Bulletin No. 2008-45 November 10, 2008 HIGHLIGHTS OF THIS … · 2012. 7. 17. · Bulletin No....

Bulletin No. 2008-45November 10, 2008

HIGHLIGHTSOF THIS ISSUEThese synopses are intended only as aids to the reader inidentifying the subject matter covered. They may not berelied upon as authoritative interpretations.

SPECIAL ANNOUNCEMENT

Announcement 2008–106, page 1137.The announcement for the 2009 IRS Individual e-file PartnershipProgram solicits applications from potential partners for par-ticipation in the program. The partnership opportunities are aresult of RRA 98 which authorized the IRS Commissioner to pro-mote the benefits of and encourage the use of e-file productsand services through partnerships with various entities that of-fer low-cost tax preparation and electronic filing of individualincome tax returns for qualified taxpayers. Those applicantsthat are accepted into the program will have a link(s) and offerdescription(s) for their products and services posted to IRS.gov(Partners Page).

INCOME TAX

Rev. Rul. 2008–50, page 1098.Federal rates; adjusted federal rates; adjusted federallong-term rate and the long-term exempt rate. For pur-poses of sections 382, 642, 1274, 1288, and other sectionsof the Code, tables set forth the rates for November 2008.

REG–142339–05, page 1116.Proposed regulations under section 45D of the Code relateto how an entity serving certain targeted populations undersection 45D(e)(2) can meet the requirements to be a qualifiedactive low-income community business. A public hearing isscheduled for January 22, 2009.

REG–107318–08, page 1131.Proposed regulations provide that the notice required undersection 411(a)(11) of the Code to be provided to a participant

of his or her right, if any, to defer receipt of an immediatelydistributable benefit must also describe the consequences offailing to defer receipt of the distribution. The regulations alsoprovide that the applicable election period for waiving the qual-ified joint and survivor annuity form of benefit under section417 is the 180-day period ending on the annuity starting date,and that a notice required to be provided under section 402(f),411(a)(11), or 417 may be provided to a participant as muchas 180 days before the annuity starting date (or, for a noticeunder section 402(f), the distribution date). A public hearing isscheduled for February 20, 2009.

Rev. Proc. 2008–66, page 1107.Cost-of-living adjustments for 2009. This procedure setsforth the cost-of-living adjustments to certain items for 2009as required under various provisions of the Code and Serviceguidance.

EMPLOYEE PLANS

REG–107318–08, page 1131.Proposed regulations provide that the notice required undersection 411(a)(11) of the Code to be provided to a participantof his or her right, if any, to defer receipt of an immediatelydistributable benefit must also describe the consequences offailing to defer receipt of the distribution. The regulations alsoprovide that the applicable election period for waiving the qual-ified joint and survivor annuity form of benefit under section417 is the 180-day period ending on the annuity starting date,and that a notice required to be provided under section 402(f),411(a)(11), or 417 may be provided to a participant as muchas 180 days before the annuity starting date (or, for a noticeunder section 402(f), the distribution date). A public hearing isscheduled for February 20, 2009.

(Continued on the next page)

Finding Lists begin on page ii.

Notice 2008–102, page 1106.2009 cost-of-living adjustments; retirement plans, etc.This notice sets forth certain cost-of-living adjustments effec-tive January 1, 2009, applicable to the dollar limits on bene-fits and contributions under qualified retirement plans. Otherlimitations applicable to deferred compensation plans are alsoaffected by these adjustments. This notice also contains cost-of-living adjustments for several pension-related amounts in re-stating the data in News Release IR–2008–118 issued October16, 2008.

EXEMPT ORGANIZATIONS

Announcement 2008–104, page 1136.A list is provided of organizations now classified as private foun-dations.

ESTATE TAX


GIFT TAX


EXCISE TAX


ADMINISTRATIVE

T.D. 9425, page 1100.REG–160868–04, page 1115.Temporary and proposed regulations under section 6707Aof the Code provide guidance for taxpayers against whom apenalty is assessed and who may request rescission of thepenalty from the Commissioner if the violation is with respectto a reportable transaction other than a listed transaction.Notice 2005–11 superseded.

REG–128841–07, page 1124.Proposed regulations under section 147 of the Code providediscreet new rules under the public approval requirement fortax-exempt bonds and also update certain provisions in existingregulations relating to the public approval requirement. A publichearing is scheduled for January 26, 2009.


November 10, 2008 2008–45 I.R.B.

The IRS MissionProvide America’s taxpayers top quality service by helping themunderstand and meet their tax responsibilities and by applying

the tax law with integrity and fairness to all.

IntroductionThe Internal Revenue Bulletin is the authoritative instrument ofthe Commissioner of Internal Revenue for announcing officialrulings and procedures of the Internal Revenue Service and forpublishing Treasury Decisions, Executive Orders, Tax Conven-tions, legislation, court decisions, and other items of generalinterest. It is published weekly and may be obtained from theSuperintendent of Documents on a subscription basis. Bulletincontents are compiled semiannually into Cumulative Bulletins,which are sold on a single-copy basis.

It is the policy of the Service to publish in the Bulletin all sub-stantive rulings necessary to promote a uniform application ofthe tax laws, including all rulings that supersede, revoke, mod-ify, or amend any of those previously published in the Bulletin.All published rulings apply retroactively unless otherwise indi-cated. Procedures relating solely to matters of internal man-agement are not published; however, statements of internalpractices and procedures that affect the rights and duties oftaxpayers are published.

Revenue rulings represent the conclusions of the Service on theapplication of the law to the pivotal facts stated in the revenueruling. In those based on positions taken in rulings to taxpayersor technical advice to Service field offices, identifying detailsand information of a confidential nature are deleted to preventunwarranted invasions of privacy and to comply with statutoryrequirements.

Rulings and procedures reported in the Bulletin do not have theforce and effect of Treasury Department Regulations, but theymay be used as precedents. Unpublished rulings will not berelied on, used, or cited as precedents by Service personnel inthe disposition of other cases. In applying published rulings andprocedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,and Service personnel and others concerned are cautionedagainst reaching the same conclusions in other cases unlessthe facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.This part includes rulings and decisions based on provisions ofthe Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.This part is divided into two subparts as follows: Subpart A,Tax Conventions and Other Related Items, and Subpart B, Leg-islation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.To the extent practicable, pertinent cross references to thesesubjects are contained in the other Parts and Subparts. Alsoincluded in this part are Bank Secrecy Act Administrative Rul-ings. Bank Secrecy Act Administrative Rulings are issued bythe Department of the Treasury’s Office of the Assistant Secre-tary (Enforcement).

Part IV.—Items of General Interest.This part includes notices of proposed rulemakings, disbar-ment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative indexfor the matters published during the preceding months. Thesemonthly indexes are cumulated on a semiannual basis, and arepublished in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

2008–45 I.R.B. November 10, 2008

November 10, 2008 2008–45 I.R.B.

Place missing child here.

Part I. Rulings and Decisions Under the Internal Revenue Codeof 1986Section 1.—Tax Imposed

The Service provides inflation adjustments to thetax rate tables for individuals, trusts, and estates fortaxable years beginning in 2009. In addition, theamounts of certain reductions allowed against theunearned income of minor children in computingthe “kiddie tax” are adjusted. Also adjusted are theamounts used to determine whether a parent mayelect to report the “kiddie tax” on the parent’s return.See Rev. Proc. 2008-66, page 1107.

Section 23.—AdoptionExpenses

The Service provides inflation adjustments to theadoption credit allowed for the adoption of a child fortaxable years beginning in 2009. The Service alsoprovides inflation adjustments to the value used incalculating the modified adjusted gross income lim-itations used to determine the amount of adoptioncredit that is allowed in taxable years beginning in2009. See Rev. Proc. 2008-66, page 1107.

Section 24.—Child TaxCredit

The Service provides inflation adjustments for thevalue used in determining the amount of the creditthat may be refundable for taxable years beginning in2009. See Rev. Proc. 2008-66, page 1107.

Section 25A.—Hope andLifetime Learning Credits

For taxable years beginning in 2009, the Ser-vice provides inflation adjustments for the amountof qualified tuition and related expenses that aretaken into account in determining the amount of theHope Scholarship Credit, and for the amount of ataxpayer’s modified adjusted gross income that istaken into account in determining the reduction inthe amount of the Hope Scholarship and LifetimeLearning Credits otherwise available. See Rev. Proc.2008-66, page 1107.

Section 32.—EarnedIncome

The Service provides inflation adjustments to thelimitations on the earned income credit for taxableyears beginning in 2009. See Rev. Proc. 2008-66,page 1107.

Section 42.—Low-IncomeHousing Credit

The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the monthof November 2008. See Rev. Rul. 2008-50, page1098.

The Service provides inflation adjustments to theamounts used to calculate the State housing creditceiling used in determining the low-income housingcredit for calendar year 2009. See Rev. Proc. 2008-66, page 1107.

Section 45A.—IndianEmployment Credit

As a result of cost-of-living adjustments, the limi-tation on wages under section 45A regarding individ-uals eligible for the Indian employment credit, whichwas $40,000 for tax years beginning in 2008, is in-creased by $45,000 for tax years beginning in 2009.See Notice 2008-102, page 1106.

Section 59.—OtherDefinitions and SpecialRules

The Service provides an inflation adjustment to theexemption amount used in computing the alternativeminimum tax for a minor child subject to the “kiddietax” for taxable years beginning in 2009. See Rev.Proc. 2008-66, page 1107.

Section 62.—AdjustedGross Income Defined

The Service provides inflation adjustments to theamounts an eligible employer may pay in calendaryear 2009 to certain welders and heavy equipmentmechanics for rig-related expenses that are deemedsubstantiated under an accountable plan if paid in ac-cordance with Rev. Proc. 2002–41, 2002–1 C.B.1098. See Rev. Proc. 2008-66, page 1107.

Section 63.—TaxableIncome Defined

The Service provides inflation adjustments to thestandard deduction amounts (including the limitationin the case of certain dependents, and the additionalstandard deduction for the aged or blind) for taxableyears beginning in 2009. See Rev. Proc. 2008-66,page 1107.

Section 68.—OverallLimitation on ItemizedDeductions

The Service provides inflation adjustments to theoverall limitation on itemized deductions for taxableyears beginning in 2009. See Rev. Proc. 2008-66,page 1107.

Section 132.—CertainFringe Benefits

The Service provides inflation adjustments to thelimitations on the exclusion of income for a qualifiedtransportation fringe benefit for taxable years begin-ning in 2009. See Rev. Proc. 2008-66, page 1107.

Section 135.—IncomeFrom United States SavingsBonds Used to Pay HigherEducation Tuition and Fees

The Service provides inflation adjustments to thelimitation on the exclusion of income from UnitedStates savings bonds for taxpayers who pay qualifiedhigher education expenses for taxable years begin-ning in 2009. See Rev. Proc. 2008-66, page 1107.

Section 137.—AdoptionAssistance Programs

The Service provides inflation adjustments to themaximum amount that can be excluded from an em-ployee’s gross income in connection with a qualifiedadoption assistance program for taxable years begin-ning in 2009. The Service also provides inflation ad-justments to the amount used to calculate the modi-fied adjusted gross income limitations used to deter-mine the amount that can be excluded from an em-ployee’s gross income for taxable years beginning in2009. See Rev. Proc. 2008-66, page 1107.

Section 146.—Volume CapThe Service provides inflation adjustments to the

amounts used to determine the State ceiling for thevolume cap of private activity bonds for calendar year2009. See Rev. Proc. 2008-66, page 1107.

Section 147.—OtherRequirements Applicable toCertain Private ActivityBonds

The Service provides an inflation adjustment to theloan limit amount on agricultural bonds for first-time

2008–45 I.R.B. 1096 November 10, 2008

farmers for calendar year 2009. See Rev. Proc. 2008-66, page 1107.

Section 148.—Arbitrage26 CFR 1.148–5: Yield and valuation of investments.

The Service provides inflation adjustments for de-termining in the calendar year 2009 whether a bro-ker’s commission or similar fee with respect to theacquisition of a guaranteed investment contract or in-vestments purchased for a yield restricted defeasanceescrow is reasonable. The Service provides an infla-tion adjustment to the computation credit determinedunder section 1.148–3(d)(4) of the proposed IncomeTax Regulations for bond years ending in 2009. SeeRev. Proc. 2008-66, page 1107.

Section 151.—Allowanceof Deductions for PersonalExemptions

The Service provides inflation adjustments to thepersonal exemption and to the threshold amounts ofadjusted gross income above which the exemptionamount phases out for taxable years beginning in2009. See Rev. Proc. 2008-66, page 1107.

Section 170.—Charitable,etc.,Contributions and Gifts

The Service provides inflation adjustments to the“insubstantial benefit” guidelines for calendar year2009. Under the guidelines, a charitable contribu-tion is fully deductible even though the contributor re-ceives “insubstantial benefits” from the charity. SeeRev. Proc. 2008-66, page 1107.

Section 179.—Electionto Expense CertainDepreciable BusinessAssets

The Service provides inflation adjustments to theaggregate cost of section 179 property that a taxpayermay elect to treat as an expense for taxable years be-ginning in 2009. See Rev. Proc. 2008-66, page 1107.

Section 213.—Medical,Dental, etc., Expenses

The Service provides inflation adjustments to thelimitation on the amount of eligible long-term carepremiums includible in the term “medical care” fortaxable years beginning in 2009. See Rev. Proc.2008-66, page 1107.

Section 220.—Archer MSAsThe Service provides inflation adjustments to the

amounts used to determine whether a health plan is

a “high deductible health plan” for purposes of de-termining whether an individual is eligible for a de-duction for cash paid to a medical savings accountfor taxable years beginning in 2009. See Rev. Proc.2008-66, page 1107.

Section 221.—Interest onEducation Loans

The Service provides inflation adjustments to theincome limitations used to determine the allowablededuction for interest on education loans for taxableyears beginning in 2009. See Rev. Proc. 2008-66,page 1107.

Section 280G.—GoldenParachute Payments

Federal short-term, mid-term, and long-term ratesare set forth for the month of November 2008. SeeRev. Rul. 2008-50, page 1098.

Section 382.—Limitationon Net Operating LossCarryforwards and CertainBuilt-In Losses FollowingOwnership Change

The adjusted applicable federal long-term rate isset forth for the month of November 2008. See Rev.Rul. 2008-50, page 1098.

Section 412.—MinimumFunding Standards


Section 415.—Limitationson Benefits andContributions UnderQualified Plans

Certain cost-of-living adjustments effective Jan-uary 1, 2009, applicable to the dollar limitations onbenefits and contributions under qualified retirementplans are set forth. Other limitations applicable to de-ferred compensation plans are also affected by theseadjustments. See Notice 2008-102, page 1106.

Section 467.—CertainPayments for the Use ofProperty or Services

The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month

of November 2008. See Rev. Rul. 2008-50, page1098.

Section 468.—SpecialRules for Mining and SolidWaste Reclamation andClosing Costs


Section 482.—Allocationof Income and DeductionsAmong Taxpayers


Section 483.—Interest onCertain Deferred Payments


Section 512.—UnrelatedBusiness Taxable Income

The Service provides an inflation adjustment to themaximum amount of annual dues that can be paidto certain agricultural or horticultural organizationswithout any portion being treated as unrelated tradeor business income by reason of any benefits or priv-ileges available to members for taxable years begin-ning in 2009. See Rev. Proc. 2008-66, page 1107.

Section 513.—UnrelatedTrade or Business

The Service provides an inflation adjustment tothe maximum cost of a “low cost article” for tax-able years beginning in 2009. Funds raised througha charity’s distribution of “low cost articles” will notbe treated as unrelated business income to the charity.See Rev. Proc. 2008-66, page 1107.

Section 642.—SpecialRules for Credits andDeductions


November 10, 2008 1097 2008–45 I.R.B.

Section 807.—Rules forCertain Reserves


Section 846.—DiscountedUnpaid Losses Defined


Section 877.—Expatriationto Avoid Tax

The Service provides an inflation adjustment tothe amount used for calendar year 2009 to determinewhether an individual’s loss of United States citizen-ship had the avoidance of United States tax as one ofits principal purposes. See Rev. Proc. 2008-66, page1107.

Section 877A.—TaxResponsibilities ofExpatriation

The Service provides an inflation adjustment to theamount that reduces the amount that would be in-cludible in the gross income of a covered expatriate

for taxable years beginning in 2009. See Rev. Proc.2008-66, page 1107.

Section 911.—Citizens orResidents of the UnitedStates Living Abroad

The Service provides an inflation adjustment tothe amount of foreign earned income that may be ex-cluded from gross income for taxable years beginningin 2009. See Rev. Proc. 2008-66, page 1107.

Section 1274.—Determi-nation of Issue Price in theCase of Certain Debt Instru-ments Issued for Property(Also Sections 42, 280G, 382, 412, 467, 468, 482,483, 642, 807, 846, 1288, 7520, 7872.)

Federal rates; adjusted federal rates;adjusted federal long-term rate and thelong-term exempt rate. For purposes ofsections 382, 642, 1274, 1288, and othersections of the Code, tables set forth therates for November 2008.

Rev. Rul. 2008–50

This revenue ruling provides variousprescribed rates for federal income taxpurposes for November 2008 (the current

month). Table 1 contains the short-term,mid-term, and long-term applicable fed-eral rates (AFR) for the current monthfor purposes of section 1274(d) of theInternal Revenue Code. Table 2 containsthe short-term, mid-term, and long-termadjusted applicable federal rates (adjustedAFR) for the current month for purposesof section 1288(b). Table 3 sets forth theadjusted federal long-term rate and thelong-term tax-exempt rate described insection 382(f). Table 4 contains the ap-propriate percentages for determining thelow-income housing credit described insection 42(b)(1) for buildings placed inservice during the current month. How-ever, under section 42(b)(2), the applicablepercentage for non-federally subsidizednew buildings placed in service after July30, 2008, and before December 31, 2013,shall not be less than 9%. Finally, Table5 contains the federal rate for determiningthe present value of an annuity, an interestfor life or for a term of years, or a remain-der or a reversionary interest for purposesof section 7520.

REV. RUL. 2008–50 TABLE 1

Applicable Federal Rates (AFR) for November 2008

Period for Compounding

Annual Semiannual Quarterly Monthly

Short-term

AFR 1.63% 1.62% 1.62% 1.61%110% AFR 1.79% 1.78% 1.78% 1.77%120% AFR 1.95% 1.94% 1.94% 1.93%130% AFR 2.12% 2.11% 2.10% 2.10%

Mid-term

AFR 2.97% 2.95% 2.94% 2.93%110% AFR 3.28% 3.25% 3.24% 3.23%120% AFR 3.57% 3.54% 3.52% 3.51%130% AFR 3.88% 3.84% 3.82% 3.81%150% AFR 4.48% 4.43% 4.41% 4.39%175% AFR 5.23% 5.16% 5.13% 5.11%

Long-term

AFR 4.24% 4.20% 4.18% 4.16%110% AFR 4.67% 4.62% 4.59% 4.58%120% AFR 5.10% 5.04% 5.01% 4.99%130% AFR 5.53% 5.46% 5.42% 5.40%

2008–45 I.R.B. 1098 November 10, 2008


Adjusted AFR for November 2008

Period for Compounding

Annual Semiannual Quarterly Monthly

Short-term adjustedAFR

2.20% 2.19% 2.18% 2.18%

Mid-term adjusted AFR 3.35% 3.32% 3.31% 3.30%

Long-term adjustedAFR

4.94% 4.88% 4.85% 4.83%


Rates Under Section 382 for November 2008

Adjusted federal long-term rate for the current month 4.94%

Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjustedfederal long-term rates for the current month and the prior two months.) 4.94%


Appropriate Percentages Under Section 42(b)(1) for November 2008

Note: Under Section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July30, 2008, and before December 31, 2013, shall not be less than 9%.

Appropriate percentage for the 70% present value low-income housing credit 7.83%

Appropriate percentage for the 30% present value low-income housing credit 3.36%


Rate Under Section 7520 for November 2008

Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,or a remainder or reversionary interest 3.6%

Section 1288.—Treatmentof Original Issue Discounton Tax-Exempt Obligations


Section 2032A.—Valuationof Certain Farm, etc.,Real Property

The Service provides an inflation adjustment to themaximum amount by which the value of certain farmand other qualified real property included in a dece-dent’s gross estate may be decreased for purposes of

valuing the estate of a decedent dying in calendar year2009. See Rev. Proc. 2008-66, page 1107.

Section 2503.—TaxableGifts

The Service provides an inflation adjustment to theamount of gifts that may be made to a person in acalendar year without including the amount in taxablegifts for calendar year 2009. See Rev. Proc. 2008-66,page 1107.

Section 2523.—Gift toSpouse

The Service provides an inflation adjustment to theamount of gifts that may be made in a calendar yearto a spouse who is not a citizen of the United States

without including the amount in taxable gifts for cal-endar year 2009. See Rev. Proc. 2008-66, page 1107.

Section 4161.—Impositionof Tax

The Service provides an inflation adjustment to theamount of excise tax imposed for calendar year 2009on the first sale by a manufacturer, producer, or im-porter of any shaft of a type used in the manufactureof certain arrows. See Rev. Proc. 2008-66, page1107.

Section 4261.—Impositionof Tax

The Service provides inflation adjustments to theamounts of the excise taxes on passenger air trans-portation beginning or ending in the United States and

November 10, 2008 1099 2008–45 I.R.B.

for each domestic segment of air transportation forcalendar year 2009. See Rev. Proc. 2008-66, page1107.

Section 6033.—Returns byExempt Organizations

The Service provides an inflation adjustment tothe amount of dues certain exempt organizations withnondeductible lobbying expenditures can charge andstill be excepted from reporting requirements for tax-able years beginning in 2009. See Rev. Proc. 2008-66, page 1107.

Section 6039F.—Notice ofLarge Gifts Received FromForeign Persons

The Service provides an inflation adjustment to theamount of gifts received, in a taxable year from for-eign persons, that triggers a reporting requirement fora United States person for taxable years beginning in2009. See Rev. Proc. 2008-66, page 1107.

Section 6323.—Validityand Priority AgainstCertain Persons

The Service provides inflation adjustments for cal-endar year 2009 to (1) the maximum amount of a ca-sual sale of personal property below which a federaltax lien will not be valid against a purchaser of theproperty and (2) the maximum amount of a contractfor the repair or improvement of certain residentialproperty at or below which a federal tax lien will notbe valid against a mechanic’s lienor. See Rev. Proc.2008-66, page 1107.

Section 6334.—PropertyExempt From Levy

The Service provides inflation adjustments to thevalue of certain property exempt from levy (fuel, pro-visions, furniture, household personal effects, armsfor personal use, livestock, poultry, and books andtools of a trade, business, or profession) for calendaryear 2009. See Rev. Proc. 2008-66, page 1107.

Section 6601.—Intereston Underpayment,Nonpayment, or Extensionsof Time for Payment, of Tax

The Service provides an inflation adjustment tothe amount used to determine the amount of interestcharged on a certain portion of the estate tax payablein installments for the estate of a decedent dying incalendar year 2009. See Rev. Proc. 2008-66, page1107.

Section 6707A.—Penaltyfor Failure to IncludeReportable TransactionInformation With Return26 CFR 301.6707A–1T: Failure to include on any re-turn or statement any information required to be dis-closed under section 6011 with respect to a reportabletransaction.

T.D. 9425

DEPARTMENT OF THETREASURYInternal Revenue Service26 CFR Part 301

Section 6707A and the Failureto Include on Any Return orStatement any InformationRequired to be DisclosedUnder Section 6011 WithRespect to a ReportableTransaction

AGENCY: Internal Revenue Service(IRS), Treasury.

ACTION: Temporary regulations.

SUMMARY: This document containstemporary regulations regarding the im-position of penalties under section 6707Aof the Internal Revenue Code (Code) forthe failure to include on any return orstatement any information required tobe disclosed under section 6011 with re-spect to a reportable transaction. The textof the temporary regulations also servesas the text of the proposed regulations(REG–160868–04) set forth in the noticeof proposed rulemaking on this subject inthis issue of the Bulletin.

DATES: Effective Date: These regulationsare effective on September 11, 2008.

Applicability Date: For dates of appli-cability, see §301.6707A–1T(f).

FOR FURTHER INFORMATIONCONTACT: Matthew Cooper, (202)622–4940 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

This document contains amendments to26 CFR part 301 under section 6707A of

the Code. Section 6707A was added to theCode by section 811 of the American JobsCreation Act of 2004, Public Law 108–357(118 Stat. 1418) (AJCA), enacted on Oc-tober 22, 2004. Section 6707A providesa monetary penalty for the failure to in-clude on any return or statement any in-formation required to be disclosed undersection 6011 with respect to a reportabletransaction. The penalty applies to returnsand statements the due date for which is af-ter October 22, 2004, and which were notfiled before that date.

The amount of the section 6707Apenalty for failure to include informationrequired under section 6011 with respectto a reportable transaction, other than alisted transaction, is $10,000 in the caseof an individual, and $50,000 in any othercase. If the failure is with respect to alisted transaction, the penalty is increasedto $100,000 in the case of an individual,and $200,000 in any other case.

Section 6707A(d)(1) grants the Com-missioner authority to rescind all or aportion of any penalty imposed undersection 6707A if (1) the violation relatesto a reportable transaction that is not alisted transaction and (2) rescission of thepenalty would promote compliance withthe requirements of the Code and effectivetax administration. Section 6707A(d)(2)provides that the Commissioner’s determi-nation whether to rescind the penalty maynot be reviewed in any judicial proceed-ing. Rev. Proc. 2007–21, 2007–9 I.R.B.613, provides the procedures to follow torequest rescission of all or any portion ofa penalty assessed under section 6707Awith respect to a reportable transactionother than a listed transaction.

Section 6707A(e) requires a personthat is required to file periodic reportsunder section 13 or 15(d) of the SecuritiesExchange Act of 1934, or consolidatedreports with another person, to disclosein those reports for the periods speci-fied by the Secretary, the requirementto pay the penalties set forth in section6707A(e)(2) (for example, certain penal-ties under section 6662(h) and penaltiesunder sections 6662A(c), 6707A(b)(2)),or 6707A(e)). Rev. Proc. 2005–51,2005–2 C.B. 296, which was amplified byRev. Proc. 2007–25, 2007–12 I.R.B. 761,describes the reports on which the disclo-sures must be made, the information thatmust be disclosed, and the deadlines by

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which persons must make the disclosureson the reports to avoid additional penaltiesunder section 6707A(e). If the personfails to disclose the requirement to pay thepenalties, then section 6707A(e) requiresthat the failure be treated as a failure todisclose a listed transaction to which anadditional section 6707A penalty applies.Because a penalty imposed under section6707A(e) is treated as a penalty imposedwith respect to a listed transaction, thepenalty is not subject to rescission.

To implement the pertinent provisionsof the AJCA, the Treasury Department andthe IRS proposed amendments to the rulesrelating to the disclosure of reportabletransactions by taxpayers under section6011 (see Prop. Treas. Reg. §1.6011–4,REG–103038–05, 2006–2 C.B. 1049) andfinalized those proposed regulations inT.D. 9350, 2007–38 I.R.B. 607 (72 FR43146) published on August 3, 2007.

Sections 1.6011–4(a) and (d) generallyrequire that a taxpayer file a disclosurestatement on Form 8886, “ReportableTransaction Disclosure Statement” (orsuccessor form) for each reportable trans-action in which the taxpayer participated.Section 1.6011–4(e)(1) provides that adisclosure statement for a reportable trans-action must be attached to the taxpayer’stax return for each taxable year for which ataxpayer participates in a reportable trans-action. In addition, a disclosure statementfor a reportable transaction must be at-tached to each amended return that reflectsa taxpayer’s participation in a reportabletransaction. The taxpayer also must send acopy of the disclosure statement to the IRSOffice of Tax Shelter Analysis (OTSA) atthe same time that any disclosure state-ment pertaining to a particular reportabletransaction is first filed. If a reportabletransaction results in a loss that is carriedback to a prior year, the disclosure state-ment for the reportable transaction mustbe attached to the taxpayer’s applicationfor tentative refund or amended tax returnfor that prior year. If a taxpayer who isa partner in a partnership, a shareholderin an S corporation, or a beneficiary ofa trust receives a timely Schedule K–1,“Partner’s Share of Income, Deductions,Credits, etc.,” less than 10 calendar daysbefore the due date of the taxpayer’sreturn (including extensions) and, basedon receipt of the timely Schedule K–1,the taxpayer determines that the taxpayer

participated in a reportable transaction, thedisclosure statement will not be consideredlate if the taxpayer discloses the reportabletransaction by filing a disclosure statementwith OTSA within 60 calendar days afterthe due date of the taxpayer’s return(including extensions).

For transactions entered into after Au-gust 2, 2007, §1.6011–4(e)(2)(i) providesthat if a transaction becomes a listed trans-action or a transaction of interest after thefiling of a taxpayer’s tax return (includ-ing an amended return) reflecting the tax-payer’s participation in the listed trans-action or transaction of interest and be-fore the end of the period of limitationsfor assessment of tax for any taxable yearin which the taxpayer participated in thelisted transaction or transaction of interest,then a disclosure statement must be filedwith OTSA within 90 calendar days afterthe date on which the transaction becamea listed transaction or a transaction of in-terest, regardless of whether the taxpayerparticipated in the transaction in the yearthe transaction became a listed transactionor a transaction of interest.

Published guidance identifying listedtransactions or transactions of interest in-volving estate, gift, employment, and cer-tain excise taxes will specify the manner inwhich taxpayers must disclose those trans-actions. See §§20.6011–4; 25.6011–4;31.6011–4; 53.6011–4; 54.6011–4; and56.6011–4.

The Treasury Department and IRSissued Notice 2005–11, 2005–1 C.B.493, providing interim guidance re-garding the imposition and rescissionof penalties under section 6707A (see§601.601(d)(2)(ii)(b)). Specifically, thenotice stated that the IRS will impose apenalty under section 6707A with respectto each failure to disclose a reportabletransaction within the time and in the formand manner provided by section 6011 andthe regulations thereunder. Accordingly,a taxpayer would be subject to a penaltyunder section 6707A for: (1) the failure toattach an appropriate reportable transac-tion disclosure statement to an original oramended return; or (2) the failure to pro-vide a copy of an appropriate disclosurestatement to OTSA, if required, within thetime and in the form and manner providedby section 6011 and the regulations there-under. A taxpayer that failed to attach areportable transaction disclosure statement

to an original or amended return and failedto provide a copy of a required disclosurestatement to OTSA would be subject to asingle penalty under section 6707A.

Notice 2005–11 requested commentsregarding the rules and standards relatingto section 6707A, including the factorsthat should be considered in exercisingthe rescission authority under section6707A(d) and how voluntary, but untimelydisclosures (for example, if a taxpayerfailed to make a required disclosure uponfiling a return, but subsequently submitsthe required disclosure statement) shouldbe treated in applying the section 6707Apenalty. Since then, many have observedthat there is little incentive for remedialaction if a complete but delinquent disclo-sure statement is penalized as harshly asa complete failure to submit a disclosurestatement. The Treasury Department andthe IRS are currently considering whetherit would be appropriate to publish a rulethat would treat as timely a Form 8886voluntarily filed prior to the date the IRSfirst contacts the taxpayer concerning atax examination for the taxable periodin which the taxpayer participated in thereportable transaction. Other appropriatedates by which filings must be made toqualify for relief would be considered aswell. Comments are specifically requestedon the necessity and appropriateness ofpublishing guidance addressing this issue.

