CONTENTS Subpart A.-Tax Conventions United States-France Income Tax Tax Convention (Rev. Rul. 75-118) 390 Subpart B.-Legislation and Related Public Law 89-487 (S. 1160) 391 Conference Report No. 93-1200 420 Subpart A.-Tax Conventions United States-France Income Tax Convention 1968-2 C.B. 691 (Also Part I, Section 882; 1.882-1.) French convention; concert tour in U.S.; fixed base. A citizen and resident of France who entered into a contract with an unrelated domestic corporation to represent him in connection with his U.S. concert appearances does not maintain a fixed base in the U.S. as that term is used in Article 14 of the U.S.France Income Tax Convention. Rev. Rul. 75-131 Advice has been requested whether, under the circumstances described below, the taxpayer maintains a "fixed base" in the United States as that term is used in Article 14(2)(b) of the United States-France Income Tax Convention (the Convention) 1968-2 C.B. 691. A, an artist and a citizen and resident of France, contracted with X, an unrelated domestic corporation, to be his representative in connection with his concert appearance in the United States for the years 1971 through 1974. X represents many performers for their United States tours. A's 1974 tour required him to be in the United States for a total of 36 days. During 1974 X's office was the only address in the United States to which inquiries regarding A's concerts could be made. Under the terms of the existing contract X has the duty to further A's career through the promotion of his United States tour and the exclusive power to execute contracts for A's services. X receives a percentage of A's earnings for performing these functions. Article 14(2) of the Convention provides, in part, that income derived by a resident of a Contracting State in respect of independent activities. performed in the other Contracting State shall not be taxable in such other State if: (1) the recipient is present in such other State for a period or periods not exceeding in the aggregate 183 days in the fiscal year concerned, and (2) the recipient does not maintain a fixed base in the other State for a period or periods exceeding in the aggregate 183 days in such year. The term "fixed base" is not defined by the Convention. The report of the Senate Foreign Relations Committee on the Convention states that the "fixed base" concept is not found in other United States tax conventions but rather is derived from the O.E.C.D. (Organization For Economic Cooperation and Development) model convention. See S. Exec. Rep. No. 5, (Tax Conventions with Brazil, France, and the Philippines) 90th Cong., 2d. Sess., 35 (1968), 1968-2 C.B. 881, 893. A commentary on Article 14, of the O.E.C.D. model convention concerning the taxation of independent personal services states as follows: The provisions of Article 14 are similar to those customarily adopted for income from industrial or commercial activities. Nevertheless it was thought that the concept of permanent establishment should be reserved for commercial and industrial activities. The term "fixed base", which is to be found in various Conventions, has therefore been used. It has not been thought appropriate to try to define it, but it would cover, for instance, a physician's consulting room or the office of an architect or a lawyer. A person performing professional services would probably not as a rule have premises of this kind in any other State than that of his residence. But if there is in another State a centre of activity of a fixed or permanent character, then that State should be entitled to tax the person's activities. See Draft Double Taxation Convention on Income and Capital, Report of the O.E.C.D. Fiscal Committee 130, (1963). Therefore, since in the convention the provisions of Article 14 are similar to the Article involving industrial and commercial activities and since the latter Article involves the use of the concept of a permanent establishment, reference may be made to the definition of permanent establishment, which is found in Article 4 of the Convention, in order to define the term "fixed base." Article 4(5) of the Convention which discusses the term "permanent establishment" provides that a resident of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because such resident carries on business in that other State through a broker, general commission agent, or any other agent of an independent status, where such persons are acting in the ordinary course of their business. Accordingly, it is held that the activities of X do not establish a fixed base of A in the United States as that term is used in Article 14 of the Convention. United States-Japan Income Tax Convention 1973-1 C.B. 630 Japan; National Institutes of Health fellowship. A U.S. nonresident alien Japanese scientist granted a fellowship to perform research at the National Institutes of Health, which do not maintain a regular faculty or established curriculum, have no organized student body, and do not have student education as their primary purpose, is not exempt from U.S. income tax by reason of Article 19 of the U.S.Japan Income Tax Convention. Rev. Rul. 75-10 Advice has been requested whether, under the circumstances described below, the National Institutes of Health (NIH) qualifies as an "accredited educational institution" under Article 19 of the United States-Japan Income Tax Convention, 1973-1 C.B. 630, (entered into force on July 9, 1972). A Japanese scientist, a nonresident alien