Bulletin No. 2009-18 HIGHLIGHTS OF THIS ISSUE · Bulletin No. 2009-18 May 4, 2009 HIGHLIGHTS OF...

Bulletin No. 2009-18May 4, 2009

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.

INCOME TAX

REG–144689–04, page 906.Proposed regulations under section 706 of the Code relate tothe determination of partners’ distributive shares of partnershipitems of income, gain, loss, deduction and credit when a part-ner’s interests varies during a partnership taxable year. Theregulations also modify the existing regulations regarding therequired taxable year of a partnership.

Notice 2009–37, page 898.This notice announces the phase-out of the new qualified hy-brid motor vehicle credit and the new advanced lean burn tech-nology motor vehicle credit for passenger automobiles andlight trucks manufactured by Ford Motor Company that are pur-chased for use or lease in the United States beginning on April1, 2009.

Notice 2009–38, page 901.Section 382. This notice provides additional guidance regard-ing the application of section 382 of the Code and other pro-visions of law to corporations whose instruments are acquiredby the Treasury Department pursuant to the Emergency Eco-nomic Stabilization Act of 2008 (EESA). Notice 2009–14 am-plified and superseded.

EMPLOYEE PLANS

Notice 2009–39, page 902.Weighted average interest rate update; corporate bondindices; 30-year Treasury securities; segment rates.This notice contains updates for the corporate bond weightedaverage interest rate for plan years beginning in April 2009;

the 24-month average segment rates; the funding transitionalsegment rates applicable for April 2009; and the minimumpresent value transitional rates for March 2009.

Announcement 2009–34, page 916.Request for comments on revenue procedure for sec-tion 403(b) prototype plans. The Service intends to estab-lish a program for the pre-approval of prototype plans undersection 403(b) of the Code. This announcement includes adraft revenue procedure that contains the Service’s proposedprocedures for issuing opinion letters as to the acceptabilityunder section 403(b) of the form of prototype plans. The Ser-vice posted draft sample plan language on the irs.gov web-site for use in drafting section 403(b) prototype plan. The Ser-vice seeks public input before finalizing these procedures andsample plan language, and invites interested persons to sub-mit comments.

EMPLOYMENT TAX

Rev. Rul. 2009–11, page 896.Differential wage payments to active duty members ofthe uniformed services. This ruling provides that differen-tial pay that employers pay to their employees who leave theirjob to go on active military duty is subject to income tax with-holding, but is not subject to Federal Insurance ContributionsAct (FICA) or Federal Unemployment Tax Act (FUTA) taxes. Ad-ditionally, the ruling provides that employers may use the ag-gregate procedure or optional flat rate withholding to calculatethe amount of income taxes required to be withheld on thesepayments, and that these payments must be reported on FormW–2. Rev. Rul. 69–136 modified and superseded.

(Continued on the next page)

Finding Lists begin on page ii.

ADMINISTRATIVE

Announcement 2009–36, page 927.This document cancels a public hearing on proposed regula-tions (REG–150066–08, 2009–5 I.R.B. 423) relating to theforeign base company sales income, in cases in which per-sonal property sold by a controlled foreign corporation (CFC)is manufactured, produced, or constructed pursuant to a con-tract manufacturing arrangement or by one or more branchesof the CFC. The temporary regulations modify the foreign basecompany sales income regulations to address current businessstructures and practices, particulary the growing importanceof contract manufacturing and other manufacturing arrange-ments. The temporary regulations, in general, will affect CFCsand their United States shareholders.

May 4, 2009 2009–18 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.

2009–18 I.R.B. May 4, 2009

May 4, 2009 2009–18 I.R.B.

Part I. Rulings and Decisions Under the Internal Revenue Codeof 1986Section 3401.—Definitions(Also §§ 3121(a), 3306(b).)

Differential wage payments to ac-tive duty members of the uniformedservices. This ruling provides that dif-ferential pay that employers pay to theiremployees who leave their job to go on ac-tive military duty is subject to income taxwithholding, but is not subject to FederalInsurance Contributions Act (FICA) orFederal Unemployment Tax Act (FUTA)taxes. Additionally, the ruling providesthat employers may use the aggregate pro-cedure or optional flat rate withholding tocalculate the amount of income taxes re-quired to be withheld on these payments,and that these payments must be reportedon Form W–2. Rev. Rul. 69–136 modi-fied and superseded.

Rev. Rul. 2009–11

ISSUES

1. Are differential wage payments madeby employers to individuals while onactive duty in the uniformed servicesof the United States for more than 30days “wages” for purposes of taxationunder the Federal Insurance Contribu-tions Act (FICA), the Federal Unem-ployment Tax Act (FUTA), and theCollection of Income Tax at Source onWages (income tax withholding)?

2. How do employers calculate theamount of income taxes required tobe withheld on differential wage pay-ments?

3. What information return reporting re-quirements apply to differential wagepayments?

FACTS

M, an employer, has employees whoare called or voluntarily enlist for activemilitary service in the United States uni-formed services (as defined in chapter 43of title 38, United Sates Code) for pe-riods exceeding 30 days. M continuesmaking payments to the individuals in anamount equal to the difference between thecompensation they receive for their mili-tary service and the wages the employees

would have received from M if the em-ployees were performing services for M.The payments supplement compensationreceived by the employees from the Fed-eral government for their military service.

LAW AND ANALYSIS

Income Tax Withholding, FICA and FUTATreatment

Section 3402(a), relating to incometax withholding, generally requires everyemployer making a payment of wages todeduct and withhold upon those wages atax determined in accordance with pre-scribed tables or computational proce-dures. Sections 3101 and 3111 imposetaxes under the Federal Insurance Contri-butions Act (“FICA”) on employees andemployers for wages paid with respect toemployment. Section 3301 imposes taxunder the Federal Unemployment Tax Act(“FUTA”) on employers on wages paidwith respect to employment.

Section 3401(a) defines “wages” forincome tax withholding purposes as allremuneration for services performed byan employee for his employer, subject tocertain exceptions. Sections 3121(a) and3306(b) contain similar, but not identical,definitions of wages for FICA and FUTApurposes.

Revenue Ruling 69–136, 1969–1 C.B.252, addresses the tax treatment of pay-ments made by civilian employers to theiremployees who are called to or enlist in ac-tive military service for an extended timeperiod. The payments are made by thecivilian employers during the period of ac-tive military service in amounts equal tothe difference between the compensationpaid by the military and the wages thatwould have been paid if the individualswere performing services for the civilianemployer. The ruling holds that the pay-ments are not wages subject to the taxesimposed by FICA or FUTA or to incometax withholding.

Revenue Ruling 68–238, 1968–1 C.B.420, addresses the tax treatment of pay-ments made by civilian employers to theiremployees who are temporarily absentfrom work while serving in a State Na-tional Guard. The payments are equivalent

to the difference between the employees’normal wages and the amounts receivedfrom the State for their services in the Na-tional Guard. The ruling holds that thesepayments are wages and are subject toFICA and FUTA taxes as well as incometax withholding.

Section 3401(h) was added to the Codeby section 105(a) of the Heroes EarningsAssistance and Relief Tax Act of 2008,Pub. L. No. 110–245, 122 Stat. 1624,1628–630. New subsection 3401(h) pro-vides that, for purposes of income tax with-holding, any differential wage payment isto be treated as a payment of wages by theemployer to the employee. The term “dif-ferential wage payment” means any pay-ment which (A) is made by an employerto an individual with respect to any periodduring which the individual is performingservice in the uniformed services (as de-fined in chapter 43 of title 38, United StatesCode) while on active duty for a period ofmore than 30 days, and (B) represents all ora portion of the wages the individual wouldhave received from the employer if the in-dividual were performing service for theemployer. Section 3401(h) applies to dif-ferential wage payments paid after Decem-ber 31, 2008. The enactment of section3401(h) modifies the holding in RevenueRuling 69–136 that differential wage pay-ments are not subject to income tax with-holding.

The payments made by M to the em-ployees while they are in military servicewith the United States uniformed servicesconstitute “differential wage payments”under section 3401(h) as these paymentsrepresent all or a portion of the wages theindividuals would have received if stillperforming services for M and are madewhile the individuals are actively servingin the United States uniformed services fora period of duty scheduled to exceed 30days. These payments are therefore treatedas wages for income tax withholding pur-poses, and M must withhold income taxeson the differential wage payments.

However, because the individuals arescheduled to be on active military dutyfor an extended period of time, rather thanbeing temporarily absent, the differentialwage payments are not wages for purposes

2009–18 I.R.B. 896 May 4, 2009

of FICA and FUTA taxes. Section 3401(h)does not address the FICA and FUTAtreatment of differential wage paymentsand does not alter the holding in RevenueRuling 69–136 that differential wage pay-ments do not constitute wages subject toFICA or FUTA taxes. Therefore M isnot required to withhold or pay FICA orFUTA tax, with respect to the differentialwage payments.

Supplemental Wage Withholding

Differential wage payments are supple-mental wages because they are not a pay-ment for services for the nonmilitary em-ployer in the current payroll period. As asupplemental wage, if the amount of thedifferential pay, when added to all othersupplemental wages paid by the same em-ployer to the employee during the calen-dar year does not exceed $1,000,000, thenthe amount of the income tax withholdingis determined under the rules provided inRegulations § 31.3402(g)–1(a)(6) and (7).The two alternative procedures for calcu-lating the amount of income taxes requiredto be withheld from the differential wagepayments are the aggregate procedure andoptional flat rate withholding.

Under the aggregate procedure, M addsthe differential wage payment to the em-ployee’s regular wages, if any, for the pay-roll period and treats the aggregate of thetwo as if it constituted a single wage pay-ment for the payroll period. The withhold-ing method used by M with respect to regu-lar wages is then used to calculate the with-holding on this single wage payment andM takes into consideration the Form W–4,Employee’s Withholding Allowance Cer-tificate, submitted by the employee.

Alternatively, M may determine theincome tax withholding on the differen-tial wage payment using optional flat ratewithholding, if certain requirements aresatisfied. Optional flat rate withholdingmay be used provided that (1) the dif-

ferential wage payment is either not paidconcurrently with regular wages or is sep-arately stated on the payroll records of theemployer, and (2) income tax has beenwithheld from the regular wages paid tothe employee during the calendar yearof the differential wage payment or thepreceding calendar year. The rate usedfor optional flat rate withholding is pro-vided in § 31.3402(g)–1(a)(7)(iii)(F) ofthe Regulations. For 2009, the rate foroptional flat rate withholding is sched-uled to be 25 percent, but this rate couldchange if income tax rates change. Thedetermination of the amount of tax to bewithheld under optional flat rate with-holding is made without reference to anypayment of regular wages, without al-lowance for the number of withholdingallowances claimed by the employee onForm W–4, and without regard to whetherthe employee has requested additionalwithholding on Form W–4.

If the differential wage payment, whenadded to all supplemental wage pay-ments previously made by M to the em-ployee during the calendar year, exceeds$1,000,000, § 31.3402(g)–1(a)(2) of theRegulations provides that the rate used indetermining the amount of withholdingon the excess shall be equal to the highestrate of tax applicable under section 1 ofthe Code. Under current law, the highestrate of tax applicable under section 1 is 35percent.

Information Return Reporting

Section 6051(a) provides that any per-son required to deduct and withhold fromemployees the tax under § 3402, must fur-nish each employee with a written state-ment showing the amount of wages paidand amounts withheld for income tax pur-poses. Section 31.6051–1(a) states thatemployers must use Form W–2 to fulfillthis requirement. Because differential pay-ments are treated as wages subject to in-

come tax withholding, M must report thepayments on each employee’s Form W–2.

HOLDINGS

1. Differential wage payments made toan individual while on active duty inthe United States uniformed servicesfor more than 30 days are subject toincome tax withholding, but are notsubject to FICA or FUTA taxes.

2. Employers may use either the aggre-gate method or optional flat rate with-holding to calculate the amount of in-come tax required to be withheld ondifferential wage payments which donot exceed $1,000,000 when added toall other supplemental wages paid bythe same employer to the individualduring the calendar year.

3. The amounts of the differential wagepayments must be reported by the em-ployer on the employee’s Form W–2.

EFFECT ON OTHER REVENUERULINGS

Revenue Ruling 69–136, 1969–1 C.B.252 is modified and superseded.

PROSPECTIVE APPLICATION

This revenue ruling is effective fordifferential wage payments made afterDecember 31, 2008 (the effective dateof § 3401(h) under the Heroes EarningsAssistance and Relief Tax Act of 2008).

DRAFTING INFORMATION

The principal author of this revenueruling is Joseph Perera of the Office ofDivision Counsel/Associate Chief Coun-sel (Tax Exempt & Government Entities).For further information regarding this rev-enue ruling, contact Mr. Perera at (202)622–6040 (not a toll-free call).

May 4, 2009 897 2009–18 I.R.B.

Part III. Administrative, Procedural, and MiscellaneousPhase-out of Credit forNew Qualified Hybrid MotorVehicles and New AdvancedLean Burn Technology MotorVehicles

Notice 2009–37

SECTION 1. PURPOSE

This notice announces the credit phase-out schedule for advanced lean burn tech-nology motor vehicles and hybrid passen-ger automobiles and light trucks manufac-tured by Ford Motor Company.

SECTION 2. BACKGROUND

Section 30B(a)(2) of the Internal Rev-enue Code provides for a credit determinedunder § 30B(c) for certain new advancedlean burn technology motor vehicles.Section 30B(a)(3) provides for a creditdetermined under § 30B(d) for certain newqualified hybrid motor vehicles. Both thenew advanced lean burn technology motorvehicle credit and the new qualified hybridmotor vehicle credit begin to phase out fora manufacturer’s passenger automobilesand light trucks in the second calendarquarter after the calendar quarter in whichat least 60,000 of the manufacturer’s pas-senger automobiles and light trucks thatqualify for either credit have been soldfor use or lease in the United States (de-termined on a cumulative basis for salesafter December 31, 2005). Taxpayerspurchasing the manufacturer’s vehiclesduring the first two calendar quarters ofthe phase-out period may claim only 50percent of the otherwise allowable credit.Taxpayers purchasing the manufacturer’svehicles during the third and fourth calen-dar quarters of the phase-out period may

claim only 25 percent of the otherwiseallowable credit. No credit is available forvehicles purchased after the last day of thefourth calendar quarter of the phase-outperiod.

Notice 2006–9, 2006–1 C.B. 413, pro-vides procedures for a vehicle manufac-turer (or in the case of a foreign vehi-cle manufacturer, its domestic distributor)to certify to the Internal Revenue Service(Service) both (1) that a particular make,model and model year of vehicle quali-fies for either the new advanced lean burntechnology motor vehicle credit or the newqualified hybrid motor vehicle credit and(2) the amount of the credit allowable withrespect to that vehicle.

Section 5.05 of Notice 2006–9 requiresa manufacturer (or, in the case of a foreignvehicle manufacturer, its domestic distrib-utor) that has received from the Service anacknowledgement of its certification for aparticular make, model, and model year ofvehicle to submit to the Service a reportof the number of qualified vehicles soldby the manufacturer (or, in the case of aforeign vehicle manufacturer, its domesticdistributor) to retail dealers during the cal-endar quarter. A qualified vehicle is de-fined for this purpose as any passenger au-tomobile or light truck that is a new ad-vanced lean burn technology motor vehi-cle or a new qualified hybrid motor vehi-cle.

In accordance with section 5.05 of No-tice 2006–9, Ford Motor Company hassubmitted quarterly reports that indicatethat its cumulative sales of qualified vehi-cles to retail dealers reached the 60,000-vehicle limit during the calendar quarterending December 31, 2008. Accordingly,the credit for all new advanced lean burntechnology motor vehicles or new quali-fied hybrid passenger automobiles or lighttrucks manufactured by Ford Motor Com-

pany will begin to phase out on April 1,2009.

SECTION 3. SCOPE OF NOTICE

This notice applies to any make, model,or model year of new advanced lean burntechnology motor vehicle or new qualifiedhybrid passenger automobile or light truckthat is —

(1) manufactured by Ford Motor Com-pany; and

(2) purchased for use or lease in theUnited States on or after April 1, 2009.

SECTION 4. CREDIT AMOUNT

.01 In general. If a new advanced leanburn technology motor vehicle or a newqualified hybrid passenger automobile orlight truck manufactured by Ford MotorCompany is purchased for use or lease af-ter March 31, 2009, the allowable credit isas follows:

(1) For vehicles purchased for use orlease on or after April 1, 2009, and onor before September 30, 2009, the creditis 50 percent of the otherwise allowableamount determined under § 30B(c) or (d)(whichever is applicable);

(2) For vehicles purchased for use orlease on or after October 1, 2009, and on orbefore March 31, 2010, the credit is 25 per-cent of the otherwise allowable amount de-termined under § 30B(c) or (d) (whicheveris applicable); and

(3) For vehicles purchased for use orlease on or after April 1, 2010, no creditis allowable.

.02 Certified Vehicles. The followingtables set forth the credit available on orafter April 1, 2009, for hybrid motor ve-hicles for which Ford Motor Company re-ceived an acknowledgement of its certifi-cation from the Service on or before April8, 2009.

2009–18 I.R.B. 898 May 4, 2009

Table 1

April 1, 2009 – September 30, 2009

Model Years Model Credit Amount

2005 Ford Escape 2WD $1,300





2005 Ford Escape 4WD $975





2010 Ford Fusion $1,700

2008 Mercury Mariner 2WD $1,500


2006 Mercury Mariner 4WD $975




2010 Mercury Milan $1,700

Table 2

October 1, 2009 – March 31, 2010







2005 Ford Escape 4WD $487.50





2010 Ford Fusion $850



May 4, 2009 899 2009–18 I.R.B.

Table 2

October 1, 2009 – March 31, 2010


2006 Mercury Mariner 4WD $487.50




2010 Mercury Milan $850

Table 3

On or after April 1, 2010












2010 Ford Fusion $0.00







2010 Mercury Milan $0.00

2009–18 I.R.B. 900 May 4, 2009

The principal author of this notice isPatrick S. Kirwan of the Office of Asso-ciate Chief Counsel (Passthroughs & Spe-cial Industries). For further informationregarding this notice, contact Mr. Kirwanat (202) 622–3110 (not a toll-free call).

Application of Section 382to Corporations WhoseInstruments are Acquiredby the Treasury DepartmentUnder Certain ProgramsPursuant to the EmergencyEconomic Stabilization Act of2008

Notice 2009–38

This notice provides additional guid-ance regarding the application of section382 of the Code and other provisions oflaw to corporations whose instrumentsare acquired by the Treasury Departmentpursuant to the Emergency EconomicStabilization Act of 2008, P.L. 110–343(EESA). This notice amplifies and su-persedes Notice 2009–14, 2009–7 I.R.B.516, to address other EESA programs andprovide additional guidance.

I. Purpose.

The Internal Revenue Service (Service)and Treasury Department (Treasury) in-tend to issue regulations implementing cer-tain of the rules as described below. Pend-ing the issuance of further guidance, tax-payers may rely on the rules set forth inthis notice to the extent provided herein.

Section 101(a)(1) of EESA authorizesthe Secretary to establish the TroubledAsset Relief Program (TARP). Section102(a) of EESA authorizes the Secretaryto also establish a program to guaranteetroubled assets. This notice provides guid-ance to corporate issuers with respect toTreasury’s acquisition of instruments pur-suant to the following EESA programs:(i) the Capital Purchase Program for pub-licly-traded issuers (Public CPP); (ii) theCapital Purchase Program for privateissuers (Private CPP); (iii) the Capital Pur-chase Program for S corporations (S CorpCPP); (iv) the Targeted Investment Pro-gram (TARP TIP); (v) the Asset Guarantee

Program; (vi) the Systemically Signifi-cant Failing Institutions Program; (vii) theAutomotive Industry Financing Program;and (viii) the Capital Assistance Programfor publicly-traded issuers (TARP CAP).Unless otherwise specified below, a refer-ence to “the Programs” shall include anyof the various EESA programs describedin the preceding sentence.

II. Background.

Section 382(a) of the Internal RevenueCode (Code) provides that the taxable in-come of a loss corporation for a year fol-lowing an ownership change may be off-set by pre-change losses only to the ex-tent of the section 382 limitation for suchyear. An ownership change occurs with re-spect to a corporation if it is a loss cor-poration on a testing date and, immedi-ately after the close of the testing date,the percentage of stock of the corporationowned by one or more 5-percent share-holders has increased by more than 50 per-centage points over the lowest percent-age of stock of such corporation ownedby such shareholders at any time duringthe testing period. See § 1.382–2T(a)(1)of the Income Tax Regulations. Section382(m) of the Code provides that the Sec-retary shall prescribe such regulations asmay be necessary or appropriate to carryout the purposes of sections 382 and 383.

Section 101(c)(5) of EESA providesthat the Secretary is authorized to issuesuch regulations and other guidance asmay be necessary or appropriate to carryout the purposes of EESA.

