45180 Federal Register / Vol. 73, No. 150 / Monday, August 4, 2008 / Proposed Rules 

Related Information 

(h) Refer to MCAI Brazilian Airworthiness 

Directives 2007–12–01 and 2007–12–02, both 

effective January 24, 2008, and EMBRAER 

Service Bulletins 170–24–0041, Revision 01, 

dated August 28, 2007; and 190–24–0012, 

Revision 01, dated August 21, 2007; for 

related information. 

Issued in Renton, Washington, on July 23, 

2008. 

Ali Bahrami, 

Manager, Transport Airplane Directorate, 

Aircraft Certification Service. 

[FR Doc. E8–17777 Filed 8–1–08; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–120844–07] 

RIN 1545–BG70 

Rules for Home Construction 

Contracts 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

and Notice of Public Hearing. 

SUMMARY: This document contains 

proposed regulations amending the 

regulations under § 1.460 to provide 

guidance to taxpayers in the home 

construction industry regarding 

accounting for certain long-term 

construction contracts that qualify as 

home construction contracts under 

section 460(e)(6) of the Internal Revenue 

Code (Code) and to provide guidance to 

taxpayers with long-term contracts 

under section 460(f) regarding certain 

changes in method of accounting for 

long-term contracts. This document also 

provides a notice of a public hearing on 

these proposed regulations. 

DATES: Written comments must be 

received by November 3, 2008. Outlines 

of topics to be discussed at the public 

hearing scheduled for December 5, 

2008, at 10 a.m. must be received by 

November 13, 2008. 

ADDRESSES: Send submissions to 

CC:PA:LPD:PR (REG–120844–07), room 

5203, Internal Revenue Service, POB 

7604 Ben Franklin Station, Washington, 

DC 20224. Submissions may be hand 

delivered Monday through Friday 

between the hours of 8 a.m. and 4 p.m. 

to CC:PA:LPD:PR (REG–120844–07), 

Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC. Alternatively, 

taxpayers may submit comments 

electronically via the Federal 

eRulemaking Portal at 

www.regulations.gov (IRS REG–120844–

07). The public hearing will be held in 

the auditorium, Internal Revenue 

Service Building, 1111 Constitution 

Avenue, NW., Washington, DC. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Brendan P. O’Hara, (202) 622–4920; 

concerning submission of comments, 

the hearing, or to be placed on the 

building access list to attend the 

hearing, Richard Hurst, (202) 622–7180 

(not toll-free numbers). 

SUPPLEMENTARY INFORMATION: 

Background and Explanation of 

Provisions 

This document contains a proposed 

amendment to the Income Tax 

Regulations, 26 CFR part 1, under 

section 460 and §§ 1.460–3, 1.460–4, 

1.460–5 and 1.460–6 of the Income Tax 

Regulations. In general, section 460(a) 

requires taxpayers to use the percentage 

of completion method (PCM) to account 

for taxable income from any long-term 

contract. Section 460(e) exempts home 

construction contracts from the general 

requirement to use the percentage of 

completion method of accounting. 

Section 460(e)(6) defines a home 

construction contract to be any 

construction contract if 80 percent or 

more of the total estimated contract 

costs are reasonably expected to be 

attributable to the construction of (i) 

dwelling units contained in buildings 

containing 4 or fewer dwelling units, 

and (ii) improvements to real property 

directly related to such dwelling units 

and located on the site of such dwelling 

units. Section 460(e)(4) defines a 

construction contract to be any contract 

for the building, construction, 

reconstruction, or rehabilitation of, or 

the installation of any integral 

component to, or improvement of, real 

property. 

These proposed regulations expand 

the types of contracts eligible for the 

home construction contract exemption 

and amend the rules for how taxpayerinitiated changes in methods of 

accounting to comply with the 

regulations under section 460 may be 

implemented. 

Definition of a Home Construction 

Contract 

Improvements to Real Property 

The definition of a construction 

contract under section 460(e) includes 

many transactions involving land 

developers and construction service 

providers in the home construction 

industry. For example, a construction 

contract under section 460(e) includes a 

contract for the provision of land by the 

taxpayer if the estimated total allocable 

contract costs attributable to the 

taxpayer’s construction activities (not 

including the cost of the land provided 

to the customer) are 10 percent or more 

of the contract’s total contract price. 

