Notice 2008-4

income equivalent to interest or gains
from property that does not give rise to
income);

•
•

•

•

How investments in such contracts
should be treated under section 956;
Whether there are other issues that
should be considered with respect
to these transactions (for example,
whether short term transactions should
be subject to the accrual regime);
Identifying arrangements similar to
prepaid forward contracts that should
be accorded tax treatment similar to
that of prepaid forward contracts; and
Appropriate transition rules and effective dates.

SECTION 3. REQUEST FOR
COMMENTS
The Internal Revenue Service and the
Treasury Department request public comments with respect to the issues described
in Section 2 of this notice. Comments
must be submitted by May 13, 2008. All
materials submitted will be available for
public inspection and copying. Comments
may be submitted to Internal Revenue Service, CC:PA:LPD:RU (Notice 2008–2),
Room 5203, PO Box 7604, Ben Franklin
Station, Washington, D.C. 20044. Submissions may also be hand-delivered
Monday through Friday between the hours
of 8:00 a.m. and 4:00 p.m. to the Courier’s
Desk, Internal Revenue Service, 1111
Constitution Avenue, NW, Washington,
DC 20224, Attn: CC:PA:LPD:RU (Notice
2008–2), Room 5203.
Submissions
may also be sent electronically via the
internet to the following email address:
Notice.Comments@irscounsel.treas.gov.
Include the notice number (Notice
2008–2) in the subject line.
DRAFTING INFORMATION
The principal author of this notice is
John W. Rogers III of the Office of the Associate Chief Counsel (Financial Institutions & Products). For further information
regarding this notice, contact Mr. Rogers
at (202) 622–3950 (not a toll-free call).

2008–2 I.R.B.

Creditability of Mexican Single
Rate Business Tax
Notice 2008–3
The Internal Revenue Service (IRS)
and the Treasury Department are evaluating the impuesto empresarial a tasa
única (IETU), a single rate business tax
recently adopted by Mexico effective January 1, 2008, to determine whether it is a
creditable income tax under Article 24(1)
(Relief from Double Taxation) of the Convention Between the Government of the
United States of America and the Government of the United Mexican States for
the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion with Respect
to Taxes on Income (the Treaty).
Article 24(1) of the Treaty generally
provides that the United States will allow
a credit for income tax paid to Mexico by
or on behalf of a U.S. resident. The taxes
in paragraphs 3 and 4 of Article 2 (Taxes
Covered by the Convention) of the Treaty
are treated as income taxes for purposes
of Article 24(1) and are therefore eligible
for a credit. In the case of Mexico, these
taxes are the income tax imposed by Mexico’s Income Tax Law and any substantially similar taxes imposed in addition to,
or in place of, the taxes listed in paragraph
3 of Article 2 after September 18, 1992, the
date the Treaty was signed.
The IRS and the Treasury Department
believe that the provisions, design, and
full operation of the IETU, including its
interaction with Mexico’s regular income
tax, require study to determine whether the
IETU is a creditable income tax. In view of
the responsibility of the IRS to administer
U.S. tax laws and treaties, pending the conclusion of this study, the IRS will not challenge a taxpayer’s position that the IETU
is an income tax that is eligible for a credit
under Article 24(1) of the Treaty. This notice is effective for the IETU paid or accrued on or after January 1, 2008. Any
change in the foreign tax credit treatment
of the IETU as a result of the study will be
prospective, and apply solely to the IETU
paid or accrued in taxable years beginning
after the date that further guidance is issued.

253

DRAFTING INFORMATION
Various personnel from the IRS and the
Treasury Department participated in the
development of this notice. For further
information regarding this notice, contact
Nina E. Chowdhry of the Office of Associate Chief Counsel (International) at
(202) 622–3880 (not a toll-free call).

