1. General timing requirements

Section 412 of the Internal Revenue Code (Code) provides that a sponsor of a qualified defined benefit plan (other than a multiemployer plan as defined in § 414(f) or a CSEC plan as defined in § 414(y)) must make contributions to or under the plan for the plan year that, in the aggregate, are not less than the minimum required contribution determined under § 430 for the plan year. Section 4971(a) imposes an excise tax on an employer that sponsors a plan subject to § 412 that has an unpaid minimum required contribution within the meaning of § 4971(c)(4) as of the end of the plan year.

Section 430(j)(1) provides that the due date for the payment of any minimum required contribution for a plan year is 8½ months after the close of the plan year. Section 430(j)(2) provides that any payment made on a date other than the valuation date for the plan year must be adjusted for interest accruing for the period between the valuation date and the payment date, determined using the plan’s effective interest rate under § 430(h)(2)(A) for the plan year.

Section 430(j)(3) provides that if the plan had a funding shortfall (as defined in § 430(c)(4)) for the preceding plan year, then the plan sponsor must pay four quarterly installments toward the required minimum contribution for the plan year. The due dates for the installments are April 15, July 15, and October 15 of the plan year, and January 15 of the following year (adjusted for a plan year that is not a calendar year under § 1.430(j)-1(c)(6)). Section 430(j)(3)(D)(i) provides that each quarterly installment is 25 percent of the required annual payment defined in § 430(j)(3)(D)(ii). Section 430(j)(3)(A) provides that if a quarterly installment is paid after the due date for that installment, then the interest rate that applies for the period of underpayment (in lieu of the interest rate that would apply under § 430(j)(2)) is the plan’s effective interest rate plus 5 percentage points.

Section 430(g)(4)(A) provides that if a plan sponsor makes a contribution to the plan after the valuation date for the plan year in which the contribution is made, and the contribution is for a preceding plan year, the contribution is taken into account as an asset of the plan for the plan year in which it is made, except that only the present value (determined as of the valuation date) of that contribution may be taken into account. For this purpose, the present value of the contribution is determined using the effective interest rate for the preceding plan year for which the contribution is made.

2. CARES Act changes

Section 3608(a)(1) of the CARES Act provides that any minimum required contribution that would otherwise be due under § 430(j) of the Code (and § 303(j) of the Employee Retirement Income Security Act, Pub. L. 93-406, as amended (ERISA)) during calendar year 2020 (including quarterly installments under § 430(j)(3) of the Code and § 303(j)(3) of ERISA) are due on January 1, 2021. Section 3608(a)(2) of the CARES Act provides that those contributions and installments are to be increased with interest accruing for the period between the original due date for the contribution or installment and the date of the payment at the effective interest rate for the plan for the plan year that includes the payment date.

1. General rules regarding benefit limitations

Section 436 of the Code provides limits on benefits and benefit accruals under single-employer defined benefit pension plans, which are applied based on the plan’s adjusted funding target attainment percentage (AFTAP) for a plan year. Section 436(b) provides generally that unpredictable contingent event benefits resulting from an event may not be paid if, taking into account the payment of those benefits, the plan’s AFTAP would be less than 60 percent. Section 436(c) provides generally that no amendment increasing liabilities may take effect if, after taking into account that amendment, the plan’s AFTAP would be less than 80 percent. Section 436(d) provides generally that the plan may not pay certain accelerated forms of benefit (such as a single-sum distribution) if the plan’s AFTAP is less than 80 percent. Section 436(e) provides generally that benefit accruals must cease if the plan’s AFTAP is less than 60 percent.

2. CARES Act changes

Section 3608(b) of the CARES Act provides that for purposes of applying § 436 of the Code (and § 206(g) of ERISA), a plan sponsor may elect to treat the plan’s AFTAP for the last plan year ending before January 1, 2020, as the AFTAP for plan years that include calendar year 2020.

Under § 430(f), the plan sponsor of a defined benefit plan that is not a multiemployer plan may elect to maintain a prefunding balance that may be used, at the plan sponsor’s election, to offset the minimum required contribution for a plan year.¹ Under § 430(f)(6)(B)(i), a plan sponsor may elect to add contributions that exceed the minimum required contribution for a plan year (adjusted with interest using the effective interest rate for the plan year in accordance with § 430(f)(6)(B)(ii)) to the plan’s prefunding balance. A plan sponsor may also elect to reduce the plan’s prefunding balance or the funding standard carryover balance as provided in § 430(f)(5). Section 1.430(f)-1(f)(1)(i) generally provides that any election under § 430(f) by the plan sponsor must be made by providing written notification of the election to the plan’s enrolled actuary and the plan administrator. Section 1.430(f)-1(f)(2)(i) generally provides that any election under § 430(f) with respect to a plan year must be made no later than the last date for making the minimum required contribution for the plan year as described in § 430(j)(1), or such later date as prescribed in guidance published in the Internal Revenue Bulletin. However, § 1.430(f)-1(f)(2)(iii) provides that any election to reduce the prefunding balance or funding standard carryover balance for a plan year (for example, in order to avoid or terminate a benefit restriction under § 436) must be made by the end of the plan year to which the election relates.

Section 436(h) provides rules that apply prior to the certification of the AFTAP for a plan year by the plan’s actuary. Under § 436(h)(1), if a benefit limitation applied to a plan on the last day of the preceding plan year, then the current year’s AFTAP generally is presumed to be equal to the prior year’s AFTAP for the period beginning on the first day of the plan year and ending when the plan’s enrolled actuary certifies the AFTAP for the current plan year. Under § 436(h)(3), if (i) the plan’s enrolled actuary has not certified the AFTAP for the current plan year by the first day of the 4th month of the plan year, and (ii) the AFTAP for the prior plan year did not result in the application of a benefit limitation for that prior plan year (but would have resulted in the application of a benefit limitation had that AFTAP been 10 percentage points lower), then the AFTAP for the current plan year is presumed to be equal to 10 percentage points less than the AFTAP for the prior plan year, for the period beginning on that first day of the fourth month and ending when the enrolled actuary of the plan certifies the plan’s AFTAP for the current plan year. Under § 436(h)(2), if no certification of the AFTAP for the current plan year is made before the first day of the 10th month of that year, then the AFTAP for the current plan year is presumed to be less than 60 percent as of that first day.

Sections 436(b)(2) and (c)(2) provide rules that allow a plan sponsor to avoid or terminate benefit restrictions under § 436(b) or (c) by making an additional contribution of a certain amount to the plan. Section 1.436-1(f) provides rules for these contributions, which are referred to as § 436 contributions. Section 1.436-1(f)(2)(i)(A) provides that any § 436 contribution made by a plan sponsor on a date other than the valuation date for the plan year must be adjusted with interest at the plan’s effective interest rate for the plan year. If the plan’s effective interest rate for the plan year has not been determined at the time of the contribution, then this interest adjustment must be made using the highest of the three segment rates as applicable for the plan year. In such a case, if the effective interest rate for the plan year is subsequently determined to be less than that highest rate, the excess is recharacterized as an employer contribution taken into account under § 430 for the current plan year.

The regulations under § 436 address the calculation of a plan’s AFTAP. Section 1.436-1(h)(4)(iii) provides rules relating to changes in a plan’s AFTAP after it has been certified, and the effect of such a change depends on whether the change is material (within the meaning of § 1.436-1(h)(4)(iii)(B)) or immaterial (within the meaning of § 1.436-1(h)(4)(iii)(C)). In general, a material change in AFTAP is defined as a change under which plan operations would have been different based on the subsequent AFTAP determination, and an immaterial change in AFTAP is defined as a change that is not material. Under § 1.436-1(h)(4)(iv)(A), a material change in a plan’s AFTAP will cause a plan to fail to comply with § 401(a).

Section 1.436-1(h)(4)(iii)(C) provides a special rule that, subject to certain conditions, deems a change in a plan’s AFTAP to be immaterial (even if the change would otherwise be material) if the change results from an event specified in § 1.436-1(h)(4)(iii)(C)(1) through (8). Section 1.436-1(h)(4)(iii)(C)(9) provides authority for the expansion of the list of events for which a resulting change in AFTAP may be deemed immaterial through publication of guidance in the Internal Revenue Bulletin. Deemed immaterial treatment under § 1.436-1(h)(4)(iii)(C) with respect to an event that results in a change in AFTAP is conditioned on the AFTAP being recertified as soon as reasonably practicable after the event. The effect of this deemed immaterial treatment is that the change in the plan’s AFTAP will not cause the plan to fail to comply with § 401(a) merely because of the change, provided that the plan administrator reflects the new AFTAP in plan operations on a prospective basis beginning with the date of the recertification.

Section 404 provides rules regarding the deductibility of employer contributions to an employees’ trust or annuity plan and compensation under a deferred payment plan. Under § 404(a)(1)(A), contributions paid to the trust of a qualified defined benefit pension plan are deductible in the taxable year when paid, subject to the applicable limits. Under § 404(a)(6), a taxpayer making a contribution in a taxable year is deemed to have made the contribution on the last day of the preceding taxable year if the payment is on account of that preceding taxable year and is made not later than the time prescribed by law for filing the return for that preceding taxable year (including extensions thereof).

Under § 101 of Reorganization Plan No. 4 of 1978 (43 FR 47713) and § 3002(c) of ERISA, the Secretary of the Treasury has interpretive jurisdiction over the subject matter addressed in this notice for purposes of ERISA, as well as the Code. Thus, the provisions of this notice pertaining to §§ 430 and 436 of the Code also apply for purposes of §§ 303 and 206(g) of ERISA.

Q-1: To which plans does the extended contribution due date of January 1, 2021, under § 3608(a)(1) of the CARES Act, apply?

A-1: The extended contribution due date of January 1, 2021, applies to a defined benefit plan for which the minimum required contribution is determined under § 430. Thus, this extended contribution due date of January 1, 2021, does not apply to a multiemployer plan, a CSEC plan, a fully-insured plan described in § 412(e)(3), or a money purchase pension plan.

Q-2: How is a contribution adjusted for interest between the valuation date and the payment date for the contribution, taking into account the interest adjustment rules of § 3608(a)(2) of the CARES Act?

A-2: To determine the portion of the minimum required contribution for a plan year that is satisfied by a contribution, § 430(j)(2) of the Code and § 1.430(j)-1(b)(4)(i) provide that the contribution is adjusted for interest for the period between the valuation date for the plan year and the payment date for the contribution, at the plan’s effective interest rate for the plan year. Under § 3608(a)(2) of the CARES Act, any payment that is made after the original due date for the contribution and by the extended due date under § 3608(a)(1) must be increased for the period between the original due date and the payment date at the effective interest rate for the plan year that includes the payment date. Thus, if a contribution for a plan year were to be made during this period, the amount of the contribution must be larger to account for interest (determined using the plan’s effective interest rate for the plan year that includes the payment date) for the period between the original due date and the payment date in order to satisfy the minimum required contribution for the plan year to the same extent as a contribution made on the original due date. The following example illustrates the application of the interest adjustment described in this A-2:

(a) Plan A has a plan year that is the calendar year and has a 2019 minimum required contribution, calculated as of the January 1, 2019, valuation date, of $1,000,000. The effective interest rate for the 2019 plan year is 5.75%, and the effective interest rate for the 2020 plan year is 5.65%. Plan A had no funding shortfall for 2018 (so there are no quarterly installment requirements for 2019), and the plan sponsor made no contributions for 2019 (and no elections to use a funding standard carryover balance or prefunding balance) before September 15, 2020. The actuary takes into account February 29, 2020, in counting the number of days in 2020 for purposes of calculating interest.

(b) In the absence of § 3608(a) of the CARES Act, the final contribution for the 2019 plan year would have been due on September 15, 2020. A final contribution of $1,100,009 made on September 15, 2020, would satisfy the 2019 minimum required contribution. This is because a contribution of $1,100,009 made on that date, discounted using the 2019 effective interest rate to January 1, 2019, would equal the $1,000,000 minimum required contribution ($1,100,009 ÷1.0575^{(258/366 365/365)} = $1,000,000).

(c) Pursuant to § 3608(a)(1) of the CARES Act, the plan sponsor has until January 1, 2021, to satisfy the 2019 minimum required contribution for Plan A. If, on December 31, 2020, the plan sponsor were to make a single contribution necessary to satisfy the 2019 minimum required contribution for Plan A, the contribution would be $1,117,827. This is because a contribution of $1,117,827 made on December 31, 2020, discounted using the 2020 effective interest rate back to September 15, 2020, and the 2019 effective interest rate from September 15, 2020, to January 1, 2019, would equal the $1,000,000 minimum required contribution ($1,117,827 ÷ 1.0565^(107/366) ÷ 1.0575^{(258/366 365/365)} = $1,000,000).

