Internal Revenue Bulletin 2015-11 (PDF rendition): IRS Notices

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

# Internal Revenue bulletin

## HIGHLIGHTS OF THIS ISSUE

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

### REG-136018-13, page 759.

These proposed regulations provide the method to be used to
adjust the applicable Federal rates under section 1288 for
tax-exempt obligations and the method to be used to determine
the long-term tax-exempt rate and the adjusted Federal long-
term rate under section 382.

### T.D. 9712, page 750.

The final regulations allow a taxpayer to elect the alternative
simplified credit for a tax year on an amended return.

## EMPLOYEE PLANS

### Announcement 2015-1, page 758.

This announcement describes changes to the processing of
employee plans determination letters that will take effect in
2015. These changes are being adopted as a result of a
process improvement strategy designed to promote case pro-
cessing efficiency. The changes to the determination letter
procedures described in this announcement will be reflected in
Rev. Proc. 2015-6, which will be published in IRB 2015-1 and
be effective on February 1, 2015.

### Rev. Proc. 2015-22, page 754.

This revenue procedure contains a modification to Revenue
Procedure 2013-22, 2013-18 I.R.B. 985, as modified by
Revenue Procedure 2014-28, 2014-16 I.R.B. 944, and mod-
ifications to Revenue Procedure 2015-8, 2015-1 I.R.B. 235.
In particular, this revenue procedure changes the addresses to
which applications for opinion and advisory letters for § 403(b)
pre-approved plans should be submitted and inserts a user fee
that was omitted from Rev. Proc. 2015-8.

## EXEMPT ORGANIZATIONS

### Announcement 2015-10, page 758.

Revocation of IRC 501(c)(3) Organizations for failure to meet
the code section requirements. Contributions made to the
organizations by individual donors are no longer deductible
under IRC 170(b)(1)(A).

## EXCISE TAX

### REG-143416-14, page 757.

The temporary and proposed regulations provide rules for the
definition of a covered entity for purposes of the fee imposed
by section 9010 of the Patient Protection and Affordable Care
Act, as amended. The temporary and proposed regulations are
necessary to clarify certain terms in section 9010.

### T.D. 9711, page 748.

(Continued on the next page)

Finding Lists begin on page ii.

MIRS

## ADMINISTRATIVE

Notice 2015-20, page 754.

This notice updates the appendix to Notice 2013-1, which lists
the Indian tribes who have settled tribal trust cases against the
United States. Notice 2012-60 originally was published in IRB
2012-41 (October 9, 2012). Notice 2012-60 was super-
ceded by Notice 2013-1 IRB 2013-3, and the appendix to
Notice 2013-1 was superceded by Notice 2013-16 (IRB
2013-14), then Notice 2013-36, then Notice 2013-55, then
Notice 2014-22, Notice 2014-38, and then Notice 2014-
61. However, one additional tribe has settled a case against
the United States since the publication of Notice 2014-61, so
we are seeking to publish an updated appendix to Notice
2013-1. This notice would supercede Notice 2014-61.

## The IRS Mission

Provide America's taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.

## Introduction

The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all
substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal practices and procedures that affect the rights and duties
of taxpayers are published.

Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the
revenue ruling. In those based on positions taken in rulings to
taxpayers or technical advice to Service field offices, identify-
ing details and information of a confidential nature are deleted
to prevent unwarranted invasions of privacy and to comply with
statutory requirements.

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
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

### Part I .- 1986 Code.

This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.

### Part II .- Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A, Tax
Conventions and Other Related Items, and Subpart B, Legisla-
tion and Related Committee Reports.

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
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury's Office of the Assistant Sec-
retary (Enforcement).

### Part IV .- Items of General Interest.

This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index for
the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
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.

## Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

26 CFR 57.2T Explanation of Terms.

T.D. 9711
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 57

### Health Insurance Providers Fee

AGENCY: Internal Revenue Service (IRS),
Treasury.

ACTION: Final and temporary regulations.

SUMMARY: This document contains
temporary regulations that provide rules
for the definition of a covered entity for
purposes of the fee imposed by section
9010 of the Patient Protection and Afford-
able Care Act, as amended. The tempo-
rary regulations are necessary to clarify
certain terms in section 9010. The tempo-
rary regulations affect persons engaged in
the business of providing health insurance
for United States health risks. The text of
the temporary regulations also serves as
the text of the proposed regulations
(REG-143416-14) published in the Pro-
posed Rules section in this issue of the
Federal Register.

DATES: Effective Date: These regula-
tions are effective on February 26, 2015.

Applicability Date: For dates of appli-
cability, see §§ 57.10 and 57.10T.

#### FOR FURTHER INFORMATION

CONTACT: Rachel S. Smith, (202) 317-
6855 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

##### Background

Section 9010 of the Patient Protection
and Affordable Care Act (PPACA), Pub-
lic Law No. 111-148 (124 Stat. 119
(2010)), as amended by section 10905 of
PPACA, and as further amended by sec-
tion 1406 of the Health Care and Educa-
tion Reconciliation Act of 2010, Public
Law 111-152 (124 Stat. 1029 (2010))
(collectively, the Affordable Care Act or

ACA) imposes an annual fee on covered
entities that provide health insurance for
United States health risks. All references
in this preamble to section 9010 are ref-
erences to the ACA. Section 9010 did not
amend the Internal Revenue Code (Code)
but contains cross-references to specified
Code sections. Unless otherwise indi-
cated, all other references to subtitles,
chapters, subchapters, and sections in this
preamble are references to subtitles, chap-
ters, subchapters, and sections in the Code
and related regulations. All references to
"fee" in this preamble are references to
the fee imposed by section 9010.

On November 27, 2013, the Treasury
Department and the IRS issued the Health
Insurance Providers Fee regulations as fi-
nal regulations (TD 9643). On August 12,
2014, the Treasury Department and the
IRS issued Notice 2014-47, 2014-35
IRB 522, to provide further guidance for
the 2014 fee year on the definition of a
covered entity. The temporary regulations
provide further guidance on the definition
of a covered entity for the 2015 fee year
and subsequent fee years.

###### General Overview

Section 9010(a) imposes an annual fee
on each covered entity engaged in the
business of providing health insurance.
The fee is due by the annual date specified
by the Secretary, but in no event later than
September 30th of each calendar year in
which a fee must be paid (fee year).

Section 9010(b) requires the Secretary
to determine the annual fee for each cov-
ered entity based on the ratio of the cov-
ered entity's net premiums written for
health insurance for any United States
health risk that are taken into account for
the calendar year immediately before the
fee year (data year) to the aggregate net
premiums written for health insurance of
United States health risks of all covered
entities that are taken into account during
the data year. In calculating the fee, the
Secretary must determine each covered
entity's net premiums written for United
States health risks based on reports sub-
mitted to the Secretary by the covered

entity and through the use of any other
source of information available to the Sec-
retary.

Section 9010(c)(1) defines a covered
entity as any entity that provides health
insurance for any United States health risk
during each fee year. Section 9010(c)(2)
excludes the following entities from being
covered entities: (A) Any employer to the
extent that the employer self-insures its
employees' health risks; (B) any govern-
mental entity; (C) any entity (i) that is
incorporated as a nonprofit corporation
under a State law, (ii) no part of the net
earnings of which inures to the benefit of
any private shareholder or individual, no
substantial part of the activities of which
is carrying on propaganda, or otherwise
attempting, to influence legislation (ex-
cept as otherwise provided in section
501(h)), and which does not participate in,
or intervene in, any political campaign on
behalf of (or in opposition to) any candi-
date for public office, and (iii) more than
80 percent of the gross revenues of which
is received from government programs
that target low income, elderly, or dis-
abled populations under titles XVIII, XIX,
and XXI of the Social Security Act; and
(D) any entity that is described in section
501(c)(9) (a voluntary employees' benefi-
ciary association (VEBA)) and is estab-
lished by an entity (other than by an em-
ployer or employers) for purposes of
providing health care benefits.

Section 9010(c)(3)(A) provides a con-
trolled group rule under which all persons
treated as a single employer under section
52(a) or (b) or section 414(m) or (o) are
treated as a single covered entity. Section
9010(c)(4) provides that, if more than one
person is liable to pay the fee on a single
covered entity by reason of the application
of the controlled group rule, then all such
persons are jointly and severally liable for
payment of the fee.

Section 57.2(c)(1) of the Health Insur-
ance Providers Fee regulations defines the
term controlled group to mean a group of
two or more persons, including at least
one person that is a covered entity, that is
treated as a single employer under section
52(a), 52(b), 414(m), or 414(o). Section

57.2(c)(3)(ii) further provides that a per-
son is treated as being a member of the
controlled group if it is a member of the
group at the end of the day on December
31st of the data year.

### Explanation of Provisions

Following the publication of the final
regulations in TD 9643, the Treasury De-
partment and the IRS received questions
about how to apply the exclusions under
section 9010(c)(2) to the general defini-
tion of a covered entity. The Treasury
Department and the IRS also received
questions about whether covered entities
must report information on net premiums
written for certain members of a con-
trolled group. Notice 2014-47 was sub-
sequently issued to resolve those ques-
tions for the 2014 fee year. The temporary
regulations adopt the general approach of
Notice 2014-47 to resolve those ques-
tions for the 2015 fee year and each sub-
sequent fee year.

Application of Exclusions under Section
9010(c)(2)

Notice 2014-47 provided that, for the
2014 fee year, the Treasury Department
and the IRS would not treat any entity as
a covered entity if it would be excluded
from the definition of a covered entity
because it qualified for one of the exclu-
sions under section 9010(c)(2) either for
the entire 2013 data year or for the entire
2014 fee year, which began on January 1,
2014. As described later in this preamble,
the controlled group rules under section
9010(c)(3)(A) and § 57.2(c)(1) do not ap-
ply for the limited purpose of determining
whether an entity qualifies for an exclu-
sion under section 9010(c)(2). Notice
2014-47 further provided that the entity
should not report its net premiums written
for the 2013 data year because the Trea-
sury Department and the IRS would not
treat such an entity as a covered entity.

The temporary regulations amend the
rules in the existing Health Insurance Pro-
viders Fee regulations to incorporate the
general approach in Notice 2014-47.
Specifically, the temporary regulations
provide that, for the 2015 fee year and
each subsequent fee year, an entity quali-
fies for an exclusion under section
9010(c)(2) if it qualifies for an exclusion

either for the entire data year ending on
the prior December 31st or for the entire
fee year beginning on January 1st. An
entity that qualifies for an exclusion under
this rule is not a covered entity for that fee
year and must not report its net premiums
written.

The temporary regulations also impose
two additional requirements. First, the
temporary regulations generally impose a
consistency requirement that binds an en-
tity to its original selection of either the
data year or the fee year (its test year) to
determine whether it qualifies for an ex-
clusion under section 9010(c)(2) for the
2015 fee year and each subsequent fee
year. For example, if an entity selects the
2014 data year as its test year for the 2015
fee year, it must use the data year as its
test year for the 2016 fee year and each
subsequent fee year.

