Internal Revenue Bulletin 2008-32 (PDF rendition): IRS Revenue Rulings

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.

Bulletin No. 200
8-32
August 11, 2008
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
T.D. 9403, page 285.
Final regulations under section 664(c) of the Code provide that
charitable remainder trusts with unrelated business taxable in-
come (UBTI) in taxable years beginning after December 31,
2006, are exempt from federal income tax but are subject to
a 100 percent excise tax on the UBTI of the charitable remain-
der trust pursuant to section 424 of the Tax Relief and Health
Care Act of 2006. The regulations provide that the excise tax
is reported and payable in accordance with appropriate forms.
The regulations clarify that, consistent with regulations section
1.664–1(d)(2), the excise tax imposed upon the charitable re-
mainder trust with UBTI is treated as paid from corpus, and the
trust income that is UBTI is income of the trust for purposes of
determining the character of the distribution made to the ben-
eficiary.
T.D. 9404, page 280.
REG–143453–05, page 310.
Section 179B of the Code allows small business refiners to
make an election to deduct as an expense 75 percent of the
qualified costs paid or incurred to comply with the highway
diesel fuel sulfur control requirements of the Environmental Pro-
tection Agency (EPA). Temporary and proposed regulations un-
der Section 179B provide guidance relating to the deduction
for qualified capital costs paid or incurred by a small business
refiner to comply with the highway diesel fuel sulfur control re-
quirements of the EPA and provide guidance for making the
election. A public hearing on the proposed regulations is sched-
uled for October 28, 2008.
T.D. 9406, page 287.
REG–138355–07, page 311.
Final, temporary, and proposed regulations under section 956
of the Code determine the basis in property acquired by a con-
trolled foreign corporation as a result of certain transactions
that otherwise qualify for nonrecognition treatment.
Notice 2008–67, page 307.
This notice explains how to claim the 50% additional first year
depreciation provided by sections 15345(a)(1) and (d)(1) of the
Food, Conservation, and Energy Act of 2008 for qualified Re-
covery Assistance property placed in service by the taxpayer
in the Kansas disaster area on or after May 5, 2007, during
the taxable year that includes May 5, 2007. The notice also
explains how to elect not to claim that 50% additional first year
depreciation if a taxpayer so chooses.
EMPLOYEE PLANS
REG–100464–08, page 313.
Proposed regulations under section 411(b)(1) of the Code pro-
vide guidance on the application of the accrual rule for defined
benefit plans under section 411(b)(1)(B) in cases where plan
benefits are determined on the basis of the greatest of two or
more separate formulas. A public hearing is scheduled for Oc-
tober 15, 2008.
(Continued on the next page)
Announcement of Declaratory Judgment Proceedings Under Section 7428 begins on page 321.
Finding Lists begin on page ii.

EXEMPT ORGANIZATIONS
T.D. 9403, page 285.
Final regulations under section 664(c) of the Code provide that
charitable remainder trusts with unrelated business taxable in-
come (UBTI) in taxable years beginning after December 31,
2006, are exempt from federal income tax but are subject to
a 100 percent excise tax on the UBTI of the charitable remain-
der trust pursuant to section 424 of the Tax Relief and Health
Care Act of 2006. The regulations provide that the excise tax
is reported and payable in accordance with appropriate forms.
The regulations clarify that, consistent with regulations section
1.664–1(d)(2), the excise tax imposed upon the charitable re-
mainder trust with UBTI is treated as paid from corpus, and the
trust income that is UBTI is income of the trust for purposes of
determining the character of the distribution made to the ben-
eficiary.
Announcement 2008–69, page 318.
The IRS has revoked its determination that Homes for All,
Inc., of Fort Myers, FL; H & H Housing, Inc., of Los Angeles,
CA; Family Home Providers, Inc., of Cumming, GA; Miller
County New Vision Coalition, Inc., of Colquitt, GA; Buyer’s
Dream Fund of Cleveland Heights, OH; American Bowling
Congress of Wyoming, MI; Accelerated Trust, Inc., of Boca
Raton, FL; National Home Charities, Inc., of Westminster, CO;
Independent Group, Inc., of Covington, KY; and Shepherd
Hills Development Corporation of Las Vegas, NV, qualify as
organizations described in sections 501(c)(3) and 170(c)(2) of
the Code.
Announcement 2008–70, page 318.
A list is provided of organizations now classified as private foun-
dations.
ESTATE TAX
Rev. Rul. 2008–44, page 292.
Special use value; farms; interest rates.The 2008 interest
rates to be used in computing the special use value of farm real
property for which an election is made under section 2032A of
the Code are listed for estates of decedents.
EMPLOYMENT TAX
T.D. 9405, page 293.
Final regulations under sections 6205 and 6413 of the Code
amend the process for making interest-free adjustments of un-
derpayments and overpayments of employment taxes. The
regulations also clarify the process for filing claims for refund
of overpayments of employment taxes under sections 6402
and 6414. The regulations will continue to permit taxpayers
to file a claim for refund in lieu of making an interest-free ad-
justment for an overpayment of employment taxes. The regu-
lations also amend the regulations under section 6011 to re-
flect the changes to the adjustment and refund processes and
amend the regulations under section 6302 to clarify deposit
obligations with respect to interest-free adjustments.
ADMINISTRATIVE
Announcement 2008–71, page 321.
This document contains a correction to a notice of public hear-
ing (Announcement 2008–64, 2008–28 I.R.B. 114) on pro-
posed regulations (REG–151135–07) providing additional rules
for certain multiemployer defined benefit plans that are in effect
on July 16, 2006. The regulations affect sponsors and admin-
istrators of, and participants in multiemployer plans that are in
either endangered or critical status. The regulations are nec-
essary to implement the new rules set forth in section 432 that
are effective for plan years beginning after 2007. The regula-
tions reflect changes made by the Pension Protection Act of
2006.
August 11, 20082008–32 I.R.B.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d meet their tax responsibilities and by applying
the tax 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 and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
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, identifying 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.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to 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 Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d 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 c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
2008–32 I.R.B.August 11, 2008

August 11, 20082008–32 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 179B.
—Deduction
for Capital Co
sts Incurred
in Complying With
Environmental Protection
Agency Sulfur Regulations
26 CFR 1.179B–1T: Deduction for capital costs in-
curred in complying with Environmental Protection
Agency sulfur regulations (temporary).
T.D. 9404
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
Capital Costs Incurred to
Comply With EPA Sulfur
Regulations
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Temporary regulations.
SUMMARY: This document contains
temporary regulations relating to the de-
duction provided under section 179B of
the Internal Revenue Code (Code) for
qualified capital costs paid or incurred by
a small business refiner to comply with the
highway diesel fuel sulfur control require-
ments of the Environmental Protection
Agency (EPA). The regulations implement
changes to the law made by the American
Jobs Creation Act of 2004, the Energy
Policy Act of 2005, and the Tax Techni-
cal Corrections Act of 2007. The text of
these temporary regulations also serves
as the text of the proposed regulations
(REG–143453–05) set forth in the notice
of proposed rulemaking on this subject in
this issue of the Bulletin.
DATES:Effective Date:These regulations
are effective on June 27, 2008.
Applicability Date:For dates of appli-
cability, see §1.179B–1T(f).
FOR
FURTHER INFORMATION
CON
TACT: Nicole Cimino, (202)
622
–3110 (not a toll-free number).
SUPPLEMENTAR
Y INFORMATION:
Paperwork Red
uction Act
These tempora
ry regulations are being
issued withou
t prior notice and public pro-
cedure pursua
nt to the Administrative Pro-
cedure Act (5
U.S.C. 553). For this reason,
the collecti
on of information contained in
these regula
tions has been reviewed and
pending rece
ipt and evaluation of public
comments, ap
proved by the Office of Man-
agement and
Budget under control number
1545–2104.
Responses to this collection
of informat
ionarerequiredtoobtainatax
benefit.
An agency ma
y not conduct or sponsor,
and a person
is not required to respond
to, a colle
ction of information unless the
collectio
n of information displays a valid
control nu
mber.
For furthe
r information concerning this
collectio
n of information, and where to
submit com
ments on the collection of in-
formatio
n and the accuracy of the esti-
mated bur
den, and suggestions for reduc-
ing this b
urden, please refer to the pream-
ble to the
cross-referencing notice of pro-
posed ru
lemaking published in this issue of
the Bull
etin.
Books or
records relating to a collection
of infor
mation must be retained as long
as their
contents may become material in
the admi
nistration of any internal revenue
law. Gen
erally, tax returns and tax return
inform
ation are confidential, as required
by 26 U.
S.C. 6103.
Backgr
ound
This do
cument contains amendments to
26 CFR p
art 1 providing temporary regula-
tions u
nder section 179B of the Code. Sec-
tion 17
9B was added to the Code by sec-
tion 33
8(a) of the American Jobs Creation
Act of
2004, Public Law 108–357 (118
Stat.
1418), and was modified by section
1324(
a) of the Energy Policy Act of 2005,
Publi
c Law 109–58 (119 Stat. 594), and
the Ta
x Technical Corrections Act of 2007,
Publ
ic Law 110–172 (121 Stat. 2473).
In ge
neral, the cost of property used in
atra
de or business or held for the produc-
tion
of income must be capitalized and, in
the case of dep
reciable property, recovered
through depre
ciation. Section 167 allows
as a depreciat
ion deduction a reasonable
allowance fo
r the exhaustion, wear, and
tear of prope
rtyusedinatradeorbusiness
or held for th
e production of income. The
depreciatio
n allowable for tangible, depre-
ciable prop
erty placed in service after 1986
generally i
s determined under section 168.
In lieu of de
ducting depreciation, sec-
tion 179B(a
) allows a small business
refiner to d
educt as an expense 75 percent
of the quali
fied costs as defined in section
45H(c)(2)
that are paid or incurred during
the taxabl
e year and are properly charge-
able to cap
ital account (“qualified capital
cost”). Se
ction 45H(c)(2) defines quali-
fied costs
as those costs paid or incurred
during th
e applicable period to comply
with the h
ighway diesel fuel sulfur control
requirem
ents of the EPA (the “applica-
ble EPA re
gulations”). The deduction is
phased ou
t for refiners whose production
in calen
dar year 2002 exceeded a speci-
fied thr
eshold. Section 179B applies to
expense
s paid or incurred after December
31, 2002
, in taxable years ending after
Decemb
er 31, 2002.
In addit
ion, section 45H allows a pro-
ductio
n credit of five cents per gallon for
low sul
fur diesel fuel produced by a small
busine
ss refiner. The aggregate credit
claime
d by a small business refiner for all
taxabl
e years may not exceed 25 percent
of the
qualified costs paid or incurred by
the sm
all business refiner. The aggre-
gate a
llowable credit is also phased out
for re
finers whose production in calendar
year 2
002 exceeded a specified threshold.
The c
redit is not allowed unless Treasury
cert
ifies, after consultation with EPA, that
the r
efiner’s qualified costs will result in
comp
liance with the applicable EPA reg-
ulat
ions. Section 280C(d) provides for
the r
eduction, by the amount of the credit
det
ermined under section 45H(a) for the
tax
able year, in deductions otherwise al-
low
able for the taxable year under subtitle
A, C
hapter 1 of the Internal Revenue Code
(se
ctions 1 through 1400T). Section 45H
ap
plies to expenses paid or incurred after
De
cember 31, 2002, in taxable years end-
in
g after December 31, 2002.
2008–32 I.R.B.280August 11, 2008

Section 45H(c) provides definitions
of terms for purposes of both the sec-
tion 179B deduction and the section 45H
credit. Under section 45H(c)(1), a tax-
payer is a small business refiner for a
taxable year if (i) the taxpayer is a refiner
of crude oil with respect to which not more
than 1,500 individuals are engaged in the
refinery operations of the business on any
day during the taxable year, and (ii) the
taxpayer’s average daily domestic refinery
run or average retained production for all
facilities of the taxpayer for the 1-year
period ending on December 31, 2002, did
not exceed 205,000 barrels. Under sec-
tion 45H(c)(2), the qualified costs with
respect to any facility of a small business
refiner are, in general, costs that are paid
or incurred by the small business refiner
to comply with the applicable EPA regu-
lations with respect to the facility during
the period beginning on January 1, 2003,
and ending on the earlier of the date that is
one year after the date on which the small
business refiner must comply with the ap-
plicable EPA regulations for that facility,
or December 31, 2009.
The applicable EPA regulations are
the regulations establishing the highway
diesel fuel sulfur control program and ap-
ply to, among others, petroleum refiners
that produce diesel fuel for heavy-duty
highway vehicles. The regulations provide
that these vehicles for the 2007 and later
model years must be fueled with highway
diesel fuel that meets a maximum sulfur
standard of 15 parts per million (ppm).
The regulations also require refiners to
produce this new low sulfur diesel fuel
beginning on June 1, 2006, but include
several transition rules under which refin-
ers are given additional time to comply
with the 15 ppm sulfur standard (for ex-
ample, the small refiner credit option for a
refiner that is granted small refiner status
by the EPA).
Explanation of Provisions
Scope
The temporary regulations provide
rules prescribing how a small business
refiner must determine the deduction al-
lowable under section 179B(a) for any
taxable year. The regulations also provide
guidance for making the elections under
section 179B.
Computation of Deduction Allowable
under Section 179B
The deduction under section 179B is al-
lowable with respect to the qualified capi-
tal costs paid or incurred by a small busi-
ness refiner during the taxable year. The
temporary regulations make it clear that
the deduction is allowable with respect to
costs paid or incurred during a taxable year
even if the property to which the costs re-
late is not placed in service until a subse-
quent taxable year. The temporary regula-
tions also make it clear that the deduction
is allowable even if the small business re-
finer is not eligible for the credit under sec-
tion 45H because of a failure to obtain the
certification required by section 45H(e).
Elections
Section 179B provides two elections.
The first election is provided under section
179B(a), which allows a small business re-
finer to elect to deduct an amount equal
to 75 percent of the qualified capital costs
paid or incurred by the small business re-
finer during the taxable year. These tem-
porary regulations provide that this elec-
tion is made for each taxable year in which
the taxpayer seeks to deduct qualified cap-
ital costs under section 179B. The elec-
tion for a taxable year applies to all qual-
ified capital costs paid or incurred by the
small business refiner during the taxable
year. The election for a taxable year must
be made by the due date (including exten-
sions) for filing the small business refiner’s
Federal income tax return for the taxable
year.
The second election is provided under
section 179B(e). Section 179B(e) pro-
vides that if a small business refiner is
a cooperative and makes an election un-
der section 179B(a), the small business
refiner may elect to allocate part or all
of the deduction allowable under section
179B(a) for the taxable year to its own-
ers that are themselves cooperatives. If a
cooperative small business refiner makes
the section 179B(e) election, the tempo-
rary regulations provide that the deduction
amount allocated to an owner is equal to
theowner’sratableshareofthetotalde-
duction amount allocated, determined on
the basis of ownership interests in the co-
operative small business refiner. The tem-
porary regulations provide that in cases in
which ownership interests vary during the
year, the small business refiner must de-
termine ratable shares under a consistently
applied method that reasonably takes into
account the varying interests during the
taxable year. Further, the temporary reg-
ulations clarify that, in computing its tax-
able income under section 1382, the coop-
erative small business refiner must reduce
its section 179B deduction by the deduc-
tion amount allocated to its owners.
The section 179B(e) election for a tax-
able year is made by the due date (includ-
ing extensions) for filing the cooperative
small business refiner’s Federal income
tax return for the taxable year. In addi-
tion, section 179B(e)(3) requires the elect-
ing cooperative small business refiner to
notify, in writing, each cooperative owner
of the amount of the section 179B(a) de-
duction that is allocated to that coopera-
tive owner. This written notice must be
mailed to the cooperative owner before the
due date (including extensions) of the co-
operative small business refiner’s Federal
income tax return.
Effective/Applicability Date
These temporary regulations apply
to taxable years ending on or after June
26, 2008. However, a taxpayer may ap-
ply the temporary regulations to taxable
years ending after December 31, 2002,
and before June 26, 2008, provided that
the taxpayer applies all provisions in
these regulations (other than those re-
lating to elections) to the taxable year.
A taxpayer applying the regulations to
those years may make the election un-
der section 179B(a) for such years under
the rules provided in Notice 2006–47,
2006–1 C.B. 892. In addition, the tax-
payer’s election under section 179B(e) for
those years will be accepted if made using
any reasonable method consistent with
the principles of section 179B(e). See
§601.601(d)(2)(ii)(b) of this chapter.
Special Analyses
It has been determined that this Trea-
sury decision is not asignificant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It also has been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
August 11, 20082812008–32 I.R.B.

not apply to these regulations. For appli-
cability of the Regulatory Flexibility Act
(5 U.S.C. chapter 6), please refer to the
Special Analyses section of the preamble
to the cross-reference notice of proposed
rulemaking published in this issue of the
Bulletin. Pursuant to section 7805(f) of
the Code, these regulations have been sub-
mitted to the Chief Counsel for Advocacy
of Small Business Administration for com-
ment on their impact on small business.
Drafting Information
The principal author of these regu-
lations is Nicole R. Cimino, Office of
Associate Chief Counsel (Passthroughs
and Special Industries). However, other
personnel from the IRS and the Treasury
Department participated in their develop-
ment.
*****
Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 602
are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority for part 1
continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.179B–1T is added to
read as follows:
§1.179B–1T Deduction for capital costs
incurred in complying with Environmental
Protection Agency sulfur regulations
(temporary).
(a)Scope and definitions—(1)Scope.
This section provides the rules for deter-
mining the amount of the deduction allow-
able under section 179B(a) for qualified
capital costs paid or incurred by a small
business refiner to comply with the high-
way diesel fuel sulfur control requirements
of the Environmental Protection Agency
(EPA). This section also provides rules for
making elections under section 179B.
(2)Definitions. For purposes of section
179B and this section, the following defi-
nitions apply:
(i) Theapplicable EPA regulationsare
the EPA regulations establishing the high-
way diesel fuel sulfur control program
(40 CFR part 80, subpart I).
(ii) Theaverage daily domestic refinery
runfor a refinery is the lesser of—
(A) The total amount of crude oil input
(in barrels) to the refinery’s domestic pro-
cessing units during the 1-year period end-
ing on December 31, 2002, divided by 365;
or
(B) The total amount of refined petro-
leum product (in barrels) produced by the
refinery’s domestic processing units dur-
ing such 1-year period divided by 365.
(iii) Theaggregate average domestic
daily refinery runfor a refiner is the sum
of the average daily domestic refinery runs
for all refineries that were owned by the re-
finer or a related person on April 1, 2003.
(iv)Cooperative owneris a person
that—
(A) Directly holds an ownership inter-
est in a cooperative small business refiner,
as defined in paragraph (a)(2)(v) of this
section; and
(B) Is a cooperative to which part 1 of
subchapter T of the Internal Revenue Code
(Code) applies.
(v)Cooperative small business refiner
is a small business refiner that is a cooper-
ative to which part 1 of subchapter T of the
Code applies.
(vi)Low sulfur diesel fuelhas the mean-
ingprescribedinsection45H(c)(5).
(vii)Qualified capital costsare quali-
fied costs as defined in section 45H(c)(2)
that are properly chargeable to capital ac-
count.
(viii)Related personhas the meaning
prescribed in section 613A(d)(3) and the
regulations under section 613A(d)(3).
(ix)Small business refinerhas the
meaningprescribedinsection45H(c)(1).
(b)Section 179B deduction—(1)In
general. Section 179B(a) allows a deduc-
tion with respect to the qualified capital
costs paid or incurred by a small business
refiner (the section 179B deduction). The
deduction is allowable with respect to the
qualified capital costs paid or incurred
during a taxable year only if the small
business refiner makes an election under
paragraph (d) of this section for the tax-
able year. The certification requirement in
section 45H(e) (relating to the certification
required to support a credit under section
45H) does not apply for purposes of the
section 179B deduction. Accordingly, the
section 179B deduction is allowable with
respect to the qualified capital costs of an
electing small business refiner even if the
refiner never obtainsa certification under
section 45H(e) with respect to those costs.
(2)Computation of section 179B deduc-
tion—(i)In general. Except as provided in
paragraphs (b)(2)(ii) and (c)(3) of this sec-
tion, a small business refiner that makes an
election under paragraph (d) of this section
for a taxable year is allowed a section 179B
deduction in an amount equal to 75 percent
of qualified capital costs that are paid or in-
curred by the small business refiner during
the taxable year.
(ii)Reduced percentage. A small busi-
ness refiner’s section 179B deduction is
reduced if the refiner’s aggregate average
daily domestic refinery run is in excess of
155,000 barrels. In that case, the number
of percentage points used in computing the
deduction under paragraph (b)(2)(i) of this
section (75) is reduced (not below zero) by
the product of 75 and the ratio of the excess
barrels to 50,000 barrels.
(3)
Example. The application of this
paragraph (b) is illustrated by the follow-
ing example:
Example. (i) A, an accrual method taxpayer, is a
small business refiner with a taxable year ending De-
cember 31. On April 1, 2003, A owns a refinery with
an average daily domestic refinery run (that is, an av-
erage daily run during calendar year 2002) of 100,000
barrels and a person related to A owns a refinery with
an average daily domestic refinery run of 85,000 bar-
rels. These are the only domestic refineries owned
by A and persons related to A. A’s aggregate average
daily domestic refinery run for the two refineries is
185,000 barrels. A incurs qualified capital costs of
$10 million in the taxable year ended December 31,
2007. The costs are incurred with respect to prop-
erty that is placed in service in year 2008. A makes
the election under paragraph (d) of this section for the
2007 taxable year.
(ii) Because A’s aggregate average daily domes-
tic refinery run is 185,000 barrels, the percentage of
the qualified capital costs that is deductible under sec-
tion 179B(a) is reduced from 75 percent to 30 percent
(75 percent reduced by 75 percent multiplied by 0.6
((185,000 barrels minus 155,000 barrels)/50,000 bar-
rels)). Thus, for 2007, A’s deduction under section
179B(a) is $3,000,000 ($10,000,000 qualified capital
costs multiplied by .30).
(c)Effect on basis—(1)In general.If
qualified capital costs are included in the
basis of property, the basis of the property
is reduced by the amount of the section
179B deduction allowed with respect to
such costs.
(2)Treatment as depreciation.Ifqual-
ified capital costs are included in the ba-
sis of depreciable property, the amount of
the section 179B deduction allowed with
respect to such costs is treated as a depre-
2008–32 I.R.B.282August 11, 2008

ciation deduction for purposes of section
1245.
(d)Election to deduct qualified capital
costs—(1)In general—(i)Section 179B
election. This paragraph (d) prescribes
rules for the election to deduct the qual-
ified capital costs paid or incurred by a
small business refiner during a taxable
year (the section 179B election). A small
business refiner making the section 179B
election for a taxableyear consents to, and
agrees to apply, all of the provisions of
section 179B and this section to qualified
capital costs paid or incurred by the refiner
during the taxable year. The section 179B
election for a taxable year applies with
respect to all qualified capital costs paid
or incurred by the small business refiner
during that taxable year.
(ii)Year-by-year election.Aseparate
section 179B election must be made for
each taxable year in which the taxpayer
seeks to deduct qualified capital costs un-
der section 179B. A small business refiner
may make the section 179B election for
some taxable years and not for other tax-
able years.
(iii)Elections for cooperative small
business refiners. See paragraph (e) of
this section for the rules applicable to the
election provided under section 179B(e),
relating to the election to allocate the
section 179B deduction to cooperative
owners of a cooperative small business
refiner (the section 179B(e) election).
(2)Time and manner for making sec-
tion 179B election—(i)Time for making
election. Except as provided in paragraph
(d)(2)(iii) of this section, a taxpayer’s sec-
tion 179B election for a taxable year must
be made by the due date (including exten-
sions) for filing the taxpayer’s Federal in-
come tax return for the taxable year.
(ii)Manner of making election—(A)
In general. Except as provided in para-
graph (d)(2)(iii) of this section, the section
179B election for a taxable year is made
by claiming a section 179B deduction
on the taxpayer’s original Federal in-
come tax return for the taxable year and
attaching the statement described in para-
graph (d)(2)(ii)(B) of this section to the
return. The section 179B election with
respect to qualified capital costs paid or
incurred by a partnership is made by the
partnership and the section 179B elec-
tion with respect to qualified capital costs
paid or incurred by an S corporation is
made by the S corporation. In the case
of qualified capital costs paid or incurred
by the members of a consolidated group
(within the meaning of §1.1502–1(h)), the
section 179B election with respect to such
costs is made for each member by the
common parent of the group.
(B)Information required in election
statement. The election statement attached
to the taxpayer’s return must contain the
following information:
(1) The name and identification number
of the small business refiner.
(2) The amount of the qualified capital
costs paid or incurred during the taxable
year for which the election is made.
(3) The aggregate average daily domes-
tic refinery run (as determined under para-
graph (a)(2)(iii) of this section).
(4) The date by which the small busi-
ness refiner must comply with the applica-
ble EPA regulations. If this date is not June
1, 2006, the statement also must explain
why compliance is not required by June 1,
2006.
(5) The calculation of the section 179B
deduction for the taxable year.
(6) For each property that will have
its basis reduced on account of the sec-
tion 179B deduction for the taxable year,
a description of the property, the amount
included in the basis of the property on
account of qualified capital costs paid or
incurred during the taxable year, and the
amount of the basis reduction to that prop-
erty on account of the section 179B deduc-
tion for the taxable year.
(iii) Except as otherwise expressly pro-
vided by the Code, the regulations under
the Code, or other guidance published in
the Internal Revenue Bulletin, a section
179B election is valid only if made at the
time and in the manner prescribed in this
paragraph (d)(2). For example, except as
otherwise expressly provided, the 179B
election cannot be made for a taxable year
to which this section applies through a re-
quest under section 446(e) to change the
taxpayer’s method of accounting.
(3)Revocation of election. An election
made under this paragraph (d) may not be
revoked without the prior written consent
of the Commissioner of Internal Revenue.
To seek the Commissioner’s consent, the
taxpayer must submit a request for a pri-
vate letter ruling (for further guidance, see,
for example, Rev. Proc. 2008–1, 2008–1
I.R.B. 1, and §601.601(d)(2)(ii)(b)ofthis
chapter).
(4)Failure to make election.Ifasmall
business refiner does not make the sec-
tion 179B election for a taxable year at the
time and in the manner prescribed in para-
graph (d)(2) of this section, no deduction
is allowed for the qualified capital costs
that the refiner paid orincurred during the
year. Instead these qualified capital costs
are chargeable to a capital account in that
taxable year, the basis of the property to
which these costs arecapitalized is not re-
duced on account of section 179B, and the
amount of depreciation allowable for the
property attributable to these costs is de-
termined by reference to these costs unre-
duced by section 179B.
(5)Elections for taxable years end-
ing before June 26, 2008. This section
does not apply to section 179B elections
for taxable years ending before June 26,
2008. The rules for making the section
179B election for a taxable year ending
before June 26, 2008 are provided in
Notice 2006–47, 2006–1 C.B. 892. See
§601.601(d)(2)(ii)(b) of this chapter.
(e)Election under section 179B(e) to
allocate section 179B deduction to coop-
erative owners—(1)In general. A coop-
erative small business refiner may elect to
allocate part or all of its cooperative own-
ers’ ratable shares of the section 179B de-
duction for a taxable year to the coopera-
tive owners (the section 179B(e) election).
The section 179B deduction allocated to a
cooperative owner is equal to the coopera-
tive owner’s ratable share of the total sec-
tion 179B deduction allocated. A coopera-
tive owner’s ratable share is determined for
this purpose on the basis of the cooperative
owner’s ownership interest in the cooper-
ative small business refiner during the co-
operative small business refiner’s taxable
year. If the cooperative owners’ interests
vary during the year, the cooperative small
business refiner shall determine the own-
ers’ ratable shares under a consistently ap-
plied method that reasonably takes into ac-
count the owners’ varying interests during
the taxable year.
(2)Cooperative small business refiner
denied section 1382 deduction for allo-
cated portion. In computing taxable in-
come under section 1382, a cooperative
small business refiner must reduce its sec-
tion 179B deduction for the taxable year
by an amount equal to the section 179B de-
August 11, 20082832008–32 I.R.B.

