Bulletin No. 2010-24June 14, 2010

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

Notice 2010–46, page 757.This notice addresses the U.S. tax imposed on substitute divi-dend payments received by foreign taxpayers that lend U.S. div-idend paying securities in securities lending transactions. Thenotice announces the upcoming withdrawal of Notice 97–66,outlines a proposed regulatory framework to address potentialover-withholding that may occur as a result of the HIRE Act, andprovides transaction relief with respect to substitute dividendpayments made between the effective date of the HIRE Act andthe issuance of regulations. Notice 97–66 modified.

EMPLOYEE PLANS

T.D. 9484, page 748.Final regulations under section 401(a)(35) of the Code relateto diversification requirements for certain defined contributionplans holding publicly traded employer securities. The regula-tions will affect administrators of, employers maintaining, par-ticipants in, and beneficiaries of defined contribution plans thatare invested in employer securities. The regulations apply forplan years beginning on or after January 1, 2011.

EXEMPT ORGANIZATIONS

Notice 2010–39, page 756.This notice solicits comments regarding the application of cer-tain requirements imposed by new section 501(r), added tothe Code by section 9007(a) of the Patient Protection and Af-fordable Care Act (Affordable Care Act). Comments should besubmitted by July 22, 2010.

ADMINISTRATIVE

Rev. Proc. 2010–23, page 762.Qualified mortgage bonds; mortgage credit certificates;national median gross income. Guidance is provided con-cerning the use of the national and area median gross incomefigures by issuers of qualified mortgage bonds and mortgagecredit certificates in determining the housing cost/income ratiodescribed in section 143(f) of the Code. Rev. Proc. 2009–27obsoleted in part.

Finding Lists begin on page ii.

The IRS MissionProvide America’s taxpayers top-quality service by helpingthem understand and meet their tax responsibilities and en-

force the 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.

June 14, 2010 2010–24 I.R.B.

Part I. Rulings and Decisions Under the Internal Revenue Codeof 1986Section 401.—QualifiedPension, Profit-Sharing,and Stock Bonus Plans26 CFR 1.401(a)(35)–1: Diversification require-ments for certain defined contribution plans.

T.D. 9484

DEPARTMENT OF THETREASURYInternal Revenue Service26 CFR Part 1

Diversification Requirementsfor Certain DefinedContribution Plans

AGENCY: Internal Revenue Service(IRS), Treasury.

ACTION: Final regulations.

SUMMARY: This document contains finalregulations under section 401(a)(35) of theInternal Revenue Code (Code) relating todiversification requirements for certain de-fined contribution plans holding publiclytraded employer securities. These regula-tions will affect administrators of, employ-ers maintaining, participants in, and bene-ficiaries of defined contribution plans thatare invested in employer securities.

DATES: Effective date: These regulationsare effective on May 19, 2010.

Applicability Date: These regulationsapply for plan years beginning on or afterJanuary 1, 2011.

FOR FURTHER INFORMATIONCONTACT: R. Lisa Mojiri-Azad orJamie Dvoretzky at (202) 622–6060 (not atoll-free number).

SUPPLEMENTARY INFORMATION:

Background

This document contains final regu-lations under section 401(a)(35) of theCode, which was added by section 901 ofthe Pension Protection Act of 2006, Pub-lic Law 109–280 (120 Stat. 780 (2006))(PPA ’06).1

Section 401(a)(35)(A) provides that atrust which is part of an applicable definedcontribution plan is not a qualified trust un-der section 401(a) unless the plan satisfiesthe diversification requirements of section401(a)(35)(B), (C), and (D). Under section401(a)(35)(B), each individual must havethe right to direct the plan to divest em-ployer securities allocated to the individ-ual’s account that are attributable to em-ployee contributions or elective deferralsand to reinvest an equivalent amount inother investment options meeting the re-quirements of section 401(a)(35)(D).2

Under section 401(a)(35)(C), each indi-vidual who is a participant who has com-pleted at least three years of service, abeneficiary of a participant who has com-pleted at least three years of service, or abeneficiary of a deceased participant mustbe permitted to elect to direct the planto divest employer securities allocated tothe individual’s account and to reinvest anequivalent amount in other investment op-tions meeting the requirements of section401(a)(35)(D).

Section 401(a)(35)(D)(i) requires anapplicable defined contribution plan tooffer individuals not less than three in-vestment options, other than employersecurities, to which the individuals maydirect the proceeds from the divestmentof employer securities, each of which isdiversified and has materially differentrisk and return characteristics.

Under section 401(a)(35)(D)(ii)(I), aplan does not fail to meet the requirementsof section 401(a)(35)(D) if it allows in-dividuals to divest employer securities

and reinvest the proceeds at periodic, rea-sonable opportunities occurring no lessfrequently than quarterly.

Under section 401(a)(35)(D)(ii)(II), aplan is not permitted to impose restrictionsor conditions with respect to the invest-ment of employer securities that are notimposed on the investment of other assetsof the plan. However, this rule does notapply to restrictions or conditions imposedto comply with securities laws. The Secre-tary is authorized to issue regulations pro-viding additional exceptions to the require-ments of section 401(a)(35)(D)(ii)(II).

An applicable defined contributionplan under section 401(a)(35) is a definedcontribution plan that holds any publiclytraded employer securities. A publiclytraded employer security is defined as anemployer security under section 407(d)(1)of the Employee Retirement Income Se-curity Act of 1974, Public Law 93–406(88 Stat. 829 (1974)) (ERISA) which isreadily tradable on an established secu-rities market. Section 401(a)(35)(F)(i)provides that a plan that holds employersecurities that are not publicly traded em-ployer securities is nevertheless treatedas holding publicly traded employer se-curities if any employer corporation orany member of a controlled group of cor-porations which includes the employer(determined by applying section 1563(a),except substituting 50 percent for 80 per-cent) has issued a class of stock that is apublicly traded employer security. How-ever, section 401(a)(35)(F) does not applyto a plan if no employer corporation, orparent corporation (as defined in section424(e)) of an employer corporation, hasissued any publicly traded employer secu-rity and no employer or parent corporationhas issued any special class of stock whichgrants particular rights to, or bears par-ticular risks for, the holder or issuer withrespect to any corporation described insection 401(a)(35)(F)(i) which has issuedany publicly traded employer security.

1 Section 901 of PPA ’06 also added a parallel provision to section 401(a)(35) at section 204(j) of the Employee Retirement Income Security Act of 1974, Public Law 93–406 (88 Stat. 829(1974)) (ERISA). Under section 101 of Reorganization Plan No. 4 of 1978 (43 FR 47713), the Secretary of Treasury has interpretative jurisdiction over the subject matter addressed in thesefinal regulations for purposes of section 204(j) of ERISA. Thus, the guidance provided in these final regulations with respect to section 401(a)(35) of the Code also applies for purposes ofsection 204(j) of ERISA.

2 Section 401(a)(28)(B) provides certain diversification rights to participants in an employee stock ownership plan within the meaning of section 4975(e)(7) (ESOP). Section 401(a)(28)(B)(v),as added by section 901(a)(2)(A) of PPA ’06, provides that section 401(a)(28)(B) does not to apply to a plan to which section 401(a)(35) applies.

2010–24 I.R.B. 748 June 14, 2010

Section 401(a)(35)(E) provides thatsection 401(a)(35) does not apply to anemployee stock ownership plan within themeaning of section 4975(e)(7) (ESOP) thatholds no contributions (or earnings there-under) that are subject to section 401(k) or(m) (generally relating to elective defer-rals and matching and employee after-taxcontributions) and the ESOP is a separateplan for purposes of section 414(l) withrespect to any other defined benefit plan ordefined contribution plan maintained bythe same employer or employers. Section401(a)(35)(E) further provides that section401(a)(35) does not apply to one-partici-pant retirement plans (within the meaningof section 401(a)(35)(E)(iv)).

Section 401(a)(35) is generally effec-tive for plan years beginning after De-cember 31, 2006. Section 401(a)(35)(H)generally provides a three year phase-inrule with respect to an individual’s rightto direct the divestment of employer se-curities attributable to employer contribu-tions, except with respect to certain par-ticipants who have attained age 55. Sec-tion 901(c)(2) of PPA ’06 includes a spe-cial rule for a plan maintained pursuant toone or more collective bargaining agree-ments between employee representativesand one or more employers that was rat-ified on or before August 17, 2006. Un-der this rule, section 401(a)(35) is not ef-fective until plan years beginning after theearlier of (1) the later of (a) December 31,2007 or (b) the date on which the last ofsuch collective bargaining agreements ter-minates (determined without regard to anyextension thereof after August 17, 2006) or(2) December 31, 2008.

Section 101(m) of ERISA as amendedby section 507 of PPA ’06 requires the planadministrator to furnish a notice to individ-uals not later than 30 days before the firstdate on which an individual is eligible toexercise his or her right to divest employersecurities with respect to any type of con-tribution. The notice must set forth the di-versification rights under section 204(j) ofERISA (which is the parallel provision inERISA to section 401(a)(35)) and describethe importance of diversifying the invest-ment of retirement account assets.

Notice 2006–107, 2006–2 C.B.1114 (December 18, 2006)), (see§601.601(d)(2)(ii)(b)) includes guid-ance and transitional rules with re-spect to the diversification require-

ments of section 401(a)(35). Notice2006–107 also includes guidance re-garding the related notice requirementsof section 101(m) of ERISA, includ-ing a model notice. Notice 2008–7,2008–1 C.B. 276 (January 22, 2008)),(see §601.601(d)(2)(ii)(b)) extends thetransitional guidance and transitional reliefthat was included in Notice 2006–107 untilthe final regulations become effective.

Notice 2009–97, 2009–52 I.R.B.972 (December 28, 2009)), (see§601.601(d)(2)(ii)(b)) extends the dead-line for adopting an interim or discre-tionary plan amendment under certainprovisions of PPA ’06, including section401(a)(35), to the last day of the first planyear that begins on or after January 1,2010.

On January 3, 2008, proposed regu-lations (REG–136701–07, 2008–1 C.B.616) under section 401(a)(35) of the Codewere published in the Federal Register(73 FR 421). No public hearing was re-quested. Written comments responding tothe notice of proposed rulemaking werereceived. After consideration of all thecomments, the proposed regulations areadopted, as amended by this Treasury de-cision. The most significant revisions arediscussed in the Summary of Commentsand Explanation of Revisions.

Summary of Comments andExplanation of Revisions

Certain defined contribution plans orinvestment funds not treated as holdingemployer securities

The proposed regulations providedthat certain investment funds that includeemployer securities as part of a broaderfund were treated as not holding employersecurities. This exception was limited tothe extent the employer securities wereheld indirectly through an investmentcompany registered under the InvestmentCompany Act of 1940; a common or col-lective trust fund or pooled investmentfund maintained by a bank or trust com-pany supervised by a State or a Federalagency; a pooled investment fund of aninsurance company that is qualified to dobusiness in a State; or any other investmentfund designated by the Commissioner inrevenue rulings, notices, or other guid-ance published in the Internal Revenue

Bulletin. The proposed regulations alsoprovided that this exception was limited tofunds where the investment is independentof the employer and where the employersecurities do not exceed 10 percent of thefund.

Commentators requested that this ex-ception be broadened to include funds thatare managed by an investment managerwithin the meaning of section 3(38) ofERISA. The final regulations do not pro-vide for this expansion because such a fundwould not necessarily be holding employersecurities only as an indirect result of itsinvestment policy. However, the final reg-ulations provide that, in the case of a mul-tiemployer plan, an investment option willnot be treated as holding employer secu-rities to the extent the employer securitiesare held indirectly through an investmentfund managed by an investment managerif the investment is independent of the em-ployer and the percentage limitation rule issatisfied.

The final regulations replace the ref-erence to a fund that is an investmentcompany registered under the InvestmentCompany Act of 1940 with a regulatedinvestment company as described in Codesection 851(a). This change extends thetypes of investment companies to includeexchange traded funds, which are unitinvestment trusts if they satisfy section851(a). The final regulations also retainthe rule from the proposed regulations thatallows the Commissioner to designate ad-ditional types of funds as eligible for thisexception.