Except as otherwise provided, any def-initions and terms used in this notice havethe same meaning as they do in section 382of the Code (and the regulations thereun-der) or in EESA, as applicable. Unless oth-erwise specified, a reference to “section” isto the particular section of the Code or reg-ulations.

III. Guidance Regarding CorporationsWhose Instruments are Acquired by theTreasury Pursuant to EESA.

Taxpayers may rely on the rules de-scribed in this Section III to the extent pro-vided below.

RULES:

A. Characterization of instruments(other than warrants) issued to Treasury.Any instrument issued to Treasury pur-suant to any of the Programs except TARPCAP, whether owned by Treasury or sub-sequent holders, shall be treated for allFederal income tax purposes as an instru-ment of indebtedness if denominated assuch, and as stock described in section1504(a)(4) if denominated as preferredstock. No instrument so denominatedshall be treated as stock for purposes ofsection 382 while held by Treasury or byother holders, except that preferred stockdescribed in section 1504(a)(4) will betreated as stock for purposes of section382(e)(1). In the case of any instrumentissued to Treasury pursuant to TARP CAP,the appropriate classification of such in-strument shall be determined by applyinggeneral principles of Federal tax law.

B. Characterization of warrants is-sued to Treasury. For all Federal incometax purposes, any warrant to purchasestock issued to Treasury pursuant to anyof the Programs except Private CPP andS Corp CPP, whether owned by Treasuryor subsequent holders, shall be treatedas an option (and not as stock). Whileheld by Treasury, such warrant will not bedeemed exercised under § 1.382–4(d)(2).For all Federal income tax purposes,any warrant to purchase stock issued toTreasury pursuant to the Private CPP shallbe treated as an ownership interest in theunderlying stock, which shall be treatedas preferred stock described in section1504(a)(4). For all Federal income taxpurposes, any warrant issued to Treasurypursuant to the S Corp CPP shall be treatedas an ownership interest in the underlyingindebtedness.

C. Value-for-value exchange. For allFederal income tax purposes, any amountreceived by an issuer in exchange for in-struments issued to Treasury under thePrograms shall be treated as received, inits entirety, as consideration for such in-struments.

D. Section 382 treatment of stock ac-quired by Treasury. For purposes of sec-tion 382, with respect to any stock (otherthan preferred stock described in section1504(a)(4)) issued to Treasury pursuant tothe Programs (either directly or upon theexercise of a warrant), the ownership rep-

May 4, 2009 901 2009–18 I.R.B.

resented by such stock on any date onwhich it is held by Treasury shall not beconsidered to have caused Treasury’s own-ership in the issuing corporation to have in-creased over its lowest percentage ownedon any earlier date. Except as describedbelow, such stock is considered outstand-ing for purposes of determining the per-centage of stock owned by other 5-percentshareholders on a testing date.

E. Section 382 treatment of redemp-tions of stock from Treasury. For purposesof measuring shifts in ownership by any5-percent shareholder on any testing dateoccurring on or after the date on which anissuing corporation redeems stock held byTreasury that had been issued to Treasurypursuant to the Programs (either directly orupon the exercise of a warrant), the stockso redeemed shall be treated as if it hadnever been outstanding.

F. Section 382(l)(1) not applicable withrespect to capital contributions made byTreasury pursuant to the Programs. Forpurposes of section 382(l)(1), any capitalcontribution made by Treasury pursuant tothe Programs shall not be considered tohave been made as part of a plan a principalpurpose of which was to avoid or increaseany section 382 limitation.

G. Certain exchanges. Paragraphs (C),(D), (E), and (F), but not paragraphs (A)and (B), of this notice apply to “CoveredInstruments” as though such instrumentswere issued directly to Treasury under thePrograms. For purposes of this notice, theterm “Covered Instrument” means any in-strument acquired by Treasury in exchangefor an instrument that was issued to Trea-sury under the Programs. In addition, theterm also includes any instrument acquiredby Treasury in exchange for a Covered In-strument. General principles of Federaltax law determine the characterization ofall Covered Instruments.

IV. Reliance on Notice.

Taxpayers may rely on the rules de-scribed in Section III of this notice. Theserules will continue to apply unless and un-til there is additional guidance. Any futurecontrary guidance will not apply to any in-strument (i) issued to Treasury pursuant to

the Programs, or acquired by Treasury inan exchange described in Section III(G) ofthis notice, prior to the publication of thatguidance, or (ii) issued to Treasury pur-suant to the Programs, or acquired by Trea-sury in an exchange described in SectionIII(G) of this notice, under a binding con-tract entered into prior to the publicationof that guidance. In exercising its author-ity under EESA in this notice, the Treasuryand the Service intend no implication re-garding the Federal income tax results thatwould obtain with respect to instrumentsthat are not specifically described in thisnotice. Accordingly, the Federal incometax consequences of instruments not de-scribed in this notice continue to be deter-mined based upon the application of gen-eral principles of Federal tax law to thespecific facts and circumstances of eachcase.

V. Effect on Other Documents.

This notice amplifies and supersedesNotice 2009–14, 2009–7 I.R.B. 516.

Drafting Information

The principal author of this notice isKeith Stanley of the Office of AssociateChief Counsel (Corporate). For furtherinformation regarding this notice, contactKeith Stanley at (202) 622–7750 (not atoll-free call).

Update for Weighted AverageInterest Rates, Yield Curves,and Segment Rates

Notice 2009–39

This notice provides guidance as to thecorporate bond weighted average interestrate and the permissible range of interestrates specified under § 412(b)(5)(B)(ii)(II)of the Internal Revenue Code as in ef-fect for plan years beginning before 2008.It also provides guidance on the corpo-rate bond monthly yield curve (and thecorresponding spot segment rates), the24-month average segment rates, and

the funding transitional segment ratesunder § 430(h)(2). In addition, this no-tice provides guidance as to the interestrate on 30-year Treasury securities un-der § 417(e)(3)(A)(ii)(II) as in effect forplan years beginning before 2008, the30-year Treasury weighted average rateunder § 431(c)(6)(E)(ii)(I), and the min-imum present value segment rates under§ 417(e)(3)(D) as in effect for plan yearsbeginning after 2007.

CORPORATE BOND WEIGHTEDAVERAGE INTEREST RATE

Sections 412(b)(5)(B)(ii) and412(l)(7)(C)(i), as amended by the Pen-sion Funding Equity Act of 2004 and bythe Pension Protection Act of 2006 (PPA),provide that the interest rates used to cal-culate current liability and to determinethe required contribution under § 412(l)for plan years beginning in 2004 through2007 must be within a permissible rangebased on the weighted average of the ratesof interest on amounts invested conser-vatively in long term investment gradecorporate bonds during the 4-year periodending on the last day before the beginningof the plan year.

Notice 2004–34, 2004–1 C.B. 848, pro-vides guidelines for determining the cor-porate bond weighted average interest rateand the resulting permissible range of in-terest rates used to calculate current liabil-ity. That notice establishes that the corpo-rate bond weighted average is based on themonthly composite corporate bond rate de-rived from designated corporate bond in-dices. The methodology for determiningthe monthly composite corporate bond rateas set forth in Notice 2004–34 continues toapply in determining that rate. See Notice2006–75, 2006–2 C.B. 366.

The composite corporate bond rate forMarch 2009 is 7.22 percent. Pursuantto Notice 2004–34, the Service has de-termined this rate as the average of themonthly yields for the included corporatebond indices for that month.

The following corporate bond weightedaverage interest rate was determined forplan years beginning in the month shownbelow.

2009–18 I.R.B. 902 May 4, 2009

For Plan YearsBeginning in Permissible Range

Month Year

CorporateBond Weighted

Average 90% to 100%

April 2009 6.39 5.75 6.39

YIELD CURVE AND SEGMENTRATES

Generally for plan years beginningafter 2007 (except for delayed effectivedates for certain plans under sections 104,105, and 106 of PPA), § 430 of the Codespecifies the minimum funding require-ments that apply to single employer planspursuant to § 412. Section 430(h)(2) spec-ifies the interest rates that must be usedto determine a plan’s target normal costand funding target. Under this provision,present value is generally determined us-ing three 24-month average interest rates

(“segment rates”), each of which appliesto cash flows during specified periods.However, an election may be made under§ 430(h)(2)(D)(ii) to use the monthly yieldcurve in place of the segment rates. Forplan years beginning in 2008 and 2009, atransitional rule under § 430(h)(2)(G) pro-vides that the segment rates are blendedwith the corporate bond weighted averageas specified above. An election may bemade under § 430(h)(2)(G)(iv) to use thesegment rates without applying the transi-tional rule.

Notice 2007–81, 2007–44 I.R.B. 899,provides guidelines for determining the

monthly corporate bond yield curve, the24-month average corporate bond segmentrates, and the funding transitional segmentrates used to compute the target normalcost and the funding target. Pursuant toNotice 2007–81, the monthly corporatebond yield curve derived from March 2009data is in Table I at the end of this notice.The spot first, second, and third segmentrates for the month of March 2009 are,respectively, 5.70, 7.53, and 7.85. Thethree 24-month average corporate bondsegment rates applicable for April 2009under the election of § 430(h)(2)(G)(iv)are as follows:

FirstSegment

SecondSegment

ThirdSegment

5.33 6.62 6.80

The transitional segment rates under§ 430(h)(2)(G) applicable for April 2009,taking into account the corporate bond

weighted average of 6.39 stated above, areas follows:

For Plan YearsBeginning in

FirstSegment

SecondSegment

ThirdSegment

2008 6.04 6.47 6.532009 5.68 6.54 6.66

30-YEAR TREASURY SECURITIESINTEREST RATES

Section 417(e)(3)(A)(ii)(II) (prior toamendment by PPA) defines the appli-cable interest rate, which must be usedfor purposes of determining the minimumpresent value of a participant’s benefitunder § 417(e)(1) and (2), as the annualrate of interest on 30-year Treasury se-curities for the month before the dateof distribution or such other time as theSecretary may by regulations prescribe.Section 1.417(e)–1(d)(3) of the IncomeTax Regulations provides that the applica-ble interest rate for a month is the annual

rate of interest on 30-year Treasury secu-rities as specified by the Commissionerfor that month in revenue rulings, noticesor other guidance published in the InternalRevenue Bulletin.

The rate of interest on 30-year Treasurysecurities for March 2009 is 3.64 percent.The Service has determined this rate as themonthly average of the daily determina-tion of yield on the 30-year Treasury bondmaturing in February 2039.

Generally for plan years beginningafter 2007, § 431 specifies the mini-mum funding requirements that apply tomultiemployer plans pursuant to § 412.Section 431(c)(6)(B) specifies a minimum

amount for the full-funding limitationdescribed in section 431(c)(6)(A), basedon the plan’s current liability. Section431(c)(6)(E)(ii)(I) provides that the inter-est rate used to calculate current liabilityfor this purpose must be no more than 5percent above and no more than 10 percentbelow the weighted average of the rates ofinterest on 30-year Treasury securities dur-ing the four-year period ending on the lastday before the beginning of the plan year.Notice 88–73, 1988–2 C.B. 383, providesguidelines for determining the weightedaverage interest rate. The following rateswere determined for plan years beginningin the month shown below.

May 4, 2009 903 2009–18 I.R.B.

For Plan YearsBeginning in Permissible Range

Month Year

30-YearTreasuryWeightedAverage 90% to 105%

April 2009 4.48 4.03 4.70

MINIMUM PRESENT VALUESEGMENT RATES

Generally for plan years beginning af-ter December 31, 2007, the applicable in-terest rates under § 417(e)(3)(D) are seg-ment rates computed without regard to a

24-month average. For plan years begin-ning in 2008 through 2011, the applica-ble interest rate is the monthly spot seg-ment rate blended with the applicable rateunder § 417(e)(3)(A)(ii)(II) as in effectfor plan years beginning in 2007. Notice2007–81 provides guidelines for determin-

ing the minimum present value segmentrates. Pursuant to that notice, the min-imum present value transitional segmentrates determined for March 2009, takinginto account the March 2009 30-year Trea-sury rate of 3.64 stated above, are as fol-lows:

For Plan YearsBeginning in

FirstSegment

SecondSegment

ThirdSegment

2008 4.05 4.42 4.482009 4.46 5.20 5.32


The principal author of this notice isTony Montanaro of the Employee Plans,

Tax Exempt and Government Entities Di-vision. Mr. Montanaro may be e-mailed [email protected].

2009–18 I.R.B. 904 May 4, 2009

Table I

Monthly Yield Curve for March 2009

Maturity Yield Maturity Yield Maturity Yield Maturity Yield Maturity Yield

0.5 4.62 20.5 7.70 40.5 7.87 60.5 7.92 80.5 7.95

1.0 4.77 21.0 7.71 41.0 7.87 61.0 7.92 81.0 7.95

1.5 4.96 21.5 7.72 41.5 7.87 61.5 7.92 81.5 7.95

2.0 5.20 22.0 7.73 42.0 7.88 62.0 7.93 82.0 7.95

2.5 5.50 22.5 7.73 42.5 7.88 62.5 7.93 82.5 7.95

3.0 5.82 23.0 7.74 43.0 7.88 63.0 7.93 83.0 7.95

3.5 6.13 23.5 7.75 43.5 7.88 63.5 7.93 83.5 7.95

4.0 6.42 24.0 7.75 44.0 7.88 64.0 7.93 84.0 7.95

4.5 6.67 24.5 7.76 44.5 7.88 64.5 7.93 84.5 7.95

5.0 6.88 25.0 7.77 45.0 7.89 65.0 7.93 85.0 7.95

5.5 7.05 25.5 7.77 45.5 7.89 65.5 7.93 85.5 7.95

6.0 7.19 26.0 7.78 46.0 7.89 66.0 7.93 86.0 7.95

6.5 7.29 26.5 7.78 46.5 7.89 66.5 7.93 86.5 7.96

7.0 7.36 27.0 7.79 47.0 7.89 67.0 7.93 87.0 7.96

7.5 7.42 27.5 7.79 47.5 7.89 67.5 7.93 87.5 7.96

8.0 7.46 28.0 7.80 48.0 7.89 68.0 7.93 88.0 7.96

8.5 7.48 28.5 7.80 48.5 7.90 68.5 7.94 88.5 7.96

9.0 7.50 29.0 7.81 49.0 7.90 69.0 7.94 89.0 7.96

9.5 7.52 29.5 7.81 49.5 7.90 69.5 7.94 89.5 7.96

10.0 7.53 30.0 7.81 50.0 7.90 70.0 7.94 90.0 7.96

10.5 7.54 30.5 7.82 50.5 7.90 70.5 7.94 90.5 7.96

11.0 7.54 31.0 7.82 51.0 7.90 71.0 7.94 91.0 7.96

11.5 7.55 31.5 7.82 51.5 7.90 71.5 7.94 91.5 7.96

12.0 7.55 32.0 7.83 52.0 7.90 72.0 7.94 92.0 7.96

12.5 7.56 32.5 7.83 52.5 7.91 72.5 7.94 92.5 7.96

13.0 7.56 33.0 7.83 53.0 7.91 73.0 7.94 93.0 7.96

13.5 7.57 33.5 7.84 53.5 7.91 73.5 7.94 93.5 7.96

14.0 7.58 34.0 7.84 54.0 7.91 74.0 7.94 94.0 7.96

14.5 7.59 34.5 7.84 54.5 7.91 74.5 7.94 94.5 7.96

15.0 7.60 35.0 7.84 55.0 7.91 75.0 7.94 95.0 7.96

15.5 7.61 35.5 7.85 55.5 7.91 75.5 7.94 95.5 7.96

16.0 7.62 36.0 7.85 56.0 7.91 76.0 7.94 96.0 7.96

16.5 7.62 36.5 7.85 56.5 7.91 76.5 7.95 96.5 7.96

17.0 7.63 37.0 7.85 57.0 7.92 77.0 7.95 97.0 7.96

17.5 7.64 37.5 7.86 57.5 7.92 77.5 7.95 97.5 7.96

18.0 7.65 38.0 7.86 58.0 7.92 78.0 7.95 98.0 7.96

18.5 7.66 38.5 7.86 58.5 7.92 78.5 7.95 98.5 7.96

19.0 7.67 39.0 7.86 59.0 7.92 79.0 7.95 99.0 7.96

19.5 7.68 39.5 7.87 59.5 7.92 79.5 7.95 99.5 7.96

20.0 7.69 40.0 7.87 60.0 7.92 80.0 7.95 100.0 7.97

May 4, 2009 905 2009–18 I.R.B.

Part IV. Items of General InterestNotice of ProposedRulemaking

Determination of DistributiveShare When a Partner’sInterest Changes

REG–144689–04

AGENCY: Internal Revenue Service(IRS), Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains pro-posed regulations regarding the determina-tion of partners’ distributive shares of part-nership items of income, gain, loss, deduc-tion and credit when a partner’s interestsvaries during a partnership taxable year.Also, the proposed regulations modify theexisting regulations regarding the requiredtaxable year of a partnership. These pro-posed regulations affect partnerships andtheir partners.

DATES: Written or electronic commentsand requests for a public hearing must bereceived by July 13, 2009.

ADDRESSES: Send submissions to:CC:PA:LPD:PR (REG–144689–04),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–144689–04),Courier’s Desk, Internal RevenueService, 1111 Constitution Avenue, NW,Washington, DC; or sent electronicallyvia the Federal eRulemakingPortal at www.regulations.gov (IRSREG–144689–04).

FOR FURTHER INFORMATIONCONTACT: Concerning the pro-posed regulations, Laura Fields orJonathan Cornwell at (202) 622–3050,concerning submissions of commentsand the hearing, Richard Hurst at (202)622–7180 (not toll-free numbers) [email protected].

SUPPLEMENTARY INFORMATION:

Background

These proposed regulations containamendments to the Income Tax Regula-tions (26 CFR Part 1) under section 706 ofthe Internal Revenue Code (Code). Theseamendments are proposed to conform theIncome Tax Regulations for certain of theprovisions of section 1246 of the TaxpayerRelief Act of 1997, Public Law 105–34(111 Stat. 788 (1997)) (the 1997 Act) andsection 72 of the Deficit Reduction Act of1984, Public Law 98–369 (98 Stat. 494(1984)) (the 1984 Act).

Also, under section 706(d)(1), theTreasury Secretary may provide in regu-lations various methods for determining apartner’s distributive share of partnershipitems of income, gain, loss, deduction andcredit that takes into account the varyinginterests of the partners for any taxableyear of the partnership in which there isa change in the interest of a partner. Pur-suant to that grant of regulatory authority,the proposed regulations provide methodsfor determining a partner’s distributiveshare of partnership items to take into ac-count the varying interests of the partnersin any year in which there is a changein a partner’s interest in the partnership.Also, the proposed regulations providethat a deemed disposition of a partner’sentire interest under other sections of theregulations is a deemed disposition of apartner’s entire interest for the purpose ofsection 706(d).

Finally, the proposed regulationsamend the rules applicable to the determi-nation of the taxable year of a partnershipin those instances in which partnershipinterests are held by “disregarded for-eign partners” (as that term is defined in§1.706–1(b)(6)(i)).

1. Varying Interest Rule

a. In general

Section 702(a) of the Code providesthat the partner in determining the part-ner’s income tax shall take into accountseparately the partner’s distributive shareof partnership items of income, gain, loss,deduction, or credit.

Section 706(a) provides that, in com-puting the taxable income of a partner fora taxable year, the inclusions required bysections 702 and 707(c) with respect to apartnership shall be based on the income,gain, loss, deduction, or credit of the part-nership for any taxable year of the partner-ship ending within or with the taxable yearof the partner.

Section 706(c)(1) provides that, exceptin the case of a termination of a partner-ship and except as provided in section706(c)(2), the taxable year of a partnershipshall not close as the result of the death ofa partner, the entry of a new partner, theliquidation of a partner’s interest in thepartnership, or the sale or exchange of apartner’s interest in the partnership. Undersection 706(c)(2)(A), the taxable year ofa partnership shall close with respect toa partner whose entire interest terminates(whether by reason of death, liquidation,or otherwise). Under section 706(c)(2)(B),the taxable year of a partnership shall notclose (other than at the end of a partner-ship’s taxable year as determined undersection 706(b)(1)) with respect to a part-ner who sells or exchanges less than hisentire interest in the partnership or withrespect to a partner whose interest is re-duced (whether by entry of a new partner,partial liquidation of a partner’s interest,gift, or otherwise).

Section 706(d)(1) provides that, ex-cept as required by sections 706(d)(2)and (d)(3), if there is a change in a part-ner’s interest in the partnership duringthe partnership’s taxable year, each part-ner’s distributive share of any partnershipitem of income, gain, loss, deduction orcredit for such taxable year is determinedby the use of any method prescribed bythe Secretary by regulations which takesinto account the varying interests of thepartners in the partnership during suchtaxable year (the varying interests rule).Section 706(d)(1) was added by the 1984Act, in part, to clarify that the varyinginterests rule applies to the disposition of apartner’s entire interest in the partnershipas well as the disposition of less than apartner’s entire interest, and to authorizethe Secretary to prescribe methods for de-termining a partner’s distributive share ofpartnership items when there is a change

2009–18 I.R.B. 906 May 4, 2009

in the partners’ interests during the taxableyear of the partnership.