duction allocated under this paragraph (e)
to the refiner’s cooperative owners for the
taxable year.
(3)Time and manner for making elec-
tion—(i)Time for making election.The
section 179B(e) election for a taxable year
must be made by the due date (including
extensions) for filing the cooperative small
business refiner’s Federal income tax re-
turn for the taxable year.
(ii)Manner of making election.The
section 179B(e) election for a taxable year
is made by attaching a statement to the co-
operative small business refiner’s Federal
income tax return for the taxable year. The
election statement must contain the fol-
lowing information:
(A) The name and identification num-
ber of the cooperative small business re-
finer.
(B) The amount of the section 179B de-
duction allowable to the cooperative small
business refiner for the taxable year (de-
termined before the application of section
179B(e) and this paragraph (e)).
(C) The name and identification num-
ber of each cooperative owner to which the
cooperative small business refiner is allo-
cating all or some of the section 179B de-
duction.
(D) The amount of the section 179B de-
duction that is allocated to each coopera-
tive owner listed in response to paragraph
(e)(3)(ii)(C) of this section.
(4)Irrevocable election. A section
179B(e) election for a taxable year, once
made, is irrevocable for that taxable year.
(5)Writtennoticetoowners. A coop-
erative small business refiner that makes
a section 179B(e) election for a taxable
year must notify eachcooperative owner
of the amount of the section 179B de-
duction that is allocated to that coopera-
tive owner. This notification must be pro-
vided in a written notice that is mailed by
the cooperative small business refiner to
its cooperative owner before the due date
(including extensions) of the cooperative
small business refiner’s Federal income
tax return for the election year. In addi-
tion, the cooperative small business refiner
must report the amount of the cooperative
owner’s section 179B deduction on Form
1099–PATR,“Taxable Distributions Re-
ceived From Cooperatives,”issued to the
cooperative owner. If Form 1099–PATR
is revised or renumbered, the amount of
the cooperative owner’s section 179B de-
duction must be reported on the revised or
renumbered form.
(f)Effective/applicability date—(1)In
general. This section applies to taxable
years ending on or after June 26, 2008.
(2)Application to taxable years end-
ing before June 26, 2008. A small busi-
nessrefinermayapplythissectiontoatax-
able year ending before June 26, 2008, pro-
vided that the small business refiner ap-
plies all provisions in this section, with
the modifications described in paragraph
(f)(3) of this section, to the taxable year.
(3)Modifications applicable to taxable
years ending before June 26, 2008.The
following modifications to the rules of this
section apply to a small business refiner
that applies those rules to a taxable year
ending before June 26, 2008:
(i)Rules relating to section 179B elec-
tion. The section 179B election for a tax-
able year ending before June 26, 2008 may
be made under the rules provided in No-
tice 2006–47, rather than under the rules
set forth in paragraph (d) of this section.
(ii)Rules relating to section 179B(e)
election. A section 179B(e) election for a
taxable year ending before June 26, 2008
will be treated as satisfying the require-
ments of paragraph (f) if the cooperative
small business refiner has calculated its
tax liability in a manner consistent with
the election and has used any reasonable
method consistent with the principles of
section 179B(e) to inform the Internal
Revenue Service that an election has been
made under section 179B(e) and to inform
cooperative owners of the amount of the
section 179B deduction they have been
allocated.
(4)Expiration date. The applicability
of §179B–1T expires on June 24, 2011.
PART 602—OMB CONTROL
NUMBERS UNDER THE PAPERWORK
REDUCTION ACT
Par. 3. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 4. In §602.101, paragraph (b) is
amended by adding the following entry in
numerical order to the table to read as fol-
lows:
§602.101 OMB Control numbers.
*****
(b) * * *
CFR part or section where
identified and described
Current OMB
control No.
*****
1.179B–1T...........................................................
1545–210
4
*****
Kevin M. Brown,
Deputy Commissioner for
Services and Enforcement.
Approved June 15, 2007.
Eric Solomon,
Assistant Secretary of
the Treasury (Tax Policy).
(Filed by the Office of the Federal Register on June 26, 2008,
8:45 a.m., and published in the issue of the Federal Register
for June
27, 2008, 73 F.R. 36420)
2008–32 I.R.B.284August 11, 2008

Section 664.—Charitable
Remainder Trusts
26 CFR 1.664–1: Charitable remainder trusts.
T.D. 9403
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
Guidance Under Section
664 Regarding the Effect
of Unrelated Business
TaxableIncomeonCharitable
Remainder Trusts
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains fi-
nal regulations that provide guidance un-
der Internal Revenue Code (Code) section
664 on the tax effect of unrelated business
taxable income (UBTI) on charitable re-
mainder trusts. The regulations reflect the
changes made to section 664(c) by section
424(a) and (b) of the Tax Relief and Health
Care Act of 2006. The regulations affect
charitable remainder trusts that have UBTI
in taxable years beginning after December
31, 2006.
DATES:Effective Date:The regulations
are effective on June 24, 2008.
Applicability Date:For dates of appli-
cability, see §1.664–1(c)(3).
FOR FURTHER INFORMATION
CONTACT: Cynthia Morton at (202)
622–3060 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collections of information con-
tained in these final regulations has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)) under control
number 1545–2101. The collection of
information in these final regulations is
in §1.664–1(c)(1). This information is
required to enable a charitable remainder
trust to report and pay the excise tax due
onanyUBTIofthetrust.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
control number.
Books or records relating to a collection
of information must be retained as long
as their contents might become material in
the administration of any internal revenue
law. Generally, tax returns and tax infor-
mation are confidential, as required by 26
U.S.C. 6103.
Background and Explanation of
Provisions
This document contains amendments
to 26 CFR part 1 under section 664 of the
Code. On March 7, 2008, proposed regu-
lations (REG–127391–07, 2008–13 I.R.B.
689) relating to the tax effect of UBTI on
charitable remainder trusts were published
in theFederal Register(73 FR 12313).
Although two comments were received in
response to the proposed regulations, no
request to speak was submitted, so no pub-
lic hearing was held (see 73 FR 18729).
After consideration of the comments, the
proposed regulations are adopted by this
Treasury decision without substantive
change.
For taxable years beginning before
January 1, 2007, section 664(c) provided
that a charitable remainder trust (whether
a charitable remainder annuity trust or a
charitable remainder unitrust) would not
be exempt from income tax for any year
in which the trust had any UBTI (within
the meaning of section 512). Instead, such
trust was taxed for each such year under
subchapter J as though it were a nonex-
empt, complex trust. The final regulations
reflect the changes to section 664(c) made
by section 424 of the Tax Relief and
Health Care Act of 2006 (Act), Public Law
109–432, 120 Stat. 2922. Section 424(a)
of the Act, which applies to taxable years
beginning after December 31, 2006, pro-
vides that charitable remainder trusts that
have UBTI remain exempt from Federal
income tax, but imposes a 100-percent
excise tax on their UBTI.
The regulations confirm that, for pur-
poses of determining the character of the
distribution made to the beneficiary, the
charitable remainder trust income that is
UBTI is considered income of the trust.
Specifically, income of the charitable
remainder trust is allocated among the
trust income categories in Treasury Reg-
ulation §1.664–1(d)(1) without regard
to whether any part of that income con-
stitutes UBTI under section 512. The
regulations also confirm that, consistent
with §1.664–1(d)(2), the excise tax im-
posed upon a charitable remainder trust
with UBTI is treated aspaid from corpus.
Summary of Com
ments
Comments Relating to Transitional Relief
The two commentators requested tran-
sitional relief to allow time for charitable
remainder trusts with investments produc-
ing significant UBTI to restructure these
investments. The commentators noted that
the Tax Relief and Health Care Act of 2006
revising section 664(c) was signed into law
on December 20, 2006, and became effec-
tive for tax years beginning after Decem-
ber 31, 2006. Consequently, charitable re-
mainder trusts had eleven days to make
changes in their investments in response to
the legislation.
The Treasury Department and the IRS
have carefully considered the concerns
of the commentators and the request for
transitional relief, but have not adopted
this comment. The primary objective of
adopting the tax on UBTI was to eliminate
a source of unfair competition by placing
the unrelated business activities of cer-
tain exempt organizations on the same tax
basis as the nonexempt businesses with
which they compete. See §1.513–1(b).
The provision denying the income tax
exemption for charitable remainder trusts
in years in which the trust has UBTI was
enacted because Congress did “not believe
that it is appropriate to allow the unrelated
business income tax to be avoided by the
use of a charitable remainder trust rather
than a tax-exempt organization”. See Pub-
lic Law 91–172, Senate Report 91–552
(H.R. 13270), C.B. 1969–3, P. 481–2.
The sanction imposed under prior law on
a charitable remainder trust investing in
UBTI-producing asset(s), specifically the
loss of tax-exempt status, was generally
viewed as particularly onerous. Section
424 of the Act changed the sanction to
alleviate its severity, but did not reflect
any change in the long-standing policy
August 11, 20082852008–32 I.R.B.

to sanction and thus to discourage such
investment by charitable remainder trusts.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It has also been deter-
mined that section 553(b) of the Admin-
istrative Procedure Act (5 U.S.C. chapter
5) does not apply to these regulations. It
is hereby certified that the collection of
information in these regulations will not
have a significant economic impact on a
substantial number of small entities. This
reporting burden flows directly from the
statute implemented by these regulations.
Accordingly, a regulatory flexibility anal-
ysis under the Regulatory Flexibility Act
(5 U.S.C. chapter 6) (RFA) is not required.
Pursuant to section 7805(f) of the Code,
the notice of proposed rulemaking preced-
ing these regulations was submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Drafting Information
The principal author of the regulations
is Cynthia Morton, Office of the Associate
Chief Counsel (Passthroughs and Special
Industries).
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and 602
are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 2. Section 1.664–1 is amended as
follows:
1. In paragraph (a)(1)(i), the last sen-
tence is revised and two sentences are
added to the end of the paragraph.
2. Paragraph (c) is revised.
3. In paragraph (d)(2), the fourth sen-
tence is revised.
The revisions and addition read as fol-
lows:
§1.664–1 Charitable remainder trusts.
(a)* * * (1)* * * (i) * * * A trust cre-
ated after July 31, 1969, which is a char-
itable remainder trust, is exempt from all
of the taxes imposed by subtitle A of the
Code for any taxable year of the trust, ex-
cept for a taxable yearbeginning before
January 1, 2007, in which it has unrelated
business taxable income. For taxable years
beginning after December 31, 2006, an ex-
cise tax, treated as imposed by chapter 42,
is imposed on charitable remainder trusts
that have unrelated business taxable in-
come. See paragraph (c) of this section.
*****
(c)Excise tax on charitable remain-
der trusts—(1)In general. For each tax-
able year beginning after December 31,
2006, in which a charitable remainder an-
nuity trust or a charitable remainder uni-
trust has any unrelatedbusiness taxable in-
come, an excise tax is imposed on that trust
in an amount equal to the amount of such
unrelated business taxable income. For
this purpose, unrelated business taxable in-
come is as defined in section 512, deter-
mined as if part III, subchapter F, chap-
ter 1, subtitle A of the Internal Revenue
Code applied to such trust. Such excise
tax is treated as imposed by chapter 42
(other than subchapter E) and is reported
and payable in accordance with the appro-
priate forms and instructions. Such excise
tax shall be allocated to corpus and, there-
fore, is not deductible in determining tax-
able income distributed to a beneficiary.
(See paragraph (d)(2) of this section.) The
charitable remainder trust income that is
unrelated business taxable income consti-
tutes income of the trust for purposes of
determining the character of the distribu-
tion made to the beneficiary. Income of
the charitable remainder trust is allocated
among the charitableremainder trust in-
come categories in paragraph (d)(1) of this
section without regard to whether any part
of that income constitutes unrelated busi-
ness taxable income under section 512.
(2)Examples. The application of the
rules in this paragraph (c) may be illus-
trated by the following examples:
Example 1. For 2007, a charitable remainder an-
nuity trust with a taxable year beginning on January
1, 2007, has $60,000 of ordinary income, includ-
ing $10,000 of gross income from a partnership that
constitutes unrelated business taxable income to the
trust. The trust has no deductions that are directly
connected with that income. For that same year, the
trust has administration expenses (deductible in com-
puting taxable income) of $16,000, resulting in net
ordinary income of $44,000. The amount of unre-
lated business taxable income is computed by taking
gross income from an unrelated trade or business and
deducting expenses directly connected with carrying
on the trade or business, both computed with mod-
ifications under section 512(b). Section 512(b)(12)
provides a specific deduction of $1,000 in comput-
ing the amount of unrelated business taxable income.
Under the facts presented inthis example, there are no
other modifications under section 512(b). The trust,
therefore, has unrelated business taxable income of
$9,000 ($10,000 minus the $1,000 deduction under
section 512(b)(12)). Undistributed ordinary income
from prior years is $12,000 and undistributed capital
gains from prior years are $50,000. Under the terms
of the trust agreement, the trust is required to pay an
annuity of $100,000 for year 2007 to the noncharita-
ble beneficiary. Because the trust has unrelated busi-
ness taxable income of $9,000, the excise tax imposed
under section 664(c) is equal to the amount of such
unrelated business taxable income, $9,000. The char-
acter of the $100,000 distribution to the noncharitable
beneficiary is as follows: $56,000 of ordinary income
($44,000 from current year plus $12,000 from prior
years), and $44,000 of capital gains. The $9,000 ex-
cise tax is allocated to corpus, and does not reduce
the amount in any of the categories of income under
paragraph (d)(1) of this section. At the beginning of
year 2008, the amount of undistributed capital gains
is $6,000, and there is no undistributed ordinary in-
come.
Example 2. During 2007, a charitable remainder
annuity trust with a taxable year beginning on January
1, 2007, sells real estate generating gain of $40,000.
Because the trust had obtained a loan to finance part
of the purchase price of the asset, some of the income
from the sale is treated as debt-financed income un-
der section 514 and thus constitutes unrelated busi-
ness taxable income under section 512. The unre-
lated debt-financed income computed under section
514 is $30,000. Assuming the trust receives no other
income in 2007, the trust will have unrelated busi-
ness taxable income under section 512 of $29,000
($30,000 minus the $1,000 deduction under section
512(b)(12)). Except for section 512(b)(12), no other
exceptions or modifications under sections 512–514
apply when calculating unrelated business taxable in-
come based on the facts presented in this example.
Because the trust has unrelated business taxable in-
come of $29,000, the excise tax imposed under sec-
tion 664(c) is equal to the amount of such unrelated
business taxable income, $29,000. The $29,000 ex-
cise tax is allocated to corpus, and does not reduce
the amount in any of the categories of income un-
der paragraph (d)(1) of this section. Regardless of
how the trust’s income might be treated under sec-
tions 511–514, the entire $40,000 is capital gain for
purposes of section 664 and is allocated accordingly
to and within the second of the categories of income
under paragraph (d)(1) of this section.
(3)Effective/applicability date.This
paragraph (c) is applicable for taxable
years beginning after December 31, 2006.
The rules that apply with respect to taxable
years beginning before January 1, 2007,
are contained in §1.664–1(c) as in effect
2008–32 I.R.B.286August 11, 2008

prior to June 24, 2008. (See 26 CFR part
1, §1.664–1(c)(1) revised as of April 1,
2007).
(d) * * *
(2)***Alltaxesimposedbychapter
42 of the Code (including without limita-
tion taxes treated under section 664(c)(2)
as imposed by chapter 42) and, for taxable
years beginning prior to January 1, 2007,
all taxes imposed by subtitle A of the Code
for which the trust is liable because it has
unrelated business taxable income, shall be
allocated to corpus. * * *
*****
PART 602—OMB CONTROL
NUMBERS UNDER THE PAPERWORK
REDUCTION ACT
Par. 3. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 4. In §602.101, paragraph (b) is
amended by adding the following entry in
numerical order to the table as follows:
§602.101 OMB Control numbers.
*****
(b) * * *
CFR part or section where
identified and described
Current OMB
control No.
*****
1.664–1(c)...........................................................
1545–2101
*****
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
Approved June 18, 2008.
Eric Solomon,
Assistant Secretary of
theTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on June 19, 2008,
1:29 p.m., and published in the issue of the Federal Register
for June 24, 2008, 73 F.R. 35583)
Section 956.—Investment
of Earnings in United
States Property
26 CFR 1.956–2: Definition of United States prop-
erty.
T.D. 9406
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Modifications to Subpart F
TreatmentofAircraftand
Vessel Leasing Income
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regula-
tions.
SUMMARY: This document contains fi-
nal and temporary regulations addressing
the treatment of certain income and assets
related to the leasing of aircraft or ves-
sels in foreign commerce under sections
367, 954, and 956 of the Internal Rev-
enue Code (Code). The regulations re-
flect statutory changes made by section
415 of the American Jobs Creation Act
of 2004 (AJCA). In general, the regula-
tions will affect United States sharehold-
ers of controlled foreign corporations that
derive income from the leasing of aircraft
or vessels in foreign commerce and U.S.
persons that transfer property subject to
these leases to a foreign corporation. The
text of these temporary regulations also
serves as the text of the proposed regula-
tions (REG–138355–07) set forth in this
issue of the Bulletin.
DATES:Effective Date:These regulations
are effective on July 3, 2008.
Applicability Dates:For dates of
applicability, see §§1.367–2T(e)(2),
1.367–4T(c)(3)(i),1.367–5T(f)(3)(ii),
1.954–2T(i) and 1.956–2T(e).
FOR FURTHER INFORMATION
CONTACT: Concerning the tempo-
rary regulations under section 367,
John H. Seibert, at (202) 622–3860;
concerning the temporary regulations
under section 954 or 956, Paul J. Carlino at
(202) 622–3840; concerning submissions
of comments, Richard A. Hurst at
Richard.A.Hurst@irscounsel.treas.gov
(not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
In General
This document contains amendments
to 26 CFR Part 1 under sections 367, 954
and 956 of the Code. Section 415(a) of
the AJCA, Public Law 108–357 (118 Stat.
1418) repealed sections 954(a)(4) and
(f), the foreign base company shipping
income provisions of subpart F. Follow-
ing repeal of the foreign base company
shipping income provisions, rents derived
from leasing an aircraft or vessel in for-
eign commerce may be included in subpart
F income only if the rents are described
in another category of subpart F income,
such as foreign personal holding company
income (FPHCI) defined in section 954(c).
Rents are included in FPHCI under sec-
tion 954(c)(1)(A). Section 954(c)(2)(A)
excludes from FPHCI rents received from
unrelated persons and derived in the active
conduct of a trade or business.
Rents derived by a controlled foreign
corporation (CFC) are considered to be
derived in the active conduct of a trade
or business if the rents are derived under
any one of four circumstances described
in the Treasury regulations under section
954(c)(2)(A). One such circumstance, pro-
vided in §1.954–2(c)(1)(iv), is when rents
are derived from property leased as a result
of the performance ofmarketing functions
by the lessor CFC. These rents are consid-
ered to be derived in the active conduct
of a trade or business if the lessor CFC,
August 11, 20082872008–32 I.R.B.

through its own officers or staff of em-
ployees located in a foreign country, main-
tains and operates an organization in the
foreign country that is regularly engaged
in the business of marketing, or of market-
ing and servicing, the leased property and
that is substantial in relation to the amount
of rents derived from leasing the property.
Section 1.954–2(c)(2)(ii) provides that
the determination of whether the organiza-
tion in the foreign country is substantial in
relation to the amount of rents derived is
based on all the facts and circumstances.
However, under §1.954–2(c)(2)(ii), the
organization will be considered substan-
tial in relation to the amount of rents if
active leasing expenses, as defined in
§1.954–2(c)(2)(iii), equal or exceed 25
percent of the adjusted leasing profit, as
defined in §1.954–2(c)(2)(iv).
Section 415(b) of the AJCA amended
section 954(c)(2)(A) to create a new mar-
keting safe harbor for the exclusion from
FPHCI for rents derived from leasing an
aircraft or vessel in foreign commerce.
The amendment to section 954(c)(2)(A)
provides:
[R]ents derived from leasing an aircraft
or vessel in foreign commerce shall not
fail to be treated as derived in the active
conduct of a trade or business if, as de-
termined under regulations prescribed
by the Secretary, the active leasing ex-
penses are not less than 10 percent of
the profit on the lease.
The legislative history of section 415(b) of
the AJCA provides that the new safe har-
bor for rents derived from leasing an air-
craft or vessel in foreign commerce “is to
be applied in accordance with the exist-
ing regulations under section 954(c)(2)(A)
by comparing the lessor’s ‘active leasing
expenses’ for its pool of leased assets to
its ‘adjusted leasing profit.’” H.R. Conf.
Rep. No. 755, 108
th
Cong., 2d Sess. 389
(2004) (hereinafter 2004 Conference Re-
port). The 2004 Conference Report in-
cludes in the definition of the term “air-
craft or vessel” engines that are leased sep-
arately from an aircraft or vessel.Id.at
391.
An aircraft or vessel will qualify
for the new safe harbor under section
954(c)(2)(A) only if it is leased in “foreign
commerce.” The legislative history pro-
vides that, for purposes of this safe harbor,
An aircraft or vessel will be considered
to be leased in foreign commerce if it
is used for the transportation of prop-
erty or passengers between a port (or
airport) in the United States and one
in a foreign country or between foreign
ports (or airports), provided the aircraft
or vessel is used predominantly outside
the United States. An aircraft or ves-
sel will be considered used predomi-
nantly outside the United States if more
than 50 percent of the miles during the
taxable year are traversed outside the
United States or the aircraft or vessel is
located outside the United States more
than 50 percent of the time during such
taxable year.
Id.at 390.
As an alternative to the new safe har-
bor, the legislative history makes clear that
alessormayqualifyforthemarketingex-
ception by satisfying a facts and circum-
stances test. The report of the House of
Representatives provides that:
The safe harbor will not prevent a
lessor from otherwise showing that it
actively carries on a trade or business.
In this regard, the requirements of sec-
tion 954(c)(2)(A) will be met if a lessor
regularly and directly performs active
and substantial marketing, remarketing,
management and operational functions
with respect to the leasing of an aircraft
or vessel (or component engines).
H.R. Rep. No. 108–548, Part I, at 210
(2004).
The 2004 Conference Report also clar-
ifies that the marketing exception for air-
craft and vessels will apply whether the
lessor engages in the marketing of the lease
as a form of financing (versus marketing
the property as such) or whether the lease
is classified as a finance lease or oper-
ating lease for financial accounting pur-
poses. 2004 Conference Report at 390.
The exception will also apply to an exist-
ing lease acquired by a lessor, if, following
the acquisition, the lessor performs active
and substantial management, operational,
and remarketing functions with respect to
the leased property.Id.The 2004 Confer-
ence Report makes clear that a taxpayer no
longer can claim FSCor ETI benefits for
an existing FSC or ETI lease transferred to
a CFC lessor.Id.
The legislative history directs the Sec-
retary of the Treasury to make conforming
changes to the current regulations “includ-
ing guidance that aircraft or vessel leasing
activity that satisfies the requirements of
section 954(c)(2)(A) shall also satisfy the
requirements for avoiding income inclu-
sion under section 956 and section 367(a).”
Id.This legislative history indicates that
Congress anticipated that taxpayers might
restructure their operations with minimal
tax cost to take advantage of the new ben-
efits under subpart F provided by section
415 of the AJCA, namely the repeal of
the foreign base company shipping income
provisions and a liberalized marketing safe
harbor for excluding active leasing income
from aircraft or vessels engaged in foreign
commerce from FPHCI.
Notice 2006–48
Notice 2006–48, 2006–1 C.B. 922, re-
leased on May 2, 2006, provided guidance
and announced the Treasury Department’s
and IRS’ intention to amend the regula-
tions under sections 367(a), 954, and 956
in accord with section 415 of the AJCA,
and the accompanying legislative history.
The notice provided that the future regula-
tions would generally be effective begin-
ning on or after May 2, 2006. These tem-
porary regulations incorporate the rules of
Notice 2006–48 with minor changes. See
§601.601(d)(2)(ii)(b).
Explanation of Provisions
The temporary regulations provide
guidance with respect to the treatment of
certain income and assets related to the
leasing of aircraft or vessels in foreign
commerce under sections 367, 954, and
956 of the Code in light of section 415 of
the AJCA.
Section 954 Regulations
The temporary regulations add a new
marketing safe harbor for purposes of de-
termining whether rents derived from leas-
ing aircraft or vessels (including compo-
nent parts, such as engines, that are leased
separately from an aircraft or vessel) in for-
eign commerce qualify for the active rents
exclusion under section 954(c)(2)(A). This
new safe harbor provides that an organi-
zation will be considered substantial un-
der §1.954–2(c)(2)(ii) if active leasing ex-
penses equal or exceed 10 percent of the
adjusted leasing profit. The temporary
regulations retain the rules in the current
regulations regarding how to determine ac-
tive leasing expenses and adjusted leas-
2008–32 I.R.B.288August 11, 2008

ing profit and that as an alternative to the
safe harbor test, a CFC can satisfy the sub-
stantiality test basedupon its facts and cir-
cumstances. The temporary regulations
also amend the current regulations to in-
clude a definition of foreign commerce and
predominant use of an aircraft or vessel
outside the United States in accordance
with the definitions given such terms in
the legislative history to section 415(b) of
the AJCA. The temporary regulations also
clarify that rents derived from certain fi-
nance leases and acquired leases are eligi-
ble for the active rents exclusion.
Section 956 Regulations
Section 956(c)(1)(A) provides that the
term “United States property” generally
includes tangible property located in the
United States. Section 956(c)(2) provides
exceptions to the general definition of U.S.
property. Section 956(c)(2)(D) excludes
from the term U.S. property any aircraft,
railroad rolling stock, vessel, motor vehi-
cle, or container used in the transporta-
tion of persons or property in foreign com-
merce and used predominantly outside the
United States.
Section 1.956–2(b)(1)(vi) provides that
whether an aircraft, railroad rolling stock,
vessel, motor vehicle, or container is used
predominantly outside the United States
depends on the facts and circumstances
in each case. The regulations also pro-
vide that as a general rule, such trans-
portation property will be considered used
predominantly outside the United States if
70 percent or more of the miles traversed
in the use of such property are traversed
outside the United States or if such prop-
erty is located outside the United States
70 percent of the time during such taxable
year. The temporary regulations amend
§1.956–2(b)(1)(vi) to provide that an air-
craft or vessel is excluded from U.S. prop-
erty if rents derived from leasing such air-
craft or vessel are excluded from FPHCI
under section 954(c)(2)(A).
Section 367 Regulations
Section 367 provides that if a U.S. per-
son transfers property to a foreign corpo-
ration in an exchange described in sections
332, 351, 354, 356, or 361 of the Code, the
foreign corporation will not be considered
a corporation for purposes of determining
the extent to which gain will be recog-
nized on such transfer. However, section
367(a)(3)(A) generally provides an excep-
tion to this rule if the property is used by
the foreign corporation in the active con-
duct of a trade or business outside of the
United States. In general, this exception
does not apply to property of which the
transferor is a lessor at the time of the
transfer, unless the transferee is the lessee
or the regulations provide otherwise.
Section 1.367(a)–2T(a) provides, in
part, that section 367(a)(1) does not apply
to property transferred to a foreign corpo-
ration if the property is transferred for use
by that corporation in the active conduct
of a trade or business outside of the United
States and certain reporting requirements
are met. Section 1.367(a)–2T(b)(3) pro-
vides that the principles of §1.954–2(d)(1)
are used to determine whether a trade
or business that produces rents or royal-
ties is actively conducted, without regard
to whether the rents or royalties are re-
ceived from an unrelated person. Section
1.367(a)–2T(b)(4) provides generally that
a foreign corporation conducts a trade or
business outside of the United States if the
primary managerial andoperational activ-
ities of the trade or business are located
outside of the United States and if imme-
diately after the transfer the transferred
assets are located outside of the United
States.
Section 1.367(a)–4T(c) through (f) con-
tains rules for determining whether cer-
tain types of property are transferred for
use in the active conduct of a trade or
business outside the United States. Sec-
tion 1.367(a)–4T(c)(1) provides that if the
transferred property will be leased by the
transferee foreign corporation, the prop-
erty generally is considered to be trans-
ferred for use in the active conduct of a
trade or business outside of the United
States only if all three of the following con-
ditions are met: (i) the transferee’s leasing
constitutes the active conduct of a leasing
business; (ii) the lessee does not use the
property in the United States; and (iii) the
transferee has need for substantial invest-
ment in assets of the type transferred.
Section 1.367(a)–4T(b)(1) provides
that even if property qualifies for the ac-
tive trade or business exception, when
a U.S. person transfers U.S. depreciated
property to a foreign corporation, that per-
son must include as ordinary income in
the year of the transfer the gain realized
that would have been included as ordinary
income under section 617(d)(1), 1245(a),
1250(a), 1252(a), or 1254(a) of the Code
if the taxpayer had sold the property at
its fair market value on the date of the
transfer (section 367recapture). Section
1.367(a)–4T(b)(2)(ii) provides that, for
this purpose, U.S. depreciated property
includes property that has been used in the
United States or has qualified as section 38
property by virtue of section 48(a)(2)(B).
Section 1.367(a)–4T(b)(3) provides a
methodology to compute the section 367
recapture amount if the property has been
used partly outside the United States. In
this circumstance, the amount of the sec-
tion 367 depreciation recapture is deter-
mined by multiplying the full section 367
recapture amount by a fraction, the numer-
ator of which is the U.S. use of the property
and denominator of which is the total use
of the property. For this purpose, U.S. use
is the number of months that the property
either was used within the United States or
qualifiedassection38propertybyvirtue
of section 48(a)(2)(B) and was subject to
depreciation by the transferor or a related
person. Total use is the total number of
months that the property was used (or was
available for use), and subject to deprecia-
tion, by the transferor or a related person.
Property is not considered to be used out-
side the United States during any period
in which the property was, for purposes
of section 38 or 168, treated as property
not used predominantly outside the United
States pursuant to the provisions of section
48(a)(2)(B).
Section 1.367(a)–5T(f) provides that,
regardless of use in an active trade or
business, section 367(a)(1) applies to a
transfer of tangible property with respect
to which the transferor is a lessor at the
time of the transfer unless: (i) the trans-
fereewasthelesseeandthetransferee
will not lease to third persons; or (ii) the
transferee will lease to third persons and
the transferee satisfies the conditions of
§1.367(a)–4T(c)(1) or (2).
The temporary regulations amend the
section 367(a) regulations to provide that
the principles of section 954(c)(2)(A) and
the related regulations shall apply to de-
termine whether a trade or business that
produces rents or royalties is actively con-
ducted under §1.367(a)–2T(b)(3). For
purposes of applying §1.367(a)–2T(b)(4),
August 11, 20082892008–32 I.R.B.

