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BrowseBrowseInterestsBiography & MemoirBusiness & LeadershipFiction & LiteraturePolitics & EconomyHealth & WellnessSociety & CultureHappiness & Self-HelpMystery, Thriller & CrimeHistoryYoung AdultBrowse byBooksAudiobooksComicsSheet MusicBrowse allUploadSign inJoinBooksAudiobooksComicsSheet MusicWelcome to Scribd! Start your free trial and access books, documents and more.Find out moreBulletin No.2006-35 August 28, 2006
Rev. Rul. 2006–41, page 331.
section 401(m) plan that is provided under the same general arrangement as the section 401(k) plan of the employer) meets the requirements for minimum coverage specified in section 410(b). The regulations affect tax-exempt employers described in section 501(c)(3), retirement plans sponsored by these employers, and participants in these plans.
Rev. Rul. 2006–43, page 329.
Government pick-up plans; employer contributions; income tax; prospective application. This ruling describes the actions required for a state or its political subdivisions, etc., to “pick-up” or treat certain contributions as employer contributions to a plan qualified under section 401(a) of the Code. If certain criteria are met, this ruling will be applied prospectively. Rev. Ruls. 81–35, 81–36, and 87–10 amplified and modified.
Rev. Rul. 2006–42, page 337.
Levy on bank account. This ruling explains that a superpriority lien argument is not a defense to a levy. If a bank has such an argument, it must file a wrongful levy suit within nine months of the levy. Otherwise, the statute of limitations bars such a suit.
T.D. 9272, page 332. REG–159929–02, page 341.
T.D. 9275, page 327.
Final regulations under section 410 of the Code implement a statutory directive of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) to amend section 1.410(b)–6(g) of the regulations. The final regulations permit, in certain circumstances, employees of a tax-exempt organization described in section 501(c)(3) to be excluded for the purpose of testing whether a section 401(k) plan (or a section 401(m) plan that is provided under the same general arrangement as the section 401(k) plan of the employer) meets the requirements for minimum coverage specified in section 410(b). The regulations affect tax-exempt employers described in section 501(c)(3), retirement plans sponsored by these employers, and participants in these plans.
Final regulations under section 410 of the Code implement a statutory directive of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) to amend section 1.410(b)–6(g) of the regulations. The final regulations permit, in certain circumstances, employees of a tax-exempt organization described in section 501(c)(3) to be excluded for the purpose of testing whether a section 401(k) plan (or a
Announcements of Disbarments and Suspensions begin on page 343. Finding Lists begin on page ii. Index for July through August begins on page iv.
Notice 2006–74, page 339.
Weighted average interest rate update; 30–year Treasury securities. The weighted average interest rate for August 2006 and the resulting permissible range of interest rates used to calculate current liability and to determine the required contribution are set forth.
Announcement 2006–55, page 342.
Aviation Safety Council, Inc., of Pasadena, CA; Budget and Credit Counseling Services, Inc., of New York, NY; and Mason Credit Counseling, Inc., of Hauppauge, NY, no longer qualify as organizations to which contributions are deductible under section 170 of the Code.
Notice 2006–73, page 339.
This notice effects interim revisions to Forms 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession, and 8840, Closer Connection Exception Statement for Aliens. Taxpayers required to file these forms should disregard certain line items. However, filers are reminded that they must retain the information elicited on those line items, as well as the rest of the form, in their books and records.
Announcement 2006–56, page 342.
This document contains corrections to temporary regulations (T.D. 9262, 2006–24 I.R.B. 1040) concerning the application of section 199 of the Code, which provides a deduction for income attributable to domestic production activities, to certain transactions involving computer software.
2006–35 I.R.B.
Section 410.—Minimum Participation Standards
26 CFR 1.410(b)–6: Excludable employees.
T.D. 9275 DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 Exclusion of Employees of 501(c)(3) Organizations in 401(k) and 401(m) Plans
AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final regulations. SUMMARY: This document contains final regulations under section 410(b) of the Internal Revenue Code. The final regulations permit, in certain circumstances, employees of a tax-exempt organization described in section 501(c)(3) to be excluded for the purpose of testing whether a section 401(k) plan (or a section 401(m) plan that is provided under the same general arrangement as the section 401(k) plan of the employer) meets the requirements for minimum coverage specified in section 410(b). These regulations affect tax-exempt employers described in section 501(c)(3), retirement plans sponsored by these employers, and participants in these plans. DATES: Effective Date: July 21, 2006. Applicability Date: These regulations apply to plan years beginning after December 31, 1996. FOR FURTHER INFORMATION CONTACT: Linda L. Conway, 202–622–6060, or Michael P. Brewer, 202–622–6090 (not toll-free numbers). SUPPLEMENTARY INFORMATION: Background This document contains final amendments to the Income Tax Regulations
(26 CFR Part 1) under section 410(b) of the Internal Revenue Code of 1986 (Code). On March 16, 2004, a notice of proposed rulemaking (REG–149752–03, 2004–1 C.B. 707) was published in the Federal Register (69 FR 12291) under section 410(b). The regulations implement a directive by Congress, contained in section 664 of the Economic Growth and Tax Relief Reconciliation Act of 2001 (Public Law 107–16, 115 Stat. 38) (EGTRRA), to amend §1.410(b)–6(g) of the regulations. Prior to the enactment of the Small Business Job Protection Act of 1996 (Public Law 104–188, 110 Stat. 1755) (SBJPA), both governmental and tax-exempt entities generally were subject to the section 410(b) coverage requirements and precluded from maintaining section 401(k) plans pursuant to section 401(k)(4)(B). To prevent the section 401(k)(4)(B) prohibition from causing a plan to fail section 410(b), the existing regulations provide that employees of either governmental or tax-exempt entities who are precluded from being eligible employees under a section 401(k) plan by reason of section 401(k)(4)(B) may be treated as excludable in applying the minimum coverage rules to a section 401(k) plan or a section 401(m) plan that is provided under the same general arrangement as the section 401(k) plan, if more than 95 percent of the employees of the employer who are not precluded from being eligible employees by section 401(k)(4)(B) benefit under the plan for the plan year. Although tax-exempt organizations described in section 501(c)(3) were precluded by section 401(k)(4)(B) from maintaining a section 401(k) plan, they were permitted to allow their employees to make salary reduction contributions to a plan or contract that satisfies section 403(b) (a section 403(b) plan). Section 1426(a) of SBJPA amended section 401(k)(4)(B), effective for plan years beginning after December 31, 1996, to allow nongovernmental tax-exempt organizations (including organizations exempt under section 501(c)(3)) to maintain section 401(k) plans. Thus, a section 501(c)(3) tax-exempt organization can now maintain a section 401(k) plan, a sec-
tion 403(b) plan, or both. Prior to the enactment of SBJPA, many eligible tax-exempt organizations maintained section 403(b) plans. In light of this provision of SBJPA, section 664 of EGTRRA directed the Secretary of the Treasury to modify the regulations under section 410(b) to provide that employees of an organization described in section 403(b)(1)(A)(i) (a section 501(c)(3) organization) who are eligible to make contributions under section 403(b) pursuant to a salary reduction agreement may be treated as excludable with respect to a plan under section 401(k) or a plan under section 401(m) that is provided under the same general arrangement as a plan under section 401(k), if (1) no employee of an organization described in section 403(b)(1)(A)(i) is eligible to participate in such section 401(k) plan or section 401(m) plan and (2) 95 percent of the employees who are not employees of an organization described in section 403(b)(1)(A)(i) are eligible to participate in such plan under such section 401(k) or (m). The amendment to §1.410(b)–6(g) of the regulations pursuant to section 664 of EGTRRA allows the continued maintenance of section 403(b) plans by these organizations without requiring the same employees to be covered under a section 401(k) plan and the section 403(b) plan. In certain circumstances, the amendments will help an employer that maintains both a section 401(k) plan and a section 403(b) plan that provides for contributions under a salary reduction agreement (within the meaning of section 402(g)) to satisfy the section 410(b) coverage requirements with respect to the section 401(k) plan without the employer having to provide dual coverage for employees. Only a few comments were received on the proposed regulations. No public hearing was requested or held. After consideration of the comments received, the final regulations adopt the provisions of the proposed regulations with certain modifications described below.
Explanation of Provisions These final regulations retain the rule that provides that employees of governmental entities who are precluded from being eligible employees under a section 401(k) plan by reason of section 401(k)(4)(B)(ii) may be treated as excludable employees if more than 95 percent of the employees of the employer who are not precluded from being eligible employees by reason of section 401(k)(4)(B)(ii) benefit under the plan for the year. As directed by section 664 of EGTRRA, these final regulations also provide that employees of a section 501(c)(3) organization who are eligible to make contributions under section 403(b) pursuant to a salary reduction agreement (within the meaning of section 402(g)) may be treated as excludable with respect to a section 401(k) plan, or a section 401(m) plan that is provided under the same general arrangement as a section 401(k) plan, if (1) no employee of a section 501(c)(3) organization is eligible to participate in such section 401(k) plan or section 401(m) plan; and (2) at least 95 percent of the employees who are neither employees of a section 501(c)(3) organization nor employees of a governmental entity who are precluded from being eligible employees under a section 401(k) plan by reason of section 401(k)(4)(B)(ii) are eligible to participate in such section 401(k) plan or section 401(m) plan. The proposed regulations, in an attempt to simplify the language in section 664 of EGTRRA, would have provided that, for purposes of testing either a section 401(k) plan, or a section 401(m) plan that is provided under the same general arrangement, employees of a section 501(c)(3) organization who are eligible to make salary reduction contributions (within the meaning of section 402(g)) under a section 403(b) plan may be treated as excludible employees if no employee of the organization (rather than no employee of any organization described in section 403(b)(1)(A)(ii) (as in the language in section 664 of EGTRRA)) is eligible to participate in the section 401(k) plan or 401(m) plan, and 95% of the employees of the employer who are not employees of the organization (rather than an organization described in section 403(b)(1)(A)(ii) (as in the language in section 664 of EGTRRA))
are eligible to participate in the section 401(k) plan or section 401(m) plan. After further consideration, the IRS and Treasury Department have concluded that this simplification of the statutory language might not in all cases result in the same employees being excludible as would be excludible by applying the statutory language, which was not the intent. Thus, the final regulations more closely track the language in section 664 of EGTRRA than the proposed regulations. The few comments received on the proposed regulations generally did not ask for changes to the basic rule but rather asked for further explanation as to the proper interpretation of the rule, including the scope of the exclusion and the interaction of the rule with other rules in the regulations under section 410(b). As explained further below, the IRS and Treasury Department believe that the answers to the questions raised in the comments is reasonably clear under the existing language, and have decided not to expand guidance in the regulation beyond the specific direction of Congress. Commentators requested clarification as to when a section 401(m) plan is provided under the same general arrangement as a section 401(k) plan for purposes of these regulations. Generally, a section 401(m) plan is provided under the same general arrangement as a section 401(k) plan only to the extent that the matching contributions are contingent upon elective deferrals in the section 401(k) plan. Commentators asked for clarification of the relationship between the proposed regulations and §1.410(b)–7(f) and whether matching contributions made under a 401(a) tax-qualified plan may be taken into account when applying the coverage requirements of section 410(b) to matching contributions provided as part of a section 403(b) plan. Treasury regulation §1.410(b)–7(f) permits a plan subject to section 403(b)(12)(A)(i), which requires the universal availability of the right to defer, to satisfy section 410(b) by taking into account plans that are not subject to section 403(b)(12)(A)(i). Accordingly, a section 403(b) plan is permitted to satisfy the section 410(b) coverage requirements for matching contributions by taking into account matching contributions that are provided under a plan that is not subject to section 403(b)(12)(A)(i) (e.g., a section
401(a) tax-qualified plan). However, because Treasury regulation §1.410(b)–7(f) does not permit a section 401(a) tax-qualified plan to satisfy the requirements of section 410(b) by taking into account a plan subject to section 403(b)(12)(A)(i), a section 401(a) tax-qualified plan must satisfy the section 410(b) coverage requirements by disregarding coverage under a section 403(b) plan. These regulations provide the rules for disregarding employees of a governmental or tax-exempt entity for purposes of applying the coverage requirements of section 410(b) to a section 401(k) plan or a section 401(m) plan that is provided under the same general arrangement as the section 401(k) plan. Commentators asked whether employees of a tax-exempt organization described in section 501(c)(3) who would be eligible to make salary reduction contributions under a section 403(b) plan but for the exclusions permitted under section 403(b)(12), such as nonresident aliens and employees who normally work less than 20 hours per week, are taken into account as employees who are eligible to make salary reduction contributions for purposes of these regulations. These regulations provide that such employees are not taken into account unless they are actually eligible to make salary reduction contributions to the section 403(b) plan. Effective Date As directed by Congress in section 664 of EGTRRA, these final regulations apply to plan years beginning after December 31, 1996. However, the preamble to the proposed regulations provided that taxpayers were permitted to rely on the proposed regulations, and if and to the extent that the final regulations were more restrictive, the final regulations would be prospective. As described above, the final regulations make certain modifications to the proposed regulations. These may be more restrictive than the proposed regulations under certain limited circumstances. Consequently, for plan years beginning after December 31, 1996, but before January 1, 2007, an employer is permitted to determine the excludible employees under a section 401(k) plan or section 401(m) plan using either §1.410(b)–6(g) in the proposed regulations or these final regulations.
