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irb07 02


									                                                                                                  Bulletin No. 2007-2
                                                                                                     January 8, 2007

These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.

INCOME TAX                                                           Notice 2007–2, page 254.
                                                                     This notice provides transition relief for the use of debit cards
                                                                     for medical expense reimbursements at certain merchants with
T.D. 9300, page 246.                                                 non-health care related merchant category codes (MCC) and
Final regulations under section 6011 of the Code eliminate reg-      addresses the use of debit cards for medical expense reim-
ulatory obstacles to the electronic filing of certain business in-   bursements at stores with the Drug Stores and Pharmacies
come tax returns and other forms. Requiring signatures on            MCC. Rev. Rul. 2003–43 modified.
attachments to a tax return, for example, can impede a tax-
payer’s ability to file the return electronically. The regulations   Notice 2007–4, page 260.
provide that in a number of situations, the signature on a tax-      Extension of transition relief for certain partnerships and
payer’s return covers attachments to that return.                    other pass-thru entities under section 470. This notice ex-
                                                                     tends to taxable years that begin before January 1, 2007, the
T.D. 9301, page 244.                                                 transition relief under section 470 of the Code provided un-
REG–152043–05, page 263.                                             der Notice 2005–29, 2005–1 C.B. 796, and Notice 2006–2,
Temporary and proposed regulations under section 63 of the           2006–2 I.R.B. 278, to partnerships and certain other pass-
Code provide rules relating to the reduction in taxable income       thru entities that are treated as holding tax-exempt use prop-
under section 302 of the Katrina Emergency Tax Relief Act of         erty because of the application of section 168(h)(6). Notices
2005. The regulations affect taxpayers who provide housing in        2005–29 and 2006–2 modified and superseded.
their principal residences to individuals displaced by Hurricane

Notice 2007–1, page 254.
                                                                     EMPLOYEE PLANS
This notice permits foreign corporations engaged, or treated
as engaged, in a trade or business within the United States          Notice 2007–3, page 255.
whose tax year end is on or after September 30, 2005, and            Retirement plans; qualification, list of changes. This no-
whose original tax return due date (including extensions) was on     tice sets forth a list of changes referred to in Rev. Proc.
or after June 15, 2006, and on or before August 17, 2006, to         2005–66, 2005–2 C.B. 509, pertaining to the statutory, reg-
elect to apply the provisions of T.D. 9281, 2006–39 I.R.B. 517,      ulatory, and guidance changes needed for certain requests to
for such tax return filing period. Such taxpayers may adopt          the Service.
the rules provided in T.D. 9281 only if the rules are adopted
in their entirety on an amended return filed within 180 days of
December 18, 2006.

                                                                                                (Continued on the next page)

Finding Lists begin on page ii.

T.D. 9300, page 246.
Final regulations under section 6011 of the Code eliminate reg-
ulatory obstacles to the electronic filing of certain business in-
come tax returns and other forms. Requiring signatures on
attachments to a tax return, for example, can impede a tax-
payer’s ability to file the return electronically. The regulations
provide that in a number of situations, the signature on a tax-
payer’s return covers attachments to that return.

Rev. Proc. 2007–11, page 261.
This procedure provides the maximum vehicle values using the
special valuation rules under sections 1.61–21(d) and (e) of the
regulations. These values are indexed for inflation and must
be adjusted annually by referring to the Consumer Price Index

Announcement 2007–2, page 263.
This document cancels a public hearing on proposed regula-
tions (REG–142270–05, 2006–43 I.R.B. 791) relating to the
railroad track maintenance credit determined for qualified rail-
road track maintenance expenditures paid or incurred by a
Class II or Class III railroad and other eligible taxpayers dur-
ing the taxable year.

January 8, 2007                                                      2007–2 I.R.B.
The IRS Mission
Provide America’s taxpayers top quality service by helping                        applying the tax law with integrity and fairness to all.
them understand and meet their tax responsibilities and by

The Internal Revenue Bulletin is the authoritative instrument of                  court decisions, rulings, and procedures must be considered,
the Commissioner of Internal Revenue for announcing official                      and Service personnel and others concerned are cautioned
rulings and procedures of the Internal Revenue Service and for                    against reaching the same conclusions in other cases unless
publishing Treasury Decisions, Executive Orders, Tax Conven-                      the facts and circumstances are substantially the same.
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
                                                                                  The Bulletin is divided into four parts as follows:
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.                                            Part I.—1986 Code.
                                                                                  This part includes rulings and decisions based on provisions of
It is the policy of the Service to publish in the Bulletin all sub-               the Internal Revenue Code of 1986.
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-                  Part II.—Treaties and Tax Legislation.
ify, or amend any of those previously published in the Bulletin.                  This part is divided into two subparts as follows: Subpart A,
All published rulings apply retroactively unless otherwise indi-                  Tax Conventions and Other Related Items, and Subpart B, Leg-
cated. Procedures relating solely to matters of internal man-                     islation and Related Committee Reports.
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.                                                          Part III.—Administrative, Procedural, and Miscellaneous.
                                                                                  To the extent practicable, pertinent cross references to these
                                                                                  subjects are contained in the other Parts and Subparts. Also
Revenue rulings represent the conclusions of the Service on the                   included in this part are Bank Secrecy Act Administrative Rul-
application of the law to the pivotal facts stated in the revenue                 ings. Bank Secrecy Act Administrative Rulings are issued by
ruling. In those based on positions taken in rulings to taxpayers                 the Department of the Treasury’s Office of the Assistant Sec-
or technical advice to Service field offices, identifying details                 retary (Enforcement).
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.                                                                     Part IV.—Items of General Interest.
                                                                                  This part includes notices of proposed rulemakings, disbar-
                                                                                  ment and suspension lists, and announcements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be                        The last Bulletin for each month includes a cumulative index
relied on, used, or cited as precedents by Service personnel in                   for the matters published during the preceding months. These
the disposition of other cases. In applying published rulings and                 monthly indexes are cumulated on a semiannual basis, and are
procedures, the effect of subsequent legislation, regulations,                    published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

2007–2 I.R.B.                                                                                                                       January 8, 2007
January 8, 2007   2007–2 I.R.B.
Part I. Rulings and Decisions Under the Internal Revenue Code
of 1986
Section 61.—Gross Income                                SUPPLEMENTARY INFORMATION:                      this area comprises the states of Louisiana,
Defined                                                                                                 Mississippi, Alabama, and Florida. Un-
                                                        Background                                      der section 2(2) of KETRA, the Hurricane
26 CFR 1.61–21(e): Vehicle cents-per-mile valua-
                                                                                                        Katrina core disaster area is the portion
tion.                                                       This document contains amendments
                                                                                                        of the Hurricane Katrina disaster area de-
                                                        to the Income Tax Regulations (26 CFR
   A revenue procedure provides maximum vehicle                                                         termined by the President to warrant in-
                                                        Part 1) relating to the reduction in tax-
values for which the special valuation rules of regu-                                                   dividual or individual and public assis-
                                                        able income for housing provided to dis-
lations sections 1.61–21(d) and (e) may be used. See                                                    tance from the federal government under
Rev. Proc. 2007-11, page 261.                           placed individuals under section 302 of
                                                                                                        the Stafford Act. See Appendix to No-
                                                        the Katrina Emergency Tax Relief Act
                                                                                                        tice 2005–73, 2005–2 C.B. 723, (Oct. 17,
                                                        of 2005 (Pub. L. No. 109–73, 119 Stat.
Section 63.—Taxable                                                                                     2005) (listing parishes and counties des-
                                                        2016) (KETRA).
Income Defined                                                                                          ignated for assistance under the Stafford
                                                            For taxable years beginning in 2005 and
26 CFR 1.9300–1T: Reduction in taxable income for
                                                        2006, a taxpayer may reduce taxable in-
housing Hurricane Katrina displaced individuals.        come by $500 for each Hurricane Katrina         Explanation of Provisions
                                                        displaced individual to whom the taxpayer
T.D. 9301                                               provides free housing in the taxpayer’s         Provision of Housing
                                                        principal residence for a period of 60 con-
DEPARTMENT OF                                           secutive days that ends in the taxable year.       The temporary regulations provide that
THE TREASURY                                            No reduction is allowed if the taxpayer         a taxpayer is considered to provide hous-
                                                        receives rent or other compensation from        ing if the housing is provided either in,
Internal Revenue Service                                any source for providing the housing.           or on the site of, the taxpayer’s princi-
26 CFR Part 1                                               A taxpayer may not claim a reduction        pal residence. In addition, the taxpayer
                                                        in taxable income with respect to the same      must be an owner or lessee of the resi-
Reduction in Taxable Income                             Hurricane Katrina displaced individual in       dence to be treated as providing housing
for Housing Hurricane Katrina                           more than one taxable year and must in-         to a Hurricane Katrina displaced individ-
Displaced Individuals                                   clude the Hurricane Katrina displaced in-       ual. The term principal residence has the
                                                        dividual’s tax identification number on the     same meaning as in section 121 and the
AGENCY: Internal Revenue Service                        taxpayer’s return. Generally, the total re-     regulations thereunder. Amounts in con-
(IRS), Treasury.                                        duction for all taxable years is $2,000.        nection with the provision of housing (for
                                                            A Hurricane Katrina displaced individ-      which the taxpayer may not be reimbursed
ACTION: Temporary regulations.                          ual is defined as a natural person who was      or compensated) include rent and utilities.
                                                        displaced from a principal place of abode       Amounts for telephone calls, food, cloth-
SUMMARY: This document contains
                                                        that, on August 28, 2005, was in the Hur-       ing and transportation are not amounts in
temporary regulations relating to the re-
                                                        ricane Katrina core disaster area. A Hur-       connection with the provision of housing
duction in taxable income under section
                                                        ricane Katrina displaced individual also is     for this purpose.
302 of the Katrina Emergency Tax Re-
                                                        defined as an individual whose principal
lief Act of 2005. The regulations affect
                                                        place of abode was located in the Hurri-        Limitations on Amount of Reduction
taxpayers who provide housing in their
                                                        cane Katrina disaster area, but outside the
principal residences to individuals dis-
                                                        core disaster area, if the abode was dam-          The temporary regulations provide that
placed by Hurricane Katrina. The text
                                                        aged by Hurricane Katrina or the individ-       the $2,000 aggregate limit on the reduc-
of the temporary regulations also serves
                                                        ual was evacuated from the abode because        tion in taxable income applies to unmar-
as the text of the proposed regulations
                                                        of Hurricane Katrina. A Hurricane Katrina       ried individuals and married taxpayers fil-
(REG–152043–05) set forth in the notice
                                                        displaced individual may not be the tax-        ing a joint tax return. Married taxpayers
of proposed rulemaking on this subject in
                                                        payer’s spouse or dependent.                    who file separate returns may reduce tax-
this issue of the Bulletin.
                                                            Under section 2(1) of KETRA, the Hur-       able income by $1,000 each for all taxable
DATES: Effective Date: These regulations                ricane Katrina disaster area is the area with   years.
are effective December 11, 2006.                        respect to which a major disaster by reason        The temporary regulations clarify that a
    Applicability Date: For date of applica-            of Hurricane Katrina has been declared by       taxpayer may reduce taxable income with
bility, see §1.9300–1T(g).                              the President before September 14, 2005,        respect to a specific Hurricane Katrina dis-
                                                        under section 401 of the Robert T. Stafford     placed individual in 2005 or 2006, but
FOR    FURTHER         INFORMATION                      Disaster Relief and Emergency Assistance        not both years. Additionally, the tempo-
CONTACT:     Marnette       M.   Myers,                 Act (42 U.S.C. 5170) (Stafford Act). For        rary regulations provide that a Hurricane
202–622–4920 (not a toll-free number).                  purposes of relief provided under KETRA,        Katrina displaced individual may be taken

2007–2 I.R.B.                                                               244                                             January 8, 2007
into account by only one taxpayer occupy-           Authority: 26 U.S.C. 7805 * * *              years. The maximum dollar limitation
ing the same principal residence.                   Section 1.9300–1T also issued under          is—
                                                 26 U.S.C. 6001. * * *                              (A) $2,000 in the case of an unmarried
Effective Date                                      Par. 2. Section 1.9300–1T is added to        individual;
                                                 read as follows:                                   (B) $2,000 in the case of a husband and
    The temporary regulations apply to tax-
                                                                                                 wife who file a joint income tax return; and
able years beginning after December 31,          §1.9300–1T Reduction in taxable income             (C) $1,000 in the case of a married indi-
2004, and before January 1, 2007, and end-       for housing Hurricane Katrina displaced         vidual who files a separate income tax re-
ing on or after December 11, 2006, which         individuals.                                    turn.
is the date the temporary regulations were
                                                                                                    (ii) Married individuals with separate
filed with the Federal Register. Taxpay-             (a) In general. For a taxable year be-
                                                                                                 principal residences. The limitations in
ers may rely on the temporary regulations        ginning in 2005 or 2006, a taxpayer who
                                                                                                 paragraphs (c)(1)(i)(B) and (c)(1)(i)(C)
with respect to taxable years ending before      is a natural person may reduce taxable in-
                                                                                                 of this section apply without regard to
the filing date, but may not rely on the ab-     come by $500 for each Hurricane Katrina
                                                                                                 whether the married individuals occupy
sence of regulations for taxable years end-      displaced individual (as defined in para-
                                                                                                 the same principal residence. A person is
ing before the filing date for a result con-     graph (e)(1) of this section) to whom the
                                                                                                 treated as married for purposes of this sec-
trary to that under the temporary regula-        taxpayer provides housing free of charge
                                                                                                 tion if the individual is treated as married
tions.                                           in, or on the site of, the taxpayer’s prin-
                                                                                                 under section 7703.
                                                 cipal residence for a period of 60 consecu-
Special Analyses                                                                                    (2) Spouse or dependent of the tax-
                                                 tive days ending in the taxable year. A tax-
                                                                                                 payer. No reduction is allowed for a
                                                 payer may not claim the reduction in tax-
    It has been determined that this Trea-                                                       Hurricane Katrina displaced individual
                                                 able income unless the taxpayer includes
sury decision is not a significant regula-                                                       who is the spouse or dependent of the
                                                 the taxpayer identification number of the
tory action as defined in Executive Order                                                        taxpayer.
                                                 Hurricane Katrina displaced individual on
12866. Therefore, a regulatory assessment                                                           (3) Individual taken into account only
                                                 the taxpayer’s income tax return.
is not required. It also has been determined                                                     once. A taxpayer may not reduce taxable
                                                     (b) Provision of housing—(1) Principal
that section 553(b) of the Administrative                                                        income under paragraph (a) of this section
                                                 residence. For purposes of this section,
Procedure Act (5 U.S.C. chapter 5) does                                                          with respect to a Hurricane Katrina dis-
                                                 the term principal residence has the same
not apply to these regulations. Please refer                                                     placed individual who was taken into ac-
                                                 meaning as in section 121 and the regula-
to the cross-referenced notice of proposed                                                       count by the taxpayer for any prior taxable
                                                 tions thereunder. See §1.121–1(b)(1) and
rulemaking published elsewhere in this is-                                                       year.
sue of the Bulletin for applicability of the                                                        (4) Taxpayers occupying the same prin-
                                                     (2) Legal interest required. A taxpayer
Regulatory Flexibility Act (5 U.S.C. chap-                                                       cipal residence. A Hurricane Katrina dis-
                                                 is treated as providing housing for pur-
ter 6). Pursuant to section 7805(f) of the                                                       placed individual may be taken into ac-
                                                 poses of this section only if the taxpayer is
Code, these temporary regulations will be                                                        count by only one taxpayer occupying the
                                                 an owner or lessee (including a co-owner
submitted to the Chief Counsel for Advo-                                                         same principal residence for all taxable
                                                 or co-lessee) of the residence.
cacy of the Small Business Administration                                                        years.
                                                     (3) Compensation for providing hous-
for comment on their impact on small busi-                                                          (d) Substantiation. A taxpayer claim-
                                                 ing—(i) In general. No reduction in tax-
ness.                                                                                            ing a reduction under this section must
                                                 able income is allowed under this section
                                                                                                 prepare and maintain records sufficient to
Drafting Information                             to a taxpayer who receives rent or any
                                                                                                 show entitlement to the reduction as pro-
                                                 other amount from any source in connec-
                                                                                                 vided in Form 8914 (Exemption Amount
   The principal author of these regula-         tion with the provision of housing.
                                                                                                 for Taxpayers Housing Individuals Dis-
tions is Marnette M. Myers of the Office of          (ii) Amounts in connection with the pro-
                                                                                                 placed by Hurricane Katrina) or other
the Associate Chief Counsel (Income Tax          vision of housing. For purposes of this
                                                                                                 forms, instructions, publications or guid-
and Accounting). However, other person-          section, amounts in connection with the
                                                                                                 ance published by the IRS.
nel from the IRS and Treasury Department         provision of housing include (but are not
                                                                                                    (e) Definitions. The following defini-
participated in their development.               limited to) amounts for rent and utilities.
                                                                                                 tions apply for purposes of this section.
                                                 Amounts for telephone calls, food, cloth-
                   *****                                                                            (1) Hurricane Katrina displaced in-
                                                 ing, and transportation are examples of
                                                                                                 dividual. The term Hurricane Katrina
Adoption of Amendments to the                    amounts not in connection with the provi-
                                                                                                 displaced individual means any natural
Regulations                                      sion of housing.
                                                                                                 person if the following requirements are
                                                     (c) Limitations—(1) Dollar limita-
   Accordingly, 26 CFR part 1 is amended         tion—(i) In general. The reduction under
                                                                                                    (i) The person’s principal place of
as follows:                                      paragraph (a) of this section may not
                                                                                                 abode on August 28, 2005, was in the
                                                 exceed the maximum dollar limitation
PART 1—INCOME TAXES                                                                              Hurricane Katrina disaster area (as de-
                                                 reduced by the amount of the reduction
                                                                                                 fined in paragraph (e)(2) of this section);
                                                 under this section for all prior taxable
   Paragraph 1. The authority citation for                                                          (ii) The person was displaced from that
part 1 continues to read, in part, as follows:                                                   abode; and