Second, the temporary regulations im-
pose a special rule for an entity that uses
the fee year as its test year. A special rule
is important in this context because the fee
is due by September 30th of the fee year,
and it may not be clear until the end of the
fee year whether an entity will in fact
qualify for an exclusion. If an entity using
the fee year as its test year does not report
its net premiums written because it ex-
pects to qualify for an exclusion under
section 9010(c)(2), but the entity ulti-
mately does not qualify for an exclusion,
the temporary regulations require the en-
tity to use the data year as its test year in
all subsequent fee years. In this circum-
stance, the entity will necessarily be a
covered entity that is required to report its
net premiums written for the immediately
following fee year. In addition, an entity
that does not timely file a report in a fee
year, and that is a covered entity for that
fee year because it does not qualify for an
exclusion, may be subject to penalties,
including the failure to report penalty un-
der section 9010(g)(2).

For example, assume that for the 2015
fee year an entity used the fee year as its
test year and reasonably expected to qual-
ify for the section 9010(c)(2)(C) exclusion
for that fee year. As a result, the entity did
not report its net premiums written and it
was not treated as a covered entity for
purposes of the 2015 fee calculation. Fur-
ther assume that as of December 31, 2015,
the entity did not satisfy the 80 percent

minimum gross revenues requirement of
section 9010(c)(2)(C)(iii) and therefore
did not qualify for this or any other exclu-
sion under section 9010(c)(2) for the 2015
fee year. Under the temporary regulations,
this entity must use the data year for each
subsequent fee year to determine whether
it qualifies for an exclusion under section
9010(c)(2). Thus, for the 2016 fee year,
because this entity must determine its el-
igibility for an exclusion based on the
2015 data year, it would not be eligible for
an exclusion under section 9010(c)(2) for
the 2016 fee year and must submit a report
in that year. This entity must also use the
data year as its test year for the 2017 fee
year and each subsequent fee year.

The Treasury Department and the IRS
request comments regarding whether
there are any circumstances in which an
entity should be permitted by the IRS to
change its test year, and if so, what con-
ditions and limitations should apply to any
such change.

#### Reporting for Controlled Group Members

Notice 2014-47 provided that a con-
trolled group must report net premiums
written only for each person who is a
controlled group member at the end of the
day on December 31st of the data year and
who would qualify as a covered entity in
the fee year if it were a single-person
covered entity (that is, not a member of a
controlled group). The temporary regula-
tions incorporate this rule for the 2015 fee
year and each subsequent fee year. There-
fore, a controlled group must not report
net premiums written for any controlled
group member who would fail to be a
covered entity in the fee year if it were not
a member of a controlled group. Although
that person's net premiums written are not
taken into account, it remains a member of
the controlled group and is jointly and
severally liable for the fee amount allo-
cated to the controlled group.

### Special Analyses

determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regula-
tions, and because these regulations do not
impose a collection of information on
small entities, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Code,
these temporary regulations have been
submitted to the Chief Counsel for Advo-
cacy of the Small Business Administra-
tion for comment on its impact on small
businesses.

### Drafting Information

The principal author of these regula-
tions is Rachel S. Smith, IRS Office of
the Associate Chief Counsel (Pass-
throughs and Special Industries). How-
ever, other personnel from the Treasury
Department and the IRS participated in
their development.

* * * * *

### Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 57 is amended
as follows:

### PART 57-HEALTH INSURANCE PROVIDERS FEE

Paragraph 1. The authority citation for
part 57 continues to read in part as fol-
lows:

Authority: 26 U.S.C. 7805; sec. 9010,
Public Law 111-148 (124 Stat. 119
(2010)).

* * * * *

Par. 2. Section 57.2 is amended by:

1\. Redesignating paragraph (b)(3) as
paragraph (b)(4).

2\. Adding paragraph (b)(3).

3\. Revising paragraph (c)(3)(ii).

The addition and revision read as fol-
lows:

#### § 57.2 Explanation of terms.

* * * * *

(b) * * *

(3) [Reserved]. For further guidance,
see § 57.2T(b)(3).

* * * * *

(3) * * *

(ii) [Reserved]. For further guidance
see § 57.2T(c)(3)(ii).

* * * * *

Par. 3. Section 57.2T is added to read
as follows:

##### § 57.2T Explanation of terms (temporary).

(a) through (b)(2) [Reserved]. For further
guidance, see § 57.2(a) through (b)(2).

(3) Application of exclusions-(i) Test
year. An entity qualifies for an exclusion
described in § 57.2(b)(2)(i) through (iv) if
it so qualifies in its test year. The term test
year means either the entire data year or
the entire fee year.

(ii) Consistency rule. For purposes of
paragraph (b)(3)(i) of this section, an en-
tity must use the same test year as it used
in its first fee year beginning after Decem-
ber 31, 2014, and in each subsequent fee
year. Thus, for example, if an entity used
the 2014 data year as its test year for the
2015 fee year, that entity must use the data
year as its test year for each subsequent
fee year.

(iii) Special rule for fee year as test
year. For purposes of paragraph (b)(3) of
this section, any entity that uses the fee
year as its test year but ultimately does not
qualify for an exclusion described in
§ 57.2(b)(2)(i) through (iv) for that entire
fee year must use the data year as its test
year for each subsequent fee year.

(b)(4) through (c)(3)(i) [Reserved]. For
further guidance, see § 57.2(b)(4) through
(c)(3)(i).

(ii) A person is treated as being a mem-
ber of the controlled group if it is a mem-
ber of the group at the end of the day on
December 31st of the data year. However,
a person's net premiums written are in-
cluded in net premiums written for the
controlled group only if the person would
qualify as a covered entity in the fee year
if the person were not a member of the
controlled group.

(d) through (n) [Reserved]. For further
guidance, see § 52.7(d) through (n).

Par. 4. Section 57.10 is revised to read
as follows:

§ 57.10 Effective/applicability date.

(a) In general. Except as provided in
paragraph (b), §§ 57.1 through 57.9 apply

to any fee that is due on or after Septem-
ber 30, 2014.

(b) [Reserved]. For further guidance,
see § 57.10T(b).

Par. 5. Section 57.10T is added to read
as follows:

### § 57.10T Effective/applicability date (temporary).

(a) [Reserved]. For further guidance,
see § 57.10(a).

(b) Paragraphs (b)(3) and (c)(3)(ii) of
§ 57.2T. Paragraphs (b)(3) and (c)(3)(ii)
of § 57.2T apply on February 26, 2015.

John Dalrymple,
Deputy Commissioner for
Services and Enforcement.

Approved: February 19, 2015.

Mark J. Mazur,
Assistant Secretary of the
Treasury (Tax Policy).

(Filed by the Office of the Federal Register on February 23,
2015, 4:15 p.m., and published in the issue of the Federal
Register for February 26, 2015, 80 F.R. 10333)

26 CFR 1.41-9: Alternative simplified credit

#### T.D. 9712

DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1

##### Alternative Simplified Credit Election

AGENCY: Internal Revenue Service
(IRS), Treasury.

ACTION: Final regulations and removal
of temporary regulations.

SUMMARY: This document contains fi-
nal regulations relating to the election of
the alternative simplified credit under sec-
tion 41(c)(5) of the Internal Revenue
Code (Code). The final regulations affect
certain taxpayers claiming the credit un-
der section 41.

DATES: Effective Date: These regula-
tions are effective on February 27, 2015.

Applicability Date: For dates of appli-
cability, see § 1.41-9(d).

FOR FURTHER INFORMATION
CONTACT: David Selig (202) 317-4137
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

###### Background

This document amends 26 CFR part 1
to provide rules relating to the time and
manner of electing the alternative simpli-
fied credit (ASC) under section 41(c)(5)
of the Internal Revenue Code (Code).

Section 41(a) provides an incremental
tax credit for increasing research activities
(research credit) based on a percentage of
a taxpayer's qualified research expenses
above a base amount. A taxpayer can ap-
ply the rules and credit rate percentages
under section 41(a)(1) to calculate the
credit (commonly referred to as the regu-
lar credit) or a taxpayer can make an elec-
tion to apply the ASC rules and credit rate
percentages under section 41(c)(5) to cal-
culate the credit. Section 41(c)(5)(C) pro-
vides that an ASC election under section
41(c)(5) applies to the taxable year for
which it is made and all succeeding tax-
able years unless revoked with the consent
of the Secretary.

On June 10, 2011, the Treasury De-
partment and the IRS published final reg-
ulations (TD 9528) (2011 Final Regula-
tions) in the Federal Register (76 FR
33994) relating to the election and calcu-
lation of the ASC. Section 1.41-9(b)(2)
provides that a taxpayer makes an election
under section 41(c)(5) by completing the
portion of Form 6765, "Credit for Increas-
ing Research Activities," (or successor
form) relating to the ASC election, and
attaching the completed form to the tax-
payer's timely filed (including extensions)
original return for the taxable year to
which the election applies. Section 1.41-
9(b)(2) also provides that a taxpayer may
not make an election under section
41(c)(5) on an amended return and that an
extension of time to make an election un-
der section 41(c)(5) will not be granted
under § 301.9100-3.

Following the publication of the 2011
Final Regulations, the Treasury Depart-
ment and the IRS received requests to

amend the regulations to allow taxpayers
to make an ASC election on an amended
return. The requests explained that the
burden of substantiating expenditures and
costs for the base period under the regular
credit can be costly, time-consuming, and
difficult, and suggested that taxpayers of-
ten need additional time to determine
whether to claim the regular credit or the
ASC.

On June 3, 2014, the Treasury Depart-
ment and the IRS published a notice of
proposed rulemaking by cross-reference
to temporary regulations (REG-133495-
13) in the Federal Register (79 FR
31892), and final and temporary regula-
tions (TD 9666) (the Temporary Regula-
tions) in the Federal Register (79 FR
31863). The final regulations removed the
rule in § 1.41-9(b)(2) that prohibited a
taxpayer from making an ASC election
for a tax year on an amended return. In its
place, the Temporary Regulations pro-
vided a rule allowing a taxpayer to make
an ASC election for a tax year on an
amended return if the taxpayer had not
previously claimed a section 41 credit for
that tax year on an original or amended
return. In addition, the Temporary Regu-
lations provided that a taxpayer that is a
member of a controlled group in a tax year
may not make an election under section
41(c)(5) for that tax year on an amended
return if any member of the controlled
group for that year claimed the research
credit using a method other than the ASC
on an original or amended return.

Written and electronic comments re-
sponding to the proposed regulations were
received. No requests for a public hearing
were made and no public hearing was
held. After consideration of all the com-
ments, the proposed regulations are ad-
opted as revised by this Treasury decision.

