Internal Revenue Bulletin 2010-6 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 201
0-6
February 8, 2010
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
Rev. Rul. 2010–6, page 387.
Federal rates; adjusted federal rates; adjusted federal
long-termrateandthelong-termexemptrate.Forpur-
poses of sections 382, 642, 1274, 1288, and other sections
of the Code, tables set forth the rates for February 2010.
T.D. 9477, page 385.
REG–132232–08, page 401.
Final, temporary, and proposed regulations under section 304
of the Code address the tax treatment of certain shareholders
who transfer stock or securities to related corporations. When
shareholders control two corporations and sell the stock or se-
curities of one controlled corporation to the other, section 304
governs the tax treatment of the shareholders on the amounts
received for the transferred stock or securities. The regula-
tions provide that shareholders will not avoid the application of
section 304 by causing controlled corporations to form or avail
themselves of related corporations to execute the transaction.
Notice 2010–16, page 396.
Haiti earthquake in 2010.This notice designates the Haiti
earthquake occurring in January 2010 as a qualified disaster
for purposes of section 139 of the Code.
EMPLOYEE PLANS
Notice 2010–15, page 390.
Miscellaneous HEART Act changes.This notice provides
guidance in the form of questions and answers with respect
to certain provisions of the Heroes Earnings Assistance and
Relief Act of 2008 (“HEART Act”). The notice also requests
comments regarding any additional issues relating to sections
of the HEART Act that are addressed in the notice.
EMPLOYMENT TAX
REG–137036–08, page 398.
Proposed regulations under section 3504 of the Code relate to
employment tax liability of agents authorized by the Secretary
to perform acts required of employers with respect to Federal
Unemployment Tax Act (FUTA) taxes on wages paid for home
care services, as defined in these regulations. The regulations
would allow an enrolled participant in a home care services
program to designate an agent to report, file, and pay all em-
ployment taxes, including federal unemployment taxes. The
change will allow an agent to file a single federal unemploy-
ment tax return for multiple home care service recipients.
ADMINISTRATIVE
Announcement 2010–5, page 402.
This document contains a correction to Revenue Procedure
2010–1, 2010–1 I.R.B. 1, which contained an incorrect internal
cross-reference.
Announcement 2010–6, page 402.
This announcement provides notice of a public hearing on pro-
posed regulations (REG–127270–06, 2009–42 I.R.B. 534) re-
lating to the exclusion from gross income for amounts received
on account of personal physical injuries or physical sickness.
A public hearing is scheduled for February 23, 2010.
(Continued on the next page)
Finding Lists begin on page ii.

Announcement 2010–7, page 403.
This document contains a correction to temporary regulations
(T.D. 9458, 2009–43 I.R.B. 547) relating to modification to
consolidated return regulation permitting an election to treat a
liquidation of a target, followed by a recontribution to a new
target, as a crosschain reorganization.
February 8, 20102010–6 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.
2010–6 I.R.B.February 8, 2010

February 8, 20102010–6 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 42.—Low-Income
Housing Credit
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2010. See Rev. Rul. 2010-6, page 387.
Section 280G.—Golden
Parachute Payments
Federal short-term, mid-term, and long-term rates
are set forth for the month of February 2010. See Rev.
Rul. 2010-6, page 387.
Section 304.—Redemption
Through Use of Related
Corporations
26 CFR 1.304–4T: Special rule for the use of related
corporations to avoid the application of section 304
(temporary).
T.D. 9477
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Use of Controlled Corporations
to Avoid the Application of
Section 304
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regula-
tions.
SUMMARY: This document contains final
and temporary regulations under section
304 of the Internal Revenue Code (Code).
The regulations apply to certain transac-
tions that are subject to section 304 but
that are entered into with a principal pur-
pose of avoiding the application of section
304 to a corporation that is controlled by
the issuing corporation in the transaction,
or with a principal purpose of avoiding the
application of section 304 to a corporation
that controls the acquiring corporation in
the transaction. The regulations affect per-
sons treated as receiving distributions in
redemption of stock by reason of section
304. The text of the temporary regulations
serves as the text of the proposed regula-
tions (REG–132232–08) in the notice of
proposed rulemaking on this subject pub-
lished in this issue of the Bulletin.
DATES:Effective Date:These regulations
are effective on December 30, 2009.
Applicability Date:These regulations
apply to acquisitions of stock occurring on
or after December 29, 2009.
FOR FURTHER INFORMATION
CONTACT: Sean W. Mullaney, (202)
622–3860 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to
26 CFR part 1 under section 304 of the
Code. Section 304(a)(1) provides gener-
ally that, for purposes of sections 302 and
303, if one or more persons are in con-
trol of each of two corporations and one
such corporation (acquiring corporation)
acquires in exchange for property stock of
the other corporation (issuing corporation)
from the person (or persons) so in control,
then, unless section 304(a)(2) applies, the
property shall be treated as received in re-
demption of the stock of the acquiring cor-
poration. Section 304(a)(2) provides gen-
erally that, for purposes of sections 302
and 303, if in exchange for property the
acquiring corporation acquires stock of the
issuing corporation from a shareholder of
the issuing corporation and the issuing cor-
poration controls the acquiring corpora-
tion, then the shareholder shall be treated
as receiving the property in redemption of
the stock of the issuing corporation. For
purposes of section 304, control means the
ownership of stock possessing at least 50
percent of the total combined voting power
of all classes of voting stock or at least 50
percent of the total value of shares of all
classes of stock. With certain modifica-
tions, the constructive ownership rules of
section 318 apply for this purpose.
Under section 304(b)(2), the determina-
tion of the amount of the property distri-
bution that is a dividend (and the source
thereof) is made as if the property were dis-
tributed by the acquiring corporation to the
extent of its earnings and profits, and then
by the issuing corporation to the extent of
its earnings and profits. If the acquiring
corporation is foreign, section 304(b)(5)
limits the amount of earnings and profits
of the acquiring corporation that are taken
into account for this purpose.
As part of a broad set of anti-avoid-
ance rules published in theFederal Regis-
teron June 14, 1988 (T.D. 8209, 1988–2
C.B. 174) the IRS and the Treasury De-
partment promulgated §1.304–4T to ad-
dress transactions that are subject to sec-
tion 304 but that are entered into with a
principal purpose of avoiding the appli-
cation of section 304 to certain corpora-
tions. Specifically, for purposes of deter-
mining the amount of a property distribu-
tion constituting a dividend (and the source
thereof) under section 304(b)(2), the Dis-
trict Director (now known as the Director
of Field Operations) is permitted to con-
sider a corporation (deemed acquiring cor-
poration) as having acquired for property
the stock of the issuing corporation that is
in fact acquired for property by the acquir-
ing corporation, if the deemed acquiring
corporation controls the acquiring corpo-
ration and if one of the principal purposes
for creating, organizing, or funding the ac-
quiring corporation (through capital con-
tributions or debt) is to avoid the applica-
tion of section 304 to the deemed acquiring
corporation.
Explanation of the Provisions
A.Transactions at Issue
The IRS and Treasury Department have
become aware of certain transactions that
are subject to section 304 but that are
entered into with a principal purpose of
avoiding the treatment of a corporation
as the issuing corporation. In one such
transaction, for example, a domestic cor-
poration (USP) wholly owns two foreign
corporations (F1 and F2). The basis and
fair market value of the F1 stock is $100x.
F1 does not have positive earnings and
profits (or its earnings and profits for pur-
poses of section 304(b)(2) are limited by
section 304(b)(5)) but has at least $100x
cash. The basis and fair market value of
the F2 stock is $100xand F2 has earnings
2010–6 I.R.B.385February 8, 2010

and profits of at least $100x. USP forms
a new foreign corporation (F3) and con-
tributes the stock of F2 to F3 in exchange
for F3 stock. In a transaction subject to
section 304(a)(1), USP then transfers the
stock of F3 to F1 in exchange for $100x
cash. Because neither F1 (the acquiring
corporation) nor F3 (the issuing corpo-
ration) has positive earnings and profits,
USP reports the $100x cash received in
redemption of the shares deemed issued
by F1 under section 304(a)(1) as a return
of basis under section 301(c)(2).
B.Anti-Avoidance Rule Applicable to
Deemed Issuing Corporations
The IRS and Treasury Department be-
lieve that an anti-avoidance rule similar to
§1.304–4T, but that applies in the case of
a transaction entered into with a principal
purpose of avoiding the treatment of a cor-
poration as the issuing corporation is ap-
propriate for transactions such as the one
described above. Accordingly, the regu-
lations amend §1.304–4T to provide that
for purposes of determining the amount
of a property distribution that is a divi-
dend (and the source thereof) under sec-
tion 304(b)(2), the acquiring corporation
shall be treated as acquiring for property
the stock of a corporation (deemed issu-
ing corporation) that is controlled by the
issuing corporation, if, in connection with
the acquisition for property of stock of the
issuing corporation by the acquiring cor-
poration, the issuing corporation acquired
stock of the deemed issuing corporation
with a principal purpose of avoiding the
application of section 304 to the deemed
issuing corporation.
C.Modifications to Current §1.304–4T
Current §1.304–4T applies at the dis-
cretion of the District Director. The IRS
and the Treasury Department believe the
anti-avoidance rule of current §1.304–4T
should be self-executing. Thus, current
§1.304–4T is amended accordingly.
Current §1.304–4T applies when “one
of the principal purposes” for the transac-
tion is to avoid the application of section
304. The regulations included in this docu-
ment apply when “a principal purpose” for
the transaction is to avoid the application
of section 304. The IRS and the Treasury
Department do not view this modification
as a substantive change.
Finally, and as noted above, current
§1.304–4T applies if one of the princi-
pal purposes for creating, organizing, or
funding the acquiring corporation, through
capital contributions or debt, is to avoid the
application of section 304 to the deemed
acquiring corporation. The regulations
included in this document clarify that this
rule may apply in cases where the funding
is from an unrelated party. For exam-
ple, the regulations may apply when the
deemed acquiring corporation facilitates
the repayment of an obligation incurred
by the acquiring corporation (even if such
obligation is with respect to a borrowing
from an unrelated party) to acquire the
stock of the issuing corporation.
D.Effectiv
e/Applicability Dates
The regulations apply to acquisitions
occurring on or after December 29, 2009.
No inference is intended as to the potential
applicability of other Code or regulatory
provisions or judicial doctrines (including
step transaction or substance over form) to
transactions described in the regulations.
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) and (d) of the Admin-
istrative Procedure Act (5 U.S.C. chapter
5) do not apply to these regulations. For
applicability of the Regulatory Flexibility
Act (5 U.S.C. chapter 6), refer to the Spe-
cial Analyses section of the preamble and
to the cross-referenced notice of proposed
rulemaking published elsewhere in this is-
sue of the Bulletin. Pursuant to section
7805(f) of the Code, these regulations have
been submitted to the Chief Counsel for
Advocacy of the Small Business Adminis-
tration for comment on its impact on small
business.
Drafting Information
The principal author of the regulations
is Sean W. Mullaney of the Office of Asso-
ciate Chief Counsel (International). How-
ever, other personnel from the IRS and the
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 is amended by adding an entry in
numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.304–4 is added to read
as follows:
§1.304–4 Special rule for the use
of related corporations to avoid the
application of section 304.
[Reserved]. For further guidance, see
§1.304–4T(a) through (d).
Par. 3. Section 1.304–4T is revised to
read as follows:
§1.304–4T Special rule for the use
of related corporations to avoid the
application of section 304 (temporary).
(a)Scope and purpose. This section
applies to determine the amount of a prop-
erty distribution constituting a dividend
(and the source thereof) under section
304(b)(2), for certain transactions involv-
ing controlled corporations. The purpose
of this section is to prevent the avoidance
of the application of section 304 to a con-
trolled corporation.
(b)Amount and source of dividend.For
purposes of determining the amount con-
stituting a dividend (and source thereof)
under section 304(b)(2), the following
rules shall apply:
(1)Deemed acquiring corporation.
A corporation (deemed acquiring corpo-
ration) shall be treated as acquiring for
property the stock of a corporation (issuing
corporation) acquired for property by an-
other corporation (acquiring corporation)
that is controlled by the deemed acquiring
corporation, if a principal purpose for cre-
ating, organizing, or funding the acquiring
corporation by any means (including,
through capital contributions or debt) is
to avoid the application of section 304 to
the deemed acquiring corporation. See
paragraph (c)Example 1of this section for
an illustration of this paragraph.
(2)Deemed issuing corporation.The
acquiring corporation shall be treated as
February 8, 20103862010–6 I.R.B.

