Internal Revenue Bulletin 2008-37 (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
8-37
September 15, 20
08
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
T.D. 9412, page 687.
REG–146895–05, page 700.
Temporary and proposed regulations under section 179C of
the Code provide guidance on making an election to deduct 50
percent of the costs of certain refineries and guidance related
to the associated reporting requirements. A public hearing on
the proposed regulations is scheduled for November 20, 2008.
T.D. 9417, page 693.
REG–161695–04, page 699.
Final, temporary, and proposed regulations under section 1301
oftheCodeproviderulesundertheAmericanJobsCreationAct
of 2004 relating to the averaging of farm and fishing income.
REG–103146–08, page 701.
Proposed regulations provide guidance under section 6039 of
the Code, which requires corporations to file an information
return with the IRS and furnish a written statement to each em-
ployee regarding: (i) the corporation’s transfer of stock pur-
suant to the employee’s exercise of an incentive stock option
described in section 422(b); and (ii) transfers of stock by the
employee where the stock was acquired pursuant to the exer-
cise of an option described in section 423(c). The time and
manner for filing a return and furnishing statements to employ-
ees, as well as the information to be contained in the return
and furnished to employees, are addressed in these proposed
regulations.
EMPLOYEE PLANS
REG–103146–08, page 701.
Proposed regulations provide guidance under section 6039 of
the Code, which requires corporations to file an information
return with the IRS and furnish a written statement to each em-
ployee regarding: (i) the corporation’s transfer of stock pur-
suant to the employee’s exercise of an incentive stock option
described in section 422(b); and (ii) transfers of stock by the
employee where the stock was acquired pursuant to the exer-
cise of an option described in section 423(c). The time and
manner for filing a return and furnishing statements to employ-
ees, as well as the information to be contained in the return
and furnished to employees, are addressed in these proposed
regulations.
EXEMPT ORGANIZATIONS
Announcement 2008–80, page 706.
The IRS has revoked its determination that After Bankruptcy
Foundation of Fishers, IN; The K.L.T. Foundation of Missoula,
MT; Debt Advocates of America of Killeen, TX; Gene & Myrna
Heilman Foundation of Madison, WI; Darwin Facility of Suison,
CA; Credit Counseling Centers of America, Inc., of Fort Laud-
erdale, FL; David Aschkenazy Memorial Loan Fund of Brooklyn,
NY; Helping Hand Corporation of Gillette, WY; and Cherokee
Place Foundation of Lenoir, NC, qualify as organizations de-
scribed in sections 501(c)(3) and 170(c)(2) of the Code.
Announcement 2008–81, page 706.
A list is provided of organizations now classified as private foun-
dations.
A
nnouncement of Declaratory Judgment Proceedings Under Section 7428 begins on page 708.
Announcements of Disbarments and Suspensions begin on page 709.
Finding Lists begin on page ii.

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.
September 15, 20082008–37 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 179C.
—Election to
Expense Certa
in Refineries
26 CFR 1.179C–1T: Election to expense certain re-
fineries (temporary).
T.D. 9412
DEPARTMENT O
FTREASURY
Internal Rev
enue Service
26 CFR Part 1
and 602
Election to Expense Certain
Refineries
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Te
mporary regulations.
SUMMARY: This document contains tem-
porary regulations relating to the election
to expense qualified refinery property un-
der section 179C of the Internal Revenue
Code, and affects taxpayers who own re-
fineries located in the United States. These
temporary regulations reflect changes to
the law made by the Energy Policy Act of
2005. The text of these temporary regula-
tions also serves as the text of the proposed
regulations (REG–146895–05) set forth in
the notice of proposed rulemaking on this
subject in this issue of the Bulletin.
DATES:Effective Date:These regulations
are effective July 9, 2008.
Applicability Date:For dates of appli-
cability, see §1.179C–1T(g).
FOR FUR
THER INFORMATION
CONTAC
T: Philip Tiegerman (202)
622–31
10 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
These
temporary regulations are being
issue
d without prior notice and public pro-
cedur
e pursuant to the Administrative Pro-
cedur
e Act (5 U.S.C. 553). For this reason,
the co
llection of information contained in
thes
e regulations has been reviewed and,
pend
ing receipt and evaluation of public
comments, app
roved by the Office of Man-
agement and Bu
dget under control number
(1545-2103).
Responses to this collection
of informati
on are mandatory.
An agency may n
ot conduct or sponsor,
and a person i
s not required to respond
to, a collect
ion of information unless the
collection o
f information displays a valid
OMB control n
umber.
For further i
nformation concerning this
collection o
f information, and where to
submit comm
ents on the collection of in-
formation a
nd the accuracy of the esti-
mated burde
n, and suggestions for reduc-
ing this bur
den, please refer to the pream-
ble to the c
ross-referencing notice of pro-
posed rule
making published in this issue of
the Bullet
in.
Books or re
cords relating to a collection
of informa
tion must be retained as long
as their co
ntents may become material in
the admin
istration of any internal revenue
law. Gene
rally, tax returns and tax return
informat
ion are confidential, as required
by 26 U.S.
C. 6103.
Backgrou
nd
This docu
ment contains proposed
amendmen
ts to 26 CFR part 1 to provide
regulat
ions under section 179C of the
Interna
l Revenue Code (Code). Section
179C was
added to the Code by section
1323(a)
of the Energy Policy Act of 2005,
Public L
aw 109–58 (119 Stat. 594) to en-
courag
e the construction of new refineries
and the
expansion of existing refineries to
enhanc
e the nation’s refinery capacity.
Sectio
n 179C(a) allows a taxpayer to
elect t
o deduct 50 percent of the cost of
any qua
lified refinery property. The re-
mainin
g 50 percent of the taxpayer’s quali-
fying
expenditures are generally recovered
under
section 168 and section 179B, if ap-
plica
ble. The provisions of section 179C
apply
to qualified refinery property placed
in ser
vice by a taxpayer after August 8,
2005
, and before January 1, 2012. All
cost
s properly capitalized into qualified re-
fine
ry property are includable in the cost of
the q
ualified refinery property.
Explanation o
fProvisions
Scope
The temporary
regulations restate the
provisions of
section 179C and provide
guidance on ce
rtain issues related to elect-
ing and deter
mining the deduction allow-
able under se
ction 179C(a). Specifically,
the temporar
y regulations provide guid-
ance on makin
g elections under section
179C(a) and (
g), and the associated re-
porting req
uirements contained in section
179C(h). Fu
rther, the temporary regula-
tions provi
de guidance on determining and
substantia
ting the production capacity re-
quirement
, as well as guidance address-
ing the ava
ilability of the deduction in cer-
tain sale-
leaseback transactions. The tem-
porary reg
ulations generally interpret the
statute i
n a manner consistent with existing
statutor
y and regulatory principles and rec-
ognize th
at taxpayers have had to address
section 1
79C issues for prior tax years in
the absen
ce of regulations. While these
tempora
ry regulations generally apply to
taxable
years ending on or after July 9,
2008 and
terminate three years after the
date the
yarepublishedintheFederalReg-
ister, t
he temporary regulations may be ap-
plied b
y taxpayers to taxable years ending
prior t
o July 9, 2008. These temporary reg-
ulatio
ns also provide procedures for claim-
ing the
section 179C(a) deduction for tax-
able ye
ars ending prior to July 9, 2008.
Proper
ty Eligible for the Section 179C
Deduc
tion
Under
section 179C(c), property must
meet s
everal requirements to be consid-
ered q
ualified refinery property eligible for
the se
ction 179C(a) deduction. These re-
quire
ments include the following: (1) the
prop
erty must be part of a qualified refin-
ery;
(2) the original use of the property
must
commence with the taxpayer; (3) the
prop
erty must be placed in service within
aspe
cified time period; (4) the property
must
meet certain production capacity re-
qui
rements; (5) the property must meet
all
applicable environmental laws; and (6)
the
property must meet certain construc-
tio
n and written binding contract require-
men
ts.
2008–37 I.R.B.687September 15, 2008

Description of Qualified Refinery
Section 179C(d) provides that a qual-
ified refinery is a refinery located in the
United States, whose primary purpose is to
process liquid fuel from crude oil or qual-
ified fuels. Section 179C(f) provides that
refinery property is ineligible for the sec-
tion 179C(a) deduction if the primary pur-
pose of the refinery is for use as a topping
plant, asphalt plant, lube oil facility, crude
or product terminal, or blending facility;
or if the refinery property is built solely
to comply with consent decrees or projects
mandated by Federal, state, or local gov-
ernments.
Original Use Requirement
Pursuant to the requirements under
section 179C(c)(1)(A), the temporary reg-
ulations provide that the original use of
qualified refinery property must com-
mence with the taxpayer. The temporary
regulations define original use as the first
use to which the property is put, whether
or not that use corresponds to the use of the
property by the taxpayer, and provide cer-
tain exceptions for taxpayers that engage
in certain sale-leaseback transactions.
The temporary regulations provide that
if a taxpayer incurs capital expenditures to
recondition or rebuild property acquired or
owned by the taxpayer, those capital ex-
penditures will meet the original use re-
quirement, and may qualify for deduction
under section 179C(a). Consistent with the
statute, the temporaryregulations clarify
that reconditioned or rebuilt property ac-
quired by a taxpayer does not satisfy the
original use requirement and is not qual-
ified refinery property. The question of
whether property is reconditioned or re-
built property is a question of fact.
Consistent with section 179C(c)(2),
the temporary regulations also provide an
exception to the original use requirement
for certain sale-leaseback transactions. If
property is originally placed in service by
a person after August 8, 2005, and is sold
to a taxpayer, and leased back to the per-
son by the taxpayer within three months
after the date the property was originally
placed in service by the person, the orig-
inal use of that property is considered to
have commenced with the taxpayer-lessor.
Placed in Service Requirements
Section 179C(c)(1)(B) provides that
qualified refinery property is property that
is placed in service by the taxpayer after
August 8, 2005, and before January 1,
2012.
Consistent with section 179C(c)(2),
the temporary regulations provide that,
for certain sale-leaseback transactions, if
property is originally placed in service by
a person after August 8, 2005, and is sold
to a taxpayer and leased back to the person
by the taxpayer within three months after
the date the property was originally placed
in service by the person, the new property
is treated as originally placed in service
by the taxpayer-lessor not earlier than the
date on which the property is used by the
lessee under the sale-leaseback.
Production Capacity Requirements
The production capacity requirement of
section 179C(c)(1)(C) and (e) is met if any
portion of qualified refinery property: (1)
enables an existing qualified refinery to in-
crease its total volume output, determined
without regard to asphalt or lube oil, by 5
percent or more on an average daily ba-
sis; or (2) enables the existing qualified
refinery to increase the percentage of to-
tal throughput attributable to processing
qualified fuels to a rate that is at least 25
percent of total throughput on an average
daily basis. Any reasonable method may
be used to determine the appropriate base-
line for measuring capacity increases and
to demonstrate and substantiate that the
capacity of the existing qualified refinery
has been sufficiently increased. For ex-
ample, the average annual output over a
number of normal production years may
provide a reasonable baseline for measur-
ing an increase in capacity. The temporary
regulations confirm that the existing qual-
ified refinery is the refinery prior to the
installation of qualified refinery property.
The temporary regulations also confirm
that the question of whether the qualified
refinery property has sufficiently enabled
output or throughput increases is properly
evaluated as of the placed-in-service date
of the qualified refinery property.
Any Applicable Environmental Laws
Requirement
Section 179C(c)(1)(D) provides that
qualified refinery property must meet all
applicable Federal, state, and local envi-
ronmental laws. However, the environ-
mental compliance requirement applies
only with respect to the laws in effect on
the date that qualified refinery property
is placed in service after August 8, 2005,
and before January 1, 2012. Furthermore,
a refinery’s failure to meet applicable en-
vironmental laws with respect to a portion
of the refinery that was in service prior
to August 8, 2005 will not disqualify the
taxpayer from making the election under
section 179C(a) with respect to the other-
wise qualifying refinery property.
Section 179C(c)(1)(D) and (c)(3) pro-
vides that the property must comply with
the Clean Air Act, notwithstanding any
waiver received by the taxpayer under that
Act.
Consistent with section 179C(f)(2), the
temporary regulations provide that the sec-
tion 179C(a) election is not available for
identifiable refinery property built solely
to comply with state, locally or Federally
mandated projects or consent decrees. For
example, a taxpayer may not elect to ex-
pense the cost of a scrubber necessary for
therefinerytocomplywiththeCleanAir
Act, even if the scrubber is installed as part
of a larger project, if the scrubber itself
does not otherwise enable an increase in
production capacity.
Construction and Written Binding
Contract Requirements
Under section 179C(c)(1), qualified
refinery property will include otherwise
qualified property that is placed in service
by the taxpayer after August 8, 2005, and
before January 1, 2012, but only if no
written binding contract for the construc-
tion of the property was in effect on or
before June 14, 2005. Pursuant to sec-
tion 179C(c)(1)(F), a taxpayer must take
some action constituting a construction
commitment before January 1, 2008. To
meet this test, any of the following three
acts is sufficient: (1) entering into a writ-
ten binding construction contract before
January 1, 2008; (2) placing the property
in service before January 1, 2008; or (3)
in the case of self-constructed property,
September 15, 20086882008–37 I.R.B.

starting self-construction after June 14,
2005, and before January 1, 2008.
Consistent with existing section 168(k)
principles, in the case of self-constructed
property, the temporary regulations pro-
vide that construction begins when phys-
ical work (not including preliminary ac-
tivities such as planning or designing,
securing financing, exploring, or research-
ing) of a significant nature begins. The
determinationofwhenworkofasignif-
icant nature begins depends on the facts
and circumstances.Cf.Treas. Regs.
§1.168(k)–1(b)(4)(iii)(B). Recognizing
that taxpayers have had to make some
determinations as to whether self-con-
structed property could qualify for the
section 179C deduction in the absence
of regulations, the temporary regulations
provide that physical work of a signifi-
cant nature will be deemed to have begun
before January 1, 2008 for purposes of
section 179C if the taxpayer performed
some physical work before January 1,
2008 (such as clearing a site or excava-
tion) and has performed physical work of
a significant nature (as defined in Treas.
Regs. §1.168(k)–1(b)(4)(iii)(B)) before
October 7, 2008.
Elections
Section 179C provides two elections.
The first election is provided under section
179C(a), which allows a taxpayer to elect
to deduct an amount equal to 50 percent
of the costs paid or incurred by the tax-
payer for qualified refinery property in the
year the property is placed in service. The
election generally must be made by the
duedate(includingextensions) for filing
the taxpayer’s federal income tax return
for the taxable year in which the qualified
refinery property is placed in service by
the taxpayer. The taxpayer must make the
election by entering the deduction claimed
at the appropriate place on the taxpayer’s
Federal income tax return.
A taxpayer that did not claim the section
179C(a) deduction on a Federal income
tax return filed for a taxable year ending
priortoJuly9,2008butwishestoclaim
the deduction for that taxable year may do
so by properly making a section 179C(a)
election under these proposed regulations
on an amended return filed by December
31, 2008.
In general, once an election is made
under section 179C(a), it may not be re-
voked except with the written consent
of the Commissioner. However, these
temporary regulations provide that a tax-
payer is deemed to have requested and
been granted consent to revoke an elec-
tion under section 179C(a) if the taxpayer
revokes the election before the revocation
deadline. The revocation deadline is the
later of December 31, 2008 or 24 months
after the due date (including extensions) of
the taxpayer’s Federal income tax return
for the taxable year for which the election
applies. The taxpayer revokes the election
by attaching a statement to an amended
return for the taxable year for which the
election applies. A taxpayer is not per-
mitted to revoke an election under section
179C(a) after the revocation deadline. The
revocation deadline may not be extended
under §301.9100–1.
The second election is provided in sec-
tion 179C(g), which allows a taxpayer that
is a subchapter T cooperative (coopera-
tive taxpayer) and that has a subchapter T
cooperative as one or more of its owners
(cooperative owner(s)) to elect to allocate
all or a portion of the deduction allowable
under section 179C(a) for the taxable year
to the cooperative owner(s). If a coop-
erative taxpayer makes an election under
section 179C(g), the temporary regula-
tions provide that this allocation is equal
tothecooperativeowner’sratableshareof
the total amount allocated, determined on
the basis of the cooperative owner’s own-
ership interest in the cooperative taxpayer
at the beginning of the cooperative tax-
payer’s taxable year. Under the temporary
regulations, the section 179C(g) election
must be made by the due date (including
extensions) for filing the cooperative tax-
payer’s original Federal income tax return
for the taxable year for which the section
179C(a) election is made by the coop-
erative taxpayer. Under the temporary
regulations, a cooperative taxpayer is re-
quired to make the election under section
179C(g) by attaching a statement to the
cooperative taxpayer’s Federal income tax
return providing the name and taxpayer
identification number of the cooperative
taxpayer, the amount of the deduction al-
lowable to the cooperative taxpayer, the
name and taxpayer identification num-
ber of each cooperative owner, and the
amount of the deduction allocated to each
of the cooperative owner(s). Consistent
with section 179C(g)(3), the temporary
regulations also require the cooperative
taxpayer to notify any cooperative owner
in writing, and on Form 1099–PATR,
“Taxable Distributions Received From Co-
operatives,” of the amount of the section
179C(a) deduction that is apportioned to
that cooperative owner. The written no-
tice must be provided to the cooperative
owner(s) before the due date (including
extensions) of the cooperative taxpayer’s
original federal income tax return.
Consistent with section 179C(g)(2),
once made, an election under section
179C(g) may not be revoked. Conse-
quently, a taxpayer that has made an
irrevocable section 179C(g) election may
not elect to revoke its section 179C(a)
election.
Reporting Requirements
Section 179C(h) provides that any tax-
payer making a section 179C(a) election
must submit a statement in order to claim
the section 179C(a) deduction. The tem-
porary regulations provide that in order to
claim the section 179C(a) deduction on a
tax return filed after July 23, 2008, the tax-
payer must attach the statement to the tax-
payer’s Federal income tax return for the
taxable year in which the qualified refin-
ery property is placed in service by the
taxpayer. The taxpayer must identify the
name and location of the qualified refinery
property and provide an affirmation that
the taxpayer’s refinery property meets the
production capacity requirements of sec-
tion 179C(e). The taxpayer also must pro-
vide the total cost basis of the qualified re-
finery property and thedepreciation treat-
ment of the capitalized portion of the qual-
ified refinery property. If it has not al-
ready filed the statement, a taxpayer that
has claimed the section 179C(a) deduction
on a Federal income tax return filed prior
to July 23, 2008, must attach a statement to
its next Federal income tax return for each
taxable year in which the taxpayer claimed
the deduction but did not file a statement.
Effective/Applicability Date
These temporary regulations generally
apply to taxable years ending on or after
July 9, 2008, and terminate three years af-
ter the date they are published in the Fed-
eral Register. However, these proposed
2008–37 I.R.B.689September 15, 2008