Special Analyses It has been determined that this is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and, because these regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Drafting Information The principal authors of these regulations are Linda L. Conway and Michael P. Brewer of the Office of the Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS and Treasury participated in the development of these regulations. ***** Adoption of Amendments to the Regulations Accordingly, 26 CFR part 1 is amended as follows: PART 1—INCOME TAXES Paragraph 1. The authority citation for part 1 is amended by removing the entry for §§1.410(b)–2 through 1.410(b)–10 and adding entries in numerical order to read, in part, as follows: Authority: 26 U.S.C. 7805. * * * §1.410(b)–2 also issued under 26 U.S.C. 410(b)(6). §1.410(b)–3 also issued under 26 U.S.C. 410(b)(6). §1.410(b)–4 also issued under 26 U.S.C. 410(b)(6). §1.410(b)–5 also issued under 26 U.S.C. 410(b)(6). §1.410(b)–6 also issued under 26 U.S.C. 410(b)(6) and section 664 of the Economic Growth and Tax Relief Reconciliation Act of 2001 (Public Law 107–16, 115 Stat. 38). §1.410(b)–7 also issued under 26 U.S.C. 410(b)(6). §1.410(b)–8 also issued under 26 U.S.C. 410(b)(6).
§1.410(b)–9 also issued under 26 U.S.C. 410(b)(6). §1.410(b)–10 also issued under 26 U.S.C. 410(b)(6).* * * Par. 2. Section 1.410(b)–0, table of contents, the entry for 1.410(b)–6 is amended by: 1. Revising the entry for 1.410(b)–6(g). 2. Adding entries for 1.410(b)–6(g)(1), (g)(2), and (g)(3). The revision and additions read as follows: §1.410(b)–0 Table of contents. ***** §1.410(b)–6 Excludable employees. ***** (g) Employees of certain governmental or tax-exempt entities. (1) Plans covered. (2) Employees of governmental entities. (3) Employees of tax-exempt entities. ***** Par. 3. In §1.410(b)–6, paragraph (g) is revised to read as follows: §1.410(b)–6 Excludable employees. ***** (g) Employees of certain governmental or tax-exempt entities—(1) Plans covered. For purposes of testing either a section 401(k) plan, or a section 401(m) plan that is provided under the same general arrangement as a section 401(k) plan, an employer may treat as excludable those employees described in paragraphs (g)(2) and (3) of this section. (2) Employees of governmental entities. Employees of governmental entities who are precluded from being eligible employees under a section 401(k) plan by reason of section 401(k)(4)(B)(ii) may be treated as excludable employees if more than 95 percent of the employees of the employer who are not precluded from being eligible employees by reason of section 401(k)(4)(B)(ii) benefit under the plan for the year. (3) Employees of tax-exempt entities. Employees of an organization described in section 403(b)(1)(A)(i) who are eligible to make salary reduction contributions under section 403(b) may be treated as excludable with respect to a section 401(k) plan,
or a section 401(m) plan that is provided under the same general arrangement as a section 401(k) plan, if— (i) No employee of an organization described in section 403(b)(1)(A)(i) is eligible to participate in such section 401(k) plan or section 401(m) plan; and (ii) At least 95 percent of the employees who are neither employees of an organization described in section 403(b)(1)(A)(i) nor employees of a governmental entity who are precluded from being eligible employees under a section 401(k) plan by reason of section 401(k)(4)(B)(ii) are eligible to participate in such section 401(k) plan or section 401(m) plan. ***** Par. 4. In §1.410(b)–10, paragraph (e) is added to read as follows: §1.410(b)–10 Effective dates and transition rules. ***** (e) Effective date for provisions relating to exclusion of employees of certain tax-exempt entities. The provisions in §1.410(b)–6(g) apply to plan years beginning after December 31, 1996. For plan years to which §1.410(b)–6 applies that begin before January 1, 1997, §1.410(b)–6(g) (as it appeared in the April 1, 2005 edition of 26 CFR part 1) applies. Mark E. Matthews, Deputy Commissioner for Services and Enforcement. Approved June 30, 2006. Eric Solomon, Acting Deputy Assistant Secretary of the Treasury (Tax Policy).
(Filed by the Office of the Federal Register on July 20, 2006, 8:45 a.m., and published in the issue of the Federal Register for July 21, 2006, 71 F.R. 41357)
Section 414.—Definitions and Special Rules
(Also § 7805.)
Government pick-up plans; employer contributions; income tax; prospective application. This ruling describes the actions required for a state or its political subdivisions, etc., to “pick-up” or treat certain contributions as employer contributions to a plan qualified under
section 401(a) of the Code. If certain criteria are met, this ruling will be applied prospectively. Rev. Ruls. 81–35, 81–36, and 87–10 amplified and modified.
LAW AND ANALYSIS Section 414(h)(1) provides that any amount contributed to a qualified plan is not treated as having been made by the employer if it is designated as an employee contribution. Section 414(h)(2) provides a special rule for qualified plans established by a State government or political subdivision thereof, or by any agency or instrumentality of the foregoing. Under this rule, contributions, although designated as employee contributions, are nevertheless treated as employer contributions if the contributions are picked up by the employing unit. Section 401(k) provides the rules relating to cash or deferred elections. Section 1.401(k)–1(a)(1) of the Income Tax Regulations provides that a plan, other than a profit-sharing, stock bonus, pre-ERISA money purchase pension or rural cooperative plan, does not satisfy the requirements of § 401(a) if the plan includes a cash or deferred arrangement. Thus, a qualified defined benefit plan is not permitted to include a cash or deferred arrangement. Section 1.401(k)–1(a)(3) generally defines a cash or deferred election as any direct or indirect election (or modification of an earlier election) by an employee to have the employer (i) provide an amount that is not currently available to the employee in the form of cash or some other taxable benefit, or (ii) contribute an amount to a trust or provide an accrual for a plan deferring the receipt of compensation. Rev. Rul. 77–462, 1977–2 C.B. 358, addresses the income tax treatment of contributions picked up by the employer within the meaning of § 414(h)(2). In Rev. Rul. 77–462, the employer school district agreed to “pick up” and pay the required contributions of the eligible employees under the plan. The revenue ruling holds that the contributions picked up by the school district are excluded from the gross income of employees until such time as they are distributed to the employees. Rev. Rul. 81–35, 1981–1 C.B. 255, and Rev. Rul. 81–36, 1981–1 C.B. 255, address certain requirements for contributions to be picked up by an employer within the meaning of § 414(h)(2). These revenue rulings establish that the following criteria must be satisfied: (i) the employer must specify that the contributions,
Rev. Rul. 2006–43
ISSUES What actions are required in order for a State or political subdivision thereof, or an agency or instrumentality of any of the foregoing, to “pick up” employee contributions to a plan qualified under § 401(a) of the Internal Revenue Code so that the contributions are treated as employer contributions pursuant to § 414(h)(2)? FACTS Employer M is a political subdivision of State N. Employer M participates in Plan A, a defined benefit pension plan qualified under § 401(a) and established by State N to provide retirement benefits to eligible employees of State N and any political subdivision of State N. Plan A requires each participating employee to make employee contributions to Plan A equal to a specified percentage of the participant’s salary. These amounts, designated as employee contributions under § 414(h)(1), are deducted from the participant’s salary. State N statutes governing Plan A permit any political subdivision to provide that the employee contributions will be paid by the employer in order to be picked up and treated as employer contributions under § 414(h)(2). On March 1, 2006, Employer M amends its governing laws to provide that the amounts designated as employee contributions under Plan A will be paid by Employer M for all of Employer M’s employees in order to be treated as employer contributions under § 414(h)(2), as permitted under the statutes governing Plan A. The amendment is in writing, was adopted by persons authorized to amend Employer M’s governing laws, and is effective for periods on or after April 1, 2006. Employer M, thereafter, treats the amounts as employer contributions, instead of as being employee contributions, for federal income tax purposes and does not include these amounts in the participating employees’ gross income.
although designated as employee contributions, are being paid by the employer in lieu of contributions by the employee; and (ii) the employee must not be given the option of choosing to receive the contributed amounts directly instead of having them paid by the employer to the plan. Rev. Rul. 81–35 and Rev. Rul. 81–36 apply even if the employer picks up the contributions through either a reduction in salary or an offset against future salary increases. Rev. Rul. 87–10, 1987–1 C.B. 136, addresses when contributions designated as employee contributions (designated employee contributions) under § 414(h)(1) to a qualified plan established by a State government (including a political subdivision thereof, or any agency or instrumentality of the foregoing) are excludable from the gross income of the employee. The ruling concludes that, to satisfy the criteria set forth in Rev. Rul. 81–35 and Rev. Rul. 81–36, the governmental action necessary to effectuate the “pick-up” must be completed before the period to which such contributions relate. Thus, designated employee contributions to a qualified plan established by a State government are excluded from gross income as “pick-up” contributions that are treated as employer contributions only to the extent the contributions relate to compensation for services rendered after the date of the last governmental action necessary to effectuate the “pick-up.” Based on the foregoing, a contribution to a qualified plan established by a State government will not be treated as picked up by the employing unit under § 414(h)(2) unless the employing unit: (1) Specifies that the contributions, although designated as employee contributions, are being paid by the employer. For this purpose, the employing unit must take formal action to provide that the contributions on behalf of a specific class of employees of the employing unit, although designated as employee contributions, will be paid by the employing unit in lieu of employee contributions. A person duly authorized to take such action with respect to the employing unit must take such action. The action must apply only prospectively and be evidenced by a contemporaneous written document (e.g., minutes of a meeting, a resolution, or an ordinance). (2) Does not permit a participating employee from and after the date of the
“pick-up” to have a cash or deferred election right (within the meaning of § 1.401(k)–1(a)(3)) with respect to designated employee contributions. Thus, for example, participating employees must not be permitted to opt out of the “pick-up”, or to receive the contributed amounts directly instead of having them paid by the employing unit to the plan. Employer M has taken formal action which was memorialized in a contemporaneous writing that provides that it will “pick up” all prospective contributions for the Employer M employees who are required to contribute to Plan A. Further, employees are required to participate in Plan A, do not have the option of choosing to receive the contributed amounts directly, and may not make a cash or deferred election with respect to such amounts. Employer M has met the requirements to have the designated employee contributions under Plan A picked up and treated as employer contributions pursuant to § 414(h)(2). Thus, contributions made to Plan A are not includible in a participant’s gross income until distributed under § 402. This revenue ruling applies only for federal income tax purposes. See §§ 3121(a)(5)(A) and 3121(v)(1)(B) of the Federal Insurance Contributions Act (FICA) for the treatment of amounts treated as an employer contributions under § 414(h)(2). HOLDING Because an authorized person has taken formal action in writing prospectively to have the employing unit pay previously designated employee contributions to a § 401(a) qualified plan, appropriate actions have been taken for the contributions to be picked up by the employing unit and treated as employer contributions pursuant to § 414(h)(2). TRANSITION RELIEF FOR PRE-EXISTING “PICK-UPS” Under the authority of § 7805(b)(8), the Service will not treat any plan that on or
before August 28, 2006, includes designated employee contributions that were intended to be picked up as employer contributions pursuant to § 414(h)(2) as failing to meet the requirements of such section prior to January 1, 2009, solely on account of the failure to satisfy the requirement that the “pick-up” be pursuant to a formal action, by a person duly authorized to take such action with respect to the employing unit, that is evidenced by contemporaneous writing, but only if the following conditions are satisfied: (1) the employing unit has taken contemporaneous action evidencing an intent to establish a “pick-up” (e.g., provided information to employees relating to the establishment of the “pick-up”) and has operated the plan accordingly; and (2) the employing unit takes formal action in writing prior to January 1, 2009, with respect to future contributions to meet the requirements set forth above in paragraph (1) of Law and Analysis in this revenue ruling. The relief provided above for “pick-ups” implemented prior to August 28, 2006, applies only if the actions taken otherwise complied with Rev. Rul. 81–35, Rev. Rul. 81–36, and Rev. Rul. 87–10, and only if the employing unit has not reported the contributions as wages subject to federal income tax withholding from and after the date of implementation of the intended “pick-up”. In addition, under the authority of § 7805(b)(8), this revenue ruling does not modify or revoke any private letter ruling issued to any taxpayer prior to August 28, 2006. See § 601.201(l)(4). EFFECT ON OTHER GUIDANCE Rev. Rul. 81–35, Rev. Rul. 81–36, and Rev. Rul. 87–10 are amplified and modified. DRAFTING INFORMATION The principal drafter of this revenue ruling is Kathleen Herrmann of the Employee Plans, Tax Exempt and Government Entities Division. For further information re-
garding this revenue ruling, please contact the Employee Plans’ taxpayer assistance telephone service at 1–877–829–5500 (a toll-free number) between the hours of 8:30 a.m. and 4:30 p.m. Eastern Time, Monday through Friday. Ms. Herrmann may be reached at (202) 283–9888 (not a toll-free number).
