IRB 2010-23 (Rev. June 7, 2010) - Internal Revenue Service · 2012. 7. 17. · Bulletin No. 2010-23...

Bulletin No. 2010-23June 7, 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

Rev. Rul. 2010–15, page 730.Federal rates; adjusted federal rates; adjusted federallong-term rate and the long-term exempt rate. For pur-poses of sections 382, 642, 1274, 1288, and other sectionsof the Code, tables set forth the rates for June 2010.

T.D. 9483, page 726.Final regulations under section 274 of the Code add clearlymarked public safety officer vehicles as a new type of qualifiednonpersonal use vehicle.

Notice 2010–42, page 733.This notice announces the phase-out of the new qualified hybridmotor vehicle credit and the new advanced lean burn technol-ogy motor vehicle credit for passenger automobiles and lighttrucks manufactured by Volkswagen Group of America that arepurchased for use or lease in the United States beginning onJuly 1, 2010.

Rev. Proc. 2010–22, page 747.2011 inflation adjusted amounts for health savings ac-counts. This procedure provides the 2011 inflation adjustedamounts for Health Savings Accounts (HSAs) under section223 of the Code.

ADMINISTRATIVE

Notice 2010–45, page 734.This notice establishes the qualifying therapeutic discoveryproject program under section 48D of the Code. Section9023(a) of the Patient Protection and Affordable Care Act(the Act) added section 48D to the Code as part of theinvestment credit under section 46. Section 48D provides

a nonrefundable tax credit equal to 50 percent of an eligibletaxpayer’s qualified investment in a qualifying therapeutic dis-covery project. Under section 9023(e) of the Act, an eligibletaxpayer may elect to receive a grant in lieu of credits. Section48D(d)(1)(B) limits the total amount of credits or grants to beallocated under the program to $1 billion during the two-yearperiod from 2009 through 2010. The Service, in consultationwith the Department of Health and Human Services, will awardcertifications for qualified investments. The credits or grantswill only be available to taxpayers having 250 or fewer full-timeand part-time employees.

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 7, 2010 2010–23 I.R.B.

Part I. Rulings and Decisions Under the Internal Revenue Codeof 1986Section 42.—Low-IncomeHousing Credit

The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the monthof June 2010. See Rev. Rul. 2010-15, page 730.

Section 274.—Disallowanceof Certain Entertainment,etc., Expenses26 CFR 1.274–5: Substantiation requirements.

T.D. 9483

DEPARTMENT OF THETREASURYInternal Revenue Service26 CFR Part 1

Qualified Nonpersonal UseVehicles

AGENCY: Internal Revenue Service(IRS), Treasury.

ACTION: Final Regulations.

SUMMARY: This document contains fi-nal regulations relating to qualified non-personal use vehicles as defined in section274(i). Qualified nonpersonal use vehi-cles are excepted from the substantiationrequirements of section 274(d)(4) that ap-ply to listed property as defined in section280F(d)(4). These final regulations addclearly marked public safety officer vehi-cles as a new type of qualified nonpersonaluse vehicle. These final regulations af-fect employers that provide their employ-ees with qualified nonpersonal use vehi-cles and the employees who use such ve-hicles.

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

Applicability Date: These regulationsapply to uses of clearly marked publicsafety officer vehicles occurring afterMay 19, 2010.

FOR FURTHER INFORMATIONCONTACT: Don Parkinson at (202)622–6040 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

SUPPLEMENTARY INFORMATION:

This document contains final IncomeTax Regulations under section 274(i)added by section 2(b) of Public Law 99–44(May 24, 1985), which provides a defini-tion of qualified nonpersonal use vehicle.Temporary Regulation §1.274–5T(k),identifying categories of qualified non-personal use vehicles and TemporaryRegulation §1.274–5T(l), providing fordefinitions of the terms “automobile,”“vehicle,” “employer,” “employee,” and“personal use” were issued in 1985. (T.D.8061, 1985–2 C.B. 93 (1985)). A no-tice of proposed rulemaking was issuedby cross-reference to Temporary Regula-tion §1.274–5T(k). (LR–145–84, 50 FR46088, 1985–2 C.B. 809 (1985)).

On June 9, 2008, proposed regulations(REG–106897–08, 2008–1 C.B. 1175)were published in the Federal Register(73 FR 32500). The proposed regulationsincorporated the text of §1.274–5T(k) andadded clearly marked public safety offi-cer vehicles as a new type of qualifiednonpersonal use vehicle, listed along withclearly marked police and fire vehiclesat §1.274–5(k)(2)(ii)(A). A definition ofclearly marked public safety officer vehi-cles was added to the provision definingclearly marked police and fire vehiclesat §1.274–5(k)(3), and an example il-lustrating application of the rules to apublic safety officer vehicle was addedat §1.274–5(k)(8) Example 3. The pro-posed regulations incorporated the textof §1.274–5T(l) with no changes. Thecorresponding provisions of the proposedregulations in LR–145–84 were with-drawn on June 8, 2008.

Written public comments on the pro-posed regulations at §1.274–5(k) and (l)were received and no hearing was re-quested. After consideration of all thecomments, these final regulations adoptthe provisions of the proposed regula-tions with an amendment to Example 3and the provision of a new Example 4in §1.274–5(k)(8) which are intended toassist taxpayers in determining whether

individual employees meet the definitionof public safety officer. The temporaryregulations at §1.274–5T(k) and (l) arewithdrawn concurrently with the publica-tion of these final regulations in the Fed-eral Register. The remaining temporaryregulations at §1.274–5T are unaffectedby this Treasury decision.

Summary of Comments andExplanation of Provisions

Section 274(d) provides that a taxpayeris not allowed a deduction or credit for cer-tain expenses unless the expenses are sub-stantiated. These substantiation require-ments apply to expenses incurred in theuse of any listed property (defined in sec-tion 280F(d)(4)), which includes any pas-senger automobile and any other propertyused as a means of transportation. Sec-tion 274(d) does not apply to any quali-fied nonpersonal use vehicle as defined insection 274(i). Both business and personaluse of a vehicle that meets the criteria tobe a qualified nonpersonal use vehicle un-der section 274(i) will also qualify as aworking condition fringe benefit that is ex-cluded from the recipient’s income undersection 132(d). Thus, if an employer pro-vides an employee with a qualified nonper-sonal use vehicle, the employee does notneed to keep records of how the vehicle isused, and both the business and the per-sonal use of the vehicle will be excludedfrom the employee’s income as a work-ing condition fringe benefit under section132(d).

Section 274(i) provides that a quali-fied nonpersonal use vehicle is any vehi-cle which by reason of its nature is notlikely to be used more than a de minimisamount for personal purposes. The leg-islative history to section 274(i) provideda list of qualified nonpersonal use vehiclesand identified a number of examples ofqualified nonpersonal use vehicles such asschool buses, qualified specialized utilityrepair trucks, and qualified moving vans.The legislative history indicated that Con-gress wanted the Commissioner to expandthe list to include other vehicles appropri-ate for listing because by their nature it ishighly unlikely that they will be used more

2010–23 I.R.B. 726 June 7, 2010

than a very minimal amount for personalpurposes. H.R. Rep. No. 99–34, at 11(1985).

Passenger automobiles such as sedansand sport utility vehicles are generally notexempt from taxation as qualified nonper-sonal use vehicles because by design theycan easily be used for personal purposes.However, unmarked law enforcement ve-hicles and clearly marked police and firevehicles are included in the list of quali-fied nonpersonal use vehicles set forth inthe legislative history to section 274(i) andincorporated into these final regulations.

Under prior rules, clearly marked ve-hicles provided to Federal, state and lo-cal government workers who respond toemergency situations did not satisfy thecurrent regulations governing qualifiednonpersonal use vehicles if the individ-ual workers were not employed by eitherthe fire department or police department.These final regulations, consistent with theproposed regulations, add clearly markedpublic safety officer vehicles to the listof qualified nonpersonal use vehicles sothat emergency responders who are notemployed by either the fire department orpolice department receive the same treat-ment as those who work for the police orfire department.

A clearly marked public safety officervehicle is a vehicle owned or leased bya governmental unit or any agency or in-strumentality thereof, that is required tobe used for commuting by a public safetyofficer as defined in section 402(l)(4)(C)who, when not on a regular shift, is oncall at all times, provided that any personaluse (other than commuting) of the vehicleoutside the limit of the public safety of-ficer’s obligation to respond to an emer-gency is prohibited by such governmen-tal unit. A public safety officer vehicle isclearly marked if, through painted insigniaor words, it is readily apparent that the ve-hicle is a public safety officer vehicle.

Section 402(l)(4)(C) provides that theterm “public safety officer” shall havethe same meaning given such term by theOmnibus Crime Control and Safe StreetsAct of 1968, as codified at 42 U.S.C. sec-tion 3796b(9)(A). The definition of publicsafety officer is part of the Public SafetyOfficer’s Benefits Act which was enactedas part L of Title I of the Omnibus CrimeControl and Safe Streets Act of 1968. 42U.S.C. section 3796b(9)(A) defines public

safety officer as “an individual servinga public agency in an official capacity,with or without compensation, as a lawenforcement officer, a firefighter, a chap-lain, or as a member of a rescue squad orambulance crew.”