Q-3: What is the result if the contribution that the plan sponsor makes is less than the amount that was due on the original due date for the minimum required contribution, as increased with interest pursuant to § 3608(a)(2) of the CARES Act?

A-3: If, after the original due date for the minimum required contribution for a plan year, the plan sponsor makes a contribution that is less than the amount that was due on that date, as adjusted for additional interest to account for the period between the original due date and the date of payment of the contribution (at the effective interest rate for the plan year in which the payment is made), then a portion of the minimum required contribution for that plan year would remain unpaid. The unpaid portion of the minimum required contribution, determined as of the valuation date and based on contributions made on or before January 1, 2021, with the contributions discounted for interest to the valuation date as described in A-2 of this notice, would give rise to an unpaid minimum required contribution within the meaning of § 4971(c)(4) of the Code that would be subject to an excise tax under § 4971(a). Furthermore, a contribution made after January 1, 2021, to satisfy that unpaid minimum required contribution must be adjusted for interest for the period between the date that the contribution is made and the valuation date at the effective interest rate for the plan year for which the contribution is made (with additional interest as required to reflect any late quarterly installments for the plan year). The following example illustrates the situation described in this A-3:

The facts are the same as in the example in A-2 of this notice, except that the plan sponsor makes a contribution of $1,100,009 on December 31, 2020, and makes no other contributions by January 1, 2021. The $1,100,009 contribution is discounted using the 2020 effective interest rate back to September 15, 2020, and the 2019 effective interest rate from September 15, 2020, to January 1, 2019, resulting in $984,061 toward satisfaction of the 2019 plan year minimum required contribution ($1,100,009 ÷ 1.0565^(107/366) ÷ 1.0575^{(258/366 365/365)} = $984,061). Because the contribution is discounted for a longer period, this amount of the discounted contribution is not enough to satisfy the minimum required contribution of $1,000,000 as of January 1, 2019, resulting in an unpaid minimum required contribution of $15,939 ($1,000,000 - $984,061= $15,939). The $15,939 unpaid minimum required contribution is subject to excise tax under § 4971(a).

Q-4: Does the extended due date under § 3608(a) of the CARES Act apply to contributions in excess of the amount needed to satisfy the minimum required contribution?

A-4: Yes, if the contribution deadline under § 430(j)(1) of the Code for a plan year is during 2020, a contribution in excess of the amount needed to satisfy the minimum required contribution for the plan year that is made by January 1, 2021, may be designated as a contribution for that plan year. The present value of the excess contributions for a plan year, which can be used to increase the prefunding balance, is determined using the interest rate adjustment described in A-2 of this notice. In accordance with § 1.430(f)-1(b)(1)(iv)(A), this present value is increased for interest for the period between the valuation date for the plan year and the first day of the next plan year. In general, this increase for interest is made using the plan’s effective interest rate for the plan year for which the contributions are made. However, pursuant to § 1.430(f)-1(b)(3)(iii), this present value is instead adjusted using the plan’s investment experience to the extent that the excess results from the use of a funding balance to offset the minimum required contribution.

Q-5: How is the amount of a quarterly installment determined, if the extended due date under § 3608(a) of the CARES Act applies to the installment?

A-5: Section 3608(a)(2) of the CARES Act specifies that, to determine the amount of a quarterly installment due by the extended due date under § 3608(a)(1) of the CARES Act of January 1, 2021, the amount of that installment is increased from the installment’s original due date to the payment date at the effective interest rate for the plan year that includes the date the quarterly installment is paid. Section 1.430(j)-1(c)(3)(ii) provides that if a contribution is made before the due date for the required installment to which it is allocated, then the amount credited toward that installment includes interest on the contribution from the date of the contribution to the due date for the installment (at the plan’s effective interest rate for the plan year for which the installment is paid). The following example illustrates the application of the interest adjustment described in this A-5:

(a) The facts are the same as in the example in A-2 of this notice. In addition, for 2020, Plan A has required quarterly installments of $250,000.

(b) In the absence of § 3608(a)(1) of the CARES Act, the first quarterly installment for the 2020 plan year would be due on April 15, 2020. Under § 3608(a)(1) of the CARES Act, the plan sponsor’s deadline for satisfying this quarterly installment is January 1, 2021. If the contribution is made on December 31, 2020, then the amount necessary to satisfy the first quarterly installment under § 3608(a)(2) of the CARES Act is $259,954 ($250,000 × 1.0565^(260/366) = $259,954).

(c) Under the extended deadline of § 3608(a) of the CARES Act, the quarterly installments for Plan A that were originally due July 15, 2020, and October 15, 2020, are also now due on January 1, 2021. The amount of these quarterly installments would be calculated in the same manner as shown in paragraph (b) of this example, except that the increase for interest would be for the period between the original due date and the payment date.

(d) If, instead of waiting until December 31, 2020, the plan sponsor makes a contribution of $400,000 on June 1, 2020, then some of that contribution will satisfy the first quarterly installment (originally due April 15, 2020) and the balance of that contribution will be applied towards the second quarterly installment (originally due July 15, 2020). The portion of the June 1 contribution that is used to satisfy the first quarterly installment is $251,771 ($250,000 × 1.0565^(47/366) = $251,771). Therefore, the balance of that contribution, which will be applied to the second quarterly installment, is $148,229 ($400,000 - $251,771 = $148,229). The remaining contribution needed to satisfy the second quarterly installment on its original due date of July 15, 2020, is $100,788 ($250,000 - $148,229 × 1.0565^(44/366) = $100,788). If the contribution necessary to satisfy that quarterly installment is not made before that due date, but is made later in the year, then the contribution necessary to satisfy the unpaid installment must be increased with interest at the effective interest rate for the plan year from July 15, 2020, until it is made.

Q-6: For a quarterly installment originally due during 2020 for which the due date is extended under § 3608(a) of the CARES Act to January 1, 2021, what is the result if a plan sponsor does not satisfy that installment?

A-6: If a plan sponsor does not satisfy a quarterly installment originally due during 2020 by the extended due date under § 3608(a) of the CARES Act of January 1, 2021, then under § 430(j)(3)(A) of the Code, the unpaid portion of that installment is subject to a higher interest rate for the period during which the installment (or a portion of the installment) remains unpaid when determining the amount of the minimum required contribution that is satisfied by a contribution. As a result of § 3608(a) of the CARES Act, the period of underpayment does not begin until January 1, 2021. The unpaid portion of the quarterly installment as of that date, if any, is re-determined as of the original due date for the installment (based on contributions made on or before January 1, 2021, and discounted for interest as described in A-5 of this notice) and then increased from the original due date to January 1, 2021, using the effective interest rate for the plan year for which the installment is due. The following examples illustrate the application of these rules:

Example 1: (a) The facts are the same as in the example in A-5 of this notice. The plan sponsor of Plan A makes a contribution of $100,788 on July 15, 2020. As shown in paragraph (d) of the example in A-5 of this notice, the first two quarterly installments have been satisfied by their original due dates. The plan sponsor does not make any additional contributions by the extended due date of January 1, 2021. As a result, the third quarterly installment of $250,000 (originally due on October 15, 2020) remains unpaid as of that date, and this unpaid installment is increased using the effective interest rate for 2020, resulting in an unpaid installment on January 1, 2021 of $252,945 ($250,000 × 1.0565^(78/366)).

(b) If the plan sponsor makes its next contribution to Plan A on February 15, 2021, the first $252,945 of that contribution will be used to satisfy the missed third quarterly installment. The interest rate used to discount the late required installment back to the due date will include the 5 percentage point increase for the period of time from February 15, 2021, to the extended due date of January 1, 2021, resulting in $249,809 as of January 1, 2021 ($252,945 ÷ 1.1065^(45/365)). Therefore, the first $252,945 of that contribution that is used to satisfy the third quarterly installment would result in $236,449 toward satisfaction of the 2020 plan year minimum required contribution for Plan A ($249,809 as of January 1, 2021, divided by 1.0565).

Example 2: (a) The facts are the same as in the first example in this A-6, except that Plan A has a plan year that began October 1, 2019, and ended September 30, 2020, and the required quarterly installments for that plan year are $200,000. In addition, Plan A’s effective interest rate is 5.71% for the plan year beginning October 1, 2019, and 5.61% for the plan year beginning October 1, 2020. The first three quarterly installments for the plan year were paid by the original due dates and the fourth quarterly installment of $200,000 (originally due October 15, 2020) is not paid by January 1, 2021. Because this quarterly installment was not paid by January 1, 2021, under the rules of this A-6, the unpaid portion of the installment is increased to January 1, 2021, using the effective interest rate for the plan year beginning October 1, 2019, resulting in an unpaid installment on that date of $202,387 ($200,000 × 1.0571^(78/365)).

(b) Note that if the contributions made by January 1, 2021, satisfy some, but not all, of the fourth quarterly installment, then the unpaid portion of that installment would be re-determined as of October 15, 2020, by discounting those contributions from the date of the contribution to October 15, 2020 (using the 5.61% effective interest rate for the plan year in which the contributions are made). The resulting unpaid quarterly installment is increased with interest to January 1, 2021 (using the 5.71% effective interest rate for the plan year for which the installment is due, rather than the 5.61% effective interest rate for the 2020 plan year). For example, if a contribution of $120,000 was made on December 15, 2020, then the unpaid portion of the quarterly installment as of January 1, 2021, is $82,058 (($200,000 – ($120,000 ÷ 1.0561^(61/365))) × 1.0571^(78/365)).

Q-7: How are the interest adjustments determined if the plan’s effective interest rate for the plan year in which the contribution is made has not been determined at the time the payment is made?

A-7: If the plan’s effective interest rate for the plan year in which the contribution is made has not been determined at the time the payment is made, then the rules for determining the interest rate for this adjustment are the same as the rules for determining the interest rate for the interest adjustment under § 1.436-1(f)(2)(i)(A). Thus, the interest adjustment must be made using the highest of the three segment rates for the plan year. However, if the effective interest rate for the plan year in which the contribution is made is subsequently determined to be less than the interest rate that was used under the preceding sentence, the difference in the present value of the contribution as of the valuation date may be added to the prefunding balance for the plan year. The following example illustrates the situation described in this A-7:

(a) The facts are the same as in the example in A-3 of this notice, except that the plan sponsor realizes that the December 31, 2020, contribution that was made would result in an unpaid minimum required contribution for 2019 and wishes to make a final contribution on January 1, 2021. However, the 2021 effective interest rate is not known as of the date of the contribution.

(b) Under this A-7, the amount necessary to avoid an unpaid minimum required contribution for 2019 is determined using the highest of the three segment rates for the 2021 plan year in accordance with the rules of § 1.436-1(f)(2)(i)(A). For purposes of this example, it is assumed that the highest of the three segment rates for the 2021 plan year is 5.45%. Therefore, the amount of the contribution needed to avoid an unpaid minimum required contribution if made on January 1, 2021, is $17,810 ($15,939 x 1.0575^{(258/366 365/365)} x 1.0545^(108/366)).

(c) Later during 2021, the 2021 effective interest rate is determined to be 5.15%. The $17,810 contribution made on January 1, 2021, results in $15,953 ($17,810 ÷ 1.0515^(108/366) ÷ 1.0575^{(258/366 365/365)}) toward the 2019 minimum required contribution. As a result, the plan sponsor has excess contributions for 2019, which have a present value as of January 1, 2019, of $14 ($15,953 - $15,939). This amount, adjusted for interest in accordance with § 1.430(f)-1(b)(1)(iv), may be added to the prefunding balance as of January 1, 2020.

Q-8: If a plan sponsor makes a contribution for a plan year after the original due date for the plan year, but on or before the extended due date under § 3608(a) of the CARES Act, how is it reported on Schedule SB of Form 5500?

A-8: Except as provided in this A-8, there are no special rules for reporting contributions that are made for a plan year after the original due date for the plan year but on or before the extended due date under § 3608(a) of the CARES Act. Thus, a plan’s actuary may not report contributions on Schedule SB of Form 5500 that will be made after the actuary signs the Schedule SB. If any contributions are made after the actuary signs the Schedule SB and the Form 5500 for a plan year has been filed but before the extended due date under § 3608(a) of the CARES Act, then the contributions may be designated as for that prior plan year only if an amended Form 5500 that includes an amended Schedule SB reflecting those contributions is filed.

