Internal Revenue Bulletin 2024-5 (PDF rendition): IRS Announcements

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Bulletin No. 2024–5
January 29, 2024
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.
ADMINISTRATIVE
Notice 2024-18, page 625.
This notice addresses the availability of administrative
exemptions from and waivers of the requirements to file
returns and other documents in electronic form. This notice
provides information about publications pertaining to failed
attempts to electronically file Forms 1120, 1120-S, and
1120-F using Internal Revenue Service (IRS) filing systems.
In addition, this notice obsoletes Notice 2010-13, 2010-4
I.R.B. 327 (January 25, 2010), Form 1120, Form 1120-F,
Form 1120S, Form 990, and Form 990-PF Electronic Filing
Waiver Request Procedures. This notice also modifies Notice
2023-60 as released on August 11, 2023, but not published
in the Internal Revenue Bulletin.
ADMINISTRATIVE, INCOME TAX
Notice 2024-19, page 627.
This notice provides relief from certain penalties imposed
solely for failure of a partnership with unrealized receivables
or inventory items to furnish Part IV of Form 8308, Report of a
Sale or Exchange of Certain Partnership Interests, by January
31, 2024, to the transferor and transferee in certain transfers
of partnership interests that occurred in calendar year 2023.
EXEMPT ORGANIZATIONS
Announcement 2024-6, page 635.
Revocation of IRC 501(c)(3) Organizations for failure to meet
the code section requirements. Contributions made to the
organizations by individual donors are no longer deductible
under IRC 170(b)(1)(A).
EMPLOYEE PLANS
T.D. 9986, page 610.
These regulations specify the methodology for constructing
the corporate bond yield curve that is used to derive the
interest rates used in calculating present value and making
other calculations under a defined benefit plan, as well as for
discounting unpaid losses and estimated salvage recover-
able of insurance companies.
EXCISE TAX
T.D. 9985, page 573.
This document finalizes rules related to the fees estab-
lished by the No Surprises Act for the Federal indepen-
dent dispute resolution (IDR) process, as established by
the Consolidated Appropriations Act, 2021 (CAA). These
final rules amend existing regulations to provide that the
administrative fee amount charged by the Department of
the Treasury, the Department of Labor, and the Depart-
ment of Health and Human Services (the Departments) to
participate in the Federal IDR process, and the ranges for
certified IDR entity fees for single and batched determina-
tions, will be set by the Departments through notice and
comment rulemaking. The preamble to these final rules
also sets forth the methodology used to calculate the
administrative fee and the considerations used to develop
the certified IDR entity fee ranges. This document also
finalizes the amount of the administrative fee for disputes
initiated on or after the effective date of these rules.
Finally, this document finalizes the certified IDR entity fee
ranges for disputes initiated on or after the effective date
of these rules.
Finding Lists begin on page ii.

EMPLOYEE PLANS
Notice 2024-16, page 622.
This notice announces that Treasury and the IRS intend to
issue proposed regulations that will address certain basis
consequences of internal restructuring transactions in which
a U.S. corporation acquires stock of a controlled foreign cor-
poration (“CFC”) from another CFC. In particular, the notice
announces rules under which basis provided under section
961(c) in stock of a second-tier CFC held by a first-tier CFC
will be transferred to a U.S. corporation that acquires the sec-
ond-tier CFC from the first-tier CFC in a liquidation described
in section 332 or an asset reorganization described in sec-
tion 368(a)(1).
INCOME TAX
Notice 2024-12, page 616.
Notice 2024-12 clarifies and modifies Notice 2023-63, which
provided interim guidance to address issues regarding speci-
fied research or experimental expenditures under § 174. Spe-
cifically, Notice 2024-12 clarifies and modifies Notice 2023-
63 regarding (1) the treatment of costs paid or incurred by a
research provider for research performed under contract, (2)
the requirement that a taxpayer that chooses to rely on any
of the rules described in Notice 2023-63 must rely on all the
rules described in sections 3 through 9 of the notice, and (3)
the obsoletion of section 5 of Revenue Procedure 2000-50.
Notice 2024-13, page 618.
This notice announces that the Department of the Trea-
sury and the Internal Revenue Service intend to propose
regulations to implement the product identification number
(PIN) requirement with respect to the energy efficient home
improvement credit under § 25C of the Internal Revenue
Code, as amended by § 13301 of Public Law 117-169, 136.
Stat. 1818 (August 16, 2022), commonly known as the Infla-
tion Reduction Act of 2022. This notice requests comments
on this PIN requirement.
REG-121010-17, page 636.
This document contains proposed regulations that would pro-
vide guidance under section 166 regarding whether a debt
instrument is worthless for Federal income tax purposes.
The proposed regulations update the standard for deter-
mining when a debt instrument held by a regulated financial
company or a member of a regulated financial group will be
conclusively presumed to be worthless.
Rev. Proc. 2024-9, page 628.
Revenue Procedure 2024-9 provides procedures for obtain-
ing automatic consent to change methods of accounting for
specified research or experimental expenditures under § 174
paid or incurred in taxable years beginning after December
31, 2021. Revenue Procedure 2024-9 also clarifies section
9 of Revenue Procedure 2023-24 to provide that section 5 of
Revenue Procedure 2000-50 is obsoleted for costs of devel-
oping computer software paid or incurred in any taxable year
beginning after December 31, 2021, and continues to apply
to costs of developing computer software paid or incurred
in any taxable year beginning on or before December 31,
2021.
TAX CONVENTIONS
Announcement 2024-5, page 635.
The United States provided a diplomatic notification, dated
July 8, 2022, to the Government of the Republic of Hungary
of its termination of the United States-Hungary Tax Treaty. In
respect of tax withheld at source, the United States-Hungary
Tax Treaty ceases to have effect with respect to amounts
paid or credited on or after January 1, 2024. In respect of
other taxes, the United States-Hungary Tax Treaty ceases to
have effect with respect to taxable periods beginning on or
after January 1, 2024.
January 29, 2024 2 Bulletin No. 2024–5

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
enforce the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management 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 rul-
ings 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.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation 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
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
January 29, 2024 Bulletin No. 2024–5

Part I
(26 CFR 54.9816-8 Independent dispute resolution
process; 26 CFR 54.9816-8T Independent dispute
resolution process (temporary))
T.D. 9985
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 54
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Part 2590
DEPARTMENT OF HEALTH
AND HUMAN SERVICES
45 CFR Part 149
Federal Independent
Dispute Resolution (IDR)
Process Administrative Fee
and Certified IDR Entity Fee
Ranges
AGENCY: Internal Revenue Service (IRS),
Department of the Treasury; Employee
Benefits Security Administration, Depart-
ment of Labor; Centers for Medicare &
Medicaid Services, Department of Health
and Human Services (HHS).
ACTION: Final rules.
SUMMARY: This document finalizes
rules related to the fees established by the
No Surprises Act for the Federal inde-
pendent dispute resolution (IDR) pro-
cess, as established by the Consolidated
Appropriations Act, 2021 (CAA). These
final rules amend existing regulations
to provide that the administrative fee
amount charged by the Department of the
Treasury, the Department of Labor, and
the Department of Health and Human
Services (the Departments) to partici-
pate in the Federal IDR process, and the
ranges for certified IDR entity fees for
single and batched determinations, will
be set by the Departments through notice
and comment rulemaking. The pream-
ble to these final rules also sets forth
the methodology used to calculate the
administrative fee and the considerations
used to develop the certified IDR entity
fee ranges. This document also finalizes
the amount of the administrative fee for
disputes initiated on or after the effective
date of these rules. Finally, this docu-
ment finalizes the certified IDR entity fee
ranges for disputes initiated on or after
the effective date of these rules.
DATES: These final rules are effective on
[insert date 30 days after date of publica-
tion in the Federal Register].
FOR FURTHER INFORMATION
CONTACT: Shira B. McKinlay or Wil-
liam Fischer, Internal Revenue Service,
Department of the Treasury, 202-317-
5500; Shannon Hysjulien or Rebecca
Miller, Employee Benefits Security
Administration, Department of Labor,
202-693-8335; and Jacquelyn Rudich or
Nora Simmons, Centers for Medicare &
Medicaid Services, Department of Health
and Human Services, 301-492-5211.
SUPPLEMENTARY INFORMATION:
I. Background
A. Preventing Surprise Medical Bills and
Establishing the Federal IDR Process
under the Consolidated Appropriations
Act, 2021
On December 27, 2020, the CAA was
enacted.
1
Title I, also known as the No Sur-
prises Act, and title II (Transparency) of
Division BB of the CAA amended chapter
100 of the Internal Revenue Code (Code),
part 7 of the Employee Retirement Income
Security Act (ERISA), and title XXVII of
the Public Health Service Act (PHS Act).
The No Surprises Act provides Federal
protections against surprise billing by
limiting out-of-network cost sharing and
prohibiting balance billing in many of the
circumstances in which surprise bills most
frequently arise. In particular, the No Sur-
prises Act added new provisions applica-
ble to group health plans and health insur-
ance issuers offering group or individual
health insurance coverage. Section 102 of
the No Surprises Act added section 9816
of the Code,
2
section 716 of ERISA,
3
and
section 2799A-1 of the PHS Act,
4
which
contain limitations on cost sharing and
requirements regarding the timing of ini-
tial payments and notices of denial of pay-
ment by plans and issuers for emergency
services furnished by nonparticipating
providers and nonparticipating emergency
facilities, and for non-emergency services
furnished by nonparticipating providers
for patient visits to participating health
care facilities, generally defined as hos-
pitals, hospital outpatient departments,
1
Public Law 116-260 (Dec. 27, 2020).
2
26 U.S.C. 9816, et seq.
3
29 U.S.C. 1185e, et seq.
4
42 U.S.C. 300gg–111, et seq.
Bulletin No. 2024–5 573 January 29, 2024

January 29, 2024 574 Bulletin No. 2024–5
critical access hospitals, and ambula-
tory surgical centers.
5
Section 103 of the No Surprises Act
established a Federal IDR process that
plans and issuers and nonparticipating pro-
viders and facilities may utilize to resolve
certain disputes regarding out-of-network
rates under section 9816 of the Code,
6
sec-
tion 716 of ERISA,
7
and section 2799A-1
of the PHS Act.
8
Section 9816(c)(8) of the
Code,
9
section 716(c)(8) of ERISA,
10
and
section 2799A-1(c)(8) of the PHS Act
11

provide that each party to a determination
under the Federal IDR process shall pay
a fee for participating in the Federal IDR
process, and the amount of the fee is an
amount established by the Departments
in a manner such that the total amount of
fees paid by all parties is estimated to be
equal to the amount of expenditures esti-
mated to be made by the Departments for
the year in carrying out the Federal IDR
process.
Section 105 of the No Surprises Act
added section 9817 of the Code,
12
section
717 of ERISA,
13
and section 2799A-2
of the PHS Act.
14
These sections contain
limitations on cost sharing and require-
ments for the timing of initial payments
and notices of denial of payment by plans
and issuers for air ambulance services fur-
nished by nonparticipating providers of
air ambulance services, and allow plans
and issuers and nonparticipating provid-
ers of air ambulance services to utilize the
Federal IDR process.
The No Surprises Act also added pro-
visions to title XXVII of the PHS Act in
a new part E
15
that apply to health care
providers, facilities, and providers of
air ambulance services, such as prohibi-
tions on balance billing for certain items
and services and requirements related to
disclosures about balance billing protec-
tions.
The Departments, along with the
Office of Personnel Management (OPM),
have issued rules in 2021 and 2022 to
implement various provisions of the No
Surprises Act. More specifically rele-
vant to this rulemaking, the Departments
and OPM issued interim final rules (July
2021 interim final rules
16
and Octo-
ber 2021 interim final rules
17
) and final
rules (August 2022 final rules
18
) imple-
menting provisions of sections 9816 and
9817 of the Code,
19
sections 716 and 717
of ERISA,
20
and sections 2799A-1 and
2799A-2 of the PHS Act.
21
Those rules
implement provisions to protect consum-
ers from surprise medical bills for emer-
gency services, non-emergency services
furnished by nonparticipating providers
for patient visits to participating facil-
ities
22
in certain circumstances, and air
ambulance services furnished by nonpar-
ticipating providers of air ambulance ser-
vices.