Explanation of Provisions

These temporary regulations providerules reflecting the AJCA enactment ofthe section 6707A penalty for the failureto include on any return or statement anyinformation required to be disclosed undersection 6011 with respect to a reportabletransaction.

These temporary regulations providethat a taxpayer may incur a separatepenalty under section 6707A with respectto each reportable transaction that the tax-payer was required, but failed, to disclosewithin the time and in the form and man-ner required under §1.6011–4(d) and (e)or as stated in other published guidance.A taxpayer who is required to disclosea reportable transaction on a Form 8886(or successor form) filed with a return,amended return, or application for tenta-tive refund and who also is required todisclose the transaction on a Form 8886

November 10, 2008 1101 2008–45 I.R.B.

(or successor form) with OTSA, is subjectto only a single section 6707A penalty forfailure to make either one or both of thosedisclosures. Additionally, these temporaryregulations define “reportable transaction”and “listed transaction” by reference to theregulations under section 6011.

These temporary regulations restate theexisting authority of the Secretary to pre-scribe the procedures to request rescissionof a section 6707A penalty with respectto a nonlisted reportable transaction byrevenue procedure or other guidance pub-lished in the Internal Revenue Bulletin.Rev. Proc. 2007–21 describes the pro-cedures for requesting rescission of apenalty assessed under section 6707A,including the deadline by which a personmust request rescission; the informationthe person must provide in the rescissionrequest; the factors that weigh in favorof and against granting rescission; wherethe person must submit the rescission re-quest; and the rules governing requestsfor additional information from the personrequesting rescission.

These temporary regulations adopt fac-tors mentioned in the legislative historyto section 6707A that the Commissioner(or the Commissioner’s delegate) shouldtake into account during the determina-tion whether to rescind all or a portion ofany penalty imposed under section 6707A.See H.R. Conf. Rep. No. 755, 108th

Cong., 2d Sess. at 599 (2004). Factorsthat these regulations identify as weighingin favor of rescission reflect circumstancesthat suggest that sustaining assessment ofthe penalty is against equity and good con-science.

These temporary regulations generallyadopt the list of factors stated in Rev. Proc.2007–21. One additional factor these reg-ulations identify as weighing in favor ofgranting rescission is whether the penaltyassessed is disproportionately larger thanthe tax benefit received. The factors iden-tified in these temporary regulations donot represent an exclusive list, and no sin-gle factor will be determinative of whetherto grant rescission in any particular case.Rather, the Commissioner (or the Com-missioner’s delegate) will consider andweigh all relevant factors, regardless ofwhether the factor is included in this list.

Because it is the policy of the IRS toadminister penalties in a manner that pro-

motes voluntary compliance with the taxlaws, it will weigh heavily in favor ofrescission if a taxpayer voluntarily files theform required under section 6011: (i) priorto the date the IRS first contacts the tax-payer (including contacts by the IRS withany partnership in which the taxpayer is apartner, any S corporation in which the tax-payer is a shareholder, or any trust in whichthe taxpayer is a beneficiary) concerning atax examination for the tax period in whichthe taxpayer participated in the reportabletransaction; and (ii) other circumstancessuggest that the taxpayer did not delay fil-ing an untimely but properly completedForm 8886 until after the IRS had takensteps to identify the taxpayer’s participa-tion in the reportable transaction in ques-tion. See IRS Policy Statement 20–1 (June29, 2004).

The temporary regulations mirror Rev.Proc. 2007–21 in providing that a rescis-sion request is not the appropriate forumto contest whether the elements necessaryto support a penalty under section 6707Aexist. That question is for the examin-ing agent, the IRS Appeals Division, andthe courts. A rescission determination isbased on the premise that a violation ofsection 6707A exists but, nonetheless, thepenalty should be rescinded (or abated).Accordingly, the temporary regulationsprovide that the Commissioner (or theCommissioner’s delegate) will not con-sider whether the taxpayer in fact failed tocomply with section 6011. Furthermore,the temporary regulations provide that theCommissioner (or the Commissioner’sdelegate) will not take into considerationdoubt as to liability for, or collectibilityof, the penalties in determining whether torescind the penalty.

Additionally, these temporary regula-tions restate the existing authority of theSecretary to prescribe by revenue proce-dure or other guidance published in theInternal Revenue Bulletin the manner inwhich taxpayers must disclose the require-ment to pay certain penalties on reportsfiled with the Securities and ExchangeCommission. Rev. Procs. 2005–51 and2007–25 are the current published guid-ance items that provide these disclosurerules and remain effective until furtherguidance is issued in the form of regu-lations or other guidance that explicitlysupersedes these two documents.

Effect on other Documents

The temporary regulations supersedeNotice 2005–11.

Special Analyses

It has been determined that this Trea-sury decision is not a significant regula-tory action as defined in Executive Order12866. Therefore, a regulatory assessmentis not required. It also has been determinedthat section 553(b) of the AdministrativeProcedure Act (5 U.S.C. chapter 5) doesnot apply to these regulations. The tempo-rary regulations are necessary to promotetaxpayers’ immediate compliance with theregulations recently finalized under sec-tion 6011 and to provide for regulatory re-lief in appropriate circumstances, includ-ing the additional taxpayer favorable fac-tor of whether the penalty assessed is dis-proportionately larger than the tax benefitreceived. For applicability of the Regula-tory Flexibility Act (5 U.S.C. chapter 6),refer to the Special Analyses section of thepreamble to the cross-referenced notice ofproposed rulemaking published in this is-sue of the Bulletin. Pursuant to section7805(f) of the Code, these regulations havebeen submitted to the Chief Counsel forAdvocacy of the Small Business Admin-istration for comment on their impact onsmall business.

Drafting Information

The principal author of these regula-tions is Matthew Cooper of the Office ofthe Associate Chief Counsel (Procedureand Administration).

* * * * *

Amendments to the Regulations

Accordingly, 26 CFR Part 301 isamended as follows:

PART 301 — PROCEDURE ANDADMINISTRATION

Paragraph 1. The authority citation forpart 301 continues to read in part as fol-lows:

Authority: 26 U.S.C. 7805 * * *Par. 2. Section 301.6707A–1T is added

to read as follows:

2008–45 I.R.B. 1102 November 10, 2008

§301.6707A–1T Failure to include onany return or statement any informationrequired to be disclosed under section6011 with respect to a reportabletransaction.

(a) In general. Any person who fails toinclude on any return or statement any in-formation required to be disclosed undersection 6011 with respect to a reportabletransaction may be subject to a monetarypenalty. The penalty for failure to includeinformation with respect to a reportabletransaction, other than a listed transaction,is $10,000 in the case of a natural person,and $50,000 in any other case. The penaltyfor failure to include information with re-spect to a listed transaction is $100,000 inthe case of a natural person, and $200,000in any other case. The section 6707Apenalty is in addition to any other penaltythat may be imposed.

(b) Definitions—(1) Reportable trans-action. The term “reportable transaction”is defined in §1.6011–4(b)(1) of this chap-ter.

(2) Listed transaction. The term “listedtransaction” is defined in section 6707A(c)of the Code and §1.6011–4(b)(2) of thischapter.

(c) Assessment of the penalty—(1) Ingeneral. The Internal Revenue Service(IRS) may assess a penalty under section6707A with respect to each failure to dis-close a reportable transaction within thetime and in the form and manner providedby §1.6011–4(d) and (e) of this chapteror pursuant to the time, form, and man-ner stated in other published guidance.A taxpayer who is required to disclosea reportable transaction with a return,amended return, or application for ten-tative refund and who also is requiredto disclose the transaction on a Form8886, “Reportable Transaction Disclo-sure Statement” (or successor form), filedwith the IRS Office of Tax Shelter Anal-ysis (OTSA), is subject to only a singlesection 6707A penalty for failure to makeeither one or both of those disclosures. Ifsection 6011 and the regulations thereun-der require a disclosure statement to befiled at the time that a return is filed, thedisclosure statement is considered to betimely filed if it is filed at the same timeas the return, even if the return is fileduntimely after its due date.

(2) Examples. The rules of paragraph(c)(1) of this section are illustrated by thefollowing examples:

Example 1. Taxpayer T is required to attach aForm 8886 to its return for the 2007 taxable year andto send a copy of the Form 8886 to OTSA at thetime it files its return. Taxpayer T fails to attach theForm 8886 to its return and fails to send a copy ofthe Form 8886 to OTSA. Taxpayer T is subject to asingle penalty under section 6707A for failure to dis-close because Taxpayer T failed to comply with thedisclosure requirements of section 6011. A penaltyunder section 6707A also would apply if Taxpayer Thad failed to comply with only one of the two require-ments.

Example 2. Same as Example 1, except that Tax-payer T also subsequently files an amended returnfor 2007 that reflects Taxpayer T’s participation inthe reportable transaction. Taxpayer T fails to attacha Form 8886 to the amended return as required by§1.6011–4(e)(1) of this chapter. Taxpayer T is sub-ject to an additional penalty under section 6707A forfailing to disclose a reportable transaction.

Example 3. In November 2009, Taxpayer U par-ticipates in a reportable transaction resulting in a lossthat is carried back to 2008. Taxpayer U fails to attacha Form 8886 to its 2008 amended return claiming theloss carryback. Section 1.6011–4(e)(1) of this chap-ter requires Taxpayer U to attach a Form 8886 to itsamended return for the 2008 taxable year. TaxpayerU is subject to a penalty under section 6707A.

Example 4. Taxpayer P participates in a non-listed reportable transaction and is required to attacha Form 8886 to its return for the 2008 taxable yearthat is due on March 16, 2009. Taxpayer P timelyfiles its return but fails to attach the Form 8886 to itsreturn. After the due date of Taxpayer P’s return andwithout an extension of time to file, Taxpayer P filesan amended return relating to the 2008 taxable year towhich Taxpayer P attaches the Form 8886. TaxpayerP is subject to a penalty under section 6707A for fail-ure to disclose because Taxpayer P failed to complywith the disclosure requirements of section 6011 bynot attaching a Form 8886 to its return for the 2008taxable year that was timely filed on or before thedue date of March 16, 2009. A penalty under section6707A also would apply if Taxpayer P had failed toattach a Form 8886 to its amended return. TaxpayerP, nevertheless, may file a complete and proper Form8886 and request in writing rescission of the penaltiesassessed within 30 days after the date the IRS sendsnotice and demand for payment of the penalties in ac-cordance with Rev. Proc. 2007–21. The filing ofthe untimely Form 8886 will weigh heavily in favorof rescission provided that Taxpayer P files the Form8886 prior to the date the IRS first contacts the tax-payer concerning a tax examination for the 2008 tax-able year and there are no other circumstances thatsuggest that Taxpayer P delayed filing the Form 8886until after the IRS had taken steps to identify Tax-payer P’s participation in the reportable transactionin question.

Example 5. Shareholder V, a shareholder inan S Corporation, receives a timely ScheduleK–1 “Partner’s Share of Income, Deductions,Credits, etc.,” on April 10, 2009, and determinesthat she is required to attach a Form 8886 to herindividual income tax return for the 2008 taxable

year. Shareholder V fails to attach the Form 8886to her 2008 individual income tax return but files aproper and complete Form 8886 with OTSA on June12, 2009. Section 1.6011–4(e)(1) of this chapterprovides that if a taxpayer who is a partner in apartnership, a shareholder in an S corporation, ora beneficiary of a trust receives a timely ScheduleK–1 less than 10 calendar days before the due dateof the taxpayer’s return (including extensions) and,based on receipt of the timely Schedule K–1, thetaxpayer determines that the taxpayer participated ina reportable transaction, the disclosure statement willnot be considered late if the taxpayer discloses thereportable transaction by filing a disclosure statementwith OTSA within 60 calendar days after the duedate of the taxpayer’s return (including extensions).Accordingly, Shareholder V is not subject to apenalty under section 6707A for failure to disclose.

Example 6. In July 2008, Taxpayer W participatesin Transaction Z, a transaction that is not reportable asof April 15, 2009, the date Taxpayer W files his indi-vidual income tax return for 2008. On July 15, 2009,Transaction Z is identified as a transaction of inter-est. Section 1.6011–4(e)(2)(i) of this chapter pro-vides that if a transaction that is not otherwise a re-portable transaction becomes a listed transaction ora transaction of interest after the taxpayer has fileda tax return (including an amended return) reflectingthe taxpayer’s participation in the listed transaction ortransaction of interest and before the end of the periodof limitations for assessment of tax for any taxableyear in which the taxpayer participated in the listedtransaction or transaction of interest, then a disclo-sure statement must be filed with OTSA within 90calendar days after the date on which the transactionbecame a listed transaction or transaction of interest,regardless of whether the taxpayer participated in thetransaction in the year the transaction became a listedtransaction or a transaction of interest. Taxpayer Wfails to file a Form 8886 with OTSA by October 13,2009, 90 calendar days after the date that the trans-action was identified as a transaction of interest. Ac-cordingly, Taxpayer W is subject to a penalty undersection 6707A.

Example 7. Taxpayer X is required to attach aForm 8886 to its return for the 2008 taxable year withrespect to participation in a listed transaction. Tax-payer X attaches the Form 8886 to its return in atimely manner. The Form 8886, however, does notdescribe any of the potential tax benefits expected toresult from this transaction and states that informa-tion will be provided upon request. Because the Form8886 does not describe any of the potential tax bene-fits expected to result from the transaction and merelyprovides that the information will be provided uponrequest, the Form 8886 filed by Taxpayer X is incom-plete and does not satisfy the requirements set forthin §1.6011–4(d) of this chapter. Taxpayer X is sub-ject to a penalty under section 6707A for failure todisclose in the appropriate manner.

(d) Rescission authority—(1) In gen-eral. The Commissioner (or the Commis-sioner’s delegate) may rescind the section6707A penalty if—

(i) The violation relates to a reportabletransaction that is not a listed transaction,and

November 10, 2008 1103 2008–45 I.R.B.

(ii) Rescinding the penalty would pro-mote compliance with the requirements ofthe Code and effective tax administration.

(2) Requesting rescission. The Secre-tary may prescribe the procedures for ataxpayer to request rescission of a section6707A penalty with respect to a reportabletransaction other than a listed transactionby publishing a revenue procedure or otherguidance in the Internal Revenue Bulletin.

(3) Factors that weigh in favor of grant-ing rescission. In determining whetherrescission would promote compliance withthe requirements of the Code and effectivetax administration, the Commissioner (orthe Commissioner’s delegate) will takeinto account the following list of factorsthat weigh in favor of granting rescission.This is not an exclusive list and no singlefactor will be determinative of whetherto grant rescission in any particular case.Rather, the Commissioner (or the Com-missioner’s delegate) will consider andweigh all relevant factors, regardless ofwhether the factor is included in this list.

(i) The taxpayer, upon becoming awarethat it failed to disclose a reportable trans-action properly, filed a complete andproper, albeit untimely, Form 8886 (orsuccessor form). This factor will weighheavily in favor of rescission providedthat—

(A) the taxpayer files the Form 8886prior to the date the IRS first contacts thetaxpayer (including contacts by the IRSwith any partnership in which the taxpayeris a partner, any S corporation in which thetaxpayer is a shareholder, or any trust inwhich the taxpayer is a beneficiary) con-cerning a tax examination for the tax pe-riod in which the taxpayer participated inthe reportable transaction; and

(B) other circumstances suggest that thetaxpayer did not delay filing an untimelybut properly completed Form 8886 untilafter the IRS had taken steps to identify thetaxpayer’s participation in the reportabletransaction in question.

(ii) The failure to disclose properly wasdue to an unintentional mistake of fact thatexisted despite the taxpayer’s reasonableattempts to ascertain the correct facts withrespect to the transaction.

(iii) The taxpayer has an establishedhistory of properly disclosing other re-portable transactions and complying withother tax laws.

(iv) The taxpayer demonstrates thatthe failure to include on any return orstatement any information required to bedisclosed under section 6011 arose fromevents beyond the taxpayer’s control.

(v) The taxpayer cooperates with theIRS by providing timely informationwith respect to the transaction at issuethat the Commissioner (or the Commis-sioner’s delegate) may request in con-sideration of the rescission request. Inconsidering whether a taxpayer cooper-ates with the IRS, the Commissioner (orthe Commissioner’s delegate) will takeinto account whether the taxpayer meetsthe deadlines described in Rev. Proc.2007–21 (or successor document) (see§601.601(d)(2)(ii)(b) of this chapter) forcomplying with requests for additionalinformation.

(vi) Assessment of the penalty weighsagainst equity and good conscience, in-cluding whether the penalty is dispro-portionate to the tax benefit received andwhether the taxpayer demonstrates thatthere was reasonable cause for, and thetaxpayer acted in good faith with respectto, the failure to timely file or to includeon any return any information required tobe disclosed under section 6011. An im-portant factor in determining reasonablecause and good faith is the extent of thetaxpayer’s efforts to ensure that personswho prepared the taxpayer’s return wereinformed of the taxpayer’s participation inthe reportable transactions. The presenceof reasonable cause, however, will notnecessarily be determinative of whether togrant rescission.

(4) Absence of favorable factors weighsagainst rescission. The absence of factsestablishing the factors described in para-graph (d)(3) of this section weighs againstgranting rescission. The absence of anyone of these factors, however, will notnecessarily be determinative of whether togrant rescission.

(5) Factors not considered. In deter-mining whether to grant rescission, theCommissioner (or the Commissioner’sdelegate) will not consider doubt as to lia-bility for, or collectibility of, the penalties.

(e) Reports to the Securities and Ex-change Commission (SEC)—(1) In gen-eral. Under section 6707A(e), a taxpayerwho is required to file periodic reports un-der section 13 or 15(d) of the SecuritiesExchange Act of 1934 (or is required to file

consolidated reports with another person)must disclose in periodic reports filed withthe SEC the requirement to pay each of thefollowing penalties:

(i) The penalty imposed by section6707A(a) in the amount of $200,000 forfailure to disclose a listed transaction.

(ii) The accuracy-related penaltyimposed by section 6662A(a) at the30-percent rate determined under section6662A(c) for a reportable transaction un-derstatement with respect to which therelevant facts affecting the tax treatmentof the reportable transaction were notadequately disclosed in accordance withregulations prescribed under section 6011.

(iii) The accuracy-related penalty im-posed by section 6662(a) at the 40-percentrate determined under section 6662(h) fora gross valuation misstatement, if the tax-payer (but for the exclusionary rule of sec-tion 6662A(e)(2)(C)(ii)) would have beensubject to the accuracy-related penalty un-der section 6662A(a) at the 30-percent ratedetermined under section 6662A(c).

(iv) The penalty described in paragraph(e)(3) of this section for failure to disclosein periodic reports filed with the SEC therequirement to pay any of the penalties de-scribed in paragraphs (e)(1)(i) through (iii)or (e)(3) of this section.

(2) Manner and content of disclosure.The Secretary may prescribe the manner inwhich disclosure of the requirement to paythe penalties identified in paragraph (e)(1)of this section must be made on reportsfiled with the SEC, including identifica-tion of the specific SEC form and sectionthereof in which the taxpayer must makethe disclosure as well as specification ofthe timing and contents of the disclosure,by publishing a revenue procedure or otherguidance in the Internal Revenue Bulletin.

(3) Penalty for failure to disclose in SECfilings. Any taxpayer who is required tofile periodic reports under section 13 or15(d) of the Securities Exchange Act of1934 (or is required to file consolidatedreports with another person) may be sub-ject to a penalty in the amount of $200,000for each failure to disclose the requirementto pay a penalty identified in paragraphs(e)(1)(i) through (e)(1)(iii) of this sectionin the manner specified by revenue proce-dure or other guidance published in the In-ternal Revenue Bulletin. The taxpayer alsomay be subject to an additional penalty inthe amount of $200,000 for each failure to

2008–45 I.R.B. 1104 November 10, 2008

disclose a penalty arising under this sec-tion in the manner specified by revenueprocedure or other guidance published inthe Internal Revenue Bulletin. The penaltyprovided by this paragraph is not subject torescission as described in paragraph (d) ofthis section.

(f) Effective/applicability date—(1)The rules of this section apply to disclosurestatements that are due after September11, 2008.

(2) The applicability of this section ex-pires on or before September 9, 2011.

Linda E. Stiff,Deputy Commissioner forServices and Enforcement.

Approved September 5, 2008.

Eric Solomon,Assistant Secretary of

the Treasury (Tax Policy).

(Filed by the Office of the Federal Register on September10, 2008, 8:45 a.m., and published in the issue of the FederalRegister for September 11, 2008, 73 F.R. 52784)

Section 7430.—Awardingof Costs and Certain Fees

The Service provides an inflation adjustment tothe hourly limit on attorney fees incurred in calen-dar year 2009 that may be awarded in a judgement orsettlement of an administrative or judicial proceedingconcerning the determination, collection, or refund oftax, interest, or penalty. See Rev. Proc. 2008-66,page 1107.

Section 7520.—ValuationTables


Section 7702B.—Treatmentof Qualified Long-TermCare Insurance

The Service provides an inflation adjustment to thestated dollar amount for calendar year 2009 of the perdiem limitation regarding periodic payments receivedunder a qualified long-term care insurance contractor periodic payments received under a life insurancecontract that are treated as paid by reason of the deathof a chronically ill individual. See Rev. Proc. 2008-66, page 1107.

Section 7872.—Treatmentof Loans With Below-MarketInterest Rates


November 10, 2008 1105 2008–45 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous2009 Limitations Adjusted AsProvided in Section 415(d),etc.1

Notice 2008–102

Section 415 of the Internal RevenueCode (the Code) provides for dollar lim-itations on benefits and contributions un-der qualified retirement plans. Section 415also requires that the Commissioner annu-ally adjust these limits for cost-of-livingincreases. Other limitations applicable todeferred compensation plans are also af-fected by these adjustments. Many of thelimitations will change for 2009 becausethe increase in the cost-of-living index metthe statutory thresholds that trigger theiradjustment. However, for others, the lim-itation will remain unchanged. For exam-ple, the limitation under § 402(g)(1) on theexclusion for elective deferrals describedin § 402(g)(3) is increased from $15,500to $16,500. This limitation affects elec-tive deferrals to § 401(k) plans and to theFederal Government’s Thrift Savings Plan,among other plans.

Cost-of-Living limits for 2009

Effective January 1, 2009, the limita-tion on the annual benefit under a definedbenefit plan under § 415(b)(1)(A) is in-creased from $185,000 to $195,000. Forparticipants who separated from servicebefore January 1, 2009, the limitation fordefined benefit plans under § 415(b)(1)(B)is computed by multiplying the partic-ipant’s compensation limitation, as ad-justed through 2008, by 1.0530.

The limitation for defined contributionplans under § 415(c)(1)(A) is increasedfrom $46,000 to $49,000.

The Code provides that various otherdollar amounts are to be adjusted at thesame time and in the same manner as thedollar limitation of § 415(b)(1)(A). Thesedollar amounts and the adjusted amountsare as follows:

The limitation under § 402(g)(1) onthe exclusion for elective deferrals de-scribed in § 402(g)(3) is increased from$15,500 to $16,500.

The annual compensation limit un-der §§ 401(a)(17), 404(l), 408(k)(3)(C),and 408(k)(6)(D)(ii) is increased from$230,000 to $245,000.

The dollar limitation under§ 416(i)(1)(A)(i) concerning the defi-nition of key employee in a top-heavyplan is increased from $150,000 to$160,000.

The dollar amount under§ 409(o)(1)(C)(ii) for determining themaximum account balance in an em-ployee stock ownership plan subject toa 5-year distribution period is increasedfrom $935,000 to $985,000, while thedollar amount used to determine thelengthening of the 5-year distributionperiod is increased from $185,000 to$195,000.

The limitation used in the definitionof highly compensated employee un-der § 414(q)(1)(B) is increased from$105,000 to $110,000.

The dollar limitation under§ 414(v)(2)(B)(i) for catch-up con-tributions to an applicable employerplan other than a plan described in§ 401(k)(11) or 408(p) for individu-als aged 50 or over is increased from$5,000 to $5,500. The dollar limitationunder § 414(v)(2)(B)(ii) for catch-upcontributions to an applicable employerplan described in § 401(k)(11) or 408(p)for individuals aged 50 or over remainsunchanged at $2,500.

The annual compensation limitationunder § 401(a)(17) for eligible partic-ipants in certain governmental plansthat, under the plan as in effect on July1, 1993, allowed cost-of-living adjust-ments to the compensation limitationunder the plan under § 401(a)(17) to betaken into account, is increased from$345,000 to $360,000.

The compensation amount under§ 408(k)(2)(C) regarding simplifiedemployee pensions (SEPs) is increasedfrom $500 to $550.

The limitation under § 408(p)(2)(E)regarding SIMPLE retirement accountsis increased from $10,500 to $11,500.

The limitation on deferrals under§ 457(e)(15) concerning deferred com-pensation plans of state and local gov-

ernments and tax-exempt organizationsis increased from $15,500 to $16,500.

The compensation amounts under§ 1.61–21(f)(5)(i) of the Income TaxRegulations concerning the definitionof “control employee” for fringe bene-fit valuation purposes is increased from$90,000 to $95,000. The compensationamount under § 1.61–21(f)(5)(iii) isincreased from $185,000 to $195,000.

The limitation on wages under § 45Aregarding individuals eligible for the In-dian employment credit is $40,000 fortax years beginning in 2008 and willincrease to $45,000 for tax years be-ginning in 2009. The termination dateof § 45A was recently extended fromDecember 31, 2007, to December 31,2009, by § 314 of Division C of theEmergency Economic Stabilization Actof 2008, P.L. 110–343.The Code also provides that several

pension-related amounts are to be adjustedusing the cost-of-living adjustment under§ 1(f)(3). These dollar amounts and theadjustments are as follows:

The adjusted gross income limita-tion under § 25B(b)(1)(A) for determin-ing the retirement savings contributioncredit for taxpayers filing a joint returnis increased from $32,000 to $33,000;the limitation under § 25B(b)(1)(B) isincreased from $34,500 to $36,000;and the limitation under § 25B(b)(1)(C)and (D) is increased from $53,000 to$55,500.

The adjusted gross income limita-tion under § 25B(b)(1)(A) for deter-mining the retirement savings contri-bution credit for taxpayers filing ashead of household is increased from$24,000 to $24,750; the limitation un-der § 25B(b)(1)(B) is increased from$25,875 to $27,000; and the limitationunder § 25B(b)(1)(C) and (D) is in-creased from $39,750 to $41,625.

The adjusted gross income limita-tion under § 25B(b)(1)(A) for deter-mining the retirement savings contri-bution credit for all other taxpayers isincreased from $16,000 to $16,500; thelimitation under § 25B(b)(1)(B) is in-creased from $17,250 to $18,000; andthe limitation under § 25B(b)(1)(C)

1 Based on News Release IR–2008–118 dated October 16, 2008.

2008–45 I.R.B. 1106 November 10, 2008

and (D) is increased from $26,500 to$27,750.

The deductible amount under§ 219(b)(5)(A) for an individual mak-ing qualified retirement contributionsremains unchanged at $5,000.

The applicable dollar amount under§ 219(g)(3)(B)(i) for determining thedeductible amount of an IRA contri-bution for taxpayers who are activeparticipants filing a joint return or as aqualifying widow(er) is increased from$85,000 to $89,000. The applicabledollar amount under § 219(g)(3)(B)(ii)for all other taxpayers (other than mar-ried taxpayers filing separate returns)is increased from $53,000 to $55,000.The applicable dollar amount under§ 219(g)(7)(A) for a taxpayer who isnot an active participant but whose

spouse is an active participant is in-creased from $159,000 to $166,000.

The adjusted gross income limita-tion under § 408A(c)(3)(C)(ii)(I) fordetermining the maximum Roth IRAcontribution for taxpayers filing a jointreturn or as a qualifying widow(er) isincreased from $159,000 to $166,000.The adjusted gross income limitationunder § 408A(c)(3)(C)(ii)(II) for allother taxpayers (other than marriedtaxpayers filing separate returns) is in-creased from $101,000 to $105,000.Administrators of defined benefit or de-

fined contribution plans that have receivedfavorable determination letters should notrequest new determination letters solelybecause of yearly amendments to adjustmaximum limitations in the plans.


The principal author of this notice isJohn Heil of the Employee Plans, Tax Ex-empt and Government Entities Division.For further information regarding the datain this notice, please contact the EmployeePlans’ taxpayer assistance telephone ser-vice at 1–877–829–5500 (a toll-free call)between the hours of 8:30 a.m. and4:30 p.m. Eastern time Monday throughFriday. For information regarding themethodology used in arriving at the datain this notice, please e-mail Mr. Heil [email protected].

26 CFR 601.602: Tax forms and instructions.(Also Part I, §§ 1, 23, 24, 25A, 32, 42, 59, 62, 63, 68, 132, 135, 137, 146, 147, 148, 151, 170, 179, 213, 220, 221, 512, 513, 877, 877A, 911, 2032A, 2503, 2523, 4161,4261, 6033, 6039F, 6323, 6334, 6601, 7430, 7702B; 1.148–3, 1.148–5.)

Rev. Proc. 2008–66

TABLE OF CONTENTS

SECTION 1. PURPOSE

SECTION 2. CHANGES

SECTION 3. 2009 ADJUSTED ITEMS

Code Section

.01 Tax Rate Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1(a)–(e)

.02 Unearned Income of Minor Children Taxed as if Parent’s Income (“Kiddie Tax”) . . . . . . . . . . 1(g)

.03 Adoption Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

.04 Child Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

.05 Hope and Lifetime Learning Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25A

.06 Earned Income Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

.07 Low-Income Housing Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42(h)

.08 Alternative Minimum Tax Exemption for a Child Subject to the “Kiddie Tax” . . . . . . . . . . . . . 59(j)

.09 Transportation Mainline Pipeline Construction Industry Optional Expense SubstantiationRules for Payments to Employees under Accountable Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62(c)

.10 Standard Deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

.11 Overall Limitation on Itemized Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

.12 Qualified Transportation Fringe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132(f)

.13 Income from United States Savings Bonds for Taxpayers Who Pay Qualified HigherEducation Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

.14 Adoption Assistance Programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

.15 Private Activity Bonds Volume Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146(d)

November 10, 2008 1107 2008–45 I.R.B.

.16 Loan Limits on Agricultural Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147(c)(2)

.17 General Arbitrage Rebate Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148(f)

.18 Safe Harbor Rules for Broker Commissions on Guaranteed Investment Contracts orInvestments Purchased for a Yield Restricted Defeasance Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

.19 Personal Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

.20 Election to Expense Certain Depreciable Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

.21 Eligible Long-Term Care Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213(d)(10)

.22 Medical Savings Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

.23 Interest on Education Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221

.24 Treatment of Dues Paid to Agricultural or Horticultural Organizations . . . . . . . . . . . . . . . . . . . . 512(d)

.25 Insubstantial Benefit Limitations for Contributions Associated with Charitable Fund-RaisingCampaigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513(h)

.26 Expatriation to Avoid Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 877

.27 Tax Responsibilities of Expatriation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 877A

.28 Foreign Earned Income Exclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 911

.29 Valuation of Qualified Real Property in Decedent’s Gross Estate . . . . . . . . . . . . . . . . . . . . . . . . . 2032A

.30 Annual Exclusion for Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2503 & 2523

.31 Tax on Arrow Shafts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4161

.32 Passenger Air Transportation Excise Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4261

.33 Reporting Exception for Certain Exempt Organizations with Nondeductible LobbyingExpenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6033(e)(3)

.34 Notice of Large Gifts Received from Foreign Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6039F

.35 Persons Against Whom a Federal Tax Lien Is Not Valid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6323

.36 Property Exempt from Levy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6334

.37 Interest on a Certain Portion of the Estate Tax Payable in Installments . . . . . . . . . . . . . . . . . . . . 6601(j)

.38 Attorney Fee Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7430

.39 Periodic Payments Received under Qualified Long-Term Care Insurance Contracts or underCertain Life Insurance Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7702B(d)

SECTION 4. EFFECTIVE DATE

SECTION 5. DRAFTING INFORMATION

SECTION 1. PURPOSE

This revenue procedure sets forth infla-tion adjusted items for 2009.