Some commenters suggested eliminat-ing some of the requirements pertainingto qualified nonpersonal use vehicles. Inparticular, commenters suggested elimina-tion of the requirement that the vehicle beclearly marked, or the requirement that theindividual be on call at all times, or therequirement that the vehicle be speciallyequipped.

Qualified nonpersonal use vehicleswere exempted from the substantiationand recordkeeping requirements imposedunder section 274(d) and minimal personaluse of such vehicles was excluded fromincome because the nature of the vehiclesprevents more than a de minimis amountof personal use. If an individual is noton call at all times, personal use may bemore than de minimis. If the vehicle isnot required to be specially equipped orclearly marked, the vehicle will functioneasily as a personal use vehicle and is notreadily distinguishable from vehicles rou-tinely used for personal purposes. Thus,these suggested changes were not adoptedbecause they conflict with the underlyinggoal and purpose of the statute.

A number of comments were made urg-ing that various specific types of workersbe included within the definition “publicsafety officer.” For example, commenterssuggested the definition of public safetyofficer should be expanded to includeemployees who respond to local disasterssuch as flash floods, pipeline ruptures,hazardous material accidents, bridge col-lapses, and mining accidents. Additionallycommenters suggested that child protec-tive service workers, emergency manage-ment personnel, and members of IncidentManagement Teams which are part ofthe Department of Homeland Security’sNational Incident Management Systemshould all be included in the definition ofpublic safety officer.

The determination of the status of an in-dividual as a public safety officer is madepursuant to a facts and circumstances anal-ysis based on an evaluation of the relevantcriteria in the Public Safety Officers’ Ben-efits Act of 1978 and its regulations (PSOBRegulations, 28 C.F.R. pt. 32). The PSOB

regulations set forth criteria to be used indetermining whether individual workersare public safety officers. For example, thePSOB Regulations at 28 C.F.R. 32.3 define“rescue squad or ambulance crew” asfollows: “a squad or crew whose membersare rescue workers, ambulance drivers,paramedics, health-care responders,emergency medical technicians, or othersimilar workers who—

(1) Are trained in rescue activity or theprovision of emergency medical services;and

(2) As such members, have the legalauthority and responsibility to—

(i) Engage in rescue activity; or(ii) Provide emergency medical ser-

vices.”Rescue activity means “search or rescue

assistance in locating or extracting fromdanger persons lost, missing, or in immi-nent danger of serious bodily harm.”

Emergency medical services means—“(1) Provision of first-response emer-

gency medical care (other than in a perma-nent medical-care facility); or

(2) Transportation of persons in med-ical distress (or under emergency condi-tions) to medical-care facilities.”

As a general rule, the determination ofthe status of an individual as a rescue squador ambulance crew member is based onwhether that individual is trained to engagein rescue activity or to provide emergencymedical services and whether that individ-ual has legal authority and legal responsi-bility to engage in rescue activity or pro-vide emergency medical services.

Thus, an individual’s job title is not de-terminative of his or her status as a publicsafety officer. Instead, the determination ismade based on the facts and circumstancesof the individual’s employment, includingtheir training, legal authority and legal re-sponsibility. Example 3 has been modifiedand an Example 4 has been added to clarifythis analysis using the criteria in the PSOBRegulations. Moreover, these final regula-tions have not been amended to add addi-tional job titles to the definition of publicsafety officer as suggested by commentersbecause an employee’s job title is not de-terminative of their status as a public safetyofficer.

June 7, 2010 727 2010–23 I.R.B.

Special Analyses

It has been determined that this Trea-sury decision is not a significant regula-tory action as defined in Executive Order12866. Therefore, a regulatory assessmentis not required. It has also been deter-mined that section 553(b) of the Admin-istrative Procedure Act (5 U.S.C. chapter5) does not apply to these regulations. Itis hereby certified that these regulationswill not have a significant economic im-pact on a substantial number of small enti-ties. This certification is based upon thefact that these regulations do not requirea collection of information and do not im-pose any new or different requirements onsmall entities. Therefore, a RegulatoryFlexibility Analysis under the RegulatoryFlexibility Act (5 U.S.C. chapter 6) is notrequired. Pursuant to section 7805(f) ofthe Internal Revenue Code, this notice ofproposed rulemaking has been submittedto the Chief Council for Advocacy of theSmall Business Administration for com-ment on its impact on small business.

Drafting Information

The principal author of these regula-tions is Don M. Parkinson, Office of theAssociate Chief Counsel (Tax Exempt andGovernment Entities). However, otherpersonnel from the IRS and TreasuryDepartment participated in their develop-ment.

* * * * *

Adoption of Amendments to theRegulations

Accordingly, 26 CFR part 1 is amendedas follows:

PART 1—INCOME TAXES

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

Authority: 26 U.S.C. 7805 * * *Par. 2. Section 1.132–5 paragraph (h)

is revised to read as follows:

§1.132–5 Working condition fringes.

* * * * *(h) Qualified nonpersonal use vehi-

cles—(1) In general. Except as providedin paragraph (h)(2) of this section, 100percent of the value of the use of a quali-fied nonpersonal use vehicle (as described

in §1.274–5(k)) is excluded from grossincome as a working condition fringe,provided that, in the case of a vehicle de-scribed in §1.274–5(k)(3) through (8), theuse of the vehicle conforms to the require-ments of paragraphs (k)(3) through (8).

(2) Shared usage of qualified nonper-sonal use vehicles. In general, a workingcondition fringe under this paragraph (h) isavailable to the driver and all passengers ofa qualified nonpersonal use vehicle. How-ever, a working condition fringe under thisparagraph (h) is available only with respectto the driver and not with respect to anypassengers of a qualified nonpersonal usevehicle described in §1.274–5(k)(2)(ii)(L)or (P).

* * * * *Par. 3. Section 1.274–5 paragraphs (k)

and (l) and the last sentence of paragraph(m) are revised to read as follows:

§1.274–5 Substantiation Requirements.

* * * * *(k) Exceptions for qualified nonper-

sonal use vehicles—(1) In general. Thesubstantiation requirements of section274(d) and this section do not apply to anyqualified nonpersonal use vehicle (as de-fined in paragraph (k)(2) of this section).

(2) Qualified nonpersonal use vehi-cle—(i) In general. For purposes of section274(d) and this section, the term qualifiednonpersonal use vehicle means any ve-hicle which, by reason of its nature (thatis, design), is not likely to be used morethan a de minimis amount for personalpurposes.

(ii) List of vehicles. Vehicles which arequalified nonpersonal use vehicles includethe following:

(A) Clearly marked police, fire, andpublic safety officer vehicles (as definedand to the extent provided in paragraph(k)(3) of this section),

(B) Ambulances used as such or hearsesused as such,

(C) Any vehicle designed to carry cargowith a loaded gross vehicle weight over14,000 pounds,

(D) Bucket trucks (cherry pickers),(E) Cement mixers,(F) Combines,(G) Cranes and derricks,(H) Delivery trucks with seating only

for the driver, or only for the driver plusa folding jump seat,

(I) Dump trucks (including garbagetrucks),

(J) Flatbed trucks,(K) Forklifts,(L) Passenger buses used as such with a

capacity of at least 20 passengers,(M) Qualified moving vans (as defined

in paragraph (k)(4) of this section),(N) Qualified specialized utility repair

trucks (as defined in paragraph (k)(5) ofthis section),

(O) Refrigerated trucks,(P) School buses (as defined in section

4221(d)(7)(c)),(Q) Tractors and other special purpose

farm vehicles,(R) Unmarked vehicles used by law en-

forcement officers (as defined in paragraph(k)(6) of this section) if the use is officiallyauthorized, and

(S) Such other vehicles as the Commis-sioner may designate.

(3) Clearly marked police, fire, or pub-lic safety officer vehicles. A police, fire,or public safety officer vehicle is a vehicle,owned or leased by a governmental unit, orany agency or instrumentality thereof, thatis required to be used for commuting by apolice officer, fire fighter, or public safetyofficer (as defined in section 402(l)(4)(C)of this chapter) who, when not on a reg-ular shift, is on call at all times, providedthat any personal use (other than commut-ing) of the vehicle outside the limit of thepolice officer’s arrest powers or the firefighter’s or public safety officer’s obliga-tion to respond to an emergency is pro-hibited by such governmental unit. A po-lice, fire, or public safety officer vehicle isclearly marked if, through painted insigniaor words, it is readily apparent that the ve-hicle is a police, fire, or public safety offi-cer vehicle. A marking on a license plateis not a clear marking for purposes of thisparagraph (k).

