Internal Revenue Bulletin 2008-19 (PDF rendition): IRS Announcements

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

Bulletin No. 200
8-19
May 12, 2008
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Ct. D. 2086, page 905.
Tax evasion; return-of-capital treatment.The Supreme
Court holds that a distributee accused of criminal tax eva-
sion may claim return-of-capital treatment without producing
evidence that, when the distribution occurred, either he or the
corporation intended a return of capital.Boulware v. United
States.
T.D. 9392, page 903.
Final regulations under section 6050L of the Code provide guid-
ance for the filing of information returns by donees relating to
qualified intellectual property contributions. These regulations
reflect changes to the law enacted in 2004.
REG–141998–06, page 911.
Proposed regulations under section 6323 of the Code relate
to the validity and priority of the federal tax lien against certain
persons. The regulations that implement section 6323 have
not been amended for some time. The most significant of the
proposed changes reflect that most liens filed by the IRS are
now self-releasing, and reflect the authority of the IRS to file
liens electronically without obtaining the permission of the lo-
cality. Other changes update the regulations by making vari-
ous incidental changes to dates and other language contained
therein.
EMPLOYEE PLANS
REG–108508–08, page 923.
Proposed regulations under section 4971 of the Code provide
guidance on the excise tax for failure to make certain required
pension funding contributions. The regulations reflect changes
made to section 4971 by the Pension Protection Act of 2006.
A public hearing is scheduled for August 4, 2008.
EXEMPT ORGANIZATIONS
Announcement 2008–40, page 941.
A list is provided of organizations now classified as private foun-
dations.
ESTATE TAX
REG–147775–06, page 916.
Proposed regulations under section 2642 of the Code identify
the standards that the IRS will apply in determining whether to
grant a transferor or a transferor’s estate an extension of time
under section 2642(g)(1) to: (1) allocate generation-skipping
transfer (GST) exemption, as defined in section 2631, to a
transfer; (2) elect under section 2632(b)(3) (the election not to
have the deemed allocation of GST exemption apply to a direct
skip); (3) elect under section 2632(c)(5)(A)(i) (the election not
to have the deemed allocation of GST exemption apply to an
indirect skip or transfers made to a particular trust); and (4)
elect under section 2632(c)(5)(A)(ii) (the election to treat any
trust as a GST trust for purposes of section 2632(c)). The
regulations also identify situations with facts that do not satisfy
the standards for granting relief and in which, as a result, the
relief described above will not be granted. A public hearing is
scheduled for August 5, 2008.
(Continued on the next page)
Finding Lists begin on page ii.

EXCISE TAX
REG–108508–08, page 923.
Proposed regulations under section 4971 of the Code provide
guidance on the excise tax for failure to make certain required
pension funding contributions. The regulations reflect changes
made to section 4971 by the Pension Protection Act of 2006.
A public hearing is scheduled for August 4, 2008.
ADMINISTRATIVE
Announcement 2008–41, page 943.
This document contains a withdrawal of proposed regulations
(REG–109367–06, 2006–2 C.B. 683) relating to the circum-
stances in which accounts or notes receivable are “acquired ...
for services rendered” within the meaning of section 1221(a)(4)
of the Code.
Announcement 2008–42, page 943.
This document provides notice of public hearing on proposed
regulations (REG–139236–07, 2008–9 I.R.B. 491) preparing
guidance on the determination of plan assets and benefit li-
abilities for purposes of the funding requirements that apply
to single employer defined benefit plans. The regulations af-
fect sponsors, administrators, participants, and beneficiaries
of single employer defined benefit plans. A public hearing is
scheduled for May 29, 2008.
Announcement 2008–43, page 944.
This document provides notice of public hearing on proposed
regulations (REG–147290–05, 2008–10 I.R.B. 576) relating
to deductions for contributions to trusts maintained for decom-
missioning nuclear power plants. A public hearing is scheduled
for June 17, 2008.
May 12, 20082008–19 I.R.B.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d meet their tax responsibilities and by applying
the tax law with
integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
2008–19 I.R.B.May 12, 2008

May 12, 20082008–19 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section
6050L.—Returns
Relatin
g to Certain Donated
Property
26 CFR 1.6050L–2: Information returns by donees
relating to qualified intellectual property contribu-
tions.
T.D. 9392
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
Information Returns by
Donees Relating to Qualified
Intellectual Property
Contributions
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations and removal
of temporary regulations.
SUMMARY: This document contains fi-
nal regulations that provide guidance for
filing information returns by donees relat-
ing to qualified intellectual property con-
tributions. These final regulations reflect
changes to the law made in 2004. The
regulations affect donees receiving net in-
come from qualified intellectual property
contributions made after June 3, 2004.
DATES:Effective date:These regulations
are effective April 7, 2008.
Applicability date:For dates of appli-
cability, see §1.6050L–2(f).
FOR FURTHER INFORMATION
CONTACT: Timothy S. Sheppard, (202)
622–4910 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information con-
tained in these final regulations has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)) under control
number 1545–1932. The collection of
informa
tion in these final regulations is in
§1.6050
L–2(a) and (b). Responses to this
collect
ion of information are required to
obtain
ataxbenefit.
An agenc
y may not conduct or sponsor,
and a pe
rson is not required to respond
to, a co
llection of information unless the
collec
tion of information displays a valid
OMB con
trol number.
Books o
r records relating to a collection
of info
rmation must be retained as long
as thei
r contents may become material in
the ad
ministration of any internal revenue
law. G
enerally, tax returns and return in-
forma
tion are confidential, as required by
26 U.S
.C. 6103.
Background
This document contains amendments
to the Income Tax Regulations (26 CFR
Part 1) relating to section 6050L of the
Internal Revenue Code (Code). These
regulations reflect changes to the law
made by the American Jobs Creation Act
of 2004, Public Law 108–357 (118 Stat.
1418). On May 23, 2005, temporary reg-
ulations (T.D. 9206, 2005–1 C.B. 1283)
relating to information returns by donees
with respect to qualified intellectual prop-
erty contributions under section 6050L
were published in theFederal Register
(70 FR 29450). A notice of proposed
rulemaking (REG–158138–04, 2005–1
C.B. 1341) cross-referencing the tem-
porary regulations was published in the
Federal Register(70 FR 29460) on the
same date. No comments were received
fromthepublicinresponsetothenoticeof
proposed rulemaking and no public hear-
ing was requested or held. Accordingly,
the proposed regulations are adopted as
amended by this Treasury decision and the
corresponding temporary regulations are
removed. The final regulations generally
retain the provisions of the proposed and
temporary regulations but eliminate tran-
sition rules that are no longer needed and
make other minor editorial changes.
Explanation of Changes
The final regulations do not include cer-
tain transition rules that were included in
the temporary and proposed regulations.
Specifi
cally, the proposed and temporary
regulat
ions provide guidance for donees
on makin
g the required information return
before
a form is prescribed by the IRS. The
IRS has
since issued a new Form 8899 on
which d
onees must report qualified donee
income
. Thus, these transition rules are
no long
er needed and are not included in
the fi
nal regulations. The proposed and
tempo
rary regulations also include a tran-
sitio
n rule that applies to donees with tax-
able y
ears to which net income from the
qual
ified intellectual property is properly
allo
cable that end prior to or on May 23,
2005
, the issuance date of the proposed and
temp
orary regulations. Under this transi-
tion
rule, the donee shall furnish the infor-
mat
ion required under section 6050L to the
don
or on or before August 22, 2005. This
tra
nsition rule is no longer needed and is
not
included in the final regulations.
Spe
cial Analyses
It h
as been determined that this Trea-
sur
y decision is not a significant regula-
tor
y action as defined in Executive Order
12
866. Therefore, a regulatory assessment
is
not required. It has also been deter-
mi
ned that section 553(b) of the Admin-
is
trative Procedure Act (5 U.S.C. chapter
5)
does not apply to these regulations. It is
h
ereby certified that these regulations will
n
ot have a significant economic impact on
a
substantial number of small entities. This
c
ertification is based upon the fact that few,
i
f any, small entities will be required to file
u
nder these regulations. Therefore, a Reg-
ulatory Flexibility Analysis under the Reg-
ulatory Flexibility Act (5 U.S.C. chapter 6)
is not required. Pursuant to section 7805(f)
of the Internal Revenue Code, the notice of
proposed rulemaking preceding this regu-
lation was submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on its impact on
small business.
Drafting Information
The principal author of these regula-
tions is Timothy S. Sheppard, Office of As-
sociate Chief Counsel (Procedure and Ad-
ministration).
*****
2008–19 I.R.B.903May 12, 2008

Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 1 and 602
are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. §1.6050L–2 is added to read as
follows:
§1.6050L–2 Information returns by
donees relating to qualified intellectual
property contributions.
(a)In general. Each donee organiza-
tion described in section 170(c), except a
private foundation (as defined in section
509(a)), other than a private foundation
described in section 170(b)(1)(F), that re-
ceives or accrues net income during a tax-
able year from any qualified intellectual
property contribution (as defined in sec-
tion 170(m)(8)) must make an annual in-
formation return on the form prescribed by
the IRS. The information return is required
for any taxable year of the donee that in-
cludes any portion of the 10-year period
beginning on the date of the contribution,
but not for taxable years beginning after
the expiration of the legal life of the qual-
ified intellectual property.
(b)Informationrequiredtobeprovided
on return. The information return required
by section 6050L and paragraph (a) of this
section shall include the following—
(1) The name, address, taxable year,
and employer identification number of the
donee making the information return;
(2) The name, address, and taxpayer
identification number of the donor;
(3) A description of the qualified intel-
lectual property in sufficient detail to iden-
tify the qualified intellectual property re-
ceivedbysuchdonee;
(4) The date of the contribution to the
donee;
(5) The amount of net income of the
donee for the taxable year that is properly
allocable to the qualified intellectual prop-
erty (determined without regard to para-
graph (10)(B) of section 170(m) and with
the modifications described in paragraphs
(5)and(6)ofsuchsection);and
(6) Such other information as may be
specified by the form or its instructions.
(c)Special rule—statement to be fur-
nished to donors. Every donee making
an information return under section 6050L
and this section with respect to a qualified
intellectual property contribution shall fur-
nish a copy of the information return to
the donor of the property. The information
return required by section 6050L and this
section shall be furnished to the donor on
or before the date the donee is required to
file the return with the IRS.
(d)Place and time for filing information
return—(1)Place for filing.Theinforma-
tion return required by section 6050L and
this section shall be filed with the IRS lo-
cation listed on the prescribed form or in
its instructions.
(2)Time for filing. A donee is required
tofilethereturnrequiredbysection6050L
and this section on or before the last day of
the first full month following the close of
the donee’s taxable year to which net in-
come from the qualified intellectual prop-
erty is properly allocable.
(e)Penalties. For penalties for failure
to comply with the requirements of this
section, see sections 6721 through 6724.
(f)Effective/applicability date.The
rules of this section apply to qualified
intellectual property contributions made
after June 3, 2004.
§1.6050L–2T [Removed]
Par. 3. Section 1.6050L–2T is re-
moved.
PART 602 —OMB CONTROL
NUMBERS UNDER THE PAPERWORK
REDUCTION ACT
Par. 4. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 5. In §602.101, paragraph (b) is
amended by removing the following entry
from the table:
§602.101 OMB Control numbers.
*****
(b) * * *
CFR part or section where
identified and described
Current OMB
control No.
*****
1.6050L–2T
...........................................................
1545–1932
*****
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
Approved March 31, 2008.
Eric Solomon,
Assistant Secretary of
the Treasury (Tax Policy).
(Filed by the Office of the Federal Register on April 4, 2008,
8:45 a.m., and published in the issue of the Federal Register
for April 7, 2008, 73 F.R. 18709)
May 12, 20089042008–19 I.R.B.

Section 7201.—Attempt to
Evade or Defeat Tax
Ct. D. 2086
SUPREME COURT OF THE
UNITED STATES
No. 06–1509
BOULWAREv.UNITED STATES
CERTIORARI TO THE
UNITED STATES COURT
OF APPEALS FOR
THE NINTH CIRCUIT
March 3, 2008
Syllabus
One element of tax evasion under
26 U. S. C. §7201 is “the existence of
a tax deficiency.”Sansonev.United
States, 380 U. S. 343, 351. Petitioner
Boulware was charged with criminal tax
evasion and filing a false income tax
return for diverting funds from a closely
held corporation, HIE, of which he was
the president, founder, and controlling
shareholder. To support his argument that
the Government could not establish the
taxdeficiencyrequiredtoconvicthim,
Boulware sought to introduce evidence
that HIE had no earnings and profits in
the relevant taxable years, so he in effect
received distributions of property that
were returns of capital, up to his basis in
his stock, which are not taxable, see 26
U. S. C. §§301 and 316(a). Under §301(a),
unless the Internal Revenue Code requires
otherwise, a “distribution of property”
“made by a corporation to a shareholder
with respect to its stock shall be treated
in the manner provided in [§301(c)].”
Section 301(c) provides that the portion
of the distribution that is a “dividend,” as
defined by §316(a), must be included in the
recipient’s gross income; and the portion
that is not a dividend is, depending on the
shareholder’s basis for his stock, either a
nontaxable return of capital or a taxable
capital gain. Section 316(a) defines
“dividend” as a “distribution” out of
“earnings and profits.” The District Court
granted the Government’sin liminemotion
to bar evidence supporting Boulware’s
return-of-capital theory, relying on the
Ninth Circuit’sMillerdecision that a
diversion of funds in a criminal tax
evasion case may be deemed a return of
capital only if the taxpayer or corporation
demonstrates that the distributions were
intended to be such a return. The court
later found Boulware’s proffer of evidence
insufficient underMillerand declined to
instruct the jury on his theory. In affirming
his conviction, the Ninth Circuit held that
Boulware’s proffer was properly rejected
underMillerbecause he offered no proof
that the amounts diverted were intended as
a return of capital when they were made.
Held:A distributee accused of crimi-
nal tax evasion may claim return-of-capi-
tal treatment without producing evidence
that, when the distribution occurred, either
he or the corporation intended a return of
capital. Pp. 6–17.
(a) Tax classifications like “dividend”
and “return of capital” turn on a transac-
tion’s “objective economic realities,” not
“the particular form the parties employed.”
Frank Lyon Co.v.United States,435
U. S. 561, 573. In economic reality, a
shareholder’s informal receipt of corpo-
rate property “may be as effective a means
of distributing profits among stockholders
as the formal declaration of a dividend,”
Palmerv.Commissioner, 302 U. S. 63,
69, or as effective a means of returning a
shareholder’s capital, seeibid.Economic
substance remains the touchstone for char-
acterizing funds that a shareholder diverts
before they can be recorded on a corpora-
tion’s books. Pp. 6–8.
(b)Miller’s view that a return-of-cap-
ital defense requires evidence of a corre-
sponding contemporaneous intent sits un-
comfortably not only with the tax law’s
economic realism, but also with the par-
ticular wording of §§301 and 316(a). As
these sections are written, the tax con-
sequences of a corporation’s distribution
made with respect to stock depend, not on
anyone’s purpose to return capital or get it
back, but on facts wholly independent of
intent: whether the corporation had earn-
ings and profits, and the amount of the
taxpayer’s basis for his stock. TheMiller
court could claim no textual hook for its
contemporaneous intent requirement, but
argued that it avoided supposed anomalies.
The court, however, mistakenly reasoned
that applying §§301 and 316(a) in crimi-
nal cases unnecessarily emphasizes the de-
ficiency’s amount while ignoring the will-
fulness of the intent to evade taxes. Will-
fulnessisanelementofthecrimesbe-
cause the substantive provisions defining
tax evasion and filing a false return ex-
pressly require it, see,e.g.,§7201. Noth-
ing in §§301 and 316(a) relieves the Gov-
ernment of the burden of proving willful-
ness or impedes it from doing so if there is
evidence of willfulness. TheMillercourt
also erred in finding it troublesome that,
without a contemporaneous intent require-
ment, a shareholder distributee would be
immune from punishment if the corpora-
tion had no earnings and profits but con-
victed if the corporation did have earning
and profits. An acquittal in the former in-
stance would in fact result merely from the
Government’s failure to prove an element
of the crime. The fact that a shareholder
of a successful corporation may have dif-
ferent tax liability from a shareholder of
a corporation without earnings and prof-
its merely follows from the way §§301
and 316(a) are written and from §7201’s
taxdeficiencyrequirement. Evenifthere
were compelling reasons to extend §7201
to cases in which no taxes are owed, Con-
gress, not the Judiciary, would have to do
the rewriting. Pp. 8–12.
(c)Milleralso suffers from its own
anomalies. First, §§301 and 316 are odd
stalks for grafting a contemporaneous
intent requirement.Correct application
of their rules will often become possible
only at the end of the corporation’s tax
year, regardless of the shareholder or cor-
poration’s understanding months earlier
when a particular distribution may have
been made. Moreover, §301(a), which
expressly provides that distributions made
with respect to stock “shall be treated in the
manner provided in [§301(c)],” ostensibly
provides for all variations of tax treatment
of such distributions unless a separate
Code provision requires otherwise. Yet
Millereffectively converts the section into
one of merely partial coverage, leaving the
tax status of one class of distributions in
limboincriminalcases. Allowing §61(a)
of the Code, which defines gross income,
“[e]xcept as otherwise provided,” as “all
income from whatever source derived,”
to step in where §301(a) has been pushed
aside would sanction yet another eccen-
tricity: §301(a) would not cover what it
says it “shall,” (distributions with respect
tostockforwhichnomorespecificprovi-
sion is made), while §61(a) would have to
2008–19 I.R.B.905May 12, 2008

apply to what by its terms it should not (a
receipt of funds for which tax treatment is
“otherwise provided” in §301(a)).Miller
erred in requiring contemporaneous intent,
and the Ninth Circuit’s judgment here,
relying onMiller, is likewise erroneous.
Pp. 12–14.
(d) This Court declines to address the
Government’s argument that the judgment
should be affirmed on the ground that be-
fore any distribution may be treated as a re-
turn of capital, it must first be distributed
to the shareholder “with respect to . . .
stock.” The facts in this case have not been
raked over with that condition in mind, and
any canvas of evidence and Boulware’s
proffer should be made by a court famil-
iar with the entire evidentiary record. Nor
will the Court take up in the first instance
the question whether an unlawful diver-
sion may ever be deemed a “distribution
. . . with respect to [a corporation’s]
stock.” Pp. 14–17.
470 F.3d 931, vacated and remanded.
SOUTER, J., delivered the opinion for
a unanimous Court.
SUPREME COURT OF THE
UNITED STATES
No. 06–1509
MICHAEL H. BOULWARE,
PETITIONERv.UNITED STATES
ON WRIT OF CERTIORARI TO THE
UNITED STATES COURT
OF APPEALS FOR
THE NINTH CIRCUIT
March 3, 2008
JUSTICE SOUTER delivered the opin-
ion of the Court.
Sections 301 and 316(a) of the Inter-
nal Revenue Code set the conditions for
treating certain corporate distributions as
returns of capital, nontaxable to the recip-
ient. 26 U. S. C. §§301, 316(a) (2000
ed. and Supp. V.). The question here
is whether a distributee accused of crimi-
nal tax evasion may claim return-of-capital
treatment without producing evidence that
either he or the corporation intended a cap-
ital return when the distribution occurred.
We hold that no such showing is required.
I
“[T]he capstone of [the] system of
sanctions . . . calculated to induce
. . . fulfillment of every duty under
the income tax law,”Spiesv.United
States, 317 U. S. 492, 497 (1943), is 26
U. S. C. §7201, making it a felony willfully
to “attemp[t] in any manner to evade or
defeat any tax imposed by” the Code.
1
One element of tax evasion under §7201
is “the existence of a tax deficiency,”
Sansonev.United States, 380 U. S. 343,
351 (1965); see alsoLawnv.United
States, 355 U. S. 339, 361 (1958),
2
which
the Government must prove beyond a
reasonable doubt, seeibid.(“[O]f course,
a conviction upon a charge of attempting
to evade assessment of income taxes by the
filing of a fraudulent return cannot stand
in the absence of proof of a deficiency”).
Anydeficiencydeterminationinthis
case will turn on §§301 and 316(a) of the
Code. According to §301(a), unless an-
other provision of the Code requires oth-
erwise, a “distribution of property” that is
“made by a corporation to a shareholder
with respect to its stock shall be treated
in the manner provided in [§301(c)].” Un-
der §301(c), the portion of the distribution
that is a “dividend,” as defined by §316(a),
must be included in the recipient’s gross
income; and the portion that is not a div-
idend is, depending on the shareholder’s
basis for his stock, either a nontaxable re-
turn of capital or a gain on the sale or
exchange of stock, ordinarily taxable to
the shareholder as a capital gain. Finally,
§316(a) defines “dividend” as
“any distribution of property made by a
corporation to its shareholders—
“(1) out of its earnings and profits
accumulated after February 28, 1913,
or
“(2) out of its earnings and prof-
its of the taxable year (computed as
of the close of the taxable year with-
out diminution by reason of any distri-
butions made during the taxable year),
without regard to the amount of the
earnings and profits at the time the dis-
tribution was made.”
Sections 301 and 316(a) together thus
make the existence of “earnings and prof-
its”
3
the decisive fact in determining the
tax consequences of distributions from a
corporation to a shareholder with respect
to his stock. This requirement of “relating
the tax status of corporate distributions to
earnings and profits is responsive to a felt
need for protecting returns of capital from
tax.” 4 Bittker & Lokken ¶92.1.1, p. 92–3.
II
In this criminal tax proceeding, pe-
titioner Michael Boulware was charged
with several counts of tax evasion and
filing a false income tax return, stemming
from his diversion of funds from Hawai-
ian Isles Enterprises (HIE), a closely held
corporation of whichhe was the president,
founder, and controlling (though not sole)
shareholder. At trial,
4
the United States
sought to establish that Boulware had re-
ceived taxable income by “systematically
divert[ing] funds from HIE in order to sup-
port a lavish lifestyle.” 384 F.3d 794, 799
(CA9 2004). The Government’s evidence
showed that
“[Boulware] gave millions of dollars of
HIE money to his girlfriend . . . and
millions of dollars to his wife . . .
without reporting any of this money on
his personal income tax returns. . . .
[H]e siphoned off this money primar-
ily by writing checks to employees and
friends and having them return the cash
to him, by diverting payments by HIE
customers, by submitting fraudulent in-
voices to HIE, and by laundering HIE
1
A related provision, 26 U. S. C. §7206(1), criminalizes the willful filing of a tax return believed to be materially false. See n. 9,infra.
2
“[T]heelementsof§7201arewillfulness[,]theexistenceofataxdeficiency,...andanaffirmativeactconstitutinganevasionorattemptedevasion of the tax.”Sansone v. United States,
380 U. S. 343, 351 (1965). The Courts of Appeals have divided over whether the Government must prove the tax deficiency is “substantial,” seeUnited States v. Daniels, 387 F.3d 636,
640–641, and n. 2 (CA7 2004) (collecting cases); we do not address that issue here.
3
Although the Code does not “comprehensively define‘earnings and profits,’” 4 B. Bittker & L. Lokken, Federal Taxation of Income, Estates and Gifts ¶92.1.3, p.92–6 (3d ed. 2003)
(hereinafter Bittker & Lokken), the “[p]rovisions of the Code and regulations relating to earnings and profits ordinarily take taxable income as thepoint of departure,”id., at 92–9.
4
The trial at issue in this case was actually Boulware’s second trial on §§7201 and 7206(1) charges, his convictions on those counts in an earlier trial having been vacated by the Ninth Circuit
for reasons not at issue here, see 384 F.3d 794 (2004). In that earlier trial, Boulware was also convicted of conspiracy to make false statements to a federally insured financial institution, in
violationof18U.S.C.§371.TheNinthCircuitaffirmedBoulware’sconspiracy conviction that first time around,however, so the present trial did not include a conspiracy charge.
May 12, 20089062008–19 I.R.B.

money through companies in the King-
dom of Tonga and Hong Kong.”Ibid.
In defense, Boulware sought to intro-
duce evidence that HIE had no retained or
current earnings and profits in the relevant
taxable years, with the consequence (he ar-
gued) that he in effect received distribu-
tions of property that must have been re-
turns of capital, up to his basis in his stock.
See §301(c)(2). Because the return of cap-
ital was nontaxable, the argument went,
the Government could not establish the tax
deficiency required to convict him.
The Government movedin limineto
bar evidence in support of Boulware’s re-
turn-of-capital theory, on the grounds of
“irrelevan[ce] in [this] criminal tax case,”
App. 20. The Government relied on the
Ninth Circuit’s decision inUnited Statesv.
Miller, 545 F.2d 1204 (1976), in which that
court held that in a criminal tax evasion
case, a diversion of funds may be deemed
a return of capital only after “some demon-
stration on the part of the taxpayer and/or
the corporation that such [a distribution
was] intended to be such a return,”id.,at
1215. Boulware, the Government argued,
had offered to make no such demonstra-
tion. App. 21.
The District Court granted the Gov-
ernment’s motion, and when Boulware
sought “to present evidence of [HIE’s]
alleged over-reporting of income, and an
offer of proof relating to the issue of . . .
dividends,”id., at 135, the District Court
denied his request. The court said that
“[n]ot only would much of [his proffered]
evidence be excludable as expert legal
opinion, it is plainly insufficient under the
Miller case,”id., at 138, and accordingly
declined to instruct thejuryonBoulware’s
return-of-capital theory. The jury rejected
his alternative defenses (that the diverted
funds were nontaxable corporate advances
or loans, or that he used the moneys for
corporate purposes), and found him guilty
on nine counts, four of tax evasion and
five of filing a false return.
The Ninth Circuit affirmed. 470 F.3d
931 (2006). It acknowledged that “im-
posing an intent requirement creates a
disconnect between civil and criminal
liability,” but thought that underMiller,
“the characterization of diverted corpo-
rate funds for civil tax purposes does not
dictate their characterization for purposes
of a criminal tax evasion charge.” 470
F.3d, at 934. The court held the test in a
criminal case to be “whether the defen-
dant has willfully attempted to evade the
payment or assessment of a tax.”Ibid.Be-
cause Boulware “‘presented no concrete
proof that the amounts were considered,
intended, or recorded on the corporate
records as a return of capital at the time
they were made,’”id., at 935 (quoting
Miller,supra, at 1215), the Ninth Circuit
held that Boulware’s proffer was “properly
rejected . . . as inadequate,” 470 F.3d, at
935.
Judge Thomas concurred because the
panel was bound byMiller, but noted
that “Miller—and now the majority opin-
ion—hold that a defendant may be crim-
inally sanctioned for tax evasion without
owing a penny in taxes to the govern-
ment.” 470 F.3d, at 938. That, he said, not
only “indicate[s] a logical fallacy, but is
in flat contradiction with the tax evasion
statute’s requirement . . . of a tax defi-
ciency.”Ibid. (internal quotation marks
omitted).
5
We granted certiorari, 551 U. S.
(2007), to resolve a split among the Courts
of Appeals over the application of §§301
and 316(a) to informally transferred or di-
verted corporate funds in criminal tax pro-
ceedings.
6
We now vacate and remand.
III
A
The colorful behavior described in
the allegations requires a reminder that
tax classifications like “dividend” and
“return of capital” turn on “the objec-
tive economic realities of a transaction
rather than . . . the particular form the
parties employed,”Frank Lyon Co.v.
United States, 435 U. S. 561, 573 (1978);
a “given result at the end of a straight
path is not made a different result . . .
by following a devious path,”Minnesota
Tea Co.v.Helvering, 302 U. S. 609,
613 (1938)
7
. As for distributions with
respect to stock, in economic reality a
shareholder’s informal receipt of corporate
property “may be as effective a means of
distributing profits among stockholders
as the formal declaration of a dividend,”
Palmerv.Commissioner, 302 U. S. 63,
69 (1937), or as effective a means of
returning a shareholder’s capital, see
ibid. Accordingly, “[a] distribution to
a shareholder in his capacity as such
...issubjectto§301eventhough
it is not declared in formal fashion.”
B. Bittker & J. Eustice, Federal Income
Taxation of Corporations and Shareholders
¶8.05[1], pp. 8–36 to 8–37 (6th ed.
1999) (hereinafter Bittker & Eustice);
see also Gardner, The Tax Consequences
of Shareholder Diversions in Close
Corporations, 21 Tax L. Rev. 223, 239
(1966) (hereinafterGardner) (“Sections
316 and 301 do not require any formal
path to be taken by a corporation in order
for those provisions to apply”).
There is no reason to doubt that eco-
nomic substance remains the right touch-
5
Judge Thomas went on to say that the Government would prevail even withoutMiller’s rule because, in his view, Boulware’s diversionswere “unlawful,” and the return-of-capital rules
would not apply to diversions made for unlawful purposes. See 470 F.3d, at 938–939.
6
A
s noted, the Ninth Circuit holds that §§301 and 316(a) are not to be consulted in a criminal tax evasion case until the defendant produces evidence of an intent to treat diverted funds as a
re
turn of capital at the time it was made. See 470 F.3d 931 (2006) (case below). Bycontrast, the Second Circuit allows a criminal defendant to invoke §§301and 316(a) without evidence of
ac
ontemporaneous intent to treat such moneys as returns of capital. SeeUnited States v. Bok, 156 F.3d 157, 162 (1998) (“[I]n return of capital cases, a taxpayer’s intent is not determinative
i
n defining the taxpayer’s conduct”). Meanwhile, theThird, Sixth, and Eleventh Circuits arguably have taken the position that §§301 and 316(a) are altogether inapplicable in criminal tax
c
ases involving informal distributions. SeeUnited States v. Williams, 875 F.2d 846, 850–852 (CA11 1989);United States v. Goldberg,330F.2d30,38(CA31964);Davis v. United States,
2
26 F.2d 331, 334–335 (CA6 1955); but see Brief for Petitioner 16 (“[T]hese cases can be read to address the allocation of the burden of proof on the returnof capital issue, rather than the
applicable substantive principles”).
7
We have also recognized that “[t]he legal right of a taxpayer to decrease theamount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot
be doubted.”Gregory v. Helvering, 293 U. S. 465, 469 (1935). The rule is a two-way street: “while a taxpayer is free to organize his affairs as he chooses, nevertheless, once having done
so, he must accept the tax consequences of his choice, whether contemplated or not, . . . and may not enjoy the benefit of some other route he might have chosen to follow but did not,”
Commissioner v. National Alfalfa Dehydrating & Milling Co., 417 U. S. 134, 149 (1974); see alsoid., at 148 (referring to “the established tax principle that a transaction is to be given its
tax effect in accord with what actually occurred and not in accord with what might have occurred”);Founders Gen. Corp. v. Hoey, 300 U. S. 268, 275 (1937) (“To make the taxability of the
transaction depend upon the determination whetherthere existed an alternative form which the statute did not tax would create burden and uncertainty”). The question here, of course, is not
whether alternative routes may have offered better or worse tax consequences, see generally Isenbergh, Review: Musings on Form and Substance in Taxation, 49 U. Chi. L. Rev. 859 (1982);
rather, it is “whether what was done . . . was the thing which the statute [, here §§301 and 316(a),] intended,”Gregory,supra, at 469.
2008–19 I.R.B.907May 12, 2008

stone for characterizing funds received
when a shareholder diverts them before
they can be recorded on the corpora-
tion’s books. While they “never even pass
through the corporation’s hands,” Bittker
& Eustice ¶8.05[9], p. 8–51, even diverted
funds may be seen as dividends or capital
distributions for purposes of §§301 and
316(a), seeTruesdellv.Commissioner,89
T. C. 1280 (1987) (treating diverted funds
as “constructive” distributions in civil tax
proceedings). The point, again, is that
“taxation is not so much concerned with
the refinements of title as it is with actual
command over the property taxed—the
actual benefit for which the tax is paid.”
Corlissv.Bowers, 281 U. S. 376, 378
(1930); see alsoGriffithsv.Commis-
sioner, 308 U. S. 355, 358 (1939).
8
B
Miller’s view that a criminal defendant
may not treat a distribution as a return
of capital without evidence of a corre-
sponding contemporaneous intent sits
uncomfortably not only with the tax law’s
economic realism, but with the particular
wording of §§301 and 316(a), as well. As
those sections are written, the tax conse-
quences of a “distribution by a corporation
with respect to its stock” depend, not on
anyone’s purpose to return capital or to get
it back, but on facts wholly independent of
intent: whether the corporation had earn-
ings and profits, and the amount of the tax-
payer’s basis for his stock. Cf.Truesdellv.
Commissioner, Internal Revenue Service
(IRS) Action on Decision 1988–25, 1988
WL 570761 (Sept. 12, 1988) (recommen-
dation regarding acquiescence); IRS Non
Docketed Service Advice Review, 1989
WL 1172952 (Mar. 15, 1989) (reply to
request for reconsideration) (“[I]ntent is
irrelevant....[E]verydistributionmade
with respect to a shareholder’s stock is
taxable as ordinary income, capital gain,
or not at all pursuant to section 301(c)
dependent upon the corporation’s earnings
and profits and the shareholder’s stock
basis. The determination is computational
and not dependent upon intent”).
When theMillercourt went the other
way, needless to say, it could claim no tex-
tual hook for the contemporaneous intent
requirement, but argued for it as the way
to avoid two supposed anomalies. First,
the court thought that applying §§301 and
316(a) in criminal cases unnecessarily em-
phasizes the exact amount of deficiency
while “completely ignor[ing] one essential
element of the crime charged: the willful
intent to evade taxes . . . .” 545 F.2d,
at 1214. But there is an analytical mis-
take here. Willfulness is an element of
the crimes charged because the substan-
tive provisions defining tax evasion and
filing a false return expressly require it,
see §7201 (“Any person who willfully at-
tempts . . . ”); §7206(1) (“Willfully
makes and subscribes . . . ”). The el-
ement of willfulness is addressed at trial
by requiring the Government to prove it.
Nothing in §§301 and 316(a) as written
(that is, without an intent requirement) re-
lieves the Government of this burden of
proving willfulness or impedes it from do-
ing so if evidence of willfulness is there.
Those two sections as written simply ad-
dress a different element of criminal eva-
sion, the existence of a tax deficiency, and
both deficiency and willfulness can be ad-
dressed straightforwardly (in jury instruc-
tions or bench findings) without tacking
an intent requirement onto the rule distin-
guishing dividends from capital returns.
Second, theMillercourt worried that if
a defendant could claim capital treatment
without showing a corresponding and con-
temporaneous intent,
“[a] taxpayer who diverted funds from
his close corporation when it was in the
midst of a financial difficulty and had
no earnings and profits would be im-
mune from punishment (to the extent of
his basis in the stock) for failure to re-
port such sums as income; while that
very same taxpayer would be convicted
if the corporation had experienced a
successful year and had earnings and
profits.” 545 F.2d, at 1214.
“Such a result,” said the court, “would con-
stitute an extreme example of form over
substance.”Ibid.The Circuit thus assumed
that a taxpayer like Boulware could be
convicted of evasion with no showing of
deficiency from an unreported dividend or
capital gain.
But the acquittal that the author of
Millercalled form trumping substance
would in fact result from the Govern-
ment’s failure to prove an element of the
crime. There is no criminal tax evasion
without a tax deficiency, seesupra,at
1–2,
9
and there is no deficiency owing
to a distribution (received with respect
to a corporation’s stock) if a corpora-
tion has no earnings and profits and the
value distributed does not exceed the tax-
payer-shareholder’s basis for his stock.
Thus the fact that a shareholder distributee
of a successful corporation may have dif-
ferent tax liability from a shareholder of a
corporation without earnings and profits
merely follows from the way §§301 and
316(a) are written (to distinguish dividend
from capital return), and from the require-
ment of tax deficiency for a §7201 crime.
Without the deficiency there is nothing but
some act expressing the will to evade, and,
under §7201, acting on “bad intentions,
alone, [is] not punishable,”United States
v.D’Agostino, 145 F.3d 69, 73 (CA2
1998).
It is neither here nor there whether the
Millercourtwasjustifiedinthinkingit
would improve things to convict more
of the evasively inclined by dropping the
deficiency requirement and finding some
8
Thus in the period between this Court’s decisions inCommissioner v. Wilcox, 327 U. S. 404 (1946) (holding embezzled funds to be nontaxable to the embezzler) andJames v. United States,
3
66 U. S. 213 (1961) (overrulingWilcox, holding embezzled funds to be taxable income), the Government routinely argued that diverted fundswere “constructive distributions,” taxable to
t
he recipient as dividends. See generally Gardner 237 (“WhileWilcoxwas good law, the safest way to insure that both the corporation and the shareholder would be taxed on their respective
g
ain from the diverted funds was to label them dividends”); 4 Bittker & Lokken ¶92.2(7), p. 92–23, n. 37.
9
Boulware was also convicted of violating §7206(1), which makes it a felony “[w]illfully [to] mak[e] and subscrib[e] any return, statement, or other document, which contains or is verified
by a written declaration that it is made under the penalties of perjury, and which [the taxpayer] does not believe to be true and correct as to every material matter.” He argues that if the Ninth
Circuit erred, its error calls into question not only his §7201 conviction, but his §7206(1) conviction as well. Brief for Petitioner 15–16. Althoughthe Courts of Appeals are unanimous in
holding that §7206(1) “does not require the prosecution to prove the existence of a tax deficiency,”United States v. Tarwater, 308 F.3d 494, 504 (CA6 2002); see alsoUnited States v. Peters,
153 F.3d 445, 461 (CA7 1998) (collecting cases), itis arguable that “the nature and character of the funds received can be critical in determining whether . . . §7206(1) has been violated,
[even if] proof of a tax deficiency is unnecessary,” 1 I. Comisky, L. Feld, & S. Harris, Tax Fraud & Evasion ¶2.03[5], p. 21 (2007); see also Brief for Petitioner 15–16. The Government does
not argue that Boulware’s §§7201 and 7206(1) convictions should be treated differently at this stage of the proceedings, however, and we will accede to the Government’s working assumption
here that the §§7201 and 7206(1) convictions stand or fall together.
May 12, 20089082008–19 I.R.B.