Claims Submitted to the IRS
Whistleblower Office Under
Section 7623
Notice 2008–4
SECTION 1. PURPOSE
This notice provides guidance to the
public on how to file claims under Internal
Revenue Code section 7623 as amended
by the Tax Relief and Health Care Act of
2006, Pub. L. No. 109–432 (120 Stat.
2958) (the Act) enacted on December 20,
2006.
SECTION 2. BACKGROUND
Section 406 of the Act amended section
7623 of the Internal Revenue Code concerning the payment of awards to certain
persons who detect underpayments of tax.
Prior statutory authority to pay awards at
the discretion of the Secretary was re-designated as section 7623(a), and a new section 7623(b) was added to the Code. Additional provisions in section 406 of the Act
establish a Whistleblower Office within
the IRS and address reward program administration issues. These provisions were
not incorporated into the Code.
The award program authorized by section 7623(a) has been previously implemented through regulations appearing at
section 301.7623–1 of the Procedure and
Administration Regulations, the substance
of which is reprinted as IRS Publication
733, with additional administrative guidance appearing in the Internal Revenue
Manual. Those regulations and Internal
Revenue Manual provisions will continue
to be followed for award claims within
the scope of section 7623(a), except to the
extent Sections 3.02 and 3.03 of this notice provides interim guidance regarding

January 14, 2008

submissions of information under section
7623(a).
New section 7623(b) requires that
awards be made for submissions meeting
certain criteria. Individuals are eligible
for section 7623(b) awards based on the
amount collected as a result of any administrative or judicial action resulting from
the information provided. Because new
section 7623(b) includes several requirements that are inconsistent with existing
regulations and administrative guidance
applicable to award claims under section
7623(a), the regulations which appear
at section 301.7623–1 will not apply to
the new award program authorized by
section 7623(b). This notice provides interim guidance applicable to award claims
submitted under the authority of section
7623(b). In addition, this notice seeks
public comment on the topics covered
herein.

3.02. Submission of Information for
Award under Sections 7623(a) or (b)

SECTION 3. INTERIM GUIDANCE

3.03 Information to be Included with IRS
Form 211

3.01 Eligibility Requirements to Submit
Claims Under Section 7623(b)
To be eligible for an award under section 7623(b), the tax, penalties, interest,
additions to tax, and additional amounts
in dispute must exceed in the aggregate
$2,000,000 and, if the allegedly noncompliant person is an individual, the individual’s gross income must exceed $200,000
for any taxable year at issue in a claim. If
the thresholds in section 7623(b) are not
met, section 7623(a) authorizes, but does
not require, the Service to pay for information relating to violations of the internal revenue laws that result in the government’s recovery of tax. Submissions that
do not qualify under section 7623(b) will
be processed under section 7623(a). Unlike payments made on claims under section 7623(b), there is no requirement that
payments made on claims under section
7623(a) be subject to the statutory award
percentages. The United States Tax Court
appeal provisions added by the Act and
codified in section 7623(b)(4) are applicable exclusively to award claims under section 7623(b). Accordingly, there is no right
to appeal to the Tax Court for claims under
section 7623(a).

January 14, 2008

(1) Individuals submitting information under section 7623(a) or (b) must
complete IRS Form 211, Application for
Award for Original Information, (available
on www.irs.gov) and send the completed
Form 211 to:
Internal Revenue Service
Whistleblower Office
SE:WO
1111 Constitution Ave., NW
Washington, D.C. 20224
(2) All claims for awards must be submitted under penalty of perjury in accordance with section 3.03(9) below.
Until further guidance is issued, claims
for awards may not be submitted electronically or by fax.