##### Summary of Comments and Explanation of Provisions

Interaction with Section 280C Elections

A commenter requested clarification
regarding whether a section 280C(c)(3)
election made for a taxable year on line 17
of Form 6765, Credit For Increasing Re-
search Activities, where no amount of reg-
ular credit is claimed, will be viewed by
the IRS as a claim of the section 41(a)(1)
credit and preclude an ASC election from

being made on an amended return for that
taxable year. Section 280(c)(3) allows a
taxpayer to make an annual irrevocable
election to claim a reduced research credit
rather than reducing the section 174 de-
duction, as required by section 280(c)(1).
A section 280C(c)(3) election must be
made on an original return. If a taxpayer is
undecided whether to claim the regular
credit for a taxable year but wants to pre-
serve the operative effect of the section
280C(c)(3) election for that taxable year,
then the taxpayer will make the section
280C(c)(3) election on line 17 of Form
6765, but leave the remaining section of
the form blank. A section 280C(c)(3) elec-
tion on line 17 of Form 6765 made in a
taxable year does not, in and of itself,
constitute a credit claim under section
41(a)(1), and accordingly does not pre-
clude a taxpayer from making an ASC
election on an amended return for that
taxable year.

###### Section 9100 Relief

One commenter requested that the final
regulations allow an extension of time to
make an election under section 41(c)(5)
under § 301.9100-3. Under § 301.9100-
3(c), the Commissioner will grant a rea-
sonable extension of time to make a reg-
ulatory election only when the interests of
the Government will not be prejudiced by
the granting of relief. Under § 301.9100-
3(c)(1)(ii), the interests of the Govern-
ment are ordinarily prejudiced if the tax-
able year in which the regulatory election
should have been made or any taxable
years that would have been affected by the
election had it been timely made are
closed by the period of limitations on as-
sessment under section 6501(a) before the
taxpayer's receipt of a ruling granting re-
lief under this section. Because the final
regulations allow a taxpayer to amend its
return to make the ASC election in a tax-
able year that is not closed by the period
of limitations for assessment under sec-
tion 6501(a) if no credit under section
41(a)(1) was claimed in the prior taxable
year on an original or amended return, an
extension of time under § 301.9100-3 to
make the ASC election is not necessary
during this period. An extension of time to
make an ASC election in a taxable year
closed by the period of limitations on as-

sessment under section 6501(a) ordinarily
prejudices the interests of the government.
See section 301.9100-3(c)(1)(ii). Accord-
ingly, the final regulations retain the rule
that an extension of time to make an elec-
tion under section 41(c)(5) will not be
granted under § 301.9100-3.

###### Period for Making an ASC Election

One commenter requested that the final
regulations provide that a taxpayer may
make an ASC election for an earlier,
closed tax year on a later year's return in
which a research credit from that closed
year is reported on a carryforward sched-
ule, or actually used as a credit against
tax, so long as no intervening amended
return claiming a research credit for that
tax year using a different method has been
claimed. The Temporary Regulations only
permitted a taxpayer to elect the ASC on
an amended return for taxable years end-
ing before June 3, 2014, (the effective/
applicability date of those regulations) if
the taxpayer makes the election before the
period of limitations for assessment of tax
has expired for that year. The rule in the
Temporary Regulations provided a rea-
sonable time period for taxpayers to de-
termine whether or not to make an ASC
election with respect to a prior, open tax
year. To permit a taxpayer to make an
ASC election for a tax year in which the
period of limitations for assessment of tax
has expired has the practical effect of per-
mitting the taxpayer to make an ASC elec-
tion on a return that cannot be amended.
Therefore, these final regulations do not
adopt this suggested modification.

One commenter requested that these
final regulations provide that an ASC
election can be made on an amended re-
turn for a tax year so long as the period for
making a refund claim under section 6511
has not expired for that tax year, even in
cases where the statute of limitations on
assessment under section 6501 is closed.
These final regulations retain the rule of
the Temporary Regulations that a tax-
payer must make an ASC election on an
amended return before the statute of lim-
itations on assessment under section
6501(a) is closed. The general period un-
der the statute of limitations on assess-
ment under section 6501(a), which is three
years after the tax return is filed, provides

a reasonable time for taxpayers to file an
ASC election on an amended return, and a
reasonable time for the IRS to examine
the amended return. This rule also pre-
serves the integrity of the rule in the
final regulations providing that an ex-
tension of time to make an election un-
der section 41(c)(5) will not be granted
under § 301.9100-3. Under § 301.9100-3,
the interests of the government are ordi-
narily prejudiced if the taxable year in
which a regulatory election should have
been made or any taxable years that would
have been affected by the election had it
been timely made are closed by the period
of limitations on assessment under section
6501(a) before the taxpayer's receipt of a
ruling granting relief under § 301.9100.
This requirement is mitigated by the fact
that the period of limitations on assess-
ment may be extended by agreement of
the IRS and the taxpayer. For clarity, the
language found in the effective date of the
Temporary Regulations referencing the
period of limitations for assessment of tax
is added to the text of the final regulations
under § 1.41-9(b)(2) relating to the time
and manner of making the ASC election.

###### Controlled Group ASC Elections

One commenter requested that the final
regulations modify the rules for controlled
group ASC elections under § 1.41-
9(b)(4), under which only the designated
member of a controlled group may make
or revoke an ASC election. Revising those
rules is beyond the scope of these regula-
tions. Therefore, the final regulations do
not amend § 1.41-9(b)(4).

###### Modification of the Election Rule

One commenter requested that these
final regulations amend the rule in the
Temporary Regulations that allows a tax-
payer to make an ASC election for a tax
year on an amended return only if the
taxpayer has not previously claimed the
section 41 credit on its original return or
an amended return for that tax year to
clarify that the previously claimed section
41 credit is determined under section
41(a)(1), and not under sections 41(a)(2)
or (3). The commenter stated that the ASC
is an alternative method to the regular
credit under section 41(a)(1), and whether

a taxpayer elects the ASC or claims the
regular credit does not impact the deter-
mination of the credits allowable under
sections 41(a)(2) and 41(a)(3). This ap-
proach is consistent with the language of
section 41(c)(5)(A) and § 1.41-9(a),
which specifically reference section
41(a)(1). Accordingly, the final regula-
tions provide that a taxpayer may make an
ASC election for a tax year on an
amended return only if the taxpayer has
not previously claimed the section
41(a)(1) credit on its original return or an
amended return for that tax year.

###### Effect on Other Documents

The Temporary Regulations are obso-
lete for taxable years beginning on or after
February 27, 2015.

## Special Analyses

It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866, as supplemented by Executive Or-
der 13563. Therefore, a regulatory assess-
ment is not required. It also has been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regula-
tions. It is hereby certified that the collec-
tion of information in these regulations
will not have a significant economic im-
pact on a substantial number of small en-
tities. Although a substantial number of
small entities may make an ASC election
on an amended return pursuant to these
regulations, the economic impact of any
collection burden on these entities relating
to this election is minimal because the
regulations will result in a benefit to tax-
payers by providing additional time for
taxpayer to calculate and elect the ASC.
Accordingly, a regulatory flexibility anal-
ysis under the Regulatory Flexibility Act
(5 U.S.C. chapter 6) is not required. Pur-
suant to section 7805(f) of the Code, these
regulations have been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
their impact on small business.

### Drafting Information

The principal author of these regula-
tions is David Selig, Office of the Asso-

ciate Chief Counsel (Passthroughs and
Special Industries). However, other per-
sonnel from the IRS and the Treasury
Department participated in their develop-
ment.

* * * * *

## Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 1 is amended
as follows:

### PART 1-INCOME TAXES

Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *

Section 1.41-9 also issued under 26
U.S.C. 41(c)(5)(C). *

Par. 2. Section 1.41-9 is amended by:

1\. Revising paragraph (b)(2).

2\. Adding a third and fourth sentence
to paragraph (d).

The revision and addition read as fol-
lows:

§ 1.41-9 Alternative simplified credit.

(b)

(2) Time and manner of election. A
taxpayer makes an election under section
41(c)(5) by completing the portion of
Form 6765, "Credit for Increasing Re-
search Activities," (or successor form) re-
lating to the election of the ASC, and
attaching the completed form to the tax-
payer's timely filed (including extensions)
original return for the taxable year to
which the election applies. A taxpayer
may make an election under section
41(c)(5) for a tax year on an amended
return, but only if the taxpayer has not
previously claimed a section 41(a)(1)
credit on its original return or an amended
return for that tax year, and only if that tax
year is not closed by the period of limita-
tions on assessment under section
6501(a). An extension of time to make an
election under section 41(c)(5) will not be
granted under § 301.9100-3 of this chap-
ter. A taxpayer that is a member of a
controlled group in a tax year may not
make an election under section 41(c)(5)
for that tax year on an amended return if
any member of the controlled group for
that tax year previously claimed the re-
search credit under section 41(a)(1) using
a method other than the ASC on an orig-
inal or amended return for that tax year.
See paragraph (b)(4) of this section for

additional rules concerning controlled
groups. See also § 1.41-6(b)(1) requiring
that all members of the controlled group
use the same method of computation.

* * * * *

(d) Effective/applicability date.
Paragraph (b)(2) of this section applies to
elections with respect to taxable years
ending on or after February 27, 2015. For
taxable years ending before February 27,
2015, see § 1.41-9T as contained in 26
CFR part 1, revised April 1, 2015.

## § 1.41-9T [Removed]

Par. 3. Section 1.41-9T is removed.

John Dalrymple,
Deputy Commissioner for
Services and Enforcement.

Approved: February 3, 2015.

Mark J. Mazur,
Assistant Secretary of the
Treasury (Tax Policy).

(Filed by the Office of the Federal Register on February 26,
2015, 8:45 a.m., and published in the issue of the Federal
Register for February 27, 2015, 80 F.R. 10587)

## Part III. Administrative, Procedural, and Miscellaneous

Per Capita Payments from
Proceeds of Settlements of
Indian Tribal Trust Cases
Notice 2015-20

### BACKGROUND

Notice 2013-1, 2013-3 IRB 281, pro-
vides guidance on the federal tax treat-
ment of per capita payments that members
of Indian tribes receive from proceeds of
certain settlements of tribal trust cases be-
tween the United States and those Indian
tribes. Additional tribes have settled tribal
trust cases against the United States since
publication of Notice 2013-1. This notice
provides an updated Appendix that re-
flects the additional settlement agree-
ments.

EFFECT ON OTHER DOCUMENTS

Notice 2013-1 Appendix is modified
and superseded.

## FURTHER INFORMATION

For further information regarding this
notice, please contact Telly Meier at
phone number (202) 317-8494(not a toll-
free number).