§1.367(a)–4T(c)(3) provides that the sub-
stantial managerial and operational activ-
ities of the trade or business of leasing
an aircraft or vessel must be conducted
outside of the United States, and the air-
craft or vessel must be used predominantly
outside of the United States, as defined
in section 954 and under the amended
regulation. A lessee that uses an aircraft
or vessel predominantly outside of the
United States will satisfy the requirement
in §1.367(a)–4T(c)(1)(ii).
In addition, Notice 2006–48 states that
the Treasury Department and IRS were
considering future guidance regarding
how to determine whether an aircraft or
vessel was used predominantly outside
the United States for a particular month
for purposes of calculating section 367
recapture. The notice also states that until
further guidance is issued, taxpayers are
permitted to use any reasonable method
to make this determination. The Treasury
Department and IRS continue to study
this issue and therefore taxpayers may
continue to use any reasonable method
to make this determination until further
guidance is issued.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It has also been determined
that section 553(b) of the Administra-
tive Procedure Act (5 U.S.C. chapter 5)
does not apply to these regulations. For
applicability of the Regulatory Flexibil-
ity Act (5 U.S.C. Ch. 6) please refer to
the cross-reference notice of proposed
rulemaking published elsewhere in this
Bulletin. Pursuant to section 7805(f) of the
Code, this regulation has been submitted
to the Chief Counsel for Advocacy of
the Small Business Administration for
comment on its impact on small business.
Drafting Information
The principal authors of these
regulations are John H. Seibert and
Paul J. Carlino, Office of Associate
Chief Counsel (International). However,
other personnel from the IRS and
Treasury Department participated in their
development.
*****
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 * * *
Par. 2. Section 1.367(a)–2T is amended
by adding paragraph (e) to read as follows:
§1.367(a)–2T Exception for transfers of
property for use in the active conduct of a
trade or business (temporary).
*****
(e)Special rules for certain transfers
occurring on or after May 2, 2006—(1)
General rule. Whether a trade or busi-
ness that produces rents or royalties is ac-
tively conducted shall be determined under
the principles of section 954(c)(2)(A) and
the accompanying regulations (but with-
out regard to whether the rents or royalties
are received from an unrelated party). See
§1.954–2(c) and (d).
(2)Effective/applicability date.The
rules of this paragraph (e) apply to
transfers occurring on or after May 2,
2006. However, if the transferor makes
the election to apply the provisions of
§1.367(a)–4T(c)(3)(i) for transfers occur-
ring on or after October 22, 2004, then
paragraph (e)(1) will also be applicable for
the transfers occurring on or after October
22, 2004.
(3)Expiration date. The applicability
of this paragraph (e) will expire on July 1,
2011.
Par. 3. Section 1.367(a)–4T is amended
by adding paragraphs (c)(3) and (i) to read
as follows:
§1.367(a)–4T Special rules applicable
to specified transfers of property
(temporary).
*****
(c) * * *
(3)Aircraft and vessels leased in for-
eign commerce—(i)In general.Forthe
purposes of satisfying paragraph (c)(1) of
this section, aircraft or vessels, including
component parts such as engines leased
separately from aircraft or vessels, trans-
ferred to a foreign corporation and leased
to other persons by the foreign corpora-
tion shall be considered to be transferred
for use in the active conduct of a trade or
business if—
(A) The employees of the foreign cor-
poration perform substantial managerial
and operational activities of leasing air-
craft or vessels outside the United States;
and
(B) The leased tangible personal
property is predominantly used outside
the United States, as determined under
§1.954–2T(c)(2)(v).
*****
(i)Effective/applicability date.(1)The
rules of paragraph (c)(3) of this section
apply for transfers of property occurring
on or after May 2, 2006. Transferors
may elect to apply these provisions to
transfers occurring on or after October
22, 2004, by citing the provisions of
paragraph (c)(3) of this section in the doc-
umentation for such transfers required by
§1.6038B–1T(c)(4)(i) and (iv).
(2)Expiration date. The applicability
of paragraph (c)(3) of this section will ex-
pire on July 1, 2011.
Par. 4. Section §1.367(a)–5T is
amended by adding paragraph (f)(3) to
read as follows:
§1.367(a)–5T Property subject to section
367(a)(1) regardless of use in a trade or
business (temporary).
*****
(f) * * *
(3)(i) With respect to vessels and air-
craft, including their component parts, that
will be leased by the transferee to third per-
sons, the transferee satisfies the conditions
set forth in §1.367(a)–4T(c).
(ii)Effective/applicability date.The
rules of this paragraph (f)(3) apply for
transfers of property occurring on or af-
ter May 2, 2006. If the transferor makes
the election to apply the provisions of
§1.367(a)–4T(c)(3) to transfers occurring
on or after October 22, 2004, then para-
graph (f)(3)(i) of this section will also be
applicable for the transfers affected by that
election.
(iii)Expiration date. The applicability
of this paragraph (f)(3) will expire on July
1, 2011.
Par. 5. Section 1.954–2 is amended as
follows:
1. Paragraph (c)(2)(ii) is revised.
2008–32 I.R.B.290August 11, 2008

2. Paragraphs (c)(2)(v), (c)(2)(vi),
(c)(2)(vii) and (c)(3)Example 6, and (i)
are added. The revision and additions read
as follows:
§1.954–2 Fore
ign personal holding
company incom
e.
*****
(c) * * *
(2) * * *
(ii) [Reserved]. For further guidance,
see §1.954–2T(c)(2)(ii).
*****
(v) [Reserved]. For further guidance,
see §1.954–2T(c)(2)(v).
(vi) [Reserved]. For further guidance,
see §1.954–2T(c)(2)(vi).
(vii) [Reserved]. For further guidance,
see §1.954–2T(c)(2)(vii).
(3) * * *
Example 6. [Reserved]. For further
guidance, see §1.954–2T(c)(3)Example 6.
*****
(i) [Reserved]. For further guidance,
see §1.954–2T(i).
Par. 6. Section 1.954–2T is added to
read as follows:
§1.954–2T Foreign personal holding
company income (temporary).
(a) through (c)(2)(i) [Reserved]. For
further guidance, see §1.954–2(a) through
(c)(2)(i).
(ii)Substantiality of foreign organiza-
tion. For purposes of paragraph (c)(1)(iv)
of this section, whether an organization in
a foreign country is substantial in relation
to the amount of rents is determined based
on all facts and circumstances. However,
such an organization will be considered
substantial in relation to the amount of
rents if active leasing expenses, as defined
in paragraph (c)(2)(iii) of this section,
equal or exceed 25 percent of the adjusted
leasing profit, as defined in paragraph
(c)(2)(iv) of this section. In addition, for
purposes of aircraft or vessels leased in
foreign commerce, an organization will
be considered substantial if active leas-
ing expenses, as defined in paragraph
(c)(2)(iii) of this section, equal or ex-
ceed 10 percent of the adjusted leasing
profit, as defined in paragraph (c)(2)(iv)
of this section. For purposes of paragraphs
(c)(1)(iv) and (c)(2) of this section and
§1.956–2T(b)(1)(vi), the termaircraft or
vesselsincludes component parts, such as
engines that are leased separately from an
aircraft or vessel.
(c)(2)(iii) through (c)(2)(iv) [Re-
served]. For further guidance, see
§1.954–2(c)(2)(iii) through (c)(2)(iv).
(v)Leased in foreign commerce.For
purposes of paragraph (c)(1)(iv) and (2)(ii)
of this section, an aircraft or vessel is con-
sidered to be leased in foreign commerce
if the aircraft or vessel is used in foreign
commerce and is used predominately out-
side the United States. For purposes of
this paragraph (c)(2)(v), an aircraft or ves-
sel is considered to be leased in foreign
commerce if used for the transportation of
property or passengers between a port (or
airport) in the United States and one in a
foreign country or between foreign ports
(or airports) provided the aircraft or vessel
is used predominantly outside the United
States. An aircraft or vessel will be consid-
ered to be used predominantly outside the
United States if more than 50 percent of the
miles traversed during the taxable year in
the use of such property are traversed out-
side the United States or if the aircraft or
vessel is located outside the United States
more than 50 percent of the time during the
taxable year.
(vi)Leases acquired by the CFC lessor.
Except as provided in this paragraph
(c)(2)(vi), the exception in paragraph
(c)(1)(iv) of this section will also apply
to rents from leases acquired from any
person, if following the acquisition the
lessor performs active and substantial
management, operational, and remarket-
ing functions with respect to the leased
property. However, if any person is claim-
ing a benefit with respect to an acquired
lease pursuant to sections 921 or 114 of
the Internal Revenue Code or section
101(d) of the American Jobs Creation Act
of 2004, Public Law No. 108–357 (118
Stat. 1418) (2004), the rents from such
lease, notwithstanding §1.954–2(b)(6),
(2)(c) and the remainder of this section,
are ineligible for the exception in section
954(c)(2)(A).
(vii)Finance leases.Paragraph
(c)(1)(iv) of this section can apply to a
lessor engaged in the marketing of leases
that are treated as finance leases for finan-
cial accounting purposes but are treated as
leases for Federal income tax purposes.
(3)Examples 1through5[Reserved].
For further guidance, see §1.954–2(c)(3)
Examples 1through5.
Example 6.ThefactsarethesameasinExample
2, except that controlled foreign corporation D pur-
chases aircraft which it leases to others. If Corpora-
tion D incurs active leasing expenses, as defined in
paragraph (c)(2)(iii) of this section, equal to or in ex-
cess of 10 percent of its adjusted leasing profit, as de-
fined in paragraph (c)(2)(iv) of this section, the rental
income of Corporation D from its leases with the un-
related foreign corporations is substantial and will be
considered as derived in the active conduct of a trade
or business for purposes of section 954(c)(2)(A). If a
particular aircraft subject to lease was not used by the
lessee corporation in foreign commerce, for example,
because 50 percent or less of the miles during the tax-
able year were traversed outside the United States and
the aircraft was located in the United States for 50
percent or more of the taxable year, Corporation D is
not prevented from otherwise showing that it actively
carries on a trade or business with regard to the rents
derived from that aircraft, for example, based on its
facts and circumstances, or as within the meaning of
paragraph (c)(1)(i) or (iii) of this section.
(d) through (h) [Reserved]. For further
guidance, see §1.954–2(d) through (h).
(i)(1)Effective/applicability date. Para-
graph (c) of this section applies to taxable
years of controlled foreign corporations
beginning on or after May 2, 2006, and
for tax years of United States sharehold-
ers with or within which such tax years of
the controlled foreigncorporations ends.
Taxpayers may elect to apply paragraph
(c) of this section to taxable years of con-
trolled foreign corporations beginning af-
ter December 31, 2004, and for tax years of
United States shareholders with or within
which such tax years of the controlled for-
eign corporations end. If an election is
made to apply paragraph (b)(1)(vi) of this
section to taxable years beginning after
December 31, 2004, then the election must
also be made for paragraph (c) of this sec-
tion.
(2)Expiration date. The applicabil-
ity of §1.954–2T(c) will expire on July 1,
2011.
Par. 7. Section 1.956–2 is amended as
follows:
1. Paragraph (b)(1)(vi) is revised.
2. Paragraph (e) is added.
The revisions and addition read as fol-
lows:
§1.956–2 Definition of United States
property.
*****
(b) * * *
(1) * * *
August 11, 20082912008–32 I.R.B.

(vi) [Reserved]. For further guidance,
see §1.956–2T(b)(1)(vi).
*****
(e) [Reserved]. For further guidance,
see §1.956–2T(e).
Par. 8. Section 1.956–2T is amended as
follows:
1. Paragraphs (a), (b), (b)(1)(i),
(b)(1)(ii), (b)(1)(iii), (b)(1)(iv), (b)(1)(v),
(b)(i)(vi), (c), (d) and (d)(1) are added.
2. Paragraph (e) is added.
The revisions and addition read as fol-
lows:
§1.956–2T Definition of United States
property (temporary).
(a) through (b)(1)(v) [Reserved]. For
further guidance, see §1.956–2(a) through
(b)(1)(v).
(vi) Any aircraft, railroad rolling stock,
vessel, motor vehicle, or container used in
the transportation of persons or property in
foreign commerce and used predominantly
outside the United States. Whether trans-
portation property described in this sub-
division is used in foreign commerce and
predominantly outside the United States is
to be determined from all the facts and
circumstances of each case. As a gen-
eral rule, such transportation property will
be considered to be used predominantly
outside the United States if 70 percent or
more of the miles traversed (during the tax-
able year at the close of which a deter-
mination is made under section 956(a)(2))
in the use of such property are traversed
outside the United States or if such prop-
erty is located outside the United States
70 percent of the time during such taxable
year. Notwithstanding the above, an air-
craft or vessel (as the term is defined in
§1.954–2T(c)(2)(ii)) is excluded from U.S.
property if rents derived from leasing such
aircraft or vessel are excluded from foreign
personal holding company income under
section 954(c)(2)(A). See paragraph (e) of
this section for the effective/applicability
dates of this paragraph (b)(1)(vi).
(c) through (d)(1) [Reserved]. For
further guidance, see §1.956–2(b)(1)(vii)
through (d)(1).
*****
(e)Effective/applicability date. Para-
graph (b)(1)(vi) of this section applies to
taxable years of controlled foreign cor-
porations beginning on or after May 2,
2006, and for tax years of United States
shareholders with or within which such
tax years of the controlled foreign corpo-
rations end. Taxpayers may elect to ap-
ply the rule of this section to taxable years
of controlled foreign corporations begin-
ning after December 31, 2004, and for tax
years of United States shareholders with
or within which such tax years of foreign
corporations end. If an election is made
to apply §1.954–2T(c) to taxable years of
a controlled foreign corporation beginning
after December 31, 2004, then the election
must also be made for paragraph (b)(1)(vi)
of this section.
(2)Expiration date. The applicability
of paragraph (b)(1)(vi) of this section will
expire on July 1, 2011.
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
Approved June 23, 2008.
Eric Solomon,
Assistant Secretary of
the Treasury (Tax Policy).
(Filed by the Office of the Federal Register on July 2, 2008,
8:45 a.m., and published in the issue of the Federal Register
for July 3, 2008, 73 F.R. 38113)
Section 2032A.—Valuation
of Certain Farm, etc.,
Real Property
26 CFR 20.2032A–4: Method of valuing farm real
property.
Special use value; farms; interest
rates.The 2008 interest rates to be used
in computing the special use value of farm
real property for which an election is made
under section 2032A of the Code are listed
for estates of decedents.
Rev. Rul. 2008–44
This revenue ruling contains a list of the
average annual effective interest rates on
new loans under the Farm Credit System.
This revenue ruling also contains a list of
the states within each Farm Credit System
Bank Chartered Territory.
Under § 2032A(e)(7)(A)(ii) of the In-
ternal Revenue Code, rates on new Farm
Credit System Bank loans are used in com-
puting the special use value of real prop-
erty used as a farm for which an election
is made under § 2032A. The rates in this
revenue ruling may be used by estates that
value farmland under § 2032A as of a date
in 2008.
Average annual effective interest
rates, calculated in accordance with
§ 2032A(e)(7)(A) and § 20.2032A–4(e)
of the Estate Tax Regulations, to be used
under § 2032A(e)(7)(A)(ii), are set forth in
the accompanying Table of Interest Rates
(Table 1). The states within each Farm
Credit System Bank Chartered Territory
are set forth in the accompanying Table
of Farm Credit System Bank Chartered
Territories (Table 2).
Rev. Rul. 81–170, 1981–1 C.B. 454,
contains an illustrative computation of an
average annual effective interest rate. The
rates applicable for valuation in 2007 are
in Rev. Rul. 2007–45, 2007–28 I.R.B.
49. For rate information for years prior
to 2007, see Rev. Rul. 2006–32, 2006–1
C.B. 1170, and other revenue rulings that
are referenced therein.
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is Lane Damazo of the Office of the As-
sociate Chief Counsel (Passthroughs and
Special Industries).For further informa-
tion regarding this revenue ruling, contact
Lane Damazo at (202) 622–3090 (not a
toll-free call).
2008–32 I.R.B.292August 11, 2008

REV. RUL. 2008–44 TABLE 1
TABLE OF INTEREST RATES
(Year of Valuation 2008)
Farm Credit System Bank Servicing State in
Which Property is LocatedRate
AgFirst,FCB .......................................................................
7.56
AgriBank,FCB ..................................................................... 6.38
CoBank,ACB ...................................................................... 6.11
Texas,FCB ........................................................................ 6.47
U.S.AgBank,FCB.................................................................. 6.09
REV. RUL. 2008–44 TABLE 2
TABLE OF FARM CREDIT SYSTEM BANK CHARTERED TERRITORIES
Farm Credit System BankLocation of Property
AgFirst,FCB ............................................ Delaware,DistrictofColumbia,Florida,Georgia,Maryland,
North Carolina, Pennsylvania, South Carolina, Virginia,
West Virginia.
AgriBank,FCB .......................................... Arkansas,Illinois,Indiana,Iowa,Kentucky,Michigan,
Minnesota, Missouri, Nebraska, North Dakota, Ohio,
South Dakota, Tennessee, Wisconsin, Wyoming.
CoBank,ACB ........................................... Alaska,Connecticut,Idaho,Maine,Massachusetts,Montana,
New Hampshire, New Jersey, New York, Oregon,
Rhode Island, Vermont, Washington.
Texas,FCB.............................................. Alabama,Louisiana,Mississippi,Texas.
U.S. Agbank, F
CB........................................
Arizona, Cali
fornia, Colorado, Hawaii, Kansas, New Mexico,
Nevada, Oklah
oma, Utah.
Section 6205.—Special
Rules Applicable to Certain
Employment Taxes
26 CFR 31.6205–1: Adjustments of underpayments.
T.D. 9405
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 31 and 602
Employment Tax Adjustments
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains fi-
nal regulations relating to employment
tax adjustments and employment tax re-
fund claims. The final regulations modify
the process for making interest-free ad-
justments for both underpayments and
overpayments of Federal Insurance Con-
tributions Act (FICA) and Railroad Retire-
ment Tax Act (RRTA) taxes and Federal
income tax withholding (ITW) under sec-
tions 6205(a) and 6413(a), respectively, of
the Internal Revenue Code (Code). These
regulations also modify the process for
filing claims for refund of overpayments
of employment taxes under sections 6402
and 6414.
This document contains final regula-
tions relating to the return requirements
under section 6011 to reflect the changes to
the adjustment and refund processes, and
to reflect additional statutory and process
updates. This document also contains fi-
nal regulations under section 6302 to clar-
ify deposit obligations with respect to in-
terest-free adjustments of underpayments
and the effect of adjustments and refunds
on the deposit schedule of a Form 943 filer.
DATES:Effective Date:These final regu-
lations are effective on January 1, 2009.
Applicability Date:With respect to
the regulations under Code sections 6205,
6402, 6413, and 6414, these final regula-
tions apply to any error ascertained on or
after January 1, 2009.
FOR FURTHER INFORMATION
CONTACT: Ligeia M. Donis, (202)
622-0047 (not a toll-free number).
August 11, 20082932008–32 I.R.B.

SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information con-
tained in these final regulations has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)) under control
number 1545–2097. The collection of
information in these proposed regula-
tions is in §§31.6011(a)–1, 31.6011(a)–4,
31.6011(a)–5, 31.6205–1, 31.6402(a)–2,
31.6413(a)–1,31.6413(a)–2,and
31.6414–1. This information is required
by the IRS to verify compliance with
return requirements under section 6011,
employment tax adjustments under sec-
tions 6205 and 6413, and claims for refund
of overpayments of employment taxes
under sections 6402 and 6414. This infor-
mation will be used to determine whether
the amount of tax has been reported and
calculated correctly.
An agency may not conduct or sponsor,
and a person is not required to respond to, a
collection of information unless it displays
a valid control number assigned by the Of-
fice of Management and Budget.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.
Background
These final regulations are issued in
connection with the IRS’s development of
new forms to report adjustments to em-
ployment taxes which will replace the ex-
isting process of reporting adjustments of
employment taxes on regularly filed em-
ployment tax returns. These regulations
affect taxpayers that file employment tax
returns, including Form 941, “Employer’s
QUARTERLY Federal Tax Return,” Form
943, “Employer’s Annual Federal Tax Re-
turn for Agricultural Employees,” Form
944, “Employer’s ANNUAL Federal Tax
Return,” Form 945, “Annual Return of
Withheld Federal Income Tax,” and Form
CT–1, “Employer’s Annual Railroad Re-
tirement Tax Return,” and any related
Spanish-language returns or returns for
U.S. possessions.
These final regulations are part of the
IRS’s effort to reduce taxpayer burden by
permitting employers to make employ-
ment tax adjustments on a separately filed
form as soon as an error is ascertained.
These regulations amend the Employment
Tax Regulations (26 CFR part 31) under
section 6011 relating to the requirement to
file a return, under sections 6205(a) and
6413(a) relating to the process for making
adjustments of underpayments and over-
payments, respectively, of employment
taxes, under section 6302 relating to de-
posit obligations, and under sections 6402
and6414relatingtothe process of filing
a claim for refund for an overpayment
of employment taxes. For purposes of
these regulations, the termemployment
taxesmeans the Federal Insurance Con-
tributions Act (FICA) tax (both the social
security and Medicare portions) imposed
on both the employer and the employee,
the Railroad Retirement Tax Act (RRTA)
tax imposed on both the employer and
employee, and Federal income tax with-
holding (ITW). To the extent that other
types of withholding are treated as ITW
under section 3402(a) (that is,gambling
withholding, pension withholding, and
backup withholding as set forth in sections
3402(q)(7), 3405(f), and 3406(h)(10), re-
spectively), these other types of withhold-
ingareincludedinthetermemployment
taxes.
Interest-free Adjustments
Generally, the Code requires that inter-
est be paid to the IRS on any underpayment
of tax and that interest be allowed and
paid to the taxpayer on any overpayment
of tax. See sections 6601(a) and 6611(a),
respectively. An exception to the general
rule, however, applies uniquely to em-
ployment taxes. Where an amount other
than the correct amount of tax imposed by
sections 3101 (employee FICA tax), 3111
(employer FICA tax), 3201 (employee
RRTA tax), 3221 (employer RRTA tax),
or 3402 (ITW) is reported to the IRS with
respect to any payment of wages or com-
pensation, sections 6205(a) and 6413(a)
permit employers to make interest-free
adjustments for underpayments and over-
payments, respectively. Where the correct
amount of tax has been reported but not
paid, no adjustment to the amount reported
is necessary; accordingly, the interest-free
adjustment rules do not apply.
Claims for Refund
For overpayments of employment
taxes, section 6413(b) permits the filing
of a claim for refund when an interest-free
adjustment cannot be made. Under the
regulatory authority in section 6413(b),
the IRS has permitted taxpayers to choose
between filing a claim for refund pursuant
to section 6402(a) and making an inter-
est-free adjustment pursuant to section
6413(a) to correct an overpayment of em-
ployment taxes.
Under section 6402(a), the IRS, within
the applicable period of limitations on
credit or refund, maycredit the amount of
an overpayment, including any interest,
against any tax liability of the person who
made the overpayment and shall, subject
to certain offsets, refund any balance to
such person. A claim for refund under
section 6402(a) must be filed within the
period of limitations on credit or refund.
Section 6414 permits refunds of ITW only
to the extent the amount of the ITW over-
payment was not actually deducted and
withheld from an employee.
Since 1960, the regulations under sec-
tions 6205 and 6413 have provided that
employment tax adjustments are made by
reporting the adjustment on an employer’s
current period employment tax return. Be-
cause the adjustment was reported on a
current period return, the amount of the ad-
justment was treated as part of the current
period’s liability. Such a process for mak-
ing adjustments of employment taxes pre-
sented a number of problems for both em-
ployers and the IRS, in large part because
it required employers to make adjustments
for past periods in connection with the fil-
ing of their current period returns.
The IRS, as part of the Form 94X
Project initiated by the Office of Taxpayer
Burden Reduction and in response to the
request of employers and the payroll com-
munity, is developing new forms to be
used when making adjustments of employ-
ment taxes. The new forms will reduce the
employer’s burden in making and tracking
adjustments and increase the IRS’s ability
to ensure employment tax compliance.
The IRS is simultaneously revising the
process for claiming refunds. These final
regulations are issued in connection with
2008–32 I.R.B.294August 11, 2008

the IRS’s development of such new forms
which will be used by employers to make
overpayment and underpayment adjust-
ments to employment taxes or to claim
refunds of overpaid employment taxes.
A notice of proposed rulemaking
(REG–111583–07, 2008–4 I.R.B. 319 [72
FR 74233]) was published in theFed-
eral Registeron December 31, 2007.
A correction to the notice of proposed
rulemaking was published in theFederal
Registeron January 28, 2008 (73 FR
4765). No requests for a public hearing
were received, therefore, no public hear-
ing was held. The IRS received written
and electronic comments responding to the
notice of proposed rulemaking, but none
of them requested substantive changes to
the proposed regulations. The proposed
regulations are adopted as amended by
this Treasury decision. The revisions are
discussed.
Summary of Comments and
Explanation of Provisions
Several positive comments were re-
ceived on the proposed regulations. No
substantive changes to the regulations
were requested. Several commentators
suggested changes for the draft form,
Form 941X, “Adjusted Employer’s QUAR-
TERLY Federal Tax Return or Claim for
Refund,” which was released to the pub-
lic on the IRS website (www.irs.gov)on
March 4, 2008, as a vision draft for com-
ment. The Form 941X is the first of a
series of forms being developed by the IRS
in conjunction with these regulations. The
series of forms will correspond to Form
941, Form 943, Form 944, Form 945, and
Form CT–1 and will be used by employers
when making adjustments of employment
taxes or claiming refunds of employment
taxes. The comments on the draft Form
941X will be taken into account in prepar-
ing the final version of the form.
As the IRS has continued to prepare for
the implementation of the new adjustment
and refund claim processes for employ-
ment taxes, some necessary changes to the
proposed regulations were identified and
incorporated into these final regulations.
These changes to the proposed regulations
are discussed below.
Overview of Final Regulations Under
Sections 6205 and 6413
The final regulations under sections
6205 and 6413 set forth the procedures
for making interest-free adjustments for
underpayments and overpayments of em-
ployment taxes, respectively. Like the
proposed regulations, the final regulations
under sections 6205 and 6413 have been
drafted to set up parallel structures accord-
ing to the type of tax being adjusted and
when the error is ascertained. Accord-
ingly, the final regulations under sections
6205 and 6413 are divided into provisions
dealing with FICA and RRTA taxes and
provisions dealing with ITW. The pro-
visions are further broken down based
on when the error is ascertained, that is,
whether the error is ascertained before or
after a return has been filed.
Interest-free Adjustments
The final regulations under section
6205 set forth the procedures for making
interest-free adjustments for underpay-
ments of employment taxes. They provide
that if a return is filed and less than the
correct amount of employee or employer
portions of FICA or RRTA tax is reported,
and the employer discovers such error
after filing the return, the employer shall
adjust the resulting underpayment of tax
by reporting the additional amount due
on an adjusted return for the return period
in which the wages or compensation was
paid. The adjustment must be made by the
due date of the return for the return pe-
riod in which the error is ascertained and
the amount of the underpayment must be
paid by the time the adjustment is made,
or interest will begin to accrue from that
date. An underpayment adjustment may
only be made within the period of limita-
tions for assessment. For underpayments
of ITW where the incorrect amount was
withheld, subject to limited exceptions, an
adjustment may be made only for errors
ascertained during the calendar year in
which the wages were paid.
Under the final regulations interest-free
adjustments for underpayments of FICA
tax, RRTA tax, and ITW are available un-
der certain circumstances where the un-
derpayment arises because the employer
failed to file an original return or failed to
report and pay the correct type of tax. The
final regulations revise the processes set
forth in the proposed regulations to accom-
modate the various possibilities of errors in
these situations and to ensure the IRS can
process the adjustments.
Specifically, under the final regulations,
if an employer filed a return reporting
FICAtaxwhenareturnreportingRRTA
tax should have been filed, the employer
can make an interest-free adjustment by
filing an original return reporting the cor-
rect amount of RRTA tax and attaching an
adjusted return to correct the erroneously
reported FICA tax. Conversely, if an em-
ployer filed a return reporting RRTA tax
when a return reporting FICA tax should
have been filed, the employer can make an
interest-free adjustment by filing an orig-
inal return reporting the correct amount
of FICA tax and attaching an adjusted
return to correct the erroneously reported
RRTA tax. In the latter situation, if the
employer already filed a return that is used
to report FICA tax in order to report ITW,
the employer can make an interest-free
adjustment by filingan adjusted return
to report the correct amount of FICA tax
with an adjusted return to correct the er-
roneously reported RRTA tax. The final
regulations also add a cross-reference to
the regulations under section 3503 which
provide that if an amount is paid under the
wrong chapter, that is, an employer erro-
neously pays FICA tax under chapter 21
instead of RRTA tax under chapter 22, or
RRTA tax instead of FICA tax, the amount
erroneously paid shall be credited against
the tax for which the employer is liable
and any balance refunded.
In addition, the final regulations pro-
vide the process by which an employer can
make an interest-free adjustment if the em-
ployer failed to file a return for a return
period solely because the employer failed
to treat any individuals as employees. The
employer can make an interest-free adjust-
ment to report the tax due with respect to
the reclassified workers by filing an origi-
nal return and an attached adjusted return
reporting the correct amount of tax, in ac-
cordance with the instructions for the ad-
justed return.
Generally, such reporting will consti-
tute an interest-free adjustment in each of
these situations if the original return and/or
adjusted return(s) are filed by the due date
of the correct return for the return period in
which the error is ascertained. The amount
August 11, 20082952008–32 I.R.B.