The existing regulations under section706 have not been revised to reflect thechanges made to that section by the 1984Act. Section 1.706–1(c)(2)(ii) providesthat in the case of a disposition of a part-ner’s entire interest in a partnership thepartner’s distributive share of partnershipitems for the taxable year of the partner-ship in which the disposition occurs maybe determined by a closing of the partner-ship’s books as of the date of disposition(interim closing method). Alternatively,the partners by agreement may determinethe departing partner’s distributive shareby taking his pro rata part of the amount ofpartnership items that such partner wouldhave included in his taxable income had heremained a partner until the end of the part-nership taxable year (proration method).Section 1.706–1(c)(2)(ii). The prorationmay be based on the portion of the taxableyear that has elapsed prior to the disposi-tion or may be determined under any othermethod that is reasonable. Moreover, thetransferee of such departing partner’s in-terest shall include in his taxable income ashis distributive share of partnership itemswith respect to the acquired interest the prorata part (determined by the method usedby the transferor partner) of the amount ofsuch items that would have been includedhad he been a partner from the beginningof the partnership’s taxable year. The ex-isting regulations, however, do not specif-ically provide for the use of these methodswhen there has been a disposition of less apartner’s entire interest in the partnership.

In Rev. Rul. 77–310, 1977–2 C.B. 217,(see §601.601(d)(2)(ii)(b)), the IRS pro-vided an example of an acceptable methodfor allocating a partnership loss for thepartnership’s taxable year among the part-ners where their profit and loss sharing per-centages were changed substantially onemonth before the end of the taxable yearas a result of capital contributions of sev-eral existing partners. The ruling pro-vided that an acceptable method, underthe facts of the ruling, was to allocatethe partnership’s loss among the partnersbased on their differing profit and losssharing percentages and the periods duringthe year each partner’s differing percent-age interests existed. See also Rev. Rul.77–311, 1977–2 C.B. 218, (applying thesame method to a partnership’s distributive

share of a loss from a lower-tier partner-ship). See §601.601(d)(2)(ii)(b).

Finally, the existing regulations undersection 706 have not been revised to reflectthe change to that section by the 1997 Actrequiring that the taxable year of the part-nership shall close with respect to a partnerwhose entire interest in the partnership ter-minates by reason of death. In that regard,§1.706–1(c)(3) provides that, when a part-ner dies, the partnership taxable year shallnot close with respect to such partner priorto the end of the partnership’s taxable year.

b. Change in partnership allocationsamong contemporaneous partners

Section 761(c) provides that a partner-ship agreement includes any modificationsof the partnership agreement made priorto, or at, the time prescribed by law forthe filing of the partnership return for thetaxable year (not including extensions).In Lipke v. Commissioner, 81 T.C. 689(1983), the Tax Court held that section706(c)(2)(B) (as in effect prior to the 1984Act) prohibited retroactive allocations ofpartnership losses where the allocationsresulted from additional capital contri-butions made by both new and existingpartners. However, the Tax Court held thatthe prohibition on retroactive allocationsunder section 706(c)(2)(B) did not apply tochanges in the allocations among partnerswho were members of the partnership forthe entire year (contemporaneous partners)if the changes in the allocations did notresult from capital contributions. Lipke v.Commissioner, supra, at 696 (1983).

As previously discussed, the 1984 Actamended section 706, in part, to clarifythat the varying interests rule applies toany change in a partner’s interest, whetherin connection with a complete dispositionof the partner’s interest or otherwise. Tothat end, Congress in the 1984 Act re-placed the varying interests rule in sec-tion 706(c)(2)(B) with the rule that nowappears in Section 706(d)(1). The legisla-tive history pertaining to this amendmentreflects Congress’s intention that the newrule of section 706(d)(1) be comparable tothe pre–1984 law without overruling thelongstanding rule of section 761(c).

The committee wishes to make clearthat the varying interests rule is not in-tended to override the longstanding ruleof section 761(c) with respect to inter-

est shifts among partners who are mem-bers of the partnership for the entire tax-able year, provided such shifts are not,in substance, attributable to the influxof new capital from such partners. SeeLipke v. Commissioner, 81 T.C. 689(1983).

S. Prt. 98–169, Vol. I, 98th Cong., 2dSess. 218–19 (1984); see also H. Rep. No.432, Pt. 2, 98th Cong., 2d Sess. 1212–13(1984) (containing similar language).

c. Conventions

Section 1.706–1(c)(2)(ii) provides that,in determining the distributive share ofpartnership items under section 702(a)with respect to a partner whose entireinterest in the partnership terminates, apartnership may use the interim closingmethod or alternatively, the partners mayby agreement choose to use the prorationmethod. Under the proration method, thepartnership’s income and losses may beprorated based on the portion of the tax-able year that has elapsed prior to the dateupon which the partners’ interests varied,or “under any other method that is rea-sonable.” These other reasonable methodshave become known as conventions.

Staff of J. Comm. On Taxation, 98thCong., General Explanation of the Rev-enue Provisions of the Deficit ReductionAct of 1984, 222 (Comm. Print 1984), pro-vides,

[I]n any case in which there is a dis-position of less than an entire interest inthe partnership by a partner (includingthe entry of a new partner), the partnersmay elect to determine the varying in-terests of the partners by using one ormore conventions that treat any changein any partner’s interest in the partner-ship during a particular month as occur-ring on one or more specified days inthe month. The actual method for ap-plying a convention is to be providedby Treasury regulations. The regula-tions may deny the use of any conven-tion when the occurrence of significant,discrete events (e.g., a large, unusualgain or loss) would mean that use ofthe convention could result in signifi-cant tax avoidance.

. . Congress intended that the regu-lations providing for these conventionswill be effective on a prospective ba-sis only. Until these regulations are

May 4, 2009 907 2009–18 I.R.B.

proposed, and for a reasonable tran-sition period thereafter, it is expectedthat Treasury will permit any reason-able convention to be used. This mayinclude a method under which any part-ner entering during a month is treated asentering on the first day of the month, amethod under which partners enteringduring the first 15 days of a month aretreated as entering on the first day of themonth and partners entering after the15th of the month are treated as enter-ing on the 16th day of the month, or anyother method that is not abusive underthe relevant facts and circumstances.As a general rule, use of a conventionis not permitted when the occurrenceof significant, discrete events (e.g., alarge, unusual gain or loss) would resultin significant tax avoidance if the con-vention is used.On December 13, 1984,

the IRS issued a news release(IR–84–129) (http://www.irs.gov/puv/irs-drop/ir–84–129.pdf) announcing that part-nerships using the interim closing methodwere permitted to use a semi-monthlyconvention. Under a semi-monthlyconvention, partners entering during thefirst 15 days of the month are treated asentering on the first day of the month,and partners entering after the 15th dayof the month (but before the end of themonth) are treated as entering on the 16th

day of the month (except to the extent thatsection 706(c)(2)(A) applied). The newsrelease provided that, until regulationswere issued, partnerships that use theproration method were required to use adaily convention.

d. Deemed dispositions

Section 1.1502–76(b)(2)(i) providesthat the federal income tax returns for theyears that end and begin with a corporationbecoming (or ceasing to be) a member (asdefined in §1.1502–1(b)) of a consolidatedgroup (as defined in §1.1502–1(h)) areseparate tax years for all Federal incometax purposes. The periods ending andbeginning with the corporation’s changein status are different tax years, and thecorporation’s items of income, gain, loss,deduction and credit must be allocatedbetween such separate tax years. Under§1.1502–76(b)(2)(vi), if the corporation isa partner in a partnership, the corporation

is treated for purposes of determining theyear to which the partnership’s items areallocated as selling the corporation’s en-tire interest in the partnership immediatelybefore the corporation’s change in status.

Section 1.1362–3(a) provides that, if anS election (as defined in section 1362(a))terminates under section 1362(d) on adate other than the first day of the taxableyear of the S corporation (as defined insection 1361(a)), the portion of the yearending as of the close of the day prior tothe termination is treated as a short tax-able year for which the corporation is anS corporation (S short year) and the portionof the S termination year beginning onthe day of the termination is effective istreated as a short taxable year for which thecorporation is a C corporation (as definedin section 1362(a)(2)) (C short year).Under §1.1362–3(a), the corporation’sitems of income, gain, loss, deductionand credit must be allocated between theS short year and C short year using thepro rata allocation approach stated insection 1362(e)(2) unless an election ismade to allocate the items using its normalaccounting method or in certain otherinstances described in sections 1362(e)(3),1362(e)(6)(C) or 1362(e)(6)(D). Under§1.1362–3(c)(1), for purposes of section706(c) only, the termination of the Selection of a corporation that is a partnerin a partnership is treated as a sale orexchange of the corporation’s entireinterest in the partnership on the last day ofthe S short year if (i) the pro rata allocationrules do not apply and (ii) the taxable yearof the partnership ends with or within theC short year.

Under section 1377(a)(2), if a share-holder terminates the shareholder’s entireinterest in an S corporation and all af-fected shareholders (as defined in section1377(a)(2)(B)) and the corporation agree,the S corporation may elect under section1377(a)(2) (terminating election) to applythe pro rata allocation method (as definedin section 1377(a)(1)) as if the S cor-poration’s taxable year consisted of twoseparate taxable years, the first of whichends at the close of the day on which theshareholder’s entire interest in the S corpo-ration is terminated. (See §1.1377–1(b)(1)for certain exceptions to the precedingrule.) Under §1.1377(b)(3)(iv), a termi-nating election by an S corporation that isa partner in a partnership is treated as a

sale or exchange of the corporation’s en-tire interest in the partnership for purposesof section 706(c) if the taxable year of thepartnership ends after the shareholder’sinterest is terminated and within the tax-able year of the S corporation.

2. Taxable years of partnerships

A partnership must determine its tax-able year under section 706(b)(1)(B) un-less the partnership establishes to the sat-isfaction of the Secretary a business pur-pose for a different year. In general, the re-quired taxable year of a partnership is de-termined by reference to the taxable yearof its partners. If partners owning a major-ity interest in a partnership have the sametaxable year, the partnership is required tohave the same taxable year as the major-ity interest owners (majority interest tax-able year). If a taxable year for the partner-ship cannot be determined under the ma-jority interest taxable year rule, the taxableyear of the partnership shall be the taxableyear of all of its principal partners (princi-pal partner taxable year). Finally, if thereis not taxable year described under the ma-jority interest taxable year rule or princi-pal partner taxable year rule, then the part-nership is required under the regulationsto have the taxable year that results in theleast aggregate deferral of income. Section1.706–1(b)(2)(C).

Under §1.706–1(b)(6)(i), the interestheld by a disregarded foreign partner isnot taken into account in determining thetaxable year of the partnership under theforegoing rules. A foreign partner is adisregarded foreign partner unless suchpartner is allocated gross income that waseffectively connected with the conductof a trade or business of the partnershipwithin the U.S. and taxation of such in-come is not otherwise precluded underany U.S. income tax treaty. The interestof a disregarded foreign partner is takeninto account in determining the taxableyear of the partnership, however, if thepartners that are not disregarded foreignpartners (regarded partners) hold a minor-ity interest in the partnership (minorityinterest rule). Section 1.706–1(b)(6)(iii).Regarded partners hold a minority interestfor this purpose if each regarded partnerholds less than a 10-percent interest incapital or profits of the partnership, andthe regarded partners in the aggregate hold

2009–18 I.R.B. 908 May 4, 2009

less than a 20-percent interest in the capi-tal or profits of the partnership.

Explanation of Provisions

1. Varying Interests Rule

a. In general

The proposed regulations amend§1.706–1(c) to reflect the change madeto section 706(c)(2)(A) in the 1997 Actwhich requires that the taxable year ofthe partnership close with respect to apartner who dies. The proposed regu-lations do not change the provisions in§1.706–1(c)(3)(iv) that the sale or ex-change of a partnership interest does notinclude any transfer of a partnership in-terest which occurs at death as a result ofinheritance or any testamentary disposi-tion or in §1.706–1(c)(5) that the transferof a partnership interest by gift does notclose the partnership taxable year withrespect to the donor.

Also, the proposed regulations add§1.706–4 to provide for the application ofthe varying interests rule in all cases inwhich a partner’s interest changes duringthe taxable year, whether by reason of adisposition of the partner’s entire interestin the partnership or a disposition of lessthan the partner’s entire interest in thepartnership.

b. Methods and conventions

Proposed §1.706–4(a) provides that,if a partner’s interest changes during thepartnership’s taxable year, the partnershipshall determine the partner’s distributiveshare using the interim closing method.However, the partnership by agreement ofthe partners may use the proration method.For each partnership taxable year in whicha partner’s interest varies, the proposedregulations provide that the partnershipmust use the same method to take intoaccount all changes occurring within thatyear.

Proposed §1.706–4(c) generally pro-vides that a partnership shall take intoaccount any variation in the partners’ in-terests in the partnership during the taxableyear by determining the distributive shareof partnership items under section 702(a)for each segment of that taxable year usingan interim closing of the books methodand by allocating those items among

the partners in accordance with their re-spective partnership interests during thatsegment. Proposed §1.706–4(c)(1) and (2)incorporate the principles of the former§1.706–1(c)(2)(ii) (as finalized in T.D.6175).

Proposed §1.706–4(d) provides that byagreement among the partners a partner-ship may use a proration method, ratherthan the interim closing method, to takeinto account any variation in a partner’sinterest in the partnership during the tax-able year. Under this method, exceptfor extraordinary items (as defined in§1.706–4(d)(3)), the partnership allocatesthe distributive share of partnership itemsunder section 702(a) among the partnersin accordance with their pro rata sharesof these same items for the entire taxableyear. In determining a partner’s pro ratashare of partnership items, the partnershipshall take into account that partner’s inter-est in such items during each segment ofthe taxable year. Proposed §1.706–4(d)(1)and (2) incorporate the principles of theformer §1.706–2(c)(2)(ii) (as finalized inT.D. 6175).

For purposes of accounting for the part-ners’ varying interests in the partnership,proposed §1.706–4 requires that for eachpartner whose interest changes in the tax-able year the partnership shall maintainsegments to account for such changes. Asegment is specific portion of a partner-ship’s taxable year. The first segment ofa taxable year for a partner that incurs achange will begin on the partnership’s firstday of its taxable year and end as of theclose of business immediately precedingthe date of the change as determined un-der the applicable convention (discussedin this preamble) used by the partnershipand its partners. The next segment will be-gin on the day prescribed by the applica-ble convention and end on the earlier ofthe close of the day immediately preced-ing the date of the subsequent change asdetermined by the applicable convention,or the end of the partnership’s taxable year.Proposed §1.706–4(a)(2) provides that thepartnership shall determine the items foreach segment of the taxable year createdby the variation event for a partner in ac-cordance with the partnership’s method ofaccounting used for its entire taxable year.Each segment is treated as a separate pe-riod.

For purposes of the interim closingmethod in of §1.706–4(c) and the prorationmethod in §1.706–4(d), the proposed reg-ulations provide a special accounting rulethat must be used to account for certainitems. For example, for an interim closingmethod, the partnership may compute anet capital loss for a segment even thoughthe partnership has net capital gain for thecomplete taxable year. Also, any limi-tation applicable to the partnership yearas a whole (for example, the limitationunder section 179) must be apportionedamong the segments using any reasonablemethod provided that the method maynot exceed any limitation applicable tothe partnership as a whole. See proposed§§1.706–4(a)(2)(i) and (ii).

In addition, proposed §1.706–4(d)(3)requires a partnership using the prorationmethod to allocate extraordinary itemsamong the partners in proportion to theirinterests at the beginning of the day onwhich they are taken into account. For thispurpose, an extraordinary item is (i) anyitem from the disposition or abandonment(other than in the ordinary course of busi-ness) of a capital asset as defined in section1221 (determined without the applicationof any other rules of law); (ii) any itemfrom the disposition or abandonment ofproperty used in a trade or business (otherthan in the ordinary course of business)as defined in section 1231(b) (determinedwithout the application of any holding pe-riod requirement); (iii) any item from thedisposition or abandonment of an asset de-scribed in sections 1221(1), (3), (4), or (5),if substantially all the assets in the samecategory from the same trade or businessare disposed of or abandoned in one trans-action (or series of related transactions);(iv) any item from assets disposed of in anapplicable asset acquisition under section1060(c); (v) any section 481(a) adjust-ment; (vi) any item from the discharge orretirement of indebtedness (for example,if a debtor partnership transfers a capitalor profits interest in such partnership to acreditor in satisfaction of its recourse ornonrecourse indebtedness, any dischargeof indebtedness income recognized undersection 108(e)(8) must be allocated amongthe persons who were partners in the part-nership immediately before the discharge);(vii) any item from the settlement of a tortor similar third-party liability; (viii) anycredit, to the extent it arises from activities

May 4, 2009 909 2009–18 I.R.B.

or items that are not ratably allocated (forexample, the rehabilitation credit undersection 47, which is based on placementin service); and (ix) any item which, inthe opinion of the Commissioner, would,if ratably allocated, result in a substantialdistortion of income in any consolidatedreturn or separate return in which the itemis included. The IRS and the TreasuryDepartment request comments concerningwhether any items should be added to orremoved from the definition of extraordi-nary items.

Under proposed §1.706–4(e), a partner-ship using the interim closing method mayuse either a calendar day convention or asemi-monthly convention. A partnershipusing the proration method may use onlythe calendar day convention. The calendarday convention requires that, with respectto a partner whose interest terminates, thepartnership’s taxable year closes as of theclose of the day on which the change oc-curs. Section 1.706–4(e)(1). The semi-monthly convention requires that any vari-ation in a partner’s interest occurring dur-ing the first through 15th day of the cal-endar month is deemed to occur at the be-ginning of the first day of the month, andany variation in a partner’s interest occur-ring during the 16th through the last day ofthe month is deemed to occur at the begin-ning of the 16th day of that month. Section1.706–4(e)(2).

A partnership must use the samemethod and convention for all variationsin the partners’ interests during the taxableyear of the partnership. For example, apartnership could not use the prorationmethod and interim closing method in thesame taxable year. Additionally, a part-nership using the interim closing methodcould not use the calendar day conventionto account for a variation in one partner’sinterest during the partnership’s taxableyear while using a monthly convention toaccount for that partner’s, or a differentpartner’s, variation in an interest duringthe partnership’s taxable year. Commentsare requested with regard to the possibleexpansion of this rule to include otherconventions or other methods.

The IRS and the Treasury Departmentare aware that some publicly traded part-nerships (as defined in section 7704) areusing conventions other than a monthlyor semi-monthly convention and are us-ing these conventions with the proration

method. Thus, the IRS and the TreasuryDepartment are requesting comments con-cerning the use of conventions other thanmonthly or semi-monthly convention. Theproposed regulations regarding the use ofconventions will not apply to existing pub-licly traded partnerships.

c. Change in partnership allocationsamong contemporaneous partners

Proposed §1.706–4(b)(1) provides thatthe varying interests rule will not precludechanges in the allocations among contem-poraneous partners resulting from amend-ments to the partnership agreement madeno later than the due date of the partner-ship return for the taxable year (excludingextensions). This exception applies onlyto allocations that are valid under section704(b) and the regulations promulgated inassociation with that section. Moreover,consistent with the Tax Court’s decision inLipke, this exception to the varying inter-ests rule will not apply to any changes ininterests of the partners attributable to con-tributions of money or other property to thepartnership. The proposed regulations fur-ther provide that this exception will not ap-ply to changes in the interests of the part-ners as a result of distributions of capitalfrom the partnership to a partner.

d. Safe harbors for service partnershipsand publicly traded partnerships

Proposed §1.706–4(b)(2) provides thatservice partnerships (as defined in that sec-tion) may allocate items relating to theprovision of services among the partnerswhose interests vary during the year usingany reasonable method to account for suchchanges even though such method is notdescribed in paragraph (a) of the proposedregulations and the partnership does notuse the methods or conventions describedin paragraphs (c) and (d), and paragraph (e)of the proposed regulations, respectively.However, the allocations must be valid un-der section 704(b).

Proposed §1.706–4(b)(3) provides thatpublicly traded partnerships (as defined insection 7704(b)) may treat all transfers ofits publicly traded units (as described in§1.7704–1(b)(1)) during a calendar monthas occurring on the first day of the fol-lowing month under a consistent methodadopted by the partnership or may usethe semi-monthly convention described in

§1.706–4(e)(2). Block transfers of pub-licly traded partnership (PTP) units (asdescribed in §1.7704–1(e)(2)) will notqualify for this safe harbor.

e. Deemed dispositions

The proposed regulations amend§1.706–1(c) to provide that a deemeddisposition of a partner’s entire in-terest in the partnership pursuant to§§1.1502–76(b)(2)(vi), 1.1362–3(c)(1),and 1.1377–1(b)(3)(iv) shall be treatedas a disposition of the partner’s entire in-terest for purposes of section 706. TheIRS and Treasury Department requestcomments concerning the relationship of§1.1502–76(b)(2)(vi)(B) and the proposedregulations regarding the deemed disposi-tion of partnership interests.

