are not materially different from the facts on which the determination is based, (3) there has been no change in the applicable law, (4) the determination was originally issued with respect to a prospective or proposed transaction, and (5) the taxpayer directly involved in the determination acted in good faith in reliance upon the determination and the retroactive revocation would be to its detriment. Where a determination issued to a taxpayer is revoked with retroactive effect, the notice to such taxpayer will, except in fraud cases, set forth the grounds upon which the revocation is being made and the reasons why the revocation is being applied retroactively.

.07 A determination issued to a taxpayer with respect to a particular operation represents a holding of the Service on that operation only. However, the application of that determination to the operation will not be affected by the subsequent issuance of guidelines or regulations (either temporary or final) if the conditions specified in section 9.06 above are met. If the determination is later found to be in error or no longer in accord with the holding of the Treasury, it will afford the taxpayer no protection with respect to a like operation in the same or subsequent year, except to the extent provided in section 9.08.

.08 If a determination is issued covering a continuing operation or a series of operations and it is determined that the determination was in error or no longer in accord with the holding of the Treasury, the Secretary or the Secretary's delegate ordinarily will limit the retroactivity of the revocation or modification to a date not earlier than that on which the original determination is modified or revoked. If a determination relates to a continuing operation or a series of operations, the determination will be applied until the date of issuance of applicable guidelines or regulations holding otherwise, or until specifically withdrawn. Publication of a notice of proposed rulemaking will not affect the application of any determination issued under the procedures set forth herein.

.09 In the case of determinations involving completed operations, other than those described in section 9.08 above, taxpayers will not be afforded the protection against retroactive revocation provided in section 9.06 above in the case of proposed operations since they will not have entered into the operations in reliance of the determination.

Sec. 10. Effect of Determinations of Issues Present in a Return Under Active Examination or Audit.

.01 The procedures set forth in sections 10.02 and 10.03 of this Revenue Procedure apply to determinations issued pursuant to a request made under section 4.

.02 Unless the District Director believes that the conclusions reached by the National Office in a determination should be reconsidered and promptly requests such reconsideration, the District Director's office will proceed to process the taxpayer's case on the basis of the conclusions expressed in the determination. If the District Director believes that the conclusions reached by the National Office in a determination should be reconsidered, the procedure set forth in section 9.03 of this Revenue Procedure shall be applicable.

.03 Except in rare or unusual circumstances, a determination that is favorable to the taxpayer is applied retroactively. Moreover, a determination that is adverse to the taxpayer is also applied retroactively unless the Secretary or the Secretary's delegate exercises the discretionary authority under section 7805(b) of the Code to limit the retroactive effect of the determination. Likewise, a determination that modifies or revokes a prior determination will also be applied retroactively, with one exception. If the new determination is less favorable to the taxpayer, it will generally not be applied to the period in which the taxpayer relied on the prior determination in situations involving continuing operations of the type described in section 9.08 of this Revenue Procedure.

Sec. 11. Effective Date.

This Revenue Procedure is effective February 3, 1977.

¹ Also released as IR 1752, dated February 3, 1977.