regulations may be relied upon by taxpay-
ers for taxable years ending prior to July 9,
2008.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It also has been deter-
mined that section 553(b) of the Admin-
istrative Procedure Act (5 U.S.C. chapter
5) does not apply to these regulations. For
the applicability of the Regulatory Flexi-
bility Act (5 U.S.C. chapter 6) refer to the
Special Analyses section of the preamble
to the cross-reference notice of proposed
rulemaking published in this issue of the
Bulletin. Pursuant to section 7805(f) of the
Code, these temporary regulations will be
submitted to the Chief Counsel for Advo-
cacy of Small Business Administration for
comment on their impact on small busi-
ness.
Drafting Information
The principal author of these regula-
tions is Philip Tiegerman, Office of As-
sociate Chief Counsel (Passthroughs and
Special Industries). However, other per-
sonnel from the IRS and Treasury Depart-
ment participated in their development.
*****
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 for part 1
continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.179C–1T is added to
read as follows:
§1.179C–1T Election to expense certain
refineries (temporary).
(a)Scope and definitions—(1)Scope.
This section provides the rules for deter-
mining the deduction allowable under sec-
tion 179C(a) for the cost of any qualified
refinery property. The provisions of this
section apply only to a taxpayer that elects
to apply section 179C in the manner pre-
scribed under paragraph (d) of this section.
(2)Definitions. For purposes of section
179C and this section, the following defi-
nitions apply:
(i)Applicable environmental lawsare
any applicable Federal, state, or local en-
vironmental laws.
(ii)Qualified fuelshas the meaning set
forth in section 45K(c).
(iii)Costis the unadjusted depreciable
basis (as defined in §1.168(b)–1(a)(3), but
without regard to the reduction in basis for
any portion of the basis the taxpayer prop-
erly elects to treat as an expense under sec-
tion 179C and this section) of the property.
(iv)Throughputisavolumetricrate
measuring the flow of crude oil or quali-
fied fuels processed over a given period of
time, typically referenced on the basis of
barrels per calendar day.
(v)Barrels per calendar dayis the
amount of fuels that a facility can process
under usual operating conditions, ex-
pressed in terms of capacity during a
24-hour period and reduced to account for
down time and other limitations.
(vi)United Stateshas the same mean-
ing as that term is defined in section
7701(a)(9).
(b)Qualified refinery property—(1)In
general. Qualified refinery property is any
property that meets the requirements set
forth in paragraphs (b)(2) through (b)(7) of
this section.
(2)Description of qualified refinery
property—(i)In general. Property that
comprises any portion of a qualified refin-
ery may be qualified refinery property. For
purposes of section 179C and this section,
a qualified refinery is any refinery located
in the United States that is designed to
serve the primary purpose of processing
crude oil or qualified fuels.
(ii)Nonqualified refinery property.Re-
finery property is not qualified refinery
property for purposes of this paragraph
(b)(2) if—
(A) The primary purpose of the refinery
property is for use as a topping plant, as-
phalt plant, lube oil facility, crude or prod-
uct terminal, or blending facility; or
(B) The refinery property is built solely
to comply with consent decrees or projects
mandated by Federal, state or local govern-
ments.
(3)Original use—(i)In general.For
purposes of the deduction allowable under
section 179C(a), refinery property will
meet the requirements of this paragraph
(b)(3) if the original use of the property
commences with the taxpayer. Except as
provided in paragraph (b)(3)(ii) of this
section, original use means the first use to
which the property is put, whether or not
that use corresponds to the use of the prop-
erty by the taxpayer. Thus, if a taxpayer
incurs capital expenditures to recondition
or rebuild property acquired or owned by
the taxpayer, only the capital expenditures
incurred by the taxpayer to recondition or
rebuild the property acquired or owned
by the taxpayer satisfy the original use
requirement. However, the cost of recon-
ditioned or rebuilt property acquired by a
taxpayer does not satisfy the original use
requirement. Whether property is recon-
ditioned or rebuilt property is a question
of fact. For purposes of this paragraph
(b)(3)(i), acquired or self-constructed
property that contains used parts will be
treated as reconditioned or rebuilt only if
the cost of the used parts is more than 20
percent of the total cost of the property.
(ii)Sale-leaseback. If any new por-
tion of a qualified refinery is originally
placed in service by a person after Au-
gust 8, 2005, and is sold to a taxpayer and
leased back to the person by the taxpayer
withinthreemonthsafterthedatetheprop-
erty was originally placed in service by the
person, the taxpayer-lessor is considered
the original user of the property.
(4)Placed-in-service date—(i)In gen-
eral. Refinery property will meet the re-
quirements of this paragraph (b)(4) if the
property is placed in service by the tax-
payer after August 8, 2005, and before Jan-
uary 1, 2012.
(ii)Sale-leaseback. If a new portion
of refinery property is originally placed in
service by a person after August 8, 2005,
and is sold to a taxpayer and leased back
to the person by the taxpayer within three
months after the date the property was
originally placed in service by the person,
the property is treated as originally placed
in service by the taxpayer-lessor not earlier
than the date on which the property is used
by the lessee under the leaseback.
(5)Production capacity—(i)In gen-
eral. Refinery property is considered
qualified refinery property if—
(A) It enables the existing qualified re-
finery to increase the total volume output,
determined without regard to asphalt or
September 15, 20086902008–37 I.R.B.

lube oil, by at least five percent on an av-
erage daily basis; or
(B) It enables the existing qualified re-
finery to increase the percentage of total
throughput attributable to processing qual-
ified fuels to a rate that is at least 25 percent
of total throughput on an average daily ba-
sis.
(ii)When production capacity is tested.
The production capacity requirement of
this paragraph (b)(5) is determined as of
the date the property is placed in service by
the taxpayer. Any reasonable method may
be used to determine the appropriate base-
line for measuring capacity increases and
to demonstrate and substantiate that the ca-
pacity of the existing qualified refinery has
been sufficiently increased.
(iii)Multi-stage projects. In the case
of multi-stage projects, a taxpayer must
satisfy the reporting requirements of para-
graph (f)(2) of this section, sufficient to
establish that the production capacity re-
quirements of this paragraph (b)(5) will be
met as a result of the taxpayer’s overall
plan.
(6)Applicable environmental laws—(i)
In general. The environmental compli-
ance requirement applies only with respect
to refinery property, or any portion of re-
finery property, that is placed in service
after August 8, 2005. A refinery’s failure
to meet applicable environmental laws
with respect to a portion of the refinery
that was in service prior to August 8, 2005
will not disqualify a taxpayer from making
the election under section 179C(a) with
respect to otherwise qualifying refinery
property.
(ii)Waiver under the Clean Air Act.
Refinery property must comply with the
Clean Air Act, notwithstanding any waiver
received by the taxpayer under that Act.
(7)Construction of property—(i)In
general. Qualified property will meet the
requirements of this paragraph (b)(7) if—
(A) The property is placed in service
by the taxpayer after August 8, 2005, and
before January 1, 2012; and
(B) No written binding contract for the
construction of the property was in effect
before June 14, 2005.
(ii)Definition of binding contract.(A)
In general. A contract is binding only if it
is enforceable under state law against the
taxpayer or a predecessor, and does not
limit damages to a specified amount (for
example, by use of a liquidated damages
provision). For this purpose, a contractual
provision that limits damages to an amount
equaltoatleast5percentofthetotalcon-
tract price will not be treated as limiting
damages to a specified amount. In deter-
mining whether a contract limits damages,
the fact that there may be little or no dam-
ages because the contract price does not
significantly differ from fair market value
will not be taken into account.
(B)Conditions. A contract is binding
even if subject to a condition, as long as the
condition is not within the control of either
partyorthepredecessorofeitherparty.A
contract will continue to be binding if the
parties make insubstantial changes in its
terms and conditions, or if any term is to be
determined by a standard beyond the con-
trol of either party. A contract that imposes
significant obligations on the taxpayer or
a predecessor will be treated as binding,
notwithstanding the fact that insubstantial
terms remain to be negotiated by the par-
ties to the contract.
(C)Options.Anoptiontoeitheracquire
or sell property is not a binding contract.
(D)Supply agreements. A binding con-
tract does not include a supply or similar
agreement if the payment amount and de-
sign specification of the property to be pur-
chased have not been specified.
(E)Components. A binding contract to
acquire one or more components of a larger
property will not be treated as a binding
contract to acquire the larger property. If
a binding contract to acquire a compo-
nent does not satisfy the requirements of
this paragraph (b)(7), the component is not
qualified refinery property.
(iii)Self-constructed property—(A)In
general. Except as provided in paragraph
(b)(7)(iii)(B) of this section, if a taxpayer
manufactures, constructs, or produces
property for use by the taxpayer in its trade
or business (or for the production of in-
come by the taxpayer), the construction of
property rules in this paragraph (b)(7) are
treated as met for qualified refinery prop-
erty if the taxpayer began manufacturing,
constructing, or producing the property
after June 14, 2005, and before January
1, 2008. Property that is manufactured,
constructed or produced for the taxpayer
by another person under a written binding
contract (as defined in paragraph (b)(7)(ii)
of this section) that is entered into prior
to the manufacture, construction, or pro-
duction of the property for use by the
taxpayer in its trade or business (or for the
production of income) is considered to be
manufactured, constructed, or produced
by the taxpayer.
(B)When construction begins.For
purposes of this paragraph (b)(7)(iii), con-
struction of property generally begins
when physical work of a significant nature
begins. Physical work does not include
preliminary activities such as planning
or designing, securing financing, explor-
ing, or researching. The determination
of when physical work of a significant
nature begins depends on the facts and cir-
cumstances. Nevertheless, physical work
of a significant nature will be deemed to
have begun for purposes of this paragraph
(b)(7)(iii)(B), and the construction of the
property will be deemed to have met the
requirements of paragraph (b)(7)(iii)(A)
of this section, if the taxpayer performed
some physical work before January 1,
2008 (such as clearing a site or excava-
tion) and has performed physical work of
a significant nature (as defined in Treas.
Regs. §§1.168(k)–1(b)(4)(iii)(B)) before
October 7, 2008.
(C)Components of self-constructed
property—(1)Acquired components.If
a binding contract (as defined in para-
graph (b)(7)(ii) of this section) to acquire
a component of self-constructed prop-
erty is in effect on or before June 14,
2005, the component does not satisfy the
requirements of paragraph (b)(7)(i) of
this section, and is not qualified refin-
ery property. However, if construction
of the self-constructed property begins
after June 14, 2005, the self-constructed
property may be qualified refinery prop-
erty if it meets all other requirements of
section 179C and this section (including
paragraph (b)(7)(i) of this section), even
though the component is not qualified
refinery property. If the construction of
self-constructed property begins before
June 14, 2005, neither the self-constructed
property nor any component related to
the self-constructed property is qualified
refinery property. If the component was
acquired before January 1, 2008, but the
construction of the self-constructed prop-
erty begins after December 31, 2007, the
component may qualify as qualified refin-
ery property even if the self-constructed
property is not qualified refinery property.
(2)Self-constructed components.Ifthe
manufacture, construction, or production
2008–37 I.R.B.691September 15, 2008