January 8, 2007                                                     245                                                   2007–2 I.R.B.
   (iii) If the abode was located outside                  separately. Because H and W reduced their 2005 tax-            SUMMARY: This document contains final
the Hurricane Katrina core disaster area                   able income with respect to O, under paragraph (c)(3)          regulations designed to eliminate regula-
(as defined in paragraph (e)(3) of this sec-               of this section, neither H nor W may reduce taxable            tory impediments to the electronic filing of
                                                           income on their 2006 income tax return with respect
tion)—                                                     to O. Under paragraphs (a) and (c)(4) of this section,
                                                                                                                          certain income tax returns and other forms.
   (A) The abode was damaged by Hurri-                     either H or W, but not both, may reduce taxable in-            These regulations affect business taxpay-
cane Katrina; or                                           come by $500 on his or her 2006 income tax return              ers who file income tax returns electroni-
   (B) The person was evacuated from that                  with respect to P.                                             cally. This document also makes conform-
abode by reason of Hurricane Katrina.                         (g) Effective date. This section applies                    ing changes to certain current regulations.
   (2) Hurricane Katrina disaster area.                    for taxable years beginning after Decem-
The term Hurricane Katrina disaster area                   ber 31, 2004, and before January 1, 2007,                      DATES: Effective Date: These regula-
means the states of Alabama, Florida,                      and ending on or after December 11, 2006.                      tions are effective on December 8, 2006.
Louisiana, and Mississippi.                                                                                                  Applicability Date:       These reg-
   (3) Hurricane Katrina core disaster                                             Linda M. Kroening,                     ulations apply with respect to tax-
area. The term Hurricane Katrina core                                  Acting Deputy Commissioner for                     able years beginning after Decem-
disaster area means the portion of the                                       Services and Enforcement.                    ber 31, 2002.        The applicability of
Hurricane Katrina disaster area designated                                                                                §§1.170A–11T, 1.556–2T, 1.565–1T,
                                                           Approved December 1, 2006.                                     1.936–7T,       1.1017–1T,    1.1368–1T,
by the President to warrant individual or
individual and public assistance from the                                              Eric Solomon,                      1.1377–1T, 1.1502–21T(b)(3)(i) and
federal government under the Robert T.                               Acting Deputy Assistant Secretary                    (b)(3)(ii)(B), 1.1502–75T, 1.1503–2T,
Stafford Disaster Relief and Emergency                                    of the Treasury (Tax Policy).                   1.6038B–1T(b)(1)(ii) and 301.7701–3T
Assistance Act (42 U.S.C. 5170).                                                                                          will expire on December 8, 2006.
                                                           (Filed by the Office of the Federal Register on December 11,
   (f) Examples. The provisions of this                    2006, 8:45 a.m., and published in the issue of the Federal     FOR    FURTHER           INFORMATION
section are illustrated by the following ex-               Register for December 12, 2006, 71 F.R. 74467)
                                                                                                                          CONTACT: Nathan Rosen,             (202)
amples in which each Hurricane Katrina
                                                                                                                          622–4910 (not a toll-free number).
displaced individual, who is not a depen-
dent or spouse of the taxpayer, is provided                Section 280F.—Limitation                                       SUPPLEMENTARY INFORMATION:
housing (within the meaning of paragraph                   on Depreciation for Luxury
(b) of this section) in, or on the site of, the            Automobiles; Limitation                                        Paperwork Reduction Act
taxpayer’s principal residence for a period                Where Certain Property
of at least 60 consecutive days ending in                  Used for Personal Purposes                                         The collection of information con-
the applicable taxable year. The examples                                                                                 tained in these regulations has been re-
                                                              A revenue procedure provides maximum vehicle                viewed and approved by the Office of
are as follows:
    Example 1. Taxpayer A provides housing to              values for which the special valuation rules of regu-          Management and Budget in accordance
N, a Hurricane Katrina displaced individual, from          lations sections 1.61–21(d) and (e) may be used. See
                                                                                                                          with the Paperwork Reduction Act of
September 1, 2005, until March 10, 2006. Under             Rev. Proc. 2007-11, page 261.
                                                                                                                          1995 (44 U.S.C. 3507(d)) under control
paragraphs (a) and (c)(3) of this section, A may
reduce taxable income by $500 on A’s 2005 income
                                                                                                                          number 1545–1868. The collection of
tax return or A’s 2006 income tax return, but not          Section 6011.—General                                          information in these final regulations is
both, with respect to N.                                   Requirement of Return,                                         in §1.170A–11(b)(2). The information
    Example 2. The facts are the same as in Example        Statement, or List                                             required in §1.170A–11(b)(2) concerning
1 except that A and B, A’s unmarried roommate and
                                                                                                                          the date on which a corporation’s board
co-lessee, provide housing to N. Under paragraphs (a)      26 CFR 1.556–2: Adjustments to taxable income.
and (c)(4) of this section, either A or B, but not both,
                                                                                                                          of directors authorizes a certain type of
may reduce taxable income by $500 for 2005 with re-                                                                       charitable contribution assists the IRS in
                                                           T.D. 9300
spect to N. If either A or B reduces taxable income for                                                                   determining the deductibility of such con-
2005 with respect to N, neither A nor B may reduce                                                                        tributions. Responses to this collection of
taxable income with respect to N for 2006.                 DEPARTMENT OF
                                                                                                                          information are mandatory.
    Example 3. Unmarried roommates and co-lessees          THE TREASURY                                                       An agency may not conduct or sponsor,
C and D provide housing to eight Hurricane Katrina
displaced individuals during 2005. Under paragraphs        Internal Revenue Service                                       and a person is not required to respond
(a) and (c)(1)(i)(A) of this section, C and D each may     26 CFR Parts 1, 301 and 602                                    to, a collection of information unless the
reduce taxable income by $2,000 on their 2005 in-                                                                         collection of information displays a valid
come tax returns.
    Example 4. (i) H and W are married to each other
                                                           Guidance Necessary to                                          control number assigned by the Office of
and provide housing to a Hurricane Katrina displaced       Facilitate Business Electronic                                 Management and Budget.
                                                                                                                              The estimated annual burden per re-
individual, O, in 2005. H and W file their 2005 in-        Filing
come tax return married filing jointly. Under para-                                                                       spondent is .25 hours.
graphs (a) and (c)(4) of this section, H and W may                                                                            Comments concerning the accuracy
                                                           AGENCY: Internal Revenue Service
reduce taxable income by $500 on their 2005 income                                                                        of this burden estimate and sugges-
tax return with respect to O.                              (IRS), Treasury.
    (ii) In 2006, H and W provide housing to O and to
                                                                                                                          tions for reducing this burden should
another Hurricane Katrina displaced individual, P. H       ACTION: Final regulations and removal                          be sent to the Internal Revenue Service,
and W file their 2006 income tax return married filing     of temporary regulations.                                      Attn: IRS Reports, Clearance Officer,

2007–2 I.R.B.                                                                        246                                                      January 8, 2007
SE:W:CAR:MP:T:T:SP, Washington, DC              of the following forms: Form 926, “Re-        taxable years of foreign corporations be-
20224, and to the Office of Manage-             turn by a U.S. Transferor of Property to a    ginning after December 31, 2004, and
ment and Budget, Attn: Desk Officer for         Foreign Corporation”; Form 972, “Con-         effective for taxable years of United States
the Department of the Treasury, Office          sent of Shareholder To Include Specific       shareholders with or within which such
of Information and Regulatory Affairs,          Amount in Gross Income”; Form 973,            taxable years of foreign corporations end.
Washington, DC 20503.                           “Corporation Claim for Deduction for          The provision in the December 2003 Reg-
    Books and records relating to a collec-     Consent Dividends”; Form 982, “Reduc-         ulations eliminating an electronic filing
tion of information must be retained as         tion of Tax Attributes Due to Discharge of    impediment under section 556 applied to
long as their contents may become mate-         Indebtedness (and Section 1082 Basis Ad-      tax years ending before the repeal of sec-
rial in the administration of any internal      justment)”; Form 1120, “U.S. Corporation      tion 556. Therefore, these final regulations
revenue law. Generally, tax returns and tax     Income Tax Return”; Form 1120S, “U.S.         amend section 1.556–2 of the Income Tax
return information are confidential, as re-     Income Tax Return for an S Corporation”;      Regulations despite the repeal of section
quired by 26 U.S.C. 6103.                       Form 1122, “Authorization and Consent of      556 itself.
                                                Subsidiary Corporation To Be Included in          These final regulations remove cer-
Background                                      a Consolidated Income Tax Return”; Form       tain portions of section 1.1502–21T
                                                5471, “Information Return of U.S. Persons     and place such language in sections
   This document contains amendments
                                                With Respect To Certain Foreign Corpo-        1.1502–21(b)(3)(i) and (b)(3)(ii)(B), so
to 26 CFR part 1 and 26 CFR part 301
                                                rations”; Form 5712–A, “Election and          as to eliminate impediments to the elec-
designed to eliminate regulatory impedi-
                                                Verification of the Cost Sharing or Profit    tronic filing of Form 1120. Other portions
ments to the electronic submission of tax
                                                Split Method Under Section 936(h)(5)”;        of that temporary regulation, however,
returns and other forms filed by corpora-
                                                and Form 8832, “Entity Classification         predate the December 2003 Regulations
tions, partnerships, other business entities,
                                                Election.”                                    or relate to matters other than electronic
and their owners.
                                                    Prior to the changes adopted by the De-   filing, and this document does not revise
   In 1998, Congress enacted the Internal
                                                cember 2003 Regulations, certain regula-      those portions.
Revenue Service Restructuring and Re-
                                                tions under the code sections cited above         The regulations as finalized by this
form Act of 1998 (RRA 1998), Pub. L. No.
                                                impeded electronic filing of returns. Some    Treasury decision clarify that refer-
105–206 (112 Stat. 685) (1998). RRA
                                                of these regulations, for example, impeded    ences in the following regulations to
1998 states a Congressional policy to pro-
                                                electronic filing by requiring taxpayers to   tax return due dates include extensions
mote the paperless filing of Federal tax
                                                include third-party signatures on their tax   of such due dates: See 1.565–1(b)(3),
returns. Section 2001(a) of RRA 1998
                                                returns or by requiring taxpayers to at-      1.936–7(b), Q. & A. 1, 1.1368–1(f)(5)(iii)
set a goal for the IRS to have at least 80
                                                tach documents or statements generated by     and (g)(2)(iii) and 1.1503–2(g)(2)(i) and
percent of all Federal tax and information
                                                a third party. Other regulations required     (iv)(B)(3)(iii).
returns filed electronically by 2007. Sec-
                                                a taxpayer to sign an IRS form and file
tion 2001(b) of RRA 1998 requires the                                                         January 2006 Final Regulations
                                                it as an attachment to the taxpayer’s in-
IRS to establish a 10-year strategic plan to                                                  Facilitating Electronic Filing
                                                come tax return. To address certain situ-
eliminate barriers to electronic filing.
                                                ations in which regulations required tax-
                                                                                                 On January 23, 2006, the IRS and
Finalization of December 2003                   payers to attach documents or statements
                                                                                              Treasury released final regulations (T.D.
Regulations Facilitating Electronic Filing      to their tax returns, for example, the De-
                                                                                              9243, 2006–8 I.R.B. 475 [71 FR 4276])
                                                cember 2003 Regulations allowed taxpay-
                                                                                              (the January 2006 Final Regulations)
    On December 19, 2003, the IRS and           ers to retain such items in their books and
                                                                                              which, among other things, removed an
Treasury published in the Federal Regis-        records. Taxpayers would be obligated, of
                                                                                              impediment to electronic filing of Form
ter (T.D. 9100, 2004–1 C.B. 297 [68 FR          course, to make the items available for in-
                                                                                              926. In the December 2003 Regula-
70701]) temporary and final regulations         spection by the IRS.
                                                                                              tions, the IRS and Treasury had previously
modifying the regulations under sections            The IRS received no comments re-
                                                                                              amended both sections 1.6038B–1(b)(1)(i)
170, 556, 565, 936, 1017, 1368, 1377,           sponding to the December 2003 Regu-
                                                                                              and 1.6038B–1(b)(1)(ii) of the Income
1502, 1503, 6038B and 7701 of the Inter-        lations, and no public hearing regarding
                                                                                              Tax Regulations to eliminate an im-
nal Revenue Code. In the same issue of the      the proposed regulations was requested
                                                                                              pediment to electronic filing of Form
Federal Register, the IRS and Treasury          or held. Accordingly, the temporary and
                                                                                              926. The January 2006 Final Regula-
published a notice of proposed rulemak-         proposed regulations are adopted with
                                                                                              tions amended section 1.6038B–1(b)(1)(i)
ing (REG–116664–01, 2004–1 C.B. 319             no substantive change by this Treasury
                                                                                              and removed temporary regulations sec-
[68 FR 70747]) proposing to amend regu-         decision, and the corresponding tempo-
                                                                                              tion 1.6038B–1T(b)(1)(i).       Therefore,
lations under the code sections noted in the    rary regulations are removed. These final
                                                                                              because the amendment in the December
previous sentence. The temporary, final,        regulations make certain non-substantive
                                                                                              2003 Regulations to 1.6038B–1T(b)(1)(i)
and proposed regulations published on De-       changes to the December 2003 Regula-
                                                                                              has already been adopted in final
cember 19, 2003, are collectively referred      tions as described below.
                                                                                              regulations, these final regulations
to as the December 2003 Regulations.                Section 556 was repealed by the Amer-
                                                                                              amend 1.6038B–1(b)(1)(ii) and remove
    The December 2003 Regulations gen-          ican Jobs Creation Act, Pub. L. No.
erally affect taxpayers who must file any       108–357 (118 Stat. 1418), effective for