(4) Qualified moving van. The termqualified moving van means any truck orvan used by a professional moving com-pany in the trade or business of movinghousehold or business goods if—

(i) No personal use of the van is allowedother than for travel to and from a movesite (or for de minimis personal use, suchas a stop for lunch on the way between twomove sites);

(ii) Personal use for travel to and froma move site is an irregular practice (that

2010–23 I.R.B. 728 June 7, 2010

is, not more than five times a month onaverage); and

(iii) Personal use is limited to situationsin which it is more convenient to the em-ployer, because of the location of the em-ployee’s residence in relation to the loca-tion of the move site, for the van not to bereturned to the employer’s business loca-tion.

(5) Qualified specialized utility repairtruck. The term qualified specialized util-ity repair truck means any truck (not in-cluding a van or pickup truck) specificallydesigned and used to carry heavy tools,testing equipment, or parts if—

(i) The shelves, racks, or other perma-nent interior construction which has beeninstalled to carry and store such heavyitems is such that it is unlikely that thetruck will be used more than a de minimisamount for personal purposes; and

(ii) The employer requires the em-ployee to drive the truck home in order tobe able to respond in emergency situationsfor purposes of restoring or maintainingelectricity, gas, telephone, water, sewer, orsteam utility services.

(6) Unmarked law enforcement vehi-cles—(i) In general. The substantiation re-quirements of section 274(d) and this sec-tion do not apply to officially authorizeduses of an unmarked vehicle by a “law en-forcement officer”. To qualify for this ex-ception, any personal use must be autho-rized by the Federal, State, county, or localgovernmental agency or department thatowns or leases the vehicle and employsthe officer, and must be incident to law-en-forcement functions, such as being able toreport directly from home to a stakeout orsurveillance site, or to an emergency situ-ation. Use of an unmarked vehicle for va-cation or recreation trips cannot qualify asan authorized use.

(ii) Law enforcement officer. The termlaw enforcement officer means an individ-ual who is employed on a full-time basisby a governmental unit that is responsiblefor the prevention or investigation of crimeinvolving injury to persons or property (in-cluding apprehension or detention of per-sons for such crimes), who is authorizedby law to carry firearms, execute searchwarrants, and to make arrests (other thanmerely a citizen’s arrest), and who regu-larly carries firearms (except when it is notpossible to do so because of the require-ments of undercover work). The term “law

enforcement officer” may include an ar-son investigator if the investigator other-wise meets the requirements of this para-graph (k)(6)(ii), but does not include Inter-nal Revenue Service special agents.

(7) Trucks and vans. The substantiationrequirements of section 274(d) and thissection apply generally to any pickup truckor van, unless the truck or van has beenspecially modified with the result that it isnot likely to be used more than a de min-imis amount for personal purposes. For ex-ample, a van that has only a front benchfor seating, in which permanent shelvingthat fills most of the cargo area has beeninstalled, that constantly carries merchan-dise or equipment, and that has been spe-cially painted with advertising or the com-pany’s name, is a vehicle not likely to beused more than a de minimis amount forpersonal purposes.

(8) Examples. The following exam-ples illustrate the provisions of paragraph(k)(3) and (6) of this section:

Example 1. Detective C, who is a “law enforce-ment officer” employed by a state police department,headquartered in City M, is provided with an un-marked vehicle (equipped with radio communica-tion) for use during off-duty hours because C must beable to communicate with headquarters and be avail-able for duty at any time (for example, to report toa surveillance or crime site). The police departmentgenerally has officially authorized personal use ofthe vehicle by C but has prohibited use of the vehiclefor recreational purposes or for personal purposesoutside the state. Thus, C’s use of the vehicle forcommuting between headquarters or a surveillancesite and home and for personal errands is authorizedpersonal use as described in paragraph (k)(6)(i) ofthis section. With respect to these authorized uses thevehicle is not subject to the substantiation require-ments of section 274(d) and the value of these usesis not included in C’s gross income.

Example 2. Detective T is a “law enforcement of-ficer” employed by City M. T is authorized to makearrests only within M’s city limits. T, along with allother officers of the force, is ordinarily on duty foreight hours each work day and on call during the othersixteen hours. T is provided with the use of a clearlymarked police vehicle in which T is required to com-mute to his home in City M. The police department’sofficial policy regarding marked police vehicles pro-hibits its personal use (other than commuting) of thevehicles outside the city limits. When not using thevehicle on the job, T uses the vehicle only for com-muting, personal errands on the way between workand home, and personal errands within City M. Alluse of the vehicle by T conforms to the requirementsof paragraph (k)(3) of this section. Therefore, thevalue of that use is excluded from T’s gross incomeas a working condition fringe and the vehicle is notsubject to the substantiation requirements of section274(d).

Example 3. Director C is employed by City M asthe director of the City’s rescue squad and is providedwith a vehicle for use in responding to emergencies.Director C is trained in rescue activity and has thelegal authority and legal responsibility to engage inrescue activity. The city’s rescue squad is not a partof City M’s police or fire departments. The director’svehicle is a sedan which is painted with insignia andwords identifying the vehicle as being owned by theCity’s rescue squad. C, when not on a regular shift, ison call at all times. The City’s official policy regard-ing clearly marked public safety officer vehicles pro-hibits personal use (other than for commuting) of thevehicle outside of the limits of the public safety of-ficer’s obligation to respond to an emergency. Whennot using the vehicle to respond to emergencies, CityM authorizes C to use the vehicle only for commut-ing, personal errands on the way between work andhome, and personal errands within the limits of C’sobligation to respond to emergencies. With respectto these authorized uses, the vehicle is not subject tothe substantiation requirements of section 274(d) andthe value of these uses is not includable in C’s grossincome.

Example 4. Coroner D is employed by CountyN to investigate and determine the cause, time, andmanner of certain deaths occurring in the County.Coroner D also safeguards the property of the de-ceased, notifies the next of kin, conducts inquests,and arranges for the burial of indigent persons. Dis provided with a vehicle for use by County N. Thevehicle is to be used in County N business and forcommuting. Personal use other than for commutingpurposes is forbidden. D is trained in rescue activitybut has no legal authority or legal responsibility to en-gage in rescue activity. D’s vehicle is a sedan whichis painted with insignia and words identifying it as aCounty N vehicle. D, when not on a regular shift, ison call at all times. D does not satisfy the criteria ofa public safety officer under 28 C.F.R. §32.3 (2008).Thus, D’s vehicle cannot qualify as a clearly markedpublic safety officer vehicle. Accordingly, businessuse of the vehicle is subject to the substantiation re-quirements of section 274(d), and the value of anypersonal use of the vehicle, such as commuting, is in-cludable in D’s gross income.

(l) Definitions. For purposes of section274(d) and this section, the terms automo-bile and vehicle have the same meaningsas prescribed in §1.61–21(d)(1)(ii) and(e)(2), respectively. Also, for purposesof section 274(d) and this section, theterms employer, employee and personaluse have the same meanings as prescribedin §1.274–6T(e).

(m) * * * However, paragraph (j)(3) ofthis section applies to expenses paid or in-curred after September 30, 2002, and para-graph (k) applies to clearly marked pub-lic safety officer vehicles, as defined in§1.274–5(k)(3), only with respect to usesoccurring after May 19, 2010.

Par. 4. Section 1.274–5T is amendedby revising paragraphs (k) and (l) to readas follows:

June 7, 2010 729 2010–23 I.R.B.

§1.274–5T Substantiation requirements(temporary).

* * * * *(k) and (l) [Reserved]. For further guid-

ance, see §1.274–5(k) and (l).

* * * * *Par. 5. Section 1.280F–6 is amended

by revising paragraph (b)(2)(ii) to read asfollows:

§1.280F–6 Special rules and definitions.

* * * * *(b) * * *(2) * * *(ii) Exception. The term “listed prop-

erty” does not include any vehicle that isa qualified nonpersonal use vehicle as de-fined in section 274(i) and §1.274–5(k).

* * * * *

Steven T. Miller,Deputy Commissioner

for Services and Enforcement.

Approved May 5, 2010.

Michael 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. 27934)

Section 280G.—GoldenParachute Payments

Federal short-term, mid-term, and long-term ratesare set forth for the month of June 2010. See Rev.Rul. 2010-15, page 730.

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

The adjusted applicable federal long-term rate isset forth for the month of June 2010. See Rev. Rul.2010-15, page 730.

Section 412.—MinimumFunding Standards


Section 467.—CertainPayments for the Use ofProperty or Services


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


Section 482.—Allocationof Income and DeductionsAmong Taxpayers


Section 483.—Interest onCertain Deferred Payments


Section 642.—SpecialRules for Credits andDeductions


Section 807.—Rules forCertain Reserves


Section 846.—DiscountedUnpaid Losses Defined


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

Federal rates; adjusted federal rates;adjusted federal long-term rate and thelong-term exempt rate. For purposes ofsections 382, 642, 1274, 1288, and othersections of the Code, tables set forth therates for June 2010.