acquiring for property the stock of a corpo-
ration (deemed issuing corporation) con-
trolled by the issuing corporation if, in con-
nection with the acquisition for property
of stock of the issuing corporation by the
acquiring corporation, the issuing corpo-
ration acquired stock of the deemed issu-
ing corporation with a principal purpose of
avoiding the application of section 304 to
the deemed issuing corporation. See para-
graph (c) Example 2 of this section for an
illustration of this paragraph.
(c)Examples. The rules of this section
are illustrated by the following examples:
Example 1.(i)Facts. P, a domestic corpora-
tion, wholly owns CFC1, a controlled foreign cor-
poration with substantialaccumulated earnings and
profits. CFC1 is organized in Country X, which im-
poses a high rate of tax on the income of CFC1. P
also wholly owns CFC2, a controlled foreign cor-
poration with accumulated earnings and profits of
$200x. CFC2 is organized in Country Y, which im-
poses a low rate of tax on the income of CFC2. P
wishes to own all of its foreign corporations in a di-
rect chain and to repatriate the cash of CFC2. In or-
der to avoid having to obtain Country X approval for
the acquisition of CFC1 (a Country X corporation)
by CFC2 (a Country Y corporation) and to avoid the
dividend distribution from CFC2 to P that would re-
sult if CFC2 were the acquiring corporation, P causes
CFC2 to form CFC3 in Country X and to contribute
$100x to CFC3. CFC3 then acquires all of the stock
of CFC1 from P for $100x.
(ii)Result. Because a principal purpose for cre-
ating, organizing or funding CFC3 (acquiring corpo-
ration) is to avoid the application of section 304 to
CFC2 (deemed acquiring corporation), under para-
graph (b)(1) of this section, for purposes of deter-
mining the amount of the $100x distribution con-
stituting a dividend (and source thereof) under sec-
tion 304(b)(2), CFC2 shall be treated as acquiring
the stock of CFC1 (issuing corporation) from P for
$100x. As a result, P receives a $100x distribution,
out of the earnings and profits of CFC2, to which sec-
tion 301(c)(1) applies.
Example 2.(i)Facts. P, a domestic corporation,
wholly owns CFC1, a controlled foreign corporation
with substantial accumulated earnings and profits.
The CFC1 stock has a basis of $100x. CFC1 is
organized in Country X. P also wholly owns CFC2, a
controlled foreign corporation with zero accumulated
earnings and profits. CFC2 is organized in Country
Y. P wishes to own all of its foreign corporations in a
direct chain and to repatriate the cash of CFC2. In or-
der to avoid having to obtain Country X approval for
the acquisition of CFC1 (a Country X corporation)
by CFC2 (a Country Y corporation) and to avoid
a dividend distribution from CFC1 to P, P forms a
new corporation (CFC3) in Country X and transfers
the stock of CFC1 to CFC3 in exchange for CFC3
stock. P then transfers the stock of CFC3 to CFC2 in
exchange for $100x.
(ii)Result. Because a principal purpose for the
transfer of the stock of CFC1 (deemed issuing cor-
poration) by P to CFC3 (issuing corporation) is to
avoid the application of section 304 to CFC1, under
paragraph (b)(2) of this section, for purposes of de-
termining the amount of the $100x distribution con-
stituting a dividend (and source thereof) under sec-
tion 304(b)(2), CFC2 (acquiring corporation) shall be
treated as acquiring thestockofCFC1fromPfor
$100x . As a result, P receives a $100x distribution,
out of the earnings and profits of CFC1, to which sec-
tion 301(c)(1) applies.
(d)Effective/applicability date.This
section applies to acquisitions of stock oc-
curring on or after December 29, 2009.
See §1.304–4T, as contained in 26 CFR
part 1 revised as of April 1, 2008, for ac-
quisitions of stock occurring on or after
June 14, 1988, and before December 29,
2009.
(e)Expiration date. This section ex-
pires on or before December 28, 2012.
Linda E. Stiff,
Deputy Commissioner
for Services and Enforcement.
Approved December 18, 2009.
Michael F. Mundaca,
Acting Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on December 29,
2009, 8:45 a.m., and published in the issue of the Federal
Register for December 30, 2009, 74 F.R. 69021)
Section 382.—Limitation
on Net Operating Loss
Carryforwards and Certain
Built-In Losses Following
Ownership Change
The adjusted applicable federal long-term rate is
set forth for the month of February 2010. See Rev.
Rul. 2010-6, page 387.
Section 412.—Minimum
Funding Standards
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2010. See Rev. Rul. 2010-6, page 387.
Section 467.—Certain
Payments for the Use of
Property or Services
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2010. See Rev. Rul. 2010-6, page 387.
Section 468.—Special
Rules for Mining and Solid
Waste Reclamation and
Closing Costs
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2010. See Rev. Rul. 2010-6, page 387.
Section 482.—Allocation
of Income and Deductions
Among Taxpayers
Federal short-term, mid-term, and long-term rates
are set forth for the month of February 2010. See Rev.
Rul. 2010-6, page 387.
Section 483.—Interest on
Certain Deferred Payments
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2010. See Rev. Rul. 2010-6, page 387.
Section 642.—Special
Rules for Credits and
Deductions
Federal short-term, mid-term, and long-term rates
are set forth for the month of February 2010. See Rev.
Rul. 2010-6, page 387.
Section 807.—Rules for
Certain Reserves
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2010. See Rev. Rul. 2010-6, page 387.
Section 846.—Discounted
Unpaid Losses Defined
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2010. See Rev. Rul. 2010-6, page 387.
Section 1274.—Determi-
nation of Issue Price in the
Case of Certain Debt Instru-
ments Issued for Property
(Also Sections 42, 280G, 382, 412, 467, 468, 482,
483, 642, 807, 846, 1288, 7520, 7872.)
Federal rates; adjusted federal rates;
adjusted federal long-term rate and the
long-term exempt rate. For purposes of
sections 382, 642, 1274, 1288, and other
2010–6 I.R.B.387February 8, 2010

sections of the Code, tables set forth the
rates for February 2010.
Rev. Rul. 2010–6
This revenue ruling provides various
prescribed rates for federal income tax
purposes for February 2010 (the current
month). Table 1 contains the short-term,
mid-term, and long-term applicable fed-
eral rates (AFR) for the current month
for purposes of section 1274(d) of the
Internal Revenue Code. Table 2 contains
the short-term, mid-term, and long-term
adjusted applicable federal rates (adjusted
AFR) for the current month for purposes
of section 1288(b). Table 3 sets forth the
adjusted federal long-term rate and the
long-term tax-exempt rate described in
section 382(f). Table 4 contains the ap-
propriate percentages for determining the
low-income housing credit described in
section 42(b)(1) for buildings placed in
service during the current month. How-
ever, under section 42(b)(2), the applicable
percentage for non-federally subsidized
new buildings placed in service after July
30, 2008, and before December 31, 2013,
shall not be less than 9%. Finally, Table
5 contains the federal rate for determining
the present value of an annuity, an interest
for life or for a term of years, or a remain-
der or a reversionary interest for purposes
of section 7520.
REV. RUL. 2010–6 TABLE 1
Applicable Federal Rates (AFR) for February 2010
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
AFR.72%.72%.72%.72%
110% AFR.79%.79%.79%.79%
120% AFR.86%.86%.86%.86%
130% AFR.94%.94%.94%.94%
Mid-term
AFR2.82%2.80%2.79%2.78%
110% AFR3.10%3.08%3.07%3.06%
120% AFR3.39%3.36%
3.35%
3.34%
130% AFR3.67%3.64%3.62%3.61%
150% AFR
4.24%4.20%4.18%4.16%
175% AFR
4.96%4.90%4.87%
4.85%
Long-term
AFR4.44%4.39%4.37%
4.35%
110% AFR4.89%4.83%4.80%4.78%
120% AFR
5.34%5.27%5.24%5.21%
130% AFR
5.79%5.71%5.67%5.64%
REV. RUL. 2010–6 TABLE 2
Adjusted AFR for February 2010
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-
term adjusted
AFR
.54%.54%.54%.54%
Mid-term adjusted AFR1.84%1.83%1.83%1.82%
Long-term adjusted
AFR
4.02%3.98%3.96%
3.95%
February 8, 20103882010–6 I.R.B.

REV. RUL. 2010–6 TABLE 3
Rates Under Section 382 for February 2010
Adjusted federal long-term rate for the current month4.02%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted
federal long-term rates for the current month and the prior two months.)4.14%
REV. RUL. 2010–6 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for February 2010
Note: Under Section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July
30, 2008, and before December 31, 2013, shall not be less than 9%.
Appropriate percentage for the 70% present value low-income housing credit7.84%
Appropriate percentage for the 30% present value low-income housing credit3.36%
REV. RUL. 2010–6 TABLE 5
Rate Under Sec
tion 7520 for February 2010
Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,
or a remainder or reversionary interest3.4%
Section 1288.
—Treatment
of Original I
ssue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2010. See Rev. Rul. 2010-6, page 387.
Section 7520.—Valuation
Tables
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2010. See Rev. Rul. 2010-6, page 387.
Section 7872.—Treatment
of Loans With Below-Market
Interest Rates
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of February 2010. See Rev. Rul. 2010-6, page 387.
2010–6 I.R.B.389February 8, 2010

Part III. Administrative, Procedural, and Miscellaneous
Miscellaneous HEART Act
Changes
Notice 2010–15
I. Purpose and background
This notice provides guidance in the
form of questions and answers with respect
to certain provisions of the Heroes Earn-
ings Assistance and Relief Tax Act of 2008
(“HEART Act” or “Act”), Pub. L. No.
110–245. This notice also requests com-
ments regarding any additional issues re-
lating to the sections of the HEART Act
that are addressed in this notice.
The sections of the HEART Act ad-
dressedinthisnoticearesection104(re-
lating to survivor and disability payments
with respect to qualified military service),
section 105 (relating to treatment of dif-
ferential military pay as wages), section
107 (relating to distributions from retire-
ment plans to individuals called to active
duty), section 109 (relating to contribu-
tions of military death gratuities to Roth
IRAs and Coverdell education savings ac-
counts), and section 111(relatingtoan
employer credit for differential wage pay-
ments to employees who are active duty
members of the uniformed services).
II. Section 104 of the HEART Act
Background
Under the Uniformed Services Employ-
ment and Reemployment Rights Act of
1994 (“USERRA”), Pub. L. No. 103–353,
an employee who leaves a civilian job for
qualified military service generally is en-
titled to be reemployed by the pre-service
civilian employer if the individual returns
to employment within a specified period
and meets the other eligibility criteria un-
der USERRA. USERRA also provides that
an individual, upon reemployment, is enti-
tled to receive certain pension, profit-shar-
ing, and similar benefits that would have
been received but for the employee’s ab-
sence during military service.
Section 414(u) of the Internal Revenue
Code (“Code”) provides rules regarding
the interaction of USERRA with the rules
governing tax-qualified retirement plans.
Section 414(u)(8) provides, in part, that
an employer maintaining a plan is treated
as meeting the requirements of USERRA
only if: an employee reemployed under
USERRA is treated as not having incurred
a break in service because of the period of
military service, the employee’s military
service is treated as service with the em-
ployer for vesting and benefit accrual pur-
poses, the employee is permitted to make
additional elective deferrals and employee
contributions in an amount not exceeding
the maximum amount the employee would
have been permitted or required to con-
tribute during the period of military ser-
vice if the employee actually had been em-
ployed by the employer during that period,
and the employee is entitled to any accrued
benefits that are contingent on employee
contributions or elective deferrals to the
extent the employee pays the contributions
or elective deferrals to the plan.
Section 104(a)
Section 104(a) of the HEART Act
adds § 401(a)(37) to the Code. Under
§ 401(a)(37), qualified retirement plans
must provide that, in the case of a partici-
pant who dies while performing qualified
military service, the survivors of the par-
ticipant are entitled to any additional ben-
efits (other than benefit accruals relating
to the period of qualified military service)
that would have been provided under the
plan had the participant resumed employ-
ment and then terminated employment on
account of death. Under section 104(c) of
the Act, this new tax qualification require-
ment also applies to tax-deferred annuities
under § 403(b) of the Code and to gov-
ernmental eligible deferred compensation
plans under § 457(b).
Section 104(d)(1) of the Act states that
the amendments made by section 104 of
the Act apply with respect to deaths and
disabilities occurring on or after January 1,
2007.
Q–1. What types of additional ben-
efits provided by a plan are subject to
§ 401(a)(37) of the Code?
A–1. Section 401(a)(37) requires that
the survivors of a participant who dies
while performing qualified military ser-
vice be entitled to any additional benefits
(other than benefit accruals relating to the
period of qualified military service) that
would be provided under the plan if the
participant had resumed employment and
then terminated employment on account
of death. The types of benefits subject to
§ 401(a)(37) include accelerated vesting,
ancillary life insurance benefits, and other
survivor’s benefits provided under a plan
that are contingent on a participant’s termi-
nation of employment on account of death.
Q–2. If the amount of death bene-
fits provided under a plan is based on the
amount of the deceased participant’s ac-
crued benefit, does §401(a)(37) require
that the death benefit be determined as if
the participant had received benefit accru-
als for the period of qualified military ser-
vice?
A–2. No. Section 401(a)(37) specif-
ically excepts benefit accruals for the
period of qualified military service from
the additional benefits to which survivors
must be entitled in the case of a partic-
ipant who dies while performing such
service. Accordingly, § 401(a)(37) does
not require that benefit accruals (whether
benefit accruals under a defined benefit
plan or contributions under a defined con-
tribution plan) be imputed for the period of
qualified military service for purposes of
determining death benefits that are based
on a deceased participant’s accrued bene-
fit.
Q–3. Does § 401(a)(37) require that
service credit for vesting purposes be pro-
vided for the period of a deceased partic-
ipant’s qualified military service for pur-
poses of determining death benefits under
the plan?
A–3. Yes. Section 401(a)(37) requires
that the survivors of a participant be enti-
tled to any additional benefits (other than
benefit accruals relating to the period of
qualified military service) provided un-
der the plan had the participant resumed
employment and then terminated em-
ployment on account of death. Section
414(u)(8)(B) provides that each period
of an individual’s qualified military ser-
vice is, upon reemployment, deemed to
constitute service with the employer for
vesting and accrual purposes. Although
§ 401(a)(37) provides an exception for
benefit accruals for the period of qualified
military service, there is no exception for
vesting service. Accordingly, even though
February 8, 20103902010–6 I.R.B.

