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Reporting Requirements – Frequently Asked Questions

Reportable Transaction Disclosure Statement - R&TC Section 18407

  1. Can I e-file Internal Revenue Service (IRS) Forms 8886, Reportable Transaction Disclosure Statement, and 8271, Investor Reporting of Tax Shelter Registration Number?
  2. California Revenue and Taxation Code (R&TC) Sections 18407, 18628, and 18648 conform to Internal Revenue Code (IRC) Sections 6011, 6111 and 6112, respectively, except as otherwise provided. Is the Franchise Tax Board (FTB) following Notice 2006-16?
  3. R&TC Section 18407 conforms to IRC Section 6011, except as otherwise provided. Is the FTB following IRS Notice 2006-6?

Information Return - R&TC Section 18628

  1. Do material advisors file IRS Form 8264, Application for Registration of a Tax Shelter, with the FTB to meet the requirements under R&TC Section 18628 as required under IRS Notice 2005-22?
  2. If the IRS accepts a request for a letter ruling on a reportable transaction, and suspends the due date for disclosing the transaction, will FTB also suspend the due date?
  3. Do material advisors have to file an information return and maintain advisee lists for transactions with a significant book-tax difference for California purposes?
  4. The Internal Revenue Service (IRS) has issued final regulations, Treasury Decision (T.D.) 9351, that provide rules on the disclosure of reportable transactions by material advisors under Internal Revenue Code Section 6111 as amended by the American Jobs Creation Act of 2004. The preamble to T.D. 9351 provides that investors are no longer required to file IRS Form 8271, Investor Reporting of Tax Shelter Registration Number, that are otherwise due on or after August 3, 2007. Is the Franchise Tax Board following T.D. 9351?

List of Advisees - R&TC Section 18648

  1. Does R&TC Section 18648 conform to the list maintenance provisions under IRC Section 6112 and its supporting regulation?
  2. If a material advisor is required to maintain a list of advisees, do the names of all advisees or only California advisees need to be maintained on the list?

Mailing address and contact information

Reportable Transaction Disclosure Statement - R&TC Section 18407

  1. Can I e-file Internal Revenue Service (IRS) Forms 8886, Reportable Transaction Disclosure Statement, and 8271, Investor Reporting of Tax Shelter Registration Number?

    Yes. We accept both the IRS Form 8886 and Form 8271 as an attachment to the California e-file return.

    If this is the first time you are disclosing the transaction, you must also mail a copy of IRS Form 8886 or the federal disclosure statement to us. The copy should show exactly the same information, word for word, provided with the electronically filed return.

  2. California Revenue and Taxation Code (R&TC) Sections 18407, 18628, and 18648 conform to IRC Sections 6011, 6111 and 6112, respectively, except as otherwise provided. Is the FTB following Notice 2006-16?

    Yes. The FTB is following IRS Notice 2006-16.

    The following instruction from IRS Notice 2006-16, Section 3.03, also applies for California disclosure purposes: "Transactions described in Sections 3.01 or 3.02 of this notice may be described in Section 1.6011-4(b)(3) through (b)(5) or (b)(7) and, notwithstanding this notice, may be subject to disclosure by taxpayers under Section 1.6011-4(a), and subject to disclosure and list maintenance requirements by material advisors under Sections 6111 and 6112." Thus, if the transaction is described in one of the other categories of reported transactions, then the material advisor must file an information return under R&TC Section 18628 or maintain an advisee list under R&TC Section 18648 for the transaction.

    Background

    IRS Notice 2006-16 (2006-9 I.R. B. 538), Tax Shelters - Notional Principal Contracts - Nonperiodic Payments - Penalties, clarifies IRS Notice 2002-35 (2002-1 C. B. 992), by illustrating certain transactions that are not the same as or substantially similar to the transactions in Notice 2002-35 and thus, are not listed transactions for purposes of IRC Sections 6111 and 6112 and Treasury Regulation Section 1.6011-4(b)(2). Notice 2006-16, Section 3.02, also modifies Notice 2002-35 by providing a safe harbor from the disclosure requirements imposed by Section 1.6011-4.

    Section 3.02, Disclosure Requirement Safe Harbor, provides that a disclosure statement is not required:

    • If a taxpayer receives acknowledgement that the pass-through entity has or will comply with its separate disclosure obligation under Section 1.6011-4, with respect to a transaction described in Notice 2002-35 (as clarified by Section 3.01 of Notice 2006-16); and
    • If the taxpayer's obligation under Section 1.6011-4 to file a disclosure statement with respect to that transaction arises from the taxpayer's direct or indirect interest in that pass-through entity.

    The acknowledgment can be a copy of the Form 8886 filed (or to be filed) by the pass-through entity, and must be received by the taxpayer prior to the time set forth in Treasury Regulation Section 1.6011-4(e) in which the taxpayer would otherwise be required to provide disclosure.

    The provisions under Section 3.01, Transactions Excluded from the Scope of Notice 2002-35, are effective as of May 6, 2006; and the provisions under Section 3.02, Disclosure Requirement Safe Harbor, are effective for disclosure statements that would otherwise be due on or after February 13, 2006.