In addition, if a plan sponsor makes a contribution for a plan year (including a quarterly installment) after the original due date for that contribution but on or before the extended due date under § 3608(a) of the CARES Act, the plan’s actuary must attach to the Schedule SB a schedule supporting the line 19 entry for discounted employer contributions showing the dates and amounts of individual contributions, the year to which the contributions (or portion of the individual contributions) are applied, the effective interest rate or rates that apply to those contributions (including the effective rate of interest for the plan year in which a payment subject to § 3608(a) of the CARES Act occurs), the 5 percentage point increase that applies for late quarterly installments, the periods during which each such rate applies, and the interest-adjusted employer contributions for the plan year. This schedule must be attached even if the contributions were made by the due date under § 3608(a) of the CARES Act.

Q-9: Is a contribution for a plan year that is made after the original due date for the plan year (but on or before the extended due date for the plan year under § 3608(a) of the CARES Act) taken into account for purposes of determining the value of plan assets for a plan year following the plan year for which the contribution is made?

A-9: Yes, for purposes of § 430, a contribution that is made after the original due date for a plan year (but on or before the extended due date for the plan year under § 3608(a) of the CARES Act) is taken into account as of a valuation date for a plan year after the plan year for which the contribution was made. Under § 1.430(g)-1(d)(1)(i), for purposes of determining the value of plan assets, if an employer makes a contribution to the plan after the valuation date for the current plan year and the contribution is for an earlier plan year, then the present value of the contribution determined as of that valuation date is taken into account as an asset of the plan as of the valuation date, provided the contribution is made before a specified deadline. The specified deadline is the deadline for contributions under § 430(j)(1) for the plan year immediately preceding the current plan year. However, that deadline is extended by § 3608(a)(1) of the CARES Act. Furthermore, the interest adjustment rules of § 3608(a)(2) of the CARES Act (as described in A-2 of this notice) override the discounting rules that apply generally for this purpose. Note, however, under § 1.436-1(h)(4)(i)(B), certification of the AFTAP for a plan year must not take into account contributions that are expected to be made after the certification date. The following example illustrates the application of these rules:

(a) Plan C has a plan year that begins on October 1 and ends on September 30, and a valuation date that is the first day of the plan year. A contribution of $1,000,000 is made on December 31, 2020, for the plan year beginning on October 1, 2018.

(b) As of October 1, 2019 (the valuation date for the plan year following the plan year for which the December 31, 2020, contribution was made), the present value of the contribution is included in plan assets for purposes of § 430 as a contribution receivable. That present value is determined by discounting the contribution from December 31, 2020, to June 15, 2020 (the original due date for the minimum required contribution for the plan year), at the effective interest rate for the plan year beginning October 1, 2020 (the plan year in which the contribution is made), and further discounting the contribution from June 15, 2020, to October 1, 2019, at the effective interest rate for the plan year beginning October 1, 2018 (the plan year for which the contribution is made).

(c) As of October 1, 2020 (the valuation date for the second plan year following the plan year for which the December 31, 2020, contribution was made), the present value of the contribution is included in plan assets for purposes of § 430 as a contribution receivable. That present value is determined by discounting the contribution from December 31, 2020, to October 1, 2020, at the effective interest rate for the plan year beginning October 1, 2020 (the plan year in which the contribution is made).

Q-10: Does the extended due date under § 3608(a) of the CARES Act change the date by which a plan sponsor may make an election to increase a prefunding balance or to use a prefunding balance or a funding standard carryover balance to offset the minimum funding requirement for a plan year?

A-10: Yes, if the plan year is a plan year for which the extended due date for minimum required contributions under § 3608(a) of the CARES Act applies, then the deadline for a plan sponsor’s election to increase a prefunding balance or to use a prefunding balance or a funding standard carryover balance to offset the minimum required contribution for that plan year is extended to January 1, 2021.

Q-11: Does the extended due date under § 3608(a) of the CARES Act change the date by which a contribution must be made in order to be deducted for a taxable year under § 404 of the Code?

A-11: No, the extended due date under § 3608(a) of the CARES Act does not change the date by which a contribution must be made in order to be deducted for a taxable year under § 404 of the Code. Under § 404(a)(6), a taxpayer is deemed to have made a payment on the last day of the preceding taxable year if the payment is on account of that taxable year and is made no later than the time prescribed by law for filing the return for that taxable year (including extensions).

Q-12: May a plan sponsor make an election under § 3608(b) of the CARES Act (to apply the AFTAP for the last plan year ending before January 1, 2020) for a plan with a plan year that is not a calendar year?

A-12: Yes, a plan sponsor may make an election under § 3608(b) of the CARES Act for a plan year that includes any portion of calendar year 2020. If the election is made for such a plan year, the AFTAP that applies for the plan year pursuant to the election is the AFTAP certified for the last plan year that ends on or before December 31, 2019. For example, if a plan sponsor makes an election under § 3608(b) of the CARES Act for a plan year that runs from July 1, 2019, to June 30, 2020, then the AFTAP that applies to determine benefit limitations under § 436 of the Code for that plan year is the certified AFTAP from the plan year that ends on June 30, 2019. In addition, that plan sponsor may separately elect to use that same AFTAP for the plan year that begins on July 1, 2020.

Q-13: What procedures must a plan sponsor follow for making an election under § 3608(b) of the CARES Act?

A-13: The election described in § 3608(b) of the CARES Act must be made using the procedures that apply for elections relating to funding balances specified in § 1.430(f)-1(f)(1)(i). Thus, the plan sponsor must provide written notification of the election to the plan’s actuary and the plan administrator. However, a plan sponsor’s election made using a different procedure will not be treated as invalid provided that, by September 30, 2020, the plan sponsor complies with the requirement described in the first sentence of this A-13.

Q-14: If a plan’s actuary has not certified the plan’s AFTAP for a plan year before the plan sponsor makes an election under § 3608(b) of the CARES Act, what is the effect of the election for purposes of the presumption rules of § 436(h) of the Code?

A-14: If a plan’s actuary has not certified the plan’s AFTAP for a plan year before the plan sponsor makes the election under § 3608(b) of the CARES Act, then the plan sponsor’s election is treated as a certification of the AFTAP for purposes of the presumption rules of § 436(h) of the Code. Thus, beginning with the date of the election, the AFTAP for the last plan year ending on or before December 31, 2019, applies for the plan year for which the election is made, rather than any presumed AFTAP determined under § 1.436-1(h)(1), (2), or (3). The following example illustrates the operation of this rule:

(a) Plan B, which is not a collectively bargained plan, has a plan year that is a calendar year. On September 30, 2019, the actuary for Plan B certified the 2019 AFTAP to be 82%. On April 30, 2020, before the actuary has certified the AFTAP for 2020, the plan sponsor makes an election under § 3608(b) of the CARES Act to apply the 2019 AFTAP to the 2020 plan year.

(b) Section 1.436-1(h)(2) applies to the plan (because, as of April 1, 2020, the plan’s actuary has not certified the plan’s AFTAP for 2020 and the AFTAP for 2019 was at least 80 percent and less than 90 percent). Accordingly, under § 1.436-1(h)(2)(iii), the presumed AFTAP for 2020 is reduced to 72 percent beginning on April 1, 2020.

(c) The plan sponsor’s election under § 3608(b) of the CARES Act is treated as a certification of the plan’s AFTAP for the plan year. Accordingly, under § 1.436-1(h)(2)(v), the 2019 AFTAP of 82 percent is used for the plan beginning April 30, 2020.

Q-15: Is a plan’s actuary required to certify the plan’s AFTAP for a plan year for which the plan sponsor makes the election under § 3608(b) of the CARES Act?

A-15: A plan’s actuary generally is required to certify the plan’s AFTAP for a plan year for which the plan sponsor makes the election under § 3608(b) of the CARES Act. This is because, as provided in A-18 of this notice, the certified AFTAP generally is relevant for the next plan year. However, if the plan sponsor makes the election under § 3608(b) of the CARES Act for a plan year that begins in 2019 and ends in 2020 and also makes an election for the next plan year, then the actuary is not required to certify the plan’s AFTAP for the plan year that begins in 2019.

If the plan’s actuary has certified an AFTAP for a plan year, then the Schedule SB of Form 5500 for that plan year should reflect the certified AFTAP. Without regard to whether the plan’s actuary has certified an AFTAP for a plan year, if the plan sponsor made an election under § 3608(b) of the CARES Act, then the plan’s actuary should attach to the Schedule SB a statement relating to the line 15 entry stating that the plan sponsor made that election, the date of that election, and the AFTAP that applied for the plan year pursuant to the election.

Q-16: If a plan’s actuary certified the plan’s AFTAP for a plan year for which the plan sponsor later makes the election under § 3608(b) of the CARES Act, what is the effect of that certification?

A-16: If a plan’s actuary certified the plan’s AFTAP for a plan year before the plan sponsor makes the election under § 3608(b) of the CARES Act, then the plan sponsor’s election is treated as a subsequent determination of the AFTAP for that plan year. However, pursuant to § 1.436-1(h)(4)(iii)(C)(9) and this notice, the plan sponsor’s election is eligible for deemed immaterial treatment (and for purposes of § 1.436-1(h)(4)(iii)(C), the plan sponsor’s election is treated as the recertification on the part of the actuary that is otherwise required for deemed immaterial treatment pursuant to § 1.436-1(h)(4)(v)(D)). Thus, the AFTAP that applies pursuant to the plan sponsor’s election is applied on a prospective basis beginning with the date of the election.

If a plan’s actuary certifies the plan’s AFTAP for a plan year after the plan sponsor makes the election under § 3608(b) of the CARES Act for that plan year, then that certified AFTAP does not apply for that plan year unless the plan sponsor revokes the election. Any revocation must be made using the same procedures as the election, and, in that case, the certified AFTAP is treated as a subsequent determination of the AFTAP that is not eligible for deemed immaterial treatment under § 1.436-1(h)(4)(iii)(C).

Q-17: How does the restriction on plan amendments and unpredictable contingent event benefits apply if the AFTAP that applies is pursuant to a plan sponsor’s election under § 3608(b) of the CARES Act?

A-17: If the AFTAP that applies is pursuant to a plan sponsor’s election under § 3608(b) of the CARES Act, then the restriction on plan amendments and unpredictable contingent event benefits is applied using the rules of § 1.436-1(g)(2) through (4) (which apply for the period in a plan year during which a § 436(h) presumption applies), except that the AFTAP that applies pursuant to the plan sponsor’s election is substituted for the presumed AFTAP. Thus, for example, the AFTAP that applies pursuant to the plan sponsor’s election will be used to calculate a presumed adjusted funding target pursuant to § 1.436-1(g)(2)(ii) and an inclusive presumed AFTAP as described in § 1.436-1(g)(2)(iii). The following example illustrates the application of the rules described in this A-17:

(a) The facts are the same as in the example in A-14 of this notice. Additionally, as of January 1, 2020, Plan B has assets of $8,600,000, and a prefunding balance of $400,000. During the period January 1, 2020, through June 30, 2020, the plan’s actuary did not certify the plan’s AFTAP for 2020, no contributions were made for 2019, no § 436 contributions were made, and the plan sponsor made no elections under § 430(f). Plan B’s sponsor amends the plan to increase benefits effective on July 1, 2020. The amendment would increase Plan B’s funding target as of January 1, 2020, by $500,000.

(b) The determination of whether the amendment is permitted to take effect is made by applying the rules of § 1.436-1(g)(2) through (4) but substituting the elected AFTAP of 82% for the presumed AFTAP. Thus, this determination is made based on a comparison of the presumed adjusted funding target (calculated using an AFTAP of 82%) with the updated interim value of adjusted plan assets.

(c) Plan B’s interim value of adjusted plan assets as of the valuation date is $8,200,000 (that is, $8,600,000 minus the prefunding balance of $400,000). Because there were no events that must be reflected in an update to the interim value of adjusted plan assets under the rules of § 1.436-1(g)(2)(iii)(A), the updated interim value of adjusted plan assets remains $8,200,000. Prior to reflecting the amendment, Plan B’s presumed adjusted funding target as of January 1, 2020, is $10,000,000 ($8,200,000, divided by the AFTAP of 82%). Increasing Plan B’s presumed adjusted funding target by $500,000 to reflect the amendment results in an inclusive presumed adjusted funding target of $10,500,00 and would result in an AFTAP of 78% (that is, the updated interim value of adjusted plan assets as of January 1, 2020, of $8,200,000 divided by the inclusive presumed adjusted funding target of $10,500,000).

(d) Because Plan B’s AFTAP was over 80% prior to taking the amendment into account but would be less than 80% if the amendment were taken into account, § 436(c) prohibits the plan amendment from taking effect unless the updated interim value of adjusted plan assets is increased so that the AFTAP would equal 80%. This would require an increase of $200,000 (that is, 80% of the presumed adjusted funding target of $10,500,000 less the interim value of adjusted plan assets of $8,200,000). Therefore, the plan sponsor may either elect to reduce Plan B’s prefunding balance as of January 1, 2020, by $200,000, or make a $200,000 § 436 contribution (with interest to the date of payment) in order to increase the AFTAP to 80% (that is, an updated interim value of adjusted plan assets as of January 1, 2020, of $8,400,000 divided by the inclusive presumed adjusted funding target of $10,500,000).