§ 401(a)(37) does not require that bene-
fit accruals be provided for the deceased
participant’s period of qualified military
service, service credit for the period of the
deceased participant’s period of qualified
military service must be provided (due
to the interaction of §§ 401(a)(37) and
414(u)(8)(B)) for vesting purposes.
Q–4. Does § 401(a)(37) apply in the
case of a plan participant who dies while
performing military service, but who was
not entitled to reemployment rights with
respect to the employer maintaining the
plan?
A–4. No. Section 401(a)(37) pro-
vides that a qualified plan must provide
that, in the case of a participant who
dies while performing qualified military
service (as defined in § 414(u)), the par-
ticipant’s survivors are entitled to certain
death benefits. Section 414(u)(5) defines
qualified military service with respect to
an individual as any service in the uni-
formed services by an individual entitled
to reemployment rights under USERRA.
Therefore, if a participant would not be en-
titled to reemployment rights with respect
to an employer under USERRA if the
participant had applied for reemployment
rights immediately before his or her death,
§ 401(a)(37) does not apply in determining
the death benefits to which the partic-
ipant’s survivors are entitled under the
employer’s plan. For information regard-
ing reemployment rights under USERRA,
seehttp://www.dol.gov/vets/programs/
userra/main.htm.
Section 104(b)
Section 104(b) of the HEART Act adds
a new § 414(u)(9) to the Code. Under
§ 414(u)(9), an employer sponsoring a
retirement plan may, for benefit accrual
purposes, treat an individual who dies or
becomes disabled while performing qual-
ified military service as if the individual
had resumed employment in accordance
with the individual’s USERRA reem-
ployment rights onthe day preceding the
death or disability and then terminated
employment on the actual date of death
or disability. Section 414(u)(9) also pro-
vides that this provision applies only if
all individuals performing qualified mili-
tary service with respect to the employer
maintaining the plan who die or become
disabled as a result of performing qualified
military service prior to reemployment by
the employer are credited with service and
benefits on reasonably equivalent terms.
Section 414(u)(9)(C) provides that the
amount of employee contributions and
the amount of elective deferrals of an
individual treated as reemployed under
§ 414(u)(9) are determined on the basis of
the individual’s average actual employee
contributions or elective deferrals for the
lesser of: (1) the 12-month period of ser-
vice with the employer immediately prior
to qualified military service, or (2) the
actual length of continuous service with
the employer.
Section 104(d)(1) of the Act states that
the amendments made by section 104 of
the Act apply with respect to deaths and
disabilities occurring on or after January 1,
2007.
Q–5. May § 414(u)(9) of the Code be
applied to a plan as of any date on or after
January 1, 2007?
A–5. Yes. Under section 104(d) of the
HEART Act, § 414(u)(9) of the Code ap-
plies to deaths and disabilities occurring
on or after January 1, 2007. However, be-
cause the provisions of § 414(u)(9) are per-
missive rather than mandatory, they may
be applied beginning as of any date on or
after January 1, 2007. For nondiscrimi-
nation rules regarding the timing of plan
amendments, see § 1.401(a)(4)–5 of the In-
come Tax Regulations.
Q–6. If, for benefit accrual purposes,
a plan provides under § 414(u)(9)(A) for
treatment of an individual who dies while
performing qualified military service as if
the individual had resumed employment,
must the plan also provide vesting credit
for that service?
A–6.Yes.As described in
Q&A–3 above, under §§ 401(a)(37) and
414(u)(8)(B), vesting credit must be pro-
vided for the period of the deceased
individual’s period of qualified military
service. This vesting credit is taken into
account for purposes of determining a
participant’s vested percentage in accru-
als earned both during qualified military
service and during other periods.
Q–7. If, for benefit accrual purposes,
a plan provides under § 414(u)(9)(A) for
treatment of an individual who becomes
disabled while performing qualified mil-
itary service as if the individual had re-
sumed employment, must the plan also
provide vesting credit for that service?
A–7. No. Section 414(u)(9) applies
only for benefit accrual purposes and nei-
ther that section nor any other Code sec-
tion requires that a plan provide vesting
credit to a disabled individual under these
circumstances. However, § 414(u)(9) does
not prohibit plans from providing vest-
ing credit for a disabled individual’s qual-
ified military service to the extent per-
mitted under other applicable rules, in-
cluding § 1.401(a)(4)–11(d)(3), which pro-
vides nondiscrimination rules for crediting
imputed service,i.e., service other than ac-
tual service with the employer.
Under § 1.401(a)(4)–11(d)(3), there
must be a legitimate business reason for
crediting the imputed service (which is
deemed to exist in the case of credit for
military service), the plan provision cred-
iting the imputed service to any highly
compensated employee (HCE) must apply
on the same terms to all similarly-situ-
ated nonhighly compensated employees
(NHCEs), and the plan provision must
notbydesignorinoperationdiscrim-
inate significantly in favor of HCEs.
Pursuant to the authority granted by
§ 1.401(a)(4)–1(d), imputed service for a
period of qualified military service that is
credited for vesting purposes to an individ-
ual who became disabled while perform-
ing qualified military service will satisfy
these requirements if the plan provision
crediting the service to any HCE applies
on the same terms to all similarly-situated
NHCEs.
Q–8. How may a plan determine em-
ployer-provided contributions or benefits
for an individual treated as reemployed un-
der § 414(u)(9) when those contributions
or benefits are contingent on the individ-
ual’s employee contributions or elective
deferrals?
A–8. Section 414(u)(9) does not pro-
vide for actual employee contributions
or elective deferrals. Instead, under
§ 414(u)(9)(C), an individual who dies or
becomes disabled while performing qual-
ified military service is deemed to have
made employee contributions or elective
deferrals for the purpose of determining
benefits under § 414(u)(8)(C) that are
contingent on employee contributions or
elective deferrals. Under § 414(u)(9)(C),
for this purpose, the individual is deemed
to have made employee contributions or
elective deferrals in an amount equal to
the lesser of the actual average employee
2010–6 I.R.B.391February 8, 2010

contributions or elective deferrals made
by the individual under the plan during the
12-month period prior to military service
or, if service with the employer is less than
12 months, the average actual employee
contributions or elective deferrals for the
actual length of continuous service with
the employer.
However, in the case of a disabled in-
dividual who is covered by a plan that
permits disabled individuals to make em-
ployee contributions or elective deferrals
and who is treated as reemployed under
§ 414(u)(9), § 414(u)(9) does not prohibit
the plan from allowing the disabled indi-
vidual to make elective deferrals or em-
ployee contributions with respect to pe-
riods of qualified military service in the
amounts permitted under § 414(u)(8)(C)
without regard to § 414(u)(9). In that case,
§ 414(u)(9) also does not prohibit the plan
from determining the disabled individual’s
employer-sponsored contributions or ben-
efits based on the actual employee contri-
butions or elective deferrals made by the
disabled individual.
III. Section 105 of the HEART Act
In the case of employees who are called
to active duty, some employers have paid
some or all of the compensation that a ser-
vice member would have received from
the employer during the service member’s
period of active duty had the employee not
been called to active duty. Prior to the
enactment of the HEART Act, these pay-
ments, commonly referred to as “differ-
ential wage payments,” were not treated
as wages for Federal employment tax pur-
poses, pursuant to Rev. Rul. 69–136,
1969–1 C.B. 252.
Section 105(a) of the HEART Act
amends § 3401 of the Code to treat dif-
ferential wage payments as wages for
income tax withholding purposes. The
term “differential wage payment” is de-
finedin§3401(h)asanypaymentwhich
(1)ismadebyanemployertoanindi-
vidual with respect to any period during
which the individual is performing service
in the uniformed services while on active
duty for a period of more than 30 days,
and (2) represents all or a portion of the
wages the individual would have received
from the employer if the individual were
performing service for the employer. This
amendment applies to remuneration paid
after December 31, 2008. See Rev. Rul.
2009–11, 2009–18 I.R.B. 896, for guid-
ance relating to § 3401(h).
Section 105(b)(1)(A) of the Act adds
§ 414(u)(12)(A) to the Code, which
provides that, for purposes of applying
the Code to retirement plans subject to
§ 414(u), (1) an individual receiving a
differential wage payment is treated as
an employee of the employer making the
payment, (2) the differential wage pay-
ment is treated as compensation, and (3)
the plan is not treated as failing to meet the
requirements of any provisions described
in § 414(u)(1)(C) by reason of any con-
tribution or benefit which is based on the
differential wage payment. The provisions
described in § 414(u)(1)(C) include var-
ious nondiscrimination requirements, in-
cluding requirements under §§ 401(a)(4),
401(k)(3), and 401(m).
Section 105(b)(1)(A) of the Act also
adds § 414(u)(12)(B) to the Code, under
which, notwithstanding the treatment of
an individual receiving differential wage
payments as an employee, an individual
is treated for purposes of distributions
(including distributions from a desig-
nated Roth account under § 402A) under
§§ 401(k)(2)(B)(i)(I), 403(b)(7)(A)(ii),
403(b)(11)(A), and 457(d)(1)(A)(ii) as
having been severed from employment
during any period the individual is per-
forming service in the uniformed ser-
vices described in § 3401(h). Section
414(u)(12)(B)(ii) provides that, if an in-
dividual elects to receive a distribution
under this provision, the plan must pro-
vide that the individual may not make an
elective deferral or employee contribution
during the 6-month period beginning on
the date of the distribution. For purposes
of the 6-month restriction, the definition
of “elective deferral”under § 414(u)(2)(C)
applies, which includes any deferral of
compensation under an eligible deferred
compensation plan under § 457(b).
Section 105(b)(2) of the Act amends
§ 219(f)(1) of the Code to provide that, for
purposes of determining the limitation on
contributions to anIRA, the term “com-
pensation” includes differential wage pay-
ments.
The amendments made by section
105(b) of the Act apply to years beginning
after December 31, 2008.
Q–9. Must differential wage payments
be treated as compensation for purposes
of determining contributions and benefits
under a plan?
A–9. No. Differential wage payments
are not required to be treated as compensa-
tion for purposes of determining contribu-
tions and benefits under a plan. However,
such payments are treated as compensation
for purposes of applying the Code. Ac-
cordingly, these payments must be treated
as compensation under § 415(c)(3) and
§ 1.415–2(d).
Q–10. Will a plan’s definition of com-
pensation fail to satisfy § 414(s) if differen-
tial wage payments are excluded from the
plan’s definition of compensation for pur-
poses of determining benefits and contri-
butions under the plan?
A–10. No. A plan’s definition of com-
pensation will not fail to satisfy § 414(s)
merely because differential wage pay-
ments are excluded from the plan’s def-
inition of compensation for purposes of
determining benefits and contributions.
Q–11. Is the rule in § 414(u)(12)(B)
which treats an individual as severed from
employment while performing service in
the uniformed services limited to individu-
als receiving differential wage payments?
A–11. No. Section 414(u)(12)(B) ap-
plies to all individuals on active duty for
aperiodofmorethan30days,regard-
less of whether they are receiving differ-
ential wage payments. Thus, for purposes
of applying rules that permit distributions
upon severance from employment under
§§ 401(k), 403(b), and 457(d), an individ-
ual is treated as having been severed from
employment during any period the individ-
ual is performing service in the uniformed
services while on active duty for a period
of more than 30 days.
Q–12. Is a plan required to provide
for distributions to an individual who is
treated as severed from employment while
performing service in the uniformed ser-
vices pursuant to § 414(u)(12)(B)?
A–12. No. Just as a plan may, but is not
required to, provide for distributions un-
der § 401(k), 403(b), or 457(d) upon ac-
tual severance from employment, a plan
may, but is not required to, provide for dis-
tributions upon a deemed severance from
employment under § 414(u)(12)(B). Thus,
for example, a plan that provides for distri-
butions upon severance from employment
may, but is not required to, also provide
for distributions upon a deemed severance
from employment under § 414(u)(12)(B).
February 8, 20103922010–6 I.R.B.