January 8, 2007                                                    247                                                 2007–2 I.R.B.
1.6038B–1T(b)(1)(ii), but do not address        volves an insignificant expenditure of time      years beginning after December 31, 2002,
section 1.6038B–1(b)(1)(i).                     by taxpayers, as noted above under the           the declaration must also include the date
                                                heading “Paperwork Reduction Act.” Ac-           of the resolution, the declaration shall be
May 2006 Regulations Facilitating               cordingly, a Regulatory Flexibility Anal-        verified by signing the return, and a copy
Electronic Filing                               ysis under the Regulatory Flexibility Act        of the resolution of the board of directors
                                                (5 U.S.C. chapter 6) is not required. Pur-       authorizing the contribution is a record that
    On May 26, 2006, the IRS and Treasury
                                                suant to section 7805(f) of the Code, the        the taxpayer must retain and keep available
Department released final and temporary
                                                December 2003 Regulations and the De-            for inspection in the manner required by
regulations (T.D. 9264, 2006–26 I.R.B.
                                                cember 2003 notice of proposed rulemak-          §1.6001–1(e).
1150 [71 FR 30591]) (the May 2006
                                                ing were submitted to the Chief Counsel          *****
Regulations), which contained numerous
                                                for Advocacy of the Small Business Ad-
temporary regulations amending or re-
                                                ministration for comment on their impact         §1.170A–11T [Removed]
placing final regulations. Some of these
                                                on small business.
final regulations had required taxpayers                                                            Par. 3. Section 1.170A–11T is re-
to provide detailed information about a         Drafting Information                             moved.
transaction. In other cases, the scope of                                                           Par. 4. Section 1.556–2 is amended by
various reporting requirements was not             The principal author of these regula-         revising paragraph (e)(2)(vii) and adding
clear. The May 2006 Regulations sim-            tions is Nathan Rosen, Office of Associate       paragraph (e)(3) to read as follows:
plified, clarified or, in some cases, elimi-    Chief Counsel (Procedure and Administra-
nated these reporting burdens.                  tion), Administrative Provisions and Judi-       §1.556–2 Adjustments to taxable income.
    The May 2006 Regulations also elimi-        cial Practice Division.
nated regulatory impediments to the elec-                                                        *****
tronic filing of certain statements that tax-                      *****                            (e) * * *
payers are required to include on or with                                                           (2) * * *
                                                Adoption of Amendments to the                       (vii) In the case of a return for a taxable
their Federal income tax returns. In some
                                                Regulations                                      year beginning before January 1, 2003, a
cases, this impediment was removed by
deleting the requirement that the taxpayer        Accordingly, 26 CFR parts 1, 301 and           copy of the contract, lease, or rental agree-
sign such statement. In other cases, where      602 is amended as follows:                       ment;
the taxpayer and a third party were both                                                         *****
required to sign such statement, this im-       PART 1—INCOME TAXES                                  (3) If the statement described in
pediment was removed by requiring each                                                           §1.556–2(e)(2) is attached to a taxpayer’s
party to indicate on such statement that           Paragraph 1. The authority citation for       income tax return for a taxable year be-
it had entered into an agreement with the       part 1 continues to read, in part, as follows:   ginning after December 31, 2002, a copy
other party addressing the substantive mat-        Authority: 26 U.S.C. 7805 * * *               of the applicable contract, lease or rental
ters covered by the final regulations. Re-         Par. 2. Section 1.170A–11 is amended          agreement is not required to be submitted
quiring such a statement from the parties in    by revising paragraph (b)(2) to read as fol-     with the return, but must be retained by the
place of the dual signatures eliminates an      lows:                                            taxpayer and kept available for inspection
e-file impediment, but to protect the Ser-                                                       in the manner required by §1.6001–1(e).
vice’s interests, the May 2006 regulations      §1.170A–11 Limitation on, and carryover
                                                of, contributions by corporations.               *****
require each party to keep either the origi-
nal or a copy of the underlying agreement                                                        §1.556–2T [Removed]
in its records.
                                                    (b) * * *
                                                                                                    Par. 5. Section 1.556–2T is removed.
Special Analyses                                    (2) The election must be made at the
                                                                                                    Par. 6. Section 1.565–1 is amended
                                                time the return for the taxable year is filed,
                                                                                                 by revising paragraph (b)(3) to read as fol-
    It has been determined that this Trea-      by reporting the contribution on the re-
sury decision is not a significant regula-      turn. There shall be attached to the re-
tory action as defined in Executive Order       turn when filed a written declaration stat-      §1.565–1 General rule.
12866. Therefore, a regulatory assessment       ing that the resolution authorizing the con-
is not required. It also has been determined    tribution was adopted by the board of di-        *****
that section 553(b) of the Administrative       rectors during the taxable year. For taxable        (b) * * *
Procedure Act (5 U.S.C. chapter 5) does         years beginning before January 1, 2003,             (3) A consent may be filed at any time
not apply to these regulations. It is hereby    the declaration shall be verified by a state-    not later than the due date (including ex-
certified that the collection of information    ment signed by an officer authorized to          tensions) of the corporation’s income tax
in these regulations will not have a sig-       sign the return that it is made under penal-     return for the taxable year for which the
nificant economic impact on a substantial       ties of perjury, and there shall also be at-     dividends paid deduction is claimed. With
number of small entities. This certifica-       tached to the return when filed a copy of        such return, and not later than the due
tion is based on the fact that the collec-      the resolution of the board of directors         date (including extensions) thereof, the
tion of information in these regulations in-    authorizing the contribution. For taxable        corporation must file Forms 972 for each

2007–2 I.R.B.                                                       248                                               January 8, 2007
consenting shareholder, and a return on        after December 31, 1982. The electing               Par. 10. Section 1.1017–1 is amended
Form 973 showing by classes the stock          corporation must set forth on the form           by revising paragraph (g)(2)(iii)(B) to read
outstanding on the first and last days of      the name and the taxpayer identification         as follows:
the taxable year, the dividend rights of       number or address of all members of the
such stock, distributions made during the      affiliated group (including foreign affili-      §1.1017–1 Basis reductions following a
taxable year to shareholders, and giving all   ates not required to file a U.S. tax return).    discharge of indebtedness.
the other information required by the form.    All members of the affiliated group must
For taxable years beginning before Jan-        consent to the election. For elections filed
                                                                                                   (g) * * *
uary 1, 2003, the Form 973 filed with the      with respect to taxable years beginning
                                                                                                   (2) * * *
corporation’s income tax return shall con-     before January 1, 2003, an authorized of-
                                                                                                   (iii) * * *
tain or be verified by a written declaration   ficer of the electing corporation must sign
                                                                                                   (B) Taxpayer’s requirement.         For
that is made under the penalties of perjury    the statement of election and must declare
                                                                                                taxable years beginning before Jan-
and the Forms 972 filed with the return        that he has received a signed statement of
                                                                                                uary 1, 2003, statements described in
must be duly executed by the consenting        consent from an authorized officer, direc-
                                                                                                §1.1017–1(g)(2)(iii)(A) must be attached
shareholders. For taxable years beginning      tor, or other appropriate official of each
                                                                                                to a taxpayer’s timely filed (including
after December 31, 2002, the Form 973          member of the affiliated group. Elections
                                                                                                extensions) Federal income tax return for
filed with the corporation’s income tax re-    filed for taxable years beginning after
                                                                                                the taxable year in which the taxpayer has
turn shall be verified by signing the return   December 31, 2002, must incorporate a
                                                                                                COD income that is excluded from gross
and the Forms 972 filed with the return        declaration by the electing corporation
                                                                                                income under section 108(a). For taxable
must be duly executed by the consenting        that it has received a signed consent from
                                                                                                years beginning after December 31, 2002,
shareholders or, if unsigned, must contain     an authorized officer, director, or other
                                                                                                taxpayers must retain the statements and
the same information as the duly executed      appropriate official of each member of
                                                                                                keep them available for inspection in the
originals. If the corporation submits un-      the affiliated group and will be verified
                                                                                                manner required by §1.6001–1(e), but are
signed Forms 972 with its return for a         by signing the return. The election is not
                                                                                                not required to attach the statements to
taxable year beginning after December          valid for a taxable year unless all affiliates
                                                                                                their returns.
31, 2002, the duly executed originals are      consent. A failure to obtain an affiliate’s
records that the corporation must retain       written consent will not invalidate the          *****
and keep available for inspection in the       election out if the possessions corpora-
                                                                                                §1.1017–1T [Removed]
manner required by §1.6001–1(e).               tion made a good faith effort to obtain
                                               all the necessary consents or the failure           Par. 11. Section 1.1017–1T is removed.
                                               to obtain the missing consent was inad-             Par. 12. Section 1.1368–1 is amended
§1.565–1T [Removed]                            vertent. Subsequently created or acquired        by revising paragraphs (f)(5)(iii) and
                                               affiliates are bound by the election. If         (g)(2)(iii) to read as follows:
   Par. 7. Section 1.565–1T is removed.        an election out is revoked under section
   Par. 8. Section 1.936–7 is amended by       936(h)(5)(F)(iii), a new election out with       §1.1368–1 Distributions by
revising paragraph (b), Q. & A. 1, to read     respect to that product area cannot be           S corporations.
as follows:                                    made without the consent of the Commis-
                                               sioner. The possessions corporation shall        *****
§1.936–7 Manner of making election             file an amended Form 5712–A with its                (f) * * *
under section 936(h)(5); special election      timely filed (including extensions) income          (5) * * *
for export sales; revocation of election       tax return to reflect any changes in the            (iii) Corporate statement regarding
under section 936(a).                          names or number of the members of the            elections. A corporation makes an election
                                               affiliated group for any taxable year after      for a taxable year under §1.1368–1(f) by
*****                                          the first taxable year to which the election     attaching a statement to a timely filed (in-
    (b) Manner of making election.             out applies. By consenting to the election       cluding extensions) original or amended
    Q. 1: How does a possessions corpora-      out, all affiliates agree to provide informa-    return required to be filed under section
tion make an election to use the cost shar-    tion necessary to compute the cost sharing       6037 for that taxable year. In the state-
ing method or profit split method?             payment under the cost sharing method or         ment, the corporation must identify the
    A. 1: A possessions corporation makes      combined taxable income under the profit         election it is making under §1.1368–1(f)
an election to use the cost sharing or         split method, and failure to provide such        and must state that each shareholder con-
profit split method by filing Form 5712–A      information shall be treated as a request        sents to the election. In the case of elec-
(“Election and Verification of the Cost        to revoke the election out under section         tions for taxable years beginning before
Sharing or Profit Split Method Under Sec-      936(h)(5)(F)(iii).                               January 1, 2003, an officer of the corpora-
tion 936(h)(5)”) and attaching it to its tax                                                    tion must sign under penalties of perjury
return. Form 5712–A must be filed on or                                                         the statement on behalf of the corpora-
before the due date (including extensions)     §1.936–7T [Removed]                              tion. In the case of elections for taxable
of the tax return of the possessions corpo-                                                     years beginning after December 31, 2002,
ration for its first taxable year beginning       Par. 9. Section 1.936–7T is removed.          the statement described in this paragraph

January 8, 2007                                                    249                                                   2007–2 I.R.B.
(f)(5)(iii) shall be verified by signing the     §1.1377–1 Pro rata share .                    parent. If the consolidated return year in
return. A statement of election to make                                                        which the loss arises begins after Decem-
a deemed dividend under §1.1368–1(f)             *****                                         ber 31, 2002, the election may be made in
must include the amount of the deemed                (b) * * *                                 an unsigned statement.
dividend that is distributed to each share-          (5) * * *                                     (ii) * * *
holder.                                              (i) * * *                                     (B) Acquisition of member from an-
                                                     (C) The signature on behalf of the        other consolidated group. If one or more
*****                                            S corporation of an authorized officer of     members of a consolidated group becomes
    (g) * * *                                    the corporation under penalties of perjury,   a member of another consolidated group,
    (2) * * *                                    except that for taxable years beginning       the acquiring group may make an irrevo-
    (iii) Time and manner of making elec-        after December 31, 2002, the election         cable election to relinquish, with respect
tion. A corporation makes an election            statement described in §1.1377–1(b)(5)(i)     to all consolidated net operating losses
under §1.1368–1(g)(2)(i) for a taxable           of this section shall be verified, and the    attributable to the member, the portion of
year by attaching a statement to a timely        requirement of this paragraph (b)(5)(i)(C)    the carryback period for which the cor-
filed (including extensions) original or         is satisfied, by the signature on the Form    poration was a member of another group,
amended return required to be filed              1120S filed by the S corporation.             provided that any other corporation join-
under section 6037 for a taxable year
                                                 *****                                         ing the acquiring group that was affiliated
(without regard to the election under
                                                                                               with the member immediately before it
§1.1368–1(g)(2)(i)). In the statement, the
                                                 §1.1377–1T [Removed]                          joined the acquiring group is also included
corporation must state that it is electing for
                                                                                               in the waiver. This election is not a yearly
the taxable year under §1.1368–1(g)(2)(i)           Par. 15. Section 1.1377–1T is removed.     election and applies to all losses that
to treat the taxable year as if it consisted        Par. 16. Section 1.1502–21 is amended      would otherwise be subject to a carryback
of separate taxable years. The corporation       by revising paragraphs (b)(3)(i) and          to a former group under section 172. The
also must set forth facts in the statement       (b)(3)(ii)(B) to read as follows:             election must be made in a separate state-
relating to the qualifying disposition (e.g.,
                                                                                               ment entitled “THIS IS AN ELECTION
sale, gift, stock issuance, or redemption),      §1.1502–21 Net operating losses.              UNDER §1.1502–21(b)(3)(ii)(B)(2) TO
and state that each shareholder who held
                                                                                               WAIVE THE PRE-[insert first taxable
stock in the corporation during the tax-         *****
                                                                                               year for which the member (or members)
able year (without regard to the election         (b)
                                                                                               was not a member of another group] CAR-
under §1.1368–1(g)(2)(i)) consents to this       ***                                           RYBACK PERIOD FOR THE CNOLs
election. For purposes of this election,            (3) Special rules—(i) Election to re-      attributable to [insert names and employer
a shareholder of the corporation for the         linquish carryback. A group may make          identification number of members].” The
taxable year is a shareholder as described       an irrevocable election under section         statement must be filed with the acquiring
in section 1362(a)(2). A single election         172(b)(3) to relinquish the entire carry-     consolidated group’s original income tax
statement may be filed for all elections         back period with respect to a CNOL for        return for the year the corporation (or cor-
made under §1.1368–1(g)(2)(i) for the            any consolidated return year. Except as       porations) became a member. If the year
taxable year. An election made under             provided in §1.1502–21(b)(3)(ii)(B), the      in which the corporation (or corporations)
§1.1368–1(g)(2)(i) is irrevocable. In the        election may not be made separately for       became a member begins before January
case of elections for taxable years begin-       any member (whether or not it remains a       1, 2003, the statement must be signed
ning before January 1, 2003, the statement       member), and must be made in a separate       by the common parent and each of the
through which a corporation makes an             statement entitled “THIS IS AN ELEC-          members to which it applies. If the year
election under §1.1368–1(g)(2)(i) must           TION UNDER §1.1502–21(b)(3)(i) TO             in which the corporation (or corporations)
be signed by an officer of the corporation       WAIVE THE ENTIRE CARRYBACK                    became a member begins after December
under penalties of perjury. In the case          PERIOD PURSUANT TO SECTION                    31, 2002, the election may be made in an
of elections for taxable years beginning         172(b)(3) FOR THE [insert consolidated        unsigned statement.
after December 31, 2002, the statement           return year] CNOLs OF THE CONSOL-
described in the preceding sentence shall                                                      *****
                                                 IDATED GROUP OF WHICH [insert
be verified by signing the return.                                                                Par.   17.     Section 1.1502–21T is
                                                 name and employer identification number
                                                                                               amended by revising paragraphs (a)
*****                                            of common parent] IS THE COMMON
                                                                                               through (b)(3)(ii)(B) to read as follows:
                                                 PARENT.” The statement must be filed
§1.1368–1T [Removed]                             with the group’s income tax return for the    §1.1502–21T Net operating losses
                                                 consolidated return year in which the loss    (Temporary).
   Par. 13. Section 1.1368–1T is removed.        arises. If the consolidated return year in
   Par. 14. Section 1.1377–1 is amended          which the loss arises begins before Jan-         (a) through (b)(3)(ii)(B) [Reserved].
by revising paragraph (b)(5)(i)(C) to read       uary 1, 2003, the statement making the        For further guidance, see §1.1502–21(a)
as follows:                                      election must be signed by the common         through (b)(3)(ii)(B).