As noted, section 460(a) requires that 

the income from any long-term contract 

be recognized using the percentage of 

completion method. However, taxpayers 

with contracts that meet the definition 

of a ‘‘home construction contract’’ are 

not required to use the percentage of 

completion method for those contracts 

and may use an exempt method. Exempt 

methods commonly used to account for 

home construction contracts include the 

completed contract method (CCM) and 

the accrual method. 

Under section 460, a home 

construction contract includes any 

construction contract if 80 percent of 

the total estimated contract costs are 

reasonably expected to be attributable to 

the construction of improvements to 

real property directly related to 

qualifying dwelling units and located on 

the site of such dwelling units. 

Commentators have suggested that 

many contracts entered into by land 

developers in the home construction 

industry should fall within the 

definition of a home construction 

contract. 

The proposed regulations expand the 

scope of the home construction contract 

exemption by providing that a contract 

for the construction of common 

improvements is considered a contract 

for the construction of improvements to 

real property directly related to the 

dwelling unit(s) and located on the site 

of such dwelling unit(s), even if the 

contract is not for the construction of 

any dwelling unit. Therefore, under the 

proposed regulations, a land developer 

that is selling individual lots (and its 

contractors and subcontractors) may 

have long-term construction contracts 

that qualify for the home construction 

contract exemption. 

Townhouses, Rowhouses, and 

Condominiums 

Under section 460, a home 

construction contract also includes any 

construction contract if 80 percent of 

the total contract costs are reasonably 

expected to be attributable to the 

construction of dwelling units 

contained in buildings containing four 

or fewer dwelling units. Section 

460(e)(6) states that each townhouse or 

rowhouse shall be treated as a separate 

building, regardless of the number of 

townhouses or rowhouses physically 

attached to each other. In certain 

circumstances, the terms condominium 


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Federal Register / Vol. 73, No. 150 / Monday, August 4, 2008 / Proposed Rules 45181 

and townhouse are used 

interchangeably to describe similar 

structures. Individual condominium 

units possess many of the characteristics 

generally associated with townhouses 

and rowhouses such as private 

ownership, shared portions of their 

structures, residential housing, and the 

economics of the underlying purchase 

transactions. 

The proposed regulations expand 

what is considered a townhouse or 

rowhouse, for purposes of the home 

construction contract exemption, to 

include an individual condominium 

unit. This will have the effect of 

allowing each condominium unit to be 

treated as a separate building for 

purposes of determining whether the 

underlying contract qualifies as a home 

construction contract. 

Completed Contract Method 

Under the current regulations under 

section 460, the appropriate severing of 

a home construction contract requires a 

facts and circumstances analysis based 

upon certain factors that are neither 

specific nor always relevant to home 

construction contracts. Likewise, the 

date a home construction contract is 

considered completed and accepted is 

determined using a facts and 

circumstances analysis. 

The IRS and Treasury Department are 

aware of controversies related to the 

application of the existing facts and 

circumstances analyses for determining 

the appropriate severance and final 

completion and acceptance of home 

construction contracts accounted for 

using the completed contract method. 

Expanding the definition of a home 

construction contract as provided in 

these proposed regulations may 

heighten the significance of these issues. 

As a result, the IRS and Treasury 

Department expect to propose specific 

severing and completion rules for home 

construction contracts accounted for 

using the completed contract method. 

Taxpayers are encouraged to submit 

comments on the types of severing and 

completion rules that would result in 

the clear reflection of income for home 

construction contracts accounted for 

using the completed contract method. 

Specifically, the IRS and the Treasury 

Department request comments on the 

circumstances (if any) in which it would 

not be appropriate to require severing 

and completion of a home construction 

contract to be determined on a dwelling 

unit by dwelling unit or lot by lot basis 

or, when a contract is not for the sale 

of a dwelling unit or lot, on the basis of 

when the taxpayer receives payment(s) 

under the contract. 