The Form 211 must be completed in its
entirety and should include the following
information:
(1) The date the claimant submits the
claim;
(2) Claimant’s name;
(3) Name of claimant’s spouse (if applicable);
(4) Claimant’s contact information, including address with zip code and telephone number;
(5) Claimant’s date of birth;
(6) Claimant’s Taxpayer Identification
Number (e.g., Social Security Number or
Individual Taxpayer Identification Number) and Taxpayer Identification Number
of claimant’s spouse, if applicable.
(7) Specific and credible information
concerning the person(s) that the claimant
believes have failed to comply with tax
laws and which will lead to the collection
of unpaid taxes. This information should
include the following:
(i) The legal name of the person(s) (e.g.,
individual or entity), and any related person(s), that committed the violation of tax
laws;
(ii) The person’s aliases, if any;
(iii) The person’s address;
(iv) The person’s Taxpayer Identification Number(s);

254

(v) A description of the amount(s) and
tax year(s) of Federal tax claimed to be
owed, and facts supporting the basis for the
amount(s) claimed to be owed;
(vi) Documentation to substantiate the
claim (e.g., financial data; the location of
bank accounts, assets, books, and records;
transaction documents or analyses relevant
to the claim); and
(vii) Any and all other facts and information pertaining to the claim.
If available information is not provided
by the claimant, the claimant bears the risk
that such information may not be considered by the Whistleblower Office in making any award determination. If documents or supporting evidence are known to
the claimant but are not in his or her possession or control, the claimant should describe these documents and identify their
location to the best of his or her ability.
(8) Explanation of how the information that forms the basis of the claim came
to the attention of the claimant, including the date(s) on which this information
was acquired, and a complete description
of the claimant’s present or former relationship (if any) to the person that is the
subject of the claim (e.g., family member,
acquaintance, client, employee, accountant, lawyer, bookkeeper, customer). If
the claimant identifies multiple person(s)
as the subject of a claim, describe his or
her relationship to each person.
(9) Information submitted under section
7623 must be accompanied by an original
signed declaration under penalty of perjury, as follows:
I declare, under penalty of perjury, that I
have examined this application and my
accompanying statement and supporting documentation and aver that such
application is true, correct and complete, to the best of my knowledge.
The requirement to submit information
under penalty of perjury precludes submissions by: (1) a person serving as a representative of the claimant, or (2) an entity other than a natural person. With respect to claims under section 7623(b), the
requirement to submit information under
penalty of perjury precludes submissions
made anonymously or under an alias.
(10) Joint claims must be signed by
each claimant and each claimant must sign
the claim under penalty of perjury as described in 3.03(8).

2008–2 I.R.B.

3.04 Examples of Grounds for not
Processing Claims Under Section 7623(b)
Examples of claims that will not be processed under section 7623(b) include:
(1) Claims submitted by an individual
who is an employee of the Department of
Treasury, or who is acting within the scope
of his/her duties as an employee of any
Federal, State, or local Government.
(2) Claims submitted by an individual
who is required by Federal law or regulation to disclose the information, or by an
individual who is precluded by Federal law
or regulation from making the disclosure.
(3) Claims submitted by an individual
who obtained or was furnished the information while acting in an official capacity
as a member of a State body or commission
having access to such materials as Federal
returns, copies or abstracts.
(4) Claims submitted by an individual
who had access to taxpayer information
arising out of a contract with the Federal
government that forms the basis of the
claim.
(5) Claims that upon initial review have
no merit or that lack sufficient specific and
credible information.
(6) Claims submitted anonymously or
under an alias.
(7) Claims filed by a person other than
a natural person (such as a corporation or
a partnership).
(8) The alleged noncompliant person is
an individual whose gross income is below
$200,000 for all taxable years at issue in a
claim.
3.05 Acknowledgment of Claim by
Whistleblower Office
The Whistleblower Office will acknowledge receipt of a claim in writing.
If required information has not been submitted on a Form 211, the Whistleblower
Office may return a Form 211 to the
claimant for completion and submission.
Following submission of the claim, the
Whistleblower Office may, in its sole discretion, offer the opportunity to confer
with the claimant to discuss the claim to
ensure that the Service fully understands
the information submitted with the claim.
The Whistleblower Office, in its sole discretion, may ask for additional assistance
from the claimant or any legal representative of such individual. Any assistance

2008–2 I.R.B.