Rev. Rul. 2006–41
The following Department Store Inventory Price Indexes for June 2006 were issued by the Bureau of Labor Statistics. The indexes are accepted by the Internal Revenue Service, under § 1.472–1(k) of the Income Tax Regulations and Rev. Proc. 86–46, 1986–2 C.B. 739, for appropriate application to inventories of department stores employing the retail inventory and last-in, first-out inventory methods for tax years ended on, or with reference to, June 30, 2006. The Department Store Inventory Price Indexes are prepared on a national basis and include (a) 23 major groups of departments, (b) three special combinations of the major groups — soft goods, durable goods, and miscellaneous goods, and (c) a store total, which covers all departments, including some not listed separately, except for the following: candy, food, liquor, tobacco, and contract departments.
BUREAU OF LABOR STATISTICS, DEPARTMENT STORE INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS (January 1941 = 100, unless otherwise noted) Percent Change from June 2005 to June 20061 -9.5 -5.6 5.6 1.6 -0.6 1.6 2.8 -4.2 2.0 -2.6 -0.5 -6.1 1.6 0.6 -0.1 0.9 1.0 -2.3 -0.6 -7.4 -2.2 1.1 4.8 0.0 -1.8 0.2 -0.3
June 2005 504.8 519.1 650.4 878.2 559.9 541.4 340.0 588.9 347.5 536.9 562.8 413.6 872.3 810.4 997.0 598.7 604.6 711.9 204.3 39.0 78.5 137.8 114.6 552.0 379.8 93.4 490.8
June 2006 456.6 490.1 686.5 892.0 556.3 549.9 349.4 564.4 354.4 523.2 560.2 388.3 885.9 815.1 996.4 604.1 610.4 695.7 203.1 36.1 76.8 139.3 120.1 552.2 372.9 93.6 489.4
Absence of a minus sign before the percentage change in this column signifies a price increase. Indexes on a January 1986 = 100 base. 3The store total index covers all departments, including some not listed separately, except for the following: candy, food, liquor, tobacco, and contract departments. DRAFTING INFORMATION The principal author of this revenue ruling is Michael Burkom of the Office of Associate Chief Counsel (Income Tax and Accounting). For further information regarding this revenue ruling, contact Mr. Burkom at (202) 622–7924 (not a toll-free call).
Section 860G.—Other Definitions and Special Rules
26 CFR 1.860G–3: Treatment of foreign persons.
Any Excess Inclusions) (Foreign Holders)
AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final and temporary regulations. SUMMARY: This document contains temporary regulations relating to income that is associated with a residual interest in a Real Estate Mortgage Investment Conduit (REMIC) and that is allocated through certain entities to foreign persons who have invested in those entities. The regulations accelerate the time when income is
T.D. 9272 DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 REMIC Residual Interests—Accounting for REMIC Net Income (Including
recognized for withholding tax purposes to conform to the timing of income recognition for general income tax purposes. The foreign persons covered by these regulations include partners in domestic partnerships, shareholders of real estate investment trusts, shareholders of regulated investment companies, participants in common trust funds, and patrons of subchapter T cooperatives. These regulations are necessary to prevent inappropriate avoidance of current income tax liability by foreign persons to whom income from REMIC residual interests is allocated. The regulations clarify the timing of income under section 860G for purposes of determining a domestic partnership’s responsibility under sections 1441 and 1442 for withholding tax with respect to a foreign partner’s share of REMIC net income as a result of indirectly holding a residual interest. The regulations also provide that an excess inclusion is treated as income from sources within the United States. The text of the temporary regulations also serves as the text of the proposed regulations (REG–159929–02) set forth in the notice of proposed rulemaking on this subject in this issue of the Bulletin. DATES: Effective Date: These regulations are effective August 1, 2006. Applicability Dates: For dates of applicability, see §§1.860A–1T(b)(5), 1.863–1T(f) and 1.1441–2T(f). FOR FURTHER INFORMATION CONTACT: Dale Collinson, (202) 622–3900 (not a toll-free number). Background and Explanation of Provisions This document contains amendments to 26 CFR part 1 under sections 860A, 860G(b), 863, 1441, and 1442 of the Internal Revenue Code (Code). Under section 860C(a)(1), in general, a holder of a REMIC residual interest must take into account the holder’s daily portion of the taxable income or net loss of the REMIC for each day of the taxable year on which the holder held the interest. Thus, a residual interest holder generally is taxable currently on the taxable income or net loss of the REMIC without regard to whether or when the REMIC makes distributions. Section 860G(b) provides an exception to this general rule in section
860C for the timing of income attributable to the ownership of a REMIC residual interest. Under this exception, for purposes of sections 871(a), 881, 1441, and 1442, if amounts are includible in the income of a holder of a REMIC residual interest that is a nonresident alien individual or a foreign corporation, the amounts are taken into account only when paid or distributed to the foreign holder, or when the interest is disposed of. In its earlier years, a REMIC may accrue and recognize more taxable interest income from the mortgages that it holds than it accrues and deducts as interest on the regular interests that it has issued. This produces net income for the REMIC and thus for the holder of the REMIC’s residual interest. Many REMICs are structured so that the REMIC uses all, or substantially all, of its cash flow to pay expenses and to pay principal and interest on regular interests (effectively using a portion of interest receipts to pay principal or other nondeductible items). Such a REMIC will make little or no distributions to the holders of the residual interest in the REMIC, and each holder will incur tax liabilities with respect to its share of the REMIC’s net income in an amount that exceeds the holder’s economic return. In addition, all or substantially all of the income attributable to holding the residual interest will be subject to special rules relating to excess inclusions. To ensure that the income will be taxable in all events, these rules, among other things, prevent the use of net operating losses to offset the excess inclusions, see section 860E, and preclude any exemption from, or reduction in, applicable withholding taxes, see section 860G(b)(2). Residual interests that entitle the holder to little or no distributions are commonly referred to as noneconomic REMIC residual interests, and persons acquiring those interests receive an inducement fee for becoming the holder and undertaking the associated tax payment responsibilities. Taxable income that must be recognized in excess of the economic income for a period is often called phantom income. In the case of a REMIC, the early phantom income is generally offset by matching deductions (generally called phantom losses) in later periods. Consistent with the Congressional purpose of ensuring that excess inclusions of
REMICs be subject to tax, §1.860E–1(c) of the Income Tax Regulations provides for disregarding transfers of noneconomic REMIC residual interests if a significant purpose of the transfer is avoiding assessment or collection of tax. In addition, §1.860G–3(a)(1) provides, “A transfer of a residual interest that has tax avoidance potential is disregarded for all Federal income tax purposes if the transferee is a foreign person.” Section 1.860G–3(a)(2) provides, “A residual interest has tax avoidance potential . . . unless, at the time of the transfer, the transferor reasonably expects that, for each excess inclusion, the REMIC will distribute to the transferee residual interest holder an amount that will equal at least 30 percent of the excess inclusion, and that each such amount will be distributed at or after the time at which the excess inclusion accrues and not later than the close of the calendar year following the calendar year of accrual.” Accordingly, foreign persons are generally precluded from becoming the direct holders of noneconomic residual interests. “Where necessary or appropriate to prevent the avoidance of tax imposed by [chapter 1 of the Code],” section 860G(b) authorizes the adoption of regulations requiring REMIC net income inclusions of foreign holders of REMIC residual interests to be taken into account for purposes of sections 871(a), 881, 1441, and 1442 earlier than is provided in section 860G(b)(1). The legislative history of the Tax Reform Act of 1986 indicates that Congress intended that this regulatory authority may be exercised with respect to noneconomic residual interests. See 2 H.R. Rep. No. 841, 99th Cong., 2d Sess. II–236 (1986) (referring to residual interests that do “not have significant value”). The IRS and Treasury Department have become aware that noneconomic REMIC residual interests are being transferred to domestic partnerships that subsequently allocate the phantom income to foreign persons. If a partnership has no foreign partners at the time the partnership acquires a noneconomic REMIC residual interest, the person transferring the residual interest to the partnership may take the position that neither §1.860E–1(c) nor §1.860G–3 is applicable. In turn, the partnership may take the position, by applying the aggregate approach to the relation between a partnership and its partners, that
foreign persons who later become partners hold the REMIC residual interest that had previously been acquired by the partnership. Based on the conclusion that the foreign partners are holders of the residual interest, the partnership may take the further position that, under section 860G(b), a withholding tax obligation on the partnership’s allocation to the foreign partner of income from the residual interest arises no sooner than the time when distributions on the residual interest are made by the REMIC (distributions that will almost never occur with a noneconomic residual) or when the interest is disposed of. Under this view, the foreign holder’s tax liability with respect to net income of the REMIC (including excess inclusions) would be deferred until disposition of the holder’s interest in the REMIC residual interest, including a disposition through termination of the REMIC, a disposition of the REMIC residual interest by the partnership, or a disposition of the partnership interest by the foreign partner. The IRS and Treasury Department have concluded that, in order to achieve effective assessment and collection of U.S. tax on REMIC net income, including excess inclusion income, in furtherance of the congressional purpose referenced above and section 860E(a)(1), (b), and (e) and section 860G(b) of the Code, the time when foreign partners are required to account for REMIC net income should be accelerated. That is, for purposes of sections 871(a), 881, 1441, and 1442, the temporary regulations eliminate the deferral (relative to section 860C) that section 860G(b)(1) might otherwise prescribe. To prevent the adoption of similar schemes using real estate investment trusts, regulated investment companies, common trust funds, or subchapter T cooperative organizations, foreign persons to whom excess inclusion income is allocated by any of these other entities must account for REMIC excess inclusions on a similarly accelerated basis. Several provisions of regulations under sections 1441 and 1442 are relevant to the taxation of REMIC net income inclusions (and particularly net income inclusions with respect to noneconomic REMIC residual interests) that are allocated to foreign persons. Under §1.1441–2(e), for purposes of section 1441 and 1442, a payment generally is considered made
to a person if that person realizes income, whether or not the income results from an actual transfer of cash or other property. Under §1.1441–2(d)(1), however, if a withholding agent is not related to the recipient or beneficial owner, the withholding agent has an obligation to withhold only to the extent that, at any time between the date that the obligation to withhold would arise but for the provisions of §1.1441–2(d) and the due date for the filing of a return on Form 1042, “Annual Withholding Tax Return for U.S. Source Income of Foreign Persons,” (including extensions) for the year in which the payment occurs, the withholding agent has control over, or custody of money or property owned by the recipient or beneficial owner from which to withhold an amount and has knowledge of the facts that give rise to the payment. For this purpose, a withholding agent is related to the recipient or beneficial owner if it is related within the meaning of section 482. Section 1.1441–2(d)(1) further provides that the foregoing exception does not apply “to distributions with respect to stock or if the lack of control or custody of money or property owned by the recipient or beneficial owner from which to withhold is part of a prearranged plan known to the withholding agent to avoid withholding under sections 1441, 1442, or 1443.” Under §1.1441–5(b)(2), a U.S. partnership is required to withhold under §1.1441–1 as a withholding agent on an amount subject to withholding (as defined in §1.1441–2(a)) that is includible in the gross income of a partner that is a foreign person. Except as provided in §1.1441–5(b)(2)(v) (which prevents a second withholding obligation from arising with respect to the actual distribution of income previously withheld upon as a distribution from a U.S. partnership or trust), a U.S. partnership is required to withhold when making any distributions that include amounts subject to withholding. To the extent a foreign partner’s distributive share of income subject to withholding has not actually been distributed to the foreign partner, the U.S. partnership must withhold on the foreign partner’s distributive share of the income on the earlier of the date that the statement on Form 1065, “U.S. Return of Partnership Income,” is mailed (or otherwise provided) to the