SECTION 2. CHANGES

.01 For taxable years beginning after2008, the $3,000 increase to the phaseoutamounts of the earned income tax creditfor married taxpayers filing a joint returnunder § 32(b)(2)(B)(iii) are adjusted for in-flation. The adjusted amounts are includedin the amounts shown in section 3.06(1) ofthis revenue procedure.

.02 Section 42(h)(3)(I) was added tothe Code by section 3001, Division C,

Title I, of the Housing and Economic Re-covery Act of 2008, Pub. L. No. 110–289,122 Stat. 2654 (2008), to provide for atemporary increase in the State housingcredit ceiling under § 42(h)(3)(C)(ii)(I)and (II) after any adjustments for inflationunder § 42(h)(3)(H). Accordingly, for cal-endar years 2008 and 2009, the inflationadjusted amount under § 42(h)(3)(C)(ii)(I)is increased by $0.20, and the inflation ad-justed amount under § 42(h)(3)(C)(ii)(II)is increased by ten (10) percent androunded to the next lowest multiple of$5,000. (See section 3.07 of this revenueprocedure.)

.03 Section 147(c)(2) was amended bysection 15341, Title XV, Subtitle C, PartIII, of the Food Conservation and EnergyAct of 2008, Pub. L. No. 110–246, 122Stat. 1651 (2008), to provide for an in-crease in the loan limits on agriculturalbonds for first-time farmers. For calen-dar year 2008, the limit is $450,000. Forcalendar years after 2008, the $450,000amount will be adjusted for inflation. (Seesection 3.16 of this revenue procedure.)

.04 Section 877A was added to theCode by section 301(a) of Title III of theHeroes Earnings Assistance and ReliefTax Act of 2008, Pub. L. No. 110–245,122 Stat. 1624 (2008), to provide spe-

2008–45 I.R.B. 1108 November 10, 2008

cial rules for the treatment of property ofcertain individuals who are “covered ex-patriates,” and who cease to be treated aslong term residents or who relinquish theirU.S. citizenship (expatriate). Pursuantto § 877A(a)(1), covered expatriates, asdefined in § 877A(g)(1), are subject toincome tax on the net unrealized gain intheir property as if the property had beensold for its fair market value on the daybefore the expatriation date, as defined in§ 877A(g)(3). Section 877A(a)(3) pro-vides that the amount of gain includiblein gross income under § 877A(a)(1) isreduced (but not below zero) by $600,000.For taxable years beginning in a calendaryear after 2008, the $600,000 amount is

adjusted for inflation. (See sections 3.26and 3.27 of this revenue procedure.)

.05 The passenger air transportation ex-cise taxes imposed under § 4261(b) and(c), as extended by § 2(b)(1) of the FederalAviation Administration Extension Act of2008, Part II, Pub. L. No. 110–330,122 Stat. 3717 (2008), apply to trans-portation taken through March 31, 2009,and to amounts paid on or before March31, 2009, for transportation beginning af-ter that date. Accordingly, the amounts in§ 4261(b) and (c) are adjusted for inflationfor 2009 and are included in this revenueprocedure. (See section 3.32 of this rev-enue procedure.)

.06 The dollar limit on contributions tofuneral trusts under § 685(c) was repealedby § 9 of the Hubbard Act, Pub. L. No.110–317, 122 Stat. 3526 (2008), fortaxable years beginning after August 29,2008. Accordingly, the dollar limitationunder § 685(c) is no longer included inthis revenue procedure.

SECTION 3. 2009 ADJUSTED ITEMS

.01 Tax Rate Tables. For taxable yearsbeginning in 2009, the tax rate tables under§ 1 are as follows:

TABLE 1 — Section 1(a) — Married Individuals Filing Joint Returns and Surviving Spouses.

If Taxable Income Is: The Tax Is:

Not over $16,700 10% of the taxable income

Over $16,700 butnot over $67,900

$1,670 plus 15% ofthe excess over $16,700




$26,637.50 plus 28% ofthe excess over $137,050



Over $372,950 $100,894.50 plus 35% ofthe excess over $372,950

TABLE 2 — Section 1(b) — Heads of Households.












November 10, 2008 1109 2008–45 I.R.B.

TABLE 3 — Section 1(c) — Unmarried Individuals (other than Surviving Spouses and Heads of Households).




$835 plus 15% ofthe excess over $8,350







Over $372,950 $108,216 plus 35% ofthe excess over $372,950

TABLE 4 — Section 1(d) — Married Individuals Filing Separate Returns.












TABLE 5 — Section 1(e) — Estates and Trusts.









Over $11,150 $2,879 plus 35% ofthe excess over $11,150

.02 Unearned Income of MinorChildren Taxed as if Parent’s Income(the “Kiddie Tax”). For taxable yearsbeginning in 2009, the amount in§ 1(g)(4)(A)(ii)(I), which is used to reduce

the net unearned income reported on thechild’s return that is subject to the “kiddietax,” is $950. This amount is the sameas the $950 standard deduction amountprovided in section 3.10(2) of this rev-

enue procedure. The same $950 amountis used for purposes of § 1(g)(7) (that is,to determine whether a parent may electto include a child’s gross income in theparent’s gross income and to calculate the

2008–45 I.R.B. 1110 November 10, 2008

“kiddie tax”). For example, one of the re-quirements for the parental election is thata child’s gross income is more than theamount referenced in § 1(g)(4)(A)(ii)(I)but less than 10 times that amount; thus,a child’s gross income for 2009 must bemore than $950 but less than $9,500.

.03 Adoption Credit. For taxable yearsbeginning in 2009, under § 23(a)(3) thecredit allowed for an adoption of a childwith special needs is $12,150. For taxableyears beginning in 2009, under § 23(b)(1)the maximum credit allowed for otheradoptions is the amount of qualified adop-tion expenses up to $12,150. The availableadoption credit begins to phase out under§ 23(b)(2)(A) for taxpayers with modi-fied adjusted gross income in excess of$182,180 and is completely phased out fortaxpayers with modified adjusted grossincome of $222,180 or more. (See section3.14 of this revenue procedure for the ad-justed items relating to adoption assistanceprograms.)

.04 Child Tax Credit. For taxableyears beginning in 2009, the value used in§ 24(d)(1)(B)(i) to determine the amountof credit under § 24 that may be refundableis $12,550.

.05 Hope and Lifetime Learning Cred-its.

(1) For taxable years beginning in2009, the Hope Scholarship Credit under§ 25A(b)(1) is an amount equal to 100percent of qualified tuition and relatedexpenses not in excess of $1,200 plus50 percent of those expenses in excessof $1,200, but not in excess of $2,400.Accordingly, the maximum Hope Schol-arship Credit allowable under § 25A(b)(1)for taxable years beginning in 2009 is$1,800.

(2) For taxable years beginning in 2009,a taxpayer’s modified adjusted gross in-come in excess of $50,000 ($100,000 fora joint return) is used to determine thereduction under § 25A(d)(2)(A)(ii) in theamount of the Hope Scholarship and Life-

time Learning Credits otherwise allowableunder § 25A(a).

.06 Earned Income Credit.(1) In general. For taxable years be-

ginning in 2009, the following amountsare used to determine the earned incomecredit under § 32(b). The “earned in-come amount” is the amount of earnedincome at or above which the maximumamount of the earned income credit is al-lowed. The “threshold phaseout amount”is the amount of adjusted gross income(or, if greater, earned income) above whichthe maximum amount of the credit beginsto phase out. The “completed phaseoutamount” is the amount of adjusted grossincome (or, if greater, earned income) ator above which no credit is allowed. Thethreshold phaseout amounts and the com-pleted phaseout amounts shown in the ta-ble below for married taxpayers filing ajoint return include the increase providedin § 32(b)(2)(B)(iii), as adjusted for infla-tion for taxable years beginning in 2009.

Number of Qualifying Children

Item One Two or More None

Earned Income Amount $ 8,950 $12,570 $ 5,970

Maximum Amount of Credit $ 3,043 $ 5,028 $ 457

Threshold Phaseout Amount(Single, Surviving Spouse, or Head ofHousehold)

$16,420 $16,420 $ 7,470

Completed Phaseout Amount(Single, Surviving Spouse, or Head ofHousehold)

$35,463 $40,295 $13,440

Threshold Phaseout Amount(Married Filing Jointly)

$19,540 $19,540 $10,590

Completed Phaseout Amount(Married Filing Jointly)

$38,583 $43,415 $16,560

The instructions for the Form 1040 se-ries provide tables showing the amount ofthe earned income credit for each type oftaxpayer.

(2) Excessive investment income. Fortaxable years beginning in 2009, theearned income tax credit is not allowedunder § 32(i) if the aggregate amountof certain investment income exceeds$3,100.

.07 Low-Income Housing Credit. Forcalendar year 2009, the amount used un-der § 42(h)(3)(C)(ii) to calculate the Statehousing credit ceiling for the low-income

housing credit is the greater of (1) $2.30multiplied by the State population, or (2)$2,665,000.

.08 Alternative Minimum Tax Exemp-tion for a Child Subject to the “KiddieTax.” For taxable years beginning in 2009,for a child to whom the § 1(g) “kiddie tax”applies, the exemption amount under §§ 55and 59(j) for purposes of the alternativeminimum tax under § 55 may not exceedthe sum of (1) the child’s earned incomefor the taxable year, plus (2) $6,700.

.09 Transportation Mainline PipelineConstruction Industry Optional Expense

Substantiation Rules for Payments to Em-ployees under Accountable Plans. Forcalendar year 2009, an eligible employermay pay certain welders and heavy equip-ment mechanics an amount of up to $16per hour for rig-related expenses that isdeemed substantiated under an account-able plan if paid in accordance with Rev.Proc. 2002–41, 2002–1 C.B. 1098. If theemployer provides fuel or otherwise reim-burses fuel expenses, up to $10 per houris deemed substantiated if paid under Rev.Proc. 2002–41.

.10 Standard Deduction.

November 10, 2008 1111 2008–45 I.R.B.

(1) In general. For taxable years be-ginning in 2009, the standard deductionamounts under § 63(c)(2) are as follows:

Filing Status Standard Deduction

Married Individuals Filing Joint Returns and Surviving Spouses (§ 1(a)) $11,400

Heads of Households (§ 1(b)) $ 8,350

Unmarried Individuals (other than Surviving Spouses and Heads of Households) (§ 1(c)) $ 5,700

Married Individuals Filing Separate Returns (§ 1(d)) $ 5,700

(2) Dependent. For taxable years be-ginning in 2009, the standard deductionamount under § 63(c)(5) for an individualwho may be claimed as a dependent by an-other taxpayer cannot exceed the greater of(1) $950, or (2) the sum of $300 and the in-dividual’s earned income.

(3) Aged or blind. For taxable yearsbeginning in 2009, the additional standarddeduction amount under § 63(f) for theaged or the blind is $1,100. These amountsare increased to $1,400 if the individual isalso unmarried and not a surviving spouse.

.11 Overall Limitation on Itemized De-ductions. For taxable years beginning in2009, the “applicable amount” of adjustedgross income under § 68(b), above whichthe amount of otherwise allowable item-ized deductions is reduced under § 68, is$166,800 (or $83,400 for a separate returnfiled by a married individual).

.12 Qualified Transportation Fringe.For taxable years beginning in 2009, themonthly limitation under § 132(f)(2)(A),regarding the aggregate fringe benefitexclusion amount for transportation in acommuter highway vehicle and any tran-sit pass, is $120. The monthly limitationunder § 132(f)(2)(B), regarding the fringebenefit exclusion amount for qualifiedparking, is $230.

.13 Income from United States SavingsBonds for Taxpayers Who Pay QualifiedHigher Education Expenses. For taxableyears beginning in 2009, the exclusion un-der § 135, regarding income from UnitedStates savings bonds for taxpayers whopay qualified higher education expenses,begins to phase out for modified adjustedgross income above $104,900 for joint

returns and $69,950 for other returns.The exclusion is completely phased outfor modified adjusted gross income of$134,900 or more for joint returns and$84,950 or more for other returns.

.14 Adoption Assistance Programs. Fortaxable years beginning in 2009, under§ 137(a)(2) the amount that can be ex-cluded from an employee’s gross incomefor the adoption of a child with specialneeds is $12,150. For taxable years be-ginning in 2009, under § 137(b)(1) themaximum amount that can be excludedfrom an employee’s gross income for theamounts paid or expenses incurred by anemployer for qualified adoption expensesfurnished pursuant to an adoption assis-tance program for other adoptions by theemployee is $12,150. The amount exclud-able from an employee’s gross income be-gins to phase out under § 137(b)(2)(A) fortaxpayers with modified adjusted gross in-come in excess of $182,180 and is com-pletely phased out for taxpayers with mod-ified adjusted gross income of $222,180 ormore. (See section 3.03 of this revenueprocedure for the adjusted items relating tothe adoption credit.)

.15 Private Activity Bonds Volume Cap.For calendar year 2009, the amounts usedunder § 146(d)(1) to calculate the Stateceiling for the volume cap for privateactivity bonds is the greater of (1) $90multiplied by the State population, or (2)$273,270,000.

.16 Loan Limits for Agricultural Bonds.For calendar year 2009, the loan limitamount on agricultural bonds under§ 147(c)(2)(A) for first-time farmers is$469,200.

.17 General Arbitrage Rebate Rules.For bond years ending in 2009, the amountof the computation credit determinedunder § 1.148–3(d)(4) of the proposedIncome Tax Regulations is $1,490.

.18 Safe Harbor Rules for BrokerCommissions on Guaranteed Invest-ment Contracts or Investments Purchasedfor a Yield Restricted Defeasance Es-crow. For calendar year 2009, under§ 1.148–5(e)(2)(iii)(B)(1), a broker’s com-mission or similar fee for the acquisitionof a guaranteed investment contract or in-vestments purchased for a yield restricteddefeasance escrow is reasonable if (1) theamount of the fee that the issuer treats asa qualified administrative cost does notexceed the lesser of (A) $35,000, and (B)0.2 percent of the computational base (asdefined in § 1.148–5(e)(2)(iii)(B)(2)) or,if more, $4,000; and (2) the issuer doesnot treat more than $99,000 in brokers’commissions or similar fees as qualifiedadministrative costs for all guaranteedinvestment contracts and investments foryield restricted defeasance escrows pur-chased with gross proceeds of the issue.

.19 Personal Exemption.(1) Exemption amount. For taxable

years beginning in 2009, the personal ex-emption amount under § 151(d) is $3,650.The exemption amount for taxpayers withadjusted gross income in excess of themaximum phaseout amount is $2,433 fortaxable years beginning in 2009.

(2) Phaseout. For taxable years be-ginning in 2009, the personal exemptionamount begins to phase out at, and reachesthe maximum phaseout amount after, thefollowing adjusted gross income amounts:

2008–45 I.R.B. 1112 November 10, 2008

Filing Status AGI – Beginningof Phaseout

AGI – MaximumPhaseout

Married Individuals Filing Joint Returns and Surviving Spouses (§ 1(a)) $250,200 $372,700

Heads of Households (§ 1(b)) $208,500 $331,000

Unmarried Individuals (other than Surviving Spouses and Heads of Households) (§ 1(c)) $166,800 $289,300

Married Individuals Filing Separate Returns (§ 1(d)) $125,100 $186,350

.20 Election to Expense Certain Depre-ciable Assets. For taxable years beginningin 2009, under § 179(b)(1) the aggregatecost of any § 179 property a taxpayer mayelect to treat as an expense cannot exceed$133,000. Under § 179(b)(2) the $133,000

limitation is reduced (but not below zero)by the amount by which the cost of § 179property placed in service during the 2009taxable year exceeds $530,000.

.21 Eligible Long-Term Care Premi-ums. For taxable years beginning in 2009,

the limitations under § 213(d)(10), re-garding eligible long-term care premiumsincludible in the term “medical care,” areas follows:

Attained Age Before the Close of the Taxable Year Limitation on Premiums

40 or less $ 320

More than 40 but not more than 50 $ 600

More than 50 but not more than 60 $1,190

More than 60 but not more than 70 $3,180

More than 70 $3,980

22 Medical Savings Accounts.(1) Self-only coverage. For taxable

years beginning in 2009, the term “highdeductible health plan” as defined in§ 220(c)(2)(A) means, for self-only cov-erage, a health plan that has an annualdeductible that is not less than $2,000 andnot more than $3,000, and under which theannual out-of-pocket expenses requiredto be paid (other than for premiums) forcovered benefits do not exceed $4,000.

(2) Family coverage. For taxable yearsbeginning in 2009, the term “high de-ductible health plan” means, for familycoverage, a health plan that has an annualdeductible that is not less than $4,000 andnot more than $6,050, and under which theannual out-of-pocket expenses requiredto be paid (other than for premiums) forcovered benefits do not exceed $7,350.

.23 Interest on Education Loans. Fortaxable years beginning in 2009, the$2,500 maximum deduction for inter-est paid on qualified education loansunder § 221 begins to phase out under§ 221(b)(2)(B) for taxpayers with mod-ified adjusted gross income in excess of$60,000 ($120,000 for joint returns), andis completely phased out for taxpayerswith modified adjusted gross income of

$75,000 or more ($150,000 or more forjoint returns).

.24 Treatment of Dues Paid to Agricul-tural or Horticultural Organizations. Fortaxable years beginning in 2009, the limi-tation under § 512(d)(1), regarding the ex-emption of annual dues required to be paidby a member to an agricultural or horticul-tural organization, is $145.

.25 Insubstantial Benefit Limitationsfor Contributions Associated with Chari-table Fund-Raising Campaigns.

(1) Low cost article. For taxable yearsbeginning in 2009, the unrelated businessincome of certain exempt organizationsunder § 513(h)(2) does not include a “lowcost article” of $9.50 or less.

(2) Other insubstantial benefits. Fortaxable years beginning in 2009, the $5,$25, and $50 guidelines in section 3 ofRev. Proc. 90–12, 1990–1 C.B. 471 (asamplified by Rev. Proc. 92–49, 1992–1C.B. 987, and modified by Rev. Proc.92–102, 1992–2 C.B. 579), for disregard-ing the value of insubstantial benefitsreceived by a donor in return for a fullydeductible charitable contribution under§ 170, are $9.50, $47.50, and $95, respec-tively.

.26 Expatriation to Avoid Tax. Forcalendar year 2009, an individual with

“average annual net income tax” of morethan $145,000 for the five taxable yearsending before the date of the loss of UnitedStates citizenship under § 877(a)(2)(A)is a covered expatriate for purposes of§ 877A(g)(1).

.27 Tax Responsibilities of Expatria-tion. For taxable years beginning in 2009,the amount that would be includible in thegross income of a covered expatriate byreason of § 877A(a)(1) is reduced (but notbelow zero) by $626,000.

.28 Foreign Earned Income Exclusion.For taxable years beginning in 2009, theforeign earned income exclusion amountunder § 911(b)(2)(D)(i) is $91,400.

.29 Valuation of Qualified Real Prop-erty in Decedent’s Gross Estate. For anestate of a decedent dying in calendar year2009, if the executor elects to use the spe-cial use valuation method under § 2032Afor qualified real property, the aggregatedecrease in the value of qualified real prop-erty resulting from electing to use § 2032Afor purposes of the estate tax cannot ex-ceed $1,000,000.

.30 Annual Exclusion for Gifts.(1) For calendar year 2009, the first

$13,000 of gifts to any person (other thangifts of future interests in property) are

November 10, 2008 1113 2008–45 I.R.B.

not included in the total amount of taxablegifts under § 2503 made during that year.

(2) For calendar year 2009, the first$133,000 of gifts to a spouse who is nota citizen of the United States (other thangifts of future interests in property) arenot included in the total amount of taxablegifts under §§ 2503 and 2523(i)(2) madeduring that year.

.31 Tax on Arrow Shafts. For calen-dar year 2009, the tax imposed under§ 4161(b)(2)(A) on the first sale by themanufacturer, producer, or importer of anyshaft of a type used in the manufacture ofcertain arrows is $0.45 per shaft.

.32 Passenger Air Transportation Ex-cise Tax. For calendar year 2009, thetax under § 4261(b) on the amount paidfor each domestic segment of taxable airtransportation is $3.60. For calendar year2009, the tax under § 4261(c) on anyamount paid (whether within or withoutthe United States) for any air transporta-tion, if the transportation begins or endsin the United States, generally is $16.10.However, for a domestic segment begin-ning or ending in Alaska or Hawaii asdescribed in § 4261(c)(3), the tax appliesonly to departures and the rate is $8.00.

.33 Reporting Exception for CertainExempt Organizations with NondeductibleLobbying Expenditures. For taxable yearsbeginning in 2009, the annual per per-son, family, or entity dues limitation toqualify for the reporting exception under§ 6033(e)(3) (and section 5.05 of Rev.Proc. 98–19, 1998–1 C.B. 547), regardingcertain exempt organizations with nonde-ductible lobbying expenditures, is $101 orless.

.34 Notice of Large Gifts Received fromForeign Persons. For taxable years begin-ning in 2009, recipients of gifts from cer-tain foreign persons may be required to re-port these gifts under § 6039F if the ag-

gregate value of gifts received in a taxableyear exceeds $14,139.

.35 Persons Against Whom a FederalTax Lien Is Not Valid. For calendar year2009, a federal tax lien is not valid against(1) certain purchasers under § 6323(b)(4)who purchased personal property in acasual sale for less than $1,380, or (2)a mechanic’s lienor under § 6323(b)(7)that repaired or improved certain residen-tial property if the contract price with theowner is not more than $6,880.

.36 Property Exempt from Levy. Forcalendar year 2009, the value of propertyexempt from levy under § 6334(a)(2) (fuel,provisions, furniture, and other householdpersonal effects, as well as arms for per-sonal use, livestock, and poultry) cannotexceed $8,230. The value of property ex-empt from levy under § 6334(a)(3) (booksand tools necessary for the trade, business,or profession of the taxpayer) cannot ex-ceed $4,120.

.37 Interest on a Certain Portion of theEstate Tax Payable in Installments. For anestate of a decedent dying in calendar year2009, the dollar amount used to determinethe “2-percent portion” (for purposes ofcalculating interest under § 6601(j)) of theestate tax extended as provided in § 6166is $1,330,000.

.38 Attorney Fee Awards. For feesincurred in calendar year 2009, theattorney fee award limitation under§ 7430(c)(1)(B)(iii) is $180 per hour.

.39 Periodic Payments Received un-der Qualified Long-Term Care InsuranceContracts or under Certain Life Insur-ance Contracts. For calendar year 2009,the stated dollar amount of the per diemlimitation under § 7702B(d)(4), regardingperiodic payments received under a qual-ified long-term care insurance contract orperiodic payments received under a lifeinsurance contract that are treated as paid

by reason of the death of a chronically illindividual, is $280.

SECTION 4. EFFECTIVE DATE

.01 General Rule. Except as providedin section 4.02, this revenue procedure ap-plies to taxable years beginning in 2009.

.02 Calendar Year Rule. This revenueprocedure applies to transactions or eventsoccurring in calendar year 2009 for pur-poses of sections 3.07 (low-income hous-ing credit), 3.09 (transportation mainlinepipeline construction industry optionalexpense substantiation rules for paymentsto employees under accountable plans),3.15 (private activity bond volume cap),3.16 (loan limits on agricultural bonds),3.17 (general arbitrage rebate rules), 3.18(safe harbor rules for broker commissionson guaranteed investment contracts or in-vestments purchased for a yield restricteddefeasance escrow), 3.26 (expatriation toavoid tax), 3.29 (valuation of qualifiedreal property in decedent’s gross estate),3.30 (annual exclusion for gifts), 3.31 (taxon arrow shafts), 3.32 (passenger air trans-portation excise tax), 3.35 (persons againstwhom a federal tax lien is not valid), 3.36(property exempt from levy), 3.37 (inter-est on a certain portion of the estate taxpayable in installments), 3.38 (attorneyfee awards), and 3.39 (periodic paymentsreceived under qualified long-term careinsurance contracts or under certain lifeinsurance contracts).

SECTION 5. DRAFTINGINFORMATION

The principal author of this revenueprocedure is Christina M. Glendening ofthe Office of Associate Chief Counsel(Income Tax & Accounting). For furtherinformation regarding this revenue pro-cedure, contact Ms. Glendening at (202)622–4920 (not a toll-free call).

2008–45 I.R.B. 1114 November 10, 2008

Part IV. Items of General InterestNotice of ProposedRulemaking byCross-Reference toTemporary Regulations

Section 6707A and the Failureto Include on Any Return orStatement Any InformationRequired to be DisclosedUnder Section 6011 WithRespect to a ReportableTransaction

REG–160868–04


ACTION: Notice of proposed rulemakingby cross-reference to temporary regula-tions.

SUMMARY: In this issue of the Bulletin,the IRS is issuing temporary regulations(T.D. 9425) under section 6707A of the In-ternal Revenue Code (Code), which pro-vide the rules relating to the assessmentof penalties under section 6707A for thefailure to include on any return or state-ment any information required to be dis-closed under section 6011 with respect toa reportable transaction. The text of thosetemporary regulations also serves as thetext of these proposed regulations.

DATES: Written or electronic commentsand requests for a public hearing must bereceived by December 10, 2008.

ADDRESSES: Send submission to:CC:PA:LPD:PR (REG–160868–04), room5203, Internal Revenue Service, P.O. Box7604, Ben Franklin Station, Washing-ton, DC 20044. Submissions may behand delivered Monday through Fridaybetween the hours of 8 a.m. and 4 p.m.to: CC:PA:LPD:PR (REG–160868–04),Courier’s Desk, Internal Revenue Ser-vice, 1111 Constitution Avenue, NW,Washington, DC, or sent electroni-cally via the Federal eRulemaking Por-tal at http://www.regulations.gov (IRSREG–160868–04).

FOR FURTHER INFORMATIONCONTACT: Concerning the pro-posed regulations, Matthew Cooper(202) 622–4940; concerning submis-sions of comments and requests for apublic hearing, Richard Hurst (202)622–2949 (TDD telephone) (not toll-freenumbers) and his e-mail address [email protected].


Background and Explanation ofProvisions

Temporary regulations in this issueof the Bulletin amend the Procedure andAdministration Regulations (26 CFR part301) relating to section 6707A. Section811 of the American Jobs Creation Actof 2004, Public Law 108–357 (118 Stat.1418) added section 6707A to the Code toprovide a monetary penalty for the failureto include on any return or statement anyinformation required to be disclosed undersection 6011 with respect to a reportabletransaction. The temporary regulationsset forth the rules relating to the assess-ment of the penalty as well as the factorsthat the Commissioner (or the Commis-sioner’s delegate) will consider in decidingwhether the penalty should be rescindedbased on promoting compliance with theCode and effective tax administration.The text of those temporary regulationsalso serves as the text of these proposedregulations. The preamble to the tempo-rary regulations explains the amendments.

Special Analyses

It has been determined that this noticeof proposed rulemaking is not a significantregulatory action as defined in ExecutiveOrder 12866. Therefore, a regulatory as-sessment is not required. It also has beendetermined that section 553(b) of the Ad-ministrative Procedure Act (5 U.S.C. chap-ter 5) does not apply to these regulations,and because they do not impose a collec-tion of information on small entities, theRegulatory Flexibility Act (5 U.S.C. chap-ter 6) does not apply. Pursuant to section7805(f) of the Code, these regulations havebeen submitted to the Chief Counsel for

Advocacy of the Small Business Adminis-tration for comment on its impact on smallbusiness.

Comments and Requests for a PublicHearing

Before these proposed regulations areadopted as final regulations, considerationwill be given to any written (a signed origi-nal and eight (8) copies) or electronic com-ments that are submitted timely to the IRS.The IRS and the Treasury Department re-quest comments on the clarity of the pro-posed rules and how they can be made eas-ier to understand. All comments will bemade available for public inspection andcopying. A public hearing may be sched-uled if requested by any person who timelysubmits comments. If a public hearingis scheduled, notice of the date, time andplace for the public hearing will be pub-lished in the Federal Register.


The principal author of these regula-tions is Matthew Cooper, Office of the As-sociate Chief Counsel (Procedure and Ad-ministration).

* * * * *

Proposed Amendments to theRegulations

Accordingly, 26 CFR part 301 is pro-posed to be amended as follows:

PART 301 — PROCEDURE ANDADMINISTRATION

Par. 1. The authority citation for part301 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *Par. 2. Section 301.6707A–1 is added

to read as follows:

§301.6707A–1 Failure to include onany return or statement any informationrequired to be disclosed under section6011 with respect to a reportabletransaction.

[The text of proposed §301.6707A–1 isthe same as the text of §301.6707A–1T

November 10, 2008 1115 2008–45 I.R.B.

published elsewhere in this issue of theBulletin].

Linda E. Stiff,Deputy Commissioner

for Services and Enforcement.


Notice of ProposedRulemaking and Notice ofPublic Hearing

Targeted Populations UnderSection 45D(e)(2)

REG–142339–05


ACTION: Notice of proposed rulemakingand notice of public hearing.

SUMMARY: This document contains pro-posed regulations relating to how an entityserving certain targeted populations undersection 45D(e)(2) can meet the require-ments to be a qualified active low-incomecommunity business. The regulations re-flect changes to the law made by the Amer-ican Jobs Creation Act of 2004. The regu-lations will affect certain taxpayers claim-ing the new markets tax credit. This doc-ument also provides a notice of a publichearing on these proposed regulations.

DATES: Written or electronic commentsmust be received by December 23, 2008.Outlines of topics to be discussed at thepublic hearing scheduled for Thursday,January 22, 2009 at 10:00 a.m. must bereceived by Friday, December 26, 2008.

ADDRESSES: Send submissions to:CC:PA:LPD:PR (REG–142339–05), room5203, Internal Revenue Service, PO Box7604, Ben Franklin Station, Washing-ton, DC 20044. Submissions may behand delivered Monday through Fridaybetween the hours of 8 a.m. and 4 p.m.to: CC:PA:LPD:PR (REG–142339–05),Courier’s Desk, Internal Revenue Ser-vice, 1111 Constitution Avenue, NW,

Washington, DC, or sent electroni-cally, via the Federal eRulemakingPortal at www.regulations.gov (IRS –REG–142339–05). The public hearingwill be held in the IRS Auditorium,Internal Revenue Building, 1111Constitution Avenue, NW, Washington,DC.

FOR FURTHER INFORMATIONCONTACT: Concerning the regulations,Julie Hanlon-Bolton, (202) 622–3040;concerning submission of comments,the hearing, and/or to be placed on thebuilding access list to attend the hearing,Funmi Awosika Taylor, (202) 622–7180(not toll-free numbers).