Commentators requested that the per-centage limitation rule be eliminated.They argued that it would be difficult andcostly to monitor the investment fund toensure that the aggregate value of the em-ployer securities held in such fund wasnot in excess of 10 percent of the totalassets of all the fund’s investments. Inresponse to these comments, the final reg-ulations provide that the determination ofwhether the value of employer securitiesexceeds 10 percent of the total value of thefund’s investments is made for the planyear as of the end of the preceding planyear. The determination can be based onthe information in the latest disclosure ofthe fund’s portfolio holdings (for exam-ple, Form N-CSR, “Certified ShareholderReport of Registered Management Invest-ment Companies”) that was filed with the

June 14, 2010 749 2010–24 I.R.B.

Securities and Exchange Commission inthat preceding plan year.

The final regulations also provide thatin a case where a fund that indirectlyholds employer securities fails to meet therequirement that the investment be inde-pendent of the employer (including thesituation where the fund no longer meetsthe percentage limitation rule), the plandoes not fail to satisfy the diversificationrequirements under section 401(a)(35)merely because it does not offer thoserights for up to 90 days after the invest-ment fund is treated as holding employersecurities.

Prohibition on restrictions or conditions

Section 401(a)(35)(D)(ii)(II) providesthat a plan is not permitted to impose re-strictions or conditions with respect to theinvestment of employer securities that arenot imposed on the investment of other as-sets of the plan. Like the proposed regu-lations, the final regulations provide thatthe prohibition on restrictions or condi-tions with respect to the investment of em-ployer securities applies to any direct or in-direct restriction on an individual’s right todivest an investment in employer securi-ties that is not imposed on an investmentthat is not employer securities, as well as adirect or indirect benefit that is conditionedon investment in employer securities.

The proposed regulations provided for anumber of permitted restrictions and con-ditions. The proposed regulations wouldhave permitted a plan to impose a restric-tion or condition either directly or indi-rectly because of applicable securities lawsor because the plan becomes an applicabledefined contribution plan, limits invest-ments in employer securities, limits trad-ing frequency, does not permit investmentin a frozen fund, imposes a fee on other in-vestment options that is not imposed on theinvestment in employer securities or im-poses a reasonable fee on the divestmentof employer securities, or allows invest-ments to be made in a stable value or simi-lar fund more frequently than other invest-ment funds.

A commentator requested clarificationwith respect to the exception for frozenfunds. The commentator requested thata frozen fund include a plan that rein-vests employer security dividends in addi-tional employer securities as long as the

plan does not permit any further invest-ment in employer securities. The final reg-ulations clarify that the plan is permittedto allow reinvestment of dividends paid onemployer securities. The final regulationsalso clarify that the frozen fund exceptionis only available for a plan that does nothave another employer securities fund.

Commentators requested that the listfor permitted indirect restrictions or con-ditions be expanded to include certain de-fined contribution plans that make match-ing contributions in employer securitiesand allow participants to divest employersecurities attributable to such contribu-tions, but do not permit participants tolater elect to reinvest any portion of theiraccount balances in employer stock. Thefinal regulations do not adopt this sugges-tion. The IRS and the Treasury Depart-ment (Treasury) have concluded that theinability to reinvest in employer securitiesgenerally acts as a material deterrent toan individual who might otherwise haveelected to diversify his or her account bal-ance of employer securities. However, thefinal regulations provide a transitional rulefor certain leveraged ESOPs. An employerstock fund does not fail to be a frozenfund merely because of the allocation ofemployer securities that are released asmatching contributions from the plan’ssuspense account that holds employersecurities acquired with an exempt loanunder section 4975(d)(3). This transitionalrule only applies to employer securitiesthat were acquired in a plan year beginningbefore January 1, 2007, with the proceedsof an exempt loan within the meaningof section 4975(d)(3) which is not refi-nanced after the end of the last plan yearbeginning before January 1, 2007. Thistransitional rule was added because theseleveraged ESOPs cannot cease allocationsof employer securities acquired with anexempt loan that are held in a suspenseaccount without significant effect on thecompany’s debt arrangements.

Commentators suggested that the spe-cial rule for a stable value or similar fundbe expanded to allow transfers out of a sta-ble value fund or similar fund more fre-quently than other funds. In response tocomments, the final regulations providethat a plan is generally permitted to allowtransfers to be made into or out of a sta-ble value fund more frequently than a fundinvested in employer securities. Thus, a

plan that includes a broad range of invest-ment alternatives as described in section401(a)(35)(D)(i), including a stable valueor similar fund, does not impose an im-permissible restriction merely because itpermits transfers into and out of the stablevalue or similar fund more frequently thanthe other funds (taking into account any re-strictions or conditions imposed with re-spect to the other investment options underthe plan).

Commentators requested clarificationas to the meaning of a stable value orsimilar fund. The final regulations pro-vide that a stable value or similar fundmeans an investment product or fund de-signed to preserve or guarantee principaland provide a reasonable rate of return,while providing liquidity for benefit dis-tributions or transfers to other investmentalternatives (such as a product or funddescribed in Department of Labor Regula-tion section 2550.404c–5(e)(4)(iv)(A) or(v)(A)).

One commentator noted that the De-partment of Labor regulations for qualifieddefault investment alternatives (QDIAs)require QDIAs to be restriction-free for90 days. The commentator requested clar-ification that the restriction-free 90-dayperiod does not cause a plan to violatethe prohibition on imposing a restrictionor condition with respect to employersecurities that is not imposed on otherinvestments. However, the commenta-tor further stated that service providerswill have difficulty administering restric-tions only after 90 days and thereforerequested that the final regulations permitrestriction-free transfers for QDIAs per-manently. The final regulations expandthe list of permitted indirect restrictions toprovide that a plan may provide for trans-fers out of a QDIA (within the meaning ofDepartment of Labor Regulation section2550.404c–5(e)) more frequently than afund invested in employer securities.

A commentator requested clarificationconcerning plans being permitted to re-strict reinvestments in only one employerstock fund when the plan allows invest-ment in another employer stock fund, pro-vided that the stock contained in each fundhas the same characteristics except for dif-ferences in the tax cost basis of the trust.The final regulations provide that any ap-plicable tax consequences are disregardedin determining whether a plan imposes an

2010–24 I.R.B. 750 June 14, 2010

indirect restriction or condition on an in-dividual’s right to divest an investmentin employer securities. Accordingly, aplan is permitted to provide that an indi-vidual may not reinvest divested amountsin the same employer securities accountbut is permitted to invest such divestedamounts in another employer securities ac-count where the only relevant differencebetween the separate accounts is the sec-tion 402(e)(4) cost (or other basis) of thetrust in the shares held in each account.

Several commentators requested clar-ification regarding the 7-day rule in theproposed regulations. The preamble tothe proposed regulations explained that the7-day rule was an example and not the ex-clusive method to limit trading frequency.The permitted restriction for trading fre-quency provides that a plan is permitted toimpose reasonable restrictions that are de-signed to limit short-term trading in em-ployer securities. Thus, the 7-day rule,which was mentioned in the preamble tothe proposed regulations, is an exampleand other short-term trading restrictions(such as a restriction based on multipletrades within a specified period) are allow-able if they meet the reasonably designedstandard.

Miscellaneous

Commentators requested clarificationwith respect to an ESOP that has beensatisfying the diversification requirementsunder section 401(a)(28) by distributingthe portion of the participant’s accountcovered by an election within 90 daysafter the period during which the electionmay be made, but which is now subjectto the diversification requirements undersection 401(a)(35). Such a distributionoption does not satisfy the diversificationrequirements under section 401(a)(35).These commentators were concerned thatan amendment which eliminates this dis-tribution option would be a violation of theanti-cutback rules under section 411(d)(6).Section 1107 of PPA ’06 provides that anyamendment which is made pursuant to aprovision of PPA ’06 will not fail to meetthe requirements of section 411(d)(6) un-less otherwise provided by the Secretaryof the Treasury.3 Thus, an amendmentto an ESOP which is now subject to the

diversification requirements under section401(a)(35) that eliminates the distributionoption available for ESOPs subject to thediversification requirements under section401(a)(28), as permitted under section1107 of PPA ’06, would not violate theanti-cutback rules under section 411(d)(6).

In addition, it is expected that guid-ance will be issued in the near future ex-ercising the authority under §1.411(d)–4,A–2(d)(4), to permit elimination of sucha distribution option with respect to anESOP that is subject to section 401(a)(35)after the end of the limited period to whichsection 1107 of PPA ’06 applies. The guid-ance will permit elimination of such a dis-tribution option during the extended reme-dial amendment period permitted with re-spect to section 401(a)(35) under Notice2009–97, that is, to the last day of the firstplan year that begins on or after January 1,2010.

Effective/Applicability Date

The final regulations are effective andapplicable for plan years beginning on orafter January 1, 2011.

For the period after the statutory effec-tive date and before the regulatory effec-tive date set forth in the preceding sen-tence, a plan must comply with section401(a)(35). During this period, a plan ispermitted to rely on Notice 2006–107, theproposed regulations, or these final regula-tions for purposes of satisfying the require-ments of section 401(a)(35).

Special Analyses

It has been determined that these fi-nal regulations are not a significant regu-latory action as defined in Executive Order12866. Therefore, a regulatory assessmentis not required. It also has been determinedthat section 553(b) of the AdministrativeProcedure Act (5 U.S.C. chapter 5) doesnot apply to these regulations, and, be-cause §1.401(a)(35)–1 would not impose acollection of information on small entities,the Regulatory Flexibility Act (5 U.S.C.chapter 6) does not apply. Pursuant to sec-tion 7805(f) of the Code, the notice of pro-posed rulemaking preceding this regula-tion was submitted to the Chief Counselfor Advocacy of the Small Business Ad-

ministration for comments on its impact onsmall business.

Drafting Information

The principal authors of these regu-lations are Dana A. Barry, formerly ofthe Office of Division Counsel/AssociateChief Counsel (Tax Exempt and Govern-ment Entities), and R. Lisa Mojiri-Azad,Office of Division Counsel/AssociateChief Counsel (Tax Exempt and Govern-ment Entities). However, other personnelfrom the IRS and the Treasury Departmentparticipated in the development of theseregulations.

* * * * *

Adoption of Amendments to theRegulations

Accordingly, 26 CFR part 1 is amendedas follows:

Part 1—INCOME TAXES

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

Authority: 26 U.S.C. 7805 * * *Section 1.401(a)(35)–1 is also issued

under 26 U.S.C. 401(a)(35). * * *Par. 2. Section 1.401(a)(35)–1 is added

to read as follows:

§1.401(a)(35)–1 DiversificationRequirements for Certain DefinedContribution Plans.

(a) General rule—(1) Diversificationrequirements. Section 401(a)(35) imposesdiversification requirements on applicabledefined contribution plans. A trust that ispart of an applicable defined contributionplan is not a qualified trust under section401(a) unless the plan—

(i) Satisfies the diversification electionrequirements for elective deferrals and em-ployee contributions set forth in paragraph(b) of this section;

(ii) Satisfies the diversification electionrequirements for employer nonelectivecontributions set forth in paragraph (c) ofthis section;

(iii) Satisfies the investment option re-quirement set forth in paragraph (d) of thissection; and

3 See also section 411(d)(6)(C)(ii).

June 14, 2010 751 2010–24 I.R.B.

(iv) Does not apply any restrictions orconditions on investments in employer se-curities that violate the requirements ofparagraph (e) of this section.

(2) Definitions, effective dates, andtransition rules. The definitions of appli-cable defined contribution plan, employersecurity, parent corporation, and publiclytraded are set forth in paragraph (f) of thissection. Applicability dates and transitionrules are set forth in paragraph (g) of thissection.

(b) Diversification requirements forelective deferrals and employee contribu-tions invested in employer securities—(1)General rule. With respect to any in-dividual described in paragraph (b)(2)of this section, if any portion of the in-dividual’s account under an applicabledefined contribution plan attributable toelective deferrals (as described in section402(g)(3)(A)), employee contributions, orrollover contributions is invested in em-ployer securities, then the plan satisfiesthe requirements of this paragraph (b) ifthe individual may elect to divest thoseemployer securities and reinvest an equiv-alent amount in other investment options.The plan may limit the time for divestmentand reinvestment to periodic, reasonableopportunities occurring no less frequentlythan quarterly.