partner or the due date for furnishing that statement. Pursuant to the authority granted under section 860G(b), for purposes of sections 871(a), 881, 1441, and 1442, these temporary regulations generally require a foreign partner in a partnership holding one or more REMIC residual interests to take into account REMIC net income inclusions at the end of its taxable year (or on the last date of the taxable year of a partnership that allocates REMIC net income to the foreign partner). The temporary regulations require a foreign shareholder in a real estate investment trust or regulated investment company, a foreign participant in a common trust fund, or a foreign patron of a subchapter T cooperative organization to take into account excess inclusion income at the same time as other income from the entity. The temporary regulations also provide that an excess inclusion is treated as income from sources within the United States. The Treasury Department and the IRS believe this treatment is appropriate because the inclusions are largely phantom income arising from the special provisions of the Code relating to REMICs and thus are unlikely to have tax significance outside the United States. The temporary regulations provide that, to the extent excess inclusions are taken into account with respect to a residual interest, net losses with respect to the residual interest are allocated and apportioned to the class and grouping(s) of gross income to which the excess inclusions were assigned. The temporary regulations also provide that the exemption available under certain circumstances to certain withholding agents that do not have custody or control of money or property from which to satisfy a withholding obligation is not available in any case with respect to an excess inclusion subject to these rules. No inference is intended as to whether, for purposes of this exemption, any right, obligation, contract, or arrangement other than a REMIC residual interest constitutes property of a sort from which a withholding obligation may be satisfied. Effective Date The regulations regarding the timing of REMIC income inclusions apply to REMIC net income of a foreign person
with respect to REMIC residual interests with respect to which the first REMIC net income allocation to the foreign person under section 860C occurs on or after August 1, 2006. The regulations regarding the source of excess inclusions are applicable for taxable years ending after August 1, 2006. Special Analyses It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. These regulations are necessary to provide taxpayers with immediate guidance to discourage the overly aggressive interpretations being employed for the inappropriate avoidance of current income tax assessment or collection by foreign persons who are allocated income from REMIC residual interests. Accordingly, good cause is found for dispensing with notice and public comment pursuant to 5 U.S.C. 553(b)(B), and with a delayed effective date pursuant to 5 U.S.C. 553(d). For the applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6) refer to the special analysis section of the preamble to the cross-referenced notice of proposed rulemaking published in this issue of the Bulletin. Pursuant to section 7805(f) of Code, these temporary regulations will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. Drafting Information The principal author of these regulations is Dale Collinson, Office of the Associate Chief Counsel (Financial Institutions and Products). However, other personnel from the IRS and Treasury Department participated in their development. ***** Adoption of Amendments to the Regulations Accordingly, 26 CFR part 1 is amended as follows:
PART 1—INCOME TAXES Paragraph 1. The authority citation for part 1 is amended by adding entries in numerical order to read, in part, as follows: Authority: 26 U.S.C. 7805 * * * Section 1.860A–1 also issued under 26 U.S.C. 860G(b) and 860G(e). Section 1.860A–1T also issued under 26 U.S.C. 860G(b) and 860G(e). * * * Section 1.860G–3T also issued under 26 U.S.C. 860G(b) and 860G(e). * * * Par. 2. Section 1.860A–0 is amended as follows: 1. Section 1.860A–1, paragraph (b)(5) is added. 2. Section 1.860A–1T is added. 3. Section 1.860G–3, paragraph (b) is revised. 4. Section 1.860G–3T is added. The additions and revisions read as follows: §1.860A–0 Outline of REMIC provisions. ***** §1.860A–1 Effective dates and transition rules. ***** (b) * * * (5) [Reserved]. §1.860A–1T Effective dates and transition rules (temporary). (a) through (b)(4) [Reserved]. (5) Accounting for REMIC net income of foreign persons. ***** §1.860G–3 Treatment of foreign persons. ***** (b) Accounting for REMIC net income. [Reserved]. §1.860G–3T Treatment of foreign persons (temporary). (a) [Reserved]. (b) Accounting for REMIC net income. (1) Allocation of partnership income to a foreign partner. (2) Excess inclusion income allocated by certain pass-through entities to a foreign person. Par. 3. In §1.860A–1 paragraph (b)(5) is added to read as follows:
§1.860A–1 Effective dates and transition rules. ***** (b) * * * (5) [Reserved]. For further guidance, see §1.860A–1T(b)(5). Par. 4. Section 1.860A–1T is added to read as follows: §1.860A–1T Effective dates and transition rules (temporary). (a) through (b)(4) [Reserved]. For further guidance, see §1.860A–1(a) through (b)(4). (5) Accounting for REMIC net income of foreign persons. Section 1.860G–3T(b) is applicable to REMIC net income (including excess inclusions) of a foreign person with respect to a REMIC residual interest if the first net income allocation under section 860C(a)(1) to the foreign person with respect to that interest occurs on or after August 1, 2006. This section will expire July 31, 2009. Par. 5. In §1.860G–3, paragraph (b) is revised as follows: §1.860G–3 Treatment of foreign persons. ***** (b) Accounting for REMIC net income. [Reserved]. For further guidance, see §1.860G–3T(b). Par. 6. Section 1.860G–3T is added to read as follows: §1.860G–3T Treatment of foreign persons (temporary). (a) [Reserved]. For further guidance, see §1.860G–3(a). (b) Accounting for REMIC net income—(1) Allocation of partnership income to a foreign partner. A domestic partnership shall separately state its allocable share of REMIC taxable income or net loss in accordance with §1.702–1(a)(8). If a domestic partnership allocates all or some portion of its allocable share of REMIC taxable income to a partner that is a foreign person, the amount allocated to the foreign partner shall be taken into account by the foreign partner for purposes of sections 871(a), 881, 1441, and 1442 as if that amount were received on the last day of the partnership’s taxable year, except to the extent that some or all
of the amount is required to be taken into account by the foreign partner at an earlier time under section 860G(b) as a result of a distribution by the partnership to the foreign partner or a disposition of the foreign partner’s indirect interest in the REMIC residual interest. A disposition in whole or in part of the foreign partner’s indirect interest in the REMIC residual interest may occur as a result of a termination of the REMIC, a disposition of the partnership’s residual interest in the REMIC, a disposition of the foreign partner’s interest in the partnership, or any other reduction in the foreign partner’s allocable share of the portion of the REMIC net income or deduction allocated to the partnership. See §1.871–14(d)(2) for the treatment of interest received on a regular or residual interest in a REMIC. For a partnership’s withholding obligations with respect to excess inclusion amounts described in this paragraph (b)(1), see §1.1441–2T(b)(5), §1.1441–2T(d)(4), §1.1441–5(b)(2)(i)(A) and §§1.1446–1 through 1.1446–7. (2) Excess inclusion income allocated by certain pass-through entities to a foreign person. If an amount is allocated under section 860E(d)(1) to a foreign person that is a shareholder of a real estate investment trust or a regulated investment company, a participant in a common trust fund, or a patron of an organization to which part I of subchapter T applies and if the amount so allocated is governed by section 860E(d)(2) (treating it “as an excess inclusion with respect to a residual interest held by” the taxpayer), the amount shall be taken into account for purposes of sections 871(a), 881, 1441, and 1442 at the same time as the time prescribed for other income of the shareholder, participant, or patron from the trust, company, fund, or organization. Par. 7. Section 1.863–0 table of contents is amended as follows: 1. The entries for §1.863–1(e) are revised. 2. Entries for §1.863–1T are added. The revisions and additions read as follows: §1.863–0 Table of contents. *****
§1.863–1 Allocation of gross income under section 863(a). ***** (e) Residual interest in a REMIC. (1) REMIC inducement fees. (2) Excess inclusion income and net losses. ***** §1.863–1T Allocation of gross income under section 863(a). (a) through (d) [Reserved]. (e) Residual interest in a REMIC. (1) REMIC inducement fees. (2) Excess inclusion income and net losses. (f) Effective date. Par. 8. Section 1.863–1 is amended as follows: 1. The paragraph heading for paragraph (e) is revised. 2. The text of paragraph (e) is redesignated as (e)(1). 3. A new paragraph heading for paragraph (e)(1) is added. 4. A new paragraph (e)(2) is added. 5. The last sentence of paragraph (f) is revised and a new sentence is added to the end. The revisions and additions read as follows: §1.863–1 Allocation of gross income under section 863(a). ***** (e) Residual interest in a REMIC—(1) REMIC inducement fees. * * * (2) Excess inclusion income and net losses. [Reserved]. For further guidance, see §1.863–1T(e)(2). (f) * * * Paragraph (e)(1) of this section is applicable for taxable years ending on or after May 11, 2004. For further guidance, see §1.863–1T(f). Par. 9. Section 1.863–1T is added to read as follows: §1.863–1T Allocation of gross income under section 863(a) (temporary). (a) through (d) [Reserved]. For further guidance, see §1.863–1(a) through (d). (e) Residual interest in a REMIC—(1) REMIC inducement fees. [Reserved]. For further guidance, see §1.863–1(e)(1).
(2) Excess inclusion income and net losses. An excess inclusion (as defined in section 860E(c)) shall be treated as income from sources within the United States. To the extent of excess inclusion income previously taken into account with respect to a residual interest (reduced by net losses previously taken into account under this paragraph), a net loss (described in section 860C(b)(2)) with respect to the residual interest shall be allocated to the class of gross income and apportioned to the statutory grouping(s) or residual grouping of gross income to which the excess inclusion income was assigned. (f) Effective date. Paragraph (e)(2) of this section applies for taxable years ending after August 1, 2006. For further guidance, see §1.863–1(f). This section will expire July 31, 2009. Par. 10. Section 1.1441–0 is amended by adding entries for §§1.1441–2(b)(5), 1.1441–2(d)(4), and 1.1441–2T to read as follows: §1.1441–0 Outline of regulation provisions for section 1441. ***** §1.1441–2 Amounts subject to withholding. ***** (b) * * * (5) REMIC residual interests. ***** (d) * * * (4) Withholding exemption inapplicable. ***** §1.1441–2T Amounts subject to withholding. (a) through (b)(4) [Reserved]. (5) REMIC residual interests. (c) through (d)(3) [Reserved]. (d)(4) Withholding exemption inapplicable. (e) [Reserved]. (f) Effective date. ***** Par. 11. Section 1.1441–2 is amended by adding paragraphs (b)(5) and (d)(4), and a sentence to the end of paragraph (f), to read as follows:
§1.1441–2 Amounts subject to withholding. ***** (b) * * * (5) REMIC residual interest. [Reserved]. For further guidance, see §1.1441–2T(b)(5). ***** (d) * * * (4) Withholding exemption inapplicable. For further guidance, see §1.1441–2T(d)(4). ***** (f) * * * For further guidance, see §1.1441–2T(f). Par. 12. Section 1.1441–2T is added to read as follows: §1.1441–2T Amounts subject to withholding (temporary). (a) through (b)(4) [Reserved]. For further guidance, see §1.1441–2(a) through (b)(4). (5) REMIC residual interests. Amounts subject to withholding include an excess inclusion described in §1.860G–3T(b)(2) and the portion of an amount described in §1.860G–3T(b)(1) that is an excess inclusion. (c) through (d)(3) [Reserved]. For further guidance, see §1.1441–2(c) through (d)(3). (4) Withholding exemption inapplicable. The exemption in §1.1441–2(d) from the obligation to withhold shall not apply to amounts described in §1.860G–3T(b)(1) (regarding certain partnership allocations of REMIC net income with respect to a REMIC residual interest). (e) [Reserved]. For further guidance, see §1.1441–2(e). (f) Effective date. This section applies after August 1, 2006. This section will expire July 31, 2009. Mark E. Matthews, Deputy Commissioner for Services and Enforcement. Approved July 14, 2006. Eric Solomon, Acting Deputy Assistant Secretary of the Treasury.
