RESOLVING INCONSISTENCIES BETWEEN IRS AND AMERICAN SAMOA TAX AUTHORITIES

Rev. Proc. 85-23

SECTION 1. PURPOSE

The purpose of this revenue procedure is to supplement Rev. Proc. 80-57, 1982 C.B. 852, which describes the procedures to be followed to resolve cases of double taxation involving the United States, Puerto Rico and United States Virgin Islands, to include American Samoa in the procedures.

SEC. 2. BACKGROUND

01 A procedure to resolve cases of double taxation has been established between the United States and American Samoa. The new procedure is set forth in an amendment to the Agreement on Coordination of Tax Administration that was signed by the Treasurer, Department of the Treasury of American Samoa, on December 23, 1981, and the Commissioner of Internal Revenue on April 15, 1982, (Samoa Agreement). The text of the Samoa Agreement is as follows (the term "Agency" refers to the Department of the Treasury of American Samoa):

Section 10. Mutual Agreement Procedure

Where by reason of inconsistent positions taken by the IRS and the Agency, a taxpayer is or would be subject to inconsistent tax treatment by the two jurisdictions, the Director of International Operations (now the Foreign Operations District) and the Tax Manager of the Agency shall endeavor to resolve by mutual agreement any difficulties or doubts arising as to the application of the tax laws of the United States and the Territory of American Samoa. In particularly, but not by the way of limitation, the Director of International Operations (now the Foreign Operations District) and the Tax Manager of the Agency may consult together to endeavor to agree:

(a) To the same allocation of income, deductions, credits, or allowances between related persons;

(b) To the same determination of residency of a particular taxpayer; or

(c) To the same determination of the source of particular items of income.

SEC. 3. IMPLEMENTATION

01 Section 1 of Rev. Proc. 80-57 is supplemented to read as follows:

The purpose of this revenue procedure is to prescribe the procedures to be used by the Internal Revenue Service and taxpayers for resolving issues arising when a taxpayer is or would be subject to inconsistent tax treatment by the Service and the tax authorities of Puerto Rico, Virgin Islands or American Samoa. Such issues generally involve: (1) allocations of income, deductions, credits, or allowances between related persons; (2) determination of residency; and (3) determinations of the source of income and related expenses. This revenue procedure does not provide procedures to be used by possession tax authorities.

02 Sec. 2.01 of Rev. Proc. 80-57 is supplemented to read as follows:

01 The Service has in accordance with the Agreements on Coordination of Tax Administration ("Agreements") with the Department of the Treasury of Puerto Rico (Internal Revenue News Release IR-2123, April 25, 1979, Announcement 79-84, 1979-23 I.R.B. 19), the Department of Finance of the United States Virgin Islands (Internal Revenue News Release IR-1926, December 30, 1977, Announcement 78-21, 1978-7 I.R.B. 42), and the Department of the Treasury of American Samoa (hereinafter "the possession tax agencies") established cooperative programs to resolve tax disputes arising from inconsistent positions taken by the Service and the possession tax agencies.

SEC. 4. EFFECTIVE DATE

This supplement to Rev. Proc. 80-57 is effective immediately.

SEC. 5. EFFECTIVE ON OTHER REVENUE PROCEDURES

Rev. Proc. 80-57 is supplemented.