Rev. Rul. 2010–15

This revenue ruling provides variousprescribed rates for federal income tax pur-poses for June 2010 (the current month).Table 1 contains the short-term, mid-term,and long-term applicable federal rates(AFR) for the current month for purposesof section 1274(d) of the Internal RevenueCode. Table 2 contains the short-term,mid-term, and long-term adjusted appli-cable federal rates (adjusted AFR) forthe current month for purposes of section1288(b). Table 3 sets forth the adjustedfederal long-term rate and the long-termtax-exempt rate described in section382(f). Table 4 contains the appropriatepercentages for determining the low-in-come housing credit described in section42(b)(1) for buildings placed in serviceduring the current month. However, undersection 42(b)(2), the applicable percentagefor non-federally subsidized new build-ings placed in service after July 30, 2008,and before December 31, 2013, shall notbe less than 9%. Finally, Table 5 containsthe federal rate for determining the presentvalue of an annuity, an interest for lifeor for a term of years, or a remainder ora reversionary interest for purposes ofsection 7520.

2010–23 I.R.B. 730 June 7, 2010

REV. RUL. 2010–15 TABLE 1

Applicable Federal Rates (AFR) for June 2010

Period for Compounding

Annual Semiannual Quarterly Monthly

Short-term

AFR .74% .74% .74% .74%110% AFR .81% .81% .81% .81%120% AFR .89% .89% .89% .89%130% AFR .96% .96% .96% .96%

Mid-term

AFR 2.72% 2.70% 2.69% 2.68%110% AFR 2.99% 2.97% 2.96% 2.95%120% AFR 3.27% 3.24% 3.23% 3.22%130% AFR 3.54% 3.51% 3.49% 3.48%150% AFR 4.09% 4.05% 4.03% 4.02%175% AFR 4.79% 4.73% 4.70% 4.68%

Long-term

AFR 4.30% 4.25% 4.23% 4.21%110% AFR 4.73% 4.68% 4.65% 4.64%120% AFR 5.17% 5.10% 5.07% 5.05%130% AFR 5.61% 5.53% 5.49% 5.47%


Adjusted AFR for June 2010

Period for Compounding

Annual Semiannual Quarterly Monthly

Short-term adjustedAFR

.76% .76% .76% .76%

Mid-term adjusted AFR 2.08% 2.07% 2.06% 2.06%

Long-term adjustedAFR

4.01% 3.97% 3.95% 3.94%


Rates Under Section 382 for June 2010

Adjusted federal long-term rate for the current month 4.01%

Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjustedfederal long-term rates for the current month and the prior two months.) 4.01%


Appropriate Percentages Under Section 42(b)(1) for June 2010

Note: Under Section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service afterJuly 30, 2008, and before December 31, 2013, shall not be less than 9%.

Appropriate percentage for the 70% present value low-income housing credit 7.81%

Appropriate percentage for the 30% present value low-income housing credit 3.35%

June 7, 2010 731 2010–23 I.R.B.


Rate Under Section 7520 for June 2010

Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,or a remainder or reversionary interest 3.2%

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


Section 7520.—ValuationTables


Section 7872.—Treatmentof Loans With Below-MarketInterest Rates


2010–23 I.R.B. 732 June 7, 2010

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

Notice 2010–42

SECTION 1. PURPOSE

This notice announces the creditphase-out schedule for new advanced leanburn technology motor vehicles and newqualified hybrid passenger automobilesand light trucks sold by Volkswagen Groupof America.

SECTION 2. BACKGROUND

Section 30B(a)(2) of the Internal Rev-enue Code provides for a credit determinedunder § 30B(c) for certain new advancedlean burn technology motor vehicles.Section 30B(a)(3) provides for a creditdetermined under § 30B(d) for certain newqualified hybrid motor vehicles. Both thenew advanced lean burn technology motorvehicle credit and the new qualified hybridmotor vehicle credit begin to phase out fora manufacturer’s passenger automobilesand light trucks in the second calendarquarter after the calendar quarter in whichat least 60,000 of the manufacturer’s pas-senger automobiles and light trucks thatqualify for either credit have been sold foruse or lease in the United States (deter-mined on a cumulative basis for sales afterDecember 31, 2005). Taxpayers purchas-ing the manufacturer’s vehicles during thefirst two calendar quarters of the phase-outperiod may claim only 50 percent of theotherwise allowable credit. Taxpayerspurchasing the manufacturer’s vehiclesduring the third and fourth calendar quar-ters of the phase-out period may claim

only 25 percent of the otherwise allowablecredit. No credit is available for vehiclespurchased after the last day of the fourthcalendar quarter of the phase-out period.Section 30B(k)(2) provides that the creditprovided by § 30B(a) shall not apply toany property purchased after December31, 2010.

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

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

In accordance with section 5.05 of No-tice 2006–9, Volkswagen Group of Amer-ica has submitted quarterly reports that in-dicate that its cumulative sales of quali-fied vehicles to retail dealers reached the60,000-vehicle limit during the calendarquarter ending March 31, 2010. Accord-ingly, the credit for all new advanced lean

burn technology motor vehicles or newqualified hybrid passenger automobiles orlight trucks sold by Volkswagen Group ofAmerica will begin to phase out on July 1,2010.

SECTION 3. SCOPE OF NOTICE

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

(1) sold by Volkswagen Group ofAmerica; and

(2) purchased for use or lease in theUnited States on or after July 1, 2010.

SECTION 4. CREDIT AMOUNT

.01 In general. If a new advanced leanburn technology motor vehicle or a newqualified hybrid passenger automobile orlight truck sold by Volkswagen Group ofAmerica is purchased for use or lease afterJuly 1, 2010, the allowable credit is as fol-lows:

(1) For vehicles purchased for use orlease on or after July 1, 2010, and onor before December 31, 2010, the creditis 50 percent of the otherwise allowableamount determined under § 30B(c) or (d)(whichever is applicable);

(2) For vehicles purchased for use orlease on or after January 1, 2011, no creditis allowable, not because of the phase-outprovisions of § 30B(f) but because thecredits under § 30B(c) and § 30B(d) expirefor vehicles purchased after that date.

.02 Certified Vehicles. The followingtables set forth the credit available on orafter July 1, 2010, for advanced lean burnmotor vehicles for which VolkswagenGroup of America received an acknowl-edgement of its certification from theService.

June 7, 2010 733 2010–23 I.R.B.

Table 1

July 1, 2010 — December 31, 2010

Model Years Model Credit Amount

2009 Audi Q7 3.0L TDI $575

2010 Audi Q7 3.0L TDI $575

2010 Audi A3 2.0L TDI $650

2010 Volkswagen Golf 2.0L TDI (automatic) $850

2010 Volkswagen Golf 2.0L TDI (manual) $650

2009 Volkswagen Jetta 2.0L TDI Sedan $650

2010 Volkswagen Jetta 2.0L TDI Sedan $650

2009 Volkswagen Jetta 2.0L TDI SportWagon $650

2010 Volkswagen Jetta 2.0L TDI SportWagon $650

2009 Volkswagen Touareg 3.0L TDI $575

2010 Volkswagen Touareg 3.0L TDI $575

Table 2

On or after January 1, 2011

Model Years Model Credit Amount

2009 Audi Q7 3.0L TDI $0.00

2010 Audi Q7 3.0L TDI $0.00

2010 Audi A3 2.0L TDI $0.00

2010 Volkswagen Golf 2.0L TDI (automatic) $0.00

2010 Volkswagen Golf 2.0L TDI (manual) $0.00

2009 Volkswagen Jetta 2.0L TDI Sedan $0.00

2010 Volkswagen Jetta 2.0L TDI Sedan $0.00

2009 Volkswagen Jetta 2.0L TDI SportWagon $0.00

2010 Volkswagen Jetta 2.0L TDI SportWagon $0.00

2009 Volkswagen Touareg 3.0L TDI $0.00

2010 Volkswagen Touareg 3.0L TDI $0.00

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

Qualifying TherapeuticDiscovery Project Credit

Notice 2010–45

SECTION 1. PURPOSE

This notice establishes the qualifyingtherapeutic discovery project programunder § 48D of the Internal RevenueCode (Code), as added to the Code bysection 9023(a) of the Patient Protec-

tion and Affordable Care Act of 2010(Pub. L. 111–148) (the Affordable CareAct). This notice provides the proceduresunder which an eligible taxpayer mayapply for certification from the InternalRevenue Service (Service) of a qualifiedinvestment with respect to a qualifyingtherapeutic discovery project as eligiblefor a credit, or for certain taxpayers, agrant under the program. The Service willconsult with the Department of Health and

2010–23 I.R.B. 734 June 7, 2010

Human Services (HHS) in conducting thisprogram as described below.

SECTION 2. BACKGROUND

.01 Section 46 of the Code provides thatthe amount of the investment credit for anytaxable year is the sum of the credits listedin § 46. That list includes the qualifyingtherapeutic discovery project credit.

.02 The qualifying therapeutic discov-ery project credit is provided under § 48D.Section 48D(a) of the Code providesthat the qualifying therapeutic discoveryproject credit for any taxable year is anamount equal to 50 percent of the quali-fied investment (as defined in § 48D(b))for that taxable year with respect to anyqualifying therapeutic discovery project(as defined in § 48D(c)(1)) of an eligibletaxpayer (as defined in § 48D(c)(2)). Theamount that is treated as a qualified invest-ment shall not exceed the amount certifiedunder section 5 of this notice as eligiblefor the credit under §48D.