(Filed by the Office of the Federal Register on July 31, 2006, 8:45 a.m., and published in the issue of the Federal Register for August 1, 2006, 71 F.R. 43363)
Section 6332.—Surrender of Property Subject to Levy
Rev. Rul. 2006–42
ISSUE After receiving a levy, does either a bank’s setoff of a taxpayer’s deposit account or a bank’s claim of a security interest that has priority over the federal tax lien under section 6323(b)(10) of the Internal Revenue Code relieve the bank of its obligation to honor the levy? FACTS Situation 1. T, a construction company, has a business deposit account with Bank A in State Z. Under the laws of State Z, Bank A owes a debt to T for the funds deposited into the account. On January 5, 2004, the Service filed a Notice of Federal Tax Lien (NFTL), providing public notice of T’s unpaid Federal tax liability and of the statutory lien arising under section 6321. On April 1, 2004, Bank A loaned $50,000 to T. As part of the transaction, T gave Bank A a promissory note payable on demand. Prior to making the loan to T, Bank A did not have actual notice or knowledge of the existence of the federal tax lien. As security for the loan, on April 1, 2004, Bank A perfected a security interest in T’s deposit account under the laws of State Z, which adopt revised Article 9 of the Uniform Commercial Code (U.C.C.). Revised Article 9 allows a bank to create a security interest in a deposit account as the original collateral for a business loan. U.C.C. 9–109(a)(1) (1999). On June 1, 2004, after providing T with notice and an opportunity for hearing, the Service issued a notice of levy in the amount of $100,000 to Bank A;
at that time, T’s deposit account in Bank A totaled $15,000. After receiving the notice of levy, on June 1, 2004, Bank A made demand for full payment of the loan ($50,000) and, after not receiving payment, set off all of T’s account against T’s liability for the loan. Under the laws of State Z, when two parties have mutual indebtedness, either of them may cancel or extinguish one debt with the other. Bank A did not send any funds to the Service in response to the notice of levy. On July 1, 2004, Bank A contacted the Service and provided proof that it met all of the requirements for claiming a superpriority interest under section 6323(b)(10) and requested that the levy be released. Situation 2. The facts are the same as in Situation 1, except that Bank A did not prove its superpriority interest under section 6323(b)(10) to the Service and, on May 1, 2005, the government filed suit against Bank A pursuant to section 6332(d) to enforce the levy. LAW AND ANALYSIS Section 6321 provides that if any person liable to pay any tax neglects or refuses to pay after demand, the amount shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person. Section 6323(a) provides that the lien imposed by section 6321 generally shall not be valid against any purchaser, holder of a security interest, mechanic’s lienor, or judgment lien creditor until the Service files its NFTL. Section 6323(b) affords protection for certain interests even if a NFTL has been filed. Section 6323(b)(10) provides that the federal tax lien shall not be valid with respect to a savings deposit, share, or other account, with an institution described in section 581 or 591 of the Internal Revenue Code, to the extent of any loan made by such institution without actual notice or knowledge of the existence of such lien, as against such institution, if such loan is secured by such account. Sections 581 and 591 describe the following institutions: banks, trust companies, mutual savings banks, cooperative banks, domestic building and loan associations, and similar saving and loans associations. Subject to the notice and opportunity for hearing provisions of section 6330, section 6331(a) provides that if any person
liable to pay any tax neglects or refuses to pay within 10 days after notice and demand, the Service may levy upon all property and rights to property belonging to such person or on which there is a federal tax lien. The levy does not determine whether the government’s claim is superior to the claims of other parties. Rather, levy authority is designed to enable the government “promptly to secure its revenues” while competing claims are resolved. United States v. National Bank of Commerce, 472 U.S. 713, 721 (1985). Section 6332(a) provides that any levied-upon person in possession of, or obligated with respect to, the taxpayer’s property or rights to property must surrender such property or rights to property, or discharge such obligation, except such part of the property or rights to property subject to an attachment or execution under any judicial process. Section 6332(d) provides that any person who fails or refuses to surrender property or rights to property subject to levy upon demand shall be liable to the United States in a sum equal to the value of property or rights not surrendered and, absent reasonable cause, provides for a penalty equal to 50 percent of that sum. Section 7426(a)(1) provides that any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on the levied upon property may file a wrongful levy suit against the government. An administrative request for return of property under section 6343(b) is not a prerequisite to filing suit for wrongful levy under section 7426. Section 6532(c)(1) states the general rule that no wrongful levy suit shall be begun after the expiration of 9 months from the date of the levy. Section 6532(c)(2) sets forth a limited exception to this general rule and provides that if an administrative request is made for the return of property described in section 6343(b), the 9-month period prescribed in section 6532(c)(1) shall be extended for a period of 12 months from the date of filing of such request or for a period of 6 months from the date of mailing by registered or certified mail by the Secretary to the person making such request of a notice of disallowance of the part of the request to which the action relates, whichever is shorter.
There are only two defenses to an action brought by the United States to enforce a levy pursuant to section 6332(d). The first is that the levied-upon party is neither in possession of nor obligated with respect to the taxpayer’s property or rights to property. The second is that the taxpayer’s property is subject to a prior judicial attachment or execution. National Bank of Commerce, 472 U.S. at 721–22. Lien priority is not one of the two defenses to a levy recognized by National Bank of Commerce. E.g., Virgin Islands Bureau of Internal Revenue v. Chase Manhattan Bank, 312 F.3d 131, 139 (3rd Cir. 2002); United States v. Citizens and Southern National Bank, 538 F.2d 1101, 1106 (5th Cir. 1976); United States v. Sterling National Bank & Trust Co., 494 F.2d 919, 921 (2d Cir. 1974); United States v. AmSouth Bank, 947 F. Supp. 459, 461 (M.D. Fl. 1996). After receiving a levy, a bank’s setoff of a taxpayer’s account does not excuse the bank from honoring the levy; a bank’s liability for honoring a levy is determined as of the time that it receives the notice of levy. E.g., State Bank of Fraser v. United States, 861 F.2d 954, 961 (6th Cir. 1988). Situation 1. Bank A’s setoff does not relieve the bank of its obligation to honor the levy. When the IRS served the levy on June 1, 2004, Bank A owed a debt of $15,000 to T, which the notice of levy seized. State Bank of Fraser, 861 F.2d at 961. At that point in time, Bank A was liable to the IRS for the amount of the debt. IRC § 6332(d)(1). The subsequent setoff does not eliminate Bank A’s liability to the Service. Additionally, Bank A’s priority interest under section 6323(b)(10) does not relieve the bank of its obligation to honor the levy. Bank A, however, prudently contacted the Service in a timely manner to resolve its dispute informally. In this situation, Bank A was able to prove its section 6323(b)(10) priority claim to the Service. In the exercise of its administrative discretion, the Service may release a levy when a bank proves its superpriority interest under section 6323(b)(10). Since it would serve no purpose to require Bank A to surrender T’s funds to the Service when Bank A and the Service agree that Bank A has a priority interest under section 6323(b)(10), the Service will generally release the levy. If Bank A had not contacted the Service informally, it could have timely filed a
wrongful levy suit in federal district court pursuant to section 7426(a)(1). Situation 2. Bank A has no defense to the notice of levy for the reasons discussed in Situation 1. Here, Bank A did not contact the Service to pursue informal resolution of its section 6323(b)(10) priority claim, nor did Bank A timely file a wrongful levy suit pursuant to section 7426(a)(1) to challenge the levy. Bank A’s failure to act in a timely manner has left it in a position where it cannot assert its superpriority claim, as a court does not have jurisdiction to hear an untimely wrongful levy suit. E.g., LaBonte v. United States, 233 F.3d 1049, 1051 (7th Cir. 2000). HOLDING A bank’s setoff of a taxpayer’s deposit account after receiving a levy or a bank’s claim of a priority security interest under section 6323(b)(10) of the Internal Revenue Code does not relieve the bank of its obligation to honor the levy. In Situation 1, however, the Service exercised it administrative discretion and released the levy after Bank A timely established that it had a superpriority interest under section 6323(b)(10). In contrast, in Situation 2, Bank A failed to take any action to protect its security interest, and it is barred from asserting superpriority as a defense against the government’s suit to enforce the levy. DRAFTING INFORMATION The principal author of this revenue ruling is Walter Ryan of the Office of Associate Chief Counsel (Procedure & Administration). For further information regarding this revenue ruling, contact Walter Ryan at (202) 622–3610 (not a toll-free call).
26 CFR 301.7805–1: Rules and regulations. Whether prospective relief will be given to a certain government pick-up plans within the meaning of section 414(h)(2) of the Code. See Rev. Rul. 2006-43, page 329.
Revision of Forms 8898 and 8840 Notice 2006–73
PURPOSE This notice effects interim revisions to Forms 8898 and 8840. Taxpayers required to file these forms should disregard certain line items. The Treasury Department (Treasury) and Internal Revenue Service (IRS) plan to revise Forms 8898 and 8840 and the corresponding instructions in accordance with this notice. Until revised forms are issued, taxpayers may rely on this notice when completing these forms. BACKGROUND Section 937(a) requires that, except as provided in regulations, to be a bona fide resident of American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the United States Virgin Islands, an individual must be present in the relevant U.S. possession for at least 183 days during the taxable year, must not have a tax home outside the possession during the taxable year, and must not have a closer connection to the United States or a foreign country than to the possession. The principles of section 7701(b)(3)(B)(ii) and Treas. Reg. § 301.7701(b)–2(d) apply to determine whether an individual has such a closer connection. See § 937(a)(2); Treas. Reg. § 1.937–1(e)(1)(i). Section 937(c) generally requires individuals who take the position for U.S. income tax reporting purposes that they became, or ceased to be, a bona fide resident of one of the specified possessions to file notice of such position. On April 18, 2006, the IRS released Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession, on which the notice required by § 937(c) is to be made. Taxpayers who changed their residence to or from a U.S. possession during any of the tax years 2001, 2002, 2003, 2004, or 2005 generally must file Form 8898 by October 16, 2006, for any such tax year. See Notice 2006–57, 2006–27 I.R.B. 13. Section 7701(b) generally provides that an alien is treated as a resident of the United States for U.S. income tax purposes if the individual (1) has entered the United States as a lawful permanent resident and is such a resident at any time during the calendar year; (2) is present in the United States for a substantial period of time (the “substantial presence test”); or (3) makes an election to be treated as a resident of the United States. An exception to the substantial presence test under section 7701(b)(3)(B) provides that an alien may still be treated as a nonresident alien if the individual (1) is present in the United States for fewer than 183 days during the current year; (2) has a tax home in a foreign country during the year; and (3) has a closer connection to that country than to the United States. Treas. Reg. § 301.7701(b)–2(d) provides a facts-and-circumstances test to determine whether an individual has such a closer connection. This facts-and-circumstances test provides a non-exclusive list of factors to be taken into consideration when making this determination. See Treas. Reg. § 301.7701(b)–2(d)(1)(i) through (x). An alien individual who otherwise meets the substantial presence test must file a statement for each tax year for which the alien claims a closer connection to a foreign country to explain the basis of the individual’s claim. See Treas. Reg. § 301.7701(b)–8(a)(1). For this purpose, the Commissioner has prescribed the use of Form 8840, Closer Connection Exception Statement for Aliens. REVISION OF FORMS Part III of Form 8898 elicits information relevant to determining whether an individual has closer connections to the United States or a foreign country than to the relevant possession for purposes of the closer connection test of § 937(a). Part IV of Form 8840 elicits substantially the same information for determining whether an individual has a closer connection to a foreign country for purposes of the closer connection test of § 7701(b). Much of the information elicited reflects the facts and circumstances specifically set forth in the regulations. See Treas. Reg. §§ 1.937–1(e)(1)(i); 301.7701(b)–2(d). Since the release of Form 8898, Treasury and the IRS have received comments concerning the reporting burden with respect to some of the information that individuals are required to provide on the form. In light of these comments, Treasury and the IRS intend to revise Forms 8898 and 8840, and the corresponding instructions, to modify the information required on lines 17 and 29 of Form 8898 and lines 20 and 31 of Form 8840. Until such time, taxpayers required to file Form 8898 or Form 8840 should disregard those line items. Because the closer connection tests of §§ 937(a) and 7701(b) are facts-and-circumstances tests, all of the factors described in Forms 8898 and 8840 are material in the determination of whether an individual is considered, respectively, a bona fide resident of a U.S. possession or a resident of the United States. Therefore, filers are required to retain the information previously elicited on lines 17 and 29 of Form 8898 or on lines 20 and 31 of Form 8840 in their books and records along with any other relevant information so that the information may be readily available for inspection in the event of an examination. See Treas. Reg. § 1.6001–1. DRAFTING INFORMATION The principal author of this notice is J. David Varley of the Office of Associate Chief Counsel (International). For further information regarding this notice, contact Mr. Varley at (202) 435–5262 (not a tollfree call).
Weighted Average Interest Rate Update Notice 2006–74
Sections 412(b)(5)(B) and 412(l)(7) (C)(i) of the Internal Revenue Code generally provide that the interest rates used to calculate current liability for purposes of determining the full funding limitation under § 412(c)(7) and the required contribution under § 412(l) must be within a permissible range around the weighted average of the rates of interest on 30-year Treasury securities during the four-year
period ending on the last day before the beginning of the plan year. Notice 88–73, 1988–2 C.B. 383, provides guidelines for determining the weighted average interest rate and the resulting permissible range of interest rates used to calculate current liability for the purpose of the full funding limitation of § 412(c)(7) of the Code. Section 417(e)(3)(A)(ii)(II) defines the applicable interest rate, which must be used for purposes of determining the
minimum present value of a participant’s benefit under § 417(e)(1) and (2), as the annual rate of interest on 30-year Treasury securities for the month before the date of distribution or such other time as the Secretary may by regulations prescribe. Section 1.417(e)–1(d)(3) of the Income Tax Regulations provides that the applicable interest rate for a month is the annual interest rate on 30-year Treasury securities as specified by the Commissioner for that month in revenue rulings, notices or 30-Year Treasury Weighted Average 4.84
other guidance published in the Internal Revenue Bulletin. The rate of interest on 30-year Treasury securities for July 2006 is 5.13 percent. The Service has determined this rate as the monthly average of the daily determination of yield on the 30-year Treasury bond maturing in February 2036. The following 30-year Treasury rates were determined for the plan years beginning in the month shown below.