If a plan provides for a distribution upon
a deemed severance from employment un-
der § 414(u)(12)(B), the plan must also
provide that an individual receiving the
distribution may not make an elective de-
ferral or employee contribution during the
6-month period beginning on the date of
the distribution.
Q–13. How does the deemed severance
rule of § 414(u)(12)(B) affect other rules
applicable to plan distributions?
A–13. Section 414(u)(12)(B) applies
only for purposes of the provisions of
§§ 401(k), 403(b), and 457(d) that permit
distributions on severance from employ-
ment. Thus, for example, in the event
an individual is treated as severed from
employment under § 401(k)(2)(B)(i)(I),
the individual may receive a distribu-
tion otherwise subject to the distribution
restrictions of § 401(k)(2)(B). On the
other hand, merely because an individual
is treated as severed from employment
under § 414(u)(12)(B) does not cause
such individual to be treated as severed
from employment under sections of the
Code other than §§ 401(k)(2)(B)(i)(I),
403(b)(7)(A)(ii), 403(b)(11)(A), and
457(d)(1)(A)(ii).
Q–14. Does § 414(u)(12)(B) apply to
individuals who have an actual severance
from employment or who otherwise are el-
igible to take a distribution of plan bene-
fits?
A–14. No. Section 414(u)(12)(B)
does not affect the status of an individ-
ual who is on active duty for a period
of more than 30 days and who has, in
fact, had a severance from employment.
Thus, for example, if such an individual
receives a distribution from a retirement
plan under § 401(k)(2)(B)(i)(I) and re-
turns to employment within six months,
§ 414(u)(12)(B)(ii) would not preclude the
individual from making elective deferrals
(as defined under § 414(u)(2)(C)) or em-
ployee contributions to the plan before the
end of the 6-month period.
Section 414(u)(12)(B) also does not
affect a plan’s ability to make other in-ser-
vice distributions tothe extent permitted
under other applicable rules and plan
terms. Thus, for example, a § 401(k)
plan may distribute a participant’s elec-
tive deferrals when the participant attains
age 59
1
/2, or under other circumstances
listed in § 401(k)(2)(B), and the distribu-
tion would not be subject to the 6-month
restriction on elective deferrals under
§ 414(u)(12)(B) (although a 6-month re-
striction may apply under § 401(k) to a
distribution on account of a financial hard-
ship under § 401(k)(2)(B)(i)(IV)).
Q–15. If an individual is eligible
under a plan to receive a distribution un-
der § 401(k)(2)(B)(i)(I) as a result of a
deemed severance from employment un-
der § 414(u)(12)(B), and is also eligible
under the plan to receive a qualified re-
servist distribution within the meaning
of § 72(t)(2)(G)(iii), as permitted un-
der § 401(k)(2)(B)(i)(V), what treatment
applies to a distribution that could be
made under § 401(k)(2)(B)(i)(I) or under
§ 401(k)(2)(B)(i)(V)?
A–15. If an individual receives a
distribution that meets the definition of
a qualified reservist distribution under
§ 72(t)(2)(G)(iii), the distribution will
be treated as a qualified reservist dis-
tribution, even if the distribution would
also have been permitted as a result of
a deemed severance of employment un-
der § 414(u)(12)(B). For example, if a
plan provides for qualified reservist dis-
tributions and for distributions on deemed
severance under § 414(u)(12)(B), a dis-
tribution to an individual that could be
either type of distribution will be treated
as a qualified reservist distribution. In that
case, the distribution would not be sub-
ject to the 6-month restriction on elective
deferrals or to the 10-percent additional
income tax of § 72(t). The rules applica-
ble to qualified reservist distributions are
discussedinSectionIV,below.
Q–16. Is a distribution made pur-
suant to § 414(u)(12)(B) an eligible
rollover distribution within the meaning
of § 402(c)(4)?
A–16. Yes. A distribution made pur-
suant to § 414(u)(12)(B) is an eligible
rollover distribution within the meaning
of § 402(c)(4), except to the extent one
of the exceptions listed under § 402(c)(4)
(other than the exception for hardship
distributions under § 401(k)(2)(B)(i)(IV))
applies. A distribution made pursuant to
§ 414(u)(12)(B) is not treated as a hardship
distribution ineligible for rollover. An
eligible rollover distribution that is paid
to an employee (rather than directly rolled
over) is subject to 20-percent mandatory
withholding under § 3405(c).
Q–17. May the contributions and bene-
fits provided as a result of differential wage
payments be included in a plan’s nondis-
crimination testing?
A–17. Yes. Under § 414(u)(12)(A),
a qualified plan is not treated as fail-
ing to meet the requirements of any
nondiscrimination provision described in
§ 414(u)(1)(C) by reason of any contri-
bution or benefit based on a differential
wage payment, as long as the differential
wage payment and the ability to make
contributions based on the differential
wage payment are provided on reasonably
equivalent terms. Accordingly, the contri-
butions and benefits provided under a plan
as a result of differential wage payments
need not be included in the plan’s nondis-
crimination testing. On the other hand,
§ 414(u)(1)(C) does not prevent such con-
tributions and benefits from being taken
into account, as long as they do not cause
the plan to fail the nondiscrimination re-
quirements. If such contributions and
benefits are included in the plan’s nondis-
crimination testing for any employee, they
must be taken into account for all employ-
ees.
IV.Section107oftheHEARTAct
Under current law, a taxpayer who re-
ceives a distribution from a qualified re-
tirement plan prior to age 59
1
/2, death, or
disability is generally subject to a 10-per-
cent additional income tax under § 72(t)
unless an exception applies. Pursuant to
amendments made by the Pension Pro-
tection Act of 2006 (PPA ’06), Pub. L.
No. 109–280, § 72(t)(2)(G) of the Code
provides that the 10-percent additional in-
come tax does not apply to a qualified re-
servist distribution.
A qualified reservist distribution is
defined under § 72(t)(2)(G)(iii) as a dis-
tribution from an IRA or a distribution
attributable to elective deferrals under a
§ 401(k) or 403(b) plan (or a plan de-
scribed in § 501(c)(18)) to a member of the
reserves who has been ordered or called
to active duty for a period exceeding 179
days or for an indefinite period. A qual-
ified reservist distribution can be made
without regard to otherwise applicable
restrictions under §§ 401(k) and 403(b) on
in-service distributions of amounts attrib-
utable to elective deferrals. In addition,
during the two-year period beginning on
the day after the end of the individual’s
active duty service, an individual who
2010–6 I.R.B.393February 8, 2010

receives a qualified reservist distribution
may make contributions to an IRA in an
amount up to the amount of the qualified
reservist distribution, which are not sub-
ject to the otherwise applicable limits on
IRA contributions and are not deductible.
As originally enacted in PPA ’06,
these special rules for qualified re-
servist distributions applied to individ-
uals ordered or called to active duty
after September 11, 2001, and before
December 31, 2007. Section 107 of
the HEART Act amends § 72(t)(2)(G)
of the Code to delete the reference to
December 31, 2007, so that the special
rules for qualified reservist distributions
no longer have an expiration date.
V. Remedial Amendment Period for
Sections 104, 105, and 107 of the
HEART Act
Section 401(b) provides for a reme-
dial amendment period during which
certain plan amendments may be made
retroactively effective to enable the plan to
comply with the requirements of § 401(a)
during that period. Section 1.401(b)–1(a)
provides that, under § 401(b), a plan
that does not satisfy the requirements of
§ 401(a) on any day solely as a result of
a disqualifying provision (as defined in
§ 1.401(b)–1(b)) is considered to have
satisfied those requirements on that date
if, on or before the last day of the reme-
dial amendment period with respect to the
disqualifying provision, all provisions of
the plan that are necessary to satisfy all
requirements of § 401(a) are in effect and
have been made effective for all purposes
for the whole of the remedial amendment
period. Section 1.401(b)–1(b)(1) provides
that the term “disqualifying provision”
includes a provision of a new plan, the
absence of a provision from a new plan, or
an amendment to an existing plan which
causes the plan to fail to satisfy the re-
quirements of the Code applicable to the
qualification of the plan as of the date the
plan or amendment is first made effective.
As provided in § 1.401(b)–1(d),
the remedial amendment period for a
disqualifying provision described in
§ 1.401(b)–1(b)(1) begins, in the case of
a provision of, or absence of a provision
from, a new plan, on the date the plan
is put into effect, and, in the case of an
amendment to an existing plan, on the
date the plan amendment is adopted or put
into effect (whichever is earlier). Gen-
erally, the remedial amendment period
for a disqualifying provision described
in § 1.401(b)–1(b)(1) ends with the due
date (including extensions) for filing the
income tax return for the employer’s tax
year that includes, in the case of a provi-
sion of, or absence of a provision from, a
new plan, the date the plan is put into ef-
fect, or, in the case of an amendment to an
existing plan, the date the plan amendment
is adopted or put into effect (whichever
is later). Section 1.401(b)–1(f) grants the
Commissioner the discretion to extend the
remedial amendment period.
Section 1.401(b)–1(b)(3) provides that
the Commissioner also may designate as
a disqualifying provision under § 401(b)
a plan provision that either (1) results
in the failure of the plan to satisfy the
qualification requirements of the Code
by reason of a change in those require-
ments, or (2) is integral to a qualification
requirement that has been changed. Under
§ 1.401(b)–1(d)(1)(iv), in the case of a plan
provision that is designated as a disquali-
fying provision under § 1.401(b)–1(b)(3)
and that results in the failure of the plan
to satisfy the changed qualification re-
quirements, the remedial amendment
period begins on the date on which the
change effected by the amendment to the
Code became effective with respect to
the plan. Under § 1.401(b)–1(d)(1)(v), in
the case of a plan provision that is desig-
nated as a disqualifying provision under
§ 1.401(b)–1(b)(3) and that is integral to
a qualification requirement that has been
changed, the remedial amendment period
generally begins on the first day on which
the plan was operated in accordance with
the changed qualification requirement.
Under § 1.401(b)–1(d)(2)(i), the remedial
amendment period for a plan provision
that is designated as a disqualifying pro-
vision under § 1.401(b)–1(b)(3) generally
ends on the date prescribed by law, includ-
ing extensions, for filing the income tax
return of the employer for the employer’s
taxable year that includes the beginning
of the remedial amendment period (un-
less the remedial amendment period is
extended by the Commissioner).
Section 104(d)(1) of the Act provides
that the statutory changes made by section
104 of the Act apply with respect to deaths
and disabilities occurring on or after Jan-
uary 1, 2007. Section 104(d)(2) of the Act
adds that a plan subject to these new provi-
sions is treated as being operated in accor-
dance with the terms of the plan if a plan
amendment is made to comply with the
requirements of § 401(a)(37) of the Code
(which was added by section 104(a) of the
Act) and is made on or before the last day
of the first plan year beginning on or af-
ter January 1, 2010 (January 1, 2012, for
governmental plans). By its terms, section
104(d)(2) of the Act does not apply to plan
amendments made pursuant to § 414(u)(9)
of the Code (which was added by section
104(b) of the Act).
Section 105(b)(2) of the Act provides
that the statutory changes made by section
105(b) of the Act apply to years beginning
after December 31, 2008. Section 105(c)
of the Act adds that a plan subject to these
new provisions is treated as being operated
in accordance with the terms of the plan
if a plan amendment is made pursuant to
section 105(b)(1) of the Act and is made
on or before the last day of the first plan
year beginning on or after January 1, 2010
(January 1, 2012, for governmental plans).
Section 107 of the Act amends
§72(t)(2)(G)oftheCodetodeletethe
reference to December 31, 2007, added as
part of PPA ’06. This amendment applies
to individuals ordered or called to active
duty on or after December 31, 2007.
Q–18. When must plans be amended to
satisfy the requirements of section 104(b)
of the Act?
A–18. Pursuant to the authority pro-
vided under § 1.401(b)–1(b)(3), plan pro-
visions that relate to the requirements of
§ 414(u)(9) of the Code (as added by sec-
tion 104(b) of the Act) are hereby desig-
nated as disqualifying provisions. More-
over, pursuant to the authority granted to
the Commissioner under § 1.401(b)–1(f)
with respect to disqualifying provisions,
plans need not be amended to include any
provisions relating to the permissive rules
of § 414(u)(9) of the Code until the last day
of the first plan year beginning on or af-
ter January 1, 2010 (January 1, 2012, for
governmental plans). Thus, the remedial
amendment period for section 104(b) of
theActisthesameperiodastheperiodfor
making plan amendments pursuant to sec-
tions 104(a) and 105(b) of the Act.
Q–19. When must plans be amended to
satisfy the requirements of section 107 of
the Act?
February 8, 20103942010–6 I.R.B.