of a component fails to meet any of the
requirements of paragraph (b)(7)(iii) of
this section, the component is not qualified
refinery property. However, if the man-
ufacture, construction, or production of a
component fails to meet any of the require-
ments provided in paragraph (b)(7)(iii) of
this section, but the construction of the
self-constructed property begins after June
14, 2005, the self constructed property
may qualify as qualified refinery prop-
erty if it meets all other requirements of
section 179C and this section (including
paragraph (b)(7)(i) of this section). If
the construction of the self-constructed
property begins before June 14, 2005, nei-
ther the self-constructed property nor any
components related to the self-constructed
property are qualified refinery property. If
the component was self-constructed be-
fore January 1, 2008, but the construction
of the self-constructed property begins
after December 31, 2007, the component
may qualify as qualified refinery property,
although the self-constructed property is
not qualified refinery property.
(c)Computation of expense deduction
for qualified refinery property. In general,
the allowable deduction under paragraph
(d) of this section for qualified refinery
property is determined by multiplying by
50 percent the cost of the qualified refinery
property paid or incurred by the taxpayer.
(d)Election—(1)In general.Atax-
payer may make an election to deduct as an
expense 50 percent of the cost of any qual-
ified refinery property. A taxpayer making
this election takes the 50 percent deduction
for the taxable year in which the qualified
refinery property is placed in service.
(2)Time and Manner for making elec-
tion—(i)Time for making election.An
election specified in this paragraph (d)
generally must be made not later than the
duedate(includingextensions) for filing
the original Federal income tax return for
the taxable year in which the qualified
refinery property is placed in service by
the taxpayer. However, a taxpayer that did
not claim the section 179C(a) deduction
on a Federal income tax return filed for a
taxable year ending prior to July 9, 2008
but wishes to claim the deduction for that
taxableyearmaydosobyproperlymak-
ing a section 179C(a) election under this
paragraph (d) on an amended return filed
by December 31, 2008.
(ii)Manner of making election.The
taxpayer makes an election under section
179C(a) and this paragraph (d) by entering
the amount of the deduction at the appro-
priate place on the taxpayer’s timely filed
original Federal income tax return for the
taxable year in which the qualified refin-
ery property is placed in service (or on
the amended return, as provided in para-
graph (d)(2)(i) of thissection), and attach-
ing a report as specified in paragraph (f) of
this section to the taxpayer’s timely filed
original Federal income tax return for the
taxable year in which the qualified refin-
ery property is placed in service (or on the
amended return, as provided in paragraph
(d)(2)(i) of this section).
(3)Revocation of Election—(i)In gen-
eral. An election made under section
179C(a) and this paragraph (d), and any
specification contained in such election,
may not be revoked except with the con-
sent of the Commissioner of Internal
Revenue.
(ii)Revocation prior to the revocation
deadline. A taxpayer is deemed to have re-
quested, and to have been granted, consent
of the Commissioner to revoke an elec-
tion under section 179C(a) and this para-
graph (d) if the taxpayer revokes the elec-
tion before the revocation deadline. The
revocation deadline is the later of Decem-
ber 31, 2008 or 24 months after the due
date (including extensions) for filing the
taxpayer’s Federal income return for the
taxable year for which the election applies.
An election under section 179C(a) and this
paragraph (d) is revoked by attaching a
statement to an amended return for the tax-
able year for which the election applies.
The statement must specify the name and
address of the refinery for which the elec-
tion applies and the amount deducted on
the taxpayer’s original Federal income tax
return for the taxable year for which the
election applies.
(iii)Revocation after the revocation
deadline. An election under section
179C(a) and this paragraph (d) may not be
revoked after the revocation deadline. The
revocation deadline may not be extended
under §301.9100–1.
(iv)Revocation by cooperative tax-
payer.A taxpayer that has made an elec-
tion to allocate the section 179C deduc-
tion to cooperative owners under section
179C(g) and paragraph (e) of this section
may not revoke its election under section
179C(a).
(e)Election to allocate section 179C
deduction to cooperative owners—(1) In
general. If a cooperative taxpayer makes
an election under section 179C(g) and this
paragraph (e), the cooperative taxpayer
may elect to allocate all, some, or none
of the deduction allowable under section
179C(a) for that taxable year to the coop-
erative owner(s). This allocation is equal
to the cooperative owner(s)’ ratable share
of the total amount allocated, determined
on the basis of each cooperative owner’s
ownership interest in the cooperative tax-
payer. For purposes of this section, a
cooperative taxpayer is an organization to
which part I of subchapter T applies, and
in which another organization to which
part I of subchapter T applies (cooperative
owner) directly holds an ownership inter-
est. No deduction shall be allowed under
section 1382 for any amount allocated
under this paragraph (e).
(2)Time and Manner for making elec-
tion—(i)Time for making election.Aco-
operative taxpayer must make the election
under section 179(g) and this paragraph (e)
by the due date (including extensions) for
filing the cooperative taxpayer’s original
Federal income tax return for the taxable
year to which the cooperative taxpayer’s
election under section 179C(a) and para-
graph (d) of this section applies.
(ii)Manner of making election.An
election under this paragraph (e) is made
by attaching to the cooperative taxpayer’s
timely filed Federal income tax return for
the taxable year (including extensions) to
which the cooperative taxpayer’s election
under section 179C(a) and paragraph (d) of
this section applies a statement providing
the following information:
(A) The name and taxpayer identifica-
tion number of the cooperative taxpayer.
(B) The amount of the deduction allow-
able to the cooperative taxpayer for the
taxable year to which the election under
section 179C(a) and paragraph (d) of this
section applies.
(C) The name and taxpayer identifica-
tion number of each cooperative owner to
which the cooperative taxpayer is allocat-
ing all or some of the deduction allowable.
(D) The amount of the allowable deduc-
tion that is allocated to each cooperative
owner listed in paragraph (e)(2)(ii)(C) of
this section.
September 15, 20086922008–37 I.R.B.

(3)Written notice to owners. If any por-
tion of the deduction allowable under sec-
tion 179C(a) is allocated to a cooperative
owner, the cooperative taxpayer must no-
tify the cooperative owner of the amount
of the deduction allocated to the cooper-
ative owner in a written notice, and on
Form 1099–PATR, “Taxable Distributions
Received From Cooperatives.” This notice
must be provided on or before the due date
(including extensions) of the cooperative
taxpayer’s original Federal income tax re-
turn for the taxable year for which the co-
operative taxpayer’s election under section
179C(a) and paragraph (d) of this section
applies.
(4)Irrevocable Election. A section
179C(g) election, once made, is irrevoca-
ble.
(f)Reporting requirement—(1)In gen-
eral. A taxpayer may not claim a deduc-
tion under section 179C(a) for any taxable
year unless the taxpayer files a report with
the Secretary containing information with
respect to the operation of the taxpayer’s
refineries.
(2)Informationtobeincludedinthe
report. The taxpayer must specify—
(i) The name and address of the refin-
ery;
(ii) Under which production capacity
requirement under section 179C(e) and
paragraph (b)(5)(i)(A) and (B) of this
section the taxpayer’s qualified refinery
qualifies;
(iii) Whether the refinery is qualified re-
finery property under section 179C(d) and
paragraph (b)(2) of this section, sufficient
to establish that the primary purpose of the
refinery is to process liquid fuel from crude
oil or qualified fuels.
(iv) The total cost basis of the qualified
refinery property at issue for the taxpayer’s
current taxable year; and
(v) The depreciation treatment of the
capitalized portion of the qualified refinery
property.
(3)Time and Manner for submitting re-
port—(i)Time for submitting report.The
taxpayer is required to submit the report
specified in this paragraph (f) not later than
the due date (including extensions) of the
taxpayer’s Federal income tax return for
the taxable year in which the qualified re-
finery property is placed in service. A
taxpayer that has made a section 179C(a)
election for a prior taxable year by claim-
ing the section 179C(a) deduction on a
Federal income tax return filed prior to
July 23, 2008, but has not already filed a
report for that year, must attach a report to
its next Federal income tax return for each
taxable year the taxpayer claimed the de-
duction but did not file a report.
(ii)Manner of submitting report.The
taxpayer must attach the report specified in
this paragraph (f) to the taxpayer’s timely
filed original Federalincome tax return for
the taxable year in which the qualified re-
finery property isplaced in service.
(g)Effective/applicability date.This
section is applicablefor taxable years end-
ing on or after July 9, 2008.
(h)Expiration date. The applicability
of this section expires on or before July 1,
2011.
PART 602—OMB CONTROL
NUMBERS UNDER THE PAPERWORK
REDUCTION ACT
Par. 3. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 4. In §602.101, paragraph (b) is
amended by adding the following entry in
numerical order to the table to read as fol-
lows:
§602.101 OMB control numbers.
*****
(b) * * *
CFR part or section where
identified and described
Current OMB
Control No.
*****
1.179C–1T...........................................................
1545–2103
*****
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
Approved July 3, 2008.
Eric Solomon,
Assistant Secretary of
theTreasury(TaxPolicy).
(
Filed by the Office of the Federal Register on July 3, 2008,
3:33 p.m., and published in the issue of the Federal Register
for July 9, 2008, 73 F.R. 39227)
Section 1301.—Averaging
of Farm Income
26 CFR 1.1301–1: Averaging of farm income.
T.D. 9417
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Farmer and Fisherman
Income Averaging
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regula-
tions.
SUMMARY: This document contains final
and temporary regulations under section
1301 of the Internal Revenue Code (Code)
relating to the averaging of farm and fish-
ing income in computing income tax lia-
bility. The regulations reflect changes to
the law made by the American Jobs Cre-
ation Act of 2004. The regulations pro-
vide guidance to individuals engaged in
a farming or fishing business who elect
to reduce their tax liability by treating all
or a portion of the current taxable year’s
farm or fishing income as if one-third of
it had been earned in each of the prior
three taxable years. The text of the tem-
2008–37 I.R.B.693September 15, 2008

porary regulations in this document also
serves as the text of proposed regulations
(REG–161695–04) set forth in a notice of
proposed rulemaking on this subject in this
issue of the Bulletin.
DATES:Effective Date:These regulations
are effective on July 22, 2008.
Applicability Dates:For dates of
applicability, see §§1.1301–1(g) and
1.1301–1T(g).
FOR FURTHER INFORMATION
CONTACT: Amy Pfalzgraf, (202)
622–4950 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains final and tem-
porary amendments to the Income Tax
Regulations (26 CFR part 1) under section
1301. For taxable years beginning after
December 31, 1997, section 1301 pro-
vides that individual taxpayers engaged in
a farming business may elect to compute
their income tax liability under section 1
by treating all or a portion of their taxable
income from the trade or business of farm-
ing as if one-third of it had been earned in
each of the prior three taxable years.
Section 314(b) of the American Jobs
Creation Act of 2004 (AJCA), Public Law
108–357 (118 Stat. 1468), amended sec-
tion 1301 to permit fishermen to make
a farm income averaging election. Sec-
tion 1301(b)(1)(A) now provides that the
income eligible for averaging includes
income attributable to a fishing business.
Fishing businessisdefinedinsection
1301(b)(4) as the conduct of commer-
cial fishing as defined in section 3 of the
Magnuson-Stevens Fishery Conservation
and Management Act (Magnuson-Stevens
Act), 16 U.S.C. 1802.
The Magnuson-Stevens Act defines
commercial fishingas fishing in which the
fish harvested are intended to or do enter
commerce through sale, barter, or trade.
16 U.S.C. 1802(4).Fishingis defined as
the catching, taking, or harvesting of fish;
the attempted catching, taking, or harvest-
ing of fish; activities that reasonably can
be expected to result in the catching, tak-
ing, or harvesting of fish; or any operations
at sea in support of, or in preparation for,
the catching, taking, or harvesting of fish.
Fishing does not include any scientific
research activity conducted by a scien-
tific research vessel. 16 U.S.C. 1802(15).
Fishis defined as finfish, mollusks, crus-
taceans, and all other forms of marine
animal and plant life, other than marine
mammals and birds. 16 U.S.C. 1802(12).
Under 50 CFR 600.10, the termscatch,
take, or harvestinclude activities that
result in the killing of fish or the bringing
of live fish on board a vessel.
Section 314(a) of the AJCA amended
section 55(c) to provide that the farm in-
come averaging election is disregarded in
computing the regular tax liability for pur-
poses of calculating the alternative mini-
mum tax (AMT). As a result, the reduc-
tion in regular tax liability resulting from
a farm income averaging election will not
be offset by a corresponding increase in the
AMT.
Section 1.1301–1 of the Income Tax
Regulations provides guidance on income
averaging for farmersunder the rules in ef-
fect before the AJCA amendments.
Explanation of Provisions
These temporary regulations provide
guidance on the AJCA changes to the
income averaging rules. In addition, con-
forming changes are made to the final
regulations in §1.1301–1.
Definition of Fishing Business
Section 1301(b)(4) definesfishing
businessby reference to section 3 of the
Magnuson-Stevens Act. The definition
of fishing business in these temporary
regulations follows the definitions in
the Magnuson-Stevens Act and the
regulations under that Act. Thus, fishing
includes catching, taking, or harvesting
activities that result in the killing of fish or
the bringing of live fish on board a vessel,
but does not include the processing of fish.
Amount of Income Eligible for Averaging
Section 1301(b)(1)(A) provides that in-
come attributable to any farming business
or fishing business is eligible for income
averaging. These temporary regulations
clarify that the maximum amount of in-
come that an individual may elect to aver-
age is the total of the individual’s farm and
fishing income and gains, reduced by any
farm and fishing deductions or losses al-
lowedasadeductionincomputingtaxable
income. Therefore, a taxpayer engaged
in both a farming business and a fishing
business must combine income, gains, de-
ductions, and losses from both the farming
business and the fishing business to deter-
mine the maximum amount of income that
is eligible for averaging.
Lessors of Vessels Used for Fishing
The rental income of a landlord that is
based on a share of a tenant’s production
is subject to fluctuations in the farm econ-
omy to the same extent as that of a farmer.
Therefore, §1.1301–1(b)(2) provides that a
landlord is engaged in a farming business
if this arrangement is established in a writ-
ten agreement before the tenant begins sig-
nificant activities on the land.
These temporary regulations similarly
provide that a lessor of a vessel is engaged
in a fishing business within the meaning
of section 1301(b)(4) if the payment due
to the lessor under the lease is based on a
share of the lessee’s catch (or a share of the
proceeds from the sale of the catch) and the
lease is a written agreement entered into
before the lessee begins significant fishing
activities resulting in the shared catch. A
fixed lease payment is not eligible for in-
come averaging.
Crewmembers
The income of crewmembers on ves-
sels engaged in fishing also is subject to
fluctuations in the fishing economy if the
crewmembers’ compensation is based on
a share of the vessel’s catch of fish or a
share of the proceeds from the sale of the
catch. Accordingly, these temporary reg-
ulations provide that these crewmembers
are engaged in a fishing business, whether
or not they are treated as employees for
employment tax purposes.
Deposits Into Merchant Marine Capital
Construction Fund
Section 7518(c)(1)(A) provides that
certain deposits into a Merchant Marine
Capital Construction Fund (CCF) reduce
taxable income for purposes of the Code
(the CCF reduction). These temporary
regulations provide that, for purposes of
income averaging computations, the CCF
reduction also reduces taxable income.
In addition, except to the extent that the
amount of the CCF deposit is determined
September 15, 20086942008–37 I.R.B.

by reference to income from maritime
operations other than fishing, the CCF re-
duction also reduces the amount of income
that is eligible for income averaging.
Effective/Applicability Date
These temporary regulations apply for
taxable years beginning after July 22,
2008. However, taxpayers may apply the
temporary regulations in taxable years
beginning after December 31, 2003, but
before July 23, 2008, if all provisions are
consistently applied in each taxable year.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It also has been deter-
mined that section 553(b) of the Admin-
istrative Procedure Act (5 U.S.C. chapter
5) does not apply to these regulations. For
the applicability of the Regulatory Flexi-
bility Act (5 U.S.C. chapter 6) please refer
to the cross-reference notice of proposed
rulemaking published elsewhere in this is-
sue of the Bulletin. Pursuant to section
7805(f), these regulations have been sub-
mitted to the Chief Counsel for Advocacy
of the Small BusinessAdministration for
comment on their impact on small busi-
ness.
Drafting Information
The principal author of these regula-
tions is Amy Pfalzgraf of the Office of
the Associate Chief Counsel (Income Tax
& Accounting). However, other person-
nel from the IRS and Treasury Department
participated in their development.
*****
Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding an entry in
numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.1301–1T also issued under
26 U.S.C. 1301(c). * * *
Par. 2. Section 1.1301–1 is amended
by:
1. Adding new paragraphs (b)(3) and
(d)(4).
2. Revising paragraph (g).
The additions and revision read as fol-
lows:
§1.1301–1 Averaging of farm income.
*****
(b) * * *
(3) [Reserved]. For further guidance,
see §1.1301–1T(b)(3).
*****
(d) * * *
(4) [Reserved]. For further guidance,
see §1.1301–1T(d)(4).
*****
(g)Effective/applicability date.(1)
Except as provided in paragraphs (b)(2),
(g)(2), and (g)(3) of this section and
§1.1301–1T(g)(2), this section applies to
taxable years beginning after December
31, 2001.
(2) Paragraphs (a), (b)(1), (c)(1),
(d)(3)(ii), (e), (f)(2), and (f)(4) of this
section apply only for taxable years be-
ginning before July 23, 2008. For taxable
years beginning after July 22, 2008, see
§1.1301–1T.
(3) Paragraphs (b)(3) and (d)(4) of this
section apply for taxable years beginning
after July 22, 2008.
Par. 3. Section 1.1301–1T is added to
read as follows:
§1.1301–1T Averaging of farm and fishing
income (temporary).
(a)Overview. An individual engaged
in a farming or fishing business may make
a farm income averaging election to com-
pute current year (election year) income
tax liability under section 1 by averag-
ing, over the prior three-year period (base
years), all or a portion of the individ-
ual’s current year electible farm income
as defined in paragraph (e) of this section.
Electible farm income includes income
from both farming and fishing businesses,
and the farm income averaging election
permits the averaging of both farm and
fishing income. An individual that makes
a farm income averaging election—
(1) Designates all or a portion of the
individual’s electible farm income for the
election year as elected farm income; and
(2) Determines the election year section
1 tax by determining the sum of—
(i) The section 1 tax that would be im-
posed for the election year if taxable in-
come for the year were reduced by elected
farm income; plus
(ii) For each base year, the amount by
which the section 1 tax would be increased
if taxable income for the year were in-
creased by one-third of elected farm in-
come.
(b)Individual engaged in a farming
or fishing business—(1)In general—(i)
Farming or fishing business.Farm-
ing businesshas the same meaning as
provided in section 263A(e)(4) and the
regulations under that section.Fishing
businessmeans the conduct of commer-
cial fishing as defined in section 3 of the
Magnuson-Stevens Fishery Conservation
and Management Act (16 U.S.C. 1802(4)).
Accordingly, a fishing business is fishing
in which the fish harvested are intended to
or do enter commerce through sale, barter,
or trade.Fishingmeans the catching,
taking, or harvesting of fish; the attempted
catching, taking, or harvesting of fish;
any activities that reasonably can be
expected to result in the catching, taking,
or harvesting of fish; or any operations
at sea in support of or in preparation
for the catching, taking, or harvesting
of fish. Fishing does not include any
scientific research activity conducted by
a scientific research vessel.Fishmeans
finfish, mollusks, crustaceans, and all
other forms of marine animal and plant
life, other than marine mammals and birds.
Catching, taking, or harvestingincludes
activities that result in the killing of fish or
the bringing of live fish on board a vessel.
(ii)Form of business. An individual en-
gaged in a farming or fishing business in-
cludes a sole proprietor of a farming or
fishing business, a partner in a partner-
ship engaged in a farming or fishing busi-
ness, and a shareholder of an S corporation
engaged in a farming or fishing business.
Except as provided in paragraph (e)(1)(i)
of this section, services performed as an
employee are disregarded in determining
whether an individual is engaged in a farm-
ing or fishing business for purposes of sec-
tion 1301.
2008–37 I.R.B.695September 15, 2008

