CCA 200919045: Exempt Belgian social security required no treaty disclosure

Plain-English summary

Chief Counsel first questioned whether the taxpayers' Belgian social-security payments were actually exempt from U.S. tax under the U.S.-Belgium treaty's saving clause and Article 17. It noted that the cited treaty provisions applied differently depending on the payment's source, the recipient's residence, and citizenship. If the income was exempt, the regulations did not require taxpayers claiming treaty-reduced or treaty-modified taxation of pensions or social security to disclose that position on the year's return. On that assumption, the taxpayers did not need to attach Form 8833 or report the Belgian social-security payments as income on Form 1040.

Ruling snapshot

• Question: If Belgian social-security income was exempt under the treaty, did the taxpayers need to disclose the treaty position or report the income?
• Outcome: Advice given: no Form 8833 or income reporting was required if the treaty exemption applied, but the exemption itself needed confirmation.
• Key authorities: Treas. Reg. § 301.6114-1(c)(1)(iii); U.S.-Belgium income tax treaty arts. 1(5), 17(2), 17(7).

Full text (IRS public release)

ID: CCA-326124-09 Number: 200919045
Release Date: 5/8/2009
Office: ------------------
UILC: 6013.03-04

From: ---------------------
Sent: 3/26/2009
To: ------------------
Cc: ---------------------
Subject: U.S.-Belgian Treaty Question

-------- asked me to look into your question. First, are you sure the social security payments will be exempt from tax if the TPs make this election? It looks like only paragraph 7 of Article 17 is an exception to the saving clause under paragraph 5 of Article 1. Paragraph 2 of Article 17 applies solely to payments from the United States to a Belgian resident, and payments from Belgium to a U.S. resident or Belgian resident who is also a U.S. citizen.

If the social security income in question is exempt from U.S. income tax, Treas. Reg. sec. 301.6114- 1(c)(1)(iii) provides that taxpayers taking the position that a U.S. treaty reduces or modifies the taxation of income derived from public or private pensions or social security are not required to disclose this position on their income tax return for the year in which the distributions are made. Accordingly, your TPs would not need to attach a Form 8833 to their return, or otherwise report the Belgian social security they received as income on Form 1040.

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