(2) Applicable individual with respectto elective deferrals and employee contri-butions. An individual is described in thisparagraph (b)(2) if the individual is—

(i) A participant;(ii) An alternate payee who has an ac-

count under the plan; or(iii) A beneficiary of a deceased partic-

ipant.(c) Diversification requirements for em-

ployer nonelective contributions investedin employer securities—(1) General rule.With respect to any individual described inparagraph (c)(2) of this section, if a portionof the individual’s account under an ap-plicable defined contribution plan attribut-able to employer nonelective contributionsis invested in employer securities, then theplan satisfies the requirements of this para-graph (c) if the individual may elect to di-vest those employer securities and reinvestan equivalent amount in other investmentoptions. The plan may limit the time fordivestment and reinvestment to periodic,reasonable opportunities occurring no lessfrequently than quarterly.

(2) Applicable individual with respectto employer nonelective contributions. Anindividual is described in this paragraph(c)(2) if the individual is—

(i) A participant who has completed atleast three years of service;

(ii) An alternate payee who has an ac-count under the plan with respect to a par-ticipant who has completed at least threeyears of service; or

(iii) A beneficiary of a deceased partic-ipant.

(3) Completion of three years of ser-vice. For purposes of paragraph (c)(2) ofthis section, a participant completes threeyears of service on the last day of the vest-ing computation period provided for un-der the plan that constitutes the completionof the third year of service under section411(a)(5). However, for a plan that usesthe elapsed time method of crediting ser-vice for vesting purposes (or a plan thatprovides for immediate vesting without us-ing a vesting computation period or theelapsed time method of determining vest-ing), a participant completes three years ofservice on the day immediately precedingthe third anniversary of the participant’sdate of hire.

(d) Investment options. An applicabledefined contribution plan must offer notless than three investment options, otherthan employer securities, to which an in-dividual who has the right to divest underparagraph (b)(1) or (c)(1) of this sectionmay direct the proceeds from the divest-ment of employer securities. Each of thethree investment options must be diversi-fied and have materially different risk andreturn characteristics. For this purpose, in-vestment options that constitute a broadrange of investment alternatives within themeaning of Department of Labor Regula-tion section 2550.404c–1(b)(3) are treatedas being diversified and having materiallydifferent risk and return characteristics.

(e) Restrictions or conditions on in-vestments in employer securities—(1) Im-permissible restrictions or conditions—(i)General rule. Except as provided in para-graph (e)(2) of this section, an applicabledefined contribution plan violates the re-quirements of this paragraph (e) if theplan imposes restrictions or conditionswith respect to the investment of employersecurities that are not imposed on the in-vestment of other assets of the plan. A

restriction or condition with respect toemployer securities means—

(A) A restriction on an individual’sright to divest an investment in employersecurities that is not imposed on an invest-ment that is not employer securities; or

(B) A benefit that is conditioned on in-vestment in employer securities.

(ii) Indirect restrictions or condi-tions—(A) Except as provided in para-graph (e)(3) of this section, a plan violatesthe requirements of this paragraph (e) ifthe plan imposes a restriction or conditiondescribed in paragraph (e)(1)(i)(A) or (B)of this section either directly or indirectly.

(B) A plan imposes an indirect restric-tion on an individual’s right to divest aninvestment in employer securities if, forexample, the plan provides that a partici-pant who divests his or her account balancewith respect to the investment in employersecurities is not permitted for a period oftime thereafter to reinvest in employer se-curities.

(C) A plan does not impose an indirectrestriction or condition merely becausethere are tax consequences that result froman individual’s divestment of an invest-ment in employer securities. Thus, theloss of the special treatment for net unre-alized appreciation provided under section402(e)(4) with respect to employer securi-ties is disregarded. Similarly, a plan doesnot impose an impermissible restriction orcondition merely because it provides thatan individual may not reinvest divestedamounts in the same employer securitiesaccount but is permitted to invest suchdivested amounts in another employer se-curities account where the only relevantdifference between the separate accountsis the section 402(e)(4) cost (or other ba-sis) of the trust in the shares held in eachaccount. (See §1.402(a)–1(b) for rulesregarding section 402(e)(4).)

(2) Permitted restrictions or condi-tions—(i) In general. An applicable de-fined contribution plan does not violatethe requirements of this paragraph (e)merely because it imposes a restriction ora condition set forth in paragraph (e)(2)(ii)or (e)(2)(iii) of this section.

(ii) Securities laws. A plan is permit-ted to impose a restriction or condition onthe divestiture of employer securities thatis either required in order to ensure com-pliance with applicable securities laws oris reasonably designed to ensure compli-

2010–24 I.R.B. 752 June 14, 2010

ance with applicable securities laws. Forexample, it is permissible for a plan tolimit divestiture rights for participants whoare subject to section 16(b) of the Secu-rities Exchange Act of 1934 (15 U.S.C.78f) to a reasonable period (such as 3 to12 days) following publication of the em-ployer’s quarterly earnings statements be-cause it is reasonably designed to ensurecompliance with Rule 10b–5 of the Secu-rities and Exchange Commission.

(iii) Deferred application of the diver-sification requirements—(A) Becomingan applicable defined contribution plan.An applicable defined contribution planis permitted to restrict the application ofthe diversification requirements of section401(a)(35) and this section for up to 90days after the plan becomes an applicabledefined contribution plan (for example,a plan becoming an applicable definedcontribution plan because the employersecurities held under the plan becomepublicly traded).

(B) Loss of exception for indirect invest-ments. In the case where an investmentfund described in paragraph (f)(3)(ii)(A)of this section no longer meets the require-ment in paragraph (f)(3)(ii)(B) of this sec-tion that the investment must be indepen-dent of the employer (including the sit-uation where the fund no longer meetsthe percentage limitation rule in paragraph(f)(3)(ii)(C) of this section), the plan doesnot fail to satisfy the diversification re-quirements of section 401(a)(35) and thissection merely because it does not offerthose rights with respect to that investmentfund for up to 90 days after the investmentfund ceases to meet those requirements.

(3) Permitted indirect restrictions orconditions—(i) In general. An applicabledefined contribution plan does not vio-late the requirements of this paragraph(e) merely because it imposes an indirectrestriction or condition set forth in thisparagraph (e)(3).

(ii) Limitation on investment in em-ployer securities. A plan is permitted tolimit the extent to which an individual’saccount balance can be invested in em-ployer securities, provided the limitationapplies without regard to a prior exerciseof rights to divest employer securities. Forexample, a plan does not impose a restric-tion that violates this paragraph (e) merelybecause the plan prohibits a participantfrom investing additional amounts in em-

ployer securities if more than 10 percentof that participant’s account balance isinvested in employer securities.

(iii) Trading frequency. A plan is per-mitted to impose reasonable restrictionson the timing and number of investmentelections that an individual can make toinvest in employer securities, providedthat the restrictions are designed to limitshort-term trading in the employer secu-rities. For example, a plan could providethat a participant may not elect to investin employer securities if the employeehas elected to divest employer securitieswithin a short period of time, such asseven days, prior to the election to investin employer securities.

(iv) Fees. The plan has not providedan indirect benefit that is conditioned oninvestment in employer securities merelybecause the plan imposes fees on other in-vestment options that are not imposed onthe investment in employer securities. Inaddition, the plan has not provided a re-striction on the right to divest an invest-ment in employer securities merely be-cause the plan imposes a reasonable fee forthe divestment of employer securities.

(v) Stable value or similar fund. A planis permitted to allow transfers to be madeinto or out of a stable value or similar fundmore frequently than a fund invested inemployer securities for purposes of para-graph (e)(1)(ii) of this section. Thus, aplan that includes a broad range of in-vestment alternatives as described in para-graph (d) of this section, including a stablevalue or similar fund, does not impose animpermissible restriction under paragraph(e)(1)(ii) of this section merely because itpermits transfers into or out of that fundmore frequently than other funds under theplan, provided that the plan would other-wise satisfy this paragraph (e) (taking intoaccount any restrictions or conditions im-posed with respect to the other investmentoptions under the plan). For purposes ofthis section, a stable value fund or similarfund means an investment product or funddesigned to preserve or guarantee princi-pal and provide a reasonable rate of return,while providing liquidity for benefit distri-butions or transfers to other investment al-ternatives (such as a product or fund de-scribed in Department of Labor Regula-tion section 2550.404c–5(e)(4)(iv)(A) or(v)(A)).

(vi) Transfers out of a qualified de-fault investment alternative (QDIA). Aplan is permitted to provide for transfersout of a QDIA within the meaning ofDepartment of Labor Regulation section2550.404c–5(e) more frequently than afund invested in employer securities.

(vii) Frozen funds—(A) General rule.A plan is permitted to prohibit any furtherinvestment in employer securities. Thus,a plan is not treated as imposing an indi-rect restriction merely because it providesthat an employee that divests an invest-ment in employer securities is not permit-ted to reinvest in employer securities, butonly if the plan does not permit additionalcontributions or other investments to be in-vested in employer securities. For this pur-pose, a plan does not provide for furtherinvestment in employer securities merelybecause dividends paid on employer secu-rities under the plan are reinvested in em-ployer securities.

(B) Transitional relief for certain lever-aged employee stock ownership plans(ESOPs). An employer stock fund doesnot fail to be a frozen fund under this para-graph (e)(3)(vii) merely because of theallocation of employer securities that arereleased as matching contributions fromthe plan’s suspense account that holdsemployer securities acquired with an ex-empt loan under section 4975(d)(3). Thisparagraph (e)(3)(vii)(B) only applies toemployer securities that were acquired ina plan year beginning before January 1,2007, with the proceeds of an exempt loanwithin the meaning of section 4975(d)(3)which is not refinanced after the end of thelast plan year beginning before January 1,2007.

(4) Delegation of authority to Commis-sioner. The Commissioner may providefor additional permitted restrictions orconditions or permitted indirect restric-tions or conditions in revenue rulings,notices, or other guidance published in theInternal Revenue Bulletin.

(f) Definitions—(1) Application of def-initions. This paragraph (f) contains defi-nitions that are applicable for purposes ofthis section.

(2) Applicable defined contributionplan—(i) General rule. Except as pro-vided in this paragraph (f)(2), an applica-ble defined contribution plan means anydefined contribution plan which holds em-ployer securities that are publicly traded.

June 14, 2010 753 2010–24 I.R.B.

See paragraph (f)(2)(iv) of this sectionfor a special rule that treats certain plansthat hold employer securities that are notpublicly traded as applicable defined con-tribution plans and paragraph (f)(3)(ii) ofthis section for a special rule that treatscertain plans as not holding publicly tradedemployer securities for purposes of thissection.

(ii) Exception for certain ESOPs. Anemployee stock ownership plan (ESOP),as defined in section 4975(e)(7), is notan applicable defined contribution plan ifthe plan is a separate plan for purposesof section 414(l) with respect to any otherdefined benefit plan or defined contribu-tion plan maintained by the same employeror employers and holds no contributions(or earnings thereunder) that are (or wereever) subject to section 401(k) or 401(m).Thus, an ESOP is an applicable definedcontribution plan if the ESOP is a portionof a larger plan (whether or not that largerplan includes contributions that are sub-ject to section 401(k) or 401(m)). For pur-poses of this paragraph (f)(2)(ii), a plan isnot considered to hold amounts ever sub-ject to section 401(k) or 401(m) merelybecause the plan holds amounts attribut-able to rollover amounts in a separate ac-count that were previously subject to sec-tion 401(k) or 401(m).

(iii) Exception for one-participantplans. A one-participant plan, as definedin section 401(a)(35)(E)(iv), is not an ap-plicable defined contribution plan.

(iv) Certain defined contribution planstreated as holding publicly traded em-ployer securities—(A) General rule. A de-fined contribution plan holding employersecurities that are not publicly traded istreated as an applicable defined contri-bution plan if any employer maintainingthe plan or any member of a controlledgroup of corporations that includes suchemployer has issued a class of stock whichis publicly traded. For purposes of thisparagraph (f)(2)(iv), a controlled group ofcorporations has the meaning given suchterm by section 1563(a), except that “50percent” is substituted for “80 percent”each place it appears.