Background

This document amends 26 CFR part 1to provide rules relating to certain targetedpopulations under section 45D(e)(2). OnMay 24, 2005, the Community Develop-ment Financial Institutions (CDFI) Fundpublished an advance notice of proposedrulemaking (ANPRM) (70 FR 29658) toseek comments from the public with re-spect to how targeted populations may betreated as eligible low-income communi-ties under section 45D(e)(2). In responseto the ANPRM, comments were receivedmaking various suggestions relating to theTreasury Department’s definition of theterm “targeted populations” and proposingamendments to the requirements to be aqualified active low-income communitybusiness under §1.45D–1. On June 30,2006, the IRS and Treasury Departmentreleased Notice 2006–60, 2006–2 C.B. 82,which announced that §1.45D–1 wouldbe amended to provide rules relating tohow an entity meets the requirements tobe a qualified active low-income commu-nity business when its activities involvecertain targeted populations under section45D(e)(2). Taxpayers may rely on Notice2006–60 until final regulations are is-sued. See §601.601(d)(2)(ii)(b). The IRSand Treasury Department have reviewedand considered all written and electroniccomments in the process of preparing theproposed regulations. This preamble tothe proposed regulations describes manyof the more significant comments received

by the IRS and Treasury Department inresponse to the notice.

General Overview

Section 45D(a)(1) provides a new mar-kets tax credit on certain credit allowancedates described in section 45D(a)(3) withrespect to a qualified equity investment ina qualified community development entity(CDE) described in section 45D(c).

Section 45D(b)(1) provides that an eq-uity investment in a CDE is a “qualifiedequity investment” if, among other re-quirements: (A) the investment is acquiredby the taxpayer at its original issue (di-rectly or through an underwriter) solely inexchange for cash; (B) substantially all ofthe cash is used by the CDE to make qual-ified low-income community investments;and (C) the investment is designated forpurposes of section 45D by the CDE.

Under section 45D(b)(2), the maxi-mum amount of equity investments issuedby a CDE that may be designated by theCDE as qualified equity investments shallnot exceed the portion of the new marketstax credit limitation set forth in section45D(f)(1) that is allocated to the CDE bythe Secretary under section 45D(f)(2).

Section 45D(c)(1) provides that an en-tity is a CDE if, among other requirements,the entity is certified by the Secretary as aCDE.

Section 45D(d)(1) provides that theterm qualified low-income community in-vestment means: (A) any capital or equityinvestment in, or loan to, any qualifiedactive low-income community business(as defined in section 45D(d)(2)); (B)the purchase from another CDE of anyloan made by the entity that is a qualifiedlow-income community investment; (C)financial counseling and other servicesspecified in regulations prescribed by theSecretary to businesses located in, andresidents of, low-income communities;and (D) any equity investment in, or loanto, any CDE.

Under section 45D(d)(2), a qualifiedactive low-income community business isany corporation (including a nonprofit cor-poration) or partnership if for such year,among other requirements, (i) at least 50percent of the total gross income of the en-tity is derived from the active conduct of aqualified business within any low-incomecommunity, (ii) a substantial portion of the

2008–45 I.R.B. 1116 November 10, 2008

use of the tangible property of the entity(whether owned or leased) is within anylow-income community, and (iii) a sub-stantial portion of the services performedfor the entity by its employees are per-formed in any low-income community.

Under section 45D(d)(3), with certainexceptions, a qualified business is anytrade or business. The rental to othersof real property is a qualified businessonly if, among other requirements, thereal property is located in a low-incomecommunity.

Section 221 of the American JobsCreation Act of 2004 (Public Law108–357, 118 Stat. 1418) amended sec-tion 45D(e)(2) to provide that the Sec-retary shall prescribe regulations underwhich one or more targeted populations(within the meaning of section 103(20)of the Riegle Community Developmentand Regulatory Improvement Act of 1994(12 U.S.C. 4702(20))) may be treated aslow-income communities. The regulationsshall include procedures for determiningwhich entities are qualified active low-in-come community businesses with respectto those populations.

The term targeted population, as de-fined in 12 U.S.C. 4702(20) and 12 C.F.R.1805.201, means individuals, or an iden-tifiable group of individuals, including anIndian tribe, who (A) are low-income per-sons; or (B) otherwise lack adequate ac-cess to loans or equity investments. Un-der 12 U.S.C. 4702(17) as interpreted by12 C.F.R 1805.104, the term low-incomemeans having an income, adjusted for fam-ily size, of not more than (A) for metropoli-tan areas, 80 percent of the area medianfamily income; and (B) for non-metropoli-tan areas, the greater of (i) 80 percent of thearea median family income; or (ii) 80 per-cent of the statewide nonmetropolitan areamedian family income.

Section 101(a) of the Gulf Oppor-tunity Zone Act of 2005 (Public Law109–135, 119 Stat. 2577) added new sec-tion 1400M(1), which provides that theGulf Opportunity Zone (GO Zone) is thatportion of the Hurricane Katrina disasterarea determined by the President to war-rant individual or individual and publicassistance from the Federal Governmentunder the Robert T. Stafford Disaster Re-lief and Emergency Assistance Act (theAct) by reason of Hurricane Katrina.

Section 1400M(2) provides that theHurricane Katrina disaster area is an areawith respect to which a major disasterhas been declared by the President beforeSeptember 14, 2005, under section 401 ofthe Act by reason of Hurricane Katrina.After determination by the President that adisaster area warrants assistance pursuantto the Act, the Federal Emergency Man-agement Agency (FEMA) makes damageassessments. The categories for damageassessment in the wake of a hurricane are:flooded area, saturated area, limited dam-age, moderate damage, extensive damage,and catastrophic damage.

Under section 1400N(m)(1), a CDEshall be eligible for an allocation un-der section 45D(f)(2) of the increasein the new markets tax credit limita-tion described in section 1400N(m)(2)only if a significant mission of the CDEis the recovery and redevelopment ofthe GO Zone. Section 1400N(m)(2)provides that the new markets tax creditlimitation otherwise determined undersection 45D(f)(1) shall be increased byan amount equal to $300,000,000 for2005 and 2006 and $400,000,000 for2007, to be allocated among CDEs tomake qualified low-income communityinvestments within the GO Zone.

Notice 2006–60 provides rules relatingto how an entity meets the requirements tobe a qualified active low-income commu-nity business when its activities involvetargeted populations. Targeted popula-tions that will be treated as a low-incomecommunity are defined as individuals,or an identifiable group of individuals,including an Indian tribe, who are low-in-come persons or who are individuals whootherwise lack adequate access to loans orequity investments. The notice providesrequirements for qualified active low-in-come community businesses that servelow-income targeted populations and forqualified active low-income communitybusinesses that serve the GO Zone Tar-geted Population.

Summary of Comments andExplanation of Provisions

The proposed amendments to§1.45D–1 incorporate the guidance pro-vided by Notice 2006–60 into the reg-ulations. Unless otherwise stated, theexisting rules of §1.45D–1 relating to

qualified active low-income communitybusinesses apply to businesses servingtargeted populations. For example, the“reasonable expectations” safe harbor of§1.45D–1(d)(6)(i) applies to businessesserving targeted populations. That ruleallows an entity to be treated as a qualifiedactive low-income community businessfor the duration of the CDE’s investmentif the CDE reasonably expects, at the timethe CDE makes the investment in, or loanto, the entity that the entity will satisfythe requirements to be a qualified activelow-income community business through-out the entire period of the investmentor loan. Except as discussed later in thispreamble, the rules in these proposed reg-ulations are the same as those provided inNotice 2006–60.

Sections 3.03 and 3.04 of Notice2006–60 and the proposed amendments to§1.45D–1 include a definition of TargetedPopulations, determined by the TreasuryDepartment, that further defines the terms“low-income persons” and “individualswho otherwise lack adequate access toloans or equity investments.”

Section 3.03(1) of Notice 2006–60states that an individual shall be consid-ered to be low-income if the individual’sfamily income, adjusted for family size,is not more than (A) for metropolitan ar-eas, 80 percent of the area median familyincome; and (B) for non-metropolitan ar-eas, the greater of (i) 80 percent of thearea median family income; or (ii) 80percent of the statewide nonmetropolitanarea median family income. A commenta-tor requested guidance on calculating theapplicable income limitation and calcu-lating the family income. In calculatingthe applicable income limitation, taxpay-ers must rely on the annual estimates ofmedian family income released by theDepartment of Housing and Urban De-velopment (HUD) and may rely on thosefigures until 45 days after HUD releases anew list of income limits, or until HUD’seffective date for the new list, whicheveris later. For example, a taxpayer hires onJanuary 1, 2007, a new employee who is amember of a four person family. The mostrecent HUD median family income esti-mates were released on March 19, 2007.In determining whether the employee islow-income on January 1, 2008, the tax-payer may rely on the 2007 HUD medianfamily income estimates for a four person

November 10, 2008 1117 2008–45 I.R.B.

family until 45 days after HUD releases anew list of income limits, or until HUD’seffective date for the new list, whicheveris later. The income limits are computedand listed, according to family size, byHUD for every Metropolitan StatisticalArea, Primary Metropolitan StatisticalArea, and nonmetropolitan county of theUnited States and Puerto Rico. HUD alsoreleases income limits for the possessionsof Guam and the Virgin Islands.

One commentator suggested that itwould be less burdensome for a qualifiedactive low-income community businessesto document that an individual is low-in-come for purposes of section 45D(e)(2) ifindividuals who live in a low-income com-munity as defined in section 45D(e)(1),(3), (4), or (5) were deemed to be low-in-come for purposes of section 45D(e)(2).However, section 45D(e)(2) directly crossreferences targeted populations as definedin 12 U.S.C. 4702(20). The term low-in-come is defined in 12 U.S.C. 4702(17) tomean having an income, adjusted for fam-ily size, of not more than: for metropolitanareas, 80 percent of the area median in-come; and for nonmetropolitan areas, thegreater of 80 percent of the area medianincome or 80 percent of the statewidenonmetropolitan area median income. Ac-cordingly, the Treasury Department is notadopting the commentator’s suggestion.

Some commentators suggested stricterrequirements for targeted populations byincreasing the 120-percent-income restric-tion in section 3.03(3) of Notice 2006–60to 150 percent of municipal median in-come and requiring that taxpayers meet allthree of the qualified active low-incomecommunity business tests set forth in sec-tions 3.03(2)(a) and 3.04(3)(a) instead ofone of the three. The commentators alsosuggested providing stricter requirementsfor the definitions of low-income persons,low-income communities, and qualifiedactive low-income community businesses.The commentators expressed concern thatNotice 2006–60 permits investments be-yond low-income communities. NeitherNotice 2006–60 nor the proposed regula-tions change the existing rules governinglow-income communities. Rather, theyprovide guidance on how an entity servingcertain targeted populations under section45D(e)(2) can be a qualified active low-in-come community business. The IRS andTreasury Department believe that Notice

2006–60 and the proposed regulationsappropriately implement Congressionalintent to expand new market tax credit in-vestments to low-income individuals andindividuals that otherwise lack adequateaccess to loans or equity investments bytreating targeted populations as a low-in-come community. Congress enacted thetargeted populations provisions under sec-tion 45D(e)(2) to expand new markets taxcredit investment dollars to other under-served areas. Consequently, the proposedregulations do not adopt the commenta-tors’ suggestions.

Some commentators believe that therules in Notice 2006–60 should be broad-ened in scope to allow entities engagedin essential governmental functions, suchas health care services to the community,to be deemed to be a qualified activelow-income community business servingtargeted populations. The IRS and Trea-sury Department do not believe that it isappropriate to provide targeted benefitsto particular industries. Accordingly, theproposed regulations do not adopt thiscomment.

Other commentators believe that anon-profit business that is not individu-ally owned should be able to satisfy theownership test if at least 25 percent ofthe business’s board is comprised of indi-viduals who are low-income or representa low-income targeted population. An-other commentator suggested removingthe 120-percent-income restriction. Con-cerning the rules for the GO Zone TargetedPopulation, one commentator suggestedusing parishes rather than census tractsand suggested removing or substantiallyreducing the percentage test for the grossincome requirement. The proposed reg-ulations do not adopt these suggestionsbecause the IRS and Treasury Departmentbelieve that the guidance provided in No-tice 2006–60 generally ensures that thebusinesses receiving qualified low-incomecommunity investments serve targetedpopulations for low-income and GO Zonepopulations. Finally, some commenta-tors suggested providing geographic rulesfor targeted populations. Targeted pop-ulations is not a geographic concept; itis designed to provide a new marketstax credit to investors of qualified activelow-income community businesses thatserve targeted populations. Therefore, thiscomment was not adopted.

Section 3.03(2) of Notice 2006–60provides qualified active low-incomecommunity business requirements forlow-income targeted populations. Severalcommentators suggested that businessesthat qualify and participate in other Fed-eral programs targeted specifically tolow-income individuals and families mayuse such participation as a proxy for meet-ing the targeted populations requirements.The IRS and Treasury Department havenot analyzed other Federal programs todetermine whether they meet the statutoryrequirements under section 45D(e), andit is not certain that programs currentlymeeting the requirements would continueto do so in the future. Moreover, the IRSand Treasury Department do not believe itis appropriate to exempt certain businessesfrom meeting the regulatory requirementsto be a qualified active low-income com-munity business based upon participationin other Federal programs, including thosedesigned to aid low-income individualsand families, because these Federal pro-grams cannot be substituted for the statu-tory requirements under section 45D(e).Therefore, the proposed regulations do notadopt this comment.

One commentator requested thatthe gross income requirement of sec-tion 3.03(2)(a)(i) of Notice 2006–60 beamended to include income from the pro-vision of services to businesses that servetargeted populations. The comment fo-cuses on wholesalers that sell goods toretailers that resell to low-income persons.The IRS and Treasury Department believethat such a rule would cover too broad arange of transactions and would conflictwith the goal of ensuring that qualifiedlow-income community investment dol-lars go directly to businesses that servetargeted populations. Accordingly, theproposed regulations do not adopt thiscomment.

Several commentators suggested thatadditional restrictions should be added tothe employee requirement under sections3.03(2)(a)(ii) and 3.04(3)(a)(ii) of Notice2006–60. One commentator proposedthat the employee should be a member ofa targeted group as defined by the workopportunity tax credit under section 51.Another commentator suggested that abusiness should be able to satisfy the em-ployee test only if the business pays awage that would increase the income of the

2008–45 I.R.B. 1118 November 10, 2008

low-income individual being hired. Stillanother commentator suggested that theemployee requirement be satisfied only ifeach $25,000 in tax credit allocation re-sults in at least one new job. Although theproposed regulations do not incorporatethese suggestions at this time, the IRS andTreasury Department request commentsregarding whether additional restrictionsshould be added to the employee require-ment.

One commentator asked that the guid-ance provided in section 3.03(2)(b) ofNotice 2006–60 on the determination ofwhether an employee is a low-incomeperson be amended to provide that thedetermination should be made on the laterof the date the employee was hired or thedate the qualified low-income communityinvestment is made. The IRS and Trea-sury Department believe that adopting thiscomment would create undue complexity.In addition, the IRS and Treasury Depart-ment do not want to provide a rule thatmay encourage employers to keep theiremployees low-income to be eligible as aqualified active low-income communitybusiness. Therefore, the proposed regula-tions retain the rule in Notice 2006–60 thatthe determination of whether an employeeis a low-income person is made at the timeof hire.

Sections 3.03(3)(a)(iii) and 3.04(4)(a)(iii) of Notice 2006–60 provide thatthe 120-percent-income restriction andthe 200-percent-income restriction,respectively, do not apply to an entitylocated within a population census tractwith a population of less than 2,000 ifsuch tract is located in a metropolitan areaand more than 75 percent of the tract iszoned for commercial or industrial use. Acommentator suggested that to determinewhether 75 percent of a population censustract is zoned for commercial or industrialuse, the area of the population censustract should be used. In addition, thetract should be considered zoned forcommercial or industrial use if commercialor industrial use is a permissible zoninguse. The IRS and Treasury Departmentagree that these suggestions will helpclarify the rule. Accordingly, the proposedregulations adopt the commentator’ssuggestions.

Sections 3.03(3)(b), 3.04(3)(b), and3.04(4)(b) of Notice 2006–60 provide teststo determine whether an entity is located

in a particular census tract. One commen-tator suggested that the percentages usedfor the use of tangible property test andservices performed test be increased from40 percent to 60 percent. The proposedregulations do not adopt this commentbecause the proposed percentages areconsistent with the qualified active low-in-come community business requirementsunder §1.45D–1(d)(4)(i).

Section 3.03(4) of Notice 2006–60 pro-vides that the rental to others of real prop-erty for low-income targeted populationsthat otherwise satisfies the requirements tobe a qualified business will be treated aslocated in a low-income community if atleast 50 percent of the entity’s total grossincome is derived from rentals to individ-uals who are low-income persons and/or toa qualified active low-income communitybusiness that meets the requirements forlow-income targeted populations. Section3.04(5) provides a similar rule for rentalof real property for the GO Zone TargetedPopulation. One commentator suggestedthat “50 percent” be lowered to “20 per-cent” to mirror the definition of non-res-idential real property for purposes of de-preciation under section 168. The IRS andTreasury Department believe that, for pur-poses of determining whether a businessengaged in the rental of real property islocated in a low-income community, it ismore appropriate to adopt rules consistentwith the rules governing whether an en-tity is a qualified active low-income com-munity business for targeted populations.Therefore, the proposed regulations do notadopt the commentator’s suggestion.

The Treasury Department has deter-mined that an individual is considered tootherwise lack adequate access to loans orequity investments only if the individualwas displaced from his or her principalresidence as a result of Hurricane Katrinaand/or the individual lost his or her prin-cipal source of employment as a result ofHurricane Katrina. In order to meet thisdefinition, the individual’s principal resi-dence or principal source of employment,as applicable, must have been locatedin a population census tract within theGO Zone that contains one or more areasdesignated by FEMA as flooded, havingsustained extensive damage, or havingsustained catastrophic damage as a resultof Hurricane Katrina. One commentatorasked how taxpayers would know which

population census tracts have received therelevant FEMA designations. The CDFIFund has made this information availableon its website at www.cdfifund.gov.

Commentators requested that theGO Zone Targeted Population beexpanded to all census tracts within theGO Zone, rather than limited to only thoseareas designated by FEMA as flooded,having sustained extensive damage, orhaving sustained catastrophic damageas a result of Hurricane Katrina. TheIRS and Treasury Department believethat for purposes of the increase in thelimitation under section 1400N(m)(2), thenew markets tax credit should only beused in the areas that were most devastatedby Hurricane Katrina or are otherwisequalified as low-income communities.The IRS and Treasury Department believethat the areas that were most devastated byHurricane Katrina are in greater need ofassistance, due to lack of adequate accessto loans or equity investments, than otherareas within the GO Zone.

Commentators requested that the pro-posed regulations not limit use of therules governing the GO Zone TargetedPopulation to investments made by CDEswith allocations from the increase un-der section 1400N(m)(2). The IRS andTreasury Department do not believe thatit is appropriate to expand the ability touse the rules governing the GO ZoneTargeted Population beyond investmentsmade by CDEs with GO Zone allocations,because it would remove much neededassistance from other low-income com-munities within the GO Zone.

Section 1.45D–1(d)(4)(iv)(A) providesthat for purposes of §1.45D–1(d)(4)(i), anentity will be treated as engaged in theactive conduct of a trade or business if,at the time the CDE makes a capital orequity investment in, or loan to, the en-tity, the CDE reasonably expects that theentity will generate revenues (or, in thecase of a nonprofit corporation, engagein an activity that furthers its purpose asa nonprofit corporation) within 3 yearsafter the date the investment or loan ismade. This “active conduct of a tradeor business” safe harbor applies only forpurposes of determining whether an en-tity is engaged in the active conduct of atrade or business and does not apply forpurposes of determining whether an entityis otherwise a qualified active low-income

November 10, 2008 1119 2008–45 I.R.B.

community business. Further, the “activeconduct of a trade or business” safe harbordoes not conflict with the gross-incomerequirement of §1.45D–1(d)(4)(i)(A) be-cause that paragraph provides that theentity is deemed to meet the gross-incomerequirement if the entity meets the require-ments of either §1.45D–1(d)(4)(i)(B) or(C) if “50 percent” is applied instead of“40 percent.” Therefore, an entity that hasno gross receipts and relies on the “ac-tive conduct of a trade or business” safeharbor of §1.45D–1(d)(4)(iv)(A) can meetthe requirements to be a qualified activelow-income community business by sat-isfying either the use of tangible propertyrequirement of §1.45D–1(d)(4)(i)(B) orthe services performed requirement of§1.45D–1(d)(4)(i)(C) at 50 percent in-stead of 40 percent. Several commentatorsrequested that, in order to accommodatestart-up entities, the proposed regulationsprovide a rule wherein a business couldqualify as a qualified active low-incomecommunity business serving targeted pop-ulations if the CDE reasonably expectsthat the entity will generate revenueswithin three years after the date the in-vestment or loan is made. If a businessserving targeted populations chose to ap-ply the gross income requirement ratherthan the employee requirement or theowner requirement, the commentators’suggestion could potentially allow a busi-ness to be a qualified active low-incomecommunity business for three years with-out having to meet any requirement. Thisresult is clearly inappropriate. Therefore,the proposed regulations do not adopt thecommentators’ suggestion. In addition,the proposed regulations clarify the lan-guage in §1.45D–1(d)(4)(iv)(A) to addressany confusion as to the application of the“active conduct of a trade or business”safe harbor.

Several commentators submitted com-ments that address subjects not within thescope of these proposed regulations. Forexample, comments were received ad-dressing CDFI Fund allocation applicationprocedures, such as minimum submissionrequirements, weighted scoring criteria,approval procedures, “high distress” crite-ria, underwriting criteria, and amendmentsto existing allocation agreements. Thesecomments have been forwarded to theCDFI Fund for consideration.

Proposed Effective/Applicability Date

The rules contained in these regulationsare proposed to apply to taxable years end-ing on or after the date of publication ofthe Treasury decision adopting these rulesas final regulation in the Federal Regis-ter. In the meantime, taxpayers may relyon Notice 2006–60, 2006–2 C.B. 82, fordesignations made by the Secretary afterOctober 22, 2004.

Request for Comments

The IRS and Treasury Department in-vite taxpayers to submit comments on is-sues relating to how an entity meets the re-quirements to be a qualified active low-in-come community business when its activ-ities involve certain targeted populationsunder section 45D(e)(2). In particular, theIRS and Treasury Department encouragetaxpayers to submit comments on the fol-lowing issues:

1. What measure of income shouldbe used to determine an individual’s in-come for purposes of the definition of low-income persons in §1.45D–1(d)(9)(i)(A)?For example, should the measure of in-come for this purpose be the same as themeasure of income used by the U.S. Cen-sus Bureau, the measure of income on theIRS Form 1040, or the measure of incomein 24 CFR Part 5, which is used for cer-tain HUD programs and other Federal pro-grams? The IRS and Treasury Departmentare considering using the measure of in-come used by the U.S. Census Bureau toensure a consistent comparison betweenthe individual’s family income and the ap-plicable area median family income.

2. Should the gross income require-ments in §1.45D–1(d)(9)(i)(B)(1)(i) and(ii)(C)(1)(i) be modified to include the fairmarket value of goods and services pro-vided to low-income persons at reducedfees? For example, should a businessthat provides its services to low-incomepersons for half of what it charges itsother customers be able to include the fairmarket value of the services provided tolow-income persons in its calculation ofgross income for purposes of the require-ment in §1.45D–1(d)(9)(i)(B)(1)(i)?

3. Should additional restrictionsbe added to the employee require-ments in §1.45D–1(d)(9)(i)(B)(1)(ii) and(ii)(C)(1)(ii)? For example, as one com-

mentator suggested, should a requirementbe added that the employee be a memberof a targeted group as defined by the workopportunity tax credit? As another com-mentator suggested, should the employeetest be satisfied only if the business paysa wage that would increase the income ofthe low-income individual being hired?

Special Analyses

It has been determined that this noticeof proposed rulemaking is not a significantregulatory action as defined in ExecutiveOrder 12866. Therefore, a regulatory as-sessment is not required. It is hereby cer-tified that these regulations will not have asignificant economic impact on a substan-tial number of small entities. This certifi-cation is based upon the fact that the regu-lations provide a positive impact because,consistent with legislative intent, they al-low a tax credit to be claimed in situationswhere it was previously unavailable with-out the Secretary providing for such situa-tions in regulations. Therefore, a Regula-tory Flexibility Analysis under the Regula-tory Flexibility Act (5 U.S.C. chapter 6) isnot required. Pursuant to section 7805(f)of the Internal Revenue Code, this noticeof proposed rulemaking will be submittedto the Chief Counsel for Advocacy of theSmall Business Administration for com-ment on their impact on small business.

Comments and Public Hearing

Before these proposed regulations areadopted as final regulations, considerationwill be given to any written comments(a signed original and eight (8) copies)or electronic comments that are submit-ted timely to the IRS. Comments are re-quested on all aspects of the proposed reg-ulations. In addition, the IRS and Trea-sury Department specifically request com-ments on the clarity of the proposed rulesand how they can be made easier to under-stand. All comments will be available forpublic inspection and copying.

A public hearing has been scheduled forFriday, January 22, 2009 at 10 a.m. in theIRS Auditorium, Internal Revenue Build-ing, 1111 Constitution Avenue, NW, Wash-ington, DC. Due to building security pro-cedures, visitors must enter at the Consti-tution Avenue entrance. In addition, allvisitors must present photo identificationto enter the building. Because of access

2008–45 I.R.B. 1120 November 10, 2008

restrictions, visitors will not be admittedbeyond the immediate entrance area morethan 30 minutes before the hearing starts.For information about having your nameplaced on the building access list to attendthe hearing, see the “FOR FURTHER IN-FORMATION CONTACT” section of thispreamble.

The rules of 26 CFR 601.601(a)(3) ap-ply to the hearing.

Persons who wish to present oral com-ments at the hearing must submit elec-tronic or written comments and an out-line of the topics to be discussed and thetime to be devoted to each topic (a signedoriginal and eight (8) copies) by Decem-ber 26, 2008. A period of 10 minutes willbe allotted to each person for making com-ments. An agenda showing the schedulingof the speakers will be prepared after thedeadline for receiving outlines has passed.Copies of the agenda will be available freeof charge at the hearing.


The principal author of these regula-tions is Lauren Ross Taylor, formerly withthe Office of the Associate Chief Coun-sel (Passthroughs and Special Industries),IRS. However, other personnel from theIRS and Treasury Department participatedin their development.

* * * * *


Accordingly, 26 CFR part 1 is proposedto be amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation forpart 1 is amended by adding an entry innumerical order to read in part as follows:

Authority: 26 U.S.C. 7805 * * *Section 1.45D–1 also issued under

26 U.S.C. 45D(e)(2) * * *Par. 2. Section 1.45D–1 is amended by:1. Revising paragraph (a) to re-

vise the entry for paragraph (h) andadd new entries for (d)(9), (d)(9)(i),(d)(9)(i)(A), (d)(9)(i)(B), (d)(9)(i)(B)(1),(d)(9)(i)(B)(2), (d)(9)(i)(B)(3),(d)(9)(i)(C), (d)(9)(i)(C)(1),(d)(9)(i)(C)(2), (d)(9)(i)(D), (d)(9)(ii),(d)(9)(ii)(A), (d)(9)(ii)(B), (d)(9)(ii)(C),

(d)(9)(ii)(C)(1), (d)(9)(ii)(C)(2),(d)(9)(ii)(C)(2)(i), (d)(9)(ii)(C)(2)(ii),(d)(9)(ii)(D), (d)(9)(ii)(D)(1),(d)(9)(ii)(D)(2), (d)(9)(ii)(E), and (h)(3).

2. Revising paragraph (d)(4)(i).3. Adding the language “See paragraph

(d)(9) of this section for rules relating totargeted populations.” to the end of para-graph (d)(4)(i)(A).

4. Adding the language “See paragraph(d)(9) of this section for rules relating totargeted populations.” to the end of para-graph (d)(4)(i)(B)(1).

5. Adding the language “See paragraph(d)(9) of this section for rules relating totargeted populations.” to the end of para-graph (d)(4)(i)(C).

6. Adding a new sentence at the end ofparagraph (d)(4)(iv)(A).

7. Adding new paragraph (d)(9).8. Revising the heading for paragraph

(h) and adding new paragraph (h)(3).The additions and revisions read as fol-

lows:

§1.45D–1 New markets tax credit.

(a) * * *(d) * * *(9) Targeted populations.(i) Low-income persons.(A) Definition.(B) Qualified active low-income com-

munity business requirements for low-in-come targeted populations.

(1) In general.(2) Employee.(3) Owner.(C) 120-percent-income restriction.(1) In general.(2) Population census tract location.(D) Rental of real property for low-in-

come targeted populations.(ii) Individuals who otherwise lack ad-

equate access to loans or equity invest-ments.

(A) In general.(B) GO Zone Targeted Population.(C) Qualified active low-income com-

munity business requirements for theGO Zone Targeted Population.

(1) In general.(2) Location.(i) In general.(ii) Determination.(D) 200-percent-income restriction.(1) In general.(2) Population census tract location.

(E) Rental of real property for theGO Zone Targeted Population.

* * * * *(h) Effective/applicability dates.(3) Targeted populations.

* * * * *(d) * * *(4) * * *(i) In general. The term qualified active

low-income community business means,with respect to any taxable year, a corpo-ration (including a nonprofit corporation)or a partnership engaged in the active con-duct of a qualified business (as definedin paragraph (d)(5) of this section), if therequirements of (d)(4)(i)(A), (B), (C), (D),and (E) of this section are met (or in thecase of an entity serving targeted popu-lations, if the requirements of paragraphs(d)(4)(i)(D), (E), and (d)(9)(i) or (ii) of thissection are met). Solely for purposes ofthis section, a nonprofit corporation willbe deemed to be engaged in the active con-duct of a trade or business if it is engagedin an activity that furthers its purpose as anonprofit corporation.

* * * * *(iv) Active conduct of a trade or busi-

ness—(A) * * * This paragraph (d)(4)(iv)applies only for purposes of determiningwhether an entity is engaged in the activeconduct of a trade or business and does notapply for purposes of determining whetherthe gross-income requirement under para-graph (d)(4)(i)(A), (d)(9)(i)(B)(1)(i), or(d)(9)(ii)(C)(1)(i) of this section is satis-fied.

* * * * *(9) Targeted populations. As deter-

mined by the Treasury Department, forpurposes of section 45D(e)(2), targetedpopulations that will be treated as a low-in-come community are individuals, or anidentifiable group of individuals, includ-ing an Indian tribe, who are low-incomepersons as defined in paragraph (d)(9)(i)of this section or who are individuals whootherwise lack adequate access to loans orequity investments as defined in paragraph(d)(9)(ii) of this section.

(i) Low-income persons—(A) Defini-tion. For purposes of section 45D(e)(2),an individual shall be considered to below-income if the individual’s family in-come, adjusted for family size, is not morethan—

November 10, 2008 1121 2008–45 I.R.B.

(1) For metropolitan areas, 80 percentof the area median family income; and

(2) For non-metropolitan areas, thegreater of 80 percent of the area me-dian family income, or 80 percent of thestatewide non-metropolitan area medianfamily income.