.03 Section 48D(d)(1)(B) of the Codeprovides that the total amount of creditsthat may be allocated under the qualify-ing therapeutic discovery project programmay not exceed $1 billion for the 2-yearperiod beginning with 2009.

.04 Section 48D(d)(3) of the Code spec-ifies the criteria that must be considered indetermining the qualifying therapeutic dis-covery projects with respect to which qual-ified investments may be certified under§ 48D(d)(1)(A).

.05 The at-risk rules in § 49 of the Codeand the recapture and other special rulesin § 50 apply to the qualifying therapeuticdiscovery project credit.

.06 Section 48D applies to amountspaid or incurred after December 31, 2008,in taxable years beginning after that dateunder section 9023(f) of the AffordableCare Act.

.07 Section 9023(e) of the AffordableCare Act provides that taxpayers may re-ceive grants in lieu of qualified therapeuticdiscovery project credits.

SECTION 3. ESTABLISHMENT OFTHE QUALIFYING THERAPEUTICDISCOVERY PROJECT PROGRAM

Section 48D(d)(1) of the Code pro-vides that not later than 60 days af-ter March 23, 2010, the date of theenactment of the Affordable Care Act, the

Secretary of the Treasury or his delegate(the Secretary), in consultation with theSecretary of Health and Human Services,shall establish a qualifying therapeuticdiscovery project program to considerand award certifications for qualifiedinvestments eligible for the credit toqualifying therapeutic discovery projectsponsors. The Treasury Department andthe Service hereby establish the qualifyingtherapeutic discovery project programunder the procedures set forth in sections5 through 11 of this notice.

SECTION 4. DEFINITIONS

The following definitions apply for pur-poses of § 48D and this notice:

.01 Qualified Investment.(1) For purposes of § 48D(a), a qual-

ified investment under § 48D(b) of theCode for any taxable year is the aggre-gate amount of the costs paid or incurredin the taxable year for expenses necessaryfor and directly related to the conduct ofa qualifying therapeutic discovery project(as defined in section 4.02 of this notice).

(2) The amount that is treated as qual-ified investment for all taxable years withrespect to any qualifying therapeutic dis-covery project may not exceed the amountcertified by the Secretary as eligible for thecredit.

(3) The qualified investment for anytaxable year with respect to any qualifyingtherapeutic discovery project will not takeinto account any cost (a) for remunerationfor any employee described in § 162(m)(3)of the Code, (b) for interest expenses, (c)for facility maintenance expenses (as de-fined in section 4.04 of this notice), (d)that is identified as a service cost under§ 1.263A–1(e)(4) of title 26, Code of Fed-eral Regulations, or (e) for any other ex-pense as determined by the Secretary.

(4) For purposes of section 4.01(3)(e) ofthis notice, the Secretary has determinedthat a qualified investment should be re-duced by the amount of any grant excludedfrom gross income under § 61 of the Code,unless the grant can only be used for costsnot included in the definition of a qual-ified investment under section 4.01(1) ofthis notice.

(5) In the case of costs described in sec-tion 4.01(1) of this notice that are paid forproperty of a character subject to an al-lowance for depreciation, rules similar to

rules of § 46(c)(4) and (d) of the Code (asin effect on the day before the date of en-actment of the Revenue Reconciliation Actof 1990) apply.

(6) An investment will be considereda qualified investment only if that invest-ment is made in a taxable year beginningin 2009 or 2010.

.02 Qualifying Therapeutic DiscoveryProject. A qualifying therapeutic discov-ery project under § 48D(c)(1) of the Codemeans a project that is designed:

(1) To treat or prevent diseases or condi-tions by conducting pre-clinical activities,clinical trials, and clinical studies, or carry-ing out research protocols, for the purposeof securing approval of a product undersection 505(b) of the Federal Food, Drug,and Cosmetic Act or section 351(a) of thePublic Health Service Act,

(2) To diagnose diseases or conditionsor to determine molecular factors relatedto diseases or conditions by developingmolecular diagnostics to guide therapeuticdecisions, or

(3) To develop a product, process, ortechnology to further the delivery or ad-ministration of therapeutics.

.03 Eligible Taxpayer. An eligible tax-payer is a taxpayer who employs not morethan 250 employees in all businesses of thetaxpayer at the time of the submission ofthe application under § 48D(d)(2) of theCode. All persons treated as a single em-ployer under § 52(a) or (b), or § 414(m) or(o), must be so treated for purposes of thedefinition of an eligible taxpayer. For pur-poses of this section, the term “employee”includes both full-time and part-time em-ployees but does not include leased em-ployees.

.04 Facility Maintenance Expenses. Fa-cility maintenance expenses are costs paidor incurred to maintain a facility, includ-ing (1) mortgage or rent payments, (2) in-surance payments, (3) utility and mainte-nance costs, and (4) costs of employmentof maintenance personnel.

SECTION 5. QUALIFYINGTHERAPEUTIC DISCOVERYPROJECT PROGRAM

.01 In General. The Service will cer-tify an eligible taxpayer’s qualified invest-ment associated with a qualifying thera-peutic discovery project under the qualify-ing therapeutic discovery project program,

June 7, 2010 735 2010–23 I.R.B.

for which an application has been submit-ted pursuant to section 6 of this notice,only if:

(1) HHS determines that the taxpayer’sproject is a qualifying therapeutic discov-ery project (as defined in section 4.02 ofthis notice);

(2) HHS determines that the taxpayer’sproject shows reasonable potential (a) toresult in new therapies (i) to treat areas ofunmet medical need, or (ii) to prevent, de-tect, or treat chronic or acute diseases andconditions, (b) to reduce long-term healthcare costs in the United States, or (c) to sig-nificantly advance the goal of curing can-cer within the 30-year period beginning onMay 21, 2010; and

(3) The Service determines that the tax-payer’s project is among those projects thathave the greatest potential (a) to create andsustain (directly or indirectly) high qual-ity, high-paying jobs in the United States,and (b) to advance United States competi-tiveness in the fields of life, biological, andmedical sciences.

.02 Program Specifications.(1) A taxpayer must file with the

Service a separate application under§ 48D(d)(2)(A) of the Code for each qual-ifying therapeutic discovery project forwhich it is seeking certification of a qual-ified investment. A primary allocationround will be conducted in accordancewith the procedures set forth in this noticeto issue certifications for both qualified in-vestments made in taxable years beginningin 2009 and qualified investments madein taxable years beginning in 2010. If anyportion of the $1 billion available under§ 48D(d)(1)(B) for allocation remains un-allocated after this primary allocation, oneor more additional allocation rounds maybe conducted.

(2) For the primary 2009–2010 alloca-tion round, an application for certificationmay be filed from the date the applicationform is released (see section 6.02 of thisnotice), through July 21, 2010. Applica-tions for certification will not be acceptedif delivered after July 21, 2010. Section7502 applies in determining the timelinessof any application for § 48D certification.Under § 7502, the date of the United Statespostmark stamped on the cover of an appli-cation shall be deemed the date of delivery.See section 6 of this notice and Appen-dix A to this notice for the information re-quired to be filed as part of the application.

See section 10 of this notice and AppendixB of this notice for a consent to disclosurethat an applicant may file with the applica-tion. Each application will be subject to apreliminary review, which will enable theService to determine whether the applicantis an eligible taxpayer (as defined in sec-tion 4.03 of this notice) and whether theapplication is otherwise complete. Prelim-inary review of timely-filed applicationswill end on September 30, 2010.

(3) Under § 48D(d)(2)(B) of the Code,the Secretary is required to take action toapprove or deny any application within30 days of the submission of the appli-cation. Applications will be consideredsubmitted for purposes of § 48D(d)(2)(B)on October 1, 2010, the day after thepreliminary review ends. An applicationfor certification may include a requestfor certification of a project’s costs undersection 4.01(1) of this notice for taxableyears beginning in 2009, 2010, or both.

(4) The Service will determine whetherto certify all or a portion of a taxpayer’squalified investment eligible for the thera-peutic discovery project credit or grant af-ter HHS has completed its review of all ap-plications submitted by eligible taxpayersin accordance with section 5.01(1) and (2)of this notice (see section 6 of this noticefor the requirements applicable to the ap-plication for § 48D certification).

(5) The Service will certify all or a por-tion of an eligible taxpayer’s qualified in-vestment for each qualifying therapeuticdiscovery project for which an applicationhas been submitted pursuant to section 6of this notice that meets the certificationrequirements under section 5.01 of this no-tice. The aggregate amount of qualified in-vestments that will be certified by the Ser-vice will not exceed $2 billion. The totalamount of credits and grants allocated un-der the program will not exceed the $1 bil-lion limitation of § 48D(d)(1)(B). The Ser-vice will certify an equal amount of quali-fied investment for each project that meetsthe certification requirements under sec-tion 5.01 of this notice. Nevertheless, in nocase will the Service certify more than theamount of the qualified investment attrib-utable to a project. If a project would oth-erwise receive certification for an amountof qualified investment that exceeds thequalified investment described in the ap-plication as attributable to the project, theunused certification amount will be appor-

tioned equally among all other projects re-ceiving a certification for only a portion oftheir qualified investments. Such reappor-tionment will continue until no project re-ceives certification for an amount that ex-ceeds the qualified investment describedin the application as attributable to theproject.