Q-18: Does the AFTAP that applies pursuant to a plan sponsor’s election for a plan year apply for purposes of the presumptions under § 436(h) used in a subsequent plan year?

A-18: The AFTAP that applies pursuant to a plan sponsor’s election for a plan year generally will not apply for purposes of the presumptions under § 436(h) used in a subsequent plan year. Instead, the actual AFTAP for the plan year that was certified by the plan’s actuary generally is used for purposes of applying the presumption rules under § 436(h) for the subsequent plan year.

If, taking into account an election made under § 3608(b) of the CARES Act for a plan year, no benefit limitation applied to a plan on the last day of the plan year, then there is no presumption of continued underfunding under § 1.436-1(h)(1) as of the beginning of the subsequent plan year and the rules of § 1.436-1(g)(3) apply. Under those rules, no benefit limitation would apply under § 436(d) and (e) during the first three months of the subsequent plan year. However, under § 1.436-1(g)(3)(ii), the limitations on unpredictable contingent event benefits and plan amendments that increase benefit liabilities must be applied during that period, based on the inclusive presumed adjusted funding target determined using the prior plan year’s certified AFTAP (as opposed to the AFTAP that applied for that prior plan year pursuant to an election under § 3608(b) of the CARES Act).

If a benefit limitation applied to a plan on the last day of the plan year for which an election under § 3608(b) of the CARES Act is made, then the rules providing a presumption of continued underfunding under § 1.436-1(h)(1) apply. Thus, as of the beginning of the subsequent plan year, the benefit limitations are applied based on a presumed AFTAP that is equal to the certified AFTAP for the plan year for which the election was made (rather than the AFTAP that applied for that plan year pursuant to an election under § 3608(b) of the CARES Act). This presumed AFTAP is used until the earliest of the four events specified in § 1.436-1(h)(1)(iv)(A) through (D). See A-14 of this notice for the rule that treats the plan sponsor’s election under § 3608(b) of the CARES Act as a certification described in § 1.436-1(h)(1)(iv)(D).

Without regard to whether a benefit limitation applied to a plan on the last day of the plan year for which an election under § 3608(b) of the CARES Act is made, if a plan’s actuary has not certified an AFTAP for the subsequent plan year before the first day of the fourth month of that year (and the plan sponsor has not made an election under § 3608(b) of the CARES Act for that plan year by that date), then the rules under § 1.436-1(h)(2) are applied based on the certified AFTAP for the plan year for which the election was made (rather than the AFTAP that applied for the plan year pursuant to an election under § 3608(b) of the CARES Act). For example, if for a calendar year plan year, the plan sponsor made an election under § 3608(b) of the CARES Act to use the 2019 AFTAP of 82% for 2020, but the plan actuary certified the AFTAP for 2020 at 81%, then under § 1.436-1(h)(2)(i), the plan will be subject to limitations of § 1.436-1(d)(3) beginning April 1, 2021, based on a presumed AFTAP of 71% for 2020 (the certified AFTAP for 2020 reduced by 10 percentage points), unless the actuary has certified an AFTAP for 2021 by that date.

In order to properly reflect § 436(h)(3) in light of the CARES Act, the plan year following a plan year for which an election under § 3608(b) of the CARES Act is made must be treated as the first effective plan year, so that the special rule of § 1.436-1(h)(2)(ii) applies. Thus, if in the example in the preceding paragraph of this A-18, the plan’s actuary certified an AFTAP for 2020 of 78%, then beginning April 1, 2021, the plan will be subject to the limitations of § 1.436-1(d)(3) based on a presumed AFTAP of 68% (the certified AFTAP for 2020 reduced by 10 percentage points), unless the plan’s actuary has certified an AFTAP for 2021 by that date.

The collections of information contained in this notice have been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. § 3507) under control number 1545-2095.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

The collections of information in this notice are in A-13 of this notice. The collections of information are required to implement the application of § 3608 of the CARES Act. The collections of information are mandatory for those plan sponsors making an election under § 3608 of the CARES Act.

The likely respondents are sponsors of single-employer defined benefit plans.

Any potential changes on burden will be reported through the renewal of the current OMB approval numbers.

Estimates of the annualized cost to respondents are not available at this time.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by § 6103.

The principal author of this notice is Tom Morgan of the Office of the Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). However, other personnel from the IRS participated in the development of this guidance. For further information regarding this notice, contact Mr. Morgan or Linda Marshall at 202-317-6700 (not a toll-free number).

¹ Similar elections to maintain a funding standard carryover balance and to use that balance to offset the minimum required contribution are available to the plan sponsor.

Section 402(f) requires the plan administrator of a plan qualified under § 401(a) to provide the written explanation described in § 402(f)(1) to any recipient of an eligible rollover distribution, as defined in § 402(c)(4). In addition, §§ 403(a)(4)(B) and 457(e)(16)(B) require the plan administrator of a § 403(a) plan, or an eligible § 457(b) plan maintained by a governmental employer described in § 457(e)(1)(A), to provide the written explanation to any recipient of an eligible rollover distribution. Further, § 403(b)(8)(B) requires a payor under a § 403(b) plan to provide the written explanation to any recipient of an eligible rollover distribution.

Section 1.402(f)-1, Q&A-1(a), provides that the plan administrator of a qualified plan is required, within a reasonable period of time before making an eligible rollover distribution, to provide the distributee with the written explanation described in § 402(f) (§ 402(f) notice).

Notice 2018-74 sets forth two safe harbor explanations that reflect relevant law as of September 19, 2018: one safe harbor explanation is for payments not from a designated Roth account and the other safe harbor explanation is for payments from a designated Roth account. Notice 2018-74 provides that the safe harbor explanations may be used by plan administrators and payors to satisfy § 402(f) to the extent that the explanations accurately reflect current law.

1. Qualified Birth or Adoption Distributions

Section 72(t)(1) generally provides for a 10% additional tax on a distribution from a qualified retirement plan, unless the distribution qualifies for one of the exceptions in § 72(t)(2). Section 113 of the SECURE Act amended § 72(t)(2) of the Code to add § 72(t)(2)(H), which permits an individual to receive up to $5,000 for a qualified birth or adoption distribution from an applicable eligible retirement plan (defined in § 72(t)(2)(H)(vi)(I) as an eligible retirement plan as defined in § 402(c)(8)(B) other than a defined benefit plan). The distribution is not subject to the 10% additional tax under § 72(t)(1) to the extent it meets the requirements of a qualified birth or adoption distribution. A qualified birth or adoption distribution is defined in § 72(t)(2)(H)(iii)(I) as any distribution from an applicable eligible retirement plan to an individual if made during the 1-year period beginning on the date on which the child of the individual is born or on which the legal adoption by the individual of an eligible adoptee is finalized.

Section 72(t)(2)(H)(v)(I) provides that the individual may recontribute a qualified birth or adoption distribution (not to exceed the amount of the distribution) to an applicable eligible retirement plan in which the taxpayer is a beneficiary and to which a rollover can be made. However, § 72(t)(2)(H)(vi)(II) provides that a qualified birth or adoption distribution is not treated as an eligible rollover distribution for purposes of the direct rollover rules of § 401(a)(31), the notice requirement under § 402(f), or the mandatory withholding rules under § 3405. Thus, although a qualified birth or adoption distribution generally may be recontributed to an applicable eligible retirement plan, a plan administrator is not required to provide a § 402(f) notice to a recipient of a qualified birth or adoption distribution.

2. Required Minimum Distributions

Section 114 of the SECURE Act amended § 401(a)(9) of the Code to change the required beginning date applicable to § 401(a) plans and other eligible retirement plans described in § 402(c)(8), including a § 401(a) qualified plan, a § 403(a) annuity plan, a § 403(b) annuity contract, a § 457(b) plan maintained by a governmental employer, and an individual retirement account or annuity (IRA) described in § 408(a) or (b). The new required beginning date for an employee or an IRA owner is April 1 of the calendar year following the calendar year in which the individual attains age 72, rather than April 1 of the calendar year following the calendar year in which the individual attains age 70½. This amendment to § 401(a)(9) is effective for distributions required to be made after December 31, 2019, with respect to individuals who will attain age 70½ after that date. As a result of this change, employees and IRA owners who will attain age 70½ in 2020 will not have a required beginning date of April 1, 2021.

3. Coronavirus-related Distributions

Section 2202(a) of the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136, 134 Stat. 281 (2020) (CARES Act) permits an individual to receive a coronavirus-related distribution from an eligible retirement plan (as defined in § 402(c)(8)(B)). Section 2202(a)(4)(A) of the CARES Act defines a coronavirus-related distribution as any distribution from an eligible retirement plan made on or after January 1, 2020, and before December 31, 2020, to a qualified individual. Section 2202(a)(2) of the CARES Act limits the amount of the aggregate distributions from all eligible retirement plans that can be treated as coronavirus-related distributions to no more than $100,000. A coronavirus-related distribution under section 2202(a) of the CARES Act is not subject to the 10% additional tax under § 72(t)(1). In addition, the coronavirus-related distribution may be included in gross income ratably over the 3-year period beginning with the taxable year of the distribution.

Section 2202(a)(3) of the CARES Act provides that a qualified individual may recontribute a coronavirus-related distribution (not to exceed the amount of the distribution) to an applicable eligible retirement plan in which the taxpayer is a beneficiary and to which a rollover can be made. However, a coronavirus-related distribution is not an eligible rollover distribution for purposes of the direct rollover rules of § 401(a)(31), the notice requirement under § 402(f), or the mandatory withholding rules under § 3405. Thus, although a coronavirus-related distribution generally may be recontributed to an applicable eligible retirement plan, a plan administrator is not required to provide a § 402(f) notice to a recipient of a coronavirus-related distribution. For more information relating to section 2202 of the CARES Act, see Notice 2020-50, 2020-28 I.R.B. 35.

You are receiving this notice because all or a portion of a payment you are receiving from the [INSERT NAME OF PLAN] (the “Plan”) is eligible to be rolled over to an IRA or an employer plan. This notice is intended to help you decide whether to do such a rollover.

This notice describes the rollover rules that apply to payments from the Plan that are not from a designated Roth account (a type of account in some employer plans that is subject to special tax rules). If you also receive a payment from a designated Roth account in the Plan, you will be provided a different notice for that payment, and the Plan administrator or the payor will tell you the amount that is being paid from each account.

Rules that apply to most payments from a plan are described in the “General Information About Rollovers” section. Special rules that only apply in certain circumstances are described in the “Special Rules and Options” section.

You may wish to consult with the Plan administrator or payor, or a professional tax advisor, before taking a payment from the Plan. Also, you can find more detailed information on the federal tax treatment of payments from employer plans in: IRS Publication 575, Pension and Annuity Income; IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs); IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs); and IRS Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans). These publications are available from a local IRS office, on the web at www.irs.gov, or by calling 1-800-TAX-FORM.

For Payments From a

Designated Roth Account

You are receiving this notice because all or a portion of a payment you are receiving from the [INSERT NAME OF PLAN] (the “Plan”) is eligible to be rolled over to a Roth IRA or designated Roth account in an employer plan. This notice is intended to help you decide whether to do a rollover.

This notice describes the rollover rules that apply to payments from the Plan that are from a designated Roth account. If you also receive a payment from the Plan that is not from a designated Roth account, you will be provided a different notice for that payment, and the Plan administrator or the payor will tell you the amount that is being paid from each account.

Rules that apply to most payments from a designated Roth account are described in the “General Information About Rollovers” section. Special rules that only apply in certain circumstances are described in the “Special Rules and Options” section.

You may wish to consult with the Plan administrator or payor, or a professional tax advisor, before taking a payment from the Plan. Also, you can find more detailed information on the federal tax treatment of payments from employer plans in: IRS Publication 575, Pension and Annuity Income; IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs); IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs); and IRS Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans). These publications are available from a local IRS office, on the web at www.irs.gov, or by calling 1-800-TAX-FORM.

The competent authorities of Switzerland and of the United States of America have established this arrangement to implement the arbitration process provided for in paragraphs 6 and 7 of Article 25 of the Convention Between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with respect to Taxes on Income signed at Washington on October 2, 1996, as Amended by the Protocols signed on October 2, 1996, and September 23, 2009 (the “Convention”) and the exchange of notes accompanying the 2009 Protocol which is annexed to the Convention as Annex A (“Treaty Annex A”) and which forms an integral part of the Convention.