### Appendix

#### Tribes That Have Entered into Settlement Agreements of Tribal Trust Cases

1\. Assiniboine and Sioux Tribes of the
Fort Peck Reservation

2\. Bad River Band of Lake Superior
Chippewa Indians

3\. Blackfeet Tribe of the Blackfeet In-
dian Reservation

4\. Bois Forte Band of Chippewa

5\. Cachil Dehe Band of Wintun Indians
of the Colusa Rancheria

6\. Chippewa Cree Tribe of the Rocky

Boy's Reservation

7\. Coeur d'Alene Tribe

8\. Confederated Salish and Kootenai
Tribes

9\. Confederated Tribes of Siletz Indi-
ans

10\. Confederated Tribes of the Colville
Reservation

11\. Confederated Tribes of the Goshute
Reservation

12\. Crow Creek Sioux Tribe

13\. Eastern Shawnee Tribe of Okla-
homa

14\. Hualapai Indian Tribe

15\. Iowa Tribe of Kansas and Nebraska

16\. Kaibab Band of Paiute Indians of
Arizona

17\. Kickapoo Tribe of Kansas

18\. Lac Courte Oreilles Band of Lake
Superior Chippewa Indians

19\. Lac du Flambeau Band of Lake
Superior Chippewa Indians

20\. Leech Lake Band of Ojibwe

21\. Lower Brule Sioux Tribe

22\. Makah Indian Tribe of the Makah
Reservation

23\. Mescalero Apache Tribe

24\. Minnesota Chippewa Tribe

25\. Nez Perce Tribe

26\. Nooksack Indian Tribe

27\. Northern Cheyenne Tribe of Indi-

ans

28\. Omaha Tribe of Nebraska

29\. Passamaquoddy Tribe of Maine

30\. Pawnee Nation

31\. Prairie Band of Potawatomi Nation

32\. Pueblo of Zia

33\. Quechan Tribe of the Fort Yuma
Reservation

34\. Red Cliff Band of Lake Superior
Chippewa Indians

35\. Rincon Luiseño Band of Indians

36\. Rosebud Sioux Tribe

37\. Round Valley Indian Tribes

38\. Salt River Pima-Maricopa Indian
Community

39\. Santee Sioux Tribe of Nebraska

40\. Sault Ste. Marie Tribe

41\. Shoshone-Bannock Tribes of the
Fort Hall Reservation

42\. Soboba Band of Luiseno Indians

43\. Spirit Lake Dakotah Nation

44\. Spokane Tribe of Indians

45\. Standing Rock Sioux Tribe

46\. Stillaguamish Tribe of Indians

47\. Summit Lake Paiute Tribe

48\. Swinomish Indian Tribal Commu-
nity

49\. Te-Moak Tribe of Western Sho-
shone Indians

50\. Tohono O'odham Nation

51\. Tulalip Tribes

52\. Tule River Indian Tribe

53\. Ute Indian Tribe of the Uintah and
Ouray Reservation

54\. Ute Mountain Ute Tribe

55\. Winnebago Tribe of Nebraska

56\. Qawalangin Tribe of Unalaska

57\. Tlingit & Haida Tribes of Alaska

58\. Northwestern Band of Shoshone
Indians

59\. Hoopa Valley Tribe

60\. Ak-Chin Indian Community

61\. Oglala Sioux Tribe

62\. Yoruk Tribe

63\. Cheyenne River Sioux Tribe

64\. Paiute-Shoshone Indians of the
Bishop Community of the Bishop Colony

65\. Seminole Nation of Oklahoma

66\. Otoe-Missouria Tribe of Oklahoma

67\. Samish Indian Nation

68\. Tonkawa Tribe of Indians of Okla-
homa

69\. Yakama Nation

70\. Miami Tribe of Oklahoma

71\. Shoshone Indian Tribe and the
Northern Arapahoe Indian Tribe of the
Wind River Reservation

72\. Pueblo of Laguna

73\. Navajo Nation

74\. Caddo Nation of Oklahoma

75\. Gros Ventre and Assiniboine
Tribes of the Fort Belknap Indian Reser-
vation

User Fees and Change of Address for Submission of
Applications for Approval of § 403(b) Pre-approved
Plans

## Revenue Procedure 2015-22

### SECTION 1. PURPOSE

This revenue procedure contains a
modification to Revenue Procedure 2013-
22, 2013-18 I.R.B. 985, as modified by
Revenue Procedure 2014-28, 2014-16
I.R.B. 944, and modifications to Revenue
Procedure 2015-8, 2015-1 I.R.B. 235. In
particular, this revenue procedure changes
the addresses to which applications for
opinion and advisory letters for § 403(b)
pre-approved plans should be submitted
and inserts a user fee that was omitted
from Rev. Proc. 2015-8.

## SECTION 2. BACKGROUND

.01 Rev. Proc. 2013-22 established a
new program for the submission of § 403(b)
pre-approved plans to the Internal Revenue
Service (Service), modeled after the pro-
gram for pre-approved § 401(a) qualified
plans, which is described in Rev. Proc.
2011-49, 2011-44 I.R.B. 608.

.02 Rev. Proc. 2014-28 modified,
among other changes, section 11.03 of Rev.
Proc. 2013-22 to allow a person to sponsor
a plan as a minor modifier of a § 403(b)
volume submitter specimen plan of a mass
submitter under the same conditions listed
in section 11.03 for a person sponsoring a
plan as a minor modifier of a § 403(b)
prototype plan of a mass submitter.

.03 The modifications to Rev. Proc.
2013-22 contained in Rev. Proc. 2014-28
did not specify a user fee for a minor
modifier of a § 403(b) volume submitter
specimen plan of a mass submitter.

.04 Rev. Proc. 2015-8, which, in part,
provides a fee schedule for certain filings
and submissions to the Service, did not
include a user fee for a minor modifier of
a § 403(b) volume submitter specimen
plan of a mass submitter.

## SECTION 3. MODIFICATION OF REV. PROC. 2013-22

The following change is made to Rev.
Proc. 2013-22:

.01 The last sentence of section 17.03
of Rev. Proc. 2013-22 is revised to read
as follows:

The request is to be sent to:

Internal Revenue Service
Attn: Pre-Approved Plans Coordinator
Room 5106, Group 7521
P.O. Box 2508
Cincinnati, OH 45201-2508

## SECTION 4. MODIFICATION OF REV. PROC. 2015-8

The following changes are made to
Rev. Proc. 2015-8

.01 Section 6.07 is modified to include a
user fee for an advisory letter for a § 403(b)
volume submitter specimen plan that is a
minor modifier of a § 403(b) volume sub-
mitter specimen plan of a mass submitter.
Section 6.07 is revised to add a new section (4)
and the remaining sections are renumbered.
As revised, section 6.07 reads as follows:

.07 Advisory Letters on § 403(b)
volume submitter plans.

(1) Section 403(b) volume
submitter specimen plan
(non-mass submitter)

$12,000

(a) with no or one
adoption agreement
$ 9,500

(b) per additional adop-
tion agreement

(2) Section 403(b) volume
submitter mass submitter
specimen plan
$12,000

(a) with no or one
adoption agreement

(b) per additional adop-
$ 1,000
tion agreement
300

(3) Section 403(b) volume $
submitter specimen plan of
a word-for-word Identical
adopter of a mass submitter
specimen plan
$ 1,000

(4) Section 403(b) vol-
ume submitter specimen
plan of a minor modifier
of a § 403(b) volume
submitter mass submitter
specimen plan (or per
adoption agreement, if
applicable)
$
300

(5) Assumption of spon-
sorship of an approved
§ 403(b) volume submit-
ter plan, without any
amendment to the plan
document, by a new en-
tity, as evidenced by a
change of employer iden-
tification number, per
specimen plan
None

(6) Change in name
and/or address of practi-
tioner of an approved
§ 403(b) volume submit-
ter specimen plan, per
specimen plan

.02 Section 7.01(3) is deleted.

.03 Section 7.02 is restated to include the
submission of applications for opinion and
advisory letters for § 403(b) pre-approved
plans and to provide the correct addresses
for all pre-approved plan submissions. As
revised, section 7.02 reads as follows:

.02 Matters handled by EP or EO De-
terminations Office.

(1) The following types of requests and
applications are handled by the EP or EO

Determinations Office and should be sent to
the Internal Revenue Service Center in Co-
vington, Kentucky, at the address shown
below: (a) requests for determination letters
on the qualified status of employee plans
under § 401, 403(a), or 409, and the exempt
status of any related trust under § 501; (b)
applications for recognition of tax exemp-
tion on Form 1023, Form 1024 and Form
1028; (c) requests for determination letters
submitted with Form 8940; (d) requests for
changes in accounting period; and (e) and
other applications for recognition of qualifi-
cation or exemption (other than on Form
1023-EZ). The address is:

Internal Revenue Service

Attention: EP/EO Determination
Letters
Stop 31
P.O. Box 12192
Covington, KY 41012-0192

(2) Applications for recognition of ex-
emption on Form 1023-EZ are handled by
the EO Determinations Office, but must
be submitted electronically online at
www.pay.gov. Paper submissions of Form
1023-EZ will not accepted.

(3) The following types of requests and
applications are handled by the EP Deter-
minations Office and should be sent to the
Internal Revenue Service at the address
shown below: (a) requests for master and
prototype opinion letters and for volume
submitter advisory letters on the form of
pre-approved employee plans under § 401
or 403(a); (b) the exempt status of any
related trust under § 501; and (c) requests
for prototype opinion letters and for vol-
ume submitter advisory letters for
§ 403(b) pre-approved plans under Rev.
Proc. 2013-22. The address is:

Internal Revenue Service
Attn: Pre-Approved Plans Coordinator
P.O. Box 2508
Rm. 5106: Group 7521
Cincinnati, OH 45201

(4) Determinations and requests not
subject to a user fee are handled by the EO
Determinations Office and should be sent
to the Internal Revenue Service at the
address shown below:

Internal Revenue Service
P.O. Box 2508
Rm. 4024
Cincinnati, OH 45201

(5) Applications shipped by Express
Mail or a delivery service for all of the
above except for pre-approved em-
ployee plans should be sent to:

Internal Revenue Service
Attention: EP/EO Determination
Letters
Stop 31
201 West Rivercenter Boulevard
Covington, KY 41011

Applications shipped by Express Mail
or a delivery service for pre-approved
employee plans should be sent to:
Internal Revenue Service
Attn: Pre-Approved Plans Coordinator
550 Main Street
Room 5106: Group 7521
Cincinnati, OH 45202

## SECTION 5. PAPERWORK REDUCTION ACT

The collections of information contained
in the revenue procedure have been re-
viewed and approved by the Office of Man-
agement and Budget in accordance with the
Paperwork Reduction Act (44 U.S.C. 3507)
under control number 1545-1520.

## SECTION 6. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 2013-22 and Rev. Proc.
2015-8 are modified.

## SECTION 7. EFFECTIVE DATE

The modifications in this revenue proce-
dure are effective as of February 26, 2015.

## SECTION 8. DRAFTING INFORMATION

The principal author of this revenue
procedure is Kathleen Herrmann of the
Office of Associate Chief Counsel (Tax
Exempt and Government Entities). For
further information regarding this notice,
contact Ms. Herrmann at (202) 317-6799
(not a toll-free number).

## Part IV. Items of General Interest

### Health Insurance Providers Fee

#### REG-143416-14

AGENCY: Internal Revenue Service
(IRS), Treasury.

ACTION: Notice of proposed rulemaking
by cross-reference to temporary regulations.

SUMMARY: This document contains
proposed regulations that provide rules for
the definition of a covered entity for pur-
poses of the fee imposed by section 9010
of the Patient Protection and Affordable
Care Act, as amended. In the Rules and
Regulations section of this issue of the
Federal Register, the IRS is issuing tem-
porary regulations. The text of those
temporary regulations also serves as the
text of these proposed regulations. The
proposed regulations are necessary to
clarify certain terms in section 9010.
The proposed regulations affect persons
engaged in the business of providing
health insurance for United States health
risks.