2. Taxable years of partnerships

The proposed regulationsamend the minority interest rule in§1.706–1(b)(6)(iii) to provide that re-garded partners have a minority interestonly if each regarded partner has less thana 10-percent interest in capital and profits,and the regarded partners collectivelyhave less than a 20-percent interest inpartnership capital and profits. Thismodification means that the interests offoreign partners will be taken into accountin determining the taxable year of thepartnership only if the regarded partnershave interests below the stated thresholdsin partnership capital and profits, ratherthan the current rule which requires onlyan interest below the threshold in eithercapital or profits. For example, under thecurrent regulations, the taxable year ofdisregarded foreign partners would not beignored in determining the taxable yearof the partnership if the regarded partnershad aggregate capital interests of less than20-percent but profits interests of morethan 20-percent. By contrast, under theproposed regulations, in that example, thetaxable year of the disregarded foreignpartners would not be applicable in deter-mining the taxable year of the partnership.

Additional Requests for Comments

The IRS and the Treasury Departmentare also requesting comments relating toany other outstanding issues arising undersection 706(d). Specifically, the IRS and

2009–18 I.R.B. 910 May 4, 2009

the Treasury Department are seeking com-ments with regard to issues that arise con-cerning allocable cash basis items and/ortiered partnerships.

Section 706(d)(2)(A) provides a spe-cial rule for determining a partner’s dis-tributive share of an allocable cash ba-sis item. Section 706(d)(2) effectively re-quires a cash method partnership to usean economic accrual method solely for thepurpose of allocating certain items. Underthe statute, a partner’s distributive share ofany allocable cash basis item is determinedby assigning a pro rata share of any allo-cable cash basis item to each day within aspecified period to which it is attributableand then allocating each day’s portion in anamount equivalent to each partner’s inter-est in the partnership on that day. A list ofallocable cash basis items is found in sec-tion 706(d)(2)(B). The IRS and the Trea-sury Department are seeking comments asto whether that list should be expanded (toinclude, for example, items such as prop-erty insurance), as well as on any otherissue with regard to allocating cash basisitems.

Section 706(d)(3) provides that if dur-ing any taxable year of the partnershipthere is a change in any partner’s inter-est in the partnership (upper-tier partner-ship), and such partnership is a partnerin another partnership (lower-tier partner-ship), then (except to the extent providedby regulations) each partner’s distributiveshare of any item of the upper-tier partner-ship attributable to the lower-tier partner-ship shall be determined by first assign-ing the appropriate portion of each suchitem to the appropriate days during whichthe upper-tier partnership is a partner inthe lower-tier partnership, and then allo-cating the portion assigned to any such dayamong the partners in proportion to theirinterests in the upper-tier partnership at theclose of such day. Thus, the daily allo-cation method, used for cash basis items,is applicable to all items of the lower-tierpartnership if there is a change in the part-nership interests in the upper-tier partner-ship. The IRS and the Treasury Depart-ment are seeking comments on this andany other issue related to tiered partner-ships and determining a partner’s varyinginterests.

Proposed Effective Date

In accord with the legislative historyto section 706(d), the proposed regu-lations provide a reasonable transitionperiod for taxpayers in the effectivedate provisions of this proposed regula-tion. Thus, the proposed amendmentsto §§1.706–1 (with the exception of thechange to §1.706–1(b)(6)(iii)), 1.706–4,and 1.706–5 are proposed to apply to part-nership taxable years that begin after thedate the final regulations are publishedin the Federal Register, but not beforetaxable years beginning after December31, 2009.

The proposed amendment to§1.706–1(b)(6)(iii) generally is applicableto the first taxable year of a partnershipthat begins on or after the date final regu-lations are published in the Federal Reg-ister, subject to two special rules. First,under the current regulations, partner-ships formed prior to September 23, 2002(“existing partnerships”) generally areexempt from the rules of §1.706–1(b)(6)unless they have voluntarily elected toapply them or unless they have under-gone a technical termination under section708(b)(1)(B). The proposed regulation re-tains this special rule, such that an existingpartnership will not be subject to the mod-ified minority interest rule in proposed§1.706–1(b)(6)(iii) unless there has beensuch an election or technical termination.Second, because the proposed regulationwould modify §1.706–1(b)(6)(iii) but oth-erwise leave the rules of §1.706–1(b)(6)unchanged, it is appropriate to exemptother partnerships from the modified mi-nority interest rule if they are alreadysubject to §1.706–1(b)(6) and the minor-ity interest rule of the current regulations(“interim period partnerships”). Thus, in-terim period partnerships will be exemptfrom the modified minority interest ruleof proposed §1.706–1(b)(6)(iii) unlessthey voluntarily elect to be subject to thisrule or undergo a technical termination.Accordingly, the proposed amendment to§1.706–1(b)(6)(iii) would apply to the firsttaxable year of a partnership that beginson or after the date final regulations arepublished in the Federal Register, subjectto these special rules for existing partner-ships and interim period partnerships.

The proposed amendments in§§1.706–4(c)(2) and (d)(2) are proposed

to apply for the taxable year of a partner-ship other than an existing publicly tradedpartnership that begin after the date thefinal regulations are published in the Fed-eral Register, but not before taxable yearsbeginning after December 31, 2009.

Special Analyses

It has been determined that this noticeof proposed rulemaking is not a signifi-cant regulatory action as defined in Exec-utive Order 12866. Therefore, a regula-tory assessment is not required. It has alsobeen determined that section 553(b) of theAdministrative Procedure Act (5 U.S.C.chapter 5) does not apply to these regu-lations, and because the regulation doesnot impose a collection of information onsmall entities, the Regulatory FlexibilityAct (5 U.S.C. chapter 6) does not apply.Pursuant to section 7805(f) of the Code,this regulation has been submitted to theChief Counsel for Advocacy of the SmallBusiness Administration for comment onits impact on small business.

Comments and Request for a PublicHearing

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 submittedtimely to the IRS. The IRS and the 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 will be scheduled ifrequested in writing by any person thattimely submits written comments. If apublic hearing is scheduled, notice of thedate, time, and place for the pubic hearingwill be published in the Federal Register.


The principal authors of these pro-posed regulations are Laura Fields andJonathan Cornwell, Office of the AssociateChief Counsel (Passthroughs and SpecialIndustries). However, other personnelfrom the IRS and the Treasury Departmentparticipated in their development.

* * * * *

May 4, 2009 911 2009–18 I.R.B.

Proposed Amendments to theRegulations

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 a new entry innumerical order to read as follows:

Authority: 26 U.S.C. 7805 * * *Section 1.706–2 also issued under

26 U.S.C. 706(d). * * *Par. 2. Section 1.706–0 is added to read

as follows:

§1.706–0 Table of contents.

This section lists the captions containedin the regulations under section 706.

§1.706–1 Taxable years of partner andpartnership.

(a) Year in which partnership income isincludible.

(b) Taxable year.(1) Partnership treated as taxpayer.(2) Partnership’s taxable year.(i) Required taxable year.(ii) Exceptions.(3) Least aggregate deferral.(i) Taxable year that results in the least

aggregate deferral of income.(ii) Determination of the taxable year of

a partner or partnership that uses a 52–53week taxable year.

(iii) Special de minimis rule.(iv) Examples.(4) Measurement of partner’s profits

and capital interest.(i) In general.(ii) Profits interest.(A) In general.(B) Percentage share of partnership net

income.(C) Distributive share.(iii) Capital interest.(5) Taxable year of a partnership with

tax-exempt partners.(i) Certain tax-exempt partners disre-

garded.(ii) Example.(iii) Effective date.(6) Certain foreign partners disre-

garded.(i) Interests of disregarded foreign part-

ners not taken into account.

(ii) Definition of foreign partner.(iii) Minority interest rule.(iv) Example.(v) Effective date.(A) Generally.(B) Voluntary change in taxable year.(C) Subsequent sale or exchange of in-

terests.(D) Transition rule.(7) Adoption of taxable year.(8) Change in taxable year.(i) Partnerships.(A) Approval required.(B) Short period tax return.(C) Change in required taxable year.(ii) Partners.(9) Retention of taxable year.(10) Procedures for obtaining approval

or making a section 444 election.(11) Effect on partner elections under

section 444.(i) Election taken into account.(ii) Effective date.(c) Closing of partnership year.(1) General rule.(2) Disposition of entire interest(i) In general.(ii) Example.(iii) Deemed dispositions.(3) Disposition of less than entire inter-

est.(4) Determination of distributive

shares.(5) Transfer of interest by gift.(d) Effective/applicability date.

§1.706–2 Certain cash basis itemsprorated over period to which attributable.[Reserved]

§1.706–3 Items attributable to interestin lower-tier partnership prorated overentire taxable year. [Reserved]

§1.706–4 Determination of DistributiveShare When a Partner’s Interest Varies.

(a) General rule.(1) Methods.(2) Segments.(i) General rule.(ii) Other provisions.(b) Exceptions.(1) Permissible changes among con-

temporaneous partners.(2) Safe harbor for certain service part-

nerships.(3) Safe harbor for publicly traded units

of publicly traded partnerships.

(c) Interim closing method.(1) In general.(2) Conventions.(3) Example.(d) Proration method.(1) In general.(2) Conventions.(3) Extraordinary items.(4) Example.(e) Conventions.(1) Calendar day convention.(2) Semi-monthly convention.(f) Effective/applicability date.

§1.706–5 Taxable year determination.

(a) General rule.(b) Effective/applicability date.Par. 3. Section 1.706–1 is amended as

follows:1. The language “capital or profits” in

the first sentence in paragraph (b)(6)(iii)is removed and the language “capital andprofits” is added in its place.

2. Paragraph (b)(6)(v)(A) is revised.3. The last sentence of paragraph

(b)(6)(v)(B) is removed and four new sen-tences are added in its place.

4. Paragraph (b)(6)(v)(C) is revised.5. Add a new sentence at the end of

paragraph (b)(6)(v)(D).6. Paragraph (c)(2) is revised.7. Paragraph (c)(3) is removed.8. Paragraph (c)(4) is redesignated as

(c)(3) and the last sentence of newly des-ignated paragraph (c)(3) is removed.

9. New paragraph (c)(4) is added.10. Paragraph (d) is revised.The additions and revisions read as fol-

lows:

§1.706–1 Taxable years of partner andpartnership.

* * * * *(b) * * *(6) * * *(v) * * * (A) Generally. The provisions

of this paragraph (b)(6) (other than para-graph (b)(6)(iii) of this section) are appli-cable for the first taxable year of a part-nership other than an existing partnershipthat begins on or after July 23, 2002. Theprovisions of paragraph (b)(6)(iii) of thissection are applicable for the first taxableyear of a partnership other than an existingpartnership or an interim period partner-ship that begins on or after the date these

2009–18 I.R.B. 912 May 4, 2009

regulations become effective. For this pur-pose, an existing partnership is a partner-ship that was formed prior to September23, 2002, and an interim period partnershipis a partnership that was formed on or afterSeptember 23, 2002, and prior to the datethese regulations become effective.

(B) * * * An existing partnership thatmakes such a change prior to the date theseregulations become effective will ceaseto be exempted from the requirements ofparagraph (b)(6) (other than paragraph(b)(6)(iii)) of this section. An existingpartnership that makes such a change onor after the date these regulations becomeeffective will cease to be exempted fromthe requirements of paragraph (b)(6) ofthis section. An interim period partner-ship may change its taxable year to a yeardetermined in accordance with paragraph(b)(6)(iii) of this section. An interim pe-riod partnership that makes such a changewill cease to be exempted from the re-quirements of paragraph (b)(6)(iii) of thissection.

(C) Subsequent sale or exchange of in-terests. If an existing partnership or an in-terim period partnership terminates undersection 708(b)(1)(B), the resulting partner-ship is not an existing partnership or aninterim period partnership for purposes ofparagraph (b)(6)(v)(A) of this section.

(D) * * * If, in the first taxable year be-ginning on or after the date these regula-tions become effective, an interim periodpartnership voluntarily changes its taxableyear to a year determined in accordancewith paragraph (b)(6)(iii) of this section,then the partners of that partnership mayapply the provisions of §1.702–3T to takeinto account all items of income, gain, loss,deduction, and credit attributable to thepartnership year of change ratably over afour-year period.

* * * * *(c) * * *(2) Disposition of entire interest—(i) In

general. A partnership taxable year shallclose with respect to a partner who sellsor exchanges his entire interest in the part-nership, with respect to a partner whoseentire interest in the partnership is liqui-dated and with respect to a partner whodies. In the case of a death or liquidation,or sale or exchange of a of partner’s en-tire interest in the partnership, the partnershall include in his taxable income for his

taxable year within or with which the part-ner’s membership in the partnership ends,the partner’s distributive share of items de-scribed in section 702(a), and any guar-anteed payments under section 707(c), forthe partner’s partnership taxable year end-ing with the date of such termination. Ifthe decedent partner’s estate or other suc-cessor sells or exchanges its entire interestin the partnership, or if its entire interestis liquidated, the partnership taxable yearwith respect to the estate or other successorin interest shall close on the date of suchsale or exchange, or the date of the com-pletion of the liquidation. The sale or ex-change of a partnership interest does not,for the purpose of this rule, include anytransfer of a partnership interest which oc-curs at death as a result of inheritance orany testamentary disposition.

(ii) Example. H is a member of a partnership hav-ing a taxable year ending December 31. Both H andhis wife W are on a calendar year and file joint re-turns. H dies on March 31, 2010. Administration ofthe estate is completed and the estate, including thepartnership interest, is distributed to W as legatee onNovember 30, 2010. Such distribution by the estate isnot a sale or exchange of H’s partnership interest. Thetaxable year of the partnership will close with respectto H on March 31, 2010, and H will include in his fi-nal return for his final taxable year (January 1 throughMarch 31, 2010) his distributive share of partnershipitems for that period under the rules of §1.706–4. Wwill include in her return for the taxable year endingDecember 31, 2010, her distributive share of partner-ship items for the period of April 1 through December31, 2010, under the rules of §1.706–4.

(iii) Deemed dispositions. A deemeddisposition of the partner’s interest pur-suant to §§1.1502–76(b)(2)(vi) (relatingto corporate partners that become or ceaseto be members of a consolidated groupwithin the meaning of §1.1502–1(h)),1.1362–3(c)(1) (relating to the terminationof the subchapter S election of an S cor-poration partner), and 1.1377–1(b)(3)(iv)(regarding an election to terminate thetaxable year of an S corporation partner),shall be treated as a disposition of thepartner’s entire interest in the partnership.

* * * * *(4) Determination of distributive

shares. See §1.706–4 for rules regardingthe methods to be used in determining thedistributive shares of items described insection 702(a) for partners whose interestsin the partnership vary as a result of adisposition of a partner’s entire interestin a partnership as described in paragraph(c)(2) of this section or as a result of a

disposition of less than an entire interestas described in paragraph (c)(3) of thissection during the partnership’s taxableyear.

* * * * *(d) Effective/applicability date. The

rules for paragraphs (a) and (b) of thissection are applicable for partnership tax-able years ending on or after May 17,2002, except for paragraph (b)(6)(iii) ofthis section which applies to partnershiptaxable years beginning the day after finalregulations are published in the FederalRegister. The rules for paragraph (c)(1) ofthis section apply for partnership taxableyears beginning after December 31, 1953.All other paragraphs under paragraph (c)of this section apply for partnership tax-able years that begin after the date the finalregulations are published in the FederalRegister, but not before taxable years be-ginning after December 31, 2009.

Par. 4. Section 1.706–2 is added andreserved to read as follows:

§1.706–2 Certain cash basis itemsprorated over period to which attributable.[Reserved]

Par. 5. Section 1.706–3 is added andreserved to read as follows:

§1.706–3 Items attributable to interestin lower-tier partnership prorated overentire taxable year. [Reserved]

Par. 6. Section 1.706–4 is added to readas follows:

§1.706–4 Determination of distributiveshare when a partner’s interest varies.

(a) General rule—(1) Methods. Exceptas provided in paragraph (b) of this sec-tion, if a partner’s interest in a partnershipvaries during the taxable year as a resultof a disposition of an entire interest in apartnership as described in §1.706–1(c)(2)or as a result of the disposition of lessthan the entire interest in a partnership orwith respect to a partner whose interestin a partnership is reduced as describedin §1.706–1(c)(3), the partnership shalldetermine the partner’s distributive shareof partnership items by using the interimclosing method (described in paragraph(c) of this section). Alternatively, a part-nership may, by agreement of the partners,use the proration method (described in

May 4, 2009 913 2009–18 I.R.B.

paragraph (d) of this section). The part-nership and all of its partners shall use thesame method (interim closing or proration)and, if applicable, the same convention(described in paragraph (e) of this section)for all variations in the partners’ interestsoccurring within each partnership taxableyear.

(2) Segments—(i) General rule. Forpurposes of accounting for a variation ina partner’s interest within a taxable yearof the partnership as a result of disposi-tions or reductions of interests as describedin §1.706–1(c)(2) or (c)(3), the partner-ship shall maintain segments, which arespecific periods of the partnership’s tax-able year. The first segment to accountfor a change in a partner’s interest shallcommence with the beginning of the tax-able year of the partnership and end at theclose of the day specified by the conven-tion used by the partnership to account forsuch change. Any additional segment shallcommence with the day specified by theconvention used by the partnership to ac-count for a previous change in the partner’sinterest and shall end as a result of an ad-ditional change in the partner’s interest atthe close of the day specified by the con-vention used by the partnership to accountfor such change, provided, however, thatthe last segment of the taxable year of thepartnership shall end no later than the closeof the day of the partnership’s taxable year.The partnership shall determine the itemsof income, gain, loss, deduction and creditof the partnership for each segment in ac-cordance with the method of accountingthat it uses for the partnership’s entire tax-able year. In general, a partnership usingthe interim closing method shall treat eachsegment as though the segment were a sep-arate distributive share period. For exam-ple, a partnership using the interim closingmethod may compute a net capital loss fora segment of a taxable year even thoughthe partnership has a net capital gain forthe entire taxable year.

(ii) Other provisions. Any limitationapplicable to the partnership year as awhole (for example, the limitation undersection 179, relating to elections to ex-pense certain depreciable business assets)must be in connection with the interimclosing method apportioned among thesegments by the partnership using any rea-sonable method, provided, however, thatthe amounts apportioned among segments

shall not exceed the limitation applicableto the partnership as a whole.

(b) Exceptions—(1) Permissiblechanges among contemporaneous part-ners. The general rule of paragraph (a)of this section, with respect to the vary-ing interests of a partner described in§1.706–1(c)(3), will not preclude changesin the allocations of the distributive shareof items described in section 702(a) amongcontemporaneous partners for the entirepartnership taxable year, provided that—

(i) Any variation in a partner’s inter-est is not attributable to a contribution ofmoney or property by a partner to the cap-ital of the partnership or a distribution ofmoney or property by the partnership to apartner that is a return of capital; and

(ii) The allocations resulting from themodification satisfy the provisions of sec-tion 704(b) and the regulations promul-gated in association with that section.

(2) Safe harbor for certain service part-nerships. Notwithstanding paragraph (a)of this section, with respect to any taxableyear in which there is a change in any part-ner’s interest in a service partnership (asdefined below in this subsection), the part-nership and such partner may choose to de-termine the partner’s distributive share ofpartnership income, gain, loss, deductionand credit using any reasonable methodto account for the varying interests of thepartners in the partnership during the tax-able year provided that the allocations arevalid under section 704(b). A service part-nership is a partnership in which substan-tially all the activities involve the perfor-mance of services in the fields of health,law, engineering, architecture, accounting,actuarial science, or consulting.

(3) Safe harbor for publicly traded unitsof publicly traded partnerships. Notwith-standing paragraph (a) of this section, apublicly traded partnership (PTP) (as de-fined in section 7704(b)) using either theinterim closing of the books method inparagraph (c) of this section or the prora-tion method in paragraph (d) of this sectionmay treat all transfers of its publicly tradedunits (as described in §1.7704–1(b)(1))during a calendar month as occurring forpurposes of determining partner statuson the first day of the following monthunder a consistent method adopted by thepartnership or may use the semi-monthlyconvention described in paragraph (e)(2)of this section. For example, PRS, a PTP,

uses the proration method in paragraph (d)of this section. PRS adopts a method treat-ing all transfers of its publicly traded unitsas occurring on the first day of the monthfollowing the transfer. If on May 5, A, apartner in PRS, sells a unit in PRS to B,and on May 12 B sells that unit to C, whoholds the interest beyond May 31, PRSmay allocate all items with respect to thatunit for the month of May to A, and mayallocate all partnership items with respectto that unit for the month of June to C. Bwill not be considered a partner and willreceive no allocation of partnership items.Block transfers of PTP units (as describedin §1.7704–1(e)(2)) will not qualify forthis safe harbor.