Method of Accounting 

Currently, the regulations under 

section 460 provide that a taxpayer that 

uses the percentage-of-completion 

method (PCM), the exempt-contract 

percentage-of-completion method 

(EPCM), or elects the 10-percent method 

or special alternative minimum taxable 

income (AMTI) method, or that adopts 

or elects a cost allocation method of 

accounting (or changes to another 

method of accounting with the 

Commissioner’s consent) must apply the 

method(s) consistently for all similarly 

classified contracts until the taxpayer 

obtains the Commissioner’s consent 

under section 446 to change to another 

method of accounting. The regulations 

further provide that a taxpayer-initiated 

change in method of accounting will be 

permitted only on a cut-off basis (that is, 

for contracts entered into on or after the 

year of change), and thus, a section 

481(a) adjustment will not be permitted 

nor required. The proposed regulations 

continue this cut-off method of 

implementation but only for taxpayerinitiated changes from a permissible 

PCM method to another permissible 

PCM method for long-term contracts for 

which PCM is required and for 

taxpayer-initiated changes from a cost 

allocation method of accounting that 

complies with the cost allocation rules 

of § 1.460–5 to another cost allocation 

method of accounting that complies 

with the cost allocation rules of § 1.460–

5. Under the proposed regulations all 

other taxpayer-initiated changes in 

method of accounting under section 460 

will be made with a section 481(a) 

adjustment. 

The proposed regulations provide that 

in determining the hypothetical 

underpayment or overpayment of tax for 

any year as part of the look-back 

computation, amounts reported as 

section 481(a) adjustments shall 

generally be taken into account in the 

tax year or years they are reported. For 

purposes of determining whether there 

is a hypothetical underpayment or 

overpayment of tax under the look-back 

computation, a taxpayer would use 

amounts reported under its old method 

for the years the old method was used 

and would use amounts reported under 

its new method for the years the new 

method was used, netted against the 

amount of any section 481(a) 

adjustments required to be taken into 

account. Thus, a look-back computation 

would not be required upon contract 

completion simply because the taxpayer 

has changed its method of accounting. 

However, a look-back computation 

would be required upon contract 

completion if actual costs or the 

contract price differ from the estimated 

amounts notwithstanding the fact a 

change in method of accounting 

occurred. For example, if a taxpayer 

using PCM changed its method of 

accounting for construction costs 

incurred in a contract reported under 

PCM, the section 460 look-back would 

be computed using the costs recognized 

prior to the year of change (reported 

under the taxpayer’s old method of 

accounting) and the costs recognized in 

subsequent years using the new method 

of accounting, netted against any 

applicable section 481(a) adjustment. 

Similarly, for changes in methods of 

accounting where no costs were 

recognized under the old method of 

accounting (for example, a change in 

method of accounting from CCM to 

PCM), look-back would effectively only 

apply to years in which the taxpayer’s 

new method of accounting was used to 

the extent that no costs were recognized 

prior to the year of change under the old 

method of accounting. This approach to 

the look-back computation is consistent 

with the underlying purpose of lookback as well as the general accounting 

method change procedures. Comments 

are specifically requested with respect 

to issues that taxpayers may foresee 

with respect to the rules provided in 

these proposed regulations for taking 

into account section 481(a) adjustments 

in the year reported for purposes of the 

look-back computation. 

Proposed Effective/Applicability Date 

These regulations are proposed to 

apply to taxable years beginning on or 

after the date the final regulations are 

published in the Federal Register. The 

final regulations will provide rules 

applicable to taxpayers that seek to 

change a method of accounting to 

comply with the rules contained in the 

final regulations. Taxpayers may not 

change or otherwise use a method of 

accounting in reliance upon the rules 

contained in these new proposed 

regulations until the rules are published 

as final regulations in the Federal 

Register. 

Special Analyses 

It has been determined that this 

proposed regulation is not a significant 

regulatory action as defined in 

Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

has also been determined that section 

553(b) of the Administrative Procedure 

Act (5 U.S.C. chapter 5) does not apply, 

and because the regulations do not 

impose a collection of information on 

small entities, the Regulatory Flexibility 

Act (5 U.S.C. chapter 6) does not apply. 