individual of the United States, is appointed to a fellowship at NIH to perform research at NIH pursuant to the authority of 42 CFR part 61 subpart B (1973) of the Public Health Regulations. Section 61.31 of these regulations provides for the establishment of service fellowships in the Public Health Service, the designation of persons to receive such fellowships, and the appointment of service fellows under authority of 42 U.S.C. section 209(g) (1969). Section 61.30 (a) of these regulations provides that a service fellow is an employee of the Public Health Service. NIH, an agency of the United States Department of Health, Education, and Welfare, is a focal point for Federal biomedical research and support of research. NIH conducts biomedical research in its own laboratories, provides grants to nonprofit organizations and institutions for research and for medical education, provides grants for the training of research investigators, and supports biomedical communications through programs and activities of the National Library of Medicine. Although NIH trains researchers in its own facilities, the primary purpose of NIH is to conduct and promote research. The division of NIH that offers the service fellowships is the Fogarty International Center (Center). The Center invites distinguished, talented, and promising scientists at all career levels to NIH for an interchange of scientific information and training. The purpose of the fellowship programs is to broaden the utility of the physical facilities and intellectual environment of NIH as a natural research source and to strengthen the mutually productive scientific centers throughout the world and NIH. Neither NIH nor the Center offers structured courses or training programs, maintains a regular faculty or curriculum, has an organized body of students, gives course credit, or awards degrees. Article 19 of the Convention provides that an individual, who is a resident of a Contracting State at the beginning of his visit to the other Contracting State, or who was, immediately before receiving the invitations. referred to below, exempt from tax in the other Contracting State under paragraph (1)(a) of Article 20 of the Convention, and who at the invitation of the Government of that other Contracting State or of a university or other accredited educational institution sitaccredited educational institution situated in the other Contracting State, is temporarily present in that other Contracting State for the primary purpose of teaching or engaging in research, or both, at a university or other accredited educational institution shall be exempt from tax by that other Contracting State on his income from personal services for teaching or research at such university or educational institution, for a period not exceeding two years from the date of his arrival or the date he completed the study, training, or research in that other Contracting State with respect to which the exemption in paragraph (1) (a) of Article 20 applied. The term "accredited educational institution" is not defined in the Convention. However, Article 2(2) of the Convention provides that any term used in this convention and not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the tax laws of that Contracting State. Although the term "accredited educational institution" is not defined in the Internal Revenue Code of 1954 or the regulations thereunder, the term "educational institution" is defined. Thus, the term "educational institution" is interpreted as this term is defined in section 151 (e) (4) of the Code and section. 1.151-3(c) of the Income Tax Regulations. See Rev. Rul. 70-196, 1970-1 C.B. 359, which interprets the term "educational institution" in Article XI of the United States-Japan Income Tax Convention of 1954 as that term is defined in section 151(e)(4) and section 1.151-3(c). Also see Rev. Rul. 74-484, 1974-2 C.B. 342. Section 151(e) (4) of the Code and section. 1.151-3(c) of the regulations define the term "educational institution" to mean a school maintaining a regular faculty and established curriculum, and having an organized body of students in attendance. It includes primary and secondary schools, colleges, universities, normal schools, technical schools, mechanical schools, and similar institutions, but does not include noneducational institutions, on-the-job training, correspondence schools, night schools, and so forth. Rev. Rul. 68-604, 1968-2 C.B. 63, holds that to qualify as an educational institution, as defined in section 151 (e) (4), the primary purpose of an institution or division thereof must be educating students. Since neither NIH nor the Center maintains a regular faculty or established curriculum, has an organized body of students, or has a primary purpose of educating students, neither NIH nor the Center is an "educational institution" as defined in section 151(e) (4) of the Code and section 1.151-3(c) of the regulations. Accordingly, neither NIH nor the Center is an "accredited educational institution" within the meaning of the term as used in Article 19 of the United States-Japan Income Tax Convention. United States-Netherlands Income T.D. 5778, 1950-1 C.B. 92 and United Advice has been requested whether, under the circumstances described below, a dividend paid by a United States subsidiary corporation to its Netherlands parent corporation is subject to the reduced rate of tax of 5 percent provided by Article VII(1) (b) of the Income Tax Convention between the United