(B) Qualified active low-income com-munity business requirements for low-in-come targeted populations—(1) In gen-eral. An entity will not be treated as a qual-ified active low-income community busi-ness for low-income targeted populationsunless—

(i) At least 50 percent of the entity’s to-tal gross income for any taxable year isderived from sales, rentals, services, orother transactions with individuals who arelow-income persons for purposes of sec-tion 45D(e)(2) and this paragraph (d)(9),

(ii) At least 40 percent of the entity’semployees are individuals who are low-income persons for purposes of section45D(e)(2) and this paragraph (d)(9), or

(iii) At least 50 percent of the entity isowned by individuals who are low-incomepersons for purposes of section 45D(e)(2)and this paragraph (d)(9).

(2) Employee. The determination ofwhether an employee is a low-income per-son must be made at the time the employeeis hired. If the employee is a low-incomeperson at the time of hire, that employee isconsidered a low-income person for pur-poses of section 45D(e)(2) and this para-graph (d)(9) throughout the time of em-ployment, without regard to any increasein the employee’s income after the time ofhire.

(3) Owner. The determination ofwhether an owner is a low-income personmust be made at the time the qualifiedlow-income community investment ismade. If an owner is a low-income personat the time the qualified low-income com-munity investment is made, that owneris considered a low-income person forpurposes of section 45D(e)(2) and thisparagraph (d)(9) throughout the time theownership interest is held by that owner.

(C) 120-percent-income restric-tion—(1) In general—(i) In no case willan entity be treated as a qualified activelow-income community business underparagraph (d)(9)(i) of this section if theentity is located in a population censustract for which the median family incomeexceeds 120 percent of—

(A) In the case of a tract not locatedwithin a metropolitan area, the statewidemedian family income, or

(B) In the case of a tract located within ametropolitan area, the greater of statewidemedian family income or metropolitanarea median family income (120-per-cent-income restriction).

(ii) The 120-percent-income restrictionshall not apply to an entity located withina population census tract with a populationof less than 2,000 if such tract is not locatedin a metropolitan area.

(iii) The 120-percent-income restric-tion shall not apply to an entity locatedwithin a population census tract with apopulation of less than 2,000 if such tractis located in a metropolitan area and morethan 75 percent of the tract is zoned forcommercial or industrial use. For thispurpose, the 75 percent calculation shouldbe made using the area of the popula-tion census tract. For purposes of thisparagraph (d)(9)(i)(C)(1)(iii), property forwhich commercial or industrial use is apermissible zoning use will be treated aszoned for commercial or industrial use.

(2) Population census tract loca-tion—(i) For purposes of the 120-per-cent-income restriction, an entity will beconsidered to be located in a populationcensus tract for which the median fam-ily income exceeds 120 percent of theapplicable median family income underparagraph (d)(9)(i)(C)(1)(i)(A) or (B) ofthis section (non-qualifying populationcensus tract) if—

(A) At least 50 percent of the total grossincome of the entity is derived from theactive conduct of a qualified business (asdefined in paragraph (d)(5) of this section)within one or more non-qualifying popu-lation census tracts (non-qualifying grossincome amount);

(B) At least 40 percent of the use of thetangible property of the entity (whetherowned or leased) is within one or morenon-qualifying population census tracts(non-qualifying tangible property usage);and

(C) At least 40 percent of the servicesperformed for the entity by its employeesare performed in one or more non-qualify-ing population census tracts (non-qualify-ing services performance).

(ii) The entity is considered to have thenon-qualifying gross income amount if theentity has non-qualifying tangible property

usage or non-qualifying services perfor-mance of at least 50 percent instead of 40percent.

(iii) If the entity has no employees, theentity is considered to have the non-qual-ifying gross income amount as well asnon-qualifying services performance if atleast 85 percent of the use of the tangibleproperty of the entity (whether owned orleased) is within one or more non-qualify-ing population census tracts.

(D) Rental of real property for low-in-come targeted populations. The rental toothers of real property for low-income tar-geted populations that otherwise satisfiesthe requirements to be a qualified businessunder paragraph (d)(5) of this section willbe treated as located in a low-income com-munity for purposes of paragraph (d)(5)(ii)of this section if at least 50 percent ofthe entity’s total gross income is derivedfrom rentals to individuals who are low-income persons for purposes of section45D(e)(2) and this paragraph (d)(9) and/orto a qualified active low-income commu-nity business that meets the requirementsfor low-income targeted populations un-der paragraphs (d)(9)(i)(B)(1)(i) or (ii) and(d)(9)(i)(B)(2) of this section.

(ii) Individuals who otherwise lackadequate access to loans or equity in-vestments—(A) In general. Paragraph(d)(9)(ii) of this section may be appliedonly with regard to qualified low-incomecommunity investments made under theincrease in the new markets tax credit lim-itation pursuant to section 1400N(m)(2).Therefore, only CDEs with a significantmission of recovery and redevelopment ofthe Gulf Opportunity Zone (GO Zone) thatreceive an allocation from the increasedescribed in section 1400N(m)(2) maymake qualified low-income communityinvestments from that allocation pursuantto the rules in paragraph (d)(9)(ii) of thissection.

(B) GO Zone Targeted Population. Asdetermined by the Treasury Department,for purposes of targeted populations undersection 45D(e)(2), an individual is con-sidered to otherwise lack adequate accessto loans or equity investments only if theindividual was displaced from his or herprincipal residence as a result of Hurri-cane Katrina and/or the individual lost hisor her principal source of employment asa result of Hurricane Katrina (GO ZoneTargeted Population). In order to meet this

2008–45 I.R.B. 1122 November 10, 2008

definition, the individual’s principal resi-dence or principal source of employment,as applicable, must have been locatedin a population census tract within theGO Zone that contains one or more areasdesignated by the Federal EmergencyManagement Agency (FEMA) as flooded,having sustained extensive damage, orhaving sustained catastrophic damage as aresult of Hurricane Katrina.

(C) Qualified active low-income com-munity business requirements for theGO Zone Targeted Population—(1) Ingeneral. An entity will not be treated asa qualified active low-income communitybusiness for the GO Zone TargetedPopulation unless—

(i) At least 50 percent of the entity’s to-tal gross income for any taxable year isderived from sales, rentals, services, orother transactions with the GO Zone Tar-geted Population, low-income persons asdefined in paragraph (d)(9)(i) of this sec-tion, or some combination thereof;

(ii) At least 40 percent of the entity’semployees consist of the GO Zone Tar-geted Population, low-income persons asdefined in paragraph (d)(9)(i) of this sec-tion, or some combination thereof; or

(iii) At least 50 percent of the entityis owned by the GO Zone Targeted Pop-ulation, low-income persons as defined inparagraph (d)(9)(i) of this section, or somecombination thereof.

(2) Location—(i) In general. In or-der to be a qualified active low-incomecommunity business under paragraph(d)(9)(ii)(C) of this section, the entitymust be located in a population censustract within the GO Zone that containsone or more areas designated by FEMAas flooded, having sustained extensivedamage, or having sustained catastrophicdamage as a result of Hurricane Katrina(qualifying population census tract).

(ii) Determination—(A) For purposesof the preceding paragraph, an entity willbe considered to be located in a qualifyingpopulation census tract if—

(I) At least 50 percent of the total grossincome of the entity is derived from theactive conduct of a qualified business (asdefined in paragraph (d)(5) of this section)within one or more qualifying populationcensus tracts (gross income requirement);

(II) At least 40 percent of the use ofthe tangible property of the entity (whetherowned or leased) is within one or more

qualifying population census tracts (use oftangible property requirement); and

(III) At least 40 percent of the servicesperformed for the entity by its employ-ees are performed in one or more qualify-ing population census tracts (services per-formed requirement).

(B) The entity is deemed to satisfy thegross income requirement if the entity sat-isfies the use of tangible property require-ment or the services performed require-ment on the basis of at least 50 percent in-stead of 40 percent.

(C) If the entity has no employees, theentity is deemed to satisfy the services per-formed requirement as well as the grossincome requirement if at least 85 percentof the use of the tangible property of theentity (whether owned or leased) is withinone or more qualifying population censustracts.

(D) 200-percent-income restric-tion—(1) In general—(i) In no case willan entity be treated as a qualified activelow-income community business underparagraph (d)(9)(ii) of this section if theentity is located in a population censustract for which the median family incomeexceeds 200 percent of—

(A) In the case of a tract not locatedwithin a metropolitan area, the statewidemedian family income, or

(B) In the case of a tract located within ametropolitan area, the greater of statewidemedian family income or metropolitanarea median family income (200-per-cent-income restriction).

(ii) The 200-percent-income restrictionshall not apply to an entity located withina population census tract with a populationof less than 2,000 if such tract is not locatedin a metropolitan area.

(iii) The 200-percent-income restric-tion shall not apply to an entity locatedwithin a population census tract with apopulation of less than 2,000 if such tractis located in a metropolitan area and morethan 75 percent of the tract is zoned forcommercial or industrial use. For thispurpose, the 75 percent calculation shouldbe made using the area of the populationcensus tract. For purposes of this para-graph (d)(9)(ii)(D)(1)(iii), property forwhich commercial or industrial use is apermissible zoning use will be treated aszoned for commercial or industrial use.

(2) Population census tract loca-tion—(i) For purposes of the 200-per-

cent-income restriction, an entity will beconsidered to be located in a populationcensus tract for which the median fam-ily income exceeds 200 percent of theapplicable median family income underparagraph (d)(9)(ii)(D)(1)(i)(A) or (B) ofthis section (non-qualifying populationcensus tract) if—

(A) At least 50 percent of the total grossincome of the entity is derived from theactive conduct of a qualified business (asdefined in paragraph (d)(5) of this section)within one or more non-qualifying popu-lation census tracts (non-qualifying grossincome amount);

(B) At least 40 percent of the use of thetangible property of the entity (whetherowned or leased) is within one or morenon-qualifying population census tracts(non-qualifying tangible property usage);and

(C) At least 40 percent of the servicesperformed for the entity by its employeesare performed in one or more non-qualify-ing population census tracts (non-qualify-ing services performance).

(ii) The entity is considered to have thenon-qualifying gross income amount if theentity has non-qualifying tangible propertyusage or non-qualifying services perfor-mance of at least 50 percent instead of 40percent.

(iii) If the entity has no employees, theentity is considered to have the non-qual-ifying gross income amount as well asnon-qualifying services performance if atleast 85 percent of the use of the tangibleproperty of the entity (whether owned orleased) is within one or more non-qualify-ing population census tracts.

(E) Rental of real property for theGO Zone Targeted Population. Therental to others of real property forthe GO Zone Targeted Population thatotherwise satisfies the requirements tobe a qualified business under paragraph(d)(5) of this section will be treated aslocated in a low-income community forpurposes of paragraph (d)(5)(ii) of thissection if at least 50 percent of the entity’stotal gross income is derived from rentalsto the GO Zone Targeted Population,low-income persons as defined inparagraph (d)(9)(i) of this section and/or toa qualified active low-income communitybusiness that meets the requirements forthe GO Zone Targeted Population under

November 10, 2008 1123 2008–45 I.R.B.

paragraphs (d)(9)(ii)(C)(1)(i) or (ii) of thissection.

* * * * *(h) Effective/applicability dates * * ** * * * *(3) Targeted populations. The rules in

paragraph (d)(9) of this section apply totaxable years ending on or after the date ofpublication of the Treasury decision adopt-ing these rules as final regulation in theFederal Register.




Public Approval Guidance forTax-Exempt Bonds

REG–128841–07


ACTION: Notice of Proposed Rulemakingand Notice of Public Hearing.

SUMMARY: This document contains pro-posed regulations on the public approvalrequirements under section 147(f) of theInternal Revenue Code (Code) applica-ble to tax-exempt private activity bondsissued by State and local governments.The proposed regulations affect State andlocal governmental issuers of tax-exemptprivate activity bonds. This documentalso provides notice of a public hearing onthese proposed regulations.

DATES: Written or electronic commentsmust be received by December 8, 2008.Outlines of topic to be discussed at thepublic hearing scheduled for January 26,2009, at 10 a.m., must be received by De-cember 29, 2008.

ADDRESSES: Send submissions toCC:PA:LPD:PR (REG–128841–07),room 5203, Internal Revenue Service,PO Box 7604, Ben Franklin Station,

Washington, DC 20044. Submissions maybe hand-delivered Monday through Fridaybetween the hours of 8 a.m. and 4 p.m.to CC:PA:LPD:PR (REG–128841–07),Courier’s Desk, Internal RevenueService, 1111 Constitution Avenue, NW,Washington, DC, or sent electronically,via the Federal eRulemakingPortal at www.regulations.gov (IRSREG–128841–07). The public hearingwill be held in the Auditorium, beginningat 10 a.m., at the Internal RevenueBuilding, 1111 Constitution Avenue, NW,Washington, DC.

FOR FURTHER INFORMATIONCONTACT: Concerning the proposed reg-ulations, David White, (202) 622–3980;concerning submissions of comments andthe hearing, contact Funmi Taylor at (202)622–7180 (not toll-free numbers).


Paperwork Reduction Act

The collection of information containedin the proposed regulations has been sub-mitted to the Office of Management andBudget in accordance with the Paper-work Reduction Act of 1995 (44 U.S.C.3507(d)). Comments on the collectionof information should be sent to the Of-fice of Management and Budget, Attn:Desk Officer for the Department of theTreasury, Office of Information and Reg-ulatory Affairs, Washington, DC 20503,with copies to the Internal Revenue Ser-vice, Attn: IRS Reports Clearance Officer,SE:W:CAR:MP:T:T:SP, Washington, DC20224. Comments on the collection ofinformation should be received by Novem-ber 10, 2008. Comments are specificallyrequested concerning:

Whether the proposed collection of in-formation is necessary for the proper per-formance of the functions of the IRS, in-cluding whether the information will havepractical utility;

The accuracy of the estimated burdenassociated with the proposed collection ofinformation;

How the quality, utility, and clarity ofthe information to be collected may be en-hanced;

How the burden of complying with theproposed collection of information may beminimized, including through the appli-cation of automated collection techniques

or other forms of information technology;and

Estimates of capital or start-up costsand costs of operation, maintenance, andpurchase of services to provide informa-tion.

The collection of information in thisproposed regulation is in §1.147(f)–1(b).This information is required to meet thepublic approval requirement under section147(f). The likely respondents are issuersof qualified private activity bonds.

Estimated total annual reporting bur-den: 2600 hours.

Estimated average annual burden perrespondent: 1.3 hours.

Estimated number of respondents:2,000.

Estimated frequency of responses: Notapplicable (this is a third party disclosurerequirement).

An agency may not conduct or sponsor,and a person is not required to respond to, acollection of information unless it displaysa valid control number assigned by the Of-fice of Management and Budget.

Books or records relating to a collectionof information must be retained as longas their contents may become material inthe administration of any internal revenuelaw. Generally, tax returns and tax returninformation are confidential, as requiredby 26 U.S.C. 6103.

Background

This document contains proposedamendments to the Income Tax Reg-ulations (26 CFR part 1) to add new§1.147(f)–1 (the “Proposed Regulations”)relating to the public approval requirementfor tax-exempt private activity bonds un-der section 147(f) of the Internal RevenueCode.


I. Introduction

In general, interest on State and localbonds is excludable from gross income un-der section 103 of the Internal RevenueCode of 1986 (the “Code”). Interest ona private activity bond is excludable fromgross income under section 103 only if thebond meets the requirements for a “quali-fied bond” under section 141(e) and otherapplicable requirements under section 103.Section 141(e) requires that a bond meet

2008–45 I.R.B. 1124 November 10, 2008

the public approval requirement of section147(f), among other requirements, to be aqualified bond.

II. Statutory predecessor and existingregulations

The predecessor to section 147(f) wassection 103(k) of the Internal RevenueCode of 1954 (“1954 Code”), which wasadded by the Tax Equity and Fiscal Re-sponsibility Act of 1982, Public L. No.97–248, 96 Stat. 324 (1982). Section103(k) of the 1954 Code imposed a publicapproval requirement on industrial devel-opment bonds. Temporary Income TaxRegulations §5f.103–2 were published un-der section 103(k) of the 1954 Code in theFederal Register on May 11, 1983 (T.D.7892, 1983–1 C.B. 30 [48 FR 21115]) (the“Existing Regulations”).

In the Tax Reform Act of 1986, Pub-lic Law No. 99–514 (the “1986 Act”),Congress reorganized the tax-exempt bondprovisions and largely carried forward theprovisions of section 103(k) of the 1954Code into new section 147(f) of the Code.In new section 147(f), Congress also ex-panded this public approval requirement toapply to all types of tax-exempt private ac-tivity bonds under section 141. The leg-islative history to the 1986 Act providesthat “[t]he conferees intend that, to the ex-tent not amended, all principles of presentlaw continue to apply under the reorga-nized provisions.” 2 H.R. Conf. Rep. No.841, 99th Cong., 2d Sess. II–686 (1986),1986–3 C.B. (Vol. 4) at 686.

III. Proposed regulations

A. In general

In general, the Proposed Regulationsprovide updating, clarifying, and sim-plifying guidance on discrete aspects ofthe public approval requirement undersection 147(f) (the “public approval re-quirement”). The Proposed Regulationsprovide guidance that focuses generally onthe scope, content, process, and timing forreasonable public notices, public hearings,and public approvals of tax-exempt pri-vate activity bonds under section 147(f).

The Proposed Regulations providesome special rules to address certainchanges to the public approval require-ment made by the 1986 Act that expanded

the application of this requirement toinclude all types of tax-exempt privateactivity bonds. The Proposed Regulationsalso provide guidance to simplify compli-ance and reduce administrative burdenson State and local governments associatedwith the public approval requirement, in-cluding guidance to recognize advances intechnology and electronic communication.The Proposed Regulations also ensurethat the affected public will receive rea-sonable public notice and an opportunityfor a public hearing and that appropriategovernmental units will approve a bondissue following public notice and a publichearing.

The Proposed Regulations generally donot update the portions of the ExistingRegulations relating to the applicable gov-ernmental units that are required to providepublic approvals for a bond issue and theapplicable elected representatives of thosegovernmental units. One special rule in theProposed Regulations provides that onlythe governmental unit by or on behalf ofwhich bonds are issued is required for cer-tain types of financings and that no sepa-rate public approval is required by a hostgovernmental unit with respect to the loca-tion, if any, of financed facilities due to theabsence of financed facilities (for example,qualified student loan bonds under section144(b) or qualified 501(c)(3) bonds undersection 145 for working capital expendi-tures) or the widespread or unknown loca-tions of the financed facilities (for exam-ple, mortgage revenue bonds). The Trea-sury Department and the IRS solicit publiccomment on whether or in what respectsthose portions of the Existing Regulationsshould be updated or modified further.

The Proposed Regulations provide thatthe Existing Regulations continue to applyfor purposes of section 147(f) to the extentthat the Existing Regulations are not in-consistent with the final version of the Pro-posed Regulations, the 1986 Act, or subse-quent law.

B. Content of public approval in general

The Proposed Regulations provide up-dated guidance on the content of informa-tion required to be included in a reasonablepublic notice and public approval. TheProposed Regulations continue and mod-ify in limited respects the existing gen-

eral standard from the Existing Regula-tions. Under the Proposed Regulations, re-quired information for this purpose gener-ally includes the information described inthis preamble.

The Existing Regulations require afunctional description of the type and useof the facility to be financed with the bondissue. In response to public comment,the Proposed Regulations streamline thisrequirement to allow a general referenceto the type of exempt facility bond beingissued or, for other types of private activitybonds, a reference to the type of qualifiedbond and a general description of the typeand use of the facility to be financed. (forexample, an exempt facility bond for anairport under section 142(a)(1), or a quali-fied 501(c)(3) bond to finance a hospital).

The Existing Regulations also requirethe maximum stated principal amount ofbonds expected to be issued for the facil-ity. The Proposed Regulations continuethis requirement.

The Existing Regulations require thename of the expected initial legal owner,operator, or manager of the facility. TheProposed Regulations modify this require-ment. Under the Proposed Regulations,the name provided may be either the nameof the legal owner or principal user (asdefined under section 144(a)) or, alter-natively, the name of the true beneficialparty of interest (for example, the name ofa 501(c)(3) organization, which is the solemember of a limited liability companyowner).

The Existing Regulations require a gen-eral description of the prospective loca-tion of the facility by street address, or,if none, by a general description that isreasonably designed to inform the publicabout the location of the project. The Ex-isting Regulations assume that bond issuesfinance a single capital project. The Pro-posed Regulations provide that, for a facil-ity that involves multiple capital projectson the same site, or adjacent or reasonablyproximate sites used for similar purposes, aconsolidated description of the geographicboundaries of all such capital projects maybe a sufficient description of the location.

The Proposed Regulations also modifyand expand the existing definition of a “fa-cility” to include within the scope of thatdefined term the principle that a facilitymay include multiple capital projects.

November 10, 2008 1125 2008–45 I.R.B.

C. Special rules for mortgage revenuebonds, qualified student loan bonds, andcertain qualified 501(c)(3) bonds

The 1986 Act extended the public ap-proval requirement beyond traditionalfacility-focused industrial developmentbonds under the 1954 Code to includequalified mortgage bonds and qualifiedveterans mortgage bonds under section143(a) and 143(b) of the Code (together,“mortgage revenue bonds”), qualified stu-dent loan bonds under section 144(b) ofthe Code, and qualified 501(c)(3) bondsunder section 145 of the Code. The expan-sion of the public approval requirementto these types of bonds raises questionsabout the scope of information appro-priately needed for public approvals forthese types of bonds. Section 147(f) andcongressional intent generally suggest thatthe public approval requirement must bemet before the issuance of the bonds. Forthese types of bonds, however, certaininformation generally required for publicapprovals about specific borrowers or spe-cific projects may be unknown before theissuance of the bonds or may be inappro-priate for portfolio loan financings.

The Treasury Department and IRS re-alize there may have been uncertainty onhow to apply certain aspects of the publicapproval requirement to mortgage rev-enue bonds, qualified student loan bonds,and qualified 501(c)(3) pooled financingbonds under section 145 after the 1986Act in light of special characteristics ofthese financings (for example, the absenceof financed facilities for qualified studentloan bonds or the widespread or unknownlocations of the facilities to be financedfor mortgage revenue bonds or certain501(c)(3) pooled bonds). Therefore, is-suers of these types of bonds that made agood faith effort to comply with section147(f) and section 5f.103–2(f)(2) of theExisting Regulations, taking into accountCongressional intent and the special char-acteristics of these types of financings,will not be subject to audit by the IRSmerely because the issuer did not includeall of the information required to be in-cluded in the public notice and publicapproval for industrial development bondsunder section 5f.103–2(f)(2) of the Exist-ing Regulations.

The Proposed Regulations providespecial rules that allow less specific infor-

mation for public approvals of mortgagerevenue bonds, qualified student loanbonds, and qualified 501(c)(3) bonds thatfinance loans described in the specialrule for pooled financings under section147(b)(4).

For mortgage revenue bonds, the Pro-posed Regulations generally require thatreasonable public notice and public ap-proval state the maximum stated principalamount of the bonds that will be issuedto finance mortgage loans under section143 and a general description of the geo-graphic jurisdiction in which residences fi-nanced with proceeds of the mortgage rev-enue bonds will be located (for example,residences located throughout a state for anissuer with a statewide jurisdiction). Noinformation is required on specific namesof mortgage loan borrowers or specific lo-cations of individual residences to be fi-nanced.

For qualified student loan bonds, theProposed Regulations generally requirethat reasonable public notice and pub-lic approval state the maximum statedprincipal amount of the bonds that willbe issued to finance student loans and ageneral description of the type of studentloan program that the loans will be madeunder (for example, a Federally-guar-anteed student loan program under theHigher Education Act of 1965 or a statesupplemental student loan program). Rec-ognizing that these bonds do not financefacilities, the Proposed Regulations donot require names of specific student loanborrowers or locations of facilities.

For qualified 501(c)(3) bonds that fi-nance loans described in the special provi-sion for pooled loan financings under sec-tion 147(b)(4), the Proposed Regulationsprovide for a two-stage public approvalprocess. First, within the time specifiedin the Proposed Regulations for public ap-proval generally, public approval must beobtained based on the stated maximumprincipal amount of bonds to be issued tofinance such loans and a general descrip-tion of the types of facility or facilitiesto be financed with the loans (for exam-ple, loans for hospital facilities). No state-ment need be made about the location ofthe facility or the initial user of the facil-ity if that information is not known at thattime. Second, before a loan is originatedand potentially after the issue date of theissue, a supplemental public approval for

that loan must be obtained based on spe-cific information about the borrower andthe particular facility to be financed withthe loan, including the location of the fa-cility. In applying the supplemental publicapproval requirement to specific loans, thepublic approval requirement applies gen-erally as if the bonds that financed thespecific loans were reissued for purposesof section 147(b). This requirement issimilar to the remedial action requirementin §1.141–12(e)(2) and (f), which treatsbonds as reissued for purposes of section147 when complying with certain remedialaction rules. The Treasury Department andthe IRS solicit comments on whether a rulesimilar to the special two-stage public ap-proval requirement for qualified 501(c)(3)bonds in pooled bond issues should applyto other types of pooled bond issues.

D. Insubstantial and substantialdeviations in public approval information

The Proposed Regulations provide gen-erally that a substantial deviation betweeninformation required to be conveyed in areasonable public notice and public ap-proval and actual information causes theissue to fail to meet the public approvalrequirement. Whether a deviation is sub-stantial is generally based on all the factsand circumstances.

The Proposed Regulations continue andclarify a rule from the Existing Regula-tions that provides that insubstantial devia-tions in public approval information do notinvalidate a public approval. Public com-mentators have indicated that questions of-ten arise about what changes are substan-tial.

The Proposed Regulations provide twoobjective safe harbors under which certainchanges will not be considered substan-tial deviations. The Proposed Regulationsprovide that each of the following is an in-substantial deviation: (1) a difference inthe amount of proceeds used for a facilitywhen the amount used for the facility dif-fers from the amount the public approvalstated would be used for the facility by anamount that is not more than five percent(5%) of net proceeds of the issue; and (2)a change in initial owner or principal userof a project when the new owner or prin-cipal user is a related party (as defined in§1.150–1) to the initial owner or principal

2008–45 I.R.B. 1126 November 10, 2008

user named in the public approval on theissuance date.

The prohibition against substantial de-viations has created problems when an is-suer reasonably expected at the time thebonds were issued to use the bonds pro-ceeds for the facility stated in the pub-lic approval, but later determined, as a re-sult of unexpected events or unforeseenchanges in circumstances, that the originalplanned use was no longer feasible or thatit did not need all of the proceeds for thefacility. In these circumstances, an issuermay be unable to use the bond proceeds foranother purpose because the new use wasnot covered by the information in the pub-lic approval.

The Proposed Regulations propose aspecial rule for certain cases in which thereis a substantial deviation between the in-formation required to be provided in a rea-sonable public notice and public approvaland subsequent events. This rule providesthat, if certain conditions are met, an is-suer can cure a substantial deviation inpublic approval information through a sub-sequent public approval. This remedialaction is similar to the permitted post-is-suance public approval used for remedialactions under §1.141–12(e)(2) and (f).

In general, the Proposed Regulationsprovide that an issuer may cure a substan-tial deviation if it satisfies several con-ditions. First, the issuer must have ob-tained a timely public approval for thebond issue in accordance with the publicapproval requirement and the issuer musthave reasonably expected on the issue dateto use the proceeds of the issue in accor-dance with the public approval informa-tion. Second, the issuer must encounterunexpected events or unforeseen changesin circumstances after the issue date as aresult of which it determines either that itis no longer feasible or viable to use theproceeds of some or all of the bonds inthe manner set forth in the original pub-lic approval, or that it did not need to usethe full amount of the proceeds stated inthe public approval for the facility. Third,the issuer must obtain a supplemental pub-lic approval for the bonds affected by thesubstantial deviation that meets the publicapproval requirement applied by treatingthose bonds as if they were reissued for thispurpose.

E. Reasonable public notice and publichearing

The Proposed Regulations update andsimplify the rules in the Existing Regula-tions on reasonable public notice and pub-lic hearings in several ways. First, in addi-tion to the existing permitted methods forproviding reasonable public notice, whichinclude newspaper publication or televi-sion or radio broadcast, the Proposed Reg-ulations allow a governmental unit to pro-vide reasonable public notice of a pub-lic hearing by posting notice of the hear-ing electronically on its website if it reg-ularly uses that website to inform its res-idents about events affecting the residents(including notice of public meetings of thegovernmental unit) and it offers a reason-able alternative method for obtaining thisinformation for residents without access tocomputers (such as phone recordings). Inaddition, the Proposed Regulations definea “writing” generally to include electroniccommunication if permitted by the govern-mental unit. Thus, the public may submitelectronic comments to the governmentalunit if permitted by the governmental unit.The proposed regulations also reduce thetime required between the reasonable pub-lic notice and public hearing from fourteendays to seven business days. These revi-sions recognize the current market envi-ronment and the increasing importance ofelectronic communication.

In addition, the Proposed Regulationsexpand the types of governmental unitsthat may provide public notice in an alter-native manner under a general State law onpublic notice procedures for public hear-ings to include all approving governmentalunits.

Finally, the Proposed Regulations al-low a governmental unit to cancel a publichearing if it provides reasonable public no-tice of the hearing and receives no requeststo participate in the hearing.

III. Proposed effective/applicability date

The proposed regulations will apply tobonds that are sold on or after the dateof publication of final regulations in theFederal Register and that are subject tosection 147(f).

Special Analyses

It has been determined that this noticeof proposed rulemaking is not a signifi-cant regulatory action as defined in Ex-ecutive Order 12866. Therefore, a reg-ulatory assessment is not required. It ishereby certified that these proposed reg-ulations will not have a significant eco-nomic impact on a substantial number ofsmall entities. This certification is basedon considerations which are summarized.In general, the proposed regulations in-volve an existing statutory public approvalrequirement for tax-exempt private activ-ity bonds under Section 147(f) of the Inter-nal Revenue Code, which requires reason-able public notice, a public hearing, andpublic approval of these bonds by certainaffected State or local governmental unitsand which imposes certain information re-quirements for this purpose. These pro-posed regulations generally address mat-ters regarding the scope, content, process,and timing for public notices and pub-lic hearings in connection with these pub-lic approvals. These proposed regulationswill affect all issuers of tax-exempt pri-vate activity bonds, including a substan-tial number of small State or local gov-ernmental units. These proposed regula-tions are not expected to have a signifi-cant economic impact on the affected enti-ties, however, because these proposed reg-ulations primarily are intended to stream-line, simplify, and clarify the application ofthe existing public approval requirementin various ways, such as by allowing cer-tain public notices on websites to reducecosts associated with print publication ofpublic notices, by limiting the informationrequired for certain types of bond issues,and by providing certain safe harbors andcurative ways to assist with compliance inconnection with changes in bond issues.Therefore, a Regulatory Flexibility Anal-ysis under the Regulatory Flexibility Act(5 U.S.C. chapter 6) is not required. TheIRS and the Treasury Department specifi-cally solicit comments from any party, par-ticularly affected small entities, on the ac-curacy of this certification. Pursuant tosection 7805(f) of the Internal RevenueCode, this notice of proposed rulemakinghas been submitted to the Small BusinessAdministration for comment on its impacton small governmental jurisdictions.

November 10, 2008 1127 2008–45 I.R.B.