Pursuant to section 7805(f) of the Code, 


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45182 Federal Register / Vol. 73, No. 150 / Monday, August 4, 2008 / Proposed Rules 

this notice of proposed rulemaking will 

be submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on its 

impact on small businesses. 

Comments and Public Hearing 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to any 

written comments (a signed original 

with eight (8) copies) or electronic 

comments that are submitted timely to 

the IRS. The IRS and Treasury 

Department request comments on the 

clarity of the proposed regulations and 

how they may be made easier to 

understand. All comments will be 

available for public inspection and 

copying. 

A public hearing has been scheduled 

for December 5, 2008, beginning at 10 

a.m., in the auditorium of the Internal 

Revenue Building, 1111 Constitution 

Avenue, NW., Washington, DC. Due to 

building security procedures, visitors 

must enter at the Constitution Avenue 

entrance. In addition, all visitors must 

present photo identification to enter the 

building. Because of access restrictions, 

visitors will not be admitted beyond the 

immediate entrance area more than 30 

minutes before the hearing starts. For 

information about having your name 

placed on the building access list to 

attend the hearing, see the FOR FURTHER

INFORMATION CONTACT section of this 

preamble. 

The rules of 26 CFR 601.601(a)(3) 

apply to the hearing. Persons who wish 

to present oral comments at the hearing 

must submit electronic or written 

comments and an outline of the topics 

to be discussed and the time to be 

devoted to each topic (signed original 

and eight (8) copies) by November 13, 

2008. A period of 10 minutes will be 

allotted to each person for making 

comments. An agenda showing the 

scheduling of the speakers will be 

prepared after the deadline for receiving 

outlines has passed. Copies of the 

agenda will be available free of charge 

at the hearing. 

Drafting Information 

The principal author of these 

regulations is Brendan P. O’Hara, Office 

of Associate Chief Counsel (Income Tax 

and Accounting). However, other 

personnel from the IRS and Treasury 

Department participated in their 

development. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

Proposed Amendments to the 

Regulations 

Accordingly, 26 CFR part 1 is 

proposed to be amended as follows: 

PART 1—INCOME TAXES 

Paragraph 1. The authority citation 

for part 1 continues to read in part as 

follows: 

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

Par. 2. Section 1.460–3 is amended 

by: 

1. Revising paragraph (b)(1)(ii). 

2. Redesignating paragraphs (b)(2)(ii), 

(b)(2)(iii) and (b)(2)(iv) as paragraphs 

(b)(2)(iii), (b)(2)(iv) and (b)(2)(v), 

respectively, and revising them. 

3. Adding a new paragraph (b)(2)(ii). 

The revisions and addition read as 

follows: 

§ 1.460–3 Long-term construction 

contracts. 

* * * * * 

(b) * * * 

(1) * * * 

(ii) Construction contract, other than 

a home construction contract, that a 

taxpayer estimates (when entering into 

the contract) will be completed within 

2 years of the contract commencement 

date, provided the taxpayer satisfies the 

$10,000,000 gross receipts test described 

in paragraph (b)(3) of this section. 

(2) * * * 

(ii) Land improvements. For purposes 

of paragraph (b)(2)(i)(B) of this section, 

improvements to real property directly 

related to, and located on the site of, the 

dwelling units consist of improvements 

to land on which dwelling units (as 

described in paragraph (b)(2)(i)(A) of 

this section) are constructed, and 

common improvements as defined in 

paragraph (b)(2)(iv) of this section. A 

long-term construction contract is a 

home construction contract if a taxpayer 

(including a subcontractor working for a 

general contractor) meets the 80% test 

in paragraph (b)(2)(i) of this section as 

applied to either paragraph (b)(2)(i)(A) 

of this section or paragraph (b)(2)(i)(B) 

of this section, or both paragraphs 

(b)(2)(i)(A) and (b)(2)(i)(B) of this 

section, collectively. 

