Section 80603 of the Infrastructure and Investment and Jobs Act, Pub. L. No. 117-58, 135 Stat. 429, 1339 (2021) clarifies and expands the rules regarding the reporting of information on digital assets by brokers under sections 6045 and 6045A of the Internal Revenue Code. The announcement clarifies that until the IRS issues new final regulations under section 80603 with respect to section 6045, a broker may continue to report gross proceeds and basis as required under existing law and regulations. In addition, until the IRS issues new final regulations under section 80603 with respect to section 6045A, a broker may continue to issue statements on transfers of covered securities as required under existing law and regulations. Brokers will not be required to report additional information with respect to dispositions of digital assets, issue additional statements, or report to the IRS on transfers of digital assets until those new final regulations under sections 6045 and 6045A are issued.

This notice provides additional guidance for brokers to comply with the provisions of the final regulations under section 1446(f) (and certain provisions of the final regulations that apply to section 1446(a)) (final regulations) that relate to withholding on the transfer of an interest in a publicly traded partnership (PTP interest). The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) intend to issue proposed regulations that would amend the final regulations to implement this additional guidance.

Federal rates; adjusted federal rates; adjusted federal long-term rate, and the long-term tax exempt rate. For purposes of sections 382, 1274, 1288, 7702(f)(11), 7872 and other sections of the Code, tables set forth the rates for January 2023.

(Also Sections 42, 280G, 382, 467, 468, 482, 483, 1288, 7520, 7872.)

This document includes final regulations under the Internal Revenue Code that provide an automatic extension of time for providers of minimum essential coverage (including health insurance issuers, self-insured employers, and government agencies) to furnish individual statements regarding such coverage and an alternative method for furnishing individual statements when the individual shared responsibility payment amount is zero. The final regulations also provide an automatic extension of time for “applicable large employers” (generally employers with 50 or more full-time employees, including full-time equivalent employees) to furnish statements relating to health insurance that the applicable large employers offer to their full-time employees. Additionally, the final regulations provide that “minimum essential coverage,” as that term is used in health insurance-related tax laws, does not include Medicaid coverage limited to COVID-19 testing and diagnostic services provided under the Families First Coronavirus Response Act. The final regulations affect some taxpayers who claim the premium tax credit; health insurance issuers, self-insured employers, government agencies, and other persons that provide minimum essential coverage to individuals; and applicable large employers.

26 CFR 1.6055-1 Information reporting for minimum essential coverage

This notice sets forth updates on the corporate bond monthly yield curve, the corresponding spot segment rates for December 2022 used under § 417(e)(3)(D), the 24-month average segment rates applicable for December 2022, and the 30-year Treasury rates, as reflected by the application of § 430(h)(2)(C)(iv).

This notice provides the indexing factors to be used by group health plans and health insurance issuers to calculate the qualifying payment amount (QPA) for items or services provided on or after January 1, 2023, and before January 1, 2024. The No Surprises Act (NSA) added parallel provisions at Code sections 9816 and 9817, ERISA sections 716 and 717, and PHS Act sections 2799A-1 and 2799A-2. These provisions provide protections against balance-billing for certain out-of-network items or services provided to patients. The QPA is the basis for determining individual cost sharing for items and services covered by the balance-billing protections in the NSA, under certain circumstances. The QPA for a given calendar year is based on information regarding median rates for certain items and services from prior years and is indexed based on changes in the consumer price index.

26 CFR 54.9816-6T: Calculating the qualifying payment amounts in 2023

Notice 2023-6 provides guidance on the new sustainable aviation fuel credits under §§ 40B and 6426(k) of the Internal Revenue Code and related credit and payment rules under §§ 34(a)(3), 38, 87, and 6427(e)(1). This notice also provides rules related to the § 4101 registration requirements. Finally, this notice requests comments from the public related to the SAF credit to assist the Department of the Treasury and the Internal Revenue Service in developing additional guidance on the SAF credit in the future.

This revenue ruling provides various prescribed rates for federal income tax purposes for January 2023 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520. Table 6 contains the deemed rate of return for transfers made during calendar year 2023 to pooled income funds described in section 642(c)(5) that have been in existence for less than 3 taxable years immediately preceding the taxable year in which the transfer was made. Finally, Table 7 contains the average of the applicable federal mid-term rates (based on annual compounding) for the 60-month period ending December 31, 2022, for purposes of section 7702(f)(11).

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of January 2023. See Rev. Rul. 2023-1, page 309.

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of January 2023. See Rev. Rul. 2023-1, page 309.

The adjusted applicable federal long-term rate is set forth for the month of January 2023. See Rev. Rul. 2023-1, page 309.

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of January 2023. See Rev. Rul. 2023-1, page 309.

The applicable federal short-term rates are set forth for the month of January 2023. See Rev. Rul. 2023-1, page 309.

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of January 2023. See Rev. Rul. 2023-1, page 309.

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of January 2023. See Rev. Rul. 2023-1, page 309.

The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month of January 2023. See Rev. Rul. 2023-1, page 309.

The applicable federal mid-term rates are set forth for the month of January 2023. See Rev. Rul. 2023-1, page 309.

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of January 2023. See Rev. Rul. 2023-1, page 309.

DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1 and 301

Information Reporting of Health Insurance Coverage and Other Issues under Sections 5000A, 6055, and 6056

AGENCY: Internal Revenue Service (IRS), Treasury

ACTION: Final regulations

SUMMARY: This document includes final regulations under the Internal Revenue Code that provide an automatic extension of time for providers of minimum essential coverage (including health insurance issuers, self-insured employers, and government agencies) to furnish individual statements regarding such coverage and an alternative method for furnishing individual statements when the individual shared responsibility payment amount is zero. The final regulations also provide an automatic extension of time for “applicable large employers” (generally employers with 50 or more full-time employees, including full-time equivalent employees) to furnish statements relating to health insurance that the applicable large employers offer to their full-time employees. Additionally, the final regulations provide that “minimum essential coverage,” as that term is used in health insurance-related tax laws, does not include Medicaid coverage limited to COVID-19 testing and diagnostic services provided under the Families First Coronavirus Response Act. The final regulations affect some taxpayers who claim the premium tax credit; health insurance issuers, self-insured employers, government agencies, and other persons that provide minimum essential coverage to individuals; and applicable large employers.

DATES: Effective date: These regulations are effective on December 15, 2022.

Applicability date: The regulations under §1.5000A-2 apply for months beginning after September 28, 2020. The regulations under §§1.6055-1 and 301.6056-1 apply for calendar years beginning after December 31, 2021.

FOR FURTHER INFORMATION CONTACT: Gerald Semasek at (202) 317-7006 or Lisa Mojiri-Azad at (202) 317-4649 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Pursuant to Treas. Reg. § 54.9816-6T(c), 29 CFR 2590.716-6(c), and 45 CFR 149.140(c), this notice provides the percentage increase for calculating the qualifying payment amounts for items and services furnished during 2023 for purposes of sections 9816 and 9817 of the Internal Revenue Code (Code), sections 716 and 717 of the Employee Retirement Income Security Act of 1974 (ERISA), and sections 2799A-1 and 2799A-2 of the Public Health Service Act (PHS Act). This notice was drafted in consultation with the Departments of Labor and Health and Human Services. Similar guidance for items and services furnished during 2022 was published in Revenue Procedure 2022-11, 2022-3 IRB 449, and Notice 2022-11, 2022-14 IRB 939.¹ Percentage increases for calculating the qualifying payment amounts for items and services furnished in future years may be published in the annual revenue procedure containing inflation-adjusted items for the following tax year.

The No Surprises Act was enacted as Title I of Division BB of the Consolidated Appropriations Act, 2021.² The No Surprises Act added sections 9816 and 9817 to the Code, sections 716 and 717 to ERISA, and sections 2799A-1 and 2799A-2 to the PHS Act. These provisions provide protections against surprise medical bills in certain circumstances. Surprise medical bills can occur when a patient unexpectedly receives health care from a provider, facility, or provider of air ambulance services that does not participate in the network of the individual’s group health plan or group or individual health insurance coverage (an out-of-network or nonparticipating provider, facility, or provider of air ambulance services).³

Before the enactment of the No Surprises Act, when the terms of a group health plan or group or individual health insurance coverage did not provide for coverage of the entire amount billed by a nonparticipating provider, facility, or provider of air ambulance services, the provider, facility, or provider of air ambulance services could balance bill the patient for the amount in excess of the amount paid by the plan or coverage and any applicable patient cost sharing (unless prohibited under applicable state law). For non-emergency services and air ambulance services, the patient could also have been responsible for out-of-network cost-sharing amounts, which may have been higher than in-network cost-sharing amounts. Under the No Surprises Act, in certain circumstances, the nonparticipating provider, facility, or provider of air ambulance services can no longer balance bill the patient for the excess amount, and patient cost sharing is generally limited to in-network levels. The No Surprises Act and implementing regulations⁴ provide that, generally, in the absence of an All-Payer Model Agreement under section 1115A of the Social Security Act or specified state law,⁵ a patient’s cost-sharing amount must be calculated based on the lesser of the qualifying payment amount⁶ or the amount billed by the provider or facility. In the case of air ambulance services, the patient’s cost-sharing amount must be calculated based on the lesser of the qualifying payment amount or the billed amount for the services.

Further, in the absence of an All-Payer Model Agreement or specified state law,⁷ the No Surprises Act and its implementing regulations provide for a 30-business-day open negotiation period for group health plans or health insurance issuers offering group or individual health insurance coverage (plans and issuers) and the nonparticipating providers, facilities, or providers of air ambulance services to determine the amount to be paid by the plans or issuers as the out-of-network rate.⁸ If the parties are unable to reach an agreement through open negotiation, the No Surprises Act provides for the out-of-network rate to be determined by a certified independent dispute resolution (IDR) entity through a Federal IDR process set forth in sections 9816(c) and 9817(b) of the Code, sections 716(c) and 717(b) of ERISA, and sections 2799A-1(c) and 2799A-2(b) of the PHS Act. The statute and implementing interim final regulations issued in October 2021⁹ and the final regulations issued in August 2022¹⁰ provide that, under the Federal IDR process, the certified IDR entity considers the qualifying payment amount for the item or service, among other additional circumstances and information as provided for in the statute and implementing regulations, in determining which offer to select as the out-of-network rate.