Those rules also implement provi-
sions to establish a Federal IDR process
to determine payment amounts when
there is a dispute between plans or issu-
ers and providers, facilities, or providers
of air ambulance services about the out-
of-network rate for these services if a
specified State law as defined in 26 CFR
54.9816-3T, 29 CFR 2590.716-3, and 45
CFR 149.30 or an applicable All-Payer
Model Agreement under section 1115A
of the Social Security Act does not pro-
vide a method for determining the total
amount payable.
The July 2021 interim final rules and
October 2021 interim final rules gener-
ally apply to plans and issuers (including
grandfathered health plans) for plan years
(in the individual market, policy years)
beginning on or after January 1, 2022,
and to health care providers, facilities,
and providers of air ambulance services
for items and services furnished during
plan years (in the individual market, pol-
icy years) beginning on or after January
1, 2022.
23
The August 2022 final rules
became effective October 25, 2022, and
are applicable for items or services pro-
vided or furnished on or after October
25, 2022, for plan years (in the individ-
ual market, policy years) beginning on or
after January 1, 2022.
B. October 2021 Interim Final Rules and
Related Guidance
The October 2021 interim final rules
implement the Federal IDR process under
sections 9816(c) and 9817(b) of the Code,
24

sections 716(c) and 717(b) of ERISA,
25

and sections 2799A-1(c) and 2799A-2(b)
5
Section 102(d)(1) of the No Surprises Act amended the Federal Employees Health Benefits (FEHB) Act, 5 U.S.C. 8901 et seq., by adding a new subsection (p) to 5 U.S.C. 8902. Under
this new provision, each FEHB Program contract must require a carrier to comply with requirements described in sections 9816 and 9817 of the Code, sections 716 and 717 of ERISA, and
sections 2799A-1 and 2799A-2 of the PHS Act (as applicable) in the same manner as these provisions apply with respect to a group health plan or health insurance issuer offering group or
individual health insurance coverage.
6
26 U.S.C. 9816.
7
29 U.S.C. 1185e, et seq.
8
42 U.S.C. 300gg–111, et seq.
9
26 U.S.C. 9816(c)(8).
10
29 U.S.C. 1185e(c)(8).
11
42 U.S.C. 300gg–111(c)(8).
12
26 U.S.C. 9817.
13
29 U.S.C. 1185f, et seq.
14
42 U.S.C. 300gg–112, et seq.
15
42 U.S.C. 300gg-131-139.
16
86 FR 36872 (July 13, 2021).
17
86 FR 55980 (October 7, 2021).
18
87 FR 52618 (August 26, 2022).
19
26 U.S.C. 9816 and 26 U.S.C. 9817.
20
29 U.S.C. 1185e, et seq. and 29 U.S.C. 1185f, et seq.
21
42 U.S.C. 300gg–111, et seq. and 42 U.S.C. 300gg–112, et seq.
22
References to a “participating facility” in this preamble mean a “participating health care facility,” as defined at 26 CFR 54.9816-3T, 29 CFR 2590.716-3, and 45 CFR 149.30.
23
The interim final rules also include interim final regulations under 5 U.S.C. 8902(p) issued by OPM that specify how certain provisions of the No Surprises Act apply to health benefit
plans offered by carriers under the FEHB Act. These provisions apply to carriers in the FEHB Program with respect to contract years beginning on or after January 1, 2022. The disclosure
requirements at 45 CFR 149.430 regarding patient protections against balance billing are applicable as of January 1, 2022.
24
26 U.S.C. 9816(c) and 26 U.S.C. 9817(b).
25
29 U.S.C. 1185e(c) and 29 U.S.C. 1185f(b).

Bulletin No. 2024–5 575 January 29, 2024
of the PHS Act.
26
The rules apply to emer-
gency services, non-emergency services
furnished by nonparticipating providers
for patient visits to certain types of par-
ticipating health care facilities
27
(unless an
individual has been provided notice and
waived the individual’s surprise billing
protections, in accordance with 45 CFR
149.410 or 149.420, as applicable), and
air ambulance services furnished by non-
participating providers of air ambulance
services, for situations in which neither a
specified State law as defined in 26 CFR
54.9816-3T, 29 CFR 2590.716-3, and
45 CFR 149.30 nor an All-Payer Model
Agreement under section 1115A of the
Social Security Act applies.
To implement the Federal IDR pro-
cess, the October 2021 interim final rules
include requirements governing the costs
of the Federal IDR process. Under sec-
tion 9816(c)(5)(F)(i) of the Code,
28
sec-
tion 716(c)(5)(F)(i) of ERISA,
29
section
2799A-1(c)(5)(F)(i) of the PHS Act,
30

and the October 2021 interim final rules,
the party whose offer is not selected is
responsible for the payment of the fee
charged by the certified IDR entity (certi-
fied IDR entity fee).
31
Under the October
2021 interim final rules, as a condition of
certification, the certified IDR entity must
notify the Departments of the amount of
the certified IDR entity fees it intends to
charge for payment determinations, which
is limited to a fixed certified IDR entity
fee amount for single determinations and
a separate fixed certified IDR entity fee
amount for batched determinations.
32
Each
of these fixed certified IDR entity fees
must be within a range set forth in guid-
ance by the Departments, unless the certi-
fied IDR entity receives written approval
from the Departments to charge a certified
IDR entity fee outside that range.
33
The
October 2021 interim final rules describe
the considerations that the Departments
will use to develop the certified IDR entity
fee ranges, including the anticipated time
and resources needed for certified IDR
entities to meet the requirements of those
interim final rules, the volume of payment
determinations, and the capacity of the
Federal IDR process to efficiently handle
the volume of IDR initiations and pay-
ment determinations, and provide that the
Departments will review and update the
allowable fee ranges annually based on
these factors, the impact of inflation, and
other cost increases. Those rules also pro-
vide that on an annual basis, the certified
IDR entity may update its certified IDR
entity fees within the ranges set forth in
current guidance and seek approval from
the Departments to charge fixed certified
IDR entity fees beyond the upper or lower
limits for certified IDR entity fees.
34
Additionally, pursuant to section
9816(c)(8) of the Code,
35
section 716(c)
(8) of ERISA,
36
and section 2799A-1(c)
(8) of the PHS Act,
37
and under the Octo-
ber 2021 interim final rules, each party
must pay an administrative fee for partic-
ipating in the Federal IDR process. The
administrative fee is established in guid-
ance in a manner so that, in accordance
with the requirements of section 9816(c)
(8)(B) of the Code,
38
section 716(c)(8)(B)
of ERISA,
39
and section 2799A-1(c)(8)(B)
of the PHS Act,
40
the total administrative
fees paid for a year are estimated to be
equal to the amount of expenditures esti-
mated to be made by the Departments in
carrying out the Federal IDR process for
that year.
41
Contemporaneously with the Octo-
ber 2021 interim final rules, the Depart-
ments released the Calendar Year 2022
Fee Guidance for the Federal Independent
Dispute Resolution Process Under the No
Surprises Act (October 2021 guidance),
setting the administrative fee for both
parties to a dispute at $50 per party.
42
The
October 2021 guidance also established
the range for fixed certified IDR entity
fees for single determinations as $200–
$500, and the range for fixed certified IDR
entity fees for batched determinations as
$268–$670, unless the Departments oth-
erwise grant approval for the certified
IDR entity to charge a fee outside these
ranges. In October 2022, the Depart-
ments released the Calendar Year 2023
Fee Guidance for the Federal Independent
Dispute Resolution Process Under the No
Surprises Act (October 2022 guidance),
again setting the administrative fee for
both parties to a dispute at $50 per party.
43

The October 2022 guidance explained that
the data available regarding usage of the
Federal IDR process was not sufficiently
reliable to support a change to either the
26
42 U.S.C. 300gg–111(c) and 42 U.S.C. 300gg–112(b).
27
A health care facility, in the context of non-emergency services, is defined as (1) a hospital (as defined in section 1861(e) of the Social Security Act), (2) a hospital outpatient department,
(3) a critical access hospital (as defined in section 1861(mm)(1) of the Social Security Act), or (4) an ambulatory surgical center described in section 1833(i)(1)(A) of the Social Security Act.
Code section 9816(b)(2)(A)(ii), ERISA section 716(b)(2)(A)(ii), and PHS Act section 2799A–1(b)(2)(A)(ii). 26 CFR 54.9816-3T, 29 CFR 2590.716-3, and 45 CFR 149.30.
28
26 U.S.C. 9816(c)(5)(F)(i).
29
29 U.S.C. 1185e(c)(5)(F)(i).
30
42 U.S.C. 300gg–111(c)(5)(F)(i).
31
In the case of a batched dispute, the party with fewest determinations in its favor is considered the non-prevailing party and is responsible for paying the certified IDR entity fee. In the event
that each party prevails in an equal number of determinations, the certified IDR entity fee will be split evenly between the parties. 86 FR 55980, 56001.
32
26 CFR 54.9816-8T(e)(2)(vii), 29 CFR 2590.716-8(e)(2)(vii), and 45 CFR 149.510(e)(2)(vii).
33
Id.
34
Id.
35
26 U.S.C. 9816(c)(8).
36
29 U.S.C. 1185e(c)(8).
37
42 U.S.C. 300gg–111(c)(8).
38
26 U.S.C. 9816(c)(8)(B).
39
29 U.S.C. 1185e(c)(8)(B).
40
42 U.S.C. 300gg–111(c)(8)(B).
41
26 CFR 54.9816-8T(d)(2)(ii), 29 CFR 2590.716-8(d)(2)(ii), and 45 CFR 149.510(d)(2)(ii).
42
Centers for Medicare & Medicaid Services (September 30, 2021). Calendar Year 2022 Fee Guidance for the Federal Independent Dispute Resolution Process under the No Surprises Act.
https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Technical-Guidance-CY2022-Fee-Guidance-Federal-Independent-Dispute-Resolution-Process-NSA.pdf.
43
Centers for Medicare & Medicaid Services (October 31, 2022). Calendar Year 2023 Fee Guidance for the Federal Independent Dispute Resolution Process under the No Surprises Act.
https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/cy2023-fee-guidance-federal-independent-dispute-resolution-process-nsa.pdf.

January 29, 2024 576 Bulletin No. 2024–5
estimated number of payment determina-
tions for which administrative fees would
be paid or the estimated ongoing program
costs for 2023; therefore, the 2023 admin-
istrative fee amount due from each party
for participating in the Federal IDR pro-
cess would remain the same as the 2022
administrative fee amount. The October
2022 guidance permits certified IDR enti-
ties to charge a fee between $200 and $700
for single determinations and between
$268 and $938 for batched determina-
tions, unless the Departments otherwise
grant approval for the certified IDR entity
to charge a fee outside of these ranges. In
addition, to account for the heightened
workload for batched determinations, the
October 2022 guidance permits a certi-
fied IDR entity to charge the following
percentage of its approved certified IDR
entity batched determination fee (“batch-
ing percentage”) for batched determina-
tions, which are based on the number of
line items initially submitted in the batch:
• 2-20 line items: 100 percent of the
approved batched determination fee;
• 21-50 line items: 110 percent of the
approved batched determination fee;
• 51-80 line items: 120 percent of the
approved batched determination fee;
and
• 81 line items or more: 130 percent of
the approved batched determination
fee.
In December 2022, the Departments
released the Amendment to the Calendar
Year 2023 Fee Guidance for the Federal
Independent Dispute Resolution Process
Under the No Surprises Act: Change in
Administrative Fee (December 2022 guid-
ance), which amended the $50 per party
administrative fee set in the October 2022
guidance to $350 for calendar year 2023.
44

The change in the administrative fee for
2023 reflected the additional costs to the
Departments to carry out the Federal IDR
process as a result of the Departments’
enhanced role in calendar year 2023 in
conducting pre-eligibility reviews to
allow the certified IDR entities to com-
plete their eligibility determinations more
efficiently,
45
as well as systemic improve-
ments that allowed for the aggregation of
data needed to estimate the rate at which
disputes were determined eligible for the
Federal IDR process and the rate at which
one or both parties paid the administra-
tive fee for purposes of calculating the
administrative fee. The December 2022
guidance did not amend the certified IDR
entity fee ranges provided in the October
2022 guidance.
C. Recent Litigation
On November 30, 2022, the Texas
Medical Association, Tyler Regional Hos-
pital, and a Texas physician filed a lawsuit
(TMA III)
46
against the Departments and
OPM, asserting that the July 2021 interim
final rules,
47
including the regulations
governing how the qualifying payment
amount (QPA) should be calculated, and
certain related guidance documents con-
flicted with the statutory language. On
August 24, 2023, the U.S. District Court
for the Eastern District of Texas (District
Court) issued a memorandum opinion and
order
48
that vacated certain portions of the
July 2021 interim final rules and associ-
ated regulatory provisions
49
and portions
of guidance documents,
50
including por-
tions that provided the methodology for
calculating the QPA and interpretations
for certified IDR entities related to the
processing of disputes for air ambulance
services.
On January 30, 2023, the Texas Med-
ical Association, Houston Radiology
Associated, Texas Radiological Society,
Tyler Regional Hospital, and a Texas phy-
sician filed a lawsuit (TMA IV)
51
against
the Departments and OPM, asserting
that the December 2022 guidance
52
that
set the $350 per party administrative fee
amount for 2023 was unlawfully issued
without notice and comment rulemak-
ing.
53
On August 3, 2023, the District
Court issued a memorandum opinion and
order
54
vacating the portion of the Decem-
ber 2022 guidance
55
that increased the
administrative fee for the Federal IDR
process to $350 per party for disputes ini-
tiated during the calendar year beginning
January 1, 2023. The District Court also
vacated certain provisions of the October
2021 interim final rules setting forth the
batching criteria under which multiple
IDR items or services may be considered
jointly as part of a single IDR dispute.
56

On August 11, 2023, the Departments
44
Centers for Medicare & Medicaid Services (December 23, 2022). Amendment to the Calendar Year 2023 Fee Guidance for the Federal Independent Dispute Resolution Process under the
No Surprises Act: Change in Administrative Fee. https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/amended-cy2023-fee-guidance-federal-independent-dispute-re-
solution-process-nsa.pdf.
45
Centers for Medicare & Medicaid Services (November 21, 2022). Notice of the Federal Independent Dispute Resolution (IDR) Team Technical Assistance to Certified Independent Dispute
Resolution Entities (IDREs) in the Dispute Eligibility Determination Process. https://www.cms.gov/files/document/idre-eligibility-support-guidance-11212022-final-updated.pdf.
46
Complaint, Tex. Med. Ass’n v. U. S. Dep’t of Health and Human Servs., No. 6:22-cv-00450-JDK (E.D. Tex. Nov. 30, 2022) (ECF No. 1).
47
86 FR 36872 (July 13, 2021).
48
See Memorandum Opinion and Order, Tex. Med. Ass’n. v. U.S. Dep’t of Health & Hum. Servs., No. 6:22-cv-00450-JDK, 2023 WL 5489028 (E.D. Tex. Aug. 24, 2023).
49
Specifically, the District Court vacated certain provisions of 26 CFR 54.9816-6T and 54.9817-1T, 29 CFR 2590.716-6 and 2590.717-1, and 45 CFR 149.130 and 149.140. The District Court
also vacated 5 CFR 890.114(a), insofar as it requires compliance with the vacated regulations and guidance.
50
Specifically, the District Court vacated FAQs 14 and 15 of FAQs about Affordable Care Act and Consolidated Appropriations Act, 2021 Implementation Part 55 (August 19, 2022), as well
as portions of Technical Guidance for Certified IDR Entities at 2-3 (August 18, 2022).
51
Complaint, Tex. Med. Ass’n. v. U. S. Dep’t of Health and Human Servs., No. 6:23-cv-00059-JDK (E.D. Tex. Jan. 30, 2023) (ECF No. 1).
52
Centers for Medicare & Medicaid Services (December 23, 2022). Amendment to the Calendar Year 2023 Fee Guidance for the Federal Independent Dispute Resolution Process Under the
No Surprises Act: Change in Administrative Fee. https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/amended-cy2023-fee-guidance-federal-independent-dispute-re-
solution-process-nsa.pdf.
53
Complaint, Tex. Med. Ass’n. v. U. S. Dep’t of Health and Human Servs., No. 6:23-cv-00059-JDK (E.D. Tex. Jan. 30, 2023) (ECF No. 1).
54
See Memorandum Opinion and Order, Tex. Med. Ass’n. v. U.S. Dep’t of Health & Hum. Servs., No. 6:23-cv-00059-JDK, 2023 WL 4977746 (E.D. Tex. Aug. 3, 2023).
55
Centers for Medicare & Medicaid Services (December 23, 2022). Amendment to the Calendar Year 2023 Fee Guidance for the Federal Independent Dispute Resolution Process under the
No Surprises Act: Change in Administrative Fee. https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/amended-cy2023-fee-guidance-federal-independent-dispute-re-
solution-process-nsa.pdf.
56
Specifically, the District Court vacated the requirement under 26 CFR 54.9816-8T(c)(3)(i)(C), 29 CFR 2590.716-8(c)(3)(i)(C), and 45 CFR 149.510(c)(3)(i)(C) that for a qualified IDR
item and service to be considered the same or similar item and service, it must be billed under the same service code or a comparable code under a different procedural code system, such as
the Current Procedural Terminology (CPT) codes with modifiers, if applicable, Healthcare Common Procedure Coding System (HCPCS) with modifiers, if applicable, or Diagnosis-Related
Group (DRG) codes with modifiers, if applicable.