For Plan Years Beginning in: Month August Drafting Information The principal authors of this notice are Paul Stern and Tony Montanaro of the Employee Plans, Tax Exempt and Government Entities Division. For furYear 2006
90% to 105% Permissible Range 4.35 to 5.08
90% to 110% Permissible Range 4.35 to 5.32
ther information regarding this notice, please contact the Employee Plans’ taxpayer assistance telephone service at 1–877–829–5500 (a toll-free number), between the hours of 8:30 a.m. and 4:30 p.m. Eastern time, Monday through
Friday. Mr. Stern may be reached at 202–283–9703. Mr. Montanaro may be reached at 202–283–9714. The telephone numbers in the preceding sentences are not toll-free.
Notice of Proposed Rulemaking by Cross-Reference to Temporary Regulations REMIC Residual Interests — Accounting for REMIC Net Income (Including Any Excess Inclusions (Foreign Holders) REG–159929–02
AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking by cross-reference to temporary regulations. SUMMARY: In this issue of the Bulletin, the IRS is issuing temporary regulations, (T.D. 9272) relating to the income that is associated with a residual interest in a Real Estate Mortgage Investment Conduit (REMIC) and that is allocated through certain entities to foreign persons who have invested in those entities. The regulations accelerate the time when income is recognized for withholding tax purposes to conform to the timing of income recognition for general tax purposes. The foreign persons covered by these regulations include partners in domestic partnerships, shareholders of real estate investment trusts, shareholders of regulated investment companies, participants in common trust funds, and patrons of subchapter T cooperatives. These regulations are necessary to prevent inappropriate avoidance of current income tax liability by foreign persons to whom income from REMIC residual interests is allocated. The regulations clarify the timing of income under section 860G for purposes of determining a domestic partnership’s responsibility under sections 1441 and 1442 for withholding tax with respect to a foreign partner’s share of REMIC net income as a result of indirectly holding a residual interest. The regulations also provide that an excess inclusion is treated as income from sources within the United States. The text of those temporary regulations also serves as the text of these proposed regulations. DATES: Written or electronic comments and requests for a public hearing must be received by October 30, 2006. ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–159929–02), room 5203, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. Alternatively, taxpayers may submit electronic comments directly to the IRS Internet site at www.irs.gov/regs or the Federal eRulemaking Portal at www.regulations.gov (IRS-REG–159929–02). FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Dale Collinson, (202) 622–3900 (not a toll-free number); concerning the submission of comments, or a request for a public hearing, Kelly Banks (Kelly.D.Banks@irscounsel.treas.gov). SUPPLEMENTARY INFORMATION: Background and Explanation of Provisions Temporary regulations in the Rules and Regulations section of this issue of the Bulletin amend the Income Tax Regulations (26 CFR Part 1) relating to sections 860A; 860G, 863, 1441, and 1442 of the Internal Revenue Code (Code). The temporary regulations provide rules relating to the recognition and sourcing of income and related withholding issues associated with a Real Estate Mortgage Investment Conduit (REMIC) residual interest that is allocated to a foreign person, including a foreign partner in a domestic partnership. The text of the temporary regulations also serves as the text of these proposed regulations. The preamble to the temporary regulations explains the amendments. Special Analyses It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It is hereby certified that these regulations will not have a significant economic impact on a substantial number of small entities. This certification is based upon the fact that the regulations do not impose any new or different requirements on small entities. Therefore, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the Code, 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 business. Comments and Requests for a Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any written comments (a signed original and 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 rules and how they can be made easier to understand. All comments will be available for public inspection and copying. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time and place for the public hearing will be published in the Federal Register. Drafting Information The principal author of these regulations is Dale Collinson, Office of the Associate Chief Counsel (Financial Institutions and Products). However, other personnel from the IRS and Treasury Department participated in their development. ***** 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 is amended by adding an entry in numerical order to read, in part, as follows: Authority: 26 U.S.C. 7805 * * * §1.860A–1 also issued under 26 U.S.C. 860G(b) and 860G(e). * * *
Par. 2. In §1.860A–1, paragraph (b)(5) is added to read as follows: §1.860A–1 Effective dates and transition rules. ***** (b) * * * (5) [The text of the proposed amendment to §1.860A–1(b)(5) is the same as the text of §1.860A–1T(b)(5) published elsewhere in this issue of the Bulletin]. Par. 3. In §1.860G–3, paragraph (b) is added to read as follows: §1.860G–3 Treatment of foreign persons. ***** (b) [The text of the proposed amendment to §1.860G–3(b) is the same as the text of §1.860G–3T(b) published elsewhere in this issue of the Bulletin]. Par. 4. Section 1.863–1 is amended as follows: 1. The paragraph heading for paragraph (e) is revised. 2. The text of paragraph (e) is redesignated as (e)(1). 3. A new paragraph heading for paragraph (e)(1) is added. 4. A new paragraph (e)(2) is added. 5. The last sentence of paragraph (f) is revised and a new sentence is added to the end. The revisions and additions read as follows: §1.863–1 Allocation of gross income under section 863(a). ***** (e) Residual interest in a REMIC—(1) REMIC inducement fees.* * * (2) [The text of the proposed amendment to §1.863–1(e)(2) is the same as the text of §1.863–1T(e)(2) published elsewhere in this issue of the Bulletin]. (f) [The text of proposed amendment to §1.863–1(f) is the same as the text of §1.863–1T(f) published elsewhere in this issue of the Bulletin]. Par. 5. Section 1.1441–2 is amended by adding paragraphs (b)(5) and (d)(4) and a sentence to the end of paragraph (f) to read as follows: §1.1441–2 Amounts subject to withholding. *****
(b) * * * (5) [The text of the proposed amendment to §1.1441–2(b)(5) is the same as the text of §1.1441–2T(b)(5) published elsewhere in this issue of the Bulletin]. ***** (d) * * * (4) [The text of the proposed amendment to §1.1441–2(d)(4) is the same as the text of §1.1441–2T(d)(4) published elsewhere in this issue of the Bulletin.] ***** (f) [The text of the proposed amendment to §1.1441–2T(f)(1) is the same as the text of §1.1441–2T(f)(1) published elsewhere in this issue of the Bulletin. Mark E. Matthews, Deputy Commissioner for Services and Enforcement.
(Filed by the Office of the Federal Register on July 31, 2006, 8:45 a.m., and published in the issue of the Federal Register for August 1, 2006, 71 F.R. 43398)
If on the other hand a suit for declaratory judgment has been timely filed, contributions from individuals and organizations described in section 170(c)(2) that are otherwise allowable will continue to be deductible. Protection under section 7428(c) would begin on August 28, 2006, and would end on the date the court first determines that the organization is not described in section 170(c)(2) as more particularly set forth in section 7428(c)(1). For individual contributors, the maximum deduction protected is $1,000, with a husband and wife treated as one contributor. This benefit is not extended to any individual, in whole or in part, for the acts or omissions of the organization that were the basis for revocation. Aviation Safety Council, Inc. Pasadena, CA Budget and Credit Counseling Services, Inc. New York, NY Mason Credit Counseling, Inc. Hauppauge, NY
Deletions From Cumulative List of Organizations Contributions to Which are Deductible Under Section 170 of the Code Announcement 2006–55
The Internal Revenue Service has revoked its determination that the organizations listed below qualify as organizations described in sections 501(c)(3) and 170(c)(2) of the Internal Revenue Code of 1986. Generally, the Service will not disallow deductions for contributions made to a listed organization on or before the date of announcement in the Internal Revenue Bulletin that an organization no longer qualifies. However, the Service is not precluded from disallowing a deduction for any contributions made after an organization ceases to qualify under section 170(c)(2) if the organization has not timely filed a suit for declaratory judgment under section 7428 and if the contributor (1) had knowledge of the revocation of the ruling or determination letter, (2) was aware that such revocation was imminent, or (3) was in part responsible for or was aware of the activities or omissions of the organization that brought about this revocation.
Computer Software Under Section 199(c)(5)(B); Correction Announcement 2006–56
AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Correcting amendments. SUMMARY: This document contains a correction to temporary regulations (T.D. 9262, 2006–24 I.R.B. 1040) that were published in the Federal Register on Thursday, June 1, 2006 (71 FR 31074) concerning the application of section 199 of the Internal Revenue Code, which provides a deduction for income attributable to domestic production activities, to certain transactions involving computer software. DATES: These corrections are effective June 1, 2006. FOR FURTHER INFORMATION CONTACT: Paul Handleman or Lauren Ross Taylor, (202) 622–3040 (not a toll-free number).
SUPPLEMENTARY INFORMATION: Background The correction notice that is the subject of this document is under section 199 of the Internal Revenue Code. Need for Correction As published, the correction notice (T.D. 9262) contains errors that may prove to be misleading and are in need of clarification. ***** Correction of Publication Accordingly, 26 CFR Part 1 is corrected by making the following correcting amendments: 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 * * * § 1.199–3T [Corrected] Par. 2. Section 1.199–3T is amended by revising paragraphs (i)(6)(iii) introductory text and Example 5 to read as follows:
§ 1.199–3T Domestic production gross receipts (temporary). ***** (i) * * * (6) * * * (iii) Exceptions. Notwithstanding paragraph (i)(6)(ii) of this section, if a taxpayer derives gross receipts from providing to customers computer software MPGE in whole or in significant part by the taxpayer within the United States for the customers’ direct use while connected to the Internet (online software), then such gross receipts will be treated as being derived from the lease, rental, license, sale, exchange, or other disposition of computer software only if — *****
Example 5. The facts are the same as in Example 4, except that O does not sell the tax preparation computer software to customers affixed to a compact disc or by download and O’s only method of providing the tax preparation computer software to customers is over the Internet. P, an unrelated person, derives, on a regular and ongoing basis in its business, gross receipts from the sale to customers of P’s substantially identical tax preparation computer software that has been affixed to a compact disc as well as from the sale to customers of P’s substantially identical tax preparation computer software that customers have downloaded from the Internet. Under paragraph (i)(6)(iii)(B) of this section, O’s gross receipts derived from providing its tax preparation computer software to customers over the Internet will
be treated as derived from the lease, rental, license, sale, exchange, or other disposition of computer software and are DPGR (assuming all the other requirements of § 1.199–3 are met).
§ 1.199–8T [Corrected] Par. 3. Section 1.199–8T is amended by revising paragraph (i)(4) to read as follows: § 1.199–8T Other rules (temporary). ***** (i) * * * (4) Computer software. Section 1.199–3T(i)(6)(ii) through (v) are applicable for taxable years beginning on or after June 1, 2006. Taxpayers may apply these temporary regulations to taxable years beginning after December 31, 2004, and before June 1, 2006. The applicability of § 1.199–3T(i)(6)(ii) through (v) expires on or before May 22, 2009. Guy R. Traynor, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration).
(Filed by the Office of the Federal Register on July 5, 2006, 8:45 a.m., and published in the issue of the Federal Register for July 6, 2006, 71 F.R. 38262)
Announcement 2006-57
Date of Suspension May 4, 2006 to August 3, 2007 Indefinite from June 21, 2006 April 7, 2006 to October 6, 2007 July 1, 2006 to June 30, 2010 April 17, 2006 to December 16, 2007 May 30, 2006 to November 29, 2008 June 15, 2006 to March 14, 2007 Indefinite from June 19, 2006 Indefinite from June 22, 2006 Indefinite from June 22, 2006 June 24, 2006 to June 23, 2008 Indefinite from July 1, 2006
Layson, David A.
Brough, Donald L.
Gulian, Yervant
Rivera-Smith, Dawn
Hecht, Jodee L.
Finch, Phillip W.
Troese Jr., Henry A.
Robbins, Ronald E.
Shapiro, Sidney C.
Name Martini, Anthony
Date of Suspension June 18, 2006 to December, 17, 2007 July 1, 2006 to March 31, 2007 Indefinite from July 1, 2006 Indefinite from July 1, 2006 Indefinite from July 1, 2006 Indefinite from June 22, 2006 August 15, 2006 to August 14, 2007 Indefinite from August 1, 2006 Indefinite from August 1, 2006 Indefinite from August 7, 2006 Indefinite from September 1, 2006
Simontacchi, Joseph F.
Carroccio, Ronald P.
Aneji, Patrick
Rosenbloom, Mark L.
Viener, Ira S.
Ganz, Sheldon M.
Tomasulo, Maria
Name Dolan Jr., John L.