Subject to certain exceptions described in paragraph 4, this arbitration process applies to cases that the competent authorities of Switzerland and the United States have determined are suitable for assistance under the mutual agreement procedure of Article 25 of the Convention in accordance with published guidance, in the case of Switzerland the “Factsheet on the mutual agreement procedure” of May 2018 or any amendment or successor provisions thereof, and in the case of the United States, Revenue Procedure 2015-40 or any amendment or successor provisions thereof.

This arrangement is adopted in accordance with paragraphs 6 and 7 of Article 25 of the Convention and subparagraphs a) and q) of paragraph 1 of the Treaty Annex A.

The competent authorities of both Contracting States, the presenter of the case, and the arbitrators will follow the procedures in this arrangement in good faith.

1. Definitions

A. “MAP” is the abbreviation for the Mutual Agreement Procedure proceedings of competent authorities under Article 25 of the Convention.

B. The term “Concerned Person” means the presenter of a case to a competent authority for consideration under Article 25 of the Convention and all other persons, if any, whose tax liability to either Contracting State may be directly affected by a mutual agreement arising from that consideration.

C. The “Commencement Date” for a case is the earliest date on which the information necessary to undertake substantive consideration for a mutual agreement has been received by the competent authorities of both Contracting States. The Commencement Date will be determined in accordance with paragraph 5 or, with respect to a case originally submitted as a request for an advance pricing arrangement (“APA”), in accordance with paragraph 21.

2. Competent Authority Assistance in General

A. A request for competent authority assistance must comply with the requirements as set out for the United States in Revenue Procedure 2015-40, or subsequent guidance, and for Switzerland in the “Factsheet on the mutual agreement procedure” of May 2018, or any applicable subsequent guidance.

B. Taxpayers shall submit their requests for competent authority assistance pursuant to Article 25, paragraph 1 of the Convention.

3. Cases Eligible for Arbitration

A. According to paragraphs 6 and 7 of Article 25 of the Convention, arbitration will be available where:

1. pursuant to a mutual agreement procedure under Article 25 of the Convention the competent authorities have endeavored but are unable to reach a complete agreement; and

2. all the requirements prescribed in paragraphs 6 and 7 of Article 25 of the Convention, paragraph 1 of the Treaty Annex A, and this arrangement are satisfied.

B. An unresolved competent authority request which originated with a bilateral APA request will be subject to arbitration procedures in accordance with paragraph 21.

C. Once a case is accepted into the MAP, neither competent authority will cease unilaterally to consider a case, except for the circumstances described in paragraph 4.

4. Cases Not Eligible for Arbitration

A. Arbitration is not available for cases that a competent authority has not accepted, or in which a competent authority ceases to provide assistance, in accordance with the Convention, the Protocol or published guidance.

1. The Swiss competent authority will generally not accept a request for competent authority assistance or will generally cease providing assistance to a taxpayer, and thus not provide for arbitration if the taxpayer does not comply with the requirements or under circumstances as described in the “Factsheet on the mutual agreement procedure” of May 2018 (or any applicable subsequent guidance).

2. The U.S. competent authority generally will not accept a request for competent authority assistance or will cease providing assistance to a taxpayer, and thus not provide for arbitration in the circumstances described in section 7.02 (Denial and Termination of Assistance) of Revenue Procedure 2015-40 (or any applicable subsequent guidance). In addition, the U.S. competent authority will not provide for arbitration for a case in which the taxpayer has reached a settlement on the issue with IRS Appeals (including an Appeals settlement through the Appeals arbitration process) or with Chief Counsel pursuant to an executed closing agreement or other written agreement such as Form 870-AD, unless otherwise permitted by Revenue Procedure 2015 40 (or any applicable subsequent guidance).

B. Arbitration is not available for cases that have been accepted for competent authority consideration, but for which the competent authorities agree that the particular case is not suitable for determination by arbitration and have notified the presenter of the case of such decision before the date on which arbitration proceedings would otherwise begin.

C. Arbitration is not available where a decision with respect to an unresolved case has been rendered by a court or administrative tribunal of either Contracting State.

5. Commencement Date

A. Within 60 days of receipt of a MAP request for assistance each competent authority will review the request and verify whether it contains the information necessary to undertake substantive consideration for a mutual agreement, pursuant to subparagraph b) of paragraph 7 of Article 25 of the Convention.

B. If a competent authority determines that the request for assistance is not complete, that competent authority will inform the taxpayer in writing within 60 days of receipt of the request, what information is necessary consistent with Rev. Proc. 2015-40 (or subsequent guidance) or the information required under Switzerland’s “Factsheet on the mutual agreement procedure” of May 2018 (or subsequent guidance).

C. Once complete information is provided, each competent authority will inform the other competent authority of the date it received the information necessary to undertake substantive consideration for a mutual agreement. The latter of these dates will be the Commencement Date, except as described in paragraph 21 with respect to cases that originated as an APA.

D. Contemporaneously, the competent authorities will confirm with each other that each has received the same information.

E. When the Commencement Date is established:

1. the competent authorities of both Contracting States will exchange correspondence with each other confirming the Commencement Date and the date the arbitration proceedings potentially shall begin for any subsequently necessary arbitration, and

2. each competent authority will inform the Concerned Person(s) resident in its territory in writing of the Commencement Date and the date the arbitration proceedings potentially shall begin for any subsequently necessary arbitration.

6. Date Arbitration Proceedings Begin

A. An arbitration proceeding with respect to a case will begin on a date (hereinafter “Date Arbitration Proceedings Begin”) which is the latest of:

1. two years after the Commencement Date of that case, unless both competent authorities have previously agreed to a different date and notified the presenter of the case (as provided in subparagraphs B and C), and

2. the earliest date upon which the nondisclosure agreements have been received by both competent authorities. (See subparagraph c) of paragraph 7 of Article 25 of the Convention.)

B. As provided in Article 25(7)(c)(i) of the Convention, the competent authorities of both Contracting States may decide that the Date Arbitration Proceedings Begin with respect to a case should be earlier or later than what it would have been without such decision in appropriate situations. Such appropriate situations could be, for example, where the competent authorities are close to reaching a mutual agreement to resolve the case, where there has been a delay by a Concerned Person in providing information in the MAP of the case, where MAP is suspended by a request from the presenter of the case, or where a Concerned Person has provided significant new information after the Commencement Date of the case.

C. If the competent authorities of both Contracting States decide the Date Arbitration Proceedings Begin with respect to a case under subparagraph B, then the competent authorities will confirm that date in writing to each other and to the Concerned Persons resident in their territory.

7. Confidentiality

According to subparagraph c) of paragraph 6 and subparagraphs d) and f) of paragraph 7 of Article 25 of the Convention and subparagraphs d) and n) of paragraph 1 of the Treaty Annex A, the confidentiality of a case will be maintained in the following manner:

A. All Concerned Persons and their authorized representatives or agents must agree prior to the beginning of arbitration proceedings not to disclose to any other person any information received during the course of the arbitration proceeding from the competent authorities of either Contracting State or the arbitration panel, other than the determination of the panel.

B. No information relating to an arbitration proceeding (including the determination of the arbitration panel) may be disclosed by the members of the arbitration panel or their staffs or by the competent authorities of the Contracting States, except as permitted by the Convention and the domestic laws of the Contracting States. In addition, all material prepared in the course of, or relating to, an arbitration proceeding will be considered to be information exchanged between the competent authorities pursuant to Article 26 of the Convention.

C. For purposes of an arbitration proceeding under paragraphs 6 and 7 of Article 25 of the Convention, the members of arbitration panel (hereinafter referred to as “arbitrators”) and their staffs will be considered to be “persons or authorities” to whom information may be disclosed under Article 26 of the Convention.

D. The competent authorities of both Contracting States will ensure that all arbitrators (and any of their staff which will assist them in carrying on the arbitration), prior to their acting in an arbitration proceeding, agree in a Declaration of Arbitrator specified by both of the competent authorities (see, e.g., Attachment 4 to this arrangement) to not disclose any information relating to an arbitration proceeding (including the determination of the arbitration panel), and to abide by and be subject to the confidentiality and nondisclosure provisions of Article 26 of the Convention and similar provisions of relevant domestic laws of the Contracting States. However, the members of the arbitration panel or their staff will disclose the determination of the arbitration panel to the competent authorities. In the event those provisions conflict, the most restrictive condition shall apply. The arbitrators must send their staff’s non-disclosure agreement to both of the competent authorities.

8. Eligibility of Arbitrators

A. In order to be eligible as an arbitrator:

1. the individual is not an employee nor has been an employee within the twelve-month period prior to the Date Arbitration Proceedings Begin of the tax administration, the Treasury Department, or the Ministry of Finance of the Contracting State which identifies him or her;

2. the individual does not have any prior involvement with the specific matters at issue in the arbitration proceeding for which he or she is being considered as an arbitrator; and

3. in addition, the individual who will serve as the chair of the arbitration panel (“Chair”) is not a citizen or resident of either Contracting State.

B. The competent authorities of both Contracting States will identify and jointly agree on 5 to 10 persons who are qualified and willing to serve as the Chair of an arbitration panel. The competent authorities will review and revise this list as necessary every three years or earlier if required.

C. The arbitrator must maintain the impartiality and independence conditions set out in clauses 1 to 3 of subparagraph A throughout the proceedings and avoid any conduct for 12 months after the date the arbitration panel delivers its decision under paragraph 18 which may damage the appearance of impartiality and independence.

D. The arbitrators will undertake to promptly disclose to both competent authorities, in writing, any new facts or circumstances that arise during or following the arbitration proceedings that might give rise to doubts with respect to their impartiality or independence.

E. The staff person of an arbitrator will be subject to the same conflict of interest rules applicable to the arbitrators as described in subparagraph A of paragraph 8.

9. Appointment of Arbitrators

A. Each competent authority of the Contracting States will appoint one arbitrator to the arbitration panel by sending a written communication (that includes a copy of the Declaration of Arbitrator identified in subparagraph D of paragraph 7, signed by the arbitrator) indicating their appointment to the other competent authority within 90 days of the Date Arbitration Proceedings Begin. (See subparagraph e) of paragraph 1 of the Treaty Annex A).

B. In the event that the competent authority of a Contracting State fails to make such appointment in the manner and within the time period in this paragraph, the appointed arbitrator shall contact the competent authority that appointed him or her. That competent authority shall contact the highest-ranking member of the Secretariat at the Centre for Tax Policy and Administration of the Organization for Economic Co-operation and Development (OECD) who is not a citizen or resident of either Switzerland or the United States, who shall appoint an arbitrator by written notice to both countries within 60 days of the date of such failure.

C. The procedure in subparagraph B will not apply, where the failure of such appointment within the period in subparagraph A is due to the fact that an individual who had agreed to serve as an arbitrator becomes unable to serve because of circumstances outside his or her control (for example, death, serious illness or natural disaster). The competent authorities of both Contracting States will determine the appropriate time period for the appointment of an arbitrator in such a case.

D. Within 60 days of the date on which the second communication of the country-appointed arbitrator is sent, the arbitrators so appointed will appoint a third arbitrator who shall serve as Chair of the panel among the list established pursuant to subparagraph B of paragraph 8. The third arbitrator so selected will inform the competent authorities of both Contracting States of his or her appointment as soon as possible and send the Declaration of Arbitrator to the competent authorities. The competent authority which received the request for assistance will inform the presenter of the case of the date of the Chair’s appointment.

E. If the two initial arbitrators fail to select the third arbitrator in the manner and within the time period in this paragraph, the two initial arbitrators will be dismissed, and each competent authority of the Contracting States will select a new arbitrator of the arbitration panel within 30 days of the dismissal of the original members.

F. The procedure in subparagraph E will not apply, where the failure of such selection within the time period in subparagraph D is due to the fact that the individual selected to serve as Chair becomes unable to serve because of circumstances outside his or her control (for example, death, serious illness or natural disaster). In such a case, unless otherwise decided, the two arbitrators will appoint a third arbitrator to serve as Chair from among the list of candidates described in subparagraph B of paragraph 8.

G. The arbitrators will be selected from individuals who:

1. satisfy the eligibility requirements identified in subparagraph A of paragraph 8 at the time of accepting an appointment to serve, and are reasonably expected to remain so during the entire arbitration proceeding and for a reasonable time thereafter in accordance with subparagraph C of paragraph 8; and

2. have significant experience in international tax matters (he or she need not, however, have experience as either a judge or arbitrator).

H. An arbitrator will be deemed appointed on the date on which he or she signs the Declaration of Arbitrator of intent to so serve required by subparagraph D of paragraph 7, such Declaration of Arbitrator to be in the form agreed by the competent authorities of both Contracting States.