(B) Exception for certain plans. Para-graph (f)(2)(iv)(A) of this section does notapply to a plan if—

(1) No employer maintaining the plan(or a parent corporation with respect to

such employer) has issued stock that ispublicly traded; and

(2) No employer maintaining the plan(or parent corporation with respect to suchemployer) has issued any special class ofstock which grants to the holder or issuerparticular rights, or bears particular risksfor the holder or issuer, with respect toany employer maintaining the plan (or anymember of a controlled group of corpora-tions that includes such employer) whichhas issued any stock that is publicly traded.

(3) Employer security—(i) Generalrule. Employer security has the meaninggiven such term by section 407(d)(1) ofthe Employee Retirement Income SecurityAct of 1974, as amended (ERISA).

(ii) Certain defined contribution plansor investment funds not treated as holdingemployer securities—(A) Exception forcertain indirect investments. Subject toparagraphs (f)(3)(ii)(B) and (C) of thissection, a plan (and an investment optiondescribed in paragraph (d) of this section)is not treated as holding employer secu-rities for purposes of this section to theextent the employer securities are held in-directly as part of a broader fund that is—

(1) A regulated investment companydescribed in section 851(a);

(2) A common or collective trust fundor pooled investment fund maintained bya bank or trust company supervised by aState or a Federal agency;

(3) A pooled investment fund of an in-surance company that is qualified to dobusiness in a State;

(4) An investment fund managed by aninvestment manager within the meaningof section 3(38) of ERISA for a multiem-ployer plan; or

(5) Any other investment fund desig-nated by the Commissioner in revenue rul-ings, notices, or other guidance publishedin the Internal Revenue Bulletin.

(B) Investment must be independent.The exception set forth in paragraph(f)(3)(ii)(A) of this section applies only ifthe investment in the employer securitiesis held in a fund under which—

(1) There are stated investment objec-tives of the fund; and

(2) The investment is independent ofthe employer (or employers) and any affil-iate thereof.

(C) Percentage limitation rule. For pur-poses of paragraph (f)(3)(ii)(B)(2) of thissection, an investment in employer secu-

rities in a fund is not considered to be in-dependent of the employer (or employers)and any affiliate thereof if the aggregatevalue of the employer securities held in thefund is in excess of 10 percent of the to-tal value of all of the fund’s investmentsfor the plan year. The determination ofwhether the value of employer securitiesexceeds 10 percent of the total value ofthe fund’s investments for the plan year ismade as of the end of the preceding planyear. The determination can be based onthe information in the latest disclosure ofthe fund’s portfolio holdings that was filedwith the Securities and Exchange Com-mission (SEC) in that preceding plan year.

(4) Parent corporation. Parent corpora-tion has the meaning given such term bysection 424(e).

(5) Publicly traded—(i) In general. Asecurity is publicly traded if it is readilytradable on an established securities mar-ket.

(ii) Readily tradable on an establishedsecurities market. For purposes of thisparagraph (f)(5), except as provided by theCommissioner in revenue rulings, notices,or other guidance published in the Inter-nal Revenue Bulletin, a security is readilytradable on an established securities mar-ket if—

(A) The security is traded on a nationalsecurities exchange that is registered undersection 6 of the Securities Exchange Act of1934 (15 U.S.C. 78f); or

(B) The security is traded on a for-eign national securities exchange that is of-ficially recognized, sanctioned, or super-vised by a governmental authority and thesecurity is deemed by the SEC as havinga “ready market” under SEC Rule 15c3–1(17 CFR 240.15c3–1).

(g) Applicability date and transitionrules—(1) Statutory effective date—(i)General rule. Except as otherwise pro-vided in this paragraph (g) and section901(c)(3)(A) and (B) of the Pension Pro-tection Act of 2006, Public Law 109–280(120 Stat. 780 (2006)) (PPA ’06), section401(a)(35) is effective for plan years be-ginning after December 31, 2006.

(ii) Collectively bargained plans—(A)Delayed statutory effective date. In thecase of a plan maintained pursuant to oneor more collective bargaining agreementsbetween employee representatives and oneor more employers ratified on or beforeAugust 17, 2006, section 401(a)(35) is ef-

2010–24 I.R.B. 754 June 14, 2010

fective for plan years beginning after theearlier of—

(1) The later of—(i) December 31, 2007; or(ii) The date on which the last such col-

lective bargaining agreement terminates(determined without regard to any exten-sion thereof); or

(2) December 31, 2008.(B) Treatment of plans with both collec-

tively bargained and non-collectively bar-gained employees. If a collective bargain-ing agreement applies to some, but not

all, of the plan participants, the defini-tion of whether the plan is considered acollectively bargained plan for purposesof this paragraph (g)(1)(ii) is made in thesame manner as the definition of whethera plan is collectively bargained under sec-tion 436(f)(3).

(2) Regulatory effective/applicabilitydate. This section is effective and appli-cable for plan years beginning on or afterJanuary 1, 2011.

(3) Statutory transition rules—(i)General rule. Pursuant to section

401(a)(35)(H), in the case of the portionof an account to which paragraph (c) ofthis section applies and that consists ofemployer securities acquired in a plan yearbeginning before January 1, 2007, the re-quirements of paragraph (c) of this sectiononly apply to the applicable percentage ofsuch securities.

(ii) Applicable percentage—(A)Phase-in percentage. For purposes of thisparagraph (g)(3), the applicable percent-age is determined as follows—

Plan year to which paragraph (c) of this section applies: The applicable percentage is:

1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332nd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663rd and following . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

(B) Special rule. For a plan for whichthe special effective date under section901(c)(3) of PPA ’06 applies, the appli-cable percentage under this paragraph(g)(3)(ii) is determined without regardto the delayed effective date in section901(c)(3)(A) and (B) of PPA ’06.

(iii) Nonapplication for participantsage 55 with three years of service. Para-graph (g)(3)(i) of this section does notapply to an individual who is a participantwho attained age 55 and had completed at

least three years of service (as defined inparagraph (c)(3) of this section) before thefirst day of the first plan year beginningafter December 31, 2005.

(iv) Separate application by class of se-curities. This paragraph (g)(3) applies sep-arately with respect to each class of secu-rities.

Steven T. Miller,Deputy Commissioner forServices and Enforcement.

Approved May 5, 2010.

Michael F. Mundaca,Assistant Secretary

of the Treasury (Tax Policy).

(Filed by the Office of the Federal Register on May 18, 2010,8:45 a.m., and published in the issue of the Federal Registerfor May 19, 2010, 75 F.R. 27927)

June 14, 2010 755 2010–24 I.R.B.

Part III. Administrative, Procedural, and MiscellaneousRequest for CommentsRegarding AdditionalRequirements for Tax-ExemptHospitals

Notice 2010–39

Section 1. PURPOSE ANDBACKGROUND

This notice solicits comments regardingthe application of certain requirements im-posed by new section 501(r), added to theInternal Revenue Code (Code) by section9007(a) of the Patient Protection and Af-fordable Care Act (Affordable Care Act),enacted March 23, 2010, Pub. L. No.111-148.1 Section 501(r) affects hospitalorganizations that are currently describedin section 501(c)(3) of the Code as exemptfrom Federal income taxation.

New section 501(r)(1) imposes four ad-ditional requirements, described in Sec-tions 2, 3, 4, and 5 of this notice, that or-ganizations described in section 501(r)(2)(“hospital organizations”) must satisfy tobe described in section 501(c)(3). The Af-fordable Care Act did not otherwise affectthe substantive standards for tax exemp-tion that hospitals are required to meet un-der section 501(c)(3).

Section 501(r)(2) provides that the ad-ditional requirements of section 501(r)apply to: (1) an organization that operatesa facility required by a State to be li-censed, registered, or similarly recognizedas a hospital; and (2) any other organiza-tion that the Secretary determines has theprovision of hospital care as its principalfunction or purpose constituting the basisfor its exemption under section 501(c)(3).Section 501(r) applies to hospital orga-nizations on a facility-by-facility basis.Accordingly, if a hospital organizationoperates more than one hospital facility,the organization is required to meet theadditional requirements of section 501(r)separately with respect to each facility.

The Affordable Care Act also addednew section 4959, which imposes an ex-cise tax for failures to meet certain ofthe new section 501(r) requirements, andadded reporting requirements under sec-

tion 6033(b) related to sections 501(r) and4959.

Section 2. COMMUNITY HEALTHNEEDS ASSESSMENT

Section 501(r)(3) requires a hospital or-ganization to conduct a community healthneeds assessment (CHNA) every threeyears and adopt an implementation strat-egy to meet the community health needsidentified through such assessment. TheCHNA must (1) take into account inputfrom persons who represent the broadinterests of the community served by thehospital facility, including those with spe-cial knowledge of or expertise in publichealth and (2) be made widely available tothe public. Section 501(r)(3)(B).

The Joint Committee on Taxation’sTechnical Explanation of the AffordableCare Act (Technical Explanation) statesthat the CHNA “may be based on cur-rent information collected by a publichealth agency or non-profit organizationsand may be conducted together with oneor more organizations, including relatedorganizations.” Joint Committee on Taxa-tion, Technical Explanation of the RevenueProvisions of the “Reconciliation Act of2010,” as amended, in combination withthe “Patient Protection and AffordableCare Act” (JCX–18–10), at 81, March 21,2010.

Section 6033(b)(15)(A) requires hos-pital organizations to include in theirannual information return (i.e., Form 990)a description of how the organization isaddressing the needs identified in eachCHNA conducted under section 501(r)(3)and a description of any needs that are notbeing addressed, along with the reasonswhy the needs are not being addressed.

Section 4959 imposes a $50,000 excisetax on a hospital organization that failsto meet the CHNA requirements of sec-tion 501(r)(3). Section 6033(b)(10), asamended, requires hospital organizationsto report the amount of the excise tax im-posed on the organization under section4959.

Section 3. FINANCIAL ASSISTANCEPOLICY

Section 501(r)(4) requires a hospital or-ganization to establish a financial assis-tance policy and a policy relating to emer-gency medical care.

Specifically, section 501(r)(4)(A) re-quires a hospital organization to have awritten financial assistance policy thatincludes the following:

i. eligibility criteria for financial assis-tance, and whether such assistance in-cludes free or discounted care;

ii. the basis for calculating amountscharged to patients;

iii. the method for applying for financialassistance;

iv. in the case of an organization whichdoes not have a separate billing andcollections policy, the actions the or-ganization may take in the event ofnonpayment, including collections ac-tion and reporting to credit agencies;and

v. measures to widely publicize the pol-icy within the community to be servedby the organization.

Section 501(r)(4)(B) requires a hospitalorganization to have a written policy re-quiring the organization to provide, with-out discrimination, care for emergencymedical conditions (within the meaningof section 1867 of the Social SecurityAct (42 U.S.C. 1395dd)) to individualsregardless of their eligibility under thefinancial assistance policy described insection 501(r)(4)(A). The Technical Ex-planation states that “[t]he policy mustprevent discrimination in the provision ofemergency medical treatment, includingdenial of service, against those eligiblefor financial assistance under the facility’sfinancial assistance policy or those eligi-ble for government assistance.” TechnicalExplanation at 82.

Section 4. LIMITATION ON CHARGES

Section 501(r)(5) requires a hospital or-ganization to limit amounts charged foremergency or other medically necessary

1 A related bill, the Health Care Education Affordability Reconciliation Act of 2010 (H.R. 4872) (the “Reconciliation Act”), was signed into law on March 30, 2010 (Pub. L. No. 111–152).The Reconciliation Act amends the Affordable Care Act and related laws.

2010–24 I.R.B. 756 June 14, 2010

care that is provided to individuals eligiblefor assistance under the organization’s fi-nancial assistance policy to not more thanthe amounts generally billed to individu-als who have insurance covering such care.Section 501(r)(5) also prohibits the use ofgross charges.