(iii) Townhouses and rowhouses. For 

purposes of determining whether a longterm construction contract is a home 

construction contract under paragraph 

(b)(2) of this section, each townhouse or 

rowhouse is a separate building. For this 

purpose, the term townhouse and 

rowhouse includes an individual 

condominium unit. 

(iv) Common improvements—(A) In 

general. A taxpayer includes in the cost 

of a dwelling unit or land its allocable 

share of the cost that the taxpayer incurs 

for any common improvements that 

benefit the dwelling unit or land. 

(B) Definition. For purposes of this 

section, a common improvement is an 

improvement that the taxpayer is 

contractually obligated, or required by 

law, to construct within the tract or 

tracts of land containing the dwelling 

units (or the land on which dwelling 

units are to be constructed) and that 

benefits the dwelling units (or the land 

on which dwelling units are to be 

constructed). In general, a common 

improvement does not solely benefit 

any particular dwelling unit or any 

particular lot on which a dwelling unit 

is constructed. However, land clearing 

and grading are common improvements, 

even when performed on a particular 

lot. Other examples of common 

improvements are sidewalks, sewers, 

roads and clubhouses. 

(v) Mixed use costs. If a contract 

involves the construction of both 

commercial units and dwelling units, a 

taxpayer must allocate the costs among 

the commercial units and dwelling units 

using a reasonable method or 

combination of reasonable methods. In 

general, the reasonableness of an 

allocation method will be based on facts 

and circumstances. Examples of 

methods that may be reasonable are 

specific identification, square footage, or 

fair market value. 

* * * * * 

Par. 3. Section 1.460–4 is amended 

by: 

1. Revising the third sentence in 

paragraph (c)(1). 

2. Redesignating paragraph (g) as 

paragraph (g)(1) and revising newly 

redesignated paragraph (g)(1). 

3. Adding a paragraph (g)(2). 

4. Revising Example 5. of paragraph 

(h). 

The revisions and additions read as 

follows: 

§ 1.460–4 Methods of accounting for longterm contracts. 

* * * * * 

(c) * * * 

(1) * * * Permissible exempt contract 

methods are the PCM, the EPCM 

described in paragraph (c)(2) of this 

section, the CCM described in paragraph 

(d) of this section, the accrual method, 

and any other permissible method. 

* * * 

* * * * * 

(g) Method of accounting—(1) In 

general. A taxpayer must apply its 

method(s) of accounting for long-term 

contracts consistently for all similarly 

classified long-term contracts until the 

taxpayer obtains the Commissioner’s 


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Federal Register / Vol. 73, No. 150 / Monday, August 4, 2008 / Proposed Rules 45183 

consent under section 446(e) to change 

to another method of accounting. 

(2) Taxpayer-initiated change in 

method of accounting—(i) Change to 

PCM for long-term contracts for which 

PCM is required. A taxpayer-initiated 

change in method of accounting for 

long-term contracts (or portion thereof) 

for which income must be determined 

using the PCM described in paragraph 

(b) of this section and the costs 

allocation rules described in § 1.460–

5(b) or (c) (required PCM contracts) from 

a method of accounting that does not 

comply with paragraph (b) of this 

section and § 1.460–5(b) or (c) to a 

method that complies with paragraph 

(b) of this section and § 1.460–5(b) or (c) 

must be applied to all required PCM 

contracts entered into before the year of 

change and not reported as completed 

as of the beginning of the year of 

change. Accordingly, a section 481(a) 

adjustment will be required. 

(ii) Change from a permissible PCM 

method to another permissible PCM 

method for long-term contracts for 

which PCM is required. A taxpayer 

initiated change in method of 

accounting for required PCM contracts, 

as defined in paragraph (g)(2)(i) of this 

section (or a portion thereof), from a 

method of accounting that complies 

with paragraph (b) of this section and 

§ 1.460–5(b) or (c) to another method of 

accounting that complies with 

paragraph (b) of this section and 

§ 1.460–5(b) or (c) must be made on a 

cut-off basis and applied only to 

contracts entered into during and after 

the year of change. Accordingly, a 

section 481(a) adjustment will be 

neither permitted nor required. 

