n-01-18.pdf

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Part III - Administrative, Procedural, and Miscellaneous
Lease Exception to the Tax Shelter Regulations
Notice 2001-18
This notice provides an exception from the registration requirements under
' 6111(d) of the Internal Revenue Code and the list maintenance requirements under
' 6112 for certain leasing transactions, except as may be provided in subsequent
guidance.
BACKGROUND
Section 301.6111-2T of the temporary Procedure and Administration
Regulations provides rules regarding the registration of confidential corporate tax
shelters under ' 6111(d). A confidential corporate tax shelter is any entity, plan,
arrangement, or transaction that satisfies the following three requirements: (1) a
significant purpose of the structure of the transaction is the avoidance or evasion of
federal income tax for a direct or an indirect corporate participant; (2) the transaction is
offered to any potential participant under conditions of confidentiality; and (3) the tax
shelter promoters may receive fees in excess of $100,000 in the aggregate. Section
301.6111-2T(b) provides that the avoidance or evasion of federal income tax is
considered a significant purpose of the structure of the transaction if the transaction is a
listed transaction under ' 301.6111-2T(b)(2), lacks economic substance under
' 301.6111-2T(b)(3), or is otherwise a tax-structured transaction under
' 301.6111-2T(b)(4). However, a transaction described in ' 301.6111-2T(b)(3) or (4)

does not need to be registered if, under ' 301.6111-2T(b)(5)(ii), the Internal Revenue
Service makes a determination by published guidance that a transaction is not subject
to the registration requirements under ' 6111(d).
Section 301.6112-1T provides rules regarding the requirement to maintain lists of
investors in potentially abusive tax shelters under ' 6112. A potentially abusive tax
shelter under ' 6112 includes any investment that is required to be registered with the
Internal Revenue Service as a tax shelter under ' 6111, and any other entity, plan, or
arrangement, if specified in regulations, that has a potential for tax avoidance or
evasion. Section 301.6112-1T A-4 provides that for purposes of the list requirement, a
tax shelter includes any transaction a significant purpose of the structure of which is the
avoidance or evasion of federal income tax within the meaning of '' 6111(d)(1)(A) and
301.6111-2T(b) (whether or not offered to any direct or indirect corporate participant). If
a transaction is exempted from registration under ' 301.6111-2T(b)(5), the transaction
is also exempted from the list maintenance requirement under ' 6112, unless the
transaction is subject to registration under ' 6111(c).
DISCUSSION
Since the issuance of '' 301.6111-2T and 301.6112-1T, the U.S. Treasury
Department and the Internal Revenue Service have received comments asking that
certain customary leasing transactions involving tangible personal property be excepted
from the registration requirement under ' 6111(d) and the list maintenance requirement
under ' 6112. After consideration of those comments, Treasury and the Service have
determined that exemptive relief for certain leasing transactions is consistent with the

objectives of the registration requirements under ' 6111(d) and the list maintenance
requirements under ' 6112.
Under ' 301.6111-2T(b)(5)(ii), no person shall be required to register under
' 6111(d) a transaction that satisfies the following requirements: (1) the transaction is
a lease or sale leaseback between an owner-lessor of tangible personal property and a
lessee who is the user of the property, (2) the terms of the lease (including any related
agreements) are consistent with customary commercial practice for the leasing of
similar items of property, (3) the transaction qualifies as a lease for federal income tax
purposes under Rev. Proc. 75-21, 1975-1 C.B. 715 (or its successor), or under
generally accepted case law principles, (4) the lessor and lessee agree to consistently
report the transaction as a lease for federal income tax purposes, and (5) the
transaction is not the same as or substantially similar to a listed transaction (or part of a
listed transaction) under ' 301.6111-2T(b)(2), including a Alease strip@ described in
Notice 95-53, 1995-2 C.B. 334, or a ALILO@ (lease in / lease out) transaction described
in Rev. Rul. 99-14, 1999-1 C.B. 835. Furthermore, no list needs to be maintained
under ' 6112 for transactions satisfying this leasing exception that are not otherwise
subject to registration under ' 6111(c).
EFFECTIVE DATE
This notice applies to leasing transactions entered into after February 28, 2000.
DRAFTING INFORMATION
The principal author of this notice is Catherine Moore of the Office of Associate
Chief Counsel (Passthroughs and Special Industries). For further information regarding

this notice, contact Catherine Moore at (202) 622-3080 (not a toll-free call).