(iii)Base years. An individual is not
required to have been engaged in a farming
or fishing business in any of the base years
in order to make a farm income averaging
election.
(2) [Reserved]. For further guidance,
see §1.1301–1(b)(2).
(3)Lessors of vessels used in fishing.A
lessor of a vessel is engaged in a fishing
business for purposes of section 1301 with
respect to payments that are received un-
der the lease and are based on a share of
the catch from the lessee’s use of the ves-
sel in a fishing business (or a share of the
proceeds from the sale of the catch) if this
manner of payment is determined under a
written lease agreement entered into be-
fore the lessee begins any significant fish-
ing activities resulting in the catch. A
lessor of a vessel is not engaged in a fishing
business for purposes of section 1301 with
respect to fixed lease payments or with re-
spect to lease payments based on a share
of the lessee’s catch (or a share of the pro-
ceeds from the sale of the catch) if the
share is determined under either an unwrit-
ten agreement or a written agreement en-
tered into after the lessee begins significant
fishing activities resulting in the catch.
(c)Making, changing, or revoking
an election—(1)In general.Afarmin-
come averaging election is made by filing
Schedule J, “Income Averaging for Farm-
ers and Fishermen,” with an individual’s
Federal income tax return for the election
year (including a late or amended return if
the period of limitation on filing a claim
for credit or refund has not expired).
(2) [Reserved]. For further guidance,
see §1.1301–1(c)(2).
(d)(1) through (3)(i) [Reserved]. For
further guidance, see §1.1301–1(d)(1)
through (3)(i).
(ii)Example. The rules of this para-
graph (d)(3) are illustrated by the follow-
ing example:
Example. (i) T is a fisherman who uses the cal-
endar taxable year. In each of the years 2001, 2002,
and 2003, T’s taxable income is $20,000. In 2004, T
has taxable income of $30,000 (prior to any farm in-
come averaging election) and electible farm income
of $10,000. T makes a farm income averaging elec-
tion with respect to $9,000 of the electible farm in-
come for 2004. Under paragraph (a)(2)(ii) of this sec-
tion, $3,000 of elected farm income is allocated to
each of the base years 2001, 2002, and 2003. Under
paragraph (a)(2) of this section, T’s 2004 tax liability
is the sum of the following amounts:
(A) The section 1 tax on $21,000, which is T’s tax-
able income of $30,000, minus elected farm income
of $9,000.
(B) For each of the base years 2001, 2002, and
2003, the amount by which section 1 tax would be
increased if one-third of elected farm income were
allocated to each year. The amount for each year is
the section 1 tax on $23,000 (T’s taxable income of
$20,000, plus $3,000, which is one-third of elected
farm income for the 2004 election year), minus the
section 1 tax on $20,000.
(ii) In 2005, T has taxable income of $50,000 and
electible farm income of $12,000. T makes a farm in-
come averaging election with respect to all $12,000
of the electible farm income for 2005. Under para-
graph (a)(2)(ii) of this section, $4,000 of elected farm
income is allocated to each of the base years 2002,
2003, and 2004. Under paragraph (a)(2) of this sec-
tion, T’s 2005 tax liability is the sum of the following
amounts:
(A) The section 1 tax on $38,000, which is T’s
taxable income of $50,000, minus elected farm in-
come of $12,000.
(B) For each of base years 2002 and 2003, the
amount by which section 1 tax would be increased if,
after adjustments for previous farm income averaging
elections pursuant to paragraph (d)(3)(i) of this sec-
tion, one-third of elected farm income were allocated
to each year. The amount for each year is the sec-
tion 1 tax on $27,000 (T’s taxable income of $20,000
increased by $3,000 for T’s 2004 farm income aver-
aging election and further increased by $4,000, which
is one-third of elected farm income for the 2005 elec-
tion year), minus the section 1 tax on $23,000 (T’s
taxable income of $20,000 increased by $3,000 for
T’s 2004 farm income averaging election).
(C) For base year 2004, the amount by which sec-
tion 1 tax would be increased if, after adjustments
for previous farm income averaging elections pur-
suant to paragraph (d)(3)(i) of this section, one-third
of elected farm income were allocated to that year.
This amount is the section 1 tax on $25,000 (T’s tax-
able income of $30,000 reduced by $9,000 for T’s
2004 farm income averaging election and increased
by $4,000, which is one-third of elected farm income
for the 2005 election year), minus the section 1 tax
on $21,000 (T’s taxable income of $30,000 reduced
by $9,000 for T’s 2004 farm income averaging elec-
tion).
(4)Deposits into Merchant Marine
Capital Construction Fund—(i)Reduc-
tions to taxable income and electible farm
income. Under section 7518(c)(1)(A), cer-
tain deposits to a Merchant Marine Capital
Construction Fund (CCF) reduce taxable
income for purposes of the Code (the CCF
reduction). The amount of the CCF reduc-
tion is limited under section 7518(a)(1)(A)
to the taxpayer’s taxable income (deter-
mined without regard to the reduction)
attributable to specified maritime opera-
tions including operations in fisheries of
the United States. The CCF reduction
is taken into account in determining the
taxable income used in computations un-
der this section. In addition, except to
the extent the amount described in sec-
tion 7518(a)(1)(A) is not attributable to
the individual’s fishing business, the CCF
reduction is treated in computing electible
farm income as an item of deduction attrib-
utable to the individual’s fishing business.
(ii)Example. Therulesofthispara-
graph (d)(4) are illustrated by the follow-
ing example:
Example. (i) T is a fisherman who uses the
calendar taxable year. In each of the years 2001,
2002, and 2003, T’s taxable income (before taking
any CCF reduction into account) is $20,000. For
taxable year 2002, all of T’s income is described
in section 7518(a)(1)(A) and is attributable to T’s
fishing business. T makes a $5,000 deposit into a
CCF for taxable year 2002. In 2004, T has taxable
income of $30,000 (before taking any CCF reduc-
tion into account). In addition, T’s electible farm
income for 2004 (before taking the CCF reduction
into account) is $10,000, all of which is described
in section 7518(a)(1)(A) and is attributable to T’s
fishing business. For taxable year 2004, T makes a
$4,000 deposit into a CCF.
(ii) The amount of the 2004 CCF deposit reduces
taxable income. Accordingly, T’s taxable income for
2004 is $26,000 ($30,000 - $4,000). In addition, the
entire amount of the CCF reduction is treated as an
item of deduction attributable to T’s fishing business.
Accordingly, T’s electible farm income for 2004 is
$6,000 ($10,000 - $4,000). Similarly, the amount of
the 2002 CCF deposit reduces T’s taxable income for
2002. Accordingly, T’s taxable income for 2002 is
$15,000 ($20,000 - $5,000).
(iii) T makes an income averaging election with
respect to all $6,000 of the electible farm income
for 2004. Under paragraph (a)(2)(ii) of this section,
$2,000 of elected farm income is allocated to each of
the base years 2001, 2002, and 2003. Under para-
graph (a)(2) of this section, T’s 2004 tax liability is
the sum of the following amounts:
(A) The section 1 tax on $20,000, which is T’s
taxable income of $26,000 ($30,000 reduced by the
$4,000 CCF deposit), minus elected farm income of
$6,000.
(B) For each of the base years 2001, 2002, and
2003, the amount by which section 1 tax would be
increased if one-third of elected farm income were al-
located to each year. The amount for base years 2001
and 2003 is the section 1 tax on $22,000 (T’s taxable
income of $20,000, plus $2,000, which is one-third
of elected farm income for the election year), minus
the section 1 tax on $20,000. The amount for base
year 2002 is the section 1 tax on $17,000 (T’s taxable
income of $15,000 ($20,000 reduced by the $5,000
CCF deposit), plus $2,000 (one-third of elected farm
income for the election year)), minus the section 1 tax
on $15,000.
(e)Electible farm income—(1)Identi-
fication of items attributable to a farming
or fishing business—(i)In general.Farm
and fishing income includes items of in-
come, deduction, gain, and loss attribut-
able to an individual’s farming or fish-
ing business. Farm and fishing losses in-
clude, to the extent attributable to a farm-
September 15, 20086962008–37 I.R.B.

ing or fishing business, any net operating
loss carryover or carryback or net capi-
tal loss carryover to an election year. In-
come, gain, or loss from the sale of de-
velopment rights, grazing rights, and other
similar rights is not treated as attributable
to a farming business. In general, farm and
fishing income does not include compen-
sation received as an employee. However,
a shareholder of an S corporation engaged
in a farming or fishing business may treat
compensation received from the corpora-
tion as farm or fishing income if the com-
pensationispaidbythecorporationinthe
conduct of the farming or fishing business.
If a crewmember on a vessel engaged in
commercial fishing (within the meaning of
section 3 of the Magnuson-Stevens Fish-
ery Conservation and Management Act,
16 U.S.C. 1802(4)) is compensated by a
share of the boat’s catch of fish or a share
of the proceeds from the sale of the catch,
the crewmember is treated for purposes
of section 1301 as engaged in a fishing
business and the compensation is treated
for such purposes as income from a fishing
business.
(ii)Gain or loss on sale or other dispo-
sition of property—(A)In general.Gain
or loss from the sale or other disposition of
property that was regularly used in the in-
dividual’s farming or fishing business for
a substantial period of time is treated as
attributable to a farming or fishing busi-
ness. For this purpose, the termprop-
ertydoes not include land, but does in-
clude structures affixed to land. Property
that has always been used solely in the
farming or fishing business by the individ-
ual is deemed to meet both the regularly
used and substantial period tests. Whether
property not used solely in the farming or
fishing business was regularly used in the
farming or fishing business for a substan-
tial period of time depends on all of the
facts and circumstances.
(B)Cessation of a farming or fishing
business. If gain or loss described in para-
graph (e)(1)(ii)(A) of this section is real-
ized after cessation of a farming or fishing
business, the gain or loss is treated as at-
tributable to a farming or fishing business
only if the property is sold within a rea-
sonable time after cessation of the farming
or fishing business. A sale or other dispo-
sition within one year of cessation of the
farming or fishing business is presumed to
be within a reasonable time. Whether a
sale or other disposition that occurs more
than one year after cessation of the farm-
ing or fishing business is within a reason-
able time depends on all of the facts and
circumstances.
(2)Determination of amount that may
be elected farm income—(i)Electible farm
income. (A) The maximum amount of in-
come that an individual may elect to av-
erage (electible farm income) is the sum
of any farm and fishing income and gains,
minus any farm and fishing deductions or
losses (including loss carryovers and car-
rybacks) that are allowed as a deduction
in computing the individual’s taxable in-
come.
(B) Individuals conducting both a farm-
ing business and a fishing business must
calculate electible farm income by com-
bining income, gains, deductions, and
losses derived from the farming business
and the fishing business.
(C) Except as otherwise provided
in paragraph (d)(4) of this section, the
amount of any CCF reduction is treated as
a deduction from income attributable to
a fishing business in calculating electible
farm income.
(D) Electible farm income may not ex-
ceed taxable income, and electible farm in-
come from net capital gain attributable to
a farming or fishing business may not ex-
ceed total net capital gain. Subject to these
limitations, an individual who has both or-
dinary income and net capital gain from a
farming or fishing business may elect to
average any combination of the ordinary
income and net capital gain.
(ii)Examples. The rules of this para-
graph (e)(2) of this section are illustrated
by the following examples:
Example 1. A has ordinary income from a farm-
ing business of $200,000 and deductible expenses
from a farming business of $50,000. A’s taxable in-
come is $150,000 ($200,000 - $50,000). Under para-
graph (e)(2)(i) of this section, A’s electible farm in-
come is $150,000, all of which is ordinary income.
Example 2. B has capital gain of $20,000 that is
not from a farming or fishing business, capital loss
from a farming business of $30,000, and ordinary in-
come from a farming business of $100,000. Under
section 1211(b), B’s allowable capital loss is limited
to $23,000. B’s taxable income is $97,000 (($20,000
- $23,000) + $100,000). B has a capital loss carryover
from a farming business of $7,000 ($30,000 total loss
- $23,000 allowable loss). Under paragraph (e)(2)(i)
of this section, B’s electible farm income is $77,000
($100,000 ordinary income from a farming business,
minus $23,000 capital loss from a farming business),
all of which is ordinary income.
Example 3. C has ordinary income from a fish-
ing business of $200,000 and ordinary loss from a
farming business of $60,000. C’s taxable income is
$140,000 ($200,000 - $60,000). Under paragraph
(e)(2)(i)(B) of this section, C must deduct the farm
loss from the fishing income in determining C’s
electible farm income. Therefore, C’s electible farm
income is $140,000 ($200,000 - $60,000), all of
which is ordinary income.
Example 4. D has ordinary income from a farm-
ing business of $200,000 and ordinary loss of $50,000
that is not from a farming or fishing business. D’s tax-
able income is $150,000 ($200,000 - $50,000). Under
paragraph (e)(2)(i)(D) of this section, electible farm
income may not exceed taxable income. Therefore,
D’s electible farm income is $150,000, all of which
is ordinary income.
Example 5. E has capital gain from a farming
business of $50,000, capital loss of $40,000 that is not
from a farming or fishing business, and ordinary in-
come from a farming business of $60,000. E’s taxable
income is $70,000 (($50,000 - $40,000) + $60,000).
Under paragraph (e)(2)(i)(D) of this section, electible
farm income may not exceed taxable income, and
electible farm income from net capital gain attribut-
able to a farming or fishing business may not exceed
total net capital gain. Therefore, E’s electible farm
income is $70,000 of which $10,000 is capital gain
and $60,000 is ordinary income.
(f)(1) [Reserved]. For further guidance,
see §1.1301–1(f)(1).
(2)Changes in filing status. An individ-
ual is not prohibited from making a farm
income averaging election solely because
the individual’s filing status is not the same
in an election year and the base years. For
example, an individual who is married and
files a joint return in the election year, who
filed as single in one or more of the base
years, may elect to average farm or fishing
income, by using the single filing status to
compute the increase in section 1 taxes for
the base years in which the individual filed
as single.
(f)(3) [Reserved]. For further guidance,
see §1.1301–1(f)(3).
(4)Alternative minimum tax.Afarm
income averaging election is disregarded
in computing the tentative minimum tax
and the regular tax under section 55 for
the election year or any base year. The
election is taken into account, however, in
determining the regular tax liability under
section 53(c) for the election year.
(f)(5) [Reserved]. For further guidance,
see §1.1301–1(f)(5).
(g)Effective/applicability date.(1)
This section applies for taxable years be-
ginning after July 22, 2008.
(2) Taxpayers may apply the provisions
of this section rather than the correspond-
ing provisions of §1.1301–1 in taxable
2008–37 I.R.B.697September 15, 2008

years beginning after December 31, 2003,
but before July 23, 2008, if all provisions
are consistently applied in each taxable
year.
(3) This section expires on July 21,
2011.
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
Approved July 7, 2008.
Eric Solomon,
Assistant Secretary of
theTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on July 21, 2008,
8:45 a.m., and published in the issue of the Federal Register
for July 22, 2008, 73 F.R. 42522)
September 15, 20086982008–37 I.R.B.