(iii) Change to an exempt contract 

method for home construction 

contracts. A taxpayer-initiated change 

in method of accounting for home 

construction contracts, as defined in 

§ 1.460–3(b)(2), to a permissible exempt 

contract method, as described in 

paragraph (c)(1) of this section, must be 

applied to all home construction 

contracts entered into before the year of 

change and not reported as completed 

as of the beginning of the year of 

change. Accordingly, a section 481(a) 

adjustment will be required. 

(iv) Change to an exempt contract 

method for exempt contracts other than 

home construction contracts. A 

taxpayer-initiated change in method of 

accounting for long-term contracts (or 

portion thereof) not described in 

paragraphs (g)(2)(i), (ii) and (iii) of this 

section to a permissible exempt contract 

method as described in paragraph (c)(1) 

of this section must be applied to all 

contracts that are eligible to use the 

exempt contract method entered into 

before the year of change and not 

reported as completed as of the 

beginning of the year of change. 

Accordingly, a section 481(a) 

adjustment will be required. 

(h) * * * 

* * * * * 

Example 5. PCM—contract terminated. C, 

whose taxable year ends December 31, 

determines the income from long-term 

contracts using the PCM. During 2001, C 

buys land and begins constructing a building 

that will contain 50 apartment units on that 

land. C enters into a contract to sell the 

building to B for $2,400,000. B gives C a 

$50,000 deposit toward the purchase price. 

By the end of 2001, C has incurred $500,000 

of allocable contract costs on the building 

and estimates that the total allocable contract 

costs on the building will be $1,500,000. 

Thus, for 2001, C reports gross receipts of 

$800,000 ($500,000/$1,500,000 × 

$2,400,000), current-year costs of $500,000, 

and gross income of $300,000 

($800,000¥$500,000). In 2002, after C has 

incurred an additional $250,000 of allocable 

contract costs on the building, B files for 

bankruptcy protection and defaults on the 

contract with C, who is permitted to keep B’s 

$50,000 deposit as liquidated damages. In 

2002, C reverses the transaction with B under 

paragraph (b)(7) of this section and reports a 

loss of $300,000 ($500,000¥$800,000). In 

addition, C obtains an adjusted basis in the 

building sold to B of $700,000 ($500,000 

(current-year costs deducted in 

2001)¥$50,000 (B’s forfeited deposit) + 

$250,000 (current-year costs incurred in 

2002). C may not apply the look-back method 

to this contract in 2002. 

* * * * * 

Par. 4. Section 1.460–5 is amended 

by: 

1. Adding a new sentence to the end 

of paragraph (c)(2). 

2. Revising paragraph (g). 

The revision and addition read as 

follows: 

§ 1.460–5 Cost allocation rules. 

* * * * * 

(c) * * * 

(2) * * * Further, this election is not 

available if a taxpayer is changing from 

a cost allocation method other than as 

prescribed in paragraph (b) of this 

section, in which case the taxpayer must 

follow the procedures under § 1.446–

1(e) for obtaining the Commissioner’s 

consent for the change in method of 

accounting. 

* * * * * 

(g) Method of accounting. A taxpayer 

that adopts, elects, or otherwise changes 

to a cost allocation method of 

accounting (or changes to another cost 

allocation method of accounting with 

the Commissioner’s consent) must apply 

that method consistently for all 

similarly classified contracts, until the 

taxpayer obtains the Commissioner’s 

consent under section 446 to change to 

another cost allocation method. A 

taxpayer-initiated change in cost 

allocation method from a method that 

does not comply with the cost allocation 

rules of this section to a method that 

complies with the cost allocation rules 

of this section must be applied to all 

long-term contracts to which the rules of 

this section apply, including contracts 

entered into before the year of change 

and not reported as completed as of the 

beginning of the year of change. 

Accordingly, a section 481(a) 

adjustment is required. Any other 

taxpayer-initiated change in cost 

allocation method to a method 

permitted under the rules of this section 

must be made on a cut-off basis and 

applied only to contracts entered into 

during and after the year of change, in 

which case a section 481(a) adjustment 

will be neither permitted nor required. 