A–19. Section 72(t)(2)(G)(iv) of the
Code, as amended by section 107 of the
Act, generally does not affect the quali-
fication of a retirement plan. However,
the amendment to § 72(t)(2)(G)(iv) of
theCodemadebysection107oftheAct
also applies under § 401(k)(2)(B)(i)(V) of
the Code to the definition of a “qualified
reservist distribution.” Pursuant to the au-
thority provided under § 1.401(b)–1(b)(3),
plan provisions that relate to the require-
ments of § 401(k)(2)(B)(i)(V), as extended
by section 107 of the Act to individuals
called to active duty after December 31,
2007, are hereby designated as disquali-
fying provisions. Pursuant to the author-
ity granted to the Commissioner under
§ 1.401(b)–1(f) with respect to disquali-
fying provisions, the remedial amendment
period with respect to these disqualifying
provisions is extended so that it ends no
earlier than the last day of the first plan
year beginning on or after January 1, 2010
(January 1, 2012, for governmental plans).
VI. Section 109 of the HEART Act
Section1477ofTitle10oftheUnited
States Code provides for the payment of a
military death gratuity to an eligible sur-
vivor of a service member. This gratu-
ity is excludable from income under § 134
of the Internal Revenue Code. Section
1967 of Title 38 of the United States Code
provides that certain members of the uni-
formed services are automatically insured
against death under the Servicemembers’
Group Life Insurance (SGLI) program. In
general, life insurance proceeds are also
excludable from income.
Section 408A of the Code provides
rules for the tax treatment of Roth IRAs.
Contributions to a Roth IRA are not de-
ductible, and “qualified distributions”
(generally distributions made after age
59
1
/2, death, or disability, and also made
after the 5-year period following an initial
contribution to any Roth IRA) from a Roth
IRA are excluded from income. A distri-
bution that is not a qualified distribution
is generally taxed under the rules of §§ 72
and 408A(d)(4), under which the portion
of the distribution that is not in excess of
the participant’s investment in the contract
(i.e., basis), taking into account all prior
distributions from the owner’s Roth IRAs,
is not included in income, and any portion
of the distribution that exceeds the recipi-
ent’s investment in the contract is included
in income. Subject to certain exceptions, a
10-percent additional income tax on early
distributions under § 72(t) will also apply.
Contributions to a Roth IRA are subject
to annual limits and a phase-out based on
income, except for certain rollover con-
tributions to the extent permitted from
another IRA or employer-sponsored plan.
For years before 2008, § 408A(e) pro-
vided that a Roth IRA could only accept
a rollover contribution of amounts dis-
tributed from another Roth IRA, from a
non-Roth IRA (subject to income limits
on conversion of a non-Roth IRA to a
Roth IRA), or from a designated Roth
account under an employer-sponsored
plan described in § 402A. These rollover
contributions to Roth IRAs are called
“qualified rollover contributions.” Section
824 of PPA ’06 amended the definition
of a qualified rollover contribution in
§408A(e)oftheCodetoalsopermit
rollovers to Roth IRAs from various types
of employer-sponsored plans, even if the
rollover is not from a designated Roth
account (subject to the income limits on
conversion of a non-Roth IRA to a Roth
IRA), effective for distributions made af-
ter December 31, 2007.
Section 530 provides rules for the tax
treatment of a Coverdell education sav-
ings account (“Coverdell ESA”). Contri-
butions to a Coverdell ESA are not de-
ductible and distributions from a Coverdell
ESA are generally excluded from income
up to the amount of the beneficiary’s qual-
ified education expenses, subject to coor-
dination with other tax benefits for educa-
tion expenses. Distributions that are not
excluded from income are generally taxed
under the rules of § 72, under which a por-
tion of the distribution is treated as a non-
taxable recovery of the recipient’s invest-
ment in the contract (i.e., basis) and the re-
mainder is included in income. Subject to
certain exceptions, a 10-percent additional
income tax on distributions not used for
qualified expenses will also apply. Contri-
butions to a Coverdell ESA are subject to
an annual limit and a phase-out based on
income. Special rules apply in the case of
rollover contributions.
Under section 109 of the HEART Act,
§ 408A(e) of the Code, as in effect both
before and after the amendments made by
PPA ’06, is amended to include as a quali-
fied rollover contribution the contribution
to a Roth IRA of a military death gratu-
ity or SGLI payment if the contribution is
made before the end of the 1-year period
beginning on the date on which the IRA
beneficiary receives the military death gra-
tuity or SGLI payment. Thus, the annual
limits on Roth IRA contributions and the
phase-out based on income do not apply
to such a contribution. Section 530 of
the Code is similarly amended to treat the
contribution of a military death gratuity
or SGLI payment to a Coverdell ESA as
a rollover contribution. The annual limit
on Coverdell ESA contributions and the
phase-out of the annual limit based on in-
come do not apply to such a contribution.
The amount treated as a qualified
rollover contribution to a Roth IRA cannot
exceed the total amount of the military
death gratuity and SGLI payments re-
ceived, reduced by any portion of such
amount contributed to a Coverdell ESA or
another Roth IRA. Similarly, the amount
treated as a qualified rollover contribution
to a Coverdell ESA cannot exceed the total
amount of the military death gratuity and
SGLI payments received, reduced by any
portion of such amount contributed to a
Roth IRA or another Coverdell ESA. For
purposes of applying § 72 to a distribu-
tion from a Roth IRA or Coverdell ESA,
the amount treated as a qualified rollover
contribution (in the case of a Roth IRA) or
as a rollover contribution (in the case of
a Coverdell ESA) is treated as investment
in the contract.
The amendments made by section 109
of the Act generally apply with respect to
deaths from injuries occurring on or after
June 17, 2008. In addition, section 109 of
the Act permits a contribution to a Roth
IRA or a Coverdell ESA of a military death
gratuity or an SGLI payment received with
respect to a death from injuries occurring
before June 17, 2008 (and on or after Oc-
tober 7, 2001), if the contribution is made
no later than June 17, 2009.
VII. Section 111 of the HEART Act
Section 111 of the HEART Act adds
§ 45P to the Code. Section 45P pro-
vides a credit to eligible small business
employers that make eligible differential
wage payments to qualified employees
whoareonactivedutyintheuniformed
services for more than 30 days. An eli-
gible small business employer may take
2010–6 I.R.B.395February 8, 2010

a credit against its income tax liability in
an amount equal to 20 percent of the sum
of the eligible differential wage payments
made to qualified employees during the
taxable year. The definition of eligible
differential wage payments for purposes
of the § 45P credit is the same definition
enacted in new § 3401(h) discussed in
Section III, above. The amount of eligible
differential wage payments that may be
taken into account for the taxable year is
limited to $20,000 per qualified employee,
resulting in a maximum credit for a taxable
year of $4,000 per qualified employee.
An employee is a qualified employee if he
or she has been an employee of the tax-
payer for the 91-day period immediately
preceding the period for which differential
wage payments are made. An employer
is an eligible small business employer
if it employed an average of fewer than
50 employees on business days during
the taxable year and provides differential
wage payments under a written plan to
every qualified employee. For purposes of
determining an employer’s eligibility, the
rules of § 414(b), (c), (m) and (o) apply,
under which the members of a controlled
group and other related entities are treated
asasingleemployer.
Section 45P(c) provides a rule to coor-
dinate the § 45P credit with other credits
under Chapter 1 of the Code (§§ 1 through
1400T) that are calculated taking into ac-
count employee compensation. Under this
rule, the amount of any such other credit
determined with respect to compensation
of an employee must be reduced by the
amount of the § 45P credit determined with
respect to that employee.
Q–20. In what circumstances does the
credit under § 45P reduce the amount of
another credit?
A–20. The amount of another credit
under Chapter 1 of the Code determined
with respect to compensation of an em-
ployee must be reduced by the amount of
the § 45P credit determined with respect to
that employee if: (1) compensation paid in
the current taxable year is an expense used
directly in determining the amount of the
other credit, (2) military differential wage
payments are a type of compensation that
can be taken into account in determining
the amount of the other credit, and (3) the
military differential wage payments taken
into account in determining the employer’s
§ 45P credit are also taken into account in
determining the other credit.
Comments Requested
The Service is considering issuing ad-
ditional guidance regarding the above
sections of the HEART Act, and comments
are requested regarding such possible
guidance. Written comments should be
submitted by April 9, 2010. Send sub-
missions to CC:PA:LPD:DRU (Notice
2010–15), Room 5203, Internal Rev-
enue Service, POB 7604 Ben Franklin
Station, Washington, DC 20044. Com-
ments may be hand delivered between
the hours of 8 a.m. and 4 p.m., Mon-
day through Friday, to CC:PA:LPD:DRU
(Notice 2010–15), Courier’s Desk, Inter-
nal Revenue Service, 1111 Constitution
Avenue, NW, Washington, DC, or sent
electronically via the Federal eRulemak-
ing portal athttp://www.regulations.gov
(Notice 2010–15). All comments will be
available for public inspection.
DRAFTING INFORMATION
The principal authors of this notice are
Robert M. Walsh of the Employee Plans,
Tax Exempt and Government Entities
Division and Joseph Perera of the Of-
fice of Division Counsel/Associate Chief
Counsel (Tax Exempt and Government
Entities). For further information regard-
ing Sections I through VI of this notice,
please call the Employee Plans taxpayer
assistance number between 8:30 a.m.
and 4:30 p.m. Eastern time, Monday
through Friday at (877) 829–5500 (a
toll-free number) or email Mr. Walsh at
RetirementPlanQuestions@irs.gov.For
further information regarding Section VII
of this notice, please contact Mr. Perera at
202–622–6040 (not a toll-free number).
Haiti Earthquake Occurring
in January 2010 Designated
as a Qualified Disaster Under
§ 139 of the Internal Revenue
Code
Notice 2010–16
This notice designates the Haiti earth-
quake occurring in January 2010 as a qual-
ified disaster for purposes of § 139 of the
Internal Revenue Code.
EARTHQUAKE DISASTER
On January 12, 2010, a magnitude 7.0
earthquake with numerous significant af-
tershocks affected southern Haiti (“Haiti
earthquake”). The earthquake and result-
ing aftershocks affected approximately 3
million people, and caused extensive dam-
age to dwellings, transportation networks,
and infrastructure in Port-au-Prince and
the surrounding areas of Haiti.USAID
Haiti — Earthquake Fact Sheet No. 1(Jan-
uary 13, 2010) andNo. 7(January 19,
2010).
This notice enables employer-spon-
sored private foundations to assist certain
victims in areas affected by the Haiti earth-
quake and enables recipients to exclude
qualified disaster relief payments from
gross income.
QUALIFIED DISASTER RELIEF
PAYMENTS EXCLUDED FROM
RECIPIENT’S GROSS INCOME
Section 139(a) provides that gross in-
come shall not include any amount re-
ceived by an individual as a qualified dis-
aster relief payment.
Section 139(b) provides that a quali-
fied disaster relief payment includes any
amount paid to or for the benefit of an in-
dividual—
(1) to reimburse or pay reasonable
and necessary personal, family, living,
or funeral expenses (not otherwise com-
pensated for by insurance or otherwise)
incurred as a result of a qualified disaster,
or
(2) to reimburse or pay reasonable and
necessary expenses (not otherwise com-
pensated for by insurance or otherwise) in-
curred for the repair or rehabilitation of
a personal residence or repair or replace-
ment of its contents to the extent that the
need for such repair, rehabilitation, or re-
placement is attributable to a qualified dis-
aster.
Under § 139(c)(3) the term “qualified
disaster” includes a disaster resulting from
an event that is determined by the Secre-
tary to be of a catastrophic nature.
February 8, 20103962010–6 I.R.B.