Date of Suspension Indefinite from April 3, 2006 Indefinite from April 3, 2006 Indefinite from April 3, 2006 Indefinite from April 3, 2006 Indefinite from April 3, 2006 Indefinite from April 3, 2006 Indefinite from April 3, 2006 Indefinite from April 3, 2006 Indefinite from April 3, 2006 Indefinite from April 3, 2006 Indefinite from April 3, 2006 Indefinite from April 3, 2006
St. Mary, Randall L.
Theriault, Michael J.
Bradley, Phillip M.
Haefele, Richard J.
Decker, William E.
Arbour, John J.
Martin Kenner, LA
Fallon, Charles D.
Agresti, Thomas J.
Kirsch, Craig F.
Name Hall, Lenny G.
Address McDowell, KY
Date of Suspension Indefinite from April 11, 2006 Indefinite from April 11, 2006 Indefinite from April 11, 2006 Indefinite from April 11, 2006 Indefinite from April 11, 2006 Indefinite from April 11, 2006 Indefinite from April 14, 2006 Indefinite from April 14, 2006 Indefinite from April 14, 2006 Indefinite from April 26, 2006 Indefinite from May 1, 2006 Indefinite from May 3, 2006 Indefinite from May 3, 2006 Indefinite from May 3, 2006 Indefinite from May 3, 2006
Hultgren, Jerry R.
Loutos, Peter A.
Smith III, Frank L.
Waters, Richard W.
Hartgraves, Travis M.
Dunn, George T.
Adkins, Thomas R.
Hairston, John W.
Marcone, Frank J.
Fraley, Donald J.
Tooke, S. Judd
Reilly, Michael G.
Faneuil, Robert A
Name Maignan, Peter R.
Address Upper Marlboro, MD
Date of Suspension Indefinite from May 3, 2006 Indefinite from May 5, 2006 Indefinite from May 8, 2006 Indefinite from May 8, 2006 Indefinite from May 8, 2006 Indefinite from May 8, 2006 Indefinite from May 8, 2006 Indefinite from May 8, 2006 Indefinite from May 8, 2006 Indefinite from May 16, 2006 Indefinite from May 16, 2006 Indefinite from May 16, 2006 Indefinite from May 16, 2006 Indefinite from May 16, 2006 Indefinite from May 18, 2006 Indefinite from May 18, 2006
Wurst, Jerome
O’Shea, Joseph G.
Biegelson, Alan
Leonard, Robert K.
Cassidy, Michael M.
Dobkin, Daniel B.
Nealy, Joseph L.
Conmey, Edwin W.
Knott Jr., Robert T.
Diamond, Howard S.
Fitzgerald, Bill L.
Brubaker, Gregory A.
Dodenbier, Robert F.
Name Young, Paul J.
Address Taft, CA
Date of Suspension Indefinite from June 8, 2006 Indefinite from June 8, 2006 Indefinite from June 8, 2006 Indefinite from June 8, 2006 Indefinite from June 8, 2006 Indefinite from June 8, 2006 Indefinite from June 8, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006
Dahodwala, Fatema
Mendola, Joseph E.
Rooney, Edward F.
Long, Rebecca L.
Silva, Zoilo I.
Tyler Jr., Earle S.
Horneber, Alice S.
Driscoll Jr., Peter
Souza, John C.
Crockett, Kevin J.
White, Debra M. Wyatt
Wilkins, Daniel J.
Merica, Chad L.
Name Wintroub, David S.
Date of Suspension Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006 Indefinite from June 12, 2006
Smith, Roderick E.
Guida, Joseph M.
Sonibare, Nash
Braun, Marc W.
Whitehead, H. Allen
Lansky, Sidney
Pazniokas, Paul M.
Bajgrowicz, James J.
Davis, Bret J.
Loffadelli, Thomas C.
Emeziem, Kelechi C.
Lamanna, Eugene C.
Name Bartels, John R.
Date of Suspension Indefinite from June 12, 2006 Indefinite from June 14, 2006 Indefinite from June 21, 2006 Indefinite from June 21, 2006 Indefinite from June 21, 2006 Indefinite from June 21, 2006 Indefinite from July 1, 2006 Indefinite from August 3, 2006 Indefinite from August 3, 2006 Indefinite from August 3, 2006 Indefinite from August 3, 2006
Shapiro, Kenneth S.
Stone, Jerry W.
Vanriper, Philip E.
Simuro, Valerie T.
Simms, William K.
Weaver, Terring M.
Name Kahn, Harold
Address Hollis, NY
Effective Date June 26, 2006 to June 25, 2010
Name Gailey, James N.
Effective Date June 5, 2006
Name Williams, Daniel S. Azan, Reinaldo L. Golub, Stephen B.
Address Carlsbad, CA Miami Beach, FL Norwalk, CT
Designation Attorney CPA CPA
Date of Censure March 29, 2006 July 24, 2006 August 3, 2006
Bulletins 2006–27 through 2006–35 Announcements:
Revenue Procedures— Continued: 2006-32, 2006-28 I.R.B. 61 2006-33, 2006-32 I.R.B. 140
2006-42, 2006-27 I.R.B. 48 2006-43, 2006-27 I.R.B. 48 2006-44, 2006-27 I.R.B. 49 2006-45, 2006-31 I.R.B. 121 2006-46, 2006-28 I.R.B. 76 2006-47, 2006-28 I.R.B. 78 2006-48, 2006-31 I.R.B. 135 2006-49, 2006-29 I.R.B. 89 2006-50, 2006-34 I.R.B. 321 2006-51, 2006-32 I.R.B. 222 2006-52, 2006-33 I.R.B. 254 2006-53, 2006-33 I.R.B. 254 2006-54, 2006-33 I.R.B. 254 2006-55, 2006-35 I.R.B. 342 2006-56, 2006-35 I.R.B. 342 2006-57, 2006-35 I.R.B. 343 9265, 2006-27 I.R.B. 1 9266, 2006-28 I.R.B. 52 9267, 2006-34 I.R.B. 313 9268, 2006-30 I.R.B. 94 9269, 2006-30 I.R.B. 92 9270, 2006-33 I.R.B. 237 9271, 2006-33 I.R.B. 224 9272, 2006-35 I.R.B. 332 9274, 2006-33 I.R.B. 244 9275, 2006-35 I.R.B. 327 9277, 2006-33 I.R.B. 226 9278, 2006-34 I.R.B. 256 2006-35, 2006-28 I.R.B. 50 2006-37, 2006-30 I.R.B. 91 2006-38, 2006-29 I.R.B. 80 2006-39, 2006-32 I.R.B. 137 2006-40, 2006-32 I.R.B. 136 2006-41, 2006-35 I.R.B. 331 2006-42, 2006-35 I.R.B. 337 2006-43, 2006-35 I.R.B. 329
2006-56, 2006-28 I.R.B. 58 2006-57, 2006-27 I.R.B. 13 2006-58, 2006-28 I.R.B. 59 2006-59, 2006-28 I.R.B. 60 2006-60, 2006-29 I.R.B. 82 2006-61, 2006-29 I.R.B. 85 2006-62, 2006-29 I.R.B. 86 2006-63, 2006-29 I.R.B. 87 2006-64, 2006-29 I.R.B. 88 2006-65, 2006-31 I.R.B. 102 2006-66, 2006-30 I.R.B. 99 2006-67, 2006-33 I.R.B. 248 2006-68, 2006-31 I.R.B. 105 2006-69, 2006-31 I.R.B. 107 2006-70, 2006-33 I.R.B. 252 2006-71, 2006-34 I.R.B. 316 2006-73, 2006-35 I.R.B. 339 2006-74, 2006-35 I.R.B. 339
REG-135866-02, 2006-27 I.R.B. 34 REG-146893-02, 2006-34 I.R.B. 317 REG-159929-02, 2006-35 I.R.B. 341 REG-148864-03, 2006-34 I.R.B. 320 REG-109512-05, 2006-30 I.R.B. 100 REG-112994-06, 2006-27 I.R.B. 47 REG-118775-06, 2006-28 I.R.B. 73 REG-118897-06, 2006-31 I.R.B. 120
2006-29, 2006-27 I.R.B. 13 2006-30, 2006-31 I.R.B. 110 2006-31, 2006-27 I.R.B. 32
Treasury Decisions— Continued: 9258 Corrected by Ann. 2006-46, 2006-28 I.R.B. 76 9262 Corrected by Ann. 2006-56, 2006-35 I.R.B. 342 9264 Corrected by Ann. 2006-46, 2006-28 I.R.B. 76
2006-20 Supplemented and modified by Notice 2006-56, 2006-28 I.R.B. 58 2006-53 Modified by Notice 2006-71, 2006-34 I.R.B. 316
2002-9 Modified and amplified by Notice 2006-67, 2006-33 I.R.B. 248 2005-41 Superseded by Rev. Proc. 2006-29, 2006-27 I.R.B. 13 2005-49 Superseded by Rev. Proc. 2006-33, 2006-32 I.R.B. 140
81-35 Amplified and modified by Rev. Rul. 2006-43, 2006-35 I.R.B. 329 81-36 Amplified and modified by Rev. Rul. 2006-43, 2006-35 I.R.B. 329 87-10 Amplified and modified by Rev. Rul. 2006-43, 2006-35 I.R.B. 329 2003-43 Amplified by Notice 2006-69, 2006-31 I.R.B. 107
9254 Corrected by Ann. 2006-44, 2006-27 I.R.B. 49
Internal Revenue Bulletins 2006–27 through 2006–35
Disaster relief: Additional postponement under section 7508A for filing certain 2004 and 2005 individual tax returns by certain taxpayers affected by Hurricane Katrina (Notice 56) 28, 58 Leave-sharing plans (Notice 59) 28, 60 Disclosure of return information, Bureau of Economic Analysis (TD 9267) 34, 313; (REG–148864–03) 34, 320 Federal Insurance Contributions Act (FICA), application to payments made for certain services (TD 9266) 28, 52 Offers in compromise, nonrefundable down payments required (Notice 68) 31, 105 Proposed Regulations: 26 CFR 31.3121(s)–1, amended; treatment of services under section 482, allocation of income and deductions from intangibles, stewardship expense (REG–146893–02) 34, 317 26 CFR 301.6103(j)(1)–1, amended; disclosure of return information to the Bureau of Economic Analysis (REG–148864–03) 34, 320 Regulations: 26 CFR 31.3102–1, amended; 31.3121(a)–2, (a)(7)–1, (a)(8)–1, (i)–1, amended; 31.3121(a)(10)–1, revised; application of the Federal Insurance Contributions Act to payments made for certain services (TD 9266) 28, 52 26 CFR 31.3121(s)–1, amended; 31.3121(s)–1T, added; treatment of services under section 482, allocation of income and deductions from intangibles, stewardship expense (TD 9278) 34, 256 26 CFR 301.6103(j)(1)–1, amended; 301.6103(j)(1)–1T, added; disclosure of return information to the Bureau of Economic Analysis (TD 9267) 34, 313 Tip reporting, Attributed Tip Income Program (ATIP) (RP 30) 31, 110
Disaster relief, additional postponement under section 7508A for filing certain 2004 and 2005 individual tax returns by certain taxpayers affected by Hurricane Katrina (Notice 56) 28, 58 Exempt organization employees, minimum coverage requirements of section 410(b) (TD 9275) 35, 327 Full funding limitations, weighted average interest rate for: July 2006 (Notice 66) 30, 99 August 2006 (Notice 74) 35, 339 Nonbank trustee and nonbank custodian, approval list (Ann 45) 31, 122 Qualified retirement plans: Government pick-up plans, employer contributions (RR 43) 35, 329 Prohibited transaction excise tax, amount involved in elective deferral (RR 38) 29, 80 Regulations: 26 CFR 1.410(b)–0, –6, –10, amended; exclusion of employees of 501(c)(3) organizations in 401(k) and 401(m) plans (TD 9275) 35, 327 Roth IRAs, distributions of designated Roth contributions, public hearing on REG–146459–05 (Ann 42) 27, 48
Disaster relief, additional postponement under section 7508A for filing certain 2004 and 2005 individual tax returns by certain taxpayers affected by Hurricane Katrina (Notice 56) 28, 58 Disclosure of return information, Bureau of Economic Analysis (TD 9267) 34, 313; (REG–148864–03) 34, 320 Offers in compromise, nonrefundable down payments required (Notice 68) 31, 105 Proposed Regulations: 26 CFR 301.6103(j)(1)–1, amended; disclosure of return information to the Bureau of Economic Analysis (REG–148864–03) 34, 320 Regulations: 26 CFR 301.6103(j)(1)–1, amended; 301.6103(j)(1)–1T, added; disclosure of return information to the Bureau of Economic Analysis (TD 9267) 34, 313
Controlled services transactions under section 482, treatment, allocation of income and deductions from intangibles, and stewardship expense (TD 9278) 34, 256; (REG–146893–02) 34, 317
Disaster relief, additional postponement under section 7508A for filing certain 2004 and 2005 individual tax returns by certain taxpayers affected by Hurricane Katrina (Notice 56) 28, 58 Disclosure of return information, Bureau of Economic Analysis (TD 9267) 34, 313; (REG–148864–03) 34, 320 Disclosure requirements with respect to prohibited tax shelter transactions to which tax-exempt entities are parties (Notice 65) 31, 102 Excise taxes with respect to prohibited tax shelter transactions to which tax-exempt entities are parties (Notice 65) 31, 102 Health Savings Accounts (HSAs) under section 4980G, employer comparable contributions (TD 9277) 33, 226 Offers in compromise, nonrefundable down payments required (Notice 68) 31, 105 Proposed Regulations: 26 CFR 301.6103(j)(1)–1, amended; disclosure of return information to the Bureau of Economic Analysis (REG–148864–03) 34, 320 Regulations: 26 CFR 54.4980G–0 thru –5, added; employer comparable contributions to Health Savings Accounts under section 4980G (TD 9277) 33, 226 26 CFR 301.6103(j)(1)–1, amended; 301.6103(j)(1)–1T, added; disclosure of return information to the Bureau of Economic Analysis (TD 9267) 34, 313