Under § 54.9816-6T(c), 29 CFR 2590.716-6(c), and 45 CFR 149.140(c), for an item or service furnished during 2022, plans and issuers must calculate the qualifying payment amount by increasing the median contracted rate (as determined in accordance with § 54.9816-6T(b), 29 CFR 2590.716-6(b), and 45 CFR 149.140(b)) for the same or similar item or service under such plan or coverage, on January 31, 2019, by the combined percentage increase as published by the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) to reflect the percentage increase in the consumer price index for all urban consumers (U.S. city average) (CPI-U) over 2019, such percentage increase over 2020, and such percentage increase over 2021.¹¹ Pursuant to Rev. Proc. 2022-11, for items and services provided on or after January 1, 2022, and before January 1, 2023, the combined percentage increase to adjust the median contracted rate for the same or similar item or service under such plan or coverage, on January 31, 2019, is 1.0648523983. The revenue procedure also provides that plans and issuers may round to the nearest dollar any resulting qualifying payment amounts.

Pursuant to § 54.9816-6T(c)(3)(i), 29 CFR 2590.716-6(c)(3)(i), and 45 CFR 149.140(c)(3)(i), for an item or service furnished during 2022, a plan or issuer that does not have sufficient information to calculate the median of the contracted rates in 2019 for the same or similar item or service provided in a geographic region must calculate the qualifying payment amount by first identifying the rate that is equal to the median of the in-network allowed amounts for the same or similar item or service provided in the geographic region in 2021, determined by the plan or issuer through use of any eligible database, and then increasing that rate by the percentage increase in the CPI-U over 2021. Similarly, in the case of a newly covered item or service furnished during the first coverage year, when a plan or issuer does not have sufficient information to calculate the median of the contracted rates in the first coverage year for the item or service, the plan or issuer must calculate the qualifying payment amount by using an eligible database to determine the rate that is equal to the median of the in-network allowed amounts for the same or similar item or service provided in the geographic region in the year immediately preceding the first coverage year, and then increasing that rate by the percentage increase in the CPI-U over the preceding year.

Under § 54.9816-6T(c)(3)(ii), 29 CFR 2590.716-6(c)(3)(ii), and 45 CFR 149.140(c)(3)(ii), for an item or service furnished in a subsequent year (before the first sufficient information year for the item or service with respect to the plan or coverage), the plan or issuer must calculate the qualifying payment amount by increasing the qualifying payment amount determined for the item or service for the year immediately preceding the subsequent year, by the percentage increase in the CPI-U over the preceding year.

The percentage increase in the CPI-U for items and services provided in 2022 over the preceding year is the average CPI-U for 2021 over the average CPI-U for 2020. Pursuant to Notice 2022-11, the percentage increase from 2021 to 2022 is 1.0299772040. The notice also provides that plans and issuers may round any resulting qualifying payment amounts to the nearest dollar.

Under § 54.9816-6T(c)(2)(i), 29 CFR 2590.716-6(c)(2)(i), and 45 CFR 149.140(c)(2)(i), with respect to a sponsor of a plan or issuer offering group or individual health insurance coverage in a geographic region in which the sponsor or issuer did not offer any group health plan or health insurance coverage in 2019, for the first year in which the group health plan or group or individual health insurance coverage is offered in the region, if the plan or issuer does not have sufficient information to calculate the median of the contracted rates for an item or service provided in the geographic region, the plan or issuer must determine the qualifying payment amount pursuant to § 54.9816-6T(c)(3)(i), 29 CFR 2590.716-6(c)(3)(i), and 45 CFR 149.140(c)(3)(i) for an item or service furnished in 2022, as previously discussed. For each subsequent year the group health plan or group or individual health insurance coverage is offered in the region, the plan or issuer must calculate the qualifying payment amounts by increasing the qualifying payment amounts so determined for items or services provided in the immediately preceding year, by the percentage increase in the CPI-U over the preceding year.¹²

Under § 54.9816-6T(c)(4)(i), 29 CFR 2590.716-6(c)(4)(i), and 45 CFR 149.140(c)(4)(i), in the case of a plan or issuer that does not have sufficient information to calculate the median of the contracted rates for the same or similar item or service provided in a geographic region and determine the qualifying payment amount in accordance with the previously described methodology because the item or service is billed under a new service code, for items or services furnished in 2022 (or for newly covered items and services, during the first coverage year for the item or service), the plan or issuer must calculate the qualifying payment amounts pursuant to § 54.9816-6T(c)(4)(i), 29 CFR 2590.716-6(c)(4)(i), and 45 CFR 149.140(c)(4)(i).

Under § 54.9816-6T(c)(4)(ii), 29 CFR 2590.716-6(c)(4)(ii), and 45 CFR 149.140(c)(4)(ii), for such an item or service furnished in a subsequent year (before the first sufficient information year for the item or service with respect to such plan or coverage or before the first year for which an eligible database has sufficient information to calculate a rate under § 54.9816-6T(c)(3)(i), 29 CFR 2590.716-6(c)(3)(i), and 45 CFR 149.140(c)(3)(i) in the immediately preceding year), the plan or issuer must calculate the qualifying payment amount by increasing the qualifying payment amount determined for the item or service for the year immediately preceding the subsequent year, by the percentage increase in the CPI-U over the preceding year.

The percentage increase in the CPI-U over a preceding year is calculated by dividing the average CPI-U for the preceding year by the average CPI-U for the year immediately prior to the preceding year. For this purpose, the average CPI-U for a year is the average of the monthly CPI-Us published by the Bureau of Labor Statistics of the Department of Labor for the 12-month period ending on August 31 of each year, rounded to 10 decimal places. The percentage increase in the CPI-U for items and services provided in 2023 over the preceding year is the average CPI-U for 2022 over the average CPI-U for 2021. Pursuant to this calculation, the percentage increase from 2022 to 2023 is 1.0768582128. Further, pursuant to this notice, plans and issuers may round any resulting qualifying payment amounts to the nearest dollar.

.01 Adjusting qualifying payment amounts based on January 31, 2019 rates.

For qualifying payment amounts calculated by increasing the median contracted rate for 2019¹³, the qualifying payment amounts for items and services furnished in 2023 are determined by taking the qualifying payment amounts calculated for items and services furnished in 2022 and multiplying the 2022 adjusted qualifying payment amounts by the percentage increase from 2022 to 2023, that is, 1.0768582128.

For example: An item is furnished in 2023. The median contracted rate for the item on January 31, 2019 was $1,500. The 2022 adjusted qualifying payment amount for the item was $1,597 ($1,500 x 1.0648523983). The 2023 adjusted qualifying payment amount for the item is $1,720 ($1,597 x 1.0768582128).

.02 Adjusting qualifying payment amounts based on 2021 rates.

For items and services furnished in 2022, for which the qualifying payment amounts were calculated by increasing the median of the in-network allowed amounts for the same or similar item or service provided in the geographic region in 2021, drawn from any eligible database, by the percentage increase from 2021 to 2022¹⁴, the qualifying payment amounts for items and services furnished in 2023 are determined by taking the qualifying payment amounts calculated for the items and services furnished in 2022 and multiplying the 2022 adjusted qualifying payment amounts by the percentage increase from 2022 to 2023 (that is, 1.0768582128).

For example: A newly covered service for which the plan or issuer does not have sufficient information to calculate the median of the contracted rates is furnished in 2022. The median of the in-network allowed amounts for the same or similar service provided in the geographic region in 2021, drawn from an eligible database, was $2,100. The 2022 adjusted qualifying payment amount for the service was $2,163 ($2,100 x 1.0299772040). The 2023 adjusted qualifying payment amount for the service is $2,329 ($2,163 x 1.0768582128).

The adjustment to the qualifying payment amounts will be applied similarly for items and services covered by a new plan or new group or individual health insurance coverage that was not offered in a geographic region in a prior year. For items and services first offered by a new plan or new group or individual health insurance coverage in a geographic region in 2022 for which the plan or issuer does not have sufficient information to calculate the median of the contracted rates for the items or services provided in the geographic region¹⁵, the qualifying payment amounts would be calculated by increasing the median of the in-network allowed amounts for the same or similar item or service provided in the geographic region in 2021, drawn from any eligible database, by the percentage increase from 2021 to 2022 (1.0299772040). For that plan or coverage, the qualifying payment amounts for items and services furnished in 2023 is determined by taking the qualifying payment amounts calculated for items and services furnished in 2022 and multiplying the 2022 adjusted qualifying payment amounts by the percentage increase from 2022 to 2023, that is, 1.0768582128.

.03 Calculating qualifying payment amounts when 2023 is the first coverage year.

For newly covered items and services furnished in 2023 for which the plan or issuer does not have sufficient information, when 2023 is the first coverage year for the item or service with respect to the plan or coverage, the qualifying payment amounts for the items and services first furnished in 2023 are determined by multiplying the median of the in-network allowed amounts for the same or similar item or service provided in the geographic region in 2022, drawn from any eligible database, by the percentage increase from 2022 to 2023, that is, 1.0768582128.

For example: A newly covered service is furnished in 2023. The median of the in-network allowed amounts for the service provided in the geographic region in 2022, drawn from an eligible database, was $3,000. The 2023 adjusted qualifying payment amount for the service is $3,231 ($3,000 x 1.0768582128).

The effective date of this notice is January 1, 2023.

The principal author of this notice is Jason Sandoval of the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). For further information regarding this notice, contact Jason Sandoval at 202-317-5500 (not a toll-free number).

¹ https://www.irs.gov/pub/irs-drop/rp-22-11.pdf and https://www.irs.gov/pub/irs-drop/n-22-11.pdf.

² Pub. L. 116-260, 134 Stat. 1182 (2020).

³ The protections against surprise billing additionally apply to health benefits plans offered by carriers under the Federal Employees Health Benefits (FEHB) Act pursuant to 5 U.S.C. 8902(p). Accordingly, the guidance provided in this notice applies to FEHB carriers to the extent consistent with their contracts. See also 5 CFR 890.114.

⁴ 86 FR 36872 (July 13, 2021).

⁵ If an All-Payer Model Agreement or specified state law applies, the applicable Agreement or law determines the cost-sharing amount. “Specified state law” is defined in § 54.9816-3T, 29 CFR 2590.716-3, and 45 CFR 149.30.

⁶ “Qualifying payment amount” is defined in § 54.9816-6T(a)(16), 29 CFR 2590.716-6(a)(16), and 45 CFR 149.140(a)(16).

⁷ If an All-Payer Model Agreement or specified state law applies, the applicable Agreement or law determines the out-of-network rate.

⁸ “Out-of-network rate” is defined in § 54.9816-3T, 29 CFR 2590.716-3, and 45 CFR 149.30.

⁹ 86 FR 55980 (October 7, 2021).

¹⁰ 87 FR 52618 (August 26, 2022).