(6) For purposes of applying the limita-tion specified in section 5.02(5) of this no-tice, a project’s qualified investment willbe considered to include any qualified in-vestment made or expected to be made ina taxable year beginning in 2009 or 2010or both, in each case as represented by thetaxpayer in its application for certification.See Appendix A for further informationregarding the information required to besubmitted with respect to qualified invest-ments made or expected to be made in con-nection with a qualifying therapeutic dis-covery project.

(7) In addition to the limitation speci-fied in section 5.02(5) of this notice, theService will not certify more than $10million as a qualified investment for anysingle taxpayer, such that no taxpayershall be allocated more than $5 millionin credits or grants in the aggregate for2009 and 2010, regardless of the numberof projects the taxpayer sponsors. If a tax-payer would otherwise receive certifica-tion for an amount of qualified investmentthat exceeds this $10 million threshold,the amount in excess of $10 million willbe apportioned equally among all otherprojects receiving a certification for onlya portion of their qualified investments.Such reapportionment will continue un-til no taxpayer receives certification foran amount that exceeds the $10 millionthreshold.

(8) In the primary 2009–2010 allocationround, the Service will approve or deny thetaxpayer’s application for § 48D certifica-tion no later than October 29, 2010, whichis within 30 days after the date timely-filedapplications will be considered to be sub-mitted pursuant to section 5.02(3), and willnotify the taxpayer, by letter, of its deci-sion. If the application for certification isapproved, the date of the certification let-ter will be treated as the approval date.

(9) If the taxpayer’s application for§ 48D certification is approved by theService, then a certification letter approv-ing the application will state the amountof qualified investment that is certified

2010–23 I.R.B. 736 June 7, 2010

as eligible for the credit or grant under§ 48D and the amount of the credit orgrant allocated to the taxpayer for the tax-payer’s project(s). If the amount of thetaxpayer’s qualified investment certifiedby the Service is less than the taxpayer’stotal qualified investment for 2009 and2010, then the taxpayer may attribute thecertification to any of the qualified invest-ment costs of the project(s) to which thecertification relates, subject to the provi-sions of section 5.02(10) of this notice.

(10) If the taxpayer requests a grantfor both 2009 and 2010 and the aggregateamount of the taxpayer’s qualified invest-ment certified by the Service for both 2009and 2010 is less than the taxpayer’s totalqualified investment for 2009 and 2010,then the taxpayer’s qualified investmentwill be attributed to 2009 before 2010.

(11) If the amount of the taxpayer’scertification by the Service is based on aqualified investment expected to be made,and the amount certified exceeds the tax-payer’s actual qualified investment for2009 and 2010, then the credit allocated tothe taxpayer shall be reduced by 50 percentof the difference between the qualifiedinvestment certified by the Service and thetaxpayer’s actual qualified investment.

(12) If an applicant has an overpaymentafter receiving a certification and claiminga credit under § 48D, the rules of the Codewith respect to overpayments of tax, in-cluding the rules of § 6402 relating to off-sets, will apply. If an applicant elects toreceive a grant, the offset provisions underTitle 31, rather than § 6402 of the Code,will apply.

SECTION 6. APPLICATION FOR § 48DCERTIFICATION

.01 A separate application for certifica-tion must be submitted for each project forwhich an eligible taxpayer is seeking certi-fication of a qualified investment. If an ap-plication for certification does not includeall of the information required by section6.02 of this notice and meet the require-ments of section 7.01 and 7.02 of this no-tice, the Service and HHS may decline toconsider the application.

.02 Application for § 48D Certification.Applications for § 48D certification will bemade on Form 8942, “Application for Cer-tification of Qualified Investments Eligiblefor Credits and Grants Under the Quali-

fying Therapeutic Discovery Project Pro-gram.” Form 8942 and its instructions willprovide the manner for submitting applica-tions. Form 8942 will be released no laterthan June 21, 2010, and will be availableto the public on www.irs.gov.

SECTION 7. OTHER REQUIREMENTS

.01 Signature. Each submission undersection 6 of this notice must be signed anddated by the taxpayer in accordance withinstructions to Form 8942. A stamped sig-nature or faxed signature is not permitted.

.02 Penalties of Perjury Statement.(1) Each application under section 6 of

this notice must be accompanied by thefollowing declaration: “Under penalties ofperjury, I declare that I have examined thissubmission, including the accompanyingdocuments, and, to the best of my knowl-edge and belief, all of the facts containedherein are true, correct, and complete.”

(2) The declaration must be signed anddated by the taxpayer in accordance withinstructions to Form 8942. The personsigning for the taxpayer must have per-sonal knowledge of the facts. Further, thedeclaration must be signed by a person au-thorized to bind the taxpayer such as anofficer on behalf of a corporation, a gen-eral partner on behalf of a local-law part-nership, a member-manager on behalf of alimited liability company, a trustee on be-half of a trust, and the proprietor in the caseof a sole proprietorship. A stamped signa-ture or faxed signature is not permitted.

.03 Significant Change in Plans. Thetaxpayer must inform the Service if theplans for a qualifying therapeutic dis-covery project change in any significantrespect from the information set forth inthe application for § 48D certification atany time prior to the date of certifica-tion. A significant change is any change,including any change that would affectthe continuing accuracy of a statementmade in the application, that a reasonableperson would conclude might have in-fluenced HHS’ evaluation. The taxpayermust contact Candace Fisher of the SmallBusiness and Self-Employed Division at(651) 312–2109 (not a toll-free number),or by e-mail at [email protected], atthe time the taxpayer determines there hasbeen a significant change to the plans forthe project.

.04 Effect of Certification and Alloca-tion. A certification and allocation by theService is not a determination that the costsdescribed in the application were or willbe, in fact, paid or incurred or that the costswere or will be necessary for and directlyrelated to the conduct of a qualified thera-peutic discovery project under § 48D(b) ofthe Code.

.05 No Right to a Conference or Ap-peal. A taxpayer does not have a right toa conference relating to any matters underthis notice. Further, a taxpayer does nothave a right to appeal the decisions madeunder this notice (including the amount ofcredit allocated to the project and whetheror not to certify the project) to any officialof HHS or the Service or the Departmentof the Treasury.

SECTION 8. GRANTS IN LIEU OFTAX CREDITS FOR QUALIFIEDINVESTMENTS IN A QUALIFYINGTHERAPEUTIC DISCOVERYPROJECT

.01 Background.(1) Section 9023(e)(1) of the Afford-

able Care Act provides that upon applica-tion, the Secretary will provide a grant toeach person who makes a qualified invest-ment in a qualifying therapeutic discoveryproject in the amount of 50 percent of theinvestment. No grant will be made with re-spect to any investment unless the invest-ment is made during a taxable year begin-ning in 2009 or 2010.

(2) Section 9023(e)(2)(A) of the Af-fordable Care Act provides that, at thestated election of the applicant, an applica-tion for certification under § 48D(d)(2) ofthe Code for a credit for the taxable yearof the applicant which begins in 2009 willbe considered to be an application for agrant under section 9023(e)(1) for the tax-able year.

(3) Section 9023(e)(2)(B) of the Af-fordable Care Act provides that an appli-cation for a grant under section 9023(e)(1)for a taxable year beginning in 2010 mustbe submitted (i) not earlier than the day af-ter the last day of the taxable year, and (ii)not later than the due date (including ex-tensions) for filing the return of tax for thetaxable year.

(4) Section 9023(e)(2)(C) of the Af-fordable Care Act provides that an appli-cation for a grant under section 9023(e)(1)

June 7, 2010 737 2010–23 I.R.B.

must include the information and be in theform as the Secretary may require to statethe amount of the credit allowable (butfor the receipt of the grant under section9023(e)(1)) under § 48D for the taxableyear for the qualified investment with re-spect to which the application is made.

(5) Section 9023(e)(3)(A) of the Af-fordable Care Act provides that the Secre-tary must make payment of the amount ofany grant during the 30-day period begin-ning on the later of (i) the date of the ap-plication for the grant, or (ii) the date thequalified investment for which the grant isbeing made is made.

(6) Section 9023(e)(4) of the Afford-able Care Act provides that the term quali-fied investment means a qualified invest-ment that is certified under § 48D(d) ofthe Code for purposes of the credit under§ 48D.

.02 Application Procedures for Grants.(1) For taxable years beginning in 2009

or 2010, at the election of an applicant onForm 8942, an application for § 48D cer-tification for a credit will be an applica-tion for a grant. The applicant must affir-matively elect on Form 8942 to apply fora grant for 2009 or 2010. If an applicantis submitting an application for certifica-tion of a qualified investment made in both2009 and 2010, then the applicant may ap-ply for a grant for 2009 only, 2010 only, orboth 2009 and 2010.