DATES: Comments and requests for a
public hearing must be received by May
27, 2015.

ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG-143416-14), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand-
delivered Monday through Friday be-
tween the hours of 8 a.m. and 4 p.m. to
CC:PA:LPD:PR (REG-143416-14), Cou-
rier's Desk, Internal Revenue Service, 1111
Constitution Avenue, NW, Washington,
DC, or sent electronically, via the Federal
eRulemaking portal at www.regulations.gov
(IRS REG-143416-14)

#### FOR FURTHER INFORMATION

CONTACT: Concerning the proposed
regulations, Rachel S. Smith, (202) 317-
6855; concerning submissions of com-
ments and request for a hearing, Regina
Johnson, (202) 317-6901 (not toll-free
numbers).

SUPPLEMENTARY INFORMATION:

##### Background

Temporary regulations in the Rules
and Regulations section of this issue of
the Federal Register amend the Health
Insurance Providers Fee Regulations (26
CFR Part 57) and serve as the text for
these proposed regulations.

## Special Analyses

It has been determined that these pro-
posed regulations are not a significant reg-
ulatory action as defined in Executive Or-
der 12866, as supplemented by Executive
Order 13563. Therefore, a regulatory as-
sessment is not required. It also has been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regula-
tions, and because the regulation does not
impose a collection of information on
small entities, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Code,
these regulations have been submitted to
the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on its impact on small business.

## Comments and Requests for a Public Hearing

Before the proposed regulations are ad-
opted as final regulations, consideration
will be given to any comments that are
submitted timely to the IRS as prescribed
in this preamble under the "Addresses"
heading. The Treasury Department and
the IRS request comments on all aspects
of the proposed regulations. All comments
will be available at www.regulations.gov
or upon request. A public hearing will be
scheduled if requested in writing by any
person that timely submits written com-
ments. If a public hearing is scheduled,
notice of the date, time, and place for the
public hearing will be published in the
Federal Register.

### Drafting Information

The principal author of these proposed
regulations is Rachel S. Smith, IRS Office
of the Associate Chief Counsel (Pass-

throughs and Special Industries). How-
ever, other personnel from the Treasury
Department and the IRS participated in
their development.

* * * * *

## Proposed Amendments to the Regulations

Accordingly, 26 CFR part 57 is pro-
posed to be amended as follows:

PART 57-HEALTH INSURANCE
PROVIDERS FEE

Paragraph 1. The authority citation for
part 57 continues to read in part as follows:

Authority: 26 U.S.C. 7805; sec. 9010,
Public Law 111-148 (124 Stat. 119 (2010)).
* * * * *

Par. 2. Section 57.2 is amended by
revising paragraphs (b)(3) and (c)(3)(ii) to
read as follows:

§ 57.2 Explanation of terms.

* * * * *

(b) * * *
(3) [The text of proposed § 57.2(b)(3)
is the same as the text of § 57.2T(b)(3)
published elsewhere in this issue of the
Federal Register].

* * * * *

(3) * * *

(ii) [The text of proposed § 57.2(c)(3)(ii)
is the same as the text of § 57.2T(c)(3)(ii)
published elsewhere in this issue of the Fed-
eral Register].

* * * * *

Par. 3. Section 57.10 is amended by
revising paragraph (b) to read as follows:

§ 57.10 Effective/applicability date.

* * * *

(b) [The text of proposed § 57.10(b) is
the same as the text of § 57.10T(b) pub-
lished elsewhere in this issue of the Fed-
eral Register].

John Dalrymple,
Deputy Commissioner for
Services and Enforcement.

(Filed by the Office of the Federal Register on [date], [time],
and published in the issue of the Federal Register for [date],
[number] F.R. [number]

[FR Doc. 2015-03945 Filed 02/23/
2015 at 4:15 pm; Publication Date: 02/26/
2015]

## Changes to Employee Plans Determination Letter Processing

### Announcement 2015-1

This announcement describes changes
to the processing of employee plans de-
termination letters that will take effect in
2015. These changes are being adopted as
a result of a process improvement strategy
designed to promote case processing effi-
ciency.

The changes to the determination letter
procedures described in this announce-
ment will be reflected in Rev. Proc.
2015-6, which will be published in IRB
2015-1 and be effective on February 1,
2015. Rev. Proc. 2015-6 will set forth the
Service's procedures for issuing determi-
nation letters on the qualified status of
employee plans.

Incomplete Applications - Procedural
Requirements. Upon receipt of a timely
filed determination letter application
("Application"), the Service will review
the Application to determine if it is com-
plete. For an Application to be complete,
it must include all of the information and
documents required by Rev. Proc.
2015-6, including, but not limited to, a
completed copy of the Procedural Re-
quirements Checklist set forth in Forms
5300, 5307, 5310 and 5316. The Proce-
dural Requirements Checklist is designed
to assist applicants in the filing of a com-
plete Application. If an Application is in-
complete, the Service will contact the ap-
plicant in writing and request the missing
information. The applicant will have 30
days from the date of the letter to provide
the information to the Service. If the ap-
plicant fails to provide the information
within the 30-day period, the case will be
closed. The Service will retain the incom-
plete Application, and the user fee submit-
ted with the Application will not be re-
funded. The applicant may submit a new
on-cycle Application, with a new user fee,
by the end of the plan's remedial amend-

ment cycle, unless a later date is specified
in the Service's letter informing the appli-
cant that the case has been closed. How-
ever, if both the response deadline and the
postmark date of any response to the letter
identifying the missing information occur
after the end of the plan's remedial
amendment cycle, the remedial amend-
ment cycle will not be extended and the
Service will send the applicant a final dis-
position letter.

The Service intends to develop a refer-
ence list ("Reference List") that applicants
may use to indicate the specific provisions
in the plan document that reflect the
items in the Cycle E Cumulative List. A
template of the Reference List will be
available at www.irs.gov. The inclusion
of a completed Reference List with the
Application will facilitate the Service's
review of the Application, and is en-
couraged. Submission of a Reference
List is not mandatory in Cycle E; how-
ever, the Service is considering making
the inclusion of the Reference List man-
datory beginning the following year, in
Cycle A.

Request for Additional Information -
Technical Review. The Service will not
conduct technical review of an Applica-
tion until it is procedurally complete, as
described above. During the course of the
technical review, the Service may issue a
written request for additional information
from the applicant. The written request
will specify the time period in which the
applicant must supply the required infor-
mation. If the applicant's response to this
request is not timely and complete, the
Service will inform the applicant again, in
writing, that the applicant must provide
the specified information within a speci-
fied period of time. If the applicant's re-
sponse to the second request is not timely
and complete, the case will be closed, the
documents retained, and the user fee sub-
mitted with the Application will not be
refunded. The applicant may submit a new
on-cycle Application, with a new user fee,
by the end of the plan's remedial amend-
ment cycle, unless a later date is specified
in the Service's letter informing the appli-
cant that the case has been closed. How-
ever, if both the response deadline and the
postmark date of any response to the sec-
ond request occur after the end of the
plan's remedial amendment cycle, the re-

medial amendment cycle will not be ex-
tended and the Service will send the ap-
plicant a final disposition letter.

# DRAFTING INFORMATION

The principal author of this announce-
ment is Sherri Edelman of the Employee
Plans, Tax Exempt and Government En-
tities Division. Questions regarding this
announcement may be sent via e-mail to
RetirementPlanQuestions@irs.gov.

# Deletions From Cumulative List of Organizations, Contributions to Which are Deductible Under Section 170 of the Code

## Announcement 2015-10

The Internal Revenue Service has re-
voked its determination that the organiza-
tions listed below qualify as organiza-
tions described in sections 501(c)(3) and
170(c)(2) of the Internal Revenue Code
of 1986.

Generally, the IRS will not disallow
deductions for contributions made to a
listed organization on or before the date of
announcement in the Internal Revenue
Bulletin that an organization no longer
qualifies. However, the IRS is not pre-
cluded from disallowing a deduction for
any contributions made after an organiza-
tion ceases to qualify under section
170(c)(2) if the organization has not
timely filed a suit for declaratory judg-
ment under section 7428 and if the con-
tributor (1) had knowledge of the revoca-
tion of the ruling or determination letter,
(2) was aware that such revocation was
imminent, or (3) was in part responsible
for or was aware of the activities or omis-
sions of the organization that brought
about this revocation.

If on the other hand a suit for declara-
tory judgment has been timely filed, con-
tributions from individuals and organiza-
tions described in section 170(c)(2) that
are otherwise allowable will continue to
be deductible. Protection under section
7428(c) would begin on March 16, 2015
and would end on the date the court first
determines the organization is not de-
scribed in section 170(c)(2) as more par-

ticularly set for in section 7428(c)(1).
For individual contributors, the maxi-
mum deduction protected is $1,000,

with a husband and wife treated as one
contributor. This benefit is not extended
to any individual, in whole or in part, for

the acts or omissions of the organization
that were the basis for revocation.

NAME OF ORGANIZATION

Effective Date of Revocation

LOCATION

Academy of America

July 1, 2001

Oak Park, MI

National LUST Program Fund

March 29, 2011

Richmond, VA

Association for Honest Attorneys (AHA)

January 1, 2010

Derby, KS

Hispanic Office of Planning &amp; Evaluation Inc.

July 1, 2011

Foxboro, MA

Determination of Adjusted
Applicable Federal Rates
under Section 1288 and
the Adjusted Federal
Long-Term Rate under
Section 382

## REG-136018-13

AGENCY: Internal Revenue Service
(IRS), Treasury.

ACTION: Notice of proposed rulemaking
and notice of public hearing.

SUMMARY: This document contains
proposed regulations that provide the
method to be used to adjust the applicable
Federal rates (AFRs) under section 1288
of the Internal Revenue Code (Code) (ad-
justed AFRs) for tax-exempt obligations
and the method to be used to determine
the long-term tax-exempt rate and the ad-
justed Federal long-term rate under sec-
tion 382. For tax-exempt obligations, the
proposed regulations affect the determina-
tion of original issue discount under sec-
tion 1273 and of total unstated interest
under section 483. In addition, the pro-
posed regulations affect the determination
of the limitations under sections 382 and
383 on the use of certain operating loss
carryforwards, tax credits, and other attri-
butes of corporations following ownership
changes. This document also contains a
request for comments and provides notice
of a public hearing on these proposed
regulations.

DATES: Written or electronic comments
must be received by June 1, 2015. Out-
lines of topics to be discussed at the public
hearing scheduled for June 24, 2015 must
be received by June 1, 2015.

ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG-136018-13), Room
5203, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand-
delivered Monday through Friday between
the hours of 8 a.m. and 4 p.m. to CC:PA:
LPD:PR (REG-136018-13), Courier's
Desk, Internal Revenue Service, 1111
Constitution Avenue, N.W., Washing-
ton, DC, or sent electronically, via the
Federal eRulemaking portal at www.
regulations.gov (IRS REG-136018-
13). The public hearing will be held in
the IRS Auditorium, Internal Revenue
Building, 1111 Constitution Avenue,
N.W., Washington, DC.