2007–2 I.R.B.                                                       250                                            January 8, 2007
*****                                             domestic owner must attach to its timely         offset the income of another person under
   Par. 18. Section 1.1502–75 is amended          filed (including extensions) U.S. income         the laws of a foreign country and that the
by revising paragraph (h)(2) to read as fol-      tax return for the taxable year in which the     consolidated group, unaffiliated dual resi-
lows:                                             dual consolidated loss is incurred an agree-     dent corporation, or unaffiliated domestic
                                                  ment described in paragraph (g)(2)(i)(A)         owner will be informed of any such foreign
§1.1502–75 Filing of consolidated                 of this section. The agreement must be           use of any portion of the dual consolidated
returns.                                          signed under penalties of perjury by the         loss.
                                                  person who signs the return. For taxable
*****                                                                                              *****
                                                  years beginning after December 31, 2002,
    (h) * * *                                                                                          (iv) * * *
                                                  the agreement attached to the income tax
    (2) Filing of Form 1122 for first year. If,                                                        (B) * * *
                                                  return of the consolidated group, unaffili-
under the provisions of paragraph (a)(1) of                                                            (3) * * *
                                                  ated dual resident corporation or unaffili-
this section, a group wishes to file a con-                                                            (iii) The unaffiliated domestic corpo-
                                                  ated domestic owner pursuant to the pre-
solidated return for a taxable year, then a                                                        ration or new consolidated group must
                                                  ceding sentence may be an unsigned copy.
Form 1122 (“Authorization and Consent                                                              file, with its timely filed (including ex-
                                                  If an unsigned copy is attached to the re-
of Subsidiary Corporation To Be Included                                                           tensions) income tax return for the tax-
                                                  turn, the consolidated group, unaffiliated
in a Consolidated Income Tax Return”)                                                              able year in which the event described in
                                                  dual resident corporation, or unaffiliated
must be executed by each subsidiary. For                                                           paragraph (g)(2)(iv)(B)(1) or (2) of this
                                                  domestic owner must retain the original
taxable years beginning before January 1,                                                          section occurs, an agreement described in
                                                  in its records in the manner specified by
2003, the executed Forms 1122 must be at-                                                          paragraph (g)(2)(i) of this section (new
                                                  §1.6001–1(e). The agreement must in-
tached to the consolidated return for the                                                          (g)(2)(i) agreement), whereby it assumes
                                                  clude the following items, in paragraphs
taxable year. For taxable years begin-                                                             the same obligations with respect to the
                                                  labeled to correspond with the items set
ning after December 31, 2002, the group                                                            dual consolidated loss as the corporation
                                                  forth in paragraph (g)(2)(i)(A) through (F)
must attach either executed Forms 1122 or                                                          or consolidated group that filed the orig-
                                                  of this section.
unsigned copies of the completed Forms                                                             inal (g)(2)(i) agreement with respect to
                                                      (A) A statement that the document sub-
1122 to the consolidated return. If the                                                            that loss. The new (g)(2)(i) agreement
                                                  mitted is an election and an agreement un-
group submits unsigned Forms 1122 with                                                             must be signed under penalties of per-
                                                  der the provisions of paragraph (g)(2) of
its return, it must retain the signed origi-                                                       jury by the person who signs the return
                                                  this section.
nals in its records in the manner required                                                         and must include a reference to this para-
                                                      (B) The name, address, identifying
by §1.6001–1(e). Form 1122 is not re-                                                              graph (g)(2)(iv)(B)(3)(iii). For taxable
                                                  number, and place and date of incorpo-
quired for a taxable year if a consolidated                                                        years beginning after December 31, 2002,
                                                  ration of the dual resident corporation,
return was filed (or was required to be                                                            the agreement attached to the return pur-
                                                  and the country or countries that tax the
filed) by the group for the immediately                                                            suant to the preceding sentence may be
                                                  dual resident corporation on its worldwide
preceding taxable year.                                                                            an unsigned copy. If an unsigned copy is
                                                  income or on a residence basis, or, in the
                                                                                                   attached to the return, the corporation or
*****                                             case of a separate unit, identification of the
                                                                                                   consolidated group must retain the origi-
                                                  separate unit, including the name under
§1.1502–75T [Removed]                                                                              nal in its records in the manner specified
                                                  which it conducts business, its principal
                                                                                                   by §1.6001–1(e).
                                                  activity, and the country in which its prin-
   Par. 19. Section 1.1502–75T is re-
                                                  cipal place of business is located.              *****
                                                      (C) An agreement by the consolidated             (vi) * * *
   Par.     20.      Section 1.1503–2 is
                                                  group, unaffiliated dual resident corpo-             (B) Annual certification. Except as
amended by revising paragraphs (g)(2)(i),
                                                  ration, or unaffiliated domestic owner           provided in §1.1503–2(g)(2)(vi)(C), until
(g)(2)(iv)(B)(3)(iii) and (g)(2)(vi)(B) to
                                                  to comply with all of the provisions of          and unless Form 1120 or the Schedules
read as follows:
                                                  §1.1503–2(g)(2)(iii)–(vii).                      thereto contain questions pertaining to
§1.1503–2 Dual consolidated loss.                     (D) A statement of the amount of the         dual consolidated losses, the consolidated
                                                  dual consolidated loss covered by the            group, unaffiliated dual resident corpora-
*****                                             agreement.                                       tion, or unaffiliated domestic owner must
    (g) * * *                                         (E) A certification that no portion of       file with its income tax return for each of
    (2) * * *                                     the dual resident corporation’s or sepa-         the 15 taxable years following the taxable
    (i) In general. Paragraph (b) of this         rate unit’s losses, expenses, or deductions      year in which the dual consolidated loss
section shall not apply to a dual consoli-        taken into account in computing the dual         is incurred a certification that the losses,
dated loss if the consolidated group, unaf-       consolidated loss has been, or will be, used     expenses, or deductions that make up the
filiated dual resident corporation, or unaf-      to offset the income of any other person un-     dual consolidated loss have not been used
filiated domestic owner elects to be bound        der the income tax laws of a foreign coun-       to offset the income of another person
by the provisions of this paragraph (g)(2).       try.                                             under the tax laws of a foreign country.
In order to elect relief under this paragraph         (F) A certification that arrangements        For taxable years beginning before Jan-
(g)(2), the consolidated group, unaffiliated      have been made to ensure that no portion         uary 1, 2003, the annual certification must
dual resident corporation, or unaffiliated        of the dual consolidated loss will be used to    be signed under penalties of perjury by a

January 8, 2007                                                       251                                                   2007–2 I.R.B.
person authorized to sign the agreement         authorized officer of the common parent           Federal income tax or information return
described in §1.1503–2(g)(2)(i). For tax-       corporation if the transferor is a member         of any direct or indirect owner of the entity
able years beginning after December 31,         of such an affiliated group. For transfers        for the taxable year of the owner that in-
2002, the certification is verified by sign-    by corporations in taxable years beginning        cludes the date on which the election was
ing the return with which the certification     after December 31, 2002, Form 926 shall           effective. An indirect owner of the entity
is filed. The certification for a taxable       be verified by signing the income tax re-         does not have to attach a copy of the Form
year must identify the dual consolidated        turn to which the form is attached.               8832 to its return if an entity in which it has
loss to which it pertains by setting forth                                                        an interest is already filing a copy of the
the taxpayer’s year in which the loss was                                                         Form 8832 with its return. If an entity, or
                                                   Par. 23. Section 1.6038B–1T is
incurred and the amount of such loss. In                                                          one of its direct or indirect owners, fails to
                                                amended by revising paragraphs (a)
addition, the certification must warrant                                                          attach a copy of a Form 8832 to its return
                                                through (b)(3) to read as follows:
that arrangements have been made to en-                                                           as directed in this section, an otherwise
sure that the loss will not be used to offset   §1.6038B–1T Reporting of certain                  valid election under §301.7701–3(c)(1)(i)
the income of another person under the          transactions to foreign corporations              will not be invalidated, but the non-fil-
laws of a foreign country and that the          (Temporary).                                      ing party may be subject to penalties,
taxpayer will be informed of any such                                                             including any applicable penalties if the
foreign use of any portion of the loss. If         (a) through (b)(3) [Reserved]. For fur-        Federal tax or information returns are
dual consolidated losses of more than one       ther guidance, see §1.6038B–1(a) through          inconsistent with the entity’s election un-
taxable year are subject to the rules of this   (b)(3).                                           der §301.7701–3(c)(1)(i). In the case of
paragraph (g)(2)(vi)(B), the certifications                                                       returns for taxable years beginning after
for those years may be combined in a sin-                                                         December 31, 2002, the copy of Form
gle document but each dual consolidated         PART 301 — PROCEDURE AND                          8832 attached to a return pursuant to this
loss must be separately identified.             ADMINISTRATION                                    paragraph (c)(1)(ii) is not required to be a
                                                                                                  signed copy.
                                                   Par. 24. The authority citation for part       *****
§1.1503–2T [Removed]                            301 continues to read, in part, as follows:
                                                   Authority: 26 U.S.C. 7805 * * *                §301.7701–3T [Removed]
   Par. 21. Section 1.1503–2T is removed.          Par.    25.    Section 301.7701–3 is
   Par. 22. Section 1.6038B–1 is amended        amended by revising paragraph (c)(1)(ii)            Par. 26. Section 301.7701–3T is re-
by revising paragraph (b)(1)(ii) to read as     to read as follows:                               moved.
follows:                                                                                          PART 602—OMB CONTROL
                                                §301.7701–3 Classification of certain
                                                                                                  NUMBERS UNDER THE PAPERWORK
§1.6038B–1 Reporting of certain transfers       business entities.
                                                                                                  REDUCTION ACT
to foreign corporations.
                                                                                                     Par. 27. The authority citation for part
*****                                               (c) * * * (1) * * *
                                                                                                  602 continues to read as follows:
    (b) * * *                                       (ii) Further notification of elections.
                                                                                                     Authority: 26 U.S.C. 7805.
    (1) * * *                                   An eligible entity required to file a Federal
                                                                                                     Par. 28. In §602.101, paragraph (b)
    (ii) Reporting by corporate transferor.     tax or information return for the taxable
                                                                                                  is amended by removing the entry for
For transfers by corporations in taxable        year for which an election is made under
                                                                                                  “1.170A–11T” and revising the entry for
years beginning before January 1, 2003,         §301.7701–3(c)(1)(i) must attach a copy
                                                                                                  “1.170A–11” to read as follows:
Form 926 must be signed by an authorized        of its Form 8832 to its Federal tax or in-
officer of the corporation if the transferor    formation return for that year. If the entity     §602.101 OMB Control numbers
is not a member of an affiliated group un-      is not required to file a return for that year,
der section 1504(a)(1) that files a consoli-    a copy of its Form 8832 (“Entity Classifi-        *****
dated Federal income tax return and by an       cation Election”) must be attached to the           (b) * * *

 CFR part or section where                                                                                   Current OMB
 identified and described                                                                                    control No.
 1.170A–11                       ...........................................................                 1545–0123

2007–2 I.R.B.                                                       252                                                 January 8, 2007
                   Linda M. Kroening,                      Eric Solomon,      (Filed by the Office of the Federal Register on December 7,
                                                                              2006, 8:45 a.m., and published in the issue of the Federal
       Acting Deputy Commissioner for    Acting Deputy Assistant Secretary    Register for December 8, 2006, 71 F.R. 71040)
             Services and Enforcement.        of the Treasury (Tax Policy).

Approved November 29, 2006.

January 8, 2007                                     253                                                        2007–2 I.R.B.
Part III. Administrative, Procedural, and Miscellaneous
T.D. 9281 Effective Date                        turn elections of §§1.882–5T(a)(7)(iii),       §105(b) of the Internal Revenue Code.
                                                1.882–5T(d)(5)(ii)(B) and 1.884–1T             Situation 1 of the ruling describes an
Notice 2007–1                                   (e)(3)(iv), and the mandatory conform-         employer who sponsors both a health flex-
                                                ing election in §1.882–5(b)(2)(ii)(A)(2)       ible spending arrangement (health FSA)
    On August 17, 2006, the Treasury De-        for such year only if the rules are adopted    and a health reimbursement arrangement
partment and the IRS published temporary        in their entirety on an amended return         (HRA). In conjunction with the health
and proposed income tax regulations T.D.        filed within 180 days of December 18,          FSA and HRA, the employer permits elec-
9281, 2006–39 I.R.B. 517 [71 FR 47443]          2006. Accordingly, a taxpayer may not          tronic reimbursement of medical expenses
under §1.882–5 regarding the determina-         file an amended return for the tax period      through the use of debit cards. Under the
tion of the interest expense allocable to ef-   provided in this notice to adopt the an-       arrangement, the cardholder’s use of the
fectively connected income of foreign cor-      nual published LIBOR rate election of          card is limited to merchants and service
porations engaged, or treated as engaged        §1.882–5T(d)(5)(ii)(B) and also remain         providers with specific merchant category
in a trade or business within the United        on the 93-percent fixed ratio election and     codes related to health care. The ruling
States, and under §1.884–1(e)(3) regard-        branch profits tax rules that were amended     states that, “the card’s use is limited to
ing the determination of branch profits         by the temporary rules in T.D. 9281. This      physicians, pharmacies, dentists, vision
tax under a liability reduction election.       notice does not change any of the tem-         care offices, hospitals, and other medical
The temporary and proposed regulations          porary and proposed rules provided in          care providers.” Thus, the use of the card
revised final regulations under §1.882–5        T.D. 9281 other than allowing eligible tax-    at other than these merchants or service
issued in T.D. 8658, 1996–1 C.B. 161 [61        payers to elect to apply such rules to the     providers would be rejected.
FR 15891] and under §1.884–1 issued             earlier tax return filing period provided in       Situation 1 of Rev. Rul. 2003–43 also
in T.D. 8432, 1992–2 C.B. 157 [57 FR            this notice within 180 days of December        sets forth rules for substantiation of med-
41644].                                         18, 2006.                                      ical expenses and provides that debit card
    The temporary regulations provided in           The principal author of this notice is     charges other than matched copayments,
T.D. 9281 are effective for the first tax       Gregory A. Spring of the Office of As-         recurring expenses and real-time substan-
year end for which a foreign corporate          sociate Chief Counsel (International).         tiation are treated as conditional pending
taxpayer’s original tax return due date         For further information regarding this         confirmation of the charges through addi-
(including extensions) is after August 17,      notice, contact Gregory A. Spring or           tional third-party information. If the debit
2006. Accordingly, for calendar-year tax-       Paul S. Epstein at (202) 622–3870 (not a       card charges are subsequently identified
payers, the applicability date for T.D. 9281    toll-free call).                               as not qualifying for medical reimburse-
is the tax year ended December 31, 2005,                                                       ment, the employer must follow certain
for which an original tax return due date                                                      correction procedures with respect to the
(including extensions) was September 15,                                                       improper payments. The after-the-fact
2006. The temporary regulations provide
                                                Amounts Received Under
                                                                                               substantiation and correction procedures
a one-time, additional period for taxpayers     Accident and Health Plans
                                                                                               described in Situation 1 of Rev. Rul.
whose original tax return due date (includ-                                                    2003–43 are sometimes referred to as
ing extensions) is after August 17, 2006,       Notice 2007–2
                                                                                               “pay and chase.” The ruling holds that
and not later than December 31, 2006, to                                                       employer-provided medical expense re-
adopt the tax return elections covered by                                                      imbursements made through the cards, as
the temporary regulations on an amended            This notice provides transition relief      described in Situation 1, are excludable
income tax return within 180 days after         with respect to the use of debit cards         from gross income under § 105(b).
the original allowable extended due date        for medical expense reimbursements at              Notice 2006–69, 2006–31 I.R.B. 107,
(whether or not the taxpayer timely filed       certain merchants with non-health care         describes an inventory information ap-
its tax return by the original due date         related merchant category codes. It also       proval system that may be used by mer-
(without regard to extensions)).                addresses the use of debit cards for medi-     chants with non-health care related mer-
    This notice permits foreign corpora-        cal expense reimbursements at stores with      chant category codes for substantiating
tions engaged, or treated as engaged in a       the Drug Stores and Pharmacies merchant        employees’ claimed medical expenses. It
trade or business within the United States      category code.                                 has been determined that transition relief
whose tax year end is on or after Septem-                                                      is warranted for a limited period, in or-
ber 30, 2005, and whose original tax return     BACKGROUND                                     der for these non-health care merchants
due date (including extensions) was on or                                                      to implement the inventory information
after June 15, 2006, and on or before              Rev. Rul. 2003–43, 2003–1 C.B. 935,         approval system.
August 17, 2006, to elect to apply the          sets forth rules for determining whether
provisions of T.D. 9281 for such earlier        employer-provided medical expense re-          TRANSITION RELIEF
tax return filing period. Such taxpay-          imbursements made through debit cards
ers may adopt the rules provided in T.D.        and other electronic media (debit cards)          All supermarkets, grocery stores, dis-
9281, including the one-time amended re-        are excludable from gross income under         count stores, and wholesale clubs that do

