Rev. Proc. 82-29

SECTION 1. PURPOSE AND SCOPE

This revenue procedure explains the procedures to be used by the Internal Revenue Service and taxpayers in certain cases of double taxation that are governed by income tax treaties of the United States. The cases covered by this revenue procedure concern the allocation of income and deductions between a United States taxpayer and a related person (including a branch office) subject to the taxing jurisdiction of a country ("treaty country") that has entered into an income tax treaty with the United States. See Rev. Proc. 77-16, 1977-1 C.B. 573, for competent authority procedures used in resolving issues other than allocation of income and deductions, including the availability to United States taxpayers of credits against foreign tax, exemptions from foreign tax, reduced rates of foreign tax, and other benefits and safeguards. Rev. Proc. 70-18, 1970-2 C.B. 493, as amplified by Rev. Proc. 79-31, 1979-1 C.B. 599, is modified and superseded by this revenue procedure.

SEC. 2. BACKGROUND

01. Income tax treaties in force between the United States and other countries generally provide for the allocation of income and deductions among related persons whose dealings with each other are not the same as those that would be made between independent persons. These treaties recognize that taxation by a treaty country of a taxpayer with an affiliate or branch office that is subject to the taxing jurisdiction of the other treaty country may result in actual or economic double taxation. As a result, these treaties provide for consultation by the competent authorities of the United States and of treaty countries on the allocation of income and deductions between related persons. The provisions of this revenue procedure do not override the provisions of any income tax treaty entered into by the United States. Taxpayers should make themselves aware of the full content of the income tax treaty under which they are operating.

02. When the United States competent authority and a treaty country competent authority agree to discuss an allocation, whether made or proposed by the United States or by the treaty country, the United States competent authority will attempt to reach an agreement that is acceptable to the United States, to the treaty country, and to the related persons.

03. The Associate Commissioner (Operations) acts as the United States competent authority in administering the operating provisions of tax treaties and in interpreting or applying these treaties. In interpreting or applying tax treaties, the Associate Commissioner (Operations) acts only with the concurrence of the Associate Chief Counsel (Technical).

04. If the United States taxpayer fails to request competent authority consideration under this revenue procedure, the taxpayer may be denied a credit for foreign tax. See Rev. Rul. 76-508, 1976-2 C.B. 225, as amplified by Rev. Rul. 80-231, 1980-2 C.B. 219, and section 4.901-2(f)(5) of the Temporary Income Tax Regulations, T.D. 7739, 1981-1 C.B. 396.

05. The Associate Commissioner (Operations) may negotiate an agreement with the competent authority of a treaty country concerning the allocation of income or deductions between a United States taxpayer and a related person at the request of the United States taxpayer. The Associate Commissioner (Operations) also may initiate competent authority negotiations in any situation to protect United States economic interests. Such a situation may arise when a taxpayer fails to request competent authority consideration after agreeing to an allocation of income or deductions that creates either actual or economic double taxation.

06. The taxpayer should send written requests for competent authority consideration to the Associate Commissioner (Operations), Internal Revenue Service, P.O. Box 7799, Washington, D.C. 20044.

SEC. 3. GENERAL CONDITIONS UNDER WHICH THIS PROCEDURE APPLIES

01. The procedures prescribed in sections 3 through 9 of this revenue procedure apply when the United States or other treaty country allocates or proposes to allocate income or deductions and this allocation may result in actual or economic double taxation.

02. In seeking to arrive at an agreement with a treaty country, the United States competent authority will be guided by the standards of arm's length dealing (referred to in the regulations under section 482 of the Internal Revenue Code) and the equivalent standard of arrangements or conditions that would have been made between independent persons (referred to in a number or treaties). The United States competent authority also will take into account all of the facts and circumstances and the purpose of the treaty to avoid double taxation when negotiating agreements on the allocation of income and deductions.

03. It is the position of the United States competent authority not to reopen a case previously closed after examination to make an adjustment unfavorable to the taxpayer unless the exceptional circumstances described in Rev. Proc. 74-5, 1974-1 C.B. 416, are present. The United States competent authority may accept a taxpayer's request for competent authority consideration that will require the reopening of a case closed after examination.