Bulletin No. 2024–5 577 January 29, 2024
released guidance
57
to reflect the TMA IV
opinion and order related to the adminis-
trative fee to clarify that the $50 per party
per dispute administrative fee amount
established in the October 2022 guidance
applies for disputes initiated on or after
August 3, 2023, and until the Departments
take action to set a new administrative fee
amount.
On October 6, 2023, the Departments
and OPM released “FAQs About Consol-
idated Appropriations Act, 2021 Imple-
mentation Part 62”
58
to provide guidance
related to the TMA III opinion and order.
On November 28, 2023, the Departments
released guidance in accordance with the
TMA III and TMA IV opinions and orders
59

to clarify how certified IDR entities should
determine whether a dispute is appropri-
ately batched and how to submit single
and batched air ambulance disputes.
60
D. Federal Independent Dispute
Resolution Operations Proposed Rules
On November 3, 2023, the Depart-
ments published the Federal Independent
Dispute Resolution Operations proposed
rules
61
(IDR Operations proposed rules).
Those proposed rules included new pro-
posed requirements for disclosing infor-
mation when initiating the Federal IDR
process and the provision of certain claims
codes with paper or electronic remittances.
Additionally, those proposed rules would
amend certain requirements related to the
open negotiation period, initiation of the
Federal IDR process, eligibility determi-
nations, batched disputes, extensions due
to extenuating circumstances, and the col-
lection of administrative fees and certified
IDR entity fees. Lastly, those proposed
rules would require plans and issuers to
register with the Federal IDR portal.
With respect to the administrative fee,
the Departments proposed in the IDR
Operations proposed rules to collect the
administrative fee directly from the par-
ties rather than having the certified IDR
entities collect the administrative fee on
the Departments’ behalf. The Depart-
ments also proposed required timeframes
for the initiating and non-initiating parties
to pay the administrative fee and proposed
to establish consequences for non-pay-
ment of the administrative fee for each
party. Finally, to ensure that the Federal
IDR process is accessible to all parties,
the Departments proposed to charge both
parties a reduced administrative fee when
the highest offer made during open nego-
tiation by either party was less than a
predetermined threshold and proposed to
charge the non-initiating party a reduced
administrative fee when the dispute is
determined ineligible by either the cer-
tified IDR entity or the Departments, as
applicable.
To align with these proposals, the
Departments also set forth the methodol-
ogy inputs used to calculate the proposed
administrative fee amounts in the pre-
amble to the IDR Operations proposed
rules that would be effective for disputes
initiated on or after January 1, 2025. The
Departments proposed that the full admin-
istrative fee amount would be $150 per
party per dispute, the reduced administra-
tive fee for both parties when the highest
offer made by either party during open
negotiation was less than the threshold
would be $75 per party per dispute (50
percent of the full administrative fee
amount), and the reduced administrative
fee for non-initiating parties in ineligible
disputes would be $30 per non-initiating
party per ineligible dispute (20 percent of
the full administrative fee amount).
The inputs to the methodology set forth
in this preamble and the administrative fee
amount the Departments are finalizing in
these final rules are effective for disputes
initiated on or after the effective date of
these final rules. In contrast, the proposed
administrative fee structure and adminis-
trative fee amounts based on inputs to the
methodology set forth in the IDR Opera-
tions proposed rules, if finalized, would be
effective for disputes initiated on or after
January 1, 2025. The administrative fee
policies finalized in these final rules are
effective, and unchanged by the propos-
als in the IDR Operations proposed rules,
unless and until superseding administra-
tive fee policies in the IDR Operations
proposed rules are adopted.
E. Public Comments Received in
Response to Proposed Rules
In the September 26, 2023 Federal
Register, the Departments published the
Federal Independent Dispute Resolution
(IDR) Process Administrative Fee and
Certified IDR Entity Fee Ranges proposed
rules (IDR Fees proposed rules),
62
which
proposed to amend existing regulations to
provide that the administrative fee amount
charged by the Departments to participate
in the Federal IDR process, and the ranges
for certified IDR entity fees for single and
batched determinations, would be set by
the Departments through notice and com-
ment rulemaking. The IDR Fees proposed
rules also discussed the methodology used
to calculate the administrative fee and the
considerations used to develop the certi-
fied IDR entity fee ranges. Finally, the
IDR Fees proposed rules proposed the
amount of the administrative fee and the
certified IDR entity fee ranges for disputes
initiated on or after the later of the effec-
tive date of these rules or January 1, 2024.
The Departments received 44 com-
ments on many different aspects of the
IDR Fees proposed rules. In particular, the
Departments received many comments
stating that the administrative fee amount
57
U.S. Department of Health and Human Services, U.S. Department of Labor, and U.S. Department of the Treasury (August 2023). Federal Independent Dispute Resolution (IDR) Process
Administrative Fee FAQs. https://www.cms.gov/files/document/idr-admin-fees-faqs-081123-508.pdf-0.
58
See U.S. Department of Health and Human Services, U.S. Department of Labor, U.S. Department of Treasury, Office of Personnel Management (October 6, 2023), FAQs about Consolidated
Appropriations Act, 2021 Implementation Part 62, available at https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/aca-part-62.pdf and https://www.
cms.gov/files/document/faqs-part-62.pdf.
59
See U.S. Department of Health and Human Services, U.S. Department of Labor, U.S. Department of Treasury, Office of Personnel Management (November 28, 2023), FAQs about Consol-
idated Appropriations Act, 2021 Implementation Part 63, available at https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/aca-part-62.pdf and https://
www.cms.gov/files/document/faqs-part-63.pdf.
60
See U.S. Department of Health and Human Services, U.S. Department of Labor, U.S. Department of Treasury, Office of Personnel Management (November 28, 2023), Federal Independent
Dispute Resolution (IDR) Process Batching and Air Ambulance FAQs, available at https://www.cms.gov/files/document/faqs-batching-air-ambulance.pdf.
61
88 FR 75744.
62
88 FR 65888.

January 29, 2024 578 Bulletin No. 2024–5
and the certified IDR entity fee ranges
create a barrier to accessing the Federal
IDR process for many parties, particularly
small, rural, or independent providers, and
these comments supported retaining the
current $50 per party per dispute adminis-
trative fee amount. The Departments also
received many comments on the proposed
certified IDR entity fee ranges, particularly
the proposed additional tiered batched fee
range for disputes with more than 25 line
items. While some commenters supported
the increased flexibility for certified IDR
entity fee ranges, many commenters were
concerned about the proposed further
increases in the certified IDR entity fee
ranges. The Departments respond to these
comments in section II of this preamble.
Many comments concerned mat-
ters that were outside of the scope of
the proposed rules and therefore are not
addressed in these final rules. For exam-
ple, the Departments received comments
stating that the current Federal IDR pro-
cess lacks the efficiency needed to resolve
disputes quickly. The Departments also
received many comments related to the
eligibility determination process, includ-
ing on difficulties determining eligibility
in States with a specified State law and
the lack of information provided by plans
and issuers. Comments on the efficiency
of the Federal IDR process and eligibil-
ity determinations relate to operations
that are outside of the scope of these final
rules’ limited focus on the administrative
fee and certified IDR entity fee ranges and
the processes for setting such amounts.
The Departments encourage interested
parties to submit comments regarding the
proposals included in the IDR Operations
proposed rules, including the proposal to
establish a Departmental eligibility review
process, in accordance with the instruc-
tions set forth in those proposed rules.
63
Some other out-of-scope comments
addressed the impacts of the Federal IDR
portal closure, which occurred in response
to litigation previously described in this
preamble. For example, the Departments
received comments requesting that, as a
result of TMA IV, the Departments should
refund $300 to each party that paid a
$350 administrative fee between Janu-
ary 1, 2023 and August 3, 2023, and the
Departments should offer an extension to
parties that would have initiated a dispute
if the administrative fee during that time
was $50, rather than $350, to now initiate
that dispute. The Departments note that
this relief was requested by the plaintiffs
in TMA IV and was denied by the court.
64

Comments also addressed the impact of
TMA III on the calculation of the QPA,
specifically asking the Departments to
address underpayments to providers due
to purported artificially suppressed QPAs.
Additionally, the Departments received
comments related to the batching require-
ments for submission of disputes. Some
of these comments addressed specific dif-
ficulties in batching emergency medicine,
radiology, and anesthesiology services
and expressed a desire to broaden the
batching criteria. While the IDR Opera-
tions proposed rules included proposals
related to the batching requirements, these
comments were outside the scope of this
rulemaking because the IDR Fees pro-
posed rules did not propose any changes
to the batching requirements or calcula-
tion of the QPA.
Finally, the Departments received
many comments suggesting different
administrative fee structures. For exam-
ple, the Departments received comments
suggesting that the administrative fee
amount be split between the parties, be
refundable to the prevailing party, be
funded 75 percent by plans and issuers
and 25 percent by providers or be payable
at the end of the Federal IDR process.
The Departments also received comments
recommending a variable administrative
fee amount tied to the amount in dispute
or the QPA, either for all disputes or just
for batched disputes. Further comments
suggested capping the administrative fee
amount or imposing a base administrative
fee amount and an additional tiered fee
amount based on the amount in dispute.
As a result of the TMA IV opinion and
order having set aside the Departments’
guidance establishing administrative fees,
the Departments set a goal of establishing
in rulemaking administrative fee amounts
that would be effective as close to January
1, 2024 as possible, because the current
$50 administrative fee amount is insuffi-
cient to satisfy the statutory requirement
that the total amount of fees paid for the
year be estimated to be equal to the amount
of expenditures estimated to be made for
the year in carrying out the Federal IDR
process. If the Departments were to con-
tinue to impose a $50 per party per dis-
pute administrative fee amount through-
out 2024, the Departments estimate that
they would collect approximately $24.6
million in administrative fees for the year
(492,000 administrative fees paid x $50
per party per dispute), as discussed fur-
ther in section IV.D.2.a of this preamble.
As discussed further in section II.A of this
preamble, the Departments estimate that
their expenditures to carry out the Fed-
eral IDR process in 2024 will be approx-
imately $56.6 million. Therefore, if the
administrative fee amount remains at $50
per party per dispute in 2024, the Depart-
ments would significantly under-collect
administrative fees required to carry out
the Federal IDR process. Accordingly,
to be able to implement an increase to
the administrative fee amount as soon
as possible, consistent with the statutory
requirement, the IDR Fees proposed rules
proposed the amount of the administrative
fee and the preamble to the proposed rules
described the methodology for calculating
it.
The Departments did not propose any
changes to the structure of the admin-
istrative fee as this would take longer to
develop and implement and would be
more efficiently operationalized with the
changes proposed in the IDR Operations
proposed rules, which are intended to be
more comprehensive. While the Depart-
ments considered alternative fee struc-
tures in this rulemaking, the Departments
were of the view that addressing the struc-
ture of the administrative fee in the IDR
Operations proposed rules would give
interested parties more time to comment,
consider, and prepare for any fee structure
change, because the effective date of the
IDR Operations proposed rules, if final-
ized, will be later than the effective date
of these final rules.
Additionally, the policies proposed in
the IDR Operations proposed rules would
63
See 88 FR 75744.
64
See Memorandum Opinion and Order, Tex. Med. Ass’n., et al. v. U.S. Dep’t of Health and Human Servs., et al., No. 6:23-cv-00059-JDK (E.D. Tex. August 3, 2023).