¹¹ The calculations of the qualifying payment amounts for anesthesia services, air ambulance services, and certain other items or services furnished during 2022 for which a plan or issuer has sufficient information to calculate the median of the contracted rates in 2019 differ slightly, but all use the same formula for increasing a base rate by the combined percentage increase as published by the Treasury Department and the IRS to reflect the percentage increase in the CPI-U over 2019 and subsequent years. See § 54.9816-6T(c)(1)(iii)-(vii), 29 CFR 2590.716-6(c)(1)(iii)-(vii), and 45 CFR 149.140(c)(1)(iii)-(vii).

¹² The calculations of the qualifying payment amounts for anesthesia services, air ambulance services, and certain other items or services furnished in a subsequent year differ slightly, but all use the same formula for increasing the indexed median contracted rate determined for the item or service in the immediately preceding year by the percentage increase. See § 54.9816-6T(c)(2)(ii), 29 CFR 2590.716-6(c)(2)(ii), and 45 CFR 149.140(c)(2)(ii).

¹³ These qualifying payment amounts are calculated by increasing the median contracted rate for the same or similar item or service under the plan or coverage, on January 31, 2019, by the combined percentage increase (2019, 2020, and 2021) published in Rev. Proc. 2022-11 (that is, 1.0648523983).

¹⁴ These qualifying payment amounts are calculated by multiplying the median of the in-network allowed amounts for the same or similar item or service provided in the geographic region in 2021, drawn from any eligible database, by the percentage increase from 2021 to 2022 (that is, 1.0299772040).

¹⁵ These qualifying payment amounts are calculated by multiplying the median of the in-network allowed amounts for the same or similar item or service provided in the geographic region in 2021, drawn from any eligible database, by the percentage increase from 2021 to 2022 (that is, 1.0299772040).

This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the Internal Revenue Code. In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I).

This notice provides guidance on the new sustainable aviation fuel credits under §§ 40B and 6426(k) of the Internal Revenue Code (Code) (collectively referred to as a SAF credit or the SAF credit) and related credit and payment rules under §§ 34(a)(3), 38, 87, and 6427(e)(1). This notice also provides rules related to the § 4101 registration requirements. Finally, this notice requests comments from the public related to the SAF credit to assist the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) in developing additional guidance on the SAF credit in the future.

Section 13203 of Public Law 117-169, 136 Stat. 1818 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022, added § 40B and amended §§ 38(b), 40A, 87, 4101(a), 6426, and 6427(e)(1), enacting a sustainable aviation fuel credit, effective for certain fuel mixtures containing sustainable aviation fuel sold or used after December 31, 2022, and prior to January 1, 2025.

The SAF credit is equal to the product of— (1) the number of gallons of sustainable aviation fuel in a qualified mixture, multiplied by (2) the sum of— (A) $1.25, plus (B) the applicable supplementary amount (as calculated under section 4.05 of this notice) with respect to such sustainable aviation fuel. See §§ 40B(a) and 6426(k). In general, the applicable supplementary amount increases the $1.25 base credit by $0.01 for each percentage point by which the lifecycle greenhouse gas emissions reduction percentage (as defined in section 3.01(4) of this notice) of the sustainable aviation fuel exceeds 50 percent. See section 3 of this notice for the requirements of sustainable aviation fuel and qualified mixtures; see section 4 of this notice for calculating the applicable supplementary amount and lifecycle greenhouse gas emissions reduction percentage.

For a claimant to qualify for the SAF credit, §§ 40B(f)(1) and 6426(k)(3) require the producer or importer of the sustainable aviation fuel to be registered with the IRS under § 4101. See section 5 of this notice for information on how a producer or importer may register; see section 6.02 of this notice for which party is the proper claimant.

A claimant who qualifies for the SAF credit may either: (1) claim an excise tax credit under § 6426(k), in which case the claimant first claims the SAF credit against its § 4081 excise tax liability for a particular quarter and, to the extent that the credit exceeds the claimant’s § 4081 excise tax liability for that quarter, the claimant may claim either a payment under § 6427(e)(1) or a refundable income tax credit under § 34(a)(3); or (2) claim a nonrefundable § 38 general business income tax credit under § 38(b)(35) and include the amount of the § 40B credit in gross income under § 87. See section 6 of this notice regarding the procedures for making a claim as well as the claim requirements.

Sections 40B and 6426(k) allow a SAF credit for the production of a qualified mixture which, broadly speaking, is a mixture of sustainable aviation fuel and kerosene. Section 40B(d)(1)(A) defines sustainable aviation fuel by reference to two American Society for Testing and Materials (ASTM) specifications: ASTM D7566 and certain Fischer Tropsch provisions of ASTM D1655 Annex A1. The referenced ASTM specifications describe two distinct processes to produce a qualified mixture. Generally, under ASTM D7566, a person produces a qualified mixture by mixing a synthetic blending component with kerosene. In contrast, under ASTM D1655 Annex A1, a person produces a qualified mixture by co-processing an appropriate feedstock with a petroleum feedstock during the production of kerosene that results in a qualified mixture, although no separate step of mixing a sustainable aviation fuel with kerosene occurs.

This notice primarily addresses the SAF credit requirements applicable to a qualified mixture produced under ASTM D7566. Treasury and the IRS, in consultation with the Department of Transportation and the Federal Aviation Administration, understand that no jet fuel is currently produced in the United States under ASTM D1655 Annex A1 that would qualify for the SAF credit. As a result, this notice provides limited information with respect to ASTM D1655 Annex A1 and requests comments with respect to ASTM D1655 Annex A1 so that future guidance may accurately address these types of claims.

.01 Sustainable aviation fuel. Under § 40B(d)(1), the term sustainable aviation fuel means the portion of liquid fuel that is not kerosene that (i) either (A) meets the specifications of “ASTM D7566” (as defined in section 3.01(1)(a) of this notice to mean the ASTM D7566 Annexes), or (B) meets the specifications of ASTM D1655 Annex A1 (as defined in section 3.01(1)(b) of this notice); and (ii) satisfies the requirements of section 3.01(2) through (4) of this notice regarding sustainability. A liquid fuel that meets the specifications of one of the ASTM D7566 Annexes or meets the specifications of ASTM D1655 Annex A1, but does not meet the requirements of section 3.01(2) through (4) of this notice is ineligible for the SAF credit.

Sustainable aviation fuel may be categorized as either (i) a SAF synthetic blending component or (ii) a co-processed liquid fuel that was produced by co-processing petroleum with synthesized hydrocarbons derived from synthesis gas via the Fischer Tropsch process (FT hydrocarbons). This notice refers to a liquid fuel that meets the specifications of one of the ASTM D7566 Annexes and that satisfies the requirements of 3.01(2) through (4) of this notice as a SAF synthetic blending component. This notice refers to a liquid fuel that meets the specifications of ASTM D1655 Annex A1, in which the FT hydrocarbons were derived from biomass that satisfies the requirements of section 3.01(2) through (4) of this notice as a SAF co-processed qualified mixture. FT hydrocarbons, which are derived from biomass that satisfies the requirements of section 3.01(2) through (4) of this notice, are referred to as SAF FT hydrocarbons.

(1) ASTM International specifications. For purposes of this notice, references to ASTM or ASTM International Standard are references to specifications published by ASTM International (formerly ASTM). For availability of ASTM specifications, see § 48.4081-1(d) of the Manufacturers and Retailers Excise Tax Regulations (26 CFR part 48).

(a) ASTM D7566 Annexes. The term ASTM D7566 Annexes means any of the annexes in ASTM D7566 that provide the specifications for a pathway to create a synthetic blending component that can be blended with ASTM D1655 kerosene (as defined in section 3.02(2)(a) of this notice) to make a qualified mixture.

(b) ASTM D1655 Annex A1. The term ASTM D1655 Annex A1 means the Fischer Tropsch provisions of ASTM D1655 Annex A1 that are contained in section A1.2.2.2, which provides a pathway for producing a liquid fuel by co-processing up to five percent of FT hydrocarbons with petroleum to make a qualified mixture. For purposes of this notice, the term petroleum includes any conventionally sourced hydrocarbons permitted under ASTM D1655 Annex A1.

Liquid fuel produced under section A1.2.2.1 does not qualify for the SAF credit because section A1.2.2.1 defines a pathway for producing a liquid fuel from co-processing an applicable material (or materials derived from an applicable material) with a feedstock that is not biomass (for example, petroleum), which § 40B(d)(1)(B) excludes from the SAF credit. See section 3.01(2) of this notice.

(2) Not derived from co-processing applicable materials. To qualify as sustainable aviation fuel, the liquid fuel must not be derived from co-processing an “applicable material” (or materials derived from an applicable material) with a feedstock that is not biomass (within the meaning of § 45K(c)(3) of the Code). Section 40B(d)(2)(A) defines the term applicable material for this purpose to mean (i) monoglycerides, diglycerides, and triglycerides, (ii) free fatty acids, and (iii) fatty acid esters. Section 45K(c)(3) defines the term biomass to mean any organic material other than (A) oil and natural gas (or any product thereof), and (B) coal (including lignite) or any product thereof.

(3) Not derived from palm fatty acid distillates or petroleum. To qualify as sustainable aviation fuel, the liquid fuel must not be derived from palm fatty acid distillates or petroleum.

(4) Lifecycle greenhouse gas emissions reduction percentage. To qualify as sustainable aviation fuel, the liquid fuel must have been certified in accordance with § 40B(e) as having a lifecycle greenhouse gas emissions reduction percentage of at least 50 percent. Section 40B(e) defines the term lifecycle greenhouse gas emissions reduction percentage to mean, with respect to any sustainable aviation fuel, the percentage reduction in lifecycle greenhouse gas emissions achieved by such fuel as compared with petroleum-based jet fuel, as defined in accordance with (i) the most recent Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) that has been adopted by the International Civil Aviation Organization (ICAO) with the agreement of the United States and is set out in Annex 16 - Environmental Protection: Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) (2018), https://elibrary.icao.int/home/product-details/229739, and related documents, or (2) any similar methodology that satisfies the criteria under § 211(o)(1)(H) of the Clean Air Act (42 U.S.C. 7545(o)(1)(H)), as in effect on August 16, 2022. See section 4.04 of this notice for a safe harbor to calculate the lifecycle greenhouse gas emissions reduction percentage.

.02 Qualified mixture.

(1) Requirements. Under § 40B(c), a qualified mixture means a mixture of sustainable aviation fuel and kerosene, but only if— (1) such mixture is produced by the taxpayer in the United States (defined in § 7701(a)(9) of the Code to mean the states and the District of Columbia); (2) such mixture is used by the taxpayer (or sold by the taxpayer for use) in an aircraft; (3) such sale or use is in the ordinary course of a trade or business of the taxpayer; and (4) the transfer of such mixture to the fuel tank of such aircraft occurs in the United States.