### FOR FURTHER INFORMATION

CONTACT: Concerning the proposed
regulations under section 1288, Jason G.
Kurth at (202) 317-6842; concerning the
proposed regulations under section 382,
William W. Burhop at (202) 317-6847;
concerning submissions of comments, the
hearing, and/or to be placed on the build-
ing access list to attend the hearing, Olu-
wafunmilayo (Funmi) Taylor at (202)
317-6901 (not toll-free numbers).

## SUPPLEMENTARY INFORMATION: Background

This document contains proposed
amendments to 26 CFR part 1 (Income
Tax Regulations) under sections 382 and
1288 of the Code. The proposed regula-
tions provide the new method by which
the Treasury Department and the IRS pro-
pose to determine the adjusted AFRs un-
der section 1288 to take into account the
tax exemption for interest on tax-exempt
obligations (as defined in section
1275(a)(3) and § 1.1275-1(e)) and the
long-term tax-exempt rate and the ad-

justed Federal long-term rate under sec-
tion 382(f) to take into account differ-
ences between rates on long-term taxable
and tax-exempt obligations.

Section 1274(d) directs the Secretary
to determine the AFRs that are used for
determining the imputed principal amount
of debt instruments to which section 1274
applies, computing total unstated interest
on payments to which section 483 applies,
and other purposes. Under section
1274(d)(1), the AFR is: (i) in the case of a
debt instrument with a term not over three
years, the Federal short-term rate; (ii) in
the case of a debt instrument with a term
over three years but not over nine years,
the Federal mid-term rate; and (iii) in the
case of a debt instrument with a term over
nine years, the Federal long-term rate.
Sections 1274(d)(2) and (3) provide spe-
cial rules for selecting the appropriate
AFR in specified circumstances. Section
1274(d)(2) provides that, in the case of a
sale or exchange, the AFR shall be the
lowest AFR in effect for any month in the
3-calendar-month period ending with the
first calendar month in which there is a
binding contract in writing for the sale or
exchange. Section 1274(d)(3) requires
that options to renew or extend be taken
into account in determining the term of a
debt instrument. During each month, the
Treasury Department determines the
AFRs that will apply during the following
calendar month based on the average mar-
ket yield of outstanding marketable obli-
gations of the United States with appro-
priate maturities. See § 1.1274-4(b). The
IRS publishes the AFRs for each month in
the Internal Revenue Bulletin (see
§ 601.601(d)(2)(ii)).

Section 1288(b)(1) provides that, in ap-
plying section 483 or section 1274 to a
tax-exempt obligation, under regulations

prescribed by the Secretary, appropriate
adjustments shall be made to the AFR to
take into account the tax exemption for
interest on the obligation. The IRS pub-
lishes the adjusted AFRs for each month
in the Internal Revenue Bulletin (see
§ 601.601(d)(2)(ii)).

In the case of a corporation that has
undergone an ownership change described
in section 382(g): (i) section 382 places an
annual limit (the section 382 limitation)
on the amount of the corporation's taxable
income that may be offset by certain net
operating loss carryforwards and built-in
losses; and (ii) section 383 places a limit,
determined by reference to the section 382
limitation, on the amount of the corpora-
tion's income tax liability that may be
offset by certain tax credits and other tax
attributes. Under section 382(b)(1), the
section 382 limitation generally equals
the product of (A) the value of the stock of
the corporation immediately prior to the
ownership change and (B) the long-term
tax-exempt rate.

Section 382(f)(1) defines the long-term
tax-exempt rate as the highest of the ad-
justed Federal long-term rates in effect for
any month in the three-calendar-month
period ending with the calendar month in
which the ownership change occurs. Sec-
tion 382(f)(2) provides that the term "ad-
justed Federal long-term rate" means the
Federal long-term rate determined under
section 1274(d), except that sections
1274(d)(2) and (3) shall not apply, and
such rate shall be properly adjusted for
differences between rates on long-term
taxable and tax-exempt obligations.

Section 382(f) was added to the Code
by the Tax Reform Act of 1986, Public
Law 99-514 (100 Stat. 2254). The Report
of the Committee on Ways and Means on
H.R. 3838, the Tax Reform Act of 1985
(the title of the Act as it passed the
House), states that the long-term tax-
exempt rate should be determined by ad-
justing the Federal long-term rate (deter-
mined under section 1274) pursuant to
section 1288 to take into account tax ex-
emption. H.R. Rep. No. 99-426, 99th
Cong., 1st Sess. 268 (1985) (1986-3 CB
(Vol. 2) 1, 268). The Conference Report
for the Tax Reform Act of 1986 states that
the adjusted Federal long-term rate is to
be computed as the yield on a diversified
pool of prime, general obligation tax-

exempt bonds with remaining periods to
maturity of more than nine years. The
report also explains that it is necessary to
the purposes of section 382 that the long-
term tax-exempt rate be lower than the
Federal long-term rate. Further, the Com-
mittee anticipated that the long-term tax-
exempt rate would ordinarily fall in a
range between (i) the Federal long-term
rate multiplied by a percentage equal to
the difference between 100 percent and
the corporate tax rate, and (ii) 100 percent
of the Federal long-term rate. 2 H.R. Rep.
No. 99-841 (Conf. Rep.), 99th Cong., 2d
Sess. II-188 (1986) (1986-3 CB (Vol. 4)
1, 188). Under current tax rates, that
would be between 65 percent and 100
percent of the Federal long-term rate.

Since November 1986, the adjusted
Federal long-term rate published under
section 382(f)(2) has been equal to the
long-term adjusted AFR with annual com-
pounding published under section 1288(b)
in the same month. See Rev. Rul. 86-133
(1986-2 CB 59) (see § 601.601(d)(2)(ii)).
For calendar months from November
1986 to February 2013, the Treasury De-
partment determined the adjusted Federal
long-term rate and each adjusted AFR de-
scribed in section 1288(b)(1) by multiply-
ing the corresponding AFR by a fraction
(the adjustment factor). The numerator of
the adjustment factor was a composite
yield of the highest-grade tax-exempt ob-
ligations available, which are prime, gen-
eral obligation tax-exempt obligations.
The denominator was a composite yield of
U.S. Treasury obligations with maturities
similar to those of the tax-exempt obliga-
tions. Each of the composite yields was
measured over a one-month period.

Since the beginning of 2008, market
yields of prime, general obligation tax-
exempt obligations have sometimes ex-
ceeded market yields of comparable U.S.
Treasury obligations, causing the adjusted
Federal long-term rate and each adjusted
AFR to exceed the corresponding AFRs.
This relationship between the adjusted
rates and the corresponding AFRs showed
that the adjustment factor no longer
served the purposes of sections 1288(b)(1)
and 382(f)(2), which require adjustments
to reflect only tax exemption, not credit
quality. These rates are also inconsistent
with the express intention of Congress
that the adjusted Federal long-term rate

and the long-term tax-exempt rate be
lower than the Federal long-term rate.

## Request for Comments and Summary of Comments

In response, the IRS published Notice
2013-4 (2013-9 IRB 527) on February
25, 2013, requesting comments on possi-
ble modifications to the method by which
adjusted AFRs and the adjusted Federal
long-term rate are determined. The notice
solicited comments on several potential
adjustment factors. One proposal was an
adjustment factor based on tax rates, un-
der which each adjusted AFR would be
the product of (A) the appropriate AFR,
and (B) the excess of (i) one hundred
percent over (ii) a tax rate or a fixed
percentage of a tax rate. Another proposal
was an adjustment factor based on histor-
ical data, under which the adjustment fac-
tor would be fixed at an amount that
would produce a spread between Federal
long-term rates and adjusted Federal long-
term rates equal to the average spread
between those rates during the period
from 1986 through 2007 (which is the pe-
riod before changes in market conditions
elevated the yields of many obligations in
relation to U.S. Treasury obligations). The
notice also requested comments on whether
the adjusted Federal long-term rate de-
scribed in section 382(f)(2) should continue
to be determined in the same manner as
the adjusted AFRs described in section
1288(b)(1).

Notice 2013-4 provided that, until the
Treasury Department and the IRS issue
further guidance, the adjusted AFRs and
the long-term tax-exempt rate would con-
tinue to be calculated using the adjustment
factor, except that the adjustment factor
would equal one for any month in which
the adjustment factor would otherwise be
greater than one or in which the denomi-
nator of the adjustment factor would oth-
erwise be less than or equal to zero.

The IRS received two comments in
response to Notice 2013-4. One com-
menter recommended an adjustment fac-
tor based on tax rates for purposes of
section 1288, and made no recommenda-
tion regarding section 382. That com-
menter suggested that the proper tax rate
to use to calculate the adjusted AFRs is
the highest individual tax rate set forth in
section 1, increased by the tax rate under

section 1411 applicable to the investment
income of individuals.

The other commenter recommended
the use of historical data to determine the
lowest individual marginal tax rate needed
to attract sufficient investors to clear the
market supply of tax-exempt obligations
for purposes of section 1288. That com-
menter recommended that there be no
change to the calculation of the long-term
tax-exempt rate under section 382. In the
alternative, the commenter recommended
that the adjusted Federal long-term rate
described in section 382(f) be subject to a
floor because the commenter argued that
section 382 is intended to defer rather than
eliminate net operating losses, and the
lower the long-term tax-exempt rate, the
greater the likelihood that net operating
losses subject to section 382 limitation
will expire before they are used.

## Explanation of Provisions

The language and purposes of sections
382 and 1288 suggest that AFRs are to be
adjusted in the same manner for purposes
of both provisions. Implementation of
each provision requires an adjustment to
take into account the effect of tax exemp-
tion on market yields. Therefore, under
these proposed regulations, the adjusted
Federal long-term rate under section
382(f) would continue to be determined in
the same manner as the adjusted AFRs
under section 1288.

The Treasury Department and the IRS
recognize that, to be entirely consistent
with the language and legislative history
of sections 382 and 1288, the adjusted
Federal long-term rate and each adjusted
AFR should be determined based on the
current market yield on a pool of tax-
exempt obligations that have terms, fea-
tures, and credit quality matching those of
U.S. Treasury obligations, which would
result in an adjusted Federal long-term
rate or adjusted AFR that is lower than the
corresponding AFR. However, under re-
cent market conditions tax-exempt obliga-
tions with perceived credit qualities ap-
proximating U.S. Treasury obligations
arguably no longer exist. Because of the
increasing spreads between the yields of
U.S. Treasury obligations and other debt
instruments, the yield of a pool of tax-
exempt obligations will likely be higher
than the yield of similar U.S. Treasury

obligations and the AFR for the corre-
sponding term.