Bulletin No. 2024–5 579 January 29, 2024
require more time for the Departments to
develop and implement due to the sub-
stantial changes to the Federal IDR por-
tal required by those proposals, if final-
ized, including adopting new processes
to collect the administrative fees directly
from the parties and collecting differing
amounts of administrative fees from dif-
ferent parties in certain circumstances, as
described further in the IDR Operations
proposed rules. Therefore, the Depart-
ments deferred those proposed changes
to the Federal IDR process and adminis-
trative fee structure and collection pro-
cedures to the IDR Operations proposed
rules and prioritized completing this
rulemaking.
The Departments encourage inter-
ested parties to submit relevant comments
regarding batching and the administrative
fee structure, the new inputs to the admin-
istrative fee methodology, and the amount
of the fee proposed in the IDR Operations
proposed rules, in response to those pro-
posed rules.
65
The Departments also sought to estab-
lish in rulemaking certified IDR entity fee
ranges that would be effective as close to
January 1, 2024 as possible, because this
effective date would provide predictability
for certified IDR entities, who must plan
for and finalize their 2024 certified IDR
entity fixed fee amounts, and parties, who
must budget for their participation in the
Federal IDR process taking into account
both the administrative and certified IDR
entity fees. Establishing the certified IDR
entity fee ranges in rulemaking with an
effective date close to January 1, 2024
would also allow for greater transparency
than the current method of establishing
the fee ranges in guidance.
F. Scope and Purpose of Rulemaking
These final rules amend 26 CFR
54.9816-8(d)(2)(ii) and (e)(2)(vii), 29
CFR 2590.716-8(d)(2)(ii) and (e)(2)(vii),
and 45 CFR 149.510(d)(2)(ii) and (e)(2)
(vii) to provide that the administrative fee
amount and the ranges for certified IDR
entity fees for single and batched disputes
will be set by the Departments through
notice and comment rulemaking, rather
than in guidance published annually. The
preamble to this rulemaking also sets forth
the methodology used to calculate the
administrative fee amount and the consid-
erations used to develop the certified IDR
entity fee ranges. These rules also finalize
the administrative fee amount and certified
IDR entity fee ranges for disputes initiated
on or after the effective date of these rules.
The finalized administrative fee amount
and certified IDR entity fee ranges in these
rules will remain in effect until changed
by notice and comment rulemaking.
The IDR Fees proposed rules proposed
that the administrative fee amount and certi-
fied IDR entity fee ranges finalized in these
final rules would be effective for disputes
initiated on or after the later of the effective
date of these rules or January 1, 2024. As
these final rules will not be effective by Jan-
uary 1, 2024, the Departments are finaliz-
ing the proposal that the administrative fee
amount and certified IDR entity fee ranges
in these rules will be effective for disputes
initiated on or after the effective date of
these rules, which is 30 calendar days from
publication in the Federal Register.
II. Overview of the Final Rules—
Departments of the Treasury, Labor,
and HHS
A. Administrative Fee Amount and
Methodology
1. Summary of Proposed and Finalized
Policies
Under section 9816(c)(8)(A) of the
Code,
66
section 716(c)(8)(A) of ERISA,
67

section 2799A-1(c)(8)(A) of the PHS
Act,
68
and the October 2021 interim final
rules,
69
each party to a determination for
which a certified IDR entity is selected
must pay an administrative fee for partic-
ipating in the Federal IDR process. Under
section 9816(c)(8)(B) of the Code,
70
sec-
tion 716(c)(8)(B) of ERISA,
71
section
2799A-1(c)(8)(B) of the PHS Act,
72
and
the October 2021 interim final rules,
73
the
administrative fee is established in a man-
ner such that the total amount of adminis-
trative fees paid for a year are estimated
to be equal to the amount of expenditures
estimated to be made by the Departments
in carrying out the Federal IDR process
for that year.
The Departments proposed to estab-
lish the amount of the administrative fee
through notice and comment rulemaking
by amending 26 CFR 54.9816-8(d)(2)
(ii), 29 CFR 2590.716-8(d)(2)(ii), and
45 CFR 149.510(d)(2)(ii). The Depart-
ments also proposed at 26 CFR 54.9816-
8(d)(2)(ii), 29 CFR 2590.716-8(d)(2)
(ii), and 45 CFR 149.510(d)(2)(ii) that,
for disputes initiated on or after the later
of the effective date of these rules or
January 1, 2024, the administrative fee
amount would be $150 per party per dis-
pute, which would remain in effect until
changed by subsequent rulemaking.
74

Under the proposed rules, the Depart-
ments would have retained the flexibility
to update the administrative fee more or
less frequently than annually if the total
estimated amount of administrative fees
paid or amount of expenditures esti-
mated to be made by the Departments
in carrying out the Federal IDR process
changed such that a new administrative
fee amount would be required to satisfy
the requirement that the total amount of
administrative fees paid is estimated to
be equal to the amount of expenditures
estimated to be made by the Departments
in carrying out the Federal IDR process.
65
See 88 FR 75744.
66
26 U.S.C. 9816(c)(8)(A).
67
29 U.S.C. 1185e(c)(8)(A).
68
42 U.S.C. 300gg–111(c)(8)(A).
69
26 CFR 54.9816-8T(d)(2)(i), 29 CFR 2590.716-8(d)(2)(i), and 45 CFR 149.510(d)(2)(i).
70
26 U.S.C. 9816(c)(8)(B).
71
29 U.S.C. 1185e(c)(8)(B).
72
42 U.S.C. 300gg–111(c)(8)(B).
73
26 CFR 54.9816-8T(d)(2)(ii), 29 CFR 2590.716-8(d)(2)(ii), and 45 CFR 149.510(d)(2)(ii).
74
As previously mentioned, in the event the effective date of these final rules is after January 1, 2024, the $50 per party per dispute administrative fee amount in effect for 2023, as provided
in the October 2022 guidance, will continue to apply to disputes initiated between January 1, 2024 and the effective date of these rules.

January 29, 2024 580 Bulletin No. 2024–5
The Departments proposed to set the
administrative fee amount by estimating
the amount of expenditures made by the
Departments in carrying out the Federal
IDR process and dividing this amount by
the estimated total number of administra-
tive fees paid by the parties. As explained
in the preamble to the IDR Fees proposed
rules, the Departments estimated the total
number of administrative fees paid based
on the total volume of closed disputes.
For the purpose of calculating the
administrative fee amount in the IDR
Fees proposed rules, the Departments
projected that approximately 225,000 dis-
putes would be closed annually, resulting
in 450,000 administrative fees paid. Addi-
tionally, the Departments estimated that
the expenditures made by the Departments
for carrying out the Federal IDR process
in 2024 would be approximately $70 mil-
lion.
75
Using this methodology, proposed
in paragraphs 26 CFR 54.9816-8(d)(2)
(ii), 29 CFR 2590.716-8(d)(2)(ii), and 45
CFR 149.510(d)(2)(ii), the Departments
calculated the proposed administrative fee
for disputes initiated on or after the effec-
tive date of these rules, and continuing
until changed by subsequent rulemaking,
by dividing the annual expenditures of
approximately $70 million estimated to
be made by the Departments in carrying
out the Federal IDR process by 450,000,
the estimated annual number of admin-
istrative fees to be paid by the disputing
parties. This resulted in a proposed admin-
istrative fee amount of $150 per party per
dispute.
76
After considering comments received
on the proposals, as discussed further in
this preamble section, the Departments are
finalizing the policy to set the administra-
tive fee amount in notice and comment
rulemaking no more frequently than once
per calendar year. The Departments may
set the administrative fee less frequently
than annually if the Departments estimate
that the total amount of administrative fees
paid under the current administrative fee
amount would continue to be equal to the
amount of expenditures estimated to be
made by the Departments in carrying out
the Federal IDR process for the upcoming
calendar year.
Additionally, in response to comments
received on the proposals, the Depart-
ments are modifying the administrative
fee methodology used to estimate the
number of administrative fees paid. The
Departments will use the estimated num-
ber of administrative fees paid to certified
IDR entities, rather than the estimated
number of closed disputes, to estimate
the total number of administrative fees
paid. In addition, the Departments will
not assume, as set forth in the IDR Fees
proposed rules, a 25 percent reduction in
the volume of disputes as the result of the
District Court vacating certain batching
requirements in TMA IV. The Departments
are also revising the expenditures esti-
mated to be made by the Departments in
carrying out the Federal IDR process from
approximately $70 million to approxi-
mately $56.6 million to reflect a reduction
in the Departments’ anticipated assistance
with eligibility determinations, as dis-
cussed later in this preamble. Collectively,
these modifications to the methodology
result in a finalized administrative fee
amount of $115 per party per dispute for
disputes initiated on or after the effective
date of these rules. As the administrative
fee methodology in the IDR Operations
proposed rules included some of the same
elements as the administrative fee meth-
odology in the IDR Fees proposed rules,
the Departments will consider whether
any modifications made to the administra-
tive fee methodology in these final rules
should also be adopted when finalizing the
administrative fee amount using the meth-
odology proposed in the IDR Operations
proposed rules.
2. Summary of Comments Received and
Responses to Comments
a. Establishing the Administrative Fee in
Notice and Comment Rulemaking
Many commenters supported the pro-
posal to establish the administrative fee
in notice and comment rulemaking. Com-
menters stated that this transparent pro-
cess would allow the public to evaluate
the administrative fee amount and provide
feedback on the feasibility of providers
using the Federal IDR process. However,
several commenters opposed the proposal
to establish the administrative fee amount
more or less frequently than annually and
stated that adopting this proposal would
introduce uncertainty in the Federal IDR
process and would make budgeting more
challenging. These commenters requested
that the Departments update the adminis-
trative fee annually, to balance stability,
transparency, and responsiveness, which
they stated would mitigate the impact of
changes to the administrative fee. One
commenter supported the proposal to
establish the administrative fee amount
more or less frequently than annually, but
only if a mid-year change led to a decrease
to the administrative fee amount. Com-
menters also stated that any increases to
the administrative fee amount should be
on an annual basis with advance notice
to interested parties. One of these com-
menters stated that the administrative fee
amount should be set predictably and with
at least 90 days’ advance notice. Some
commenters requested further clarifica-
tion on the process for proposing and
finalizing administrative fee amounts in
notice and comment rulemaking.
The Departments agree that one of the
goals of establishing the administrative fee
amount in notice and comment rulemak-
ing is to foster transparency and allow
interested parties to provide feedback on
the methodology and process for setting
the proposed fee amount. The Depart-
ments recognize commenters’ concerns
about establishing the administrative fee
amount more or less frequently than annu-
ally, and the Departments are finalizing a
policy under which they would establish
the administrative fee amount no more
frequently than once per calendar year. In
addition, the Departments are finalizing
as proposed the proposal to change the
administrative fee amount less frequently
than annually if the expenditures estimated
to be made by the Departments in carrying
75
The list of expenditures associated with the estimated $70 million was provided in the IDR Fees proposed rules at 88 FR 65893.
76
As described in the IDR Fees proposed rules, the Departments estimated that the proposed administrative fee amount of $150 per party per dispute would result in an estimated annual
collection approximately equal to the estimated annual expenditures of approximately $70 million. See 88 FR 65888 at 65899.

Bulletin No. 2024–5 581 January 29, 2024
out the Federal IDR process and the esti-
mated total amount of administrative fees
paid in the upcoming year are estimated
to be equal. If the Departments determine
that the estimated total amount of admin-
istrative fees paid in a future year at the
current administrative fee amount would
be less than the expenditures estimated to
be made by the Departments in carrying
out the Federal IDR process for that year,
the Departments would propose to raise
the administrative fee amount in notice
and comment rulemaking. Alternatively,
if the Departments determine that the esti-
mated total amount of administrative fees
paid in a future year at the current admin-
istrative fee amount would be more than
the expenditures estimated to be made in
carrying out the Federal IDR process for
that year, the Departments would propose
to lower the administrative fee amount in
notice and comment rulemaking. Con-
sistent with the statute, the Departments
will set the administrative fee such that
the estimated total amount of adminis-
trative fees paid is equal to the amount of
expenditures estimated to be made by the
Departments in carrying out the Federal
IDR process.
77
The Departments also reiterate that
using the notice and comment rulemak-
ing process to establish the administrative
fee amount will provide interested parties
with substantial advance notice of fee
changes, so additional advance notice is
not needed. As described in the IDR Fees
proposed rules, the Departments will pro-
vide details on the methodology used to
determine the proposed administrative fee
amount, and the proposed administrative
fee amount, if finalized, would be effec-
tive prospectively. Interested parties will
be provided with a period to submit pub-
lic comments on the proposals, and the
Departments will consider all comments
submitted within the comment period in
developing the final rules.
In addition, other commenters raised
concerns regarding the amount of the
administrative fee changing between any
proposed and final rules. One commenter
did not support making changes to the
administrative fee amount between the
proposed and final rules, while another
commenter stated that any such changes
should be by no more than 10 percent.
The Departments acknowledge these
commenters’ suggestions but note that the
Departments may have more recent data
available to estimate the total amount of
administrative fees paid or the amount of
expenditures estimated to be made by the
Departments in carrying out the Federal
IDR process while developing the final
rules than they had while developing the
IDR Fees proposed rules, and it is reason-
able for the Departments to rely on the
more recent data in developing the final
rules, provided that they use the meth-
odology described in the preamble to the
IDR Fees proposed rules or a methodol-
ogy modified from the preamble to the
IDR Fees proposed rules in response to
comments. As in these final rules, these
circumstances may result in the Depart-
ments finalizing a different administrative
fee amount than the amount proposed.
The finalized administrative fee amount
will differ from the amount proposed, if
necessary, to comply with the statutory
requirement that the total administrative
fees paid are estimated to be equal to the
amount of expenditures estimated to be
made by the Departments in carrying out
the Federal IDR process.
78
One commenter was concerned about
the ability to comment on the administra-
tive fee amount rather than just the meth-
odology used to calculate the amount and
stated that only seeking comment on the
methodology could inhibit commenters’
ability to accurately express the impact of
the proposed fee amount on a disputing
party’s access to the Federal IDR process.
As previously explained, the Depart-
ments are finalizing a policy to establish
the administrative fee amount in notice
and comment rulemaking no more fre-
quently than once per calendar year and
will provide opportunity for comment
on any new proposed administrative fee
amount, as well as any changes to the
methodology used to calculate the admin-
istrative fee amount.
b. Administrative Fee Methodology
– Estimated Total Number of
Administrative Fees Paid
Many commenters opposed the
Departments’ proposed administrative
fee methodology for estimating the total
number of administrative fees to be paid.
Many commenters suggested that estimat-
ing the total number of administrative fees
paid based on the projected total number
of disputes closed would not capture all
disputes in which administrative fees are
paid. Some commenters were concerned
that this methodology could result in an
overpayment of administrative fees to the
Departments. One of these commenters
was concerned that the data from the six-
month period in 2023 used to estimate the
number of disputes closed would be rad-
ically different from 2024 data. Several
commenters suggested using other met-
rics to calculate the estimated total num-
ber of administrative fees paid, including
the number of disputes initiated, the num-
ber of disputes for which a certified IDR
entity fee was paid, and the number of dis-
putes for which parties submitted offers.
Moreover, some commenters asserted
that using disputes closed contradicts the
Departments’ regulations requiring each
party to pay the administrative fee at the
time the certified IDR entity is selected
and the Departments’ guidance permitting
certified IDR entities to collect the admin-
istrative fee from parties up to the time of
offer submission.
79
The Departments proposed to use the
projected total number of disputes closed
to calculate the administrative fee amount
because that metric reflected collections
under current collections processes,
80
and
77
Section 9816(c)(8)(B) of the Code, section 716(c)(8)(B) of ERISA, and section 2799A-1(c)(8)(B) of the PHS Act.
78
Id.
79
See 26 CFR 54.9816-8(d)(2)(i), 29 CFR 2590.716-8(d)(2)(i), and 45 CFR 149.510(d)(2)(i); see also section 4.8 of the Federal Independent Dispute Resolution (IDR) Process Guidance
for Certified IDR Entities. October 2022. https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/federal-independent-dispute-resolution-process-guidance-for-certi-
fied-idr-entities.pdf.
80
Under current guidance, the administrative fee may be collected by certified IDR entities up until the time the parties submit their offers, and therefore the administrative fee is not collected
for all disputes initiated. See, for example, Centers for Medicare & Medicaid Services (March 2023). Federal Independent Dispute Resolution (IDR) Process Guidance for Certified IDR
Entities. https://www.cms.gov/files/document/federal-idr-guidance-idr-entities-march-2023.pdf.