DESIGNATION AS QUALIFIED
DISASTER
The Commissioner of Internal Rev-
enue, pursuant to delegation by the Sec-
retary, has determined that the Haiti
earthquake occurring in January 2010 is
an event of a catastrophic nature under
§ 139(c)(3). Therefore, the Haiti earth-
quake is designated as a qualified disaster
under § 139.
SECTION 501(c)(3) ORGANIZATIONS
Employer-sponsored private founda-
tions may choose to provide disaster relief
to employee victims of the Haiti earth-
quake. Like all organizations described
in § 501(c)(3), private foundations should
exercise due diligence when providing
disaster relief as set forth in Publication
3833,Disaster Relief: Providing Assis-
tance Through Charitable Organizations.
DRAFTING INFORMATION
The principal author of this notice is
Sheldon Iskow of the Office of Associate
Chief Counsel (Income Tax & Account-
ing). For further information regarding
this notice, contact Mr. Iskow at (202)
622–4920 (not a toll-free call).
2010–6 I.R.B.397February 8, 2010

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking
Section 3504 A
gent
Employment Ta
x Liability
REG–137036–
08
AGENCY: Inte
rnal Revenue Service
(IRS), Treas
ury.
ACTION: Noti
ce of proposed rulemaking.
SUMMARY: Thi
s document contains pro-
posed regul
ations relating to employment
tax liabili
ty of agents authorized by the
Secretary u
nder section 3504 of the Inter-
nal Revenue
Code (Code) to perform acts
required of
employers with respect to taxes
under the F
ederal Unemployment Tax Act
on wages pa
id for home care services, as
defined in
these regulations. These pro-
posed regu
lations affect employers who
arehomeca
re service recipients, as de-
finedint
hese regulations, and their desig-
nated age
nts. These regulations also pro-
pose amen
dments to modify the existing
regulati
ons under section 3504 to be con-
sistent
with the organizational structure of
the Inte
rnal Revenue Service (IRS), and to
update t
he citation to the Internal Revenue
Code of 1
986.
DATES: W
ritten or electronic comments
must be r
eceived by April 13, 2010.
ADDRES
SES: Send submissions to:
CC:PA:
LPD:PR (REG–137036–08), room
5203, I
nternal Revenue Service, POB
7604, B
en Franklin Station, Washington
DC, 200
44. Submissions may be hand
deliv
ered Monday through Friday, be-
tween
the hours of 8 a.m. and 4 p.m.
to CC:
PA:LPD:PR (REG–137036–08),
Couri
er’s Desk, Internal Revenue Ser-
vice,
1111 Constitution Avenue, NW,
Washi
ngton, DC. Additionally, taxpay-
ers m
ay submit comments electronically
via t
he Federal eRulemaking Portal at
http
://www.regulations.gov.(Indicate IRS
and R
EG–137036–08.)
FOR F
URTHER INFORMATION
CONT
ACT: Concerning the proposed reg-
ula
tions, contact Selvan Boominathan at
(202) 622–004
7; concerning the submis-
sion of commen
ts or requests for a hearing,
contact Oluwa
funmilayo (Funmi) Taylor,
at (202) 622–7
180 (not toll-free numbers).
SUPPLEMENTAR
Y INFORMATION:
Background
Federal, stat
e, and local government
programs see
k to help elderly or disabled
individuals
maintain their independence
by funding ho
me health care and other
personal ser
vices. See, for example,
Deficit Red
uction Act of 2005, Public
Law No. 109–
171, section 6071, 120
Stat. 4, 102
–110 (2006) (authorizing the
Secretary o
f Health and Human Services
to, among ot
her things, award grants
to states t
o “[i]ncrease the use of home
and commun
ity-based, rather than insti-
tutional,
long-term care services.”) The
governmen
t agencies that administer the
programs s
eek to assist the service recipi-
ents with
employment tax compliance by
helping t
he service recipients to designate
agents to
report, file, and pay employ-
ment taxe
s on their behalf. The IRS and
the Trea
sury Department are proposing
changes
to the regulations under section
3504, th
e section under which a third party
can be au
thorized to act as an agent for an
employe
r, to permit designated agents to
provid
e comprehensive assistance to these
servic
e recipients who are employers.
1. Empl
oyment Taxes In General
Employ
ers are generally required to
withho
ld income tax and Federal Insur-
ance Co
ntributions Act (FICA) taxes from
their e
mployees’ wages under sections
3402(
a) and 3102(a), respectively, and are
separ
ately liable for the employer’s share
of FIC
A taxes and Federal Unemployment
Tax Ac
t (FUTA) taxes under sections 3111
and 33
01, respectively (collectively re-
ferre
d to herein as “employment taxes”).
Sect
ions 3102(b), 3111, 3301, and 3403
prov
ide that the employer is the person
liab
le for the withholding and payment of
empl
oyment taxes; additionally, the em-
ploy
er is required to make tax deposits, file
emp
loyment tax returns, and file and fur-
nis
hFormsW–2,Wage and Tax Statement,
to e
mployees (collectively referred to
herein as “emp
loyment tax obligations”).
Anemployeris
generally defined as the
person for who
m an individual performs
services as an
employee. See Sections
3121(d), 3306
(a), and 3401(d).
FUTA tax is imp
osed under section
3301 on each em
ployer in an amount
equal to a per
centage of wages paid by
the employer
with respect to employment.
FUTA tax is im
posed on the employer in
an amount equ
al to 6.2 percent of wages.
Under secti
on 3306(b), wages of an em-
ployee subj
ect to the FUTA tax are limited
to $7,000 pe
r calendar year. Section 3302
provides fo
r a credit against FUTA tax
in the amou
nt of contributions paid by
the employ
er into an unemployment fund
maintaine
d during the taxable year under
the unempl
oyment law of a state. The
credit is l
imitedtoanamountequalto90
percent o
f the FUTA tax.
2. Domest
ic Service Employment
The emplo
yment tax obligations of an
employer
are modified with respect to
domestic
services provided in a private
home of th
e employer. Employers are
not requ
ired to withhold income taxes on
wages pa
id for domestic services, but may
enter in
to a voluntary withholding agree-
ment to w
ithhold income taxes from one
or more d
omestic employees. See sections
3401(a
)(3) and 3402(p). An employer is
not lia
ble for FICA taxes with respect to
cash wa
ges for domestic services as long
as the c
ash wages are less than an appli-
cable d
ollar threshold amount, which is
adjus
ted annually. Sections 3121(a)(7)(B)
and 31
21(x). When the cash wages equal
or exc
eed the threshold amount, all of
the ca
sh wages (including amounts below
the th
reshold) paid to that employee by
the e
mployer are subject to FICA taxes.
For e
xample, the FICA wage threshold
for d
omestic services for 2009 is $1,700.
This
threshold applies separately to each
empl
oyer with respect to each employee.
An em
ployer is liable for FUTA taxes
wit
h regard to domestic services if the
emp
loyer paid aggregate wages of $1,000
or m
ore (for all domestic employees) in
any
calendar quarter in the current or prior
yea
r. Section 3306(c)(2).
February 8, 20103982010–6 I.R.B.

3. Agency Relationship Under Code
Section 3504
Section 3504 of the Code authorizes the
Secretary of the Treasury to promulgate
regulations to authorize an agent to per-
form certain specified acts required of em-
ployers. Under section 3504, all provi-
sions of law (including penalties) appli-
cable with respect to employers are ap-
plicable to the agent and remain applica-
ble to the employer. Accordingly, both
the agent and employer are liable for the
employment taxes and penalties associated
with the employer’s employment tax obli-
gations undertaken by the agent. Section
31.3504–1 of the Employment Tax Regu-
lations provides that the IRS may authorize
an agent to undertake the employment tax
obligations of an employer with respect to
income tax withholding and FICA taxes.
The agent is required to file only one re-
turn for each tax return period using the
agent’s own employer identification num-
ber (EIN) regardless of the number of em-
ployers for whom the agent acts. The cur-
rent regulations do not authorize an agent
to undertake the employment tax obliga-
tions of an employer with respect to the
FUTA tax. Thus, an authorized agent can
act on behalf of the employer for income
tax withholding and FICA tax purposes,
but the employer must continue to meet its
employment tax obligations with respect
to FUTA tax.
4. Home Care Service Recipients
Federal, state, and local governments
fund programs to provide elderly or dis-
abled individuals with services to as-
sist them with health care or other per-
sonal needs in their homes or commu-
nities. Following an evolution in policy
that seeks to empower the individuals
receiving services to have autonomy,
these programs generally give the ser-
vice recipients discretion in selecting
the service providers and directing their
activities. See Deficit Reduction Act
of 2005 section 6071(d)(2)(C)(ii), 120
Stat. at 108 (providing that the Sec-
retary of Health and Human Services
shall give preference when awarding
grants to state applications proposing
to provide eligible individuals with the
opportunity to receive home and com-
munity-based long-term care services as
self-directed services); also see “Roadmap
to Medicaid Reform,” Centers for Medi-
care and Medicaid Services, available
athttp://www.cms.hhs.gov/smdl/down-
loads/Rvltcneeds.pdf. The programs au-
thorize the use of certain intermediaries
to serve as agents to disburse payments
to service providers on the service recip-
ient’s behalf. The federal, state, or local
government agencies that administer these
programs screen intermediaries before
they are entrusted with funds to pay for
the services. Intermediaries can be public
or private entities. Many are nonprofit
organizations. The IRS addressed ques-
tions with regard to certain intermediaries
working with state or local government
agencies in previous guidance. See No-
tice 2003–70, 2003–2 C.B. 916. See
§601.601(d)(2).
The service recipient is generally the
employer of the individuals providing the
services for employment tax purposes.
However the Service recognizes that there
are some government programs under
which parents, grandparents, or guardians
who are engaged in providing care for a
disabled child or grandchild receive fund-
ing that do not give rise to an employment
relationship between the service recipi-
ent and the care provider. Although the
services generally constitute domestic ser-
vices under section 3401(a)(3) such that
income tax withholding is not required,
FICA tax and FUTA tax must still be paid
subject to the applicable thresholds, and
some service recipients and their service
providers may agree to voluntarily with-
hold income tax under section 3402(p). In
recent years, many home care service re-
cipients have applied to designate the inter-
mediary that arranges to pay their service
providers as an agent under section 3504
so that the intermediary can withhold, re-
port, and pay income tax withholding and
FICA tax on the service recipient’s behalf.
Designating these intermediaries as agents
reduces the administrative burden on the
service recipient who may not otherwise
have an obligation to report, file, or pay
employment taxes. The intermediaries
have access to training in compliance with
employment tax requirements and have
the payroll information from the payments
they make to the service providers. An
intermediary that is designated as an agent
can efficiently handle reporting, filing,
and paying income tax withholding and
FICA on behalf of multiple service recipi-
ents on a single return.A service recipient
can complete the application to designate
the intermediary as agent at the time the
recipient enrolls with the intermediary.
Under the current regulations, a service
recipient can designate an intermediary as
agent to handle income tax withholding
and FICA but cannot designate an inter-
mediary as agent to pay FUTA tax and
file FUTA returns. As a result, separate
FUTA returns must be prepared for thou-
sands of individual service recipients re-
porting small amounts of wages and FUTA
tax.
Explanation of Provisions
These proposed regulations would
amend the current regulations to allow a
home care service recipient to designate
an agent under section 3504 to report, file,
and pay all employment taxes, including
FUTA. This change will allow an inter-
mediarytofileasingleFUTAreturnon
behalf of multiple home care service re-
cipients as the intermediary does currently
with respect to income tax withholding
and FICA.
Specifically, the proposed regulation
would amend the employment tax regula-
tions under section 3504 to provide that the
IRS may authorize a party to act as agent
on behalf of employers who are home care
service recipients with respect to FUTA
taxes imposed on wages paid for home
care services, provided that the party has
been authorized to act as an agent for those
home care service recipients for income
tax withholding and FICA tax purposes.
The agent is permitted to act for FUTA tax
purposes only on behalf of employers who
are home care service recipients, and not
for any other type of employer on whose
behalf the agent is authorized to act for
income tax withholding and FICA tax pur-
poses. Additionally, the agent is permitted
to act as an agent for FUTA tax purposes
only with respect to wages paid for home
care services rendered to the home care
service recipient.
These regulations propose to define the
termhome care service recipientas an in-
dividual who is an enrolled participant in a
program administered by a Federal, state,
or local government agency that provides
Federal, state, or local government funds
to pay, in whole or in part, for the pro-
2010–6 I.R.B.399February 8, 2010