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking by
Cross-Refere
nce to
Temporary Re
gulations
Farmer and Fi
sherman
Income Avera
ging
REG–161695–04
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
by cross-reference to temporary regula-
tions.
SUMMARY: In this issue of the Bulletin,
the IRS is issuing final and temporary reg-
ulations (T.D. 9417) under section 1301
of the Internal Revenue Code (Code) re-
lating to the averaging of farm and fish-
ing income in computing income tax lia-
bility. The regulations reflect changes to
the law made by the American Jobs Cre-
ation Act of 2004. The regulations provide
guidance to individuals engaged in a farm-
ing or fishing business who elect to reduce
their tax liability by treating all or a portion
of the current taxable year’s farm or fish-
ing income as if one-third of it had been
earned in each of the prior three taxable
years. The text of those temporary regu-
lations also serves as the text of these pro-
posed regulations.
DATES: Written or electronic comments
and requests for a public hearing must be
received by October 20, 2008.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–161695–04), In-
ternal Revenue Service, POB 7604, Ben
Franklin Station, Washington, DC 20044.
Taxpayers also may submit comments
electronically via the Federal eRulemak-
ing Portal atwww.regulations.gov(IRS
REG–161695–04).
FOR FURTHE
R INFORMATION
CONTACT:C
oncerningsub-
mission of
comments or to re-
quest a hea
ring, Richard Hurst at
Richard.
A.Hurst@irscounsel.treas.gov;
concerni
ng the proposed regulations,
Amy Pfalzgraf
, (202) 622–4950 (not a
toll-free num
ber).
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
Final and temporary regulations in this
issue of the Bulletin amend the Income Tax
Regulations (26 CFR Part 1) relating to
section 1301 of the Internal Revenue Code
(Code). The final and temporary regula-
tions provide rules for averaging taxable
income from a farming or fishing business
under section 1301. The text of those tem-
porary regulations also serves as the text of
these proposed regulations. The preamble
to the final and temporary regulations ex-
plains the amendments.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a sig-
nificant regulatory action as defined in
Executive Order 12866.Therefore, a reg-
ulatory assessment is not required. It also
has been determined that section 553(b)
of the Administrative Procedure Act
(5 U.S.C. chapter 5) does not apply to these
regulations, and because the regulations do
not impose a collection of information on
small entities, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Code,
this regulation has been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Comments and Requests for a Public
Hearing
Before the
se proposed regulations are
adopted as
final regulations, consideration
will be giv
en to any written (either a signed
paper orig
inal with eight (8) copies or elec-
tronic) co
mments that are submitted timely
to the IRS
. The IRS and Treasury Depart-
ment requ
est comments on the clarity of
the propo
sed rules and how they can be
made easi
er to understand. All comments
will be av
ailable for public inspection and
copying
. A public hearing will be sched-
uled if r
equested in writing by any person
who timely sub
mits written comments. If
apublicheari
ng is scheduled, notice of the
date, time, an
d place for the public hearing
will be publis
hedintheFederal Register.
Drafting Info
rmation
The principal
author of these regula-
tions is Amy P
falzgraf of the Office of As-
sociate Chie
f Counsel (Income Tax & Ac-
counting). H
owever, other personnel from
the IRS and Tr
easury Department partici-
patedinthei
r development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. In §1.1301–1, paragraphs (a),
(b)(1), (b)(3), (c)(1), (d)(3)(ii), (d)(4), (e),
(f)(2), and (f)(4) are revised to read as fol-
lows:
§1.1301–1 Averaging of farm and fishing
income.
(a) [The text of the proposed amend-
ment to §1.1301–1(a) is the same as the
text of §1.1301–1T(a) published elsewhere
in this issue of the Bulletin].
(b)***(1)[Thetextoftheproposed
amendment to §1.1301–1(b)(1) is the same
as the text of §1.1301–1T(b)(1) published
elsewhere in this issue of the Bulletin].
*****
(3) [The text of the proposed amend-
ment to §1.1301–1(b)(3) is the same as the
text of §1.1301–1T(b)(3) published else-
where in this issue of the Bulletin].
(c)***(1)[Thetextoftheproposed
amendment to §1.1301–1(c)(1) is the same
as the text of §1.1301–1T(c)(1) published
elsewhere in this issue of the Bulletin].
*****
(d) * * *
(3) * * *
(ii) [The
text of the proposed amend-
ment to §1
.1301–1(d)(3)(ii) is the same as
2008–37 I.R.B.699September 15, 2008

the text of §1.1301–1T(d)(3)(ii) published
elsewhere in this issue of the Bulletin].
(4) [The text of the proposed amend-
ment to §1.1301–1(d)(4) is the same as the
text of §1.1301–1T(d)(4) published else-
where in this issue of the Bulletin].
(e) [The text of the proposed amend-
ment to §1.1301–1(e) is the same as the
text of §1.1301–1T(e) published elsewhere
in this issue of the Bulletin].
(f) * * *
(2) [The text of the proposed amend-
ment to §1.1301–1(f)(2) is the same as the
text of §1.1301–1T(f)(2) published else-
where in this issue of the Bulletin].
*****
(4) [The text of the proposed amend-
ment to §1.1301–1(f)(4) is the same as the
text of §1.1301–1T(f)(4) published else-
where in this issue of the Bulletin].
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on July 21, 2008,
8:45 a.m., and published in the issue of the Federal Register
for July 22, 2008, 73 F.R. 42538)
Notice of Proposed
Rulemaking by
Cross-Reference to
Temporary Regulations
and Notice of Public Hearing
Election to Expense Certain
Refineries
REG–146895–05
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
by cross-reference to temporary regula-
tions and notice of public hearing.
SUMMARY: In this issue of the Bulletin,
the IRS is issuing temporary regulations
(T.D.9412)relatingtotheelectiontoex-
pense qualified refinery property under
section 179C of the Internal Revenue Code
(Code) and affects taxpayers who own re-
fineries located in the United States. The
temporary regulations reflect changes to
the law by the Energy Policy Act of 2005.
The text of those regulations also serves
as the text of these proposed regulations.
This document also provides notice of a
public hearing.
DATES: Written or electronic comments
must be received by September 8, 2008.
Outlines of the topics to be discussed at
the public hearing scheduled for Thursday,
November 20, 2008, at 10 a.m. must be
received by Tuesday, October 14, 2008.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR(REG–146895–05),
room 5203, Internal Revenue Service,
PO Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may
be hand-delivered Monday through Friday
betweenthehoursof8a.m. and4p.m.
to CC:PA:LPD:PR (REG–146895–05),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue, NW,
Washington, DC 20224. Alternatively,
taxpayers may submit electronic
comments via the Federal eRulemaking
Portalatwww.regulations.gov
(IRS–REG–146895–05).
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Philip Tiegerman at (202)
622–3110; concerning submissions of
comments, hearing, and/or to be placed
on the building access list to attend the
hearing, Oluwafunmilayo Taylor at (202)
622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
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 in-
formation should be received by Septem-
ber 8, 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 Internal
Revenue Service, including whether the
information will have practical utility;
The accuracy of the estimated burden
associated with the proposed collection of
information (see below);
How the quality, utility, and clarity of
the information to be collected may be en-
hanced;
How the burden of complying with the
proposed collections 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 collection of information
in this proposed regulation is in
§1.179C–1T(d)(2), §1.179C–1T(d)(3),
§1.179C–1T(e)(2), and §1.179C–1T(f).
The collections of information in
§1.179C–1T(d)(2) and §1.179C–1T(f)
are required in order for a taxpayer to
make and supportan election under
section 179C(a) to expense 50 percent
of the cost of qualified refinery prop-
erty. The collection of information in
§1.179C–1T(d)(3) is required in order for
the taxpayer to revoke an election under
section 179C(a). The collection of infor-
mation in §1.179C–1T(e)(2) is required in
order for a taxpayer that is an organization
described in section 1381 that has made an
election under section 179C(a) to allocate
all or a portion of this expense to its owners
that are organizationsdescribed in section
1381. The collection of information is
mandatory. The likely recordkeepers are
owners of certain existing refineries.
Estimated total annual recordkeeping
burden: 120 hours.
The estimated annual burden per
recordkeeper varies depending on indi-
vidual circumstances, with an estimated
average of 10 hours.
Estimated number of recordkeepers:
12.
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
September 15, 20087002008–37 I.R.B.

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 and Explanation of
Provision
The temporary regulations in this issue
of the Bulletin amend the Income Tax Reg-
ulations (26 CFR part 1) relating to sec-
tion 179C. The temporary regulations de-
fine “qualified refinery property” and as-
sist the taxpayer in identifying those costs
that may be expensed pursuant to this pro-
vision. The text of those regulations also
serves as the text of these proposed reg-
ulations. The preamble to the temporary
regulations explains the amendments.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. The collections of informa-
tion in §1.179–1T(d)(2), (e)(2) and (f) are
required by section 179C(b), (g) and (h),
respectively, and, therefore, are not im-
posed by these regulations. Accordingly,
they are not subject to the Regulatory
Flexibility Act. Only the collection of in-
formation in §1.179–1T(d)(3), regarding
the revocation of an election under section
179C(a), is imposed by these regulations.
It is hereby certified that the collection of
information contained in §1.179–1T(d)(3)
of the regulations will not have a signif-
icant economic impact on a substantial
number of small entities. This certifica-
tion is based upon the fact that although
most of the 12 taxpayers who potentially
could or would make an election under
section 179C(a) will be small entities, it
is expected that few, if any, of those 12
taxpayers once having made the election
will choose to revoke it. Therefore, the
collection of information will not affect a
substantial number of small entities. The
information required to revoke an election
under section 179C(a) consists entirely
of a portion of the information required
to make the election. Consequently, the
economic burden for those taxpayers who
choose to revoke the election is mini-
mal in nature and the regulations do not
impose any burden in addition to the bur-
den associated with making the election.
Therefore, a Regulatory Flexibility Anal-
ysis under the Regulatory Flexibility Act
(5 U.S.C. chapter 6)is not required. Pur-
suant to section 7805(f) of the Code, this
regulation has been submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its
impact on small business.
Comments and Requests for a Public
Hearing
Before the proposed regulations are
adopted as final regulations, consideration
will be given to any written comments (a
signed original and eight (8) copies) or
electronic comments that are submitted
timely to the IRS. The IRS and Treasury
Department specifically request comments
on the clarity of the proposed rule and
how it may be made easier to understand.
All comments will be available for public
inspection and copying.
A public hearing has been scheduled for
Thursday, November 20, 2008, beginning
at 10 a.m. in the IRS auditorium, Internal
Revenue Building, 1111 Constitution Av-
enue, NW, Washington, DC. Due to build-
ing security procedures, visitors must en-
ter at the Constitution Avenue entrance. In
addition, all visitors must present photo
identification to enter the building. Be-
cause of access restrictions, visitors will
not be admitted beyond the Constitution
Avenue entrance area more than 30 min-
utes before the hearing starts. For infor-
mation about having your name placed on
the building access list to attend the hear-
ing, see theFOR FURTHER INFOR-
MATION CONTACTsection of this pre-
amble.
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 comments by October 7,
2008, and an outline of the topics to be dis-
cussed and the time to be devoted to each
topic (signed original and eight (8) copies)
by Tuesday, October 14, 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 regu-
lations is Philip Tiegerman of the Of-
fice of the Associate Chief Counsel
(Passthroughs and Special Industries).
However, other personnel from the IRS
and Treasury Department participated in
their development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding an entry in
numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.179C also issued under
26 U.S.C. 179C. * * *
Par. 2. Section 1.179C–1 is added to
read as follows:
§1.179C–1 Election to expense certain
refineries.
[The text of proposed §1.179C–1 is the
same as the text of §1.179C–1T published
elsewhere in this issue of the Bulletin].
LindaE.Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on July 3, 2008,
3:33 p.m., and published in the issue of the Federal Register
for July 9, 2008, 73 F.R. 39270)
Notice of Proposed
Rulemaking
Information Reporting
Requirements Under Internal
RevenueCodeSection6039
REG–103146–08
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains pro-
posed regulations relating to the return and
information statement requirements under
2008–37 I.R.B.701September 15, 2008

section 6039 of the Internal Revenue Code
(Code). These regulations reflect changes
to section 6039 made by section 403 of the
Tax Relief and Health Care Act of 2006.
These proposed regulations affect corpora-
tions that issue statutory stock options and
provide guidance to assist corporations in
complyingwiththereturnandinforma-
tion statement requirements under section
6039.
DATES: Written or electronic comments
and requests for a public hearing must be
received by October 15, 2008.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–103146–08), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–103146–08),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue, NW,
Washington, DC, or sent electronically
via the Federal eRulemaking Portal
athttp://www.regulations.gov/(IRS
REG–103146–08).
FOR FURTHER INFORMATION
CONTACT: Concerning these proposed
regulations, Thomas Scholz at (202)
622–6030 (not a toll-free number); con-
cerning submissions of comments and/or
to request a hearing, Richard Hurst at
Richard.A.Hurst@irscounsel.treas.gov.
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained
in this notice of proposed rulemaking has
been submitted to theOffice of Manage-
ment and Budgetfor review in accor-
dance with the Paperwork Reduction Act
of 1995 (44 U.S.C. 3507(d)). Comments
on the collection of information should be
sent to the Office of Management and Bud-
get, Attn: Desk Officer for the Department
of the Treasury, Office of Information
and Regulatory Affairs, Washington, DC
20503, with copies to theInternal Rev-
enue Service, Attn: IRS Reports Clear-
ance Officer, SE:W:CAR:MP:T:T:SP,
Washington, DC 20224. Comments on
the collection of information should be re-
ceived by September 15, 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 Internal
Revenue Service, including 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 collection of information in these
proposed regulations is in §1.6039–1 and
§1.6039–2. Section 6039 requires corpo-
rations to file an information return with
the IRS and furnish a written statement
to each employee, in a manner prescribed
by the Secretary in regulations, regarding:
(i) the corporation’s transfer of stock pur-
suant to the employee’s exercise of an in-
centive stock option described in section
422(b); and (ii) the transfer of stock by the
employee where the stock was acquired
pursuant to the exercise of an option de-
scribedinsection423(c).Theinformation
on the statements required to be provided
by the corporation will be used by employ-
ees to complete their income tax returns in
the year of the disposition of the stock ac-
quired pursuant to the statutory stock op-
tion. The likely respondents are for-profit
corporations.
Estimated total annual reporting bur-
den: 25,000 hours.
Estimated average annual burden hours
per respondent: 30 minutes.
Estimated number of respondents:
50,000.
Estimated annual frequency of re-
sponses: annually.
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
Section 403 of the Tax Relief and
Health Care Act of 2006 (Act) amended
the information reporting requirements
of section 6039. Prior to its amendment,
section 6039 required corporations to fur-
nish a written statement to each employee,
in a manner prescribed by the Secretary
in regulations, regarding: (i) the corpo-
ration’s transfer of stock pursuant to the
employee’s exercise of an incentive stock
option described in section 422(b); and
(ii) the transfer of stock by the employee
where the stock was acquired pursuant
to the exercise of an option described in
section 423(c). Corporations must furnish
employees with the information state-
ments required by section 6039 on or
beforeJanuary31oftheyearfollowingthe
year for which the statement is required.
Prior to the amendment of section 6039
made by the Act, the regulations under
section 6039 were last updated in 2004.
See T.D. 9144, 2004–2 C.B. 413 [69 FR
46401].
As amended by the Act, section 6039
requires corporations to file an information
return with the IRS, in addition to provid-
ing employees with an information state-
ment, following a stock transfer. The time
and manner for filing a return with the IRS,
as well as the information to be contained
in the return and furnished to employees,
is addressed in these proposed regulations.
Section 6039, as amended by the Act, ap-
plies to stock transfers occurring on or af-
ter January 1, 2007. However, in Notice
2008–8, 2008–3 I.R.B. 276 (December 19,
2007) (see §601.601(d)(2)(ii)(b)), the IRS
waived the obligation to file an informa-
tion return for 2007 stock transfers gov-
erned by section 6039.
Explanation of Provisions
These proposed regulations describe
the information that would be required
in the return filed with the IRS and the
information statement furnished to em-
ployees pursuant to section 6039. There
are two sections under these proposed
regulations: §1.6039–1, Returns required
September 15, 20087022008–37 I.R.B.