Par. 5. Section 1.460–6 is amended 

by: 

1. Adding paragraph (c)(3)(vii). 

2. Redesignating paragraph (d)(2)(iv) 

as paragraph (d)(2)(v). 

3. Adding a new paragraph (d)(2)(iv). 

The additions and revision read as 

follows: 

§ 1.460–6 Look-back method. 

* * * * * 

(c) * * * 

(3) * * * 

(vii) Section 481(a) adjustments. For 

purposes of determining the 

hypothetical underpayment or 

overpayment of tax for any year, 

amounts reported as section 481(a) 

adjustments shall be taken into account 

in the tax year or years they are 

reported. However, any portion of a 

section 481(a) adjustment not yet 

reported as of the tax year in which the 

contract is completed shall be taken into 

account in the tax year the contract is 

completed for purposes of determining 

the hypothetical underpayment or 

overpayment of tax. 

* * * * * 

(d) * * * 

(2) * * * 

(iv) Section 481(a) adjustments. For 

purposes of determining the 

hypothetical underpayment or 

overpayment of tax for any year under 

the simplified marginal impact method, 

amounts reported as section 481(a) 

adjustments shall be taken into account 

in the tax year or years they are 

reported. However, any portion of a 

section 481(a) adjustment not yet 

reported as of the tax year in which the 

contract is completed shall be taken into 

account in the tax year the contract is 

completed for purposes of determining 


ebenthall on PRODPC60 with PROPOSALS
45184 Federal Register / Vol. 73, No. 150 / Monday, August 4, 2008 / Proposed Rules 

the hypothetical underpayment or 

overpayment of tax. 

* * * * * 

Linda E. Stiff, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. E8–17830 Filed 8–1–08; 8:45 am] 

BILLING CODE 4830–01–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R05–OAR–2006–0003; FRL–8696–4] 

Approval and Promulgation of Air 

Quality Implementation Plans; Illinois 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: EPA is proposing to approve 

a revision to the Illinois State 

Implementation Plan (SIP) for ozone. 

The state is incorporating revisions EPA 

made to its definition of volatile organic 

compound (VOC). This SIP revision 

adds one compound to the list of 

compounds that are exempt from being 

considered a VOC. This is because it 

was determined that the listed 

compound does not contribute to ozone 

formation. 

DATES: Comments must be received on 

or before September 3, 2008. 

ADDRESSES: Submit your comments, 

identified by Docket ID No. EPA–R05–

OAR–2006–0003, by one of the 

following methods: 

1. www.regulations.gov: Follow the 

on-line instructions for submitting 

comments. 

2. E-mail: mooney.john@epa.gov. 

3. Fax: (312) 886–5824. 

4. Mail: John M. Mooney, Chief, 

Criteria Pollutant Section, Air Programs 

Branch (AR–18J), U.S. Environmental 

Protection Agency, 77 West Jackson 

Boulevard, Chicago, Illinois 60604. 

5. Hand Delivery: John M. Mooney, 

Chief, Criteria Pollutant Section, Air 

Programs Branch (AR–18J), U.S. 

Environmental Protection Agency, 77 

West Jackson Boulevard, Chicago, 

Illinois 60604. Such deliveries are only 

accepted during the Regional Office 

normal hours of operation, and special 

arrangements should be made for 

deliveries of boxed information. The 

Regional Office official hours of 

business are Monday through Friday, 

8:30 a.m. to 4:30 p.m. excluding Federal 

holidays. 

Please see the direct final rule which 

is located in the Rules section of this 

Federal Register for detailed 

instructions on how to submit 

comments. 

FOR FURTHER INFORMATION CONTACT: Matt 

Rau, Environmental Engineer, Criteria 

Pollutant Section, Air Programs Branch 

(AR–18J), Environmental Protection 

Agency, Region 5, 77 West Jackson 

Boulevard, Chicago, Illinois 60604, 

(312) 886–6524, rau.matthew@epa.gov. 