The Technical Explanation states that“[i]t is intended that amounts billed tothose who qualify for financial assis-tance may be based on either the best,or an average of the three best, negoti-ated commercial rates, or Medicare rates.”Technical Explanation at 82.

Section 5. BILLING ANDCOLLECTION

Section 501(r)(6) requires a hospital or-ganization to forego extraordinary collec-tion actions against an individual beforethe organization has made reasonable ef-forts to determine whether the individualis eligible for assistance under the hospitalorganization’s financial assistance policy.

The Technical Explanation states that“extraordinary collections include law-suits, liens on residences, arrests, bodyattachments, or other similar collectionprocesses.” Technical Explanation at 82.The Technical Explanation also states that“[i]t is intended that for this purpose, ‘rea-sonable efforts’ includes notification bythe hospital of its financial assistance pol-icy upon admission and in written and oralcommunications with the patient regardingthe patient’s bill, including invoices andtelephone calls, before collection action orreporting to credit agencies is initiated.”Technical Explanation at 82.

Section 6. EFFECTIVE DATES

Section 501(r) (except for section501(r)(3)), section 6033(b)(10), and sec-tion 6033(b)(15) apply to taxable yearsbeginning after March 23, 2010, the dateof enactment of the Affordable CareAct. The CHNA requirements of section501(r)(3) are effective for taxable yearsbeginning after March 23, 2012. The sec-tion 4959 excise tax for failure to satisfysection 501(r)(3) is effective for failuresoccurring after the date of enactment.

Section 7. REQUEST FOR COMMENTS

The IRS and the Department of Trea-sury request comments regarding the re-

quirements for hospital organizations de-scribed in this notice, including in particu-lar the need, if any, for guidance regardingsuch requirements. Comments are specif-ically requested regarding appropriate re-quirements for a CHNA, and what consti-tutes “reasonable efforts” to determine eli-gibility for assistance under a financial as-sistance policy for purposes of the billingand collection requirements under section501(r)(6). In addition, comments are re-quested regarding section 501(r)(2)(B)(ii),which provides that an organization thatoperates more than one hospital facility“shall not be treated as described in [sec-tion 501(c)(3)] with respect to any such fa-cility for which such requirements are notseparately met,” including the tax conse-quences of a failure with respect to some,but not all, facilities and the proper taxtreatment in future periods in such a case.

Comments should refer to Notice2010–39 and be submitted by July 22,2010, to:

Internal Revenue ServiceCC:PA:LPD:PR (Notice 2010–39)Room 5203P.O. Box 7604Ben Franklin StationWashington, DC 20044

Submissions may be hand deliveredMonday through Friday between the hoursof 8 a.m. and 4 p.m. to:

Courier’s DeskInternal Revenue Service1111 Constitution Ave., N.W.Washington, DC 20224Attn: CC:PA:LPD:PR

(Notice 2010–39)

Alternatively, taxpayers maysubmit comments electronically tonotice.comments@irscounsel.treas.gov.Please include “Notice 2010–39”in the subject line of any electroniccommunications.

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

Section 8. DRAFTING INFORMATION

The principal author of this noticeis Garrett Gluth of the Exempt Organi-zations, Tax Exempt and GovernmentEntities Division. For further information

regarding this notice, contact Mr. Gluth at(202) 283–9485 (not a toll-free call).

Prevention ofOver-Withholding and U.S. TaxAvoidance With Respect toCertain Substitute DividendPayments

Notice 2010–46

I. SUMMARY AND MODIFICATIONAND WITHDRAWAL OF NOTICE97–66

A. Background

On October 14, 1997, final regulationswere published in the Federal Regis-ter (T.D. 8735, 1997–2 C.B. 72, 62 FR53498 (1997)) (the “final regulations”)that source substitute interest and substi-tute dividend payments made pursuant toa securities lending transaction describedin § 1058 of the Internal Revenue Code(“Code”) or a substantially similar trans-action or a sale-repurchase transaction(a “Securities Lending Transaction”) byreference to the income that would beearned with respect to the underlyingtransferred debt security or stock. Thefinal regulations also provide that substi-tute interest and dividend payments thatare from sources within the United Statesunder the regulations are characterizedas interest and dividends for purposes ofdetermining the fixed or determinable an-nual or periodical income of nonresidentalien individuals and foreign corpora-tions subject to tax under §§ 871(a), 881,4948(a) and Chapter 3 of the Code andfor purposes of granting tax treaty benefitswith respect to interest and dividends. Aspromulgated, the final regulations weremade applicable in all respects for sub-stitute interest payments (as defined in§ 1.861–2(a)(7)) and substitute dividendpayments (as defined in § 1.861–3(a)(6))made after November 13, 1997.

Some taxpayers expressed concern thatthe total U.S. gross-basis tax paid withrespect to a series of Securities LendingTransactions (that is, a chain of related Se-curities Lending Transactions with respectto identical securities) could be excessiveunder the final regulations. For example, a

June 14, 2010 757 2010–24 I.R.B.

series of Securities Lending Transactionscould give rise to multiple substitute pay-ments, each of which would be treated asequivalent to a dividend under the finalregulations. If a dividend distribution onthe transferred security were U.S.-sourceincome, each substitute dividend paymentin the series would be treated as U.S.-source income and potentially subject togross-basis taxation under §§ 871 and 881and withholding of tax under §§ 1441 and1442. Thus, a series of Securities Lend-ing Transactions could result in “cascad-ing” taxation that might, in the aggregate,exceed 30 percent of the amount of the div-idend distribution on the underlying trans-ferred security.

To allow relief for taxpayers unable tostructure transactions to avoid excessive orcascading taxation, the Treasury Depart-ment and the Service issued Notice 97–66,1997–2 C.B. 328 (1997), on November12, 1997. Notice 97–66 provides guid-ance that generally limits the aggregateU.S. gross-basis tax on a series of Securi-ties Lending Transactions to no more than30 percent of the amount equivalent tothe dividend distribution on the underly-ing transferred security. To implement thislimitation, Notice 97–66 provides a for-mulary method to calculate the amount ofU.S. tax to be imposed on a foreign-to-for-eign substitute dividend payment. Underthis method,

the amount of U.S. withholding tax tobe imposed under §§ 1.871–7(b)(2) and1.881–2(b)(2) with respect to a foreign-to-foreign payment will be the amountof the underlying dividend multipliedby a rate equal to the excess of therate of U.S. withholding tax that wouldbe applicable to U.S. source dividendspaid by a U.S. person directly to the re-cipient of the substitute payment overthe rate of U.S. withholding tax thatwould be applicable to U.S. source div-idends paid by a U.S. person directly tothe payor of the substitute payment.The following example demonstrates

the operation of this rule. If a borrowerthat is eligible under an income tax treatyfor a reduced rate of tax equal to 15 percenton U.S.-source dividends makes a substi-tute dividend payment to a lender that isresident in a non-treaty jurisdiction sub-

ject to a tax of 30 percent on U.S.-sourcedividends, the amount of tax imposedon the substitute dividend payment un-der §§ 1.871–7(b)(2) and 1.881–2(b)(2)generally would be limited to 15 percent(i.e., the payee’s tax rate of 30 percent lessthe payor’s rate of 15 percent). Notice97–66 also provides in an example thatif the securities lender’s tax liability hasalready been reflected in prior withhold-ing within a series of Securities LendingTransactions, the borrower, as a with-holding agent, is permitted to reduce thelender’s liability by such amount.

It has been widely reported that sometaxpayers have relied on Notice 97–66 toavoid U.S. gross-basis taxation of foreignlenders of U.S. dividend-paying stocks intransactions undertaken primarily to en-hance the after-tax yield of U.S. dividend-paying stocks held by foreign persons.1

On March 18, 2010, the Hiring Incen-tives to Restore Employment Act, Pub.L. No. 111–147, 124 Stat. 71 (2010)(“HIRE Act”) was enacted. Section 541of the HIRE Act added new § 871(l) tothe Code, which provides that certain div-idend equivalent payments are treated asU.S.-source dividends, effective for pay-ments made on or after the date that is180 days after the date of enactment. Theterm “dividend equivalent” is defined forthis purpose to include “any substitute div-idend made pursuant to a securities lend-ing or sale-repurchase transaction that (di-rectly or indirectly) is contingent upon, ordetermined by reference to, the payment ofa dividend from sources within the UnitedStates.” § 871(l)(2)(A). Section 871(l)(6)authorizes the Secretary to reduce tax withrespect to a chain of dividend equivalents“but only to the extent that the taxpayer canestablish that such tax has been paid withrespect to another dividend equivalent insuch chain, or is not otherwise due, or asthe Secretary determines is appropriate toaddress the role of financial intermediariesin such chain.”

B. Modification and Withdrawal of Notice97–66

Notice 97–66 is withdrawn effec-tive for payments made on or afterSeptember 14, 2010 (the effective dateof § 871(l)). Prior to September 14,

2010, taxpayers may continue to rely onNotice 97–66, except that Notice 97–66is modified as follows: a withholdingagent or foreign lender may not relyon Notice 97–66 when the withholdingagent or foreign lender knows or hasreason to know that a Securities LendingTransaction, or series of such transactions,has a principal purpose of reducing oreliminating the amount of gross-basis taxthat would have been due in the absenceof such transaction or transactions. Forexample, a person may not rely on Notice97–66 to reduce or eliminate the amountof U.S. tax on the substitute dividendit is obligated to pay the foreign lenderwhen it structures or participates in anarrangement whereby it: (1) borrowsshares of a domestic corporation from aforeign person in a transaction describedin § 1058 after a dividend declaration; (2)sells that stock to a related U.S. personbefore the ex-dividend date; and (3) entersinto a total return swap agreement with thatrelated person in order to hedge its risk.No inference is intended as to whether anytransaction entered into prior to May 20,2010, is eligible for the relief describedin Notice 97–66, and the Service maychallenge transactions under existing law,including by applying existing judicialdoctrines, as appropriate.

II. PROPOSED WITHHOLDING ANDREPORTING FRAMEWORK

The Treasury Department and the Ser-vice intend to issue regulations exercisingthe authority described in § 871(l)(6).These regulations will coordinate thetax imposed on substitute payments un-der § 871(l) and §§ 1.871–7(b)(2) and1.881–2(b)(2) with the withholding and re-porting requirements under §§ 1441, 1442and 1461 and the regulations thereunder toensure that the appropriate amount of taxis paid and reported. Generally, the regu-lations, as described below, are expectedto replace the formulary approach pre-viously adopted by Notice 97–66 with adocumentation-based system under whichwithholding agents will be able to reducewithholding to the extent that withholdingis shown to have been made on anothersubstitute payment or dividend with re-spect to identical securities. Additionally,

1 See STAFF OF S. PERMANENT SUBCOMM. ON INVESTIGATIONS, 110TH CONG., REPORT ON DIVIDEND TAX ABUSE: HOW OFFSHORE ENTITIES DODGE TAXES ONU.S. STOCK DIVIDENDS (COMM. PRINT 2008).

2010–24 I.R.B. 758 June 14, 2010

to reduce instances of potential exces-sive or cascading taxation and to properlyaccount for the role of financial intermedi-aries in Securities Lending Transactions,this proposed system is expected to exemptcertain financial institutions from beingsubject to withholding at source on receiptof substitute dividend payments providedthat they assume responsibility and lia-bility for properly withholding, reporting,depositing, and paying U.S. tax with re-spect to substitute dividend payments.This system will also permit the Serviceto administer compliance by market par-ticipants more effectively by disqualifyingnoncompliant taxpayers from eligibilityfor the relief provided in this notice inappropriate cases.

A. Substitute Dividend Payments to a“Qualified Securities Lender”

Treatment of Withholding Agent. Theregulations are expected to provide thata withholding agent making a substitutedividend payment to a financial institutionthat meets the regulatory definition of aQualified Securities Lender will not be re-quired to withhold U.S. tax with respectto such payment. Part 2.A.ii describesthe certifications required to be made by aQualified Securities Lender to a withhold-ing agent in order to relieve a withholdingagent of its obligation to withhold on a sub-stitute dividend.