States and the Netherlands (the "Convention"), T.D. 5778, 1950-1 C.B. 92, and United States-Netherlands Supplementary In come Tax Convention, 1967-2 C.B. 472. S2 is a domestic corporation all of whose stock is owned by S1, a corporation organized under the laws of the Netherlands. P, a Netherlands corporation, owns all of the stock of S1. S1 was organized in 1947 and is a holding company holding the stock of three United States corporations including S2 and numerous foreign corporations. $1 does not have a permanent establishment in the United States. $1 acquired the stock of S2 in 1965 as a partial liquidation distribution from a Canadian subsidiary of P. This liquidation was effected upon a belief that Canada might amend its income tax law in a way that the Canadian corporation would be taxed on dividends received from S2 and taxed on capital gain arising from a later disposition of the S2 stock. S1 has complete dominion and control over dividends which it receives from S2 and is under no obligation to transfer such dividends to P. S2 had gross income from manufacturing in 1973 and in each year since its incorporation. However, such gross income has included neither interest nor dividend income. S2 paid a dividend to $1 on December 1, 1973. Article VII of the Convention provides, in part, that dividends paid by a United States corporation to a Netherlands corporation shall be subject to tax by the United States at a rate not exceeding 5 percent if (1) during the part of the taxable year preceding payment of the dividend and during the whole of the prior taxable year the Netherlands corporation owned at least 25 percent of the voting stock of the United States corporation; (2) not more than 25 percent of the gross income of the United States corporation for such year consisted of interest and dividends; and (3) the shares of stock with respect to which the dividends are paid are not effectively connected with any permanent establishment that the Netherlands corporation has in the United States. Accordingly, the dividend paid in 1973 by S2 to S1 falls within the scope of Article VII (1) (b) of the Convention and is subject to the reduced rate of tax of 5 percent. United States-Netherlands T.D. 5778, 1950-1 C.B. 92, 505.112: Dividends and Interest Paid by a Netherlands Corporation. Whether dividends and interest paid by a Netherlands Antilles corporation that is a limited partner in a United States limited partnership are exempt from United States taxation under Article XII of the Convention. See Rev. Rul. 75-23, page 290. Subpart B.-Legislation and Related Committee Reports Public Law 89-487 An Act to amend section 3 of the Administrative Procedure Act, chapter 324, of the Act of June 11, 1946 (60 Stat. 238), to clarify and protect the right of the public to information, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 3, chapter 324, of the Act of June 11, 1946 (60 Stat. 238), is amended to read as follows: "Sec. 3. Every agency shall make available to the public the following information: "(a) PUBLICATION in the FEDERAL REGISTER.-Every agency shall separately state and currently publish in the Federal Register for the guidance of the public (A) descriptions of its central and field organization and the established places at which, the officers from whom, and the methods whereby, the public may secure information, make submittals or requests, or obtain decisions; (B) statements of the 1 Senate Report No. 813, page 392, House Report No. 1497 is not published. general course and method by which its functions are channeled and determined, including the nature and requirements of all formal and informal procedures available; (C) rules of procedure, descriptions of forms available or the places at which forms may be obtained, and instructions as to the scope and contents of all papers, reports, or examinations; (D) substantive rules of general applicability adopted as authorized by law, and statements of general policy or interpretations of general applicability formulated and adopted by the agency; and (E) every amendment, revision, or repeal of the foregoing. Except to the extent that a person has actual and timely notice of the terms thereof; no person shall in any manner be required to resort to, or be adversely affected by any matter required to be published in the Federal Register and not so published. For purposes of this subsection, matter which is reasonably available to the class of persons affected thereby shall be deemed published in the Federal Register when incorporated by reference therein with the approval of the Director of the Federal Register. "(b) AGENCY OPINIONS AND ORDERS.-Every agency shall, in accordance with published rules, make available for public inspection and copying (A) all final opinions (including concurring and dissenting opinions) and all orders made in the adjudication of cases, (B) those statements of policy and interpretations which have been adopted by the agency and are not published in the Federal Register, and (C) administrative staff manuals and instructions to staff that affect any member of the public, unless such materials are promptly published and copies offered for sale. To the extent required to prevent a clearly unwarranted invasion of personal privacy, an agency may delete identifying details when it makes available or publishes an opinion, statement of policy, interpretation, or staff manual or instruction: Provided, That in every case the justification for |