other device to exempt returns of capital.
10
Even if there were compelling reasons to
extend §7201 to cases in which no taxes
are owed, it bears repeating that “[t]he
spirit of the doctrine which denies to the
federal judiciary power to create crimes
forthrightly admonishes that we should
not enlarge the reach of enacted crimes by
constituting them from anything less than
the incriminating components contem-
plated by the words used in the statute,”
Morissettev.United States,342U.S.
246, 263 (1952) (opinion for the Court by
Jackson, J.). If §301, §316(a), or §7201
could stand amending, Congress will have
to do the rewriting.
C
Not only isMillerdevoid of the sup-
port claimed for it, but it suffers the de-
merit of some anomalies of its own. First
and most obviously, §§301 and 316 are odd
stalks for grafting a contemporaneous in-
tent requirement, given the fact that the
correct application of their rules will of-
ten become known only at the end of the
corporation’s tax year, regardless of the
shareholder’s or corporation’s understand-
ing months earlier when a particular dis-
tribution may have been made. Section
316(a)(2) conditions treating a distribution
as a constructive dividend by reference
to earnings and profits, and earnings and
profits are to be” computed as of the close
of the taxable year . . . without regard
to the amount of the earnings and prof-
its at the time the distribution was made.”
A corporation may make a deliberate dis-
tribution to a shareholder, with everyone
expecting a profitable year and consider-
ing the distribution to be a dividend, only
to have the shareholder end up liable for
no tax if the company closes out its tax
year in the red (so long as the shareholder’s
basis covers the distribution); when such
facts are clear at the time the reporting
forms and returns are filed,
11
the share-
holder does not violate §7201 by paying
no tax on the moneys received, intent be-
ing beside the point. And since intent to
make a distribution a taxable one cannot
control, it would be odd to condition non-
taxable return-of-capital treatment on con-
temporaneous intent, when the statute says
nothing about intent at all.
The intent interpretation is strange for
another reason, too (a reason in some ten-
sion with the Ninth Circuit’s assumption
that an unreported distribution without
contemporaneous intent to return capital
will support a conviction for evasion). The
text of §301(a) ostensibly provides for all
variations of tax treatment of distributions
received with respect to a corporation’s
stock unless a separate provision of the
Code requires otherwise. YetMilleref-
fectively converts the section into one of
merely partial coverage, with the result
of leaving one class of distributions in a
tax status limbo in criminal cases. That
is, while §301(a) expressly provides that
distributions made by a corporation to
a shareholder with respect to its stock
“shall be treated in the manner provided
in [§301(c)],” underMiller, a distribution
from a corporation without earnings and
profits would fail to be a return of capital
for lack of contemporaneous intent to treat
it that way; but to the extent that distribu-
tion did not exceed the taxpayer’s basis
for the stock (and thus become a capital
gain), §301(a) would leave the distribution
unaccounted for.
It is no answer to say that §61(a) of
the Code would step in where §301(a) has
been pushed out. Although §61(a) de-
fines gross income, “[e]xcept as otherwise
provided,” as “all income from whatever
source derived,” the plain text of §301(a)
does provide otherwise for distributions
made with respect to stock. So using
§61(a) as a stopgap would only sanction
yet another eccentricity: §301(a) would
be held not to cover what its text says it
“shall” (the class of distributions made
with respect to stock for which no other
more specific provision is made), while
§61(a) would need to be applied to what
by its terms it should not be (a receipt of
funds for which tax treatment is “other-
wise provided” in §301(a)).
The implausibility of a statutory read-
ing that either creates a tax limbo or forces
resort to an atextual stopgap is all the
clearer from the Ninth Circuit’s discussion
in this case of its own understanding of the
consequences ofMiller’s rule: the court
openly acknowledgedthat “imposing an
intent requirement creates a disconnect
between civil and criminal liability,” 470
F.3d, at 934. In construing distribution
rules that draw no distinction in terms of
criminal or civil consequences, the dis-
parity of treatment assumed by the Court
of Appeals counts heavily against its con-
temporaneous intent construction (quite
apart from the Circuit’s understanding that
its interpretation entails criminal liability
for evasion without any showing of a tax
deficiency).
Millererred in requiring a contempora-
neous intent to treat the receipt of corpo-
rate funds as a return of capital, and the
judgment of the Court of Appeals here, re-
lying onMiller, is likewise erroneous.
IV
The Government has raised nothing
that calls for affirmance in the face of the
Court of Appeals’s reliance onMiller.The
United States does not defend differential
treatment of criminal and civil cases, see
Brief for United States 24, and it thus
stops short of fully defending the Ninth
Circuit’s treatment. The Government’s
argument, instead, is that we should affirm
under the rule that before any distribu-
tion may be treated as a return of capital
(or, by a parity of reasoning, a dividend),
it must first be distributed to the share-
holder “with respect to . . . stock.”Id.,
at 19 (internal quotations omitted). The
taxpayer’s intent, the Government says,
may be relevant to this limiting condition,
and Boulware never expressly claimed
anysuchintent. Seeibid.(“[I]ntent is
. . . relevant to whether a payment is a
‘distribution . . . with respect to [a corpo-
ration’s] stock’”); but see Tr. of Oral Arg.
44 (“[J]ust to be clear, the Government is
arguing for an objective test here”).
10
“A better [method of exempting returns of capital from taxation] could no doubt be devised.” 4 Bittker & Lokken ¶92.1.1, p. 92–3; seeibid. (suggesting, for example, that “all receipts
from a corporation could be treated as taxable income, and a correction for any resulting over taxation could be made in computing gain or loss when stock is sold, exchanged, or becomes
worthless”); see also Andrews, “Out of its Earnings and Profits”: Some Reflections on the Taxation of Dividends, 69 Harv. L. Rev. 1403, 1439 (1956) (criticizing the earnings and profits
concept “[a]s a device for separating income from return of capital,” and suggesting that “[d]istributions which ought to be treated as return of capital [could] be brought within the concept
of a partial liquidation by special provision”).
11
Sometimes these facts are not clear, and in certain circumstances a corporation may be required to assume it is profitable. For example, the instructions to IRS Form 1099–DIV provide
that when a corporation is unsure whether it has sufficient earnings and profits at the end of the taxable year to cover a distribution to shareholders,“the entire payment must be reported as a
dividend.” Seehttp://www.irs.gov/pub/irs-pdf/i1099div.pdf(as visited Feb. 15, 2008, and available in Clerk of Court’s case file).
2008–19 I.R.B.909May 12, 2008

The Government is of course correct
that“withrespectto...stock”isa
limiting condition in §301(a). Seesupra,
at 2–3.
12
As the Government variously
says, it requires that “the distribution of
property by the corporation be made to a
shareholder because of his ownership of
its stock,” Brief for United States 16; and
that “‘an amount paid by a corporation to
a shareholder [be] paid to the shareholder
in his capacity as such,’”ibid.(quot-
ing 26 CFR §1.301–1(c) (2007) (emphasis
deleted)).
This, however, is not the time or
place to home in on the “with respect to
...stock”condition.Factswithabearing
on it may range from the distribution
of stock ownership
13
to conditions of
corporate employment (whether, for
example, a shareholder’s efforts on behalf
of a corporation amount to a good reason
to treat a payment of property as salary).
The facts in this case have yet to be raked
over with the stock ownership condition
in mind, sinceMillerseems to have
pretermitted a full consideration of the
defensive proffer, and if consideration is to
be given to that condition now, the canvas
of evidence and Boulware’s proffer should
be made by a court familiar with the whole
evidentiary record.
14
As a more specific version of its “with
respectto...stock”position,theGov-
ernment says that the diversions of corpo-
rate funds to Boulware were in fact un-
lawful, see Brief for United States 34–37;
see also n. 5,supra, and it argues that
§§301 and 316(a) are inapplicable to ille-
gal transfers, see Brief for United States
34–37; see alsoD’Agostino, 145 F.3d, at
73 (“[T]he ‘no earnings and profits, no in-
come’ rule would not necessarily apply in
a case ofunlawfuldiversion, such as em-
bezzlement, theft, a violation of corporate
law, or an attempt to defraud third party
creditors” (emphasis in original)); see also
n. 8,supra. The Government goes so
far as to claim that “[t]he only rational ba-
sis for the jury’s judgment was a conclu-
sion that [Boulware] unlawfully diverted
the funds.” Brief for United States 37.
But we decline to take up the question
whether an unlawful diversion may ever
be deemed a “distribution . . . with re-
spect to [a corporation’s] stock,” a question
which was not considered by the Ninth Cir-
cuit. We do, however, reject the Govern-
ment’s current characterization of the jury
verdict in Boulware’s case. True, the ju-
rors were not moved by Boulware’s sug-
gestion that the diversions were corporate
advances or loans, or that he was using the
funds for corporate purposes. But the jury
was not asked, and cannot be said to have
answered, whether Boulware breached any
fiduciary duty as a controlling shareholder,
unlawfully diverted corporate funds to de-
fraud his wife, or embezzled HIE’s funds
outright.
V
Sections §§301 and 316(a) govern the
tax consequences of constructive distribu-
tions made by a corporation to a share-
holder with respect to its stock. A defen-
dant in a criminal tax case does not need
to show a contemporaneous intent to treat
diversions as returns of capital before re-
lying on those sections to demonstrate no
taxes are owed. The judgment of the Court
of Appeals is vacated, and the case is re-
manded for further proceedings consistent
with this opinion.
It is so ordered.
12
Another limiting condition is that the diversion of funds must be a “distribution” in the first place (regardless of the “with respect to stock” limitation), seesupra, at 6–8, though the
Government is content to assume that §301(a)’s “distribution” language iscapacious enough to cover the diversions involved here, and that if Boulware bears the burden of production in
going forward with the defense that the funds he received constituted a “distribution” within the meaning of §301(a), see n. 14,infra, that burden has been met. Nor does the Government
dispute that Boulware offered sufficient evidence of his basis and HIE’s lack of earnings and profits. See Brief for United States 34, n. 11.
13
See,e.g.,Truesdell v. Commissioner, IRS Non Docketed Service Advice Review, 1989 WL 1172952 (Mar. 15, 1989) (“We believe a corporation and its shareholders have a common
o
bjective—to earn a profit for the corporation to pass onto its shareholders. Especially where the corporation is wholly owned by one shareholder, thecorporation becomes the alter ego of the
s
hareholder in his profit making capacity. . . . [B]y passing corporate funds to himself as shareholder, a sole shareholder is acting in pursuit of thesecommon objectives”). We note, however,
t
hat although Boulware was not a sole shareholder, the Tax Court has taken it as “well settled that a distribution of corporate earnings to shareholdersmay constitute a dividend,” and so a return
of capital as well, “notwithstanding that it is not in proportion to stock-holdings.”Dellinger v. Commissioner, 32 T. C. 1178, 1183 (1959); seeibid. (noting that because other stockholders did
not complain when a taxpayer received unequal property, “under the circumstances they must be deemedto have ratified the distribution”); see alsoCrowley v. Comissioner, 962 F.2d 1077
(CA1 1992);Lengsfield v. Commissioner, 241 F.2d 508 (CA5 1957);Baird v. Commissioner, 25 T. C. 387 (1955);Thielking v. Commissioner, 53 TCM 746 (1987), ¶87, 227, P-H Memo TC.
14
Boulware does not dispute that he bears the burden of producing some evidence to support his return-of-capital theory, including evidence that the corporation lacked earnings and profits
and that he had sufficient basis in his stock to cover the distribution. See Tr. of Oral Arg. 53. He instead argues that, as to the “with respect to . . . stock” requirement, it suffices to show
“[t]hat he is a stockholder, and that he did not receive this money in any nonstockholder capacity.”Id., at 57. The Government, for its part, on the authority ofHolland v. United States,348
U. S. 121 (1954) andBok, 156 F.3d, at 163–164, argues that Boulware must offer more evidence than that. We express no view on that issue here, just as we decline to consider the more
general question whether the Second Circuit’s rule inBok, which places on the criminal defendant the burden to produce evidence in support of a return-of-capital theory, is authorized by
Hollandand consistent withSandstrom v. Montana, 442 U. S. 510 (1979), and related cases.
May 12, 20089102008–19 I.R.B.

Part IV. Items o
fGeneralInterest
Notice of Proposed
Rulemaking
Withdrawal of Regulations
Under Old Section
6323(b)(10)
REG–141998–06
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains pro-
posedregulationsrelatedtothevalidity
and priority of the Federal tax lien against
certain persons under section 6323 of the
Internal Revenue Code (the Code). The
proposed regulations update the corre-
sponding Treasury Regulations in various
respects. The proposed regulations reflect
the adjustment within section 6323(b)
of certain dollar amounts as well as the
amendment of section 6323(b)(10) by
the IRS Restructuring and Reform Act
of 1998 (RRA 1998). In addition, the
proposed regulations amend the existing
regulations under section 6323(c), (g), and
(h) to reflect that a notice of Federal tax
lien (NFTL) is not treated as meeting the
filing requirements until it is both filed
and indexed in the office designated by the
state (in the case of real property located
in a state where a deed is not valid against
a purchaser until the filing of such deed
has been entered and recorded in the pub-
lic index); the lien will be extinguished
if an NFTL contains a certificate of re-
lease and the NFTL is not timely refiled;
and current law provides the IRS with
a 10-year period to collect an assessed
tax. The proposed regulations also make
changes to the existing regulations under
section 6323(f) to clarify the IRS’s author-
ity to file NFTLs electronically. Finally,
the proposed regulations make incidental
changes throughout the existing regula-
tions under section 6323 to make the dates
in the examples more contemporaneous
with the present and to remove language
deemed no longer necessary.
DATES: Written or electronic comments
and requests for a public hearing must be
received by June 16, 2008.
ADDRESSES: Send submissions to
CC:PA:LPD:PR (REG–141998–06), room
5203, Internal Revenue Service, POB
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand-delivered Monday through Friday
betweenthehoursof8a.m. and4p.m.
to CC:PA:LPD:PR (REG–141998–06),
Courier’s Desk, Internal Revenue Service,
1111 Constitution Avenue, NW, Washing-
ton, DC, 20224, or viathe Federal eRule-
making Portal atwww.regulations.gov
(IRS–REG–141998–06).
FOR FURTHER INFORMATION
CONTACT: Concerning the regulations,
Debra A. Kohn at (202) 622–7985; con-
cerning submissions of comments and
the hearing, Regina Johnson at (202)
622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Procedure and Admin-
istration Regulations (26 CFR part 301)
under section 6323 of the Code. If any
person liable for tax neglects or refuses to
pay after demand, the amount of that tax is
a lien in favor of the United States against
all property and rights to property of such
person under section 6321. Section 6323
provides that a Federal tax lien is only
valid against certain persons if an NFTL is
filed and addresses generally the validity
and priority of the Federal tax lien against
such persons. Section 6323(b) and (c) ad-
dresses the protection of certain interests
even though an NFTL has been filed. Sec-
tion 6323(f) prescribes the place for filing
and the form of an NFTL. Section 6323(g)
addresses the refiling of an NFTL. Section
6323(h) contains definitions of certain
terms used throughout section 6323.
Since 1976, there have been numer-
ous amendments to section 6323 that are
not reflected in the existing regulations.
Section 6323(b)(10) has been amended
by RRA 1998. In addition, several sub-
sections of section 6323(b) have been
amended to increase the dollar amounts
these sections reference. Also, section
6323(f)(4) was amended by the Revenue
Act of 1978 to provide that an NFTL does
not meet the filing requirements with re-
spect to real property until the filing is
entered and recorded in a public index
maintained by the state if the laws of the
state provide that a deed is not valid against
a purchaser unless it is recorded in a public
index. Moreover, section 6502, the statute
that governs the period the IRS has to take
collection action (referenced in various
places throughout §301.6323(g)–1(c)),
was amended by the Revenue Act of 1990
to change the period from six years to 10
years.
There have also been several changes
to IRS practice that are not reflected
in the existing regulations. Section
301.6323(f)–1(d)(2) of the existing reg-
ulations provides that an NFTL may be
filed electronically if the state in which
it is being filed permits electronic filing.
Whether a state “permits” electronic fil-
ing of NFTLs has been subject to varying
interpretations, thus casting doubt on the
validity of NFTLs filed electronically in
jurisdictions that do not specifically pro-
vide for electronic filing. However, the
requirements for proper filing of liens are
a matter of Federal, not state, law.United
States v. Union Cent. Life Ins. Co.,368
U.S. 291, 82 S. Ct. 349, 7 L. Ed. 2d
294 (1961). Thus, the IRS already pos-
sesses the authority to dictate the form and
content of its NFTLs. The proposed reg-
ulations remove the “permits” language
so that they correctly reflect the IRS’s
authority to file NFTLs electronically.
Section 301.6323(g)–1(a)(3) and (4) of
the existing regulations states that the IRS
may refile an NFTL once the filing period
has elapsed and that failure to refile within
the specified perioddoes not affect the ex-
istence of the lien. The existing regula-
tions also provide that failure to refile dur-
ing the specified period does not affect the
NFTL with respect to property that is the
subject matter of a suit or that was levied
upon prior to the expiration of the required
refiling period. These provisions concern-
ing the effect of a failure to refile are, to
some extent, inconsistent with current IRS
practice. Most filed NFTLs now contain
a certificate of release that automatically
releases the lien as of the date the NFTL
prescribes, which is the date at the end of
the required refiling period. Therefore, if
2008–19 I.R.B.911May 12, 2008

the IRS does not refile an NFTL within
the specified period, the certificate of re-
lease contained in the NFTL extinguishes
the lien. The proposed regulations update
the regulations under section 6323 to re-
flect these changes in IRS practice.
The Code currently provides a 10-year
period for instituting a proceeding in court
or serving a levy to collect an assessed
tax liability, while §301.6323(g)–1(c)
of the existing regulations references
the 6-year period that existed until
1990. The proposed regulations update
§301.6323(g)–1(c) to reflect this change
in the law.
The proposed regulations also update
the regulations under section 6323(h) to re-
flect changes made by the Uniform Com-
mercial Code (UCC). Section 9–312(a) of
the UCC, as adopted by most states in
2001, now provides that a security interest
in chattel paper, negotiable documents, in-
struments, or investment property may be
perfected by filing.
The proposed regulations also make
various incidental changes throughout the
§301.6323 regulations.
Explanation of Provisions
I.Adjustment of Dollar Amounts
Under section 6323(b) of the Code, a
Federal tax lien is not valid against certain
interests even though an NFTL has been
filed.
Section 6323(b)(4) includes, as one
such interest, certain tangible personal
property purchased in a casual sale.
In 1976, the purchase price of such
property was required to be less than
$250. The limit of $250 is reflected in
§301.6323(b)–1(d)(1) and in examples 1
and 3 contained in §301.6323(b)–1(d)(3).
This limit has been raised in the most
recent amendment to section 6323(b)(4)
to $1,000. The statutory limit is indexed
annually for inflation. After indexing, the
amount for 2008 is $1,320.
Section 6323(b)(7) protects a me-
chanic’s lienor with respect to residential
property subject to the mechanic’s lien.
In 1976, the protection extended to such
property was limited to an amount not
more than $1,000. The limit of $1,000
is reflected in §301.6323(b)–1(g)(1)
and in the examples contained in
§301.6323(b)–1(g)(2). This amount was
raised to $5,000 in the most recent amend-
ment to section 6323(b)(7). The statutory
limit is indexed annually for inflation.
After indexing, the amount for 2008 is
$6,600. The proposed regulations update
§301.6323(b)–1(d) and (g) to make the
dollar limits consistent with those appli-
cable under the current version of section
6323(b)(4) and (7).
Section 301.6323(b)–1(d)(3),Exam-
ple 3, references a $500 limit on house-
hold goods exempt from levy, citing
Treas. Reg. §301.6334–1(a)(2). Sec-
tion 301.6334–1(a)(2) is the regulation
under I.R.C. §6334(a)(2). The amount
reflected in section 6334(a)(2) as set forth
in the most recent version of the Code
is $6,250. The amounts in both sec-
tion 6334(a)(2) and the corresponding
regulation are indexed annually for in-
flation. After indexing, the applicable
amount for 2008 is $7,900. Accordingly,
§301.6323(b)–1(d)(3),Example 3,is
amended to make the reference to the limit
on household goods exempt from levy
consistent with the amounts applicable in
section 6334(a)(2) and §301.6334–1(a)(2).
II.RemovalofProtectionforPassbook
Loans
Section 6323(b)(10)currently protects
from a Federal tax lien certain institutions
holding deposit-secured loans, to the ex-
tent of any loan made without actual notice
or knowledge of the Federal tax lien. Prior
to the enactment of RRA 1998, section
6323(b)(10) was entitled “passbook loans”
and protected from a Federal tax lien an in-
stitution granting a loan without actual no-
tice or knowledge of the Federal tax lien,
if the loan was secured by an account ev-
idenced by a passbook and if the lending
institution was continuously in possession
of the passbook from the time the loan
was made. Section 301.6323(b)–1(j) re-
flects this language and, in addition, in-
cludes both a definition of “passbook” and
an example of the provision’s operation.
The amendment of section 6323(b)(10)
renders the language in the regulations
pertaining to passbook accounts obso-
lete. Because leaving §301.6323(b)–1(j)
in place is misleading and unnecessary
in light of the amendment of section
6323(b)(10), the proposed regulations re-
move §301.6323(b)–1(j).
III.Clarification of Language Authorizing
IRS to File NFTLs Electronically
Section 301.6323(f)–1(d)(2) sets forth
a definition of a Form 668, the form that,
when filed, serves as an NFTL. This sec-
tion includes NFTLs filed by electronic or
magnetic media “if a state in which [an
NFTL] is filed permits a notice of Federal
tax lien to be filed by the use of an elec-
tronic or magnetic medium.”
Most local recording offices now have
the technological capability to accept elec-
tronically-filed NFTLs. The proposed
regulations amend §301.6323(f)–1(d)(2)
to provide that a Form 668 may be filed
either in paper form or electronically. In
addition, the proposed regulations specifi-
cally define transmission by fax and e-mail
as electronic, as opposed to paper, filings.
The regulations as amended reflect the
IRS’s authority to file NFTLs electroni-
cally in all situations and allow the IRS
to work with local jurisdictions to receive
electronically-filed NFTLs if they have
the capacity to do so without obtaining
permission from the state.
IV.Revision of Language on Late Refiling
of NFTLs
Section 301.6323(g)–1(a) sets forth
general principles pertaining to refiling
NFTLs. Section 301.6323(g)–1(a)(1) pro-
vides in part that if two or more NFTLs
are filed with respect to a particular tax
assessment, the failure to refile during the
specified period in respect to one of the
notices does not affect the effectiveness
of the refiling of any other NFTL. Section
301.6323(g)–1(a)(3) states in part that
the failure to refile an NFTL during the
required filing period does not affect the
effectiveness of the notice with respect
to property that is the subject matter of a
suit or that has been levied upon prior to
the expiration of the filing period. Section
301.6323(g)–1(a)(4), as well as several
of the examples in §301.6323(g)–1(b)(3)
and (c)(3), suggest that a lien may con-
tinue to exist when an NFTL is not refiled.
These provisions are, to some extent, in-
consistent with current IRS practice. Most
NFTLs now contain a certificate of release
that automatically becomes effective on
thedateprescribedintheNFTL,whichis
the date the required refiling period ends.
Therefore, if an NFTL that contains a cer-
May 12, 20089122008–19 I.R.B.

tificate of release is not timely refiled in
each jurisdiction where it was originally
filed, the lien self-releases and is extin-
guished in all jurisdictions. See I.R.C.
§6325(f)(1)(A). The extinguishment of
the lien invalidates NFTLs filed in other
jurisdictions and requires the IRS to file
certificates of revocation, as well as new
NFTLs, in each jurisdiction where NFTLs
were previously filed.
The proposed regulations amend these
provisions to provide that, with respect to
an NFTL that includes a certificate of re-
lease, failure to timely refile the NFTL
in any jurisdiction where it was originally
filed extinguishes the lien, and that when
anNFTLisfiledinmorethanonejuris-
diction, certificates of revocation as well
as new NFTLs must be filed in all the ju-
risdictions for the lien to be reinstated.
V.Revision of References to 6-Year
Collection Period
Section 6502 generally affords a
10-year period for instituting a proceed-
ing in court or serving a levy to col-
lect a properly assessed tax. The pe-
riod section 6502 allowed for taking
these collection actions was, until 1990,
six years. The existing regulations un-
der section 6323(g) do not reflect this
change. Instead, subsections (b) and (c)
of §301.6323(g)–1, which addresses refil-
ing of NFTLs, imply that the applicable
period for collection is six years.Exam-
ple 5of §301.6323(g)–1(b)(3) references
the 6-year period. In addition, several
references to a 6-year collection period
occur in §301.6323(g)–1(c)(1), and addi-
tional references to the 6-year period occur
inExample 1in §301.6323(g)–1(c)(3).
The proposed regulations update
§301.6323(g)–1(c) to reflect this change
in the law.
VI.Incidental Updates
Various references and dates contained
in the regulations under section 6323
have been rendered obsolete since 1976.
The proposed regulations update vari-
ous provisions throughout the §301.6323
regulations to make dates more contem-
poraneous with the present and remove
language deemed no longer necessary. In
addition, the proposed regulations remove
all references to Internal Revenue Service
district directors, as these positions were
eliminated by the Internal Revenue Ser-
vice reorganization implemented pursuant
to RRA 1998.
Proposed Effective Date
These regulations are proposed to gen-
erally apply with respect to any NFTL filed
on or after the date that these regulations
are published as final regulations in the
Federal Register.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory
assessment is not required. It also has
been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these reg-
ulations, and because these regulations
do not impose collection of information
on small entities, the Regulatory Flexi-
bility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the
Code, this notice of proposed rulemaking
has been submitted to the Chief Counsel
for Advocacy of the Small Business
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 comments (a
signed original and eight (8) copies) or
electronic comments that are timely sub-
mitted to the IRS. The IRS and Treasury
Department request comments on the clar-
ity of the proposed rules and how they may
be made easier to understand. All com-
ments will be available for public inspec-
tion and copying. A public hearing will be
scheduled if requested in writing by any
person that timely submits written com-
ments. If a public hearing is scheduled, no-
tice of the date, time, and place for the pub-
lichearingwillbepublishedintheFederal
Register.
Drafting Information
The principal author of these regula-
tions is Debra A. Kohn of the Office of the
Associate Chief Counsel (Procedure and
Administration).
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 301 is pro-
posed to be amended as follows:
PART 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation for
part 301 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 301.6323(b)–1 is
amended as follows:
1. Paragraph (d)(1) is revised.
2. Paragraphs (d)(3)Example 1and
(d)(3)Example 3are revised.
3. Paragraphs (g)(1) and (g)(2)Exam-
ple 1throughExample 3are revised.
4. Paragraphs (i)(1)(iii) and (j) are re-
vised.
The revisions read as follows:
§301.6323(b)–1 Protection for certain
interests even though notice filed.
*****
(d)Personal property purchased in ca-
sual sale—(1)In general. Even though a
notice of lien imposed by section 6321 is
filed in accordancewith §301.6323(f)–1,
the lien is not valid against a purchaser (as
defined in §301.6323(h)–1(f)) of house-
hold goods, personal effects, or other tan-
gible personal property of a type described
in §301.6334–1 (which includes wearing
apparel, school books, fuel, provisions,
furniture, arms for personal use, livestock,
and poultry (whether or not the seller is the
head of a family); and books and tools of
a trade, business, or profession (whether or
not the trade, business, or profession of the
seller)), purchased, other than for resale, in
a casual sale for less than $1,320, effective
for 2008 and adjusted each year based on
the rate of inflation (excluding interest and
expenses described in §301.6323(e)–1).
*****
(3) * * *
Example 1. A, an attorney’s widow, sells a set
of law books for $200 to B, for B’s own use. Prior
to the sale a notice of lien was filed with respect
to A’s delinquent tax liability in accordance with
§301.6323(f)–1. B has no actual notice or knowledge
of the tax lien. In addition, B does not know that the
sale is one of a series of sales. Because the sale is a
casual sale for less than $1,320 and involves books
2008–19 I.R.B.913May 12, 2008