A qualified mixture may be produced by either mixing a SAF synthetic blending component with kerosene (to produce a SAF qualified mixture; see section 3.02(2) of this notice) or by co-processing SAF FT hydrocarbons with petroleum to produce a co-processed liquid fuel (which is a SAF co-processed qualified mixture; see section 3.02(3) of this notice).

(2) SAF qualified mixture. A SAF qualified mixture means a mixture of a SAF synthetic blending component (within the meaning of section 3.01 of this notice) with ASTM D1655 kerosene (as defined in section 3.02(2)(a) of this notice) that meets the requirements of ASTM D7566 (as defined in section 3.02(2)(b) of this notice) and which may be regarded as ASTM D1655 compliant SAF.

(a) ASTM D1655 kerosene and ASTM D1655 compliant SAF. The term ASTM D1655 kerosene means petroleum-based kerosene that meets the specifications set forth in ASTM D1655 and does not include liquid fuel co-processed with FT hydrocarbons or the addition of a synthetic blending component.

The term ASTM D1655 compliant SAF means ASTM D1655 kerosene that has been blended with a SAF synthetic blending component described in a specific ASTM D7566 Annex and meets the batch specifications described in ASTM D7566, Table 1. It also means kerosene produced by co-processing SAF FT hydrocarbons with petroleum under ASTM D1655 Annex A1. Once the mixture meets those batch specifications or is produced under ASTM D1655 Annex A1, the mixture may be regarded as jet fuel under ASTM D1655. ASTM D1655 compliant SAF is fully fungible with ASTM D1655 kerosene.

The terms ASTM D1655 kerosene and ASTM D1655 compliant SAF are not ASTM designations, but rather are used in this notice to distinguish between two types of fuel (for federal excise tax purposes) that qualify as jet fuel under the ASTM D1655 specifications for jet fuel.

(b) ASTM D7566. The term ASTM D7566 means the batch specifications set forth under ASTM D7566, Table 1, which includes the blending requirements for each synthetic blending component and the overall specifications and requirements for the blended mixture to be regarded as ASTM D1655 compliant SAF. Blending percentage requirements for various synthetic blending components with ASTM D1655 kerosene are listed in section 6 of ASTM D7566 and range from 10 to 50 percent.

(3) SAF co-processed qualified mixture. A SAF co-processed qualified mixture means a co-processed liquid fuel that meets the requirements of ASTM D1655 Annex A1 (within the meaning of section 3.01(1)(b) of this notice) and in which the biomass used to create the FT hydrocarbons satisfies the requirements of section 3.01(2) through (4) of this notice.

ASTM D1655 Annex A1 provides a pathway for producing a liquid fuel by co-processing FT hydrocarbons with petroleum that results in a qualified mixture if the producer uses SAF FT hydrocarbons. This process is functionally different from mixing two distinct products, such as a synthetic blending component and kerosene, to create a qualified mixture. Here, petroleum-based hydrocarbons and up to five percent of SAF FT hydrocarbons are processed together to produce kerosene, a portion of which was derived from sustainable sources. Before processing, neither the petroleum-based hydrocarbons nor the SAF FT hydrocarbons qualify as kerosene.

As a result, a SAF co-processed qualified mixture must be produced in the United States. A co-processed liquid fuel that is imported into the United States is ineligible for the SAF credit. The requirement that the SAF co-processed qualified mixture be produced in the United States is not met by mixing co-processed liquid fuel with additional ASTM D1655 kerosene or ASTM D1655 compliant SAF (as defined in section 3.02(2)(a) of this notice) in the United States.

Only the portion of the SAF co-processed qualified mixture attributable to the SAF FT hydrocarbons (derived from biomass) qualifies for the SAF credit. Conversely, no portion of the kerosene derived from a petroleum-based source in a SAF co-processed qualified mixture qualifies for the SAF credit.

.03 Taxation of sustainable aviation fuels and qualified mixtures.

(1) In general.

(a) Taxable fuel. Section 4081(a)(1) imposes an excise tax on certain removals, entries, and sales of taxable fuel. Section 4083(a) defines taxable fuel as gasoline, diesel fuel, and kerosene. The term kerosene, for the purpose of kerosene-type jet fuel, means any liquid covered by ASTM D1655 or military specification MIL–DTL–5624T (Grade JP–5) or MIL–DTL–83133E (Grade JP–8).

(b) Blended taxable fuel. Section 4081(b)(1) imposes an excise tax on taxable fuel removed or sold by the “blender” thereof, subject to certain credits provided in § 4081(b)(2). Section 48.4081-1(b) defines blender as any person that produces blended taxable fuel. Section 48.4081-1(c)(1)(i) generally defines the term blended taxable fuel as any taxable fuel that is produced outside the bulk transfer/terminal system by mixing (A) taxable fuel with respect to which tax has been imposed under § 4041(a)(1) or 4081(a) (other than taxable fuel for which a credit or payment has been allowed) and (B) any other liquid on which tax has not been imposed under § 4081.

(2) SAF synthetic blending component. A SAF synthetic blending component will not be treated as a taxable fuel for purposes of the excise tax imposed on taxable fuel under § 4081. A liquid fuel produced under the ASTM D7566 Annexes cannot, by definition, meet the specifications of ASTM D1655 until it is blended with kerosene. Accordingly, a SAF synthetic blending component is not treated as a taxable fuel for purposes of § 4081(a). However, the SAF synthetic blending component is taxable under § 4041(a) or (c) if it is used in a diesel-powered highway vehicle or a diesel-powered train, or as fuel in aviation.

(3) SAF qualified mixture. After a SAF qualified mixture is produced, the entire mixture is taxable under § 4081. The SAF qualified mixture is taxable under § 4081(a) if produced within the bulk transfer/terminal system. Alternatively, the SAF qualified mixture is taxable under § 4081(b) if it is produced with previously-taxed kerosene outside the bulk transfer/terminal system (subject to the credit for previously-taxed fuel under § 4081(b)(2)).

(4) Co-processed liquid fuel and SAF co-processed qualified mixture. Both co-processed liquid fuel and a SAF co-processed qualified mixture meet the specifications of ASTM D1655 and are therefore kerosene. As a result, any product produced under ASTM D1655 Annex A1 is a taxable fuel for purposes of § 4081(a).

.01 Applicability. The methods of determining the lifecycle greenhouse gas emissions reduction percentage and the applicable supplementary amount under section 4 of this notice apply only to a SAF qualified mixture.

.02 In general. The SAF synthetic blending component must be certified, in accordance with § 40B(e), as having a lifecycle greenhouse gas emissions reduction percentage of at least 50 percent. See section 4.04 of this notice. This requirement also applies to § 6426(k). See § 6426(k)(2).

Once the SAF synthetic blending component meets the minimum 50 percent reduction threshold, the lifecycle greenhouse gas emissions reduction percentage is then used to calculate the applicable supplementary amount of the SAF credit under § 40B(b) or 6426(k). The applicable supplementary amount increases the $1.25 base credit by $0.01 for each whole percentage point by which the lifecycle greenhouse gas emissions reduction percentage with respect to such fuel exceeds 50 percent. The applicable supplementary amount determined under §§ 40B(b) and 6426(k) is calculated in $0.01 increments and cannot exceed $0.50.

.03 Lifecycle greenhouse gas emissions of petroleum-based jet fuel. Until further notice, for purposes of calculating the lifecycle greenhouse gas emissions reduction percentage, the IRS will treat the lifecycle greenhouse gas emissions of petroleum-based jet fuel as equal to 89 grams of carbon dioxide equivalent per megajoule of energy or 89 gCO2e/MJ as the baseline. This is the standard adopted by the ICAO. See Annex 16 - Environmental Protection: Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) (2018), https://elibrary.icao.int/home/product-details/229739.

.04 Calculating the lifecycle greenhouse gas emissions reduction percentage; safe harbor. The IRS will accept a lifecycle greenhouse gas emissions reduction percentage calculated from the ICAO’s most recent publication of the CORSIA Default Life Cycle Emissions Values for CORSIA Eligible Fuels. At the time of publication of this notice, the most recently published version (Fourth Edition, June 2022) is available at: https://www.icao.int/environmental-protection/CORSIA/Pages/CORSIA-Eligible-Fuels.aspx.

The IRS will also accept a lifecycle greenhouse gas emissions reduction percentage calculated from the ICAO’s most recent publication of the CORSIA Methodology for Calculating Actual Life Cycle Emissions Values. At the time of publication of this notice, the most recently published version (Third Edition, June 2022) is available at: https://www.icao.int/environmental-protection/CORSIA/Pages/CORSIA-Eligible-Fuels.aspx.

The lifecycle greenhouse gas emissions reduction percentage is calculated by multiplying a fraction, the numerator of which is the baseline for the lifecycle greenhouse gas emissions of petroleum-based jet fuel (LC) minus the lifecycle emissions value (LSf), and the denominator of which is the baseline (LC), by 100 percent ([(LC - LSf)/ LC] × 100% = lifecycle greenhouse gas emissions reduction percentage). The lifecycle greenhouse gas emissions reduction percentage must be rounded down to the nearest whole percent.

The registered producer or importer of the SAF synthetic blending component must record the lifecycle greenhouse gas emissions reduction percentage on the Certificate for SAF Synthetic Blending Component. See section 7.02 of this notice.

.05 Calculating the applicable supplementary amount. To calculate the applicable supplementary amount for purposes of §§ 40B(b) and 6426(k), subtract 50 from the lifecycle greenhouse gas emissions reduction percentage, then multiply that number by the applicable rate for the supplementary amount (currently $0.01) ([lifecycle greenhouse gas emissions reduction percentage – 50] × applicable rate for the supplementary amount). The applicable supplementary amount under §§ 40B(b) and 6426(k) must be calculated using the same methodology used to determine the lifecycle greenhouse gas emissions reduction percentage under § 40B(e).

The registered producer or importer of the SAF synthetic blending component must record the applicable supplementary amount on the Certificate for SAF Synthetic Blending Component. See section 7.02 of this notice.

.06 Example. A blender used 100,000 gallons of a SAF synthetic blending component to produce a SAF qualified mixture. The SAF synthetic blending component was produced via a pathway that has a lifecycle carbon dioxide emission equivalent of 28.9 grams per megajoule of energy. To calculate the amount of the credit, first calculate the lifecycle greenhouse gas emissions reduction percentage (rounding down to the nearest whole percent): [(89 gCO2e/MJ – 28.9 gCO2e/MJ)/ 89 gCO2e/MJ] × 100% = 67.5%, rounded down to 67%.