During the period from 1986 to 2007,
certain tax-exempt obligations satisfied
the criteria in the Code and the legislative
history. As discussed in this preamble, the
current adjustment factor is based on the
ratio of yields on prime, general obliga-
tion tax-exempt obligations to yields of
U.S. Treasury obligations with similar
maturities. From 1986 to 2007, that ratio
(and, as a result, the ratios of adjusted
AFRs and adjusted Federal long-term
rates to AFRs) was, on average, approxi-
mately equal to one minus 59 percent of
the maximum individual tax rate under
section 1. That relationship was relatively
stable over the period; the ratio of the
spread between the yields to the maxi-
mum individual tax rate under section 1
generally did not vary by more than a few
percentage points. In the absence of cur-
rent market data from tax-exempt obliga-
tions and U.S. Treasury obligations with
similar maturities and similar credit qual-
ity, the Treasury Department and the IRS
believe this historical market data pro-
vides the best indication of the effect of a
tax exemption on market yields.

The Treasury Department and the IRS
therefore propose use of this historical
market data to create an appropriate ad-
justment factor based on individual tax
rates. Consistent with a proposal in Notice
2013-4 and one commenter's suggestion
regarding section 1288, the proposed ad-
justment factor is one minus the product
of a tax rate and a fixed percentage. The
Treasury Department would therefore de-
termine the adjusted AFRs and the ad-
justed Federal long-term rate for each
month from the appropriate AFRs for that
month using the proposed adjustment fac-
tor that results from the following calcu-
lation: 100 percent - [(a combined tax
rate) X (a fixed percentage)]. Consistent
with both commenters' suggestions re-
garding section 1288, the tax rate is the
maximum individual tax rate.

Specifically, the tax rate in the pro-
posed adjustment factor is the sum of the
maximum individual rate under section 1
and the maximum individual rate under
section 1411 for the month to which the
rate applies. Using current maximum in-
dividual tax rates under sections 1 and
1411, the combined tax rate in the calcu-

lation would be 43.4 percent, the sum of
39.6 percent and 3.8 percent. High-
income individuals purchase a large per-
centage of municipal bonds because these
purchasers benefit the most from the tax
exemption. While individual and corpo-
rate tax rates were relatively stable from
1986 to 2007, data analyzed by the Trea-
sury Department indicate that the differ-
ential between yields on tax-exempt mu-
nicipal bonds and comparable U.S.
Treasury obligations was significantly
more correlated with the highest individ-
ual income tax rates than with corporate
tax rates. Thus, an adjustment factor based
on the maximum individual tax rate al-
lows a better approximation of the
market-based adjustment that Congress
intended than would one based on a cor-
porate tax rate. The tax on net investment
income under section 1411 is included in
the proposed adjustment factor to account
for the entire rate of federal tax imposed
on high-income individuals who hold tax-
able obligations.

The fixed percentage is the amount by
which that combined tax rate must be
multiplied to reflect the historical relation-
ship between the maximum tax rate and
the spread between yields of taxable and
tax-exempt obligations. The spread is less
than 100% of the maximum tax rate be-
cause, for example, issuers of tax-exempt
bonds need to attract purchasers with ef-
fective tax rates lower than the maximum
individual tax rate. The fixed percentage
in the proposed adjustment factor is 59
percent, because the yield on tax-exempt
obligations from February 1986 to July
2007 was lower than that of comparable
taxable obligations by, on average, 59 per-
cent of the maximum individual rate in
effect under section 1.

Therefore, the adjustment factor under
current tax rates would be 74.39 percent,
the result of subtracting 25.61 percent (the
product of 43.4 percent and 59 percent)
from 100 percent. If an AFR for a given
month were 5 percent, under current tax
rates, the corresponding adjusted AFR
would be 3.72 percent: the product of
74.39 percent and 5 percent. If that 5
percent AFR were the Federal long-term
rate for debt instruments with annual com-
pounding, the adjusted Federal long-term
rate under section 382 would likewise be
3.72 percent.

The proposed regulations do not adopt
the suggestion of one commenter that the
adjusted Federal long-term rate described
in section 382(f) be subject to a floor
because that would be inconsistent with
the primary purpose of section 382. The
primary purpose of section 382 is to pre-
serve the integrity of the carryover provi-
sions by discouraging tax-motivated cor-
porate acquisitions while allowing the
carryover provisions to perform their in-
tended averaging function. To accomplish
this purpose, section 382 seeks to limit the
use of pre-change losses by an acquiring
corporation to no more than the loss cor-
poration's ability to use such losses, with
that limit being determined by multiplying
the long-term tax-exempt rate-a rate be-
low the Federal long-term rate-by the
value of the loss corporation. The Confer-
ence Report for the Tax Reform Act of
1986 explains:

The use of a rate lower than the
long-term Federal rate is necessary
to ensure that the value of NOL
carryforwards to the buying corpo-
ration is not more than their value to
the loss corporation. Otherwise
there would be a tax incentive for
acquiring loss corporations. If the
loss corporation were to sell its as-
sets and invest in long-term Trea-
sury obligations, it could absorb its
NOL carryforwards at a rate equal
to the yield on long-term govern-
ment obligations. Since the price
paid by the buyer is larger than the
value of the loss company's assets
(because of the value of NOL carry-
forwards are taken into account), ap-
plying the long-term Treasury rate to
the purchase price would result in
faster utilization of NOL carryfor-
wards by the buying corporation.

2 H.R. Rep. No. 99-841 (Conf. Rep.),
99th Cong., 2d Sess. II-188 (1986)
(1986-3 CB (Vol. 4) 1, 188).

Imposing a floor on the adjusted Fed-
eral long-term rate, and thereby on the
long-term tax-exempt rate, would reduce
the effect of the mechanism Congress es-
tablished to ensure that the value of net
operating loss carryforwards to the acquir-
ing corporation is not more than the value
of those carryforwards to the loss corpo-
ration. Moreover, as a matter of statutory
interpretation, an upward adjustment of
the adjusted Federal long-term rate to

comply with a fixed minimum level would
disregard the express direction of Con-
gress to determine the adjusted Federal
long-term rate based on the Federal long-
term rate determined under section
1274(d), which is not subject to a floor,
with adjustments to take into account the
differences between rates on taxable and
tax-exempt obligations. Further, the legis-
lative history of section 382(f) suggests
that Congress intended that the adjusted
Federal long-term rate be determined in a
manner similar to the adjusted AFR under
section 1288.

The tax rate used to determine adjusted
AFRs under these proposed regulations
differs from the tax rate used to determine
the interest rate on demand deposit secu-
rities under the State and Local Govern-
ment Series (SLGS). Demand deposit
SLGS securities are one-day certificates
of indebtedness that are automatically
rolled over each day until the holder re-
quests redemption. See 31 CFR § 344.7.
The interest rate on the securities is based
on yields of 13-week Treasury bills, with
a number of adjustments. Among the ad-
justments is multiplying the annualized
Treasury bill yield by the excess of one
over the estimated marginal tax rate of
purchasers of tax-exempt bonds. That es-
timated marginal tax rate is published
from time to time in the Federal Register
and is currently 39.6 percent. The Trea-
sury Department and the IRS request
comments on whether the interest rate on
SLGS should reflect the same correction
for tax exemption as the adjusted AFRs
(the product of the fixed percentage and
the combined tax rate).

## Proposed Effective/Applicability Date

These regulations are proposed to ap-
ply to calendar months beginning after the
date of publication of the Treasury deci-
sion adopting these rules as final regula-
tions in the Federal Register.

## Special Analyses

It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in Exec-
utive Order 12866, as supplemented by
Executive Order 13563. Therefore, a reg-
ulatory assessment is not required. It also
has been determined that section 553(b) of

the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these
regulations, and because the regulations
do not impose a collection of information
on small entities, the Regulatory Flexibil-
ity Act (5 U.S.C. chapter 6) does not ap-
ply. Pursuant to section 7805(f) of the
Code, this notice of proposed rulemaking
has been submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comments on its impact
on small business.

## Comments and Public Hearing

Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written (a signed orig-
inal and eight (8) copies) or electronic com-
ments that are submitted timely to the IRS
as prescribed in this preamble under the "Ad-
dresses" heading. The Treasury Department
and the IRS request comments on all aspects
of the proposed rules. All comments will be
available for public inspection and copying at
www.regulations.gov or upon request.

A public hearing has been scheduled
for June 24, 2015, at 10:00 a.m., in the
IRS Auditorium, Internal Revenue Ser-
vice, 1111 Constitution Avenue, N.W.,
Washington, DC. Due to building security
procedures, visitors must enter through
the Constitution Avenue entrance. In ad-
dition, all visitors must present photo
identification to enter the building. Be-
cause of access restrictions, visitors will
not be admitted beyond the immediate
entrance area more than 30 minutes before
the hearing starts. For information about
having your name placed on the building
access list to attend the hearing, see the
"FOR FURTHER INFORMATION
CONTACT" section of this preamble.

The rules of 26 CFR 601.601(a)(3) ap-
ply to the hearing. Persons who wish to
present oral comments at the hearing must
submit written (signed original and eight
(8) copies) or electronic comments and an
outline of the topics to be discussed and
the time to be devoted to each topic by
June 1, 2015. A period of 10 minutes will
be allotted to each person for making
comments. An agenda showing the sched-
uling of the speakers will be prepared
after the deadline for receiving outlines
has passed. Copies of the agenda will be
available free of charge at the hearing.

## Drafting Information

The principal authors of the proposed
regulations are Jason G. Kurth, IRS Office
of the Associate Chief Counsel (Financial
Institutions and Products) and William W.
Burhop, IRS Office of the Associate Chief
Counsel (Corporate). However, other per-
sonnel from the Treasury Department and
the IRS participated in their development.
* * * * *

## Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:

# PART 1-INCOME TAXES

Paragraph 1. The authority citation for
part 1 is amended by adding entries in
numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *

Section 1.382-12 also issued under 26
U.S.C. 382(f) and 26 U.S.C. 382(m). * * *
Section 1.1288-1 also issued under 26
U.S.C. 1288(b). * * *

Par. 2. Section 1.382-1 is amended by
revising the introductory text and adding
an entry for § 1.382-12 to read as follows:

§ 1.382-1 Table of contents.

This section lists the captions that ap-
pear in the regulations for §§ 1.382-2
through 1.382-12.

* * * * *

## § 1.382-12 Determination of adjusted Federal long-term rate.

(a) In general.

(b) Adjusted Federal long-term rate.

(d) Effective/applicability date.

Par. 3. Section 1.382-12 is added to
read as follows:

### § 1.382-12 Determination of adjusted Federal long-term rate.

(a) In general. The long-term tax-
exempt rate for an ownership change is
the highest of the adjusted Federal long-
term rates in effect for any month in the
3-calendar-month period ending with the
calendar month in which the change date
occurs. For purposes of the previous sen-
tence, the adjusted Federal long-term rate
is the Federal long-term rate determined
under section 1274(d) (without regard to
paragraphs (2) and (3) thereof), adjusted
for differences between rates on long-term
taxable and tax-exempt obligations. The
Secretary calculates the adjusted Federal
long-term rate as provided in paragraph
(b) of this section. The Internal Revenue
Service publishes the long-term tax-
exempt rate and the adjusted Federal long-
term rate for each month in the Internal
Revenue Bulletin (see § 601.601(d)(2)(ii)
of this chapter).