of a profession (tangible personal property of a type
described in §301.6334–1, irrespective of the fact
that A has never engaged in the legal profession), the
tax lien is not valid against B even though a notice of
lien was filed prior to the time of B’s purchase.
*****
Example 3. In an advertisement appearing in a lo-
cal newspaper, G indicates that he is offering for sale
a lawn mower, a used television set, a desk, a refrig-
erator, and certain used dining room furniture. In re-
sponse to the advertisement, H purchases the dining
room furniture for $200. H does not receive any infor-
mation which would impart notice of a lien, or that the
sale is one of a series of sales, beyond the information
contained in the advertisement. Prior to the sale, a
notice of lien was filed with respect to G’s delinquent
tax liability in accordance with §301.6323(f)–1. Be-
cause H had no actual notice or knowledge that sub-
stantially all of G’s household goods were being sold
or that the sale is one of a series of sales, and because
the sale is a casual sale for less than $1,320, H does
not purchase the dining room furniture subject to the
lien. The household goods are of a type described
in §301.6334–1(a)(2) irrespective of whether G is the
head of a family or whether all such household goods
offered for sale exceed $7,900 in value.
*****
(g)Residential property subject to a
mechanic’s lien for certain repairs and
improvements—(1)In general.Even
though a notice of a lien imposed by
section 6321 is filed in accordance with
§301.6323(f)–1, the lien is not valid
against a mechanic’s lienor (as defined in
§301.6323(h)–1(b)) who holds a lien for
the repair or improvement of a personal
residence if —
(i) The residence is occupied by the
owner and contains no more than four
dwelling units; and
(ii) The contract price on the prime
contract with the owner for the repair or
improvement (excluding interest and ex-
penses described in §301.6323(e)–1) is
not more than $6,600, effective for 2008
and adjusted each year based on the rate
of inflation.
(iii) For purposes of paragraph (g)(1)(ii)
of this section, the amounts of subcontracts
under the prime contract with the owner
are not to be taken into consideration for
purposes of computing the $6,600 prime
contract price. It is immaterial that the no-
tice of tax lien was filed before the contrac-
tor undertakes his work or that he knew of
the lien before undertaking his work.
(2) * * *
Example 1. A owns a building containing four
apartments, one of which he occupies as his personal
residence. A notice of lien which affects the building
is filed in accordance with §301.6323(f)–1. There-
after, A enters into a contract with B in the amount
of $800, which includes labor and materials, to repair
the roof of the building. B purchases roofing shingles
from C for $300. B completes the work and A fails
to pay B the agreed amount. In turn, B fails to pay
C for the shingles. Under local law, B and C acquire
mechanic’s liens on A’s building. Because the con-
tract price on the prime contract with A is not more
than $6,600 and under local law B and C acquire me-
chanic’s liens on A’s building, the liens of B and C
have priority over the Federal tax lien.
Example 2. Assume the same facts as inExam-
ple 1, except that the amount of the prime contract
between A and B is $7,100. Because the amount of
the prime contract with the owner, A, is in excess
of $6,600, the tax lien has priority over the entire
amount of each of the mechanic’s liens of B and C,
even though the amount of the contract between B
and C is $300.
Example 3. Assume the same facts as inExample
1, except that A and B do not agree in advance upon
the amount due under the prime contract but agree
that B will perform the work for the cost of mate-
rials and labor plus 10 percent of such cost. When
the work is completed, it is determined that the total
amount due is $850. Because the prime contract price
is not more than $6,600 and under local law B and C
acquire mechanic’s liens on A’s residence, the liens
of B and C have priority over the Federal tax lien.
*****
(i)***(1)***
(iii) After the satisfaction of a levy pur-
suant to section 6332(b), unless and un-
til the Internal Revenue Service delivers to
the insuring organization a notice (for ex-
ample, another notice of levy, a letter, etc.)
executed after the date of such satisfaction,
that the lien exists.
*****
(j)Effective/applicability date.This
section applies to any notice of Federal tax
lien filed on or after the date these regula-
tions are published as final regulations in
theFederal Register.
Par. 3. Section 301.6323(c)–2 is
amended as follows:
1. Paragraph (d),Example 1through
Example 5, is revised.
2. Paragraph (e) is added.
The revisions and addition read as fol-
lows:
§301.6323(c)–2 Protection for real
property construction or improvement
financing agreements.
*****
(d) * * *
Example 1. A, in order to finance the construc-
tion of a dwelling on a lot owned by him, mortgages
the property to B. The mortgage, executed January
4, 2006, includes an agreement that B will make
cash disbursements to A as the construction pro-
gresses. On February 1, 2006, in accordance with
§301.6323(f)–1, a notice of lien is filed and recorded
in the public index with respect to A’s delinquent tax
liability. A continues the construction, and B makes
cash disbursements on June 15, 2006, and Decem-
ber 15, 2006. Under local law B’s security interest
arising by virtue of the disbursements is protected
against a judgment lien arising February 1, 2006 (the
date of tax lien filing) out of an unsecured obligation.
Because B is the holder of a security interest coming
into existence by reason of cash disbursements made
pursuant to a written agreement, entered into before
tax lien filing, to make cash disbursements to finance
the construction of real property, and because B’s
security interest is protected, under local law, against
a judgment lien arising as of the time of tax lien filing
out of an unsecured obligation, B’s security interest
has priority over the tax lien.
Example 2.(i) C is awarded a contract for the
demolition of several buildings. On March 3, 2004,
C enters into a written agreement with D which pro-
vides that D will make cash disbursements to finance
the demolition and also provides that repayment of
the disbursements is secured by any sums due C un-
der the contract. On April 1, 2004, in accordance with
§301.6323(f)–1, a notice of lien is filed with respect
to C’s delinquent tax liability. With actual notice of
the tax lien, D makes cash disbursements to C on Au-
gust 13, September 13, and October 13, 2004. Under
local law D’s security interest in the proceeds of the
contract with respect to the disbursements is entitled
to priority over a judgment lien arising on April 1,
2004 (the date of tax lien filing) out of an unsecured
obligation.
(ii) Because D’s security interest arose by reason
of disbursements made pursuant to a written agree-
ment, entered into before tax lien filing, to make cash
disbursements to finance a contract to demolish real
property, and because D’s security interest is valid un-
der local law against a judgment lien arising as of the
time of tax lien filed out of an unsecured obligation,
the tax lien is not valid with respect to D’s security
interest in the proceeds of the demolition contract.
Example 3.Assume the same facts as inExam-
ple 2and, in addition, assume that, as further security
for the cash disbursements, the March 3, 2004, agree-
ment also provides for a security interest in all of C’s
demolition equipment. Because the protection of the
security interest arising from the disbursements made
after tax lien filing under the agreement is limited un-
der section 6323(c)(3) to the proceeds of the demo-
lition contract and because, under the circumstances,
the security interest in the equipment is not otherwise
protected under section 6323, the tax lien will have
priority over D’s security interest in the equipment.
Example 4. (i) On January 3, 2006, F and G enter
into a written agreement, whereby F agrees to provide
G with cash disbursements, seed, fertilizer, and insec-
ticides as needed by G, in order to finance the raising
and harvesting of a crop on a farm owned by G. Un-
der the terms of the agreement F is to have a secu-
rity interest in the crop, the farm, and all other prop-
ertythenownedorthereafteracquiredbyG.Inac-
cordance with §301.6323(f)–1, on January 10, 2006,
a notice of lien is filed and recorded in the public in-
dex with respect to G’s delinquent tax liability. On
March 3, 2006, with actual notice of the tax lien, F
makes a cash disbursement of $5,000 to G and fur-
nishes him seed, fertilizer, and insecticides having a
value of $10,000. Under local law F’s security in-
May 12, 20089142008–19 I.R.B.

terest, coming into existence by reason of the cash
disbursement and the furnishing of goods, has prior-
ity over a judgment lien arising January 10, 2006 (the
date of tax lien filing and recording in the public in-
dex) out of an unsecured obligation.
(ii) Because F’s security interest arose by reason
of a disbursement (including the furnishing of goods)
made under a written agreement which was entered
into before tax lien filing and which constitutes an
agreement to finance the raising or harvesting of a
farm crop, and because F’s security interest is valid
under local law against a judgment lien arising as of
the time of tax lien filing out of an unsecured obliga-
tion, the tax lien is not valid with respect to F’s secu-
rity interest in the crop even though a notice of lien
was filed before the security interest arose. Further-
more, because the farm is property subject to the tax
lien at the time of tax lien filing, F’s security interest
with respect to the farm also has priority over the tax
lien.
Example 5. Assume the same facts as inExample
4and in addition that on October 2, 2006, G acquires
several tractors to which F’s security interest attaches
under the terms of the agreement. Because the trac-
tors are not property subject to the tax lien at the time
of tax lien filing, the tax lien has priority over F’s se-
curity interest in the tractors.
(e)Effective/applicability date.This
section applies with respect to any notice
of Federal tax lien filed on or after the
date these regulations are published as fi-
nal regulations in theFederal Register.
Par. 4. Section 301.6323(f)–1 is
amended as follows:
1. Paragraph (d)(2) is revised.
2. Paragraph (f) is added.
The revision and addition read as fol-
lows:
§301.6323(f)–1 Place for filing notice;
form.
*****
(d) * * *
(2)Form 668 defined.ThetermForm
668means either a paper form or a form
transmitted electronically, including a
form transmitted by facsimile (fax) or
electronic mail (e-mail). A Form 668
must identify the taxpayer, the tax liability
giving rise to the lien, and the date the
assessment arose regardless of the method
used to file the notice of Federal tax lien.
*****
(f)Effective/applicability date.This
section applies with respect to any notice
of Federal tax lien filed on or after the
date these regulations are published as fi-
nal regulations in theFederal Register.
Par. 5. Section 301.6323(g)–1 is
amended as follows:
1. Paragraphs (a)(1), (a)(4), (b)(3) in-
troductory text, (b)(3)Example 1,(b)(3)
Example 5, and (c)(1) are revised.
2. Paragraphs (a)(3), (a)(3)(i), and
(a)(3)(ii) are redesignated as paragraphs
(a)(3)(i), (a)(3)(i)(A), and (a)(3)(i)(B), re-
spectively.
3. The undesignated text following
newly-designated paragraph (a)(3)(i)(B)
is designated as paragraph (a)(3)(ii).
4.Newly-designated paragraph
(a)(3)(i) is revised.
5.Newly-designated paragraph
(a)(3)(i)(A) is revised.
6.Newly-designated paragraph
(a)(3)(ii) is revised.
7. Paragraphs (c)(1) through (c)(1)(ii)
are revised.
8. Paragraph (c)(2) is removed.
9. Paragraph (c)(3) is redesignated as
paragraph (c)(2) and revised.
10. Paragraph (d) is added.
The revisions and addition read as fol-
lows:
§301.6323(g)–1 Refiling of notice of tax
lien.
(a)In general—(1)Requirement to re-
file. In order to continue the effect of a no-
tice of lien, the notice must be refiled in
the place described in paragraph (b) of this
section during the required filing period
(described in paragraph (c) of this section).
If two or more notices of lien are filed with
respect to a particular tax assessment, and
each notice of lien contains a certificate of
release that releases the lien when the re-
quired refiling period ends, the failure to
comply with the provisions of paragraphs
(b)(1)(i) and (c) of this section in respect to
one of the notices of lien releases the lien
and renders ineffective the refiling of any
other notice of lien.
*****.
(3)Effect of failure to refile. (i) If the In-
ternal Revenue Service fails to refile a no-
tice of lien in the manner described in para-
graphs (b) and (c) of this section, the notice
of lien is not effective, after the expiration
of the required filing period, as against any
person without regard to when the interest
of the person in the property subject to the
lien was acquired. If a notice of lien con-
tains a certificate of release that releases
the lien at the end of the required refiling
period and the notice of lien is not refiled
during this period, the lien is extinguished
and the notice of lien is ineffective with re-
spect to—
(A) Property which is the subject matter
of a suit, to which the United States is a
party, commenced prior to the expiration
of the required filing period; and
*****
(ii) However, if a notice of lien does not
contain a certificate of release that releases
the lien at the end of the required refiling
period, the failure to refile during the re-
quired refiling period will not affect the ex-
istence of the lien nor the effectiveness of
the notice with respect to property which
is the subject matter of a suit commenced
prior to the expiration of the required re-
filing period, or property which has been
levied upon prior to the expiration of such
period.
(4)Filing of new notice. If a notice of
lien is not refiled, and the notice of lien
contains a certificate of release that au-
tomatically releases the lien when the re-
quired refiling period ends, the lien is re-
leased as of that date and is no longer in
existence. The Internal Revenue Service
must revoke the release before it can file a
new notice of lien. This new filing must
meet the requirements of section 6323(f)
and §301.6323(f)–1 and is effective from
the date on which such filing is made.
(b) * * *
(3)Examples. The following examples
illustrate the provisions of this section:
Example 1. A, a delinquent taxpayer, is a resi-
dent of State M and owns real property in State N. In
accordance with §301–6323–f(1), notices of lien are
filed in States M and N. The notices of lien contain
certificates of release that release the lien at the end of
the required refiling period. In order to continue the
effect of the notice of lien filed in either M or N, the
IRS must refile, during the required refiling period,
the notice of lien with the appropriate office in M as
well as with the appropriate office in N.
*****
Example 5. D, a delinquent taxpayer, is a resi-
dent of State M and owns real property in States N
and O. In accordance with §301.6323(f)–1, the Inter-
nal Revenue Service files notices of lien in M, N, and
O States. Nine years and 6 months after the date of
the assessment shown on the notice of lien, D estab-
lishes his residence in P, and at that time the Internal
Revenue Service receives from D a notification of his
change in residence in accordance with the provisions
of paragraph (b)(2) of this section. On a date which is
9 years and 7 months after the date of the assessment
shown on the notice of lien, the IRS properly refiles
notices of lien in M, N, and O which refilings are suf-
ficient to continue the effect of each of the notices of
lien. The Internal Revenue Service is not required to
file a notice of lien in P because D did not notify the
Internal Revenue Service of his change of residence
2008–19 I.R.B.915May 12, 2008

to P more than 89 days prior to the date each of the
refilings in M, N, and O was completed.
*****
(c)Required filing period—(1)In gen-
eral. For the purpose of this section, ex-
cept as provided in paragraph (c)(2) of
this section, the termrequired filing period
means—
(i) The 1-year period ending 30 days
after the expiration of 10 years after the
date of the assessment of the tax; and
(ii) The 1-year period ending with the
expiration of 10 years after the close of the
preceding required refiling period for such
notice of lien.
(2)Examples. The following examples
illustrate the provisions of this paragraph:
Example 1. On March 10, 1998, an assessment
of tax is made against B, a delinquent taxpayer, and
a lien for the amount of the assessment arises on
that date. On July 10, 1998, in accordance with
§301.6323(f)–1, a notice of lien is filed. The notice
of lien filed on July 10, 1998, is effective through
April 9, 2008. The first required refiling period for
the notice of lien begins on April 10, 2007, and ends
on April 9, 2008. A refiling of the notice of lien
during that period will extend the effectiveness of the
notice of lien filed on July 10, 1998, through April
9, 2018. The second required refiling period for the
notice of lien begins on April 10, 2017, and ends on
April 9, 2018.
Example 2. Assume the same facts as inExam-
ple 1,exceptthattheInternal Revenue Service fails
to refile a notice of lien during the first required refil-
ing period (April 10, 2007, through April 9, 2008). A
notice of lien is filed on June 9, 2009, in accordance
with §301.6323(f)–1. This notice is ineffective if the
original notice contained a certificate of release, as
the certificate of release would have had the effect of
extinguishing the lien as of April 10, 2008. The In-
ternal Revenue Service could revoke the release and
file a new notice of lien, which would be effective as
of the date it was filed.
(d)Effective/applicability date.This
section applies with respect to any notice
of Federal tax lien filed on or after the
date these regulations are published as fi-
nal regulations in theFederal Register.
Par. 6. Section 301.6323(h)–1 is
amended as follows:
1. Paragraphs (a)(2)(ii) and (a)(3) are
revised.
2. A new paragraph (h) is added.
The revisions and addition read as fol-
lows:
§301.6323(h)–1 Definitions.
(a) * * *
(2) * * *
(ii) The following example illustrates
the application of paragraph (a)(2):
Example. (i) Under the law of State X, a secu-
rity interest in certificated securities, negotiable doc-
uments, or instruments may be perfected, and hence
protected against a judgment lien, by filing or by
the secured party taking possession of the collateral.
However, a security interest in such intangible per-
sonal property is considered to be temporarily per-
fected for a period of 20 days from the time the se-
curity interest attaches, to the extent that it arises
for new value given under an authenticated security
agreement. Under the law of X, a security interest at-
taches to such collateral when there is an agreement
between the creditor and debtor that the interest at-
taches, the debtor has rights in the property, and con-
sideration is given by the creditor. Under the law of
X, in the case of temporary perfection, the security in-
terest in such property is protected during the 20-day
period against a judgment lien arising, after the secu-
rity interest attaches, out of an unsecured obligation.
Upon expiration of the 20-day period, the holder of
the security interest must perfect its security interest
under local law.
(ii) Because the security interest is perfected dur-
ing the 20-day period against a subsequent judgment
lien arising out of an unsecured obligation, and be-
cause filing or the taking of possession before the
conclusion of the period of temporary perfection is
not considered, for purposes of paragraph (a)(2)(i) of
this section, to be a requisite action which relates back
to the beginning of such period, the requirements of
this paragraph are satisfied. Because filing or taking
possession is a condition precedent to continued per-
fection, filing or taking possession of the collateral is
a requisite action to establish such priority after expi-
ration of the period of temporary perfection. If there
is a lapse of perfection for failure to take possession,
the determination of when the security interest ex-
ists (for purposes of protection against the tax lien) is
made without regard to the period of temporary per-
fection.
(3)Money or money’s worth. For pur-
posesofthisparagraph,thetermmoney or
money’s worthincludes money, a security
(as defined in paragraph (d) of this sec-
tion), tangible or intangible property, ser-
vices, and other consideration reducible to
a money value. Money or money’s worth
also includes any consideration which oth-
erwise would constitute money or money’s
worth under the preceding sentence which
was parted with before the security inter-
est would otherwise exist if, under local
law, past consideration is sufficient to sup-
port an agreement giving rise to a secu-
rity interest. A firm commitment to part
with money, a security, tangible or intan-
gible property, services, or other consid-
eration reducible to a money value does
not, in itself, constitute a consideration in
money or money’s worth. A relinquish-
ing or promised relinquishment of dower,
curtesy, or of a statutory estate created in
lieu of dower or curtesy, or of other mari-
tal rights is not a consideration in money or
money’s worth. Nor is love and affection,
promise of marriage, or any other consid-
eration not reducible to a money value a
consideration in money or money’s worth.
*****
(h)Effective/applicability date.This
section applies as of the date these regula-
tions are published as final regulations in
theFederal Register.
LindaE.Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on April 16, 2008,
8:45 a.m., and published in the issue of the Federal Register
for April 17, 2008, 73 F.R. 20877)
Notice of Proposed
Rulemaking and Notice of
Public Hearing
Regulations Under Section
2642(g)
REG–147775–06
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains
proposed regulations providing guidance
under section 2642(g)(1). The proposed
regulations describe the circumstances
and procedures under which an exten-
sion of time will be granted under section
2642(g)(1). The proposed guidance af-
fects individuals (or their estates) who
failed to make a timely allocation of gener-
ation-skipping transfer (GST) exemption
to a transfer, and individuals (or their es-
tates) who failed to make a timely election
under section 2632(b)(3) or (c)(5). This
document also provides notice of a public
hearing.
DATES: Written or electronic comments
must be received by July 16, 2008. Out-
lines of topics to be discussed at the pub-
lic hearing scheduledfor August 5, 2008,
must be received by July 15, 2008.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR(REG–147775–06),
Internal Revenue Service, Room 5203,
May 12, 20089162008–19 I.R.B.

PO Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may
be hand delivered Monday through Friday
betweenthehoursof8a.m.and4p.m.to
CC:PA:LPD:PR (REG–147775–06), 1111
Constitution Avenue, NW, Washington,
DC 20224; or sent electronically
viatheFederaleRulemaking
Portalatwww.regulations.gov
(IRS-REG–147775–06).The public
hearing will be held in the IRS auditorium.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Theresa M. Melchiorre,
(202) 622–3090; concerning submis-
sions of comments, the hearing, and/or
to be placed on the building access list
to attend the hearing, Richard Hurst at
Richard.A.Hurst@irscounsel.treas.govor
(202) 622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collections of information con-
tained in this notice of proposed rulemak-
ing have been submitted to the Office of
Management and Budget for review in
accordance with the Paperwork Reduc-
tion Act of 1995 (44 U.S.C. 3507(d)).
Comments on the collections of infor-
mation should be sent to theOffice of
Management and Budget, Attn: Desk
Officer for the Department of the Trea-
sury, Office of Information and Regulatory
Affairs, Washington, DC 20503, with
copies to theInternal Revenue Service,
Attn: IRS Reports Clearance Officer,
SE:W:CAR:MP:T:T:SP, Washington, DC
20224. Comments on the collection of
information should be received by June
16, 2008.
Comments are specifically requested
concerning:
Whether the proposed collection of in-
formation is necessary for the proper per-
formance of the functions of the IRS, in-
cluding whether the information will have
practical utility;
The accuracy of the estimated burden
associated with the proposed collection of
information;
How the quality, utility, and clarity of
the information to be collected may be en-
hanced;
How the burden of complying with the
proposed collection of information may be
minimized, including through the appli-
cation of automated collection techniques
or other forms of information technology;
and
Estimates of capital or start-up costs
and costs of operation, maintenance, and
purchase of service to provide information.
The reporting requirement in these pro-
posed regulations is in §26.2642–7(h)(2)
and (3). This information must be re-
ported by transferors or the executors of
transferors’ estates requesting relief under
section 2642(g)(1). This information will
be used by the IRS to determine whether
to grant a transferor or a transferor’s es-
tate an extension of time to: (1) allocate
GST exemption, as defined in section
2631, to a transfer; (2) elect under section
2632(b)(3) (the election not to have the
deemed allocation of GST exemption ap-
ply to a direct skip); (3) elect under section
2632(c)(5)(A)(i) (the election not to have
the deemed allocation of GST exemption
apply to an indirect skip or transfers made
to a particular trust); and (4) elect under
section 2632(c)(5)(A)(ii) (the election to
treat any trust as a GST trust for purposes
of section 2632(c)).
The following estimates are an approx-
imation of the average time expected to be
necessary for a collection of information.
They are based on the information that is
available to the IRS. Individual respon-
dents may require greater or less time, de-
pending on their particular circumstances.
Estimated total annual reporting bur-
den: 1800 hours.
Estimated average annual burden: 2
hours.
Estimated number of respondents: 900.
Estimated annual frequency of re-
sponse: When relief is requested.
An agency may not conduct or sponsor,
and a person is not required to respond to, a
collection of information unless it displays
a valid control number assigned by the Of-
fice of Management and Budget.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.
Background
The proposed regulations provide
guidance on the application of section
2642(g)(1). Congress added section
2642(g)(1) to the Internal Revenue Code
(Code) in section 564 of the Economic
Growth and Tax Relief Reconciliation Act
of 2001 (EGTRRA), (Public Law 107–16,
§564, 115 Stat. 91). This section directs
the Secretary to issue regulations describ-
ing the circumstances and procedures
under which an extension of time will be
granted to: (1) allocate GST exemption,
as defined in section 2631(a), to a transfer;
(2) elect under section 2632(b)(3) (the
election not to have the deemed allocation
of GST exemption apply to a direct skip);
(3) elect under section 2632(c)(5)(A)(i)
(the election not to have the deemed al-
location of GST exemption apply to an
indirect skip or transfers made to a par-
ticular trust); and (4) elect under section
2632(c)(5)(A)(ii) (the election to treat any
trust as a GST trust for purposes of sec-
tion 2632(c)). In determining whether to
grant relief, section 2642(g)(1) directs that
all relevant circumstances be considered
including evidence of intent contained in
the trust instrument or the instrument of
transfer.
The legislative history accompanying
section 2642(g)(1) indicates that Con-
gress believed that, in appropriate circum-
stances, an individual should be granted
an extension of time to allocate GST ex-
emption regardless of whether any period
of limitations had expired. Those cir-
cumstances include situations in which
the taxpayer intended to allocate GST
exemption and the failure to allocate the
exemption was inadvertent. H.R. Conf.
Rep. No. 107–84, 202 (2001).
After the enactment of section
2642(g)(1), the IRS issued Notice
2001–50, 2001–2 C.B. 189, which an-
nounced that transferors may seek an
extension of time to make an allocation
of GST exemption. The notice provides,
generally, that relief will be granted under
§301.9100–3 of the Procedure and Ad-
ministration Regulations if the taxpayer
satisfies the requirements of those regu-
lations and establishes to the satisfaction
of the Commissioner that the taxpayer
acted reasonably and in good faith and
that a grant of the requested relief will not
prejudice the interests of the Government.
2008–19 I.R.B.917May 12, 2008

If relief is granted under §301.9100–3
and the allocation is made, the amount of
GST exemption allocated to the transfer
is the Federal gift or estate tax value of
the property as of the date of the transfer
and the allocation is effective as of the
date of the transfer. (Notice 2001–50 will
be made obsolete upon the publication
of the Treasury decision adopting these
proposed regulations as final regulations
in theFederal Register.)
On August 2, 2004, the IRS issued Rev.
Proc. 2004–46, 2004–2 C.B. 142, which
provides an alternate simplified method to
obtain an extension of time to allocate GST
exemption in certain situations. Generally,
this method is available only with regard
to aninter vivostransfer to a trust from
which a GST may be made and only if each
of the following requirements is met: (1)
the transfer qualified for the gift tax annual
exclusion under section 2503(b); (2) the
sum of the amount of the transfer and all
other gifts by the transferor to the donee in
the same year did not exceed the applica-
ble annual exclusion amount for that year;
(3) no GST exemption was allocated to the
transfer; (4) the taxpayer has unused GST
exemption to allocate to the transfer as of
the filing of the request for relief; and (5)
no taxable distributions or taxable termina-
tions have occurred as of the filing of the
request for relief.
To date, the IRS has issued numerous
private letter rulings under §301.9100–3
granting an extension of time to timely
allocate GST exemption in situations in
which transferors (or their executors)
failed to allocate GSTexemption to a trust
on a timely filed Federal gift or estate
tax return. These proposed regulations
are intended to replace §301.9100–3 with
regard to relief under section 2642(g)(1).
Accordingly, §301.9100–3 will be
amended to provide that relief under
section 2642(g)(1) cannot be obtained
through the provisions of §§301.9100–1
and 301.9100–3 after the date of pub-
lication of the Treasury decision adopt-
ing these rules as final regulations in
theFederal Register. Relief under
§301.9100–2(b) (the automatic 6-month
extension) will continue to be available
to transferors or transferor’s estates qual-
ifying for that relief. In addition, the
procedures contained in Revenue Proce-
dure 2004–46 will remain effective for
transferors within the scope of that Rev-
enue Procedure.
Explanation of Provisions
The proposed regulations identify the
standards that the IRS will apply in deter-
mining whether to grant a transferor or a
transferor’s estate an extension of time to:
(1) allocate GST exemption, as defined in
section 2631, to a transfer; (2) elect un-
der section 2632(b)(3) (the election not to
have the deemed allocation of GST ex-
emption apply to a direct skip); (3) elect
under section 2632(c)(5)(A)(i) (the elec-
tion not to have the deemed allocation of
GST exemption apply to an indirect skip or
transfers made to a particular trust); and (4)
elect under section 2632(c)(5)(A)(ii) (the
election to treat any trust as a GST trust
for purposes of section 2632(c)). The pro-
posed regulations alsoidentify situations
with facts that do not satisfy the standards
for granting relief and in which, as a result,
an extension of time will not be granted.
If an extension of time to allocate
GST exemption is granted under section
2642(g)(1), the allocation of GST exemp-
tion will be considered effective as of the
date of the transfer, and the value of the
property transferred for purposes of chap-
ter 11 or chapter 12 will determine the
amount of GST exemption to be allocated.
If an extension of time to elect out of the
automatic allocation of GST exemption
under section 2632(b)(3) or (c)(5)(A)(i) is
granted under section 2642(g)(1), the elec-
tion will be considered effective as of the
date of the transfer. If an extension of time
to elect to treat any trust as a GST trust
under section 2632(c)(5)(A)(ii) is granted
under section 2642(g)(1), the election will
be considered effective as of the date of
the first (or each) transfer covered by that
election.
The amount of GST exemption that
may be allocated to a transfer pursuant
to an extension granted under section
2642(g)(1) is limited to the amount of the
transferor’s unused GST exemption under
section 2631(c) as of the date of the trans-
fer. Thus, if the amount of GST exemption
has increased since the date of the transfer,
no portion of the increased amount may
be applied by reason of the grant of relief
under section 2642(g)(1) to a transfer tak-
ing place in an earlier year and prior to the
effective date of that increase.
Requests for relief under section
2642(g)(1) will be granted when the tax-
payer establishes to the satisfaction of the
IRS that the taxpayer acted reasonably
andingoodfaith,andthatthegrantof
relief will not prejudice the interests of the
Government.
For purposes of section 2642(g)(1), the
following nonexclusive list of factors will
be used to determine whether a transferor
or the executor of a transferor’s estate
acted reasonably and in good faith: (1)
the intent of the transferor or the executor
of the transferor’s estate to timely allo-
cate GST exemption or to timely make an
election under section 2632(b)(3) or (c)(5)
as evidenced in the trust instrument, in-
strument of transfer, or contemporaneous
documents, such as Federal gift or estate
tax returns or correspondence; (2) the
occurrence of intervening events beyond
the control of the transferor as defined in
section 2652(a), or of the executor of the
transferor’s estate as defined in section
2203, that caused the failure to allocate
GST exemption to a transfer or the failure
to elect under section 2632(b)(3) or (c)(5);
(3) the lack of awareness by the transferor
or the executor of the transferor’s estate
of the need to allocate GST exemption to
a transfer after exercising reasonable dili-
gence, taking into account the experience
ofthetransferorortheexecutorofthe
transferor’s estateand the complexity of
the GST issue; (4) evidence of consistency
by the transferor in allocating (or not al-
locating) the transferor’s GST exemption,
although evidence of consistency may
be less relevant if there is evidence of a
change of circumstances or change of trust
beneficiaries that would otherwise support
a deviation from priorGST tax exemption
allocation practices; and (5) reasonable
reliance by the transferor or the executor
of the transferor’s estate on the advice of
a qualified tax professional retained or
employed by either (or both) of them, and
the failure of the transferor or executor, in
reliance on or consistent with that advice,
to allocate GST exemption to the transfer
or to make an election described in section
2632(b)(3) or (c)(5). The IRS will con-
sider all relevant facts and circumstances
in making this determination.
For purposes of section 2642(g)(1), the
following nonexclusive list of factors will
be used to determine whether the inter-
ests of the Government would be preju-
May 12, 20089182008–19 I.R.B.

diced: (1) the grant of requested relief
would permit the use of hindsight to pro-
duce an economic advantage or other ben-
efit that either would not have been avail-
able if the allocation or election had been
timely made, or that results from the se-
lection of one out of anumber of alterna-
tives (other than whether or not to make an
allocation or election) that were available
at the time the allocation or election could
have been made timely; (2) if the transferor
or the executor of the transferor’s estate
delayed the filing of the request for relief
with the intent to deprive the IRS of suffi-
cient time (by reason of the expiration or
the impending expiration of the applicable
statute of limitations or otherwise) to chal-
lenge the claimed identity of the transferor,
the value of the transferred property that is
the subject of the requested relief, or any
other aspect of the transfer that is relevant
for transfer tax purposes; and (3) a deter-
mination by the IRS that, in the event of
a grant of relief under section 2642(g)(1),
it would be unreasonably disruptive or dif-
ficult to adjust the GST tax consequences
of a taxable termination or a taxable distri-
bution that occurred between the time for
making a timely allocation of GST exemp-
tion or a timely election described in sec-
tion 2632(b)(3) or (c)(5) and the time at
which the request for relief under section
2642(g)(1) was filed. The IRS will con-
sider all relevant facts and circumstances
in making this determination.
Relief under section 2642(g)(1) will not
be granted when the standard of reason-
ableness, good faith and lack of prejudice
to the interests of the Government is not
met. This standard is not met in the fol-
lowing situations: (1) the transferor or the
executor of the transferor’s estate made an
allocation of GST exemption as described
in §26.2632–1(b)(4)(ii)(A)(1), or an elec-
tion under section 2632(b)(3) or (c)(5), on
a timely filed Federal gift or estate tax re-
turn, and the relief requested would de-
crease or revoke that allocation or election;
(2) the transferor or the transferor’s ex-
ecutor delayed in requesting relief in order
to preclude the IRS, as a practical matter,
from challenging the identity of the trans-
feror, the value of the transferred interest
on the Federal estate or gift tax return, or
any other aspect of the transaction that is
relevant for Federal estate or gift tax pur-
poses; (3) the action or inaction that is the
subject of the request for relief reflected
or implemented the decision with regard
to the allocation of GST exemption or an
election described in section 2632(b)(3) or
(c)(5) that was made by the transferor or
executor of the transferor’s estate who had
been accurately informed in all material re-
spects by a qualified tax professional re-
tained or employed by either (or both) of
them; or (4) the IRS determines that the
transferor’s request is an attempt to benefit
from hindsight.
A request for relief under section
2642(g)(1) does not reopen, suspend or
extend the period of limitations on assess-
ment of any estate, gift, or GST tax under
section 6501. Thus, the IRS may request
that the transferor or the transferor’s ex-
ecutor consent under section 6501(c)(4)
to extend the period of limitations on as-
sessment of any or all gift and GST taxes
on the transfer(s) for which relief under
section 2642(g)(1) has been requested.
The transferor or the transferor’s executor
has the right to refuse to extend the period
of limitations, or to limit such extension to
particular issues or to a particular period
of time. See section 6501(c)(4)(B).
If the grant of relief under section
2642(g)(1) results in a potential tax refund
claim, no refund will be paid or credited to
the taxpayer or the taxpayer’s estate if, at
the time of filing the request for relief, the
period of limitations for filing a claim for
a credit or refund of Federal gift, estate, or
GST tax under section 6511 on the transfer
for which relief is granted has expired.
Relief provided under section
2642(g)(1) will be granted through the
IRS letter ruling program.
Proposed Effective Date
Section 26.2642–7 applies to requests
for relief filed on or after the date of pub-
lication of the Treasury decision adopting
these rules as final regulations in theFed-
eral Register.
Availability of IRS Documents
The IRS notice and revenue procedure
cited in this preamble are published in the
Cumulative Bulletin and are available at
www.irs.gov.
Special Analyses
It has been determined that this no-
tice of proposed rulemaking is not a
significant regulatory action as defined
in Executive Order 12866. Therefore,
a regulatory assessment is not required.
Pursuant to the Regulatory Flexibil-
ity Act (RFA) (5 U.S.C. chapter 6), it
is hereby certified that this regulation
will not have a significant economic
impact on a substantial number of small
entities. The applicability of this rule is
limited to individuals (or their estates)
and trusts, which are not small entities
as defined by the RFA (5 U.S.C. 601).
Although it is anticipated that there may
be a beneficial economic impact for
some small entities, including entities
that provide tax and legal services that
assist individuals in the private letter
ruling program, any benefit to those
entities would be indirect. Further, this
indirect benefit will not affect a substantial
number of these small entities because
only a limited number of individuals (or
their estates) and trusts would submit a
private letter ruling request under this
rule. Therefore, only a small fraction
of tax and legal services entities would
generate business or benefit from this
rule. Accordingly, a regulatory flexibility
analysis is not required. 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 entities.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written (a signed origi-
nal and eight (8) copies)orelectroniccom-
ments that are submitted timely to the IRS.
The IRS and Treasury Department request
comments on the clarity of the proposed
rules and also on how they can be made
easier to understand. All comments will be
available for public inspection and copy-
ing.
A public hearing has been scheduled
for August 5, 2008 in the IRS auditorium.
Due to building security procedures, vis-
itors must enter at the Constitution Av-
enue entrance. In addition, all visitors
must present photo identification to en-
ter the building. Because of access re-
strictions, visitors will not be admitted be-
yond the immediate entrance area more
than 30 minutes before the hearing starts.
2008–19 I.R.B.919May 12, 2008