2007–2 I.R.B.                                                      254                                             January 8, 2007
not have a merchant category code related       medications as described in Rev.       Rul.    timely adoption of an interim or discre-
to health care will nevertheless be deemed      2003–102, 2003–2 C.B. 559).                    tionary amendment can be found in sec-
to be an “other medical care provider”                                                         tion 5.05 of Rev. Proc. 2005–66. Section
within the meaning of Situation 1 of Rev.       EFFECT ON OTHER DOCUMENTS                      III of Notice 2005–95, 2005–2 C.B. 1172,
Rul. 2003–43 with respect to debit card                                                        provides that the general timing rules to
transactions occurring on or before De-            Rev. Rul. 2003–43, 2003–1 C.B. 935,         adopt a plan amendment described in sec-
cember 31, 2007. In addition, mail order        is modified.                                   tion 5.05 of Rev. Proc. 2005–66 do not
vendors and web-based vendors that sell                                                        apply if a statutory provision or guidance
                                                DRAFTING INFORMATION
prescription drugs will also be deemed to                                                      issued by the Service provides an earlier
be an “other medical care provider” with           The principal author of this notice is      or later date than the deadline set forth in
respect to debit card transactions occurring    Stephanie L. Caden of the Office of Di-        Rev. Proc. 2005–66.
on or before December 31, 2007. As re-          vision Counsel/Associate Chief Counsel
quired in Rev. Rul. 2003–43, employ-                                                           II. BACKGROUND
                                                (Tax Exempt and Government Entities).
ers must substantiate all debit card charges    For further information regarding this no-         Rev. Proc. 2005–66 sets forth pro-
incurred during the relief period and fol-      tice, contact Ms. Caden at (202) 622–6080      cedures for issuing opinion, advisory,
low the correction procedures in Rev. Rul.      (not a toll-free call).                        and determination letters and establishes
2003–43 with respect to any unsubstanti-
                                                                                               the five-year remedial amendment cycle
ated payment. After December 31, 2007,
                                                                                               for individually designed plans and the
health FSA or HRA debit cards may not be
                                                2006 Cumulative List of                        six-year remedial amendment cycle for
used at any store, vendor or merchant that
does not have health care related merchant      Changes in Plan Qualification                  pre-approved plans. In addition, section
                                                Requirements                                   5.05 of Rev. Proc. 2005–66 provides the
category codes unless the store, vendor or
                                                                                               deadline for timely adoption of an interim
merchant has implemented an inventory
                                                Notice 2007–3                                  amendment or discretionary amendment.
information approval system as described
                                                                                               Notice 2005–95 clarifies the interaction of
in Notice 2006–69.
                                                I. PURPOSE                                     the Rev. Proc. 2005–66 amendment tim-
STORES WITH DRUG STORES                                                                        ing deadlines for qualified plans with the
AND PHARMACIES MERCHANT                             This notice contains the 2006 Cumu-        deadlines set forth in statutory provisions
CATEGORY CODE                                   lative List of Changes in Plan Qualifi-        or guidance issued by the Service.
                                                cation Requirements (2006 Cumulative               Under section 4 of Rev. Proc. 2005–66,
   Under Rev. Rul. 2003–43, health FSA          List) described in section 4 of Rev. Proc.     the Internal Revenue Service intends to
and HRA debit cards may be used at stores       2005–66, 2005–2 C.B. 509. The 2006             annually publish a Cumulative List to
with the merchant category code for Drug        Cumulative List is to be used primarily by     identify statutory, regulatory and guidance
Stores and Pharmacies. However, many            (1) plan sponsors of individually designed     changes that must be taken into account
stores with this code also sell a significant   plans (that is, single employer individu-      in submissions by plan sponsors to the
number of items which do not qualify as         ally designed defined contribution plans,      Service for opinion, advisory and determi-
medical expenses under § 213(d). In order       including employee stock ownership plans       nation letters whose remedial amendment
to curtail the ability to purchase non-med-     (ESOPs), and single employer individu-         period begins on February 1st following
ical items with such debit cards, as well       ally designed defined benefit plans) and       issuance of the Cumulative List.
as to provide a level playing field, the IRS    plan sponsors of multiple employer plans           In Notice 2005–101, 2005–2 C.B.
and Treasury have determined that it is ap-     that fall in Cycle B and (2) plan sponsors     1219, the Service published the 2005
propriate to require similar substantiation     and practitioners in drafting defined ben-     Cumulative List of Changes in Plan Qual-
rules for all stores that sell a significant    efit pre-approved plans (that is, defined      ification Requirements (2005 Cumulative
number of items which do not qualify as         benefit plans that are master and prototype    List). The 2005 Cumulative List is used
medical expenses under § 213(d).                (M&P) or volume submitter (VS) plans)          primarily by plan sponsors of individu-
   Accordingly, after December 31, 2008,        for their first submission under the initial   ally designed plans that fall in Cycle A
health FSA and HRA debit cards may not          remedial amendment cycle under Rev.            that must be submitted to the Service for
be used at stores with the Drug Stores and      Proc. 2005–66. An individually designed        review by January 31, 2007. Thus, the
Pharmacies merchant category code un-           plan is in Cycle B if the last digit of the    2005 Cumulative List set forth those plan
less (1) the store participates in the inven-   employer identification number is 2 or 7.      qualification requirements that applied to
tory information approval system as de-         Multiple employer plans are also in Cycle      individually designed defined contribution
scribed in Notice 2006–69, or (2) on a store    B, pursuant to section 10.03 of Rev. Proc.     plans, including ESOPs, and individually
location by store location basis, 90 per-       2005–66.                                       designed defined benefit plans. Plan qual-
cent of the store’s gross receipts during           The list of changes in section V of this   ification requirements included statutory
the prior taxable year consisted of items       notice does not extend the deadline by         changes and guidance that became effec-
which qualify as expenses for medical care      which a plan must be amended to com-           tive after December 31, 2001. The Service
under § 213(d) (including nonprescription       ply with any statutory, regulatory, or guid-   stated that plan language for guidance is-
                                                ance changes. The general deadline for         sued after December 13, 2005 would not

January 8, 2007                                                    255                                                  2007–2 I.R.B.
be reviewed, unless it was on the 2005         uary 31, 2008. The 9-month submission            See section 8 of Rev. Proc. 2005–66 re-
Cumulative List.                               period for mass-submitters and national          garding plan termination.
   In Notice 2004–84, 2004–2 C.B. 1030,        sponsors will end October 31, 2007, as
the Service published the 2004 Cumula-         provided in section 18.02 of Rev. Proc.          IV. SPECIAL RULES FOR THE
tive List of Changes in Plan Qualification     2005–66.                                         PENSION PROTECTION ACT OF 2006
Requirements (2004 Cumulative List).               The 2006 Cumulative List, set forth
                                                                                                   Under section 1107 of PPA ’06, a plan
The 2004 Cumulative List was used pri-         in sections V and VI of this notice, in-
                                                                                                amendment made pursuant to any amend-
marily by plan sponsors and practitioners      forms plan sponsors of issues the Service
                                                                                                ment made by PPA ’06 generally may be
in drafting defined contribution pre-ap-       has specifically identified for review in
                                                                                                retroactively effective, if, in addition to
proved plans (that is, defined contribution    determining whether an individually de-
                                                                                                meeting the other applicable requirements,
plans that are master and prototype or vol-    signed plan, multiple employer plan or
                                                                                                the amendment is made on or before the
ume submitter plans) that were required        defined benefit pre-approved plan has
                                                                                                last day of the first plan year beginning on
to be submitted to the Service for review      been properly updated.          Specifically,
                                                                                                or after January 1, 2009 (January 1, 2011 in
by January 31, 2006. Thus, the 2004 Cu-        the 2006 Cumulative List reflects law
                                                                                                the case of a governmental plan). Section
mulative List set forth only those plan        changes under the Economic Growth
                                                                                                VI of the notice includes certain PPA ’06
qualification requirements that applied to     and Tax Relief Reconciliation Act of
                                                                                                law changes effective in 2006 and 2007.
defined contribution pre-approved plans.       2001 (EGTRRA), Pub. L. 107–16 (with
                                                                                                   Master and prototype plan sponsors
Plan qualification requirements included       technical corrections made by the Job
                                                                                                and VS practitioners are required to in-
statutory changes and guidance that be-        Creation and Worker Assistance Act
                                                                                                clude applicable PPA ’06 provisions listed
came effective after December 31, 2001         of 2002 (JCWAA), Pub. L. 104–147),
                                                                                                in section VI of this notice in plan doc-
and any relevant qualification require-        the Pension Funding Equity Act of
                                                                                                uments submitted with their opinion and
ments not contained in the 2004 Cumula-        2004 (PFEA), Pub. L. 108–218, the
                                                                                                advisory letter applications for pre-ap-
tive List. The Service also stated that plan   American Jobs Creation Act of 2004
                                                                                                proved defined benefit plans. The Service
language for guidance issued after De-         (AJCA), Pub. L. 108–357, the Gulf Op-
                                                                                                will consider PPA ’06 in issuing opinion
cember 14, 2004 would not be reviewed,         portunity Zone Act of 2005 (GOZA),
                                                                                                and advisory letters, and such letters may
unless it was on the 2004 Cumulative List.     Pub. L. 109–135, and certain law changes
                                                                                                be relied on with respect to PPA ’06, but
                                               under the Pension Protection Act of 2006
                                                                                                only for the PPA ’06 provisions listed in
III. APPLICATION OF 2006                       (PPA ’06), Pub. L. 109–280, described
                                                                                                section VI of this notice under items 27,
CUMULATIVE LIST                                below. In order to be qualified, a plan
                                                                                                28, 31, 32, and 33.
                                               must comply with all relevant qualifica-
                                                                                                   Individually designed plans and multi-
    This notice is being issued in con-        tion requirements, not just those on the
                                                                                                ple employer plans can be amended, at the
junction with the determination letter         2006 Cumulative List. The following
                                                                                                option of plan sponsors, to include the ap-
program for individually designed plans        items on the 2006 Cumulative List include
                                                                                                plicable PPA ’06 provisions listed in sec-
and multiple employer plans eligible for       guidance that has not yet been published:
                                                                                                tion VI of this notice. Individually de-
Cycle B and the opinion and advisory           2, 8, 11, 18, 25, 28, 29, 30, 31, 32, and 33.
                                                                                                signed plans and multiple employer plans
letter programs for M&P and VS de-                 Except for the items listed in section V
                                                                                                must identify which PPA ’06 provisions
fined benefit pre-approved plans. In Rev.      and the items listed in section VI (to the ex-
                                                                                                the plan has been amended to include and
Proc. 2005–66, the Service announced the       tent provided in section IV) of this notice,
                                                                                                the plan provision that reflects the PPA ’06
opening of the initial five-year remedial      the Service will not consider in its review
                                                                                                provision when submitting the determina-
amendment cycle. In accordance with            of any opinion, advisory or determination
                                                                                                tion letter application. However, the Ser-
Rev. Proc. 2005–66, the Service will start     letter application, for the submission pe-
                                                                                                vice will not consider PPA ‘06 in issuing
accepting determination letter applications    riod that begins February 1, 2007, any:
                                                                                                determination letters for individually de-
for Cycle B individually designed plans
                                                                                                signed plans and multiple employer plans,
(i.e., the last digit of the plan sponsor’s    1.   guidance published after December
                                                                                                and such letters cannot be relied on with re-
employer identification number is 2 or 7)           14, 2006;
                                                                                                spect to any plan provision identified as re-
and multiple employer plans beginning on
                                                                                                flecting PPA ’06, regardless of whether the
February 1, 2007. The 12-month submis-         2.   statutes enacted after December 14,
                                                                                                plan has been amended to reflect PPA ’06
sion period for Cycle B individually de-            2006;
signed plans and multiple employer plans
                                                                                                   Terminating plans must include the ap-
will end January 31, 2008. In addition, the    3.   qualification requirements first effec-
                                                                                                plicable PPA ’06 provisions that are in ef-
Service will start accepting opinion and            tive in 2008 or later; or
                                                                                                fect at the time of termination.
advisory letter applications for defined
benefit pre-approved plans beginning on        4.   statutory provisions that are first ef-     V. 2006 CUMULATIVE LIST OF
February 1, 2007. The 12-month sub-                 fective in 2007, for which there is no      CHANGES IN PLAN QUALIFICATION
mission period for non-mass submitter               guidance identified in this notice.         REQUIREMENTS
sponsors and practitioners, word-for-word
identical adopters, and M&P minor modi-           Terminating plans must include all law           The following list consists of statutory
fier placeholder applications will end Jan-    changes in effect at the time of termination.    provisions and associated guidance which