I. Where one of the two initial arbitrators becomes ineligible for service as an arbitrator (e.g., violates the Declaration of Arbitrator identified in subparagraph D of paragraph 7) or for any other reason it is necessary to replace an arbitrator after the arbitrator was appointed, the competent authority who had selected that individual will select a replacement as soon as possible and no later than 30 days after the position becomes vacant.

J. Where the third arbitrator (the Chair) becomes ineligible for service as an arbitrator (e.g., violates the Declaration of Arbitrator identified in subparagraph D of paragraph 7) or for any other reason it is necessary to replace the third arbitrator after he or she was appointed, the two initial arbitrators will select a replacement among the list established pursuant to subparagraph B of paragraph 8 as soon as possible and no later than 14 days after the position becomes vacant.

K. If any arbitrator is unable to fulfill his or her duties, the competent authorities will consult with the remaining panel members to determine a new timetable, if necessary.

L. Should it come to light that an arbitrator has a conflict of interest which would have prevented that arbitrator’s original appointment, the arbitrator must recuse himself or herself from consideration of the case and inform the competent authorities.

10. Terms of Reference

A. As soon as possible after the Date Arbitration Proceedings Begin, the competent authorities of both Contracting States will develop a brief Statement of Information which will identify the Concerned Person(s) and contain a general description of the proposed adjustments or similar issues to be resolved in a case. The competent authority of a Contracting State, or an arbitrator selected by the competent authority of a Contracting State, may disclose the Statement of Information, if the confidentiality of the information is ensured by first obtaining an Affirmation of Confidentiality (see, e.g., Attachment 5 to this arrangement) and such disclosure is permitted by the law of the Contracting State, to a candidate to be an arbitrator of the case to check whether that candidate satisfies the eligibility requirements identified in subparagraph A of paragraph 8.

B. The competent authorities of both Contracting States undertake to develop, within 30 days after the Date Arbitration Proceedings Begin, a “Terms of Reference” for a case to include:

1. description of the relevant business activities of the Concerned Person(s);

2. description of the adjustments or similar issues in dispute in the case;

3. description of the matters to be considered for the resolution of the case; including identification of all matters in the case previously agreed between the competent authorities; and

4. a description of the final position taken by each competent authority in the negotiation of the unresolved matters which prevent the mutual agreement between the competent authorities.

The competent authorities may also provide logistical or procedural information in the Terms of Reference.

C. The Terms of Reference will be communicated to the Chair on the date of his or her appointment, or as soon thereafter as possible.

D. If the Terms of Reference has not been completed by the date for submission of the Proposed Resolutions and Position Papers, the competent authorities of both Contracting States will send to the Chair their most recent written proposals for the Terms of Reference along with their Proposed Resolutions and Position Papers. All the matters identified as unresolved in these draft Terms of References are treated as unresolved for the purpose of the subsequent proceedings.

11. Proposed Resolutions, Position Papers, and Reply Submissions

A. As provided in subparagraph g) of paragraph 1 of the Treaty Annex A, the competent authority of each of the Contracting States will be permitted to submit a Proposed Resolution, not to exceed five pages in total, addressing each adjustment or similar issue raised in a case. Such Proposed Resolution will be a resolution of the entire case, and will reflect, without modification, all matters in the case previously agreed between the competent authorities of both Contracting States. Such Proposed Resolution will be limited to a disposition of the specific monetary amounts of income, expense or taxation reportable to the Contracting States, for each adjustment or similar issue in the case, based on the application of the Convention to the case. The competent authority of each of the Contracting States will also be permitted to submit a supporting Position Paper, not to exceed 30 pages plus annexes, for consideration by the arbitration panel.

B. The submission of a Proposed Resolution and supporting Position Paper by the competent authority of a Contracting State will be made by posting it (or similarly sending it via express delivery service) to the Chair within 60 days of the appointment of the Chair. Unless alternative arrangements are made, the Chair will in turn send a copy of each competent authority’s Proposed Resolution and supporting Position Paper to the other panel members and the other competent authority within 5 days of receipt of the later submission by the panel.

C. In the event that only one of the competent authorities of the Contracting States submits a Proposed Resolution within the allotted time, then that Proposed Resolution shall be deemed to be the determination of the arbitration panel in that case and the arbitration panel shall be terminated.

D. As provided in subparagraph g) of paragraph 1 of the Treaty Annex A, each of the competent authorities of the Contracting States will be permitted to submit a Reply Submission, not to exceed 10 pages, plus annexes, to the arbitration panel in order to address any points raised by the Proposed Resolution or supporting Position Paper submitted by the other competent authority. In this Reply Submission, the competent authority may also comment upon any Presenter Position Paper submitted under the provisions of paragraph 12. If the competent authority exercises its option to also comment upon a Presenter Position Paper, its Reply Submission should not exceed 20 pages, plus annexes. The submission of a Reply Submission by the competent authority will be made by posting it (or similarly sending it via express delivery service) to the Chair within 120 days of appointment of the Chair. Unless alternative arrangements are made, the Chair will send a copy of each competent authority’s Reply Submission paper to the other panel members and the other competent authority within 5 days of receipt of the later reply by the panel.

E. In a particular case, the competent authorities of both Contracting States may decide to use a different presentation or page limitation for the Proposed Resolutions, supporting Position Papers, or Reply Submissions, such as provided in paragraphs 13 and 14.

F. Any annex to a supporting Position Paper or Reply Submission which does not reflect information widely available to the general public must be a document previously made available for the competent authorities of both Contracting States to use in negotiation. Any factual information used in a supporting Position Paper or Reply Submission, which does not reflect information widely available to the general public, must be what was contained in a document previously made available for both competent authorities to use in negotiation.

G. Except with respect to the final position taken by the competent authority of the other Contracting State as described in clause 4 of subparagraph B of paragraph 10, the competent authority of a Contracting State will only be permitted to refer to a proposal for resolution made by either competent authority of the Contracting States during negotiations if that proposal is submitted to the arbitration panel for consideration as a Proposed Resolution.

H. The arbitration panel may ask both competent authorities in writing for additional information. Such additional information may be submitted to the arbitration panel only at its request and copies of the panel’s request and the competent authority’s response shall be provided to the competent authority of the other Contracting State on the date on which the request or the response is submitted. The panel shall establish a deadline for responding to the request. If the panel requests information or analyses that have not previously been available or considered for purposes of the negotiation, the competent authorities will consult with each other to determine how to respond to the panel’s request. The panel may not request additional information from the presenter of the case.

I. Unless otherwise decided between the competent authorities of both Contracting States and the Chair, the competent authorities will send to the Chair four copies of each document submitted to the arbitration panel, for distribution to the other arbitrators and the other competent authority.

J. Unless otherwise decided between the competent authorities of both Contracting States, any information which does not reflect information widely available to the general public (including any information provided by the presenter of a case or his authorized representatives or agents in writing or orally) that was not available to both competent authorities before the Date Arbitration Proceedings Begin will not be taken into account for purposes of the arbitration decision. Furthermore, any Reply Submission or any additional information that was provided to the panel after the deadline specified in subparagraph D or H respectively will not be taken into account for purposes of the arbitration decision.

K. To the extent needed, the arbitration panel may adopt any additional procedures necessary for the conduct of its business, provided that the procedures are not inconsistent with any provision of Article 25 of the Convention, the Treaty Annex A, or this arrangement or any other procedural rules decided between the competent authorities of both Contracting States. If the arbitration panel adopts any additional procedures, the Chair will provide a written copy of them to the competent authorities.

12. Presenter Position Paper

A. According to subparagraph h) of paragraph 1 of the Treaty Annex A, within 90 days of the appointment of the Chair, the presenter of a case may submit a Position Paper (“Presenter Position Paper”) not to exceed 30 pages, plus annexes. The position, arguments, or analyses raised in the Presenter Position Paper must be positions, arguments, or analyses previously provided to the competent authorities for their consideration in negotiation prior to the Date Arbitration Proceedings Begin. Any annex of the Presenter Position Paper which does not reflect information widely available to the general public must be a document made available to the competent authorities for their consideration prior to the Date Arbitration Proceedings Begin.

B. Any Presenter Position Paper should be sent so that each competent authority receives it simultaneously. The competent authority initiating the MAP will deliver copies of the Presenter Position Paper to the panel, according to the instructions of the Chair no later than 7 days after receipt of the original Presenter Position Paper.

13. Multiple Adjustments

A. Where an arbitration proceeding concerns a case comprising multiple adjustments or similar issues each requiring a disposition of specific monetary amounts of income, expense or taxation, the Proposed Resolution may propose a separate disposition for each adjustment or similar issue.

B. Unless the competent authorities of both Contracting States decide upon a different presentation to the arbitration panel, the Proposed Resolution and supporting Position Paper in such a case will address each adjustment separately, within the overall page limitation.

C. The arbitration panel will make a determination on each adjustment or similar issue, separately. Thus, the final determination of the arbitration panel may be comprised of a Proposed Resolution from the competent authority of a Contracting State on one adjustment and a Proposed Resolution from the competent authority of the other Contracting State on another adjustment.

14. Permanent Establishment, Residency, and Other Threshold Questions

A. In the case of an arbitration proceeding concerning:

1. the taxation of an individual with respect to whom the competent authorities of the Contracting States have been unable to reach an agreement regarding the Contracting State of which the individual is resident;

2. the taxation of the business profits of an enterprise with respect to which the competent authorities have been unable to reach an agreement on whether a permanent establishment exists; or

3. such other issues the determination of which are contingent on resolution of similar threshold questions; the competent authorities may submit Proposed Resolutions separately addressing the relevant threshold questions as described in clause 1, 2, or 3 (for example, the question of whether a permanent establishment exists) and the contingent determinations (for example, the determination of the amount of profit attributable to such permanent establishment).

B. In such a case, a competent authority is allowed to submit a Proposed Resolution and supporting Position Paper which will address each issue separately, taking alternative positions as appropriate. For example, the competent authority is allowed to take a position that no permanent establishment exists in one Proposed Resolution, and to propose an amount of business profit to be attributable to a permanent establishment in another Proposed Resolution in case the arbitration panel determines that a permanent establishment exists.

C. The arbitration panel will make a determination on the threshold question and the contingent determination separately. For example, if the competent authorities have not reached an agreement on the existence of a permanent establishment, the panel must first determine whether a permanent establishment exists. Once it is determined that a permanent establishment exists, the panel must then determine the amount of profits attributable to that permanent establishment.

15. Communication

A. Before the Chair is appointed, the competent authorities of both Contracting States will send any correspondence concurrently to both arbitrators.

B. After the Chair is appointed, unless otherwise agreed between the Chair and competent authorities, the competent authorities will send any correspondence to the Chair. Similarly, the Chair will send any correspondence concurrently to the competent authorities.

C. No competent authority of the Contracting States will have any ex parte communications, except for administrative or logistical reasons, with an arbitrator.

D. All communication, except for logistical matters, between the competent authorities of both Contracting States and the panel must be in writing. Written communication by fax or email is allowed, however, no information that may identify the taxpayer(s) may be included in an email unless other security precautions to protect taxpayer information are agreed upon by both competent authorities. Express mail or air mail shall be used for all correspondence other than that sent via facsimile or email.

E. The arbitrators may communicate by telephone, videoconference, fax or face-to-face meetings. Arbitrators may communicate by e-mail; however, they must not include any taxpayer information in the e-mail.

F. All arbitrators must be present (physically or remotely) during substantive discussions.

G. No arbitrator shall have communications regarding the issues or matters before the panel with the presenter of the case, the taxpayers involved in the case, or their representatives during or subsequent to the arbitration process.

16. Competent Authority Initiating the MAP

A. For requests for competent authority assistance concerning an adjustment raised in either Switzerland or the United States, the competent authority of the country that proposed the adjustment (or in the case where there is no adjustment, denied the credit or claim) is considered the competent authority initiating the MAP.

B. For requests originally submitted as an APA, the competent authority of the country in which the parent company is located is considered the competent authority initiating the MAP. For APA requests originally submitted by associated enterprises other than the parent company, the competent authorities will determine the competent authority that is considered the competent authority initiating the MAP.

C. Meeting facilities, related resources, financial management, other logistical support, and general administrative coordination of the arbitration proceeding will be provided, at its own cost, by the Contracting State whose competent authority initiated the MAP in a case. (See subparagraph o) of paragraph 1 of the Treaty Annex A.)

D. The competent authorities encourage the arbitrators to use tele-and videoconferencing. If a face-to-face meeting is necessary, the Chair will contact the competent authority of the Contracting State who initiated the MAP in a case and ask it to arrange facilities for the meeting. The competent authority initiating the MAP in a case may arrange meeting facilities in a location that minimizes the arbitration panel’s travel time and expenses. Each competent authority may arrange a meeting in the other’s meeting facilities, as needed.