in connection with certain options; and
§1.6039–2, Statements to persons with
respect to whom information is reported.
In crafting these proposed regulations, one
principal objective was to require corpora-
tions to furnish employees with sufficient
information to enable them to calculate
their tax obligations upon disposition of
the shares acquired by the exercise of a
statutory option. Under these proposed
regulations, essentially the same informa-
tion would be reported with respect to the
transfer of stock pursuant to the exercise of
an incentive stock option and the transfer
of stock acquired pursuant to an employee
stock purchase plan.
With respect to a transfer of stock upon
the exercise of an incentive stock option,
the information required to be furnished
to employees pursuant to the existing reg-
ulations under §1.6039–1 is sufficient to
enable the employee to calculate his or
her tax obligations upon disposition of the
shares. Therefore, the information that
wouldberequiredintheinformationre-
turn and the statement furnished to em-
ployees under these proposed regulations
is generally the same information that is
included in the statement furnished to em-
ployees pursuant to the existing regula-
tions under §1.6039–1. With respect to
an employee’s transfer of stock acquired
under an employee stock purchase plan,
the information required to be furnished to
employees pursuant to the existing regu-
lations under §1.6039–1 is not sufficient
to enable the employee to calculate his or
her tax obligations upon disposition of the
shares. Accordingly, these proposed reg-
ulations would require that additional in-
formation be included in the information
return and the statement furnished to em-
ployees.
As discussed further in the preamble,
the IRS will issue two forms with instruc-
tions that corporations must use to satisfy
the return and information statement re-
quirements under section 6039.
1. Returns required with respect to
incentive stock options
Section 1.6039–1(a) of these proposed
regulations would require every corpora-
tion that transfers stock pursuant to an em-
ployee’s exercise of an incentive stock op-
tion described in section 422(b) to file a
return with respect to each transfer made
during a particular year. This return would
include the following information:
(i) The name, address, and employer
identification number of the corporation
transferring the stock;
(ii) If other than the corporation iden-
tified in (i), the name, address and em-
ployer identification number of the corpo-
ration whose stock is being transferred;
(iii) The name, address, and identifying
number of the person to whom the share or
shares of stock were transferred pursuant
to the exercise of the option;
(iv) The date the option was granted to
the person;
(v) The exercise price per share;
(vi) The date the option was exercised
by the person;
(vii) The fair market value of a share of
stock on the date the option was exercised
by the person; and
(viii)Thenumberofsharesofstock
transferred to the person pursuant to the
exercise of the option.
The information required to be included
on the information return pursuant to these
proposed regulations is generally the same
information that is required to be furnished
to employees pursuant to the existing reg-
ulations. However, while the existing reg-
ulations require that the corporation re-
port the total cost of all shares acquired,
these proposed regulations would require
instead that the corporation report the ex-
ercise price per share. The exercise price
per share, rather than the total cost of all
shares acquired, is more readily useable by
the employee in calculating the tax obliga-
tion when the employee later disposes of
some or all of the shares.
Returns required by §1.6039–1(a) must
be filed on or before January 31 of the
year following the calendar year for which
the return is made. Such returns must be
made on Form 3921,Exercise of an In-
centive Stock Option Under Section 422(b)
(or its designated successor), and filed in
the manner provided in the instructions
thereto. The IRS expects to release Form
3921 later this year.
2. Returns required with respect to stock
purchased under an employee stock
purchase plan
Section 1.6039–1(b) of these proposed
regulations would require every corpora-
tion which records a transfer of the legal
title of a share of stock acquired by the em-
ployee where the stock was acquired pur-
suant to the exercise of an option described
in section 423(c) to file a return with re-
spect to each transfer made during a par-
ticular year. This return would include the
following information:
(i) The name, address, and identifying
number of the transferor;
(ii) The name, address and employer
identification number of the corporation
whose stock is being transferred;
(iii) The date the option was granted to
the transferor;
(iv) The fair market value of the stock
on the date the option was granted;
(v) The exercise price per share;
(vi) The date the option was exercised
by the transferor;
(vii) The fair market value of the stock
on the date the option was exercised by the
transferor;
(viii) The date the legal title of the
shares was transferred by the transferor;
and
(ix) The number of shares to which le-
gal title was transferred by the transferor.
These proposed regulations would re-
quire that all of the information required
pursuant to the existing regulations be in-
cluded on the information statement fur-
nished to employees. However, the infor-
mation required to be furnished to employ-
ees pursuant to the existing regulations is
not sufficient to enable the employee to
calculate his or her tax obligations upon
disposition of the shares. Accordingly,
items (iii), (iv), (v), (vi) and (vii) in the
list in the preceding paragraph would re-
quest new information that is not required
to be reported under the existing regula-
tions. This additional information, along
with the information required under the
existing regulations, will enable the em-
ployee to determine his or her tax obliga-
tions upon the disposition of shares.
Returns required by §1.6039–1(b) must
be filed on or before January 31 of the year
following the calendar year for which the
return is made. Such returns must be made
on Form 3922,Transfer of Stock Acquired
Through an Employee Stock Purchase
Plan Under Section 423(c)(or its desig-
nated successor), and filed in the manner
provided in the instructions thereto. The
IRS expects to release Form 3922 later
this year.
2008–37 I.R.B.703September 15, 2008

3. Information statements required with
respect to incentive stock options
Section 1.6039–2(a) of these proposed
regulations would require every corpora-
tion filing a return under §1.6039–1(a) to
furnish to each employee named in such
return a written statement with respect to
the transfer or transfers made to such em-
ployee during such year. Each information
statement required by §1.6039–2(a) must
be furnished to the employee on or be-
fore January 31 of the year following the
calendar year for which the return under
§1.6039–1(a) is made. Such information
statements must be furnished to employ-
ees on Form 3921 (or its designated suc-
cessor) and be delivered in the manner pro-
vided in the instructions thereto. Rules re-
garding electronic furnishing of the infor-
mation statements and furnishing the infor-
mation statement by mail (items addressed
under §1.6039–1(d) and (f) of the existing
regulations) will be set forth in the instruc-
tions to Form 3921 (or its designated suc-
cessor).
4. Information statements required with
respect to stock purchased under an
employee stock purchase plan
Section 1.6039–2(b) of these proposed
regulations would require every corpora-
tion filing a return under §1.6039–1(b) to
furnish to each employee named in such
return a written statement with respect to
the transfer or transfers made by the em-
ployee during such year. Each informa-
tion statement required by §1.6039–2(b)
must be furnished to the employee on or
before January 31 of the year following the
calendar year for which the return under
§1.6039–1(b) is made. Such information
statements must be furnished to employ-
ees on Form 3922 (or its designated suc-
cessor) and be delivered in the manner pro-
vided in the instructions thereto. Rules re-
garding electronic furnishing of the infor-
mation statements and furnishing the infor-
mation statement by mail (items addressed
under §1.6039–1(d) and (f) of the existing
regulations) will be set forth in the instruc-
tions to Form 3922 (or its designated suc-
cessor).
Proposed Effective Date
These regulations under section 6039
are proposed to apply to any stock trans-
fer occurring on or after January 1, 2007.
However, corporations are not required to
comply with the return requirements of
§1.6039–1(a) and (b) for stock transfers
that occur during the 2007 and 2008 calen-
dar years. Notwithstanding the waiver of
the return requirements for 2007 and 2008
stock transfers, corporations must furnish
information statements to employees for
such 2007 and 2008 stock transfers. For
purposes of furnishing information state-
ments for 2007 and 2008 stock transfers,
corporations may rely on §1.6039–1 of
the 2004 final regulations (T.D. 9144) or
§1.6039–2 of these proposed regulations.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory as-
sessment is not required. It is hereby cer-
tified that the regulations will not have a
significant economic impact on a substan-
tial number of small entities. This certifi-
cation is based on the fact that the filing of
a return with the IRS and the provision of
employee statements required under these
proposed regulations will impose a mini-
mal administrative burden on small enti-
ties. It is estimated that it will take approx-
imately 30 minutes to prepare and provide
the information required by these regula-
tions. Further, the information to be pro-
vided is readily available. Therefore, an
analysis under the Regulatory Flexibility
Act (5 U.S.C. chapter 6) is not required.
Pursuant to section 7805(f) of the Inter-
nal Revenue Code, this regulation has been
submitted to the Chief Counsel for Advo-
cacy of the Small Business Administration
for comment on their impact on small busi-
ness.
Comments and Request for 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) or electronic com-
ments that are timely submitted to the IRS.
The IRS and the Treasury Department re-
quest comments on the clarity of the pro-
posed rules and how they can be made eas-
ier to understand. All comments will be
available for public inspection and copy-
ing. A public hearing will be scheduled
ifrequestedinwritingbyanypersonthat
timely submits written or electronic com-
ments. If a public hearing is scheduled,
notice of the date, time, and place for the
hearing will be published in theFederal
Register.
Drafting Information
The principal author of these proposed
regulations is Thomas Scholz, Office of
the Division Counsel/Associate Chief
Counsel (Tax Exempt and Government
Entities). However, other personnel from
the IRS and Treasury Department partici-
pated in their development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.6039–1 is revised to
read as follows:
§1.6039–1 Returns required in connection
with certain options.
(a)Requirement of return with respect
to incentive stock options under section
6039(a)(1). (1) Every corporation which
in any calendar year transfers to any per-
son a share of stock pursuant to such per-
son’s exercise of an incentive stock option
shall, for such calendar year, file a return
with respect to each transfer made during
such year. This return must include the fol-
lowing information—
(i) The name, address, and employer
identification number of the corporation
transferring the stock;
(ii) If other than the corporation identi-
fied in paragraph (a)(1)(i) of this section,
the name, address and employer identifi-
cation number of the corporation whose
stock is being transferred;
(iii) The name, address, and identifying
number of the person to whom the share or
shares of stock were transferred pursuant
to the exercise of the option;
(iv) The date the option was granted to
the person;
September 15, 20087042008–37 I.R.B.

(v) The exercise price per share;
(vi) The date the option was exercised
by the person;
(vii) The fair market value of a share of
stock on the date the option was exercised
by the person; and
(viii)Thenumberofsharesofstock
transferred to the person pursuant to the
exercise of the option.
(2) Each return required by this para-
graph (a) shall be made on Form 3921,Ex-
ercise of an Incentive Stock Option Under
Section 422(b)(or its designated succes-
sor), and shall be filed in such manner as
provided in the instructions thereto.
(b)Requirement of return with re-
spect to stock purchased under an em-
ployee stock purchase plan under section
6039(a)(2). (1) Every corporation which
in any calendar year records, or has by
its agent recorded, a transfer of the le-
gal title of a share of stock acquired by
the transferor pursuant to the transferor’s
exercise of an option granted under an em-
ployee stock purchase plan and described
in section 423(c) (relating to the special
rule where the option price is between 85
percent and 100 percent of value of the
stock), shall, for such calendar year, file a
return with respect to each transfer made
during such year. This return must include
the following information—
(i) The name, address, and identifying
number of the transferor;
(ii) The name, address and employer
identification number of the corporation
whose stock is being transferred;
(iii) The date the option was granted to
the transferor;
(iv) The fair market value of a share of
stock on the date the option was granted;
(v) The exercise price per share;
(vi) The date the option was exercised
by the transferor;
(vii) The fair market value of a share of
stock on the date the option was exercised
by the transferor;
(viii) The date the legal title of the
shares was transferred by the transferor;
and
(ix) The number of shares to which le-
gal title was transferred by the transferor.
(2) Each return required by this para-
graph (b) shall be made on Form 3922,
Transfer of Stock Acquired Through an
Employee Stock Purchase Plan Under Sec-
tion 423(c)(or its designated successor),
and shall be filed in such manner as pro-
vided in the instructions thereto.
(3) A return is required by reason of a
transfer described in section 6039(a)(2) of
a share only with respect to the first trans-
fer of such share by the person who exer-
cised the option. Thus, for example, if the
owner has record title to a share or shares
of stock transferred to a recognized broker
or financial institution and the stock is sub-
sequentlysoldbysuchbrokerorinstitu-
tion (on behalf of the owner), the corpora-
tion is only required to file a return relating
to the transfer of record title to the broker
or financial institution. Similarly, a return
is required when a share of stock is trans-
ferred by the optionee to himself and an-
other person (or persons) as joint tenants,
tenants by the entirety or tenants in com-
mon. However, when stock is originally
issued to the optionee and another person
(or persons) as joint tenants, or as tenants
by the entirety, the return required by this
paragraph shall be filed with respect to the
first transfer of the title to such stock by the
optionee.
(4) Every corporation which transfers
any share of stock pursuant to the exercise
of an option described in this paragraph
shall identify such stock in a manner suffi-
cient to enable the accurate reporting of the
transfer of record title to such shares. Such
identification may be accomplished by as-
signing to the certificates of stock issued
pursuant to the exercise of such options a
special serial number or color.
(c)Time for filing returns—(1)In gen-
eral. Each return required by this section
for a calendar year must be filed on or be-
fore January 31 of the year following the
year for which the return is required.
(2)Extension of time. An extension of
time to file returns required by this sec-
tion may be granted in accordance with the
guidelines and procedures set forth in the
instructions to Form 3921 and Form 3922.
(d)Penalty. For provisions relating to
the penalty provided for failure to file a
return under this section, see section 6721.
(e)Effective/applicability date—(1)In
general. Upon the date of publication of
the Treasury decision adopting the rules
of this section as a final regulation in the
Federal Register, these rules will apply as
of January 1, 2007.
(2)Transition period. Taxpayers are
not required to comply with the return re-
quirements of paragraphs (a) and (b) of this
section for stock transfers that occur dur-
ing the 2007 and 2008 calendar years.
Par. 3. A new §1.6039–2 is added to
read as follows:
§1.6039–2 Statements to persons with
respect to whom information is reported.
(a)Requirement of statement with re-
spect to incentive stock options under sec-
tion 6039(b). (1) Every corporation fil-
ing a return under §1.6039–1(a) shall fur-
nish to each person whose name is set forth
in such return a written statement with
respect to the transfer or transfers made
to such person during such year. This
statement must include the information de-
scribed in §1.6039–1(a)(1).
(2) Each statement required by this
paragraph (a) to be furnished to any per-
son must be furnished to such person on
Form 3921,Exercise of an Incentive Stock
Option Under Section 422(b)(or its desig-
nated successor), and be delivered at such
timeandinsuchmannerasprovidedin
the instructions thereto.
(b)Requirement of statement with
respect to stock purchased under an em-
ployee stock purchase plan under section
6039(b). (1) Every corporation filing a
return under §1.6039–1(b) shall furnish
to each person whose name is set forth
in such return a written statement with
respect to the transfer or transfers made
by such person during such year. This
statement must include the information
described in §1.6039–1(b)(1).
(2) Each statement required by this
paragraph (b) to be furnished to any person
mustbefurnishedtosuchpersononForm
3922,Transfer of Stock Acquired Through
an Employee Stock Purchase Plan Under
Section 423(c)(or its designated succes-
sor), and be delivered at such time and in
such manner as provided in the instruc-
tions thereto.
(3) If the statement required by this
paragraph is made by the authorized trans-
fer agent of the corporation, it is deemed
to have been made by the corporation. The
termtransfer agent, as used in this section,
means any designee authorized to keep the
stock ownership records of a corporation
and to record a transfer of title of the stock
of such corporation on behalf of such cor-
poration.
(c)Time for furnishing statements—(1)
In general. Each statement required by this
2008–37 I.R.B.705September 15, 2008