January 29, 2024 582 Bulletin No. 2024–5
the Departments were of the view that it
was a reliable metric upon which to base
the estimated total number of administra-
tive fees to be paid. However, after con-
sidering the comments, the Departments
agree with the commenters who stated
that estimating the total number of admin-
istrative fees paid using the projected
number of disputes closed would not cap-
ture all disputes in which administrative
fees are paid because administrative fees
may be paid for disputes that have not
yet been closed. To capture all disputes in
which parties pay administrative fees, the
Departments are finalizing the administra-
tive fee amount based on a methodology
that estimates the total number of admin-
istrative fees paid by projecting Federal
IDR portal data on the number of admin-
istrative fees paid to certified IDR entities,
as explained in the subsequent paragraphs.
The number of administrative fees paid to
certified IDR entities is currently the best
available metric in the Federal IDR por-
tal data to capture all administrative fees
parties pay for disputes in any stage of the
Federal IDR process.
In the preamble to the IDR Fees pro-
posed rules, the Departments set the
administrative fee amount based on the
projection that 225,000 disputes would be
closed annually. Because both initiating
and non-initiating parties to a dispute are
required to pay the administrative fee, the
Departments estimated in the preamble to
the IDR Fees proposed rules that 450,000
administrative fees would be paid annu-
ally, or 37,500 per month. As explained
above, in setting the administrative fee
in these final rules, the Departments are
using the total number of administrative
fees paid to certified IDR entities for dis-
putes in any stage of the Federal IDR pro-
cess after certified IDR entity selection.
Using the methodology being adopted in
these final rules, the Departments estimate
that 492,000 administrative fees will be
paid annually, or 41,000 administrative
fees will be paid per month, by the parties.
The Departments estimate the total num-
ber of administrative fees paid annually
based on the monthly average number of
administrative fees paid to certified IDR
entities between February 2023 and July
2023. This monthly average was approxi-
mately 41,000, and the Departments pro-
jected this figure forward by 12 months to
estimate that 492,000 administrative fees
will be paid annually.
The Departments are using data from
the same time period that was used in the
IDR Fees proposed rules (February 2023
to July 2023), without updating to newer
data. Data from this time period remains
the best available data to project future
trends due to portal closures and other
Federal IDR process changes that began
in August 2023 due to the TMA III and
TMA IV opinions and orders. While the
Departments considered using data from
the most recent six-month period prior
to the finalization of this rule (June 2023
to November 2023), they concluded this
would inaccurately reflect the monthly
average number of administrative fees
paid, as various aspects of the Federal
IDR process were temporarily suspended
from August 4, 2023 to October 6, 2023
for all disputes.
81
The Departments considered com-
ments providing alternatives for estimat-
ing the total number of administrative fees
paid in calculating the administrative fee
amount. Some commenters wanted the
Departments to estimate the total number
of administrative fees paid based on the
number of disputes initiated. This metric
is inaccurate for purposes of calculating
the administrative fee amount because the
administrative fee may not be collected
for all disputes initiated. The obligation
for parties to pay the administrative fee
attaches at the time of certified IDR entity
selection (with guidance permitting cer-
tified IDR entities to collect the adminis-
trative fee from parties until the time of
offer submission). Therefore, if a dispute
is withdrawn before selection of the cer-
tified IDR entity, there is no obligation
for the parties to pay administrative fees
for that dispute. For this reason, using the
total number of disputes initiated to esti-
mate the number of administrative fees to
be paid in the administrative fee method-
ology risks the Departments underfunding
the Federal IDR process.
82
Other commenters requested the
Departments to estimate the total number
of administrative fees paid based on the
number of disputes for which a certified
IDR entity fee was paid. Because parties
are not required to pay their certified IDR
entity fees and administrative fees at the
same time, the number of certified IDR
entity fees paid would not necessarily
reflect the number of administrative fees
paid. Therefore, this metric would also be
inaccurate for purposes of calculating the
administrative fee amount.
Finally, the Departments also consid-
ered estimating the total number of admin-
istrative fees paid based on the number
of disputes for which parties submitted
offers. However, the Departments did
not believe this metric would accurately
reflect the estimated number of adminis-
trative fees that would be paid, since par-
ties may pay administrative fees without
submitting offers. Thus, the metric could
understate the total number of administra-
tive fees paid.
In summary, the Departments are of
the view that it is most accurate to use the
total number of administrative fees paid
to certified IDR entities in the adminis-
trative fee methodology rather than the
other metrics suggested by commenters
in the prior paragraphs, as this metric
reflects actual administrative fees that
have been paid for disputes in any stage
of the Federal IDR process after certified
IDR entity selection.
83
Therefore, in rec-
ognition of commenters’ concerns about a
methodology that could underestimate the
total number of administrative fees paid in
2024, resulting in an overestimate of the
amount of the administrative fee needed
81
Of note, batched disputes and single disputes involving air ambulance services also remained suspended after October 6, 2023 and would not be reflected in the most recent data.
82
In the IDR Operations proposed rules, the Departments proposed to use the total volume of disputes projected to be initiated because the proposed operational changes in those rules, if
finalized, would result in the Departments’ collection of administrative fees closer to a dispute’s date of initiation, and therefore, it may be appropriate to estimate the total volume of admin-
istrative fees paid using the total volume of disputes initiated. 88 FR 75793.
83
As explained in these final rules, under current processes, the total volume of administrative fees paid to certified IDR entities is the best metric to use in the administrative fee methodology
to align with statute requiring the Departments to estimate the total number of administrative fees paid. As operations of the Federal IDR process improve over time, the Departments will
consider changes to the methodology to best estimate the total number of administrative fees paid.

Bulletin No. 2024–5 583 January 29, 2024
for 2024, the Departments are establish-
ing the administrative fee methodology
using the total number of administrative
fees paid to certified IDR entities, rather
than the total number of closed disputes,
to estimate the total number of administra-
tive fees paid in 2024.
The Departments also received com-
ments regarding the Departments’ pro-
jections of the total number of closed
disputes used to estimate the total number
of administrative fees paid. Several com-
menters suggested that the Departments’
estimate of 225,000 closed disputes is too
low. A few commenters suggested that the
Departments are underestimating utiliza-
tion of the Federal IDR process and rec-
ommended that the Departments analyze
the available data from States implement-
ing similar policies before the No Sur-
prises Act.
In the IDR Fees proposed rules, the
Departments estimated that 225,000
disputes would be closed annually, and
because both the initiating and non-initiat-
ing parties to a dispute are required to pay
the administrative fee, 450,000 adminis-
trative fees would be paid annually. The
Departments now estimate that 492,000
administrative fees will be paid to certified
IDR entities in the year, as described ear-
lier in this preamble section. The Depart-
ments continue to be of the view that Fed-
eral IDR process data is the best available
data to project trends in the Federal IDR
process, especially because regulations
and volume differ in State IDR processes.
As mentioned in the IDR Fees proposed
rules, the Departments initially anticipated
17,333 disputes involving non-air ambu-
lance services would be initiated during
the first year of implementation of the Fed-
eral IDR process. The Departments devel-
oped this estimate based on the experience
of New York State. However, the use of
State data resulted in the Departments
underestimating utilization of the Federal
IDR process, as nearly 335,000 disputes
were initiated in the Federal IDR process
between April 2022 and March 2023.
84
As
demonstrated by this result, past data from
State processes has limited applicability
in predicting future use of the Federal
IDR process. For this reason, the Depart-
ments are of the view that it is better to
use Federal IDR process data rather than
State data to estimate the total number of
administrative fees paid.
In addition, several commenters dis-
agreed with the Departments’ assumption
of a 25 percent reduction in the volume
of disputes in estimating the total number
of administrative fees paid to account for
the impact of TMA IV’s vacatur of batch-
ing regulations and guidance, or asked
for more detail on how the projected 25
percent reduction factor was determined,
including the details on how the batch-
ing of claims will be treated in the future.
One commenter noted that the vacatur of
the $350 administrative fee amount and
batching regulations as a result of TMA IV
allows many additional claims to become
economically viable, so the Departments
should expect dispute volume to increase.
Another commenter stated that the Depart-
ments cannot know with certainty that the
TMA IV opinion and order will decrease
the number of disputes. This commenter
also asserted that TMA IV did not affect
the batching criteria that serve as the larg-
est obstacle for emergency medicine, and
therefore there will not be large batches
in emergency medicine, which the com-
menter noted comprised over 70 percent
of disputes reflected in the Partial Report
on the Independent Dispute Resolution
(IDR) Process October 1 – December 31,
2022.
85
Moreover, a few commenters sug-
gested that the TMA III opinion and order
will increase dispute volume as providers
will continue to see low QPAs from plans
and issuers and will rely on the Federal
IDR process for appropriate payment. One
commenter agreed with the Departments’
assumption that the TMA IV opinion and
order will decrease the volume of dis-
putes but disagreed with the Departments’
rationale that the increased number of line
items will take more time to close. This
commenter expected that providers batch-
ing claims rather than submitting claims
individually would increase efficiencies in
the Federal IDR process.
After reviewing the comments, the
Departments have reconsidered the
assumption that the number of disputes
will decrease by 25 percent as a result of
TMA IV’s vacatur of batching regulations
and guidance. Therefore, the Departments
are not finalizing the projected 25 percent
reduction in the estimated total number of
administrative fees paid.
The Departments recognize that certain
batching criteria remain in place, such as
criteria that impact the batching of emer-
gency medicine claims, and items and ser-
vices included in such claims will have to
be submitted as separate disputes if they do
not comply with the applicable batching
criteria.
86
Moreover, because the Depart-
ments are finalizing the administrative
fee amount based on a methodology that
estimates the total number of administra-
tive fees paid based on the total number of
administrative fees paid to certified IDR
entities, rather than the total number of
closed disputes, the methodology no lon-
ger requires the Departments to make an
assumption on whether batched disputes
will take more time to close after the vaca-
tur of the batching regulations as a result
of TMA IV. In addition, the Departments
do not have data available to support com-
menters’ assertion that TMA III will lead
more providers to rely on the Federal IDR
process for appropriate claims payment.
Plans and issuers are required to calculate
QPAs using a good faith, reasonable inter-
pretation of the applicable statutes and
regulations that remain in effect after the
TMA III opinion and order.
87
Furthermore,
in their experience operating the Federal
IDR process, the Departments have not
seen a clear or quantifiable relationship
between changes in policy and changes
in the number of disputes initiated. The
84
Centers for Medicare & Medicaid Services (April 27, 2023). Federal Independent Dispute Resolution Process - Status Update. https://www.cms.gov/files/document/federal-idr-processsta-
tus-update-april-2023.pdf.
85
U.S. Department of Health and Human Services, U.S. Department of Labor, U.S. Department of the Treasury. Partial Report on the Independent Dispute Resolution (IDR) Process October
1 – December 31, 2022. https://www.cms.gov/files/document/partial-report-idr-process-octoberdecember-2022.pdf.
86
U.S. Department of Health and Human Services, U.S. Department of Labor, U.S. Department of Treasury, Office of Personnel Management (October 6, 2023). FAQs about Consolidated
Appropriations Act, 2021 Implementation Part 62. https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/aca-part-62.pdf and https://www.cms.gov/files/
document/faqs-part-62.pdf.
87
Id.