(2) A valid election on Form 8942 to ap-ply for a grant for a taxpayer’s 2010 tax-able year will be considered effective theday after the last day of the taxpayer’s 2010taxable year. If a taxpayer receives a cer-tification for a credit for its 2010 taxableyear but did not request a grant on Form8942 at the time it filed its application, thetaxpayer may request a grant in lieu of thecredit by filing an amended Form 8942, in-cluding all information required in section8.02(3) and (4) of this notice, requesting agrant not later than the due date (includingextensions) for filing the return of tax forthe taxpayer’s 2010 taxable year in whichthe certified qualified investment to whichthe grant relates was made.

(3) An election on Form 8942 to ap-ply for a grant must include the appli-cant’s Data Universal Numbering System(DUNS) number from Dun and Brad-street. If the applicant does not alreadyhave a DUNS number, it may requestone at no cost by calling the dedicated

toll-free DUNS Number request line at1–866–705–5711.

(4) To make a valid election, ap-plicants for a grant must also regis-ter with the Central Contractor Reg-istration (CCR). To register, go towww.ccr.gov/startregistration.aspx. Theregistration must be completed before apayment can be made.

(5) When an application for certifica-tion of qualified investment in a qualifyingtherapeutic discovery project is approvedand the applicant has requested a grant inlieu of a credit, the Service will send a let-ter to the applicant in the same manner asdescribed in section 5 of this notice. Thenotice will inform the grant applicant thatthe payment of the grant will be made bythe Department of Treasury.

(6) Payment of Grants for Taxpayerswith Taxable Years Beginning in 2009.

(a) For a certified applicant that re-quests a grant for its 2009 taxable yearon a timely-filed Form 8942, or on anamended Form 8942 filed no later thanSeptember 30, 2010, the Department ofTreasury will authorize payment to thecertified applicant for its 2009 taxableyear no later than October 29, 2010. Ifan applicant files an amended Form 8942requesting a grant for its 2009 taxable yearafter September 30, 2010, and not laterthan the due date (including extensions)for filing the return for the 2009 taxableyear, then the Department of Treasurywill authorize payment to the certifiedapplicant for its 2009 taxable year within30 days after the request for the grant isfiled.

(b) For an applicant with a 2009 fiscalyear ending on or before September 30,2010, the Department of Treasury will au-thorize full payment to the certified appli-cant no later than October 29, 2010, if theapplicant’s qualified investment reportedon Form 8942 as having been paid or in-curred by September 30, 2010, is equal to,or greater than, the amount of the qualifiedinvestment certified by the Service.

(c) For an applicant with a 2009 taxableyear ending after September 30, 2010, ifthe applicant’s qualified investment as re-ported on Form 8942 as having been paidor incurred by September 30, 2010, is lessthan the qualified investment certified bythe Service, then the Department of Trea-sury will authorize payment to the certifiedapplicant no later than October 29, 2010,

for a grant equal to 50 percent of the appli-cant’s qualified investment as reported onForm 8942 as having been paid or incurredby September 30, 2010. The remainingamount of the grant will be authorized forpayment within 30 days after the end of theapplicant’s 2009 taxable year.

(7) The Department of Treasury willmake payment to the certified applicant forits 2010 taxable year during the 30-day pe-riod beginning on the day after the last dayof the 2010 taxable year if the applicantrequested a grant on the Form 8942 filedby July 21, 2010, or if the taxpayer filesan amended Form 8942 requesting a grantpursuant to section 8.02(2) of this noticeno later than the last date of its 2010 tax-able year. If the taxpayer files an amendedForm 8942 requesting a grant pursuant tosection 8.02(2) of this notice after the endof its 2010 taxable year and not later thanthe due date (including extensions) for fil-ing the return for the 2010 taxable year,then the Department of Treasury will au-thorize payment to the certified applicantfor its 2010 taxable year within 30 days af-ter the request for the grant is filed.

.03 Special Rules.(1) Section 48D(f)(1) of the Code pro-

vides that in the case of any investmentwith respect to which the Secretary makesa grant under section 9023(e) of the Af-fordable Care Act, no credit will be deter-mined with respect to the investment forthe taxable year in which the grant is madeor any subsequent taxable year.

(2) Section 48D(f)(2) of the Code pro-vides that if a credit was determined under§ 48D with respect to the investment forany taxable year ending before the grant ismade (A) the tax imposed under subtitleA on the taxpayer for the taxable year inwhich the grant is made will be increasedby so much of the credit as was allowedunder § 38, (B) the general business carry-forwards under § 39 will be adjusted so asto recapture the portion of the credit whichwas not so allowed, and (C) the amountof the grant will be determined without re-gard to any reduction in the basis of anyproperty of a character subject to an al-lowance for depreciation by reason of thecredit.

(3) Section 48D(f)(3) of the Code pro-vides that a grant made by the Secretaryunder section 9023(e) of the AffordableCare Act will not be includible in the grossincome of the taxpayer.

2010–23 I.R.B. 738 June 7, 2010

(4) Section 9023(e)(5)(A) of the Af-fordable Care Act provides that in mak-ing grants, the Secretary will apply rulessimilar to the rules of § 50 of the Code.In applying such rules, any increase in taxunder chapter 1 of the Code by reason ofan investment ceasing to be a qualified in-vestment will be imposed on the person towhom the grant was made.

(5) Section 9023(e)(5)(B)(i) of the Af-fordable Care Act provides that if theamount of the grant made under section9023(e) exceeds the amount allowable as agrant, the excess must be recaptured undersection 9023(e)(5)(A) as if the investmentto which the excess portion of the grantrelated had ceased to be a qualified in-vestment immediately after the grant wasmade.

(6) Section 9023(e)(5)(B)(ii) of the Af-fordable Care Act provides that in no eventwill the amount of a grant, the identity ofthe person to whom the grant was made,or a description of the investment withrespect to which the grant was made betreated as return information for purposesof § 6103 of the Code.

(7) Section 9023(e)(6) of the Afford-able Care Act provides that the Secretarywill not make any grant to (A) any Fed-eral, State, or local government (or any po-litical subdivision, agency, or instrumen-tality thereof), (B) any organization de-scribed in § 501(c) of the Code and ex-empt from tax under § 501(a), (C) any en-tity referred to in § 54(j), or (D) any part-nership or other pass-thru entity any part-ner (or other holder of an equity or profitsinterest) of which is described in section9023(e)(6)(A) through (C). A partnershipor pass-thru entity is not eligible for a grantif any direct or indirect partner (or otherholder of an equity or profits interest) is de-scribed in section 9023(e)(6)(A) through(C). A partnership or other pass-thru en-tity must determine if any of its partnersor other holders of any equity or profits in-terest is described in section 9023(e)(6)(A)through (C) before the partnership or thepass-thru entity may apply for a grant.

SECTION 9. SPECIAL RULES FORCREDITS AND GRANTS IN LIEU OFTAX CREDITS

.01 Section 48D(e)(1) of the Code pro-vides that if a credit is allowed for an ex-penditure related to property of a character

subject to an allowance for depreciation,the basis of the property must be reducedby the amount of the credit.

.02 Section 48D(e)(2)(A) of the Codeprovides that a credit will not be allowedfor any investment for which bonus de-preciation is allowed under § 168(k),§ 1400L(b)(1), or § 1400N(d)(1).

.03 Section 48D(e)(2)(B) of the Codeprovides that no deduction will be allowedfor the portion of the expenses otherwiseallowable as a deduction taken into ac-count in determining the credit for the tax-able year which is equal to the amount ofthe credit determined for the taxable yearattributable to that portion. This rule doesnot apply to expenses related to propertyof a character subject to an allowance fordepreciation the basis of which is reducedunder § 48D(e)(1), or which are describedin § 280C(g).

.04 Section 48D(e)(2)(C)(i) of theCode provides that, except as providedin § 48D(e)(2)(C)(ii), any expenses takeninto account for a taxable year must not betaken into account for purposes of deter-mining the credit allowable under § 41 or§ 45C for the taxable year.

.05 Section 48D(e)(2)(C)(ii) of theCode provides that any expenses for anytaxable year which are qualified researchexpenses (within the meaning of § 41(b))must be taken into account in determin-ing base period research expenses forpurposes of applying § 41 to subsequenttaxable years.

.06 Section 280C(g)(1) of the Codeprovides that, in general, no deduction willbe allowed for that portion of the quali-fied investment (as defined in § 48D(b))otherwise allowable as a deduction for thetaxable year which (A) would be qualifiedresearch expenses (as defined in § 41(b)),basic research expenses (as defined in§ 41(e)(2)), or qualified clinical testingexpenses (as defined in § 45C(b)) if thecredit under § 41 or § 45C were allowedwith respect to the expenses for the taxableyear, and (B) is equal to the amount ofthe credit determined for the taxable yearunder § 48D(a), reduced by (i) the amountdisallowed as a deduction by reason of§ 48D(e)(2)(B), and (ii) the amount of anybasis reduction under § 48D(e)(1).