Because the lifecycle greenhouse gas emissions reduction percentage is at least 50 percent, the SAF synthetic blending component qualifies for the $1.25/gallon credit. Additionally, the SAF synthetic blending component qualifies for the applicable supplementary amount, which is calculated by subtracting 50 from the lifecycle greenhouse gas emissions reduction percentage (67), and then multiplying by the applicable rate ($0.01): (67 – 50) × $0.01 = $0.17 per gallon.

The SAF credit is calculated as follows: 100,000 gallons × ($1.25 + $0.17) = $142,000.00.

.01 Registration.

(1) In general. Section 4101(a)(1) provides that every person producing or importing sustainable aviation fuel must register with the Secretary at such time, in such form and manner, and subject to such terms and conditions, as the Secretary may by regulations prescribe. Section 48.4101-1 provides the registration requirements for fuel registrants.

Section 40B(f) provides that no SAF credit is allowed with respect to any sustainable aviation fuel unless the producer or importer of such fuel is registered with the Secretary under § 4101, and provides such information with respect to such fuel as the Secretary may require for purposes of carrying out § 40B, including certification (in such form and manner as the Secretary prescribes) from an unrelated party demonstrating compliance with— (1) any general requirements, supply chain traceability requirements, and information transmission requirements established under the CORSIA described in § 40B(e)(1), or (2) in the case of any methodology established under § 40B(e)(2), requirements similar to the requirements described in § 40B(f)(2)(A)(i). See also § 6426(k)(3).

Until further notice, the IRS will treat the producer or importer of a SAF synthetic blending component and the United States producer of a SAF co-processed qualified mixture as the persons required to register under § 4101. The IRS will not register an importer of a co-processed liquid fuel or an importer of a SAF qualified mixture as an importer of sustainable aviation fuel due to the requirement that a qualified mixture be produced in the United States. See § 40B(c)(1).

(2) Procedure for registering. Application for registration is made on Form 637, Application for Registration (For Certain Excise Tax Activities), under Activity Letter “SA,” in accordance with the instructions for that form. The IRS is revising Form 637 to add Activity Letter “SA.” Until the revised Form 637 is released, applicants may use the current Form 637 by writing in “Activity Letter SA” and providing the following:

(a) The annual volume of the sustainable aviation fuel the applicant produces;

(b) The locations and a description of the applicant’s production facilities;

(c) The feedstocks and sources of feedstocks used to produce the sustainable aviation fuel;

(d) A statement indicating whether the applicant produces sustainable aviation fuel under an ASTM D7566 Annex or ASTM D1655 Annex A1, and if applicable, the specific ASTM D7566 Annex under which the SAF synthetic blending component is produced;

(e) A sample Certificate of Analysis (as defined in section 6.04(3) of this notice) for the type of sustainable aviation fuel the applicant produces, demonstrating conformance with either an ASTM D7566 Annex or ASTM D1655 Annex A1;

(f) Certification from the International Sustainability and Carbon Certification (ISCC), Roundtable on Sustainable Biomaterials (RSB), or other unrelated party demonstrating compliance with— (i) any general requirements, supply chain traceability requirements, and information transmission requirements established under CORSIA, which has been adopted by the ICAO with the agreement of the United States, or (ii) any similar methodology that satisfies the criteria under section 211(o)(1)(H) of the Clean Air Act (42 U.S.C. 7545(o)(1)(H)), as in effect on August 16, 2022;

(g) Certification in accordance with § 40B(e) that the SAF synthetic blending component has a lifecycle greenhouse gas emissions reduction percentage of at least 50 percent;

(h) The names and addresses of any person(s) acting for the applicant as an agent or broker in buying, selling, or transporting any sustainable aviation fuel;

(i) The business entities to which the applicant sells sustainable aviation fuel;

(j) The business entities from or with which the applicant buys, trades, transfers, or exchanges any sustainable aviation fuel; and

(k) The annual volume of the sustainable aviation fuel the applicant buys, sells, trades, transfers, or exchanges.

(3) Requirements. The IRS will register an applicant with Activity Letter “SA” only if the IRS— (A) concludes that the applicant is engaged as a producer or importer of a SAF synthetic blending component or the producer of a SAF co-processed qualified mixture, or is likely to become so engaged within a reasonable time after being registered under § 4101; and (B) is satisfied with the filing, deposit, payment, reporting, and claim history for all federal taxes of the applicant and any related person (as defined in § 48.4101-1(b)(5)).

The IRS will not consider an applicant likely to become engaged in the business of producing or importing a SAF synthetic blending component or producing a SAF co-processed qualified mixture unless the producer or importer (as applicable) can provide certification from an unrelated party demonstrating compliance with § 40B(d)(1)(D) and (f)(2)(A).

(4) Certification demonstrating compliance with § 40B(f)(2)(A); safe harbor. The IRS will consider a producer or importer of a SAF synthetic blending component or the producer of a SAF co-processed qualified mixture to meet the requirements of § 40B(f)(2)(A), relating to the sustainability requirements of CORSIA, if the producer or importer (as applicable) has a valid, relevant certificate from ISCC, RSB, or other ICAO-approved sustainability certification scheme. At the time of publication of this notice, the most recently published version (First Edition, November 2020) of CORSIA Approved Sustainability Certification Schemes, which lists ICAO-approved sustainability certification schemes, is available at https://www.icao.int/environmental-protection/CORSIA/Pages/CORSIA-Eligible-Fuels.aspx.

.02 Blenders of SAF synthetic blending components and ASTM D1655 kerosene used to produce SAF qualified mixtures. Section 4101 and § 48.4101-1 require any person who produces taxable fuel to be registered. Section 4083(a)(1) defines taxable fuel to include kerosene, which for jet fuel means ASTM D1655 kerosene (and ASTM D7566 and D1655 compliant SAF). The person who blends the SAF synthetic blending component with ASTM D1655 kerosene to produce a SAF qualified mixture produces ASTM D1655 compliant SAF, which meets the specifications of ASTM D1655 and is a taxable fuel.

As a result, the blender is required to be registered either under Activity Letter “S” if the blending occurs within the bulk transfer/terminal system (that is, above the rack) or under Activity Letter “M” if the blending occurs outside the bulk transfer/terminal system (that is, below the rack).

Pursuant to § 48.4101-1(h)(1)(v), each registrant must notify the IRS of any change in the information the registrant submitted in connection with its application for registration within 10 days after the change occurs. A previously-registered “S” registrant or a previously-registered “M” registrant that begins producing SAF qualified mixtures must inform the IRS of this change by contacting the IRS office with which the registrant is registered.

.03 Producers of SAF co-processed qualified mixtures and co-processed liquid fuel. As stated above, § 4101 and § 48.4101-1 require any person who produces taxable fuel to be registered. The person who produces a SAF co-processed qualified mixture is also producing kerosene, a taxable fuel under § 4083(a)(1). As a result, the producer is required to be registered under Activity Letter “S” in addition to Activity Letter “SA.”

A person who produces co-processed liquid fuel (regardless of whether it qualifies for the SAF credit or as a SAF co-processed liquid fuel) is also producing kerosene. As a result, the producer is required to be registered under Activity Letter “S.”

In addition, a previously-registered “S” registrant that begins producing co-processed liquid fuel or a SAF co-processed qualified mixture must inform the IRS of this change by contacting the IRS office with which the registrant is registered.

.01 In general. In order to qualify for a SAF credit, the claimant must produce, then use or sell for use, a qualified mixture that meets all requirements set forth in this notice. The producer or importer of the sustainable aviation fuel must also be registered under § 4101. See also §§ 40B(f)(1), 6426(k)(3). See section 6.04 of this notice for the claim requirements applicable to a SAF qualified mixture produced under ASTM D7566.

.02 Claimant. The person eligible to claim the SAF credit is the person who produces the qualified mixture, assuming all other statutory requirements are met. With respect to a SAF qualified mixture, the person who produces the SAF qualified mixture does not have to be the same person that produced or imported the SAF synthetic blending component. With respect to a SAF co-processed qualified mixture, the person who produces the SAF co-processed qualified mixture is the proper claimant.

.03 Making a claim.

(1) Excise tax claims under §§ 6426(k) and 6427(e)(1); refundable income tax claims under § 34(a)(3).

(a) In general. First, the claimant must claim an excise tax SAF credit under § 6426(k), along with any credit under § 6426(c) or (e) against its § 4081 excise tax liability. To the extent that the SAF credit under § 6426(k) (along with the sum of any credit under § 6426(c) or (e)) exceeds the claimant’s § 4081 liability for a particular quarter, the claimant may claim a payment under § 6427(e)(1) or a refundable income tax credit under § 34(a)(3). A claimant may only make one claim for each gallon of sustainable aviation fuel used in a qualified mixture. A claimant may not make a claim under § 6427(e)(1) or § 34(a)(3) for an amount that will be claimed or is required to be claimed under § 6426(k).

(b) Procedure for making a claim. A claimant claiming an excise tax SAF credit under § 6426(k) must first make the claim on a Form 720, Quarterly Federal Excise Tax Return, if reporting excise tax liability, in accordance with the instructions for that form. For federal income tax purposes, a claimant’s expense for the § 4081 excise tax, whether taken as a deduction or as a component of cost of goods sold, is reduced by the amount of the excise tax credit under § 6426(k). See generally Exxon Mobil Corp. v. United States, 43 F.4th 424 (5th Cir. 2022).

The payment under § 6427(e)(1) is claimed on Form 720 or Form 8849, Schedule 3, Certain Fuel Mixtures and the Alternative Fuel Credit, in accordance with the instructions for those forms. A person may not make a claim on a Form 8849, Schedule 3 for an amount that is claimed (or will be claimed) on Form 720, Form 720X, Amended Quarterly Federal Excise Tax Return, or Form 4136, Credit for Federal Tax Paid on Fuels.

The § 34(a)(3) refundable income tax credit is claimed on Form 4136 in accordance with the instructions for that form, for amounts otherwise allowable under § 6427(e)(1), but that were not claimed on Form 720 or Form 8849, Schedule 3.

Although the SAF credit applies to fuel sold or used after December 31, 2022, a claimant will be ineligible to make a claim immediately after the credit goes into effect due to the registration requirements imposed by §§ 40B and 6426(k). In general, a claimant will be able to file an amended return (Form 720X) to claim a credit under § 6426(k) with respect to qualified mixtures produced beginning on January 1, 2023, once the appropriate persons are registered and the other requirements of this notice are met. Similarly, a claimant will be able to use § 34(a)(3) to claim a refundable income tax credit, which it would otherwise be eligible to claim as a payment under § 6427(e)(1).