Before these Proposed Regulations areadopted as final regulations, considerationwill be given to any written comments(including a signed original and eight (8)copies) or electronic comments that aresubmitted timely to the IRS. The TreasuryDepartment and the IRS specifically re-quest comments on the clarity of the pro-posed rules and how they can be made eas-ier to understand.

All comments will be available for pub-lic inspection and copying.

A public hearing has been scheduled forJanuary 26, 2009, beginning at 10 a.m. inthe IRS Auditorium, Internal Revenue Ser-vice Building, 1111 Constitution Avenue,N.W., Washington, DC. Due to buildingsecurity procedures, visitors must enter atthe Constitution Avenue entrance. In addi-tion, all visitors must present photo identi-fication to enter the building. Because ofaccess restrictions, visitors will not be ad-mitted beyond the immediate entrance areamore than 30 minutes before the hearingstarts. For information about having yourname placed on the building access listto attend the hearing, see the FOR FUR-THER INFORMATION CONTACT sec-tion of this preamble.

The rules of 26 CFR 601.601(a)(3) ap-ply to the hearing. Persons who wish topresent oral comments at the hearing mustsubmit written or electronic comments byDecember 8, 2008 and submit an outline ofthe topics to be discussed and the amountof time to be devoted to each topic (asigned original and eight (8) copies) byDecember 29, 2008. A period of 10 min-utes will be allotted to each person formaking comments.

An agenda showing the scheduling ofthe speakers will be prepared after thedeadline for receiving outlines has passed.Copies of the agenda will be available freeof charge at the hearing.


The principal authors of these reg-ulations are Rebecca L. Harrigal andDavid White, Office of Associate ChiefCounsel (Financial Institutions andProducts), IRS. However, other personnelfrom the IRS and Treasury Departmentparticipated in their development.

* * * * *



PART 1 — INCOME TAXES

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

Authority: 26 U.S.C. 7805 * * *Par. 2. Section 1.147(f)–1 is added to

read as follows:

§1.147(f)–1. Public Approval of PrivateActivity Bonds.

(a) In general. Interest on a privateactivity bond is excludable from gross in-come under section 103(a) only if the bondmeets the requirements for a qualifiedbond under section 141(e) and other appli-cable requirements under section 103. Inorder to be a qualified bond under section141(e), one of the requirements that mustbe met is the public approval requirementunder section 147(f). This section pro-vides guidance on the public approvalrequirement under section 147(f). In ad-dition, to the extent not inconsistent withthis section, the Tax Reform Act of 1986(Public Law 99–514), or subsequent law,§5f.103–2 of this chapter continues toapply for purposes of the public approvalrequirement under section 147(f).

(b) Scope, content, process, and timingfor public approvals.

(1) In general. This paragraph (b)provides guidance on the scope, content,process, and timing required for public ap-proval of an issue of private activity bondsunder section 147(f). In general, exceptas otherwise provided in this section, tomeet the public approval requirement un-der section 147(f) for an issue (as definedin §1.150–1) of private activity bonds,reasonable public notice (as defined inparagraph (c)(3) of this section) must begiven in advance for a public hearing (asdefined in paragraph (c)(2) of this sec-tion), a public hearing must be held, andthe applicable governmental units undersection 147(f)(2)(A) must provide pub-lic approval within the time set forth inparagraph (b)(8) of this section and in themanner set forth in section 147(f)(2)(B).

(2) General rule on information re-quired for a reasonable public notice andpublic approval. Except as otherwise pro-

vided in this section, a facility (as definedin paragraph (c) of this section) to be fi-nanced with an issue is within the scope ofa public approval under section 147(f) ifthe reasonable public notice of the publichearing and the public approval includethe information set forth in paragraphs(b)(2)(i) through (iv)of this section.

(i) The facility. The information in-cludes a general functional description ofthe type and use of the facility to be fi-nanced with the issue. For this purpose, afacility description generally is sufficientif it identifies the facility by reference toa particular category of exempt facilitybond to be issued (for example, an ex-empt facility bond for an airport under sec-tion 142(a)(1) or an enterprise zone facil-ity bond under section 1394(a)), or if notan exempt facility bond, by reference toanother general category of private activ-ity bond, together with accompanying in-formation on the type and use of the facil-ity to be financed with the issue (for ex-ample, a qualified small issue bond undersection 144(b) for a manufacturing facility,a qualified 501(c)(3) bond under section145 for a hospital facility and working cap-ital expenditures, or a qualified mortgagebond for qualified mortgage loans for sin-gle-family housing residences under sec-tion 143).

(ii) The maximum stated principalamount of bonds. The information in-cludes the maximum stated principalamount of the issue of private activitybonds to be issued to finance the facility.

(iii) The name of the initial owner orprincipal user of the facility. The infor-mation includes the name of the expectedinitial owner or principal user (as definedunder section 144(a)) of the facility. Thename provided may be either the name ofthe legal owner or principal user of thefacility or, alternatively, the name of thetrue beneficial party of interest for such le-gal owner or user (for example, the nameof a 501(c)(3) organization which is thesole member of a limited liability companyowner).

(iv) The location of the facility. Theinformation includes a general descriptionof the prospective location of the facilityby street address, reference to boundarystreets or other geographic boundaries,or other description of the specific ge-ographic location that is reasonably de-signed to inform readers of the location.

2008–45 I.R.B. 1128 November 10, 2008

For a facility involving multiple capitalprojects located on the same site, or on ad-jacent or reasonably proximate sites withsimilar uses, a consolidated descriptionof the location of those capital projectsmay provide a sufficient description ofthe location of the facility. For example,a facility for a 501(c)(3) educational en-tity involving multiple buildings on theentity’s main urban college campus maydescribe the location of the facility byreference to the outside street boundariesof that campus with a reference to anynoncontiguous features of that campus.

(3) Special rule for mortgage revenuebonds. Mortgage revenue bonds undersection 143 are treated as within the scopeof a public approval under paragraph(b)(2) of this section if the reasonablepublic notice of the public hearing and thepublic approval state that the bonds areto be issued under section 143, the maxi-mum stated principal amount of mortgagerevenue bonds expected to be issued, anda general description of the geographicjurisdiction in which the residences to befinanced with the proceeds of the mortgagerevenue bonds are expected to be located,recognizing the issuer jurisdictional lim-itations on such financing under section143(c)(1)(B) (for example, residences lo-cated throughout a state for an issuer with astatewide jurisdiction or residences withina particular local geographic jurisdiction,such as within a city or county, for a localissuer). In applying paragraph (b)(2) ofthis section to mortgage revenue bonds, noinformation is required on specific namesof mortgage loan borrowers or specificlocations of individual residences to befinanced.

(4) Special rule for qualified studentloan bonds. Qualified student loan bondsunder section 144(b) are treated as withinthe scope of a public approval under para-graph (b)(2) of this section if the reason-able public notice of the public hearing andthe public approval state that the bondswill be issued under section 144(b), themaximum stated principal amount of qual-ified student loan bonds expected to be is-sued for qualified student loans, and a gen-eral description of the type of student loanprogram that the loans are to be made un-der (for example, a Federally-guaranteedstudent loan program under the Higher Ed-ucation Act of 1965 or a state supplementalstudent loan program). In applying para-

graph (b)(2) of this section to qualified stu-dent loan bonds, and recognizing that thesebonds do not finance facilities, no infor-mation is required with respect to namesof specific student loan borrowers or loca-tions of facilities.

(5) Special rule for certain qualified501(c)(3) bonds. Qualified 501(c)(3)bonds under section 145 to be usedto finance loans described in section147(b)(4)(B) (without regard to any elec-tion under section 147(b)(4)(A)) aretreated as within the scope of a publicapproval under paragraph (b)(2) of thissection if both of the following require-ments are met—

(i) Pre-issuance general public ap-proval. Within the time period defined inparagraph (b)(8) of this section, public ap-proval is obtained after reasonable publicnotice of a public hearing is provided anda public hearing is held. For this purpose,a facility is treated as described in a pub-lic notice of a public hearing and publicapproval if the notice and public approvalprovide that the bonds will be qualified501(c)(3) bonds to be used to financeloans described in section 147(b)(4)(B),the maximum stated principal amount ofbonds expected to be issued to financeloans to other 501(c)(3) organizations orgovernmental units as described in sec-tion 147(b)(4)(B), a general descriptionof the type of facility to be financed withsuch loans (for example, loans for hospitalfacilities or college facilities), and a state-ment that an additional public approvalthat includes specific project informationwill be obtained before any such loans areoriginated; and

(ii) Post-issuance public approval forspecific loans. Before a loan described insection 147(b)(4)(B) is originated, a sup-plemental public approval for the bonds tobe used to finance that loan is obtained, andthat supplemental public approval meetsall the requirements of section 147(f) andthis section applied by treating the bondsto be used to finance such loan as if theywere reissued for purpose of section 147(f)(applied without regard to this paragraph(b)(5)).

(6) Deviations in public approval infor-mation.

(i) In general. Except as otherwise pro-vided in this paragraph (b)(6), a substan-tial deviation between the information re-quired to be provided in a public notice

of public hearing and public approval un-der paragraph (b)(2) of this section and ac-tual information causes that issue to failto meet the public approval requirementunder section 147(f). Conversely, insub-stantial deviations between information re-quired to be provided in a notice of pub-lic hearing and public approval and actualinformation do not cause a failure to meetsection 147(f). In general, for purposes ofthis paragraph (b)(6), the determination ofwhether a deviation is substantial is basedon all the facts and circumstances. How-ever, a change in the fundamental natureor type of a project is a substantial devia-tion.

(ii) Certain insubstantial deviations inpublic approval information. For purposesof this paragraph (b)(6), the following de-viations are treated as insubstantial devia-tions:

(A) Use of proceeds. A deviation be-tween the amount of proceeds of the is-sue that the notice of public hearing andpublic approval stated would be used for afacility and the amount of proceeds actu-ally used for that facility is insubstantial ifthe amount of the difference does not ex-ceed an amount equal to five percent (5%)of the net proceeds (as defined in section150(a)(3)) of the issue.

(B) Initial owner or principal user.A deviation between the initial owner orprincipal user of the facility named in a no-tice of public hearing and public approvaland the actual initial owner or principaluser of the facility is treated as insubstan-tial if such parties are related parties (asdefined in §1.150–1) on the issue date ofthe issue.

(iii) Special rule to address certainsubstantial deviations in public approvalinformation. A substantial deviation be-tween the information required to beconveyed in the notice of public hearingand the public approval under paragraph(b)(2) and the actual information does notcause that issue to fail to meet the publicapproval requirement under section 147(f)if the following requirements are met:

(A) Original public approval and rea-sonable expectations. The issuer obtaineda timely public approval (as set forth inparagraph (b)(8) of this section) for the is-sue in accordance with section 147(f) and,on the issue date of the issue, the issuer rea-sonably expected there would be no sub-stantial deviations between the informa-

November 10, 2008 1129 2008–45 I.R.B.

tion required to be conveyed in the noticeof public hearing and public approval andactual information.

(B) Unexpected events or unforeseenchanges in circumstances. As a result ofunexpected events or unforeseen changesin circumstances that arise after the issuedate of the issue, the issuer determines thatit cannot use some or all of the proceeds inthe manner provided in the public approvaleither because such use is no longer feasi-ble or viable, or because the cost of the fa-cility was less than expected so the issuerdid not need all of the proceeds specifiedin the public approval for the facility.

(C) Supplemental public approval. Be-fore using the proceeds of the bonds thatare affected by the substantial deviationfor a different use, the issuer obtains asupplemental public approval for thosebonds, and that supplemental public ap-proval meets all the requirements of sec-tion 147(f) applied by treating those bondsas if they were reissued for purposes ofsection 147(f).

(7) Certain timing requirements. Ex-cept as otherwise provided in this section,a public approval of an issue under sec-tion 147(f) is timely only if the issuer ob-tains the public approval within one yearbefore the issue date (as defined in section1.150–1) of the issue. For a plan of financ-ing described in section 147(f)(2)(C), pub-lic approval is timely for the plan of financ-ing if the issuer obtains public approval forthe plan of financing within one year be-fore the issue date of the first issue issuedunder the plan of financing and the issuerissues all issues under the plan of financ-ing within three years after the issue dateof such first issue.

(c) Definitions—Unless otherwisestated, for purposes of this section, thefollowing definitions apply:

(1) Facility. In general, for purposes ofthis section and section 5f.103–2, the termfacility means one or more capital projects,including land, buildings, equipment, andother property to be financed with an is-sue that is located on the same site, or ad-jacent or proximate sites used for similarpurposes, and that is subject to the publicapproval requirement under section 147(f).For an issue of mortgage revenue bondsunder section 143 or qualified student loanbonds under section 144(b), the term facil-ity means the mortgage loans or qualifiedstudent loans to be financed with the pro-

ceeds of the issue. For an issue of quali-fied 501(c)(3) bonds under section 145, theterm facility means a facility, as defined inthe first sentence of this paragraph (c)(1),and also includes working capital expen-ditures to be financed with proceeds of theissue.

(2) Public hearing. The term publichearing means a forum providing a rea-sonable opportunity for interested individ-uals to express their views, both orally andin writing, on the proposed issue of bondsand the location and nature of the proposedfacility to be financed. In general, a gov-ernmental unit may select its own proce-dure for a public hearing, provided that in-terested individuals have a reasonable op-portunity to express their views. Thus, agovernmental unit may impose reasonablerequirements on persons who wish to par-ticipate in the hearing, such as a require-ment that persons desiring to speak at thehearing make a written request to speak atleast 24 hours before the hearing or thatthey limit their oral remarks to a prescribedtime. If a governmental unit provides rea-sonable public notice for a public hearingand receives no timely requests to partici-pate in the hearing, then the governmentalunit may cancel the hearing and, for pur-poses of this section, the public hearing re-quirement will be treated as met. For pur-poses of this public hearing requirement,it is unnecessary, for example, to have theapplicable elected representative of the ap-proving governmental unit present at thehearing, to submit a report on the hearingto that applicable elected representative, orto meet State administrative procedural re-quirements for public hearings. Except tothe extent in conflict with a specific re-quirement of this paragraph (c)(2), com-pliance with State procedural requirementsfor public hearings generally satisfies therequirements of this paragraph (c)(2). Apublic hearing may be conducted by an in-dividual appointed or employed to performsuch function by the governmental unit orits agencies, or by the issuer. Thus, for ex-ample, for bonds to be issued by an author-ity that acts on behalf of a county, the hear-ing may be conducted by the authority, thecounty, or an appointee of either.

(3) Reasonable public notice. Reason-able public notice means notice that is rea-sonably designed to inform residents of theaffected governmental units, including res-idents of the issuing governmental unit and

the governmental unit where a facility isto be located, of the proposed issue. Thenotice must state the time and place forthe public hearing and contain the informa-tion required under paragraph (b) of thissection. Notice is presumed reasonableif given no fewer than seven (7) businessdays before the public hearing in one of theways permitted by this paragraph (c)(2).Notice is treated as reasonably designed toinform affected residents of an approvinggovernmental unit if it is given in one ofthe following ways:

(i) Newspaper publication. Public no-tice may be given by publication in oneor more newspapers of general circulationavailable to the residents of the govern-mental unit.

(ii) Radio or television broadcast. Pub-lic notice may be given by radio or televi-sion broadcast to the residents of the gov-ernmental unit.

(iii) Governmental unit website post-ing. Public notice may be given by elec-tronic posting on the approving govern-mental unit’s website for its residents, pro-vided that the governmental unit regularlyuses that website to inform its residentsabout events affecting the residents (in-cluding notice of public meetings of thegovernmental unit) and the governmentalunit offers a reasonable, publicly knownalternative method for obtaining this in-formation for residents without access tocomputers (such as phone recordings).

(iv) Alternative State law public noticeprocedures. Public notice may be givenin a way that is permitted under a generalState law for public notices for public hear-ings for the approving governmental unit.

(4) Writing. Unless specifically statedotherwise in this section, if permitted bythe governmental unit, the term writing in-cludes electronic communication.

(5) Mortgage revenue bonds. The termmortgage revenue bonds means qualifiedmortgage bonds under section 143(a) ofthe Code or qualified veterans’ mortgagebonds under section 143(b) of the Code.

(d) Special rule on required govern-mental unit approvals for certain types offinancings. In applying section 147(f)(2)and §5f.103–2(c) of this chapter, to mort-gage revenue bonds under section 143, toqualified student loan bonds under sec-tion 144(b), and to the portion of an issueof qualified 501(c)(3) bonds under section145 that finance working capital expendi-

2008–45 I.R.B. 1130 November 10, 2008

tures, the governmental unit by or on be-half of which those types of bonds are is-sued is treated as the only governmentalunit required to provide a public approvaland no separate public approval is requiredby a host governmental unit with respect tothe location, if any, of a financed facility.

(e) Effective/applicability date. Ex-cept as otherwise provided in this section,§1.147(f)–1 applies to bonds that are soldon or after the date of publication of finalregulations in the Federal Register andthat are subject to section 147(f).




Notice to Participants ofConsequences of Failing toDefer Receipt of QualifiedRetirement Plan Distributions;Expansion of ApplicableElection Period and Period forNotices

REG–107318–08


ACTION: Notice of Proposed Rulemakingand notice of public hearing.

SUMMARY: This document contains pro-posed regulations under sections 402(f),411(a)(11), and 417 of the Internal Rev-enue Code (Code). The proposed regu-lations would provide that the notice re-quired under section 411(a)(11) to be pro-vided to a participant of his or her right,if any, to defer receipt of an immediatelydistributable benefit must also describe theconsequences of failing to defer receiptof the distribution. The proposed regula-tions would also provide that the applica-ble election period for waiving the qual-ified joint and survivor annuity form of

benefit under section 417 is the 180-dayperiod ending on the annuity starting date,and that a notice required to be providedunder section 402(f), section 411(a)(11),or section 417 may be provided to a par-ticipant as much as 180 days before theannuity starting date (or, for a notice un-der section 402(f), the distribution date).These regulations would affect adminis-trators of, employers maintaining, partic-ipants in, and beneficiaries of tax-favoredretirement plans.

DATES: Written or electronic commentsand requests to speak at the public hearingmust be received by January 7, 2009.

ADDRESSES: Send submissions to:CC:PA:LPD:PR (REG–107318–08), room5203, Internal Revenue Service, PO Box7604, Ben Franklin Station, Washing-ton D.C. 20044. Submissions may behand-delivered Monday through Fridaybetween the hours of 8 a.m. and 4 p.m.to: CC:PA:LPD:PR (REG–107318–08),Courier’s Desk, Internal Revenue Ser-vice, 1111 Constitution Avenue, N.W.,Washington, D.C., or sent electroni-cally via the Federal eRulemaking Por-tal at http://www.regulations.gov (IRSREG–107318–08).

FOR FURTHER INFORMATIONCONTACT: Concerning the regulations,Michael P. Brewer at (202) 622–6090;concerning submission of comments orto request to speak at the public hearing,Funmi Taylor at (202) 622–7180 (nottoll-free numbers).


Paperwork Reduction Act

The collection of information containedin this notice of proposed rulemaking hasbeen submitted to the Office of Manage-ment and Budget for review in accordancewith the Paperwork Reduction Act of 1995(44 U.S.C. 3507(d)). Comments on thecollection of information should be sent tothe Office of Management and Budget,Attn: Desk Officer for the Departmentof the Treasury, Office of Informationand Regulatory Affairs, Washington, DC20503, with copies to the Internal Rev-enue Service, Attn: IRS Reports Clear-ance Officer, SE:W:CAR:MP:T:T:SP;

Washington, DC 20224. Comments onthe collection of information should be re-ceived by December 8, 2008. Commentsare specifically requested concerning:

Whether the proposed collection of in-formation is necessary for the proper per-formance of the functions of the InternalRevenue Service, including whether theinformation will have practical utility;

The accuracy of the estimated burdenassociated with the proposed collection ofinformation;

How the quality, utility, and clarity ofthe information to be collected may be en-hanced;

How the burden of complying with theproposed collections of information maybe minimized, including through the appli-cation of automated collection techniquesor other forms of information technology;and

Estimates of capital or start-up costsand costs of operation, maintenance, andpurchase of service to provide information.

The collection of informationin these proposed regulations is in§1.411(a)–11(c)(2) of the Income TaxRegulations. This collection of infor-mation is required to comply with thestatutory notice requirements of section411(a), and is expected to be included inthe notices currently provided to employ-ees that inform them of their rights andbenefits under the plan. The likely record-keepers are businesses or other for-profitinstitutions and nonprofit institutions andorganizations.

Estimated total annual recordkeepingburden: 100,000 hours.

Estimated average annual burden hoursper recordkeeper: 1 hour.

Estimated number of recordkeepers:100,000.

An agency may not conduct or sponsor,and a person is not required to respond to, acollection of information unless it displaysa valid control number assigned by the Of-fice of Management and Budget.

Books or records relating to a collectionof information must be retained as longas their contents may become material inthe administration of any internal revenuelaw. Generally, tax returns and tax returninformation are confidential, as requiredby 26 U.S.C. 6103.

November 10, 2008 1131 2008–45 I.R.B.

Background

A. Notice of Consequences of Failing toDefer

Section 411(a)(11)(A) provides that, ifthe present value of any nonforfeitable ac-crued benefit exceeds $5,000, a qualifiedplan must provide that such benefit maynot be immediately distributed without theconsent of the participant. Similarly, sec-tion 203(e) of the Employee RetirementIncome Security Act of 1974, as amended(ERISA), provides that if the present valueof any nonforfeitable accrued benefit withrespect to a participant in a plan exceeds$5,000, the benefit may not be immedi-ately distributed without the consent of theparticipant.

Section 1102(b)(1) of the Pension Pro-tection Act of 2006 (PPA ’06), 109 PublicLaw 280, 120 Stat. 780, instructs the Sec-retary of the Treasury to modify the regula-tions under section 411(a)(11) of the Code“to provide that the description of a par-ticipant’s right, if any, to defer receipt ofa distribution shall also describe the con-sequences of failing to defer such receipt.”Section 1102(b)(2)(A) of PPA ’06 providesthat the modifications required by section1102(b)(1) of PPA ’06 shall apply to yearsbeginning after December 31, 2006. Sec-tion 1102(b)(2)(B) of PPA ’06, however,states that a plan shall not be treated asfailing to meet the requirements of section411(a)(11) with respect to any descriptionof the consequences of failing to defer pro-vided “within 90 days after the Secretaryof the Treasury issues the modifications re-quired by [section 1102(b)(1) of PPA ’06]if the plan administrator makes a reason-able attempt to comply with such require-ments.”

Section 1.411(a)–11(c)(2)(i) states that,in order for a plan to obtain valid con-sent under section 411(a)(11), “so long as abenefit is immediately distributable, a par-ticipant must be informed of the right, ifany, to defer receipt of the distribution.”Section 1.411(a)–11(c)(4) states that a dis-tribution is immediately distributable priorto the later of the time a participant has at-tained normal retirement age or age 62.

Q&A–32 of Notice 2007–7, 2007–5I.R.B. 395, provides that a plan admin-istrator is required to revise the noticerequired under section 411 to reflect themodifications made by section 1102(b)

of PPA ’06 for notices provided in planyears beginning after December 31, 2006.Notice 2007–7 further provides that, pur-suant to section 1102(b)(2)(B) of PPA ’06,a plan will not be treated as failing to meetthe new requirements of section 1102(b)of PPA ’06 if the plan administrator makesa reasonable attempt to comply with thenew requirements with respect to a noticethat is provided prior to the 90th day afterthe issuance of regulations reflecting themodifications required by such section1102(b) of PPA ’06. See §601.601(b)(2)(ii)(b).

Q&A–33 of Notice 2007–7 includesa safe harbor that would be considered areasonable attempt to comply with the re-quirement in section 1102(b)(1) of PPA ’06that a description of a participant’s rightto defer receipt of a distribution includea description of the consequences offailing to defer. In particular, Q&A–33provides that a description that is writtenin a manner reasonably calculated to beunderstood by the average participant andthat includes the following information isa reasonable attempt to comply with therequirements of section 1102(b)(2)(B) ofPPA ’06: (a) in the case of a defined benefitplan, a description of how much largerbenefits will be if the commencementof distributions is deferred; (b) in thecase of a defined contribution plan, adescription indicating the investmentoptions available under the plan (includingfees) that will be available if distributionsare deferred; and (c) the portion of thesummary plan description that containsany special rules that might materiallyaffect a participant’s decision to defer. Forpurposes of clause (a), a plan administratorcan use a description that includes thefinancial effect of deferring distributions,as described in §1.417(a)(3)–1(d)(2)(i),based solely on the normal form of benefit.

Q&A–31 of Notice 2007–7 providesthat the provisions of section 1102 apply toplan years that begin after December 31,2006. Q&A–31 explains that this meansthat the new rules relating to the content ofthe notices apply only to notices issued inthose plan years, without regard to the an-nuity starting date for the distributions.

B. Expansion of Applicable ElectionPeriod

Section 401(a)(11)(A)(i) provides that,except as provided in section 417, a planthat is qualified under section 401(a) mustprovide the accrued benefit payable to avested participant who does not die beforethe annuity starting date in the form of aqualified joint and survivor annuity.

Section 417(a)(1)(A) provides that, ingeneral, a plan satisfies section 401(a)(11)only if each participant may elect at anytime during the “applicable election pe-riod” to waive the qualified joint and sur-vivor annuity form of benefit (and to re-voke the waiver), and certain other require-ments are satisfied. Before PPA ’06, sec-tion 417(a)(6)(A) provided that the “appli-cable election period” for a participant towaive the qualified joint and survivor an-nuity form of distribution was the 90-dayperiod ending on the annuity starting date.

Section 1102(a)(1)(A) of PPA ’06amended section 417(a)(6)(A) by chang-ing the 90-day “applicable election pe-riod” for electing a distribution subject tothe qualified joint and survivor annuity(QJSA) rules of sections 401(a)(11) and417 in a form other than a QJSA to a180-day applicable election period. Sec-tion 1102(a)(2)(A) of PPA ’06 made a par-allel amendment to section 205(c)(7)(A)of ERISA by striking “90-day” and insert-ing “180-day”.

Sections 1102(a)(1)(B) and1102(a)(2)(B) of PPA ’06 provide that theSecretary of the Treasury shall modifythe regulations relating to section 417of the Code and section 205 of ERISAby substituting “180 days” for “90 days”each place it appears.

Section 1102(a)(3) of PPA ’06 providesthat the amendments to the applicable elec-tion period apply to years beginning afterDecember 31, 2006.

C. Expansion of Period for Notices

Section 417(a)(3)(A) of the Code andsection 205(c)(3)(A) of ERISA providethat a plan must provide to each par-ticipant, “within a reasonable period oftime before the annuity starting date” andconsistent with such regulations as theSecretary of the Treasury may prescribe,a written explanation that describes theterms and conditions of the qualified joint

2008–45 I.R.B. 1132 November 10, 2008

and survivor annuity and certain otherinformation. Similarly, section 402(f)(1)provides that a plan administrator must,“within a reasonable period of time” be-fore making an eligible rollover distribu-tion, provide to recipients an explanationof certain tax consequences of the distri-bution.

Section 1102(a)(1)(B) of PPA ’06 pro-vides that the Secretary of the Treasuryshall modify the regulations under sections402(f), 411(a)(11), and 417 by substituting“180 days” for “90 days” each place itappears in §§1.402(f)–1, 1.411(a)–11(c),and 1.417(e)–1(b). Similarly, section1102(a)(2)(B) of PPA ’06 provides that theSecretary of the Treasury shall modify theregulations relating to sections 203(e) and205 of ERISA by substituting “180 days”for “90 days” each place it appears.

Section 1102(a)(3) provides that theamendments to the notice periods apply toyears beginning after December 31, 2006.Q&A–31 of Notice 2007–7 explains thatthe 180-day period for distributing noticesapplies to notices distributed in a plan yearthat begins after December 31, 2006.

D. Requirements under ERISA

ERISA section 203(e) is the parallelprovision to section 411(a)(11) of the Codeand ERISA section 205 is the ERISA par-allel to section 417 of the Code. Pursuantto section 101 of Reorganization Plan No.4 of 1978, 29 U.S.C. 1001nt (the Reorga-nization Plan), the Secretary of the Trea-sury generally has authority to issue regu-lations under parts 2 and 3 of subtitle B oftitle I of ERISA, including sections 203(e)and 205 of ERISA. Thus, the changes re-quired by section 1102 of PPA ’06 wouldapply as well for purposes of ERISA sec-tions 203(e) and 205.


A. Notice of Consequences of Failing toDefer

These proposed regulations would pro-vide that the notice required by section411(a)(11) advising a participant of theright, if any, to defer receipt of a distri-bution must also inform the participant ofthe consequences of failing to defer suchreceipt. The proposed regulations wouldalso provide guidance on the relevant in-formation that must be provided to a par-

ticipant in order to satisfy the requirementthat the participant be notified of the con-sequences of failing to defer.

Specifically, these proposed regulationswould require that the participant be pro-vided a description of specified federal taximplications of failing to defer and, in thecase of a defined benefit plan, a state-ment of the amount payable to the par-ticipant under the normal form of bene-fit both upon immediate commencementand when the benefit is no longer imme-diately distributable (that is, the later ofage 62 or attainment of normal retirementage). Section 1.417(a)(3)–1(c)(2)(ii) per-mits a plan to provide participants with aQJSA explanation, which does not varybased on the participant’s marital status,of the relative value of optional forms ofbenefit compared to the value of a QJSA.These proposed regulations would permitthe statement of the amount payable to notbe based on the participant’s marital sta-tus, to the extent the plan is permitted un-der §1.417(a)(3)–1(c)(2)(ii) to use a QJSAexplanation that does not vary based onwhether the participant is married or un-married.

The proposed regulations would alsorequire the information in the notice to in-clude, in the case of a defined contribu-tion plan, a statement that some currentlyavailable investment options in the planmay not be generally available on simi-lar terms outside the plan and contact in-formation for obtaining additional infor-mation on the general availability outsidethe plan of currently available investmentoptions in the plan. In addition, the pro-posed regulations would require the noticeto include, in the case of a defined contri-bution plan, a statement that fees and ex-penses (including administrative or invest-ment-related fees) outside the plan may bedifferent from fees and expenses that ap-ply to the participant’s account and contactinformation for obtaining information onsuch fees.

The proposed regulations also includean additional category of information thatmust be provided relating to any provi-sions of the plan (and provisions of any ac-cident or health plan maintained by the em-ployer) that could reasonably be expectedto materially affect a participant’s decisionwhether to defer receipt of the distribu-tion. Thus, for example, the proposed reg-ulations would require a description of the

eligibility requirements for retiree healthbenefits if such benefits are limited to par-ticipants who have an undistributed benefitunder the employer’s retirement plan.

In general, the proposed regulationswould also provide that the required in-formation regarding the consequencesof a participant’s failing to defer receiptof a distribution must appear together.However, the proposed regulations wouldpermit a cross-reference to where therequired information may be found innotices or other information provided ormade available to the participant, as longas the notice of consequences of failingto defer includes a statement of how thereferenced information may be obtainedwithout charge and explains why the refer-enced information is relevant to a decisionwhether to defer.

