rp-06-26.pdf

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Part III

Administrative, Procedural, and Miscellaneous

26 CFR 601.201: Rulings and determination letters.
(Also: Part l, Section 7528)

Rev. Proc. 2006-26

SECTION 1. PURPOSE
The purpose of this revenue procedure is to announce the introduction of user fees for
requests submitted to the U.S. competent authority for discretionary determinations
under limitation on benefits provisions of U.S. income tax treaties. This revenue
procedure modifies section 14 (Fees) of Rev. Proc. 2002-52, 2002-2 C.B. 242, and will
be effective for such requests submitted on or after May 4, 2006.

SECTION 2. BACKGROUND
Almost all U.S. income tax treaties contain a limitation on benefits article. A resident of
a Contracting State must satisfy one of the enumerated tests set forth in that article to

be entitled to U.S. treaty benefits with respect to an item of income, profit or gain. The
U.S. competent authority will not make a determination on whether or not a resident of a
Contracting State meets the conditions of one of these enumerated tests. However, if a
resident of a Contracting State does not meet one of the tests, most limitation on
benefits articles authorize the U.S. competent authority to make a discretionary
determination that the resident be entitled to some or all of the benefits of the income
tax treaty. Rev. Proc. 2002-52, Procedures for Obtaining Competent Authority
Assistance, currently sets forth rules for requesting a discretionary determination under
a limitation on benefits provision of an income tax treaty. Section 3.08 of Rev. Proc.
2002-52.
Section 14 of Rev. Proc. 2002-52 currently provides that user fees are not required as a
condition to requesting competent authority assistance, including requests for a
discretionary determination pursuant to section 3.08. The Internal Revenue Service has
recently determined that user fees are appropriate for this limited type of request for
competent authority assistance. The rules for these user fees are set forth below and
will be incorporated into the next update of Rev. Proc. 2002-52.
SECTION 3. PROCEDURES
.01 Fees
Effective May 4, 2006, a user fee of $15,000 will be charged for each entity requesting a
discretionary limitation on benefits determination. The fee will apply regardless of
whether the request is for: (1) an initial determination; (2) a renewal of a previously
issued determination; or (3) a supplemental determination required, for example, if there

is a material change in fact, or the applicant seeks benefits with respect to a different
type of income, or requests a lower rate of withholding tax on dividends. If a request is
submitted that requires the competent authority to make a discretionary determination
for more than one entity, a separate fee will be charged for each entity.
.02 Acceptance of Request
A user fee will not be charged until the U.S. competent authority has formally accepted
the request for consideration. Requests should continue to be submitted to the Director,
International (LMSB), and include the information required in section 3.08 of Rev. Proc.
2002-52. Within 30 days of receipt of a complete submission, the U.S. competent
authority will provide written notice to the applicant as to whether the request will be
accepted or rejected for consideration. If a request is accepted, the applicant will be
required to mail a check or money order in the appropriate amount, along with a copy of
the written notice of acceptance to the IRS office identified below. The check or money
order should be payable to the United States Treasury. Substantive consideration of a
request for a discretionary determination will not begin until the applicant has submitted
the appropriate user fee.
The mailing address for the user fee is:
IRS/BFC
P.O. Box 9002
Beckley, WV 25802

.03 Refunds of user fees
In general, a user fee will not be refunded once the competent authority accepts a

request for consideration and the user fee is paid. For example, the Service will not
refund the user fee if the request for a discretionary determination is withdrawn by the
applicant, or if the applicant fails to submit additional information as requested by the
Competent Authority.
A user fee may be refunded, however, if:
(a) A higher user fee is paid than is required; or
(b) Taking into account all the facts and circumstances, including the Service’s
resources devoted to the request, the Competent Authority declines to rule and,
in his or her sole discretion, decides a refund is appropriate.

SECTION 4. EFFECT ON OTHER DOCUMENTS
Section 14 of Rev. Proc. 2002-52, 2002-2 C.B. 242, is modified accordingly.
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective May 4, 2006.
SECTION 7. DRAFTING INFORMATION
The principal author of this revenue procedure is Quyen P. Huynh of the Office of
Associate Chief Counsel (International). For further information regarding this revenue
procedure contact Quyen P. Huynh at (202) 622-3880 (not a toll free call).