(2) Nonrefundable income tax credit. The § 40B credit is a § 38 general business credit. A claimant may make this claim on Form 8864, Biodiesel, Renewable Diesel, and Sustainable Aviation Fuels Credit, in accordance with the instructions for that form.

Section 87 provides that gross income includes the SAF credit determined with respect to the taxpayer for the taxable year under § 40B(a). Therefore, a claimant must include the amount of the § 40B credit in its gross income.

The amount of the credit determined under § 40B with respect to any sustainable aviation fuel must be properly reduced to take into account any benefit provided with respect to such sustainable aviation fuel solely by reason of the application of § 6426(k) or 6427(e)(1). See § 40B(g). In addition, for purposes of § 40A (biodiesel and renewable diesel used as fuel), the term biodiesel shall not include any liquid with respect to which a credit may be determined under § 40 or 40B.

A claimant will be ineligible to make a claim immediately after the credit goes into effect due to the registration requirements; however, a claimant generally will be able to file a Form 8864 with an amended income tax return to claim a credit under § 40B once the appropriate persons are registered and the other requirements of this notice are met.

.04 Claim requirements.

(1) Applicability. The claim requirements under section 6.04 of this notice apply only to claims made with respect to a SAF qualified mixture produced under ASTM D7566.

(2) Certificate for SAF Synthetic Blending Component. Each claim for a credit or payment under § 34(a)(3), 40B, 6426(k), or 6427(e)(1) with respect to a SAF qualified mixture must contain an original Certificate for SAF Synthetic Blending Component described in section 7.02 of this notice and, if applicable, the Statement(s) of SAF Synthetic Blending Component Reseller described in section 7.03 of this notice. However, in the case of a certificate and statement that support a claim made on more than one claim form, the certificate and statement are to be included with the first claim and the claimant is to provide information related to the certificate on any subsequent claim in accordance with the instructions applicable to the claim form.

(3) Declaration for SAF Qualified Mixture. Each claim for a credit or payment under § 34(a)(3), 40B, 6426(k), or 6427(e)(1) with respect to a SAF qualified mixture must contain a Declaration for SAF Qualified Mixture. The declaration consists of a statement that is signed under penalties of perjury by a person with authority to bind the claimant, is substantially in the same form as the model declaration in Appendix A of this notice, and contains all the information necessary to complete such declaration.

The declaration must contain the Certificate of Analysis (COA) reference number for the COA associated with the SAF qualified mixture, as well as the COA reference numbers for the SAF synthetic blending component and the D1655 kerosene that the claimant blended to produce the SAF qualified mixture. A COA is a document from an unrelated party used to verify the type and quality of fuel used as jet fuel. Separate COAs are generated for each synthetic blending component, for the kerosene used to mix with the synthetic blending component, and for the SAF qualified mixture. The COA reference number for the SAF synthetic blending component must match the COA reference number for the SAF synthetic blending component on the Certificate for SAF Synthetic Blending Component.

.01 Applicability. This section describes the certificate and reseller statement applicable only to SAF synthetic blending components.

.02 Certificate for SAF Synthetic Blending Component. The Certificate for SAF Synthetic Blending Component required by section 6.04(2) of this notice consists of (i) a statement that is signed under penalties of perjury by a person with authority to bind the producer or importer of a SAF synthetic blending component, (ii) is substantially in the same form as the model certificate in Appendix B of this notice, and (iii) contains all the information necessary to complete the certificate. The certificate identification number is determined by the producer or importer and must be unique to each certificate.

A producer or importer may, with respect to a particular sale of a SAF synthetic blending component, provide multiple separate certificates, each applicable to a portion of the total volume of the SAF synthetic blending component sold. Thus, for example, a producer or importer that sells 5,000 gallons of a SAF synthetic blending component may provide its buyer with five certificates for 1,000 gallons each. The multiple certificates may be provided to the buyer at or after the time of sale or to a reseller in the circumstances described in section 7.03(1) of this notice.

.03 Statement of SAF Synthetic Blending Component Reseller.

(1) In general. A person that receives a Certificate for SAF Synthetic Blending Component, and subsequently sells the SAF synthetic blending component without producing a SAF qualified mixture, must provide to its buyer the certificate, and a statement that is substantially in the same form as the model statement in Appendix C of this notice. The statement must contain all of the information necessary to complete the model statement in Appendix C and be attached to the original Certificate for SAF Synthetic Blending Component.

A reseller cannot make multiple copies of a Certificate for SAF Synthetic Blending Component in order to use it for multiple buyers. If a single certificate applies to a SAF synthetic blending component that a reseller expects to sell to multiple buyers, then the reseller should return the certificate (together with any statements provided by intervening resellers) to the producer or importer. The producer or importer may reissue multiple Certificates for SAF Synthetic Blending Component to the reseller that reflect the appropriate volumes. The reissued certificates must include the certificate identification number from the certificate that was returned.

(2) Withdrawal of the right to provide a statement. The IRS may withdraw the right of a buyer of a SAF synthetic blending component to provide the buyer’s Certificate for SAF Synthetic Blending Component and Statement of SAF Synthetic Blending Component Reseller under this section 7 if the IRS cannot verify the accuracy of the buyer’s statements.

.01 General comments. The Treasury Department and the IRS request comments on whether any issues related to the SAF credit provided in this notice require clarification or additional guidance. The IRS anticipates issuing additional guidance on the SAF credit.

.02 Comments on specific questions. The Treasury Department and IRS invite specific comments in response to the following questions:

(1) Section 40B(e)(2) provides that “any similar methodology, which satisfies the criteria under § 211(o)(1)(H) of the Clean Air Act (42 U.S.C. 7545(o)(1)(H)), as in effect on the date of enactment of this section” may be used to determine the reduction in lifecycle greenhouse gas emissions. What methods exist that could qualify as a “similar methodology”? Do the lifecycle emissions values that have been developed by the Environmental Protection Agency for the Renewable Fuel Standard qualify as a “similar methodology”? Does the Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) model developed by the Argonne National Laboratory qualify as a “similar methodology”?

(2) Section 40B(f)(2)(A)(ii) (concerning general requirements, supply chain traceability requirements, and information requirements established under CORSIA) provides that in the case of any methodology established under § 40B(e)(2) (concerning any similar methodology, which satisfies the criteria § 211(o)(1)(H) of the Clean Air Act (42 U.S.C. 7545(o)(1)(H))), requirements similar to the requirements described in section 40B(e)(1) apply. What CORSIA requirements are needed to ensure supply chain traceability of information related to lifecycle greenhouse gas emissions and what unrelated party or parties are qualified to demonstrate compliance?

(3) Are any SAF co-processed qualified mixtures currently being produced in the United States? Are any SAF FT hydrocarbons currently being produced in the United States?

(4) With respect to the registration requirements under § 4101, this notice treats the person who produces a SAF co-processed qualified mixture as a sustainable aviation fuel producer. Is it more appropriate to treat the producer of the SAF FT hydrocarbons as the sustainable aviation fuel producer?

(5) What types of verification exist to show what portion of a SAF co-processed qualified mixture is attributable to FT hydrocarbons versus petroleum? Are carbon dating or mass balancing appropriate types of verification?

(6) What entities are capable of providing the certifications required by § 40B(d)(1)(D) (relating to a lifecycle greenhouse gas emissions reduction percentage of at least 50 percent) and (f)(2)(A) (concerning general requirements, supply chain traceability requirements, and information requirements established under CORSIA or a similar methodology under the Clean Air Act) with respect to SAF co-processed qualified mixtures?

(7) Section 40B(c)(4) requires that the transfer of the qualified mixture into an aircraft occur in the United States. What types of verification exist to show that the qualified mixture is transferred to the fuel tank of an aircraft in the United States?

.01 Written comments should be submitted by February 17, 2023. The subject line for the comments should include a reference to Notice 2023-06. Comments may be submitted in one of two ways:

(1) electronically via the Federal eRulemaking Portal at http://www.regulations.gov (type IRS-2022-0036 in the search field on the regulations.gov homepage to find this notice and submit comments); or

(2) alternatively, by mail to: Internal Revenue Service, CC:PA:LPD:PR (Notice 2023-06), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

.02 All commenters are strongly encouraged to submit comments electronically. The Treasury Department and the IRS will publish for public availability any comment submitted electronically, or on paper, to its public docket on www.regulations.gov.

Sections 5 and 6.04 of this notice set forth collections of information to be provided to the IRS with Form 637, and to determine whether a claimant qualifies for a SAF credit. The collections of information will be reflected in the submission to the Office of Management and Budget (OMB) for review in accordance with the Paperwork Reduction Act (44 U.S.C. 3507(c)) that is associated with Form 637 (OMB control number 1545-1835). This submission will be updated in the ordinary course. 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 principal author of this notice is Elisabeth Shellan of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this notice, call the energy security guidance contact number at (202) 317-5254 (not a toll-free number).

(To support a claim related to sustainable aviation fuel (SAF) under the Internal Revenue Code)

The undersigned blender of a SAF qualified mixture (“Claimant”) hereby declares the following:

1. ___________________________________________________________________________________________________

___________________________________________________________________________________________________

___________________________________________________________________________________________________

Claimant’s name, address, and employer identification number (EIN)

2. Claimant declares that the SAF qualified mixture to which this declaration relates:

(A) Is a mixture of SAF synthetic blending component and kerosene;

(1) The SAF synthetic blending component used to create the mixture meets the requirements of an ASTM D7566 Annex (the certificate of analysis reference number demonstrating conformance with such standard is ____________________, dated ____________ and the Certificate for SAF Synthetic Blending Component, for the SAF synthetic blending component used to create the mixture, certificate identification number is ____________________, dated __________);

(2) The kerosene used to create the mixture meets the requirements of ASTM D1655 (the certificate of analysis reference number demonstrating conformance with such standard is ____________________, dated __________);

(3) The SAF qualified mixture meets the requirements of ASTM D7566 (the certificate of analysis reference number demonstrating conformance with such standard is ____________________, dated __________);

(B) The mixture was produced by Claimant in the United States;

(C) The mixture was used by Claimant (or sold by Claimant) for use in an aircraft;

(D) Such sale or use was in the ordinary course of the trade or business of the Claimant;

(E) The transfer of such mixture to the fuel tank of such aircraft occurred in the United States.

3. Claimant is registered under activity letter M or S or both with registration number(s) ____________________. Claimant’s registration has not been suspended or revoked by the Internal Revenue Service.

Under penalties of perjury, I, ___________________________________________ declare that I have examined this declaration, and to the best of my knowledge and belief, it is true, correct, and complete.