(c) Interim closing method—(1) In gen-eral. A partnership shall take into accountany variation in a partner’s interest in thepartnership as described in §1.706–1(c)(2)or (c)(3) during the partnership’s taxableyear by determining the distributive shareof partnership items under section 702(a)for each segment of that taxable year us-ing an interim closing of the books method,and by allocating those items among thepartners in accordance with their respec-tive partnership interests during that seg-ment.

(2) Conventions. A partnership usingthe interim closing method may use eitherthe calendar day convention provided inparagraph (e)(1) of this section or the semi-monthly convention provided in paragraph(e)(2) of this section to determine when thesegments within that taxable year end.

(3) Example. PRS is a partnership that wasformed in 2004. It has three partners, P,R, and S,who each own a one-third interest in the partnership.PRS owns and operates a skiing enterprise and undersection 706(b)(1)(C), has adopted a calendar yearend of June 30th. Each partner is an individual whois on the calendar year. On December 31, 2010,S sold her entire interest in PRS to Y. PRS, for itsfiscal year ending June 30, 2011, earned $150,000 ofincome, and under an interim closing of the books onDecember 31, 2010, $90,000 of income was earnedfor the period beginning after December 31, 2010,and $60,000 of income was earned before January 1,2011. The partnership has no specific provision inthe partnership agreement relating to which section706 method to use with regard to varying interestsof the partnership. Thus, pursuant to §1.706–4(a)(1),PRS will be required to use the interim closing of thebooks method to account for the varying interests ofS and Y in the partnership. As a result, S is allocatedone-third of the income earned prior to January 1,2011, or $20,000. Y is allocated $30,000 which isone-third of the income earned after December 31,2010. Since S sold her entire interest in PRS, thepartnership taxable year closes with respect to her

2009–18 I.R.B. 914 May 4, 2009

pursuant to §1.706–1(c)(2)(i). Thus, she must in-clude her share of PRS’s income on her 2010 federalincome tax return.

(d) Proration method—(1) In general.Except as provided in paragraph (d)(3) ofthis section, a partnership may, by agree-ment of the partners, take into accountany variation in a partner’s interest in thepartnership described in §1.706–1(c)(2) or(c)(3) during the partnership’s taxable yearby allocating the distributive share of part-nership items under section 702(a) amongthe partners according to their pro ratashares of such items for the entire taxableyear. In determining a partner’s pro ratashare of partnership items, the partnershipshall take into account that partner’s in-terest in such items during each segment.For purposes of this paragraph (d), specificitems that are aggregated by the partner-ship at the end of the year (other than ex-traordinary items as defined in paragraph(d)(3) of this section) shall be disregarded,and the aggregate of the items shall be con-sidered to be the partnership item for theyear.

(2) Conventions. A partnership usingthe proration method shall use the calen-dar day convention described in paragraph(e)(1) of this section.

(3) Extraordinary items. A partnershipmust allocate extraordinary items amongthe partners in proportion to their interestsat the beginning of the calendar day of theday on which they are taken into account.For purposes of this paragraph (d), an ex-traordinary item is—

(i) Any item from the disposition orabandonment of a capital asset (other thanin the ordinary course of business) as de-fined in section 1221 (determined withoutthe application of any other rules of law);

(ii) Any item from the disposition orabandonment of property used in a trade orbusiness (other than in the ordinary courseof business) as defined in section 1231(b)(determined without the application of anyholding period requirement);

(iii) Any item from the disposition orabandonment of an asset described in sec-tion 1221(1), (3), (4), or (5), if substan-tially all the assets in the same categoryfrom the same trade or business are dis-posed of or abandoned in one transaction(or series of related transactions);

(iv) Any item from assets disposed of inan applicable asset acquisition under sec-tion 1060(c);

(v) Any section 481(a) adjustment;(vi) Any item from the discharge or

retirement of indebtedness (for example,if a debtor partnership transfers a capitalor profits interest in such partnership to acreditor in satisfaction of its recourse ornonrecourse indebtedness, any dischargeof indebtedness income recognized undersection 108(e)(8) must be allocated amongthe persons who were partners in the part-nership immediately before the discharge);

(vii) Any item from the settlement of atort or similar third-party liability or pay-ment of a judgment;

(viii) Any credit, to the extent it arisesfrom activities or items that are not ratablyallocated (for example, the rehabilitationcredit under section 47, which is based onplacement in service); or

(ix) Any item which, in the opinion ofthe Commissioner, would, if ratably allo-cated, result in a substantial distortion ofincome in any return in which the item isincluded.

(4) Example. PRS is a partnership that wasformed in 2004. It has three partners, P,R, and S,who each own a one-third interest in the partnership.PRS owns and operates a skiing enterprise, and undersection 706(b)(1)(C), has adopted a calendar yearend of June 30th. Each partner is an individual whois on the calendar year. On December 31, 2010,S sold her entire interest in PRS to Y. PRS, for itsfiscal year ending June 30, 2010, earned $150,000of income. The partnership has a specific provisionin the partnership agreement agreeing to use the pro-ration method when accounting for varying interestsin the partnership. (See §1.706–4(a)(1)). Using theproration method, $75,000 of income is includedin the first segment of the year that begins July 1,2010 and ends December 31, 2010, and $75,000is included in the second segment of the year thatbegins January 1, 2011 and ends June 30, 2011. Forthe first segment, S’s distributive share of partnershipincome is one-third of $75,000, or $25,000. For thesecond segment, Y’s distributive share of partnershipincome is one-third of $75,000, or $25,000. BecauseS sold her entire interest in PRS, the partnershiptaxable year closes with respect to her pursuant to§1.706–1(c)(2)(i). Thus, she must include her dis-tributive share of PRS’s income, or $25,000, on her2010 Federal income tax return.

(e) Conventions—(1) Calendar dayconvention. Under the calendar day con-vention, the first segment of the partner-ship’s taxable year commences with thebeginning of the partnership’s taxable yearand ends at the close of any day on whichthe variation occurs in the partner’s in-terest in the partnership. Any additionalsegment shall commence with the begin-ning of the day following a prior variationin a partner’s interest and end on the ear-

lier of the close of the day on which anadditional variation occurs in the partner’sinterest or the close of the partnership’staxable year, as applicable.

(2) Semi-monthly convention. Underthe semi-monthly convention, the firstsegment of the partnership’s taxable yearcommences with the beginning of the part-nership’s taxable year, and with respect toa partner’s variation in interest occurringon the first through the 15th day of a calen-dar month, is deemed to close at the end ofthe last day of the immediately precedingcalendar month, and with respect to anyvariation in interest occurring on the 16th

through the last day of a calendar month,is deemed to close at the end of the 15th

calendar day of that month. Any addi-tional segment of the partnership taxableyear shall commence with beginning ofthe first day, or 16th day of the month ofthe last segment, as the case may be, asdetermined for a prior change and shallclose at the earlier of the close of the part-nership’s taxable year, or with respect toa partner’s variation in interest occurringon the first through 15th day of a calendarmonth, is deemed to close at the end ofthe last day of the immediately precedingcalendar month, and with respect to anyvariation in interest occurring on the 16th

through last day of a calendar month, isdeemed to close at the end of the 15th

calendar day of that month.(f) Effective/applicability date. Except

with respect to paragraphs (c)(2) and (d)(2)of this section, this section is applicablefor partnership taxable years that begin theday after the date final regulations are pub-lished in the Federal Register, but not be-fore taxable years beginning after Decem-ber 31, 2009. The rules of paragraphs(c)(2) and (d)(2) of this section are appli-cable for the taxable year of partnershipsother than existing publicly traded partner-ships that begin after the date the final reg-ulations are published in the Federal Reg-ister, but not before taxable years begin-ning after December 31, 2009. For pur-poses of the immediately preceding sen-tence, an existing publicly traded partner-ship is a partnership described in section7704(b) of the Internal Revenue Code thatwas formed on a date before these pro-posed regulations are published in the Fed-eral Register. However, existing publiclytraded partnerships may rely on the provi-sions of this section.

May 4, 2009 915 2009–18 I.R.B.

Par. 7. Section 1.706–5 is added to readas follows:

§1.706–5 Taxable year determination.

(a) In general. For purposes of§1.706–4, the taxable year of a partner-ship shall be determined without regard tosection 706(c)(2)(A) and the regulationspromulgated under that Internal RevenueCode section.

(b) Effective/applicability date. Thissection is applicable for partnership tax-able years that begin the day after the datefinal regulations are published in the Fed-eral Register, but not before taxable yearsbeginning after December 31, 2009.

Linda E. Stiff,Deputy Commissioner forServices and Enforcement.

(Filed by the Office of the Federal Register on April 13, 2009,8:45 a.m., and published in the issue of the Federal Registerfor April 14, 2009, 74 F.R. 17119)

Request for Comments onRevenue Procedure for§ 403(b) Prototype Plans

Announcement 2009–34

The Internal Revenue Service intends toestablish a program for the pre-approval ofprototype plans under § 403(b) of the Inter-nal Revenue Code (Code). This announce-ment includes a draft revenue procedurethat contains the Service’s proposed pro-cedures for issuing opinion letters as to theacceptability under § 403(b) of the form ofprototype plans. The Service is simultane-ously posting draft sample plan languageon the irs.gov website for use in draft-ing § 403(b) prototype plans. The Serviceseeks public input before finalizing theseprocedures and sample plan language, andinvites interested persons to submit com-ments.

Background

Final regulations under § 403(b) (the2007 regulations) were published on July26, 2007 (T.D. 9340, 2007–36 I.R.B. 487[72 Fed. Reg. 41128]). These regulationsare a comprehensive update of the § 403(b)regulations and are generally effective Jan-uary 1, 2009. Under the 2007 regulations,sponsors of § 403(b) plans are required to

maintain a written plan. Notice 2009–3,2009–2 I.R.B. 250, provides, in part, thatthe Service will not treat a § 403(b) planas failing to satisfy the requirements of§ 403(b) and the 2007 regulations duringthe 2009 calendar year if certain conditionsare met. One condition is that by no laterthan December 31, 2009, the sponsor ofthe plan has adopted a written plan thatis intended to satisfy the requirements of§ 403(b) (including the 2007 regulations)effective as of January 1, 2009.

In Rev. Proc. 2007–71, 2007–51 I.R.B.1184, the Service provided guidance re-garding compliance with the 2007 regula-tions and published model plan languagethat may be used by public schools eitherto adopt a written plan to reflect the re-quirements of § 403(b) and the 2007 regu-lations or to amend a § 403(b) plan to re-flect the requirements of § 403(b) and the2007 regulations. Rev. Proc. 2007–71also provides that other eligible employ-ers may use the model language as sam-ple language to comply with one or moreof the requirements imposed by the 2007regulations. Rev. Proc. 2007–71, includ-ing its provisions regarding the extent towhich the model plan language may berelied upon, is not modified by the draftrevenue procedure in this announcement.Accordingly, absent further notice, publicschools and other eligible employers maycontinue to use the model language in Rev.Proc. 2007–71.

§ 403(b) Prototype Plan Program

In order to promote compliance with§ 403(b) and the 2007 regulations, the Ser-vice is establishing an opinion letter pro-gram for § 403(b) prototype plans. This isdescribed in detail in the draft revenue pro-cedure in the appendix of this announce-ment. While this will be the first timethe Service has had a § 403(b) prototypeplan program, the procedures and rules ofthis program, as set forth in the draft rev-enue procedure, will generally be simi-lar to those that apply under Rev. Proc.2005–16, 2005–1 C.B. 674, the Service’sopinion letter program for master and pro-totype plans qualified under § 401(a), ex-cept for differences related to the require-ments of § 403(b).

This program for § 403(b) prototypeplans will allow employee benefits prac-titioners and financial organizations, such

as mutual funds and insurance companies,to obtain advance approval of the form ofa § 403(b) prototype plan. Generally, un-der the draft revenue procedure, a § 403(b)prototype plan is a plan document preparedby a vendor (or other person) who ex-pects the plan to be adopted by at least 30employers, along with an adoption agree-ment to be completed by each adoptingemployer. Employers who adopt these§ 403(b) prototype plans will generallyhave assurance that the form of the planmeets the requirements under § 403(b) andthe 2007 regulations. As described in No-tice 2009–3, the draft revenue procedurewould provide for a retroactive remedialamendment of § 403(b) plans for years af-ter 2009.

The Service will announce the date thatit will start accepting applications for opin-ion letters for § 403(b) prototype planswhen the draft revenue procedure has beenfinalized after consideration of the com-ments received. Vendors will be able tosponsor an approved prototype plan thatthe Service expects will enable most eli-gible employers to satisfy the written planrequirement of the 2007 regulations. How-ever, the Service also intends to establish adetermination letter program for § 403(b)plans at a later date that would allow eligi-ble employers to obtain determination let-ters for individually designed plans.

Request for Comments and Information

Interested persons are invited tocomment on the draft revenue pro-cedure, the sample plan languagedraft (http://www.irs.gov/pub/irs-tege/draft_lrm_403b_prototypes.pdf), or anyother aspect of the § 403(b) prototype planprogram, generally.

Written comments should be submit-ted by June 1, 2009, to CC:PA:LPD:PR(Announcement 2009–34), Room 5203,Internal Revenue Service, POB 7604,Ben Franklin Station, Washington, D.C.20044. Comments may be hand de-livered Monday through Friday be-tween the hours of 8 a.m. and 4 p.m.to CC:PA:LPD:PR (Announcement2009–34), Courier’s Desk, Internal Rev-enue Service, 1111 Constitution Ave., NW,Washington, D.C. Alternatively, com-ments may be submitted via the Internet [email protected].

2009–18 I.R.B. 916 May 4, 2009

All materials submitted will be availablefor public inspection and copying.

In order to anticipate its future work-load, the Service also requests each entitythat expects to file an opinion letter ap-plication for a § 403(b) prototype plan,either as a prototype plan sponsor or as amass submitter (each within the meaningof section 7 of the draft revenue proce-dure), to so advise the Service in writingby June 1, 2009, at the following ad-dress: [email protected] entity that expects to file as a mass

submitter is also asked to provide anestimate of how many opinion letterapplications it will submit on behalf ofprototype sponsors that use the masssubmitter’s plan. This informationshould be submitted separately from anycomments on the draft revenue procedureand sample plan language.


The principal authors of this an-nouncement are Angelique Carring-

ton and James P. Flannery of theEmployee Plans, Tax Exempt andGovernment Entities Division. For furtherinformation regarding this announcement,please contact the Employee Planstaxpayer assistance answering service at1–877–829–5500 (a toll-free number) ore-mail Ms. Carrington or Mr. Flannery [email protected].

Appendix

Draft Revenue Procedure

Rev. Proc.

TABLE OF CONTENTS

SECTION 1. PURPOSE


SECTION 3. OVERVIEW OF THE REVENUE PROCEDURE

SECTION 4. WHAT IS A § 403(b) PROTOTYPE PLAN?

SECTION 5. PROVISIONS REQUIRED IN EVERY § 403(b) PROTOTYPE PLAN

SECTION 6. STANDARDIZED PLANS AND NONSTANDARDIZED PLANS

SECTION 7. WHO CAN SPONSOR A § 403(b) PROTOTYPE PLAN? / WHO CAN BE A MASS SUBMITTER?

SECTION 8. DUTIES OF A PROTOTYPE SPONSOR

SECTION 9. SCOPE OF AN OPINION LETTER

SECTION 10. EMPLOYER RELIANCE ON AN OPINION LETTER

SECTION 11. MAINTENANCE OF APPROVED STATUS

SECTION 12. HOW TO APPLY FOR AN OPINION LETTER

SECTION 13. WITHDRAWAL OF APPLICATION

SECTION 14. ABANDONMENTS

SECTION 15. REVOCATION

SECTION 16. RETROACTIVE REMEDIAL AMENDMENT

SECTION 17. EFFECT ON OTHER DOCUMENTS

SECTION 18. EFFECTIVE DATE

SECTION 19. PAPERWORK REDUCTION ACT

SECTION 1. PURPOSE

.01 This revenue procedure establishesan opinion letter program for § 403(b)prototype plans. Under this program,the Service will accept applications foropinion letters regarding the acceptabilityunder § 403(b) of the Internal RevenueCode of the form of prototype plans start-

ing [DATE TO BE DETERMINED].The procedures and rules of this programare generally similar to those that applyunder Rev. Proc. 2005–16, 2005–1 C.B.674, to the Service’s opinion letter pro-gram for master and prototype (M&P)plans qualified under § 401(a), except fordifferences related to the requirements of§ 403(b).

.02 The Service expects that most el-igible employers will be able to adopt aprototype plan approved under this rev-enue procedure to satisfy the requirementin § 1.403(b)–3(b)(3) of the Income TaxRegulations that a § 403(b) contract beissued pursuant to a written plan. How-ever, the Service also intends to establish adetermination letter program for § 403(b)

May 4, 2009 917 2009–18 I.R.B.

plans (“the determination letter program”)that will allow eligible employers thatmaintain § 403(b) plans with featureswhich preclude the use of a prototype doc-ument under this revenue procedure or thatchoose not to use a prototype document toreceive assurance that the form of a plansatisfies the requirements of § 403(b).

.03 An eligible employer that adopts anapproved § 403(b) prototype plan will gen-erally be able to rely directly on the proto-type plan’s opinion letter and will not needto request an individual determination let-ter under the determination letter program.In the case of a plan that provides for con-tributions that, under § 403(b)(12)(A)(i),are subject to the nondiscrimination re-quirements of §§ 401(a)(4) and 410(b),this reliance will be limited to contribu-tions that satisfy certain uniform coverageand contribution standards. If such a plandoes not satisfy these standards, the eligi-ble employer will still generally be ableto rely directly on the prototype § 403(b)plan’s opinion letter, except with respect towhether those contributions satisfy the re-quirements of §§ 401(a)(4) and 410(b). Inthis case, if the eligible employer wishes toobtain reliance with respect to the require-ments of §§ 401(a)(4) and 410(b), the em-ployer will have the opportunity to requesta determination letter after the determina-tion letter program is established.

.04 This revenue procedure allows aneligible employer to retroactively correctdefects in the form of its written § 403(b)plan by timely adopting an approved§ 403(b) prototype plan that was submit-ted to the Service for an opinion letter bya date that will be announced in the future(and will not be earlier than March 15,2010), or by otherwise timely amendingits plan and submitting a request for adetermination letter. Future guidance willspecify the date(s) for timely adoption andfor timely amendment and submission.


.01 Contributions for an annuity con-tract purchased for an employee by aneligible employer are generally excludedfrom the employee’s gross income if therequirements described in § 403(b) aremet. Amounts paid by an eligible em-ployer to a custodial account which sat-isfies the requirements of § 401(f)(2) aretreated as contributed to an annuity con-

tract for an employee if the requirementsof § 403(b)(7)(A)(i) and (ii) are met. Forpurposes of this revenue procedure, andexcept where otherwise indicated, an el-igible employer is a public school or anemployer described in § 501(c)(3) whichis exempt from tax under § 501(a).

.02 Final regulations under § 403(b)(“the 2007 regulations”) were publishedon July 26, 2007 (72 FR 41128). The2007 regulations are generally effective asof January 1, 2009.

.03 Section 1.403(b)–3(b)(3) of the2007 regulations provides that a contract(or custodial account) does not satisfy therequirements of § 403(b) unless it is main-tained pursuant to a plan. A plan means awritten defined contribution plan which,in both form and operation, satisfies therequirements of the 2007 regulations.

.04 The Service has not heretoforemaintained a program for the issuance ofdetermination or opinion letters as to theacceptability of a plan under § 403(b).However, the Service did on occasionissue private letter rulings regarding theexcludability of contributions to a contractunder § 403(b).

.05 The Service has received commentsfrom the public recommending ways toassist eligible employers in complyingwith the written plan requirement of the2007 regulations. Among the recom-mendations have been the publication ofmodel plan language for § 403(b) plans ofpublic schools, the establishment of a de-termination letter process for individuallydesigned § 403(b) plans, and the expan-sion of the scope of the Service’s masterand prototype plan opinion letter programfor the pre-approval of plans qualifiedunder § 401(a) to include § 403(b) plans.

.06 In Rev. Proc. 2007–71, 2007–2C.B. 1184, the Service provided guidanceregarding compliance with the 2007 regu-lations and published model plan languagethat may be used by public schools eitherto adopt a written plan to reflect the re-quirements of § 403(b) and the 2007 regu-lations or to amend a § 403(b) plan to re-flect the requirements of § 403(b) and the2007 regulations. Rev. Proc. 2007–71also provides that other eligible employ-ers may use the model language as sam-ple language to comply with one or moreof the requirements imposed by the 2007regulations. Rev. Proc. 2007–71, includ-ing its provisions regarding the extent to

which the model plan language may berelied upon, is not modified by this rev-enue procedure. Accordingly, absent fur-ther notice, public schools and other eligi-ble employers may continue to utilize thelanguage in Rev. Proc. 2007–71 as modelor sample language.