B. Expansion of Applicable ElectionPeriod and Period for Notices

Consistent with sections 1102(a)(1)(A)and (1)(B) and 1102(a)(2)(A) and (2)(B)of PPA ’06, the proposed regulationswould both (1) expand the definition ofapplicable election period to up to 180days, and (2) expand the time periodfor notices issued under sections 402(f),411(a)(11), and 417 to allow the noticesto be issued up to 180 days prior to theannuity starting date (or, in the case ofa notice under section 402(f), the dateof distribution). Specifically, the pro-posed regulations would substitute “180days” for “90 days” and “180-day” for“90-day” each place those terms appearin §1.401(a)–13(g)(4)(ii), §1.401(a)–20,A–3(b)(1), A–4, A–10(a), A–16, andA–24(a)(1), §1.402(f)–1, §1.411(a)–11(c),and §1.417(e)–1(b).

Pursuant to section 101 of the Reorga-nization Plan, the Secretary of Treasuryhas the authority to issue regulations un-der ERISA sections 203(e) and 205. Thus,these proposed regulations that apply tosections 402(f), 411(a)(11), and 417 of theCode would apply as well for purposes ofsections 203(e) and 205 of ERISA.

Proposed Effective/Applicability Date

These regulations are proposed to be-come effective for notices provided (andelection periods beginning) on or after thefirst day of the first plan year beginning onor after January 1, 2010. However, in no

November 10, 2008 1133 2008–45 I.R.B.

event will the regulations become effectivefor notices provided (and election periodsbeginning) earlier than the first day of thefirst plan year beginning 90 days after pub-lication of final regulations in the FederalRegister.

With respect to the regulations relatingto the notice of consequences of failingto defer the receipt of distributions, untilthese regulations become effective, a planwill be treated as complying if: (1) the plancomplies either with these proposed regu-lations or with Q&A–32 and Q&A–33 inNotice 2007–7; or (2) if the plan adminis-trator makes a reasonable attempt to com-ply with the requirement that the descrip-tion of a participant’s right, if any, to deferreceipt of a distribution shall also describethe consequences of failing to defer suchreceipt.

With respect to the proposed regula-tions relating to the expanded applicableelection period and the expanded periodfor notices, plans may rely on these pro-posed regulations for notices provided(and election periods beginning) duringthe period beginning on the first day of thefirst plan year beginning on or after Jan-uary 1, 2007 and ending on the effectivedate of final regulations.

Special Analyses

It has been determined that this noticeof proposed rulemaking is not a significantregulatory action as defined in ExecutiveOrder 12866. Therefore, a regulatory as-sessment is not required. It also has beendetermined that section 553(b) of the Ad-ministrative Procedure Act (5 U.S.C. chap-ter 5) does not apply to these regulations.

It is hereby certified that the collectionof information contained in this regulationwill not have a significant economic im-pact on a substantial number of small en-tities. This certification is based on sev-

eral factors, including that the regulationmerely provides guidance to implement astatutorily-required notice, and that the in-cremental burden in the regulation wouldbe minimal because it only requires includ-ing additional information in notices al-ready provided by all of the affected enti-ties. Accordingly, a Regulatory FlexibilityAnalysis under the Regulatory FlexibilityAct (5 U.S.C. chapter 6) is not required.Pursuant to section 7805(f) of the Code,this notice of proposed rulemaking will besubmitted to the Chief Counsel for Advo-cacy of the Small Business Administrationfor comment on its impact on small busi-ness.


Before these proposed regulations areadopted as final regulations, considerationwill be given to any written (one signedand eight (8) copies) or electronic com-ments that are submitted timely to the IRS.All comments will be available for publicinspection and copying.

A public hearing has been scheduledfor Friday, February 20, 2009, at 10 a.m.in the IRS Auditorium, Internal Rev-enue Building, 1111 Constitution Avenue,N.W., Washington, DC. Due to buildingsecurity procedures, visitors must enterat the Constitution Avenue entrance. Inaddition, all visitors must present photoidentification to enter the building. Be-cause of access restrictions, visitors willnot be admitted beyond the immediateentrance area more than 30 minutes beforethe hearing starts. For information abouthaving your name placed on the buildingaccess list to attend the hearing, see theFOR FURTHER INFORMATION CON-TACT section of this preamble.

Persons who wish to present oral com-ments at the hearing must submit written orelectronic comments by January 7, 2009,

and submit an outline of the topics to bediscussed and the amount of time to be de-voted to each topic (a signed original andeight (8) copies) by January 16, 2009. Aperiod of 10 minutes will be allotted toeach person for making comments.

An agenda showing the scheduling ofthe speakers will be prepared after thedeadline for receiving outlines has passed.Copies of the agenda will be available freeof charge at the hearing.


The principal author of these regula-tions is Michael P. Brewer, Office of Di-vision Counsel/Associate Chief Counsel(Tax Exempt and Government Entities).However, other personnel from the Officeof Chief Counsel, IRS, and the Depart-ment of Treasury participated in the devel-opment of these regulations.



PART 1—INCOME TAXES

Paragraph 1. The authority citation forpart 1 continues to read as follows:

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

§1.401(a)–13; §1.401(a)–20; §1.402(f)–1;§1.411(a)–11; §1.417(e)–1 [Amended]

Par. 2. For each entry listed in the“Location” column, remove the languagein the “Remove” column and add the lan-guage in the “Add” column in its place.

Location Remove Add

1.401(a)–13(g)(4)(ii), first sentence 90 days 180 days

1.401(a)–20, A–4, third sentence 90 days 180 days

1.401(a)–20, A–10(a), fifth and sixthsentences

90 days 180 days

1.401(a)–20, A–16, sixth sentence 90 days 180 days

1.401(a)–20, A–24(a)(1), fifth sentence 90 days 180 days

1.402(f)–1, A–2(a), first sentence 90 days 180 days

2008–45 I.R.B. 1134 November 10, 2008

Location Remove Add

1.411(a)–11(c)(2)(ii) 90 days 180 days

1.411(a)–11(c)(2)(iii)(A), first sentence 90 days 180 days

1.417(e)–1(b)(3)(i) 90 days 180 days

1.417(e)–1(b)(3)(ii), first sentence 90 days 180 days

1.417(e)–1(b)(3)(iii) 90 days 180 days

1.417(e)–1(b)(3)(vi), second sentence 90 days 180 days

1.417(e)–1(b)(3)(vii) 90 days 180 days

1.417(e)–1(b)(3)(vii) 90-day 180-day

§1.411(a)–11 [Amended]

Par. 3. Section 1.411(a)–11 is amendedas follows:

1. The second sentence of paragraph(c)(2)(i) is revised.

2. The second sentence of paragraph(c)(2)(iii)(B)(3) is revised.

3. Paragraphs (c)(2)(vi) and (h) areadded.

The additions and revisions read as fol-lows:

§1.411(a)–11 Restriction and valuationof distributions.

* * * * *(c) * * *(2) Consent—(i) * * * In addition,

so long as a benefit is immediately dis-tributable, a participant must be informedof the right, if any, to defer receipt of thedistribution and of the consequences offailing to defer such receipt. * * *

* * * * *(iii) * * *(B) * * *(3) * * * The summary described in

paragraph (c)(2)(iii)(B)(2) of this sectionmust advise the participant of the right, ifany, to defer receipt of the distribution andof the consequences of failing to defer suchreceipt, must set forth a summary of thedistribution options under the plan, mustrefer the participant to the most recent ver-sion of the notice (and, in the case of a no-tice provided in any document containinginformation in addition to the notice, mustidentify that document and must provide areasonable indication of where the noticemay be found in that document, such as byindex reference or by section heading), andmust advise the participant that, upon re-quest, a copy of the notice will be providedwithout charge.

* * * * *(vi) Consequences of failing to de-

fer—(A) A notice under this paragraph(c)(2) that is required to describe the con-sequences of failing to defer receipt ofa distribution until it is no longer imme-diately distributable must, to the extentapplicable under the plan and in a mannerdesigned to be easily understood, providethe participant with the information setout in paragraphs (c)(2)(vi)(A)(1) through(5) of this section and explain why it isrelevant to a decision whether to defer.

(1) A description of the following fed-eral tax implications of failing to defer:differences in the timing of inclusion intaxable income of an immediately com-mencing distribution that is not rolled over(or not eligible to be rolled over) and adistribution that is deferred until it is nolonger immediately distributable (includ-ing, as applicable, differences in the tax-ation of distributions of designated Rothcontributions within the meaning of sec-tion 402A); application of the 10% addi-tional tax on certain distributions beforeage 591/2 under section 72(t); and, in thecase of a defined contribution plan, lossof the opportunity upon immediate com-mencement for future tax-favored treat-ment of earnings if the distribution is notrolled over (or not eligible to be rolledover) to an eligible retirement plan de-scribed in section 402(c)(8)(B).

(2) In the case of a defined benefitplan, a statement of the amount payableto the participant under the normal formof benefit both upon immediate com-mencement and upon commencementwhen the benefit is no longer immedi-ately distributable (assuming no futurebenefit accruals). The statement need notvary based on the participant’s maritalstatus if the plan is permitted, pursuant

to §1.417(a)(3)–1(c)(2)(ii), to provide aQJSA explanation that does not vary basedon the participant’s marital status.

(3) In the case of a defined contributionplan, a statement that some currently avail-able investment options in the plan maynot be generally available on similar termsoutside the plan and contact informationfor obtaining additional information on thegeneral availability outside the plan of cur-rently available investment options in theplan.

(4) In the case of a defined contribu-tion plan, a statement that fees and ex-penses (including administrative or invest-ment-related fees) outside the plan may bedifferent from fees and expenses that ap-ply to the participant’s account and contactinformation for obtaining additional infor-mation on the fees and expenses that applyto the participant’s account.

(5) An explanation of any provisionsof the plan (and provisions of an acci-dent or health plan maintained by the em-ployer) that could reasonably be expectedto materially affect a participant’s decisionwhether to defer receipt of the distribu-tion. Such provisions would include, forexample: plan terms under which a partic-ipant who fails to defer may lose eligibilityfor retiree health coverage or eligibility forearly retirement subsidies or social secu-rity supplements; plan terms under whichthe benefit of a rehired participant whofailed to defer may be adversely affectedby the decision not to defer; and, in thecase of a defined contribution plan, planterms under which undistributed benefitsthat otherwise are nonforfeitable becomeforfeitable upon the participant’s death.

(B) Location of information; incorpo-ration by reference. In general, the infor-mation required to be provided in a no-tice under this paragraph (c)(2)(vi) must

November 10, 2008 1135 2008–45 I.R.B.

appear together (for example, in a list ofconsequences of failing to defer). How-ever, the notice will not be treated as fail-ing to satisfy the requirements of this para-graph (c)(2)(vi) merely because the no-tice includes a cross-reference to wherethe required information may be found innotices or other information provided ormade available to the participant, as longas the notice of consequences of failingto defer includes a statement of how thereferenced information may be obtainedwithout charge and explains why the refer-enced information is relevant to a decisionwhether to defer.

* * * * *(h) Consequences of Failing to Defer

Effective/Applicability Date. The provi-sions in paragraph (c) of this section thatdescribe the requirement to notify partici-pants of the consequences of failing to de-fer are effective for notices provided on orafter the first day of the first plan year be-ginning on or after January 1, 2010.


(Filed by the Office of the Federal Register on October 8,2008, 8:45 a.m., and published in the issue of the FederalRegister for October 9, 2008, 73 F.R. 59575)

Foundations Status of CertainOrganizations

Announcement 2008–104

The following organizations have failedto establish or have been unable to main-tain their status as public charities or as op-erating foundations. Accordingly, grantorsand contributors may not, after this date,rely on previous rulings or designationsin the Cumulative List of Organizations(Publication 78), or on the presumptionarising from the filing of notices under sec-tion 508(b) of the Code. This listing doesnot indicate that the organizations have losttheir status as organizations described insection 501(c)(3), eligible to receive de-ductible contributions.

Former Public Charities. The follow-ing organizations (which have been treatedas organizations that are not private foun-dations described in section 509(a) of theCode) are now classified as private foun-dations:

135 Club, Bethlehem, PAAlpha Omega of Illinois NFP, Elgin, ILAngel Village, Inc., Hendersonville, TNAnthony D. Amico Memorial Scholarship

Fund, Plainview, NYArt to the Nations, San Francisco, CAArts Creating Unity Institute, Inc.,

Los Angeles, CAAware Effectiveness, Inc., Pasadena, CABabylon Foundation, Inc.,

Los Angeles, CABethany II Housing Development Corp.,

New York, NYBethel Outreach Development Center,

Inc., Wilmington, DEBeyond Excellence, Inc., Houston, TXBMV Helping Hands, Libertyville, ILBridge Foundation, Sacramento, CABucksport Development Corporation,

Inc., Bucksport, MEBuilding Independence, Inc., Chetek, WIC Project, Freeport, NYCarlton Manor Housing Corporation,

Culver City, CACasa Piedra, Inc., Leominster, MACenter for Sports and Entertainment,

Ventura, CAChildren’s Wildfire Fund,

Shady Cove, ORColony Building Corp. Center,

Beasley, TXCommunity and Addiction Services ETC,

Spokane Valley, WAConsortium for Community Care, Inc.,

Calabasas, CACottage Foundation, Houston, TXC T I Training & Development NFP,

Chicago, ILDare to Dream Foundation,

Santa Monica, CADarsey Foundation, Inc., Bellaire, TXDelta Center for Rural Development, Inc.,

Helena, ARDr. Albert A. Nwokeuku Foundation,

Inc., Baltimore, MDEast African Health and Wellness Center,

Minneapolis, MNEducation Technology & Arts, Inc. ETA,

Inc., Hopkins, SCEgypt Plantation Museum, Inc.,

Wharton, TXEzzell Resource Group, Inc.,

Brooklyn, NYFamily and Community Educational

Services, Inc., Readyville, TNFamily Education Resource Center,

Bullhead City, AZ

Family Unity International, Inc.,Staten Island, NY

Fort Smith Riverfront Boxing Club,Fort Smith, AR

Fred K. Koken Foundation, Juneau, AKFresh Start Coaching, Pittsburgh, PAFriends of Castillo de San Marcos National

Monument, Inc., St. Augustine, FLGolden Star Christian Community

Outreach Center, Philadelphia, PAGrundy County R-V School District

Foundation, Inc., Galt, MSHelping Our Elderly Live Better,

Washington, DCHHFA Foundation, Inc., White Plains, NYHighly Favored Ministries, Arlington, TXHolodec Environmental Foundation,

Salt Lake City, UTHome Quest, Inc.,

Egg Harbor Township, NJHope for Restoration, Plano, TXHorizon Foundation, LTD, Brookfield, WIIn Moms Arms, Long Beach, CAIntensive Care of Youth, Jacksonville, NCInternational Sailing & Boating Hall of

Fame, Jensen Beach, FLIsland Community News, Inc., Kihei, HIJames Cooley Historic Foundation,

San Diego, CAJordans Crossing, Inc., Newark, OHJulius Boys Home, Inc., Los Angeles, CAKingston Community Organization for

Community Concerns, Inc., Shelby, NCLadies of Charissa Civic Club,

San Antonio, TXLife Enrichments Center, Inc., Adult Day

Services, Arlington, TXLimbs for Life Charitable Foundation,

Allendale, NJLiving Free Health Foundation, Inc.,

Annandale, VALiving Hope Outreach Ministries,

Kennettt, MOLyon Estates, Inc., Union, MSMay the Blessings Be Foundation,

Waller, TXMelvin Lee Foundation Holistic Center,

Kansas City, MOMentoring and More, Inc., Yorkville, ILMeta Point, Inc., Moreno Valley, CAMid-Way Ministries, Canaseraga, NYMillenium Second Chance Educational

Center, Inc., Camilla, GAMovie Foundation, Van Nuys, CANational Association of Minority

Contractors Colorado, Littleton, CONational Network of Organ Donors, Inc.,

Palm Beach Gardens, FL

2008–45 I.R.B. 1136 November 10, 2008

Need Neighborhood Education andEconomic Development, Jackson, MS

New Beginnings Cultural Center,Harrisburg, PA

Nishi Kaigan Dojo, Berkeley, CANutrition & Health Partnership, Inc.,

Wellesley, MAOne Vision Ministries, New River, AZOpen Arms Outreach Community Center,

Inc., Decatur, GAPalm Bay High Instrumental Music

Parents Association, Melbourne, FLPlay Your Game, Beaverton, ORPositive Networking Services, Inc.,

Portsmouth, VAPrecious Tots Dotties Learning Academy

at Fort Worth Texas, Arlington, TXProdigal Daughters Association,

Calumet City, ILProject Help, Inc., Latrobe, PAPryors Ponderosa, Inc., Lancaster, CARegion A Connect NC Commission, Inc.,

Sylva, NCReligious Without Borders Initiative, Inc.,

Plattsburgh, NYRoger Hodges Ministries, Amarillo, TXRural Learning Center, Howard, SDSister to Sister II, Inc., St. Louis, MOSpoken Word Ministries, Inc.,

Jackson, MSSt. Louis Women’s Final Four, Inc.,

St. Louis, MOSTAR Flight Fund, Inc., Austin, TXTDB Community Development Corp.,

Chester, VATeen Pregnancy Outreach Development

Center Shelter, Inc., Whitesburg, GAThat So Pretty Ceramics, Austin, TXTheatre Exile, Inc., New York, NYTimothy Judd Foundation, Houston, TXTravis County Development Corporation,

Austin, TXTwenty Three Middle, Inc.,

Newburyport, MAUmoja Art Village, Inc., Chicago, ILUnion City Action Network, Newark, CAUnity Fellowship Community

Development Center, Detroit, MIUnlimited Dimensions Adolescent

Group Home and Learning Resource,New Orleans, LA

Village Child Group Home,Sacramento, CA

Virginia Wyche Wilson CommunityDevelopment Agency, Jacksonville, FL

Vision of Missions Tabernacle CDC, Inc.,Philadelphia, PA

Vision Services Group, Inc., Charlotte, NC

Whistle Away Crime, Inc., Littleton, COWilliamson County Conservation

Foundation, Inc., Round Rock, TXWomen of Destiny Ministries

International, Inc., Foothill Ranch, CAWomens Leadership Network,

Laguna Beach, CAWomens Social Impact Workshop, Inc.,

Philadelphia, PAYouth Sports University, Lancaster, CA

If an organization listed above submitsinformation that warrants the renewal ofits classification as a public charity or asa private operating foundation, the Inter-nal Revenue Service will issue a ruling ordetermination letter with the revised clas-sification as to foundation status. Grantorsand contributors may thereafter rely uponsuch ruling or determination letter as pro-vided in section 1.509(a)–7 of the IncomeTax Regulations. It is not the practice ofthe Service to announce such revised clas-sification of foundation status in the Inter-nal Revenue Bulletin.

Request for Applications toParticipate in the 2009 IRSIndividual e-file PartnershipProgram

Announcement 2008–106

The Stakeholder Partnerships, Educa-tion and Communication (SPEC) organ-ization within the Internal Revenue Ser-vice (IRS) is continuing its efforts to es-tablish IRS e-file partnerships with vari-ous entities. The IRS is seeking non-mon-etary e-file partnerships for Filing Season2009. No applications for funding (mone-tary compensation) will be considered. Acommercial business, non-profit organiza-tion, state government or local governmentmay submit applications. Applications arenot solicited from other Federal govern-ment agencies. The program is an annualprogram and covers the period January16 through October 15, 2009. All prioryear partners must reapply for FilingSeason 2009.

BACKGROUND

The IRS Restructuring and ReformAct of 1998 (RRA 98) authorized the

IRS Commissioner to promote the ben-efits of and encourage the use of e-fileservices. RRA 98 enables the IRS to en-ter into non-monetary partnerships withbusinesses to offer low cost income taxpreparation and electronic filing for quali-fied taxpayers.

Continued opportunities for growth inelectronic tax administration are evident.For Filing Season 2008, the IRS received90 million electronically filed returns, anincrease of 12.4% over the previous year.Visit the IRS website, http://www.irs.gov,for the most current results from market re-search on individual taxpayers, includingdemographic data and psychographic stud-ies. This research includes attitudinal sur-veys, customer satisfaction surveys, PublicService communications, tracking studiesand any focus group results.

The IRS accepts many forms and sched-ules for electronic filing. Visit the IRS.govwebsite for a complete listing of acceptedforms and schedules.

FILING SEASON 2009

For Filing Season 2009, the IRS willcontinue to focus on the 1040 series in-come tax returns covering “IRS e-file Us-ing a Tax Preparer” and “IRS e-file Us-ing a Personal Computer.” Additional em-phasis continues to be placed on the fol-lowing features: electronic signature op-tions, Federal/State e-file, and electronicpayment options for balance due and esti-mated payment options.

A major area of emphasis is to reachthose taxpayers who continue to file com-puter prepared paper returns (v-code). Re-search indicates that the number of v-codereturns continues to increase (76% of allv-code returns are prepared by paid prepar-ers). Emphasis should be placed on con-verting v-code filers to electronically filetheir returns through advertising the bene-fits of e-file.

Participants should also reach those in-dividuals eligible for the Earned IncomeTax Credit (EITC). It’s important to notethat military families may qualify for EITCsince supplemental payments and combatpay are exempt from the income calcula-tions.

Participants are encouraged to focus onreducing the number of errors made onelectronically filed returns, including thosereturns claiming EITC. The “EITC Assis-

November 10, 2008 1137 2008–45 I.R.B.

tant” is an interactive web-based tool de-signed to help tax professionals determinewhether or not their clients are eligible forEITC, and why. The “EITC Assistant” isa step taken by the IRS to maximize tax-payer participation, minimize EITC errorswhile increasing compliance. You can findthe “EITC Assistant” on the IRS website athttp://www.irs.gov/eitc.

The Hispanic population is the fastestgrowing minority segment in the U.S. Par-ticipants are encouraged to market theire-file services to this segment of the pop-ulation and offer the Spanish versions foronline filing and/or downloadable soft-ware.

The IRS expects all accepted partnersto market, promote and offer e-file productand services through October 15, 2009.The IRS will supply the partners withthe key marketing messages that supportelectronic filing during the Filing Sea-son (January through April 15, 2009) andpost-Filing Season (April through Octo-ber 15, 2009). These messages should beused in your promotion of electronic filingand displayed on the websites of Partici-pants. Utilization of these messages willensure uniformity and maximize publicawareness. For additional information onthe various e-file programs, features, andmarket research, visit the IRS website athttp://www.irs.gov.

Participants will receive hyperlinksfrom IRS.gov (Partners Page) – to the Par-ticipant’s website. Potential Participantsmay request links for the following cate-gories:

• e-file Solutions for Taxpayers• Software and Other Tools for Your

e-file Business• e-file Opportunities for Financial Insti-

tutions and Employers• Pay Your Taxes Electronically

Safeguarding Taxpayer Data

The security of taxpayer accounts andpersonal information is a top priority forthe IRS. Tax professionals must imple-ment safeguards to protect taxpayer’sdata. It is not only the law, but it is goodbusiness practice, as it increases customerconfidence and trust. Refer to Publica-tion 4557, Safeguarding Taxpayer Data,a Guide for Your Business, which de-scribes the various security provisionsand rules that impact tax professionals.

The document assists tax professionalsin understanding their requirements forprotecting the privacy and confidentialityof taxpayer data, and provides guidanceon implementing the necessary securitycontrols within their business to satisfythese requirements. Publication 4557 canbe accessed at http://www.irs.gov.

PARTICIPATION STANDARDS &REQUIREMENTS

Participants will abide by the followingstandards and requirements, if applicable:

• The Participant was actively engagedin the electronic tax preparation andfiling industry in 2007 and 2008.

• The Participant will offer their taxpreparation and e-file services to theindividual taxpayer. The IRS will notpost advertisements offering both freetax preparation and free e-file on theIRS.gov Partners Page. Promotionon IRS.gov of free services, servicesthat include both free tax preparationand free e-filing, is reserved for FreeFile Alliance members only. Visitwww.freefilealliance.org to find outhow to become a member of the FreeFile Alliance or visit www.irs.gov formore details on free file.

• The Participant will market, promoteand offer e-file services through Octo-ber 15, 2009. The Participant shoulduse the key marketing messages, pro-vided by the IRS, for the promotionof Filing Season and Post Filing Sea-son electronic filing and place them onyour website.

• The Participant (Electronic ReturnOriginator, Intermediate ServiceProvider, Software Developer, andTransmitter) must be in good standingwith the IRS, comply with the e-filerequirements stated in the IRS Rev-enue Procedure 2007–40 (announcedin IR Bulletin 2007–26 dated June 25,2007), current versions of Publications1345, 1345A, 1346, 3112, and passthe annual Suitability and ParticipantsAcceptance Testing (PATS) conductedby the IRS. You can find the IRS e-filetechnical publications on the IRS web-site at http://www.irs.gov.

• The participant will comply withrequirements in Publication 1346,Electronic Return File Specifi-cations for Individual Income

Tax Returns, http://www.irs.gov/taxpros/providers/article/0,,id=97974,00.html. A newsequence (0300) is being addedto capture the volumes ofreturns (English and Spanish)e-filed through IRS.gov withparticipating companieshttp://www.irs.gov/efile/lists/0,,id=101223,00.html. An indicator“A” for English returns andan indicator “S” for Spanishreturns (if applicable) will be usedby Participants in their recordlayouts. Refer to the “RecordLayouts Nature of Change Page”of Publication 1346 to find moredetailed information. IRS willnot use the indicators to build amarketing database. In addition,the indicators will not be used tocompile company-specific data orpropriety data. The database willonly be used to create aggregatedata profiles of all users.

• The Participant will comply with theprivacy provisions of 26 U.S.C. §7216and U.S.C.§ 6103.

• The Participant will be required toprove and display third-party certifica-tions for the privacy/security/authen-ticity of its online service. The Par-ticipant’s website should display thethird-party certification and privacyseals. Participants must use softwarethat will enable their websites to statetheir privacy practices in a standardmachine-readable format that can beretrieved automatically and interpretedeasily by users.

• Participants will comply with the se-curity provisions in applicable De-partment of Treasury/IRS rules in-cluding, but not limited to, 31C.F.R.Part 10, IRS Rev. Proc. 2005–60,current versions of IRS Publications1345, 1345A, and 3112, and 26 U.S.C.§7216. In addition, Participants mustcomply with the Federal Trade Com-mission’s Gramm-Leach-Bliley Actto protect the security of taxpayerinformation. Refer to Publication4557, Safeguarding Taxpayer Data,a Guide for Your Business, for guid-ance on various security rules andprovisions that impact tax profession-als. The document can be accessed athttp://www.irs.gov.

2008–45 I.R.B. 1138 November 10, 2008

• Participants must comply with IRS’new security and privacy require-ments for Authorized IRS e-fileProviders participating in elec-tronic filing of individual incometax returns for the 2009 Filing Sea-son. Some of the new requirementsmay apply to online filing only. Adraft of the requirements existson IRS.gov http://www.irs.gov/efile/article/0,,id=186487,00.html. Whenthe requirements are finalized, theywill be included in the electronicversion of the 2009 Publication 1345.These new requirements will becomeeffective January 1, 2009.

• The Participant will offer their prod-ucts and services to filers of the indi-vidual 1040 Series returns, includingcomplex returns, balance due returns,Federal/State returns, and 1040EZ re-turns.

• The Participant will clearly disclose itscustomer service support options (in-cluding associated fees, if any) andprivacy policy on the landing page ofits website. Participants must providetaxpayers with a business contact pointby on-line form, email, mail, facsimileor telephone number which the Partic-ipant maintains and reviews.

• The Participant is encouraged tooffer the Spanish versions for onlinefiling and/or downloadable software.The Participant who offers Spanishversions for online filing and/or down-loadable software will have customerservice support to assist Hispanic tax-payers.

• The Participant will target v-codersand individuals eligible for EITC.

• The Participant will focus on reduc-ing the number of errors on electroni-cally prepared returns, including thosereturns claiming EITC.

• The Participant will offer a variety ofe-file features including the Self-Se-lect PIN, Electronic Payment Options,Federal/State e-file, Direct Deposit ofRefunds, etc.

• The Participant will be permitted onlyone (1) hyperlink on IRS.gov per cate-gory:

• e-file Solutions for Taxpayerhttp://www.irs.gov/efile/lists/0,,id=101223,00.html

• Software and Other Tools for Youre-file Businesshttp://www.irs.gov/efile/lists/0,,id=101225,00.html

• e-file Opportunities for FinancialInstitutions and Employershttp://www.irs.gov/efile/lists/0,,id=101233,00.html

• Pay Your Taxes Electronicallyhttp://www.irs.gov/efile/lists/0,,id=101227,00.html

• The Participant will provide the IRSwith a description (not to exceed 200characters including spaces) for eachhyperlink placed on the IRS e-file Part-ners Page. The hyperlink descriptionmay describe multiple offers/services.

• The Participant will not have a URL(s)containing the word “IRS.”

• The Participant will be required to sup-ply the IRS with a link to their web-site in their application or no less thanten (10) business days before the siteis expected to go live (start date of elec-tronic filing). All sites must be exam-ined before they can be posted on theIRS e-file Partners Page. The purposeof the review is to ensure each Partici-pant’s website complies with the stan-dards and requirements set forth in thisannouncement.

• The Participant will adhere to theIRS e-file rule for registration ofwebsites which enables IRS to morequickly identify fraud schemes, in-cluding phishing. Failure to do socould result in suspension or ex-pulsion from participation in IRSe-file. For more information, visithttp://www.irs.gov/efile/index.html.

• The Participant will adhere to industrybest practices to ensure the taxpayer re-turn information entrusted to them issecure and the privacy of such infor-mation is maintained. In any instancewhere a Participant contracts with aservice provider to obtain technologyservices, it will adhere to this standard.To the extent multiple Participants relyon a single service provider for frontor back office services (not ISP ser-vices), it is even more critical that suchtaxpayer security and privacy be main-tained with respect to others who sharethese services.

• A Participant’s website will be func-tionally adequate and consistent with

the Participant’s offer in permitting ataxpayer to complete their return. Fail-ure to comply may result in the Partici-pant’s removal from the Partners Page.

• Whenever taxpayers are requested orrequired to provide their SSN, it mustbe part of a secure session. Participantsare not permitted to use SSNs as a re-quested field for registration purposesor for establishing a taxpayer accounton-line.

• The Participant will display the IRSe-file logo on the landing page of itswebsite. The e-file logo should be aclick-through to the IRS e-file land-ing page www.irs.gov/efile. If thee-file logo is displayed on other webpages in addition to the landing pageof the Participant, the logo(s) shouldbe a click-through to the IRS e-filelanding page. The e-file logo andguidelines can be downloaded fromhttp://www.irs.gov.

• The Participant’s website will not con-tain inappropriate content. Participantwebsites must meet the following cri-teria:

• The site clearly relates to and com-plements existing information,products and services on IRS.gov.

• The site contains relevant and use-ful content that will benefit ourcustomers.

• The site contains accurate andtimely information.

• The site provides information at nocost. The Participant will not linkto sites whose primary purpose isto sell products or services (unlessit is part of an approved agreementwith IRS).

• The site has an excellent overallquality and professional image.

• The site is easy to navigate.• The site is a credible source for

information. The site must be freeof typos and errors so that it doesnot detract from the readability ofthe site.

• The site does not exhibit hate, bias,or discrimination.

• The site does not contain mislead-ing or unsubstantiated claims orconflict with the mission of theIRS.

November 10, 2008 1139 2008–45 I.R.B.