___________________________________________

Printed or typed name of person signing this declaration

___________________________________________

Title of person signing

___________________________________________

Signature and date signed

Certificate Identification Number: ____________________

(To support a claim related to sustainable aviation fuel (SAF) under the Internal Revenue Code)

The undersigned producer or importer of a SAF synthetic blending component (“Producer”) hereby certifies the following under penalties of perjury:

1. ___________________________________________________________________________________________________

___________________________________________________________________________________________________

___________________________________________________________________________________________________

Producer’s name, address, and employer identification number (EIN)

2. ___________________________________________________________________________________________________

___________________________________________________________________________________________________

___________________________________________________________________________________________________

Name, address, and EIN of person buying the SAF synthetic blending component from Producer.

3. ___________________________________________________________________________________________________

___________________________________________________________________________________________________

___________________________________________________________________________________________________

Name and address of the unrelated party certifying compliance with the general requirements, supply chain traceability requirements, and information transmission requirements established under the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) or similar requirements for methodologies established under section 211(o)(1)(H) of the Clean Air Act (42 U.S.C. 7545(o)(1)(H)).

4. ___________________________________________________________________________________________________

Date and location of sale to buyer

5. This certificate applies to __________ gallons of a SAF synthetic blending component.

6. Producer certifies that the SAF synthetic blending component to which this certificate relates:

(A) Meets the requirements of an ASTM D7566 Annex (the certificate of analysis reference number demonstrating conformance with such standard is ____________________, dated __________ );

(B) Is not derived from co-processing an applicable material (monoglycerides, diglycerides, triglycerides, free fatty acids, or fatty acid esters) or materials derived from an applicable material with a feedstock that is not biomass (as defined in section 45K(c)(3));

(C) Is not derived from palm fatty acid distillates or petroleum; and

(D) Has been certified in accordance with section 40B(e) as having a lifecycle greenhouse gas emissions reduction percentage of at least 50 percent.

7. The lifecycle greenhouse gas emissions reduction percentage of the SAF synthetic blending component to which this certificate relates is __________. (This percent must be rounded down to the nearest whole percent.)

(Check one)

______ The lifecycle greenhouse gas emissions reduction percentage is calculated from the “Default Life Cycle Emissions Values for CORSIA Eligible Fuels” in the most recently published version by the International Civil Aviation Organization (ICAO).

______ The lifecycle greenhouse gas emissions reduction percentage is calculated from the “CORSIA Methodology for Calculating Actual Life Cycle Emission Values” in the most recently published version by the ICAO.

______ The lifecycle greenhouse gas emissions reduction percentage is calculated according to a methodology that satisfies the criteria of section 211(o)(1)(H) of the Clean Air Act (42 U.S.C. 7545(o)(1)(H)). Describe method: _________________

___________________________________________________________________________________________________

___________________________________________________________________________________________________

8. The applicable supplementary amount with respect to the SAF synthetic blending component to which this certificate relates is __________. In no event can the applicable supplementary amount exceed $0.50.

9. This certificate applies to the following sale:

______ Invoice or delivery ticket number

______ Total number of gallons of the SAF synthetic blending component sold under that invoice or delivery ticket number (including SAF synthetic blending component not covered by this certificate)

______ Total number of certificates issued for that invoice or delivery ticket number

10. ___________________________________________________________________________________________________

___________________________________________________________________________________________________

___________________________________________________________________________________________________

Name, address, and EIN of reseller to whom certificate is issued (only in the case of certificates reissued to a reseller after the return of the original certificate)

11. _________ Original Certificate Identification Number (only in the case of certificates reissued to a reseller after return of the original certificate)

12. Producer is registered as a sustainable aviation fuel (activity letter SA) producer or importer with registration number __________. Producer’s registration has not been suspended or revoked by the Internal Revenue Service.

Producer understands that the fraudulent use of this certificate may subject Producer and all parties making any fraudulent use of this certificate to a fine or imprisonment, or both, together with the costs of prosecution.

___________________________________________

Printed or typed name of person signing this certificate

___________________________________________

Title of person signing

___________________________________________

Signature and date signed

Note: In the case of a claimant that is also the producer or importer of the SAF synthetic blending component, the information required on lines 2, 4, and 10 of the model certificate is not applicable and those lines do not need to be completed.

(To support a claim related to sustainable aviation fuel (SAF) under the Internal Revenue Code)

The undersigned SAF synthetic blending component reseller (“Reseller”) hereby certifies the following under penalties of perjury:

1. ___________________________________________________________________________________________________

___________________________________________________________________________________________________

___________________________________________________________________________________________________

Reseller’s name, address, and employer identification number (EIN)

2. ___________________________________________________________________________________________________

___________________________________________________________________________________________________

___________________________________________________________________________________________________

Name, address, and EIN of Reseller’s buyer

3. ___________________________________________________________________________________________________

Date and location of sale to buyer

4. __________________________________Volume of the SAF synthetic blending component sold

5. __________________________________Certificate Identification Number on the Certificate for SAF Synthetic Blending Component

Reseller has bought the SAF synthetic blending component described in the accompanying Certificate for SAF Synthetic Blending Component and reseller has no reason to believe that any information in the certificate is false.

Reseller has not been notified by the Internal Revenue Service that its right to provide a certificate and a statement has been withdrawn.

Reseller understands that the fraudulent use of this statement may subject Reseller and all parties making any fraudulent use of this statement to a fine or imprisonment, or both, together with the costs of prosecution.

___________________________________________

Printed or typed name of person signing this certificate

___________________________________________

Title of person signing

___________________________________________

Signature and date signed

This notice provides additional guidance for brokers to comply with the provisions of the final regulations under section 1446(f) (and certain provisions of the final regulations that apply to section 1446(a)) (final regulations) that relate to withholding on the transfer of an interest in a publicly traded partnership (PTP interest). The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) intend to issue proposed regulations that would amend the final regulations to implement this additional guidance.

Sections 864(c)(8) and 1446(f) were added to the Code by the Tax Cuts and Jobs Act, Pub. L. 115-97, on December 22, 2017. Section 864(c)(8) generally provides that gain or loss of a foreign person on the sale or exchange of an interest in a partnership engaged in a U.S. trade or business is treated as effectively connected gain or loss and, therefore, is subject to U.S. tax. Section 1446(f)(1) requires a transferee of an interest in a partnership to withhold 10 percent of the amount realized if any portion of the gain on the disposition would be treated under section 864(c)(8) as effectively connected with the conduct of a trade or business within the United States (unless an exception applies).

On November 30, 2020, the Treasury Department and the IRS published the final regulations (TD 9926) in the Federal Register (85 FR 76910, as corrected at 86 FR 13191), primarily relating to withholding and information reporting under section 1446(f). The final regulations include withholding requirements under section 1446(f)(1) that generally require a broker that effects a transfer of a PTP interest on behalf of a transferor to withhold on the payment of an amount realized made to the transferor. However, a broker is not required to withhold, or may withhold at a reduced rate, if it can rely on (i) a certification from the transferor that claims an exception or reduction to withholding (generally provided on a valid Form W-8 or W-9) or (ii) a representation made by the publicly traded partnership (PTP) on a qualified notice indicating that the exception under §1.1446(f)-4(b)(3)(ii) applies (ten-percent exception). A broker is also not required to withhold when it makes the payment of an amount realized to a qualified intermediary (QI), or a U.S. branch treated as a U.S. person, that assumes primary withholding responsibility under section 1446(f)(1).

The provisions of the final regulations that relate to a broker’s obligation to withhold on the transfer of a PTP interest apply to transfers that occur on or after January 1, 2022. However, on September 7, 2021, the Treasury Department and the IRS released Notice 2021-51, 2021-36 I.R.B. 361, deferring the applicability date of these provisions to transfers that occur on or after January 1, 2023. On May 16, 2022, the Treasury Department and the IRS released Notice 2022-23, 2022-20 I.R.B. 1062, proposing changes to the qualified intermediary agreement (QI agreement), including rules that will apply to QIs required to withhold on the transfer of a PTP interest under section 1446(f) starting January 1, 2023. Subsequently, the Treasury Department and the IRS released Revenue Procedure 2022-43, 2022-52 I.R.B. 570, which provides the final QI agreement effective as of January 1, 2023.

Following the publication of the final regulations, taxpayers and other stakeholders raised concerns regarding the difficulty of brokers to determine, for withholding under section 1446(f), whether entities organized outside of the United States are classified as PTPs for U.S. tax purposes. Because the final regulations generally require withholding on the sale of a PTP interest unless the PTP represents on a qualified notice that the ten-percent exception applies, or the transferor provides a certification claiming another exception to withholding under §1.1446(f)-4(b)), a broker that is unable to determine the classification of an entity may be required to withhold on each sale of an interest in such entity. The view of these stakeholders was that it is impractical to identify a complete list of entities organized outside of the United States that are classified as partnerships for U.S. tax purposes and that are traded on a foreign established securities market or foreign secondary market. These stakeholders requested that a broker be able to presume that an entity organized outside of the United States is not a PTP unless it has actual knowledge to the contrary, and that a PTP organized outside of the United States is presumed to not have effectively connected income unless it represents otherwise on a qualified notice.

The Treasury Department and the IRS have determined that the burden on brokers to determine whether a foreign entity that trades on a foreign market is a PTP for U.S. tax purposes would likely be disproportionate to the amount of gain subject to section 864(c)(8) on transfers of interests in such entities. The Treasury Department and the IRS intend to issue proposed regulations that would amend the final regulations to provide withholding relief to brokers on the sale of an interest in an entity that is organized outside of the United States and that trades solely on a foreign established securities market or foreign secondary market (foreign-traded entity). This proposed amendment would allow a broker that effects a sale of an interest in a foreign-traded entity to presume that the entity is not a PTP for U.S. tax purposes unless the broker has actual knowledge otherwise.

However, the Treasury Department and the IRS have determined that it is inappropriate to allow a broker that knows that a foreign-traded entity is a PTP for U.S. tax purposes to presume that the PTP does not have effectively connected income, and therefore do not intend to include such a presumption in the proposed regulations. Thus, in such a case, a broker would be required to withhold under section 1446(f) on the sale of an interest in the PTP unless the PTP has indicated on a qualified notice that the ten-percent exception applies or the broker receives a certification from the transferor claiming another exception or reduction to withholding.