For more information about having your
name placed on the list to attend the hear-
ing, see the “FOR FURTHER INFORMA-
TION CONTACT” section of this pream-
ble.
The rules of 26 CFR 601.601(a)(3) ap-
ply to the hearing. Persons who wish to
present oral comments at the hearing must
submit written (a signed original and eight
(8) copies) or electronic comments by July
16, 2008, and an outline of the topics to
be discussed and the time to be devoted to
each topic by July 15, 2008. A period of
10 minutes will be allotted to each person
for making comments. An agenda show-
ing the scheduling of the speakers will be
prepared after the deadline for receiving
outlines has passed. Copies of the agenda
will be available free of charge at the hear-
ing.
Drafting Information
The principal author of these regula-
tionsisTheresaM.Melchiorre,Officeof
Chief Counsel, IRS.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR parts 26 and 301
are proposed to be amended as follows:
PART 26—GENERATION-SKIPPING
TRANSFER TAX REGULATIONS
UNDER THE TAX REFORM ACT OF
1986
Paragraph 1. The authority citation for
part 26 is amended by adding an entry in
numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 26.2642–7 also issued under
26 U.S.C. 2642(g). * * *
Par. 2. Section 26.2642–7 is added to
read as follows:
§26.2642–7 Relief under section
2642(g)(1).
(a)In general.Under section
2642(g)(1)(A), the Secretary has the au-
thority to issue regulations describing the
circumstances in which a transferor, as de-
fined in section 2652(a), or the executor of
a transferor’s estate, as defined in section
2203, will be granted an extension of time
to allocate generation-skipping transfer
(GST) exemption as described in sections
2642(b)(1) and (2). The Secretary also
has the authority to issue regulations de-
scribing the circumstances under which a
transferor or the executor of a transferor’s
estate will be granted an extension of time
to make the elections described in section
2632(b)(3) and (c)(5). Section 2632(b)(3)
provides that an election may be made by
or on behalf of a transferor not to have the
transferor’s GST exemption automatically
allocated under section 2632(b)(1) to a
direct skip, as defined in section 2612(c),
made by the transferor during life. Section
2632(c)(5)(A)(i) provides that an elec-
tionmaybemadebyoronbehalfofa
transferor not to have the transferor’s GST
exemption automatically allocated under
section 2632(c)(1) to an indirect skip, as
definedinsection2632(c)(3)(A),ortoany
or all transfers made by such transferor to a
particular trust. Section 2632(c)(5)(A)(ii)
provides that an election may be made by
or on behalf of a transferor to treat any
trust as a GST trust, as defined in section
2632(c)(3)(B), for purposes of section
2632(c) with respect to any or all transfers
made by that transferor to the trust. This
section generally describes the factors that
the Internal RevenueService (IRS) will
consider when an extension of time is
sought by or on behalf of a transferor to
timely allocate GSTexemption and/or to
make an election under section 2632(b)(3)
or (c)(5). Relief provided under this sec-
tion will be granted through the IRS letter
ruling program. See paragraph (h) of this
section.
(b)Effect of Relief. If an extension of
time to allocate GST exemption is granted
under this section, the allocation of GST
exemption will be considered effective as
of the date of the transfer, and the value
of the property transferred for purposes of
chapter 11 or chapter 12 will determine
the amount of GST exemption to be allo-
cated. If an extension of time to elect out
of the automatic allocation of GST exemp-
tion under section 2632(b)(3) or (c)(5) is
granted under this section, the election will
be considered effective as of the date of the
transfer. If an extension of time to elect
to treat any trust as a GST trust under sec-
tion 2632(c)(5)(A)(ii) is granted under this
section, the election will be considered ef-
fective as of the dateof the first (or each)
transfer covered by that election.
(c)Limitation on relief. The amount of
GST exemption that may be allocated to a
transfer as the result of relief granted un-
der this section is limited to the amount
of the transferor’s unused GST exemption
under section 2631(c) as of the date of the
transfer. Thus, if, by the time of the mak-
ing of the allocation or election pursuant to
relief granted under this section, the GST
exemption amount under section 2631(c)
has increased to an amount in excess of the
amount in effect for the date of the transfer,
no portion of the increased amount may be
applied to that earlier transfer by reason of
the relief granted under this section.
(d)Basis for determination—(1)In
general. Requests for relief under this
section will be granted when the transferor
or the executor of the transferor’s estate
provides evidence (including the affidavits
described in paragraph (h) of this section)
to establish to the satisfaction of the IRS
that the transferor or the executor of the
transferor’s estate acted reasonably and in
good faith, and that the grant of relief will
not prejudice the interests of the Govern-
ment. Paragraphs (d)(2) and (d)(3) of this
section set forth nonexclusive lists of fac-
tors the IRS will consider in determining
whether this standard of reasonableness,
good faith, and lack of prejudice to the in-
terests of the Government has been met so
that such relief will be granted. In making
this determination, IRS will consider these
factors, as well as all other relevant facts
and circumstances. Paragraph (e) of this
section sets forth situations in which this
standard has not been met and, as a result,
in which relief under this section will not
be granted.
(2)Reasonableness and good faith.The
following is a nonexclusive list of fac-
tors that will be considered to determine
whether the transferor or the executor of
the transferor’s estate acted reasonably and
in good faith for purposes of this section:
(i) The intent of the transferor to timely
allocate GST exemption to a transfer or
to timely make an election under section
2632(b)(3) or (c)(5),as evidenced in the
trust instrument, the instrument of transfer,
or other relevant documents contempora-
neous with the transfer, such as Federal gift
and estate tax returns and correspondence.
This may include evidence of the intended
GST tax status of the transfer or the trust
(for example, exempt, non-exempt, or par-
tially exempt), or more explicit evidence
May 12, 20089202008–19 I.R.B.

of intent with regard to the allocation of
GST exemption or the election under sec-
tion 2632(b)(3) or (c)(5).
(ii) Intervening events beyond the con-
trol of the transferor or of the executor
of the transferor’s estate as the cause of
the failure to allocate GST exemption to a
transfer or the failure to make an election
under section 2632(b)(3) or (c)(5).
(iii) Lack of awareness by the transferor
or the executor of the transferor’s estate of
the need to allocate GST exemption to the
transfer, despite the exercise of reasonable
diligence, taking into account the experi-
ence of the transferor or the executor of the
transferor’s estate and the complexity of
the GST issue, as the cause of the failure to
allocate GST exemption to a transfer or to
make an election under section 2632(b)(3)
or (c)(5).
(iv) Consistency by the transferor with
regard to the allocation of the transferor’s
GST exemption (for example, the trans-
feror’s consistent allocation of GST ex-
emption to transfers to skip persons or to a
particular trust, or the transferor’s consis-
tent election not to have the automatic al-
location of GST exemption apply to trans-
fers to one or more trusts or skip persons
pursuant to section 2632(b)(3) or (c)(5)).
Evidence of consistency may be less rele-
vant if there has been a change of circum-
stances or change of trust beneficiaries that
would otherwise explain a deviation from
prior GST exemption allocation decisions.
(v) Reasonable reliance by the trans-
feror or the executor of the transferor’s es-
tate on the advice of a qualified tax pro-
fessional retained or employed by one or
both of them and, in reliance on or con-
sistent with that advice, the failure of the
transferor or the executor to allocate GST
exemption to the transfer or to make an
election described in section 2632(b)(3) or
(c)(5). Reliance on a qualified tax profes-
sional will not be considered to have been
reasonable if the transferor or the execu-
tor of the transferor’s estate knew or should
have known that the professional either—
(A) Was not competent to render advice
on the GST exemption; or
(B) Was not aware of all relevant facts.
(3)Prejudice to the interests of the Gov-
ernment. The following is a nonexclusive
list of factors that will be considered to de-
termine whether the interests of the Gov-
ernment would be prejudiced for purposes
of this section:
(i) The interests of the Government
would be prejudiced to the extent to which
the request for relief is an effort to benefit
from hindsight. The interests of the Gov-
ernment would be prejudiced if the IRS
determines that the requested relief is an
attempt to benefit from hindsight rather
than to achieve the result the transferor
or the executor of the transferor’s estate
intended at the time when the transfer was
made. A factor relevant to this determina-
tion is whether the grant of the requested
relief would permit an economic advan-
tage or other benefit that would not have
been available if the allocation or election
had been timely made. Similarly, there
would be prejudice if a grant of the re-
quested relief would permit an economic
advantage or other benefit that results
from the selection of one out of a number
of alternatives (other than whether or not
to make an allocation or election) that
were available at the time the allocation
or election could have been timely made,
if hindsight makes the selected alternative
more beneficial than the other alterna-
tives. Finally, in a situation where the
only choices were whether or not to make
a timely allocation or election, prejudice
would exist if the transferor failed to make
the allocation or election in order to wait
to see (thus, with the benefit of hindsight)
whether or not the making of the allocation
of exemption or election would be more
beneficial.
(ii) The timing of the request for relief
will be considered in determining whether
the interests of the Government would be
prejudiced by granting relief under this
section. The interests of the Government
would be prejudiced if the transferor or the
executor of the transferor’s estate delayed
the filing of the request for relief with the
intent to deprive the IRS of sufficient time
to challenge the claimed identity of the
transferor of the transferred property that
is the subject of the request for relief, the
value of that transferred property for Fed-
eral gift or estate tax purposes, or any other
aspect of the transfer that is relevant for
Federal gift or estate tax purposes. The
fact that any period of limitations on the
assessment or collection of transfer taxes
has expired prior to the filing of a request
for relief under this section, however, will
not by itself prohibit a grant of relief under
this section. Similarly, the combination of
the expiration of any such period of limita-
tions with the fact that the asset or interest
was valued for transfer tax purposes with
the use of a valuation discount will not by
itself prohibit a grant of relief under this
section.
(iii) The occurrence and effect of an
intervening taxable termination or taxable
distribution will be considered in deter-
mining whether the interests of the Gov-
ernment would be prejudiced by granting
relief under this section. The interests
of the Government may be prejudiced if
a taxable termination or taxable distribu-
tion occurred between the time for mak-
ing a timely allocation of GST exemption
or a timely election described in section
2632(b)(3) or (c)(5) and the time at which
the request for relief under this section was
filed. The impact of a grant of relief on
(and the difficulty of adjusting) the GST
tax consequences of that intervening ter-
mination or distribution will be considered
in determining whether the occurrence of a
taxable termination or taxable distribution
constitutes prejudice.
(e)Situations in which the standard of
reasonableness, good faith, and lack of
prejudice to the interests of the Govern-
ment has not been met. Reliefunderthis
section will not be granted if the IRS de-
termines that the transferor or the executor
of the transferor’s estate has not acted rea-
sonably and in good faith, and/or that the
grant of relief would prejudice the interests
of the Government. The following situa-
tions provide illustrations of some circum-
stances under which the standard of rea-
sonableness, good faith, and lack of preju-
dice to the interests of the Government has
not been met, and as a result, in which re-
lief under this section will not be granted:
(1)Timely allocations and elections.
Relief will not be granted under this sec-
tion to decrease or revoke a timely allo-
cation of GST exemption as described in
§26.2632–1(b)(4)(ii)(A)(1), or to revoke
an election under section 2632(b)(3) or
(c)(5) made on a timely filed Federal gift
or estate tax return.
(2)Timing. Relief will not be granted if
the transferor or executor delayed the fil-
ing of the request for relief with the in-
tent to deprive the IRS of sufficient time to
challenge the claimed identity of the trans-
ferororthevaluationofthetransferred
property for Federal gift or estate tax pur-
poses. (However, see paragraph (d)(3)(ii)
2008–19 I.R.B.921May 12, 2008

of this section for examples of facts which
alone do not constitute prejudice.)
(3)Failure after being accurately in-
formed. Relief will not be granted un-
der this section if the decision made by
the transferor or the executor of the trans-
feror’s estate (who had been accurately in-
formed in all material respects by a quali-
fied tax professional retained or employed
by either (or both) of them with regard
to the allocation of GST exemption or an
election described in section 2632(b)(3) or
(c)(5)) was reflected or implemented by
the action or inaction that is the subject of
the request for relief.
(4)Hindsight. Relief under this section
will not be granted if the IRS determines
that the requested relief is an attempt to
benefit from hindsight rather than an at-
tempt to achieve the result the transferor or
the executor of the transferor’s estate in-
tended when the transfer was made. One
factor that will be relevant to this determi-
nation is whether the grant of relief will
give the transferor the benefit of hindsight
by providing an economic advantage that
may not have been available if the allo-
cation or election had been timely made.
Thus, relief will not be granted if that relief
will shift GST exemption from one trust
to another trust unless the beneficiaries of
the two trusts, and their respective inter-
ests in those trusts, are the same. Sim-
ilarly, relief will not be granted if there
is evidence that the transferor or executor
had not made a timely allocation of the ex-
emption in order to determine which of the
various trusts achieved the greatest asset
appreciation before selecting the trust that
should have a zero inclusion ratio.
(f)Period of limitations under section
6501. A request for relief under this sec-
tion does not reopen, suspend, or extend
the period of limitations on assessment or
collection of any estate, gift, or GST tax
under section 6501. Thus, the IRS may
request that the transferor or the trans-
feror’s executor consent, under section
6501(c)(4), to an extension of the period of
limitation on assessment or collection of
any or all gift and GST taxes for the trans-
fer(s) that are the subject of the requested
relief. The transferor or the transferor’s
executor has the right to refuse to ex-
tend the period of limitations, or to limit
such extension to particular issues or to
a particular period of time. See section
6501(c)(4)(B).
(g)Refunds. The filing of a request
for relief under section 2642(g)(1) with the
IRS does not constitute a claim for refund
or credit of an overpayment and no implied
right to refund will arise from the filing of
such a request for relief. Similarly, the fil-
ing of such a request for relief does not ex-
tend the period of limitations under section
6511 for filing a claim for refund or credit
of an overpayment. In the event the grant
of relief under section 2642(g)(1) results in
a potential claim for refund or credit of an
overpayment, no such refund or credit will
be allowed to the taxpayer or to the tax-
payer’s estate if the period of limitations
under section 6511 for filing a claim for
a refund or credit of the Federal gift, es-
tate, or GST tax that was reduced by the
granted relief has expired. The period of
limitations under section 6511 is generally
the later of three years from the time the
original return is filed or two years from
the time the tax was paid. If the IRS and
the taxpayer agree to extend the period for
assessment of tax, the period for filing a
claim for refund or credit will be extended.
Section 6511(c). The taxpayer or the tax-
payer’s estate is responsible for preserving
any potential claim for refund or credit. A
taxpayer who seeks and is granted relief
under section 2642(g)(1) will not be re-
garded as having filed a claim for refund
or credit by requesting such relief. In order
to preserve a right of refund or credit, the
taxpayer or the executor of the taxpayer’s
estate also must file before the expiration
of the period of limitations under section
6511 for filing such a claim any required
forms for requesting a refund or credit in
accordance with the instructions to such
forms and applicable regulations.
(h)Procedural requirements—(1)Let-
ter ruling program. The relief described in
this section is provided through the IRS’s
private letter ruling program. See Rev-
enue Procedure 2008–1, 2008–1 I.R.B. 1,
or its successor, (which are available at
www.irs.gov. Requests for relief under this
section that do not meet the requirements
of §301.9100–2 of this chapter must be
made under the rules of this section.
(2)Affidavit and declaration of trans-
feror or the executor of the transferor’s es-
tate—(i) The transferor or the executor of
the transferor’s estate must submit a de-
tailed affidavit describing the events that
led to the failure to timely allocate GST
exemption to a transfer or the failure to
timely elect under section 2632(b)(3) or
(c)(5), and the events that led to the dis-
covery of the failure. If the transferor or
the executor of the transferor’s estate re-
lied on a tax professional for advice with
respect to the allocation or election, the af-
fidavit must describe—
(A) The scope of the engagement;
(B) The responsibilities the transferor
or the executor of the transferor’s estate
believed the professional had assumed, if
any; and
(C) The extent to which the transferor or
the executor of the transferor’s estate relied
on the professional.
(ii) Attached to each affidavit must be
copies of any writing (including, without
limitation, notes and e-mails) and other
contemporaneous documents within the
possession of the affiant relevant to the
transferor’s intent with regard to the ap-
plicationofGSTtaxtothetransactionfor
which relief under this section is being
requested.
(iii) The affidavit must be accompanied
by a dated declaration, signed by the trans-
feror or the executor of the transferor’s es-
tate that states: “Under penalties of per-
jury, I declare that I have examined this af-
fidavit, including any attachments thereto,
and to the best of my knowledge and be-
lief, this affidavit, including any attach-
ments thereto, is true, correct, and com-
plete. In addition, under penalties of per-
jury, I declare that I have examined all the
documents included as part of this request
for relief, and, to the best of my knowl-
edge and belief, these documents collec-
tively contain all the relevant facts relating
to the request for relief, and such facts are
true, correct, and complete.”
(3)Affidavits and declarations from
other parties—(i) The transferor or the
executor of the transferor’s estate must
submit detailed affidavits from individu-
als who have knowledge or information
about the events that led to the failure to
allocate GST exemption or to elect un-
der section 2632(b)(3) or (c)(5), and/or
to the discovery of the failure. These in-
dividuals may include individuals whose
knowledge or information is not within
the personal knowledge of the transferor
or the executor of the transferor’s estate.
The individuals described in paragraph
(h)(3)(i) of this section must include—
(A) Each agent or legal representative
of the transferor who participated in the
May 12, 20089222008–19 I.R.B.

transaction and/or the preparation of the
return for which relief is being requested;
(B) The preparer of the relevant Federal
estate and/or gift tax return(s);
(C) Each individual (including an em-
ployee of the transferor or the executor of
the transferor’s estate) who made a sub-
stantial contribution to the preparation of
the relevant Federal estate and/or gift tax
return(s); and
(D) Each tax professional who advised
or was consulted by the transferor or the
executor of the transferor’s estate with re-
gard to any aspect of the transfer, the trust,
the allocation of GST exemption, and/or
the election under section 2632(b)(3) or
(c)(5).
(ii) Each affidavit must describe the
scope of the engagement and the respon-
sibilities of the individual as well as the
advice or service(s) the individual pro-
vided to the transferor or the executor of
the transferor’s estate.
(iii) Attached to each affidavit must be
copies of any writing (including, without
limitation, notes and e-mails) and other
contemporaneous documents within the
possession of the affiant relevant to the
transferor’s intent with regard to the ap-
plication of GST tax to the transaction for
which relief under this section is being
requested.
(iv) Each affidavit also must include the
name, and current address of the individ-
ual, and be accompanied by a dated decla-
ration, signed by the individual that states:
“Under penalties of perjury, I declare that
I have personal knowledge of the infor-
mation set forth in this affidavit, includ-
ing any attachments thereto. In addition,
under penalties of perjury, I declare that
I have examined this affidavit, including
any attachments thereto, and, to the best
of my knowledge and belief, the affidavit
contains all the relevant facts of which I am
aware relating to the request for relief filed
by or on behalf of [transferor or the ex-
ecutor of the transferor’s estate], and such
facts are true, correct, and complete.”
(v) If an individual who would be re-
quired to provide an affidavit under para-
graph (h)(3)(i) of this section has died or
is not competent, the affidavit required un-
der paragraph (h)(2) of this section must
include a statement to that effect, as well as
a statement describing the relationship be-
tween that individual and the transferor or
the executor of the transferor’s estate and
the information or knowledge the trans-
feror or the executor of the transferor’s es-
tate believes that individual had about the
transfer, the trust, the allocation of exemp-
tion, or the election. If an individual who
would be required to provide an affidavit
under paragraph (h)(3)(i) of this section re-
fuses to provide the transferor or the ex-
ecutor of the transferor’s estate with such
an affidavit, the affidavit required under
paragraph (h)(2) of this section must in-
clude a statement that the individual has
refused to provide the affidavit, a descrip-
tion of the efforts made to obtain the af-
fidavit from the individual, the informa-
tion or knowledge the transferor or the ex-
ecutor of the transferor’s estate believes
the individual had about the transfer, and
the relationship between the individual and
thetransferorortheexecutorofthetrans-
feror’s estate.
(i)Effective/applicability date. Section
26.2642–7 applies to requests for relief
filed on or after the date of publication of
the Treasury decision adopting these pro-
posed rules as final regulations in theFed-
eral Register.
PART 301—PROCEDURE AND
ADMINISTRATION
Par. 3. The authority citation for part
301 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 4. Section 301.9100–3 is amended
by adding a new paragraph (g) to read as
follows:
§301.9100–3 Other extensions.
*****
(g)Reliefundersection
2642(g)(1)—(1)Procedures. The pro-
cedures set forth in this section are not
applicable for requests for relief under
section 2642(g)(1). For requests for relief
under section 2642(g)(1), see §26.2642–7.
(2)Effective/applicability date. Para-
graph (g) of this section applies to requests
for relief under section 2642(g)(1) filed on
or after the date of publication of the Trea-
sury decision adoptingthese rules as final
regulations in theFederal Register.
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on April 16, 2008,
8:45 a.m., and published in the issue of the Federal Register
for April 17, 2008, 73 F.R. 20870)
Notice of Proposed
Rulemaking and Notice of
Public Hearing
Determination of Minimum
Required Pension
Contributions
REG–108508–08
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains pro-
posed regulations providing guidance on
the determination of minimum required
contributions for purposes of the funding
rules that apply to single employer defined
benefit plans. These regulations would af-
fect sponsors, administrators, participants,
and beneficiaries of single employer de-
fined benefit plans. This document also
provides a notice of a public hearing on
these proposed regulations.
DATES: Written or electronic comments
must be received by July 14, 2008. Out-
lines of topics to be discussed at the public
hearing scheduled for August 4, 2008, at
10 a.m. must be received by July 15, 2008.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR(REG–108508–08),
room 5203, Internal Revenue Service,
PO Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may
be hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–108508–08),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue, NW,
Washington, DC, or sent electronically
viatheFederaleRulemaking
Portalatwww.regulations.gov
(IRS-REG–108508–08).The public
hearingwillbeheldintheIRSAuditorium,
Internal Revenue Building, 1111
Constitution Avenue, NW, Washington,
DC.
2008–19 I.R.B.923May 12, 2008

FOR FURTHER INFORMATION
CONTACT: Concerning the regulations,
Lauson C. Green or Linda S. F. Marshall
at (202) 622–6090; concerning submis-
sions of comments, the hearing, and/or
being placed on the building access list to
attend the hearing, Richard A. Hurst, at
Richard.A.Hurst@irscounsel.treas.govor
(202) 622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed In-
come Tax Regulations (26 CFR part 1) un-
der sections 430(a), 430(c), 430(e), and
430(j), as added to the Internal Revenue
Code (Code) by the Pension Protection Act
of 2006 (PPA ’06), Public Law 109–280
(120 Stat. 780). In addition, this document
contains proposed Excise Tax Regulations
(26 CFR part 54) under section 4971.
Section 412 provides minimum fund-
ing requirements that generally apply for
pension plans (including both defined
benefit pension plans and money purchase
pension plans). PPA ’06 makes extensive
changes to those minimum funding re-
quirements that generally apply for plan
years beginning on or after January 1,
2008. Section 430, which was added by
PPA ’06, specifies the minimum funding
requirements that apply to single employer
defined benefit pension plans (including
multiple employer plans) pursuant to sec-
tion 412.
1
Section 430(a) provides that a plan’s
minimum required contribution for a plan
year is determined under one of two rules,
depending on whether the value of plan as-
sets is less than, or is equal to or greater
than, the plan’s funding target. If the value
of plan assets is less than the funding tar-
get, the minimum required contribution is
the sum of: (1) target normal cost; (2) any
shortfall amortization charge; and (3) any
waiver amortization charge. If the value of
plan assets equals or exceeds the funding
target, the minimum required contribution
is the plan’s target normal cost, reduced
(but not below zero) by the excess of the
value of plan assets over the plan’s fund-
ing target. For purposes of section 430(a),
the value of plan assets is determined af-
ter reduction for certain funding balances
as provided under section 430(f)(4)(B).
Section 430(c) provides that a shortfall
amortization charge is the total (not less
than zero) of the shortfall amortization in-
stallments for the plan year with respect
to any shortfall amortization base estab-
lished for that plan year and the 6 preced-
ing plan years. Section 430(c)(2)(A) pro-
vides that the shortfall amortization install-
ments with respect to a shortfall amortiza-
tion base established for a plan year are the
amounts necessary to amortize the short-
fall amortization base in level annual in-
stallments over the 7-plan-year period be-
ginningwiththatplanyear.
Section 430(c)(3) provides that a short-
fall amortization base is determined for
a plan year based on the plan’s funding
shortfall for the plan year. Under sec-
tion 430(c)(4), the funding shortfall is the
amount (if any) by which the plan’s fund-
ing target for the year exceeds the value of
the plan’s assets (as reduced by the funding
standard carryover balance and prefund-
ing balance under section 430(f)(4)(B)).
The shortfall amortization base for a plan
year is the plan’s funding shortfall, mi-
nus the present value (determined using
the interest rates under section 430(h)(2))
of the total of the shortfall amortization in-
stallments and waiver amortization install-
ments that have been determined for the
plan year and any succeeding plan year
with respect to any shortfall amortization
bases and waiver amortization bases for
preceding plan years.
Under section 430(c)(5), a shortfall
amortization base is not established for a
plan year if the value of a plan’s assets is
at least equal to the plan’s funding target
for the plan year. For this purpose, the
prefunding balance is subtracted from the
value of plan assets, but only if an election
to use that prefunding balance to offset the
minimum required contribution is in effect
for the plan year. A transition rule applies
for plan years beginning after 2007 and
before 2011 under which only a specified
percentage of the plan’s funding target is
taken into account for purposes of section
430(c)(5). The transition rule does not ap-
ply to a plan that is not in effect for 2007 or
to a plan that is subject to the pre- PPA ’06
deficit reduction contribution rules for
2007 (that is, a plan covering more than
100 participants andwith a funded current
liability below the applicable threshold).
Under section 430(e), the waiver amor-
tization charge for a plan year is the total
of the waiver amortization installments for
the plan year with respect to any waiver
amortization bases for the 5 preceding plan
years. Under section 430(e)(2), the waiver
amortization installments with respect to
a waiver amortization base established for
a plan year are the amounts necessary to
amortize the waiver amortization base in
level annual installments over the 5-plan-
year period beginning with the succeed-
ing plan year. Under section 430(e)(4), the
waiver amortization base for a plan year
is the amount of the waived funding defi-
ciency (if any) for that plan year.
If a plan’s funding shortfall for a plan
year is zero (that is, the value of the plan’s
assets, reduced by the funding standard
carryover balance and prefunding bal-
ance to the extent provided under section
430(f)(4)(B), is at least equal to the plan’s
funding target for the year), any shortfall
amortization bases and waiver amorti-
zation bases for preceding plan years
(and any associated shortfall amortization
installments and waiver amortization in-
stallments) are eliminated.
Under section 430(j), as under pre-
PPA ’06 law, the due date for the payment
of a minimum required contribution for a
plan year is generally 8
1
/2months after the
end of the plan year. Any payment made
on a date other than the valuation date for
the plan year must be adjusted for interest
accruing at the plan’s effective interest rate
under section 430(h)(2)(A) for the plan
year for the period between the valuation
date and the payment date. Pursuant to
section 430(g)(2), the valuation date for a
plan year must be the first day of the plan
year except in the case of a small plan
described in section 430(g)(2)(B).
Under section 430(j)(3)(A), quarterly
contributions must be made during a plan
year if the plan had a funding shortfall for
the preceding plan year. Each quarterly
installment is 25% of the required annual
payment. The required annual payment is
equal to the lesser of 90% of the minimum
1
Section 302 of the Employee Retirement Income Security Act of 1974, as amended (ERISA), sets forth funding rules that are parallel to those in Code section412,andsection303ofERISA
sets forth additional funding rules for single employer plans that are parallel to those in section 430 of the Code. Under section 101 of Reorganization Plan No. 4 of 1978 (43 FR 47713) and
section 302 of ERISA, the Secretary of the Treasury has interpretive jurisdiction over the subject matter addressed in these proposed regulations for purposes of ERISA, as well as the Code.
Thus, these proposed Treasury regulations issued under section 430 of the Code would apply as well for purposes of section 303 of ERISA.
May 12, 20089242008–19 I.R.B.