17. Fees and Expenses

A. The fees and expenses will be borne equally by the Contracting States. (See subparagraph o) of paragraph 1 of the Treaty Annex A.)

B. Neither competent authority of both Contracting States will charge any Concerned Persons for costs associated with the arbitration procedure itself. The recharge of potential costs related to the mutual agreement procedure to the Concerned Person pursuant to domestic law remains reserved.

C. The fees of the arbitrators will be set at the fixed amount of $2000 (two thousand United States dollars) or the equivalent in Swiss francs per day, subject to modification by the competent authorities. (See subparagraph o) of paragraph 1 of the Treaty Annex A.) The competent authorities will not compensate a staff member of an arbitrator. The competent authorities anticipate that the arbitrators will be able to perform their duties without the use of staff.

D. In general, each arbitrator will be compensated for no more than seven days of work on the arbitration (e.g., five days of preparation and two meeting days). If the arbitrators feel they require additional time to properly consider the case, the Chair will contact the competent authorities to request additional time. As a general rule, the competent authorities envision that the panel will be able to complete their joint consideration of the case through telecommunications.

E. In general, the expenses of the arbitrators will be set in accordance with the International Centre for Settlement of Investment Disputes Schedule of Fees for arbitrators in effect on the Date Arbitration Proceedings Begin, subject to modification by the competent authorities. (See subparagraph o) of paragraph 1 of the Treaty Annex A.) This applies in particular for hotel, meals and incidental costs. With regard to travel expenses, the arbitrators will be reimbursed for economy class travel.

18. Arbitration Panel Determination

A. The arbitration panel shall deliver a written determination concurrently to the competent authorities of both Contracting States within six months of the appointment of its Chair (or, where subparagraph I or J of paragraph 9 applies, unless otherwise decided by the competent authorities of both Contracting States, within six months of the appointment of the new arbitrator).

B. In making its determination, the arbitration panel will apply, as necessary and in descending order of priority:

1. the provisions of the Convention, as interpreted according to the customary rules of international law;

2. any agreed commentaries or explanations of the Contracting States concerning the Convention;

3. the laws of the Contracting States to the extent they are not inconsistent with each other; and

4. any OECD Commentary, Guidelines, or Reports regarding relevant analogous portions of the OECD Tax Model Convention.

C. The determination of the arbitration panel will be limited to one of the Proposed Resolutions submitted by the competent authorities of the Contracting States for each adjustment or similar issue and any threshold questions, and will not include a rationale or any other explanation of the determination. The determination of the arbitration panel has no precedential value with respect to the application of the Convention to any other case.

D. Unless the Concerned Persons do not accept the determination of the arbitration panel, such determination shall constitute a resolution by mutual agreement under Article 25 of the Convention and shall be binding on both competent authorities with respect to that case.

E. The determination of the panel will be decided on the basis of a majority vote.

F. Each Concerned Person must, within 30 days of receiving the determination of the panel from the competent authority to which the case was first presented, advise that competent authority in writing whether that Concerned Person accepts the determination of the panel. If the Concerned Persons fail to accept the determination within 30 days, the determination is considered rejected.

G. If any Concerned Person fails to advise the competent authority within that period of time, the determination will be considered not to have been accepted and the case will be closed.

H. If a Concerned Person has not renounced domestic legal remedies with respect to all of the issues covered by the arbitration decision by the time that person accepts the panel’s determination, the determination is considered rejected and the case will be closed.

I. Where the determination of the arbitration panel is not accepted, the case may not subsequently be the subject of an arbitration proceeding.

J. The treatment of any interest or penalties will be determined by applicable domestic law of Switzerland or the United States.

K. In the event that the panel does not agree on a determination within six months of the appointment of its Chair (or, where subparagraph I or J of paragraph 9 applies, unless otherwise decided by the competent authorities of both Contracting States, within six months of the appointment of the new arbitrator), the Competent authorities will agree on the procedure to apply.

19. Terminating Proceedings

A. If at any time before the arbitration panel delivers a determination to the competent authorities of the Contracting States:

1. the competent authorities notify in writing the arbitrators and the presenter of the case that they have reached a mutual agreement to resolve the case pursuant to Article 25 of the Convention;

2. the competent authorities notify in writing the arbitrators that the presenter of the case has withdrawn its request for assistance;

3. a decision concerning the case is rendered by a court or administrative tribunal of one of the Contracting States during the arbitration proceeding; or

4. if any Concerned Person or their authorized representative or agents violates the written nondisclosure statement required by subparagraph d) of paragraph 7 of Article 25 of the Convention, and the competent authorities of both Contracting States agree that such violation should result in the termination of the arbitration proceeding;

then the MAP, including the arbitration proceeding, with respect to the case will terminate.

B. If the arbitration proceeding and MAP with respect to the case is terminated under clauses 2, 3, or 4 of subparagraph A, the competent authorities of both Contracting States will exchange letters to close the MAP case unagreed.

C. If the presenter terminates an arbitration proceeding by withdrawing its request for assistance, the presenter will not ordinarily be allowed access to the competent authority procedures for the same matter and same years

D. The presenter’s death is not an event triggering the termination of the arbitration proceeding, unless explicitly requested by the heirs.

E. At the termination of any proceeding each arbitrator must immediately destroy all documents or other information received from either competent authority of the Contracting State, or that otherwise reflect the considerations or discussions of the arbitration panel, and delete all information that may be stored on any computer, personal data assistant or other electronic device or media.

20. Miscellaneous

A. In computing the days necessary for an action in this arrangement, the day when the event beginning this computation occurred will not be counted.

B. Any due date which falls upon a weekend of holiday for either competent authority will be extended to the next calendar day which is a business day for both competent authorities.

21. Advance Pricing Agreements

A. A case initially submitted to the competent authorities as a request for an APA is eligible for arbitration, but only with respect to tax years covered by the APA for which tax returns have been filed. Tax years prior to those covered by the APA for which the taxpayer has requested a rollback will be covered by the arbitration determination only if both competent authorities have agreed to cover those years in their position papers and only to the extent the tax years are still open to assessment according to the time limits in the domestic law of both Contracting States.

B. For APA years for which tax returns have not been filed, the competent authorities agree to apply the transfer pricing method used in the Position Paper of the competent authority whose result the panel determined was the better result, provided the transfer pricing method is sufficiently described in the supporting Position Paper.

C. For purposes of establishing a Commencement Date for a case initially submitted as a request for an APA, the information necessary to undertake substantive consideration for a mutual agreement in the United States is the information required to be submitted to the Internal Revenue Service under Revenue Procedure 2015-41, section 3 (or any applicable successor provisions). In Switzerland, the information is that which would be required under instructions or commentaries published by the Federal Department of Finance.

D. Once complete information is provided, the Commencement Date of the case, for purposes of any subsequently necessary arbitration, will be the earlier of i) the date on which the competent authorities have exchanged position papers setting forth their initial negotiating positions or ii) two years from the earliest date on which the information necessary to undertake substantive consideration for a mutual agreement concerning the APA has been received by both competent authorities. The arbitration proceedings will begin on the date determined under paragraph 6.

E. For requests originally submitted as an APA, the competent authority of the country in which the parent company is located is considered the competent authority initiating the Mutual Agreement Procedure. For APA requests originally submitted by associated enterprises other than the parent company, the competent authorities will determine the competent authority serving as the one initiating the MAP.

F. The provisions of paragraphs 1 through 20 and 22 apply as appropriate.

22. Coordination with Protocol Entry into Force

Notwithstanding subparagraphs A through D of paragraph 5 and subparagraph D of paragraph 21, the Commencement Date for a MAP case (or a case that was initially submitted as an APA) that was already under consideration by the competent authorities as of September 20, 2019 will be September 20, 2019. (See subparagraph c) of paragraph 2 of Article 5 of the 2009 Protocol.)

Agreed:

For Switzerland For the United States of America

____________________________ ______________________________

Pascal Duss Douglas W. O’Donnell

State Secretariat for International United States Competent Authority

Financial Matters SIF Commissioner, Large Business and International Division

Date: Date:

Attachments:

1. Sample Taxpayer Nondisclosure Statement

2. Sample Nondisclosure Statement of Taxpayer’s Authorized Representative

3. Sample Taxpayer Authorization to Disclose Tax Information for Purposes of Treaty MAP Arbitration Proceedings

4. Sample Declaration of Arbitrator

5. Sample Affirmation of Confidentiality

_______________________________________________________________________

NAME OF TAXPAYER

_______________________________________________________________________

ADDRESS

_______________________________________________________________________

CITY STATE/CANTON COUNTRY POSTAL CODE (ZIP CODE)

The above-named taxpayer hereby consents to the competent authorities of the United States and Switzerland undertaking an arbitration proceeding described in paragraphs 6 and 7 of Article 25 (Mutual Agreement Procedure) of the Convention Between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income singed at Washington on October 2, 1996 as Amended by the Protocols signed on October 2, 1996, and September 23, 2009 (Convention) as necessary in order to reach a mutual agreement under Article 25 regarding the request filed with the [United States/Switzerland] Competent Authority on b [date] b.

This consent and nondisclosure statement also covers the following concerned persons¹ that the taxpayer has the legal authority to bind:

[Enter name and address of each such concerned person. If none, enter “Not Applicable.”]

The following concerned persons, if any, are not covered by this consent and nondisclosure statement (and therefore must submit a separate consent and nondisclosure statement on their own behalf): [Enter name and address of each such concerned person. If none, enter “Not Applicable.”]

In making this consent, the taxpayer and, if applicable, each of the concerned persons covered by this consent and nondisclosure statement, agrees not to disclose to any person (other than the taxpayer’s authorized representative or agent, another concerned person, its authorized representative or agent, or one of the competent authorities or its authorized representative²) any information received during the course of the arbitration proceeding from either Contracting State or the arbitration board, other than the determination of such board.

The following persons are all of the representatives or agents of the taxpayer or, if applicable, the specified concerned person, who have been authorized to assist the taxpayer or specified concerned person in the mutual agreement procedure to which this consent and nondisclosure statement applies. Attached to this consent and nondisclosure statement are the nondisclosure statements of each of these representatives and agents, as is required by paragraphs 6 and 7 of Article 25 of the Convention.

[Enter name and address of each such representative or agent and the concerned person(s) for which each is acting. If none, enter “Not Applicable.”]

[Under penalties of perjury]³, I declare that I have examined this consent and nondisclosure statement and any accompanying attachments and to the best of my knowledge and belief, they are true, correct, and complete. Furthermore, I certify that I have the legal authority to execute this consent and nondisclosure statement on behalf of each concerned person covered by it and to bind each concerned person to its terms.

__________________ _________________________________________

Date Signature

__________________________________________

Printed Name

_________________________________________

Position

¹ As defined in the relevant treaty provisions, the term “concerned person” means the taxpayer requesting mutual agreement procedure assistance from a competent authority under Article 25 of the Convention and any other person whose tax liability to either the United States or Switzerland may be directly affected by the mutual agreement arising from that request. A concerned person that has the legal authority to bind any other concerned person(s) on this matter may do so in a comprehensive statement.

² The U.S. Competent Authority has authorized the International Centre for Dispute Resolution (ICDR), a division of the American Arbitration Association, to act on its behalf with respect to certain designated matters concerning the arbitration proceeding.

³ For use in the United States.

I hereby agree that neither I nor any member of my firm’s office staff nor any other person who may assist me or the firm in the mutual agreement proceeding requested in the letter of [date] submitted by [name of taxpayer] to the competent authorities of the United States and Switzerland will disclose to any person (other than the taxpayer, another concerned person,¹ its authorized representative or agent, or one of the competent authorities or its authorized representative²) any information received during the course of the arbitration proceeding from either Contracting State or the arbitration board, other than the determination of such board.

__________________ _________________________________________

Date Signature

__________________________________________

Printed Name

_________________________________________

Position

¹ As defined in the relevant treaty provisions, the term “concerned person” means the taxpayer requesting mutual agreement procedure assistance from a competent authority under Article 25 of the Convention Between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income signed at Washington on October 2, 1996, as Amended by the Protocols signed on October 2, 1996, and September 23, 2009, and any other person whose tax liability to either the United States or Switzerland may be directly affected by the mutual agreement arising from that request.