2007–2 I.R.B.                                                      256                                               January 8, 2007
reflect changes to plan qualification re-                     6.    401(a)(31):                                       •   Section 401(k)(11) of the Code
quirements. Miscellaneous guidance is                                                                                     was amended by § 611(f) of
also provided. The Service has identi-
                                                                    •    Section 401(a)(31) was amended
                                                                                                                          EGTRRA to increase the maxi-
                                                                         by § 643(b) of EGTRRA to allow
fied below plan qualification requirements                                                                                mum amount of qualified salary
                                                                         employees’ after-tax contribu-
which were not on the 2005 Cumulative                                                                                     reduction contributions that can
                                                                         tions to be rolled over under cer-
List as “(New)”. Thus, the 2006 Cumula-                                                                                   be made to SIMPLE 401(k) plans.
                                                                         tain circumstances. (2004 C. L.).
tive List contains those plan qualification                                                                               (2004 C. L.).
requirements listed in the 2004 and 2005
                                                                    •    Section     401(a)(31)(B)     was
                                                                                                                      •   Section 402(g) of the Code was
                                                                         amended by § 657(a) of EGTRRA
Cumulative Lists as well as additional                                                                                    amended by § 611(d) of EGTRRA
                                                                         (as amended by § 411(t) of
2006 plan qualification requirements.                                                                                     to increase the applicable dollar
                                                                         JCWAA) to provide for the au-
                                                                                                                          amount. (2004 C. L.).
                                                                         tomatic rollover of certain manda-
1.      72(p): Section 1.72(p)–1 of the In-
                                                                         tory distributions.     The effec-
                                                                                                                      •   Section 401(m)(9) of the Code
        come Tax Regulations relating to                                                                                  was amended by § 666 of
                                                                         tive date is March 28, 2005.
        plan loans was published on Decem-                                                                                EGTRRA to eliminate the mul-
                                                                         (2004 C. L.).
        ber 3, 2002 (67 Fed. Reg. 71821).                                                                                 tiple use test. (2004 C. L.).
        (2004 C. L.).
                                                                         • Notice 2005–5, 2005–1 C.B.                 •   Final Regulations under § 401(k)
                                                                             337. (2004 C. L.).
                                                                                                                          and § 401(m) of the Code
2.      401(a): Final Regulations under                                                                                   were published on Decem-
        § 401(a) of the Code regarding per-
                                                                    •    Sections 641, 642 and 643
                                                                                                                          ber 29, 2004 (69 Fed.         Reg.
                                                                         of EGTRRA (as amended by
        missible normal retirement ages will                                                                              78144). (2004 C. L.).
                                                                         § 411(q) of JCWAA) amended
        be published soon. (New).
                                                                         the definition of eligible retire-      8.   402A: Section 402A of the Code was
                                                                         ment plan in § 402 to include a              added by § 617 of EGTRRA to offer
3.      401(a)(4):
                                                                         § 403(b) annuity contract and eli-           optional treatment of elective defer-
        •    Amendments to § 1.401(a)(4)–8                               gible governmental § 457(b) plan.            rals as designated Roth contributions
             of the Regulations relating to new                          (2004 C. L.).                                to defined contribution plans, effec-
             comparability plans were pub-                          •    Section 636(b) of EGTRRA                     tive for taxable years beginning after
             lished on June 29, 2001 (66 Fed.                            modified the definition of el-               December 31, 2005. (2004 C. L.).
             Reg. 34535). (2004 C. L.).                                  igible rollover distribution to
             • Rev. Rul. 2001–30, 2001–2                                 exclude hardship distributions.              •   Final Regulations under § 401(k)
                                                                         (2004 C. L.).                                    and § 401(m) of the Code relating
                 C.B. 46. (2004 C. L.).
                                                                                                                          to designated Roth contributions
        •    Amendments to § 1.401(a)(4)–9                    7.    401(k) & 401(m):                                      were published on January 3, 2006
             of the Regulations relating to new
                                                                    •    Section         401(k)(2)        and             (71 Fed. Reg. 6). (2005 C. L.).
             comparability plans were pub-
             lished on June 29, 2001 (66 Fed.                            § 401(k)(10) of the Code were                    • Notice 2006–44, 2006–20
                                                                         amended by § 646(a)(1) of                            I.R.B. 889, provides a sample
             Reg. 34535). (2005 C. L.).
                                                                                                                              amendment for Roth § 401(k)
             • Rev. Rul. 2004–21, 2004–1                                 EGTRRA to permit distribu-
                                                                                                                              plans. (New).
                 C.B. 544. (2005 C. L.).                                 tions of elective deferrals from
                                                                         a § 401(k) plan upon severance               •   Final Regulations under § 402A
                                                                         from employment. (2004 C. L.).                   will be issued soon.1 (New).
4.      401(a)(9):
                                                                         • Notice 2002–4, 2002–1 C.B.            9.   404:
        •    Sections 1.401(a)(9)–1 through                                  298. (2004 C. L.).
             –9 of the Regulations were pub-                        •    Section 636(a) of EGTRRA di-                 •   Section 404(k)(2)(A) of the
             lished on April 17, 2002 and                                rected the Secretary of the Trea-                Code was amended by § 662(a)
             June 15, 2004 (67 Fed. Reg.                                 sury to revise the regulations relat-            of EGTRRA (as amended by
             18988 and 69 Fed. Reg. 33288).                              ing to safe harbor hardship distri-              § 411(w) of JCWAA) to allow
             (2004 C. L.).                                               butions of elective deferrals from               ESOP dividends to be reinvested
                                                                         § 401(k) plans so that the time the              without the loss of dividend de-
5.      401(a)(17): Section 401(a)(17) of the                            employee is prohibited from mak-                 ductions. (2005 C. L.).
        Code was amended by § 611(c) of                                  ing elective and employee contri-                • Notice 2002–2, 2002–1 C.B.
        EGTRRA to increase the compensa-                                 butions is reduced from one year                    285, provides guidance with
        tion limit to $200,000. (2004 C. L.).                            to six months after a hardship dis-                 respect to the changes made to
                                                                         tribution. (2004 C. L.).                            § 404(k) of the Code and on
        •    Notice 2001–56, 2001–2 C.B.                                 • Notice 2001–56. (2004 C. L.).                     the effective date of § 409(p)
             277. (2004 C. L.).                                          • Notice 2002–4. (2004 C. L.).                      of the Code. (2005 C. L.).

1   Proposed Regulations under § 402A were published on January 26, 2006 (71 Fed. Reg. 4320). (2005 C. L.).

January 8, 2007                                                                        257                                                2007–2 I.R.B.
10. 408(q): Section 408(q) of the Code             § 401(k) plan meets the § 410(b) min-                 published on August 9, 2006
    was added by § 602 of EGTRRA (as               imum coverage requirements. (New).                    (71 Fed. Reg. 45379) with
    amended by § 411(i) of JCWAA) to al-                                                                 respect to a utilization test.
    low for deemed individual retirement       13. 411(a):                                               (New).
    accounts (IRAs) in an eligible retire-         •   Section 411(a) of the Code was            •   Section     411(d)(6)(D)      and
    ment plan. (2004 C. L.).                           amended by § 633 of EGTRRA                    § 411(d)(6)(E) of the Code were
                                                       (as amended by § 411(o) of                    added by § 645 of EGTRRA to
    •   Section 1.408(q)–1 of the Reg-
                                                       JCWAA) to provide for faster                  permit the elimination of certain
        ulations was published on                                                                    optional forms of benefit under
                                                       vesting of matching contributions.
        July 22, 2004 (69 Fed. Reg.                                                                  certain conditions. (2005 C. L.).
                                                       (2004 C. L.).
        43735). (2004 C. L.).
                                                   •   Rev. Rul. 2003–65, 2003–1 C.B.                • Section 1.411(d)–4, Q&A–
                                                       1035. (2005 C. L.).                               2(e) of the Regulations was
11. 409: Section 409(p) of the Code
    was added by § 656 of EGTRRA                   •   Amendments to § 1.411(d)–3 of                     published on January 25, 2005
                                                       the Final Regulations were pub-                   (70 Fed. Reg. 3475) to
    relating to restrictions on the allo-                                                                implement § 411(d)(6)(E).
    cation of employer securities in an                lished on August 9, 2006 (71 Fed.
                                                       Reg. 45379) with respect to the                   (2005 C. L.).
    ESOP maintained by an S corpora-
    tion. (2005 C. L.).                                interaction between the anti-cut-
                                                                                             16. 412:
                                                       back rules of § 411(d)(6) and the
    •   Section 1.409(p)–1T of the                     nonforfeitability requirements of         •   Rev. Rul. 2004–20, 2004–1 C.B.
        Regulations was published on                   § 411(a). (New).                              546, provides guidance with re-
        July 21, 2003 (68 Fed. Reg.                                                                  spect to whether a qualified pen-
        42970). (2005 C. L.).                  14. 411(a)(11): Section 411(a)(11)(D) of
                                                                                                     sion plan can be a § 412(i) plan
    •   Section 1.409(p)–1T of the Reg-            the Code was added by § 648(a) of
                                                                                                     if the plan holds life insurance
        ulations was published on De-              EGTRRA (as amended by § 411(r)
                                                                                                     contracts and annuity contracts for
        cember 17, 2004 (69 Fed. Reg.              of JCWAA) to allow amounts attrib-
                                                                                                     benefits at normal retirement age
        75455). (2005 C. L.).                      utable to rollover contributions to be
                                                                                                     in excess of a participant’s bene-
    •   Rev. Proc. 2003–23, 2003–1 C.B.            disregarded in determining the value
                                                                                                     fits at normal retirement age under
        599, as modified and superseded            of an account balance for involuntary
                                                                                                     the plan. (2005 C. L.).
                                                   distributions. (2004 C. L.).
        by Rev. Proc. 2004–14, 2004–1                                                            •   Notice 2004–59, 2004–2 C.B.
        C.B. 489, allows a direct rollover     15. 411(d)(6):                                        447, provides guidance with re-
        from an ESOP maintained by an                                                                spect to restrictions placed on
        S corporation to an individual re-         •   Central Laborers’ Pension Fund                plan amendments following an
        tirement plan (IRA). (2005 C. L.).             v. Heinz, 124 S.Ct. 2230 (2004).              employer’s election of an alterna-
    •   Rev. Rul. 2003–6, 2003–1 C.B.                  (2005 C. L.).                                 tive deficit reduction contribution.
        286, provides guidance with re-                • Rev. Proc. 2005–23, 2005–1                  (2005 C. L.).
        spect to whether an ESOP main-                     C.B. 991, as modified by Rev.
        tained by an S corporation is eligi-               Proc. 2005–76, 2005–2 C.B.        17. 414(v): Section 414(v) of the Code
        ble for the delayed effective date                 1139. (2005 C. L.).                   was added by § 631 of EGTRRA (as
        of § 409(p) under § 656(d)(2) of               • Amendments to § 1.411(d)–3              amended by § 411(o) of JCWAA)
        EGTRRA. (2005 C. L.).                              of the Final Regulations were         to allow for catch-up contributions
    •   Rev. Rul. 2004–4, 2004–1 C.B.                      published on August 9, 2006           for individuals age 50 or older.
        414, provides guidance relating to                 (71 Fed. Reg. 45379) with             (2004 C. L.).
        synthetic equity owned by a dis-                   respect to the interaction be-
        qualified person in a nonallocation                tween the anti-cutback rules
                                                                                                 •   Regulations under § 414(v) were
                                                                                                     published on July 8, 2003 (68 Fed.
        year of an ESOP maintained by an                   of § 411(d)(6) and the non-
                                                                                                     Reg. 40510). (2004 C. L.).
        S corporation. (2005 C. L.).                       forfeitability requirements of
    •   Final Regulations will be pub-                     § 411(a). (New).
                                                                                                     • Notice 2002–4. (2004 C. L.).
        lished soon that provide guidance          •   Section 645(b)(3) of EGTRRA           18. 415:
        concerning requirements under                  directed the Secretary of the Trea-
        § 409(p) for ESOPs holding stock               sury to issue regulations under           •   Section 415(b) of the Code was
        of S corporations. (New).                      § 411(d)(6)(B). (2005 C. L.).                 amended by § 611 of EGTRRA
                                                       • Section 1.411(d)–3 of the Reg-              to increase the dollar limit
12. 410(b): Final Regulations were pub-                    ulations was published on Au-             and change the age when the
    lished on July 21, 2006 (71 Fed. Reg.                  gust 12, 2005 (70 Fed. Reg.               limit is reduced or increased.
    41357) permitting some employees                       47109). (2005 C. L.).                     (2005 C. L.).
    of tax-exempt organizations to be ex-              • Amendments to § 1.411(d)–3                  • Rev. Rul. 2001–51, 2001–2
    cluded when determining whether a                      of the Final Regulations were                 C.B. 427. (2004 C. L.).

2007–2 I.R.B.                                                    258                                             January 8, 2007
        •    Section 415(b)(2)(E)(ii) of the                   20. 417:                                                                   or converted into a profit sharing
             Code was amended by § 101(b)(4)                                                                                              plan. (2004 C. L.).
             of PFEA to fix the percentage at                        •    Section 1.417(e)–1 of the Reg-                              •   Rev. Proc. 2002–21, 2002–1 C.B.
             5.5%. (2005 C. L.).                                          ulations was published on                                       911, provides guidance with re-
             • Notice 2004–78, 2004–2 C.B.                                July 16, 2003 (68 Fed. Reg.                                     spect to defined contribution re-
                 879, provides the actuarial as-                          41906) relating to retroactive an-                              tirement plans maintained by pro-
                 sumptions that must be used                              nuity starting date. (2005 C. L.).                              fessional employer organizations.
                 for distributions with annuity                      •    Final       Regulations      under                              (2004 C. L.).
                 starting dates occurring during                          § 417(a)(3) were published on                               •   Rev. Proc. 2003–86, 2003–2
                 the plans years beginning in                             March 24, 2006 (71 Fed. Reg.                                    C.B. 1211, amplifies Rev. Proc.
                 2004 and 2005. (2005 C. L.).                             14798) regarding the disclosure                                 2002–21 relating to relief pro-
        •    Section 415(c) of the Code was                               of the relative value of optional                               vided for certain defined contri-
             amended by §§ 611(b) and 632                                 forms of benefit. (New).                                        bution plans maintained by pro-
             of EGTRRA (as amended by                                                                                                     fessional employer organizations.
                                                               21. 4975:
             § 411(p) of JCWAA) to in-                                                                                                    (2004 C. L.).
             crease the maximum annual ad-                           •    Section 4975 of the Code was                                •   Rev. Rul. 2003–11, 2003–1 C.B.
             ditions permitted to the lesser of                           amended by § 612 of EGTRRA to                                   285, provides guidance with re-
             $40,000 or 100% of compensa-                                 allow plan loans for Subchap-                                   spect to satisfying the nondiscrim-
             tion. (2004 C. L.).                                          ter S shareholder-employees.                                    ination rules under § 401(a)(4) of
             • Rev. Rul. 2001–51, 2001–2                                  (2004 C. L.).                                                   the Code and the minimum cover-
                 C.B. 427. (2004 C. L.).                             •    Section 4975(f) of the Code was                                 age requirements under § 410(b)
        •    Rev. Rul. 2002–27, 2002–1                                    amended by § 240 of AJCA to                                     of the Code when applying the in-
             C.B. 925, provided that “com-                                allow an S corporation distribu-                                creased compensation limit to for-
             pensation” within the meaning of                             tion on allocated shares to pay off                             mer employees. (2005 C. L.).
             § 415(c) could in certain situations                         an exempt loan as long as equal                             •   Rev. Rul. 2004–10, 2004–1 C.B.
             include “deemed § 125 compen-                                amounts are allocated to partici-                               484, provides guidance with re-
             sation”. (2004 C. L.).                                       pant accounts. (2005 C. L.).                                    spect to charging administrative
        •    Final Regulations under § 415                                                                                                expenses to former and current
             with respect to pre-PPA ’06 law                   22. Hurricane Relief:                                                      employees. (2004 C. L.).
             will be published soon.2 (New).                                                                                          •   Rev. Rul. 2004–12, 2004–1 C.B.
             • See section VI of this notice                         •    Katrina Emergency Tax Re-                                       478, provides guidance with re-
                 for PPA ’06 provisions related                           lief Act of 2005, P.L. 109–73.                                  spect to the distribution restric-
                 to § 415 that will be reflected                          (2005 C. L.).                                                   tions applicable to rollover contri-
                 in the § 415 Final Regulations.                          • Notice 2005–92, 2005–2 C.B.                                   butions. (2004 C. L.).
                 (New).                                                       1165. (2005 C. L.).                                     •   Rev. Rul. 2005–55, 2005–2 C.B.
                                                                     •    Announcement 2005–70, 2005–2                                    284, provides guidance with re-
19. 416: Section 416 of the Code was                                      C.B. 682. (2005 C. L.).                                         spect to medical reimbursement
    amended by § 613 of EGTRRA (as                                   •    Gulf Opportunity Zone Act                                       accounts under a profit sharing
    amended by § 411(k) of JCWAA) to                                      of 2005, P.L. 109–135, added                                    plan. (2005 C. L.).
    make several changes to the top-heavy                                 § 1400M and § 1400Q to the Code                             •   Section 1.401(a)–21 of the Final
    rules. (2004 C. L.).                                                  to provide certain tax benefits to                              Regulations were published on
                                                                          those areas affected by Hurricanes
        •    Section 416(g)(4)(H) of the
                                                                          Katrina, Wilma, and Rita. (New).
                                                                                                                                          October 20, 2006 (71 Fed. Reg.
             Code was added by § 613(d)                                                                                                   61877) setting forth standards for
             of EGTRRA to provide certain                                                                                                 the use of an electronic medium
                                                               23. Miscellaneous:
             safe harbor § 401(k) plans and                                                                                               to applicable notices to recipients
             § 401(m) plans an exemption from                        •    Rev. Rul. 2001–62, 2001–2 C.B.                                  or to make participant elections.
             the top-heavy rules. (2004 C. L.).                           632, provides guidance with re-                                 (New).
             • Rev. Rul. 2004–13, 2004–1                                  spect to the mortality table un-
                  C.B. 485. (2004 C. L.).                                 der § 415(b)(2)(E)(v) of the Code                    The following guidance contains
        •    Section 416(c)(1)(C) of the                                  and the applicable mortality table                sample or model amendments: Notice
             Code was amended by § 613(e)                                 under § 417(e)(3)(A)(ii)(I) of the                2001–57, 2001–1 C.B. 279 (miscella-
             of EGTRRA (as amended by                                     Code. (2005 C. L.).                               neous EGTRRA amendments); Rev. Rul.
             § 411(k)(1) of JCWAA) to provide                        •    Rev. Rul. 2002–42, 2002–1 C.B.                    2001–62, 2001–2 C.B. 632 (applicable
             when a frozen defined benefit plan                           76, provides guidance with re-                    mortality table); Rev. Proc. 2002–29,
             is exempt from the minimum ben-                              spect to a situation where a money                2002–2 C.B. 1176 (required minimum
             efit requirements. (2005 C. L.).                             purchase pension plan is merged                   distribution amendments); Rev. Proc.