.07 Section 280C(g)(2) of the Codeprovides that, in the case of expenses de-scribed in § 280C(g)(1) taken into accountin determining the credit under § 48D

for the taxable year, if (A) the amountof the portion of the credit determinedwith respect to the expenses, exceeds (B)the amount allowable as a deduction forthe taxable year for the expenses (deter-mined without regard to § 280C(g)(1)),the amount chargeable to capital accountfor the taxable year for the expenses mustbe reduced by the amount of the excess.

.08 For controlled groups, § 280C(g)(3)of the Code provides that § 280C(b)(3) ap-plies for purposes of § 280C(g).

.09 The rules under this section 9 applyto credits under § 48D of the Code andgrants in lieu of tax credits.

SECTION 10. DISCLOSURE OFINFORMATION

.01 Announcement. Consistent with§ 48D(d)(4) of the Code and section9023(e)(5)(B)(ii) of the Affordable CareAct, the Service will, upon making acertification for credit or grant, publiclydisclose the identity of the applicant andthe amount of the credit or grant with re-spect to the applicant. In addition, uponmaking a certification with respect to tax-payers that have either elected to receivea grant for the 2009 tax year or providedthe consent as provided in section 10.02 ofthis notice with respect to their applicationfor credit, the Service will also publishthe type and location of the project that isthe subject of the application for § 48Dqualifying therapeutic discovery projectcertification in the event the project re-ceives an allocation.

.02 Consent to disclosure of informa-tion concerning the allocation. Section48D(d)(4) of the Code provides that theService will, upon making a certifica-tion, publicly disclose the identity of theapplicant and the amount of the creditwith respect to the applicant. Section9023(e)(5)(B)(ii) of the Affordable CareAct provides that in no event will theamount of a grant, the identity of theperson to whom the grant was made, ora description of the investment with re-spect to which the grant was made betreated as return information for purposesof § 6103. Thus, the statute authorizespublic disclosure of more information fortaxpayers awarded allocation for a grantthan for taxpayers awarded allocation fora credit. In order to provide the publicwith the same information on taxpayers

June 7, 2010 739 2010–23 I.R.B.

who are allocated credits as receive grants,the Service is seeking authorization topublish the type of qualifying therapeuticdiscovery project that is the subject of theapplication for § 48D certification in thoseinstances where disclosure of that infor-mation is not authorized by the statute.Therefore, the Service requests that eachtaxpayer that applies for a credit, or for agrant for a taxable year beginning in 2010,submit with the application for § 48Dcertification a declaration, consenting tothe Service’s disclosure of the type andlocation of the project that is the subjectof the application for § 48D qualifyingtherapeutic discovery project certificationin the event the project receives an allo-cation. To provide a valid consent, thedeclaration must be in the form set forthin Appendix B. A taxpayer is not requiredto provide a declaration consenting todisclosure of certain information in orderto receive an allocation of the qualifyingtherapeutic discovery project credit. Noris a declaration consenting to disclosureneeded if the taxpayer elects to receive agrant for a taxable year beginning in 2009.The Service will not publish any returninformation with respect to applicationsthat are not awarded an allocation of thequalifying therapeutic discovery projectcredit or grant.

.03 FOIA Requests. Anyone interestedin submitting a request for records un-der the FOIA with respect to the qual-ifying therapeutic discovery project pro-gram under § 48D (including a request forrecords relating to the HHS recommenda-tion) should direct a request that conformsto the Service’s FOIA regulations, found at26 C.F.R. § 601.702, to the following ad-dress:

IRS FOIA RequestHQ FOIAStop 2112385 Chamblee Tucker RoadChamblee, GA 30341

Except for the information the Serviceis authorized to make available to the pub-lic under § 48D(d)(4) of the Code, section9023(e)(5)(B)(ii) of the Affordable CareAct, or pursuant to an applicant’s con-sent, the Service expects that such infor-mation would be exempt from disclosureunder one or more of the following Free-dom of Information Act (FOIA) exemp-tions: 5 U.S.C. § 552(b)(3), in conjunc-tion with § 6103 of the Code with respectto returns and return information, 5 U.S.C.§ 552(b)(4) with respect to trade secret orother confidential commercial or financialinformation, 5 U.S.C. § 552(b)(5) with re-spect to predecisional and deliberative ma-terial, and 5 U.S.C. § 552(b)(6) with re-spect to personal information.

SECTION 11. EFFECTIVE DATE

This notice is effective May 21, 2010.

SECTION 12. PAPERWORKREDUCTION ACT

The collection of information containedin this notice has been reviewed and ap-proved by the Office of Management andBudget (OMB) in accordance with the Pa-perwork Reduction Act (44 U.S.C. § 3507)under control number 1545–2175.

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 validOMB control number.

The collections of information in thisnotice are in sections 5, 6, 7, 8, and Ap-pendix A of this notice. Form 8942, Ap-plication for Certification of Qualified In-vestments Eligible for Credits, will be usedto collect the information in sections 5,6, 7, and 8. This information is requiredto obtain an allocation of qualifying ther-apeutic discovery project credit or grant.This information will be used by the Ser-vice to verify that the taxpayer is eligi-ble for the qualifying therapeutic discov-

ery project credit or grant. The collectionof information is required to obtain bene-fit. The likely respondents are business orother for-profit institutions.

The estimated total annual reportingburden is 14,544 hours.

The estimated annual burden per re-spondent varies, depending on the individ-ual circumstances, with an estimated aver-age of 12 hours, 7 minutes. The estimatednumber of respondents is 1,200.

The estimated annual frequency of re-sponses is on occasion.

Books or records relating to a collectionof information must be retained as longas the contents may become material inthe administration of any internal revenuelaw. Generally, tax returns and return in-formation are confidential, as required by26 U.S.C. § 6103.

SECTION 13. DRAFTINGINFORMATION

The principal author of this noticeis Julie Hanlon Bolton of the Office ofAssociate Chief Counsel (Passthroughs& Special Industries). For further in-formation regarding this notice, contactJulie Hanlon Bolton at (202) 622–3040(not a toll-free call). For furtherinformation regarding the applicationfor certification, the documentation tobe submitted to the Service establishingthat the requirements of § 48D(d)(3) ofthe Code are satisfied, and the issuanceof the certification that the requirementsof § 48D(d)(3) are satisfied, contactCandace Fisher of the Small Businessand Self-Employed Division at (651)312–2109 (not a toll-free number)or by e-mail at [email protected] further information regardingthe selection criteria for HHS’evaluation, contact JoAnne Goodnight [email protected].

2010–23 I.R.B. 740 June 7, 2010

APPENDIX A

APPLICATIONS FOR CERTIFICATION OF QUALIFIED INVESTMENTS ATTRIBUTABLE TOQUALIFYING THERAPEUTIC DISCOVERY PROJECTS

The Internal Revenue Service (Service), in consultation with the Department of Health and Human Services (HHS), will select forcertification applications from eligible taxpayers under § 48D(c)(2) of the Internal Revenue Code (Code) for one or more projectsthat are qualifying therapeutic discovery projects under § 48D(c)(1) and that meet the selection criteria in § 48D(d)(3)(A) and (B).

This Appendix A:

1. Describes the content and format of information to be provided by an applicant for certification,2. Provides the questions that must be answered in a Project Information Memorandum to be filed with the applicant’s Form

8942, “Application for Certification of Qualified Investments Eligible for Credits and Grants Under the Qualifying Thera-peutic Discovery Project Program,” and

3. Identifies the evaluation criteria to be used by the Service and HHS in the review of applications for certification.

The Service and HHS reserve the right to request clarifications and/or supplemental information from some or all applicantsthrough written submissions and/or oral presentations. No additional written submissions, or requests to make oral presentations,will be accepted if not explicitly solicited by the Service or HHS. It is expected that the Service and HHS will determine whetherto approve an application at any time after the application has been received without any further exchanges or discussions with theapplicant. Therefore, all applicants are advised to submit complete and fully responsive applications.

Applications will not be returned to applicants.

SUBMISSION INFORMATION FOR CERTIFICATION

A. General

A complete application for certification includes Form 8942, completed in accordance with instructions, an attached ProjectInformation Memorandum as described below, and, if the applicant elects to consent to certain limited disclosure (see Section 10.2of Notice 2010–45 (Notice)), a properly executed copy of the “Consent to Public Disclosure of Certain Qualifying TherapeuticDiscovery Project Program Application Information” (Consent) contained in Appendix B to the Notice. A complete applicationmust be submitted for each qualifying therapeutic discovery project that the applicant sponsors for which the applicant isrequesting a credit or a grant. All applications shall be prepared in accordance with this Appendix A in order to provide a standardbasis for review and to ensure that each application will be uniform as to format and content.

Each application should clearly respond to each question to demonstrate the applicant’s capability, knowledge, and experienceregarding the requi

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