Under the final regulations, a broker may rely on a certification from a transferor that claims an exception or reduction to withholding. However, a broker may not rely on a certification if it is received earlier than 30 days before a transfer (unless an allowance applies in the final regulations to allow a broker to rely on documentation that it already possesses) or at any time after a transfer. Taxpayers and other stakeholders have requested an allowance for brokers to rely on late certifications that claim an exception or reduction to withholding on the transfer of a PTP interest. These stakeholders noted that for other types of payments, brokers that are withholding agents are allowed to rely on late documentation for purposes of reducing withholding (for example, under the regulations under sections 1441 and 1471), and thus requested that the final regulations be amended to provide that those same provisions apply for purposes of applying section 1446(f) on the transfer of a PTP interest.

The Treasury Department and the IRS have determined that it is appropriate to allow brokers to rely on late certifications for purposes of withholding under section 1446(f) in order to reduce overwithholding and claims for refund and to better coordinate with the documentation rules under sections 1441 and 1471. The Treasury Department and the IRS intend to issue proposed regulations that would amend the final regulations to allow brokers to rely on late certifications when certain requirements are met. A broker would be permitted to rely on a valid certification that it receives within 30 days of the date of payment. If the certification is received more than 30 days after the date of payment but within one year of the date of the payment, a broker would be permitted to rely on the certification if it contains a signed affidavit stating that the information and representations on the certification were accurate as of the time of payment. If a certification is received more than one year after the date of payment, the broker would be permitted to rely on the certification if it contains the signed affidavit and, in the case of a claim for treaty benefits under §1.1446(f)-4(b)(5), documentary evidence described in §1.1441-6(c)(4)(i) or (ii) to support the treaty claim made on the certificate.

The allowance for late certifications would apply to any certification used to claim an exception or reduction to withholding on the transfer of a PTP interest under §1.1446(f)-4. For example, a broker may rely on a late Form W-8IMY from a foreign partnership to claim a modified amount realized pursuant to §1.1446(f)-4(c)(2)(ii) if the form meets the requirements for late certifications. A broker may also rely on any underlying certifications provided by the foreign partnership on behalf of its partners to establish a claim of non-foreign status or a claim of treaty benefits to the extent that those certifications separately meet the requirements for late certifications.

The Treasury Department and the IRS also intend to issue proposed regulations that would amend the final regulations that relate to withholding under section 1446(a) to provide the same allowance for late certifications that are received by nominees treated as withholding agents under §1.1446-4 on PTP distributions subject to section 1446(a).

The Treasury Department and the IRS have received requests for clarity on the application of section 1446(f) to transactions described by requestors as short sales of PTP interests (PTP shorts). In a PTP short, a taxpayer obtains a PTP interest from a third party (original PTP interest owner), subject to an obligation to deliver an identical PTP interest to the original PTP interest owner in the future. The taxpayer immediately sells the PTP interest to an unrelated market participant for cash (sale to market). To satisfy its obligation to deliver an identical PTP interest to the original PTP interest owner, the taxpayer may buy a replacement PTP interest and deliver it to the original PTP interest owner. As an economic matter, the taxpayer will profit from the transaction if the value of the PTP interest has declined during the term of the PTP short. Alternatively, the taxpayer may instead deliver a PTP interest that it holds at that time to the original PTP interest owner. In the latter case, the taxpayer may have owned the PTP interest when it enters into the PTP short, or it may have acquired the PTP interest during the term of the PTP short. Taxpayers typically carry out these transactions through a broker, who has the legal relationship with both the taxpayer and the original PTP interest owner.

Taxpayers and other stakeholders have requested that guidance be issued to the effect that no withholding applies to PTP shorts. In response, the Treasury Department and the IRS intend to issue proposed regulations that would amend the final regulations to provide an exception to withholding under section 1446(f) on a PTP short (PTP short exception). The PTP short exception would apply to a PTP short effected by a broker on behalf of a taxpayer that obtained the PTP interest from another party (including the broker or a customer of the broker) for sale to market. No withholding would be required on the sale to market of the PTP interest or on the later transfer by the taxpayer of an identical PTP interest to the original PTP interest owner. The proposed regulations would not address the treatment of the PTP short to the original PTP interest owner.

The Treasury Department and the IRS have determined that the PTP short exception should not apply in certain situations in which there may be gain arising from the PTP short that is subject to section 864(c)(8). Therefore, the PTP short exception would not apply if on the date that the sale to market is entered on the books of the broker (i) the taxpayer holds substantially identical property (within the meaning of section 1233) in an account with the broker or (ii) the broker has actual knowledge that the taxpayer holds substantially identical property in an account with another broker. In such cases, the taxpayer may realize gain from delivery of such substantially identical property to the original PTP interest owner or from a constructive sale under section 1259. Because any such gain would be attributable, in whole or in part, to the taxpayer’s ownership in the substantially identical PTP interest, it is inappropriate to provide relief from withholding under section 1446(f). This limitation to the PTP short exception would apply regardless of whether the taxpayer delivers to the original PTP interest owner the substantially identical PTP interest held on the date of the sale to market or a PTP interest acquired during the term of the PTP short.

The proposed regulations would also clarify existing guidance to brokers regarding withholding and reporting associated with PTP shorts that do not qualify for the PTP short exception. The date of transfer for purposes of withholding and reporting on a PTP short under §1.1446(f)-4 would be the date on which the sale to market of the PTP interest is entered on the books of the broker, but the broker would not be required to satisfy its withholding liability until payment is made. This would allow a broker to withhold from the proceeds of the sale to market when it knows that the PTP short exception does not apply because it holds (or knows that another broker holds) substantially identical property for the taxpayer at the time of such sale. A broker would be required to deposit any withheld amounts with the IRS in accordance with §1.6302-2.

The proposed regulations would apply to transfers or distributions made on or after January 1, 2023. Before the promulgation of the proposed regulations, a broker required to withhold under section 1446(a) or 1446(f) may rely on the provisions of this Notice regarding the proposed regulations described in sections III through V. A QI applying the provisions of the QI agreement (as in effect on January 1, 2023) may also rely on the provisions of this Notice regarding the proposed regulations described in sections III through V.

The principal author of this notice is Subin Seth of the Office of Associate Chief Counsel (International). For further information regarding this notice, contact Mr. Seth at (202) 317-5003 (not a toll-free number).

Section 80603 of the Infrastructure Investment and Jobs Act, Pub. L. No. 117-58, 135 Stat. 429, 1339 (2021) (Infrastructure Act) clarifies and expands the rules regarding the reporting of information on digital assets by brokers under sections 6045 and 6045A of the Internal Revenue Code. This announcement provides transitional guidance under sections 6045 and 6045A with respect to the reporting of information on digital assets.

Section 6045(a) provides that every person doing business as a broker shall make a return showing the name and address of each customer, with such details regarding gross proceeds and such other information as the Secretary of the Treasury or her delegate (Secretary) may by forms or regulations require with respect to such business. These rules apply when required by the Secretary and in accordance with regulations prescribed by the Secretary. Other subsections of section 6045 require a broker to furnish a payee statement to customers, define the term “broker,” require basis reporting for specified securities that are also covered securities, and provide other applicable rules.

A person doing business as a broker is required to file information returns and furnish payee statements in accordance with existing regulations under section 6045 for each customer for whom the broker has sold stocks, certain commodities, and other specified categories of assets in exchange for cash. The information returns and payee statements are required to show each customer’s name and address, details regarding gross proceeds, the adjusted basis of certain categories of assets sold, and certain other information. Brokers must furnish payee statements to customers by February 15 of the year following the calendar year of the sale. Brokers must file information returns on Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, with the Internal Revenue Service (IRS) by February 28 (or March 31 if filing electronically) of the year following the calendar year of the sale. The existing regulations under section 6045 do not specifically address the extent to which these requirements apply to sales or exchanges of digital assets and do not specifically include digital assets as a specified security subject to basis reporting.

Section 6045A(a) generally requires a broker who transfers to another broker securities that are covered securities in the hands of the transferring broker to furnish to the receiving broker a written statement setting forth information required by the regulations. The existing regulations under section 6045A require transfer statements to include specified information about the customer, the brokers involved, and the original acquisition information about the covered security. Brokers must furnish the transfer statements required under section 6045A(a) not later than 15 days after the date of the transfer. Section 6045A(c). The existing regulations under section 6045A do not specifically address the extent to which these requirements apply to transfers of digital assets.

Section 80603 clarifies and expands the rules regarding how digital assets should be reported by brokers under sections 6045 and 6045A to improve tax administration and tax compliance with respect to trading and investing in digital assets. First, section 80603(a) clarifies the definition of broker in section 6045(c)(1) to include any person who, for consideration, is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person. Second, section 80603(b)(1) modifies the definition of specified securities subject to basis reporting under section 6045(g) to explicitly include digital assets and to provide that these specified securities are treated as covered securities for purposes of basis reporting if they are acquired on or after January 1, 2023. Third, section 80603(b)(1)(B) defines a digital asset to mean any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary, except as otherwise provided by the Secretary. Fourth, section 80603(b)(2) clarifies that transfer statement reporting under section 6045A(a) applies to transfers between brokers of covered securities that are digital assets and adds a new information reporting provision for certain transfers under section 6045A(d). Under this new provision, brokers must report to the IRS transfers during a calendar year of digital assets that are covered securities, provided the transfer is not part of a sale or exchange and is not to an account maintained by a person that the broker knows or has reason to know is also a broker. Finally, section 80603(c) provides that these amendments apply to returns required to be filed, and statements required to be furnished, after December 31, 2023.

The Department of the Treasury (Treasury Department) and the IRS intend to implement section 80603 of the Infrastructure Act by publishing regulations specifically addressing the application of sections 6045 and 6045A to digital assets and providing forms and instructions for broker reporting. A notice of proposed rulemaking will be published that sets forth proposed regulatory text, explains the proposed rules, solicits public comments, and announces a public hearing. This process will allow the Treasury Department and the IRS to accept comments from affected taxpayers, industries, and other interested parties and enable the public to meaningfully participate in the regulatory process. After careful consideration of all public comments received and all testimony at the public hearing, final regulations will be published.

Until the Treasury Department and the IRS issue new final regulations pursuant to section 80603 under section 6045, a broker may report gross proceeds and basis as required under existing law and regulations as of December 23, 2022. In addition, until the Treasury Department and the IRS issue new final regulations pursuant to section 80603 under section 6045A, a broker may furnish statements on transfers of covered securities as required under existing law and regulations as of December 23, 2022. Brokers will not be required to report or furnish additional information with respect to dispositions of digital assets under section 6045, or issue additional statements under section 6045A, or file any returns with the IRS on transfers of digital assets under section 6045A(d) until those new final regulations under sections 6045 and 6045A are issued.

The principal author of this announcement is the Office of the Associate Chief Counsel (Procedure & Administration).