2   Section 1.415(c)–2(e) of the Proposed Regulations under § 415 was published on May 31, 2005 (70 Fed. Reg. 31214). (2004 C. L.).

January 8, 2007                                                                          259                                                               2007–2 I.R.B.
2003–13, 2003–1 C.B. 317 (required lan-          29. 411: PPA ’06 § 701 provides rules for     DRAFTING INFORMATION
guage for deemed IRAs); Notice 2005–5                cash balance plans and other hybrid
(automatic rollover); and Notice 2006–44,                                                          The principal author of this notice is
                                                     defined benefit plans. (New).
2006–20 I.R.B. 889 (Roth section 401(k)                                                        Angelique V. Carrington of the Employee
plans).                                              •   Guidance will be issued regard-       Plans, Tax Exempt and Government En-
                                                         ing cash balance plans and other      tities Division. For further information
VI. PENSION PROTECTION ACT OF                            hybrid defined benefit plans          regarding this notice, please contact the
2006 PROVISIONS                                          soon. (New).                          Employee Plans’ taxpayer assistance tele-
                                                 30. 411(a): Section 411(a) of the Code        phone service at 1–877–829–5500 (a
   The following is a list of PPA ’06 provi-                                                   toll-free number) between the hours of
                                                     was amended by § 904 of PPA ’06
sions effective in 2007 or earlier. See sec-                                                   8:30 a.m. and 4:30 p.m. Eastern Time,
                                                     to provide for faster vesting of em-
tion IV of this notice for rules that apply to                                                 Monday through Friday. Ms. Carrington
                                                     ployer nonelective contributions.
the PPA ’06 provisions identified below:                                                       may be reached at (202) 283–9888 (not a
                                                                                               toll-free number).
24. 401(a)(35): PPA ’06 § 901(a)(1)                  •   Guidance regarding § 411(a), as
    added § 401(a)(35) requiring that                    amended by § 904 of PPA ’06,
    defined contribution plans provide                   will be issued soon. (New).           Transition Relief for Certain
    employees with the freedom to divest                                                       Partnerships and Other
                                                 31. 415(b)(2)(E)(ii): Section 415(b)(2)
    publicly traded securities. (New).
                                                     (E)(ii) of the Code was amended by        Pass-Thru Entities Under
    •   Notice 2006–107,       2006–51               § 303 of PPA ‘06 regarding the inter-     § 470
        I.R.B. 1114 (December 18, 2006).             est rate assumption for applying ben-
        (New).                                       efit limitations to lump sum distribu-    Notice 2007–4
                                                     tions. (New).
25. 401(k): PPA ’06 § 826 modified the
    rules relating to distributions from a           •   Guidance regarding § 415(b)(2)
    § 401(k) plan on account of a partic-                (E)(ii), as amended by PPA ’06,          This notice extends by one year the
    ipant’s hardship to permit the plan to               will be included in the § 415 Final   transition relief in Notice 2006–2, 2006–2
    treat a participant’s beneficiary under              Regulations, to be issued soon.       I.R.B. 278, and Notice 2005–29, 2005–1
    the plan the same as the participant’s               (New).                                C.B. 796, provided previously to part-
    spouse or dependent. (New).                                                                nerships and other pass-thru entities that
                                                 32. 415(b)(11): PPA ’06 § 867(a) re-
    •   Guidance regarding PPA ’06                   moved the 100% of compensation            are treated under § 470 of the Internal
        § 826 will be issued soon. (New).            limitation for a church plan partici-     Revenue Code as holding tax-exempt use
                                                     pant if the participant has never been    property solely as a result of the applica-
26. 401(k)(2)(B)(i)(V): PPA ’06 § 827
                                                     a highly compensated employee of          tion of § 168(h)(6).
    permits reservists called to active
                                                     the church. (New).
    duty after September 11, 2001 and                                                          BACKGROUND
    before 2008 to take in-service distri-           •   Guidance regarding § 415(b)(11),
    butions from a § 401(k) plan. (New).                 as added by PPA ’06, will be              Section 848 of the American Jobs Cre-
                                                         included in the § 415 Final           ation Act of 2004, Pub. L. No. 108–357,
27. 402(c)(2)(A): PPA ’06 § 822(a)
                                                         Regulations, to be issued soon.       118 Stat. 1418, 1602 (AJCA), enacted on
    amended § 402(c)(2)(A) to permit
                                                         (New).                                October 22, 2004, added § 470, which im-
    nontaxable distributions from a qual-
                                                                                               poses new limitations on the deductibility
    ified plan to be directly rolled over        33. PPA ’06 § 1102(a) provides that no-
                                                                                               of losses relating to tax-exempt use prop-
    tax-free to either another qualified             tice required to be provided under
                                                                                               erty. Under § 470(c)(2), “tax-exempt use
    plan or a § 403(b) plan if the separate          §§ 402(f), 411(a)(11), or 417 may be
                                                                                               property” has the meaning provided un-
    accounting requirements are met.                 provided as much as 180 days be-
                                                                                               der § 168(h) (with certain modifications).
    (New).                                           fore the annuity starting date. Sec-
                                                                                               Under § 168(h)(6), if any property that is
28. 402(c)(11): PPA ’06 § 829(a)(1)                  tion 1102(b) of PPA ’06 provides that
                                                                                               not otherwise “tax-exempt use property”
    added § 402(c)(11) to allow non-                 the notice under § 411(a)(11) also
                                                                                               under § 168(h) is owned by a partnership
    spouse beneficiaries to roll over dis-           include a description of the conse-
                                                                                               that has both a tax-exempt entity and a per-
    tributions from a qualified plan to an           quences of failing to defer receipt of
                                                                                               son who is not a tax-exempt entity as part-
    individual retirement plan. (New).               a distribution. (New).
                                                                                               ners, and any allocation to the tax-exempt
    •   Guidance regarding § 402(c)(11)              •   Guidance regarding PPA ’06            entity of partnership items is not a qual-
                                                         § 1102 will be issued soon.           ified allocation, an amount equal to the
        will be issued soon. (New).
                                                         (New).                                tax-exempt entity’s proportionate share of
                                                                                               the property generally is treated as tax-ex-
                                                                                               empt use property. Section 168(h)(6)(E)
                                                                                               provides that, for purposes of determining

2007–2 I.R.B.                                                       260                                            January 8, 2007
whether property is tax-exempt use prop-         However, the DESCRIPTION OF THE                 26 CFR 1.61–21: Taxation of fringe benefits.
erty, rules similar to those applicable to       TAX TECHNICAL CORRECTIONS                       (Also Internal Revenue Code §§ 61, 280F.)
partnerships apply to other pass-thru enti-      ACT OF 2006, as prepared by the Staff of
ties. Section 849(a) of the AJCA provides        the Joint Committee on Taxation (October        Rev. Proc. 2007–11
that § 470 generally applies to leases en-       2, 2006, JCX–48–06), provides that it is
tered into after March 12, 2004. Section         not intended that the effective date of the
                                                                                                 SECTION 1. PURPOSE
403(ff) of the Gulf Opportunity Zone Act         legislation supersede the rules set forth in
of 2005, Pub. L. No. 109–135, 119 Stat.          Notice 2006–2 and Notice 2005–29, with             .01 This revenue procedure provides:
2632, amended § 849(a) of the AJCA to            respect to the application of § 470 in the      (1) the maximum value of employer-pro-
provide that, in the case of property treated    case of partnerships and other pass-thru        vided vehicles first made available to em-
as tax-exempt use property solely by rea-        entities, for taxable years of these entities   ployees for personal use in calendar year
son of § 168(h)(6), § 470 applies to prop-       beginning in 2005 and 2004, respectively.       2007 for which the vehicle cents-per-mile
erty acquired after March 12, 2004.              The Service will continue to apply the          valuation rule provided under section
    Notice 2006–2 and Notice 2005–29             rules set forth in Notice 2005–29 and           1.61–21(e) of the Income Tax Regula-
provide transition relief to partnerships        Notice 2006–2. Additionally, in the case        tions may be applicable is $15,100 for a
and other pass-thru entities that are treated    of partnerships and pass-thru entities de-      passenger automobile and $16,100 for a
by § 470 as holding tax-exempt use               scribed in § 168(h)(6)(E), for taxable years    truck or van; (2) the maximum value of
property as a result of the application of       beginning before January 1, 2007, the Ser-      employer-provided vehicles first made
§ 168(h)(6). Specifically, Notice 2006–2         vice will not apply § 470 to disallow losses    available to employees for personal use in
and Notice 2005–29 provide that, in the          associated with property that is treated as     calendar year 2007 for which the fleet-av-
case of partnerships and pass-thru entities      tax-exempt use property solely as a result      erage valuation rule provided under sec-
described in § 168(h)(6)(E), for taxable         of the application of § 168(h)(6).              tion 1.61–21(d) of the regulations may
years that begin before January 1, 2006,                                                         be applicable is $20,100 for a passenger
and January 1, 2005, respectively, the           EXTENSION OF TRANSITION RELIEF
                                                                                                 automobile and $21,100 for a truck or van.
Internal Revenue Service will not apply
                                                    In the case of partnerships and
§ 470 to disallow losses associated with                                                         SECTION 2. BACKGROUND
                                                 other pass-thru entities described in
property that is treated as tax-exempt use
                                                 § 168(h)(6)(E), for taxable years that
property solely as a result of the applica-                                                          .01 If an employer provides an em-
                                                 begin before January 1, 2007, the Service
tion of § 168(h)(6). Notice 2006–2 was                                                           ployee with a vehicle that is available
                                                 will not apply § 470 to disallow losses
issued subsequent to the receipt by the                                                          to the employee for personal use, the
                                                 associated with property that is treated as
Treasury Department of a letter from the                                                         value of the personal use must generally
                                                 tax-exempt use property solely as a result
Chairmen and Ranking Members of both                                                             be included in the employee’s income
                                                 of the application of § 168(h)(6). Abusive
the Senate Finance Committee and House                                                           and wages. Internal Revenue Code § 61;
                                                 transactions involving partnerships and
Ways and Means Committee requesting                                                              Treas. Reg. § 1.61–21.
                                                 other pass-thru entities remain subject to
that the Treasury Department consider                                                                .02 For employer-provided passen-
                                                 challenge by the Service under other pro-
extending the transition relief provided in                                                      ger automobiles (including trucks and
                                                 visions of the tax law.
Notice 2005–29 for taxable years begin-                                                          vans) made available to employees for
ning before January 1, 2006.                     EFFECT ON OTHER DOCUMENTS                       personal use that meet the requirements
    On September 29, 2006, the Tax Tech-                                                         of section 1.61–21(e)(1) of the regula-
nical Corrections Act of 2006 was in-              Notice 2006–2 and Notice 2005–29 are          tions, generally the value of the personal
troduced in Congress. This legislation           modified and superseded.                        use may be determined under the vehicle
addresses, among other things, the appli-                                                        cents-per-mile valuation rule of section
cation of § 470 to partnerships and other        DRAFTING INFORMATION                            1.61–21(e). However, regulations section
pass-thru entities with tax-exempt use                                                           1.61–21(e)(1)(iii)(A) provides that for a
                                                    For further information regarding this
property as a result of § 168(h)(6). See                                                         passenger automobile first made avail-
                                                 notice, contact John Aramburu of the
H.R. 6264, 109th Cong. 2nd Sess. § 6(e)                                                          able after 1988 to any employee of the
                                                 Office of the Associate Chief Counsel
(2006) and S. 4026, 109th Cong. 2nd Sess.                                                        employer for personal use, the value of
                                                 (Income Tax & Accounting) at (202)
§ 6(e) (2006). The Chairmen of the Senate                                                        the personal use may not be determined
                                                 622–4960 (not a toll-free call).
Finance Committee and House Ways and                                                             under the vehicle cents-per-mile valuation
Means Committee solicited comments re-                                                           rule for a calendar year if the fair market
garding the legislation. As of the date of                                                       value of the passenger automobile (de-
this notice, no congressional action has                                                         termined pursuant to regulations section
been taken on the legislation.                                                                   1.61–21(d)(5)(i) through (iv)) on the first
    If enacted in its current form, the legis-                                                   date the passenger automobile is made
lation will be effective retroactively, in the                                                   available to the employee exceeds a spec-
case of property treated as tax-exempt use                                                       ified dollar limit.
property solely by reason of § 168(h)(6),                                                            .03 For employer-provided vehicles
to property acquired after March 12, 2004.                                                       available to employees for personal use

January 8, 2007                                                     261                                                       2007–2 I.R.B.
for an entire year, generally the value of      Proc. 2006–18, 2006–12 I.R.B. 645. For        Lease Values of the automobiles in the
the personal use may be determined un-          purposes of this revenue procedure, the       fleet. The fleet-average valuation rule may
der the automobile lease valuation rule         term “trucks and vans” refers to passenger    not be used to determine the Annual Lease
of section 1.61–21(d) of the regulations.       automobiles that are built on a truck chas-   Value of any automobile if its fair market
Under this valuation rule, the value of         sis, including minivans and sport utility     value on the date it is first made available
the personal use is the Annual Lease            vehicles (SUVs) that are built on a truck     exceeds $20,100 for a passenger automo-
Value. Provided the requirements of reg-        chassis.                                      bile other than a truck or van, or $21,100
ulations section 1.61–21(d)(5)(v) are met,                                                    for a truck or van. If all other appli-
an employer with a fleet of 20 or more          SECTION 3. PROCEDURE                          cable requirements are met, an employer
automobiles may use a fleet-average value                                                     with a fleet of 20 or more vehicles consist-
for purposes of calculating the Annual             .01 Maximum Automobile Value for           ing of passenger automobiles other than
Lease Values of the automobiles in the          Using the Cents-per-mile Valuation Rule.      trucks or vans as well as trucks and vans
employer’s fleet. The fleet-average value       An employer providing a passenger auto-       may use the fleet-average valuation rule
is the average of the fair market values of     mobile for the first time in calendar year    as long as none of the vehicles exceed
all the automobiles in the fleet. However,      2007 for the personal use of any employee     their respective maximum allowable val-
section 1.61–21(d)(5)(v)(D) of the regula-      may determine the value of the personal       ues. If the fair market value of any passen-
tions provides that for an automobile first     use by using the vehicle cents-per-mile       ger automobile in the fleet exceeds these
made available after 1988 to an employee        valuation rule in section 1.61–21(e) of the   amounts, the employer may determine the
of the employer for personal use, the value     regulations if its fair market value on the   value of the personal use under regulations
of the personal use may not be determined       date it is first made available does not      section 1.61–21(f) (Commuting valuation)
under the fleet-average valuation rule for a    exceed $15,100 for a passenger automo-        or the general valuation rules of section
calendar year if the fair market value of the   bile other than a tuck or van, or $16,100     1.61–21(b) or may determine the Annual
automobile (determined pursuant to reg-         for a truck or van. If the fair market        Lease Value of such automobile separately
ulations section 1.61–21(d)(5)(i) through       value of the passenger automobile exceeds     under the automobile lease valuation rule
(v)) on the first date the passenger auto-      this amount, the employer may determine       of section 1.61–21(d)(2) if the applicable
mobile is made available to the employee        the value of the personal use under the       requirements are met.
exceeds a specified dollar limit.               general valuation rules of regulations sec-
    .04 The maximum passenger auto-             tion 1.61–21(b) or under the special valua-   SECTION 4. EFFECTIVE DATE
mobile values for applying the vehicle          tion rules of section 1.61–21(d) (Automo-
cents-per-mile and the fleet-average value      bile lease valuation) or section 1.61–21(f)       This revenue procedure applies to em-
rules reflect the automobile price inflation    (Commuting valuation) if the applicable       ployer-provided passenger automobiles
adjustment of Code section 280F(d)(7).          requirements are met. See Rev. Proc.          first made available to employees for per-
The method of calculating this price in-        2005–48, 2005–2 C.B. 271, for guidance        sonal use in calendar year 2007.
flation amount for automobiles other than       on determining the maximum value of pas-
trucks and vans uses the “new car” com-         senger automobiles first made available       SECTION 5. DRAFTING
ponent of the Consumer Price Index (CPI)        during calendar year 2005, and Rev. Proc.     INFORMATION
“automobile component”. When calcu-             2006–15, 2006–5 I.R.B. 387, for guidance
lating this price inflation adjustment for      on determining the maximum value of pas-         The principal author of this revenue
trucks and vans, the “new trucks” com-          senger automobiles first made available       procedure is Don M. Parkinson of the
ponent of the CPI is used. This results         during calendar year 2006.                    Office of the Division Counsel/Associate
in somewhat higher maximum values for              .02 Maximum Automobile Value for           Chief Counsel (Tax Exempt & Govern-
trucks and vans. This change reflects the       Using the Fleet-Average Valuation Rule.       ment Entities). For further information
higher rate of price inflation that trucks      An employer with a fleet of 20 or more        regarding the maximum automobile value
and vans have been subject to since 1988,       automobiles providing an automobile for       for applying the valuation rules of reg-
and is consistent with the change an-           the first time in calendar year 2007 for      ulations section 1.61–21(e)(1)(iii)(A)
nounced in Rev. Proc. 2003–75, 2003–2           the personal use of any employee for an       (the vehicle cents-per-mile valuation
C.B. 1018, for purposes of calculating de-      entire year may determine the value of        rule), and section 1.61–21(d)(5)(v)(D)
preciation deductions. See also Rev. Proc.      the personal use by using the fleet-aver-     (the fleet average valuation rule), contact
2004–20, 2004–1 C.B. 642, Rev. Proc.            age valuation rule in regulations section     Don M. Parkinson at (202) 622–6040 (not
2005–13, 2005–1 C.B. 759, and Rev.              1.61–21(d)(5)(v) to calculate the Annual      a toll-free call).