January 29, 2024 584 Bulletin No. 2024–5
Departments are of the view that the his-
torical data from February 2023 to July
2023 is the best available data at this time
to project utilization of the Federal IDR
process in 2024, and the Departments are
therefore finalizing the administrative fee
amount based on a methodology that does
not include a 25 percent reduction in the
volume of disputes.
c. Administrative Fee Methodology –
Estimated Expenditures
The Departments also received com-
ments related to their estimated expen-
ditures for purposes of calculating the
administrative fee amount. Several com-
menters suggested that the Departments
should disclose more data supporting the
estimated costs to carry out the Federal
IDR process in the administrative fee
methodology to provide the public with
an opportunity to comment. Some of these
commenters asserted that the IDR Fees
proposed rules did not provide enough
detail on the estimated expenditures to
allow interested parties to provide mean-
ingful comment on the proposed adminis-
trative fee amount. One commenter urged
the Departments to establish a regular
process for detailing the Departments’
data on the administrative fee, including
an annual disclosure statement with a bal-
ance sheet, to promote transparency and
predictability. A few commenters disputed
the Departments’ reference that Freedom
of Information Act (FOIA) regulations
prevent the Departments from providing
detail on certain estimated expenditure
amounts. These commenters stated that
without this transparency, interested par-
ties were not afforded an opportunity to
meaningfully comment on the proposals
related to the administrative fee amount
and methodology inputs.
The Departments are finalizing the
administrative fee amount based on
a methodology that divides the “esti-
mated,” rather than “projected,” expen-
ditures to carry out the Federal IDR
process by the estimated total number
of administrative fees to be paid in the
year. The use of “estimated” rather than
“projected” expenditures is to ensure the
terminology used to describe the method-
ology is consistent with that of the stat-
utory text.
88
To calculate the estimated
expenditures to carry out the Federal
IDR process, the Departments included
the Federal resources needed to carry out
the Federal IDR process, such as future
personnel and contract costs. The pream-
ble to the IDR Fees proposed rules pro-
vided an overview of the future contract
costs and Federal resources included in
the estimated expenditures and explained
that the estimated expenditures to carry
out the Federal IDR process in 2024 were
approximately $70 million. The Depart-
ments disagree with commenters that the
Departments did not provide sufficient
information to allow meaningful com-
ment. In particular, in the preamble to
the IDR Fees proposed rules, the Depart-
ments provided details on the types of
costs that are included in the estimated
expenditures.
89
While the Departments described the
contract costs and Federal resources asso-
ciated with estimated expenditures to
carry out the Federal IDR process in the
preamble to the IDR Fees proposed rules,
in response to comments requesting addi-
tional specifics on the estimated expen-
ditures and in an effort to promote trans-
parency, the Departments are providing
further detail on costs included in the total
estimated expenditures in these final rules
within the bounds of the Departments’
ability to disclose these amounts. To avoid
releasing sensitive contract information,
the Departments are breaking down the
costs, which include the future contract
and Federal personnel costs, by category
of expenditure, and providing approxi-
mate cost estimates for carrying out the
following categories of Federal IDR pro-
cess activities:
90
• Maintaining, operating, and improv-
ing the Federal IDR portal, certifying
IDR entities, and collecting data from
certified IDR entities (approximately
$26,360,000);
• Conducting program integrity activ-
ities, such as certain QPA audits (as
further described subsequently in
this preamble) and IDR decision
audits, and receiving and investigat-
ing Federal IDR process-related com-
plaints (approximately $13,060,000,
of which QPA audits resulting from
complaints filed by providers, facil-
ities, or providers of air ambulance
services comprise approximately
$5,000,000);
• Providing outreach to parties and
technical assistance to certified IDR
entities, including assisting with eli-
gibility determinations when the vol-
ume of disputes submitted exceeds
the capacity of certified IDR enti-
ties to perform those determinations
(approximately $11,630,000, of
which assisting with eligibility deter-
minations comprises approximately
$10,000,000);
91
and
• Collecting administrative fees
(approximately $5,530,000), which
includes costs to invoice certified
IDR entities for administrative fees
collected, provide the system infra-
structure for certified IDR entities to
record and remit administrative fees
collected, track data on fees collected
and make continuous improvements
to the collections process and invoic-
ing systems.
The Departments are publishing sum-
mary-level estimated budget information
and have provided meaningful data for
public input for the purposes of calculat-
ing the administrative fee amount. The
Departments intend to continue to provide
data on the Federal IDR process to pro-
mote transparency and predictability in
the administrative fee amount, including
publishing quarterly public reports with
88
Section 9816(c)(8)(B) of the Code, section 716(c)(8)(B) of ERISA, and section 2799A-1(c)(8)(B) of the PHS Act.
89
88 FR 65893.
90
As discussed further later in this preamble section, the Departments have reconsidered costs associated with total estimated expenditures of carrying out the Federal IDR process and are
revising the total estimated expenditures for 2024 from approximately $70 million to approximately $56.6 million. Additionally, certain expenses apply across multiple categories that were
included in the IDR Fees proposed rules. This revised combination of categories better provides a meaningful cost estimate of these activities.
91
Centers for Medicare & Medicaid Services (November 21, 2022). Notice of the Federal Independent Dispute Resolution (IDR) Team Technical Assistance to Certified Independent Dispute
Resolution Entities (IDREs) in the Dispute Eligibility Determination Process. https://www.cms.gov/files/document/idre-eligibility-support-guidance-11212022-final-updated.pdf.

Bulletin No. 2024–5 585 January 29, 2024
the Departments’ expenditures and admin-
istrative fee collections.
92
In response to commenters’ concerns
regarding the Departments’ reference to
the applicability of FOIA exemptions to
information shared during the rulemaking
process, the Departments clarify that they
will disclose information in response to
any requests in accordance with the FOIA
and accompanying regulations. However,
the Departments are not publishing spe-
cific future contract estimates in this rule
in response to commenters’ requests for
more detail on estimated expenditures of
Federal IDR process activities and the
data underlying those estimates because
publishing those contract estimates could
undermine future contract procurements.
For example, if the Departments were to
publish the projected future cost of the
contracts used to maintain the Federal IDR
portal, the Federal Government would be
meaningfully disadvantaged in future con-
tract negotiations related to the Federal
IDR portal, as bidders would know how
much the Departments anticipate such
a future contract being worth. Although
current contract awards are published and
publicly available,
93
these award amounts
do not necessarily reflect the future value
of the contract, as there may be future
changes in policy and operations and the
scope of work.
The Departments are of the view that
interested parties had sufficient informa-
tion to meaningfully comment on the IDR
Fees proposed rules. For example, com-
menters provided valuable information in
their comments regarding how the Depart-
ments should estimate the total number of
administrative fees paid. Based on these
comments, the Departments modified the
methodology accordingly. Similarly, the
Departments provided detailed informa-
tion in the IDR Fees proposed rules on
their calculation of the estimated expendi-
tures to carry out the Federal IDR process.
Specifically, the Departments detailed the
types of activities included in estimating
the annual expenditures of approximately
$70 million and received comments on
these activities. After considering com-
ments received on these details of the
administrative fee methodology, the
Departments have revised this estimate
of annual expenditures down to approxi-
mately $56.6 million, as explained in later
paragraphs.
In addition, many commenters raised
concerns about the inclusion of certain
types of expenses in the administrative fee
methodology. Several commenters recom-
mended excluding all or some of the QPA
audit costs given that the QPA also serves
a purpose outside of the Federal IDR pro-
cess in calculating patient cost sharing.
Some commenters asked the Departments
to disclose their total expenditures on
QPA audits and the portion proposed to be
funded by administrative fees compared
to other sources.
As previously mentioned, the Depart-
ments are required to include estimated
expenditures to carry out the Federal IDR
process, which include contract costs
and Federal resources, in calculating the
administrative fee amount. Accordingly,
the Departments disagree with comment-
ers who suggested that QPA audit costs
should not be included in the calculation
of the administrative fee amount and are
adopting an administrative fee methodol-
ogy that includes certain QPA audit costs
in the estimated expenditures. For any
dispute in the Federal IDR process, a plan
or issuer would have been required to dis-
close the QPA to the provider along with
the initial payment or notice of denial of
payment for items and services, and dis-
puting parties must include the QPA for
items and services when initiating a dis-
pute. Certified IDR entities are required to
consider the QPA when selecting between
the offers submitted by disputing parties
when determining the total out-of-net-
work payment rate for items and services
subject to the Federal IDR process.
94
Furthermore, it is the responsibility of
the Departments (or the applicable State
authorities), rather than the provider,
facility, provider of air ambulance ser-
vices, or the certified IDR entity, to mon-
itor plan and issuer compliance with the
QPA requirements.
95
To date, the Depart-
ments have only conducted audits as
part of investigations of complaints, and
anticipate continuing to conduct these
risk-based audits in the future, though
the No Surprises Act permits the Depart-
ments to conduct random and risk-based
audits.
96
Given the role of the QPA in the
Federal IDR process and the direct impact
on providers, performing audits on plans
and issuers in response to allegations that
the plan’s or issuer’s QPAs are inaccurate
is necessary to carry out the Federal IDR
process and promotes the integrity of and
confidence in the Federal IDR process.
Moreover, addressing concerns about
inaccurately calculated QPAs helps to
ensure plans and issuers provide correctly
calculated QPAs when they participate in
the Federal IDR process. For example, in
the absence of QPA audits to investigate
complaints from providers, facilities, and
providers of air ambulance services that
one or more of a plan’s or issuer’s QPAs
are inaccurate, plan and issuer compli-
ance with QPA requirements would go
unchecked.
97
Certified IDR entities must
consider the relevant QPA in making
each payment determination under the
No Surprises Act,
98
and unchecked QPAs
would significantly threaten the integrity
of QPAs and the payment determinations
92
See, e.g., U.S. Department of Health and Human Services, U.S. Department of Labor, U.S. Department of the Treasury. Initial Report on the Independent Dispute Resolution (IDR) Process
April 15 – September 30, 2022. https://www.cms.gov/files/document/initial-report-idr-april-15-september-30-2022.pdf. U.S. Department of Health and Human Services, U.S. Department
of Labor, U.S. Department of the Treasury. Partial Report on the Independent Dispute Resolution (IDR) Process October 1 – December 31, 2022. https://www.cms.gov/files/document/
partial-report-idr-process-octoberdecember-2022.pdf.
93
Available at www.sam.gov.
94
Section 9816(c)(5)(C)(i)(I) of the Code, section 716(c)(5)(C)(i)(I) of ERISA, and section 2799A-1(c)(5)(C)(i)(I) of the PHS Act.
95
Section 9816(a)(2)(A)(i) of the Code, section 716(a)(2)(A) of ERISA, and section 2799A-1(a)(2)(A)(i) of the PHS Act. See also 86 FR 36899. However, a provider or facility may always
assert to the certified IDR entity that additional information points in favor of the selection of its offer as the out-of-network payment amount, even where that offer is for a payment amount
that is different from the QPA. 87 FR 52627.
96
Section 9816(a)(2)(A)(ii) of the Code, and section 2799A-1(a)(2)(A)(ii) of the PHS Act. The July 2021 interim final rules describe the enforcement responsibilities for each Department and
OPM. 86 FR 36899 (July 13, 2021). https://www.federalregister.gov/documents/2021/07/13/2021-14382/requirements-related-to-surprise-billing-part-i.
97
The accuracy of a plan’s or issuer’s QPA (or QPA methodology) may not be reviewed within a payment determination under the Federal IDR process. See 86 FR 55996.
98
Section 9816(c)(5)(C)(i)(I) of the Code, section 716(c)(5)(C)(i)(I) of ERISA, and section 2799A-1(c)(5)(C)(i)(I) of the PHS Act.

January 29, 2024 586 Bulletin No. 2024–5
made by certified IDR entities. These
audits help to increase transparency into
the QPA calculation methodology and
encourage compliance among plans and
issuers. Accordingly, QPA audits are an
integral part of the Federal IDR process,
the costs of which are reasonably included
in the calculation of the administrative fee
amount.
In estimating the expenditures to carry
out the Federal IDR process, the Depart-
ments are including estimated costs only
for certain QPA audits that the Depart-
ments anticipate incurring to investigate
complaints regarding inaccurate QPAs
made by providers, facilities, and provid-
ers of air ambulance services under the
Federal IDR process. The Departments
are not including the costs of QPA audits
conducted: (1) in connection with Depart-
ment of Labor, OPM, or Department of
the Treasury investigations; (2) randomly;
or (3) in response to complaints from con-
sumers, as not all of these audits are neces-
sarily related to the Federal IDR process.
The Departments are of the view that only
the costs related to QPA audits conducted
in response to complaints from entities that
are potential parties to a payment determi-
nation are sufficiently related to the Fed-
eral IDR process to justify their inclusion
in the administrative fee calculation. For
example, consumers who complain that a
plan or issuer inaccurately calculated their
cost sharing based on an erroneously calcu-
lated QPA will not be involved in the Fed-
eral IDR process, and therefore the costs
of such audits are appropriately excluded
from those costs supported by administra-
tive fees paid by parties to the Federal IDR
process. Because HHS is primarily respon-
sible for the implementation of the Federal
IDR process, the Departments view simi-
larly random QPA audits that may be con-
ducted by the Departments, as well as any
QPA audits in connection with Department
of Labor, OPM, and Department of the
Treasury investigations.
The costs of HHS conducting QPA
audits for complaints that a plan’s or issu-
er’s QPAs are inaccurate are estimated
to be approximately $5,000,000 in 2024.
As plans and issuers improve their com-
pliance in calculating QPAs correctly,
the Departments anticipate that the costs
of conducting these audits will decrease,
which would be reflected in the estimated
expenditures used to determine future
administrative fee amounts.
Several commenters also disagreed
with including costs associated with
assisting with eligibility reviews in the
estimated expenditures to carry out the
Federal IDR process. A few of these com-
menters noted that certified IDR entities
are responsible for conducting eligibility
reviews and therefore certified IDR entity
fees should cover this cost. Some com-
menters asserted that such costs should be
recovered through the non-prevailing par-
ty’s certified IDR entity fee, as the eligi-
bility determination is part of the payment
determination. One of these commenters
expressed concern that including this
expense would incentivize certified IDR
entities to understaff as HHS would inter-
vene to address a staffing shortage.
The Departments disagree that the costs
of assisting with eligibility determinations
should be excluded from estimated expen-
ditures. Certified IDR entities voluntarily
participate in the Federal IDR process and
set their certified IDR entity fees within
ranges established by the Departments to
ensure they remain financially viable and
that such fees can cover their operating
expenses to participate in the Federal IDR
process, which include the costs incurred
in determining the eligibility of items
and services for the Federal IDR process.
While certified IDR entities are responsi-
ble for making eligibility determinations,
and therefore incur costs associated with
this activity, the Departments have also
incurred costs since November 2022
to assist certified IDR entities in mak-
ing these determinations by performing
research and outreach on disputes pending
eligibility determinations, including iden-
tifying and obtaining information neces-
sary for certified IDR entities to make eli-
gibility determinations, and will continue
to incur such costs in 2024.
99
The Depart-
ments disagree with the commenter that
stated that the Departments’ assistance
would incentivize certified IDR entities
to understaff. Certified IDR entities could
not have reasonably predicted the amount
of personnel they would need to make eli-
gibility determinations within the required
timeframe given the extremely high vol-
ume of disputes. Moreover, it has been
difficult for certified IDR entities to make
staffing adjustments in response to utiliza-
tion of the Federal IDR process due to the
repeated temporary pauses in the Federal
IDR portal resulting from litigation mat-
ters and changes in operations.
When the Departments first developed
the Federal IDR process and the rules and
guidance establishing how certified IDR
entities were to calculate their fees for
the scope of work they were expected to
perform, the Departments and the certified
IDR entities did not anticipate the signifi-
cant difficulty and costs involved in deter-
mining eligibility for the Federal IDR
process. After six months of operating the
Federal IDR process and receiving feed-
back from disputing parties and certified
IDR entities, the Departments determined
that it was necessary to assist certified
IDR entities with determining eligibility
through performing research and outreach
on disputes pending eligibility determina-
tions, including identifying and obtaining
information necessary to make an eligi-
bility determination.
100
The Departments
determined that this course of action was
necessary when it became clear that eligi-
bility determinations were taking signifi-
cantly longer than the Departments had
anticipated.
In the IDR Operations proposed rules,
the Departments proposed several poli-
cies aimed at improving communication
between the parties that would make
eligibility determinations less burden-
some for certified IDR entities and speed
up the Federal IDR process, as well as
allow the Departments to make eligibil-
ity determinations under extenuating cir-
cumstances.
101
However, these policies, if
99
Centers for Medicare & Medicaid Services (November 21, 2022). Notice of the Federal Independent Dispute Resolution (IDR) Team Technical Assistance to Certified Independent Dispute
Resolution Entities (IDREs) in the Dispute Eligibility Determination Process. https://www
.cms.gov/files/document/idre-eligibility-support-guidance-11212022-final-updated.pdf.
100
The Departments are providing technical assistance regarding eligibility but are not making eligibility determinations, as, under current regulations, only certified IDR entities may make
eligibility determinations.