04. If there is no income tax treaty between the United States and another country there is no authority for the Service to provide relief from United States tax due to double taxation arising under the tax laws of the other country and the United States. Therefore, in such a case the United States competent authority is unable to consider a taxpayer's request that involves a nontreaty country.

SEC. 4. PROCEDURES TO BE FOLLOWED IF TREATY COUNTRY PROPOSES ALLOCATION

01. If a treaty country allocates or proposes to allocate the income or deductions attributable to transactions involving a United States taxpayer, the United States taxpayer should request United States competent authority consideration.

02. The taxpayer must file a written request for competent authority consideration with the Associate Commissioner (Operations), Internal Revenue Service, P.O. Box 7799, Washington, DC 20044, as soon as practical after the treaty country's position on the adjustment has been sufficiently developed to permit consideration, whether or not the adjustment has been formally proposed. In any event, the request should be filed no later than 90 days after the treaty country's adjustments are formally communicated to the related person.

03. At the time of the request for competent authority consideration, the United States taxpayer must file an amended United States tax return (for example, a Form 1120X Amended U.S. Corporation Income Tax Return if a Form 1120 was originally filed), as provided by the regulations under section 6402, with the Internal Revenue Service Center where the original return for the same tax year was filed. On the amended United States tax return the taxpayer may claim a credit or refund of the taxes attributable to the proposed allocation and shall indicate that a competent authority request is being filed. A copy of the amended United States tax return shall be attached to the request for competent authority consideration.

04. The competent authority request must be signed by a person having authority to sign the United States taxpayer's federal income tax returns. The request must contain a statement that competent authority consideration is being requested and must include the following information:

(a) a reference to the specific income tax treaty provisions under which the request is made;

(b) the names, addresses, and taxpayer identification numbers of the United States taxpayer and all related persons involved in the proposed allocation and the tax years affected;

(c) the office where the United States taxpayer and the related person or persons filed federal income tax returns for the years in question;

(d) a statement whether the federal income tax returns of both the United States taxpayer and the related person or persons for the years in question were examined, or are in the process of being examined;

(e) a description of the control and business relationships between the United States taxpayer and the related person or persons;

(f) a statement of the status of the tax liability of the related person in the treaty country for the year or years of the proposed adjustment;

(g) actions requested of, proposed, or taken by the competent authority of the treaty country, a description of the pertinent transactions and the issues, and the amount of any correlative adjustment that would have to be made to the income or deductions of the United States taxpayer if the United States competent authority were to accept the position of the treaty country;

(h) copies of pertinent foreign income tax returns (with English translation), and a schedule (in United States dollars) showing the allocation proposed by the treaty country and computation of the resulting foreign tax;

(i) copies of pertinent correspondence from the treaty country, briefs, protests, and other relevant material (all with English translation);

(j) copies of Foreign Tax Credit Computation (Forms 1118) that were filed with the tax return for each year under consideration;

(k) copies of powers of attorney on file with respect to the United States taxpayer; and

(l) on a separate document, a statement that the United States taxpayer consents to the disclosure to the competent authority of the treaty country (with the name of the country specifically stated) and the competent authority's staff of any or all of the items of information set forth or enclosed in the request for United States competent authority consideration. This statement must be dated and signed by a person having authority to sign the United States taxpayer's federal income tax return and is required to facilitate the administrative handling of the request by the United States competent authority for purposes of the recordkeeping requirements of section 6103(p) of the Code. Failure to provide such a statement will not prevent the United States competent authority from disclosing information under the terms of a tax treaty. See section 6103(k)(4).

05. If a treaty country is considering but has not yet proposed any adjustments to income or deductions arising out of transactions of or with a United States taxpayer, and the United States statutory period in which the United States taxpayer can file a claim for credit or refund of income taxes for the years involved is about to expire, the United States taxpayer should file a protective claim for credit or refund of these taxes on the appropriate amended United States tax return (including, to the extent available, the information required in a competent authority request under section 4.04 above). The amended United States tax return must be filed with the Internal Revenue Service Center where the original tax return for the same tax year was filed. The taxpayer must send a copy of the amended United States tax return to the Associate Commissioner (Operations) (see section 2.06 above for address). Final disposition of the amended United States tax return will be deferred by the Service pending: (1) the perfection of the request for competent authority consideration under section 4.01 above and the disposition of the issues under consideration; or (2) the withdrawal of the claim for credit or refund by the taxpayer. Beginning 6 months after the amended United States tax return is filed and every 6 months thereafter, the taxpayer must state in writing (by a person authorized to sign its federal income tax returns) to the Associate Commissioner (Operations) that the treaty country is still considering an adjustment of the income or deductions. The statement must include any available information described in section 4.04 above not previously submitted and any necessary modifications or previously submitted information. The Associate Commissioner (Operations) may deny competent authority consideration if the United States taxpayer fails to file the supplemental statement within each 6 months period.