shall be under the direction and control
of the Whistleblower Office or the office
assigned to investigate the matter. The
submission of a claim does not create an
agency relationship between the claimant
and the Federal Government, nor does the
claimant act in any way on behalf of the
Federal Government.
3.06 Confidentiality of Claimant’s Identity
The Service will protect the identity of
the claimant to the fullest extent permitted
by law. Under some circumstances, such
as when the claimant is needed as a witness in a judicial proceeding, it may not be
possible to pursue the investigation or examination without revealing the claimant’s
identity. The Service will make every effort to inform the claimant before proceeding in such a case.
3.07 IRS Process for Evaluating Claim
The process for evaluating a claim is
initiated by Service consideration of the
information provided by the claimant in
light of the facts developed by the Service
in investigating the claim. This process
will also consider whether the information
submitted by the claimant resulted in administrative action taken by the Service or
judicial action. For example, in the case
of large entities where the entities’ tax returns are subject to annual examination by
the Service, an administrative action can
mean the creation of a new issue under the
Audit Plan or a change in the way information about an issue is collected or analyzed, which would not otherwise have
occurred without the information provided
by the claimant. In other cases, an administrative action may include initiating
an examination of the person which would
not otherwise have occurred without information provided by the claimant. Alternatively, a claimant’s description of information when the alleged noncompliant
person is already under investigation and
when the information results in no change
in the manner regarding how the issue is
approached or resolved would not generally be regarded as resulting in administrative or judicial action and therefore would
not be eligible for an award.

255

3.08 Duration of Process from Submitted
Claim to Award Determination.
The process, from submission of complete information to the Service until the
proceeds that serve as the basis for any
award determination are collected, may
take several years. Accordingly, the Service is unable to make any commitment to
the claimant concerning the expected duration of the process.
Payment of awards will not be made
until there is a final determination of the
tax liability (including taxes, penalties,
interest, additions to tax and additional
amounts) owed to the Service and such
amounts have been collected by the Service. Examples of when a final determination of tax liability can be made include,
but are not limited to: (1) at the administrative level, when the Service and person
that is the subject of the claimant’s allegations enter into a closing agreement
which conclusively waives the right to
appeal or otherwise challenge a deficiency
or additional tax liability determined by
the Service; (2) if the person that is the
subject of the claimant’s allegations petitions the United States Tax Court for a
redetermination of a deficiency, when the
decision in that case becomes final within
the meaning of section 7481; and (3) after
the expiration of the statutory period for
a taxpayer to file a claim for refund and
to file a refund suit based on that claim
against the United States or, if a refund
suit is filed, when the judgment in that suit
becomes final. In a case in which litigation
is commenced, any award consideration
will be delayed until that litigation has
been concluded with finality.
3.09 Percentages Applied to Awards
Under 7623(b)
The Whistleblower Office will make
the final determination whether an award
will be paid and the amount of the award
for claims which it processes. Awards will
be paid in proportion to the value of information furnished voluntarily with respect
to proceeds collected, including penalties,
interest, additions to tax and additional
amounts. The amount of the award will
be at least 15% but no more than 30% of
the collected proceeds in cases in which
the Service determines that the information submitted by the claimant substan-

January 14, 2008

tially contributed to the Service’s detection and recovery of tax. If the claimant
planned and initiated the actions that led to
the underpayment of tax, or to the violation
of the internal revenue laws, the Whistleblower Office may reduce the award. If the
claimant is convicted of criminal conduct
arising from his or her role in planning and
initiating the action, the Whistleblower Office will deny the claim.
If an action is based principally on allegations resulting from judicial or administrative proceedings, government reports,
hearing, audit, or investigation, or the media, an award of a lesser amount, subject to
the discretion of the Whistleblower Office,
may be provided; such an award, however, may not exceed 10% of the collected
proceeds, including penalties, interest, additions to tax, and additional amounts resulting from the action. This reduction in
award percentage does not apply if the Service determines that the claimant was the
initial source of the information that resulted in the judicial or administrative proceedings, government reports, hearing, audit, or investigation, or the media’s report
on the allegations.
3.10 Tax Treatment of Awards
All awards will be subject to current
federal tax reporting and withholding requirements. Award recipients will receive
a Form 1099 or such other form as may be
prescribed by law, regulation or publication.
3.11 Appeal Rights
When the Whistleblower Office has
made a final determination regarding a
claim, the Whistleblower Office will send
correspondence to the claimant regarding its final award determination. Final
Whistleblower Office determinations regarding awards under section 7623(b)
may, within 30 days of such determination,
be appealed to the United States Tax Court.
In accordance with section 7623(b)(4),
decisions under section 7623(a) may not
be appealed to the Tax Court.