.07 Notice 2009–3, 2009–2 I.R.B. 250,states that the Service and Treasury haveconcluded that compliance with the 2007regulations would be facilitated by the es-tablishment of both pre-approved and indi-vidually designed plan programs and thattransition relief should be provided to all§ 403(b) plan sponsors who have made ap-propriate efforts to comply with the writ-ten plan requirement in the 2007 regula-tions. The transition relief under the no-tice provides that the Service will not treata § 403(b) plan as failing to satisfy the re-quirements of § 403(b) and the 2007 regu-lations during the 2009 calendar year, pro-vided that:

(1) on or before December 31, 2009, thesponsor of the plan has adopted a written§ 403(b) plan that is intended to satisfythe requirements of § 403(b) (including the2007 regulations) effective as of January 1,2009;

(2) during 2009, the sponsor operatesthe plan in accordance with a reasonableinterpretation of § 403(b), taking into ac-count the 2007 regulations; and

(3) before the end of 2009, the spon-sor makes its best efforts to retroactivelycorrect any operational failure during the2009 calendar year to conform to the termsof the written § 403(b) plan, with such cor-rection to be based on the general prin-ciples of correction set forth in the Ser-vice’s Employee Plans Compliance Reso-lution System (EPCRS) at section 6 of Rev.Proc. 2008–50, 2008–35 I.R.B. 464.

The relief in Notice 2009–3 appliessolely with respect to the 2009 calendaryear, and may not be relied on with respectto the operation of a § 403(b) plan or cor-rection of operational defects in any prioror subsequent year.

.08 The Service expects that most el-igible employers will be able to adopt a§ 403(b) prototype plan approved underthe opinion letter program described in thisrevenue procedure. As indicated in No-tice 2009–3 and in section 1.02 above, theService also intends to establish a deter-mination letter program that will enableother eligible employers to receive assur-

2009–18 I.R.B. 918 May 4, 2009

ance that the form of a plan satisfies the re-quirements of § 403(b). Eligible employ-ers that utilize either the opinion letter pro-gram or the determination letter programwill be able to retroactively correct defectsin the form of a written § 403(b) plan foryears after 2009 by timely adopting reme-dial amendments.

SECTION 3. OVERVIEW OF THEREVENUE PROCEDURE

.01 The Service is establishing a§ 403(b) prototype plan program throughthis revenue procedure with the intent ofassisting eligible employers in comply-ing with the written plan requirement ofthe 2007 regulations. For many years theService has maintained a similar programfor plans qualified under § 401(a). Basedon the Service’s experience with the pro-totype plan program for qualified plans,it believes that the prototype program for§ 403(b) plans offers most eligible em-ployers a lower-cost way to satisfy thewritten plan requirement and obtain assur-ance from the Service that a plan meetsthe requirements of § 403(b) than an indi-vidual determination letter.

.02 As more fully described in section 4,a § 403(b) prototype plan is a two-part plandocument intended to satisfy the require-ments of § 403(b) and the 2007 regulationswhich a vendor or other entity (referred toas “the prototype sponsor”) provides to el-igible employers that wish to adopt a writ-ten § 403(b) plan. The prototype spon-sor submits the document to the Servicefor approval, in the form of an opinion let-ter issued to the sponsor by the Service,that the form of the document meets the re-quirements of § 403(b) and the 2007 regu-lations.

.03 The first part of a § 403(b) prototypeplan document, called the basic plan docu-ment, contains provisions that apply to theplan of any eligible employer that uses thedocument to adopt a written § 403(b) plan.Under the prototype program, an eligibleemployer may not modify the provisionsof a basic plan document. The secondpart of the document, called the adoptionagreement, is the part of the plan documentwhich the eligible employer completes andsigns in order to establish a written plan.The adoption agreement gives the eligibleemployer elections and options to chooseamong in order to customize the particu-

lar features of its plan. Thus, many eligi-ble employers can use the same § 403(b)prototype plan document to adopt a writ-ten § 403(b) plan, with the plans differ-entiated by the different choices each eli-gible employer makes in its plan’s adop-tion agreement and the different invest-ment arrangements (i.e., annuity contractsand custodial accounts) offered under eachplan. This revenue procedure does not im-pose any special restrictions on the types,number, or features of investment arrange-ments that may be offered under an eligibleemployer’s § 403(b) prototype plan. How-ever, the terms of the § 403(b) prototypeplan must override any inconsistent pro-visions of investment arrangements underthe plan.

.04 Because the terms of a § 403(b)prototype plan apply to each eligible em-ployer that adopts the plan (with variationsaccording to the different adoption agree-ment elections made by each employer)and because the revenue procedure doesnot impose special restrictions on invest-ment arrangements under a § 403(b) proto-type plan, the terms of the prototype planmust satisfy the requirements of § 403(b)and the 2007 regulations, regardless ofthe employer’s choices in the adoptionagreement or the terms of investment ar-rangements under the plan, and the Servicetherefore will not review the terms of anyinvestment arrangements or documentsother than the basic plan document andadoption agreement. Section 5 describesthe provisions that must therefore be in-cluded in every § 403(b) prototype plan.Also see section 9 regarding the scope ofan opinion letter.

.05 Some of the provisions describedin section 5 that must be included in ev-ery § 403(b) prototype plan reflect require-ments of the prototype program rather thanrequirements of law. One of those re-quirements is that each § 403(b) prototypeplan allow the prototype sponsor to amendthe § 403(b) prototype plan on behalf ofeach eligible employer that has adoptedthe plan. Under this revenue procedure,each prototype sponsor obligates itself tocarry out certain duties under the proce-dure, among them to keep the documentup to date for changes in law and to pro-vide copies of amendments to the docu-ment to eligible employers. See section 7for eligibility to sponsor a § 403(b) proto-type plan, section 12 for opinion letter ap-

plication procedures, and sections 8 and 11through 15 regarding the duties of sponsor-ship.

.06 One of the Service’s goals in estab-lishing the § 403(b) prototype plan pro-gram is to ensure that § 403(b) prototypeplans will be broadly suitable for the ma-jority of eligible employers. The Servicedoes not intend that prototype plans besuitable for every eligible employer or ev-ery circumstance. Thus, the revenue pro-cedure does not permit § 403(b) proto-type plans to include certain provisionsthat the Service believes do not apply tomost eligible employers, such as vestingschedules and provisions applicable onlyto churches and organizations described in§ 3121(w)(3). See section 5.06 and section9.

.07 While the Service intends to es-tablish a determination letter program for§ 403(b) plans in the future, the § 403(b)prototype plan program is designed toenable eligible employers that adopt a§ 403(b) prototype plan to obtain assur-ance (referred to in section 10 as “re-liance”), without the need to apply for anindividual determination letter, that theService has determined that the terms ofthe eligible employer’s § 403(b) prototypeplan satisfy § 403(b) and the 2007 regu-lations. However, if the adopting eligibleemployer is neither a governmental entitynor a church, the extent to which the em-ployer may rely directly on the § 403(b)prototype plan’s opinion letter withoutapplying for an individual determinationletter depends on the form of the eligibleemployer’s § 403(b) prototype plan, asexplained in section 3.08 (next paragraph).

.08 There are two forms of § 403(b) pro-totype plan under this revenue procedure:a “standardized plan” and a “nonstandard-ized plan.” A plan is a standardized planif the only contributions the employer maychoose to provide under the plan are elec-tive deferrals or if the plan automaticallysatisfies uniform coverage and contribu-tion standards with respect to any othercontributions under the plan. A nonstan-dardized plan is a plan that is not a stan-dardized plan. An eligible employer thatadopts a standardized plan generally mayrely directly on the opinion letter for theplan. An eligible employer that adopts anonstandardized plan generally may relydirectly on the opinion letter for the planexcept with respect to whether the plan sat-

May 4, 2009 919 2009–18 I.R.B.

isfies the nondiscrimination requirementsof §§ 401(a)(4) and 410(b) relating to con-tributions under the plan other than elec-tive deferrals. The eligible employer willbe able to request a determination letteron the nondiscrimination requirements, ifdesired, after the determination letter pro-gram is open. Finally, if the § 403(b)prototype plan is a governmental plan asdescribed in § 414(d) or a “nonelectingchurch plan” (see section 5.05(4)), the eli-gible employer may generally rely on theopinion letter regardless of whether theplan is a standardized plan or a nonstan-dardized plan. Of course, an opinion lettermay not be relied upon with respect to Ti-tle I of ERISA, although the Service maydecline to issue an opinion letter on a planthat fails to satisfy a Code provision thatis parallel to a provision of Part 2 of Sub-title B of Title I of ERISA. Standardizedand nonstandardized plans are discussed insection 6, and reliance is discussed in sec-tion 10. Also see section 9 regarding thescope of reliance on an opinion letter.

.09 As indicated in Notice 2009–3, thisrevenue procedure provides a remedialamendment provision that allows eligibleemployers to retroactively correct defectsin the form of their § 403(b) plans forcertain years through the timely adoptionof remedial amendments. This provisionapplies to eligible employers that timelyadopt a § 403(b) prototype plan or thatotherwise timely amend and request a de-termination letter for a § 403(b) plan. Plansponsors should not draw any inferencesfrom this provision regarding the appli-cation of § 401(b) regarding retroactivechanges in plans qualified under § 401(a).See section 16.

SECTION 4. WHAT IS A § 403(b)PROTOTYPE PLAN?

.01 A § 403(b) prototype plan is a de-fined contribution plan that is intended tosatisfy the requirements of § 403(b) andis made available by a prototype spon-sor for adoption by eligible employers. A§ 403(b) prototype plan consists of a ba-sic plan document and an adoption agree-ment. The basic plan document containsall the nonelective provisions of the pro-totype plan that apply to the plans of alladopting eligible employers. The basicplan document may not include any op-tions or blanks to be completed. The adop-

tion agreement contains all the options thatmay be selected by an adopting eligibleemployer.

.02 An adoption agreement can be usedwith only one basic plan document. Abasic plan document can be used withmore than one adoption agreement, buteach basic plan document/adoption agree-ment pair constitutes a separate § 403(b)prototype plan. A § 403(b) prototype planadopted by an eligible employer is a singleplan regardless of whether there are mul-tiple investment arrangements or multiplevendors (i.e., insurance companies or reg-ulated investment company custodians)under the plan. Adoption of two prototype§ 403(b) plans (that is, execution of twoseparate adoption agreements) constitutesthe adoption of two separate § 403(b)plans.

.03 A prototype sponsor may maintainmore than one basic plan document. Forexample, a prototype sponsor may main-tain one basic plan document to be usedonly with plans that limit contributions toelective deferrals and another basic plandocument to be used with plans that pro-vide for elective deferrals and employernonelective contributions, whether or notsuch plans also provide for matching con-tributions and/or after-tax employee con-tributions.

.04 As described above, a basic plandocument may have more than one adop-tion agreement. For example, a basic plandocument may have one adoption agree-ment to be used to adopt a standardizedplan and another adoption agreement to beused to adopt a nonstandardized plan. Seesection 6 for an explanation of the differ-ence between a standardized plan and anonstandardized plan.

SECTION 5. PROVISIONSREQUIRED IN EVERY § 403(b)PROTOTYPE PLAN

.01 Subsections .05 though .11 of thissection 5 describe provisions that mustbe included in every § 403(b) prototypeplan. Some of these requirements reflectrequirements in the 2007 regulations; oth-ers derive from the nature and purposes ofthe prototype plan program and are gen-erally similar to requirements that applyunder Rev. Proc. 2005–16 to the Service’sopinion letter program for M&P plansqualified under § 401(a).

.02 As provided in section 9.02, the Ser-vice’s review of a § 403(b) prototype planwill consider only the terms of the basicplan document and adoption agreement.Accordingly, the provisions described insubsections .05 though .11 of this sec-tion 5 must be included in the basic plandocument or adoption agreement of every§ 403(b) prototype plan, regardless of theterms of any investment arrangements un-der the plan or any documents that may beincorporated by reference. This does notpreclude the adoption of a § 403(b) proto-type plan (including a standardized plan,as described in section 6) in cases wheredifferent investment arrangements (annu-ity contracts or custodial accounts) undera plan have different features or preventthe inclusion of additional provisions inthe terms of the investment arrangementsunder the plan or documents incorporatedby reference. However, the terms of thebasic plan document and adoption agree-ment must satisfy the requirements of lawand subsections .05 though .11 of thissection 5 without regard to the terms ofinvestment arrangements under the plan orany documents incorporated by reference.

.03 For example, an eligible employer’s§ 403(b) prototype plan may offer bothinvestment arrangements that permit loansand investment arrangements that do not.In this case, the basic plan document andadoption agreement, as completed by theemployer, must (1) provide that partici-pant loans are available, depending on thechoice of investment arrangements, (2)include provisions reflecting the require-ments of the 2007 regulations, including§ 1.403(b)–6, and § 1.72(p)–1, and (3)identify the party responsible (e.g., theemployer) for coordination among thevendors to ensure compliance with therequirements and limitations on partic-ipant loans. For sample plan languagethat satisfies these requirements, see theListing of Required Modifications (for§ 403(b) plans) which may be down-loaded from the Internet at the follow-ing address: (http://www.irs.gov/pub/irs-tege/draft_lrm_403b_prototypes.pdf). Asanother example, a § 403(b) prototypeplan may provide that the forms of annuitybenefit available under the plan are thosedescribed in the contracts under the plan.However, the terms of the basic plan docu-ment and adoption agreement must ensurethat the required minimum distributions

2009–18 I.R.B. 920 May 4, 2009

of § 401(a)(9) will be satisfied regardlessof the form of benefit paid, and the dis-tributable events under the plan must bedescribed in the basic plan document andadoption agreement.

.04 As provided in subsection .07 of thissection 5, the terms of the basic plan doc-ument and adoption agreement must over-ride any inconsistent provisions of invest-ment arrangements under the plan or docu-ments incorporated by reference. An eligi-ble employer that adopts a § 403(b) proto-type plan should take this and the other re-quirements of this section 5 into account inconsidering investment arrangements to beoffered under the plan as well as other doc-uments that may be incorporated by refer-ence.

.05 Every § 403(b) prototype plan mustsatisfy the requirements of §§ 1.403(b)–1through 1.403(b)–11, including the follow-ing requirements:

(1) The plan must contain all the ma-terial terms and conditions for eligibility,benefits, applicable limitations, the invest-ment arrangements available under theplan, and the time and form under whichbenefit distributions will be made.

(2) The plan must satisfy the uni-versal availability requirement with re-spect to elective deferrals described in§ 1.403(b)–5(b), whether or not this re-quirement is applicable to the plan under§ 1.403(b)–5.

(3) The plan must limit the amountof compensation that can be taken intoaccount with respect to any contributionunder the plan to the limitation in effectunder § 401(a)(17), whether or not thislimitation is applicable to the plan under§ 1.403(b)–5.

(4) Unless the plan is designed by theprototype sponsor to be available for adop-tion only as a governmental plan as definedin § 414(d) or a church plan as definedin § 414(e) for which the election under§ 410(d) has not been made (a “nonelect-ing church plan”), the plan must includeterms that satisfy the applicable require-ments of § 401(m) if the plan provides formatching or after-tax employee contribu-tions.

(5) The plan must set forth theterms governing any hardship distribu-tions, loans, plan-to-plan transfers, con-tract-to-contract exchanges, and rolloversinto the plan that are available under theplan.

.06 Every § 403(b) prototype plan mustprovide for full and immediate vesting ofall contributions under the plan.

.07 Every § 403(b) prototype plan mustprovide that in the event of any conflict be-tween the terms of the plan and the termsof any annuity contract or custodial ac-count under the plan, or of any other doc-ument that is incorporated by reference inthe plan, the terms of the plan shall control.

.08 Every § 403(b) prototype plan mustprovide a procedure for amendment ofthe plan by the prototype sponsor, so thatchanges in the Code, regulations, revenuerulings, or other guidance published by theService, or corrections of prior approvedplans, may be applied to all eligible em-ployers that have adopted the plan.

.09 Under § 1.415(f)–1(a)(3), all§ 403(b) annuity contracts purchased byan employer for a participant are treated asone § 403(b) annuity contract for purposesof § 415. Every § 403(b) prototype planmust include plan language reflecting thisrule. In particular, the plan language mustcoordinate the application of the § 415limits to all the § 403(b) prototype plansof the adopting eligible employer andits related employers so that, if the only§ 403(b) plans maintained by the adopt-ing employer and its related employersare prototype plans, the plans will satisfy§ 415(c) and § 1.415(f)–1(a)(3) withoutrequiring the addition of overriding planlanguage. The plan language must alsoallow the adopting eligible employer toadd overriding language to the adoptionagreement if necessary to coordinate theapplication of the § 415 limits where theadopting eligible employer or its relatedemployers also maintain § 403(b) plansthat are not prototype plans. For thispurpose, the term “related employers”means all employers that are aggregatedwith the adopting eligible employer un-der § 414(b) and (c) (each as modifiedby § 415(h)), (m), and (o), including§ 1.414(c)–5. Sample language providedin the Listing of Required Modifica-tions (for § 403(b) plans) may be down-loaded from the Internet at the follow-ing address: (http://www.irs.gov/pub/irs-tege/draft_lrm_403b_prototypes.pdf).

.10 Every § 403(b) prototype plan mustprovide that the eligible employer is con-sidered to have adopted an individually de-signed plan, and the eligible employer is

not entitled to reliance on an opinion letterissued with respect to the plan, if:

(1) the eligible employer amends anyprovision of the plan, including its adop-tion agreement (other than to (a) changethe choice of options or procedures in theadoption agreement, (b) add overridinglanguage in the adoption agreement ifnecessary to satisfy § 415 because of therequired aggregation of multiple plans, or(c) adopt sample or model amendmentspublished by the Service that specificallyprovide that their adoption by an adopterof an approved § 403(b) prototype planwill not cause such plan to be treated asindividually designed); or

(2) the eligible employer chooses todiscontinue participation in the plan asamended by the prototype sponsor anddoes not substitute another approved§ 403(b) prototype plan.

.11 The adoption agreement of every§ 403(b) prototype plan must satisfy thefollowing requirements:

(1) The adoption agreement must re-quire the adopting employer to indicatewhether:

(a) the plan is a governmental plan asdefined in § 414(d),

(b) the plan is a nonelecting churchplan, or

(c) the adopting eligible employer is anorganization described in § 501(c)(3) andthe plan is neither a governmental planas defined in § 414(d) nor a nonelectingchurch plan.

(2) The adoption agreement must allowthe adopting eligible employer to add over-riding plan language if necessary to satisfy§ 415 because of the required aggregationof multiple plans.

(3) The adoption agreement must iden-tify who: (a) is responsible for the variousadministrative functions under the plan tocomply with the requirements of § 403(b)and other tax requirements, including suchrequirements that apply on the basis of theaggregated contracts issued to a participantunder the plan; and (b) is responsible tomaintain a list of all the vendors of annuitycontracts and custodial accounts under theplan.

(4) The adoption agreement must con-tain a dated employer signature line. Theeligible employer must sign the adoptionagreement when it first adopts the plan andmust complete and sign a new adoptionagreement if the plan has been restated. In

May 4, 2009 921 2009–18 I.R.B.

addition, the eligible employer must com-plete a new signature page if it modifiesany prior elections or makes new electionsin its adoption agreement. The signaturerequirement may be satisfied by an elec-tronic signature that reliably authenticatesand verifies the adoption of the adoptionagreement, or restatement, amendment ormodification thereof, by the eligible em-ployer.

(5) The adoption agreement must statethat it is to be used only with one spe-cific basic plan document, and must iden-tify that document.

(6) The adoption agreement must con-tain a cautionary statement to the effectthat the failure to properly fill out theadoption agreement may result in failureof the plan to satisfy the requirementsof § 403(b). The Service expects that§ 403(b) prototype plan documents willbe written in a manner designed to assistadopting eligible employers in the correctcompletion of the adoption agreement.

(7) The adoption agreement must alsostate that the prototype sponsor will in-form the adopting eligible employer of anyamendments made to the plan or of the dis-continuance or abandonment of the plan.

(8) The adoption agreement must in-clude the prototype sponsor’s name, ad-dress, and telephone number (or a space forthe address and telephone number of theprototype sponsor’s authorized representa-tive) for inquiries by adopting eligible em-ployers regarding the adoption of the plan,the meaning of plan provisions, or the ef-fect of the opinion letter.

SECTION 6. STANDARDIZEDPLANS AND NONSTANDARDIZEDPLANS

.01 Each § 403(b) prototype plan is ei-ther a standardized plan or a nonstandard-ized plan. A § 403(b) prototype plan is astandardized plan if:

(1) the only contributions which anadopting eligible employer may elect toprovide under the plan are elective defer-rals; or

(2) the form of the plan satisfies therequirements in section 6.02 with respectto any contributions under the plan otherthan elective deferrals, regardless of theadopting eligible employer’s elections inthe adoption agreement or the terms of anyinvestment arrangements under the plan or

any documents incorporated by referencein the plan.