section to be furnished to any person for
a calendar year must be furnished to such
person on or before January 31 of the year
following the year for which the statement
is required.
(2)Extension of time. An extension of
time to furnish statements required by this
section may be granted in accordance with
the guidelines and procedures set forth in
the instructions to Form 3921 and Form
3922.
(d)Penalty. For provisions relating to
the penalty provided for failure to furnish
a statement under this section, see section
6722.
(e)Effective/applicability date—(1)In
general. Upon the date of publication of
the Treasury decision adopting the rules
of this section as a final regulation in the
Federal Register, these rules will apply as
of January 1, 2007.
(2)Reliance and transition period.For
stock transfers that are subject to the return
requirements under §1.6039–1(a) and (b),
and occur during the 2007 and 2008 cal-
endar years, taxpayers may comply with
§1.6039–1 of the 2004 final regulations
(69 FR 46401) or this section.
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement
(Filed by the Office of the Federal Register on July 16, 2008,
8:45 a.m., and published in the issue of the Federal Register
for July 17, 2008, 73 F.R. 40999)
Deletions From Cumulative
List of Organizations
Contributions to Which
are Deductible Under Section
170 of the Code
Announcement 2008–80
The Internal Revenue Service has re-
voked its determination that the organi-
zations listed below qualify as organiza-
tions described in sections 501(c)(3) and
170(c)(2) of the Internal Revenue Code of
1986.
Generally, the Service will not disallow
deductions for contributions made to a
listed organization on or before the date
of announcement in the Internal Revenue
Bulletin that an organization no longer
qualifies. However, the Service is not
precluded from disallowing a deduction
for any contributions made after an or-
ganization ceases to qualify under section
170(c)(2) if the organization has not timely
filed a suit for declaratory judgment under
section 7428 and if the contributor (1) had
knowledge of the revocation of the ruling
or determination letter, (2) was aware that
such revocation was imminent, or (3) was
in part responsible for or was aware of the
activities or omissions of the organization
that brought about this revocation.
If on the other hand a suit for declara-
tory judgment has been timely filed, con-
tributions from individuals and organiza-
tions described in section 170(c)(2) that
are otherwise allowable will continue to
be deductible. Protection under section
7428(c) would begin on September 15,
2008, and would end on the date the court
first determines that the organization is not
describedinsection170(c)(2)asmorepar-
ticularly set forth in section 7428(c)(1).
For individual contributors, the maximum
deduction protected is $1,000, with a hus-
band and wife treated as one contributor.
This benefit is not extended to any individ-
ual, in whole or in part, for the acts or omis-
sions of the organizations that were the ba-
sis for revocation.
After Bankruptcy Foundation
Fishers, IN
The K.L.T. Foundation
Missoula, MT
Debt Advocates of America
Killeen, TX
Gene & Myrna Heilman Foundation
Madison, WI
Darwin Facility
Suison, CA
Credit Counseling Centers of
America, Inc.
Fort Lauderdale, FL
David Aschkenazy Memorial Loan Fund
Brooklyn, NY
Helping Hand Corporation
Gillette, WY
Cherokee Place Foundation
Lenoir, NC
Foundations Status of Certain
Organizations
Announcement 2008–81
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:
2 Extremes, Los Angeles, CA
Adonai Research and Awareness
Foundation for Multiple Sclerosis,
Olney, MD
African Design Concepts, Inc, Bronx, NY
All About Dialysis, Inc.,
Lawrenceville, GA
Allen Chapel AME Church Center for
Human Development, Riverside, CA
Alpha Omega Communities Outreach
Services, Inc., Fayetteville, NC
Arlington Shakespeare Society,
Arlington, TX
Atkins Residential Care Home,
Los Angeles, CA
Auxiliary of the Houston School for Deaf
Children, Houston, TX
AWIP, Inc., Conyers, GA
Berkeley Animal Welfare Fund,
Berkeley, CA
Buffalo Eastsiders Standing Together
Community Association and Crime
Watch, Inc., Buffalo, NY
Butts Enterprises, Inc.,
Lauderdale Lakes, FL
Care-Ed, Inc., Sarasota, FL
CCBM Organization for Orphans in
Liberia, Inc., Charlotte, NC
Center on Alcohol Drugs and Disability,
San Mateo, CA
C’est Ma Vie Homes, Inc.,
Staten Island, NY
September 15, 20087062008–37 I.R.B.

Chief Cornerstone Worldvision,
Columbia, SC
Christ Exalted Order, Inc.,
Miami Gardens, FL
Christian Cultural Center Community
Development Corporation,
Brooklyn, NY
City Place Neighborhood Development
Corporation, Bowie, MD
Club Acatlan de Juarez, Compton, CA
Community Development Corporation of
Columbia, Columbia, SC
Community Threads, Woodinville, WA
Contours Community Development
Corporation, Frisco, TX
COPLA a NJ Nonprofit Corporation,
Springlake Heights, NJ
Covenant of Shalom, Inc., Topeka, KS
Coweta Teen Mothers and Babe Service
Center, Inc., Stone Mountain, GA
Daj’ Unlimited, Inc., Fort Lauderdale, FL
Destiny Fullfilllment, Inc.,
Woodbridge, VA
Did You Know fka Exposure,
Rochester, NY
Dile Foundation, Inc., Baltimore, MD
Doc Stewart’s Baseball, Inc.,
Roseburg, OR
DRG Option Development Corporation,
Fort Worth, TX
Eden’s Gate Foundation, New York, NY
Elder Village Ecological Residence,
Eugene, OR
Equal Chance Community Development
Corporation, Griffin, GA
Essential Transitional Services, Inc.,
Stone Mountain, GA
Extended Hands Community
Development Corporation,
Fort Lauderdale, FL
Faith Without Borders, Austin, TX
Family Focus, Port Huron, MI
FeVA Productions, Inc., New York, NY
Fifth Amendment Foundation,
Malibu, CA
Fire Child Ministries, Inc.,
Catonsville, MD
Forerunners Ministries, Inglewood, CA
Foundation for People With Disabilities,
Fulton, NY
Fresh Drink of Water, Los Angeles, CA
Gay Fathers Coalition – Baltimore, Inc.,
Baltimore, MD
Gifted Elegant Magnificent & Motivated
Sisters, Incorporated, Atlanta, GA
Global Credit Management, Inc.,
Boca Raton, FL
Golden West Affordable Housing, Inc.,
Big Spring, TX
Gracie Jiu-Jitsu Museum, Torrance, CA
Green’s Outreach Services,
Willow Springs, NC
Habitat Research, Inc., Perham, MN
Harvest Ranch, Inc., Cosby, TN
Health Care Alliance Medical Center,
Inc., Huntington Beach, CA
His Rescue Missions, Studio City, CA
Home of Positive Enlightenment,
Irvington, NJ
Home School Financial Services
Association, Brentwood, TN
Homes for You Community Development
Corporation, Detroit, MI
Horse Hugs, Chapel Hill, NC
House of El Shaddai, Incorporated,
Evansville, IN
House of Restoration, Lakewood, WA
HPV Foundation, Inc., Bremerton, WA
Huntington Community Services, Inc.,
Philadelphia, PA
I Still Believe Health and Wellness for
Young Adults, Los Angeles, CA
Independent Medical Institute,
Sacramento, CA
Its Harvest Time Ministries International,
Inc., Orlando, FL
Jacobs Ladder, Summerville, SC
Jasons North Star Ranch, Houston, TX
Joshua Team Benevolence Foundation,
Groves, TX
Kerwin Phillips Foundation, Red Hill, PA
Kingdom Kids Academy, Inc.,
Charlotte, NC
LBC Foundation USA, Inc.,
South San Francisco, CA
Life-Springs Crusades and Ministries,
Export, PA
Lighthouse Early Learning Center, Inc.,
Columbia, IL
LOCMA Ministries, Inc., Charlotte, NC
Love the Children, Inc., Titusville, FL
Loving Care Children’s Center and Food
Nutritional Program, Houston, TX
Lutheran Social Service of Syracuse, Inc.,
Syracuse, NY
MacSwain Senior Association,
Aransas Pass, TX
Majestic Visions Alliance, Fairburn, GA
Majesty Family Services, Inc.,
Glendale, AZ
Mandeville Canyon Preservation
and Conservation Association,
Los Angeles, CA
Mid-Way Ministries, Canaseraga, NY
Millenium Foundation, Inc.,
Philadelphia, PA
Minority Home Ownership Council,
Las Vegas, NV
Mississippi Complex for Outreach and
Rehabilitation Excellence, Clinton, MS
Missouri Restaurant Association
Education Foundation, Saint Louis, MO
MMC for Children & Families,
West Sacramento, CA
National Addiction Therapy Research
Association, Inc., Salisbury, MD
National Coalition of Blacks for
Reparations in America Legal Defen,
Little Rock, AR
Nations of the Drum, Diamond Bar, CA
Native Visions, Prescott, AZ
New Beginnings Faith Center,
Philadelphia, PA
New Life Outreach Ministry of Pinellas,
Inc., St. Petersburg, FL
New Millenniums Church, Oakland, CA
Noact, Inc., Lago Vista, TX
Old Homes Restored Community
Development Corporation, Houston, TX
Operation Reach Community
Development Corporation, Houston, TX
Organ Buddies, Inc., North Wales, PA
Our Future Vision, Inc., Decatur, GA
Parents Alliance Against Discrimination,
Inc., Ft. Lauderdale, FL
Parents of Teen Parents, Copley, OH
Peer to Peer International, Inc.,
Prattville, AL
Pelican House, Incorporated, Houston, TX
Perfect Healing, Inc.,
North Miami Beach, FL
Place to Go, Newark, DE
Philo-Brotherly Love, Toledo, OH
P. H. P. Ministries Incorporation,
Nashville, TN
Pony Express Your Self Youth
Development Program,
Cape Girardeau, MO
Positive Direction Services, Inc.,
Alta Loma, CA
Prayer International, Benicia, CA
Project Hope, Inc., Syracuse, NY
Project Self, Inc., Lafayette, LA
Rebuilding Our Communities, Inc.,
Dorchester, SC
Redeemer Economic & Development
Ministries, Inc., Temple Hills, MD
Responsible Fathering for Effective
Change, Inc., Smyrna, GA
Restoration Village Community
Development Corporation,
Pikesville, MD
2008–37 I.R.B.707September 15, 2008

Reuse Center of the Treasure Coast, Inc.,
Riviera Beach, FL
RSBC Development and Outreach
Corporation, Garysburg, NC
Rural Health International, Vienna, VA
Rushford Institute for Nanotechnology,
Rushford, MN
Russell CEOs, Philadelphia, PA
S and L Transition House, Orlando, FL
Sai Hira Ram Trust, Inc., Roseland, NJ
Sacramento Black Chamber of Commerce
Foundation, Inc.,Sacramento, CA
Sault Housing Services, Inc.,
Sault Ste Marie, MI
Scott’s Seafood Cancer Research Fund,
Sacramento, CA
Schekinah Mission Center,
Los Angeles, CA
Sisters Network, Chicago, IL
Southwest Health Center, Inc.,
Bellaire, TX
Spin Single Parents Integrative Network,
Sebastopol, CA
Stephen’s Active Adult Day Care,
Loris, SC
Strategies 2 Success, Los Angeles, CA
Success Builders, Inc., Jacksonville, FL
Tate Outreach Organization, Chicago, IL
Tax Clinic, Inc., Wayne, PA
Teach Another Generation, Incorporated,
Oakland, CA
Teens for Tomorrow, Austin, TX
Teen Mothers and Infant Center,
Itta Bena, MS
Tomtenhaus Animal Sanctuary,
Abrams, WI
Turning Point Life Center, Matteson, IL
Tuscaloosa Housing Opportunities
Corporation, Tuscaloosa, AL
UMOJA Studio, Little Rock, AR
Urban Educational Resource Center,
Mobile, AL
Visions and Dreams Counseling Services,
Inc., Houston, TX
Visions of Hope, Louisville, KY
Volunteer Health Services Foundation,
Columbus, OH
Walker Holistic Care, Inc., Houston, TX
W.C. Jones Foundation, Corona, NY
Westminster Foundation, Inc.,
Orlando, FL
Willie R. Davis Scholarship Fund, Inc.,
Washington, DC
Women Abuse Resource, Inc.,
Philadelphia, PA
Women in Sports and Entertainment,
Detroit, MI
Woodstock Foundation, Inc., Canton, GA
Word of Life Programs, Huntsville, AL
Workforce Investment Board of Will
County, Joliet, IL
World of Voices, Inc., Stockton, CA
Young Street Ministries Corporation,
Augusta, GA
Young Triumph, Inc., Torrance, CA
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 may thereafter 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 7428(c) Validation
of Certain Contributions
Made During Pendency
of Declaratory Judgment
Proceedings
Announcement 2008–82
This announcement serves notice to po-
tential donors that the organization listed
below has recently filed a timely declara-
tory judgment suit under section 7428 of
the Code, challenging revocation of its
status as an eligibledonee under section
170(c)(2).
Protection under section 7428(c) of the
Code begins on the date that the notice
of revocation is published in the Internal
Revenue Bulletin and ends on the date
on which a court first determines that an
organization is not described in section
170(c)(2), as more particularly set forth in
section 7428(c)(1).
In the case of individual contributors,
the maximum amount of contributions
protected during this period is limited to
$1,000.00, with a husband and wife being
treated as one contributor. This protec-
tion is not extended to any individual who
was responsible, in whole or in part, for
the acts or omissions of the organizations
that were the basis for the revocation.
This protection also applies (but without
limitation as to amount) to organizations
described in section 170(c)(2) which are
exempt from tax under section 501(a). If
the organization ultimately prevails in its
declaratory judgment suit, deductibility
of contributions would be subject to the
normal limitations set forth under section
170.
Chaim Ministries, Inc.
Los Alamitos, CA
After Bankruptcy Foundation, Inc.
Fishers, IN
Round Rock Band Boosters, Inc.
Round Rock, TX
September 15, 20087082008–37 I.R.B.