vision of home care services, as defined
in the proposed regulations. A participant
qualifies as a home care service recipient
while enrolled in such a program and un-
til the end of the calendar year in which the
participant ceases to be enrolled in the pro-
gram. In all such programs, intermediaries
who are engaged to assist beneficiaries to
receive and distribute funds on the benefi-
ciaries’ behalf are reviewed and approved
by a state or local government agency.
These regulations propose to define
home care servicesto include health care
and personal attendant care services ren-
dered to a home care service recipient
in his home or local community. Ser-
vices provided outside the home care
service recipient’s private home may qual-
ify as home care services for purposes of
these regulations even if the services do
not qualify as domestic service in a pri-
vate home of the employer for purposes
of sections 3121(a)(7), 3306(c)(2), and
3401(a)(3), so long as the services are pro-
vided within the service recipient’s local
community.
Because section 3504 provides that all
provisions of law applicable to an em-
ployer apply to the agent, the agent can
report on its aggregate FUTA tax return
the state unemployment contributions paid
into a state unemployment fund on the
home care service recipient’s behalf as
a credit under section 3302 against the
FUTA tax. The credit can be reported by
the agent regardless of whether the state
unemployment contributions are made un-
der the name and state identifying number
of the home care service recipient or the
agent.
These regulations also propose amend-
ments to modify the existing regulations
undersection3504tobeconsistentwith
the organizational structure of the IRS and
to update the citation to the Internal Rev-
enue Code of 1986.
Proposed Effective Date
These regulations are proposed to ap-
ply to wages paid on or after January 1
of the calendar year following the date of
publication of a Treasury decision adopt-
ing these rules as final regulations in the
Federal Register. Taxpayers may rely
on these proposed regulations for guid-
ance pending the issuance of final reg-
ulations. Additionally, pursuant to sec-
tion 7805(b)(7), taxpayers may apply these
proposed regulations to all taxable years
for which a valid designation as an agent
has been in effect under §31.3504–1(a) of
the Employment Tax Regulations. Thus,
prior to publication of a Treasury decision
adopting these rules as final regulations,
any party already authorized under section
3504 to serve as an agent for a home care
service recipient, as defined in the pro-
posed regulations, or with an application
pending, will not need to file any addi-
tional application in order to expand the
scope of the agency to cover FUTA taxes.
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 this regulation, and
because the regulation does not impose a
collection of information on small entities,
the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to sec-
tion 7805(f) of the Internal Revenue 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 Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written or electronic
comments that are submitted timely to the
IRS. The Treasury Department and the IRS
specifically request comments on the clar-
ity of the proposed regulations and how
they can be made easier to understand. All
comments will be available for public in-
spection and copying. A public hearing
will be scheduled and held upon written re-
quest by any person who submits written
comments on the proposed regulation. If a
public hearing is scheduled, notice of the
time and place for the hearing will be pub-
lished in theFederal Register.
Drafting Information
The principal author of these proposed
regulations is Selvan Boominathan, Of-
fice of Division Counsel/Associate Chief
Counsel (Tax Exempt and Government
Entities), Internal Revenue Service. How-
ever, personnel from other offices of the
IRS and Treasury participated in their de-
velopment.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 31 is pro-
posed to be amended as follows:
PART 31—EMPLOYMENT TAXES
AND COLLECTION OF INCOME TAX
AT SOURCE
Paragraph 1. The authority citation for
part 31 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par.2. Section 31.3504–1 is revised to
read as follows:
§31.3504–1 Designation of Agent by
Application.
(a)In general. In the event wages as
defined in chapter 21 or 24 of the Inter-
nal Revenue Code of 1986, or compensa-
tion as defined in chapter 22 of the Code,
of an employee or group of employees,
employed by one or more employers, is
paid by a fiduciary, agent, or other per-
son (“agent”), or if that agent has the con-
trol, receipt, custody, or disposal of those
wages, or compensation, the Internal Rev-
enue Service may, subject to the terms
and conditions as it deems proper, autho-
rize that agent to perform the acts required
of the employer or employers under those
provisions of the Code and the regulations
which have application, for purposes of the
taxes imposed by the chapter or chapters,
in respect of the wages or compensation. If
the agent is authorized by the Internal Rev-
enue Service to perform such acts, all pro-
visions of law (including penalties) and of
the regulations applicable to an employer
shall be applicable to the agent. How-
ever, each employer for whom the agent
acts shall remain subject to all provisions
of law (including penalties) and of the reg-
ulations applicableto an employer. Any
application to authorize an agent to per-
form such acts, signed by the agent and
theemployer,shallbemadeontheform
prescribed by the Internal Revenue Service
February 8, 20104002010–6 I.R.B.

and shall be filed with the Internal Rev-
enue Service as prescribed in the instruc-
tions to the form and other applicable guid-
ance.
(b)Special rule for home care service
recipients.(1)In general. In the event a
fiduciary, agent, or other person (“agent”)
is authorized pursuant to paragraph (a) of
this section to perform the acts required of
an employer under chapters 21 or 24 on
behalf of one or more home care service
recipients, as defined in paragraph (b)(3)
of this section, the Internal Revenue Ser-
vice may authorize that agent to perform
the acts as are required of employers for
purposes of the tax imposed by chapter 23
of the Internal Revenue Code of 1986 with
respect to wages paid for home care ser-
vices, as defined in paragraph (b)(2) of this
section rendered to the home care service
recipient. Each home care service recipi-
ent for whom the agent performs the acts
of an employer and each agent authorized
under this section to perform the acts of an
employer shall remain subject to all pro-
visions of law (including penalties) and of
the regulations applicable to an employer
with respect to those wages paid.
(2)Home care services. For purposes
of this section, the termhomecareser-
vicesincludes health care and personal at-
tendant care services rendered in the home
care service recipient’s home or local com-
munity.
(3)Home care service recipient.For
purposes of this section, the termhome
care service recipientmeans any individ-
ual who receives home care services, as
defined in paragraph (b)(2) of this section,
while enrolled, and for the remainder of the
calendar year after ceasing to be enrolled,
in a program administered by a Federal,
state, or local government agency that pro-
vides Federal, state, or local government
funds, to pay, in whole or in part, for the
home care services for that individual.
(c)Effective and applicability dates.
An authorization under paragraph (a) of
this section in effect prior to the date of
publication of a Treasury decision adopt-
ing these rules as final regulations in the
Federal Registercontinues to be in effect
after that date. Paragraph (b) of this sec-
tion applies to wages paid on or after Jan-
uary 1 of the calendar year following the
date of publication of a Treasury decision
adopting these rules as final regulations in
theFederal Register. However, pursuant
to section 7805(b), taxpayers may rely on
paragraph (b) of this section for all taxable
years for which a valid designation is in
effect under paragraph (a) of this section.
Linda M. Kroening,
Acting Deputy Commissioner
for Services and Enforcement.
(Filed by the Office of the Federal Register on January 12,
2010, 8:45 a.m., and published in the issue of the Federal
Register for January 13, 2010, 75 F.R. 1735)
Notice of Proposed
Rulemaking by
Cross-Reference to
Temporary Regulations
Use of Controlled Corporations
to Avoid the Application of
Section 304
REG–132232–08
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
by cross-reference to temporary regula-
tions.
SUMMARY: In this issue of the Bulletin,
the IRS and the Treasury Department are
issuing temporary regulations (T.D. 9477)
under section 304 of the Internal Revenue
Code (Code). The temporary regulations
apply to certain transactions that are sub-
ject to section 304 but that are entered into
with a principal purpose of avoiding the
application of section 304 to a corporation
controlled by the issuing corporation in the
transaction, or to a corporation that con-
trols the acquiring corporation in the trans-
action. The temporary regulations affect
shareholders treated asreceiving distribu-
tions in redemption of stock by reason of
section 304. The text of temporary regula-
tions published in this issue of the Bulletin
serves as the text of these proposed regu-
lations.
DATES: Written or electronic comments
and requests for a public hearing must be
received by March 30, 2010.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–132232–08), room
5203, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–132232–08),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue NW,
Washington, DC, or sent electronically
via the Federal eRulemaking Portal
athttp://www.regulations.gov(IRS
REG–132232–08).
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Sean W. Mullaney, (202)
622–3860; concerning submissions
of comments or requests for a pub-
lic hearing, Richard Hurst at (202)
622–7180 (not toll-free numbers) or
Richard.A.Hurst@irscounsel.treas.gov.
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
Temporary regulations in this issue of
the Bulletin amend the Income Tax Regu-
lations (26 CFR part 1) relating to section
304 of the Code. The text of the tempo-
rary regulations serves as the text of these
proposed regulations. The preamble to the
temporary regulations explains the tempo-
rary regulations and these proposed regu-
lations.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in Ex-
ecutive Order 12866. Therefore, a reg-
ulatory assessment is not required. It is
hereby certified that the collections of in-
formation contained in these regulations
will not have a significant economic im-
pact on a substantial number of small en-
tities. Accordingly, a regulatory flexibility
analysis is not required. These regulations
primarily will affect United States persons
that are large corporations engaged in cor-
porate transactions among their controlled
corporations. Thus, the number of affected
small entities—in whichever of the three
categories defined inthe Regulatory Flex-
ibility Act (small businesses, small organi-
zations, and small governmental jurisdic-
tions)—will not be substantial. The IRS
and the Treasury Department estimate that
2010–6 I.R.B.401February 8, 2010