.02 The form of a § 403(b) prototypeplan satisfies the requirements in this sec-tion 6.02 with respect to any contributionsunder the plan other than elective deferralsif:

(1) The plan by its terms benefitsall employees except those that may beexcluded under § 1.410(b)–6. For thispurpose, employee means an employee,within the meaning of § 1.403(b)–2(b)(9),of the adopting eligible employer and anyeligible employer within the meaning of§ 1.403(b)–2(b)(8) in the adopting eli-gible employer’s controlled group. Thecontrolled group consists of the adoptingeligible employer and each other employerthat is aggregated with the adopting eli-gible employer under § 414(b), (c), (m)or (o), including § 1.414(c)–5. Thus, ifthere is more than one eligible employerin the controlled group, the plan must ben-efit all the employees of all the eligibleemployers in the controlled group exceptthose employees that may be excludedunder § 1.410(b)–6. (A plan does not failto satisfy this requirement with respect tocontributions other than elective deferralsmerely because the plan provides, eitheras the result of an elective provision orby default in the absence of an election tothe contrary, that individuals who becomeemployees as the result of a transactiondescribed in § 410(b)(6)(C), relating tocertain employer acquisitions and dispo-sitions, are excluded from eligibility toparticipate in the plan during the periodbeginning on the date of the transactionand ending on a date that is not later thanthe earlier of the last day of the first planyear beginning after the date of the trans-action or the date of a significant changein the plan or in the coverage of the plan.)

(2) All benefits, rights, and features un-der the plan (other than those, if any, thathave been prospectively eliminated) arecurrently available to all employees bene-fiting under the plan. (For information re-garding benefits, rights, and features, see§ 1.401(a)(4)–4.) Thus, for example, allemployees benefiting under the plan mustbe able to choose among all the investmentarrangements available under the plan.

(3) If the plan provides for employernonelective contributions (other thanmatching contributions), the plan mustsatisfy one of the design-based safe har-

bors described in § 1.401(a)(4)–2(b)(2)with respect to such contributions.

(4) The plan must define compensationfor purposes of determining the amount ofcontributions other than elective deferralsas total compensation. For this purpose,total compensation means a definition ofcompensation that includes all compen-sation within the meaning of § 415(c)(3)(disregarding § 415(c)(3)(E)) and excludesall other compensation, or that otherwisesatisfies § 414(s) under § 1.414(s)–1(c).

.03 A nonstandardized plan is a§ 403(b) prototype plan that is not a stan-dardized plan.

SECTION 7. WHO CAN SPONSOR A§ 403(b) PROTOTYPE PLAN? / WHOCAN BE A MASS SUBMITTER?

.01 A person is eligible to sponsor a§ 403(b) prototype plan if the person (1)has an established place of business in theUnited States where it is accessible duringevery business day and (2) expects at least30 eligible employers to adopt its § 403(b)prototype plan basic plan document(s). Aperson eligible to sponsor a § 403(b) pro-totype plan may request opinion letters forany number of basic plan documents andadoption agreements.

.02 Any person that has an estab-lished place of business in the UnitedStates where it is accessible during ev-ery business day may sponsor a plan asa word-for-word identical adopter of a§ 403(b) prototype plan of a mass submit-ter, regardless of the number of eligibleemployers expected to adopt the plan. Amass submitter is any person that (1) hasan established place of business in theUnited States where it is accessible duringevery business day and (2) submits opin-ion letter applications on behalf of at least30 prototype sponsors each of which issponsoring, on a word-for-word identicalbasis, the same basic plan document. A§ 403(b) prototype plan of a mass sub-mitter must include language designatingthe mass submitter as agent for the pro-totype sponsor for purposes of makingplan amendments. A mass submitter mayrequest opinion letters for any number ofbasic plan documents and adoption agree-ments.

.03 The filing of an application for anopinion letter for a § 403(b) prototypeplan constitutes a representation that the

2009–18 I.R.B. 922 May 4, 2009

requirements in .01 or .02 of this section 7are satisfied.

SECTION 8. DUTIES OF APROTOTYPE SPONSOR

.01 A prototype sponsor must maintaina written record of the eligible employersthat have adopted the plan. Upon writtenrequest, the prototype sponsor must pro-vide the Service a list of the names, ad-dresses, and employer identification num-bers of all eligible employers that haveadopted the plan, excluding employers thatceased to maintain the plan as a prototypeplan more than three years prior to the re-quest.

.02 Unless the prototype sponsor haswithdrawn its opinion letter applicationpursuant to section 13, notified the Serviceand adopting eligible employers that it isabandoning the plan pursuant to section14, or been notified by the Service undersection 15 that its opinion letter has beenrevoked, the prototype sponsor must con-tinue to maintain the approved status ofthe plan as provided in section 11. Thus,the prototype sponsor must timely amendthe plan for changes in the Code, regula-tions, revenue rulings, or other guidancepublished by the Service, and must applyfor new opinion letters when required.The prototype sponsor must provide to theeligible employer copies of the plan andany restatements thereof, all amendmentsand all opinion letters, and must complywith the notice requirements under thisprocedure and any other written guidance.

.03 The prototype sponsor must have aprocedure to verify that an adopting eli-gible employer has timely completed andsigned a new adoption agreement when re-quired (i.e., upon initial adoption and re-statement of the prototype plan). If theprototype sponsor is unable to verify anadopting eligible employer’s timely com-pletion of a new adoption agreement, theprototype sponsor must notify the eligibleemployer that failure to timely complete anew adoption agreement could result in ad-verse tax consequences to participants.

.04 The prototype sponsor must havea procedure for adopting eligible employ-ers to acknowledge receipt of plan amend-ments when an adopting eligible employeris not required to complete a new adop-tion agreement. The prototype sponsormust notify any adopting eligible employ-

ers that fail to acknowledge receipt of aplan amendment that failure to take theamendment into account in the operationof the plan could result in adverse tax con-sequences to participants.

.05 The filing of an application for anopinion letter for a § 403(b) prototype planconstitutes a representation that the pro-totype sponsor agrees to comply with therequirements of this revenue procedure.Failure to do so may result in the loss ofeligibility to sponsor § 403(b) prototypeplans and the revocation of opinion let-ters that have been issued to the prototypesponsor.

SECTION 9. SCOPE OF AN OPINIONLETTER

.01 An opinion letter for a § 403(b) pro-totype plan constitutes a determination thatthe plan as adopted by a particular adopt-ing eligible employer satisfies the require-ments of § 403(b) only under the circum-stances, and to the extent, described in sec-tion 10.

.02 The Service’s review of a prototypesponsor’s application for an opinion let-ter for a § 403(b) prototype plan, or of anadopting eligible employer’s applicationfor a determination letter for the eligibleemployer’s § 403(b) prototype plan, willconsider only the terms of the basic plandocument and adoption agreement. TheService’s review will not consider, and anopinion or determination letter will not ex-press an opinion with respect to, the termsof any annuity contracts or custodial ac-counts under the plan of any adopting el-igible employer or any other documentsthat may be incorporated into an adoptingeligible employer’s plan by reference.

.03 An opinion letter for a § 403(b) plandoes not express an opinion, and may notbe relied upon, with respect to whether anyplan is subject to the requirements of TitleI of ERISA or whether a plan satisfies anyof those requirements.

.04 Opinion letters will not be issued forany of the following:

(1) TEFRA church defined benefitplans. (See § 1.403(b)–10(f)(2).)

(2) Plans that:(a) include provisions applicable only

to churches or qualified church-con-trolled organizations as described in§ 3121(w)(3), church-related organiza-tions described in § 1.403(b)–2(b)(6), or

ministers described in § 414(e)(5)(A),such as the provisions of § 1.403(b)–9,relating to retirement income accounts andspecial limitations under § 415(c)(7); or

(b) fail to satisfy requirements that ap-ply to organizations other than churchesand qualified church-controlled organiza-tions as described in § 3121(w)(3), such asuniversal availability for elective deferralsor the limitation of § 401(a)(17).

(3) Plans grandfathered under Rev. Rul.82–102, 1982–1 C.B. 62.

(4) Plans that include blanks or fill-inprovisions for the eligible employer tocomplete unless the provisions have pa-rameters that preclude the eligible em-ployer from completing the provisions ina manner that could cause the plan to failto satisfy § 403(b).

(5) Plans that incorporate by referencethe limitations of § 415 or the ACP test of§ 401(m)(2).

Paragraph (2) of this section 9.04 doesnot preclude the adoption of a § 403(b)prototype plan by an exempt organizationunder § 501(c)(3) that is one of the enti-ties described in paragraph (2). The Ser-vice may, in its discretion, decline to issueopinion letters for other types of plans notdescribed in this section 9.04. For exam-ple, in the case of a plan that provides fornonelective contributions and is neither agovernmental plan as defined in § 414(d)nor a nonelecting church plan, the Servicemay, in its discretion, decline to issue anopinion letter where the plan fails to sat-isfy a Code provision that is parallel to aprovision in Part 2 of Subtitle B of Title Iof ERISA (such as §§ 410 and 411 of theInternal Revenue Code).

SECTION 10. EMPLOYERRELIANCE

.01 An eligible employer that adoptsa standardized § 403(b) prototype planmay rely upon a favorable opinion letterissued for the plan that the form of theadopting eligible employer’s plan satisfiesthe requirements of § 403(b) if (1) the onlycontributions under the plan are electivedeferrals or (2) all of the employers in theadopting eligible employer’s controlledgroup are eligible employers within themeaning of § 1.403(b)–2(b)(8). If theplan provides for contributions other thanelective deferrals and the adopting eligibleemployer’s controlled group includes any

May 4, 2009 923 2009–18 I.R.B.

employer that is not an eligible employerwithin the meaning of § 1.403(b)–2(b)(8),the adopting eligible employer may relyon the opinion letter, except with respectto whether contributions under the planother than elective deferrals satisfy the re-quirements of §§ 401(a)(4) and 410(b). Inthis case, the adopting eligible employermay request an individual determinationletter in order to obtain reliance with re-spect to the requirements of §§ 401(a)(4)and 410(b). The Service intends to publishprocedures for requesting such a letter inthe future.

.02 An eligible employer that adoptsa standardized or a nonstandardized§ 403(b) prototype plan may rely upona favorable opinion letter issued for theplan that the form of the adopting eligibleemployer’s plan satisfies the requirementsof § 403(b) if the plan is a governmentalplan as defined in § 414(d) or a nonelect-ing church plan. However, the issuanceof a favorable opinion letter does not con-stitute a determination that the plan is agovernmental plan as defined in § 414(d)or a nonelecting church plan, but insteadis conditioned on the adopting eligibleemployer’s representation to that effect.

.03 An eligible employer that adopts anonstandardized § 403(b) prototype planmay rely upon a favorable opinion let-ter issued for the plan that the form ofthe adopting eligible employer’s plan sat-isfies the requirements of § 403(b), exceptwith respect to whether contributions un-der the plan other than elective deferralssatisfy the requirements of §§ 401(a)(4)and 410(b), if applicable. The adopting el-igible employer may request an individualdetermination letter in order to obtain re-liance with respect to the requirements of§§ 401(a)(4) and 410(b), under proceduresto be published in the future.

.04 Notwithstanding the other provi-sions of this section, an opinion letter is-sued for a § 403(b) prototype plan maynot be relied upon with respect to the re-quirements of § 415 if the adopting eligibleemployer or any of its related employersmaintains another § 403(b) plan coveringany of the same participants as the § 403(b)prototype plan, unless the other plan is alsoa § 403(b) prototype plan. For this pur-pose, the term “related employers” meansall employers that are aggregated with theadopting eligible employer under § 414(b)and (c) (each as modified by § 415(h)),

(m), and (o), including § 1.414(c)–5. Theadopting eligible employer may request anindividual determination letter in order toobtain reliance with respect to the require-ments of § 415 under procedures to be pub-lished in the future.

.05 An opinion letter for a § 403(b) pro-totype plan also may not be relied uponwith respect to issues of an inherently fac-tual nature, such as whether the effectiveavailability of any benefits, rights, and fea-tures is nondiscriminatory, or with respectto whether a plan satisfies the requirementsof §§ 401(a)(4) and 410(b) with respect toformer employees.

.06 An eligible employer’s reliance onan opinion letter will not be adversely af-fected by the prototype sponsor’s correc-tion, after the § 403(b) prototype plan hasbeen approved, of obvious and unambigu-ous typographical errors in the approvedplan and/or cross-references in the planthat merely correct a reference but thatdo not in any way change the original in-tended meaning of the provisions. TheService in its discretion may determinewhether any changes made by the proto-type sponsor to the approved § 403(b) pro-totype plan conform to these standards.

SECTION 11. MAINTENANCE OFAPPROVED STATUS

.01 An approved § 403(b) prototypeplan must be amended by the prototypesponsor and, if necessary, the eligible em-ployer, to retain its approved status if anyprovisions therein fail to meet the require-ments of § 403(b) as a result of a changesin the Code, regulations, revenue rulings,or other guidance published by the Ser-vice. The Service expects future guidanceto require the restatement of every § 403(b)prototype plan by the prototype sponsorevery six years. Upon issuance of a newopinion letter for the restated plan, adopt-ing eligible employers would be requiredto complete new adoption agreements. Fu-ture guidance will also address operationalcompliance and whether interim amend-ments may be required between plan re-statements.

.02 If a prototype sponsor determinesthat a § 403(b) prototype plan as adoptedby an eligible employer may no longer sat-isfy the requirements of § 403(b) and theprototype sponsor does not or cannot sub-mit a request to correct under the Voluntary

Correction Program (VCP) component ofthe Employee Plans Compliance Resolu-tion System (EPCRS), the prototype spon-sor must notify the eligible employer thatthe plan may no longer satisfy § 403(b), ad-vise the eligible employer that adverse taxconsequences to participants may ensue,and inform the eligible employer about theavailability of EPCRS. See Rev. Proc.2008–50, or any successor thereto.

SECTION 12. HOW TO APPLY FORAN OPINION LETTER

.01 The Service will accept applicationsfor opinion letters for § 403(b) prototypeplans beginning [DATE TO BE DETER-MINED].

.02 A separate application is requiredfor each adoption agreement that is offeredfor adoption by the prototype sponsor. Forexample, if a prototype sponsor maintainstwo basic plan documents and there aretwo adoption agreements that may be usedwith each basic plan document, the proto-type sponsor must submit four separate ap-plications.

.03 An application for an opinion let-ter for a § 403(b) prototype plan may befiled by a prototype sponsor as defined insection 7.01, by a mass submitter as de-fined in section 7.02 with respect to itsmass submitter plan, or by a mass submit-ter on behalf of a word-for-word identi-cal adopter of the mass submitter’s plan.An application filed by a prototype spon-sor or by a mass submitter with respect toa mass submitter plan must be submittedon Form 8929, Application for Approvalof § 403(b) Prototype Plan. An applica-tion filed by a mass submitter on behalfof a word-for-word identical adopter ofthe mass submitter’s plan must be filed onForm 8929–A, Application for Approvalof § 403(b) Prototype Plan Mass Submit-ter Adopting Sponsor. The forms (and in-structions) specify what to include with theapplication. These forms may be down-loaded from the Internet at the followingaddress: [TO BE ADDED WHEN FI-NALIZED]. All information on the firstpage of the application must be typed. Theapplicable user fee, determined under sec-tion 6.03 of Rev. Proc. 2009–8, 2009–1I.R.B. 229, as if the application were fora master and prototype plan, should be in-cluded with the application. The request isto be sent to:

2009–18 I.R.B. 924 May 4, 2009

Internal Revenue ServiceP.O. Box 2508Cincinnati, OH 45201Attn: § 403(b) Prototype CoordinatorRoom 5106

A request shipped by Express Mail or adelivery service should be sent to:

Internal Revenue Service550 Main StreetP.O. Box 2508Cincinnati, OH 45202Attn: § 403(b) Prototype CoordinatorRoom 5106

.04 In the case of an initial submissionof a mass submitter’s basic plan documentunder this revenue procedure, the masssubmitter’s application(s) must also be ac-companied by applications for opinion let-ters filed on behalf of at least 30 word-for-word identical adopters, unless the masssubmitter has already satisfied this require-ment in connection with a previous ap-plication under this revenue procedure in-volving another basic plan document. Af-ter satisfying the 30 word-for-word iden-tical adopter requirement, the mass sub-mitter may submit additional applicationson behalf of other prototype sponsors thatwish to adopt a word-for-word identicalplan. In addition, the mass submitter maythen submit requests for opinion letters forits other § 403(b) prototype plans regard-less of the number of identical adopters ofsuch other plans.

.05 Sample plan language to be usedin drafting § 403(b) prototype plans isavailable from Employee Plans Rulingsand Agreements. Such language is notautomatically required in § 403(b) pro-totype plans, but should be used as aguide in drafting such plans. To ex-pedite the review of their plans, pro-totype sponsors are encouraged to usethe Service’s sample plan language andto identify where such language is be-ing used in their plan documents. Thesample plan language may be down-loaded from the Internet at the follow-ing address: (http://www.irs.gov/pub/irs-tege/draft_lrm_403b_prototypes.pdf).

.06 The Service may determine the ex-tent of review of a § 403(b) prototype planbased on the application. A failure to dis-close a material fact or misrepresentationof a material fact in the application may ad-

versely affect the reliance that would oth-erwise be obtained through issuance by theService of a favorable opinion letter. Sim-ilarly, failure to accurately provide any ofthe information called for on any form re-quired by this revenue procedure may re-sult in no reliance.

.07 The Service may, at its discretion,require any additional information that itdeems necessary in connection with its re-view of a § 403(b) prototype plan. If a let-ter requesting changes to plan documentsis sent to the prototype sponsor or an au-thorized representative, the changes mustbe received no later than 30 days from thedate of the letter, and the response mustinclude either a copy of the plan with thechanges highlighted or, if the changes arenot extensive, replacement pages. If thechanges are not received within 30 days,the application may be considered with-drawn. An extension of the 30-day timelimit will only be granted for good cause.

.08 The Service will return, without fur-ther action, plans that are not in substan-tial compliance with the approval require-ments or plans that are so deficient thatthey cannot be reviewed in a reasonableamount of time. A plan may be considerednot to be in substantial compliance if, forexample, it omits an applicable Code sec-tion or merely incorporates by reference anapplicable Code section. The Service willnot consider these plans until after they arerevised, and they will be treated as new re-quests as of the date they are resubmitted.No additional user fee will be charged ifan inadequate submission is amended to bein substantial compliance and is resubmit-ted to the Service within 30 days followingthe date the prototype sponsor is notified ofsuch inadequacy.

.09 If the plan document submitted aspart of an opinion letter request containsa provision that gives rise to an issue forwhich contrary published authorities exist,failure to disclose and address significantcontrary authorities may result in requestsfor additional information, which will de-lay action on the request.

.10 An opinion letter issued to a pro-totype sponsor is not transferable to anyother entity. For this purpose, a change ofemployer identification number is deemedto be a change of entity.

.11 A change in a prototype sponsor’sname only is not deemed to be a changeof entity. However, the prototype spon-

sor must notify the Service in writing ofthe change in name and certify that it stillmeets the conditions for sponsorship de-scribed in section 7. No opinion letter willbe issued and no user fee will be requiredfor a mere change in name.

SECTION 13. WITHDRAWAL OFREQUESTS

.01 A prototype sponsor may withdrawits request for an opinion letter at any timeprior to the issuance of such letter by noti-fying EP Rulings and Agreements in writ-ing of such withdrawal. The prototypesponsor must also notify each eligible em-ployer that has adopted the plan that therequest has been withdrawn. Such an el-igible employer will be deemed to have anindividually designed plan.

.02 Even though a request is with-drawn, EP Rulings and Agreements willretain all correspondence and documentsassociated with that request and will notreturn them to the prototype sponsor.EP Rulings and Agreements may furnishit views concerning the approval status ofthe plan to EP Examinations, which hasaudit jurisdiction over the returns of theeligible employers that have adopted theplan.

SECTION 14. ABANDONMENT OFSPONSORSHIP OF § 403(b) PLANS

.01 A prototype sponsor must notifyEP Rulings and Agreements in writing ofan approved § 403(b) prototype plan thatis no longer used by any eligible employerand which the prototype sponsor no longerintends to offer for adoption. Such writtennotification should be sent to the addressin section 12.03 and should refer to thefile folder number appearing on the latestopinion letter issued.

.02 A prototype sponsor that intends toabandon an approved § 403(b) prototypeplan that is in use by any adopting eli-gible employer must inform each adopt-ing eligible employer that the form of theplan has been terminated, that the eligibleemployer’s plan will become an individu-ally designed plan (unless the eligible em-ployer adopts another approved § 403(b)prototype plan), and that any employer re-liance will not continue if there is a changein § 403(b), the regulations, revenue rul-ings, or other guidance published by theService. After so informing all adopting

May 4, 2009 925 2009–18 I.R.B.

eligible employers, the prototype sponsormust notify EP Rulings and Agreements inaccordance with subsection .01 of this sec-tion 14.