required contribution under section 430 for
the plan year or 100% of the minimum re-
quired contribution under section 430 (de-
termined without regard to any waiver un-
der section 412) for the preceding plan
year. If a quarterly installment is not made,
the interest charge that applies for the pe-
riod of underpayment is determined us-
ing the plan’s effective interest rate plus
5 percentage points. The requirements re-
garding quarterly contributions are similar
to the requirements that formerly applied
under section 412(m) as in effect before
amendments made by PPA ’06.
Under section 430(j)(4), a plan spon-
sor of a plan that is subject to the quar-
terly contribution requirements for a plan
year (other than a small plan described
in section 430(g)(2)(B)) must make addi-
tional quarterly contributions in order to
ensure that a minimum level of liquid as-
sets is available to pay benefits as of the
end of each quarter. Generally, this re-
quired minimum level of liquid assets is
the amount of liquid assets needed to pay
for three years of benefits, and an addi-
tional quarterly contribution (made in liq-
uid assets) is due if the plan has insuffi-
cient liquid assets to meet this minimum
level. A plan sponsor that fails to satisfy
this liquidity requirement is treated as fail-
ing to make the required quarterly contri-
bution and, pursuant to section 206(e) of
ERISA, is required to cease making cer-
tain types of accelerated payments that are
describedinsection401(a)(32)(B)ofthe
Code. Pursuant to section 430(j)(4)(C), the
portion of an installment that is treated as
not made because of theliquidity require-
ment continues to be treated as unpaid un-
til the close of the quarter that contains the
duedateforthecontribution. Theseliq-
uidity requirements are substantially sim-
ilar to the requirements that formerly ap-
plied under section 412(m)(5), as in effect
before amendments made by PPA ’06.
Section 402 of PPA ’06 provides a se-
ries of special funding rules for a plan
maintained by a commercial passenger air-
line (or by an employer whose principal
business is providing catering services to
a commercial passenger airline) if such an
employer has made an election provided
under that section. If an eligible employer
has made the election described in sec-
tion 402(a)(1) of PPA ’06 (which is only
available for a frozen plan), the calcula-
tion of the minimum required contribution
for the plan is determined using a special
17-plan-year amortization period and an
interest rate of 8.85%. If an eligible em-
ployer has made the election described in
section 402(a)(2) of PPA ’06 (which can be
made without regard to whether the plan
is frozen), calculation of the minimum re-
quired contribution for the plan is deter-
mined using a special 10-plan-year amorti-
zation period for the initial shortfall amor-
tization base (that is, the shortfall amorti-
zation base for the first plan year for which
section 430 applies to the plan) and, pur-
suant to the amendment to section 402 of
PPA ’06 made by section 6615 of the U.S.
Troop Readiness, Veterans’ Care, Katrina
Recovery, and Iraq Accountability Appro-
priations Act, 2007, Public Law 110–28
(121 Stat. 112), an interest rate of 8.25%
is used to determine the funding target for
each of those 10 plan years.
Section 4971(a) provides an excise tax
on a failure to meet applicable minimum
funding requirements. In the case of a sin-
gle employer plan, the tax is 10% of the
aggregate unpaid minimum required con-
tributions for all planyears remaining un-
paid as of the end of any plan year ending
with or within a taxable year. In the case
of a multiemployer plan, the tax is 5% of
the accumulated funding deficiency as of
the end of any plan year ending with or
within the taxable year. Section 4971(b)
provides an additional excise tax that ap-
plies where the applicable minimum fund-
ing requirements remain unsatisfied for a
specified period. Section 4971(c) provides
definitions that apply for purposes of sec-
tion 4971, including a definition of unpaid
minimum required contribution (which is
based on the new section 430 rules for de-
termining the minimum required contribu-
tion for a year). Section 4971(f) imposes a
tax of 10% of the amount of the liquidity
shortfall for a quarter that is not paid by the
due date for the installment for that quar-
ter.
Regulations under section 4971 were is-
sued on May 1, 1986 (T.D. 8084, 1986–1
C.B. 327). In addition, proposed regula-
tions regarding section 4971 were issued
on the same date. Guidance regarding
quarterly contribution requirements under
former section 412(m) was issued in No-
tice 89–52, 1989–1 C.B. 692, and guid-
ance regarding the liquidity requirements
under former section 412(m)(5) was issued
in Rev. Rul. 95–31, 1995–1 C.B. 76. See
§601.601(d)(2).
Explanation of Provisions
I.Overview
These proposed regulations are the
fourth in a series of proposed regulations
under new section 430.
2
These proposed
regulations would provide guidance re-
garding the minimum contribution rules
that apply to sponsors of single employer
defined benefit plans under section 430. In
addition, this document includes proposed
regulations under section 4971, reflect-
ing changes to the excise tax rules under
PPA ’06.
II.Section 1.430(a)–1 Determination of
Minimum Required Contribution
Section 1.430(a)–1 would provide rules
for determining the minimum required
contribution for a single employer de-
fined benefit plan (including a multiple
employer plan under section 413(c)) for
a plan year under section 430(a). The
determination of the amount of the mini-
mum required contribution for a plan year
depends on whether the value of plan as-
sets, as reduced to reflect certain funding
balances pursuant to section 430(f)(4)(B)
(but not below zero), equals or exceeds
the plan’s funding target for the plan
year. If this value of plan assets is less
than the funding target for the plan year,
the minimum required contribution for
that plan year is equal to the sum of the
plan’s target normal cost for the plan year
plus any applicable shortfall amortization
installments and waiver amortization in-
stallments. If this value of plan assets
equals or exceeds the funding target for
the plan year, the minimum required con-
tribution for that plan year is equal to the
target normal cost of the plan for the plan
2
Proposed §§1.430(h)(3)–1 and 1.430(h)(3)–2, relating to the mortality tables used to determine liabilities under section 430(h)(3), were issued May 29, 2007 (REG–143601–06, 2007–24
I.R.B. 1398 [72 FR 29456]), proposed §1.430(f)–1, relating to prefundingand funding standard carryover balances under section 430(f), was issued August 31, 2007 (REG–113891–07,
2007–42 I.R.B. 821 [72 FR 50544]), and proposed §§1.430(d)–1, 1.430(g)–1,1.430(h)(2)–1, and 1.430(i)–1, relating to measurement of plan assets and liabilities for pension funding purposes,
were issued December 31, 2007 (REG–139236–07, 2008–9 I.R.B. 491 [72 FR 74215]).
2008–19 I.R.B.925May 12, 2008

year reduced (but not below zero) by any
such excess.
The proposed regulations provide that
the shortfall amortization installments
with respect to a shortfall amortization
base established for a plan year are the
annual amounts necessary to amortize
that shortfall amortization base in level
annual installments over the 7-year period
beginningwiththatplanyear. Aspro-
vided in proposed §1.430(h)(2)–1(f)(2),
these installments are determined assum-
ing that the installments are paid on the
valuation date for each plan year and
using the interest rates applicable under
section 430(h)(2)(C) or (D). The shortfall
amortization installments are determined
using the interest rates that apply for the
plan year for which the shortfall amor-
tization base is established and are not
redetermined in subsequent plan years to
reflect changes in interest rates under sec-
tion 430(h)(2) for those subsequent plan
years.
3
Under the proposed regulations, if the
value of plan assets (reduced by the pre-
funding balance if the prefunding balance
is used to offset the minimum required
contribution for the plan year as provided
under §1.430(f)–1(c), but not below zero)
is equal to or greater than the funding tar-
get for the plan year, then no shortfall
amortization base is established for that
plan year. If this value of plan assets is
less than the funding target for the plan
year, a shortfall amortization base is estab-
lished for the plan year. In such a case,
the shortfall amortization base (which can
be either positive or negative) is equal to
the funding shortfall of the plan for the
plan year, minus the sum of the present
values of any remaining shortfall amor-
tization installments and waiver amorti-
zation installments (determined in accor-
dance with §1.430(h)(2)–1(f)(2) using the
interest rates that apply for the current plan
year). For this purpose, the funding short-
fall of a plan for any plan year is the excess
(if any) of the funding target of the plan for
the plan year, over the value of plan assets
for the plan year (as reduced to reflect the
subtraction of the funding standard carry-
over balance and prefunding balance to the
extent provided under §1.430(f)–1(c)).
The proposed regulations reflect the
transition rule under section 430(c)(5)(B)
under which only a specified portion of
the funding target is taken into account
in determining whether a shortfall amor-
tization base is established for plan years
beginning before January 1, 2011. This
transition rule does not apply with respect
to any plan year beginning after 2008 if a
shortfall amortization base was required
to be established for any preceding year,
nor does it apply to a plan that was not in
effect for a plan year beginning in 2007 or
to a plan that was subject to section 412(l)
for the last plan year before section 430
applies to the plan (the pre-effective plan
year), determined after the application of
section 412(l)(6) and (9). The proposed
regulations would not provide for any
adjustment to the applicable percentages
under this transition rule for a plan for
which the effective date of section 430 is
delayed under sections 104 through 106 of
PPA ’06.
Under the proposed regulations, the
waiver amortization installments with
respect to a waiver amortization base es-
tablished for a plan year are the annual
amounts necessary to amortize that waiver
amortization base in level annual install-
ments over the 5-year period beginning
with the following plan year. As pro-
vided in proposed §1.430(h)(2)–1(f)(2),
these installments are determined assum-
ing that the installments are paid on the
valuation date for each plan year and
using the interest rates applicable under
section 430(h)(2). Thus, if the plan is
using segment rates, the installments are
determined by applying the first segment
rate to the first four installments and the
second segment rate to the fifth (and fi-
nal) installment. The waiver amortization
installments established with respect to a
waiver amortization base are determined
using the interest rates that apply for the
plan year for which the waiver is granted
(even though the first installment with
respect to the waiver amortization base is
not due until the subsequent plan year) and
are not redetermined in subsequent plan
years to reflect changes in interest rates
under section 430(h)(2) for those subse-
quent plan years. A waiver amortization
base is established for each plan year for
which a waiver of the minimum funding
standard has been granted, and the amount
of that waiver amortization base is equal
to the amount of the minimum required
contribution waived (or the waived fund-
ing deficiency) for the plan year.
In the case of a plan that received a
funding waiver under section 412 for a
plan year for which section 430 was not
yet effective with respect to the plan,
the proposed regulations provide that the
waiver is treated as giving rise to a waiver
amortization base, and the amortization
charges with respect to that funding waiver
are treated as waiver amortization install-
ments. With respect to such a preexisting
funding waiver, the amount of the annual
waiver amortization installment is equal to
the amortization charge with respect to that
waiver determined using the interest rate
or rates that applied for the pre-effective
plan year. Thus, for a plan that received a
waiver in the past, the plan sponsor would
have to contribute the amounts needed
to amortize that waiver over the original
schedule as previously established.
In accordance with section 430(c)(6),
the proposed regulations provide that, in
any case in which the funding shortfall of
a plan for a plan year is zero, the short-
fall amortization bases for all preceding
plan years (and all shortfall amortization
installments determined with respect to
those shortfall amortization bases) are
reduced to zero, and the waiver amorti-
zation bases for all preceding plan years
(and all waiver amortization installments
determined with respect to such bases) are
reduced to zero.
The proposed regulations would pro-
vide rules for determining the amount of a
minimum required contribution for a short
plan year. Under the proposed regulations,
the amortization installments are prorated
for a short plan year. The proposed reg-
ulations would not provide for any prora-
tion of the target normal cost. Instead, the
determination of target normal cost would
reflect actual accruals that accrue or are ex-
pected to accrue during the plan year.
4
The
proposed regulations also provide rules for
the treatment of installments in subsequent
plan years to take into account the pro-
3
The proposed regulations reflect the alternative amortization periods and interest rates that apply to a commercial passenger airline (or other eligible employer) that has made an election
under section 402 of PPA ’06.
4
See 29 CFR §2530.204–2(e) for rules relating tochanges in accrual computation periods.
May 12, 20089262008–19 I.R.B.

ration of these installments for short plan
years and any change in valuation date.
III.Section 1.430(j)–1 Payment of
Minimum Required Contributions
The proposed regulations under section
430(j) would provide rules related to the
payment of minimum required contribu-
tions, including the payment of quarterly
contributions and liquidity requirements.
The proposed regulations provide that any
payment of the minimum required contri-
bution under section 430 for a plan year
that is made on a date other than the val-
uation date for that plan year is adjusted
for interest accruingfor the period between
the valuation date and the payment date,
at the effective interest rate for the plan
for that plan year determined pursuant to
§1.430(h)(2)–1(f)(1). The direction of the
adjustment depends on whether the contri-
bution is paid before or after the valuation
date for the plan year. If the contribution
is paid after the valuation date for the plan
year, the contribution is discounted to the
valuation date using the plan’s effective in-
terest rate. By contrast, if the contribu-
tion is paid before the valuation date for
the plan year (which could only occur in
the case of a small plan described in sec-
tion 430(g)(2)(B)), the contribution is in-
creased for interest at that same interest
rate.
Under the proposed regulations, a pay-
ment of the minimum required contribu-
tion under section 430 for a plan year can
be made no earlier than the first day of the
plan year. The deadline for any payment
of any minimum required contribution for
a plan year is 8
1
/2months after the close of
the plan year. If a minimum required con-
tribution is not paid by this deadline, an ex-
cise tax applies under section 4971.
The proposed regulations would pro-
vide rules for accelerated quarterly contri-
butions for underfunded plans. These rules
are similar to the rules provided under No-
tice 89–52; however, these rules have been
updated to reflect statutory changes. These
statutory changes include changes regard-
ing which plans are subject to the quarterly
contribution requirements as well as the in-
terest rates applicable to missed quarterly
contributions.
Under the proposed regulations, in any
case in which the plan has a funding short-
fall for the preceding plan year, the em-
ployer maintaining the plan must make
the required quarterly installments.
5
The
amount of each required quarterly install-
ment is equal to 25% of the required annual
payment. For this purpose, the required
annual payment is equal to the lesser of
90% of the minimum required contribu-
tion under section 430(a) for the plan year,
or 100% of the minimum required contri-
bution under section 430(a) (determined
without regard to any funding waiver un-
der section 412) for the preceding plan
year. These minimum required contribu-
tions are determined under section 430 as
of the valuation date for each year and have
no adjustment for interest.
6
The proposed
regulations provide that, for purposes of
determining the required annual payment,
the minimum required contribution for a
plan year is determined without regard to
use of the prefunding balance or funding
standard carryover balance in the current
year or any prior year.
Pursuant to section 430(j)(3)(C), the
proposed regulations would provide that
the due dates for the four required quar-
terly installments with respect to a full
plan year are as follows: the first install-
ment is due on the 15
th
day of the 4th plan
month, the second installment is due on
the 15
th
day of the 7th plan month, the
third installment is due on the 15
th
day of
the 10th plan month, and the fourth in-
stallment is due on the 15
th
day following
the close of the plan year. In the case of a
short plan year, the proposed regulations
would provide rules for determining the
amount of the required annual payment,
the number and due dates of installments,
and the amount of those installments. The
proposed regulations also provide rules
for determining the plan month in the case
of a plan year that does not begin on the
first day of a calendar month.
The proposed regulations would pro-
vide that, if the employer fails to pay
the full amount of a required installment,
then the rate of interest used to adjust the
amount of the contribution with respect to
the underpayment of the required install-
ment for the period of time that begins on
the due date for the required installment
and that ends on the date of payment is
equal to the effective interest rate for the
plan for that plan year determined pursuant
to §1.430(h)(2)–1(f)(1) plus 5 percentage
points. This increased interest rate applies
only to installments that are due after the
valuation date for the plan year because
section 430(j)(3) refers to interest being
charged on late quarterly contributions.
The amount of the underpayment is equal
to the excess of the required installment
over the amount (if any) of the install-
ment contributed to or under the plan on
or before the due date for the installment.
For this purpose, the proposed regulations
contain an ordering rule under which con-
tributions are to be credited against unpaid
required installments in the order in which
those installments were required to be
paid.
As was the case in Notice 89–52, the
proposed regulations would provide that
a plan sponsor generally can use a plan’s
funding balances to satisfy quarterly con-
tribution requirements. However, this rule
is subject to the new limitation on the use
of funding balances by underfunded plans
pursuant to section 430(f)(3)(C). An eligi-
ble plan sponsor’s election to use the plan’s
prefunding balance and funding standard
carryover balance under section 430(f) sat-
isfies the obligation to make an installment
on the date of the election, to the extent of
the amount elected, as adjusted with inter-
est at the plan’s effective interest rate un-
der section 430(h)(2)(A) for the plan year
from the valuation date through the due
date of the installment. Comments are
requested regarding whether rules should
be provided under which a plan sponsor
is deemed to make an election to use a
funding balance to theextentitisavail-
able to avoid a failure to make any required
quarterly installment or under which a plan
sponsor can make a single election that
will apply to all future quarterly install-
ments until revoked.
5
These proposed regulations do not provide rules for determining whether a plan has a funding shortfall for the 2007 plan year for purposes of determining whether the plan must make
required quarterly installments for the 2008 plan year. Nonetheless, plans must make this determination on a reasonable basis. See the discussion inthis preamble under the heading “Proposed
Legislation” for a rule that the IRS and the Treasury Department are considering for this purpose.
6
In determining required installments for the plan year that begins in 2008, the minimum required contribution for the 2007 plan year under section 412is used as the minimum required
contribution for the preceding plan year. This amount, which does not reflect either use of the credit balance or the granting of any funding waiver, isadjusted with interest to the end of the
2007 plan year at the plan’s valuation interest rate for the 2007 plan year.
2008–19 I.R.B.927May 12, 2008

A plan sponsor that uses the plan’s pre-
funding balance or funding standard car-
ryover balance toward satisfaction of the
plan’s quarterly contribution requirement
before the plan’s effective interest rate for
the plan year has been determined should
assume, in order to ensure that the quar-
terly contribution requirements are satis-
fied, that the effective interest rate is equal
to the lowest of the three segment rates
(generally the first segment rate) to ad-
just the elected amount. Plan sponsors
should also note that, pursuant to proposed
§1.430(f)–1(b)(1)(ii)(B), the amount of the
funding balance that is used to satisfy the
quarterly contribution requirements can-
not later be added back to the prefund-
ing balance (because only contributions in
excess of the minimum funding require-
ment, determined without regard to the off-
set under section 430(f)(3), are eligible to
be added to the prefunding balance).
The proposed regulations would pro-
vide rules for the liquidity requirements
thatgenerallyapplytoplansforwhich
quarterly contributions are required. Un-
der the proposed regulations, a plan sub-
ject to the requirement to make quarterly
contributions (other than a small plan de-
scribed in section 430(g)(2)(B)) is treated
as failing to pay the full amount of the re-
quired installment for a quarter to the ex-
tent that the value of the liquid assets paid
after the close of that quarter and on or be-
fore the due date for the installment is less
than the liquidity shortfall for that quarter.
Thus,inordertosatisfythequarterlycon-
tribution requirement for a quarter, liquid
assets in the amount of the liquidity short-
fall must be contributed after the close of
that quarter and on or before the due date
for the installment.
7
The use of funding
balances or the contribution of illiquid as-
sets cannot remedy a liquidity shortfall.
The rules under the proposed regula-
tions relating to the liquidity requirements
are similar to the rules provided under Rev.
Rul. 95–31; however, these rules have
been updated to reflectstatutory changes.
For example, the definition of liquid assets
under the proposed regulations is the same
as the definition of liquid assets under Rev.
Rul. 95–31. Unlike Rev. Rul. 95–31, the
proposed regulations measure satisfaction
of a liquidity shortfall by reference to con-
tributions made after the close of the quar-
ter and by the due date for the installment
while including contributions made during
the plan quarter in plan assets. Although
this appears to be a change from the rules
of Rev. Rul. 95–31, the two formulations
are mathematically identical.
The proposed regulations provide that,
for purposes of applying the additional 5
percentage point interest adjustment in the
case of a quarterly contribution that is not
fully paid, the liquidity increment for the
quarter (the portion of the quarterly in-
stallment that is due solely by reason of
the liquidity requirements) continues to be
treated as unpaid until the close of the quar-
ter in which the due date for that install-
ment occurs, regardless of when it is con-
tributed. However, for purposes of adjust-
ing the contribution to the valuation date at
the effective interest rate, the adjustment
is made from the actual contribution date
(rather than from the close of the quarter).
In addition, the proposed regulations pro-
vide an ordering rule under which, if a con-
tribution for a quarter is less than the total
amount needed to satisfy the quarterly con-
tribution requirement taking into account
the liquidity requirement, then the contri-
bution is first attributed toward satisfying
the quarterly contribution requirement de-
termined without regard to the liquidity re-
quirement.
Under the proposed regulations, if the
amount of any required installment is
increased because of the liquidity short-
fall rules, that increase cannot exceed the
amount that, when added to prior required
installments determined under section
430(j) for the plan year, would increase
the funding target attainment percentage
of the plan for the plan year (taking into
account the expected increase in funding
target due to benefits accruing or earned
during the plan year) to 100%.
The proposed regulations would pro-
vide that the rules under section 430(j)
generally apply to a plan maintained by
a commercial passenger airline (or other
eligible employer) that has made an elec-
tion under section 402(a)(1) or 402(a)(2)
ofPPA’06inthesamemannerasthey
apply to any other plan subject to section
430. However, in the case of a plan with
respect to which the election under sec-
tion 402(a)(1) of PPA ’06 has been made,
the determination of the funding short-
fall for a plan year is made by reference
to the unfunded liability under section
402(e)(3)(A) of PPA ’06. In addition, the
effective interest rate for a plan with re-
spect to which the election under section
402(a)(1) of PPA ’06 has been made is
deemed to be 8.85%. Pursuant to pro-
posed §1.430(h)(2)–1(f)(1), the effective
interest rate for a plan with respect to
which the election under section 402(a)(2)
of PPA ’06 has been made will be 8.25%
for the 10-year period during which the
election applies to the plan.
IV.Section 54.4971(c)–1 Taxes on Failure
to Meet Minimum Funding Standards
These proposed regulations set forth the
definitions that apply for purposes of ap-
plying the rules of section 4971 that were
modified by PPA ’06.
The proposed regulations define the
termaccumulated funding deficiency
(which is only relevant for a multiem-
ployer plan) as having the meaning given
to that term by section 431. A multiem-
ployer plan’s accumulated funding defi-
ciency for a plan year takes into account
all charges and credits to the funding stan-
dard account under section 412 for plan
years before the first plan year for which
section 431 applies to the plan.
The proposed regulations define the
termunpaid minimum required contribu-
tion, with respect to any plan year, as any
minimum required contribution under sec-
tion 430 for the plan year that is not paid
on or before the due date for the plan year
under section 430(j)(1). The proposed
regulations provide that a plan’s accumu-
lated funding deficiency under section 412
for the pre-effective plan year is treated as
an unpaid minimum required contribution
for that plan year until correction is made.
Unlike the determination of accumulated
funding deficiency which applied under
section 412 prior to PPA ’06, the total
unpaid minimum required contributions
is not adjusted with interest. However,
as described in the following paragraph,
correction of an unpaid minimum required
contribution does require a contribution
that includes an adjustment for interest.
7
In this context, see Department of Labor Interpretive Bulletin 94–3 (29 CFR2509.94–3), which sets forth the Department’s view that, in the absence ofan applicable exemption, a contribution
by an employer to a defined benefit plan in a form other than cash constitutes a prohibited transaction under section 406 of ERISA and section 4975 of theCode.
May 12, 20089282008–19 I.R.B.

The proposed regulations define the
termcorrectas it applies to the accumu-
lated funding deficiency and the unpaid
minimum required contribution of a plan.
With respect to an accumulated funding
deficiency under a multiemployer plan, the
proposed regulations set forth rules that
are the same as the rules set forth in pro-
posed §54.4971–2(a). Under the proposed
regulations, the correction of an unpaid
minimum required contribution under a
single employer plan for a plan year re-
quires the contribution, to or under the
plan, of the amount that, when discounted
to the valuation date for the plan year
for which the unpaid minimum required
contribution is due at the appropriate rate
of interest, equals or exceeds the unpaid
minimum required contribution. For this
purpose, the appropriate rate of interest
is the plan’s effective interest rate for the
plan year for which the unpaid minimum
required contribution is due except to the
extent that the payments are subject to
additional interest as provided under sec-
tion 430(j)(3) or (4). With respect to an
unpaid minimum required contribution,
the proposed regulations provide an or-
dering rule under which a contribution is
attributable first to the earliest plan year of
any unpaid minimum required contribu-
tion for which correction has not yet been
made. With respect to an accumulated
funding deficiency under section 412 for
the pre-effective plan year that is treated
as an unpaid minimum required contribu-
tion, the proposed regulations provide that
correction requires the contribution, to or
under the plan, of the amount of that accu-
mulated funding deficiency adjusted with
interest from the end of the pre-effective
plan year to the date of the contribution
at the plan’s valuation interest rate for the
pre-effective plan year.
The IRS and the Treasury Department
intend to issue further guidance in the fu-
ture on the application of section 4971, in-
cluding special rules applicable to multi-
employer plans that are in critical or en-
dangered status under section 432.
Proposed Legislation
As of the date of the issuance of these
proposed regulations, bills have been
passed in the House of Representatives and
the Senate that would provide for technical
corrections to PPA ’06.
8
These bills would
amend section 430(j)(3)(A) to authorize
the Treasury Department to provide rules
for determining the funding shortfall for
purposes of the pre-effective plan year
and would add section 430(j)(3)(E)(iii)
to authorize the Treasury Department to
provide special rules for the treatment
of quarterly contributions in the case of
a plan with a valuation date other than
the first day of the plan year. These bills
would also specify an effective date for
the PPA ’06 amendments to section 4971.
These proposed regulations have
reserved§1.430(j)–1(c)(6)and
§1.430(j)–1(g)(5)(ii) in order to accom-
modate any enacted changes to section
430(j). If legislation similar to that in the
proposed technical corrections is enacted,
the IRS and the Treasury Department
are considering including the following
provisions in final regulations. First, the
funding shortfall for the pre-effective
plan year would be determined as the
excess (if any) of the plan’s current
liability determined pursuant to section
412(l)(7) on the valuation date for the
plan’s pre-effective plan year, over the net
plan assets for the pre-effective plan year
as determined under §1.430(i)–1(f)(5)(ii).
Second, if a quarterly installment is due
before the valuation date for the plan year,
the minimum required contribution for
the plan year would be increased by an
additional amount if that quarterly install-
ment is not paid by the due date. This
additional amount would be determined
by applying interest at an annual rate of
5% to the underpayment of the required
installment for the period of time between
the due date for the required installment
and the earlier of the date of payment or
the valuation date.
Effective/Applicability Dates of
Regulations
Section430generallyappliestoplan
years beginning on or after January 1,
2008. The proposed regulations under
section 430 are proposed to apply gener-
ally to plan years beginning on or after
January 1, 2009. When the regulations are
finalized, plans will be permitted to apply
them for plan years beginning in 2008. In
addition, for plan years beginning in 2008,
plans are permitted to rely on the proposed
regulations for purposes of satisfying the
requirements of section 430. In the case
of a plan for which the effective date of
section 430 is delayed in accordance with
sections 104 through 106 of PPA ’06, the
regulations are proposed to apply to plan
years beginning on or after the date section
430 first applies with respect to the plan.
The amendments made to section 4971
by section 114 of PPA ’06 do not have
a specific effective date. The regulations
provide that the amendments to section
4971 generally apply at the same time as
the amendments to section 430 (or section
431, as applicable) apply to the plan. Thus,
the regulations provide that the amend-
ments to section 4971 generally apply to
taxable years beginning on or after January
1, 2008, but only with respect to plan years
for which section 430 (or section 431) ap-
pliestotheplanthatendwithorwithinany
such taxable year. In the case of a plan
to which a delayed effective date applies
pursuant to sections 104 through 106 of
PPA ’06, the regulations provide that the
amendments made to section 4971 apply
to the same taxable years, but only with re-
spect to plan years for which section 430
applies to the plan. The regulations under
section 4971 generally are proposed to ap-
ply at the same time the statutory changes
to section 4971 under PPA ’06 become
effective but would not apply to taxable
years ending before April 15, 2008. Thus,
for example, the regulations under section
4971 would not apply to a short taxable
year beginning January 1, 2008, and end-
ing February 29, 2008.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory as-
sessment is not required. It has also been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C. chap-
ter 5) does not apply to these regulations
and, because the proposed regulations do
not impose a collection of information on
small entities, a regulatory flexibility anal-
ysis is not required. Pursuant to section
7805(f) of the Code, these regulations have
8
See H.R. 3361 as passed by the House of Representatives on March 13, 2008 and S. 1974 as passed by the Senate on December 19, 2007.
2008–19 I.R.B.929May 12, 2008

been submitted to the Chief Counsel for
Advocacy of the Small Business Adminis-
tration for comment on its impact on small
business.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, considera-
tion will be given to any written (a signed
original and eight (8) copies) or electronic
comments that are submitted timely to the
IRS. The IRS and the Treasury Depart-
ment specifically request comments on
the clarity of the proposed regulations and
how they may be made easier to under-
stand. All comments will be available for
public inspection and copying.
A public hearing has been scheduled for
August 4, 2008, beginning at 10 a.m. in
the Auditorium, Internal Revenue Service,
1111 Constitution Avenue, NW, Washing-
ton, DC. Due to building security proce-
dures, visitors must enter at the Consti-
tution Avenue entrance. In addition, all
visitors must presentphoto identification
to enter the building. Because of access
restrictions, visitors will not be admitted
beyond the immediate entrance area more
than 30 minutes before the hearing starts.
For information about having your name
placed on the building access list to attend
thehearing,seetheFOR FURTHER IN-
FORMATION CONTACTsection of this
preamble.
The rules of 26 CFR 601.601(a)(3) ap-
ply to the hearing. Persons who wish to
present oral comments at the hearing must
submit written or electronic comments by
July 15, 2008, and an outline of topics to be
discussed and the amount of time to be de-
voted to each topic (a signed original and
eight (8) copies) by July 15, 2008. A pe-
riod of 10 minutes will be allotted to each
person for making comments. An agenda
showing the scheduling of the speakers
will be prepared after the deadline for re-
ceiving outlines has passed. Copies of the
agenda will be available free of charge at
the hearing.
Drafting Information
The principal authors of these reg-
ulations are Lauson C. Green and
Linda S. F. Marshall, Office of Division
Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities).
However, other personnel from the IRS
and the Treasury Department participated
in the development of these regulations.
*****
Proposed Amend
ments 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 1.430(a)–1 is added to
read as follows:
§1.430(a)–1 Determination of minimum
required contribution.
(a)In general—(1)Overview.This
section sets forth rules for determining a
plan’s minimum required contribution for
a plan year under section 430(a). Sec-
tion 430 and this section apply to single
employer defined benefit plans (includ-
ing multiple employer plans as defined in
section 413(c)) that are subject to section
412 but do not apply to multiemployer
plans (as defined in section 414(f)). Para-
graph (b) of this section defines a plan’s
minimum required contribution for a
plan year. Paragraph (c) of this section
provides rules for determining shortfall
amortization installments. Paragraph (d)
of this section provides rules for deter-
mining waiver amortization installments.
Paragraph (e) of this section provides for
early deemed amortization of shortfall and
waiver amortization bases for fully funded
plans. Paragraph (f) of this section pro-
vides definitions that apply for purposes
of this section. Paragraph (g) of this sec-
tion provides examples that illustrate the
application of this section. Paragraph (h)
of this section provides effective/applica-
bility dates and transition rules.
(2)Special rules for multiple employer
plans. In the case of a multiple employer
plan to which section 413(c)(4)(A) applies,
the rules of section 430 and this section
are applied separately for each employer
under the plan, as if each employer main-
tained a separate plan. Thus, the min-
imum required contribution is computed
separately for each employer under such
a multiple employer plan. In the case of
a multiple employer plan to which sec-
tion 413(c)(4)(A) does not apply (that is,
a plan described in section 413(c)(4)(B)
that has not made the election for section
413(c)(4)(A) to apply), the rules of section
430 and this section are applied as if all
participants in the plan were employed by
a single employer.
(b)Definition of minimum required
contribution—(1)In general. In the case
of a defined benefit plan that is not a
multiemployer plan (within the meaning
of section 414(f)), except as offset under
section 430(f) and §1.430(f)–1, the mini-
mum required contribution for a plan year
is determined as the applicable amount
determined under paragraph (b)(2) of this
section or paragraph (b)(3) of this section,
reduced by the amount of any funding
waiver under section 412(c) that is granted
for the plan year. See paragraph (b)(4)
of this section for special rules for a plan
maintained by a commercial passenger
airline (or other eligible employer) for
which an election under section 402 of the
Pension Protection Act of 2006, Public
Law 109–280 (120 Stat. 780) (PPA ’06),
has been made, and see section 430(j)
and §1.430(j)–1 for rules regarding the
required interest adjustment for a contri-
bution that is paid on a date other than the
valuation date for the plan year.
(2)Plan assets less than funding tar-
get—(i)General rule. For any plan year
in which the value of plan assets of the
plan (as reduced to reflect the subtraction
of certain funding balances as provided un-
der §1.430(f)–1(c), but not below zero) is
less than the funding target of the plan for
the plan year, the minimum required con-
tribution for that plan year is equal to the
sum of—
(A) The target normal cost of the plan
for the plan year;
(B) The total (not less than zero) of the
shortfall amortization installments deter-
mined with respect to the shortfall amor-
tization bases for the plan year and each of
the 6 preceding plan years as described in
paragraph (c) of this section; and
(C) The total of the waiver amortization
installments determined with respect to the
waiver amortization bases for each of the 5
preceding plan years as described in para-
graph (d) of this section.
(ii)Special rule for short plan
years—(A)Proration of amortization in-
stallments. In determining the minimum
May 12, 20089302008–19 I.R.B.