reported must be paid by the time the orig-
inal return and/or adjusted return(s) are
filed or interest will accrue from that date.
The final regulations under section
6413(a) set forth the procedures for mak-
ing interest-free adjustments for overpay-
ments of employment taxes. They provide
that, if an employer ascertains an overpay-
ment error within the applicable period
of limitations on credit or refund, the em-
ployer is required to repay or reimburse
its employees the amount of overcollected
employee FICA tax or employee RRTA
tax prior to the expiration of the applicable
period of limitations on credit or refund.
However, the requirement to repay or
reimburse does not apply to the extent
that taxes were not withheld from the
employee or if, after reasonable efforts,
the employer cannot locate the employee;
in such case, the employer may make an
adjustment for only the employer share
of FICA or RRTA tax. An interest-free
adjustment for an overpayment may not
be made once a claim for refund has been
filed.
The final regulations under section
6413(a) further provide that once an em-
ployer repays or reimburses an employee
to the extent required, the employer may
report both the employee and employer
portions of FICA or RRTA tax as an
overpayment on an adjusted return. The
employer must certify on the adjusted re-
turn that it has repaid or reimbursed its
employees to the extent required.
Under the final regulations, the report-
ing of the overpayment constitutes an in-
terest-free adjustment if the overpayment
is reported on an adjusted return filed be-
fore the 90
th
day prior to expiration of
the period of limitations on credit or re-
fund. Similar rules apply for making in-
terest-free adjustments for overpayments
of ITW, except that an interest-free adjust-
ment may only be made if the employer
ascertains the error and repays or reim-
burses its employees within the same cal-
endar year that the wages were paid and re-
ports the adjustment on an adjusted return.
Unlike the proposed regulations, the fi-
nal regulations do not require the employer
to repay or reimburse the employee or to
adjust the overpayment by the due date of
thereturnforthereturnperiodfollowing
the return period in which the error is as-
certained. Upon further consideration, the
IRS determined there was insufficient rea-
son to impose a timing restriction other
than the period of limitations on credit or
refund of taxes.
For both underpayments and overpay-
ments, interest-free adjustments are made
by reporting the error on a separately filed
adjusted return. The new adjusted return
will not be filed as an attachment to a cur-
rent return and will not affect the liability
reported on the current return. In addition,
the regulations provide that the forms used
to accept an assessment of employment
taxes after an examination (that is, Form
2504, “Agreement to Assessment and Col-
lection of AdditionalTax and Acceptance
of Overassessment (Excise or Employment
Tax)”, and Form 2504–WC, “Agreement to
Assessment and Collection of Additional
Tax and Acceptance of Overassessment in
Worker Classification Cases (Employment
Tax)”) constitute adjusted returns for pur-
poses of permitting the assessment to be
treated as an interest-free adjustment.
The IRS intends to issue guidance to
provide examples of how the final regula-
tions under sections 6205, 6402, 6413, and
6414 apply in different factual scenarios.
Deposits, Payments, and Credits
The final regulations under section
6302 provide that an employer making
an interest-free adjustment must pay the
amount of the adjustment by the time it
files an adjusted return; such timely pay-
ment will satisfy the employer’s deposit
obligations with respect to the adjustment.
Conversely, if the amount of the adjust-
ment is not paid by the time the adjusted
return is filed, a penalty under section
6656 for failure to deposit may apply be-
cause the deposit obligation for such taxes
is not deemed to be satisfied and the em-
ployer may not have otherwise satisfied
its deposit obligations for accumulated
employment taxes.
In addition, the final regulations gov-
erning agricultural employers (Form 943
filers) provide that for purposes of deter-
mining the amount of accumulated taxes
in the employer’s lookback period (which
determines the employer’s deposit sched-
ule), adjustments to tax liability made pur-
suant to the filing of adjusted returns or
claims for refund will not be taken into
account. This rule is consistent with the
rule already in effect with respect to Form
941 and Form 944 filers that adjustments
to prior return periods are not taken into ac-
count in determining the employment tax
liability for such prior return period. See
§31.6302–1T(b)(4). The final regulations
also added language to clarify that new
agricultural employers are treated as hav-
ing employment tax liabilities of zero for
any lookback period before the date the
employer started or acquired its business,
which is consistent with the current rule
governing the lookback period for Form
941 and Form 944 filers.
The adjusted overpayment amount will
be applied as a credit toward payment of
the employer’s liability for the calendar
quarter (or calendar year for annual returns
being adjusted) in which the adjusted re-
turn is filed, unless the IRS notifies the em-
ployer that the employer is not entitled to
the adjustment (thatis, because there is no
overpayment or because the requirements
for making an adjustment were not satis-
fied) or that the credit will be applied to a
different return period.
Refunds for Overpayments
In lieu of making an interest-free ad-
justment for an overpayment, employers
may file a claim for refund pursuant to
section 6402 or 6414 for the amount of
the overpayment. Furthermore, if an em-
ployer cannot make an interest-free adjust-
ment with respect to an overpayment be-
cause the period of limitations for claim-
ing a credit or refund for such overpay-
ment will expire within 90 days or be-
cause the IRS has otherwise notified the
employer that it is not entitled to the adjust-
ment, the employer may recover the over-
payment only by filing a claim for refund.
The final regulations under section
6402(a) set out the procedures for filing
a claim for refund of overpaid FICA and
RRTA taxes. The regulations permit an
employer to file a claim for refund of an
overpayment of FICA or RRTA tax, but
require the employer to certify as part of
the claim process that the employer has
repaid or reimbursed the employee’s share
of FICA or RRTA tax to the employee
or has secured the written consent of the
employee to allowance of the refund or
credit. However, the employer is not re-
quired to repay or reimburse the employee
or obtain the written consent of the em-
ployee to the extent that the overpayment
does not include taxes withheld from the
2008–32 I.R.B.296August 11, 2008

employee or, after reasonable efforts, the
employer cannot locate the employee or
the employee, once contacted, will not
provide the requested consent.
The final regulations under section
6414 set out the procedures for filing a
claim for refund of overpaid ITW which
are similar to the procedures for filing
a claim for refund of overpaid FICA or
RRTA tax, except that an employer may
not file a claim for refund of an overpay-
ment of ITW for an amount the employer
deducted or withheld from an employee.
Tax Returns or Statements
The final regulations for reporting em-
ployment taxes under section 6011 reflect
the changes to the adjustment and refund
processes. The final regulations are up-
dated to conform to current law due to the
enactment of section 3510, added to the
Code by section 2(b)(1) of the Social Secu-
rity Domestic Employment Reform Act of
1994 (Public Law 103–387), which man-
dates annual returns for domestic service
employment taxes, and to reflect the cur-
rent use of Schedule H (Form 1040) as
the generally prescribed form for report-
ing wages for domestic service in a private
home paid in calendar years beginning af-
ter December 31, 1994.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It has also been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations.
In accordance with the Regulatory
Flexibility Act (5 U.S.C. chapter 6), this
regulation will not have a significant eco-
nomic impact on a substantial number of
small entities.
The final regulations under sections
6011, 6205, 6402, 6413, and 6414 affect
all taxpayers that file employment tax re-
turns. Therefore, the IRS has determined
that these regulations will have an impact
on a substantial number of small entities.
The IRS has determined, however, that
the impact on entities affected by the fi-
nal regulations will not be significant. The
regulations require taxpayers to provide
certain information if they file adjusted re-
turns to make interest-free adjustments to
their employment taxes for either under-
payments or overpayments or file claims
for refund for an overpayment of employ-
ment tax. The taxpayer must provide an
explanation setting forth the basis for the
correction or the claim in detail, designat-
ing the return period in which the error
was ascertained and the return period be-
ing corrected, and setting forth such other
information as may be required by the in-
structions to the form. In addition, for ad-
justments of overpayments and for claims
for refund, taxpayers must also obtain and
retain the written receipt of the employee
showing the date and amount of the re-
payment, evidence of reimbursement, or
the written consent of the employee. For
purposes of overpayment adjustments and
claims for refund of employee FICA and
RRTA tax overcollected in an earlier year,
the employer must also obtain and retain
the employee’s written statement that the
employee has not claimed refund or credit
of the amount of the overcollection, or
if so, such claim has been rejected, and
that the employee will not claim refund or
credit of the amount.
This collection of information is not
new to the final regulations and has been
in existence since the 1960’s when the pre-
vious regulations were promulgated. In
addition, the amendments to the regula-
tions are being made in conjunction with
a project of the Office of Taxpayer Bur-
den Reduction which seeks to revise the
process for making corrections to employ-
ment tax returns to make it less burden-
some to taxpayers. The filing of a claim for
refund and the making of an interest-free
adjustment pursuant to the final regula-
tions are voluntary on the part of taxpay-
ers.
Based on these facts, the IRS hereby
certifies that the collection of information
contained in these regulations will not
have a significant economic impact on a
substantial number of small entities. Ac-
cordingly, a regulatory flexibility analysis
is not required.
Pursuant to section 7805(f) of the Code,
the proposed regulations preceding these
regulations were submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its
impact on small business.
Drafting Information
The principal author of these regula-
tions is Ligeia M. Donis of the Office of the
Division Counsel/Associate Chief Coun-
sel (Tax Exempt and Government Enti-
ties). However, other personnel from the
IRS and Treasury Department participated
in their development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 31 and 602
are amended as follows:
PART 31—EMPLOYMENT TAXES
AND COLLECTION OF INCOME TAX
AT THE SOURCE
Paragraph 1. The authority citation for
part 31 continues to read, in part, as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 31.6011(a)–1 is
amended by revising the text of paragraphs
(a)(2), (a)(3), and the section heading and
text of paragraphs (a)(4) and (c) to read as
follows:
§31.6011(a)–1 Returns under Federal
Insurance Contributions Act.
(a) * * *
(2)Employers of agricultural workers.
Every employer who pays wages for agri-
cultural labor with respect to taxes im-
posed by the Federal Insurance Contribu-
tions Act must make a return for the first
calendar year in which the employer pays
such wages and for each subsequent cal-
endar year (whether or not wages are paid)
until the employer has filed a final return
in accordance with §31.6011(a)–6. Form
943, “Employer’s Annual Federal Tax Re-
turn for Agricultural Employees,” is the
form prescribed for making the annual re-
turn required by this section, except that,
if the employer’s principal place of busi-
ness is in Puerto Rico, or if the employer
has employees who are subject to income
tax withholding for Puerto Rico, the return
must be made on Form 943–PR,“Planilla
para la Declaración ANUAL de la Con-
tribución Federal del Patrono de Emplea-
dos Agrícolas.” However, Form 943 is the
form prescribed for making such return
August 11, 20082972008–32 I.R.B.

in the case of every employer of agricul-
tural workers who is required pursuant to
§31.6011(a)–4 to make a return of income
tax withheld from wages.
(3)Employers of domestic workers.
Schedule H (Form 1040), “Household Em-
ployment Taxes,” is the form prescribed for
use by every employer in making a return
as required under paragraph (a)(1) of this
section in respect of wages, as defined in
the Federal Insurance Contributions Act,
paid by the employer in any calendar year
for domestic service as defined in section
3510. Schedule H (Form 1040) is gener-
ally filed as an attachment to an income
tax return; however, if the employer does
not otherwise have an obligation to file
an income tax return, Schedule H (Form
1040) may be filed as a separate return. If,
however, the employer is required under
paragraph (a)(1) of this section to make a
return on Form 941, “Employer’s QUAR-
TERLY Federal Tax Return,” or under
paragraph (a)(2) of this section to make
areturnonForm943,“Employer’s An-
nual Federal Tax Return for Agricultural
Employees,” or under paragraph (a)(5)
ofthissectiontomakeareturnonForm
944, “Employer’s ANNUAL Federal Tax
Return,” the employer may choose instead
to report wages with respect to domestic
workers on such Form 941, Form 943, or
Form 944. If such wages are included on
Form 941, Form 943, or Form 944, the
employer must also include Federal unem-
ployment tax for the employee(s) on Form
940, “Employer’s Annual Federal Unem-
ployment (FUTA) Tax Return,” under the
provisions of §31.6011(a)–3.
(4)Employers in Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa,
or the Commonwealth of the Northern
Mariana Islands.Form 941–PR, “Planilla
para la Declaración Federal TRIMES-
TRAL del Patrono,” (or Form 944–PR,
“Planilla para la Declaración Federal
ANUAL del Patrono,” if the IRS noti-
fied the employer that the Form 944–PR
must be filed in lieu of Form 941–PR)
is the form prescribed for use in mak-
ing the return required under paragraph
(a)(1) (or (a)(5)) of this section in the
case of every employer whose princi-
pal place of business is in Puerto Rico,
or if the employer has employees who
are subject to income tax withholding
for Puerto Rico. Form 941–SS, “Em-
ployer’s QUARTERLY Federal Tax Return
(American Samoa, Guam, the Common-
wealth of the Northern Mariana Islands,
and the U.S. Virgin Islands),” (or Form
944–SS,“Employer’s ANNUAL Federal
Tax Return (American Samoa, Guam, the
Commonwealth of the Northern Mariana
Islands, and the U.S. Virgin Islands),”
if the IRS notified the employer that
Form 944–SS must be filed in lieu of
Form 941–SS) is the form prescribed for
use in making the return required under
paragraph (a)(1) (or (a)(5)) of this section
in the case of every employer whose
principal place of business is in the U.S.
Virgin Islands, Guam, American Samoa,
or the Commonwealth of the Northern
Mariana Islands, or if the employer has
employees who are subject to income tax
withholding for these U.S. possessions.
However, Form 941 (or Form 944 if the
IRS notified the employer that Form 944
must be filed in lieu of Form 941) is the
form prescribed for making such return
in the case of every such employer who
is required pursuant to §31.6011(a)–4 to
make a return of income tax withheld from
wages.
*****
(c)Adjustments and refunds.Forrules
applicable to adjustments and refunds
of employment taxes, see sections 6205,
6402, 6413, and 6414, and the applicable
regulations.
*****
Par. 3. Section 31.6011(a)–4 is
amended by revising paragraph (a)(2) to
read as follows:
§31.6011(a)–4 Returns of income tax
withheld.
(a) * * *
(2)Wages paid for domestic service.
Schedule H (Form 1040), “Household Em-
ployment Taxes,” is the form prescribed
for making the return required under para-
graph (a)(1) of this section with respect to
income tax withheld, pursuant to an agree-
ment under section 3402(p), from wages
paid for domestic service as defined in sec-
tion 3510. Schedule H (Form 1040) is gen-
erally filed as an attachment to an income
tax return; however, if the employer does
not otherwise have an obligation to file
an income tax return, Schedule H (Form
1040) may be filed as a separate return.
The preceding sentence shall not apply in
the case of an employer who has cho-
sen under §31.6011(a)–1(a)(3) to use Form
941, “Employer’s QUARTERLY Federal
Tax Return,” Form 943, “Employer’s An-
nual Tax Return for Agricultural Employ-
ees,” or Form 944, “Employer’s ANNUAL
Federal Tax Return,” as the return with
respect to such payments for purposes of
the Federal Insurance Contributions Act.
For the requirements relating for Sched-
ule H (Form 1040) with respect to qual-
ified State individual income taxes, see
§301.6361–1(d)(3)(iv).
*****
Par. 4. Section 31.6011(a)–5 is
amended by revising paragraph (a) to read
as follows:
§31.6011(a)–5 Monthly returns.
(a)In general—(1)Requirement.The
provisions of this section are applicable
in respect of the taxes reportable on re-
turns required pursuant to §31.6011(a)–1
or §31.6011(a)–4. An employer (or other
person) who is required by §31.6011(a)–1
or §31.6011(a)–4 to make quarterly or an-
nual returns on any such form shall, in
lieu of making such quarterly or annual re-
turns, make returns of such taxes in ac-
cordance with the provisions of this sec-
tion if the employer is so notified in writ-
ing by the IRS. Every employer (or other
person) notified by the IRS shall make a
return for the calendar month in which the
notice is received, for each of the prior cal-
endar months in the return period, and for
each calendar month afterwards (whether
or not wages are paid in any such month)
until the employer has filed a final return or
is required to make quarterly or annual re-
turns pursuant to notification as provided
in paragraph (a)(2) of this section. Each
return required under this section shall be
made on the form prescribed for making
the return which would otherwise be re-
quired of the employer (or other person)
under the provisions of §31.6011(a)–1 or
§31.6011(a)–4, except that, if some other
form is furnished by the IRS for use in lieu
of such prescribed form, the return shall be
made on such other prescribed form. The
IRS may notify any employer (or other per-
son)—
(i) Who by reason of notification as
provided in §301.7512–1, is required
to comply with the provisions of such
§301.7512–1; or
2008–32 I.R.B.298August 11, 2008

(ii)Whofailedto—
(A) Make any return required pursuant
to §31.6011(a)–1 or §31.6011(a)–4;
(B) Pay tax reportable on any such
form; or
(C) Deposit any such tax as required
under the provisions of §31.6302–1.
(2)Termination of requirement.The
IRS, in its discretion, may notify the em-
ployer in writing that the employer shall
discontinue the filing of monthly returns
under this section. If the employer is so
notified, the IRS will provide the em-
ployer with instructions for filing the
final monthly return. Afterwards, the
employer shall make quarterly or annual
returns in accordancewith the provisions
of §31.6011(a)–1 or §31.6011(a)–4.
*****
Par. 5. Section 31.6205–1 is amended
to read as follows:
§31.6205–1 Adjustments of
underpayments.
(a)In general. (1) An employer who
has underreported and underpaid em-
ployee Federal Insurance Contributions
Act (FICA) tax under section 3101 or
employer FICA tax under section 3111,
employee Railroad Retirement Tax Act
(RRTA) tax under section 3201 or em-
ployer RRTA tax under section 3221, or
income tax required under section 3402 to
be withheld, with respect to any payment
of wages or compensation, shall correct
such error as provided in this section. Such
correction may constitute an interest-free
adjustment as provided in paragraph (b) or
(c)ofthissection.
(2) No correction will be eligible for in-
terest-free adjustment treatment if the fail-
ure to report relates to an issue that was
raised in an examination of a prior return
period or if the employer knowingly under-
reported its employment tax liability.
(3) Every correction under this section
of an underpayment of tax with respect to
a payment of wages or compensation shall
be made on the form prescribed by the IRS
that corresponds to the return being cor-
rected. The form, filed in accordance with
this section and the instructions, will con-
stitute an adjusted return for the return pe-
riod being corrected.
(4) Every adjusted return on which an
underpayment is corrected pursuant to this
section shall designate the return period in
which the error was ascertained and the
return period being corrected, explain in
detail the grounds and facts relied upon to
support the correction, and set forth such
other information as may be required by
the regulations in this section and by the
instructions relating to the adjusted return.
(5) For purposes of this section, an error
is ascertained when the employer has suf-
ficient knowledge of the error to be able to
correct it.
(6) No correction will be eligible for in-
terest-free adjustment treatment pursuant
to this section after the earlier of the fol-
lowing:
(i) Receipt from the IRS of notice and
demand for payment thereof based upon an
assessment.
(ii) Receipt from the IRS of a Notice
of Determination of Worker Classification
(Notice of Determination) in connection
with such underpayment. Prior to receipt
of a Notice of Determination, the taxpayer
may, in lieu of making a payment, make a
cash bond deposit that would have the ef-
fect of stopping the accrual of any interest,
but would not deprive the taxpayer of its
right to receive a Notice of Determination
andtopetitiontheTaxCourtundersection
7436.
(7) Subject to the exceptions specified
in paragraphs (a)(2) and (a)(6) of this
section, Form 2504, “Agreement to Assess-
ment and Collection of Additional Tax and
Acceptance of Overassessment (Excise
or Employment Tax),” Form 2504–WC,
“Agreement to Assessment and Collec-
tion of Additional Tax and Acceptance of
Overassessment in Worker Classification
Cases (Employment Tax),” and such other
forms as may be prescribed by the IRS,
constitute adjusted returns for purposes of
this section.
(8) For provisions related to furnish-
ing employee statements and corrected
employee statements reporting wages and
withheld taxes, see sections 6041 and
6051 and §§1.6041–2 and 31.6051–1. For
provisions relating to filing information
returns and corrected information returns
reporting wages and withheld taxes, see
sections 6041 and 6051 and §§1.6041–2
and 31.6051–2.
(9) For the period of limitations upon
assessment and collection of taxes, see
§301.6501(a)–1.
(b)Federal Insurance Contributions
Act and Railroad Retirement Tax Act—(1)
Undercollection ascertained before return
is filed. If an employer collects less than
the correct amount of employee FICA or
RRTA tax from an employee with respect
to a payment of wages or compensation,
and if the employer ascertains the error
before filing the return on which the em-
ployee tax with respect to such wages or
compensation is requiredtobereported,
the employer shall nevertheless report on
the return and pay to the IRS the correct
amount of employee tax. If the employer
does not report the correct amount of tax
in these circumstances, the employer may
not later correct the error through an inter-
est-free adjustment.
(2)Error ascertained after return is
filed.(i) If an employer files a return on
whichFICAtaxorRRTAtaxisrequiredto
be reported, and reports on the return less
than the correct amount of employee or
employer FICA or RRTA tax with respect
to a payment of wages or compensation,
and if the employer ascertains the error
after filing the return, the employer shall
correct the error through an interest-free
adjustment as provided in this section.
The employer shall adjust the underpay-
ment of tax by reporting the additional
amount due on an adjusted return for the
return period in which the wages or com-
pensation was paid, accompanied by a
detailed explanation of the amount being
reported on the adjusted return and any
other information as may be required by
this section and by the instructions relating
to the adjusted return. The reporting of the
underpayment on an adjusted return con-
stitutes an adjustment within the meaning
of this section only if the adjusted return
is filed within the period of limitations for
assessment for the return period being cor-
rected, and by the due date for filing the
return for the return period in which the
error is ascertained. For purposes of the
preceding sentence, the due date for filing
the adjusted return is determined by refer-
ence to the return being corrected, without
regard to the employer’s current filing
requirements. For example, an employer
with a current annual filing requirement
who is correcting an error on a previously
filed quarterly return must file the ad-
justed return by the due date for filing a
quarterly return for the quarter in which
the error is ascertained. The amount of
the underpayment adjusted in accordance
with this section must be paid to the IRS
August 11, 20082992008–32 I.R.B.

by the time the adjusted return is filed. If
an adjustment is reported pursuant to this
section, but the amount of the adjustment
is not paid when due, interest accrues from
that date (see section 6601).
(ii) If an employer files a return report-
ing FICA tax for a return period although
the employer was required to file a re-
turn reporting RRTA tax, and if the em-
ployer ascertains the error after filing the
return, the employer shall correct the error
throughaninterest-free adjustment as pro-
vided in this section. The employer shall
adjust the underpayment of RRTA tax by
reporting the correct amount of RRTA tax
on an original return for reporting RRTA
taxforthereturnperiodforwhichthein-
correct return was filed, accompanied by
an adjusted return corresponding to the
incorrect return that was filed to correct
the erroneously reported and paid FICA
tax. The adjusted return must include a
detailed explanation of the amounts be-
ing reported on the original return and the
adjusted return and any other information
as may be required by the regulations in
this section and by the instructions relat-
ing to the adjusted return. The reporting
of the correct amounts for the period con-
stitutes an adjustment within the meaning
of this section only if the returns are filed
by the due date of the return for report-
ingtheRRTAtaxforthereturnperiodin
which the error is ascertained. Pursuant
to §31.3503–1, the amount of erroneously
paid FICA tax will be credited against the
underpaid RRTA tax. Any remaining un-
derpayment of RRTA tax adjusted in ac-
cordance with this section must be paid to
the IRS by the time the returns are filed in
accordance with this paragraph. If an ad-
justment is reported pursuant to this sec-
tion, but the amount of the remaining un-
derpayment is not paid when due, interest
accrues from that date (see section 6601).
(iii)Ifanemployerfilesareturnreport-
ing RRTA tax for a return period although
the employer was required to file a return
reporting FICA tax, and if the employer as-
certains the error after filing the return, the
employer shall correct the error through an
interest-free adjustment as provided in this
section. The employer shall adjust the un-
derpayment of FICA tax by reporting the
correct amount of FICA tax on an origi-
nal return for reporting FICA tax for the
return period for which the incorrect re-
turnwasfiled(oranadjustedreturnfor
reporting the FICA tax if an original re-
turn was already filed for such return pe-
riod to report the income tax required to
be withheld under section 3402), accom-
panied by an adjusted return correspond-
ing to the incorrect return that was filed to
correct the erroneously reported and paid
RRTA tax. The adjusted return(s) must in-
clude a detailed explanation of the amount
being reported on the original return and/or
the adjusted return(s) and any other infor-
mation as may be required by the regu-
lations in this section and by the instruc-
tions relating to the form. The reporting
of the correct amounts for the period con-
stitutes an adjustment within the meaning
of this section only if the returns are filed
by the due date of the return for report-
ingtheFICAtaxforthereturnperiodin
which the error is ascertained. Pursuant
to §31.3503–1, the amount of erroneously
paid RRTA tax will be credited against the
underpaid FICA tax. Any remaining un-
derpayment of FICA tax adjusted in accor-
dancewiththissectionmustbepaidtothe
IRS by the time the returns are filed in ac-
cordance with this paragraph (b)(2)(iii). If
an adjustment is reported pursuant to this
section, but the amount of the remaining
underpayment is not paid when due, in-
terest accrues from that date (see section
6601).
(3)Return not filed because of failure
to treat individual as employee.Ifanem-
ployer fails to file a return for a return pe-
riod solely because the employer failed to
treat any individuals properly as employ-
ees for the return period (and, therefore,
failed to withhold and pay any employer
or employee FICA or RRTA tax with re-
spect to wages or compensation paid to
the employees) and if the employer ascer-
tains the error after the due date of the re-
turn, the employer shall correct the error
through an interest-free adjustment as pro-
vided in this section. The employer shall
report the amount due by filing an origi-
nalreturnrequiredtobefiledtoreportthe
tax for the return period for which the em-
ployer failed to file a return, accompanied
by an adjusted return as provided in the in-
structions to the adjusted return. The ad-
justed return must include a detailed expla-
nation of the amount being reported on the
original return and adjusted return and any
other information as may be required by
this section and by the instructions relating
to the adjusted return. The reporting of the
correct amount of tax for the return period
constitutes an adjustment within the mean-
ing of this section only if the original and
adjusted returns are filed by the due date
of the return for reporting such tax for the
return period in which the error is ascer-
tained. For purposes of the preceding sen-
tence, the due date for filing the adjusted
return is determined by reference to the
return being corrected, without regard to
the employer’s current filing requirements.
For example, an employer with a current
annual filing requirement who is correct-
ing an error on a previously filed quarterly
return must file the adjusted return by the
due date for filing a quarterly return for the
quarter in which the error is ascertained.
The amount of the underpayment adjusted
in accordance with this section must be
paid to the IRS by the time the returns are
filed in accordance with this paragraph. If
an adjustment is reported pursuant to this
section, but the amount of the adjustment
is not paid when due, interest accrues from
that date (see section 6601).
(c)Income tax required to be withheld
from wages—(1)Undercollection ascer-
tained before return is filed.Ifanem-
ployer collects less than the correct amount
of income tax required to be withheld from
wages under section 3402, and if the em-
ployer ascertains the error before filing the
return on which the withheld tax is re-
quired to be reported, the employer shall
nevertheless report on the return and pay to
the IRS the correct amount of tax required
to be withheld. If the employer does not
report the correct amount of tax in these
circumstances, the employer may not cor-
rect the error through an interest-free ad-
justment.
(2)Error ascertained after return is
filed. If an employer files a return on
which income tax required to be withheld
from wages is required to be reported and
reports on the return less than the cor-
rect amount of income tax required to be
withheld, and if the employer ascertains
the error after filing the return, the em-
ployer shall correct the error through an
interest-free adjustment as provided in
this section. The employer shall adjust the
underpayment of tax by reporting the ad-
ditional amount due on an adjusted return
for the return period in which the wages
were paid, accompanied by a detailed ex-
planation of the amount being reported on
the adjusted return and any other informa-
2008–32 I.R.B.300August 11, 2008