SECTION 15. REVOCATION

An opinion letter found to be in error ornot in accord with the current views of theService may be revoked. However, exceptin rare or unusual circumstances, such re-vocation will not be applied retroactivelyif the conditions set forth in sections 13and 14 of Rev. Proc. 2009–4, 2009–1I.R.B. 118 (disregarding references thereinto §§ 7428 and 7476) are met. For this pur-pose, opinion letters will be given the sameeffect as rulings. Revocation may be ef-fected by a notice to the prototype spon-sor to which the letter was originally is-sued, or by a regulation, revenue ruling,or other statement published in the Inter-nal Revenue Bulletin. The prototype spon-sor should then notify each adopting eligi-ble employer of the revocation as soon aspossible. The content of the notificationto each adopting eligible employer mustexplain how the revocation affects any re-liance an adopting eligible employer hason the applicable opinion letter.

SECTION 16. RETROACTIVEREMEDIAL AMENDMENT

.01 Effective January 1, 2009, a con-tract does not satisfy the requirements of§ 403(b) unless the contract is maintainedpursuant to a written plan which, in bothform and operation, satisfies the require-ments of the 2007 regulations. The transi-tion relief in Notice 2009–3 sets forth con-ditions under which a § 403(b) plan willnot be treated as failing to satisfy the re-quirements of § 403(b) and the 2007 regu-lations during the 2009 calendar year. Therelief in Notice 2009–3 applies solely withrespect to the 2009 calendar year.

.02 This section 16 allows an eligibleemployer to retroactively correct defectsin the form of its written § 403(b) planby timely adopting an approved § 403(b)prototype plan or by otherwise timelyamending its plan and submitting a re-quest for a determination letter. Underthis remedial amendment provision, aneligible employer must amend its plan tothe extent necessary to correct any formdefects retroactive to the first day of theplan’s remedial amendment period. For

this purpose, “the first day of the plan’sremedial amendment period” means thelater of January 1, 2010, or the effectivedate of the plan.

.03 The form of a plan will be treatedas satisfying the requirements of the 2007regulations as of the first day of the plan’sremedial amendment period if, on or be-fore such day, the eligible employer adoptsa written plan that is intended to satisfy therequirements of § 403(b) and the 2007 reg-ulations and the conditions in paragraphs(1) or (2) of this section 16.02 are satisfied:

(1) The eligible employer amends theplan to the extent necessary to correct anyform defects retroactive to the first day ofthe plan’s remedial amendment period bytimely adopting an approved § 403(b) pro-totype plan. (An eligible employer thattimely adopts an approved § 403(b) pro-totype plan is not required, but may never-theless choose, to amend its plan retroac-tive to January 1, 2009. However, for pur-poses of Notice 2009–3 and whether theService will treat the eligible employer’s§ 403(b) plan as satisfying the require-ments of § 403(b) and the 2007 regula-tions during the 2009 calendar year, onlythe plan that was adopted and in effecton December 31, 2009, will be taken intoaccount.) For this purpose, an approved§ 403(b) prototype plan means a plan forwhich a favorable opinion letter is issuedpursuant to a timely filed application un-der this revenue procedure. An applica-tion for an opinion letter under this rev-enue procedure is timely filed if (a) theapplication is filed with the Service by adate to be announced in the future (whichwill not be earlier than March 15, 2010), or(b) if the plan is a word-for-word identicaladopter of a mass submitter plan, the opin-ion letter application for the mass submit-ter plan is filed with the Service by a dateto be announced in the future (which willnot be earlier than March 15, 2010), irre-spective of when the opinion letter applica-tion for the identical adopter plan is filed.The Service will announce, in subsequentguidance, the date by which an approved§ 403(b) prototype plan must be adoptedto be considered timely adopted for pur-poses of this section. The Service expectsthat eligible employers will have a periodin excess of one year from the date of theannouncement in which to timely adopt anapproved § 403(b) prototype plan.

(2) The eligible employer timelyamends the plan to the extent necessaryto correct any form defects retroactive tothe first day of the plan’s remedial amend-ment period and timely submits the planto the Service for a determination letter.(An eligible employer that timely submitsits plan for a determination letter is notrequired, but may nevertheless choose, toamend the plan retroactive to January 1,2009. However, for purposes of Notice2009–3 and whether the Service will treatthe eligible employer’s § 403(b) plan assatisfying the requirements of § 403(b) andthe 2007 regulations during the 2009 cal-endar year, only the plan that was adoptedand in effect on December 31, 2009, willbe taken into account.) Future guidanceregarding the determination letter programfor § 403(b) plans will specify the date bywhich a § 403(b) plan must be amendedand submitted to the Service to be con-sidered timely amended and submitted forpurposes of this section, but this date willnot be earlier than March 15, 2010. Anyamendments required by the Service asa result of its review of a timely submit-ted determination letter application for a§ 403(b) plan will be considered timelyadopted if they are adopted by the 91st

day following issuance of a determinationletter.

.04 For purposes of this section 16, a“written plan intended to satisfy the re-quirements of § 403(b) and the 2007 regu-lations” includes both a new plan that is in-tended to satisfy those requirements and anexisting plan that has been amended withthe intent of satisfying those requirements,including a plan that is based on the modelplan language in Rev. Proc. 2007–71 anda plan that is an adoption of a § 403(b) pro-totype plan that has been timely submit-ted for an opinion letter under this revenueprocedure.

SECTION 17. EFFECT ON OTHERDOCUMENTS

Section 6.03 of Rev. Proc. 2009–8 ismodified to provide that the user fee foran application for an opinion letter for a§ 403(b) prototype plan is the same userfee that would apply if the application werefor a master or prototype plan.

2009–18 I.R.B. 926 May 4, 2009

SECTION 18. EFFECTIVE DATE

This revenue procedure is effective[TO BE ADDED WHEN FINALIZED].

SECTION 19. PAPERWORKREDUCTION ACT

[TO BE ADDED WHEN FINAL-IZED].


The principal authors of this rev-enue procedure are Angelique Carringtonand James P. Flannery of the EmployeePlans, Tax Exempt and GovernmentEntities Division. For further informationregarding this revenue procedure,please contact the Employee Planstaxpayer assistance answering service at1–877–829–5500 (a toll-free number) ore-mail Ms. Carrington or Mr. Flannery [email protected].

Guidance Regarding ForeignBase Company Sales Income;Hearing Cancellation

Announcement 2009–36

AGENCY: Internal Revenue Service(IRS), Treasury.

ACTION: Cancellation of notice of publichearing on proposed rulemaking.

SUMMARY: This document cancels apublic hearing on proposed rulemakingrelating to the foreign base company salesincome, in cases in which personal prop-erty sold by a controlled foreign corpora-tion (CFC) is manufactured, produced, orconstructed pursuant to a contract manu-facturing arrangement or by one or morebranches of the CFC. The temporary reg-ulations modify the foreign base companysales income regulations to address currentbusiness structures and practices, particu-larly the growing importance of contractmanufacturing and other manufacturingarrangements. The temporary regulations,in general, will affect CFCs and theirUnited States shareholders.

DATE: The public hearing, originallyscheduled for April 20, 2009, at 10 a.m.,is cancelled.

FOR FURTHER INFORMATIONCONTACT: Richard A. Hurst of the Pub-lications and Regulations Branch, LegalProcessing Division, Associate ChiefCounsel (Procedure and Administration),at [email protected].

SUPPLEMENTARY INFORMATION:

A notice of public hearing that appearedin the Federal Register on Monday,December 29, 2008 (REG–150066–08,2009–5 I.R.B. 423 [73 FR 79421]), an-nounced that a public hearing was sched-uled for April 20, 2009, at 10 a.m., in the

auditorium, Internal Revenue Building,1111 Constitution Avenue, NW, Washing-ton, DC. The subject of the public hearingis under section 954 of the Internal Rev-enue Code.

The public comment period for theseregulations expired on March 30, 2009.Outlines of topics to be discussed at thehearing were due on April 2, 2009. The no-tice of proposed rulemaking and notice ofpublic hearing instructed those interestedin testifying at the public hearing to sub-mit an outline of the topics to be addressed.As of Monday, April 6, 2009, no one hasrequested to speak. Therefore, the publichearing scheduled for April 20, 2009, iscancelled.

LaNita Van Dyke,Chief, Publications and

Regulations Branch,Legal Processing Division,

Associate Chief Counsel(Procedure and Administration).

(Filed by the Office of the Federal Register on April 8, 2009,8:45 a.m., and published in the issue of the Federal Registerfor April 9, 2009, 74 F.R. 16161)

May 4, 2009 927 2009–18 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.

2009–18 I.R.B. i May 4, 2009

Numerical Finding List1

Bulletins 2009–1 through 2009–18

Announcements:

2009-1, 2009-1 I.R.B. 242

2009-2, 2009-5 I.R.B. 424

2009-3, 2009-6 I.R.B. 459

2009-4, 2009-8 I.R.B. 597

2009-5, 2009-8 I.R.B. 569

2009-6, 2009-9 I.R.B. 643

2009-7, 2009-10 I.R.B. 663

2009-8, 2009-8 I.R.B. 598

2009-9, 2009-9 I.R.B. 643

2009-10, 2009-9 I.R.B. 644

2009-11, 2009-10 I.R.B. 663

2009-12, 2009-11 I.R.B. 686

2009-13, 2009-11 I.R.B. 686

2009-14, 2009-11 I.R.B. 687

2009-15, 2009-11 I.R.B. 687

2009-16, 2009-11 I.R.B. 691

2009-17, 2009-12 I.R.B. 714

2009-18, 2009-12 I.R.B. 714

2009-19, 2009-12 I.R.B. 715

2009-20, 2009-12 I.R.B. 716

2009-21, 2009-13 I.R.B. 730

2009-22, 2009-13 I.R.B. 731

2009-23, 2009-13 I.R.B. 731

2009-24, 2009-13 I.R.B. 732

2009-25, 2009-14 I.R.B. 755

2009-26, 2009-14 I.R.B. 755

2009-27, 2009-14 I.R.B. 756

2009-28, 2009-15 I.R.B. 760

2009-29, 2009-14 I.R.B. 757

2009-30, 2009-15 I.R.B. 794

2009-31, 2009-15 I.R.B. 798

2009-32, 2009-15 I.R.B. 799

2009-33, 2009-15 I.R.B. 799

2009-34, 2009-18 I.R.B. 916

2009-35, 2009-17 I.R.B. 892

2009-36, 2009-18 I.R.B. 927

Notices:

2009-1, 2009-2 I.R.B. 250

2009-2, 2009-4 I.R.B. 344

2009-3, 2009-2 I.R.B. 250

2009-4, 2009-2 I.R.B. 251

2009-5, 2009-3 I.R.B. 309

2009-6, 2009-3 I.R.B. 311

2009-7, 2009-3 I.R.B. 312

2009-8, 2009-4 I.R.B. 347

2009-9, 2009-5 I.R.B. 419

2009-10, 2009-5 I.R.B. 419

2009-11, 2009-5 I.R.B. 420

2009-12, 2009-6 I.R.B. 446

2009-13, 2009-6 I.R.B. 447

Notices— Continued:

2009-14, 2009-7 I.R.B. 516

2009-15, 2009-6 I.R.B. 449

2009-16, 2009-8 I.R.B. 572

2009-17, 2009-8 I.R.B. 575

2009-18, 2009-10 I.R.B. 648

2009-19, 2009-10 I.R.B. 660

2009-20, 2009-12 I.R.B. 711

2009-21, 2009-13 I.R.B. 724

2009-22, 2009-14 I.R.B. 741

2009-23, 2009-16 I.R.B. 802

2009-24, 2009-16 I.R.B. 817

2009-25, 2009-15 I.R.B. 758

2009-26, 2009-16 I.R.B. 833

2009-27, 2009-16 I.R.B. 838

2009-29, 2009-16 I.R.B. 849

2009-30, 2009-16 I.R.B. 852

2009-31, 2009-16 I.R.B. 856

2009-32, 2009-17 I.R.B. 865

2009-33, 2009-17 I.R.B. 865

2009-34, 2009-17 I.R.B. 876

2009-35, 2009-17 I.R.B. 876

2009-36, 2009-17 I.R.B. 883

2009-37, 2009-18 I.R.B. 898

2009-38, 2009-18 I.R.B. 901

2009-39, 2009-18 I.R.B. 902

Proposed Regulations:

REG-144615-02, 2009-7 I.R.B. 561

REG-144689-04, 2009-18 I.R.B. 906

REG-148568-04, 2009-5 I.R.B. 421

REG-160872-04, 2009-4 I.R.B. 358

REG-158747-06, 2009-4 I.R.B. 362

REG-116699-07, 2009-13 I.R.B. 727

REG-138326-07, 2009-9 I.R.B. 638

REG-143686-07, 2009-8 I.R.B. 579

REG-150670-07, 2009-4 I.R.B. 378

REG-113462-08, 2009-4 I.R.B. 379

REG-147636-08, 2009-9 I.R.B. 641

REG-150066-08, 2009-5 I.R.B. 423

Revenue Procedures:

2009-1, 2009-1 I.R.B. 1

2009-2, 2009-1 I.R.B. 87

2009-3, 2009-1 I.R.B. 107

2009-4, 2009-1 I.R.B. 118

2009-5, 2009-1 I.R.B. 161

2009-6, 2009-1 I.R.B. 189

2009-7, 2009-1 I.R.B. 226

2009-8, 2009-1 I.R.B. 229

2009-9, 2009-2 I.R.B. 256

2009-10, 2009-2 I.R.B. 267

2009-11, 2009-3 I.R.B. 313

2009-12, 2009-3 I.R.B. 321

2009-13, 2009-3 I.R.B. 323

2009-14, 2009-3 I.R.B. 324

Revenue Procedures— Continued:

2009-15, 2009-4 I.R.B. 356

2009-16, 2009-6 I.R.B. 449

2009-17, 2009-7 I.R.B. 517

2009-18, 2009-11 I.R.B. 670

2009-19, 2009-14 I.R.B. 747

2009-20, 2009-14 I.R.B. 749

2009-21, 2009-16 I.R.B. 860

2009-22, 2009-16 I.R.B. 862

2009-23, 2009-17 I.R.B. 884

2009-24, 2009-17 I.R.B. 885

Revenue Rulings:

2009-1, 2009-2 I.R.B. 248

2009-2, 2009-2 I.R.B. 245

2009-3, 2009-5 I.R.B. 382

2009-4, 2009-5 I.R.B. 408

2009-5, 2009-6 I.R.B. 432

2009-6, 2009-12 I.R.B. 694

2009-7, 2009-13 I.R.B. 717

2009-8, 2009-10 I.R.B. 645

2009-9, 2009-14 I.R.B. 735

2009-10, 2009-14 I.R.B. 738

2009-11, 2009-18 I.R.B. 896

Tax Conventions:

2009-5, 2009-8 I.R.B. 569

Treasury Decisions:

9434, 2009-4 I.R.B. 339

9435, 2009-4 I.R.B. 333

9436, 2009-3 I.R.B. 268

9437, 2009-4 I.R.B. 341

9438, 2009-5 I.R.B. 387

9439, 2009-5 I.R.B. 416

9440, 2009-5 I.R.B. 409

9441, 2009-7 I.R.B. 460

9442, 2009-6 I.R.B. 434

9443, 2009-8 I.R.B. 564

9444, 2009-9 I.R.B. 603

9445, 2009-9 I.R.B. 635

9446, 2009-9 I.R.B. 607

9447, 2009-12 I.R.B. 694

1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2008–27 through 2008–52 is in Internal Revenue Bulletin2008–52, dated December 29, 2008.

May 4, 2009 ii 2009–18 I.R.B.

Finding List of Current Actions onPreviously Published Items1

Bulletins 2009–1 through 2009–18

Notices:

99-35

Obsoleted by

Notice 2009-15, 2009-6 I.R.B. 449

2001-55

Modified by

Notice 2009-1, 2009-2 I.R.B. 250

2002-27

Modified by

Notice 2009-9, 2009-5 I.R.B. 419

2005-74

Obsoleted by

T.D. 9446, 2009-9 I.R.B. 607

2007-26

Modified by

Notice 2009-15, 2009-6 I.R.B. 449

2007-52

Clarified, modified, and amplified by

Notice 2009-24, 2009-16 I.R.B. 817

2007-53

Clarified, modified, and ampilfied by

Notice 2009-23, 2009-16 I.R.B. 802

2007-54

Obsoleted by

T.D. 9436, 2009-3 I.R.B. 268

2008-11

Obsoleted by

T.D. 9436, 2009-3 I.R.B. 268

2008-12

Obsoleted by

T.D. 9436, 2009-3 I.R.B. 268Rev. Proc. 2009-11, 2009-3 I.R.B. 313

2008-13

Obsoleted by

T.D. 9436, 2009-3 I.R.B. 268

List of forms modified and superseded by

Rev. Proc. 2009-11, 2009-3 I.R.B. 313

Modified and clarified by

Notice 2009-5, 2009-3 I.R.B. 309

2008-46

Obsoleted by

T.D. 9436, 2009-3 I.R.B. 268Rev. Proc. 2009-11, 2009-3 I.R.B. 313

2008-100

Amplified and superseded by

Notice 2009-14, 2009-7 I.R.B. 516

Notices— Continued:

2008-110

Modified by

Notice 2009-34, 2009-17 I.R.B. 876

Proposed Regulations:

REG-144615-02

Corrected by

Ann. 2009-19, 2009-12 I.R.B. 715

REG-149519-03

Withdrawn by

Ann. 2009-4, 2009-8 I.R.B. 597

REG-148326-05

Corrected by

Ann. 2009-14, 2009-11 I.R.B. 687

REG-158747-06

Hearing scheduled by

Ann. 2009-29, 2009-14 I.R.B. 757

REG-150066-08

Corrected by

Ann. 2009-31, 2009-15 I.R.B. 798

Hearing cancelled by

Ann. 2009-36, 2009-18 I.R.B. 927

Revenue Procedures:

2007-17

Superseded by

Rev. Proc. 2009-14, 2009-3 I.R.B. 324

2007-66

Modified and superseded by

Rev. Proc. 2009-21, 2009-16 I.R.B. 860

2007-68

Superseded by

Rev. Proc. 2009-17, 2009-7 I.R.B. 517

2007-71

Modified by

Notice 2009-3, 2009-2 I.R.B. 250

2008-1

Superseded by

Rev. Proc. 2009-1, 2009-1 I.R.B. 1

2008-2

Superseded by

Rev. Proc. 2009-2, 2009-1 I.R.B. 87

2008-3

Superseded by

Rev. Proc. 2009-3, 2009-1 I.R.B. 107

2008-4

Superseded by

Rev. Proc. 2009-4, 2009-1 I.R.B. 118

2008-5

Superseded by

Rev. Proc. 2009-5, 2009-1 I.R.B. 161

Revenue Procedures— Continued:

2008-6

Superseded by

Rev. Proc. 2009-6, 2009-1 I.R.B. 189

2008-7

Superseded by

Rev. Proc. 2009-7, 2009-1 I.R.B. 226

2008-8

Superseded by

Rev. Proc. 2009-8, 2009-1 I.R.B. 229

2008-9

Superseded by

Rev. Proc. 2009-9, 2009-2 I.R.B. 256

2008-17

Obsoleted in part by

Rev. Proc. 2009-18, 2009-11 I.R.B. 670

2008-61

Superseded by

Rev. Proc. 2009-3, 2009-1 I.R.B. 107

2008-65

Amplified and supplemented by

Rev. Proc. 2009-16, 2009-6 I.R.B. 449

2008-66

Modified and superseded by

Rev. Proc. 2009-21, 2009-16 I.R.B. 860

2008-68

Amplified and superseded by

Rev. Proc. 2009-15, 2009-4 I.R.B. 356

Revenue Rulings:

65-286

Obsoleted by

T.D. 9435, 2009-4 I.R.B. 333

71-381

Obsoleted in part by

Rev. Rul. 2009-9, 2009-14 I.R.B. 735

76-54

Obsoleted by

T.D. 9435, 2009-4 I.R.B. 333

92-19

Supplemented by

Rev. Rul. 2009-3, 2009-5 I.R.B. 382

2008-19

Modified by

Rev. Rul. 2009-3, 2009-5 I.R.B. 382

Treasury Decisions:

9436

Corrected by

Ann. 2009-15, 2009-11 I.R.B. 687

1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2008–27 through 2008–52 is in Internal Revenue Bulletin 2008–52, dated December 29,2008.

2009–18 I.R.B. iii May 4, 2009

Treasury Decisions— Continued:

9438

Corrected by

Ann. 2009-30, 2009-15 I.R.B. 794

9439

Corrected by

Ann. 2009-12, 2009-11 I.R.B. 686

9441

Corrected by

Ann. 2009-18, 2009-12 I.R.B. 714

9442

Corrected by

Ann. 2009-13, 2009-11 I.R.B. 686Ann. 2009-20, 2009-12 I.R.B. 716

9446

Corrected by

Ann. 2009-23, 2009-13 I.R.B. 731

May 4, 2009 iv 2009–18 I.R.B.

2009–18 I.R.B. May 4, 2009

May 4, 2009 2009–18 I.R.B.

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