required contribution in the case of a plan
year that is shorter than 12 months (and
is not a 52-week plan year of a plan that
uses a 52–53 week plan year), the short-
fall amortization installments and waiver
amortization installments that are taken
into account under paragraphs (b)(2)(i)(B)
and (C) of this section are determined by
multiplying the amount of those install-
ments that would be taken into account
for a 12-month plan year by a fraction,
the numerator of which is the duration of
the short plan year and the denominator of
which is 1 year.
(B)Effect on subsequent years.Inplan
years after the short plan year, installments
with respect to a shortfall amortization
base (or waiver amortization base) con-
tinue to be taken into account under para-
graphs (b)(2)(i)(B) and (C) of this section
until the total amount of those installments,
as originally determined to be paid over
7 years (or 5 years in the case of waiver
amortization installments), has been taken
into account. Thus, for example, in the
case of a plan that has a short plan year, an
additional partial installment will be taken
into account under paragraphs (b)(2)(i)(B)
and (C) of this section during the plan year
after the end of the original amortization
period in an amount determined so that the
total of the amortization installments (in-
cluding the prorated installment payable
for the short plan year and the additional
partial installment) is equal to the total
amount of the amortization installments
as originally determined. Similarly, in the
case of a plan that has a short plan year,
the total number of plan years required
to take into account the full amount of
installments will exceed 7 plan years (or
5 plan years in the case of waiver amor-
tization installments), and, accordingly,
the number of preceding plan years taken
into account in paragraphs (b)(2)(i)(B)
and (C) of this section is correspondingly
increased so that the total amount of the
amortization installments as originally de-
termined is taken into account. In addition,
for plan years beginning after the close of
the short plan year, the shortfall amortiza-
tion installments and waiver amortization
installments that are taken into account
under paragraphs (b)(2)(i)(B) and (C) of
this section are assumed to be paid on
the valuation date for the new plan year
(rather than on the valuation date for the
short plan year and preceding plan years).
(3)Plan assets equal or exceed fund-
ing target. For any plan year in which the
value of plan assets (as reduced to reflect
the subtraction of certain funding balances
as provided under §1.430(f)–1(c), but not
below zero) equals or exceeds the funding
target of the plan for the plan year, the min-
imum required contribution for that plan
year is equal to the target normal cost of
the plan for the plan year reduced (but not
below zero) by that excess.
(4)Special rules for commercial pas-
senger airlines—(i)In general. This para-
graph (b)(4) provides special rules for a
plan maintained by a commercial passen-
ger airline (or an employer whose principal
business is providing catering services to
a commercial passenger airline) for which
an election under section 402 of PPA ’06
has been made.
(ii)Frozen plans—(A)Determinations
during 17-year amortization period.Ifan
election described in section 402(a)(1) of
PPA ’06 applies for the plan year with re-
spect to an eligible plan described in sec-
tion 402(c)(1) of PPA ’06, then the plan’s
minimum required contribution for pur-
poses of section 430 of the Code for the
plan year is equal to the amount neces-
sary to amortize (at an interest rate of 8.85
percent) the unfunded liability of the plan
in equal installments over the remaining
amortization period. For this purpose, the
unfunded liability means the excess of the
accrued liability under the plan determined
using the unit credit funding method and
an interest rate of 8.85 percent over the fair
market value of assets, and the remaining
amortization period is the 17-plan-year pe-
riod beginning with the first plan year for
which the election was made, reduced by 1
year for each plan year after the first plan
year for which the election was made. In
addition, the section 430(f)(3) election to
apply funding balances against the mini-
mum required contribution does not apply
to a plan to which the election described
in section 402(a)(1) of PPA ’06 applies for
the plan year.
(B)Determinations following 17-year
amortization period. If an election de-
scribed in section 402(a)(1) of PPA ’06 ap-
plied to the plan for any preceding plan
year but does not apply for the current plan
year, then the plan’s minimum required
contribution for purposes of section 430 of
the Code for the plan year is determined
without regard to that election. For the first
plan year for which that election no longer
applies to the plan, any prefunding balance
or funding standard carryover balance is
reduced to zero.
(iii)Other plans of commercial pas-
senger airlines. If an election described
in section 402(a)(2) of PPA ’06 has been
made for an eligible plan described in sec-
tion 402(c)(1) of PPA ’06, then the min-
imum required contribution for purposes
of section 430 is determined under gener-
ally applicable rules, except that the short-
fall amortization base for the first plan
year for which section 430 applies to the
plan is amortized over 10 years (rather
than over 7 years as provided in para-
graph (c)(1) of this section) in accordance
with §1.430(h)(2)–1(e) and (f) using the
interest rates that apply for the first plan
year for which section 430 applies to the
plan. In such a case, the shortfall amortiza-
tion installments with respect to the short-
fall amortization base for that plan year
will continue to be included in determin-
ing the minimum required contribution for
10 years rather than 7 years. See also
§1.430(h)(2)–1(b)(6) for a special rule for
determining the funding target in the case
of a plan for which an election under sec-
tion 402(a)(2) of PPA ’06 has been made.
(c)Shortfall amortization install-
ments—(1)In general. For purposes of
this section, the shortfall amortization
installments with respect to a shortfall
amortization base established for a plan
year are the annual amounts necessary to
amortize that shortfall amortization base in
level annual installments over the 7-year
period beginning with that plan year. See
§1.430(h)(2)–1(e) and (f) for rules regard-
ing interest rates used for determining
shortfall amortization installments and the
date within each plan year on which the
installments are assumed to be paid. The
shortfall amortization installments are de-
termined using the interest rates that apply
for the plan year for which the shortfall
amortization base is established and are
not redetermined in subsequent plan years
to reflect changes in interest rates under
section 430(h)(2) for those subsequent
plan years.
(2)Shortfall amortization base—(i)
In general. For purposes of this sec-
tion, unless the value of plan assets (as
reduced to reflect the subtraction of cer-
tain funding balancesas provided under
§1.430(f)–1(c)(2), but not below zero) is
2008–19 I.R.B.931May 12, 2008

equal to or greater than the funding target
of the plan for the plan year, a shortfall
amortization base is established for the
plan year equal to—
(A) The funding shortfall of the plan for
the plan year; minus
(B) The amount attributable to future
installments determined under paragraph
(c)(2)(ii) of this section.
(ii)Amount attributable to future in-
stallments. The amount attributable to fu-
ture installments is equal to the sum of the
present values (determined in accordance
with §1.430(h)(2)–1(e) and (f) using the
interest rates that apply for the current plan
year) of—
(A) The shortfall amortization install-
ments that have been determined for the
plan year and any succeeding plan year
with respect to the shortfall amortization
bases of the plan for any plan year preced-
ing the plan year; and
(B) The waiver amortization install-
ments that have been determined for the
plan year and any succeeding plan year
with respect to the waiver amortization
bases of the plan for any plan year preced-
ing the plan year.
(iii)Transition rule. See paragraph
(h)(4) of this section for a transition rule
under which only a portion of the funding
target is taken into account in determining
whether a shortfall amortization base is
established under this paragraph (c)(2).
(d)Waiver amortization install-
ments—(1)In general. For purposes of
this section, the waiver amortization in-
stallments with respect to a waiver amorti-
zation base established for a plan year are
the annual amounts necessary to amortize
that waiver amortization base in level an-
nual installments over the 5-year period
beginning with the following plan year.
See §1.430(h)(2)–1(e) and (f) for rules
regarding interest rates used for deter-
mining waiver amortization installments
and the date within each plan year on
which the installments are assumed to be
paid. The waiver amortization install-
ments established with respect to a waiver
amortization base are determined using
the interest rates that apply for the plan
year for which the waiver is granted (even
though the first installment with respect
to the waiver amortization base is not due
until the subsequent plan year) and are not
redetermined in subsequent plan years to
reflect changes in interest rates under sec-
tion 430(h)(2) for those subsequent plan
years.
(2)Waiver amortization base—(i)In
general. For purposes of this section, a
waiver amortization base is established
for each plan year for which a waiver of
the minimum funding standard has been
granted in accordance with section 412(c).
The amount of the waiver amortization
base is equal to the amount of the mini-
mum required contribution waived (or the
waived funding deficiency) for the plan
year.
(ii)Transition rule. See paragraph
(h)(3) of this section for the treatment of
funding waivers granted for plan years
beginning before 2008.
(e)Early deemed amortization upon at-
tainment of funding target. In any case in
which the funding shortfall of a plan for a
plan year is zero—
(1) The shortfall amortization bases for
all preceding plan years (and all short-
fall amortization installments determined
with respect to those shortfall amortization
bases) are reduced to zero; and
(2) The waiver amortization bases for
all preceding plan years (and all waiver
amortization installments determined with
respect to such bases) are reduced to zero.
(f)Definitions—(1)In general.The
definitions set forth in this paragraph (f)
apply for purposes of this section.
(2)Funding shortfall.Thetermfunding
shortfallmeans the excess (if any) of—
(i) The funding target of the plan for a
plan year; over
(ii) The value of plan assets for the plan
year (as reduced to reflect the subtraction
of the funding standard carryover balance
and prefunding balance to the extent pro-
vided under §1.430(f)–1(c), but not below
zero).
(3)Funding target.Thetermfund-
ing targetmeans the plan’s funding tar-
get for a plan year determined under
§1.430(d)–1(b)(2), §1.430(i)–1(c), or
§1.430(i)–1(e)(1), whichever applies to
the plan for the plan year.
(4)Target normal cost.Thetermtar-
get normal costmeans the plan’s target
normal cost for a plan year determined
under §1.430(d)–1(b)(1), §1.430(i)–1(d),
or §1.430(i)–1(e)(2), whichever applies to
the plan for the plan year.
(g)Examples. The following examples
illustrate the rules of this section. Un-
less otherwise indicated, these examples
are based on the following assumptions:
the plan is subject to section 430 starting in
2008; the plan year is the calendar year; the
valuation date is January 1; and the plan’s
funding standard carryover balance is $0.
Example 1. (i) Plan A has a funding target of
$2,500,000 and assets totaling $1,800,000 as of Jan-
uary 1, 2008. The 2008 actuarial valuation is per-
formed using the 24-month average segment rates ap-
plicable for September 2007 (determined without re-
gard to the transitional rule of section 430(h)(2)(G)).
(ii) A $700,000 shortfall amortization base is es-
tablished for 2008, which is equal to the $2,500,000
funding target less $1,800,000 of assets.
(iii) With respect to this shortfall amortization
base of $700,000, there is a shortfall amortiza-
tion installment of $116,852 (which is equal to the
$700,000 shortfall amortization base amortized over
7 years) for each year from 2008 through 2014. The
amount of this shortfall amortization installment is
determined by discounting the first five installments
using the first segment interest rate of 5.26%, and by
discounting the sixth and seventh installments using
the second segment rate of 5.82%.
Example 2. (i) The facts are the same as inEx-
ample 1, except that the plan was granted a fund-
ing waiver of $300,000 in 2006, as of December 31,
2006. The valuation interest rate for the January 1,
2007, actuarial valuation is 8.50% (which exceeds
150% of the applicable federal mid-term rate).
(ii) The waiver amortization installment for the
plan year beginning January 1, 2007, is $70,166,
which is equal to the $300,000 funding waiver base
amortized over 5 years at the valuation interest rate
of 8.50%.
(iii) As of January 1, 2008, the present value of
the remaining waiver amortization installments is
$260,318, which is determined by discounting the
remaining four waiver amortization installments of
$70,166 to January 1, 2008, using the first segment
rate of 5.26%. See paragraph (h)(3) of this section.
(iv) A $439,682 shortfall amortization base is es-
tablished for 2008, which is equal to the $2,500,000
funding target, less $1,800,000 of assets, less
$260,318 (which is the present value of the remain-
ing waiver amortization installments).
(v) With respect to this shortfall amortization
base of $439,682, there is a shortfall amortization in-
stallment of $73,397 (which is equal to the $439,682
shortfall amortization base amortized over 7 years)
for each year from 2008 through 2014.
Example 3. (i) The facts are the same as inExam-
ple 2. Plan A has a $100,000 target normal cost for
the 2008 plan year and was granted a funding waiver
for 2008 to the largest extent permitted under section
412(c).
(ii) The minimum required contribution is
$243,563 as of January 1, 2008. This is equal to the
$100,000 target normal cost, plus the $70,166 waiver
amortization installment from the 2006 waiver, plus
the $73,397 January 1, 2008, shortfall amortization
installment.
(iii) In accordance with section 412(c)(1)(C), the
portion of the minimum required contribution attrib-
utable to the amortization of the 2006 funding waiver
cannot be waived. Therefore, the maximum amount
of the January 1, 2008, minimum required contribu-
tion that can be waived is $173,397.
May 12, 20089322008–19 I.R.B.

(iv) In accordance with paragraph (d) of this
section, a waiver amortization base of $173,397 is es-
tablished as of January 1, 2008, to be amortized over
5 years beginning with the 2009 plan year. Although
the waiver amortization installments for the 2008
funding waiver are not included in the minimum
required contribution until 2009, the amount of those
installments is determined based on the interest rates
used for the 2008 plan year.
(v) The waiver amortization installments are cal-
culated using the first segment interest rate of 5.26%
for the first four installments (calculated as of Jan-
uary 1, 2009, through January 1, 2012) and the second
segment interest rate of 5.82% for the final install-
ment payable as of January 1, 2013. Accordingly, the
waiver amortization installments that are payable be-
ginning January 1, 2009, are $40,530 each.
Example 4. (i) The facts are the same as inExam-
ple 3. As of January 1, 2009, Plan A has a funding
target of $2,750,000 and assets totaling $1,900,000.
The 2009 actuarial valuation is performed using
the 24-month average segment rates applicable for
September 2008 (determined without regard to the
transitional rule of section 430(h)(2)(G)). For the
2009 plan year, the first segment rate is equal to
5.50%, the second segment rate is equal to 6.00%,
and the third segment rate is equal to 6.50%.
(ii) As of January 1, 2009, the present value of
the remaining three waiver amortization installments
with respect to the 2006 waiver is $199,715, which is
determined using the first segment rate of 5.50%.
(iii) As of January 1, 2009, the present value of
the remaining five waiver amortization installments
with respect to the 2008 waiver is $182,594, which is
determined using the first segment rate of 5.50%.
(iv) As of January 1, 2009, the present value of
the remaining six shortfall amortization installments
with respect to the 2008 shortfall amortization base
is $385,511, which is determined using the first seg-
ment rate of 5.50% for the first five installments and
the second segment rate of 6.00% for the sixth install-
ment.
(v) A shortfall amortization base of $82,180
is established for 2009, which is equal to the
$2,750,000 funding target, less $1,900,000 of assets,
less $199,715 (the present value of the remaining
waiver amortization installments with respect to the
2006 waiver), less $182,594 (the present value of the
remaining waiver amortization installments with re-
spect to the 2008 waiver), less $385,511 (the present
value of the remaining installments with respect to
the 2008 shortfall amortization base).
(vi) With respect to this shortfall amortization
base of $82,180, there is a shortfall amortization
installment of $13,795 (which is equal to the $82,180
shortfall amortization base amortized over 7 years)
for each year from 2009 through 2015.
Example 5. (i) The facts are the same as in
Example 4, except that Plan A has assets totaling
$2,000,000 as of January 1, 2009. Plan A has a target
normal cost of $110,000 as of January 1, 2009.
(ii) A shortfall amortization base of -$17,820
is established for 2009, which is equal to the
$2,750,000 funding target, less $2,000,000 of assets,
less $199,715 (the present value of the remaining
installments with respect to the 2006 waiver), less
$182,594 (the present value of the remaining install-
ments with respect to the 2008 waiver), less $385,511
(the present value of the remaining installments with
respect to the 2008 shortfall amortization base).
(iii) The shortfall amortization installment for the
2009 shortfall amortization base is -$2,991, which
is equal to the -$17,820 shortfall amortization base
amortized over 7 years. The first five shortfall amor-
tization installments are discounted using the first
segment rate of 5.50% and the sixth and seventh
shortfall amortization installments are discounted
using the second segment rate of 6.00%.
(iv) The minimum required contribution for the
2009 plan year is $291,102. This is equal to the
target normal cost of $110,000 plus the shortfall
amortization charge of $70,406 (that is, $73,397
minus $2,991) plus the waiver amortization charge
of $110,696 (that is, $70,166 plus $40,530).
Example 6. (i)Thefactsarethesameasin
Example 5, except that Plan A has assets totaling
$2,800,000 as of January 1, 2009.
(ii) Because the assets of $2,800,000 exceed the
funding target of $2,750,000 as of January 1, 2009, no
new shortfall amortization base is established under
paragraph (c)(2) of this section.
(iii) Furthermore, under paragraph (e) of this sec-
tion, all shortfall amortization bases and waiver amor-
tization bases (and all shortfall amortization install-
ments and waiver amortization installments associ-
ated with those bases) are reduced to zero as of Jan-
uary 1, 2009.
(iv) The minimum required contribution for the
2009 plan year is $60,000, which is equal to the
$110,000 target normal cost less the excess of the
assets over the funding target ($2,800,000 minus
$2,750,000).
Example 7. (i) The actuarial valuation for Plan
B as of January 1, 2008, based on a 12-month plan
year, determines a target normal cost of $110,000
and a shortfall amortization installment for 2008 of
$185,000. The plan year for Plan B is changed to
April 1 through March 31, effective April 1, 2008, re-
sulting in a short plan year beginning January 1, 2008,
and ending March 31, 2008.
(ii) The target normal cost for the short plan
year is redetermined in order to reflect the fact that
there is a short plan year. An actuarial valuation
shows that the target normal cost is $25,000 for the
short plan year based on the accruals for that short
plan year (determined in accordance with 29 CFR
§2530.204–2(e)).
(iii) In accordance with paragraph (b)(2)(ii)(A) of
this section, the shortfall amortization base is pro-
rated to reflect the three months covered by the short
plan year. Accordingly, the shortfall amortization in-
stallment for the short plan year is $46,250 (that is,
$185,000 multiplied by 3/12).
(iv) The total minimum required contribution for
the short plan year (without offset for any carryover
balance as of January 1, 2008) is $71,250 (that is,
the sum of the target normal cost of $25,000 plus the
shortfall amortization installment of $46,250).
Example 8. (i) The facts are the same as inExam-
ple 7. The first segment rate for the plan year begin-
ning April 1, 2008, is 5.30%, and the second segment
rate is 5.80%.
(ii) The present value of the remaining shortfall
amortization installments with respect to the Jan-
uary 1, 2008, shortfall amortization base is equal
to $1,074,937. This is determined by discounting
the remaining installments (6 full-year installments
due April 1, 2008 through April 1, 2013, and a final
9-month installment due April 1, 2014) using the
first segment rate of 5.30% for the first five install-
ments and the second segment rate of 5.80% for the
remaining installments.
(h)Effective/applicability dates and
transition rules—(1)In general. Section
430 generally applies to plan years be-
ginning on or after January 1, 2008. In
general, this section applies to plan years
beginning on or after January 1, 2009.
However, plans are permitted to apply
this section in determining the minimum
required contribution for plan years begin-
ning in 2008.
(2)Plans with delayed effective date.
In the case of a plan for which the effec-
tive date of section 430 is delayed in ac-
cordance with sections 104 through 106 of
PPA ’06, this section applies to plan years
beginning on or after the date section 430
first applies with respect to the plan.
(3)Treatment of pre–2008 funding
waivers. In the case of a plan that has
received a funding waiver under section
412 for a plan year for which section 430
was not yet effective with respect to the
plan, the waiver is treated as giving rise to
a waiver amortization base and the amorti-
zation charges with respect to that funding
waiver are treated as waiver amortization
installments as described in paragraph (d)
of this section. With respect to such a pre-
existing funding waiver, the amount of the
waiver amortization installment is equal
to the amortization charge with respect to
that waiver determined using the interest
rate or rates that applied for the pre-effec-
tive plan year.
(4)Transition rule for determining
whether shortfall amortization base is
established—(i)In general. Except as
provided in paragraphs (h)(4)(iii) and (iv)
of this section, in the case of plan years be-
ginning after 2007 and before 2011, only
the applicable percentage of the funding
target is taken into account in determining
whether a shortfall amortization base is
established for the plan year under para-
graph (c)(2) of this section.
(ii)Applicable percentage.Forpur-
poses of paragraph (h)(4)(i) of this section,
the applicable percentage is determined in
accordance with the following table:
2008–19 I.R.B.933May 12, 2008

Calendar year in which the plan year beginsApplicable percentage
200892
200994
201096
(iii)Transition rule not available if
funding falls below applicable percentage.
The transition rule of paragraph (h)(4)(i)
of this section does not apply with respect
to any plan year beginning after 2008 if a
shortfall amortization base was required
to be established under paragraph (c)(2) of
this section for any preceding year.
(iv)Transition rule not available for
new plans or deficit reduction plans.The
transition rule of paragraph (h)(4)(i) of this
section does not apply to a plan—
(A) That was not in effect for a plan year
beginning in 2007; or
(B) That was subject to section 412(l)
for the pre-effective plan year, determined
after the application of sections 412(l)(6)
and (9) (regardless of whether the deficit
reduction contribution for the pre-effective
plan year was equal to zero).
(v)Pre-effective plan year. For pur-
poses of this section, the pre-effective plan
year for a plan is the last plan year begin-
ning before section 430 applies to the plan.
Thus, except for plans with a delayed ef-
fective date under paragraph (h)(2) of this
section, the pre-effective plan year for a
plan is the last plan year beginning before
January 1, 2008.
Par. 3. Section 1.430(j)–1 is added to
read as follows:
§1.430(j)–1 Payment of minimum required
contributions.
(a)In general—(1)Overview.This
section provides rules related to the pay-
ment of minimum required contributions,
including the payment of quarterly con-
tributions. Section 430(j) and this section
apply to single employer defined benefit
plans (including multiple employer plans
as defined in section 413(c)) but do not ap-
ply to multiemployer plans (as defined in
section 414(f)). Paragraph (b) of this sec-
tion describes the general timing require-
ment for minimum required contributions.
Paragraph (c) of this section describes the
accelerated quarterly contribution sched-
ule for plans with a funding shortfall in the
preceding plan year. Paragraph (d) of this
section provides rules regarding liquidity
requirements. Paragraph (e) of this section
provides definitions. Paragraph (f) of this
section provides examples that illustrate
the rules of this section. Paragraph (g) of
this section sets forth effective/applicabil-
ity dates and transition rules.
(2)Special rules for multiple employer
plans. In the case of a multiple employer
plan to which section 413(c)(4)(A) applies,
the rules of section 430 and this section
are applied separately for each employer
under the plan, as if each employer main-
tained a separate plan. Thus, for example,
required quarterly contributions are deter-
mined separately for each employer under
such a multiple employer plan. In the case
of a multiple employer plan to which sec-
tion 413(c)(4)(A) does not apply (that is,
a plan described in section 413(c)(4)(B)
that has not made the election for section
413(c)(4)(A) to apply), the rules of section
430 and this section are applied as if all
participants in the plan were employed by
asingleemployer.
(3)Applicability of section 430(j)
to plans of commercial passenger air-
lines—(i)In general. Except as otherwise
provided in this section, the rules of sec-
tion 430(j) and this section apply to a
plan for which an election described in
section 402 of the Pension Protection Act
of 2006, Public Law 109–280 (120 Stat.
780) (PPA ’06), has been made in the same
manner as those rules apply to any other
plan subject to section 430.
(ii)Special rules for plans for which
election was made pursuant to section
402(a)(1) of PPA ’06. For purposes of
applying the rules of section 430(j) and
this section to a plan with respect to which
the election under section 402(a)(1) of
PPA ’06 has been made, the effective in-
terest rate for the plan is deemed to be
8.85% during the period for which the
election applies. In addition, see para-
graph (e)(4)(ii) of this section for a special
determination of the funding shortfall for
a plan for which the election in section
402(a)(1) of PPA ’06 has been made.
(b)General timing requirement for min-
imum required contributions—(1)Earliest
date for contributions. A payment of the
minimum required contribution under sec-
tion 430 for a plan year can be made no
earlier than the first day of the plan year.
(2)Deadline for contributions.The
deadline for any payment of any minimum
required contribution for a plan year is 8
1
/2
months after the close of the plan year. See
section 4971 and the regulations thereun-
der regarding an excise tax that applies
with respect to minimum required con-
tributions not paid by this deadline. See
also section 430(k) of the Code and sec-
tion 101(d) of the Employee Retirement
Income Security Act of 1974 (ERISA),
29 U.S.C. 1021(d), for additional rules
that apply in the case of a failure to pay
minimum required contributions by this
deadline.
(3)Adjustment for interest. Any pay-
ment of the minimum required contribu-
tion under section 430for a plan year that
is made on a date other than the valua-
tion date for that plan year is adjusted for
interest accruing for the period between
the valuation date and the payment date,
at the effective interest rate for the plan
for that plan year determined pursuant to
§1.430(h)(2)–1(f)(1). The direction of the
adjustment depends on whether the contri-
bution is paid before or after the valuation
date for the plan year. If the contribution
is paid after the valuation date for the plan
year, the contribution is discounted to the
valuation date using the plan’s effective in-
terest rate. By contrast, if the contribu-
tion is paid before the valuation date for
the plan year (which could only occur in
the case of a small plan described in sec-
tion 430(g)(2)(B)), the contribution is in-
creased for interest using the plan’s effec-
tive interest rate.
(c)Accelerated quarterly contribution
schedule for underfunded plans—(1)In
general—(i)Plan subject to quarterly
contribution requirement. In any case in
which the plan has a funding shortfall
for the preceding plan year, the employer
May 12, 20089342008–19 I.R.B.

maintaining the plan shall make the re-
quired installments described in paragraph
(c)(3) of this section by the due dates de-
scribed in paragraph (c)(4) of this section.
(ii)Satisfaction of installments through
use of funding balances. In the case of a
plan that is subject to the quarterly contri-
bution requirement under this paragraph
(c), if the plan sponsor makes an elec-
tion to use the plan’s prefunding balance
or funding standard carryover balance
under section 430(f), then the plan spon-
sor is treated as satisfying the obligation
to make a required installment under
paragraph (c)(1)(i) of this section on the
date of the election to the extent of the
amount elected, as adjusted with interest.
This interest adjustment is made at the
plan’s effective interest rate under section
430(h)(2)(A) for the plan year from the
valuation date through the due date of the
installment.
(iii)Consequences of failure to make
quarterly contribution—(A)Interest ad-
justment. If the full amount of a required
installment is not paid by the due date for
that installment, then an increased rate of
interest applies in adjusting the payment to
the valuation date. This increased rate of
interest is equal to the rate otherwise used
under paragraph (b) of this section plus
5 percentage points, and applies with re-
spect to the underpayment of the required
installment (determined pursuant to para-
graph (c)(2) of this section) for the period
of time that begins on the due date for the
required installment and that ends on the
date on which payment is made.
(B)Application to required installments
due before the valuation date.Themod-
ified interest rate described in paragraph
(c)(1)(iii)(A) of this section only applies to
a required installment that is due on or af-
ter the valuation date for the plan year. See
paragraph (c)(6) of this section for rules
that apply to required installments that are
duebeforethevaluationdatefortheplan
year.
(C)Additional consequences. See sec-
tion 430(k) of the Code and section 101(d)
of ERISA for examples of additional con-
sequences of failure to make quarterly con-
tributions.
(2)Determination of underpay-
ment—(i)Underpayment for a quarter.
For purposes of this section, the amount
of the underpayment with respect to a re-
quired installment for a quarter is equal to
the excess of—
(A) The required installment; over
(B) The amount (if any) of the install-
ment contributed to or under the plan on
or before the due date for the installment.
(ii)Order of crediting contributions.
For purposes of this section, contributions
are first credited against the earliest unpaid
required installments.
(3)Amount of required installment—(i)
In general. For purposes of this section,
the amount of any required installment is
equal to 25% of the required annual pay-
ment described in paragraph (c)(3)(ii) of
this section.
(ii)Required annual payment.The
required annual payment is equal to the
lesser of—
(A) 90% of the minimum required con-
tribution under section 430 for the plan
year; or
(B) 100% of the minimum required
contribution under section 430 (deter-
mined without regard to any funding
waiver under section 412) for the preced-
ingplanyear.
(iii)Treatment of funding balances.For
purposes of paragraph (c)(3)(ii) of this sec-
tion, the minimum required contribution
for a plan year is determined without re-
gard to the use of the prefunding balance or
funding standard carryover balance in the
current year or any prior year. However,
see paragraph (c)(1)(ii) of this section re-
garding a plan sponsor’s election to use the
plan’s prefunding balance or funding stan-
dard carryover balance in the current year
for the payment of quarterly installments.
(4)Due dates for installments. For pur-
poses of this section, there is a required in-
stallment for each quarter of the plan year.
The due dates for the four required quar-
terly installments with respect to a full plan
year are set forth in the following table:
InstallmentDue date
First quarter’s installment
15
th
day of 4th plan month
Second quarter’s installment
15
th
day of 7th plan month
Third quarter’s installment
15
th
dayof10thplanmonth
Fourth quarter’s installment
15
th
day after the close of the plan year
(5)Special rules for short plan
years—(i)In general. In the case of a short
plan year, the rules of this paragraph (c)
are modified as provided in this paragraph
(c)(5).
(ii)Current plan year is short plan
year—(A)Amount of required annual pay-
ment. In determining the required annual
payment pursuant to paragraph (c)(3)(ii)
of this section for a short plan year, the
amount otherwise determined under para-
graph (c)(3)(ii)(B) (based on the prior
year’s minimum required contribution) is
multiplied by a fraction, the numerator of
which is the duration of the short plan year
and the denominator of which is 1 year.
(B)Number and due dates of install-
ments. If the plan has a short plan year,
then an installment is due 15 days after the
close of that short plan year. In addition,
an installment is required for each due date
determined under paragraph (c)(4) of this
section that falls within the short plan year.
Thus, for example, if the short plan year
ends before the 15
th
day of the 4
th
plan
month of the plan year, there will be only
one installment for that short plan year, and
that installment will be due on the 15
th
day
after the close of the short plan year.
(C)Amount of installments.The
amount of each installment required to be
paid for the short plan year is equal to the
required annual payment determined pur-
suant to paragraph (c)(3)(ii) of this section
(as modified by paragraph (c)(5)(ii)(A)
of this section) divided by the number of
installments determined pursuant to para-
graph (c)(5)(ii)(B) of this section.
2008–19 I.R.B.935May 12, 2008

(iii)Prior plan year is short plan year.
If the prior plan year is a short plan year,
then the rule of paragraph (c)(3)(ii)(B) re-
garding the use of 100% of the prior year’s
minimum required contribution in deter-
mining the required annual payment does
not apply. Accordingly, in such a case, the
required annual payment is equal to 90%
of the minimum required contribution un-
der section 430 for the current plan year.
(6)Special rule for plans with valuation
dates after the first day of the plan year.
[Reserved]
(d)Liquidity requirement in connection
with quarterly contributions—(1)In gen-
eral—(i)Requirement to make additional
quarterly contributions. Except as pro-
vided in paragraphs (d)(1)(ii) and (iii) of
this section, if a plan is subject to the re-
quirement to make quarterly contributions
under paragraph (c) of this section, then
the plan is treated as failing to pay the
full amount of a required installment for a
quarter to the extent that the value of the
liquid assets contributed after the close of
that quarter and on or before the due date
for the installment is less than the liquidity
shortfall for that quarter.
(ii)Limitation on increase. The amount
by which any required installment is in-
creased by reason of paragraph (d)(1)(i) of
this section cannot exceed the amount that,
when added to prior required installments
for the plan year, would increase the fund-
ing target attainment percentage of the plan
for the plan year (taking into account the
expected increase in the funding target due
to benefits accruing or earned during the
plan year) to 100%.
(iii)Small plan exception. The liquidity
requirement of this paragraph (d) does not
apply to a small plan that is described in
§1.430(g)–1(b)(2).
(2)Period of underpayment—(i)Gen-
eral rule. For purposes of applying the
additional 5 percentage point interest ad-
justment pursuant to paragraph (c)(1)(iii)
of this section, the liquidity increment with
respect to a quarter as described in para-
graph (d)(2)(ii) of this section continues to
be treated as unpaid until the close of the
quarter in which the due date for that in-
stallment occurs without regard to when
that portion is paid. However, for purposes
of adjusting the contribution to the valua-
tion date at the effective interest rate under
paragraph (b)(3) of this section, the adjust-
ment is made from the contribution date
(rather than the close of the quarter).
(ii)Liquidity increment. For purposes
of this paragraph (d), the liquidity incre-
ment with respect to a quarter is the portion
of the required installment for that quarter
that is treated as not paid solely by reason
of paragraph (d)(1)(i) of this section.
(iii)Ordering rule. If the employer
makes a contribution for a quarter that, af-
ter application of paragraph (c)(2)(ii) of
this section, is less than the total amount
needed to satisfy the requirements of para-
graph (c) of this section as increased by
this paragraph (d) for a quarter, then the
contribution is first attributed toward sat-
isfying the requirements of paragraph (c)
of this section (without regard to this para-
graph (d)) and then to the liquidity incre-
ment.
(3)Consequences of failure to pay liq-
uidity shortfall. See section 4971(f) for an
excise tax on the failure to pay a liquid-
ity shortfall. See also section 206(e) of
ERISA.
(e)Definitions—(1)In general.The
definitions set forth in this paragraph (e)
apply for purposes of this section.
(2)Adjusted disbursements.Theterm
adjusted disbursementsmeans disburse-
ments from the plan reduced by the prod-
uct of—
(i) The plan’s funding target attain-
ment percentage determined under section
430(d)(2) for the plan year; and
(ii) The sum of the purchases of annu-
ities and payments of single sums.
(3)Disbursements from the plan.The
termdisbursements from the planmeans
all disbursements from the trust, including
purchases of annuities, payments of single
sums and other benefits, and administra-
tive expenses.
(4)Funding shortfall—(i)In general.
The termfunding shortfallmeans the ex-
cess (if any) of—
(A) The funding target of the plan for a
plan year; over
(B) The value of plan assets for the plan
year (as reduced to reflect the subtraction
of certain funding balances as provided un-
der §1.430(f)–1(c), but not below zero).
(ii)Special rule for plans of commercial
passenger airlines. In the case of a plan
year for which an election described in sec-
tion 402(a)(1) of PPA ’06 is in effect, the
termfunding shortfallmeans the unfunded
liability for that plan year determined un-
der §1.430(a)–1(b)(4)(ii).
(iii)
Special rule for first effective plan
year. See paragraph (g)(5)(ii) of this sec-
tion for a calculation of the funding short-
fall for the plan’s pre-effective plan year.
(iv)Special rule for plan spinoffs and
mergers.[Reserved]
(5)Liquid assets—(i)In general.The
termliquid assetsmeans cash, marketable
securities, and other assets described in
this paragraph (e)(5)(i). For this purpose,
marketable securities include financial in-
struments such as stocks and other equity
interests, evidences of indebtedness (in-
cluding certificates ofdeposit), options,
futures contracts, and other derivatives, for
which there is a liquid financial market,
and other interests in entities (such as part-
nerships, trusts, or regulated investment
companies) for which there is a liquid fi-
nancial market. For purposes of the pre-
ceding sentence, a liquid financial mar-
ket is an established financial market de-
scribed in §1.1092(d)–1(b) (other than an
interbank market or an interdealer mar-
ket described in §1.1092(d)–1(b)(1)(v) and
(vi), respectively). Any security that is
issued or guaranteed by the government
of the United States or an agency or in-
strumentality thereof for which there is an
established financial market described in
§1.1092(d)–1(b) is a marketable security.
Finally, any financial instrument or other
interest in an entity that, under its terms,
contains a right by which the instrument
or other interest may immediately be re-
deemed, exchanged, or converted into cash
or a marketable security, is a marketable
security, provided there are no restrictions
on the exercise of that right.
(ii)Insurance and annuity contracts.
Other assets that are treated as liquid assets
of a plan are insurance, annuity, or other
contracts issued by an insurance company
that is licensed to do business under the
laws of any State, but only if the insurance,
annuity, or other contract—
(A) Would be treated as a marketable
security under paragraph (e)(5)(i) of this
section if it were a financial instrument;
(B) Provides for substantially equal
monthly disbursements to the extent pro-
vided in paragraph (e)(5)(iii) of this sec-
tion; or
(C) Is benefit responsive within the
meaning of paragraph (e)(5)(iv) of this
section.
May 12, 20089362008–19 I.R.B.