Regulations: 26 CFR 301.6103(j)(1)–1, amended; 301.6103(j)(1)–1T, added; disclosure of return information to the Bureau of Economic Analysis (TD 9267) 34, 313
Accounting methods, revised instructions for Form 3115, Application for Change in Accounting Method (Ann 52) 33, 254 Computer software, domestic production activities deduction under section 199(c)(5)(B): Change in hearing location for REG–111578–06 (Ann 53) 33, 254 Correction to TD 9262 (Ann 56) 35, 342 Consolidated returns, basis reallocation, loss suspension, and expiration of losses on certain stock dispositions, correction to TD 9254 (Ann 44) 27, 49 Controlled services cost method under section 482 regulations, identification of specified eligible covered services (Ann 50) 34, 321 Controlled services transactions under section 482, treatment, allocation of income and deductions from intangibles, and stewardship expense (TD 9278) 34, 256; (REG–146893–02) 34, 317 Corporations: Attribution of earnings and profits to stock of controlled foreign corporations (REG–135866–02) 27, 34 Distributions of interests in a loss corporation from qualified trusts (TD 9269) 30, 92 Information returns required with respect to certain foreign corporations and certain foreign-owned domestic corporations (TD 9268) 30, 94; (REG–109512–05) 30, 100 Inversions, surrogate foreign corporations (Notice 70) 33, 252 Surrogate foreign corporation status for purposes of section 7874 (TD 9265) 27, 1; (REG–112994–06) 27, 47 Credits: Enhanced oil recovery credit, 2006 inflation adjustment (Notice 62) 29, 86 Low-income housing credit, satisfactory bond, “bond factor” amounts for the period: January through September 2006 (RR 37) 30, 91 New markets tax credit, low-income community business (Notice 60) 29, 82 Nonbusiness energy property, siding not component specifically and primarily designed to reduce heat loss or gain of dwelling (Notice 71) 34, 316 Work opportunity and welfare-to-work tax credits (Ann 49) 29, 89 Debit cards used to reimburse participants in self-insured medical reimbursement plans and dependent care assistance programs (Notice 69) 31, 107 Disaster relief: Additional postponement under section 7508A for filing certain 2004 and 2005 individual tax returns by certain taxpayers affected by Hurricane Katrina (Notice 56) 28, 58
Disaster relief, additional postponement under section 7508A for filing certain 2004 and 2005 individual tax returns by certain taxpayers affected by Hurricane Katrina (Notice 56) 28, 58 Disclosure requirements with respect to prohibited tax shelter transactions to which tax-exempt entities are parties (Notice 65) 31, 102 Excise taxes with respect to prohibited tax shelter transactions to which tax-exempt entities are parties (Notice 65) 31, 102 List of organizations classified as private foundations (Ann 51) 32, 222 Revocations (Ann 48) 31, 136; (Ann 54) 33, 254; (Ann 55) 35, 342
Disaster relief, additional postponement under section 7508A for filing certain 2004 and 2005 individual tax returns by certain taxpayers affected by Hurricane Katrina (Notice 56) 28, 58 Disclosure of return information, Bureau of Economic Analysis (TD 9267) 34, 313; (REG–148864–03) 34, 320 Offers in compromise, nonrefundable down payments required (Notice 68) 31, 105 Proposed Regulations: 26 CFR 301.6103(j)(1)–1, amended; disclosure of return information to the Bureau of Economic Analysis (REG–148864–03) 34, 320
Casualty and theft loss deductions attributable to Hurricanes Katrina, Rita, and Wilma, safe harbor methods for individuals, personal-use residential real property and certain personal belongings (RP 32) 28, 61 Depreciation, Gulf Opportunity (GO) Zone additional first year depreciation deduction (Notice 67) 33, 248 Leave-sharing plans (Notice 59) 28, 60 Disciplinary actions involving attorneys, certified public accountants, enrolled agents, and enrolled actuaries (Ann 57) 35, 343 Disclosure of return information: Bureau of Economic Analysis (TD 9267) 34, 313; (REG–148864–03) 34, 320 By certain officers and employees for investigative purposes (TD 9274) 33, 244 E-file, guidance necessary to facilitate business electronic filing and burden reduction, correction to TD 9264 (Ann 46) 28, 76; correction to REG–134317–05 (Ann 47) 28, 78 Effect of elections in certain multi-step transactions (TD 9271) 33, 224 Exempt organization employees, minimum coverage requirements of section 410(b) (TD 9275) 35, 327 Forms: 1098, 1099, 5498 and W-2G, requirements for filing electronically or magnetically (revised 8-2006) (RP 33) 32, 140 3115, Application for Change in Accounting Method, instructions revised May 2006 (Ann 52) 33, 254 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, specifications for filing electronically or magnetically (RP 29) 27, 13 8840, Closer Connection Exception Statement for Aliens, revision (Notice 73) 35, 339 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession, postponement of filing date for tax years 2001 through 2005 (Notice 57) 27, 13; revision (Notice 73) 35, 339 Health Savings Accounts (HSAs) under section 4980G, employer comparable contributions (TD 9277) 33, 226 Information reporting for payments to attorneys, reporting of gross proceeds payments (TD 9270) 33, 237 Insurance companies, life-nonlife tacking rule, correction to TD 9258 (Ann 46) 28, 76 Interest: Investment: Federal short-term, mid-term, and long-term rates for: July 2006 (RR 35) 28, 50 August 2006 (RR 39) 32, 137 Portfolio interest rules as applied to payments made to partnerships and simple or grantor trusts (REG–118775–06) 28, 73 Inventory: LIFO, price indexes used by department stores for: May 2006 (RR 40) 32, 136 June 2006 (RR 41) 35, 331 Levy, use of superpriority lien arguments as a defense to (RR 42) 35, 337 Marginal production rates, 2006 (Notice 61) 29, 85
Nonqualified deferred compensation, permitted accelerated payment (Notice 64) 29, 88 Offers in compromise, nonrefundable down payments required (Notice 68) 31, 105 Partnerships, portfolio interest rules as applied to payments made to partnerships and simple or grantor trusts (REG–118775–06) 28, 73 Postponement of filing date for Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession, for tax years 2001 through 2005 (Notice 57) 27, 13 Private foundations, organizations now classified as (Ann 51) 32, 222 Proposed Regulations: 26 CFR 1.367(b)–2, –4, revised; 1.1248–1, –2, –3, –7, revised; 1.1248–8, added; section 1248 attribution principles (REG–135866–02) 27, 34 26 CFR 1.482–0, –1, –2, –4, –6, –8, amended; 1.482–9, added; 1.861–8, amended; 1.6038A–3(a)(3), amended; 1.6662–6, amended; treatment of services under section 482, allocation of income and deductions from intangibles, stewardship expense (REG–146893–02) 34, 317 26 CFR 1.860A–1, amended; 1.860G–3, amended; 1.863–1, amended; 1.1441–2, amended; REMIC residual interestsaccounting for REMIC net income (including any excess inclusions (foreign holders) (REG–159929–02) 35, 341 26 CFR 1.871–14, amended; 1.881–2, amended; revisions to regulations relating to repeal of tax on interest of nonresident alien individuals and foreign corporations received from certain portfolio debt investments (REG–118775–06) 28, 73 26 CFR 1.985–3, amended; United States dollar approximate separate transactions method (REG–118897–06) 31, 121 26 CFR 1.6038–2, amended; 1.6038A–2, amended; information returns required with respect to certain foreign corporations and certain foreign-owned domestic corporations (REG–109512–05) 30, 100 26 CFR 1.7874–2, added; guidance regarding expatriated entities and their foreign parents (REG–112994–06) 27, 47 26 CFR 301.6103(j)(1)–1, amended; disclosure of return information to the Bureau of Economic Analysis (REG–148864–03) 34, 320 Publications: 1220, Specifications for Filing Forms 1098, 1099, 5498 and W-2G Electronically or Magnetically, 2006 revision (RP 33) 32, 140 1239, Specifications for Filing Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, Electronically or Magnetically, revised (RP 29) 27, 13 Real Estate Investment Trust (REIT) income tests, rents from real property (Notice 58) 28, 59 Real Estate Mortgage Investment Conduit (REMIC), allocation of income to foreign persons by certain entities (TD 9272) 35, 332; (REG–159929–02) 35, 341 Record retention requirements for tax-exempt bonds (Notice 63) 29, 87
Regulations: 26 CFR 1.199–3T, –8T, amended; computer software under section 199(c)(5)(B), correction to TD 9262 (Ann 56) 35, 342 26 CFR 1.338–3, amended; 1.338(h)(10)–1, amended; 1.338(h)(10)–1T, removed; effect of elections in certain multi-step transactions (TD 9271) 33, 224 26 CFR 1.382–1, amended; 1.382–10, added; 1.382–10T, removed; distributions of interests in a loss corporation from qualified trusts (TD 9269) 30, 92 26 CFR 1.410(b)–0, –6, –10, amended; exclusion of employees of 501(c)(3) organizations in 401(k) and 401(m) plans (TD 9275) 35, 327 26 CFR 1.482–0, –1, –2, –4, –6, –8, amended; 1.482–0T, –1T, –2T, –4T, –6T, –8T, –9T, added; 1.861–8, –8T, amended; 1.6038–3(a)(3), amended; 1.6038A–3T, added; 1.6662–6, amended; 1.6662–6T, added; treatment of services under section 482, allocation of income and deductions from intangibles, stewardship expense (TD 9278) 34, 256 26 CFR 1.860A–0, –1, amended; 1.860A–1T, added; 1.860G–3, amended; 1.860G–3T, added; 1.863–0, –1, amended; 1.863–1T, added; 1.1441–0, –2, amended; 1.1441–2T, added; REMIC residual interests-accounting for REMIC net income (including any excess inclusions) (foreign holders) (TD 9272) 35, 332 26 CFR 1.1502–76T, amended; 1.1563–1, amended; 602.101, amended; amendment of tacking rule requirements of lifenonlife consolidated regulations, and guidance necessary to facilitate business electronic filing and burden reduction, correction to TD 9258 and TD 9264 (Ann 46) 28, 76 26 CFR 1.6038–2, –2T, amended; 1.6038A–2, –2T, amended; 602.101(b), amended; information returns required with respect to certain foreign corporations and certain foreignowned domestic corporations (TD 9268) 30, 94 26 CFR 1.6041–1, –3, amended; 1.6045–5, added; reporting of gross proceeds payments to attorneys (TD 9270) 33, 237 26 CFR 1.7874–2T, added; guidance regarding expatriated entities and their foreign parents (TD 9265) 27, 1 26 CFR 54.4980G–0 thru –5, added; employer comparable contributions to Health Savings Accounts under section 4980G (TD 9277) 33, 226 26 CFR 301.6103(j)(1)–1, amended; 301.6103(j)(1)–1T, added; disclosure of return information to the Bureau of Economic Analysis (TD 9267) 34, 313 26 CFR 301.6103(k)(6)–1, added; 301.6103(k)(6)–1T, removed; disclosure of return information by certain officers and employees for investigative purposes (TD 9274) 33, 244 Revocations, exempt organizations (Ann 48) 31, 136; (Ann 54) 33, 254; (Ann 55) 35, 342 Revoking an election under section 83(b) (RP 31) 27, 32 Tax Exempt Bond (TEB) Mediation Pilot Program, one-year renewal (Ann 43) 27, 48 United States dollar approximate separate transactions method (DASTM) (REG–118897–06) 31, 121
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