2007–2 I.R.B.                                                      262                                            January 8, 2007
Part IV. Items of General Interest
Notice of Proposed                          request a public hearing, Richard Hurst at     Drafting Information
Rulemaking by                     
                                                                                              The principal author of these regula-
Cross-Reference to                          SUPPLEMENTARY INFORMATION:                     tions is Marnette M. Myers of the Office
Temporary Regulations                                                                      of Associate Chief Counsel (Income Tax
                                            Background                                     & Accounting). However, other person-
Reduction in Taxable Income                                                                nel from the IRS and Treasury Department
                                                Temporary regulations in this issue of     participated in their development.
for Housing Hurricane Katrina
                                            the Bulletin amend the Income Tax Regu-
Displaced Individuals                       lations (26 CFR part 1). The text of those
                                            regulations also serves as the text of these   Proposed Amendments to the
REG–152043–05                               proposed regulations. The preamble to the      Regulations
                                            temporary regulations explains the amend-
AGENCY: Internal Revenue Service
                                            ments.                                            Accordingly, 26 CFR part 1 is proposed
(IRS), Treasury.
                                                                                           to be amended as follows:
ACTION: Notice of proposed rulemaking       Special Analyses
                                                                                           PART 1—INCOME TAXES
by cross-reference to temporary regula-
                                                It has been determined that this notice
tions.                                                                                        Paragraph 1. The authority citation for
                                            of proposed rulemaking is not a signifi-
                                            cant regulatory action as defined in Exec-     part 1 continues to read, in part, as follows:
SUMMARY: In this issue of the Bulletin,
                                            utive Order 12866. Therefore, a regula-           Authority: 26 U.S.C. 7805 * * *
the IRS is issuing temporary regulations
                                            tory assessment is not required. It also has      Par. 2. Section 1.9300–1 is added to
(T.D. 9301) relating to the reduction in
                                            been determined that section 553(b) of the     read as follows:
taxable income under section 302 of the
                                            Administrative Procedure Act (5 U.S.C.            [The text of proposed §1.9300–1 is the
Katrina Emergency Tax Relief Act of
                                            chapter 5) does not apply to these regu-       same as the text of §1.9300–1T published
2005. The regulations affect taxpayers
                                            lations, and, because the regulations do       elsewhere in this issue of the Bulletin.]
that provide housing in their principal
residences to individuals displaced by      not impose a collection of information on
                                            small entities, the Regulatory Flexibility                             Linda M. Kroening,
Hurricane Katrina. The text of those reg-                                                              Acting Deputy Commissioner for
ulations also serves as the text of these   Act (5 U.S.C. chapter 6) does not apply.
                                            Pursuant to section 7805(f) of the Code,                         Services and Enforcement.
proposed regulations.
                                            this notice of proposed rulemaking will be     (Filed by the Office of the Federal Register for December
                                                                                           11, 2006, 8:45 a.m., and published in the issue of the Federal
DATES: Written or electronic comments       submitted to the Chief Counsel for Advo-       Register for December 12, 2006, 71 F.R. 74482)
must be received by March 12, 2007.         cacy of the Small Business Administration
                                            for comment on its impact on small busi-
ADDRESSES: Send submissions to:             ness.                                          Railroad Track Maintenance
CC:PA:LPD:RU          (REG–152043–05),
Internal Revenue Service, POB 7604,         Comments and Requests for a Public             Credit; Hearing Cancellation
Ben Franklin Station, Washington, DC        Hearing
20044. Submissions may be hand-de-
                                                                                           Announcement 2007–2
livered Monday through Friday be-              Before these proposed regulations are
                                                                                           AGENCY: Internal Revenue Service
tween the hours of 8 a.m. and 4 p.m.        adopted as final regulations, consideration
                                                                                           (IRS), Treasury.
to CC:PA:LPD:PR (REG–152043–05),            will be given to any written comments
Courier’s Desk, Internal Revenue Service,   (a signed original and eight (8) copies)       ACTION: Cancellation of notice of public
1111 Constitution Avenue, NW, Wash-         or electronic comments that are submitted      hearing on proposed rulemaking by cross-
ington, DC. Alternatively, taxpayers may    timely to the IRS. The IRS and Treasury        reference to temporary regulations.
submit comments electronically via the      Department specifically request comments
IRS Internet site at       on the clarity of the proposed rule and how    SUMMARY: This document cancels a
or the Federal eRulemaking Portal           it may be made easier to understand. All       public hearing on proposed regulations
at     (IRS   comments will be available for public in-      (REG–142270–05, 2006–43 I.R.B. 791)
REG–152043–05).                             spection and copying. A public hearing         by cross-reference to temporary regula-
                                            will be scheduled if requested in writing      tions relating to the railroad track main-
FOR      FURTHER        INFORMATION         by any person that timely submits written      tenance credit determined for qualified
CONTACT: Concerning the proposed            comments. If a public hearing is sched-        railroad track maintenance expenditures
regulations, Marnette M. Myers, (202)       uled, notice of the date, time and place for   paid or incurred by a Class II or Class
622–4920 (not a toll-free number); con-     the public hearing will be published in the    III railroad and other eligible taxpayers
cerning submission of comments and/or to    Federal Register.                              during the taxable year.

January 8, 2007                                                263                                                            2007–2 I.R.B.
DATES: The public hearing, originally      SUPPLEMENTARY INFORMATION: A                  ing at the public hearing to submit an out-
scheduled for January 9, 2007 at 10 a.m.   notice of proposed rulemaking by cross-       line of the topics to be addressed. As of
is cancelled.                              reference to temporary regulations and no-    Monday, December 11, 2006, no one has
                                           tice of public hearing that appeared in the   requested to speak. Therefore, the public
FOR      FURTHER      INFORMATION          Federal Register on Friday, September         hearing scheduled for January 9, 2007, is
CONTACT: Kelly Banks of the Publi-         8, 2006 (71 FR 53053), announced that         cancelled.
cations and Regulations Branch, Legal      a public hearing was scheduled for Jan-
Processing Division, Associate Chief       uary 9, 2006, at 10 a.m. in the IRS Au-                                LaNita Van Dyke,
Counsel (Procedure and Administration)     ditorium, New Carrollton Federal Build-                        Branch Chief, Publications
at (202) 622–0392 (not a toll-free num-    ing, 5000 Ellin Road, Lanham, MD 20706.                           and Regulations Branch,
ber).                                      The subject of the public hearing is under                      Legal Processing Division,
                                           section 45G of the Internal Revenue Code.                         Associate Chief Counsel
                                              The public comment period expired on                    (Procedure and Administration).
                                           December 7, 2006. The notice of proposed      (Filed by the Office of the Federal Register on December 26,
                                           rulemaking by cross-reference to tempo-       2006, 8:45 a.m., and published in the issue of the Federal
                                                                                         Register for December 27, 2006, 71 F.R. 77654)
                                           rary regulations and notice of public hear-
                                           ing instructed those interested in testify-

2007–2 I.R.B.                                                 264                                                    January 8, 2007
Definition of Terms
Revenue rulings and revenue procedures           and B, the prior ruling is modified because      of a prior ruling, a combination of terms
(hereinafter referred to as “rulings”) that      it corrects a published position. (Compare       is used. For example, modified and su-
have an effect on previous rulings use the       with amplified and clarified, above).            perseded describes a situation where the
following defined terms to describe the ef-          Obsoleted describes a previously pub-        substance of a previously published ruling
fect:                                            lished ruling that is not considered deter-      is being changed in part and is continued
    Amplified describes a situation where        minative with respect to future transac-         without change in part and it is desired to
no change is being made in a prior pub-          tions. This term is most commonly used in        restate the valid portion of the previously
lished position, but the prior position is be-   a ruling that lists previously published rul-    published ruling in a new ruling that is self
ing extended to apply to a variation of the      ings that are obsoleted because of changes       contained. In this case, the previously pub-
fact situation set forth therein. Thus, if       in laws or regulations. A ruling may also        lished ruling is first modified and then, as
an earlier ruling held that a principle ap-      be obsoleted because the substance has           modified, is superseded.
plied to A, and the new ruling holds that the    been included in regulations subsequently            Supplemented is used in situations in
same principle also applies to B, the earlier    adopted.                                         which a list, such as a list of the names of
ruling is amplified. (Compare with modi-             Revoked describes situations where the       countries, is published in a ruling and that
fied, below).                                    position in the previously published ruling      list is expanded by adding further names in
    Clarified is used in those instances         is not correct and the correct position is       subsequent rulings. After the original rul-
where the language in a prior ruling is be-      being stated in a new ruling.                    ing has been supplemented several times, a
ing made clear because the language has              Superseded describes a situation where       new ruling may be published that includes
caused, or may cause, some confusion.            the new ruling does nothing more than re-        the list in the original ruling and the ad-
It is not used where a position in a prior       state the substance and situation of a previ-    ditions, and supersedes all prior rulings in
ruling is being changed.                         ously published ruling (or rulings). Thus,       the series.
    Distinguished describes a situation          the term is used to republish under the              Suspended is used in rare situations
where a ruling mentions a previously pub-        1986 Code and regulations the same po-           to show that the previous published rul-
lished ruling and points out an essential        sition published under the 1939 Code and         ings will not be applied pending some
difference between them.                         regulations. The term is also used when          future action such as the issuance of new
    Modified is used where the substance         it is desired to republish in a single rul-      or amended regulations, the outcome of
of a previously published position is being      ing a series of situations, names, etc., that    cases in litigation, or the outcome of a
changed. Thus, if a prior ruling held that a     were previously published over a period of       Service study.
principle applied to A but not to B, and the     time in separate rulings. If the new rul-
new ruling holds that it applies to both A       ing does more than restate the substance

The following abbreviations in current use       ER—Employer.                                     PRS—Partnership.
and formerly used will appear in material        ERISA—Employee Retirement Income Security Act.   PTE—Prohibited Transaction Exemption.
                                                 EX—Executor.                                     Pub. L.—Public Law.
published in the Bulletin.
                                                 F—Fiduciary.                                     REIT—Real Estate Investment Trust.
                                                 FC—Foreign Country.                              Rev. Proc.—Revenue Procedure.
                                                 FICA—Federal Insurance Contributions Act.        Rev. Rul.—Revenue Ruling.
                                                 FISC—Foreign International Sales Company.        S—Subsidiary.
                                                 FPH—Foreign Personal Holding Company.            S.P.R.—Statement of Procedural Rules.
                                                 F.R.—Federal Register.                           Stat.—Statutes at Large.
                                                 FUTA—Federal Unemployment Tax Act.               T—Target Corporation.
B.T.A.—Board of Tax Appeals.
                                                 FX—Foreign corporation.                          T.C.—Tax Court.
                                                 G.C.M.—Chief Counsel’s Memorandum.               T.D. —Treasury Decision.
C.B.—Cumulative Bulletin.
                                                 GE—Grantee.                                      TFE—Transferee.
CFR—Code of Federal Regulations.
                                                 GP—General Partner.                              TFR—Transferor.
                                                 GR—Grantor.                                      T.I.R.—Technical Information Release.
                                                 IC—Insurance Company.                            TP—Taxpayer.
Ct.D.—Court Decision.
                                                 I.R.B.—Internal Revenue Bulletin.                TR—Trust.
                                                 LE—Lessee.                                       TT—Trustee.
                                                 LP—Limited Partner.                              U.S.C.—United States Code.
DC—Dummy Corporation.
                                                 LR—Lessor.                                       X—Corporation.
                                                 M—Minor.                                         Y—Corporation.
Del. Order—Delegation Order.
                                                 Nonacq.—Nonacquiescence.                         Z —Corporation.
DISC—Domestic International Sales Corporation.
                                                 P—Parent Corporation.
EE—Employee.                                     PHC—Personal Holding Company.
                                                 PO—Possession of the U.S.
E.O.—Executive Order.

January 8, 2007                                                        i                                                   2007–2 I.R.B.
Numerical Finding List1
Bulletins 2007–1 through 2007–2

2007-1, 2007-1 I.R.B. 243
2007-2, 2007-2 I.R.B. 263


2007-1, 2007-2 I.R.B. 254
2007-2, 2007-2 I.R.B. 254
2007-3, 2007-2 I.R.B. 255
2007-4, 2007-2 I.R.B. 260

Proposed Regulations:

REG-152043-05, 2007-2 I.R.B. 263

Revenue Procedures:

2007-1, 2007-1 I.R.B. 1
2007-2, 2007-1 I.R.B. 88
2007-3, 2007-1 I.R.B. 108
2007-4, 2007-1 I.R.B. 118
2007-5, 2007-1 I.R.B. 161
2007-6, 2007-1 I.R.B. 189
2007-7, 2007-1 I.R.B. 227
2007-8, 2007-1 I.R.B. 230
2007-11, 2007-2 I.R.B. 261

Treasury Decisions:

9300, 2007-2 I.R.B. 246
9301, 2007-2 I.R.B. 244

1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2006–27 through 2006–52 is in Internal Revenue Bulletin
2006–52, dated December 26, 2006.

2007–2 I.R.B.                                                                              ii                                                           January 8, 2007
Finding List of Current Actions on
Previously Published Items1
Bulletins 2007–1 through 2007–2

Modified and superseded by
Notice 2007-4, 2007-2 I.R.B. 260

Modified and superseded by
Notice 2007-4, 2007-2 I.R.B. 260

Proposed Regulations:

Corrected by
Ann. 2007-2, 2007-2 I.R.B. 263

Revenue Procedures:

Superseded by
Rev. Proc. 2007-1, 2007-1 I.R.B. 1

Superseded by
Rev. Proc. 2007-2, 2007-1 I.R.B. 88

Superseded by
Rev. Proc. 2007-3, 2007-1 I.R.B. 108

Superseded by
Rev. Proc. 2007-4, 2007-1 I.R.B. 118

Superseded by
Rev. Proc. 2007-5, 2007-1 I.R.B. 161

Superseded by
Rev. Proc. 2007-6, 2007-1 I.R.B. 189

Superseded by
Rev. Proc. 2007-7, 2007-1 I.R.B. 227

Superseded by
Rev. Proc. 2007-8, 2007-1 I.R.B. 230

Revenue Rulings:

Modified by
Notice 2007-2, 2007-2 I.R.B. 254

1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2006–27 through 2006–52 is in Internal Revenue Bulletin 2006–52, dated December 26,

January 8, 2007                                                                          iii                                                               2007–2 I.R.B.
2007–2 I.R.B.   January 8, 2007
January 8, 2007   2007–2 I.R.B.
                                  INTERNAL REVENUE BULLETIN
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