Treatment of Qualified SecuritiesLender. The regulations will coordinatethe obligation of a Qualified SecuritiesLender to withhold on substitute dividendpayments that it makes, pay and deposittax on substitute dividends it receives, andreport on substitute dividends it makes(on behalf of itself or any other person).The regulations are expected to definethese obligations in terms of two distinctcategories of substitute dividends thatQualified Securities Lenders pay or re-ceive.

In circumstances where a QualifiedSecurities Lender receives a substitutedividend payment (the “first substitutedividend payment”) and is obligated tomake an offsetting substitute dividendpayment with respect to identical secu-rities (the “second substitute dividendpayment”), the regulations are expected toprovide that a Qualified Securities Lender:(A) will not be liable for U.S. gross-basis

tax on the first substitute dividend pay-ment under § 871(a) or 881(a); and (B)must properly withhold under §§ 1441 and1442 and report with respect to the secondsubstitute dividend payment.

In circumstances where a Qualified Se-curities Lender receives a substitute divi-dend payment for which it has no obliga-tion to make an offsetting substitute divi-dend payment with respect to identical se-curities, the Qualified Securities Lenderremains liable for tax under § 871(a) or881(a) by virtue of the receipt of such sub-stitute dividend payment.

The Service intends to monitor Qual-ified Securities Lenders for compliancewith all applicable rules described in thisnotice and may revoke an institution’sstatus as a Qualified Securities Lenderfor noncompliance. Such noncompliancemay include, for example, circumstancesin which an institution structures or par-ticipates in arrangements designed tofacilitate the avoidance of U.S. gross-ba-sis taxation by foreign persons that holdor held U.S. equities, as well as circum-stances in which an institution does notwithhold and deposit tax at the proper ratewhen it acts as a custodian on behalf ofboth a borrower and lender in the sameSecurities Lending Transaction.

i. Definition of Qualified SecuritiesLender

For purposes of the relief describedabove, the regulations are expected toprovide that a foreign financial institutionis a Qualified Securities Lender only if itsatisfies all of the following conditions:

• it is a bank, custodian, broker-dealer,or clearing organization that is sub-ject to regulatory supervision by a gov-ernmental authority in the jurisdictionin which it was created or organized,and is regularly engaged in a trade orbusiness that includes the borrowingof securities of domestic corporations(as defined in § 7701(a)(4)) from, andlending of securities of domestic cor-porations to, its unrelated customers;

• it is subject to audit by the Service un-der § 7602 or, in the case of a Qual-ified Intermediary (QI) that appropri-ately amends its QI agreement with theService, by an external auditor. Furtherguidance will specify the requirements

of such an amendment to the QI agree-ment. In general, however, the amend-ment will require the QI to report, with-hold, deposit, and pay U.S. tax as de-scribed in Parts II.A and D of this no-tice; and

• it files an annual statement on a formprescribed by the Service certifyingthat it satisfies the conditions nec-essary to be a Qualified SecuritiesLender.

ii. Certifications by a Qualified SecuritiesLender

As noted above, the regulations are ex-pected to relieve a withholding agent of itsliability to withhold U.S. tax with respectto any substitute dividend paid to a Qual-ified Securities Lender only if the with-holding agent receives a written certifica-tion from the Qualified Securities Lender,either on a form prescribed by the Ser-vice or as otherwise provided by regu-lation. This certification must include astatement that the recipient of a substitutedividend is a Qualified Securities Lenderand that, with respect to any substitutedividend it receives from the withholdingagent, it will withhold and remit or paythe proper amount of U.S. gross-basis taxwith respect to substitute dividend pay-ments that it receives or makes.

B. Credit Forward of Prior Withholding

The Treasury Department and the Ser-vice believe that the vast majority of in-stances of excessive or cascading taxationwill be relieved through the Qualified Se-curities Lender rules described above. Toaddress remaining instances of excessiveor cascading taxation not addressed by theQualified Securities Lender rules, the reg-ulations are expected to provide a creditforward system, as described below.

i. Availability of credit for priorwithholding

The regulations are expected to providethat withholding agents may limit the ag-gregate U.S. gross-basis tax within a se-ries of Securities Lending Transactions tothe amount of U.S. gross-basis tax, if any,applicable to the foreign taxpayer (otherthan in the case of a Qualified SecuritiesLender that is obligated to make an offset-ting substitute dividend payment) bearing

June 14, 2010 759 2010–24 I.R.B.

the highest rate of U.S. gross-basis tax oneither a substitute or actual dividend withrespect to the underlying security trans-ferred in the series. As a result, the aggre-gate taxes paid in such transactions shouldnot exceed the 30 percent statutory rate ap-plicable to U.S.-source dividends paid toforeign persons. The regulations are ex-pected to provide that withholding agentsmay relieve excessive tax on substitutedividends by reducing withholding on asubstitute dividend payment that the with-holding agent is obligated to make by anamount not to exceed the amount that hasbeen previously withheld within the sameseries of Securities Lending Transactions,but only to the extent that there is suffi-cient evidence that tax was actually with-held on a prior dividend and/or substitutedividend paid to the withholding agent ora prior withholding agent within the samesuch series. No payee in a series of Se-curities Lending Transactions may claim arefund (or claim a credit against any otherliability) solely because a prior payee inthe same series was subjected to a higherrate of gross-basis U.S. tax. Moreover, notaxpayer or withholding agent in a seriesof Securities Lending Transactions maycredit any tax withheld with respect to asubstitute dividend payment in such seriesagainst any tax imposed with respect to asubstitute dividend payment in a differentseries of Securities Lending Transactions.

ii. Substantiation of Prior Withholding

The regulations are expected to providethat sufficient evidence of prior withhold-ing will be deemed to exist where thereis written documentation that identifiesamounts previously withheld by anotherwithholding agent with respect to actualdividend distributions or substitute div-idends in the same series of SecuritiesLending Transactions or as otherwise pre-scribed by the Service in future guidance.For example, the regulations are expectedto provide that a withholding agent maypresume that tax has been withheld bya prior withholding agent in a series ofSecurities Lending Transactions if thatagent: (1) receives a substitute dividendnet of U.S. withholding taxes; (2) receivesa written statement from the immediatelyprior withholding agent setting out theamount of such taxes; (3) identifies theperson who withheld such tax and the re-

cipient of the payment against which suchtax was withheld; and (4) does not knowor have reason to know that the writtenstatement is unreliable. For these determi-nations, a withholding agent may not relyupon evidence of a sale of the underlyingsecurity as a basis to determine that taxhas been paid or withheld.

C. Anti-Abuse

Finally, the regulations are expectedto provide that a withholding agent or aQualified Securities Lender may not relyon any of the foregoing rules (includingany certifications provided by a QualifiedSecurities Lender) when the withhold-ing agent or Qualified Securities Lenderknows or has reason to know that a Se-curities Lending Transaction, or series ofsuch transactions, has a principal purposeof reducing or eliminating the amount ofU.S. gross-basis tax that would have beendue in the absence of such transaction ortransactions. In such a case, a withhold-ing agent or Qualified Securities Lendermust withhold, and the recipient of suchpayment is subject to U.S. gross-basis tax,at 30 percent (subject to reduction underan applicable income tax treaty) on eachsubstitute dividend payment with respectto such transaction.

D. Other Considerations—InformationReporting of Substitute Payments

In cases in which a withholding agent(including a Qualified Securities Lender)makes a substitute dividend payment and,in reliance on the regulations, (1) reducesthe withholding or (2) is exempted fromwithholding, the withholding agent shouldinclude on Form 1042 and Form 1042–S:(a) the gross amount of the substitute div-idend to which the recipient would haveotherwise been entitled before considera-tion of any withholding tax obligations;and (b) the amount of tax withheld by thewithholding agent and shown to have beenwithheld by other withholding agents inthe series of Securities Lending Transac-tions based on the documentation and in-formation as described above. In addition,a withholding agent (including a QualifiedSecurities Lender) that makes a substitutedividend payment to a United States per-son as defined in § 7701(a)(30) will be re-quired to report and withhold to the extentrequired under Chapter 61 and § 3406.

III. TRANSITION RULE

A. Summary and General Transition Rule

The Treasury Department and the Ser-vice anticipate that the regulatory frame-work outlined in Part II of this notice willbe effective for transactions entered into onor after January 1, 2012. Until such regu-lations are issued, and after September 14,2010 (the “transition period”), § 871(l) willapply with the potential for U.S. tax dueon a series of Securities Lending Transac-tions that exceeds 30 percent in the aggre-gate. In order to avoid excessive or cas-cading tax in these situations, withholdingagents may rely on the transition rules de-scribed in this Part.

Generally, the transition rules describedin this Part III provide that the maximumaggregate U.S. gross-basis tax due, if any,with respect to a series of Securities Lend-ing Transactions and any related dividendpayment is the amount determined by thetax rate paid by the foreign taxpayer (otherthan in the case of a Qualified SecuritiesLender that is obligated to make an off-setting substitute dividend payment) bear-ing the highest rate of U.S. gross-basistax in the series. Accordingly, the aggre-gate U.S. gross-basis taxes paid in suchtransactions generally should not exceedthe 30 percent statutory rate applicable toU.S.-source dividends paid to foreign per-sons.

B. Receipt of Net Payments

A withholding agent that is obligated tomake a substitute dividend payment pur-suant to a Securities Lending Transactionmay presume that U.S. tax has been paidin an amount equal to the amount impliedby the net payment if all of the followingare satisfied:

• The withholding agent receives a sub-stitute dividend or dividend paymentwith respect to identical securities thatreflects a reduction for withholding ofU.S. gross-basis tax;

• The withholding agent does not knowor have reason to know that tax was notwithheld and deposited or paid. Forthis purpose, a withholding agent has areason to know that tax was not with-held if, for example, the amount ofany lending fee or similar fee is in-creased directly or indirectly, in whole

2010–24 I.R.B. 760 June 14, 2010

or in part, by the difference betweenthe gross amount of the substitute divi-dend and the net amount received; and

• The withholding agent is a person sub-ject to audit under § 7602, or in the caseof a QI, by an external auditor.

No payee in a series of Securities Lend-ing Transactions may claim a refund (orclaim a credit against any other liability)solely because a prior payee in the same se-ries was subjected to a higher rate of gross-basis U.S. tax. Moreover, no taxpayer orwithholding agent in a series of SecuritiesLending Transactions may credit any taxwithheld with respect to a substitute div-idend payment in such series against anytax imposed with respect to a substitutedividend payment in a different series ofSecurities Lending Transactions.

C. Application of Qualified SecuritiesLender Rules

During the transition period, with-holding agents may adopt a system thatreasonably implements the principles ofthe Qualified Securities Lender systemdescribed in Part II of this notice. Inparticular, during the transition period, awithholding agent is not required to with-hold on a substitute dividend paymentmade to a Qualified Securities Lender ifthe withholding agent receives, at leastannually, a statement from its counter-party that substantially complies with thecertification requirement described in PartII.A.ii of this notice. A financial institu-tion may make such a certification onlyif it reasonably determines that it meetsthe requirements to qualify as a Quali-fied Securities Lender described in PartII.A.i of this notice (without regard tothe requirement that a Qualified Securi-ties Lender file an annual statement withthe Service). It is anticipated that futureguidance will provide that all QualifiedSecurities Lenders taking advantage ofthe transition relief described in this Partmay be required to identify themselves tothe Service (in a manner to be specified)before the end of calendar year 2010. AQI that provides such a certification willbe deemed to have agreed to amend its QIagreement for these purposes as necessaryto report, withhold, deposit, and pay U.S.tax as described in Part II.A of this notice.

D. Anti-Abuse

Withholding agents may not rely on thetransition relief described in Part III of thisnotice with respect to a Securities LendingTransaction or series of such transactionsthat are entered into with a principal pur-pose of reducing or eliminating the aggre-gate amount of U.S. tax that would havebeen due in the absence of such transac-tion or series of transactions. A financialinstitution that is determined to have struc-tured or engaged in one or more transac-tions described in the preceding sentenceon or after May 20, 2010, will not qualifyas a Qualified Securities Lender for a pe-riod of 5 years from the date of such deter-mination.