(iii)Insurance and annuity contracts
providing for substantially equal periodic
payments. If the contract provides for
substantially equal monthly disbursements
(for example, an annuity contract in pay
status), the only portion of the contract that
may be treated as liquid assets for a quar-
ter is the amount equal to 36 times the
monthly disbursement (in the month con-
taining the last day of the quarter) which is
available under the terms of the contract,
provided there are no restrictions (within
the meaning of paragraph (e)(5)(v) of this
section) on the disbursements.
(iv)Benefit responsive insurance and
annuity contracts. A contract is consid-
ered benefit responsive if, under applicable
law and contractual provisions, the plan
has the right to receive disbursements from
the contract in order to pay plan benefits
for any participant in the plan, without
restrictions (within the meaning of para-
graph (e)(5)(v) of this section).
(v)Restrictions. For purposes of para-
graphs (e)(5)(iii) and (iv) of this section,
a restriction on a redemption, exchange
or conversion right, or a restriction on a
disbursement, may result not only from
applicable law or contractual provisions,
but also from rehabilitation, conservator-
ship, receivership, insolvency, bankruptcy
or similar proceedings.
(6)Liquidity shortfall—(i)In general.
The termliquidity shortfallmeans, with
respect to any required installment, an
amount equal to the excess (as of the last
day of the quarter for which that install-
ment is made) of—
(A) The base amount with respect to the
quarter, over
(B) The value (as of the last day of the
quarter) of the plan’s liquid assets.
(ii)Base amount—(A)In general.For
purposes of this paragraph (e)(6)(ii), the
termbase amountmeans, with respect to
any quarter, an amount equal to 3 times the
sum of the adjusted disbursements from
the plan for the 12 months ending on the
last day of such quarter.
(B)Special rule. If the generally appli-
cable base amount for a quarter determined
under paragraph (e)(6)(ii)(A) of this sec-
tion exceeds an amount equal to 2 times the
sum of the adjusted disbursements from
the plan for the 36 months ending on the
last day of the quarter and the enrolled
actuary for the plan certifies to the satis-
faction of the Commissioner that such ex-
cess is the result of nonrecurring circum-
stances, the base amount with respect to
that quarter is determined without regard
to amounts related tothose nonrecurring
circumstances.
(7)Plan month—(i)Plan year begins
on the first day of a calendar month.For
a plan year that begins with the first day
of a calendar month, the termplan month
means any calendar month that begins dur-
ing the plan year.
(ii)Plan year begins on a date other
than the first day of a calendar month.For
a plan year that begins on a date other than
the first day of a calendar month, the first
day of eachplan monthis the day of the
calendar month that corresponds to the day
of the calendar month that is the first day of
the plan year. Thus, for example, if the first
day of a plan year is January 15, then a plan
monthstartsonthe15
th
of each calendar
month. However, if a calendar month does
not contain a day that corresponds to the
day of the calendar month which is the
first day of the plan year (for example, if
a calendar month has only 30 days and
the first day of the plan year is the 31
st
day of a calendar month), then the first
day of the plan month that begins during
that calendar month is the last day of that
calendar month.
(8)Quarter.Thetermquartermeans,
with respect to any required installment,
the 3-plan-month period preceding the
plan month in which the due date for that
installment occurs.
(9)Short plan year.Thetermshort plan
yearmeans a plan year that is shorter than
12 months (and is not a 52-week plan year
of a plan that uses a 52–53 week plan year).
(f)Examples. The following examples
illustrate the rules of this section.
Example 1. (i) Plan A has a calendar year plan
year and a January 1 valuation date. Plan A has
a funding standard carryover balance of $15,000
as of January 1, 2008, and the plan’s funding ratio
for 2007 (determined using the transition rule in
§1.430(f)–1(h)(5)) was over 80%. The minimum
required contribution for Plan A (prior to any offset
for the carryover balance) is $100,000 for 2008 and
is $125,000 for 2009. The effective interest rate for
the 2009 plan year is 5.90%. Plan A is subject to the
quarterly contribution requirements for 2009.
(ii) The required annual payment for 2009 is equal
to the lesser of (a) 100% of the 2008 minimum re-
quired contribution ($100,000) or (b) 90% of the 2009
minimum required contribution (90% of $125,000, or
$112,500). Therefore, each required quarterly install-
ment for 2009 is 25% of $100,000, or $25,000.
(iii) Installments of $25,000 each are due by April
15, 2009, July 15, 2009, October 15, 2009, and Jan-
uary 15, 2010. The final contribution for the 2009
plan year is due by September 15, 2010. The amount
of this contribution is equal to $125,000, less the con-
tributions made prior to that date, with all contribu-
tions adjusted to the valuation date using the effective
interest rate for the 2009 plan year. If the plan spon-
sor makes each required quarterly installment on the
date due, the remaining amount due is determined as
follows:
(A) The contribution paid April 15, 2009, is
adjusted by discounting the contribution amount for
3
1
/2months at the effective interest rate ($25,000 ÷
1.0590
(3.5/12)
= $24,585).
(B) The contribution paid July 15, 2009, is dis-
counted for 6
1
/2months at the effective interest rate
($25,000 ÷ 1.0590
(6.5/12)
= $24,236).
(C) The contribution paid October 15, 2009, is
discounted for 9
1
/2months at the effective interest
rate ($25,000 ÷ 1.0590
(9.5/12)
= $23,891).
(D) The contribution paid January 15, 2010, is
discounted for 12
1
/2months at the effective interest
rate ($25,000 ÷ 1.0590
(12.5/12)
= $23,551).
(E) The sum of the above contributions for the
2009 plan year paid through January 15, 2010, ad-
justed for interest to the valuation date, is $96,263.
The remaining amount due for the 2009 plan year is
$125,000 minus $96,263, or $28,737, as of January
1, 2009.
(iv) If the final contribution is made on Septem-
ber 15, 2010, the remaining amount due must be
increased for interest at the plan’s effective inter-
est rate for the 20
1
/2months between January 1,
2009, and September 15, 2010 (so that when it is
discounted with interest for those 20
1
/2months the
resulting amount will equal $28,737). Therefore,
the remaining contribution made on September 15,
2010, is $28,737 x 1.0590
(20.5/12)
= $31,694.
Example 2. (i) The facts are the same as inEx-
ample 1, except that the plan sponsor elects to use
the $15,000 carryover balance as of January 1, 2008,
to offset the minimum required contribution for the
2008 plan year. The plan sponsor makes a contribu-
tion on January 1, 2008, of $85,000, which satisfies
the minimum contribution requirement for 2008.
(ii) The required quarterly installment for 2009
is unaffected by the plan sponsor’s election to off-
set the minimum required contribution by the carry-
over balance for 2008. Therefore, the required an-
nual payment is $100,000 (determined as the lesser
of (a) 100% of $100,000 or (b) 90% of $125,000)
and the amount of each required quarterly installment
for 2009 is 25% of the required annual payment, or
$25,000.
Example 3. (i) The facts are the same as inEx-
ample 1. Plan A’s funding standard carryover bal-
ance has increased to $17,000 as of January 1, 2009,
basedontheactualrateofreturnofplanassetsforthe
2008 plan year. Plan A’s funding ratio for 2008 (de-
termined under §1.430(f)–1(d)(3)) is over 80%. On
April 13, 2009, the plan sponsor elects to use the en-
tire amount of the carryover balance to offset the min-
imum required contribution for 2009.
(ii) The plan sponsor’s election to use the car-
ryover balance to offset the minimum required
contribution is treated as satisfying the requirement
to make a required installment to the extent of the
amount elected, adjusted with interest. This adjust-
ment is made at the plan’s effective interest rate
for the 2009 plan year, and applies for the period
2008–19 I.R.B.937May 12, 2008

between January 1, 2009, and April 15, 2009. There-
fore, the $17,000 carryover balance as of January 1,
2009, offsets $17,000 x 1.0590
(3.5/12)
or $17,287 of
the $25,000 quarterly contribution installment due
April 15, 2009, and the remaining contribution due
on April 15, 2009, is $25,000 minus $17,287, or
$7,713.
(iii) The interest adjustments in paragraph (ii) of
thisExample 3are based on the effective interest rate
even if that rate is not determined by the time that the
quarterly contribution is due. If the plan’s effective
interest rate for the plan year has not been determined
at the time that the quarterly contribution is due, the
actual amount of the required installment satisfied by
the use of the carryover balance is determined after
the effective interest rate is determined. If the extent
to which the carryover balance satisfies the install-
ment requirement is overestimated and the result is
the full amount of the required quarterly installment
is not paid by the due date, the plan is subject to the
consequences for late or unpaid quarterly contribu-
tions as described in paragraph (c)(1)(iii) of this sec-
tion.
Example 4. (i)ThefactsarethesameasinEx-
ample 3. The plan sponsor makes a contribution of
$7,713 (which is equal to the remaining portion of
the first required quarterly installment) on April 15,
2009. For the 2009 plan year, the plan sponsor makes
another contribution of $200,000 on June 30, 2009.
No further contributions are made for the 2009 plan
year.
(ii) The contributions made for the 2009 plan year
areadjustedtothevaluationdateusingtheplan’sef-
fective interest rate for the 2009 plan year. The con-
tribution paid April 15, 2009, is discounted for the
3
1
/2months between January 1, 2009, and the date
of payment, using the effective interest rate of 5.90%
($7,713 / 1.0590
(3.5/12)
= $7,585). The contribution
paid June 30, 2009, is discounted for 6 months us-
ing the effective interest rate ($200,000 / 1.0590
(6/12)
= $194,349), for a total interest-adjusted contribution
of $201,934.
(iii) The minimum required contribution for 2009
(prior to any offset for the carryover balance) is
$125,000 and, under §1.430(f)–1(b)(1)(ii)(B), this
amount is used to determine the interest-adjusted
excess contribution. Accordingly, the interest-ad-
justed excess contribution for 2009 is $201,934
minus $125,000, or $76,934, increased for interest to
January 1, 2010, using the effective interest rate for
2009 of 5.90%. Thus, the interest-adjusted excess
contribution as of January 1, 2010, is $76,934 mul-
tiplied by 1.059, or $81,473. All or a portion of this
amount may be credited to the prefunding balance at
the election of the plan sponsor.
Example 5. (i) The facts are the same as inExam-
ple 3. The plan sponsor pays the required quarterly
installment of $7,713 on April 15, 2009, and install-
ments of $25,000 each on July 15, 2009, and October
15, 2009. However, only $10,000 of the installment
due on January 15, 2010, is paid. No additional con-
tributions are made until the final contribution for the
plan year of $55,000 is paid on September 15, 2010.
(ii) The 2009 Schedule SB shows that the con-
tributions for the plan year exceed the minimum re-
quired contribution. This is determined by compar-
ing the minimum required contribution of $108,000
($125,000 offset by $17,000 for the amount of car-
ryover balance used) and the interest-adjusted con-
tributions made for the 2009 plan year, developed as
shown below:
(A) The contribution paid April 15, 2009, is
adjusted by discounting the contribution amount for
3
1
/2months at the effective interest rate ($7,713 ÷
1.0590
(3.5/12)
= $7,585).
(B) The contribution paid July 15, 2009, is dis-
counted for 6
1
/2months at the effective interest rate
($25,000 ÷ 1.0590
(6.5/12)
= $24,236).
(C) The contribution paid October 15, 2009, is
discounted for 9
1
/2months at the effective interest
rate ($25,000 ÷ 1.0590
(9.5/12)
= $23,891).
(D) The contribution paid January 15, 2010, is
discounted for 12
1
/2months at the effective interest
rate ($10,000 ÷ 1.0590
(12.5/12)
= $9,420).
(E) Pursuant to paragraph (c)(1)(iii)(A) of this
section, the adjustment for interest on the $15,000 un-
derpayment of the quarterly installment due January
15, 2010, is increased by 5 percentage points for the
8-month period of underpayment (January 15, 2010,
through September 15, 2010). Accordingly, $15,000
of the contribution paid on September 15, 2010, is
discounted using a rate of 10.90% for 8 months and
at the 5.90% effective interest rate for the remaining
12
1
/2months between the quarterly contribution due
date of January 15, 2010, and the valuation date of
January 1, 2009. This portion of the September 15,
2010, contribution results in an adjusted amount of
$13,189 as of January 1, 2009 ($15,000 ÷ 1.1090
(8/12)
÷ 1.0590
(12.5/12)
).
(F) The remaining $40,000 of the contribution
paid on September 15, 2010, is discounted using the
effective interest rate of 5.90% for the 20
1
/2-month
period between the date of payment and the valua-
tion date. This portion of the payment is therefore
adjusted to $36,268 as of the valuation date (that is,
$40,000 ÷ 1.0590
(20.5/12)
).
(G) The sum of the above contributions for the
2009 plan year paid through January 15, 2010, ad-
justed for interest to the valuation date, is $114,589.
This is greater than the minimum required contribu-
tion for the 2009 plan year of $108,000.
Example 6. (i)ThefactsarethesameasinEx-
ample 5, except that the plan sponsor does not make
a contribution on September 15, 2010. Another con-
tribution is not made until December 15, 2010.
(ii) The 2009 Schedule SB shows an unpaid min-
imum required contribution of $42,868 as of January
1, 2009. This is equal to the difference between
the minimum required contribution of $108,000
($125,000 offset by $17,000 for the amount of carry-
over balance used) and $65,132 (the interest-adjusted
contributions made for the 2009 plan year before
the 8
1
/2month deadline, as illustrated in paragraphs
(ii)(A) through (ii)(D) ofExample 5).
Example 7. (i) The facts are the same as inExam-
ple 1, except that the plan year is changed to an Au-
gust 1 - July 31 plan year effective August 1, 2009.
This results in a short plan year beginning January 1,
2009, and ending July 31, 2009. The minimum re-
quired contribution for the 7-month period covered
by the plan year is calculated as $72,917 in accor-
dance with §1.430(a)–1(b)(2)(ii).
(ii) As provided in paragraph (c)(5) of this sec-
tion, a required installment is due 15 days after the
close of the short plan year (August 15, 2009), and
required installments are also due on the regularly
scheduled due dates for quarterly installments that oc-
cur within the short plan year (April 15, 2009, and
July 15, 2009).
(iii) The required installments are determined
based on the lesser of (a) 90% of the minimum
required contribution for the short plan year ending
July 31, 2009 (90% of $72,917, or $65,625) or (b)
7/12 of 100% of the 2008 minimum required contri-
bution ($100,000 x 7/12, or $58,333). The required
installments are thus based on $58,333 since that is
the smaller amount.
(iv) The amount of each required installment is
determined by dividing the amount determined in
paragraph (iii) of thisExample 7by the number of
required installments for the short plan year. This cal-
culation results in required installments of $19,444
each (that is, $58,333 divided by 3 installments).
(v) The deadline for the remaining payment is 8
1
/2
months after the end of the short plan year, or April
15, 2010. If the plan sponsor pays the minimum re-
quired amount at each installment date, does not elect
to offset any amounts by any carryover or prefund-
ing balance, and makes a final payment on April 15,
2010, then the remaining payment is $17,429, deter-
mined as follows:
(A) The contribution paid April 15, 2009, is
adjusted by discounting the contribution amount for
3
1
/2months at the effective interest rate ($19,444 ÷
1.0590
(3.5/12)
= $19,122).
(B) The contribution paid July 15, 2009, is dis-
counted for 6
1
/2months at the effective interest rate
($19,444 ÷ 1.0590
(6.5/12)
= $18,850).
(C) The contribution paid August 15, 2009, is dis-
counted for 7
1
/2months at the effective interest rate
($19,444 ÷ 1.0590
(7.5/12)
= $18,760).
(D) The sum of the above contributions for the
2009 plan year paid through August 15, 2009, ad-
justed for interest to the valuation date, is $56,732.
The remaining amount paid April 15, 2010, for the
2009 plan year is ($72,917 - $56,732) x 1.059
(15.5/12)
= $17,429.
Example 8. (i) Plan B has an August 10 to August
9 plan year. Quarterly installments are required for
the plan year that begins August 10, 2009.
(ii) For the plan year that begins on August 10,
2009, a plan month begins on the 10th day of each
calendar month. Accordingly, the due dates for the
required installments for that plan year are Novem-
ber 24, 2009, February 24, 2010, May 24, 2010, and
August 24, 2010. The deadline for the final contribu-
tion for the plan year is April 24, 2011.
Example 9. (i) Plan C has a calendar-year plan
year and is not a small plan described in section
430(g)(2)(B). Plan C is subject to the requirement to
pay quarterly contributions under paragraph (c) of
this section for the 2009 plan year. The valuation date
for Plan C is January 1, and Plan C’s funding target
attainment percentage (“FTAP”) is 85% as of January
1, 2009. Before taking the liquidity requirement of
paragraph (d) of this section into account, quarterly
contributions are required for the 2009 plan year in
the amount of $50,000 each. During the 12-month
period ending March 31, 2009, periodic annuity
payments of $350,000 and lump sum payments of
$200,000 were made by Plan C. None of these pay-
ments were due to nonrecurring circumstances. In
addition, administrative expenses of $100,000 were
paid from the plan trust. The market value of Plan
C’s assets is $1,500,000 as of March 31, 2008, of
which $1,300,000 is in liquid assets. The amount
May 12, 20089382008–19 I.R.B.

needed to increase the plan’s FTAP (including the
expected increase in the funding target due to bene-
fits accruing or earned during the plan year) to 100%
is $500,000.
(ii) The amount of the adjusted disbursements
from Plan C for the 12-month period ending March
31, 2009, is calculated as the sum of the annuity
benefits, lump sum payments, and administrative ex-
penses paid during the 12-month period, reduced by
the product of the lump sum payments and the plan’s
FTAP. This results in adjusted disbursements for the
period of $480,000 (that is, $350,000 plus $200,000
plus $100,000, reduced by 85% of $200,000 in lump
sum payments).
(iii) The base amount is calculated in accordance
with paragraph (e)(6)(ii) of this section as three times
the adjusted disbursements determined in paragraph
(ii) of thisExample 9, or $1,440,000.
(iv) The liquidity shortfall is the difference be-
tween the base amount of $1,440,000 determined in
paragraph (iii) of thisExample 9and the $1,300,000
in liquid assets as of March 31, 2008, or $140,000.
The quarterly contribution due on April 15, 2009, is
therefore $140,000, since this amount is larger than
the $50,000 quarterly contribution requirement oth-
erwise applicable but less than the $500,000 needed
to increase the plan’s FTAP (including the expected
increase in the funding target due to benefits accruing
or earned during the plan year) to 100%. The liquid-
ity increment is $90,000.
(v) Note that any contributions made through
March 31, 2009, are included in Plan C’s assets as of
March 31, 2009, and would therefore not be applied
toward satisfying the liquidity shortfall contribution
requirement due April 15, 2009. Similarly, any fund-
ing standard carryover balance or prefunding balance
as of January 1, 2009, cannot be applied to offset the
liquidity shortfall contribution requirement. Only
contributions made in cash or other liquid assets
made after March 31, 2009, and by April 15, 2009,
can be used to timely satisfy this requirement.
Example 10. (i) The facts are the same as inEx-
ample 9. The plan sponsor makes a contribution of
$30,000 on April 15, 2009, and makes an additional
contribution of $110,000 on April 30, 2009. The ef-
fective interest rate for Plan C for the 2009 plan year
is 5.90%.
(ii) The contribution paid on April 15, 2009, is
applied first to the portion of the quarterly contribu-
tion that is required under paragraph (c) of this section
(that is, the portion not attributable to the liquidity
shortfall contribution). This results in an underpay-
ment of this portion of the quarterly contribution due
April 15, 2009, of $20,000 (that is, $50,000 minus
$30,000). In accordance with paragraph (c)(1)(iii)(A)
of this section, the interest rate used to adjust this por-
tion of the late quarterly contribution is increased by
5 percentage points for the
1
/2-month period of un-
derpayment. Accordingly, $20,000 of the April 15,
2009, contribution is adjusted to the January 1, 2009,
valuation date using an interest rate of 10.90% for
the
1
/2month between the April 15, 2009, due date
and the April 30, 2009, payment date, and by 5.90%
for the 3
1
/2-month period between January 1, 2009,
and the April 15, 2009, due date. This portion re-
sults in an interest-adjusted contribution of $19,584
as of January 1, 2009 ($20,000 ÷ 1.1090
(0.5/12)
÷
1.059
(3.5/12)
).
(iii) Under paragraph (d)(2) of this section, the
interest rate used to adjust the portion of the under-
payment attributable to the liquidity shortfall contri-
bution is increased by 5 percentage points, and the
contribution is treated as unpaid until the close of the
quarter in which the due date occurs. Therefore, even
though the full amount of the liquidity shortfall was
paid by April 30, 2009, the increase in the interest rate
is applied as if the late liquidity shortfall contribution
was not made until June 30, 2009, 2
1
/2months after
the contribution was due.
(iv) However, in accordance with paragraph
(d)(2) of this section, each payment is discounted
for interest based on the date of the actual payment,
despite the fact that the 5-percentage-point increase
in the interest rate is calculated as if the payment
was not made until the end of the quarter. Therefore,
the portion of the underpayment due to the liquidity
increment ($140,000 minus the $50,000 quarterly
contribution requirement otherwise required, or
$90,000) is adjusted for interest for the 4-month pe-
riodbetweentheJanuary1,2009,valuationdateand
the April 30, 2009, date of payment. An interest rate
of 10.90% is used for 2
1
/2months (corresponding to
the period between the April 15, 2009, due date and
June 30, 2009, the end of the quarter in which the
payment was due), and Plan C’s effective interest
rate for the 2009 plan year (5.90%) is used for the
remaining 1
1
/2months. Therefore, the portion of the
April 30, 2009, contribution attributable to the liq-
uidity increment is adjusted to $87,452 as of January
1, 2009 ($90,000 ÷ 1.1090
(2.5/12)
÷ 1.0590
(1.5/12)
).
Example 11. (i) The facts are the same as inEx-
ample 10, except that the plan sponsor does not make
the second contribution of $110,000 until July 15,
2009.
(ii) The July 15, 2009, contribution is adjusted
for interest for a total of 6
1
/2months for the period
between January 1, 2009, and the payment date of
July 15, 2009. In accordance with paragraph (d)(2)
of this section, the 5-percentage-point increase in the
interest rate used to adjust the portion of the contribu-
tion attributable to the unpaid liquidity shortfall con-
tribution is applied as if the contribution was made at
the end of the quarter in which the payment was due.
Therefore, the interest adjustment for the $90,000 at-
tributable to the late liquidity shortfall contribution
uses an interest rate of 10.90% for the 2
1
/2-month pe-
riod corresponding to the period between the April
15, 2009, due date and June 30, 2009, the end of the
quarter in which the payment was due, and the effec-
tive interest rate of 5.90% for the remaining 4 months.
(iii) The liquidity shortfall is recalculated as of
June 30, 2009, and the larger of the resulting amount
or the $50,000 quarterly contribution otherwise appli-
cable is due on July 15, 2009. This amount is required
to be paid in addition to the unpaid liquidity short-
fall contribution due April 15, 2009. Note that the
amount of liquid assets as of June 30, 2009 is smaller
than it would have been had the April 15, 2009, liq-
uidity shortfall payment been made. Therefore, the
fact that the April 15, 2009, liquidity shortfall pay-
ment was not made before June 30, 2009, means that
the plan sponsor is required to contribute more than
the amount needed to increase the liquid assets to the
base amount as of June 30, 2009. However, in ac-
cordance with paragraph (d)(1)(ii) of this section, the
total amount of the required installments (including
those due but not paid) is limited so that it is no larger
than the amount that wouldincrease the plan’s FTAP
(taking into account the expected increase in the fund-
ing target due to benefits accruing or earned during
the plan year) to 100%.
Example 12. (i) Plan D, which is a small plan de-
scribed in section 430(g)(2)(B), has a calendar year
plan year and a valuation date of December 31. The
quarterly required installments for the 2009 plan year
are $30,000 each and each of the required install-
ments is paid on the due date. The effective interest
rate for Plan D for the 2009 plan year is 5.90%.
(ii) The total contributions made for the plan year
and before the valuation date, adjusted with interest to
the valuation date, equal $92,402. This is developed
as shown below:
(A) The contribution paid April 15, 2009, is
adjusted by increasing the contribution amount for
8
1
/2months at the effective interest rate ($30,000 x
1.0590
(8.5/12)
= $31,243).
(B) The contribution paid July 15, 2009, is in-
creased for 5
1
/2months at the effective interest rate
($30,000 x 1.0590
(5.5/12)
= $30,799).
(C) The contribution paid October 15, 2009, is
increased for 2
1
/2months at the effective interest rate
($30,000 x 1.0590
(2.5/12)
= $30,360).
(iii) Pursuant to §1.430(g)–1(d)(2), the interest-
adjusted value of the contributions for the 2009 plan
year that are made before the valuation date is sub-
tracted from the December 31, 2009, plan assets in
determining the value of plan assets for the Decem-
ber 31, 2009 actuarial valuation.
(g)Effective/applicability dates and
transition rules—(1)In general. Section
430 generally applies to plan years be-
ginning on or after January 1, 2008. In
general, this section applies to plan years
beginning on or after January 1, 2009.
However, plans are permitted to apply this
section in applying the rules of section
430(j) for plan years beginning in 2008.
(2)Plans with delayed effective date.
In the case of a plan for which the effec-
tive date of section 430 is delayed in ac-
cordance with sections 104 through 106 of
PPA ’06, this section applies to plan years
beginning on or after the first day of the
first effective plan year.
(3)First effective plan year.Forpur-
poses of this section, the first effective plan
year for a plan is the first plan year for
which section 430 applies to the plan.
(4)Pre-effective plan year. For pur-
poses of this section, the pre-effective plan
year for a plan is the last plan year be-
fore the first effective plan year. Thus,
except for plans with a delayed effective
date under paragraph (g)(2) of this section,
the pre-effective plan year for a plan is the
last plan year beginning before January 1,
2008.
(5)Special rules relating to first effec-
tive plan year—(i)Determination of min-
imum required contribution for pre-effec-
2008–19 I.R.B.939May 12, 2008

tive plan year. In the case of the plan’s first
effective plan year, the minimum required
contribution for the preceding plan year for
purposes of paragraph (c)(3)(ii)(B) of this
section is equal to the minimum required
contribution under section 412 for the pre-
effective plan year (determined without re-
gard to any funding waiver under section
412), which is determined as of the last
day of the pre-effective plan year and is de-
termined without regard to the use of the
plan’s credit balance.
(ii)Determination of funding shortfall
for pre-effective plan year.[Reserved]
PART 54—PENSION EXCISE TAXES
Par. 4. The authority citation for part
54 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 5. Section 54.4971(c)–1 is added
to read as follows:
§54.4971(c)–1 Taxes on failure to meet
minimum funding standards; definitions
(a)In general. This section sets forth
definitions that apply for purposes of ap-
plying the rules of section 4971.
(b)Accumulated funding deficiency.
With respect to a multiemployer plan, the
termaccumulated funding deficiencyhas
the meaning given to that term by section
431. A plan’s accumulated funding defi-
ciency for a plan year takes into account
all charges and credits to the funding stan-
dard account under section 412 for plan
years before the first plan year for which
section 431 applies to the plan.
(c)Unpaid minimum required contri-
bution—(1)In general.Thetermunpaid
minimum required contributionmeans,
with respect to any plan year, any mini-
mum required contribution under section
430 for the plan year that is not paid on or
before the due date for the plan year under
section 430(j)(1).
(2)Accumulated funding deficiency for
pre-effective plan year. For purposes of
this section, a plan’s accumulated fund-
ing deficiency under section 412 for the
pre-effective plan year is treated as an un-
paid minimum required contribution for
that plan year until correction is made un-
der the rules of paragraph (d)(2) of this sec-
tion.
(d)Correct—(1)Accumulated funding
deficiency.Thetermcorrectmeans, with
respect to an accumulated funding defi-
ciency for a plan year, the contribution, to
or under the plan, of the amount neces-
sary to reduce the accumulated funding de-
ficiency as of the end of that plan year to
zero. To reduce the deficiency to zero, the
contribution must include interest at the
plan’s valuation interest rate for the period
between the end of that plan year and the
date of the contribution.
(2)Unpaid minimum required contribu-
tion—(i)Interest adjustments—(A)Gen-
eral rule.Thetermcorrectmeans, with re-
spect to an unpaid minimum required con-
tribution for a plan year, the contribution,
to or under the plan, of an amount that,
when discounted to the valuation date for
the plan year for which the unpaid min-
imum required contribution is due at the
appropriate rate of interest, equals or ex-
ceeds the unpaid minimum required con-
tribution. For this purpose, the appropriate
rate of interest is the plan’s effective inter-
est rate for the plan year for which the un-
paid minimum required contribution is due
except to the extent that the payments are
subject to additional interest as provided
under section 430(j)(3) or (4).
(B)Pre-PPA accumulated funding de-
ficiency.Thetermcorrectmeans, with
respect to the accumulated funding defi-
ciency under section 412 for the pre-ef-
fective plan year that is described in para-
graph (c)(2) of this section, the contribu-
tion, to or under the plan, of the amount
of that accumulated funding deficiency in-
creased with interest from the end of the
pre-effective plan year to the date of the
contribution at the plan’s valuation inter-
est rate for the pre-effective plan year.
(ii)Ordering rule. For purposes of sec-
tion 4971 and this section, a contribution
is attributable first to the earliest plan year
of any unpaid minimum required contribu-
tion for which correction has not yet been
made.
(3)Corrective action of certain retroac-
tive plan amendments. Certain retroactive
plan amendments that meet the require-
ments of section 412(d)(2) may reduce the
minimum required contribution for a plan
year, which would reduce the accumulated
funding deficiency or the amount of the
unpaid minimum required contribution for
a plan year.
(e)Taxable period.Thetermtaxable
periodhas the same meaning given that
term under §54.4971–1(e).
(f)Examples. The following examples
illustrate the rules of this section.
Example 1. (i) Plan A, a single employer defined
benefit plan, has a calendar year plan year and a Jan-
uary 1 valuation date. The sponsor of Plan A has a
calendar taxable year. Plan A has no funding shortfall
as of the end of 2008, and Plan A has no unpaid min-
imum required contributions for 2008 or any earlier
plan year. The minimum required contribution for the
2009 plan year is $250,000. The plan sponsor makes
one contribution for 2009 on July 1, 2009, in the
amount of $200,000, and the sponsor does not make
an election to use the prefunding balance or funding
standard carryover balance to offset the minimum re-
quired contribution for 2009. The effective interest
rate for Plan A for the 2009 plan year is 5.90%.
(ii) The interest-adjusted contribution for 2009 is
$200,000 divided by 1.0590
(6/12)
, or $194,349, as of
January 1, 2009. The unpaid minimum required con-
tribution for the 2009 plan year is $250,000 minus
$194,349, or $55,651. The excise tax due under sec-
tion 4971(a) is 10% of the unpaid minimum required
contribution, or $5,565.
Example 2. (i) The facts are the same as inEx-
ample 1. The plan sponsor makes a contribution of
$175,000 on December 31, 2010.
(ii) Under the ordering rule in paragraph (d)(2)(ii)
of this section, the contribution made on December
31, 2010, is applied first to correct the unpaid min-
imum required contribution for 2009. The portion
of the contribution paid December 31, 2010, that is
required to eliminate the unpaid minimum required
contribution for 2009 (taking into account the 2009
effective interest rate for the 24 months between
January 1, 2009, and the payment date of Decem-
ber 31, 2010), is $55,651 multiplied by 1.059
(24/12)
or $62,412. The remaining payment of $112,588
($175,000 minus $62,412) is applied to the contribu-
tion required for the 2010 plan year.
Example 3. (i) Plan B, a single employer defined
benefit plan, has a calendar plan year. The sponsor
of Plan B has a calendar taxable year. Plan B has
an accumulated funding deficiency of $100,000 as
of December 31, 2007, including additional interest
due to late quarterly contributions during 2007. The
valuation interest rate for the 2007 plan year is 7.5%.
(ii) In accordancewith paragraph (c)(2) of this
section, the accumulated funding deficiency under
section 412 as of December 31, 2007, is considered
an unpaid minimum required contribution until it is
corrected. Pursuant to paragraph (d)(2)(i)(B) of this
section, the amount needed to correct that accumu-
lated funding deficiency is $100,000 plus interest at
the valuation interest rate of 7.5% for the period be-
tween December 31, 2007, and the date of payment
of the contribution.
(iii) The funding shortfall as of January 1, 2008, is
calculated as the difference between the funding tar-
get and the value of assets as of that date. The assets
are not adjusted by the amount of the accumulated
funding deficiency; the factthat the contribution was
not made for the 2007 plan year means that the Jan-
uary 1, 2008, funding shortfall is larger than it would
have been otherwise.
Example 4. (i) The facts are the same as inEx-
ample 3. The minimum required contribution for the
2008 plan year is $125,000, but the plan sponsor does
not make any required contributions for 2008.
May 12, 20089402008–19 I.R.B.