SUPPLEMENTARY INFORMATION: In the 

Final Rules section of this Federal 

Register, EPA is approving the State’s 

SIP submittal as a direct final rule 

without prior proposal because the 

Agency views this as a noncontroversial 

submittal and anticipates no adverse 

comments. A detailed rationale for the 

approval is set forth in the direct final 

rule. If no adverse comments are 

received in response to this rule, no 

further activity is contemplated. If EPA 

receives adverse comments, the direct 

final rule will be withdrawn and all 

public comments received will be 

addressed in a subsequent final rule 

based on this proposed rule. EPA will 

not institute a second comment period. 

Any parties interested in commenting 

on this action should do so at this time. 

Please note that, if EPA receives adverse 

comment on an amendment, paragraph, 

or section of this rule and if that 

provision may be severed from the 

remainder of the rule, EPA may adopt 

as final those provisions of the rule that 

are not the subject of an adverse 

comment. For additional information, 

see the direct final rule which is located 

in the Rules section of this Federal 

Register. 

Dated: July 14, 2008. 

Walter W. Kovalick Jr., 

Acting Regional Administrator, Region 5. 

[FR Doc. E8–17698 Filed 8–1–08; 8:45 am] 

BILLING CODE 6560–50–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R05–OAR–2008–0501; FRL–8698–8] 

Approval and Promulgation of Air 

Quality Implementation Plans; Indiana 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: EPA is proposing to approve 

a request submitted by the Indiana 

Department of Environmental 

Management on May 22, 2008, to revise 

the Indiana State Implementation Plan 

(SIP). The submission revises the 

Indiana Administrative Code (IAC) by 

amending and updating the definition of 

‘‘References to Code of Federal 

Regulations,’’ to refer to the 2007 

edition. 

In the final rules section of this 

Federal Register, EPA is approving the 

SIP revision as a direct final rule 

without prior proposal, because EPA 

views this as a noncontroversial 

revision and anticipates no adverse 

comments. A detailed rationale for the 

approval is set forth in the direct final 

rule. If we do not receive any adverse 

comments in response to these direct 

final and proposed rules, we do not 

contemplate taking any further action in 

relation to this proposed rule. If EPA 

receives adverse comments, we will 

withdraw the direct final rule and will 

respond to all public comments in a 

subsequent final rule based on this 

proposed rule. EPA will not institute a 

second comment period on this action. 

Any parties interested in commenting 

on this action should do so at this time. 

DATES: Comments must be received on 

or before September 3, 2008. 

ADDRESSES: Submit your comments, 

identified by Docket ID No. EPA–R05–

OAR–2008–0501 by one of the following 

methods: 

• www.regulations.gov: Follow the 

on-line instructions for submitting 

comments. 

• E-mail: mooney.john@epa.gov. 

• Fax: (312) 886–5824. 

• Mail: John Mooney, Chief, Criteria 

Pollutant Section, Air Programs Branch 

(AR–18J), U.S. Environmental 

Protection Agency, 77 West Jackson 

Boulevard, Chicago, Illinois 60604. 

• Hand Delivery: John Mooney, Chief, 

Criteria Pollutant Section, Air Programs 

Branch (AR–18J), U.S. Environmental 

Protection Agency, 77 West Jackson 

Boulevard, Chicago, Illinois 60604. 

Such deliveries are only accepted 

during the Regional Office normal hours 

of operation, and special arrangements 

should be made for deliveries of boxed 

information. The Regional Office official 

hours of business are Monday through 

Friday, 8:30 a.m. to 4:30 p.m. excluding 

Federal holidays. 

Please see the direct final rule which 

is located in the Rules section of this 

Federal Register for detailed 

instructions on how to submit 

comments. 

FOR FURTHER INFORMATION CONTACT: 

Charles Hatten, Environmental 

Engineer, Criteria Pollutant Section, Air 

Programs Branch (AR–18J), 

Environmental Protection Agency, 

Region 5, 77 West Jackson Boulevard, 

Chicago, Illinois 60604, (312) 886–6031, 

hatten.charles@epa.gov. 


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