tion as may be required by this section and
by the instructions relating to the adjusted
return. The reporting of the underpayment
on an adjusted return constitutes an adjust-
ment within the meaning of this section
only if the adjusted return is filed by the
due date for filing the return for the return
period in which the error is ascertained.
For purposes of the preceding sentence,
the due date for filing the adjusted return
is determined by reference to the return
being corrected, without regard to the em-
ployer’s current filing requirements. For
example, an employer with a current an-
nual filing requirement who is correcting
an error on a previously filed quarterly
return must file the adjusted return by the
due date for filing a quarterly return for the
quarter in which the error is ascertained.
However, an adjustment may only be re-
ported pursuant to this section if the error
is ascertained within the same calendar
year that the wages to the employee were
paid, unless the underpayment is attrib-
utable to an administrative error (that is,
an error involving the inaccurate reporting
of the amount actually withheld), section
3509 applies to determine the amount of
the underpayment, or the adjustment is re-
ported on a Form 2504 or Form 2504–WC.
The amount of the underpayment adjusted
in accordance with this section must be
paid to the IRS by the time the adjusted
return is filed. If an adjustment is reported
pursuant to this section, but the amount
of the adjustment is not paid when due,
interest accrues from that date (see section
6601).
(3)Return not filed because of failure
to treat individual as employee.Ifanem-
ployer fails to file a return for a return pe-
riod solely because the employer failed to
treat any individuals properly as employ-
ees for the return period (and, therefore,
failed to withhold and pay any income tax
required to be withheld from wages), the
employer shall correct the error through
an interest-free adjustment as provided in
this section. The employer shall report the
amount due by filing an original return for
the return period for which the employer
failed to file a return, accompanied by an
adjusted return as provided in the instruc-
tions to the adjusted return. The adjusted
return must include a detailed explanation
of the amount being reported on the origi-
nal and adjusted returns and any other in-
formation as may be required by this sec-
tion and by the instructions relating to the
adjusted return. The reporting of the cor-
rect amount of tax for the return period
constitutes an adjustment within the mean-
ing of this section only if the original and
adjusted returns are filed by the due date
of the return for reporting such tax for the
return period in which the error is ascer-
tained. For purposes of the preceding sen-
tence, the due date for filing the adjusted
return is determined by reference to the
return being corrected, without regard to
the employer’s current filing requirements.
For example, an employer with a current
annual filing requirement who is correct-
ing an error on a previously filed quarterly
return must file the adjusted return by the
due date for filing a quarterly return for the
quarter in which the error is ascertained.
However, an adjustment may only be re-
ported pursuant to this section if the er-
ror is ascertained within the same calen-
dar year that the wages to the employee
were paid, or if section 3509 applies to de-
termine the amount of the underpayment,
or if the adjustment is reported on a Form
2504 or Form 2504–WC. The amount of
the underpayment adjusted in accordance
with this section must be paid to the IRS
by the time the returns are filed in accor-
dance with this paragraph. If an adjust-
ment is reported pursuant to this section,
but the amount of the adjustment is not
paid when due, interest accrues from that
date (see section 6601).
(d)Deductions from employee—(1)
Federal Insurance Contributions Tax Act
and Railroad Retirement Tax Act.Ifan
employer collects less than the correct
amount of employee FICA or RRTA
tax from an employee with respect to a
payment of wages or compensation, the
employer must collect the amount of the
undercollection by deducting the amount
from remuneration of the employee, if
any, paid after the employer ascertains the
error. Such deductions may be made even
though the remuneration, for any reason,
does not constitute wages or compensa-
tion. The correct amount of employee tax
must be reported and paid, as provided in
paragraph (b) of this section, whether or
not the undercollection is corrected by a
deduction made as prescribed in this para-
graph (d)(1), and even if the deduction is
made after the return on which the em-
ployee tax must be reported is due. If such
a deduction is not made, the obligation
of the employee to the employer with re-
spect to the undercollection is a matter for
settlement between the employee and the
employer. If an employer makes an erro-
neous collection of employee tax from two
or more of its employees, a separate set-
tlement must be made with respect to each
employee. An overcollection of employee
tax from one employee may not be used
to offset an undercollection of such tax
from another employee. For provisions
relating to the employer’s liability for the
tax, whether or not it collects the tax from
the employee, see §31.3102–1(d). This
paragraph (d)(1) does not apply if section
3509 applies to determine the employer’s
liability.
(2)Income tax required to be withheld
from wages. If an employer collects less
than the correct amount of income tax re-
quired to be withheld from wages during
a calendar year, the employer must col-
lect the amount of the undercollection on
or before the last day of the year by de-
ducting the amount from remuneration of
the employee, if any, paid after the em-
ployer ascertains the error. Such deduc-
tions may be made even though the remu-
neration, for any reason, does not consti-
tute wages. The correct amount of income
tax must be reported and paid, as provided
in paragraph (c) of this section, whether or
not the undercollection is corrected by a
deduction made as prescribed in this para-
graph (d)(2), and even if the deduction is
made after the return on which the tax must
be reported is due. If such a deduction is
not made, the obligation of the employee to
the employer with respect to the undercol-
lection is a matter for settlement between
the employee and the employer within the
calendar year. If an employer makes an er-
roneous collection of income tax from two
or more of its employees, a separate settle-
ment must be made with respect to each
employee. An overcollection of income
tax from one employee may not be used to
offset an undercollection of such tax from
another employee. For provisions relat-
ing to the employer’s liability for the tax,
whether or not it collects the tax from the
employee, see §31.3403–1. For provisions
relating to the employer’s liability for an
underpayment of tax unless the employer
can show that the income tax against which
the tax under section 3402 may be credited
has been paid, see §31.3402(d)–1. This
paragraph (d)(2) does not apply if section
August 11, 20083012008–32 I.R.B.

3509 applies to determine the employer’s
liability.
Par. 6. Section 31.6302–0 is amended
by adding new entries for §31.6302–1
paragraphs (c)(7) and (g)(4)(i) and (ii) to
read as follows:
§31.6302–0 Table of contents.
*****
§31.6302–1 Federal tax deposit rules for
withheld income taxes and taxes under
the Federal Insurance Contributions Act
(FICA) attributable to payments made
after December 31, 1992.
*****
(c) * * *
(7) Exception to the monthly and semi-
weekly deposit rules for employers mak-
ing interest-free adjustments.
*****
(g) * * *
(4) * * *
(i) In general.
(ii) Adjustments and Claims for Re-
fund.
*****
Par. 7. Section 31.6302–1 is amended
by adding paragraph (c)(7) and revising
paragraph (g)(4) to read as follows:
§31.6302–1 Federal tax deposit rules for
withheld income taxes and taxes under
the Federal Insurance Contributions Act
(FICA) attributable to payments made
after December 31, 1992.
*****
(c) * * *
(7)Exception to the monthly and semi-
weekly deposit rules for employers making
interest-free adjustments. An employer fil-
ing an adjusted return under §31.6205–1
to report taxes that were accumulated in a
prior return period shall pay the amount of
the adjustment by the time it files the ad-
justed return, and the amount timely paid
will be deemed to have been timely de-
posited by the employer. The payment
may be made by a check or money or-
der with the adjusted return, by electronic
funds transfer, or by other methods of pay-
ment as provided by the instructions relat-
ingtotheadjustedreturn.
*****
(g) * * *
(4)Lookback period—(i)In general.
Forpurposesofthisparagraph(g),the
lookback period for Form 943 taxes is the
second calendar year preceding the cur-
rent calendar year. For example, the look-
back period for calendar year 1993 is cal-
endar year 1991. New employers shall be
treated as having employment tax liabili-
ties of zero for any lookback period before
the date the employer started or acquired
its business.
(ii)Adjustments and Claims for Refund.
The employment tax liability reported on
the original return for the return period is
the amount taken into account in deter-
mining whether the amount of Form 943
taxes accumulated in the lookback period
exceeds $50,000. Any amounts reported
on adjusted returns or claims for refund
pursuant to sections 6205, 6402, 6413 and
6414 filed after the due date of the origi-
nal return are not taken into account when
determining the amount of Form 943 taxes
accumulated in the lookback period. How-
ever, prior period adjustments reported on
Form 943 for 2008 and earlier years are
taken into account in determining the em-
ployment tax liability for the return period
in which the adjustments are reported.
*****
Par. 8. Section 31.6402(a)–1 is
amended by revising paragraph (a) to read
as follows:
§31.6402(a)–1 Credits or refunds.
(a)In general. For regulations un-
dersection6402ofspecial application to
credits or refunds of employment taxes,
see §§31.6402(a)–2, 31.6402(a)–3, and
31.6414–1. For regulations under section
6402 of general application to credits or re-
funds, see §§301.6402–1 and 301.6402–2.
For provisions relating to adjustments
without interest of overpayments of taxes
under the Federal Insurance Contribu-
tions Act or the Railroad Retirement
Tax Act or income tax withholding, see
§§31.6413(a)–1 and 31.6413(a)–2.
*****
Par. 9. Section 31.6402(a)–2 is
amended by revising paragraph heading
and text of paragraph (a) and removing
paragraph (c) to read as follows:
§31.6402(a)–2 Credit or refund of tax
under Federal Insurance Contributions
Act or Railroad Retirement Tax Act
(a)Claim by person who paid tax to
IRS—(1)In general.(i) Any person may
file a claim for credit or refund for an
overpayment (except to the extent that the
overpayment must be credited pursuant
to §31.3503–1) if the person paid to the
IRS more than the correct amount of em-
ployee Federal Insurance Contributions
Act (FICA) tax under section 3101 or
employer FICA tax under section 3111,
employee Railroad Retirement Tax Act
(RRTA) tax under section 3201, employee
representative RRTA tax under section
3211, or employer RRTA tax under sec-
tion 3221, or interest, addition to the tax,
additional amount, or penalty with respect
to any such tax.
(ii) The claim for credit or refund must
be made in the manner and subject to the
conditions stated in this section. The claim
for credit or refund must be filed on the
form prescribed by the IRS and must des-
ignate the return period to which the claim
relates, explain in detail the grounds and
facts relied upon to support the claim, and
set forth such other information as may
be required by this section and by the in-
structions relating to the form used to make
such claim. No refund or credit pursuant
to this section for employer tax will be
allowed unless the employer has first re-
paid or reimbursed its employee or has se-
cured the employee’s consent to the al-
lowance of the claim for refund and in-
cludes a claim for the refund of such em-
ployee tax. However, this requirement
does not apply to the extent that the taxes
were not withheld from the employee or,
after the employer makes reasonable ef-
forts to repay or reimburse the employee
or secure the employee’s consent, the em-
ployer cannot locate the employee or the
employee will not provide consent. No re-
fund or credit of employee FICA or RRTA
tax overcollected in an earlier year will be
allowed if the employee has claimed a re-
fund or credit of the amount of the over-
collection which has not been rejected or
if the employee has taken the amount of
such tax into account in claiming a credit
against or refund of the employee’s income
tax, including instances in which the em-
ployee has included an overcollection of
2008–32 I.R.B.302August 11, 2008

employee FICA or RRTA tax in comput-
ing a special refund (see §31.6413(c)–1).
(iii) For adjustments without interest of
overpayments of FICA or RRTA taxes, see
§31.6413(a)–2.
(iv) For corrections of FICA and
RRTA tax paid under the wrong chap-
ter, see §31.6205–1(b)(2)(ii) and (iii) and
§31.3503–1.
(v) For provisions related to furnish-
ing employee statements and corrected
employee statements reporting wages and
withheld taxes, see sections 6041 and
6051 and §§1.6041–2 and 31.6051–1. For
provisions relating to filing information
returns and corrected information returns
reporting wages and withheld taxes, see
sections 6041 and 6051 and §§1.6041–2
and 31.6051–2.
(vi) For the period of limitations
on credit or refund of taxes, see
§301.6511(a)–1.
(2)Statements supporting employer’s
claims for employee tax.(i) Every em-
ployer who files a claim for refund or
credit of employee FICA tax under section
3101 or employee RRTA tax under section
3201 collected from an employee must
certify as part of the claim process that
the employer has repaid or reimbursed the
tax to its employee or has secured the em-
ployee’s written consent to allowance of
the filing of the claim for refund except to
the extent that the taxes were not withheld
from the employee. The employer must
retain as part of its records the written
receipt of the employee showing the date
and amount of the repayment, evidence of
reimbursement, or the written consent of
the employee, whichever is used in sup-
port of the claim.
(ii) Every employer who files a claim
forrefundorcreditofemployeeFICAtax
under section 3101 or employee RRTA tax
under section 3201 collected from an em-
ployee in a calendar year prior to the year
in which the credit or refund is claimed,
also must certify as part of the claim
process that the employer has obtained the
employee’s written statement that the em-
ployee has not claimed refund or credit of
the amount of the overcollection, or if so,
such claim has been rejected, and that the
employee will not claim refund or credit
of the amount. The employer must retain
the employee’s written statement as part
of the employer’s records.
*****
Par. 10. Section 31.6413(a)–1 is re-
vised to read as follows:
§31.6413(a)–1 Repayment or
reimbursement by employer of tax
erroneously collected from employee.
(a)Federal Insurance Contributions
Act and Railroad Retirement Tax Act—(1)
Overcollection ascertained before return
is filed. (i) If an employer during any
return period collects from an employee
more than the correct amount of em-
ployee Federal Insurance Contributions
Act (FICA) tax under section 3101 or
employee Railroad Retirement Tax Act
(RRTA) tax under section 3201, and if the
employer ascertains theerror before filing
the return on which the employee tax is
required to be reported, repays or reim-
burses the amount of the overcollection
to the employee before filing the return
for such return period, and obtains and
keeps as part of its records the written
receipt of the employee showing the date
and amount of the repayment or evidence
of reimbursement, the employer shall not
report on any return or pay to the IRS the
amount of the overcollection.
(ii) Any overcollection not repaid or
reimbursed to the employee as provided in
paragraph (a)(1)(i) of this section shall be
reported and paid to the IRS on the return
for reporting such tax for the return pe-
riod in which the overcollection is made.
However, the reporting and payment of
the overcollection may subsequently be
treated as an overpayment error ascer-
tained after the return is filed for purposes
of paragraph (a)(2) of this section.
(iii) For purposes of this paragraph
(a)(1), an error is ascertained when the
employer has sufficient knowledge of the
error to be able to correct it.
(2)Error ascertained after return is
filed. (i) If an employer files a return
for a return period on which FICA tax
or RRTA tax is reported, collects from
an employee and pays to the IRS more
than the correct amount of the employee
FICA or RRTA tax, and if the employer
ascertains the error after filing the return
and within the applicable period of limi-
tations on credit or refund, the employer
shall repay or reimburse the employee in
the amount of the overcollection prior to
the expiration of suchlimitations period.
However, this paragraph (a)(2) does not
apply to the extent that, after reasonable
efforts, the employer cannot locate the em-
ployee, or the employee does not provide
the employer with the written statement
required by §31.6413(a)–1(a)(2)(iv). This
paragraph (a)(2) has no application in any
case in which an overcollection is made
the subject of a claim by the employer
for refund or credit under the procedure
provided in §31.6402(a)–2.
(ii) If the employer repays the amount
of the overcollection to an employee, the
employer shall obtain and keep as part of
its records the written receipt of the em-
ployee, showing the date and amount of the
repayment.
(iii) If the employer reimburses the
amount of the overcollection to an em-
ployee, the employer shall keep as part
of its records evidence of reimbursement.
The employer shall reimburse the em-
ployee by applying the amount of the
overcollection against the employee FICA
or RRTA tax which attaches to wages or
compensation paid by the employer to the
employee prior to the expiration of the
applicable period of limitations on credit
or refund. If the amount of the overcollec-
tion exceeds the amount so applied against
such employee tax, the excess amount
shall be repaid to the employee as required
by this section.
(iv) If, in any calendar year, an em-
ployer repays or reimburses an employee
in the amount of an overcollection of
employee FICA or RRTA tax that was
collected from the employee in a prior
calendar year, the employer shall obtain
from the employee and keep as part of
its records a written statement that the
employee has not claimed refund or credit
of the amount of the overcollection, or
if so, such claim has been rejected, and
that the employee will not claim refund or
credit of such amount. For this purpose, a
claim for refund or credit by the employee
includes instances in which the employee
has included an overcollection of em-
ployee FICA or RRTA tax in computing a
special refund (see §31.6413(c)–1).
(v) For purposes of this paragraph
(a)(2), an error is ascertained when the
employer has sufficient knowledge of the
error to be able to correct it.
(vi) For the period of limitations
on credit or refund of taxes, see
§301.6511(a)–1.
August 11, 20083032008–32 I.R.B.

(vii) For corrections of FICA and
RRTA tax paid under the wrong chap-
ter, see §31.6205–1(b)(2)(ii) and (iii) and
§31.3503–1.
(b)Income tax withheld from
wages—(1)Overcollection ascertained
before return is filed. (i) If an employer
during any return period collects from an
employee more than the correct amount
of tax required to be withheld from wages
under section 3402, and if the employer
ascertains the error before filing the re-
turn on which such tax is required to be
reported, repays or reimburses the amount
of the overcollection to the employee be-
fore filing the return for such return period
and before the end of the calendar year in
which the overcollection was made, and
obtains and keeps as part of its records the
written receipt of the employee showing
the date and amount of the repayment or
evidence of reimbursement, the employer
shall not report on any return or pay to the
IRS the amount of the overcollection.
(ii) Any overcollection not repaid or
reimbursed to the employee as provided in
paragraph (b)(1)(i) of this section shall be
reportedandpaidtotheIRSonthereturn
for reporting such tax for the return pe-
riod in which the overcollection is made.
However, the reporting and payment of
the overcollection may subsequently be
treated as an overpayment error ascer-
tained after the return is filed for purposes
of paragraph (b)(2) of this section.
(iii) For purposes of this paragraph
(b)(1), an error is ascertained when the
employer has sufficient knowledge of the
error to be able to correct it.
(2)Error ascertained after return is
filed. (i) If an employer files a return for
a return period on which tax required to
be withheld from wages is reported, col-
lects from an employee and pays to the
IRS more than the correct amount of the
taxrequiredtobewithheldfromwages,
and if the employer ascertains the error
after filing the return but before the end
of the calendar year in which the wages
were paid, the employer shall repay or
reimburse the employee in the amount of
the overcollection prior to the end of the
calendar year. However, this paragraph
does not apply to the extent that, after
reasonable efforts, the employer cannot
locate the employee.
(ii) If the employer repays the amount
of the overcollection to an employee, the
employer shall obtain and keep as part of
its records the written receipt of the em-
ployee, showing the date and amount of the
repayment.
(iii) If the employer reimburses the
amount of the overcollection to an em-
ployee, the employer shall keep as part
of its records evidence of reimbursement.
The employer shall reimburse the em-
ployee by applying the amount of the over-
collection against the tax under section
3402, which otherwise would be required
to be withheld from wages paid by the
employer to the employee in the calendar
year in which the overcollection is made.
If the amount of the overcollection ex-
ceeds the amount so applied against such
tax, the excess amount shall be repaid to
the employee as required by this section.
(iv) For purposes of this paragraph
(b)(2), an error is ascertained when the
employer has sufficient knowledge of the
error to be able to correct it.
Par. 11. Section 31.6413(a)–2 is re-
vised to read as follows:
§31.6413(a)–2 Adjustments of
overpayments.
(a)In general. (1) An employer who
has overcollected or overpaid employee
Federal Insurance Contributions Act
(FICA) tax under section 3101 or em-
ployer FICA tax under section 3111, em-
ployee Railroad Retirement Tax (RRTA)
tax under section 3201 or employer RRTA
tax under section 3221, or income tax re-
quired under section 3402 to be withheld,
and has repaid or reimbursed the amount
of the overcollection of such tax to the
employee, shall correct such error as pro-
vided in this section. Such correction may
constitute an interest-free adjustment as
provided in paragraph (b) or (c) of this
section.
(2) Every correction under this section
of an overpayment of tax shall be made on
the form prescribed by the IRS that corre-
sponds to the return being corrected. The
form, filed in accordance with this section
and the instructions, will constitute an ad-
justed return for the return period being
corrected.
(3) Every adjusted return on which an
overpayment is corrected pursuant to this
section shall certify that the employer has
repaid or reimbursedits employee, except
where taxes were not withheld from the
employee or where, after reasonable ef-
forts, the employer cannot locate the em-
ployee. Every adjusted return shall desig-
nate the return period in which the error
was ascertained and the return period be-
ing corrected, explain in detail the grounds
and facts relied upon to support the cor-
rection, and set forth such other informa-
tion as may be required by this section and
§31.6413(a)–1 and by the instructions re-
lating to the adjusted return. Every ad-
justed return, filed by an employer, for
overpayment of employee FICA tax un-
der section 3101 or employee RRTA tax
under section 3201 collected from an em-
ployee in a calendar year prior to the year
in which the adjusted return is filed, must
also certify that the employer has obtained
the employee’s written statement that the
employee has not claimed refund or credit
of the amount of the overcollection, or
if so, such claim has been rejected, and
that the employee will not claim refund or
credit of the amount.
(4) For purposes of this section, an error
is ascertained when the employer has suf-
ficient knowledge of the error to be able to
correct it.
(5) For provisions related to furnish-
ing employee statements and corrected
employee statements reporting wages and
withheld taxes, see sections 6041 and
6051 and §§1.6041–2 and 31.6051–1. For
provisions relating to filing information
returns and corrected information returns
reporting wages and withheld taxes, see
sections 6041 and 6051 and §§1.6041–2
and 31.6051–2.
(b)Federal Insurance Contributions
Act and Railroad Retirement Tax Act—(1)
Overcollection ascertained before return
is filed.If an employer collects more than
the correct amount of employee FICA
or RRTA tax from an employee, and if
the employer ascertains the error before
filing the return on which the employee
tax with respect to such wages or com-
pensation is required to be reported, and
repays or reimburses the employee under
§31.6413(a)–1(a)(1), the employer shall
not report on any return or pay to the IRS
the amount of the overcollection. If the
employer does not repay or reimburse
the amount of the overcollection under
§31.6413(a)–1(a)(1) before filing the re-
turn, the employer must report the amount
of the overcollection on the return. How-
ever, the payment of the overcollection
2008–32 I.R.B.304August 11, 2008

may subsequently be treated as an over-
payment error ascertained after the return
is filed for purposes of paragraph (b)(2) of
this section.
(2)Error ascertained after return is
filed—(i)Employee tax.Ifanemployer
files a return for a return period on which
FICA tax or RRTA tax is required to be re-
ported and reports on the return more than
the correct amount of employee FICA or
RRTA tax, and if the employer ascertains
the error after filing the return, and repays
or reimburses the employee the amount
of the overcollection of employee tax,
as provided in §31.6413(a)–1(a)(2), the
employer may correct the error through
an interest-free adjustment as provided
in this section. The employer shall ad-
just the overpayment of tax by reporting
the overpayment on an adjusted return
for the return period in which the wages
or compensation was paid, accompanied
by a detailed explanation of the amount
being reported on the adjusted return as
required by paragraph (a)(3) of this sec-
tion. Except as provided in paragraph (d)
of this section, the reporting of the over-
paymentonanadjustedreturnconstitutes
an adjustment within the meaning of this
section only if the adjusted return is filed
before the expiration of the period of limi-
tations on credit or refund. The employer
shall take the adjusted amount as a credit
towards payment of employment tax lia-
bilities for the return period in which the
adjusted return is filed unless the IRS no-
tifies the employer that the adjustment is
not permitted under paragraph (d) of this
section.
(ii)Employer tax. If an employer files
areturnforareturnperiodonwhichFICA
orRRTAtaxisrequiredtobereportedand
reports on the return more than the correct
amount of employer FICA or RRTA tax,
and if the employer ascertains the error af-
ter filing the return, the employer may cor-
rect the error through an interest-free ad-
justment as provided in this section. The
employer must first repay or reimburse the
employee the amount of any overcollec-
tion of employee tax, if any, as required
by §31.6413(a)–1(a)(2), before making the
adjustment for the employer tax. The em-
ployer shall adjust the overpayment of tax
by reporting the overpayment on an ad-
justed return for the return period in which
the wages or compensation was paid, ac-
companied by a detailed explanation of the
amount being reported on the adjusted re-
turn as required by paragraph (a)(3) of this
section. Except as provided in paragraph
(d) of this section, the reporting of the
overpayment on an adjusted return consti-
tutes an adjustment within the meaning of
this section only if the adjusted return is
filed before the expiration of the period of
limitations on credit or refund. The em-
ployer shall take the adjusted amount as a
credit towards payment of employment tax
liabilities for the return period in which the
adjusted return is filed unless the IRS noti-
fies the employer that the adjustment is not
permitted under paragraph (d) of this sec-
tion.
(c)Income tax withheld from
wages—(1)Overcollection ascertained
before return is filed.Ifanemployer
collects more than the correct amount of
income tax required to be withheld from
wages, and if the employer ascertains the
error before filing the return on which
the tax is required to be reported, and
repays or reimburses the employee un-
der §31.6413(a)–1(b)(1), the employer
shall not report on any return or pay to
the IRS the amount of the overcollection.
If the employer does not repay or reim-
burse the amount of the overcollection
under §31.6413(a)–1(b)(1) before filing
the return, the employer must report the
amount of the overcollection on the re-
turn. However, the reporting and payment
of the overcollection may subsequently
be treated as an overpayment error ascer-
tained after the return is filed for purposes
of paragraph (c)(2) of this section.
(2)Error ascertained after return is
filed.Ifanemployerfilesareturnforare-
turn period on which income tax required
to be withheld from wages is required
to be reported and reports on the return
more than the correct amount of income
tax required to be withheld, and if the em-
ployer ascertains the error after filing the
return, and repays or reimburses the em-
ployee in the amount of the overcollection
as provided in §31.6413(a)–1(b)(2), the
employer may correct the error through
an interest-free adjustment as provided in
this section. The employer shall adjust
the overpayment of tax by reporting the
overpayment on an adjusted return for the
return period in which the wages were
paid, accompanied by a detailed expla-
nation of the amount being reported on
theadjustedreturnasrequiredinpara-
graph (a)(3) of this section. Except as
provided in paragraph (d) of this section,
the reporting of the overpayment on an
adjusted return constitutes an adjustment
within the meaning of this section. If
the amount of the overcollection is not
repaid or reimbursed to the employee
under §31.6413(a)–1(b)(2), there is no
overpayment to be adjusted under this
section. However, the employer may ad-
just an overpayment of tax attributable to
an administrative error, that is, an error
involving the inaccurate reporting of the
amount withheld, pursuant to this sec-
tion. The employer shall take the adjusted
amount as a credit towards payment of
employment tax liabilities for the return
period in which the adjusted return is
filed unless the IRS notifies the employer
that the adjustment is not permitted under
paragraph (d) of this section.
(d)Adjustments not permitted—(1)
In general. If an adjustment cannot be
made, a claim for refund or credit may be
filed in accordance with §31.6402(a)–2 or
§31.6414–1.
(2)90-day exception. No adjustment in
respect of an overpayment may be made
if the overpayment relates to a return pe-
riod for which the period of limitations on
credit or refund of such overpayment will
expire within 90 days of filing the adjusted
return.
(3)No adjustment after claim for refund
filed. No adjustment in respect of an over-
payment may be made after the filing of a
claim for credit or refund of such overpay-
ment under §31.6402(a)–2.
(4)No adjustment after IRS notifica-
tion. No adjustment may be made upon
notification by the IRS that the adjustment
is not permitted.
Par. 12. Section 31.6414–1 is amended
by revising paragraph (a) to read as fol-
lows:
§31.6414–1 Credit or refund of income
tax withheld from wages.
(a)In general.(1) Any employer who
pays to the IRS more than the correct
amount of income tax required to be with-
held from wages under section 3402 or
interest, addition to the tax, additional
amount, or penalty with respect to such
tax, may file a claim for refund of the
overpayment in the manner and subject
to the conditions stated in this section on
August 11, 20083052008–32 I.R.B.

the form prescribed by the IRS. The claim
for refund must designate the return pe-
riod to which the claim relates, explain in
detail the grounds and facts relied upon
to support the claim, and set forth such
other information as may be required by
the regulations in this section and by the
instructions relating to the form used to
make such claim. No refund to the em-
ployer will be allowed under this section
for the amount of any overpayment of tax
which the employer deducted or withheld
from an employee.
(2) For provisions related to furnish-
ing employee statements and corrected
employee statements reporting wages and
withheld taxes, see sections 6041 and
6051 and §§1.6041–2 and 31.6051–1. For
provisions relating to filing information
returns and corrected information returns
reporting wages and withheld taxes, see
sections 6041 and 6051 and §§1.6041–2
and 31.6051–2.
(3) For interest-free adjustments of
overpayments of income tax withheld
from wages, see §31.6413(a)–2.
*****
PART 602—OMB CONTROL
NUMBERS UNDER THE PAPERWORK
REDUCTION ACT
Par. 13. The authority citation for part
602 continues to read in part as follows:
Authority: 26 U.S.C. 7805.
Par. 14. In §602.101, paragraph (b)
is amended by adding the following entry
in numerical order to the table to read as
follows:
§602.101 OMB Control numbers
*****
(b) * * *
CFR part or section where
identified and described
Current OMB
control No.
*****
31.6011(a)–1...........................................................
1545–2097
31.6011(a)
–4
...........................................................
1545–2097
31.6011(a)–5
...........................................................
1545–2097
31.6205–1
...........................................................
1545–2097
31.6402(a
)–2
...........................................................
1545–2097
31.6413(a)–1...........................................................
1545–2097
31.6413(a)–2...........................................................
1545–209
7
31.6414–
1
...........................................................
1545–2097
*****
Linda E. S
tiff,
Deputy Co
mmissioner for
Service
s and Enforcement.
Approve
d June 23, 2008.
Eric Sol
omon,
Assista
nt Secretary of the
Treasur
y(TaxPolicy).
(Filed by the Office of the Federal Register on June 30, 2008,
8:45 a.m., and published in the issue of the Federal Register
for July
1, 2008, 73 F.R. 37371)
Section 6
402.—Authority to
Make Credits or Refunds
Final regulations modify the process for making
claims for refund of overpayments of Federal Insur-
ance Contribution Act (FICA) and Railroad Retire-
ment Tax Act (RRTA) taxes under section 6402 of the
Code. See T.D. 9405, page 293.
Section
6413.—Special
Rules Applicable to Certain
Employment Taxes
Final regulations modify the process for making
interest-free adjustments for overpayments of Federal
Insuranc
e Contribution Act (FICA) and Railroad Re-
tirement
Tax Act (RRTA) taxes and Federal income
tax with
holding (ITW) under section 6413(a) of the
Code. Se
e T.D. 9405, page 293.
Section 6414.—Income
Tax Withheld
Final regulations modify the process for making
claims for refund of overpayments of Federal income
tax withholding (ITW) under section 6414 of the
Code. See T.D. 9405, page 293.
2008–32 I.R.B.306August 11, 2008