² The U.S. Competent Authority has authorized the International Centre for Dispute Resolution (ICDR), a division of the American Arbitration Association to act on its behalf with respect to certain designated matters concerning the arbitration proceeding

_________________________________________________________________________________________________________

NAME OF TAXPAYER

_________________________________________________________________________________________________________

U.S. OR SWISS TAX IDENTIFICATION NUMBER (e.g., EIN)

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ADDRESS

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CITY STATE/CANTON COUNTRY POSTAL CODE (ZIP CODE)

The above-named taxpayer, in accordance with the competent authorities of the United States and Switzerland undertaking an arbitration proceeding described in paragraphs 6 and 7 of Article 25 of the Convention Between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income singed at Washington on October 2, 1996 as Amended by the Protocols signed on October 2, 1996 and September 23, 2009 (Convention), consents to the disclosure by the competent authorities of Switzerland and the United States of any and all returns and return information with respect to the taxpayer’s mutual agreement procedure (MAP) request submitted to the competent authorities on [date], to the individuals appointed (or identified for potential appointment pending clearance) by the respective competent authorities to arbitrate the MAP case, the individual appointed (or identified for potential appointment pending clearance) as the Chair of the arbitration panel, and the following representatives, if any, of the respective competent authorities who are authorized by the competent authority to act on its behalf with respect to certain designated matters concerning the arbitration proceeding:

In the case of the United States: International Centre for Dispute Resolution (ICDR), a division of the American Arbitration Association

In the case of Switzerland: __________________________________________.

In the case of a consolidated group of U.S. corporations, this consent is made in regard to all such information concerning the following members of the consolidated group, who are the subjects of the mutual agreement request:

[Enter name and address of each consolidated group member, if any, who is a concerned person.¹ If none, enter “Not Applicable.”]

I certify that I have the legal authority to execute a request for or consent to disclose a return or return information to disclose information to third parties and I hereby make this consent on behalf of the taxpayer, including each of the members of the consolidated group listed above.²

In the case of married Swiss tax resident filing jointly and involved in an arbitration, both spouses shall sign the authorization to disclose tax information for purposes of treaty MAP arbitration proceedings.

__________________ _________________________________________

Date Signature

__________________________________________

Printed Name

_________________________________________

Position

¹ As defined in the relevant treaty provisions, the term “concerned person” means the taxpayer requesting mutual agreement procedure assistance from a competent authority under Article 25 of the Convention and any other person whose tax liability to either the United States or Switzerland may be directly affected by the mutual agreement arising from that request.

² Each taxpayer or concerned person (as defined in footnote 1) whose U.S. tax liability may be directly affected by the mutual agreement procedure request must sign a consent. In the case of a consolidated group (as defined in Treas. Reg. 1.1502-1(h)), a person authorized by law to act for the common parent should execute the consent on behalf of the group. See Treas. Reg. §1.1502-77(a).

In the matter of the Mutual Agreement Procedure case under Article 25 of the Convention Between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income singed at Washington on October 2, 1996 as Amended by the Protocols singed on October 2, 1996, and September 23, 2009 (Convention) involving the following Concerned Persons:

[Names and addresses of taxpayers that will be directly affected by the decision]

Paragraphs 6 and 7 of Article 25 (Mutual Agreement Procedure) of the Convention and the Implementing Arrangement regarding paragraphs 6 and 7 of Article 25 of the Convention between the Competent Authorities of Switzerland and the United States (Implementing Arrangement) provide rules and procedures under which the United States - Switzerland arbitration process (the Proceeding) will operate. As provided in subparagraphs A and C of paragraph 8 of the Implementing Arrangement, I certify that I can serve impartially in this case, and that I am independent of the Contracting States and Concerned Persons at this time and shall remain so during the entire arbitration proceeding and for a reasonable period of time thereafter.

Past or existing facts or circumstances that might be likely to give rise to justifiable doubts as to my impartiality or independence, if any, are identified in an Attachment to this Declaration.

Notwithstanding such relationships and interests, if any, I believe that I can be impartial and can exercise independent judgment in making my decisions in the Proceeding and thus to the best of my knowledge and belief, there is no reason why I should not serve as an Arbitrator with respect to the above-noted case. If, at any stage during the Proceeding, any new fact or circumstance arises that might give rise to such doubts, I shall promptly disclose such fact or circumstance to both competent authorities.

I understand that with regard to any information received from International Centre for Dispute Resolution, a division of the American Arbitration Association, the Swiss State Secretariat for International Finance, and the U.S. Internal Revenue Service in connection with the Proceeding, I and my staff, if any, are considered to be among the “persons or authorities” involved in the administration of taxes covered by Article 26 (Exchange of Information) of the Convention. I and my staff agree to abide by and be subject to the confidentiality and nondisclosure provisions of Articles 25 (Mutual Agreement Procedure) and 26 (Exchange of Information) of the Convention and the applicable domestic laws of Switzerland and the United States concerning the confidentiality of tax information. In the event those provisions conflict, the most restrictive condition shall apply. I confirm that I have the legal authority to bind my staff in this matter and will ensure they are aware of their obligations regarding confidentiality and non-disclosure. In particular, I agree that I may not disclose any information relating to the Proceeding, except as permitted by the Convention and the domestic laws of Switzerland and the United States. In addition, all material received and prepared in the course of, or relating to the Proceeding shall be considered to be information exchanged between the Switzerland and the United States and shall be destroyed in accordance with subparagraph E of paragraph 19 of the Implementing Arrangement referenced above.

[Under penalties of perjury]¹, I hereby accept appointment as an Arbitrator in this case and will fairly decide the matters in controversy between the Competent Authorities of Switzerland and the United States in accordance with the Convention and the related agreements referred to above. I declare that these statements and any accompanying attachments are, to the bet of my knowledge and belief, true, correct, and complete.

__________________ _________________________________________

Date Signature

__________________________________________

Printed Name

_________________________________________

Address

¹ For use in the United States.

This affirmation is provided in order to consider the acceptance of an appointment as an arbitrator in the MAP case number xxx (hereinafter referred to as the Proceeding) based on Article 25 (Mutual Agreement Procedure) of the Convention Between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income singed at Washington on October 2, 1996 as Amended by the Protocols singed on October 2, 1996, and September 23, 2009 (hereinafter referred to as the Convention).

I understand that with regard to any information received from the International Centre for Dispute Resolution, a division of the American Arbitration Association, the Swiss State Secretariat for International Finance, and the U.S. Internal Revenue Service in connection with the Proceeding, I am considered to be among the “persons or authorities” involved in the administration of taxes covered by Article 26 (Exchange of Information) of the Convention. I agree to abide by and be subject to the confidentiality and nondisclosure provisions of Article 25 (Mutual Agreement Procedure) and Article 26 (Exchange of Information) of the Convention and the applicable domestic laws of the United States and Switzerland concerning the confidentiality of tax information. In the event those provisions conflict, the most restrictive condition shall apply. In particular, I agree that I may not disclose any information relating to the Proceeding, except as permitted by the Convention and the domestic laws of the United States and Switzerland. In addition, all material received and prepared in the course of, or relating to the Proceeding shall be considered to be information exchanged between United States and Switzerland, and shall be destroyed in accordance with subparagraph E of paragraph 19 of the Implementing Arrangement regarding paragraphs 6 and 7 of Article 25 of the Convention between the Competent Authorities of Switzerland and the United States.

__________________ _________________________________________

Date Signature

__________________________________________

Printed Name

_________________________________________

Address

Certain IRS regulations, including these, are exempt from the requirements of Executive Order 12866, as supplemented and affirmed by Executive Order 13563. Therefore, a regulatory assessment is not required. Because the proposed regulations mainly affect the IRS and would not impose requirements on small entities, it is certified, under the Regulatory Flexibility Act (5 U.S.C. chapter 6) that the proposed regulations do not impose a significant economic impact on a substantial number of small entities. Pursuant to section 7805(f) of the Code, the IRS will submit the proposed regulations to the Chief Counsel for Advocacy of the Small Business Administration for comments about the regulations’ impact on small businesses.

Before these proposed regulations are adopted as final, consideration will be given to comments that are submitted timely to the IRS as prescribed in the preamble under the “ADDRESSES” section. The Treasury Department and the IRS request comments on all aspects of the proposed regulations. Any electronic comments submitted, and to the extent practicable any paper comments submitted, will be made available at www.regulations.gov or upon request.

A public hearing will be scheduled if requested in writing by any person who timely submits electronic or written comments. Requests for a public hearing are also encouraged to be made electronically. If a public hearing is scheduled, notice of the date and time for the public hearing will be published in the Federal Register. Announcement 2020-4, I.R.B. 2020-17, provides that until further notice, public hearings conducted by the IRS will be held telephonically. Any telephonic hearing will be made accessible to people with disabilities.

The principal author of these regulations is William V. Spatz of the Office of Associate Chief Counsel (Procedure and Administration).

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements.

Accordingly, under the authority of 26 U.S.C. 7805, the notice of proposed rulemaking (REG-132434-17) that was published in the Federal Register on March 28, 2018 (83 FR 13206) is withdrawn.

Accordingly, 26 CFR part 301 is proposed to be amended as follows:

PART 301—PROCEDURE AND ADMINISTRATION

Paragraph 1. The authority citation for part 301 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 301.7602-1 is amended by:

1. In paragraph (b)(2), adding “(Secretary)” at the end of the first sentence.

2. Revising paragraphs (b)(3) and (d).

The revisions read as follows:

§ 301.7602-1 Examination of books and witnesses.

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(b)* * *

(3) Participation of a person described in section 6103(n)--(i) IRS contractor access to books and records obtained by the IRS administratively--(A) In general. The Secretary may not, under the authority of section 6103(n), provide any books, papers, records, or other data obtained pursuant to section 7602 to any person authorized under section 6103(n), except when such person requires such information for the sole purpose of providing expert evaluation and assistance to the IRS.

(B) Persons providing expert evaluation and assistance. For the purposes of paragraph (b)(3)(i)(A) of this section, persons providing expert evaluation and assistance may include, but are not limited to, the following:

(1) Persons with specialized expertise in certain substantive areas, including, but not limited to, economists, engineers, attorneys specializing in an area relevant to an issue in the examination (such as patent law, property law, environmental law, or foreign, state, or local law (including foreign, state, or local tax law)), industry experts, or other subject-matter experts;

(2) Persons providing support as ancillary service contractors including, but not limited to, court reporters, translators or interpreters, photocopy services, providers of data processing programs or equipment, litigation support services, or other similar contractors; and

(3) Whistleblower-related contractors described in §301.6103(n)-2.

(C) Hiring of certain non-government attorneys. The IRS may not hire an attorney as a contractor to assist in an examination under section 7602 unless the attorney is hired by the IRS as a specialist in foreign, state, or local law (including foreign, state, or local tax law), or in non-tax substantive law that is relevant to an issue in the examination, such as patent law, property law, or environmental law, or is hired for knowledge, skills, or abilities other than providing legal services as an attorney.

(ii) IRS contractor participation in an IRS summons interview--(A) In general. No person other than an officer or employee of the IRS or its Office of Chief Counsel may, on behalf of the Secretary, question a witness under oath whose testimony was obtained pursuant to section 7602. Persons authorized by section 6103(n) and with whom the Secretary may provide books, papers, records, or other data obtained pursuant to section 7602 may also attend a summons interview and provide assistance to the IRS or Office of Chief Counsel employees in attendance, but may not question the summoned witness under oath or ask a summoned person’s representative to clarify an objection or assertion of privilege.

(B) Court reporters, translators, and interpreters are not barred from asking questions. Court reporters who are hired as contractors by the IRS to make a record of an IRS summons interview are permitted to ask typical housekeeping questions of a summoned witness. Examples of such questions include, but are not limited to, asking whether the witness swears to tell the truth, asking the witness to spell a word or phrase, and asking whether the witness can speak up or speak rather than gesture an answer. Translators and interpreters who are hired as contractors by the IRS to assist in the interview of a summoned witness are permitted to translate any of the questions that are asked of the witness by an IRS or Office of Chief Counsel officer or employee and to ask questions which may be necessary to clarify the translation.

* * * * *

(d) Applicability date. This section is applicable after September 3, 1982, except for paragraphs (b)(1) and (2) of this section which are applicable on and after April 1, 2005 and paragraph (b)(3) of this section which applies to examinations begun or administrative summonses served by the IRS on or after August 6, 2020. For rules under paragraphs (b)(1) and (2) of this section that are applicable to summonses issued on or after September 10, 2002 or under paragraph (b)(3) of this section that are applicable to summons interviews conducted on or after June 18, 2014 and before July 14, 2016, see 26 CFR 301.7602-1T (revised as of April 1, 2016). For rules under paragraph (b)(3) of this section that are applicable to administrative summonses served by the IRS before August 6, 2020, see 26 CFR 301.7602-1 (revised as of April 1, 2020).

Sunita Lough,

Deputy Commissioner for Services and Enforcement.

(Filed by the Office of the Federal Register on August 6, 2020, 8:45 a.m., and published in the issue of the Federal Register for August 7, 2020, 85 F.R. 47931)