06. The amended United States tax return filed under this revenue procedure permits only the making of a credit or refund that is agreed to by the United States and the treaty country competent authorities or that is unilaterally allowed by the United States competent authority. This revenue procedure does not grant a United States taxpayer the right to invoke section 482 of the Code in its favor or compel the Service to allocate income or deductions or grant a tax credit or refund. If the United States taxpayer accepts the decision of the competent authority, the decision of the competent authority is not subject to judicial review.

SEC. 5. PROCEDURES TO BE FOLLOWED IF THE UNITED STATES PROPOSES ALLOCATION

01. If the Service allocates or proposes to allocate income or deductions attributable to transactions involving a United States taxpayer subject to the tax jurisdiction of a treaty country, the United States taxpayer should request United States competent authority consideration. (See Rev. Rul. 76-508, as amplified by Rev. Rul. 80-231. Also see section 6 of this revenue procedure for procedures to be followed by the related person if any.)

02. A written request for competent authority consideration should be submitted as soon as the amount of the adjustment is determined, communicated in writing to the taxpayer, and agreed to by the taxpayer subject to competent authority relief. Taxpayers who do not agree with the correctness of the adjustment are encouraged to pursue their right of administrative review before the Appeals Division before requesting competent authority relief.

03. The taxpayer must file the written request for competent authority consideration with the Service office where the United States taxpayer's case is pending. A copy of the request must be filed with the Associate Commissioner (Operations), Internal Revenue Service, P.O. Box 7799, Washington, DC 20044. However, if the request for competent authority is not filed until after a suit contesting the tax liability of the taxpayer is pending in a court in the United States, the request should be filed with the Chief Counsel, Attention: Associate Chief Counsel (Litigation), Internal Revenue Service, Washington, DC 20044, and a copy filed with the Associate Commissioner (Operations).

04. The Internal Revenue Service office receiving the written request for competent authority consideration will promptly forward a copy of the request, pertinent files, and other appropriate information and documents to the Associate Commissioner (Operations).

05. If a request for competent authority consideration is filed, the Service will postpone further examination action on the issues accepted for competent authority consideration, except for cases pending in court and other cases in which action must be taken to avoid prejudicing the Government's interest. If there are other issues raised during the examination and the taxpayer is not in agreement with these issues, the district director will follow the usual procedures and issue the taxpayer a thirty-day letter. In preparing a protest of the unagreed issues, the taxpayer need not include any unagreed issue under consideration by the competent authority. Following the receipt of the taxpayer's protest, appeal procedures shall be initiated with respect to those issues not subject to competent authority consideration. If the competent authorities are unable to resolve the double taxation problem to the satisfaction of the United States taxpayer and the taxpayer wishes to then pursue other administrative or judicial avenues of appeal, the original protest will then be amended to include the issue unresolved by the competent authority.

06. The United States competent authority will not accept any taxpayer's request for consideration of a case that is pending in court without Chief Counsel's consent. If the case is pending in the United States Tax Court, the Chief Counsel may in appropriate cases request the court to delay trial pending competent authority action. If the case is pending in any other court, the Chief Counsel will consult with the Department of Justice about appropriate action. Final decision on delaying trial rests with the court. However, the filing of a competent authority request does not relieve the taxpayer from taking any action that may become necessary with respect to litigation. On completion of the competent authority consideration, the taxpayer must reinstate litigation if the taxpayer decides to continue litigation.