Act) is covered by the law and policies
in place at the time the information was
submitted. Supplemental information provided on or after December 20, 2006, will
not be considered a new claim unless its
receipt prompts the Service to take an administrative or judicial action that would
not otherwise have been taken on the basis
of the earlier-supplied information alone.
3.13 Additional Questions
An electronic mailbox for email inquiries has been set up and may be accessed at WO@IRS.gov.
SECTION 4. REQUEST FOR
COMMENTS
Interested parties are invited to submit comments on or before February
13, 2008. Comments should be submitted to: Internal Revenue Service,
CC:PA:LPD:PR (Notice 2008–4), Room
5203, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20224. Alternatively, comments may be hand delivered Monday through Friday between
the hours of 8:00 a.m. to 4:00 p.m.
to: CC:PA:LPD:PR (Notice 2008–4),
Courier’s Desk,
Internal Revenue
Service, 1111 Constitution Avenue,
N.W., Washington, D.C. Comments
may also be submitted electronically
via the following email address:
Notice.Comments@irscounsel.treas.gov.
Please include “Notice 2008–4” in the
subject line of any electronic submissions.
SECTION 5. EFFECTIVE DATE
This notice is effective as of January 14,
2008.
SECTION 6. DRAFTING
INFORMATION
The principal author of this notice is
Holly Styles of the Office of Associate
Chief Counsel, General Legal Services.
For further information regarding this
notice, contact Holly Styles at (202)
927–0900 (not a toll-free call).

3.12 Claims Submitted Prior to Date of
Enactment of the Act
Information provided prior to December 20, 2006 (the date of enactment of the

January 14, 2008

256

Qualifying Relative for
Purposes of Section 152(d)(1)
Notice 2008–5
PURPOSE
This notice provides guidance under
section 152(d) of the Internal Revenue
Code for determining whether an individual is a qualifying relative for whom
the taxpayer may claim a dependency exemption deduction under section 151(c).
Section 152(d)(1)(D) provides that an individual is not a qualifying relative of the
taxpayer if the individual is a qualifying
child of any other taxpayer. This notice
clarifies that an individual is not a qualifying child of “any other taxpayer” if the
individual’s parent (or other person with
respect to whom the individual is defined
as a qualifying child) is not required by
section 6012 to file an income tax return
and (i) does not file an income tax return,
or (ii) files an income tax return solely to
obtain a refund of withheld income taxes.
BACKGROUND
Section 151 allows a taxpayer a deduction for each individual who is a dependent (as defined in section 152) of the taxpayer for the taxable year. Section 152(a)
provides that the term “dependent” means
a “qualifying child” (as defined in section
152(c)) or a “qualifying relative” (as defined in section 152(d)). The terms “qualifying child” and “qualifying relative” were
added to section 152 by section 201 of the
Working Families Tax Relief Act of 2004
(WFTRA), Pub. L. No. 108–311, 118 Stat.
1169, effective for taxable years beginning
after December 31, 2004. WFTRA established a uniform definition of a “qualifying child” pursuant to section 152(c) for
determining whether a taxpayer may claim
certain child-related tax benefits, namely
head of household filing status, the earned
income credit, child tax credit, the child
and dependent care credit, and the dependency exemption deduction. See §§ 2(b),
32, 24, 21, 152. WFTRA also established
the term “qualifying relative” to identify
individuals (other than a qualifying child)
for whom a dependency exemption deduction may be allowed.

2008–2 I.R.B.