Id.
101
88 FR 75744.

Bulletin No. 2024–5 587 January 29, 2024
finalized, will take time to implement. In
the interim, the Departments are working
to balance feedback from interested par-
ties asking the Departments to increase the
efficiency of the Federal IDR process and
decrease the backlog of disputes with other
feedback asking the Departments to min-
imize expenditures and avoid increases to
the administrative fee. The Departments
have also received comments urging them
to shorten the time it takes for payment
determinations to be reached. The Depart-
ments continue to believe that some level
of assistance is necessary to address the
high volume of disputes submitted and
the backlog of disputes, due in part to
the closing and reopening of the Federal
IDR process to make necessary systems
updates in light of the TMA III and TMA
IV opinion and orders.
However, after reviewing comments,
the Departments have reconsidered the
amount of estimated costs associated
with pre-eligibility reviews that should be
included in the estimated expenditures to
carry out the Federal IDR process in cal-
endar year 2024. In estimating the expen-
ditures of approximately $70 million in
the IDR Fees proposed rules, the Depart-
ments included an increase in costs to
reflect the Departments taking on a greater
role in assisting with eligibility determina-
tions to improve the efficiency of the Fed-
eral IDR process.
102
Based on comments
received urging the Departments to avoid
increasing the administrative fee, the
Departments will not take on a greater role
in broadly assisting certified IDR entities
with eligibility determinations at this time.
Instead, the Departments will limit their
assistance with eligibility determinations
to more complex disputes, such as dis-
putes where there is missing information
to determine Federal versus State jurisdic-
tions in a State with a specified State law.
This approach will ensure efficient use of
the Departments’ resources by leveraging
the Departments’ assistance and expertise
in handling pre-eligibility reviews for dis-
putes that certified IDR entities may need
to spend more time on, such as disputes
for which information was limited due to
the systems in place when those disputes
were initiated, and will allow certified
IDR entities to focus on moving disputes
through the Federal IDR process. Further-
more, this will allow the Departments to
keep the costs of assisting with eligibility
determinations lower in 2024 such that the
expenditures estimated to be made by the
Departments to carry out the Federal IDR
process are now estimated to be approx-
imately $56.6 million in 2024. The total
estimated expenditures in the IDR Fees
proposed rules included approximately
$20 million for the Departments to assist
with eligibility determinations via con-
ducting research and outreach. The esti-
mated cost of assisting with eligibility
determinations in 2024, as used to calcu-
late the administrative fee as finalized, is
approximately $10 million.
Furthermore, the Departments do not
anticipate that the decision to focus their
assistance with pre-eligibility reviews on
more complex disputes and the revised
administrative fee amount finalized in
these rules will impact the fees certified
IDR entities choose to charge. Given the
backlog of disputes, utilization of the
Federal IDR process strains the current
capacity of certified IDR entities to make
timely determinations. While the Depart-
ments’ assistance with eligibility determi-
nations is currently helping to alleviate the
backlog of disputes, certified IDR entities’
operating expenses are not expected to
decrease as a result. If the Departments
are able to decrease their assistance with
eligibility determinations, the costs of
pre-eligibility reviews would decrease,
which would be reflected in the estimated
expenditures used to determine future
administrative fee amounts.
In addition, some commenters dis-
agreed with including the costs of inves-
tigating complaints of non-compliance in
the administrative fee methodology. Com-
menters asked for clarity in the “inves-
tigating relevant complaints” expense
and asserted that “relevant” complaints
beyond the Federal IDR process would be
inappropriate to include in the calculation
of the administrative fee amount. A few of
these commenters suggested that the party
found to be non-compliant should bear the
costs of the investigation and asked the
Departments to publicly report summary
data on these investigations and the costs
covered by non-compliant parties com-
pared to those covered by administrative
fees. One commenter suggested that the
investigation of complaints related to vio-
lations of the No Surprises Act should be
funded by a congressional appropriation
as these are largely unrelated to the Fed-
eral IDR process.
The Departments clarify that the com-
plaints costs included in the estimated
expenditures in the administrative fee
methodology only include costs associ-
ated with receiving and investigating Fed-
eral IDR process-related complaints. For
example, such costs include investigating
complaints within the Departments’ juris-
diction regarding the failure of a non-pre-
vailing party to pay the payment deter-
mination amount to the prevailing party
within 30 days of the certified IDR entity’s
payment determination as required by the
No Surprises Act.
103
Complaints costs do
not include costs for complaints that are
not related to the Federal IDR process,
such as those related to the QPA for patient
cost sharing. Therefore, the Departments
are of the view that those costs are appro-
priate to include in the administrative fee
methodology and are necessary to ensure
compliance with the Federal IDR pro-
cess.
104
Many commenters suggested that
the Departments consider other funding
sources besides the administrative fee to
fund expenditures. Several commenters
102
While there is an implementation appropriation, the initial appropriation of $500 million in the CAA is finite and only remains available until expended through 2024. Moreover, the Depart-
ments note that additional mandatory funding for the Federal IDR process has not been appropriated beyond the initial $500 million made available in the CAA. However, the Departments
cannot rely on budget requests or on appropriations enacted by Congress when calculating this fee. The statute requires the fee to be set at an amount such that the total amount of fees paid
is estimated to be equal to the amount of expenditures estimated to be made by the Departments in carrying out the Federal IDR process.
103
Section 9816(c)(6) of the Code, section 716(c)(6) of ERISA, and section 2799A-1(c)(6) of the PHS Act.
104
While there is an implementation appropriation, the initial appropriation of $500 million in the CAA is finite and only remains available until expended through 2024. Moreover, the Depart-
ments note that additional mandatory funding for the Federal IDR process has not been appropriated beyond the initial $500 million made available in the CAA. The Departments are unable to
appropriate this funding themselves, although they have made numerous requests to Congress for additional funding, and therefore this is not a reliable source of Federal IDR process funding.

January 29, 2024 588 Bulletin No. 2024–5
suggested that implementing penalties
could help fund expenditures, including
penalties for submitting ineligible dis-
putes, failing to comply with disclosure
obligations, or delaying the Federal IDR
process. Some commenters suggested
the CAA’s $500 million appropriation to
implement the No Surprises Act should
cover at least a portion of the Depart-
ments’ estimated expenditures. One com-
menter asked for confirmation that the
implementation appropriation has been
exhausted fully and suggested requesting
additional funds from Congress in upcom-
ing budget requests to support the funding
of the Departments’ ongoing implemen-
tation. Another commenter asserted that
the administrative fee methodology set
forth in the IDR Fees proposed rules did
not take into account any appropriations
funding.
As required by the No Surprises
Act,
105
both parties to a dispute must pay
an administrative fee for participating in
the Federal IDR process. By statute, the
administrative fee amount must be cal-
culated such that the total amount of fees
paid for a year is estimated to be equal to
the amount of expenditures estimated to
be made by the Departments for such year
in carrying out the Federal IDR process.
While the CAA appropriated $500 mil-
lion to remain available until expended
through 2024 for preparing regulations,
guidance, and reports, collecting data,
conducting audits and enforcement activ-
ities,
106
and establishing and initially
implementing the No Surprises Act and
Title II Transparency provisions through
calendar year 2024, this finite appropria-
tion is not solely for the Federal IDR pro-
cess. Additionally, while the Fiscal Year
2024 President’s budget included another
$500 million appropriation request for the
continued implementation of the No Sur-
prises Act and Title II Transparency provi-
sions, the administrative fee amount final-
ized in these rules must still be consistent
with the statutory requirement to set the
administrative fee amount such that the
total amount of administrative fees paid
is estimated to be equal to the amount of
expenditures estimated to be made by the
Departments in carrying out the Federal
IDR process. As a result, when calculat-
ing this fee, the Departments cannot rely
on budget requests or on appropriations
enacted by Congress.
In addition, commenters urged the
Departments to consider strategies to
decrease utilization of the Federal IDR
process, decrease administrative burden,
increase the efficiency of the Federal
IDR process, and ultimately reduce the
cost of administering the Federal IDR
process. Examples of commenters’ sug-
gestions include enforcing disclosure
requirements, requiring plans and issuers
to include remittance advance remark
codes (RARCs) at the time of initial claim
determination, easing batching require-
ments, disincentivizing bad faith conduct,
making improvements to the Federal IDR
portal, and implementing a required ini-
tial payment amount for out-of-network
emergency services. Several comment-
ers suggested that the volume of ineligi-
ble disputes and the cost of conducting
eligibility reviews would be reduced or
eliminated if the Departments enforced
disclosure requirements or required plans
and issuers to provide adequate informa-
tion for providers to determine whether a
claim is eligible for the Federal IDR pro-
cess. One commenter suggested that plans
and issuers should cover the cost of eligi-
bility reviews when they fail to inform the
provider of eligibility for the Federal IDR
process. Another commenter suggested
that the cost of eligibility reviews should
be assessed to the party that challenges
eligibility as this cost would be avoidable
if the plan or issuer provided sufficient
information. One commenter suggested
that the Departments could reduce the
administrative burden of the Federal IDR
process by contracting with an established
claims processing clearinghouse that cur-
rently possesses the capabilities to per-
form real-time eligibility determinations
to create an in-portal eligibility validation
process.
The Departments continue to consider
improvements to the Federal IDR process
and recently published the IDR Operations
proposed rules,
107
which include policies
aimed at reducing the volume of ineligible
disputes, establishing additional disclosure
requirements (such as requiring plans and
issuers to use approved claim adjustment
reason codes (CARCs) and RARCs), incen-
tivizing good faith conduct with respect to
open negotiation and exchange of informa-
tion, and otherwise improving the Federal
IDR process. Overall, these policies would,
if finalized, support efficiency in Federal
IDR process operations and reduce the cost
of administering the Federal IDR process
in the future.
Recognizing that the cost of certifying
IDR entities is included in the adminis-
trative fee methodology, one commenter
sought clarity on how the methodology
considers efficiencies gained from certi-
fying more IDR entities to make payment
determinations and therefore reduce the
backlog.
The Departments note that the ben-
efits of certifying new IDR entities will
be achieved over time, as new certified
IDR entities acclimate to the process and
increase the speed at which they move
disputes through the Federal IDR process.
As efficiencies in the Federal IDR process
are adopted over time, the expenditures
required to carry out the Federal IDR pro-
cess could decrease, exerting downwards
pressure on the administrative fee amount.
If any of these situations results in changes
to the data used to calculate the admin-
istrative fee amount, the Departments
intend to take these changes into consider-
ation when establishing the administrative
fee amount in the future.
105
Section 9816(c)(8)(A) of the Code, section 716(c)(8)(A) of ERISA, and section 2799A-1(c)(8)(A) of the PHS Act.
106
As previously explained in the preamble to these final rules, the Departments may conduct random or risk-based QPA audits. The Departments consider it appropriate to include some of the
costs of conducting risk-based QPA audits resulting from complaints filed by providers, facilities, or providers of air ambulance services alleging that the QPA was inaccurate as expenditures
made in carrying out the Federal IDR process, and therefore include the costs of conducting these audits in estimating the expenditures made by the Departments in carrying out the Federal
IDR process. Other audit costs, such as the QPA audits conducted in connection with Department of Labor, OPM, or Department of Treasury investigations; audits conducted randomly; or
audits conducted in response to complaints from consumers regarding QPAs may be funded using other appropriations, as applicable.
107
88 FR 75744.