E. Other Considerations

A Qualified Securities Lender may useany reasonable method, consistently ap-plied, to determine which securities withina pool of fungible securities available toborrow have actually been borrowed andlent.

Withholding agents will be required toperform information reporting as specifiedin Part II.D above.

F. Extensions

The Treasury Department and the Ser-vice believe that administrative relief is ap-propriate to ensure that withholding agentshave sufficient time to make the opera-tional changes necessary to comply with§ 541 of the HIRE Act and the provisionsof this notice. Therefore, to the extentthat § 871(l) applies to any substitute div-idend payments in respect of any transac-tion described in § 871(l)(2)(A), withhold-ing agents are hereby granted an automaticsix-month extension of time to file infor-mation returns pursuant to § 1.1461–1(c)with respect to the calendar year 2010.However, the time for filing informationreturns pursuant to § 1.1461–1(c) shall notbe extended beyond the date on which thewithholding agent provides a copy of thereturn to the recipient. In addition, with-holding agents are hereby granted an au-tomatic extension for making deposits ofwithheld tax from such substitute dividendpayments until January 31, 2011, for thecalendar year 2010. The Treasury Depart-ment and the Service believe that the ad-ministrative relief provided by this notice

is in the best interests of sound tax admin-istration.

IV. EFFECTIVE DATES

The modification of Notice 97–66 de-scribed in Part I is effective for amountspaid on or after May 20, 2010 and be-fore September 14, 2010. The transitionrules described in Part III are effective foramounts paid on or after September 14,2010.

V. PAPERWORK REDUCTION ACT

The collections of information con-tained in this notice have been reviewedand approved by the Office of Manage-ment and Budget in accordance with thePaperwork Reduction Act (44 U.S.C.3507) under control number 1545–1566.

An agency may not conduct or sponsor,and a person is not required to respondto, a collection of information unless thecollection of information displays a validcontrol number.

The collection of information containedin this notice is in Part III. The informa-tion is required to prevent excessive tax-ation under §871(l) during the transitionperiod. The information will be used forthe same purpose described in the preced-ing sentence. The collections of informa-tion are required to obtain a benefit. Thelikely respondents are businesses or otherfor-profit institutions.

The estimated total annual reportingand/or recordkeeping burden is 1,000hours.

The estimated annual burden per re-spondent/recordkeeper varies from 1minute to 15 minutes, depending on indi-vidual circumstances, with an estimatedaverage of 10 minutes. The estimatednumber of respondents and/or recordkeep-ers is 6,000.

The estimated frequency of responses(used for reporting requirements only) isonce.

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

June 14, 2010 761 2010–24 I.R.B.

VI. EFFECT ON OTHER DOCUMENTS

Notice 97–66 is modified as provided inPart I.

VII. REQUEST FOR COMMENTS

The Treasury Department and the Ser-vice invite comments on the guidance de-scribed in this notice. In particular, com-ments are requested on the following is-sues.

1. The definition of a Qualified Securi-ties Lender.

2. The treatment of substitute dividendspaid to a Qualified Securities Lenderwhere that entity holds the relevantposition in a proprietary account.

3. Whether additional rules are requiredto address abusive Securities LendingTransactions that avoid U.S. tax in ad-dition to the anti-abuse regulation de-scribed above.

4. The treatment of substitute dividendspaid with respect to securities trans-ferred from a commingled accountcontaining securities held by a Qual-ified Securities Lender in its propri-etary capacity and other securitiesheld in connection with transactionsfor customers.

5. Whether a Qualified Intermediarywith Qualified Securities Lender sta-tus (a “Lender QI”) should be re-quired to provide the withholdingrate pool information of its customersto another Qualified Intermediary (a“Borrower QI”) that has borrowedsecurities in a Securities LendingTransaction. Whether a Borrower QIshould be required to withhold andcarry out information reporting on asubstitute dividend payment made toa Lender QI based upon the withhold-ing information provided by a LenderQI with respect to its customers.

6. The definition of a series of Securi-ties Lending Transactions, and howrelated securities loans in a seriesshould be identified, including ap-propriate methods pursuant to whicha Qualified Securities Lender maydetermine which securities within apool of fungible securities are attrib-utable to particular Securities LendingTransactions.

The principal authors of this notice arePeter Merkel and John Sweeney of the Of-fice of Associate Chief Counsel (Interna-tional). For further information regardingthis notice, contact Peter Merkel or JohnSweeney at (202) 622–3870 (not a toll-freecall).

26 CFR 601.601: Rules and regulations.(Also Part I, §§ 25, 103, 143; 1.25–4T, 1.103–1,6a.103A–2.)

Rev. Proc. 2010–23

SECTION 1. PURPOSE

This revenue procedure provides guid-ance with respect to the United States andarea median gross income figures that areto be used by issuers of qualified mortgagebonds, as defined in § 143(a) of the Inter-nal Revenue Code, and issuers of mortgagecredit certificates, as defined in § 25(c), incomputing the housing cost/income ratiodescribed in § 143(f)(5).

SECTION 2. BACKGROUND

.01 Section 103(a) provides that, ex-cept as provided in § 103(b), gross incomedoes not include interest on any state orlocal bond. Section 103(b)(1) providesthat § 103(a) shall not apply to any pri-vate activity bond that is not a qualifiedbond (within the meaning of § 141). Sec-tion 141(e) provides that the term “qual-ified bond” includes any private activitybond that (1) is a qualified mortgage bond,(2) meets the applicable volume cap re-quirements under § 146, and (3) meets theapplicable requirements under § 147.

.02 Section 143(a)(1) provides that theterm “qualified mortgage bond” means abond that is issued as part of a “qualifiedmortgage issue”. Section 143(a)(2)(A)provides that the term “qualified mort-gage issue” means an issue of one or morebonds by a state or political subdivisionthereof, but only if (i) all proceeds of theissue (exclusive of issuance costs and areasonably required reserve) are to be usedto finance owner-occupied residences; (ii)the issue meets the requirements of sub-sections (c), (d), (e), (f), (g), (h), (i), and(m)(7) of § 143; (iii) the issue does notmeet the private business tests of para-graphs (1) and (2) of § 141(b); and (iv)

with respect to amounts received morethan 10 years after the date of issuance,repayments of $250,000 or more of prin-cipal on financing provided by the issueare used not later than the close of the firstsemi-annual period beginning after thedate the prepayment (or complete repay-ment) is received to redeem bonds that arepart of the issue.

.03 Section 143(f) imposes eligibilityrequirements concerning the maximumincome of mortgagors for whom financingmay be provided by qualified mortgagebonds. Section 25(c)(2)(A)(iii)(IV) pro-vides that recipients of mortgage creditcertificates must meet the income re-quirements of § 143(f). Generally, under§§ 143(f)(1) and 25(c)(2)(A)(iii)(IV),these income requirements are met onlyif all owner-financing under a qualifiedmortgage bond and all certified indebt-edness amounts under a mortgage creditcertificate program are provided to mort-gagors whose family income is 115 percentor less of the applicable median familyincome. Under § 143(f)(6), the incomelimitation is reduced to 100 percent of theapplicable median family income if thereare fewer than three individuals in thefamily of the mortgagor.

.04 Section 143(f)(4) provides that theterm “applicable median family income”means the greater of (A) the area mediangross income for the area in which the res-idence is located, or (B) the statewide me-dian gross income for the state in which theresidence is located.

.05 Section 143(f)(5) provides for anupward adjustment of the income limita-tions in certain high housing cost areas.Under § 143(f)(5)(C), a high housingcost area is a statistical area for whichthe housing cost/income ratio is greaterthan 1.2. The housing cost/income ratiois determined under § 143(f)(5)(D) bydividing (a) the applicable housing priceratio by (b) the ratio that the area mediangross income bears to the median grossincome for the United States. The applica-ble housing price ratio is the new housingprice ratio (new housing average purchaseprice for the area divided by the new hous-ing average purchase price for the UnitedStates) or the existing housing price ratio(existing housing average area purchaseprice divided by the existing housing aver-age purchase price for the United States),whichever results in the housing cost/in-

2010–24 I.R.B. 762 June 14, 2010

come ratio being closer to 1. This incomeadjustment applies only to bonds issued,and nonissued bond amounts elected, afterDecember 31, 1988. See § 4005(h) of theTechnical and Miscellaneous Revenue Actof 1988, 1988–3 C.B. 1, 311 (1988).

.06 The Department of Housing andUrban Development (HUD) has com-puted the median gross income for theUnited States, the states, and statisti-cal areas within the states. The incomeinformation was released to the HUDregional offices on May 14, 2010, andmay be obtained by calling the HUDreference service at 1–800–245–2691.The income information is also avail-able at HUD’s World Wide Web site,http:huduser.org/datasets/il.html, whichprovides a menu from which you mayselect the year and type of data of interest.The Internal Revenue Service annuallypublishes the median gross income for theUnited States.

.07 The most recent nationwide averagepurchase prices and average area purchaseprice safe harbor limitations were pub-lished on March 16, 2009, in Rev. Proc.2009–18, 2009–11 I.R.B. 686.

SECTION 3. APPLICATION

.01 When computing the income re-quirements of § 143(f), issuers of quali-fied mortgage bonds and mortgage creditcertificates must use either (1) the me-dian gross income for the United States,

the states, and statistical areas within thestates, as released to the HUD regional of-fices on March 19, 2009, or (2) the me-dian gross income for the United States,the states, and statistical areas within thestates, as released to the HUD regional of-fices on May 14, 2010.

.02 If an issuer uses the median grossincome for the United States, the states,and statistical areas within the states, asreleased to the HUD regional offices onMarch 19, 2009, to compute the hous-ing cost/income ratio under § 143(f)(5),the issuer must use the median gross in-come for the United States, the states,and statistical areas within the states, asreleased to the HUD regional offices onMarch 19, 2009, for all purposes under§ 143(f). Likewise, if an issuer usesthe median gross income for the UnitedStates, the states, and statistical areaswithin the states, as released to the HUDregional offices on May 14, 2010, tocompute the housing cost/income ratiounder § 143(f)(5), the issuer must use themedian gross income for the United States,the states, and statistical areas within thestates, as released to the HUD regionaloffices on May 14, 2010, for all purposesunder § 143(f).

SECTION 4. EFFECT ON OTHERREVENUE PROCEDURES

.01 Rev. Proc. 2009–27, 2009–19I.R.B. 938, is obsolete except as provided

in §§ 3.01, 3.02, or 5.01 of this revenueprocedure.

.02 This revenue procedure does not af-fect the effective date provisions of Rev.Rul. 86–124, 1986–2 C.B. 27. Those ef-fective date provisions will remain opera-tive at least until the Service publishes anew revenue ruling that conforms the ap-proach to effective dates set forth in Rev.Rul. 86–124 to the general approach takenin this revenue procedure.

SECTION 5. EFFECTIVE DATES

.01 Issuers must use the United Statesand area median gross income figuresspecified in § 3.01 of this revenue proce-dure for commitments to provide financingthat are made, or (if the purchase precedesthe financing commitment) for residencesthat are purchased, in the period that be-gins on May 14, 2010, and ends on thedate when these United States and areamedian gross income figures are renderedobsolete by a new revenue procedure.

DRAFTING INFORMATION

The principal authors of this rev-enue procedure are David White andTimothy Jones of the Office of AssociateChief Counsel (Financial Institutions& Products). For further informationregarding this revenue procedure, contactMr. White or Mr. Jones at (202) 622–3980(not a toll-free call).

June 14, 2010 763 2010–24 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.