07. The competent authority request must be signed by a person having authority to sign the United States taxpayer's federal tax returns. The request must contain a statement that competent authority consideration is being requested and must include the following information:

(a) a reference to the specific income tax treaty provisions under which the request is made;

(b) the names, addresses, and taxpayer identification numbers of the United States taxpayer and all related taxpayers involved in the proposed allocation and the tax year affected;

(c) the district office which has made or is proposing to make the adjustment;

(d) a description of the control and business relationships between the United States taxpayer and the related person or persons;

(e) a statement of the status of the tax liability of the related person in the treaty country for the year or years of the proposed adjustment;

(f) actions requested of, proposed, or taken by the competent authority of the treaty country, a description of the pertinent transactions and the issues and the amount of any correlative adjustment that would have to be made to the related person's income or deductions if the treaty country competent authority were to accept the position of the United States;

(g) the adjustments should be stated in United States dollars and the appropriate foreign currency, identifying the conversion method used to reconcile the United States entity's books and records with the foreign entity's books and records;

(h) copies of pertinent foreign income tax returns, correspondence, briefs, protests, and other relevant material (with English translation);

(i) copies of Foreign Tax Credit Computation (Forms 1118) that were filed with the tax return for each year under consideration;

(j) copies of powers of attorney on file with respect to the United States taxpayer;

(k) copies of pertinent Forms 2952 (Information Return with Respect to Controlled Foreign Corporations), including copies of the financial statements and surplus analysis required to be filed with the return for each related entity and for each year under consideration; and

(l) on a separate document, a statement that the United States taxpayer consents to the disclosure to the competent authority of the treaty country (with the name of the country specifically stated) and the competent authority's staff of any or all of the items of information set forth or enclosed in the request for competent authority consideration. This statement must be dated and signed by a person having authority to sign the United States taxpayer's federal income tax returns and is required to facilitate the administrative handling of the request by the United States competent authority for purposes of the recordkeeping requirements of section 6103(p) of the Code. Failure to provide such a statement will not prevent the United States competent authority from disclosing information under the terms of a tax treaty. See section 6103(k)(4).

SEC. 6. NOTIFICATION TO RELATED ENTITY

In any case covered by section 4 or 5 of this revenue procedure, the United States taxpayer should either itself take, or advise a related person to take, such timely protective action as may be necessary with foreign tax authorities. This includes the staying of the expiration of the foreign period of limitations on the making of a refund or other tax adjustment, complying with any applicable procedures of the treaty country for invoking competent authority consideration, and attempting to resist an adjustment or obtain an appropriate correlative adjustment.

SEC. 7. CASES RECEIVED FROM, AND REFERRED TO, FOREIGN COMPETENT AUTHORITIES

01. The United States competent authority will not initiate action under this revenue procedure with respect to foreign corporations, partnerships, or other entities of a treaty country. Requests sent to the United States competent authority by these taxpayers will be referred to the competent authority of the treaty country.

02. When a treaty country competent authority refers a request for mutual agreement to the United States competent authority, the United States competent authority will contact the United States taxpayer and advise the taxpayer to comply with this revenue procedure in order to obtain consideration by the United States competent authority.

SEC. 8. REV. PROC. 65-17

Rev. Proc. 65-17, 1965-1 C.B. 833, and Amendment I of Rev. Proc. 65-17, 1966-2 C.B. 1211, as amplified by Rev. Proc. 65-31, 1965-2 C.B. 1024, provide that the United States taxpayer must file a request for the treatment provided by Rev. Proc. 65-17 in writing with the appropriate district director before closing action is taken on the section 482 issue that forecloses availability of Rev. Proc. 65-17. Therefore, if a United States taxpayer desires competent authority action and the benefits provided by Rev. Proc. 65-17, the taxpayer must file a request under Rev. Proc. 65-17 before entering into any closing agreement or before any other closing action (as defined in section 4.03 of Rev. Proc. 65-31) is taken on the section 482 issue.

Rev. Rul. 82-80, page 7, this Bulletin, states that a United States subsidiary, whose taxable income has been increased for a tax year because of an allocation under section 482 of the Code, may receive payment from its foreign parent corporation from which, or to which, the allocation of income or deductions was made, in an amount not in excess of the taxable income increase without further federal income tax consequences. For procedures to be followed in applying this position and requirements that must be fulfilled to qualify for such treatment, see Rev. Proc. 65-17.