Part III. Administrative, Procedural, and Miscellaneous
Bonus Depreciation for the
Kansas Disaster Area
Notice 2008–67
SECTION 1. PURPOSE
This notice provides procedures for
a taxpayer to claim the 50-percent ad-
ditional first year depreciation (Kansas
additional first yeardepreciation) pro-
vided by § 15345(a)(1) and (d)(1) of the
Food, Conservation, and Energy Act of
2008 (the Act), Pub. L. No. 110–246, 122
Stat. 1651 (June 18, 2008), for qualified
Recovery Assistance property (RA prop-
erty) placed in service by the taxpayer on
or after May 5, 2007, during the taxable
year that includes May 5, 2007. This
notice also explains how a taxpayer may
elect not to deduct the Kansas additional
first year depreciation for RA property.
SECTION 2. BACKGROUND AND RA
PROPERTY
.01 Section 15345(a)(1) of the Act pro-
vides, in general, that § 1400N(d) of the
Internal Revenue Code shall apply to the
Kansas disaster area. Section 1400N(d),
added by § 101 of the Gulf Opportunity
Zone Act of 2005, Pub. L. No. 109–135,
119 Stat. 2577 (Dec. 21, 2005), gen-
erally allows a 50-percent additional first
year depreciation deduction for qualified
Gulf Opportunity Zone property. Section
15345(d)(1) of the Act provides that, with
the exception of newly revised dates for
determining the eligibility of the Kansas
additional first year depreciation deduc-
tion for RA property, the rules for deter-
mining the eligibility of the Kansas addi-
tional first year depreciation deduction for
RA property will be determined by follow-
ing § 1400N(d)(1) through (5).
.02 RA property is depreciable prop-
erty that meets all of the following require-
ments:
(1) The property is de-
scribed in § 168(k)(2)(A)(i) and
§ 1.168(k)–1(b)(2)(i) of the Income
Tax Regulations, or the property is
nonresidential real property (as defined
in § 168(e)(2)(B)) or residential rental
property (as defined in § 168(e)(2)(A))
and depreciated under § 168;
(2) Substantially all of the use of the
property is in the Kansas disaster area (as
defined in § 15345(b) of the Act and sec-
tion 2.04 of this notice) and in the active
conduct of a trade or business by the tax-
payer in the Kansas disaster area. For pur-
poses of this section 2.02(2), rules sim-
ilar to the rules in section 3 of Notice
2006–77, 2006–2 C.B. 590, for determin-
ing “substantially all” and “active conduct
of a trade or business” apply;
(3) The original use of the property
commences with the taxpayer in the
Kansas disaster area on or after May 5,
2007. Used property will satisfy the origi-
nal use requirement so long as the property
has not been previously used within the
Kansas disaster area. For purposes of
this section 2.02(3), rules similar to the
original use rules in section 5 of Notice
2007–36, 2007–17 I.R.B. 1000, apply;
(4) The property is acquired by the tax-
payer by purchase (as defined in § 179(d)
and § 1.179–4(c)) on or after May 5, 2007,
but only if no written binding contract
for the acquisition of the property was in
effect on or before May 4, 2007. For pur-
poses of this section 2.02(4), rules similar
to the rules in § 1.168(k)–1(b)(4)(ii) (bind-
ing contract), in § 168(k)(2)(E)(i) and
§ 1.168(k)–1(b)(4)(iii) (self-constructed
property), and in § 168(k)(2)(E)(iv) and
§ 1.168(k)–1(b)(4)(iv) (disqualified trans-
actions) apply; and
(5) The property is placed in service by
the taxpayer on or before December 31,
2008 (December 31, 2009, in the case of
qualified nonresidential real property and
residential rental property).
.03 Depreciable property is not eligible
for the Kansas additional first year depre-
ciation deduction if:
(1) The 50-percent additional first year
depreciation deduction under § 168(k), as
amended by § 103 of the Economic Stim-
ulus Act of 2008, Pub. L. No. 110–185,
122 Stat. 613 (Feb. 13, 2008), applies to
the property;
(2) The property is de-
scribed in § 168(k)(2)(D)(i) and
§ 1.168(k)–1(b)(2)(ii)(A)(2);
(3) The property is described in
§ 168(f);
(4) Any portion of the property is fi-
nanced with the proceeds of any obligation
the interest on which is tax-exempt under
§103;
(5) The property is a qualified revital-
ization building (as defined in § 1400I(b))
for which the taxpayer has made an elec-
tion under § 1400I(a)(1) or (a)(2) in ac-
cordance with section 7 of Rev. Proc.
2003–38, 2003–1 C.B. 1017;
(6) The property is included in any class
of property for which the taxpayer elects
not to deduct the Kansas additional first
year depreciation (see section 4 of this no-
tice);
(7) The property is placed in service
and disposed of during the same taxable
year. However, rules similar to the rules
in § 1.168(k)–1(f)(1)(ii) and (iii) (tech-
nical termination of a partnership under
§ 708(b)(1)(B) or transactions described in
§ 168(i)(7)) apply; or
(8) The property is converted from busi-
ness or income-producing use to personal
use in the same taxable year in which the
property is placed in service by a taxpayer.
.04 The counties in Kansas that
comprise the Kansas disaster area
are: Barton, Clay, Cloud, Comanche,
Dickinson, Edwards, Ellsworth, Kiowa,
Leavenworth, Lyon, McPherson, Osage,
Osborne, Ottawa, Phillips, Pottawatomie,
Pratt, Reno, Rice, Riley, Saline, Shawnee,
Smith, and Stafford.
.05 If depreciable property is not RA
property in the taxable year in which
the property is placed in service by the
taxpayer, the Kansas additional first
year depreciation deduction is not al-
lowable for the property even if the
property subsequently becomes RA
property due to a change in use.See
§ 1.168(k)–1(f)(6)(iv)(B).
.06 Limitation provisions of the Code
(for example, §§ 465, 469, and 704(d)) ap-
ply and may limit the amount of the Kansas
additional first year depreciation deduc-
tion that may be claimed by a taxpayer sub-
ject to such a provision.
.07 If RA property is no longer RA
property in the hands of the same taxpayer
at any time before the end of the RA prop-
erty’s recovery period as determined under
§ 167(f)(1) or § 168, as applicable, then the
taxpayer generally must recapture in the
taxable year in which the RA property is
no longer RA property the benefit derived
August 11, 20083072008–32 I.R.B.

from claiming the Kansas additional first
year depreciation deduction for such prop-
erty.See§ 1400N(d)(5). For purposes of
this section 2.07, rules similar to the recap-
ture rules in section 3 of Notice 2008–25,
2008–9 I.R.B. 484, apply.
SECTION 3. CLAIMING THE
KANSAS ADDITIONAL FIRST YEAR
DEPECIATION FOR THE TAXABLE
YEAR THAT INCLUDES MAY 5, 2007
.01In General. The Kansas additional
first year depreciation deduction is allow-
able in the taxable year in which the RA
property is placed in service by the tax-
payer. The computation of the allowable
Kansas additional first year depreciation
deduction and the otherwise allowable de-
preciation deduction for RA property is
made in accordance with rules similar to
the rules for 50-percent bonus depreciation
property in § 1.168(k)–1(d)(1)(i), (1)(iii),
and (2). Further, rules similar to the rules
in § 1.168(k)–1(f) apply for purposes of
the Kansas additional first year deprecia-
tion deduction.
.02Returns Not Filed for the Taxable
Year that Includes May 5, 2007.Ifatax-
payer has not filed its federal tax return
for the taxable year that includes May 5,
2007, and wants to claim the Kansas ad-
ditional first year depreciation for a class
of property (as defined in section 4.02 of
this notice) that is RA property placed in
service by the taxpayer on or after May 5,
2007, during the taxable year that includes
May 5, 2007, the taxpayer may claim the
Kansas additional first year depreciation
for that class of property on line 14 of
Form 4562,Depreciation and Amortiza-
tion, for the federal tax return for the tax-
able year that includes May 5, 2007. If
the RA property is listed property under
§ 280F(d)(4), such as passenger automo-
biles or computers, the taxpayer may claim
the Kansas additional first year deprecia-
tion for that listed property on line 25 of
Form 4562,Depreciation and Amortiza-
tion, for the federal tax return for the tax-
able year that includes May 5, 2007.
.03Returns Filed for the Taxable Year
that Includes May 5, 2007.
(1)In general. If a taxpayer timely filed
its federal tax return for the taxable year
that includes May 5, 2007, and did not
claim on that return the Kansas additional
first year depreciation for a class of prop-
erty that is RA property placed in service
by the taxpayer on or after May 5, 2007,
during the taxable year that includes May
5, 2007, but wants to do so, the taxpayer
may claim the Kansas additional first year
depreciation for that class of property un-
der this section 3.03, provided the taxpayer
did not make an election not to deduct the
Kansas additional first year depreciation
for the class of property pursuant to section
4.03 of this notice. The taxpayer has the
option of claiming the Kansas additional
first year depreciation for the taxable year
that includes May 5, 2007:
(a)byfilinganamendedfederaltaxre-
turn (or a qualified amended return under
Rev. Proc. 94–69, 1994–2 C.B. 804, if ap-
plicable) on or before December 31, 2009,
for the taxable year that includes May 5,
2007, and any affected subsequent taxable
year, and including the statement “Filed
Pursuant to Notice 2008–67” at the top of
any amended return (or qualified amended
return);
(b) by filing a Form 3115,Application
for Change in Accounting Method,with
the taxpayer’s timely filed federal tax re-
turn for the first taxable year succeeding
the taxable year that includes May 5, 2007,
if this return has not been filed on or before
August 11, 2008, and the taxpayer owns
the property as of the first day of this tax-
able year; or
(c) if the taxpayer’s federal tax return
for the first taxable year succeeding the
taxable year that includes May 5, 2007,
was filed on or before August 11, 2008,
by —
(i) filing an amended federal tax return
(or a qualified amended return) on or be-
fore December 31, 2009, for the first tax-
able year succeeding the taxable year that
includes May 5, 2007, attaching a Form
3115 to the amended federal tax return,
and including the statement “Filed Pur-
suant to Notice 2008–67” at the top of any
amended return (or qualified amended re-
turn); or
(ii) filing a Form 3115 with the tax-
payer’s timely filed federal tax return for
the second taxable year succeeding the tax-
able year that includes May 5, 2007, if the
taxpayer owns the property as of the first
day of this taxable year.
(2)Automatic change in method of ac-
counting. The Form 3115 is to be com-
pleted and filed in accordance with the au-
tomatic change in method of accounting
provisions in Rev. Proc. 2002–9, 2002–1
C.B. 327 (as modified and amplified by
Rev. Proc. 2002–19, 2002–1 C.B. 696, as
amplified, clarified, and modified by Rev.
Proc. 2002–54, 2002–2 C.B. 432, and as
modified and clarified by Announcement
2002–17, 2002–1 C.B. 561), or any suc-
cessor, with the following modifications:
(a) The scope limitations in section 4.02
of Rev. Proc. 2002–9 do not apply; and
(b) For purposes of section 6.02(4)(a)
of Rev. Proc. 2002–9, the taxpayer must
include on line 1a of the Form 3115 the
designated automatic accounting method
change number 115.
SECTION 4. ELECTION NOT TO
DEDUCT THE KANSAS ADDITIONAL
FIRST YEAR DEPRECIATION
.01In General. A taxpayer may make
an election not to deduct the Kansas addi-
tional first year depreciation for any class
of property that isRA property placed
in service during the taxable year.See
§ 1400N(d)(2)(B)(iv). If a taxpayer makes
this election, then the election applies to
all RA property that is in the same class
of property and placed in service in the
same taxable year, and no Kansas addi-
tional first year depreciation deduction is
allowable for the class of property. The
election not to deduct the Kansas addi-
tional first year depreciation is made by
each person owning RA property (for ex-
ample, for each member of a consolidated
group by the common parent of the group,
by the partnership, or by the S corpora-
tion). In addition, rules similar to the rules
in § 1.168(k)–1(e)(5) (failure to make
election), (6) (alternative minimum tax),
and (7) (revocation of election) apply for
purposes of the election not to deduct the
Kansas additional first year depreciation
deduction.
.02Definition of Class of Property.For
purposes of this notice, the term “class of
property” means:
(1) Except for the property described
in this section 4.02(2), (3), (4), (5), and
(6), each class of property described in
§ 168(e) (for example, 5-year property);
(2) Water utility property as defined in
§ 168(e)(5) and depreciated under § 168;
(3) Computer software as defined in,
and depreciated under, § 167(f)(1) and the
regulations thereunder;
2008–32 I.R.B.308August 11, 2008

(4) Qualified leasehold improvement
property as defined in § 168(k)(3) and
§ 1.168(k)–1(c) and depreciated under
§ 168;
(5) Nonresidential real property as de-
fined in § 168(e)(2)(B)and depreciated un-
der § 168; or
(6) Residential rental property as de-
fined in § 168(e)(2)(A) and depreciated
under § 168.
.03Time and Manner of Making the
Election.
(1)In general. Except as provided in
section 4.03(3) of this notice, an election
not to deduct the Kansas additional first
year depreciation forany class of property
that is RA property placed in service dur-
ing the taxable year must be made by the
due date (including extensions) of the fed-
eral tax return for the taxable year in which
the RA property is placed in service by the
taxpayer. Except as provided in sections
4.03(2) and (3) of this notice, the elec-
tion not to deduct the Kansas additional
first year depreciation must be made in the
manner prescribed on Form 4562,Depre-
ciation and Amortization, and its instruc-
tions.
(2)Returns for the taxable year that in-
cludes May 5, 2007, filed on or after Au-
gust 11, 2008. If a taxpayer files its fed-
eral tax return for the taxable year that in-
cludes May 5, 2007, on or after August 11,
2008, and wants to make the election not to
deduct the Kansas additional first year de-
preciation for any class of property that is
RA property placed in service by the tax-
payer on or after May 5, 2007, during the
taxable year that includes May 5, 2007, the
taxpayer must follow the instructions for
that taxable year’s Form 4562,Deprecia-
tion and Amortization(see “Election Out”
on page 4 of the 2006 or 2007 Instruc-
tions for Form 4562). Pursuant to those
instructions, the taxpayer attaches a state-
ment to its timely filed return (including
extensions) identifying the class of prop-
erty for which the taxpayer is making the
election and indicating that, for such class
of property, the taxpayer is electing not to
claim the Kansas additional first year de-
preciation.
(3)Special rules for returns for the tax-
able year that includes May 5, 2007, filed
before August 11, 2008.
(a) If a taxpayer files its federal tax
return for the taxable year that includes
May 5, 2007, before August 11, 2008, then
the taxpayer has made the election not to
deduct the Kansas additional first year de-
preciation for a class of property that is RA
property placed in service by the taxpayer
on or after May 5, 2007, during the taxable
year that includes May 5, 2007, if the tax-
payer:
(i) made the election within the time
prescribed in section 4.03(1) of this notice
and in the manner prescribed in section
4.03(2) of this notice;
(ii) made the election within the time
prescribed in section 4.03(1) of this notice
and included with the taxpayer’s federal
tax return for the taxable year that includes
May 5, 2007, an affirmative statement to
the effect that the taxpayer is not deducting
the Kansas additional first year deprecia-
tion for the class of property. The affirma-
tive statement may be a statement attached
to, or written on, the return (for example,
writing on the Form 4562 “not deducting
bonus for 5-year property”); or
(iii) made the deemed election provided
for in section 4.03(3)(b) of this notice.
(b)Deemed election. If section
4.03(3)(a)(i)or(ii)ofthisnoticedoesnot
apply, a taxpayer that files its federal tax
return for the taxable year that includes
May 5, 2007, before August 11, 2008, will
be treated as having made the election not
to deduct the Kansas additional first year
depreciation for a class of property that is
RA property placed in service by the tax-
payer on or after May 5, 2007, during the
taxable year that includes May 5, 2007, if
the taxpayer:
(i) on that return, did not claim the
Kansas additional first year depreciation
deduction for that class of property but did
claim depreciation; and
(ii) does not file an amended federal tax
return (or qualified amended return) or a
Form 3115 within the time and in the man-
ner prescribed in section 3.03(1) of this
notice to claim the Kansas additional first
year depreciation for that class of property
for the taxable year that includes May 5,
2007.
SECTION 5. DRAFTING
INFORMATION
The principal author of this notice is
Douglas H. Kim of the Office of Asso-
ciate Chief Counsel (Income Tax and Ac-
counting). For further information regard-
ing this notice, contact Mr. Kim at (202)
622–4930 (not a toll-free call).
August 11, 20083092008–32 I.R.B.

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking by
Cross-Refere
nce to
Temporary Re
gulations
and Notice of
Public Hearing
Capital Cost
sIncurredto
Comply With
EPA Sulfur
Regulation
s
REG–143453–05
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Noti
ce of proposed rulemaking
by cross-ref
erence to temporary regula-
tions and no
tice of public hearing.
SUMMARY: In this issue of the Bulletin,
the IRS is issuing temporary regulations
(T.D. 9404) under section 179B of the In-
ternal Revenue Code (Code) relating to the
deduction for qualified capital costs paid
or incurred by a small business refiner to
comply with the highway diesel fuel sulfur
control requirements of the Environmen-
tal Protection Agency (EPA). The tempo-
rary regulations implement changes to the
law made by the American Jobs Creation
Act of 2004, the Energy Policy Act of
2005, and the Tax Technical Corrections
Act of 2007. The text of those tempo-
rary regulations alsoserves as the text of
these proposed regulations. This docu-
ment also provides notice of a public hear-
ing on these proposed regulations.
DATES: Written or electronic comments
must be received by September 25, 2008.
Outlines of topics to be discussed at the
public hearing scheduled for October 28,
2008, at 10 a.m. must be received by
September 22, 2008.
ADDRESS
ES: Send submissions to:
CC:PA:L
PD:PR (REG–143453–05), room
5203, In
ternal Revenue Service, PO Box
7604, B
en Franklin Station, Washing-
ton, DC
20044. Submissions may be
hand-d
elivered Monday through Friday
betwee
n the hours of 8 a.m. and 4 p.m.
to CC:P
A:LPD:PR (REG–143453–05),
Couri
er’s Desk, Internal Revenue Ser-
vice,
1111 Constitution Avenue, NW,
Washington, D
C, or sent electroni-
cally via the F
ederal eRulemaking Por-
tal athttp://
www.regulations.gov(IRS
REG–143453–0
5). The public hearing
will be held in
the IRS Auditorium,
Internal Rev
enue Building, 1111
Constitutio
n Avenue, NW, Washington,
DC.
FOR FURTHER I
NFORMATION
CONTACT: Con
cerning the proposed reg-
ulations, N
icole Cimino, (202) 622–3110;
concerning
submissions of comments,
the hearing
, and/or to be placed on the
building ac
cess list to attend the hearing,
Oulwafunm
ilayo Taylor, (202) 622–7180
(not toll-
free numbers).
SUPPLEMEN
TARY INFORMATION:
Paperwork
Reduction Act
The collec
tion of information contained
in this not
ice of proposed rulemaking has
been submi
tted to the Office of Manage-
ment and Bu
dget for review in accordance
with the P
aperwork Reduction Act of 1995
(44 U.S.C
. 3507(d)). Comments on the
collecti
on of information should be sent to
theOffic
e of Management and Budget,
Attn: De
sk Officer for the Department
of the Tr
easury, Office of Information
and Regu
latory Affairs, Washington, DC
20503, w
ith copies to theInternal Rev-
enue Ser
vice, Attn: IRS Reports Clear-
ance Of
ficer, SE:W:CAR:MP:T:T:SP,
Washin
gton, DC 20224. Comments on
the col
lection of information should be
receiv
ed by August 26, 2008. Comments
are spe
cifically requested concerning:
Whethe
r the proposed collection of in-
format
ion is necessary for the proper per-
forma
nce of the functions of the IRS, in-
cludi
ng whether the information will have
pract
ical utility;
The ac
curacy of the estimated burden
assoc
iated with the proposed collection of
infor
mation;
How th
e quality, utility, and clarity of
the in
formation to be collected may be en-
hance
d;
How th
e burden of complying with the
propo
sed collection of information may be
mini
mized, including through the appli-
cati
on of automated collection techniques
or other forms
of information technology;
and
Estimates of c
apital or start-up costs
and costs of op
eration, maintenance, and
purchase of se
rvice to provide information.
The collectio
n of information in
this proposed
regulation is in section
1.179B–1T(d
) and section 1.179B–1T(e).
This informa
tion collected under section
1.179B–1T(d
) relates to the election under
section 179B
(a) by a small business refiner
to deduct a po
rtion of the qualified capital
costs paid or
incurred. The information
collected u
nder section 1.179B–1T(e) re-
lates to the
election under section 179B(e)
by a coopera
tive small business refiner to
allocate al
l or some of its section 179B(a)
deduction
to its cooperative owners and to
notify tho
se cooperative owners of the al-
located am
ount. This information will be
used by the
IRS for examination purposes.
The colle
ctionofinformationisrequired
to obtain
a benefit. The likely respondents
are small
business refiners.
Estimate
d total annual reporting bur-
den: 50 ho
urs.
The estim
ated annual burden per re-
spondent
varies from .75 to 1.5 hours, de-
pending o
n individual circumstances, with
an estim
ated average of 1 hour.
Estimate
d number of respondents: 50.
Estimate
d frequency of responses: An-
nually.
An agency
may not conduct or sponsor,
and a per
son is not required to respond to, a
collect
ion of information unless it displays
avalidc
ontrol number assigned by the Of-
fice of M
anagement and Budget.
Books or
records relating to a collection
of infor
mation must be retained as long
as their
contents may become material in
the adm
inistration of any internal revenue
law. Ge
nerally, tax returns and tax return
inform
ation are confidential, as required
by 26 U.
S.C. 6103.
Backgr
ound
Tempor
ary regulations in this issue
of the B
ulletin amend 26 CFR part 1 by
adding
regulations under section 179B
of the
Code. The temporary regulations
conta
in rules relating to the deduction
provi
ded under section 179B for qualified
costs
paid or incurred by a small busi-
ness r
efiner to comply with the highway
2008–32 I.R.B.310August 11, 2008

diesel fuel sulfur control requirements
of the EPA. The text of those temporary
regulations also serves as the text of these
proposed regulations. The preamble to
the temporary regulations explains the
temporary regulations and these proposed
regulations.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory as-
sessment is not required. It also has been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C. chap-
ter 5) does not apply to these regulations.
It is hereby certified that the collection of
information in these regulations will not
have a significant economic impact on a
substantial number of small entities. This
certification is based upon the fact, as dis-
cussed earlier in this preamble, that the
amount of time necessary to record and re-
tain the required information is estimated
to average one hour for those taxpayers
electing to deduct qualified capital costs
and electing to allocate all or some of that
deduction to certain owners. Therefore, a
Regulatory Flexibility Analysis under the
Regulatory Flexibility Act (5 U.S.C. chap-
ter 6) is not required. Pursuant to sec-
tion 7805(f) of the Code, this notice of
proposed rulemaking has been submitted
to the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment 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 comments
(a signed original and eight (8) copies)
or electronic comments that are submitted
timely to the IRS. The IRS and the Trea-
sury Department specifically request com-
ments on the clarity of the proposed rules
and how they may be made easier to un-
derstand. All comments will be available
for public inspection and copying.
A public hearing has been sched-
uled for October 28, 2008, beginning at
10:00 a.m. in the IRS Auditorium, Internal
Revenue Building, 1111 Constitution
Avenue, NW, Washington, DC. Due to
building security procedures, all visitors
must enter at the Constitution Avenue
entrance. In addition,all visitors must
present photo identification to enter the
building. Because of access restrictions,
visitors will not be admitted beyond the
immediate entrance area more than 30
minutes before the hearing starts. For
information about having your name
placed on the building access list to attend
the hearing, see theFOR FURTHER
INFORMATION CONTACTsection 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 or electronic com-
ments by September 25, 2008 and an out-
line of the topics to be discussed and the
time to be devoted to each topic (signed
original and eight (8) copies) by Septem-
ber 22, 2008. A period of 10 minutes will
be allotted to each person for making com-
ments. An agenda showing the scheduling
of the speakers will be prepared after the
deadline for receiving outlines has passed.
Copies of the agenda will be available free
of charge at the hearing.
Drafting Information
The principal author of these regu-
lations is Nicole R. Cimino, Office of
Associate Chief Counsel (Passthroughs
and Special Industries). However, other
personnel from the IRS and the Treasury
Department participated in their develop-
ment.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.179B–1 is added to
read as follows:
§1.179B–1 Deduction for capital costs
incurred in complying with Environmental
Protection Agency sulfur regulations.
[The text of this proposed §1.179B–1 is
the same as the text of §1.179B–1T pub-
lished elsewhere in this issue of the Bul-
letin].
Kevin M. Brown,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on June 26, 2008,
8:45 a.m., and published in the issue of the Federal Register
for June 27, 2008, 73 F.R. 36475)
Notice of Proposed
Rulemaking by
Cross-Reference to
Temporary Regulations
and Notice of Proposed
Rulemaking
Modifications to Subpart F
Treatment of Aircraft and
Vessel Leasing Income
REG–138355–07
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
by cross-reference to temporary regula-
tions and notice of proposed rulemaking.
SUMMARY: In this issue of the Bulletin,
the IRS is issuing temporary regulations
(T.D. 9406) relating to the subpart F treat-
ment of aircraft and vessel leasing income
under sections 954 and 956 of the Inter-
nal Revenue Code (Code) and the trans-
fer of tangible property incorporated in air-
craft and vessels that are used predomi-
nantly outside the United States under sec-
tion 367 of the Code. The regulations
reflect statutory changes made by section
415 of the American Jobs Creation Act of
2004 (AJCA)). In general, the regulations
will affect United States shareholders of
controlled foreign corporations that derive
income from the leasing of aircraft or ves-
sels in foreign commerce and that transfer
property subject to these leases to a foreign
corporation. The text of those temporary
regulations also serves as the text of these
proposed regulations.
DATES: Written or electronic comments
and requests for a public hearing must be
received by October 1, 2008.
August 11, 20083112008–32 I.R.B.

ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–138355–07), In-
ternal Revenue Service, PO Box 7604, Ben
Franklin Station, Washington, DC 20044.
Submissions may be hand delivered
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–138355–07),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue, NW,
Washington, DC, or sent electronically,
viatheFederaleRulemaking
Portalatwww.regulations.gov
(IRS-REG–138355–07).
FOR FURTHER INFORMATION
CONTACT: Concerning the pro-
posed regulations under section 367,
John H. Seibert, at (202) 622–3860;
concerning the proposed regulations under
section 954 or 956, Paul J. Carlino at
(202) 622–3840; concerning submissions
of comments or a public hearing,
Richard Hurst, at (202) 622–7180 (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
Temporary regulations in this issue
of the Bulletin provide guidance under
section 367 of the Code, relating to the
nonrecognition of gain on certain property
transferred to a foreign corporation if the
property is used by the foreign corpora-
tion in the active conduct of a trade or
business outside of the United States. The
regulations also provide guidance under
section 954 relating to the determination
of whether rents derived from leasing an
aircraft or vessel in foreign commerce will
be treated as derived in the active con-
duct of a trade or business under section
954(c)(2)(A), and section 956, relating to
whether an aircraft or vessel used in the
transportation of persons or property in
foreign commerce is excluded from U.S.
property. The text of the temporary reg-
ulations also serves as the text of these
proposed regulations. The preamble to
the temporary regulations explains the
temporary regulations and these proposed
regulations.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory as-
sessment is not required. It has also been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C. chap-
ter 5) does not apply to these regulations,
and because the proposed regulation does
not impose a collection of information on
small entities, the Regulatory Flexibility
Act (5 U.S.C. Ch. 6) does not apply. Pur-
suant to section 7805(f) of the Code, this
regulation has been submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its
impact on small business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, considera-
tion will be given to any written (a signed
original and eight (8) copies) or electronic
comments that are submitted timely to
the IRS. The IRS and Treasury Depart-
ment request comments on the clarity of
the proposed rules and how they can be
made easier to understand. All comments
will be available for public inspection and
copying. A public hearing will be sched-
uled if requested in writing by any person
that timely submits written comments. If a
public hearing is scheduled, notice of the
date, time, and place for the public hearing
will be published in theFederal Register.
Drafting Information
The principal authors of these
regulations are John H. Seibert and
Paul J. Carlino, Office of Associate
Chief Counsel (International). However,
other personnel from the IRS and
Treasury Department participated in their
development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. In §1.367(a)–2 is added to read
as follows:
§1.367(a)–2 Exception for transfers of
property for use in the active conduct of
a trade or business.
[The text of the proposed §1.367(a)–2
is the same as the text for §1.367(a)–2T(a)
through (e)(2) published elsewhere in this
issue of the Bulletin.]
Par. 3. In §1.367(a)–4 is added to read
as follows:
§1.367(a)–4 Special rules applicable
to specified transfers of property
(temporary).
[The text of the proposed §1.367(a)–4
is the same as the text for §1.367(a)–4T(a)
through (i)(1) published elsewhere in this
issue of the Bulletin.]
Par. 4. In §1.367(a)–5 is added to read
as follows:
§1.367(a)–5 Property subject to section
367(a)(1) regardless of use in trade or
business.
[The text of the proposed §1.367(a)–5
is the same as the text for §1.367(a)–5T(a)
through (f)(3)(ii) published elsewhere in
this issue of the Bulletin.]
Par. 5. Section 1.954–2(c)(2)(ii),
(c)(2)(v) and (c)(3)Example 6and (i) are
revised to read as follows:
§1.954–2 Foreign personal holding
company income.
*****
(c) * * *
(2) * * *
(ii) [The text of the proposed amend-
ment to §1.954–2(c)(2)(ii) is the same as
the text of §1.954–2T(c)(2)(ii) published
elsewhere in this issue of the Bulletin.]
*****
(v) [The text of the proposed amend-
ment to §1.954–2(c)(2)(v) is the same as
the text for §1.954–2T(c)(2)(v) published
elsewhere in this issue of the Bulletin.]
(vi) [The text of the proposed amend-
ment to §1.954–2(c)(2)(vi) is the same as
the text for §1.954–2T(c)(2)(vi) published
elsewhere in this issue of the Bulletin.]
(vii) [The text of the proposed amend-
ment to §1.954–2(c)(2)(vii) is the same as
2008–32 I.R.B.312August 11, 2008

the text for §1.954–2T(c)(2)(vii) published
elsewhere in this issue of the Bulletin.]
(3) * * *
Example 6. [The text of the proposed
amendment to §1.954–2(c)(3)Example 6
is the same as the text for §1.954–2T(c)(3)
Example 6published elsewhere in this is-
sue of the Bulletin.]
(i) [The text of the proposed amend-
ment to §1.954–2(c)(3)(i) is the same as
the text for §1.954–2T(c)(3)(i) published
elsewhere in this issue of the Bulletin.]
Par. 6. Section 1.956–2(b)(1)(vi) and
(e) are revised to read as follows:
§1.956–2 Definition of United States
Property
*****
(b) * * *
(1) * * *
(vi) [The text of the proposed amend-
ment to §1.956–2(b)(1)(vi) is the same as
the text for §1.956–2T(b)(1)(vi) published
elsewhere in this issue of the Bulletin.]
*****
(e) [The text of the proposed amend-
ment to §1.956–2(e) is the same as the
text of §1.956–2T(e) published elsewhere
in this issue of the Bulletin].
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on July 2, 2008,
8:45 a.m., and published in the issue of the Federal Register
for the July 3, 2008, 73 F.R. 38162)
Notice of Proposed
Rulemaking and Notice of
Public Hearing
Accrual Rules for Defined
Benefit Plans
REG–100464–08
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains
proposed regulations providing guidance
on the application of the accrual rule
for defined benefit plans under section
411(b)(1)(B) of the Internal Revenue Code
(Code) in cases where plan benefits are
determined on the basis of the greatest
of two or more separateformulas. These
regulations would affect sponsors, admin-
istrators, participants, and beneficiaries of
defined benefit plans. This document also
provides a notice of a public hearing on
these proposed regulations.
DATES: Written or electronic comments
must be received by September 16, 2008.
Outlines of topics to be discussed at the
public hearing scheduled for October 15,
2008, at 10 a.m. must be received by
September 24, 2008.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR(REG–100464–08),
room 5203, Internal Revenue Service,
PO Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may
be hand-delivered Monday through Friday
betweenthehoursof8a.m. and4p.m.
to CC:PA:LPD:PR (REG–100464–08),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue, NW,
Washington, DC, or sent electronically
viatheFederaleRulemaking
Portal atwww.regulations.gov(IRS
REG–100464–08). The public hearing
will be held in the IRS Auditorium,
Internal Revenue Building, 1111
Constitution Avenue, NW, Washington,
DC.
FOR FURTHER INFORMATION
CONTACT: Concerning the regulations,
Lauson C. Green or Linda S. F. Marshall
at (202) 622–6090; concerning submis-
sions of comments, the hearing, and/or
being placed on the building access list
to attend the hearing, Richard A. Hurst at
Richard.A.Hurst@irscounsel.treas.govor
at (202) 622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed In-
come Tax Regulations (26 CFR part 1) un-
dersection411(b)oftheCode.
1
Section 401(a)(7) provides that a trust
is not a qualified trust under section 401
unless the plan of which such trust is a part
satisfies the requirements of section 411
(relating to minimum vesting standards).
Section 411(a) requires a qualified plan
to provide that an employee’s right to the
normal retirement benefit is nonforfeitable
upon attainment of normal retirement age
and that an employee’s right to his or her
accrued benefit is nonforfeitable upon
completion of the specified number of
years of service under one of the vesting
schedulessetforthinsection411(a)(2).
Section 411(a)(7)(A)(i) defines a partic-
ipant’s accrued benefit under a defined
benefit plan as the employee’s accrued
benefit determined under the plan, ex-
pressed in the form of an annual benefit
commencing at normal retirement age,
subject to an exception in section 411(c)(3)
under which the accrued benefit is the
actuarial equivalent of the annual benefit
commencing at normal retirement age in
the case of a plan that does not express
the accrued benefit as an annual benefit
commencing at normal retirement age.
Section 411(a) also requires that a de-
fined benefit plan satisfy the requirements
of section 411(b)(1). Section 411(b)(1)
provides that a defined benefit plan must
satisfy one of the three accrual rules of
section 411(b)(1)(A), (B), and (C) with re-
spect to benefits accruing under the plan.
The three accrual rules are the 3 percent
method of section 411(b)(1)(A), the 133
1
/3
percent rule of section 411(b)(1)(B), and
the fractional rule of section 411(b)(1)(C).
Section 411(b)(1)(A) provides that a
defined benefit plan satisfies the require-
ments of the 3 percent method if, under
the plan, the accrued benefit payable upon
the participant’s separation from service is
not less than (A) 3 percent of the normal
retirement benefit to which the partici-
pant would be entitled if the participant
commenced participation at the earliest
1
Section 204(b) of the Employee Retirement Income Security Act of 1974, PublicLaw 93–406 (88 Stat.829), as amended (ERISA), sets forth rules that are parallel to those in section 411(b)
of the Code. Under section 101 of Reorganization Plan No. 4 of 1978 (43 FR 47713), the Secretary of the Treasury has interpretive jurisdiction over the subject matter addressed in these
proposed regulations for purposes of ERISA, as well as the Code. Thus, these proposed Treasury regulations issued under section 411(b)(1)(B) of the Code would apply as well for purposes
of section 204(b)(1)(B) of ERISA.
August 11, 20083132008–32 I.R.B.

possible entry age under the plan and
served continuously until the earlier of
age 65 or the normal retirement age under
the plan, multiplied by (B) the number of
years (not in excess of 33
1
/3years) of his
or her participation in the plan. Section
411(b)(1)(A) provides that, in the case of
a plan providing retirement benefits based
on compensation during any period, the
normal retirement benefit to which a par-
ticipant would be entitled is determined
as if the participant continued to earn an-
nually the average rate of compensation
during consecutive years of service, not in
excess of 10, for which his or her compen-
sation was highest. Section 411(b)(1)(A)
also provides that Social Security bene-
fits and all other relevant factors used to
compute benefits are treated as remaining
constant as of the current plan year for all
years after the current year.
Section 411(b)(1)(B) provides that a
defined benefit plan satisfies the require-
ments of the 133
1
/3percent rule for a
particular plan year if, under the plan,
the accrued benefit payable at the normal
retirement age is equal to the normal re-
tirement benefit, and the annual rate at
which any individual who is or could be
a participant can accrue the retirement
benefits payable at normal retirement age
under the plan for any later plan year is
not more than 133
1
/3percent of the annual
rate at which the individual can accrue
benefits for any plan year beginning on or
after such particular plan year and before
such later plan year.
For purposes of applying the 133
1
/3per-
cent rule, section 411(b)(1)(B)(i) provides
that any amendment to the plan which is
in effect for the current year is treated as
in effect for all other plan years. Section
411(b)(1)(B)(ii) provides that any change
in an accrual rate which does not apply to
any individual who is or could be a partici-
pant in the current plan year is disregarded.
Section 411(b)(1)(B)(iii) provides that the
fact that benefits under the plan may be
payable to certain participants before nor-
mal retirement age is disregarded. Section
411(b)(1)(B)(iv) provides that Social Se-
curity benefits and all other relevant fac-
tors used to compute benefits are treated as
remaining constant as of the current plan
year for all years after the current year.
Section 411(b)(1)(C) provides that a de-
fined benefit plan satisfies the fractional
rule if the accrued benefit to which any par-
ticipant is entitled upon his or her separa-
tion from service is not less than a frac-
tion of the annual benefit commencing at
normal retirement age to which the partic-
ipant would be entitled under the plan as
in effect on the date of separation if the
participant continued to earn annually un-
til normal retirement age the same rate of
compensation upon which the normal re-
tirement benefit would be computed un-
der the plan, determined as if the partic-
ipant had attained normal retirement age
on the date on which any such determina-
tion is made (but taking into account no
more than 10 years of service immediately
preceding separation from service). This
fraction, which cannot exceed 1, has a nu-
merator that is the total number of the par-
ticipant’s years of participation in the plan
(as of the date of separation from service)
and a denominator that is the total num-
ber of years the participant would have par-
ticipated in the plan if the participant sep-
arated from service at normal retirement
age. Section 411(b)(1)(C) also provides
that Social Security benefits and all other
relevant factors used to compute benefits
are treated as remaining constant as of the
current plan year for all years after the cur-
rent year.
Section 1.411(a)–7(a)(1) of the Income
Tax Regulations provides that, for pur-
poses of section 411 and the regulations
under section 411, the accrued benefit of a
participant under a defined benefit plan is
either (A) the accrued benefit determined
under the plan if the plan provides for an
accrued benefit in the form of an annual
benefitcommencingatnormalretirement
age, or (B) an annual benefit commencing
at normal retirement age which is the actu-
arial equivalent (determined under section
411(c)(3) and §1.411(c)–1)) of the accrued
benefit under the plan if the plan does not
provide for an accrued benefit in the form
of an annual benefit commencing at nor-
mal retirement age.
Section 1.411(b)–1(a)(1) provides that
a defined benefit plan is not a qualified
plan unless the method provided by the
plan for determining accrued benefits
satisfies at least one of the alternative
methods in §1.411(b)–1(b) for determin-
ing accrued benefits with respect to all
active participants under the plan. The
three alternative methods are the 3 percent
method, the 133
1
/3percent rule, and the
fractional rule. A defined benefit plan may
provide that accrued benefits for partici-
pants are determined under more than one
plan formula. Section 1.411(b)–1(a)(1)
provides that, in such a case, the accrued
benefits under all such formulas must be
aggregated in order to determine whether
or not the accrued benefits under the plan
for participants satisfy one of these meth-
ods. Under §1.411(b)–1(a)(1), a plan may
satisfy different methods with respect to
different classifications of employees, or
separately satisfy one method with re-
spect to the accrued benefits for each such
classification, provided that such classifi-
cations are not so structured as to evade
the accrued benefit requirements of sec-
tion 411(b) and §1.411(b)–1.
Section 1.411(b)–1(b)(2)(i) provides
that a defined benefit plan satisfies the
133
1
/3percent rule for a particular plan
year if (A) under the plan the accrued
benefit payable at the normal retirement
age (determined under the plan) is equal to
the normal retirement benefit (determined
under the plan), and (B) the annual rate at
which any individual who is or could be a
participant can accrue the retirement bene-
fits payable at normal retirement age under
the plan for any later plan year cannot be
more than 133
1
/3percent of the annual
rate at which the participant can accrue
benefits for any plan year beginning on or
after such particular plan year and before
such later plan year.
Section1.411(b)–1(b)(2)(ii)(A)
through (D) sets forth a series of rules
that correspond to the rules of section
411(b)(1)(B)(i) through (iv). For example,
§1.411(b)–1(b)(2)(ii)(A) sets forth a spe-
cial plan amendment rule for purposes of
satisfying the 133
1
/3percent rule that cor-
responds to section 411(b)(1)(B)(i). Under
that rule, any amendment to a plan that is
in effect for the current year is treated as if
it were in effect for all other plan years.
Section 1.411(b)–1(b)(2)(ii)(E) pro-
vides that a plan is not treated as
failing to satisfy the requirements of
§1.411(b)–1(b)(2) for a plan year merely
because no benefits under the plan accrue
to a participant who continues service
with the employer after the participant has
2008–32 I.R.B.314August 11, 2008

attained normal retirement age.
2
Section
1.411(b)–1(b)(2)(ii)(F) provides that a
plan does not satisfy the requirements of
§1.411(b)–1(b)(2) if the base for the com-
putation of retirement benefits changes
solely by reason of an increase in the num-
ber of years of participation.
Rev. Rul. 2008–7, 2008–7 I.R.B. 419,
see §601.601(d)(2)(ii)(b), describes the
application of the accrual rules of sec-
tion 411(b)(1)(A) through (C) and the
regulations under section 411(b)(1)(A)
through (C) to a defined benefit plan that
was amended to change the plan’s ben-
efit formula from a traditional formula
based on highest average compensation to
a new lump sum-based benefit formula.
Under the terms of the plan described
in the revenue ruling, for an employee
who was employed on the day before the
change, a hypothetical account was estab-
lished equal to the actuarial present value
of the employee’s accrued benefit as of
that date, and that account was also to be
credited with subsequent pay credits and
interest credits. Under transition rules set
forth in the plan, the accrued benefit of
certain participants is the greater of the
accrued benefit provided by the hypothet-
ical account balance at the age 65 normal
retirement age and the accrued benefit
determined under the traditional formula
as in effect on the day before the change,
but taking into account post-amendment
compensation and service for a limited
number of years.
Revenue Ruling 2008–7 describes how
the accrued benefits of different participant
groups satisfy, or fail to satisfy, the accrual
rules under section 411(b)(1)(A) through
(C), taking into account the requirement
in §1.411(b)–1(a)(1) that a plan that de-
termines a participant’s accrued benefits
under more than one formula must aggre-
gate the accrued benefits under all of those
formulas in order to determine whether or
not the accrued benefits under the plan sat-
isfy one of the alternative methods under
section 411(b)(1)(A) through (C). How-
ever, Revenue Ruling 2008–7 explains
that, in the case of a plan amendment
that replaces the benefit formula under
the plan for all periods after the amend-
ment, pursuant to section 411(b)(1)(B)(i)
and §1.411(b)–1(b)(2)(ii)(A), the rule
that would otherwise require aggrega-
tion of the multiple formulas does not
apply. Under section 411(b)(1)(B)(i) and
§1.411(b)–1(b)(2)(ii)(A), any amendment
to the plan which is in effect for the current
plan year is treated as if it were in effect
for all other plan years (including past and
future plan years).
Revenue Ruling 2008–7 illustrates the
application of this rule with respect to
participants who only accrue benefits un-
der the new formula (who in the ruling
are referred to as participants who are not
“grandfathered”). For these participants,
the plan amendment completely ceases
accruals under a traditional pension ben-
efit formula that provides an annuity at
normal retirement age based on service
and average pay and, for all periods after
the amendment, provides for the greater
of the section 411(d)(6) protected benefit
under the pre-amendment formula and the
benefit under a new post-amendment lump
sum-based benefit formula. In such a
case, as stated in Revenue Ruling 2008–7,
the section 411(d)(6) protected benefit
under the pre-amendment formula is not
aggregated with the post-amendment for-
mula, but rather is entirely disregarded,
for purposes of applying the 133
1
/3per-
cent rule because the new formula is
treated under section 411(b)(1)(B)(i) and
§1.411(b)–1(b)(2)(ii)(A) as having been in
effect for all plan years. This analysis was
reflected inRegister v. PNC Fin. Servs.
Group, Inc., 477 F.3d 56 (3d Cir. 2007).
In addition to satisfying the require-
ments of section 411(b)(1)(B), a defined
benefit plan must also satisfy the age dis-
crimination rules of section 411(b)(1)(H),
taking into account section 411(b)(5), as
added to the Code by the Pension Pro-
tection Act of 2006, Public Law 109–280
(120 Stat. 780) (PPA ’06). In the case of a
conversion of a plan to a statutory hybrid
plan pursuant to an amendment that is
adopted after June 29, 2005 (a “post-PPA
conversion plan”), the conversion amend-
ment must satisfy the rule of section
411(b)(5)(B)(iii) that prohibits wearaway
of benefits upon conversion. In the case of
a plan converted to a statutory hybrid plan
pursuant to an amendment that is adopted
on or before June 29, 2005 (a “pre-PPA
conversion plan”), as provided in Notice
2007–6, the IRS will not consider and will
not issue determination letters with respect
to whether such a pre-PPA conversion
plan satisfies the requirements of section
411(b)(1)(H) (as in effect prior to the ad-
dition of section 411(b)(5) by PPA ’06),
including the effect of any wearaway.
Thus, although wearaway upon conversion
is expressly prohibited with respect to
post-PPA conversion plans pursuant to
section 411(b)(5), the IRS will not address
and will not issue determination letters
with respect to whether a conversion
that results in wearaway with respect
to a pre-PPA conversion plan violates
the age discrimination rules of section
411(b)(1)(H). See §601.601(d)(2)(ii)(b).
Revenue Ruling 2008–7 provides a
different analysis as to whether a plan
with wearaway fails to satisfy the accrual
rules of section 411(b)(1)(B) when the
pre-amendment formula continues in place
after the amendment for a group of partici-
pants. In such a case, where an amendment
has gone into effect but continues the prior
formula for some period of time with re-
spect to one or more participants, the appli-
cation of the rule in section 411(b)(1)(B)(i)
and §1.411(b)–1(b)(2)(ii)(A) does not
result in a disregard of the prior plan for-
mula (which remains in effect after the
amendment). Instead, the 133
1
/3percent
rule must be applied with respect to those
participants based on the combined effect
of the two ongoing formulas.
3
Revenue Ruling 2008–7 provides relief
from disqualification under the Internal
Revenue Code (under the authority of sec-
tion 7805(b)) for a limited class of plans
under which a group of employees speci-
fied under the plan receives a benefit equal
to the greatest of the benefits provided
under two or more formulas (an applicable
“greater-of” benefit), provided that each
such formula standing alone would satisfy
an accrual rule of section 411(b)(1)(A),
(B), or (C) for the years involved. Under
the relief set forth in Rev. Rul. 2008–7,
for plan years beginning before January
1, 2009, the IRS will not treat a plan eli-
gible for the relief as failing to satisfy the
accrual rules of section 411(b)(1)(A), (B),
2
However, section 411(b)(1)(H), which was added to the Code after the issuance of §1.411(b)–1, generally requiresthe continued accrual of benefits after attainment of normal retirement age.
3
Two federal courts have taken a position contrary to this interpretation of section 411(b)(1)(B)(i) and §1.411(b)–1(b)(2)(ii)(A) as set forth in Revenue Ruling 2008–7. SeeTomlinson v.
El Paso Corp., 2008 WL 762456 (D. Colo. Mar. 19, 2008);Wheeler v. Pension Value Plan for Employees of Boeing Corp., 2007 WL 2608875 (S.D. Ill. Sept. 6, 2007).
August 11, 20083152008–32 I.R.B.

and (C) solely because the plan provides
an applicable “greater-of” benefit, where
the separate formulas, standing alone,
would satisfy an accrual rule of section
411(b)(1)(A), (B), and (C).
Explanation of Provisions
The fact pattern described in Revenue
Ruling 2008–7 has occurred in a num-
ber of situations over the past few years.
Employers sponsoring these plans have
suggested that their plans should satisfy
the accrual rules of section 411(b)(1)(A),
(B), and (C), contending that any technical
violation of the accrual rules is directly
because the participant has higher front-
loaded accruals under one formula when
compared to the otherformula that will
ultimately provide the larger benefit under
the plan. While the relief under section
7805(b) that is provided under Revenue
Ruling 2008–7 addresses the situation
for past years, the relief does not apply
for the parallel accrual rules of section
204(b)(1)(A), (B) and (C) of ERISA and
only applies to plan years beginning be-
fore January 1, 2009.
The proposed regulations would pro-
vide a limited exception to the existing re-
quirement under §1.411(b)–1(a)(1) to ag-
gregate the accrued benefits under all for-
mulas in order to determine whether or
not the accrued benefits under the plan
for participants satisfy one of the alterna-
tive methods under section 411(b)(1)(A)
through (C). Under this limited exception,
certain plans that determine a participant’s
benefits as the greatest of the benefits de-
termined under two or more separate for-
mulas would be permitted to demonstrate
satisfaction of the 133
1
/3percent rule of
section 411(b)(1)(B) by demonstrating that
each separate formula satisfies the 133
1
/3
percent rule of section 411(b)(1)(B).
4
A plan would be eligible for this ex-
ception only if each ofthe separate for-
mulas uses a different basis for determin-
ing benefits. For example, a plan would
be eligible for this special rule if it pro-
vides a benefit equal to the greater of the
benefits under two formulas, one of which
determines benefits on the basis of high-
est average compensation and the other of
which determines benefits on the basis of
career average compensation. As another
example, a traditional defined benefit plan
which determined benefits based on high-
est average compensation that is amended
to add a cash balance formula (as in the
facts of Rev. Rul. 2008–7) would be el-
igible for this exception where, in order
to provide a better transition for longer
service active participants, the plan pro-
vides that a group of participants is enti-
tled to the greater of the benefit provided
by the hypothetical account balance and
the benefit determined under the contin-
uing traditional formula. In each of the
above two examples, each separate for-
mula under the plan uses a different ba-
sis for determining benefits and, therefore,
both of those plans would be eligible to
utilize this exception. Accordingly, both
plans would be permitted to demonstrate
satisfaction of the 133
1
/3percent rule of
section 411(b)(1)(B) by demonstrating that
each separate formula under the plan sat-
isfies the 133
1
/3percent rule of section
411(b)(1)(B).
The utility of this exception can be seen
from the following example of a plan that
provides a benefit equal to the greater of
two formulas. One formula provides a
benefit of 1 percent of average compen-
sation for the 3 consecutive years of ser-
vice with the highest such average mul-
tiplied by the number of years of service
at normal retirement age (not in excess of
25 years of service), and the other formula
provides a benefit that is the accumulation
of 1.5 percent of compensation for each
year of service. Under the existing final
regulations, the 133
1
/3percent rule of sec-
tion 411(b)(1)(B) is applied by reference
to the annual rate of accrual for each year
from the year of the test through normal re-
tirement age. If the participant’s accrued
benefit currently is determined using the
1 percent formula (because the high-3 av-
erage compensation is significantly higher
than the effective career average compen-
sation that is used under the 1.5 percent
formula), but the participant’s normal re-
tirement benefit will ultimately be deter-
mined using the 1.5 percent formula if ser-
vice continues to normal retirement age
(because the 25-year service cap will ap-
plytothe1percentformula,butnotthe
1.5 percent formula), then the annual rate
of accrual will have to be determined for
testing purposes on a consistent basis for
each year, either using each year’s com-
pensation or high-3 average compensation.
Thus, in order to test the plan under the
133
1
/3percent rule, the existing final reg-
ulations would require that either the ac-
cruals under the 1 percent formula be ex-
pressed in terms of a single year’s pay
or the accruals under the 1.5 percent for-
mula be expressed in terms of high-3 aver-
age compensation. In either case, the an-
nual rates of accrual would differ from the
stated rates under the plan formulas. In ad-
dition, the annual rates of accrual for the
accumulation formula when those rates are
expressed in terms of high-3 average com-
pensation could be negative in some cases.
In contrast, using the exception set forth in
the proposed regulation would enable the
plan to be tested using the annual rates of
accrual expressed in the plan formulas.
The proposed regulations would also
provide an extension of this exception in
the case of a plan that provides benefits
based on the greatest of three or more ben-
efit formulas. In such a case, the plan
would be eligible for a modified version of
the formula-by-formula testing under the
proposed regulations. Under this modifi-
cation, the accrued benefits determined un-
der all benefit formulas that have the same
basis are first aggregated and then those
aggregated formulas are treated as a single
formula for purposes of applying the sep-
arate testing rule under the proposed regu-
lations.
Eligibility for separate testing un-
der the proposed regulations would be
constrained by an anti-abuse rule. The
proposed regulations would provide that
a plan is not eligible for separate test-
ing if the Commissioner determines that
the plan’s use of separate formulas with
different bases is structured to evade the
general requirement to aggregate formulas
under §1.411(b)–1(a)(1) (for example, if
the differences between the bases of the
separate formulas are minor).
Proposed Effective/Applicability Date
These regulations are proposed to be
effective for plan years beginning on or
after January 1, 2009.
4
These proposed regulations would only apply for purposes of the 133
1
/3percent rule of section 411(b)(1)(B) (and the parallel rule of section 204(b)(1)(B) of ERISA). Neither Rev. Rul.
2008–7 nor these proposed regulations are relevant to (and thus they do notaffect) the application of the age discrimination rules of section 411(b)(1)(H) (or the parallel age discrimination
rules of section 204(b)(1)(H) of ERISA).
2008–32 I.R.B.316August 11, 2008

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. Therefore, a regula-
tory assessment is not required. It also has
been determined thatsection 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these reg-
ulations, and because the regulations do
not impose a collection of information on
small entities, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Code,
this regulation has been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, considera-
tion will be given to any written (a signed
original and eight (8) copies) or electronic
comments that are submitted timely to the
IRS. The IRS and the Treasury Depart-
ment specifically request comments on
the clarity of the proposed regulations and
how they may be made easier to under-
stand. All comments will be available for
public inspection and copying.
Under these proposed regulations, a
plan eligible for the separate testing option
would not violate the accrual rules merely
because the plan provides higher front-
loaded accruals under one formula when
compared to the otherformula that will
ultimately provide the larger benefit under
the plan. Some commentators have sug-
gested a broader rule that would modify
the regulations to provide that a plan does
not violate the accrual rules where the plan
provides a pattern of accruals that affords
higher benefits in earlier years (that is,
benefit accruals are frontloaded) relative
to a pattern of accruals that satisfies the
accrual rules. The 3 percent method of
section 411(b)(1)(A) and the fractional
rule of section 411(b)(1)(C) automatically
achieve this result because they are cumu-
lative tests that test on the basis of the total
accrued benefit compared to the projected
normal retirement benefit. By contrast,
the 133
1
/3percent rule is based on a com-
parison of the “annual rate at which any
individual who is or could be a participant
can accrue the retirement benefits payable
at normal retirement age” for a later plan
year with the annual rate for an earlier plan
year. The existing final regulations in-
clude an example (§1.411(b)–1(b)(2)(iii),
Example (3)) that demonstrates how a
plan fails the 133
1
/3percent rule where
it provides accruals in earlier years that
are frontloaded relative to accruals that
apply in later years.The proposed regu-
lations do not include a provision under
the 133
1
/3percent rule that recognizes
prior frontloading of benefits. However,
commentators who would suggest such
a provision under the 133
1
/3percent rule
should describe how that provision would
fit within the statutory language of section
411(b)(1)(B), including the application of
section 411(b)(1)(B)(i) (which requires
that an amendment to the plan that is in
effect for the current year be treated as in
effect for all other plan years).
A public hearing has been scheduled for
October 15, 2008, beginning at 10 a.m. in
the Auditorium, Internal Revenue Service,
1111 Constitution Avenue, NW, Washing-
ton, DC. Due to building security proce-
dures, visitors must enter at the Consti-
tution Avenue entrance. In addition, all
visitors must presentphoto identification
to enter the building. Because of access
restrictions, visitors will not be admitted
beyond the immediate entrance area more
than 30 minutes before the hearing starts.
For information about having your name
placed on the building access list to attend
the hearing, see theFOR FURTHER IN-
FORMATION CONTACTsection 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 or electronic comments by
September 16, 2008, and an outline of top-
ics to be discussed and the amount of time
to be devoted to each topic (a signed orig-
inal and eight (8) copies) by September
24, 2008. A period of 10 minutes will be
allotted to each person for making com-
ments. An agenda showing the scheduling
of the speakers will be prepared after the
deadline for receiving outlines has passed.
Copies of the agenda will be available free
of charge at the hearing.
Drafting Information
The principal authors of these reg-
ulations are Lauson C. Green and
Linda S. F. Marshall, Office of Division
Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities).
However, other personnel from the IRS
and the Treasury Department participated
in the development ofthese regulations.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.411(b)–1 is amended
by adding new paragraph (b)(2)(ii)(G) to
read as follows:
§1.411(b)–1 Accrued benefit
requirements.
*****
(b) * * *
(2) * * *
(ii) * * *
(G)Special rule for multiple formu-
las—(1)In general. Notwithstanding
paragraph (a)(1) of this section, a plan that
determines a participant’s accrued benefit
as the greatest of the benefits determined
under two or more separate formulas is
permitted, to the extent provided under
this paragraph (b)(2)(ii)(G), to demon-
strate satisfaction of section 411(b)(1)(B)
and this paragraph (b) by demonstrating
that each separate formula satisfies the
requirements of section 411(b)(1)(B) and
this paragraph (b).
(2)Separate bases requirement.Aplan
is eligible for separate testing under this
paragraph (b)(2)(ii)(G) if each of the sepa-
rate formulas uses a different basis for de-
termining benefits. For example, a plan is
eligible for this special rule if it provides an
accrued benefit equal to the greater of the
benefits under two formulas, one of which
determines accrued benefits on the basis
of highest average compensation and the
other of which determines accrued benefits
August 11, 20083172008–32 I.R.B.