2010–24 I.R.B. i June 14, 2010

Numerical Finding List1

Bulletins 2010–1 through 2010–24

Announcements:

2010-1, 2010-4 I.R.B. 333

2010-2, 2010-2 I.R.B. 271

2010-3, 2010-4 I.R.B. 333

2010-4, 2010-5 I.R.B. 384

2010-5, 2010-6 I.R.B. 402

2010-6, 2010-6 I.R.B. 402

2010-7, 2010-6 I.R.B. 403

2010-8, 2010-7 I.R.B. 408

2010-9, 2010-7 I.R.B. 408

2010-10, 2010-7 I.R.B. 410

2010-11, 2010-10 I.R.B. 438

2010-12, 2010-7 I.R.B. 410

2010-13, 2010-8 I.R.B. 426

2010-14, 2010-11 I.R.B. 449

2010-15, 2010-10 I.R.B. 438

2010-16, 2010-11 I.R.B. 450

2010-17, 2010-13 I.R.B. 515

2010-18, 2010-12 I.R.B. 460

2010-19, 2010-14 I.R.B. 529

2010-20, 2010-15 I.R.B. 551

2010-21, 2010-15 I.R.B. 551

2010-22, 2010-16 I.R.B. 602

2010-23, 2010-16 I.R.B. 602

2010-24, 2010-15 I.R.B. 587

2010-25, 2010-15 I.R.B. 588

2010-26, 2010-16 I.R.B. 604

2010-27, 2010-18 I.R.B. 657

2010-28, 2010-17 I.R.B. 616

2010-29, 2010-17 I.R.B. 616

2010-30, 2010-19 I.R.B. 668

2010-31, 2010-19 I.R.B. 681

2010-32, 2010-19 I.R.B. 681

2010-33, 2010-18 I.R.B. 658

2010-34, 2010-20 I.R.B. 685

2010-35, 2010-20 I.R.B. 685

2010-36, 2010-21 I.R.B. 696

2010-37, 2010-20 I.R.B. 685

2010-38, 2010-21 I.R.B. 696

2010-39, 2010-22 I.R.B. 724

2010-40, 2010-22 I.R.B. 725

Notices:

2010-1, 2010-2 I.R.B. 251

2010-2, 2010-2 I.R.B. 251

2010-3, 2010-2 I.R.B. 253

2010-4, 2010-2 I.R.B. 253

2010-5, 2010-2 I.R.B. 256

2010-6, 2010-3 I.R.B. 275

2010-7, 2010-3 I.R.B. 296

2010-8, 2010-3 I.R.B. 297

2010-9, 2010-3 I.R.B. 298

Notices— Continued:

2010-10, 2010-3 I.R.B. 299

2010-11, 2010-4 I.R.B. 326

2010-12, 2010-4 I.R.B. 326

2010-13, 2010-4 I.R.B. 327

2010-14, 2010-5 I.R.B. 344

2010-15, 2010-6 I.R.B. 390

2010-16, 2010-6 I.R.B. 396

2010-17, 2010-14 I.R.B. 519

2010-18, 2010-14 I.R.B. 525

2010-19, 2010-7 I.R.B. 404

2010-20, 2010-8 I.R.B. 422

2010-21, 2010-12 I.R.B. 451

2010-22, 2010-10 I.R.B. 435

2010-23, 2010-11 I.R.B. 441

2010-24, 2010-12 I.R.B. 452

2010-25, 2010-14 I.R.B. 527

2010-26, 2010-14 I.R.B. 527

2010-27, 2010-15 I.R.B. 531

2010-28, 2010-15 I.R.B. 541

2010-29, 2010-15 I.R.B. 547

2010-30, 2010-18 I.R.B. 650

2010-31, 2010-16 I.R.B. 594

2010-32, 2010-16 I.R.B. 594

2010-33, 2010-17 I.R.B. 609

2010-34, 2010-17 I.R.B. 612

2010-35, 2010-19 I.R.B. 660

2010-36, 2010-17 I.R.B. 612

2010-37, 2010-18 I.R.B. 654

2010-38, 2010-20 I.R.B. 682

2010-39, 2010-24 I.R.B. 756

2010-40, 2010-21 I.R.B. 693

2010-41, 2010-22 I.R.B. 715

2010-42, 2010-23 I.R.B. 733

2010-43, 2010-22 I.R.B. 716

2010-44, 2010-22 I.R.B. 717

2010-45, 2010-23 I.R.B. 734

2010-46, 2010-24 I.R.B. 757

Proposed Regulations:

REG-132232-08, 2010-6 I.R.B. 401

REG-134235-08, 2010-16 I.R.B. 596

REG-137036-08, 2010-6 I.R.B. 398

REG-101896-09, 2010-5 I.R.B. 347

REG-117501-09, 2010-11 I.R.B. 442

REG-131028-09, 2010-4 I.R.B. 332

REG-148681-09, 2010-11 I.R.B. 443

REG-114494-10, 2010-22 I.R.B. 723

Revenue Procedures:

2010-1, 2010-1 I.R.B. 1

2010-2, 2010-1 I.R.B. 90

2010-3, 2010-1 I.R.B. 110

2010-4, 2010-1 I.R.B. 122

2010-5, 2010-1 I.R.B. 165

2010-6, 2010-1 I.R.B. 193

Revenue Procedures— Continued:

2010-7, 2010-1 I.R.B. 231

2010-8, 2010-1 I.R.B. 234

2010-9, 2010-2 I.R.B. 258

2010-10, 2010-3 I.R.B. 300

2010-11, 2010-2 I.R.B. 269

2010-12, 2010-3 I.R.B. 302

2010-13, 2010-4 I.R.B. 329

2010-14, 2010-12 I.R.B. 456

2010-15, 2010-7 I.R.B. 404

2010-16, 2010-19 I.R.B. 664

2010-17, 2010-8 I.R.B. 425

2010-18, 2010-9 I.R.B. 427

2010-19, 2010-13 I.R.B. 469

2010-20, 2010-14 I.R.B. 528

2010-21, 2010-13 I.R.B. 473

2010-22, 2010-23 I.R.B. 747

2010-23, 2010-24 I.R.B. 762

Revenue Rulings:

2010-1, 2010-2 I.R.B. 248

2010-2, 2010-3 I.R.B. 272

2010-3, 2010-3 I.R.B. 272

2010-4, 2010-4 I.R.B. 309

2010-5, 2010-4 I.R.B. 312

2010-6, 2010-6 I.R.B. 387

2010-7, 2010-8 I.R.B. 417

2010-8, 2010-10 I.R.B. 432

2010-9, 2010-13 I.R.B. 461

2010-10, 2010-13 I.R.B. 461

2010-11, 2010-14 I.R.B. 516

2010-12, 2010-18 I.R.B. 617

2010-13, 2010-21 I.R.B. 691

2010-15, 2010-23 I.R.B. 730

Tax Conventions:

2010-2, 2010-2 I.R.B. 271

2010-26, 2010-16 I.R.B. 604

2010-27, 2010-18 I.R.B. 657

Treasury Decisions:

9474, 2010-4 I.R.B. 322

9475, 2010-4 I.R.B. 304

9476, 2010-5 I.R.B. 336

9477, 2010-6 I.R.B. 385

9478, 2010-4 I.R.B. 315

9479, 2010-18 I.R.B. 618

9480, 2010-11 I.R.B. 439

9481, 2010-17 I.R.B. 605

9482, 2010-22 I.R.B. 698

9483, 2010-23 I.R.B. 726

9484, 2010-24 I.R.B. 748

1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin2009–52, dated December 28, 2009.

June 14, 2010 ii 2010–24 I.R.B.

Finding List of Current Actions onPreviously Published Items1

Bulletins 2010–1 through 2010–24

Announcements:

2009-23

Corrected by

Ann. 2010-29, 2010-17 I.R.B. 616

2009-51

Supplemented and superseded by

Ann. 2010-16, 2010-11 I.R.B. 450

2010-4

Corrected by

Ann. 2010-10, 2010-7 I.R.B. 410

2010-22

Corrected by

Ann. 2010-34, 2010-20 I.R.B. 685

Notices:

97-66

Modified by

Notice 2010-46, 2010-24 I.R.B. 757

2005-88

Superseded by

Notice 2010-13, 2010-4 I.R.B. 327

2006-87

Superseded by

Notice 2010-27, 2010-15 I.R.B. 531

2007-25

Superseded by

Notice 2010-27, 2010-15 I.R.B. 531

2007-77

Superseded by

Notice 2010-27, 2010-15 I.R.B. 531

2008-14

Modified and superseded by

Notice 2010-33, 2010-17 I.R.B. 609

2008-41

Modified by

Notice 2010-7, 2010-3 I.R.B. 296

2008-55

Modified by

Notice 2010-3, 2010-2 I.R.B. 253

2008-88

Modified by

Notice 2010-7, 2010-3 I.R.B. 296

2008-107

Superseded by

Notice 2010-27, 2010-15 I.R.B. 531

Notices— Continued:

2008-113

Modified by

Notice 2010-6, 2010-3 I.R.B. 275

2008-115

Modified by

Notice 2010-6, 2010-3 I.R.B. 275

2008-116

Modified and superseded by

Notice 2010-32, 2010-16 I.R.B. 594

2009-11

Amplified by

Notice 2010-9, 2010-3 I.R.B. 298

2009-13

Obsoleted by

T.D. 9478, 2010-4 I.R.B. 315REG-131028-09, 2010-4 I.R.B. 332

2009-35

Supplemented by

Notice 2010-17, 2010-14 I.R.B. 519

2009-38

Amplified and superseded by

Notice 2010-2, 2010-2 I.R.B. 251

2009-62

Modified and supplemented by

Notice 2010-23, 2010-11 I.R.B. 441

Proposed Regulations:

REG-127270-06

Hearing scheduled by

Ann. 2010-6, 2010-6 I.R.B. 402

REG-134235-08

Hearing scheduled by

Ann. 2010-33, 2010-18 I.R.B. 658

Revenue Procedures:

80-59

Modified and superseded by

Rev. Proc. 2010-11, 2010-2 I.R.B. 269

87-35

Obsoleted by

Rev. Proc. 2010-3, 2010-1 I.R.B. 110

2001-18

Superseded by

Rev. Proc. 2010-16, 2010-19 I.R.B. 664

2008-14

Updated by

Rev. Proc. 2010-15, 2010-7 I.R.B. 404

2009-1

Superseded by

Rev. Proc. 2010-1, 2010-1 I.R.B. 1

Revenue Procedures— Continued:

2009-2

Superseded by

Rev. Proc. 2010-2, 2010-1 I.R.B. 90

2009-3

Superseded by

Rev. Proc. 2010-3, 2010-1 I.R.B. 110

2009-4

Superseded by

Rev. Proc. 2010-4, 2010-1 I.R.B. 122

2009-5

Superseded by

Rev. Proc. 2010-5, 2010-1 I.R.B. 165

2009-6

Superseded by

Rev. Proc. 2010-6, 2010-1 I.R.B. 193

2009-7

Superseded by

Rev. Proc. 2010-7, 2010-1 I.R.B. 231

2009-8

Superseded by

Rev. Proc. 2010-8, 2010-1 I.R.B. 234

2009-9

Superseded by

Rev. Proc. 2010-9, 2010-2 I.R.B. 258

2009-15

Amplified and superseded by

Rev. Proc. 2010-12, 2010-3 I.R.B. 302

2009-17

Superseded by

Rev. Proc. 2010-21, 2010-13 I.R.B. 473

2009-25

Superseded by

Rev. Proc. 2010-3, 2010-1 I.R.B. 110

2009-27

Obsoleted by

Rev. Proc. 2010-23, 2010-24 I.R.B. 762

2009-55

Corrected by

Ann. 2010-11, 2010-10 I.R.B. 438

2010-1

Corrected by

Ann. 2010-5, 2010-6 I.R.B. 402

Revenue Rulings:

67-436

Obsoleted by

REG-101896-09, 2010-5 I.R.B. 347

92-19

Supplemented in part by

Rev. Rul. 2010-7, 2010-8 I.R.B. 417

1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin 2009–52, dated December 28,2009.

2010–24 I.R.B. iii June 14, 2010

Revenue Rulings— Continued:

2008-52

Supplemented and superseded by

Rev. Rul. 2010-2, 2010-3 I.R.B. 272

Treasury Decisions:

9350

Corrected by

Ann. 2010-38, 2010-21 I.R.B. 696Ann. 2010-39, 2010-22 I.R.B. 724

9424

Corrected by

Ann. 2010-18, 2010-12 I.R.B. 460

9443

Corrected by

Ann. 2010-8, 2010-7 I.R.B. 408

9458

Corrected by

Ann. 2010-7, 2010-6 I.R.B. 403

June 14, 2010 iv 2010–24 I.R.B.

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