(b) Adjusted Federal long-term rate.
The adjusted Federal long-term rate for a
calendar month is the product of the Fed-
eral long-term rate determined under sec-
tion 1274(d) for that month, based on an-
nual compounding, multiplied by the
adjustment factor described in paragraph
(c) of this section.

(1) The excess of 100 percent, over

(2) The product of-

(i) 59 percent, and

(ii) The sum of the maximum rate in
effect under section 1 applicable to indi-
viduals and the maximum rate in effect
under section 1411 applicable to individ-
uals for the month to which the adjusted
applicable Federal rate applies.

(d) Effective/applicability date. The
rules of this section apply to the determi-
nation of the long-term tax-exempt rate
and the adjusted Federal long-term rate
during calendar months beginning after
the date of publication of the Treasury

decision adopting these rules as final reg-
ulations in the Federal Register.

Par. 4. Section 1.1288-1 is added to
read as follows:

#### § 1.1288-1 Adjustment of applicable Federal rate for tax-exempt obligations.

(a) In general. In applying section 483
or section 1274 to a tax-exempt obliga-
tion, the applicable Federal rate is ad-
justed to take into account the tax exemp-
tion for interest on the obligation. For
each applicable Federal rate determined
under section 1274(d), the Secretary com-
putes a corresponding adjusted applicable
Federal rate by multiplying the applicable
Federal rate by the adjustment factor de-
scribed in paragraph (b) of this section.
The Internal Revenue Service publishes
the applicable Federal rates and the ad-
justed applicable Federal rates for each
month in the Internal Revenue Bulletin
(see § 601.601(d)(2)(ii) of this chapter).

(b) Adjustment factor. The adjustment
factor is a percentage equal to-

(1) The excess of 100 percent, over

(2) The product of-

(i) 59 percent, and

(c) Effective/applicability date. The
rules of this section apply to the determi-
nation of adjusted applicable Federal rates
during calendar months beginning after
the date of publication of the Treasury
decision adopting these rules as final reg-
ulations in the Federal Register.

John M. Dalrymple
Deputy Commissioner for
Services and Enforcement.

# Definition of Terms

Revenue rulings and revenue procedures
(hereinafter referred to as "rulings") that
have an effect on previous rulings use the
following defined terms to describe the
effect:

Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).

Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.

Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.

Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A

and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).

Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.

Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.

Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the new
ruling does more than restate the sub-

stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.

Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.

Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.

# Abbreviations

The following abbreviations in current
use and formerly used will appear in ma-
terial published in the Bulletin.

A-Individual.

Acq .- Acquiescence.

B-Individual.

BE-Beneficiary.

F.R .- Federal Register.

FUTA-Federal Unemployment Tax Act.

FX-Foreign corporation.

G.C.M .- Chief Counsel's Memorandum.

GE-Grantee.

TFE-Transferee.

CFR-Code of Federal Regulations.

GP-General Partner.

TFR-Transferor.

CI-City.

GR-Grantor.

T.I.R .- Technical Information Release.

COOP-Cooperative.

IC-Insurance Company.

TP-Taxpayer.

Ct.D .- Court Decision.

I.R.B .- Internal Revenue Bulletin.

TR-Trust.

CY-County.

LE-Lessee.

TT-Trustee.

D-Decedent.

LP-Limited Partner.

U.S.C .- United States Code.

DC-Dummy Corporation.

LR-Lessor.

X-Corporation.

DE-Donee.

M-Minor.

Del. Order-Delegation Order.

Nonacq .- Nonacquiescence.

O Organization.

DR-Donor.

P-Parent Corporation.

PHC-Personal Holding Company.

PO Possession of the U.S.

PR-Partner.

PRS-Partnership.

PTE-Prohibited Transaction Exemption.
Pub. L .- Public Law.

REIT-Real Estate Investment Trust.

Rev. Proc .- Revenue Procedure.

Rev. Rul .- Revenue Ruling.

S Subsidiary.

S.P.R .- Statement of Procedural Rules.

Stat .- Statutes at Large.

BK-Bank.

T-Target Corporation.

B.T.A .- Board of Tax Appeals.

T.C .- Tax Court.

C-Individual.

T.D .- Treasury Decision.

C.B .- Cumulative Bulletin.

ERISA-Employee Retirement Income Security Act.
EX-Executor.

F-Fiduciary.

FC-Foreign Country.

FICA-Federal Insurance Contributions Act.

FISC-Foreign International Sales Company.

FPH-Foreign Personal Holding Company.

Y-Corporation.

Z-Corporation.

DISC-Domestic International Sales Corporation.

E-Estate.

EE-Employee.

E.O .- Executive Order.

ER-Employer.

## Numerical Finding List1

Bulletin 2015-1 through 2015-11

### Announcements:

2015-1, 2015-11 I.R.B. 758
2015-2, 2015-3 I.R.B. 324

2015-3, 2015-3 I.R.B. 328
2015-4, 2015-5 I.R.B. 565
2015-5, 2015-7 I.R.B. 602
2015-6, 2015-8 I.R.B. 685
2015-8, 2015-9 I.R.B. 698
2015-10, 2015-11 I.R.B. 758

#### Proposed Regulations:

REG-109187-11, 2015-2 I.R.B. 277
REG-132751-14, 2015-2 I.R.B. 279
REG-145878-14, 2015-2 I.R.B. 290
REG-153656-3, 2015-5 I.R.B. 566
REG-102648-15, 2015-10 I.R.B. 745
REG-136018-13, 2015-11 I.R.B. 759
REG-143416-14, 2015-11 I.R.B. 757

Revenue Procedures-Continued:

2015-16, 2015-7 I.R.B. 596
2015-17, 2015-7 I.R.B. 599
2015-18, 2015-8 I.R.B. 642
2015-19, 2015-8 I.R.B. 678
2015-20, 2015-9 I.R.B. 694
2015-22, 2015-11 I.R.B. 754

## Revenue Rulings:

2015-1, 2015-4 I.R.B. 331
2015-2, 2015-3 I.R.B. 321
2015-3, 2015-6 I.R.B. 580
2015-4, 2015-10 I.R.B. 743

## Treasury Decisions:

9707, 2015-2 I.R.B. 247
9708, 2015-5 I.R.B. 337

9709, 2015-7 I.R.B. 593
9710, 2015-8 I.R.B. 603
9711, 2015-11 I.R.B. 748
9712, 2015-11 I.R.B. 750

## Notices:

2015-1, 2015-2 I.R.B. 249
2015-2, 2015-4 I.R.B. 334
2015-3, 2015-6 I.R.B. 583
2015-4, 2015-5 I.R.B. 407
2015-5, 2015-5 I.R.B. 408
2015-6, 2015-5 I.R.B. 412
2015-7, 2015-6 I.R.B. 585
2015-8, 2015-6 I.R.B. 589
2015-9, 2015-6 I.R.B. 590
2015-11, 2015-8 I.R.B. 618
2015-15, 2015-9 I.R.B. 687
2015-12, 2015-8 I.R.B. 700
2015-13, 2015-10 I.R.B. 722
2015-14, 2015-10 I.R.B. 722
2015-16, 2015-10 I.R.B. 732
2015-19, 2015-9 I.R.B. 690
2015-20, 2015-11 I.R.B. 754

## Revenue Procedures:

2015-1, 2015-1 I.R.B. 1
2015-2, 2015-1 I.R.B. 105
2015-3, 2015-1 I.R.B. 129
2015-4, 2015-1 I.R.B. 144
2015-5, 2015-1 I.R.B. 186
2015-6, 2015-1 I.R.B. 194
2015-7, 2015-1 I.R.B. 231
2015-8, 2015-1 I.R.B. 235
2015-9, 2015-2 I.R.B. 249
2015-10, 2015-2 I.R.B. 261
2015-12, 2015-2 I.R.B. 265
2015-13, 2015-5 I.R.B. 419
2015-14, 2015-5 I.R.B. 450
2015-15, 2015-5 I.R.B. 564

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2014-27 through 2014-52 is in Internal Revenue Bulletin
2014-52, dated December 28, 2014.

## Finding List of Current Actions on Previously Published Items1

Bulletin 2015-1 through 2015-11

### Announcements:

2010-3
Amplified by
Ann. 2015-3, 2015-3 I.R.B. 328

### Revenue Procedures:

2014-01
Superseded by
Rev. Proc. 2015-01, 2015-01 I.R.B. 1

2014-02
Superseded by
Rev. Proc. 2015-02, 2015-01 I.R.B. 105

2014-03
Superseded by
Rev. Proc. 2015-03, 2015-01 I.R.B. 129

2014-04
Superseded by
Rev. Proc. 2015-04, 2015-01 I.R.B. 144

2014-05
Superseded by
Rev. Proc. 2015-05, 2015-01 I.R.B. 186

2014-06
Superseded by
Rev. Proc. 2015-06, 2015-01 I.R.B. 194

2014-07
Superseded by
Rev. Proc. 2015-07, 2015-01 I.R.B. 231

2014-08
Superseded by
Rev. Proc. 2015-08, 2015-01 I.R.B. 235

2014-10
Superseded by
Rev. Proc. 2015-10, 2015-2 I.R.B. 261

2003-63
Superseded by
Rev. Proc. 2015-12, 2015-2 I.R.B. 265

2011-14
Modified by
Rev. Proc. 2015-12, 2015-2 I.R.B. 265

2011-14
Modified by
Rev. Proc. 2015-13, 2015-5 I.R.B. 419

Revenue Procedures-Continued:

2011-14
Amplified by
Rev. Proc. 2015-13, 2015-5 I.R.B. 419

2011-14
Clarified by
Rev. Proc. 2015-13, 2015-5 I.R.B. 419

1997-27
Clarified by
Rev. Proc. 2015-13, 2015-5 I.R.B. 419

1997-27
Modified by
Rev. Proc. 2015-13, 2015-5 I.R.B. 419

2012-11
Superseded by
Rev. Proc. 2015-17, 2015-7 I.R.B. 599

2015-9
Modified by
Rev. Proc. 2015-17, 2015-7 I.R.B. 599

2015-14
Modified by
Rev. Proc. 2015-20, 2015-9 I.R.B. 694

2013-22
Modified by
Rev. Proc. 2015-22, 2015-11 I.R.B. 754

2015-8
Modified by
Rev. Proc. 2015-22, 2015-11 I.R.B. 754

### Revenue Rulings:

92-19
Supplemented by
Rev. Rul. 2015-02, 2015-3 I.R.B. 321

Notices:

2013-01
Modified by
Notice 2015-20, 2015-11 I.R.B. 754

2013-01
Superseded by
Notice 2015-20, 2015-11 I.R.B. 754

1A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2014-27 through 2014-52 is in Internal Revenue Bulletin 2014-52, dated December 28,
2014.

# Internal Revenue Service Washington, DC 20224

Official Business
Penalty for Private Use, $300

# INTERNAL REVENUE BULLETIN

The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletins are available at www.irs.gov/irb/.

## We Welcome Comments About the Internal Revenue Bulletin

If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page
(www.irs.gov) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave.
NW, IR-6230 Washington, DC 20224.

Internal Revenue Bulletin 2015-11 (PDF rendition): IRS Notices

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