Announcement of Disciplinary Sanctions From the Office
of Professional Responsibility
Announcement 2008-83
TheOfficeofProfessionalResponsi-
bility (OPR) announcesrecent disciplinary
sanctions involving attorneys, certified
public accountants, enrolled agents, en-
rolled actuaries, enrolled retirement plan
agents, and appraisers. These individuals
are subject to the regulations governing
practice before the Internal Revenue Ser-
vice (IRS), which are set out in Title 31,
Code of Federal Regulations, Part 10, and
which are published in pamphlet form as
Treasury Department Circular No. 230.
The regulations prescribe the duties and
restrictions relating to such practice and
prescribe the disciplinary sanctions for
violating the regulations.
The disciplinary sanctions to be im-
posed for violation of the regulations are:
Disbarred from practice before the
IRS—An individual who is disbarred is
not eligible to represent taxpayers before
the IRS.
Suspended from practice before the
IRS—An individual who is suspended is
not eligible to represent taxpayers before
the IRS during the term of the suspension.
Censured in practice before the
IRS—Censure is a public reprimand. Un-
like disbarment or suspension, censure
does not affect an individual’s eligibility
to represent taxpayers before the IRS, but
OPR may subject the individual’s future
representations to conditions designed to
promote high standards of conduct.
Monetary penalty—A monetary
penalty may be imposed on an individual
who engages in conduct subject to sanc-
tion or on an employer, firm, or entity
if the individual was acting on its behalf
and if it knew, or reasonably should have
known, of the individual’s conduct.
Disqualification of appraiser—An
appraiser who is disqualified is barred
from presenting evidence or testimony in
any administrative proceeding before the
Department of the Treasury or the IRS.
Under the regulations, attorneys, cer-
tified public accountants, enrolled agents,
enrolled actuaries, and enrolled retirement
plan agents may not assist, or accept assis-
tance from, individuals who are suspended
or disbarred with respect to matters consti-
tuting practice (i.e., representation) before
the IRS, and they may not aid or abet sus-
pended or disbarred individuals to practice
before the IRS.
Disciplinary sanctions are described in
these terms:
Disbarred by decision after hearing,
Suspended by decision after hearing,
Censured by decision after hearing,
Monetary penalty imposed after hear-
ing, and Disqualified after hearing—An
administrative law judge (ALJ) conducted
an evidentiary hearing upon OPR’s com-
plaint alleging violation of the regulations
and issued a decision imposing one of
these sanctions. After 30 days from the
issuance of the decision, in the absence of
an appeal, the ALJ’s decision became the
final agency decision.
Disbarred by default decision, Sus-
pended by default decision, Censured by
default decision, Monetary penalty im-
posed by default decision, and Disqual-
ified by default decision—An ALJ, after
findingthatnoanswertoOPR’scomplaint
had been filed, granted OPR’s motion for a
default judgment and issued a decision im-
posing one of these sanctions.
Disbarment by decision on appeal,
Suspended by decision on appeal, Cen-
sured by decision on appeal, Monetary
penalty imposed by decision on ap-
peal, and Disqualified by decision on
appeal—The decision of the ALJ was
appealed to the agency appeal authority,
acting as the delegate of the Secretary
of the Treasury, and the appeal authority
issued a decision imposing one of these
sanctions.
Disbarred by consent, Suspended by
consent, Censured by consent, Mone-
tary penalty imposed by consent, and
Disqualified by consent—In lieu of a
disciplinary proceeding being instituted
or continued, an individual offered a con-
sent to one of these sanctions and OPR
accepted the offer. Typically, an offer
of consent will provide for: suspension
for an indefinite term; conditions that the
individual must observe during the sus-
pension; and the individual’s opportunity,
after a stated number of months, to file
with OPR a petition for reinstatement af-
firming compliance with the terms of the
consent and affirming current eligibility
to practice (i.e., an active professional
license or active enrollment status). An
enrolled agent or an enrolled retirement
plan agent may also offer to resign in order
to avoid a disciplinary proceeding.
Suspended by decision in expedited
proceeding, Suspended by default de-
cision in expedited proceeding, Sus-
pended by consent in expedited pro-
ceeding—OPR instituted an expedited
proceeding for suspension (based on cer-
tain limited grounds, including loss of a
professional license and criminal convic-
tions).
OPR has authority to disclose the
grounds for disciplinary sanctions in these
situations: (1) an ALJ or the Secretary’s
delegate on appeal has issued a decision
on or after September 26, 2007, which was
theeffectivedateofamendmentstothe
regulations that permit making such deci-
sions publicly available; (2) the individual
has settled a disciplinary case by signing
OPR’s “consent to sanction” form, which
requires consenting individuals to admit to
one or more violations of the regulations
and to consent to the disclosure of the in-
dividual’s own return information related
to the admitted violations (for example,
failure to file Federal income tax returns);
or (3) OPR has issued a decision in an
expedited proceeding for suspension.
Announcements of disciplinary sanc-
tions appear in the Internal Revenue Bul-
letin at the earliest practicable date. The
sanctions announced below are alphabet-
ized first by the names of states and sec-
ond by the last names of individuals. Un-
less otherwise indicated, section numbers
(e.g., §10.51) refer to the regulations.
2008–37 I.R.B.709September 15, 2008

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Alaska
JuneauClark, James F.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
July 28, 2008
California
HollywoodBusch, Steven M.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license in Florida)
Indefinite from
July 28, 2008
Connecticut
GreenwichRussell, PhillipAttorneySuspended by default
decision in expedited
proceeding under §10.82
(conviction under 18
U.S.C. §4, misprison of a
felony)
Indefinite from
August 1, 2008
Florida
Atlantic BeachBerry, Jr., MichaelL.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
July 28, 2008
Busch, Steven M.,
See California
JacksonvilleClance, Wayne D.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
July 28, 2008
Indiana
WabashSmith, Michael J.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license in New York)
Indefinite from
August 5, 2008
Kentucky
PikevilleLinton, Jr., Robert F.CPASuspended by default
decision in expedited
proceeding under §10.82
(suspension of CPA
license)
Indefinite from
August 1, 2008
September 15, 20087102008–37 I.R.B.

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Kentucky (Continued)
LouisvilleSmith, Jr., Louis M.AttorneySuspended by decision
in expedited proceeding
under §10.82 (suspension
of attorney license)
Indefinite from
August 1, 2008
Louisiana
ShreveportMcGinn, Desmond E.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
August 5, 2008
Maryland
CatonsvilleAntlitz, Ronald E.CPASuspended by consent
for admitted violations of
§10.51 (failure to timely
file Federal income tax
returns)
Indefinite from
July 25, 2008
Massachusetts
NeedhamCrossen, Gary C.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
August 5, 2008
WinchesterCurry, Kevin P.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
August 5, 2008
CambridgePeraner, Robert A.Enrolled AgentCensured by consent
for admitted violations
of §10.51 (failure to
file Federal income tax
returns)
Indefinite from
May 12, 2008
WakefieldTamagani, Jr., James E. AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
August 5, 2008
SpringfieldViscito, LeonardCPASuspended by decision
in expedited proceeding
under §10.82 (suspension
of CPA license)
Indefinite from
August 1, 2008
Michigan
MarionYoder, Daniel L.Enrolled AgentSuspended by decision
after hearing for violation
of §10.51(failure to file
and timely file Federal
income tax returns)
May 15, 2008
through
May 14, 2010
2008–37 I.R.B.711September 15, 2008

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Minnesota
RochesterDjonne, Terry L.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
August 5, 2008
Overboe, David J.,
See North Dakota
New York
New YorkCherry, Gwenerva D.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
August 5, 2008
FlushingManela, RaphealCPASuspended by default
decision in expedited
proceeding under §10.82
(conviction under New
York law, offering a false
instrument for filing)
Indefinite from
August 1, 2008
Old BrookvilleMoshell, Stuart R.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
August 5, 2008
Smith, Michael, J.,
See Indiana
North Carolina
HendersonAlston, D. BernardAttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
August 5, 2008
CaryO’Rourke, Neil G.AttorneySuspended by decision
in expedited proceeding
under §10.82 (attorney
disbarment)
Indefinite from
August 1, 2008
North Dakota
FargoOverboe, David A.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license in Minnesota)
Indefinite from
August 1, 2008
September 15, 20087122008–37 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.
2008–37 I.R.B.iSeptember 15, 2008

Numerical Finding List
1
Bulletins 2008–27 through 2008–37
Announcements:
2008-62, 2008-27 I.R.B.74
2008-63, 2008-28 I.R.B.114
2008-64, 2008-28 I.R.B.114
2008-65, 2008-31 I.R.B.279
2008-66, 2008-29 I.R.B.164
2008-67, 2008-29 I.R.B.164
2008-68, 2008-30 I.R.B.244
2008-69, 2008-32 I.R.B.318
2008-70, 2008-32 I.R.B.318
2008-71, 2008-32 I.R.B.321
2008-72, 2008-32 I.R.B.321
2008-73, 2008-33 I.R.B.391
2008-74, 2008-33 I.R.B.392
2008-75, 2008-33 I.R.B.392
2008-76, 2008-33 I.R.B.393
2008-77, 2008-33 I.R.B.394
2008-78, 2008-34 I.R.B.453
2008-79, 2008-35 I.R.B.568
2008-80, 2008-37 I.R.B.706
2008-81, 2008-37 I.R.B.706
2008-82, 2008-37 I.R.B.708
2008-83, 2008-37 I.R.B.709
Notices:
2008-55, 2008-27 I.R.B.11
2008-56, 2008-28 I.R.B.79
2008-57, 2008-28 I.R.B.80
2008-58, 2008-28 I.R.B.81
2008-59, 2008-29 I.R.B.123
2008-60, 2008-30 I.R.B.178
2008-61, 2008-30 I.R.B.180
2008-62, 2008-29 I.R.B.130
2008-63, 2008-31 I.R.B.261
2008-64, 2008-31 I.R.B.268
2008-65, 2008-30 I.R.B.182
2008-66, 2008-31 I.R.B.270
2008-67, 2008-32 I.R.B.307
2008-68, 2008-34 I.R.B.418
2008-69, 2008-34 I.R.B.419
2008-70, 2008-36 I.R.B.575
2008-71, 2008-35 I.R.B.462
Proposed Regulations:
REG-161695-04, 2008-37 I.R.B.699
REG-164965-04, 2008-34 I.R.B.450
REG-143453-05, 2008-32 I.R.B.310
REG-146895-05, 2008-37 I.R.B.700
REG-142680-06, 2008-35 I.R.B.565
REG-120476-07, 2008-36 I.R.B.679
REG-129243-07, 2008-27 I.R.B.32
REG-138355-07, 2008-32 I.R.B.311
Proposed Regulations— Continued:
REG-142040-07, 2008-34 I.R.B.451
REG-149405-07, 2008-27 I.R.B.73
REG-100464-08, 2008-32 I.R.B.313
REG-101258-08, 2008-28 I.R.B.111
REG-102122-08, 2008-31 I.R.B.278
REG-103146-08, 2008-37 I.R.B.701
REG-115457-08, 2008-33 I.R.B.390
REG-121698-08, 2008-29 I.R.B.163
Revenue Procedures:
2008-32, 2008-28 I.R.B.82
2008-33, 2008-28 I.R.B.93
2008-34, 2008-27 I.R.B.13
2008-35, 2008-29 I.R.B.132
2008-36, 2008-33 I.R.B.340
2008-37, 2008-29 I.R.B.137
2008-38, 2008-29 I.R.B.139
2008-39, 2008-29 I.R.B.143
2008-40, 2008-29 I.R.B.151
2008-41, 2008-29 I.R.B.155
2008-42, 2008-29 I.R.B.160
2008-43, 2008-30 I.R.B.186
2008-44, 2008-30 I.R.B.187
2008-45, 2008-30 I.R.B.224
2008-46, 2008-30 I.R.B.238
2008-47, 2008-31 I.R.B.272
2008-48, 2008-36 I.R.B.586
2008-49, 2008-34 I.R.B.423
2008-50, 2008-35 I.R.B.464
2008-51, 2008-35 I.R.B.562
2008-52, 2008-36 I.R.B.587
2008-53, 2008-36 I.R.B.678
Revenue Rulings:
2008-32, 2008-27 I.R.B.6
2008-33, 2008-27 I.R.B.8
2008-34, 2008-28 I.R.B.76
2008-35, 2008-29 I.R.B.116
2008-36, 2008-30 I.R.B.165
2008-37, 2008-28 I.R.B.77
2008-38, 2008-31 I.R.B.249
2008-39, 2008-31 I.R.B.252
2008-40, 2008-30 I.R.B.166
2008-41, 2008-30 I.R.B.170
2008-42, 2008-30 I.R.B.175
2008-43, 2008-31 I.R.B.258
2008-44, 2008-32 I.R.B.292
2008-45, 2008-34 I.R.B.403
2008-46, 2008-36 I.R.B.572
Treasury Decisions:
9401, 2008-27 I.R.B.1
9402, 2008-31 I.R.B.254
9403, 2008-32 I.R.B.285
9404, 2008-32 I.R.B.280
Treasury Decisions— Continued:
9405, 2008-32 I.R.B.293
9406, 2008-32 I.R.B.287
9407, 2008-33 I.R.B.330
9408, 2008-33 I.R.B.323
9409, 2008-29 I.R.B.118
9410, 2008-34 I.R.B.414
9411, 2008-34 I.R.B.398
9412, 2008-37 I.R.B.687
9413, 2008-34 I.R.B.404
9414, 2008-35 I.R.B.454
9415, 2008-36 I.R.B.570
9417, 2008-37 I.R.B.693
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2008–1 through 2008–26 is in Internal Revenue Bulletin
2008–26, dated June 30, 2008.
September 15, 2008ii2008–37 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2008–27 through 2008–37
Announcements:
2008-64
Corrected by
Ann. 2008-71, 2008-32 I.R.B.321
2008-72
Corrected by
Ann. 2008-78, 2008-34 I.R.B.453
Notices:
99-48
Superseded by
Rev. Proc. 2008-40, 2008-29 I.R.B.151
2000-9
Obsoleted by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
2004-2
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
2004-50
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
2006-88
Modified and superseded by
Notice 2008-60, 2008-30 I.R.B.178
2007-22
Amplified by
Notice 2008-59, 2008-29 I.R.B.123
Proposed Regulations:
REG-129243-07
Corrected by
Ann. 2008-75, 2008-33 I.R.B.392
REG-151135-07
Hearing scheduled by
Ann. 2008-64, 2008-28 I.R.B.114
REG-101258-08
Corrected by
Ann. 2008-73, 2008-33 I.R.B.391
Revenue Procedures:
92-25
Superseded by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
92-83
Obsoleted by
Rev. Proc. 2008-37, 2008-29 I.R.B.137
2001-10, section 6.02(1)(a)
Modified and amplified by
Rev. Proc. 2008-52, 2008-36 I.R.B.587
Revenue Procedures— Continued:
2001-42
Superseded by
Rev. Proc. 2008-39, 2008-29 I.R.B.143
2002-9
Clarified, modified, amplified, and superseded by
Rev. Proc. 2008-52, 2008-36 I.R.B.587
Modified and amplified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
2002-28, section 7.02(1)(a)
Modified and amplified by
Rev. Proc. 2008-52, 2008-36 I.R.B.587
2005-29
Superseded by
Rev. Proc. 2008-49, 2008-34 I.R.B.423
2006-27
Modified and superseded by
Rev. Proc. 2008-50, 2008-35 I.R.B.464
2006-29
Superseded by
Rev. Proc. 2008-34, 2008-27 I.R.B.13
2006-34
Superseded by
Rev. Proc. 2008-44, 2008-30 I.R.B.187
2007-14
Superseded by
Rev. Proc. 2008-52, 2008-36 I.R.B.587
2007-19
Superseded by
Rev. Proc. 2008-39, 2008-29 I.R.B.143
2007-42
Superseded by
Rev. Proc. 2008-32, 2008-28 I.R.B.82
2007-43
Superseded by
Rev. Proc. 2008-33, 2008-28 I.R.B.93
2007-49
Section 3 modified and superseded by
Rev. Proc. 2008-50, 2008-35 I.R.B.464
2007-50
Superseded by
Rev. Proc. 2008-36, 2008-33 I.R.B.340
2007-70
Modified by
Ann. 2008-63, 2008-28 I.R.B.114
2007-72
Amplified and superseded by
Rev. Proc. 2008-47, 2008-31 I.R.B.272
2008-12
Modified and superseded by
Rev. Proc. 2008-35, 2008-29 I.R.B.132
Revenue Procedures— Continued:
2008-43
Modified by
Rev. Proc. 2008-52, 2008-36 I.R.B.587
Revenue Rulings:
67-213
Amplified by
Rev. Rul. 2008-40, 2008-30 I.R.B.166
71-234
Modified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
76-273
Obsoleted by
T.D. 9414, 2008-35 I.R.B.454
77-480
Modified by
Rev. Proc. 2008-43, 2008-30 I.R.B.186
82-105
Obsoleted by
T.D. 9414, 2008-35 I.R.B.454
91-17
Amplified by
Rev. Proc. 2008-41, 2008-29 I.R.B.155
Rev. Proc. 2008-42, 2008-29 I.R.B.160
Superseded in part by
Rev. Proc. 2008-40, 2008-29 I.R.B.151
2005-6
Amplified by
Rev. Proc. 2008-38, 2008-29 I.R.B.139
2008-12
Amplified by
Rev. Rul. 2008-38, 2008-31 I.R.B.249
Clarified by
Ann. 2008-65, 2008-31 I.R.B.279
Treasury Decisions:
9391
Corrected by
Ann. 2008-74, 2008-33 I.R.B.392
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2008–1 through 2008–26 is in Internal Revenue Bulletin 2008–26, dated June 30, 2008.
2008–37 I.R.B.iiiSeptember 15, 2008

September 15, 20082008–37 I.R.B.

2008–37 I.R.B.September 15, 2008

September 15, 20082008–37 I.R.B.

INTERNAL REVENUE BULLETIN
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