(ii) The total unpaid minimum required contri-
bution as of December 31, 2008, is the sum of the
$100,000 accumulated funding deficiency under sec-
tion 412 from 2007 and the $125,000 unpaid min-
imum required contribution for 2008, or $225,000.
The section 4971(a) excise tax applies to the aggre-
gate unpaid minimum required contributions for all
plan years that remain unpaid as of the end of 2008. In
this case, there is an unpaid minimum required con-
tribution of $100,000 for the 2007 plan year and an
unpaid minimum required contribution of $125,000
for the 2008 plan year. The section 4971(a) excise
tax is 10% of the aggregate of those unpaid amounts,
or $22,500.
Example 5. (i)ThefactsarethesameasinEx-
ample 4, except that the plan sponsor makes a contri-
bution of $150,000 on December 31, 2008. No addi-
tional contributions are paid through September 15,
2009. Quarterly contributions of $25,000 each are
due April 15, 2008, July 15, 2008, October 15, 2008,
and January 15, 2009. Plan B’s effective interest rate
for the 2008 plan year is 5.75%.
(ii) In accordance with paragraph (c)(2) of this
section, the accumulated funding deficiency under
section 412 as of December 31, 2007, is treated as
an unpaid minimum required contribution until it is
corrected.
(iii) The December 31, 2008, contribution is first
applied to the 2007 accumulated funding deficiency
under section 412 that is treated as an unpaid mini-
mum required contribution. Accordingly, the amount
needed to correct the 2007 unpaid required mini-
mum contribution ($100,000 multiplied by 1.075, or
$107,500) is applied to eliminate this unpaid mini-
mum required contribution for the 2007 plan year.
(iv) The remaining December 31, 2008, contri-
bution ($150,000 minus $107,500, or $42,500) is
then applied to the 2008 minimum required contri-
bution. This amount is first allocated to the quarterly
contribution due April 15, 2008. In accordance with
§1.430(j)–1(c)(1)(iii)(A), the adjustment for interest
on late quarterly contributions is increased by 5
percentage points for the period of underpayment.
Therefore, $25,000 of the remaining December 31,
2008, contribution is discounted using an interest
rate of 10.75% for the 8
1
/2-month period between
the payment date of December 31, 2008 and the
quarterly contribution due date of April 15, 2008,
and at the 5.75% effective interest rate for the 3
1
/2
months between April 15, 2008, and January 1, 2008.
This portion of the December 31, 2008, contribution
results in an adjusted amount of $22,880 (that is,
$25,000 ÷ 1.1075
(8.5/12)
÷ 1.0575
(3.5/12)
)asofJan-
uary 1, 2008.
(v) The remaining December 31, 2008, contri-
bution is then applied to the quarterly contribution
due July 15, 2008. The balance of the December 31,
2008, contribution ($150,000 minus $107,500 minus
$25,000, or $17,500) is paid after the due date for
the second required quarterly installment. Accord-
ingly, the remaining $17,500 contribution is adjusted
using an interest rate of 10.75% for the 5
1
/2-month
period between the payment date of December 31,
2008 and the quarterly contribution due date of July
15, 2008, and at the 5.75% effective interest rate for
the 6
1
/2months between July 15, 2008, and January 1,
2008. This portion of the December 31, 2008, contri-
bution results in an adjusted amount of $16,202 (that
is, $17,500 ÷ 1.1075
(5.5/12)
÷ 1.0575
(6.5/12)
)asofJan-
uary 1, 2008.
(vi) The remaining unpaid minimum required
contribution for 2008 is $125,000 minus the inter-
est-adjusted amounts of $22,880 and $16,202 applied
towards the 2008 minimum required contribution as
determined in paragraphs (iv) and (v) of thisExample
5. This results in an unpaid minimum required con-
tribution of $85,918 for 2008. The section 4971(a)
excise tax is 10% of the unpaid minimum required
contribution, or $8,592.
Example 6. (i) Plan C, a single employer de-
fined benefit plan, has a calendar year plan year and
a January 1 valuation date, and has no funding stan-
dard carryover balance or prefunding balance as of
January 1, 2008. Plan C’s sponsor has a calendar
year taxable year. The minimum required contribu-
tions for Plan C are $100,000 for the 2008 plan year,
$110,000 for the 2009 plan year, $125,000 for the
2010 plan year, and $135,000 for the 2011 plan year.
No contributions for these plan years are made until
September 15, 2012, at which time the plan sponsor
contributes $273,000 (which is exactly enough to cor-
rect the unpaid minimum required contributions for
the 2008 and 2009 plan years).
(ii) The excise tax under section 4971(a) is 10%
of the aggregate unpaid minimum required contribu-
tions for all plan years remaining unpaid as of the end
of any plan year ending within the 2008 taxable year.
Accordingly, the excise tax for the 2008 taxable year
is $10,000 (that is, 10% of $100,000). The excise tax
for the 2009 taxable year is $21,000 (that is, 10% of
the sum of $100,000 and $110,000) and the excise tax
for the 2010 taxable year is $33,500 (that is, 10% of
the sum of $100,000, $110,000, and $125,000).
(iii) The contribution made on September 15,
2012, is applied to correct the unpaid minimum
required contributions for the 2008 and 2009 plan
years by the deadline for making contributions for
the 2011 plan year. Therefore, the excise tax under
section 4971(a) for the 2011 taxable year is based
only on the remaining unpaid minimum required
contributions for the 2010 and 2011 plan years, or
$26,000 (that is, 10% of the sum of $125,000 and
$135,000).
(iv)Theplansponsormayalsoberequiredtopay
an excise tax of 100% under section 4971(b), if the
unpaid minimum required contributions are not cor-
rected by the end of the taxable period.
(g)Effective/applicability dates and
transition rules—(1)Statutory effective
date—(i)In general. In general, the
amendments made to section 4971 by sec-
tion 114 of the Pension Protection Act of
2006, Public Law 109–280, 120 Stat. 780
(PPA ’06), apply to taxable years begin-
ning on or after January 1, 2008, but only
with respect to plan years that end with or
within any such taxable year.
(ii)Plans with delayed PPA ’06 effec-
tive dates. In the case of a plan for which
the effective date of section 430 is delayed
in accordance with sections 104 through
106 of PPA ’06, the amendments made to
section4971bysection114ofPPA’06ap-
ply to taxable years beginning on or after
January 1, 2008, but only with respect to
plan years beginning on or after the date
section 430 first applies with respect to the
plan.
(2)Effective date of regulations.This
section is effective for taxable years be-
ginning on and after the statutory effective
date described in paragraph (g)(1) of this
section, but in no event does this section
apply to taxable years ending before April
15, 2008.
(3)Pre-effective plan year. For pur-
poses of this section, the pre-effective plan
year for a plan is the last plan year begin-
ning before section 430 applies to the plan.
Thus, except for plans with a delayed ef-
fective date under paragraph (g)(1)(ii) of
this section, the pre-effective plan year for
a plan is the last plan year beginning be-
fore January 1, 2008.
LindaE.Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on April 11, 2008,
10:10 a.m., and published in the issue of the Federal Register
for April 15, 2008, 73 F.R. 20203)
Foundations Status of Certain
Organizations
Announcement 2008–40
The following organizations have failed
to establish or have been unable to main-
tain their status as public charities or as op-
erating foundations. Accordingly, grantors
and contributors maynot, after this date,
rely on previous rulings or designations
in the Cumulative List of Organizations
(Publication 78), or on the presumption
arising from the filing of notices under sec-
tion 508(b) of the Code. This listing does
notindicate that the organizations have lost
their status as organizations described in
section 501(c)(3), eligible to receive de-
ductible contributions.
Former Public Charities.The follow-
ing organizations (which have been treated
as organizations that are not private foun-
dations described in section 509(a) of the
Code) are now classified as private foun-
dations:
3 Squares, Inc., Manlius, NY
A A Jones Community Development
Corporation, New Orleans, LA
2008–19 I.R.B.941May 12, 2008

Adaptive Summiteers Association,
Burbank, CA
Adonai Endowment Fund, Inc.,
Baltimore, MD
Africa Aids Foundation, Bronx, NY
Agape Paradise Haven, Detroit, MI
Alamo Fountain Center, Inc.,
Sugar Land, TX
Always Keep God First Ministry, Inc.,
Camden, NJ
Arkansas Automotive School for
Mechanics, Little Rock, AR
Austin Advocate Services, Inc.,
Arlington, TX
Barberton Health District Fund,
Akron, OH
Bartlesville Demolay, Inc.,
Bartlesville, OK
Benedictine Military School Endowment
Fund Series II, Inc., Savannah, GA
Bernardtown Outreach Group,
Coatesville, PA
Best Program, Pomona, CA
Bossier Colone Senior Care Center, Inc.,
Bossier City, LA
Bostons Children First, Inc.,
Dorchester, MA
Boys to Men of Texas, Houston, TX
Bridge to Bridge River to Railroad
Development Corporation,
Kennewick, WA
Brooks Center, Falls Church, VA
Broward Christian Drama Ministry, Inc.,
Davie, FL
Camp Noah, Charleston, SC
Center at North Branch for Life
Transitions, Inc., North Branch, NJ
Centre Township Land Protection
Foundation, Mohrsville, PA
Charles I. Goldfarb Foundation,
Birmingham, AL
Chris Maritimes International,
Inglewood, CA
Community Initiative, Inc., Cookville, TN
Counseling Services Foundation,
Plano, TX
Cultural Awareness, Inc., Oakland, CA
Dependable Community Development
Corporation, Bronx, NY
Disabilities Unlimited, Inc.,
West Allis, WI
Eduit, Inc., Washington, DC
Elyon Community Center, Inc., Miami, FL
Ephesians Economic Development
Corporation, New Orleans, LA
Essential Money Matters, Inc.,
McDonough, GA
Faithful Community Development, Inc.,
Dallas, TX
Family Foundation, Inc., Ypsilanti, MI
First Nations Council, Inc., Brighton, CO
Florida Arts Foundation,
West Palm Beach, FL
Florida Horsemen’s Charitable
Foundation, Inc., Miami, FL
Four Corners Small Business Foundation,
Gallup, NM
Fox Hill Educational Tech Program,
Great Neck, NY
Friends of Sewell Park, Inc., Miami, FL
Friends of West Augustine,
St. Augustine, FL
Galisteo International Stone Sculpture
Symposium, Galisteo, NM
Generations, Brodnax, VA
Genesis Group (A Christian Church),
Fresno, CA
Georgia Works, Incorporated, Lilburn, GA
Godsearch, Inc., Aurora, CO
Golden Hearts Foundation, Inc.,
Topanga, CA
Good Hope Community Foundation, Inc.,
Erwin, NC
Harrisville Society of Friends,
Harrisville, OH
Helping Hands for the Disabled and
Disadvantaged, Inc., St. Louis, MO
Holy David Community Development
Center, Inc., Chicago, IL
House of the Children, Inc., Camden, NJ
IGBO Kwenu, Inc., Washington, DC
Integrated Health Corporation,
Kensington, MD
International Youth Mind Society,
Irvine, CA
It Takes a Nation It Takes a Village,
Dallas, TX
J W Knowledge Enrichment Foundation,
Pasadena, CA
Kingdom Builders 2000, Inc.,
Indianapolis, IN
Kingdom Builders Ministries, Inc.,
Portsmouth, VA
Lady Jammers Basketball, Irving, TX
Ladys Choice Crisis Intervention and
Resource Center, Fayetteville, NC
Little World Development Center, Inc.,
Hyde Park, MA
Maestro Community Development
Corporation, Long Branch, NJ
Match, Milwaukee, WI
Millennium Community Housing Corp.,
Waterford, MI
Miracle House for Children,
Myrtle Beach, SC
Moon is Always the Moon, Inc.,
Brooklyn, NY
Mountain Watershed Institute,
Missoula, MT
Networks Electronic Commerce and
Telecommunications NET Institute,
New York, NY
New Beginnings Residential Care Facility,
Inc., Cross, SC
New Canaan Community Development,
Inc., Newark, NJ
Noble Symond Golub and Lelia J. Golub
Educational Trust, Wilmington, MA
Northampton County Faith Community
Enterprises, Murfreesboro, NC
Oath, Inc., Brooklyn, NY
Operation H.E.L.P., Inc.
Ministries, Olmsted, IL
Operation P.U.L.L., Inc.,
West Memphis, AR
Palace of Refuge, St. Louis, MO
Peace for All, Los Angeles, CA
Peacemakers, Inc., Reading, PA
Prepared, Inc., Columbus, GA
Priest River Community Center
Corporation, Priest River, ID
Ranch Schoolhouse Family Support
Services & Economic Development
Corp., Grenada, MS
R.E.A.L. Force Services, Detroit, MI
Red Rose Child Care, Byram, MS
Refuge for Prodigals International Bible
Ministries, Inc., Baltimore, MD
Roaming Buffalo Healing Ministries,
Eagle Butte, SD
Roloc Senior Housing Corporation,
Charlotte, NC
Romans 10–13 Ministries, Augusta, GA
Samaritan Flights, Inc., Alpharetta, GA
Society for Addictive Disorders,
Santee, CA
Soldiers of Peace, Inc., Sherman Oaks, GA
Song of Peace Ministries, Inc., Norco, CA
Spiritual and Truth Center of Excellence,
Inc., Savannah, GA
Spring of Spiritual Harmony, Fremont, CA
St. Clair County Health Facilities
Corporation, Osceola, MO
Taste, Inc., Boise, ID
Team Ministries, Round Rock, TX
Texas Community Transitional Center,
Inc., Houston, TX
Texas Educational Outreach,
Incorporated, Houston, TX
TLF Child Protection Fund,
Cleveland, OH
Top Rank Sports Corp., Riviera Beach, FL
Total You Ministry, Ridgeland, MS
May 12, 20089422008–19 I.R.B.

Treme Arts Center, New Orleans, LA
Trumpet Ministries, Inc., Newark, NJ
TSB Welcome Home, Inc., Dallas, TX
US-China Youth Culture Exchange
Foundation Corporation, Lexington, KY
Vester Community Services, Inc.,
Downey, CA
Victims of Intense Crimes Embracing
Others Foundation, Inc., Milwaukee, WI
Women Celebrating Victory Over Pain,
Alpharetta, GA
Zawadi Foundation, Inc., East Point, GA
If an organization listed above submits
information that warrants the renewal of
its classification as a public charity or as
a private operating foundation, the Inter-
nal Revenue Service will issue a ruling or
determination letter with the revised clas-
sification as to foundation status. Grantors
and contributors maythereafter rely upon
such ruling or determination letter as pro-
vided in section 1.509(a)–7 of the Income
Tax Regulations. It is not the practice of
the Service to announce such revised clas-
sification of foundation status in the Inter-
nal Revenue Bulletin.
Section 1221(a)(4) Capital
Asset Exclusion for Accounts
and Notes Receivable
Announcement 2008–41
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Withdrawal of notice of pro-
posed rulemaking.
SUMMARY: This document with-
draws a notice of proposed rulemaking
(REG–109367–06, 2006–2 C.B. 683)
relating to the circumstances in which ac-
counts or notes receivable are “acquired ...
for services rendered” within the meaning
of section 1221(a)(4).
FOR FURTHER INFORMATION
CONTACT: K. Scott Brown, (202)
622–7454 (not a toll-free call).
SUPPLEMENTARY INFORMATION:
Background
On August 7, 2006, the Treasury De-
partment and the IRS published in the
Federal Register(71 FR 44600) proposed
regulations § 1.1221–1(e) under section
1221(a)(4) of the Internal Revenue Code.
These regulations sought to clarify the
circumstances in which accounts or notes
receivable are “acquired ... for services
rendered” within the meaning of section
1221(a)(4).
Written comments were received from
interested parties, and public hearings to
discuss these regulations were held on
November 7, 2006, and August 22, 2007.
Most of the comments focused on the de-
cisions inBurbank Liquidating Corp. v.
Commissioner, 39 T.C. 999 (1963),acq.
sub nom. United Assocs., Inc., 1965–1
C.B. 3,aff’dinpartandrev’dinpart
on other grounds, 335 F.2d 125 (9
th
Cir.
1964) andFederal National Mortgage As-
sociation v. Commissioner, 100 T.C. 541
(1993). The Treasury Department and the
IRS considered the comments and have
decided to withdraw the proposed regula-
tions.
The IRS will not challenge return
reporting positions of taxpayers under
section 1221(a)(4) that apply existing
law, includingBurbank Liquidating;Fed-
eral National Mortgage Association;and
Bieldfeldt v. Commissioner, 231 F.3d 1035
(7th Cir. 2000),cert. denied, 534 U.S. 813
(2001).See alsoRev. Rul. 80–56, 1980–1
C.B. 154, and Rev. Rul. 80–57, 1980–1
C.B. 157. The IRS and the Treasury
Department will continue to study this
area and may issue guidance in the future.
*****
Withdrawal of Notice of Proposed
Rulemaking
Accordingly, under the authority of
26 U.S.C. 7805, the notice of proposed
rulemaking (REG–109367–06) published
in theFederal Registeron August 7, 2006
(71 FR 44600) is withdrawn.
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on April 22, 2008,
8:45 a.m., and published in the issue of the Federal Register
for April 23, 2008, 73 F.R. 21861)
Measurement of Assets and
Liabilities for Pension Funding
Purposes; Hearing
Announcement 2008–42
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of public hearing on pro-
posed rulemaking.
SUMMARY: This document provides
notice of public hearing on a notice of
proposed rulemaking (REG–139236–07,
2008–9 I.R.B. 491) preparing guidance on
the determination of plan assets and ben-
efit liabilities for purposes of the funding
requirements that apply to single employer
defined benefit plans. These regulations
affect sponsors, administrators, partici-
pants, and beneficiaries of single employer
defined benefit plans.
DATES: The public hearing is being held
on May 29, 2008, at 10 a.m. The IRS
must receive outlines of the topics to be
discussed at the hearing by May 8, 2008.
ADDRESSES: The public hearing is be-
ing held in the auditorium, Internal Rev-
enue Building, 1111 Constitution Avenue,
NW, Washington, DC. Send submissions
to: CC:PA:LPD:PR (REG–139236–07),
room 5203, Internal Revenue Service,
P. O. Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may
be hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–139236–07),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue, NW,
Washington, DC. Alternatively, taxpayers
may submit electronic outlines of oral
comments via the Federal eRulemaking
Portal athttp://www.regulations.gov.
FOR FURTHER INFORMATION
CONTACT: Concerning the regulations,
Lauson C. Green or Linda S. F. Marshall
at (202) 622–6090; concerning submis-
sions of comments, the hearing, and/or
to be placed on the building access list to
attend 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
2008–19 I.R.B.943May 12, 2008

the notice of proposed rulemaking
(REG–139236–07) that was published in
theFederal Registeron Monday, Decem-
ber 31, 2007 (72 FR 74215).
Persons,whowishtopresentoralcom-
ments at the hearing that submitted written
comments, must submit an outline of the
topics to be discussed and the amount of
time to be devoted to each topic (signed
original and eight (8) copies) by May 8,
2008.
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 11
th
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 April 22, 2008,
8:45 a.m., and published in the issue of the Federal Register
for April 23, 2008, 73 F.R. 21860)
Nuclear Decommissioning
Funds; Hearing
Announcement 2008–43
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 proposed regu-
lations (REG–147290–05, 2008–10 I.R.B.
576) relating to deductions for contribu-
tions to trusts maintained for decommis-
sioning nuclear power plants.
DATES: The public hearing is being held
on Tuesday, June 17, 2008, at 10:00 a.m.
The IRS must receive outlines of the topics
to be discussed at the public hearing by
Tuesday, May 20, 2008.
ADDRESSES: The public hearing is being
held in the IRS Auditorium, Internal Rev-
enue Service Building, 1111 Constitution
Avenue, NW, Washington, DC 20224.
Send Submissions to CC:PA:LPD:PR
(REG–147290–05), room 5205, Internal
Revenue Service, P.O. Box 7604, Ben
Franklin Station, Washington, DC 20044.
Submissions may be hand-delivered Mon-
day through Friday to CC:PA:LPD:PR
(REG–147290–05), Courier’s Desk, In-
ternal Revenue Service, 1111 Constitu-
tion Avenue, NW, Washington, DC, or
sent electronically via the Federal erule-
making Portal atwww.regulations.gov
(IRS-REG–147290–05).
FOR FURTHER INFORMATION
CONTACT: Concerning the regulations,
Patrick Kirwan (202) 622–3110; concern-
ing submissions of comments, the hearing
and/or to be placed on the building access
list to attend the hearing Funmi Taylor at
(202) 622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
The subject of the public hearing
is the notice of proposed rulemaking
(REG–147290–05) that was published in
theFederal Registeron Monday, Decem-
ber 31, 2007 (72 FR 74213).
The rules of 26 CFR 601.601(a)(3) ap-
ply to the hearing. Persons who wish to
present oral comments at the hearing that
submitted written comments by March 31,
2008, must submit an outline of the topics
to be addressed and the amount of time to
be denoted to each topic (Signed original
and eight (8) copies).
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 11
th
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 hear-
ing, see the “FOR FURTHER INFORMA-
TION CONTACT” section of this docu-
ment.
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 April 22, 2008,
8:45 a.m., and published in the issue of the Federal Register
for April 23, 2008, 73 F.R. 21860)
May 12, 20089442008–19 I.R.B.

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.
2008–19 I.R.B.iMay 12, 2008

Numerical Finding List
1
Bulletins 2008–1 through 2008–19
Announcements:
2008-1, 2008-1 I.R.B.246
2008-2, 2008-3 I.R.B.307
2008-3, 2008-2 I.R.B.269
2008-4, 2008-2 I.R.B.269
2008-5, 2008-4 I.R.B.333
2008-6, 2008-5 I.R.B.378
2008-7, 2008-5 I.R.B.379
2008-8, 2008-6 I.R.B.403
2008-9, 2008-7 I.R.B.444
2008-10, 2008-7 I.R.B.445
2008-11, 2008-7 I.R.B.445
2008-12, 2008-7 I.R.B.446
2008-13, 2008-8 I.R.B.480
2008-14, 2008-8 I.R.B.481
2008-15, 2008-9 I.R.B.511
2008-16, 2008-9 I.R.B.511
2008-17, 2008-9 I.R.B.512
2008-18, 2008-12 I.R.B.667
2008-19, 2008-11 I.R.B.624
2008-20, 2008-11 I.R.B.625
2008-21, 2008-13 I.R.B.691
2008-22, 2008-13 I.R.B.692
2008-23, 2008-14 I.R.B.731
2008-24, 2008-13 I.R.B.692
2008-25, 2008-14 I.R.B.732
2008-26, 2008-13 I.R.B.693
2008-27, 2008-15 I.R.B.751
2008-28, 2008-14 I.R.B.733
2008-29, 2008-15 I.R.B.786
2008-30, 2008-16 I.R.B.825
2008-31, 2008-15 I.R.B.787
2008-32, 2008-16 I.R.B.826
2008-33, 2008-16 I.R.B.826
2008-34, 2008-17 I.R.B.849
2008-35, 2008-17 I.R.B.849
2008-36, 2008-16 I.R.B.827
2008-37, 2008-17 I.R.B.850
2008-38, 2008-17 I.R.B.851
2008-39, 2008-18 I.R.B.867
2008-40, 2008-19 I.R.B.941
2008-41, 2008-19 I.R.B.943
2008-42, 2008-19 I.R.B.943
2008-43, 2008-19 I.R.B.944
Court Decisions:
2085, 2008-17 I.R.B.828
2086, 2008-19 I.R.B.905
Notices:
2008-1, 2008-2 I.R.B.251
2008-2, 2008-2 I.R.B.252
Notices— Continued:
2008-3, 2008-2 I.R.B.253
2008-4, 2008-2 I.R.B.253
2008-5, 2008-2 I.R.B.256
2008-6, 2008-3 I.R.B.275
2008-7, 2008-3 I.R.B.276
2008-8, 2008-3 I.R.B.276
2008-9, 2008-3 I.R.B.277
2008-10, 2008-3 I.R.B.277
2008-11, 2008-3 I.R.B.279
2008-12, 2008-3 I.R.B.280
2008-13, 2008-3 I.R.B.282
2008-14, 2008-4 I.R.B.310
2008-15, 2008-4 I.R.B.313
2008-16, 2008-4 I.R.B.315
2008-17, 2008-4 I.R.B.316
2008-18, 2008-5 I.R.B.363
2008-19, 2008-5 I.R.B.366
2008-20, 2008-6 I.R.B.406
2008-21, 2008-7 I.R.B.431
2008-22, 2008-8 I.R.B.465
2008-23, 2008-7 I.R.B.433
2008-24, 2008-8 I.R.B.466
2008-25, 2008-9 I.R.B.484
2008-26, 2008-9 I.R.B.487
2008-27, 2008-10 I.R.B.543
2008-28, 2008-10 I.R.B.546
2008-29, 2008-12 I.R.B.637
2008-30, 2008-12 I.R.B.638
2008-31, 2008-11 I.R.B.592
2008-32, 2008-11 I.R.B.593
2008-33, 2008-12 I.R.B.642
2008-34, 2008-12 I.R.B.645
2008-35, 2008-12 I.R.B.647
2008-36, 2008-12 I.R.B.650
2008-37, 2008-12 I.R.B.654
2008-38, 2008-13 I.R.B.683
2008-39, 2008-13 I.R.B.684
2008-40, 2008-14 I.R.B.725
2008-41, 2008-15 I.R.B.742
2008-42, 2008-15 I.R.B.747
2008-43, 2008-15 I.R.B.748
2008-44, 2008-16 I.R.B.799
2008-45, 2008-17 I.R.B.835
2008-46, 2008-18 I.R.B.868
2008-47, 2008-18 I.R.B.869
Proposed Regulations:
REG-168745-03, 2008-18 I.R.B.871
REG-147290-05, 2008-10 I.R.B.576
REG-141998-06, 2008-19 I.R.B.911
REG-147775-06, 2008-19 I.R.B.916
REG-153589-06, 2008-14 I.R.B.730
REG-104713-07, 2008-6 I.R.B.409
REG-104946-07, 2008-11 I.R.B.596
REG-110136-07, 2008-17 I.R.B.838
Proposed Regulations— Continued:
REG-111583-07, 2008-4 I.R.B.319
REG-114126-07, 2008-6 I.R.B.410
REG-114942-07, 2008-18 I.R.B.901
REG-119518-07, 2008-17 I.R.B.844
REG-124590-07, 2008-16 I.R.B.801
REG-127391-07, 2008-13 I.R.B.689
REG-136701-07, 2008-11 I.R.B.616
REG-137573-07, 2008-15 I.R.B.750
REG-139236-07, 2008-9 I.R.B.491
REG-141399-07, 2008-8 I.R.B.470
REG-143468-07, 2008-17 I.R.B.848
REG-147832-07, 2008-8 I.R.B.472
REG-149475-07, 2008-9 I.R.B.510
REG-151135-07, 2008-16 I.R.B.815
REG-108508-08, 2008-19 I.R.B.923
Revenue Procedures:
2008-1, 2008-1 I.R.B.1
2008-2, 2008-1 I.R.B.90
2008-3, 2008-1 I.R.B.110
2008-4, 2008-1 I.R.B.121
2008-5, 2008-1 I.R.B.164
2008-6, 2008-1 I.R.B.192
2008-7, 2008-1 I.R.B.229
2008-8, 2008-1 I.R.B.233
2008-9, 2008-2 I.R.B.258
2008-10, 2008-3 I.R.B.290
2008-11, 2008-3 I.R.B.301
2008-12, 2008-5 I.R.B.368
2008-13, 2008-6 I.R.B.407
2008-14, 2008-7 I.R.B.435
2008-15, 2008-9 I.R.B.489
2008-16, 2008-10 I.R.B.547
2008-17, 2008-10 I.R.B.549
2008-18, 2008-10 I.R.B.573
2008-19, 2008-11 I.R.B.594
2008-21, 2008-12 I.R.B.657
2008-22, 2008-12 I.R.B.658
2008-23, 2008-12 I.R.B.664
2008-24, 2008-13 I.R.B.684
2008-25, 2008-13 I.R.B.686
Revenue Rulings:
2008-1, 2008-2 I.R.B.248
2008-2, 2008-2 I.R.B.247
2008-3, 2008-2 I.R.B.249
2008-4, 2008-3 I.R.B.272
2008-5, 2008-3 I.R.B.271
2008-6, 2008-3 I.R.B.271
2008-7, 2008-7 I.R.B.419
2008-8, 2008-5 I.R.B.340
2008-9, 2008-5 I.R.B.342
2008-10, 2008-13 I.R.B.676
2008-11, 2008-10 I.R.B.541
2008-12, 2008-10 I.R.B.520
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2007–27 through 2007–52 is in Internal Revenue Bulletin
2007–52, dated December 26, 2007.
May 12, 2008ii2008–19 I.R.B.

Revenue Rulings— Continued:
2008-13, 2008-10 I.R.B.518
2008-14, 2008-11 I.R.B.578
2008-15, 2008-12 I.R.B.633
2008-16, 2008-11 I.R.B.585
2008-17, 2008-12 I.R.B.626
2008-18, 2008-13 I.R.B.674
2008-19, 2008-13 I.R.B.669
2008-20, 2008-14 I.R.B.716
2008-21, 2008-15 I.R.B.734
2008-22, 2008-16 I.R.B.796
2008-23, 2008-18 I.R.B.852
2008-24, 2008-18 I.R.B.861
Tax Conventions:
2008-8, 2008-6 I.R.B.403
2008-39, 2008-18 I.R.B.867
Treasury Decisions:
9368, 2008-6 I.R.B.382
9369, 2008-6 I.R.B.394
9370, 2008-7 I.R.B.428
9371, 2008-8 I.R.B.447
9372, 2008-8 I.R.B.462
9373, 2008-8 I.R.B.463
9374, 2008-10 I.R.B.521
9375, 2008-5 I.R.B.344
9376, 2008-11 I.R.B.587
9377, 2008-11 I.R.B.578
9378, 2008-14 I.R.B.720
9379, 2008-14 I.R.B.715
9380, 2008-14 I.R.B.718
9381, 2008-14 I.R.B.694
9382, 2008-9 I.R.B.482
9383, 2008-15 I.R.B.738
9384, 2008-16 I.R.B.792
9385, 2008-15 I.R.B.735
9386, 2008-16 I.R.B.788
9387, 2008-16 I.R.B.789
9388, 2008-17 I.R.B.832
9389, 2008-18 I.R.B.863
9390, 2008-18 I.R.B.855
9392, 2008-19 I.R.B.903
2008–19 I.R.B.iiiMay 12, 2008

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2008–1 through 2008–19
Announcements:
2006-88
Clarified and superseded by
Notice 2008-35, 2008-12 I.R.B.647
Notice 2008-36, 2008-12 I.R.B.650
2008-6
Superseded by
Ann. 2008-19, 2008-11 I.R.B.624
Notices:
2001-16
Modified by
Notice 2008-20, 2008-6 I.R.B.406
2001-60
Modified and superseded by
Notice 2008-31, 2008-11 I.R.B.592
2002-44
Superseded by
Notice 2008-39, 2008-13 I.R.B.684
2003-51
Superseded by
Rev. Proc. 2008-24, 2008-13 I.R.B.684
2006-27
Clarified and superseded by
Notice 2008-35, 2008-12 I.R.B.647
2006-28
Clarified and superseded by
Notice 2008-36, 2008-12 I.R.B.650
2006-52
Clarified and amplified by
Notice 2008-40, 2008-14 I.R.B.725
2006-77
Clarified and amplified by
Notice 2008-25, 2008-9 I.R.B.484
2006-107
Modified by
Notice 2008-7, 2008-3 I.R.B.276
2007-30
Modified and superseded by
Notice 2008-14, 2008-4 I.R.B.310
2007-54
Clarified by
Notice 2008-11, 2008-3 I.R.B.279
2008-13
Supplemented by
Notice 2008-46, 2008-18 I.R.B.868
Notices— Continued:
2008-27
Clarified, amended, supplemented, and
superseded by
Notice 2008-41, 2008-15 I.R.B.742
Proposed Regulations:
REG-209020-86
Corrected by
Ann. 2008-11, 2008-7 I.R.B.445
REG-107592-00
Partial withdrawal by
Ann. 2008-25, 2008-14 I.R.B.732
REG-149856-03
Hearing scheduled by
Ann. 2008-26, 2008-13 I.R.B.693
REG-147290-05
Hearing scheduled by
Ann. 2008-43, 2008-19 I.R.B.944
REG-109367-06
Withdrawn by
Ann. 2008-41, 2008-19 I.R.B.943
REG-113891-07
Hearing scheduled by
Ann. 2008-4, 2008-2 I.R.B.269
REG-114126-07
Corrected by
Ann. 2008-36, 2008-16 I.R.B.827
REG-127770-07
Hearing scheduled by
Ann. 2008-24, 2008-13 I.R.B.692
REG-133300-07
Hearing scheduled by
Ann. 2008-34, 2008-17 I.R.B.849
REG-139236-07
Hearing scheduled by
Ann. 2008-42, 2008-19 I.R.B.943
REG-141399-07
Hearing cancelled by
Ann. 2008-31, 2008-15 I.R.B.787
Revenue Procedures:
97-36
Modified by
Rev. Proc. 2008-23, 2008-12 I.R.B.664
2001-23
Modified by
Rev. Proc. 2008-23, 2008-12 I.R.B.664
2002-9
Modified by
Rev. Proc. 2008-18, 2008-10 I.R.B.573
Revenue Procedures— Continued:
Modified and amplified by
Rev. Proc. 2008-25, 2008-13 I.R.B.686
2007-1
Superseded by
Rev. Proc. 2008-1, 2008-1 I.R.B.1
2007-2
Superseded by
Rev. Proc. 2008-2, 2008-1 I.R.B.90
2007-3
Superseded by
Rev. Proc. 2008-3, 2008-1 I.R.B.110
2007-4
Superseded by
Rev. Proc. 2008-4, 2008-1 I.R.B.121
2007-5
Superseded by
Rev. Proc. 2008-5, 2008-1 I.R.B.164
2007-6
Superseded by
Rev. Proc. 2008-6, 2008-1 I.R.B.192
2007-7
Superseded by
Rev. Proc. 2008-7, 2008-1 I.R.B.229
2007-8
Superseded by
Rev. Proc. 2008-8, 2008-1 I.R.B.233
2007-26
Obsoleted in part by
Rev. Proc. 2008-17, 2008-10 I.R.B.549
2007-31
Obsoleted in part by
Rev. Proc. 2008-19, 2008-11 I.R.B.594
2007-39
Superseded by
Rev. Proc. 2008-3, 2008-1 I.R.B.110
2007-52
Superseded by
Rev. Proc. 2008-9, 2008-2 I.R.B.258
2008-13
Corrected by
Ann. 2008-15, 2008-9 I.R.B.511
Revenue Rulings:
58-612
Clarified and amplified by
Rev. Rul. 2008-15, 2008-12 I.R.B.633
64-250
Amplified by
Rev. Rul. 2008-18, 2008-13 I.R.B.674
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2007–27 through 2007–52 is in Internal Revenue Bulletin 2007–52, dated December 26,
2007.
May 12, 2008iv2008–19 I.R.B.

Revenue Rulings— Continued:
89-42
Modified and superseded by
Rev. Rul. 2008-17, 2008-12 I.R.B.626
92-19
Supplemented in part by
Rev. Rul. 2008-19, 2008-13 I.R.B.669
97-31
Modified and superseded by
Rev. Rul. 2008-17, 2008-12 I.R.B.626
2001-48
Modified and superseded by
Rev. Rul. 2008-17, 2008-12 I.R.B.626
2007-4
Supplemented and superseded by
Rev. Rul. 2008-3, 2008-2 I.R.B.249
Treasury Decisions:
8697
Corrected by
Ann. 2008-38, 2008-17 I.R.B.851
9273
Corrected by
Ann. 2008-33, 2008-16 I.R.B.826
9362
Corrected by
Ann. 2008-9, 2008-7 I.R.B.444
Ann. 2008-12, 2008-7 I.R.B.446
9363
Corrected by
Ann. 2008-10, 2008-7 I.R.B.445
9368
Corrected by
Ann. 2008-29, 2008-15 I.R.B.786
Ann. 2008-30, 2008-16 I.R.B.825
9375
Corrected by
Ann. 2008-16, 2008-9 I.R.B.511
9386
Corrected by
Ann. 2008-35, 2008-17 I.R.B.849
2008–19 I.R.B.vMay 12, 2008

May 12, 20082008–19 I.R.B.

2008–19 I.R.B.May 12, 2008

May 12, 20082008–19 I.R.B.

INTERNAL REVENUE BULLETIN
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