on the basis of career average compensa-
tion. As another example, a defined bene-
fit plan that bases benefits on highest av-
erage compensation and that is amended
to add a statutory hybrid benefit formula
(as defined in §1.411(a)(13)–1(d)(3)) that
provides for pay credits to be made based
on each year’s compensation is eligible for
this separate testing exception if the plan
provides that one or more participants are
entitled to the greater of the benefit deter-
mined under the statutory hybrid benefit
formula and the benefit determined under
the original formula.
(3)Plans with three or more formulas.
If a plan determines a participant’s bene-
fits as the greatest of the benefits deter-
mined under three or more separate for-
mulas, but two or more of the formulas
use the same basis for determining bene-
fits, then the plan may nonetheless apply
paragraphs (b)(2)(ii)(G)(1)and(2)ofthis
section by aggregatingall benefit formulas
that have the same basis and treating those
aggregated formulasas a single formula
for purposes of paragraphs (b)(2)(ii)(G)(1)
and (2) of this section.
(4)Anti-abuse rule. A plan is not eli-
gible for separate testing under this para-
graph (b)(2)(ii)(G) if the Commissioner
determines that the plan’s use of separate
formulas with different bases is structured
to evade the requirement to aggregate for-
mulas under paragraph (a)(1) of this sec-
tion (for example, if the differences be-
tween the bases of the separate formulas
are minor).
(5)Effective/applicability date.This
paragraph (b)(2)(ii)(G) is applicable for
plan years beginning on or after January 1,
2009.
Steven T. Miller,
Acting Deputy Commissioner
for Services and Enforcement.
(Filed by the Office of the Federal Register on June 17, 2008,
8:45 a.m., and published in the issue of the Federal Register
for June 18, 2008, 73 F.R. 34665)
Deletions From Cumulative
List of Organizations
Contributions to Which
are Deductible Under Section
170 of the Code
Announcement 2008–69
The Internal Revenue Service has re-
voked its determination that the organi-
zations 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 Service will not disallow
deductions for contributions made to a
listed organization on or before the date
of announcement in the Internal Revenue
Bulletin that an organization no longer
qualifies. However, the Service is not
precluded from disallowing a deduction
for any contributions made after an or-
ganization ceases to qualify under section
170(c)(2) if the organization has not timely
filed a suit for declaratory judgment under
section 7428 and if the contributor (1) had
knowledge of the revocation of the ruling
or determination letter, (2) was aware that
such revocation was imminent, or (3) was
in part responsible for or was aware of the
activities or omissions of the organization
that brought about this revocation.
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 August 11, 2008,
andwouldendonthedatethecourtfirst
determines that the organization is not de-
scribed in section 170(c)(2) as more partic-
ularly set forth in section 7428(c)(1). For
individual contributors, the maximum de-
duction protected is $1,000, with a hus-
band and wife treated as one contributor.
This benefit is not extended to any indi-
vidual, in whole or in part, for the acts or
omissions of the organization that were the
basis for revocation.
Homes for All, Inc.
Fort Myers, FL
H & H Housing, Inc.
Los Angeles, CA
Family Home Providers, Inc.
Cumming, GA
Miller County New Vision Coalition, Inc.
Colquitt, GA
Buyer’s Dream Fund
Cleveland Heights, OH
American Bowling Congress
Wyoming, MI
Accelerated Trust, Inc.
Boca Raton, FL
National Home Charities, Inc.
Westminster, CO
Independent Group, Inc.
Covington, KY
Shepherd Hills Development Corporation
Las Vegas, NV
Foundations Status of Certain
Organizations
Announcement 2008–70
The following organizations have failed
to establish or have been unable to main-
tain their status as public charities or as op-
erating foundations. Accordingly, grantors
and contributors maynot, after this date,
rely on previous rulings or designations
in the Cumulative List of Organizations
(Publication 78), or on the presumption
arising from the filing of notices under sec-
tion 508(b) of the Code. This listing does
notindicate that the organizations have lost
their status as organizations described in
section 501(c)(3), eligible to receive de-
ductible contributions.
Former Public Charities.The follow-
ing organizations (which have been treated
as organizations that are not private foun-
dations described in section 509(a) of the
Code) are now classified as private foun-
dations.
Adonai Christian Ministries, Inc.,
Norfolk, VA
Advance Humanity Aide AHA,
McClellanville, SC
Almarie King Education Fund,
Port Orchard, WA
Alpha and Omega Church Alpha
and Omega Immanuel NFP-Inc.,
Chicago, IL
Alvarado Project, San Francisco, CA
American Cowboy Association, Inc.,
Longwood, FL
American Indian Community History
Center, Kensington, CA
Americare Community Services, Inc.,
Richmond, WA
2008–32 I.R.B.318August 11, 2008

Anchored in Excellence Community
Development Corporation,
Baytown, TX
Annie Laura Avant Community, Inc.,
Detroit, MI
Aqua Resources, Inc., Beaumont, TX
Arkansas Hunters Feeding the Hungry,
Inc., Little Rock, AR
Arts Fund Inc., Salem, MA
Ascended Masters Healing Center for the
Mind Body and Soul, Tucson, AZ
Associated Lenders, Desoto, TX
Auko Community Development
Corporaton, Los Angeles, CA
B & S Kitter Kare, Crane, MO
Baby Basics, Inc., Milwaukee, WI
Backpacks for Kids, Dallas, TX
Baldwin Bethany Community
Development Corporation,
Los Angeles, CA
B E S T Academy, Houston, TX
Bewear Prison Ministry, Inc., Houston, TX
Breath of Life of Central Florida,
Lake Panasoffke, FL
BRH New Communities, Inc.,
Baton Rouge, LA
Bridges of Hope Community
Development Center, Inc.,
Inglewood, CA
Brooks Chapel Project Outreach, Inc.,
Moscow, TN
Building Blocks Center, Inc., Fresno, TX
Caeli Foundation, Orem, UT
Cairs, Inc., Nokomis, FL
California Museum of Military History,
Inc., San Francisco, CA
CAPPA Children’s Foundation,
Sacramento, CA
Caring for Cats Charitable Trust,
Stoughton, MA
Caring for Families, Los Angeles, CA
Center for Religious Architecture,
Chicago, IL
Charity Challenges, Inc., Rochester, NY
Chisholm Community Services of
Oklahoma, Inc., Jefferson, TX
Choice Resolutions Group, Inc.,
Houston, TX
Cian Society Foundation, New York, NY
Circle of Life Foundation, Inc.,
Odenton, MD
Citizens for Parental Rights,
Grand Rapids, MI
City Community Development
Corporation, Cleveland, OH
Claver House of Renewal NFP,
Chicago, IL
College Solutions, Inc., Gilbert, AZ
Come and Dine Ministries, Inc.,
Adelphi, MD
CommitteetoPreserveLunaPark
Housing, Brooklyn, NY
Community Awareness Committee,
Avalon, PA
Community Mobilization Organization,
Bronx, NY
Comnec, Incorporated, Los Angeles, CA
Compassion Global Relief Mission,
Randallstown, MD
Concerned Rosebud Area Citizens, Inc.,
White River, SD
Creston Community Development
Corporation, Inc., Houston, TX
Crew Ensemble, Inc., Baltimore, MD
Culverton Affordable Housing
Development Fund Company, Inc.,
Troy, NY
Dawn of Hope, Granville, OH
Daybreak Community Development
Corp., Plainfield, NJ
Deanza Clinic, Calexico, CA
Divine Institute of Modeling & Etiquette,
Inc., Tempe, AZ
Dublin Area Senior Volunteer Program,
Dublin, CA
Eagles Missionary Supply, Inc.,
Midlothian, VA
Eastside Affordable Housing Program,
Bellevue, WA
Eastside Community and Development
Center, Inc., Springfield, IL
Eden Foundation,Incorporated,
Winter Park, FL
Education Support, Inc., Cheyenne, WY
E G T Community Development Corp.,
Bayonne, NJ
Emmanuel Christian Fellowship
Ministries, Inc., Severn, MD
Emmanuel House, Newark, NJ
E-nitiative Wealth, Inc., Torrance, CA
E.R. Rewis Water & Spirit Outreach, Inc.,
Chokoloskee, FL
Evangelical Crusade Outreach,
Phoenix, AZ
Ezekiel House, Inc., Lansing, MI
Faith Temple Outreach Ministries,
Grenada, MS
Fannie Roberts Adult Day Care,
Thomasville, GA
Financial Fitness Center, Inc., FFC,
Atlanta, GA
Flips Community Development &
Outreach of Texas, Inc., Irving, TX
For Childrens Sake of Maryland,
Austin, TX
Foundation for Agape of North Alabama,
Huntsville, AL
Foundation for People With Disabilities,
Fulton, NY
Fourth Watch Ministries, Seymour, TN
Francies Nonprofit Housing Community
Development Corporation,
Rochester, MI
Friendly Community Services Outreach,
Inc., Victorville, CA
Friendly Group Home, Inc.,
Lehigh Acres, FL
Friends & Neighbors Elderly Support
& Housing Services of LA, Inc.,
Lafayette, LA
Friends of Idasa, Inc., Washington, DC
Full Gospel Globe Mission Church,
Powell, OH
Genesis House, Inc., Indianapolis, IN
Ghana Golden Pod Organization, Inc.,
Bronx, NY
Ghova Institute, Inc., Hyattsville, MD
Gilbert Lindsay Manor Tenant
Committe-Association,
Los Angeles, CA
Global Harvest Ministerial Association,
Inc., Clearwater, FL
Golden Gate Community Development
Corporation, Raeford, NC
Good Stewardship, Inc., Summerville, SC
Grace and Mercy Foundation,
Inglewood, CA
Grazette Halfway House, Inc.,
West Palm Beach, FL
Gregory House Foundation, Jackson, MS
GregoryTrainingCenter,
San Francisco, CA
Grupo Jalisco En San Antonio TX,
San Antonio, TX
Guardian Angel Foster Home, Inc.,
Hinesville, GA
Guardians of Childrens and Parents
Family Rights Organization,
Washington, DC
Guidance Behind the Walls, Aurora, CO
Hawaii Mana, Honolulu, HI
Help Us, Incorporated, Martinsburg, WV
Helping Hands Community Resource
Distribution Center, Inc., Miami, FL
Helping Hands Family Services,
Chicago, IL
Heritage House, Inc., Lithonia, GA
His Greatest Creation, Fort Worth, TX
Historic Stop Six Empowerment
Coalition, Fort Worth, TX
Hollies Hope, Inc., Metairie, LA
Home Buyers Network, Inc.,
McDonough, GA
August 11, 20083192008–32 I.R.B.

HOPE, Philippi, WV
Hopkins County Healthcare Service,
Sulphur Springs, TX
Humanity Resources, Inc.,
Ft. Lauderdale, FL
Illinois Chaplaincy, Inc., Chicago, IL
In the Gap Ministries Community
Development Corporation,
Charlotte, NC
Infamous Warriors Drill Team of Des
Moines, Des Moines, IA
Inner Circle Counsel Enterprise, Inc.,
Miami, FL
Institute for World Transformation,
Antioch, CA
Inter-Action, Inc., Stone Mountain, GA
International Association of Rosenbergs
System of Integrative Body
Psychotherapy, Santa Monica, CA
International Bodytalk Foundation, Inc.,
Sarasota, FL
Ivana Housing Development Corporation,
Citrus Heights, CA
James A. Rhodes Leadership Foundation,
Columbus, OH
Jesus Children Ministry, Sacramento, CA
Joshua Ministries, Inc., Nashville, TN
Jubilee House, Riverside, CA
Khmer County Services of Florida,
Cerritos, CA
L & K Teen Summit, Jacksonville, FL
Laura B. Collins Child Development
Center, Inc., Chicago, IL
Life Center, Inc., Newport News, VA
Lifefaqs Org., Oakdale, CT
Lord’s Kitchenette & Ministries of Helps,
Inc.,Tulsa,OK
Los Angeles Oral Health Foundation,
Los Angeles, CA
Lott of Love Foundation, Inc.,
Baton Rouge, LA
Love at Work Group, Inc.,
Washington, DC
Loving Care Foundation, Salem, VA
Marcelo Balboa Ironman Foundation,
Superior, CO
Mary Alice Foundation, Inc.,
Milwaukee, WI
Mary Esther Enterprises, Inc., Shelby, NC
McPherson Gardens, Inc., Euclid, OH
Medicine Lodge, Inc., Great Falls, MT
Metrovoice Youth Entrepreneurs Program,
Inc., Washington, DC
Michigan Elite Hoops, Detroit, MI
Michigan Institute for Prevention and
Intervention, Gross Pointe, MI
Middle Tennessee Labrador Retriever
Rescue, Nashville, TN
Milestone Social Services, Inc.,
Winter Park, FL
Mobiles Pride Youth Organization,
Mobile, AL
Molly Crouch Anderson Scholarship
Foundation, Itasca, TX
Moorish Development Corporation,
Wichita, KS
More Than a Memory Productions,
Channelview, TX
Morning Star Community Development
Corporation, Williamston, NC
Mountain View Home for the Elderly
Corp., Cidra, PR
Mt. Sinai Senior Services, Inc.,
South Setuaket, NY
Multicultural Citizens Advisory
Commissioners, Inc., Atlantic City, NJ
My Contribution, Hercules, CA
My Fathers House, Shaker Heights, OH
National Artist Development Academy,
Inc., Brooklyn, NY
National Center for Open Source
and Education Corporation,
Thetford Center, VT
National Interscholastic Motorsports
Association, Inc., NIMA, Warren, AR
Natural Home, Inc., Washington, DC
NBPT, Inc., Selma, AL
Neighborhood Center for Greater Omaha,
Omaha, NE
New Creations Revelations Ministries,
Riverside, CA
New World Shalom Initiative,
Clarksdale, MS
Next Step up Ministries, Greensboro, NC
North Miami Performing Arts, Inc.,
Opalocka, FL
Northwest Collaborative, Spokane, WA
Northwest Intake Center, Inc.,
Cypress, TX
Oakville Community Center, Inc.,
Danville, AL
Omni Women Center, Washington, DC
Opendoor Services, Inc.-Employment
Services, Modesto, CA
Oregon Association of Family Career
and Community Leaders of America,
Salem, OR
Oregon Association of Health
Occupations Students of America,
Salem, OR
Organization for the Development
of Agriculture in Haiti OADH,
Brooklyn, NY
Othell Adkins Ministries, Gulfport, MS
Our Loving Arms, Inc., Buffalo, NY
Paradigm Athletic Association,
Silver Springs, MD
PASC Academy Charter School,
Stockton, CA
Peace Education Foundation of Florida,
Inc., Hollywood, FL
Peek Adventures, Lauderdale, MN
Photoaid, Inc., New York, NY
Prairie Ridge Elementary School Parent
Teacher Organization, Longmont, CO
Princeton Future Farmer Agriculture
Corporation, Princeton, CA
Proceed Community Development
Corporation, Inc., Elizabeth, NJ
Project Clean Across America, Avon, CO
Project Hope, Inc., Northport, AL
Pueblo Zoological Society Foundation,
Pueblo, CO
Raising the Bar, Blue Springs, MO
RD Foundation, Rockford, IL
Rebuilding Everyone’s Attitude Causes
Hope (REACH), Spring, TX
Reform & Independent Services, Inc.,
Detroit, MI
Rescue Ministries International, Inc.,
Lakeland, FL
River Ridge Learning Center,
River Ridge, LA
Riverside County Underwater Search and
Recovery Team, Inc., Perris, CA
ROCS, Scottsdale, AZ
Robert L. Campbell Ministries, Inc.,
Sugar Land, TX
Roharco, Inc., Cincinnati, OH
Rural West Texas Community
Partnerships, Denver City, TX
Safespaces Org., Brentwood, CA
Sant Kiltirel Mapou, Inc., Miami, FL
Second Baptist Community Development
NFP, Evanston, IL
Seneca High School Foundation,
Seneca, IL
Senior Services, Inc., Wheatfield, NY
Shelton and Lucille Buchanan Family
Foundation, San Diego, CA
Sierra Development Corporation,
Somerset, NJ
Southwest Community Center of
Rockford, Rockford, IL
Special Education Advocacy Services for
Children and Youth, Washington, DC
Spirit Builders, Inc., Cordova, TN
Spiritual Essence by Pamela Dorsey,
Dallas, TX
St. Paul/Gillespie-Selden Rural Life
Community Center, Inc., Cordele, GA
Stepping Stones Academy, Inc.,
Crosby, TX
2008–32 I.R.B.320August 11, 2008

Strategies to Equip People for Success,
Inc., Lauderdale Lakes, FL
Sun Civic League, Sun, LA
Tabernacle of Faith Outreach Ministries,
Detroit, MI
Temple Education Ministries, Inc.,
Inmann, SC
Texas Institute for Housing Opportunities,
Inc., Austin, TX
Time of the End Ministries, San Diego, CA
T. J. Striders Youth Track and Field Club,
San Bernardino, CA
TNT Connections Charities, Inc.,
Jacksonville, FL
Total Life Center, Virginia Beach, VA
Transformations Community
Development Corporation, Inc.,
Bowie, MD
Transformers International, Inc.,
Miami, FL
Tutor in Town, Incorporated, Miami, FL
Valley Initiative for Affordable Housing,
Merced, CA
Victory Foundation, Corona, CA
Vision Inspires Synergy in Organizations
Nationwide, Inc., Elizabeth, NJ
Visionary Institute for Total Ageless
Living, Inc., Potomac, MD
Ujima Consortium, Inc., Southfield, MI
Wee Bee Care, Inc., Stockbridge, CA
West Georgia Community Development
Corporation, Newnan, GA
WGH Heritage, Inc., Grand Prairie, TX
Wilmingtonians, Inc., Middletown, DE
Wings Foundation, Inc., Oak Hill, WV
Women of Color Public Policy and
Education Institute, Inc., Brooklyn, NY
Won Last Chance, Inc., Chandler, AZ
Work Works, Inc., Poughkeepsie, NY
Worstell Foundation, Mexico, MO
Youth Solutions, Inc., Brandon, MS
If an organization listed above submits
information that warrants the renewal of
its classification as a public charity or as
a private operating foundation, the Inter-
nal Revenue Service will issue a ruling or
determination letter with the revised clas-
sification as to foundation status. Grantors
and contributors maythereafter rely upon
such ruling or determination letter as pro-
vided in section 1.509(a)–7 of the Income
Tax Regulations. It is not the practice of
the Service to announce such revised clas-
sification of foundation status in the Inter-
nal Revenue Bulletin.
Multiemployer Plan Funding
Guidance; Correction
Announcement 2008–71
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correction to a notice of a pub-
lic hearing on proposed rulemaking.
SUMMARY: This document contains a
correction to a notice of public hearing
(Announcement 2008–64, 2008–28 I.R.B.
114) on a notice of proposed rulemaking
that was published in theFederal Reg-
isteron Friday, June 27, 2008 (73 FR
36476) providing additional rules for cer-
tain multiemployer defined benefit plans
that are in effect on July 16, 2006. These
proposed regulations affect sponsors and
administrators of, and participants in mul-
tiemployer plans that are in either endan-
gered or critical status. These regulations
are necessary to implement the new rules
set forth in section 432 that are effective
for plan years beginning after 2007. The
proposed regulations reflect changes made
by the Pension Protection Act of 2006.
FOR FURTHER INFORMATION
CONTACT: Bruce Perlin, (202) 622–6090
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The correction notice that is the subject
of this document is under section 432 of
the Internal Revenue Code.
Need for Correction
As published, a notice of a pub-
lic hearing on proposed rulemaking
(REG–151135–07) contains an error that
may prove to be misleading and is in need
of clarification.
Correction of Publication
Accordingly, the publication of a notice
of public hearing on proposed rulemaking
(REG–151135–07), which was the subject
of FR Doc. E8–14563, is corrected as fol-
lows:
On page 36477, column 1, under the
caption “SUPPLEMENTARY INFOR-
MATION:”, line 5, the language “Fed-
eral Registeron Tuesday, March 8,” is
corrected to read “Federal Registeron
Tuesday, March 18,”.
LaNita Van Dyke,
Chief, Publications and
Regulations Branch,
Legal Processing Division,
Associate Chief Counsel
(Procedure and Administration).
(Filed by the Office of the Federal Register on July 1, 2008,
8:45 a.m., and published in the issue of the Federal Register
for July 2, 2008, 73 F.R. 37910)
Section 7428(c) Validation
of Certain Contributions
Made During Pendency
of Declaratory Judgment
Proceedings
Announcement 2007–72
This announcement serves notice to po-
tential donors that the organization listed
below has recently filed a timely declara-
tory judgment suit under section 7428 of
the Code, challenging revocation of its
status as an eligibledonee under section
170(c)(2).
Protection under section 7428(c) of the
Code begins on the date that the notice
of revocation is published in the Internal
Revenue Bulletin and ends on the date
on which a court first determines that an
organization is not described in section
170(c)(2), as more particularly set forth in
section 7428(c)(1).
In the case of individual contributors,
the maximum amount of contributions
protected during this period is limited to
$1,000.00, with a husband and wife being
treated as one contributor. This protec-
tion is not extended to any individual who
was responsible, in whole or in part, for
the acts or omissions of the organization
that were the basis for the revocation.
This protection also applies (but without
limitation as to amount) to organizations
described in section 170(c)(2) which are
exempt from tax under section 501(a). If
the organization ultimately prevails in its
declaratory judgment suit, deductibility
of contributions would be subject to the
August 11, 20083212008–32 I.R.B.

normal limitations set forth under section
170.
Sea of Sound Production, Inc.
Midlothian, VA
Educate the Children, Inc.
Long Beach, CA
Family Home Providers, Inc.
Cumming, GA
2008–32 I.R.B.322August 11, 2008

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 ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
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 withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis 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
withamplifiedandclarified, above).
Obsoleteddescribes 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.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes 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 pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis 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 rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis 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 fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
August 11, 2008i2008–32 I.R.B.

Numerical Finding List
1
Bulletins 2008–27 through 2008–32
Announcements:
2008-62, 2008-27 I.R.B.74
2008-63, 2008-28 I.R.B.114
2008-64, 2008-28 I.R.B.114
2008-65, 2008-31 I.R.B.279
2008-66, 2008-29 I.R.B.164
2008-67, 2008-29 I.R.B.164
2008-68, 2008-30 I.R.B.244
2008-69, 2008-32 I.R.B.318
2008-70, 2008-32 I.R.B.318
2008-71, 2008-32 I.R.B.321
2008-72, 2008-32 I.R.B.321
Notices:
2008-55, 2008-27 I.R.B.11
2008-56, 2008-28 I.R.B.79
2008-57, 2008-28 I.R.B.80
2008-58, 2008-28 I.R.B.81
2008-59, 2008-29 I.R.B.123
2008-60, 2008-30 I.R.B.178
2008-61, 2008-30 I.R.B.180
2008-62, 2008-29 I.R.B.130
2008-63, 2008-31 I.R.B.261
2008-64, 2008-31 I.R.B.268
2008-65, 2008-30 I.R.B.182
2008-66, 2008-31 I.R.B.270
2008-67, 2008-32 I.R.B.307
Proposed Regulations:
REG-143453-05, 2008-32 I.R.B.310
REG-129243-07, 2008-27 I.R.B.32
REG-138355-07, 2008-32 I.R.B.311
REG-149405-07, 2008-27 I.R.B.73
REG-100464-08, 2008-32 I.R.B.313
REG-101258-08, 2008-28 I.R.B.111
REG-102122-08, 2008-31 I.R.B.278
REG-121698-08, 2008-29 I.R.B.163
Revenue Procedures:
2008-32, 2008-28 I.R.B.82
2008-33, 2008-28 I.R.B.93
2008-34, 2008-27 I.R.B.13
2008-35, 2008-29 I.R.B.132
2008-37, 2008-29 I.R.B.137
2008-38, 2008-29 I.R.B.139
2008-39, 2008-29 I.R.B.143
2008-40, 2008-29 I.R.B.151
2008-41, 2008-29 I.R.B.155
2008-42, 2008-29 I.R.B.160
2008-43, 2008-30 I.R.B.186
2008-44, 2008-30 I.R.B.187
2008-45, 2008-30 I.R.B.224
Revenue Procedures— Continued:
2008-46, 2008-30 I.R.B.238
2008-47, 2008-31 I.R.B.272
Revenue Rulings:
2008-32, 2008-27 I.R.B.6
2008-33, 2008-27 I.R.B.8
2008-34, 2008-28 I.R.B.76
2008-35, 2008-29 I.R.B.116
2008-36, 2008-30 I.R.B.165
2008-37, 2008-28 I.R.B.77
2008-38, 2008-31 I.R.B.249
2008-39, 2008-31 I.R.B.252
2008-40, 2008-30 I.R.B.166
2008-41, 2008-30 I.R.B.170
2008-42, 2008-30 I.R.B.175
2008-43, 2008-31 I.R.B.258
2008-44, 2008-32 I.R.B.292
Treasury Decisions:
9401, 2008-27 I.R.B.1
9402, 2008-31 I.R.B.254
9403, 2008-32 I.R.B.285
9404, 2008-32 I.R.B.280
9405, 2008-32 I.R.B.293
9406, 2008-32 I.R.B.287
9409, 2008-29 I.R.B.118
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2008–1 through 2008–26 is in Internal Revenue Bulletin
2008–26, dated June 30, 2008.
2008–32 I.R.B.iiAugust 11, 2008

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2008–27 through 2008–32
Announcements:
2008-64
Corrected by by
Ann. 2008-71, 2008-32 I.R.B.321
Notices:
99-48
Superseded by
Rev. Proc. 2008-40, 2008-29 I.R.B.151
2000-9
Obsoleted by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
2004-2
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
2004-50
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
2006-88
Modified and superseded by
Notice 2008-60, 2008-30 I.R.B.178
2007-22
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
Proposed Regulations:
REG-151135-07
Hearing scheduled by
Ann. 2008-64, 2008-28 I.R.B.114
Revenue Procedures:
92-25
Superseded by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
92-83
Obsoleted by
Rev. Proc. 2008-37, 2008-29 I.R.B.137
2001-42
Superseded by
Rev. Proc. 2008-39, 2008-29 I.R.B.143
2002-9
Modified and amplified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
2006-29
Superseded by
Rev. Proc. 2008-34, 2008-27 I.R.B.13
2006-34
Superseded by
Rev. Proc. 2008-44, 2008-30 I.R.B.187
Revenue Procedures— Continued:
2007-19
Superseded by
Rev. Proc. 2008-39, 2008-29 I.R.B.143
2007-42
Superseded by
Rev. Proc. 2008-32, 2008-28 I.R.B.82
2007-43
Superseded by
Rev. Proc. 2008-33, 2008-28 I.R.B.93
2007-70
Modified by
Ann. 2008-63, 2008-28 I.R.B.114
2007-72
Amplified and superseded by
Rev. Proc. 2008-47, 2008-31 I.R.B.272
2008-12
Modified and superseded by
Rev. Proc. 2008-35, 2008-29 I.R.B.132
Revenue Rulings:
67-213
Amplified by
Rev. Rul. 2008-40, 2008-30 I.R.B.166
71-234
Modified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
77-480
Modified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
91-17
Amplified by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
Rev. Proc. 2008-42, 2008-29 I.R.B.160
Superseded in part by
Rev. Proc. 2008-40, 2008-29 I.R.B.151
2005-6
Amplified by
Rev. Proc. 2008-38, 2008-29 I.R.B.139
2008-12
Amplified by
Rev. Rul. 2008-38, 2008-31 I.R.B.249
Clarified by
Ann. 2008-65, 2008-31 I.R.B.279
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2008–1 through 2008–26 is in Internal Revenue Bulletin 2008–26, dated June 30, 2008.
August 11, 2008iii2008–32 I.R.B.

INTERNAL REVENUE BULLETIN
The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superin-
tendent of Documents when their subscriptions must be renewed.
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