  3. R&TC Section 18407 conforms to IRC Section 6011, except as otherwise provided. Is the FTB following IRS Notice 2006-6?

    Yes. It is the intent of the FTB to follow IRS Notice 2006-6, effective for transactions required to be disclosed beginning January 6, 2006.

    Background

    IRS Notice 2006-6, Notification of Removal of the Transaction with a Significant Book-Tax Difference Category of Reportable Transaction under Section 1.6011.4, provides that the significant book-tax difference category of reportable transactions is no longer required to be disclosed under Section 1.6011-4. Taxpayers are not required to file a disclosure statement solely because the transaction has a significant book-tax difference under Section 1.6011-4(b)(6). This is effective for transactions required to be disclosed beginning January 6, 2006.

    The IRS decided to remove significant book-tax differences as a category of reportable transactions because the significant book-tax differences are captured on the Schedule M-3. Notice 2006-6 does not relieve taxpayers of the obligation to file a Schedule M-3.

    The following is required to be filed by taxpayers with California significant book-tax differences for taxable years ending on or after December 31, 2005:

    • If you are required to file a federal Schedule M-3 with the IRS, attach a copy of the federal Schedule M-3 to the California tax return.
    • Complete the Schedule M-1 on California book to tax difference as required.

    The following instruction from IRS Notice 2006-6 also applies for California disclosure purposes: "If a transaction with a significant book-tax difference also is described in Section 1.6011-4(b)(2) through (5) or (7), the transaction is a reportable transaction under Section 1.6011-4 for which disclosure may be required by taxpayers under Section 1.6011-4, and for which disclosure and list maintenance may be required by material advisors under Sections 6111 and 6112, respectively." Thus, if the significant book-tax difference is described in one of the other categories of reportable transactions, then IRS Form 8886 must be attached to the California tax return and, if it is the first time that the taxpayer is disclosing such transaction, mail a copy of the form.

Information Return - R&TC 18628

  1. Do material advisors file IRS Form 8264, Application for Registration of a Tax Shelter, with the FTB to meet the requirements under R&TC Section 18628 as required under IRS Notice 2005-22?

    Material advisors must file a reportable transactions information return with FTB when the advisor is:

    • Organized in California,
    • Does business in California,
    • Derives income from California sources, or
    • Provides any material aid, assistance, or advice with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction, including listed transaction, to a taxpayer that is organized in California, does business in California, or derives income from California sources.

    For purposes of meeting California's reportable transactions disclosure requirements under R&TC Section 18628, as amended, material advisors must file IRS Form 8264 with the FTB as follows:

    • Provide a copy of Form 8264, or a Form 8264 completed on a California-only basis if there is a filing requirement under California law but not under federal law, on the same date Form 8264 is required to be filed with the IRS for reportable transactions. Currently, IRS Notice 2005-22 provides that until further guidance is issued, a material advisor must file Form 8264 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 a reportable transaction.
    • For listed transactions, the Form 8264 is due by the later of 60 days after entering into the transaction or 60 days after the transaction becomes listed.

    If a person filed IRS Form 8264 with the FTB under R&TC Section 18628 before the amendment made by AB 115, that person is not required to file as a material advisor an amended or duplicate Form 8264 for the same transaction. However, the material advisor must supplement the information provided on a previously filed Form 8264 if the information is no longer accurate or if there is additional required information that was not available at the time the information was originally disclosed on Form 8264. For more information see FTB Notice 2005-7.

    How To Report

    Complete IRS Form 8264, Application for Registration of a Tax Shelter, and mail a copy of the form.

    Background

    The American Jobs Creation Act of 2004 (P.L. 108-357) amended IRC Section 6111 to now require material advisors to file a reportable transactions information return, which replaces IRS Form 8264, Application for Registration of a Tax Shelter. However, until the IRS issues further guidance or a new form, material advisors must disclose reportable transactions, including listed transactions, by filing an information return on Form 8264. IRS Notice 2005-22, Temporary Rules Under Section 6111 and 6112, which clarifies and modifies IRS Notices 2004-80 and 2005-17, provides that material advisors must file an information return on Form 8264 to disclose reportable transactions, including listed transactions. This information return must be filed by the last day of the month that follows the end of the calendar quarter in which the advisor became a material advisor.

    Assembly Bill (AB) 115 (Stat. 2005, Ch. 691) amended R&TC Section 18628 to conform to IRC Section 6111, except as otherwise provided.


  2. If the IRS accepts a request for a letter ruling on a reportable transaction, and suspends the due date for disclosing the transaction, will FTB also suspend the due date?

    If the material advisor sends FTB a copy of the request for a letter ruling filed with the IRS on or before the date the information return is due with respect to a particular transaction, we will suspend the due date for disclosing that transaction:

    • Until 60 days from the date of the IRS ruling that the transaction is a reportable transaction subject to the reporting requirements under IRC Section 6111, or
    • If the request is withdrawn, 60 days from the date of the request to withdraw.

    Mail a copy of the request.