• The Participant must provide taxpay-ers a method to obtain the status oftheir tax return. Taxpayers can bedirected to “Where’s My Tax Re-fund?”. Taxpayers can get refundinformation about their Federal in-come tax return through the IRS’secure website 72 hours after IRSacknowledges receipt of their re-turn. Note: the Where’s My Refund?URL is http://www.irs.gov/individuals/article/0,,id=96596,00.html.

• The Participant will prominently dis-play on the landing page of its websitethe promotion of income tax prepara-tion and electronic filing for individu-als eligible for EITC.

• The Participant is encouraged to offera monetary incentive (reduced returnpreparation and electronic filing costs)to attract taxpayers.

• The Participant will disclose limita-tions in the forms and schedules thatare likely to be needed to supporttheir offerings. The Participant shouldclearly display a listing of the formsand schedules that will be offeredeither visible or accessible from theParticipant’s landing page.

• The Participant will clearly disclosea listing of the States that their soft-ware supports either visible or accessi-ble from the Participant’s landing page.

• The Participant is permitted to of-fer commercial products and servicesconsistent with obtaining the posi-tive consent of the user as describedin 26 U.S.C. 7616 before offeringfee-based products and services notrelated to tax preparation.

• The Participant will include a featurein their tax preparation software thatwill “time out” the session after nochanges are made for a period of timeconsistent with best practices approvedby privacy seal certification programs.

• The Participant shall report securityincidents to the IRS as soon as possiblebut not later than one (1) hour afterconfirmation of the incident. For thepurposes of this requirement, an eventthat can result in an unauthorized dis-closure, misuse, modification, or de-struction of taxpayer information shallbe considered a reportable securityincident. The instructions for submit-ting incident reports will be posted onIRS.gov. Visit http://www.irs.gov/efile/

article/0,,id=186487,00.html for adraft of IRS’ new security and privacyrequirements for Authorized IRS e-fileProviders.

• The Participant will submit writtennotification (e.g., email) to the IRSof changes, additions and deletions toURLs, link descriptions, etc.

• The Participant will submit Perfor-mance Reports to the IRS Point ofcovering Filing Season and post FilingSeason activity. The reports will coverinformation such as e-file statistics,website activity and anything else theIRS deems necessary. The IRS Pointof Contact will provide written report-ing instructions and requirements toaccepted Participants.

PERFORMANCE STANDARDS

• The IRS will have the accepted Par-ticipant’s hyperlink(s) available on theIRS website for the start of electronicfiling, subject to the participant’s pass-ing of the annual Suitability, PATS test-ing, and website review. Hyperlinkswill remain on the IRS e-file PartnersPage through October 15, 2009, or atthe discretion of the IRS.

• The IRS will randomize on a daily ba-sis the offers of the Participants listedon the IRS e-file Partners Page.

• The IRS may establish a link from theIRS e-file Partners Page to the Free Fileweb page and vice versa.

• The IRS will accept, if appropriate,the Participant’s written request forchanges/additions/deletions related toa URL, link description, etc.

• The IRS will review the Participant’swebsite(s) at any time to ensure thatparticipation requirements are met.

• The IRS will not endorse specific of-ferings or products, but will promotethe IRS e-file Partners Page. A “SiteDisclaimer” will be displayed upon ex-iting the IRS website before the userenters the Participant’s website.

PARTICIPATION TERMS

The IRS Individual e-file PartnershipProgram is an annual program, and allprospective Participants, including return-ing Participants, must reapply each yearfollowing the guidelines in the InternalRevenue Bulletin announcement adver-tised on IRS.gov. If the IRS determines

that the Participant is not meeting the “Par-ticipation Standards & Requirements,” theIRS may terminate its partnership with theParticipant and remove the participant’shyperlink(s) from the IRS e-file PartnersPage.

• The Participant will notify the IRS im-mediately if it wishes to terminate itspartnership with the IRS. The notifica-tion should be submitted through emailto the IRS Point of Contact or sentto the Point of Contact’s address in-dicated below in “IRS Point of Con-tact/Application Submission.”

APPLICATION PROCESS

Applications should contain the follow-ing information, if applicable:

• Provide Primary and Secondary Pointsof Contact (name, title, address,cell/telephone number, fax numberand email address) for discussion ofyour application and program partici-pation.

• Identify the Applicant’s secure web-site.

• Identify the Applicant’s tax prepara-tion software and the States it will sup-port.

• Identify the IRS forms and schedulesthat support your offering(s).

• Include the Applicant’s ElectronicFiler Identification Number(s) (EFIN)and/or Electronic Transmitter Identifi-cation Number (ETIN).

• Indicate if the Applicant will offerthe Spanish versions for online filingand/or downloadable software. De-scribe customer service support forassisting Hispanic taxpayers.

• Identify the Applicant’s hyperlink(s)and provide a short description (notto exceed 200 characters includingspaces) of the services and productsto be promoted on the IRS e-file Part-ners Page. In addition, the Applicantshould provide the associated URL(s).URL(s) cannot contain the word“IRS.” Indicate the category for eachhyperlink:

• e-file Solutions for Taxpayers• Software and Other Tools for Your

e-file Business• e-file Opportunities for Financial

Institutions and Employers

2008–45 I.R.B. 1140 November 10, 2008

• Pay Your Taxes Electronically

• Identify the Applicant’s third partyadministrators (i.e., VeriSign, Thawte,Truste) that certify the privacy/secu-rity/authenticity of its online serviceand provide certification that the Ap-plicant’s current status is active and ingood standing.

• Identify the Applicant’s communica-tion vehicle(s) (i.e., website, market-ing/promotional products, etc.) to mar-ket and promote your products and ser-vices and IRS e-file. Describe the in-centives, discounts, offers, benefits totaxpayers or other specific approachesto increase e-file volumes.

• Describe steps the Applicant will taketo reach taxpayers that claim EITC.This can include marketing/promo-tional efforts, monetary incentives(reduced return preparation and elec-tronic filing costs).

• Describe steps the Applicant will taketo reduce errors on electronically filedreturns, including those returns claim-ing EITC.

• Certification statement that the Appli-cant is in compliance with the privacyand disclosure provisions of 26 U.S.C.7216 and 26 U.S.C. 6103.

• Certification statement that theApplicant is in compliance withthe Federal Trade Commission’sGramm-Leach-Bliley (GLB) Act of1999, Financial Privacy Rule and Safe-guard Rules.

• Certification statement that the Appli-cant is in compliance with IRS’ secu-rity and privacy requirements for Au-thorized IRS e-file Providers partici-pating in electronic filing of individualincome tax returns.

IRS POINT OFCONTACT/APPLICATIONSUBMISSION

Applications to participate in theIRS Individual e-file PartnershipProgram should be submitted as aWord document through email at*[email protected] (Please makesure there is an asterisk before the WI(Wage and Investment) when submittingan application.) An application may alsobe sent to:

Internal Revenue Service5000 Ellin RoadLanham, MD 20706Attention: Karen Bradley C4–132SE:W:CAR:SPEC:FO:IMS

If you wish to have a hyperlink(s)on the IRS e-file Partners Page for thestart of electronic filing, your applica-tion must be submitted by December 10,2008. If your application is received afterthe deadline, there is no guarantee that itwill be accepted by the IRS.

Any questions regarding the devel-opment of applications, the submis-sion of Performance Reports, or anyother type of contact for this program

should be directed to Karen Bradleyat (202) 283–7034 or through email to*[email protected]. Please makesure there is an asterisk (*) before the WI(Wage and Investment) for any type ofemail contact.

APPLICATION EVALUATION

All applications will be evaluated basedon the required information provided tothe IRS and the applicant’s ability to ful-fill their responsibilities. Prior year perfor-mance will also be considered when evalu-ating applications from returning partners.

ACCEPTANCE/DENIAL OFAPPLICATION

If your application is accepted, youwill receive written notification from theIRS. If your application is denied, you willreceive written notification from the IRSwith an explanation of the denial.

e-Help

If you have any questions relatedto e-products/electronic filing, you cancontact the e-Help Desk toll-free at1–866–255–0654. The e-Help desk assis-tors are ready to respond to non-accountrelated questions and issues. You can alsogo to http://www.irs.gov where the IRShouses a variety of information which im-pacts the tax professional.

November 10, 2008 1141 2008–45 I.R.B.

Definition of TermsRevenue rulings and revenue procedures(hereinafter referred to as “rulings”) thathave an effect on previous rulings use thefollowing defined terms to describe the ef-fect:

Amplified describes a situation whereno change is being made in a prior pub-lished position, but the prior position is be-ing extended to apply to a variation of thefact situation set forth therein. Thus, ifan earlier ruling held that a principle ap-plied to A, and the new ruling holds that thesame principle also applies to B, the earlierruling is amplified. (Compare with modi-fied, below).

Clarified is used in those instanceswhere the language in a prior ruling is be-ing made clear because the language hascaused, or may cause, some confusion.It is not used where a position in a priorruling is being changed.

Distinguished describes a situationwhere a ruling mentions a previously pub-lished ruling and points out an essentialdifference between them.

Modified is used where the substanceof a previously published position is beingchanged. Thus, if a prior ruling held that aprinciple applied to A but not to B, and thenew ruling holds that it applies to both A

and B, the prior ruling is modified becauseit corrects a published position. (Comparewith amplified and clarified, above).

Obsoleted describes a previously pub-lished ruling that is not considered deter-minative with respect to future transac-tions. This term is most commonly used ina ruling that lists previously published rul-ings that are obsoleted because of changesin laws or regulations. A ruling may alsobe obsoleted because the substance hasbeen included in regulations subsequentlyadopted.

Revoked describes situations where theposition in the previously published rulingis not correct and the correct position isbeing stated in a new ruling.

Superseded describes a situation wherethe new ruling does nothing more than re-state the substance and situation of a previ-ously published ruling (or rulings). Thus,the term is used to republish under the1986 Code and regulations the same po-sition published under the 1939 Code andregulations. The term is also used whenit is desired to republish in a single rul-ing a series of situations, names, etc., thatwere previously published over a period oftime in separate rulings. If the new rul-ing does more than restate the substance

of a prior ruling, a combination of termsis used. For example, modified and su-perseded describes a situation where thesubstance of a previously published rulingis being changed in part and is continuedwithout change in part and it is desired torestate the valid portion of the previouslypublished ruling in a new ruling that is selfcontained. In this case, the previously pub-lished ruling is first modified and then, asmodified, is superseded.

Supplemented is used in situations inwhich a list, such as a list of the names ofcountries, is published in a ruling and thatlist is expanded by adding further names insubsequent rulings. After the original rul-ing has been supplemented several times, anew ruling may be published that includesthe list in the original ruling and the ad-ditions, and supersedes all prior rulings inthe series.

Suspended is used in rare situations toshow that the previous published rulingswill not be applied pending some futureaction such as the issuance of new oramended regulations, the outcome of casesin litigation, or the outcome of a Servicestudy.

AbbreviationsThe following abbreviations in current useand formerly used will appear in materialpublished in the Bulletin.

A—Individual.Acq.—Acquiescence.B—Individual.BE—Beneficiary.BK—Bank.B.T.A.—Board of Tax Appeals.C—Individual.C.B.—Cumulative Bulletin.CFR—Code of Federal Regulations.CI—City.COOP—Cooperative.Ct.D.—Court Decision.CY—County.D—Decedent.DC—Dummy Corporation.DE—Donee.Del. Order—Delegation Order.DISC—Domestic International Sales Corporation.DR—Donor.E—Estate.EE—Employee.E.O.—Executive Order.

ER—Employer.ERISA—Employee Retirement Income Security Act.EX—Executor.F—Fiduciary.FC—Foreign Country.FICA—Federal Insurance Contributions Act.FISC—Foreign International Sales Company.FPH—Foreign Personal Holding Company.F.R.—Federal Register.FUTA—Federal Unemployment Tax Act.FX—Foreign corporation.G.C.M.—Chief Counsel’s Memorandum.GE—Grantee.GP—General Partner.GR—Grantor.IC—Insurance Company.I.R.B.—Internal Revenue Bulletin.LE—Lessee.LP—Limited Partner.LR—Lessor.M—Minor.Nonacq.—Nonacquiescence.O—Organization.P—Parent Corporation.PHC—Personal Holding Company.PO—Possession of the U.S.PR—Partner.

PRS—Partnership.PTE—Prohibited Transaction Exemption.Pub. L.—Public Law.REIT—Real Estate Investment Trust.Rev. Proc.—Revenue Procedure.Rev. Rul.—Revenue Ruling.S—Subsidiary.S.P.R.—Statement of Procedural Rules.Stat.—Statutes at Large.T—Target Corporation.T.C.—Tax Court.T.D. —Treasury Decision.TFE—Transferee.TFR—Transferor.T.I.R.—Technical Information Release.TP—Taxpayer.TR—Trust.TT—Trustee.U.S.C.—United States Code.X—Corporation.Y—Corporation.Z —Corporation.

2008–45 I.R.B. i November 10, 2008

Numerical Finding List1

Bulletins 2008–27 through 2008–45

Announcements:

2008-62, 2008-27 I.R.B. 74

2008-63, 2008-28 I.R.B. 114

2008-64, 2008-28 I.R.B. 114

2008-65, 2008-31 I.R.B. 279

2008-66, 2008-29 I.R.B. 164

2008-67, 2008-29 I.R.B. 164

2008-68, 2008-30 I.R.B. 244

2008-69, 2008-32 I.R.B. 318

2008-70, 2008-32 I.R.B. 318

2008-71, 2008-32 I.R.B. 321

2008-72, 2008-32 I.R.B. 321

2008-73, 2008-33 I.R.B. 391

2008-74, 2008-33 I.R.B. 392

2008-75, 2008-33 I.R.B. 392

2008-76, 2008-33 I.R.B. 393

2008-77, 2008-33 I.R.B. 394

2008-78, 2008-34 I.R.B. 453

2008-79, 2008-35 I.R.B. 568

2008-80, 2008-37 I.R.B. 706

2008-81, 2008-37 I.R.B. 706

2008-82, 2008-37 I.R.B. 708

2008-83, 2008-37 I.R.B. 709

2008-84, 2008-38 I.R.B. 748

2008-85, 2008-38 I.R.B. 749

2008-86, 2008-40 I.R.B. 843

2008-87, 2008-40 I.R.B. 843

2008-88, 2008-40 I.R.B. 843

2008-89, 2008-40 I.R.B. 844

2008-90, 2008-41 I.R.B. 896

2008-91, 2008-42 I.R.B. 963

2008-92, 2008-42 I.R.B. 963

2008-93, 2008-41 I.R.B. 896

2008-94, 2008-42 I.R.B. 964

2008-95, 2008-42 I.R.B. 964

2008-96, 2008-43 I.R.B. 1010

2008-97, 2008-43 I.R.B. 1010

2008-98, 2008-44 I.R.B. 1087

2008-99, 2008-44 I.R.B. 1089

2008-100, 2008-44 I.R.B. 1090

2008-101, 2008-44 I.R.B. 1090

2008-102, 2008-43 I.R.B. 1011

2008-104, 2008-45 I.R.B. 1136

2008-106, 2008-45 I.R.B. 1137

Court Decisions:

2087, 2008-41 I.R.B. 845

Notices:

2008-55, 2008-27 I.R.B. 11

2008-56, 2008-28 I.R.B. 79

2008-57, 2008-28 I.R.B. 80

Notices— Continued:

2008-58, 2008-28 I.R.B. 81

2008-59, 2008-29 I.R.B. 123

2008-60, 2008-30 I.R.B. 178

2008-61, 2008-30 I.R.B. 180

2008-62, 2008-29 I.R.B. 130

2008-63, 2008-31 I.R.B. 261

2008-64, 2008-31 I.R.B. 268

2008-65, 2008-30 I.R.B. 182

2008-66, 2008-31 I.R.B. 270

2008-67, 2008-32 I.R.B. 307

2008-68, 2008-34 I.R.B. 418

2008-69, 2008-34 I.R.B. 419

2008-70, 2008-36 I.R.B. 575

2008-71, 2008-35 I.R.B. 462

2008-72, 2008-43 I.R.B. 998

2008-73, 2008-38 I.R.B. 717

2008-74, 2008-38 I.R.B. 718

2008-75, 2008-38 I.R.B. 719

2008-76, 2008-39 I.R.B. 768

2008-77, 2008-40 I.R.B. 814

2008-78, 2008-41 I.R.B. 851

2008-79, 2008-40 I.R.B. 815

2008-80, 2008-40 I.R.B. 820

2008-81, 2008-41 I.R.B. 852

2008-82, 2008-41 I.R.B. 853

2008-83, 2008-42 I.R.B. 905

2008-84, 2008-41 I.R.B. 855

2008-85, 2008-42 I.R.B. 905

2008-86, 2008-42 I.R.B. 925

2008-87, 2008-42 I.R.B. 930

2008-88, 2008-42 I.R.B. 933

2008-89, 2008-43 I.R.B. 999

2008-90, 2008-43 I.R.B. 1000

2008-91, 2008-43 I.R.B. 1001

2008-92, 2008-43 I.R.B. 1001

2008-93, 2008-43 I.R.B. 1002

2008-94, 2008-44 I.R.B. 1070

2008-95, 2008-44 I.R.B. 1076

2008-96, 2008-44 I.R.B. 1077

2008-97, 2008-44 I.R.B. 1080

2008-98, 2008-44 I.R.B. 1080

2008-100, 2008-44 I.R.B. 1081

2008-101, 2008-44 I.R.B. 1082

2008-102, 2008-45 I.R.B. 1106

Proposed Regulations:

REG-209006-89, 2008-41 I.R.B. 867

REG-157711-02, 2008-44 I.R.B. 1087

REG-143544-04, 2008-42 I.R.B. 947

REG-160868-04, 2008-45 I.R.B. 1115

REG-161695-04, 2008-37 I.R.B. 699

REG-164965-04, 2008-34 I.R.B. 450

REG-142339-05, 2008-45 I.R.B. 1116

REG-143453-05, 2008-32 I.R.B. 310

REG-146895-05, 2008-37 I.R.B. 700

Proposed Regulations— Continued:

REG-155087-05, 2008-38 I.R.B. 726

REG-142680-06, 2008-35 I.R.B. 565

REG-120476-07, 2008-36 I.R.B. 679

REG-120844-07, 2008-39 I.R.B. 770

REG-128841-07, 2008-45 I.R.B. 1124

REG-129243-07, 2008-27 I.R.B. 32

REG-138355-07, 2008-32 I.R.B. 311

REG-140029-07, 2008-40 I.R.B. 828

REG-142040-07, 2008-34 I.R.B. 451

REG-142333-07, 2008-43 I.R.B. 1008

REG-149404-07, 2008-40 I.R.B. 839

REG-149405-07, 2008-27 I.R.B. 73

REG-100464-08, 2008-32 I.R.B. 313

REG-101258-08, 2008-28 I.R.B. 111

REG-102122-08, 2008-31 I.R.B. 278

REG-102822-08, 2008-38 I.R.B. 744

REG-103146-08, 2008-37 I.R.B. 701

REG-106251-08, 2008-39 I.R.B. 774

REG-107318-08, 2008-45 I.R.B. 1131

REG-115457-08, 2008-33 I.R.B. 390

REG-121698-08, 2008-29 I.R.B. 163

Revenue Procedures:

2008-32, 2008-28 I.R.B. 82

2008-33, 2008-28 I.R.B. 93

2008-34, 2008-27 I.R.B. 13

2008-35, 2008-29 I.R.B. 132

2008-36, 2008-33 I.R.B. 340

2008-37, 2008-29 I.R.B. 137

2008-38, 2008-29 I.R.B. 139

2008-39, 2008-29 I.R.B. 143

2008-40, 2008-29 I.R.B. 151

2008-41, 2008-29 I.R.B. 155

2008-42, 2008-29 I.R.B. 160

2008-43, 2008-30 I.R.B. 186

2008-44, 2008-30 I.R.B. 187

2008-45, 2008-30 I.R.B. 224

2008-46, 2008-30 I.R.B. 238

2008-47, 2008-31 I.R.B. 272

2008-48, 2008-36 I.R.B. 586

2008-49, 2008-34 I.R.B. 423

2008-50, 2008-35 I.R.B. 464

2008-51, 2008-35 I.R.B. 562

2008-52, 2008-36 I.R.B. 587

2008-53, 2008-36 I.R.B. 678

2008-54, 2008-38 I.R.B. 722

2008-55, 2008-39 I.R.B. 768

2008-56, 2008-40 I.R.B. 826

2008-57, 2008-41 I.R.B. 855

2008-58, 2008-41 I.R.B. 856

2008-59, 2008-41 I.R.B. 857

2008-60, 2008-43 I.R.B. 1006

2008-61, 2008-42 I.R.B. 934

2008-62, 2008-42 I.R.B. 935

2008-63, 2008-42 I.R.B. 946

1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2008–1 through 2008–26 is in Internal Revenue Bulletin2008–26, dated June 30, 2008.

November 10, 2008 ii 2008–45 I.R.B.

Revenue Procedures— Continued:

2008-65, 2008-44 I.R.B. 1082

2008-66, 2008-45 I.R.B. 1107

Revenue Rulings:

2008-32, 2008-27 I.R.B. 6

2008-33, 2008-27 I.R.B. 8

2008-34, 2008-28 I.R.B. 76

2008-35, 2008-29 I.R.B. 116

2008-36, 2008-30 I.R.B. 165

2008-37, 2008-28 I.R.B. 77

2008-38, 2008-31 I.R.B. 249

2008-39, 2008-31 I.R.B. 252

2008-40, 2008-30 I.R.B. 166

2008-41, 2008-30 I.R.B. 170

2008-42, 2008-30 I.R.B. 175

2008-43, 2008-31 I.R.B. 258

2008-44, 2008-32 I.R.B. 292

2008-45, 2008-34 I.R.B. 403

2008-46, 2008-36 I.R.B. 572

2008-47, 2008-39 I.R.B. 760

2008-48, 2008-38 I.R.B. 713

2008-49, 2008-40 I.R.B. 811

2008-50, 2008-45 I.R.B. 1098

Treasury Decisions:

9401, 2008-27 I.R.B. 1

9402, 2008-31 I.R.B. 254

9403, 2008-32 I.R.B. 285

9404, 2008-32 I.R.B. 280

9405, 2008-32 I.R.B. 293

9406, 2008-32 I.R.B. 287

9407, 2008-33 I.R.B. 330

9408, 2008-33 I.R.B. 323

9409, 2008-29 I.R.B. 118

9410, 2008-34 I.R.B. 414

9411, 2008-34 I.R.B. 398

9412, 2008-37 I.R.B. 687

9413, 2008-34 I.R.B. 404

9414, 2008-35 I.R.B. 454

9415, 2008-36 I.R.B. 570

9417, 2008-37 I.R.B. 693

9418, 2008-38 I.R.B. 713

9419, 2008-40 I.R.B. 790

9420, 2008-39 I.R.B. 750

9421, 2008-39 I.R.B. 755

9422, 2008-42 I.R.B. 898

9423, 2008-43 I.R.B. 966

9424, 2008-44 I.R.B. 1012

9425, 2008-45 I.R.B. 1100

2008–45 I.R.B. iii November 10, 2008

Finding List of Current Actions onPreviously Published Items1

Bulletins 2008–27 through 2008–45

Announcements:

2008-19

Superseded by

Ann. 2008-95, 2008-42 I.R.B. 964

2008-64

Corrected by

Ann. 2008-71, 2008-32 I.R.B. 321

2008-72

Corrected by

Ann. 2008-78, 2008-34 I.R.B. 453

Notices:

88-80

Modified by

Notice 2008-79, 2008-40 I.R.B. 815

99-48

Superseded by

Rev. Proc. 2008-40, 2008-29 I.R.B. 151

2000-9

Obsoleted by

Rev. Proc. 2008-41, 2008-29 I.R.B. 155

2004-2

Amplified by

Notice 2008-59, 2008-29 I.R.B. 123

2004-50

Amplified by

Notice 2008-59, 2008-29 I.R.B. 123

2005-11

Superseded by

T.D. 9425, 2008-45 I.R.B. 1100

2005-91

Obsoleted by

T.D. 9422, 2008-42 I.R.B. 898

2006-88

Modified and superseded by

Notice 2008-60, 2008-30 I.R.B. 178

2007-22

Amplified by

Notice 2008-59, 2008-29 I.R.B. 123

2007-36

Clarified, modified, and amplified by

Rev. Proc. 2008-54, 2008-38 I.R.B. 722

2007-52

Updated and amplified by

Notice 2008-96, 2008-44 I.R.B. 1077

2007-53

Updated by

Notice 2008-97, 2008-44 I.R.B. 1080

Notices— Continued:

2008-41

Amended and supplemented by

Notice 2008-88, 2008-42 I.R.B. 933

Proposed Regulations:

REG-161695-04

Corrected by

Ann. 2008-92, 2008-42 I.R.B. 963

REG-143453-05

Hearing cancelled by

Ann. 2008-96, 2008-43 I.R.B. 1010

REG-129243-07

Corrected by

Ann. 2008-75, 2008-33 I.R.B. 392

REG-151135-07

Hearing scheduled by

Ann. 2008-64, 2008-28 I.R.B. 114

REG-101258-08

Corrected by

Ann. 2008-73, 2008-33 I.R.B. 391

REG-103146-08

Hearing scheduled by

Ann. 2008-102, 2008-43 I.R.B. 1011

Revenue Procedures:

92-25

Superseded by

Rev. Proc. 2008-41, 2008-29 I.R.B. 155

92-83

Obsoleted by

Rev. Proc. 2008-37, 2008-29 I.R.B. 137

2001-10

Section 6.02(1)(a) modified and amplified by

Rev. Proc. 2008-52, 2008-36 I.R.B. 587

2001-42

Superseded by

Rev. Proc. 2008-39, 2008-29 I.R.B. 143

2002-9

Clarified, modified, amplified, and superseded by

Rev. Proc. 2008-52, 2008-36 I.R.B. 587

Modified and amplified by

Rev. Proc. 2008-43, 2008-30 I.R.B. 186

2002-28

Section 7.02(1)(a) modified and amplified by

Rev. Proc. 2008-52, 2008-36 I.R.B. 587

2002-64

Superseded by

Rev. Proc. 2008-55, 2008-39 I.R.B. 768

2005-29

Superseded by

Rev. Proc. 2008-49, 2008-34 I.R.B. 423


2006-27


Rev. Proc. 2008-50, 2008-35 I.R.B. 464

2006-29

Superseded by

Rev. Proc. 2008-34, 2008-27 I.R.B. 13

2006-34

Superseded by

Rev. Proc. 2008-44, 2008-30 I.R.B. 187

2007-14

Superseded by

Rev. Proc. 2008-52, 2008-36 I.R.B. 587

2007-19

Superseded by

Rev. Proc. 2008-39, 2008-29 I.R.B. 143

2007-37

Updated by

Rev. Proc. 2008-62, 2008-42 I.R.B. 935

2007-42

Superseded by

Rev. Proc. 2008-32, 2008-28 I.R.B. 82

2007-43

Superseded by

Rev. Proc. 2008-33, 2008-28 I.R.B. 93

2007-44

Modified by

Rev. Proc. 2008-56, 2008-40 I.R.B. 826

2007-49

Section 3 modified and superseded by

Rev. Proc. 2008-50, 2008-35 I.R.B. 464

2007-50

Superseded by

Rev. Proc. 2008-36, 2008-33 I.R.B. 340

2007-63

Superseded by

Rev. Proc. 2008-59, 2008-41 I.R.B. 857

2007-66


Rev. Proc. 2008-54, 2008-38 I.R.B. 722

2007-70

Modified by

Ann. 2008-63, 2008-28 I.R.B. 114

2007-72

Amplified and superseded by

Rev. Proc. 2008-47, 2008-31 I.R.B. 272

2008-3

Modified and amplified by

Rev. Proc. 2008-61, 2008-42 I.R.B. 934

1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2008–1 through 2008–26 is in Internal Revenue Bulletin 2008–26, dated June 30, 2008.

November 10, 2008 iv 2008–45 I.R.B.


2008-12


Rev. Proc. 2008-35, 2008-29 I.R.B. 132

2008-43

Modified by

Rev. Proc. 2008-52, 2008-36 I.R.B. 587

2008-52

Modified by

Ann. 2008-84, 2008-38 I.R.B. 748

Revenue Rulings:

67-213

Amplified by

Rev. Rul. 2008-40, 2008-30 I.R.B. 166

71-234

Modified by

Rev. Proc. 2008-43, 2008-30 I.R.B. 186

76-273

Obsoleted by

T.D. 9414, 2008-35 I.R.B. 454

77-480

Modified by

Rev. Proc. 2008-43, 2008-30 I.R.B. 186

82-105

Obsoleted by

T.D. 9414, 2008-35 I.R.B. 454

91-17

Amplified by

Rev. Proc. 2008-41, 2008-29 I.R.B. 155Rev. Proc. 2008-42, 2008-29 I.R.B. 160

Superseded in part by

Rev. Proc. 2008-40, 2008-29 I.R.B. 151

2005-6

Amplified by

Rev. Proc. 2008-38, 2008-29 I.R.B. 139

2006-57

Modified by

Notice 2008-74, 2008-38 I.R.B. 718

2008-12

Amplified by

Rev. Rul. 2008-38, 2008-31 I.R.B. 249

Clarified by

Ann. 2008-65, 2008-31 I.R.B. 279

Treasury Decisions:

8073

Corrected by

Ann. 2008-99, 2008-44 I.R.B. 1089

9391

Corrected by

Ann. 2008-74, 2008-33 I.R.B. 392

Treasury Decisions— Continued:

9417

Corrected by

Ann. 2008-91, 2008-42 I.R.B. 963

2008–45 I.R.B. v November 10, 2008

November 10, 2008 2008–45 I.R.B.

2008–45 I.R.B. November 10, 2008

November 10, 2008 2008–45 I.R.B.

INTERNAL REVENUE BULLETINThe Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue

Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superin-tendent of Documents when their subscriptions must be renewed.

CUMULATIVE BULLETINSThe contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are

sold on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the weeklyBulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of printand are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from theSuperintendent of Documents.

ACCESS THE INTERNAL REVENUE BULLETIN ON THE INTERNETYou may view the Internal Revenue Bulletin on the Internet at www.irs.gov. Under information for: select Businesses. Under

related topics, select More Topics. Then select Internal Revenue Bulletins.

INTERNAL REVENUE BULLETINS ON CD-ROMInternal Revenue Bulletins are available annually as part of Publication 1796 (Tax Products CD-ROM). The CD-ROM can be

purchased from National Technical Information Service (NTIS) on the Internet at www.irs.gov/cdorders (discount for online orders)or by calling 1-877-233-6767. The first release is available in mid-December and the final release is available in late January.

HOW TO ORDERCheck the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance,

detach entire page, and mail to the Superintendent of Documents, P.O. Box 371954, Pittsburgh PA, 15250–7954. Please allow two tosix weeks, plus mailing time, for delivery.

WE WELCOME COMMENTS ABOUT THE INTERNALREVENUE BULLETIN

If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it,we would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page(www.irs.gov) or write to the IRS Bulletin Unit, SE:W:CAR:MP:T:T:SP, Washington, DC 20224

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Bulletin No. 2008-45 November 10, 2008 HIGHLIGHTS OF THIS … · 2012. 7. 17. · Bulletin No....

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Transcript of Bulletin No. 2008-45 November 10, 2008 HIGHLIGHTS OF THIS … · 2012. 7. 17. · Bulletin No....