SEC. 9. ACTION BY COMPETENT AUTHORITY

01. The United States taxpayer will be notified if the facts provide a basis for competent authority assistance. The United States competent authority will not assist the taxpayer if:

(a) under the facts and circumstances the taxpayer is not entitled to such assistance (for example, actual or economic double taxation does not exist);

(b) the taxpayer indicates unwillingness to accept a competent authority agreement except under conditions that are clearly unreasonable or unfairly prejudicial to the interests of the United States;

(c) the taxpayer does not accept the concept that competent authority negotiations are a government to government activity that does not include the taxpayer's participation in the negotiation proceedings;

(d) the taxpayer does not furnish, upon request, sufficient information to determine whether the treaty applies to the taxpayer's facts and circumstances, or the taxpayer otherwise fails to act as required by this procedure;

(e) the request is from a taxpayer under the jurisdiction of another competent authority (see section 7.01 of this revenue procedure); or

(f) the taxpayer has demonstrated an unwillingness to execute a consent extending the period of limitations on assessment of tax for the tax year or years under consideration (see section 9.02 of this revenue procedure).

02. If the United States competent authority accepts a request for consideration, the United States taxpayer must supply any additional information needed to resolve the case and keep the United States competent authority informed about proceedings in the treaty country or any other pertinent developments. The taxpayer also may be requested to execute a consent extending the period of limitations on assessment of tax for the tax year or years concerned.

03. If the United States competent authority denies assistance, the United States taxpayer may ask the Commissioner of Internal Revenue to name a panel and have the panel review the denial of assistance. The panel will notify the taxpayer that the taxpayer may present oral arguments at a hearing, if so desired, in support of the taxpayer's request for competent authority assistance. The decision of the panel whether competent authority assistance should be provided is final and is not subject to judicial review. The United States competent authority will notify the taxpayer of the panel's decision. If the panel decides that the case is suitable for competent authority assistance, the United States competent authority will assist the taxpayer in accordance with this revenue procedure.

04. The United States competent authority will notify a taxpayer requesting assistance under this revenue procedure of any agreement or partial agreement that the United States and the treaty country competent authority reach with respect to the request. If such agreement or partial agreement is not acceptable to the taxpayer, the taxpayer may withdraw the request for competent authority consideration and may then pursue all rights to administrative and judicial review otherwise available under the laws of the treaty country and the United States.

05. When appropriate, in cases covered by sections 4 and 5 of this revenue procedure, the taxpayer will be requested to enter into a closing agreement reflecting the terms of the competent authority in accordance with sections 6.07 and 6.17 of Rev. Proc. 68-16, 1968-1 C.B. 770.

06. The United States competent authority will not grant unilateral relief to a United States taxpayer with respect to an adjustment to income, deductions, credits or other items solely because the period of limitations has expired in the foreign country and the competent authority of that country has declined to grant any relief from double taxation.

If the period provided by the foreign statute of limitations has expired, then the United States competent authority may take into account other relevant facts and may, as a matter of discretion, provide unilateral relief with respect to the adjustment to the extent necessary to avoid actual or economic double taxation of income. Relevant facts include the absence of actual or constructive notice of the proposed allocation so that the taxpayer could not avail itself of any remedies in the foreign jurisdiction; the absence of abusive tax arrangements in the structuring of the relevant international relationships and transactions; and the absence of recurring adjustments. In no event, however, will relief be granted where there is fraud or negligence with respect to the relevant international relationships and transactions.

Unilateral relief will generally only be granted by the United States in the context of a tax treaty used by the other competent authority to grant unilateral relief to taxpayers of that country. If an income tax treaty is not in force with a particular foreign country, then the service will not provide relief with respect to an adjustment because the period of limitations of that country has expired.

SEC. 10. REQUEST FOR RULINGS

01. Requests for advance rulings about the interpretation or application of a treaty on United States taxation, as distinguished from requests to the United States competent authority under this revenue procedure or Rev. Proc. 77-16, should be submitted to the Associate Chief Counsel (Technical) in accordance with Rev. Proc. 80-20, 1980-1 C.B. 633.

02. The Service does not issue advance rulings on the effect of the treaty on the tax laws of the treaty country for purposes of determining the tax of the treaty country or the meaning of a treaty article for that purpose.

SEC. 11. EFFECTIVE DATE

This revenue procedure is effective May 3, 1982.

SEC. 12. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 70-18 and Rev. Proc. 79-31 are superseded.