    Background

    IRS Notice 2005-22, Temporary Rules Under Section 6111 and 6112, covers the due date by which a potential material advisor must disclose a transaction to the IRS. If a material advisor submits a request for a letter ruling on or before the date for IRS Form 8264, Application for Registration of a Tax Shelter, and fully discloses all relevant facts about the transaction, the IRS will suspend the material advisor's obligation to disclose the transaction by the due date (see Treasury Regulation Section 1.6011-4(f)).


  3. Do material advisors have to file an information return and maintain advisee lists for transactions with a significant book-tax difference for California purposes?

    No. Since it is the intent of the FTB to follow IRS Notice 2006-6, material advisors do not have to file an information return under R&TC Section 18628 or maintain an advisee list under R&TC Section 18648 for transactions with a significant book-tax difference. This is effective for transactions with a California significant book-tax difference required to be disclosed on or after January 6, 2006, or for transactions with a significant book-tax difference for which lists should have been prepared and maintained on or after January 6, 2006.

    Consequently, except as noted below, for a transaction involving a California significant book-tax difference under Section 1.6011.4, material advisors are not required to follow the material advisor reporting requirements under FTB Notice 2005-7 for any disclosure due on or after January 6, 2006.

    The following instruction from IRS Notice 2006-6 also applies for California disclosure purposes:

    "If a transaction with a significant book-tax difference also is described in Section 1.6011-4(b)(2) through (5) or (7), the transaction is a reportable transaction under Section 1.6011-4 for which disclosure may be required by taxpayers under Section 1.6011-4, and for which disclosure and list maintenance may be required by material advisors under Sections 6111 and 6112, respectively." Thus, if the significant book-tax difference is described in one of the other categories of reportable transactions, then the material advisor must file an information return under R&TC Section 18628 or maintain an advisee list under R&TC Section 18648 for the transactions.

    Background

    IRS Notice 2006-6, Notification of Removal of the Transaction with a Significant Book-Tax Difference Category of Reportable Transaction under Section 1.6011.4, provides that the removal of the significant book-tax difference category from the categories of reportable transactions under Treasury Regulation Section 1.6011-4 also applies to material advisors who are required to file a return under IRC Section 6111 and maintain advisee lists under IRC Section 6112. This is effective for transactions required to be disclosed beginning January 6, 2006.

    R&TC Sections 18628 and 18648 conform to IRC Sections 6111 and 6112, respectively, except as otherwise provided.


  4. The Internal Revenue Service (IRS) has issued final regulations, Treasury Decision (T.D.) 9351, that provide rules on the disclosure of reportable transactions by material advisors under Internal Revenue Code Section 6111 as amended by the American Jobs Creation Act of 2004. The preamble to T.D. 9351 provides that investors are no longer required to file IRS Form 8271, Investor Reporting of Tax Shelter Registration Number, that are otherwise due on or after August 3, 2007. Is the Franchise Tax Board following T.D. 9351?


  5. Yes. It is the intent of the Franchise Tax Board to follow T.D. 9351, effective for disclosures due on or after August 3, 2007. Thus, investors do not have to file IRS Form 8271 with the Franchise Tax Board that are otherwise due on or after August 3, 2007. However, a material advisor must provide the reportable transaction number to all taxpayers and material advisors for whom the material advisor acts as a material advisor in accordance with Section 301.6111-3(d)(2).

    Background

    Before the enactment of the American Jobs Creation Act (AJCA), IRC section 6111 provided that tax shelter organizers were required to provide investors in tax shelters the registration number for the tax shelter. Section 301.6111-1T, Q&A 55, requires investors to report the registration number of the tax shelter to the IRS on Form 8271, "Investor Reporting of Tax Shelter Registration Number", and attach the Form 8271 to any return on which any deduction, loss, credit, or other tax benefit attributable to the tax shelter is claimed. Because only a few investors must still file Form 8271 for pre-AJCA section 6111 tax shelters and because the IRS already is aware of these transactions, the IRS and Treasury Department have decided that investors are no longer required to file Forms 8271 otherwise due on or after August 3, 2007. The Form 8271 will be obsolete.

List of Advisees - R&TC Section 18648

  1. Does R&TC Section 18648 conform to the list maintenance provisions under IRC Section 6112 and its supporting regulation?

    Yes. R&TC Section 18648, as amended by AB 115 (Stats. 2005, Ch. 619), conforms to IRC Section 6112, except as otherwise provided. For state purposes as provided under California law, you are required to maintain and submit the same information you do for federal purposes. However, for California purposes, material advisors must automatically provide to the FTB the list of advisees for listed transactions. See List Maintenance Requirements.

  2. If a material advisor is required to maintain a list of advisees, do the names of all advisees or only California advisees need to be maintained on the list?


  3. R&TC Section 18648 requires the material advisor to maintain a list of all advisees regardless of the advisee's physical address.

Mailing address and contact information

Send copies of your documents and forms to:

Tax Shelter Filing
ATSU 398 MS F385
Franchise Tax Board
P.O. Box 1673
Sacramento CA 95812-9900

For Courier service delivery:

Tax Shelter Filing
Franchise Tax Board
Sacramento CA 95827