small organizationsand small governmen-
tal jurisdictions are likely to be affected
only insofar as they transfer the stock of
a controlled corporation to a related cor-
poration. While a certain number of small
entities may engage in such transactions,
the IRS and the Treasury Department do
not anticipate the number to be substantial.
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
Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any electronic or written
comments (a signed original and eight (8)
copies) that are submitted timely to the
IRS. The IRS and the Treasury Depart-
ment specifically request comments on the
clarity of the proposed rules and how they
can be made easier to understand. Com-
ments are also requested as to whether the
regulations should include factors that are
indicative of a principal purpose, or lack
of a principal purpose, to avoid the ap-
plication of section 304. If such factors
should be included, specific examples are
requested. See, for example, Prop. Treas.
Reg. §1.987–2(b)(3)(ii) and (iii).
All comments will be available for pub-
lic inspection and copying. A public hear-
ing will be scheduled if requested in writ-
ing by any person that timely submits writ-
ten comments. If a public hearing is sched-
uled, notice of the date, time, and place for
the public hearing will be published in the
Federal Register.
Drafting Information
The principal author of these proposed
regulations is Sean W. Mullaney of the Of-
fice of Associate Chief Counsel (Interna-
tional). However, other personnel from the
IRS and the Treasury Department partici-
pated 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. Section 1.304–4 is revised to
read as follows:
§1.304–4 Special rule for the use
of related corporations to avoid the
application of section 304.
[The text of proposed §1.304–4 is the
same as the text of §1.304–4T(a) through
(d) 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 December 29,
2009, 8:45 a.m., and published in the issue of the Federal
Register for December 30, 2009, 74 F.R. 69043)
Correction to an Erroneous
Cross-Reference in Revenue
Procedure 2010–1, 2010–1
I.R.B. 1
Announcement 2010–5
This document contains a correction
to Revenue Procedure 2010–1, 2010–1
I.R.B. 1, which contained an incorrect
internal cross-reference.
Section 8.08(2)(b) incorrectly read:
“For a § 301.9100 letter ruling request
for an extension of time to file an entity
classification election for multiple entities
qualifying under section15.07(4)for the
user fee provided in paragraph(A)(5)(d)
of Appendix A of this revenue procedure,
the Associate office generally will issue a
single letter on behalf of all entities that are
the subject of the request. The taxpayer
may request that separate letters be issued
to each entity that are the subject of the
request.See generallysection 5.03 of this
revenue procedure.”
Section 8.08(2)(b) should have read:
“For a § 301.9100 letter ruling request
for an extension of time to file an entity
classification election for multiple entities
qualifying under section15.07(2)for the
user fee provided in paragraph(A)(5)(a)
of Appendix A of this revenue procedure,
the Associate office generally will issue a
single letter on behalf of all entities that are
the subject of the request. The taxpayer
may request that separate letters be issued
to each entity that are the subject of the
request.See generallysection 5.03 of this
revenue procedure.”
For further information regard-
ing this announcement, contact
Gregory T. Armstrong at (202) 622–7950
(not a toll-free call).
Damages Received on
Account of Personal Physical
Injuries or Physical Sickness;
Hearing
Announcement 2010–6
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of public hearing on pro-
posed rulemaking.
SUMMARY: This document provides no-
tice of public hearing on a notice of pro-
posed rulemaking (REG–127270–06) re-
lating to the exclusion from gross income
for amounts received on account of per-
sonal physical injuries or physical sick-
ness.
DATES: The public hearing is being held
on Tuesday, February 23, 2010, at 10 a.m.
The IRS must receive outlines of the topics
to be discussed at the hearing by Tuesday,
February 2, 2010.
ADDRESSES: The public hearing is be-
ing held in room 2615, Internal Revenue
Building, 1111 Constitution Avenue, NW,
Washington, DC. Send submissions to:
CC:PA:LPD:PR (REG–127270–06), room
5203, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–127270–06),
Courier’s Desk, Internal Revenue Service,
1111 Constitution Avenue, NW, Wash-
ington, DC. Alternatively, taxpayers may
submit electronic outlines of oral com-
ments via the Federal eRulemaking Portal
athttp://www.regulations.gov.
FOR FURTHER INFORMATION
CONTACT: Concerning the regu-
lations, Sheldon A. Iskow at (202)
February 8, 20104022010–6 I.R.B.

622–4920; concerning submissions of
comments, the hearing, and/or to be
placed on the building access list to at-
tend the hearing, Richard A. Hurst at
Richard.A.Hurst@irscounsel.treas.govor
(202) 622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
The subject of the public hearing
is the notice of proposed rulemaking
(REG–127270–06, 2009–42 I.R.B. 534)
that was published in theFederal Regis-
teron Tuesday, September 15, 2009 (74
FR 47152).
Persons,whowishtopresentoralcom-
ments at the hearing that submitted writ-
ten comments, must submit an outline of
thetopicstobediscussedandtheamount
of time to be devoted to each topic (signed
original and eight (8) copies) by February
2, 2010.
A period of 10 minutes is allotted to
each person for presenting oral comments.
After the deadline for receiving out-
lines has passed, the IRS will prepare an
agenda containing the schedule of speak-
ers. Copies of the agenda will be made
available, free of charge, at the hearing or
in the Freedom of Information Reading
Room (FOIA RR) (Room 1621) which
is located at the 11th and Pennsylvania
Avenue NW entrance, 1111 Constitution
Avenue, NW, Washington, DC.
Because of access restrictions, the IRS
will not admit visitors beyond the imme-
diateentranceareamorethan30minutes
before the hearing starts. For informa-
tion about having your name placed on the
building access list to attend the hearing,
see the FOR FURTHER INFORMATION
CONTACT section of this document.
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 January 8,
2010, 8:45 a.m., and published in the issue of the Federal
Register for January 11, 2010, 75 F.R. 1301)
Modification to Consolidated
Return Regulation Permitting
an Election to Treat a
Liquidation of a Target,
Followed by a Recontribution
to a New Target, as a
Cross-Chain Reorganization
Announcement 2010–7
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correcting amendment.
Summary: This document contains a cor-
rection to temporary regulations (T.D.
9458, 2009–43 I.R.B. 547), which were
published in theFederal Registeron Fri-
day, September 4, 2009 (74 FR 45757)
relating to modification to consolidated
return regulation permitting an election
to treat a liquidation of a target, followed
by a recontribution to a new target, as a
cross-chain reorganization.
DATES: The correction is effective on Jan-
uary 13, 2010 and is applicable beginning
September 4, 2009.
FOR FURTHER INFORMATION
CONTACT: Guy Traynor at (202)
622–3693 (not a toll-free number).
SUPPLEMENTARY INFORATION:
Background
The temporary regulation that is the
subject to this correction is under section
1502 of the Internal Revenue Code.
Need for Correction
As published, temporary regulations
(T.D. 9458), contains an error which may
prove to be misleading and is in need of
clarification.
*****
Correction of Publication
Accordingly, 26 CFR part 1 is cor-
rected by making the following correcting
amendment.
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. Paragraph (f)(5)(ii)(G)
needs to be added following paragraph
(f)(5)(ii)(F)(3), to read as follows:
§1.1502–13T Intercompany transactions
(temporary).
*****
(f) * * *
(5) * * *
(ii) * * *
(G)Expiration date.Paragraphs
(f)(5)(ii)(B), (B)(1), (B)(2) and (F)(1),
(2), and (3) of this section will expire on
September 3, 2012.
*****
Guy R. Traynor,
Federal Register Liaison,
Publications & Regulations Branch,
Legal Processing Division,
Associate Chief Counsel
(Procedure & Administration).
(Filed by the Office of the Federal Register on January 12,
2010, 8:45 a.m., and published in the issue of the Federal
Register for January 13, 2010, 75 F.R. 1704)
2010–6 I.R.B.403February 8, 2010

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.
February 8, 2010i2010–6 I.R.B.

Numerical Finding List
1
Bulletins 2010–1 through 2010–6
Announcements:
2010-1, 2010-4 I.R.B.333
2010-2, 2010-2 I.R.B.271
2010-3, 2010-4 I.R.B.333
2010-4, 2010-5 I.R.B.384
2010-5, 2010-6 I.R.B.402
2010-6, 2010-6 I.R.B.402
2010-7, 2010-6 I.R.B.403
Notices:
2010-1, 2010-2 I.R.B.251
2010-2, 2010-2 I.R.B.251
2010-3, 2010-2 I.R.B.253
2010-4, 2010-2 I.R.B.253
2010-5, 2010-2 I.R.B.256
2010-6, 2010-3 I.R.B.275
2010-7, 2010-3 I.R.B.296
2010-8, 2010-3 I.R.B.297
2010-9, 2010-3 I.R.B.298
2010-10, 2010-3 I.R.B.299
2010-11, 2010-4 I.R.B.326
2010-12, 2010-4 I.R.B.326
2010-13, 2010-4 I.R.B.327
2010-14, 2010-5 I.R.B.344
2010-15, 2010-6 I.R.B.390
2010-16, 2010-6 I.R.B.396
Proposed Regulations:
REG-132232-08, 2010-6 I.R.B.401
REG-137036-08, 2010-6 I.R.B.398
REG-101896-09, 2010-5 I.R.B.347
REG-131028-09, 2010-4 I.R.B.332
Revenue Procedures:
2010-1, 2010-1 I.R.B.1
2010-2, 2010-1 I.R.B.90
2010-3, 2010-1 I.R.B.110
2010-4, 2010-1 I.R.B.122
2010-5, 2010-1 I.R.B.165
2010-6, 2010-1 I.R.B.193
2010-7, 2010-1 I.R.B.231
2010-8, 2010-1 I.R.B.234
2010-9, 2010-2 I.R.B.258
2010-10, 2010-3 I.R.B.300
2010-11, 2010-2 I.R.B.269
2010-12, 2010-3 I.R.B.302
2010-13, 2010-4 I.R.B.329
Revenue Rulings:
2010-1, 2010-2 I.R.B.248
2010-2, 2010-3 I.R.B.272
2010-3, 2010-3 I.R.B.272
Revenue Rulings— Continued:
2010-4, 2010-4 I.R.B.309
2010-5, 2010-4 I.R.B.312
2010-6, 2010-6 I.R.B.387
Treasury Decisions:
9474, 2010-4 I.R.B.322
9475, 2010-4 I.R.B.304
9476, 2010-5 I.R.B.336
9477, 2010-6 I.R.B.385
9478, 2010-4 I.R.B.315
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin
2009–52, dated December 28, 2009.
2010–6 I.R.B.iiFebruary 8, 2010

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2010–1 through 2010–6
Notices:
2005-88
Superseded by
Notice 2010-13, 2010-4 I.R.B.327
2008-41
Modified by
Notice 2010-7, 2010-3 I.R.B.296
2008-55
Modified by
Notice 2010-3, 2010-2 I.R.B.253
2008-88
Modified by
Notice 2010-7, 2010-3 I.R.B.296
2008-113
Modified by
Notice 2010-6, 2010-3 I.R.B.275
2008-115
Modified by
Notice 2010-6, 2010-3 I.R.B.275
2009-11
Amplified by
Notice 2010-9, 2010-3 I.R.B.298
2009-13
Obsoleted by
T.D. 9478, 2010-4 I.R.B.315
REG-131028-09, 2010-4 I.R.B.332
2009-38
Amplified and superseded by
Notice 2010-2, 2010-2 I.R.B.251
Proposed Regulations:
REG-127270-06
Hearing scheduled by
Ann. 2010-6, 2010-6 I.R.B.402
Revenue Procedures:
80-59
Modified and superseded by
Rev. Proc. 2010-11, 2010-2 I.R.B.269
87-35
Obsoleted by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
2009-1
Superseded by
Rev. Proc. 2010-1, 2010-1 I.R.B.1
2009-2
Superseded by
Rev. Proc. 2010-2, 2010-1 I.R.B.90
Revenue Procedures— Continued:
2009-3
Superseded by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
2009-4
Superseded by
Rev. Proc. 2010-4, 2010-1 I.R.B.122
2009-5
Superseded by
Rev. Proc. 2010-5, 2010-1 I.R.B.165
2009-6
Superseded by
Rev. Proc. 2010-6, 2010-1 I.R.B.193
2009-7
Superseded by
Rev. Proc. 2010-7, 2010-1 I.R.B.231
2009-8
Superseded by
Rev. Proc. 2010-8, 2010-1 I.R.B.234
2009-9
Superseded by
Rev. Proc. 2010-9, 2010-2 I.R.B.258
2009-15
Amplified and superseded by
Rev. Proc. 2010-12, 2010-3 I.R.B.302
2009-25
Superseded by
Rev. Proc. 2010-3, 2010-1 I.R.B.110
2010-1
Corrected by
Ann. 2010-5, 2010-6 I.R.B.402
Revenue Rulings:
67-436
Obsoleted by
REG-101896-09, 2010-5 I.R.B.347
2008-52
Supplemented and superseded by
Rev. Rul. 2010-2, 2010-3 I.R.B.272
Treasury Decisions:
9458
Corrected by
Ann. 2010-7, 2010-6 I.R.B.403
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2009–27 through 2009–52 is in Internal Revenue Bulletin 2009–52, dated December 28,
2009.
February 8, 2010iii2010–6 I.R.B.

INTERNAL REVENUE BULLETIN
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