Bulletin No. 2024–5 589 January 29, 2024
d. Administrative Fee Methodology –
Other Comments
The Departments sought comments
on whether, when calculating the admin-
istrative fee amount in future years, they
should apply an inflationary adjustment,
such as the consumer price index for all
urban consumers (CPI–U), to the amount
of estimated expenditures to be made by
the Departments in carrying out the Fed-
eral IDR process. A few commenters sup-
ported using an inflationary adjustment,
such as the CPI-U, to adjust the adminis-
trative fee amount in future years. Other
commenters opposed this approach, stat-
ing that it would not necessarily correlate
with the Departments’ expenditures to
operate the Federal IDR process and may
not align with the established methodol-
ogy of dividing the Departments’ esti-
mated expenditures by the estimated total
number of administrative fees to be paid.
Another commenter stated that this pro-
posal would be unnecessary if the Depart-
ments finalize the proposal to establish the
administrative fee amount more or less
frequently than annually. Finally, another
commenter asked the Departments to
revisit this proposal when data are more
predictable after implementing planned
improvements to the Federal IDR process.
Upon consideration of the comments,
the Departments are not finalizing the use
of an inflationary adjustment, such as the
CPI-U, to adjust the administrative fee
amount in future years. The Departments
agree with commenters that the CPI-U
may not correlate with projected increases
in the Departments’ estimated expendi-
tures to carry out the Federal IDR process
and therefore using it could be inconsis-
tent with the statute.
Several commenters urged the Depart-
ments to improve the Federal IDR pro-
cess before increasing the administrative
fee amount by decreasing the backlog,
enforcing timely payment, and holding
all parties accountable to the regulatory
requirements. Some commenters recom-
mended maintaining the current adminis-
trative fee amount until there is stability in
the Federal IDR process and more data are
available to accurately forecast long-term
costs. A few commenters suggested that
the Departments modify the administra-
tive fee amount in future years to make up
for any shortfall or surplus created by the
finalized administrative fee amount.
As previously mentioned, the Depart-
ments continue to consider improve-
ments to the Federal IDR process; how-
ever, implementing these improvements
would increase the costs of carrying out
the Federal IDR process in the short term
and would take time to operationalize. As
previously mentioned, the Departments
proposed policies in the IDR Operations
proposed rules aimed to improve the
overall efficiency and operations of the
Federal IDR process.
108
The Departments
were unable to propose those policies in
the IDR Fees proposed rules because they
are much more comprehensive than the
fee-related policies proposed in the IDR
Fees proposed rules and would require
more time to develop and implement, if
finalized. There is an urgency to publish
these final rules due to the need to suffi-
ciently fund the Federal IDR process in
2024, because, as explained above, the
current $50 administrative fee amount is
insufficient to provide total administrative
fees that are estimated to be equal to the
expenditures estimated to be made by the
Departments in carrying out the Federal
IDR process, as required by the No Sur-
prises Act.
109
e. Administrative Fee Amount and Impact
Many commenters opposed the pro-
posed $150 per party per dispute adminis-
trative fee amount and stated that it would
make the Federal IDR process cost-pro-
hibitive to pursue for many providers,
especially small providers, rural provid-
ers, independent practices, and certain
medical specialties, such as psychiatry,
emergency medicine, radiology, and anes-
thesiology. Some commenters requested
that the Departments analyze how the pro-
posed administrative fee amount would be
cost-prohibitive for providers and would
deter and limit dispute resolution for small
providers. A few commenters asserted
that the administrative fee amount would
unfairly favor plans and issuers over pro-
viders in the Federal IDR process. One
commenter recommended against using a
methodology to calculate the administra-
tive fee amount that did not consider the
increased financial burdens on providers
compared to plans and issuers. Another
commenter stated that the proposed
administrative fee amount prioritizes the
interest of certified IDR entities and the
Departments in covering their costs at the
expense of parties’ access to the Federal
IDR process.
Similarly, some commenters stressed
that it is important to keep the administra-
tive fee amount low to prevent the admin-
istrative fee from serving as a de facto
barrier to the Federal IDR process. These
commenters asserted that such a de facto
barrier would not align with congressio-
nal intent, as Congress decided against
adding a dollar-value threshold to the No
Surprises Act despite considering this
while developing the legislation. Several
commenters raised concerns that reducing
access to the Federal IDR process would
reduce providers’ reimbursements for out-
of-network services, as it would not be
cost-effective to dispute certain payment
amounts in the Federal IDR process. Some
commenters asserted that a cost-prohib-
itive administrative fee amount would
reduce incentives for plans and issuers to
negotiate fair in-network contracts or, in
some cases, renew contracts, forcing pro-
viders out of networks.
A few commenters suggested that
patients would also be impacted by the
increased administrative fee amount,
either through plans and issuers narrowing
provider networks or increasing premiums
and cost-sharing amounts, or providers
passing on costs to patients or going out
of business. However, several comment-
ers noted that the proposed fee amount
was an improvement from the previous
$350 amount.
For reasons described throughout this
preamble, the Departments are finalizing
the administrative fee amount for disputes
initiated on or after the effective date of
these rules as $115 per party per dispute.
108
88 FR 75744.
109
Section 9816(c)(8)(B) of the Code, section 716(c)(8)(B) of ERISA, and section 2799A-1(c)(8)(B) of the PHS Act.

January 29, 2024 590 Bulletin No. 2024–5
This change in the administrative fee
amount between the proposed and final
rules reflects modifications to the esti-
mated expenditures and to the administra-
tive fee methodology described elsewhere
in this preamble.
While the Departments are statuto-
rily required to set the administrative
fee amount such that the total amount of
administrative fees paid is estimated to be
equal to the amount of expenditures esti-
mated to be made by the Departments in
carrying out the Federal IDR process, the
Departments acknowledge the concerns
of commenters related to accessibility and
affordability of the Federal IDR process
and the impact of the proposed administra-
tive fee amount on the parties and patients.
In the Departments’ effort to balance their
statutory obligations with the priority of
ensuring equitable access for parties to
engage in the Federal IDR process, the
Departments proposed in the IDR Opera-
tions proposed rules to reduce the adminis-
trative fee amount in certain circumstances.
In the IDR Operations proposed rules,
the Departments proposed to reduce the
administrative fee amount to $75 (50 per-
cent of the full administrative fee amount
proposed in those proposed rules) for both
parties when the highest offer by either
party in open negotiation was less than
the full administrative fee amount ($150
as proposed in those proposed rules)
110

and to $30 (20 percent of the full admin-
istrative fee amount proposed in those
proposed rules) for non-initiating parties
in ineligible disputes.
111
The Departments
also proposed in the IDR Operations pro-
posed rules to revise the requirements for
batching qualified IDR items and services
together into a single Federal IDR process
dispute.
112
The Departments anticipate that
these proposals would make the Federal
IDR process more accessible for all par-
ties, but especially the parties for whom
commenters expressed concerns, such as
small and rural providers and certain med-
ical specialties.
The administrative fee amount being
finalized in these final rules is applied
equally to both parties to a dispute. The
Departments are of the view that it would
be inequitable to charge a smaller party a
lower administrative fee, because a dis-
pute initiated by a smaller party costs the
Departments the same amount to process
as a dispute initiated by a larger party.
Furthermore, the value of a dispute, rather
than the size of the party, determines
whether it will be cost-effective for the
party to pursue the dispute. For example,
a smaller party could initiate a high dollar
value dispute, while a larger party could
initiate a small dollar value dispute. The
Departments proposed in the IDR Oper-
ations proposed rules to charge both par-
ties a reduced administrative fee when the
highest offer made during open negotia-
tion is less than the full administrative fee
amount,
113
which is intended to improve
the accessibility of the Federal IDR pro-
cess for parties to low-dollar disputes. The
Departments anticipate that such parties
may be smaller providers and facilities or
independent practices. However, larger
parties to low-dollar disputes would not
be precluded from paying the reduced
administrative fee as long as the dispute
meets the aforementioned requirement.
The Departments considered the
impact of the proposed $150 administra-
tive fee amount on the parties compared to
the current $50 administrative fee amount
and the previous $350 administrative fee
amount. While the Departments under-
stand that it may be economically infeasi-
ble to initiate some claims in the Federal
IDR process due to the administrative
and certified IDR entity fees associated
with accessing the process, as discussed
previously, the Departments are statuto-
rily obligated to charge an administrative
fee amount such that the administrative
fees paid are estimated to be equal to the
amount of expenditures estimated to be
made by the Departments in carrying out
the Federal IDR process.
114
The method-
ology used by the Departments is derived
from this statutory language.
Congress did not include a dollar-value
threshold for Federal IDR process dis
-
putes in the No Surprises Act. Rather,
Congress opted to include a requirement
in the No Surprises Act for each party to
a dispute for which a certified IDR entity
is selected to pay to the Departments, at
such time and in such manner as specified
by the Departments, a fee for participat-
ing in the Federal IDR process.
115
There-
fore, regardless of the administrative fee
amount, disputing parties must always
evaluate whether it would be economi-
cally efficient to initiate a dispute in the
Federal IDR process. Congress also pro-
vided in the No Surprises Act that the
administrative fee amount is established
by the Departments in a manner such that
the total amount of fees paid for such year
is estimated to be equal to the amount of
expenditures estimated to be made by the
Departments for such year in carrying out
the Federal IDR process.
116
In regard to comments stating that the
administrative fee could result in narrow-
ing networks, many factors may impact
whether a provider, facility, or provider of
air ambulance services and a plan or issuer
will enter a network agreement with one
another, including the market power of
each party, Federal and State network ade-
quacy laws, and other factors. The Depart-
ments acknowledge that the amount paid
for out-of-network services is one of the
factors that impacts market participants’
decisions whether to enter network agree-
ments. The No Surprises Act represents
a substantial change to the way the par-
ties come to agreement on payment for
out-of-network services by prohibiting,
in many circumstances, the practice of
sending surprise medical bills to patients
and establishing a Federal IDR process
for determining the appropriate out-of-
network rate. Many providers report that
initial payments made by plans and issu-
ers for out-of-network services are now
110
88 FR 75799.
111
88 FR 75800.
112
88 FR 75783 through 75791.
113
88 FR 75799.
114
Section 9816(c)(8)(B) of the Code, section 716(c)(8)(B) of ERISA, and section 2799A-1(c)(8)(B) of the PHS Act.
115
Section 9816(c)(8)(A) of the Code, section 716(c)(8)(A) of ERISA, and section 2799A-1(c)(8)(A) of the PHS Act.
116
Section 9816(c)(8)(B) of the Code, section 716(c)(8)(B) of ERISA, and section 2799A-1(c)(8)(B) of the PHS Act.

Bulletin No. 2024–5 591 January 29, 2024
substantially lower than such payments
were before enactment of the No Sur-
prises Act. Some providers report that
plans’ and issuers’ abilities to make lower
payments for out-of-network services has
impacted their willingness to offer accept-
able in-network payment rates in network
agreement negotiations. To the extent that
the Federal IDR process and the prohibi-
tion on surprise medical billing change
this equilibrium among parties, they could
impact the number of providers and plans
and issuers that are able to agree on terms
for entering a network agreement and con-
sequently network breadth.
In the IDR Operations proposed rules,
the Departments are proposing a num-
ber of steps to accelerate throughput in
the Federal IDR process,
117
which would
make it easier for the parties to use the
process to determine the appropriate pay-
ment amount for out-of-network services.
That said, the appropriate payment rate for
out-of-network services is only one fac-
tor among many that influences network
breadth. It is also important for the parties
to meaningfully engage in open negotia-
tion to determine an appropriate out-of-
network payment rate, since agreeing to
rates in open negotiation allow the parties
to avoid the costs of using the Federal IDR
process. Even as the Federal IDR process
becomes faster and more parties avail
themselves of the opportunity to agree to
out-of-network payment rates during the
open negotiation period, the price paid for
out-of-network services will remain one
among many factors in a dynamic market.
Furthermore, the Departments anticipate
that a Federal IDR process with consis-
tent payment determination outcomes will
lead to fewer dispute initiations, because
parties will have a better understanding
of what a determination will likely be and
more disputes would likely be settled in
open negotiation or even earlier, resulting
in the parties avoiding the costs associated
with the Federal IDR process.
The Departments also do not anticipate
that the policies finalized in these rules
would cause plans and issuers to increase
premiums, as further discussed in sec-
tion IV.G of this preamble, or patient cost
sharing, because administrative fees paid
would likely represent a very small per-
centage of the costs considered by plans
and issuers in calculating annual premi-
ums or cost sharing.
Many commenters emphasized the
importance of considering the proposed
administrative fee amount alongside
batching requirements to determine
whether the administrative fee amount
would be cost-prohibitive. Some com-
menters suggested that batching policies
could mitigate the financial challenges
providers and facilities face, especially
when pursuing low-dollar claims. A few
commenters suggested it was premature
to update the administrative fee amount or
provide feedback on a proposed amount
until batching guidance is updated. One
commenter viewed an administrative fee
of $150 per party as reasonable so long as
a claim is defined as an episode of care or
a single medical encounter in the batching
policy.
The Departments are continuing to
assess batching flexibilities and the impact
of batching on various parts of the Federal
IDR process. To further improve batching
requirements, the Departments proposed
provisions in the IDR Operations pro-
posed rules
118
that would allow for more
clarity, certainty, and flexibility in batch-
ing multiple items or services in a single
dispute.
119
These batching proposals are
designed so that the expenses of engag-
ing in the Federal IDR process, including
the administrative fee, do not unreason-
ably impede parties’ access to the Federal
IDR process. As previously mentioned,
the IDR Operations proposed rules
120
also
proposed a reduced administrative fee
for low-dollar disputes, identified as dis-
putes for which the highest offer by either
party in open negotiation was less than
the administrative fee amount, which, if
finalized, would mitigate financial burden
on providers and facilities when pursu-
ing payment on low-dollar claims. The
Departments encourage interested parties
to submit comments on the IDR Opera-
tions proposed rules prior to the comment
deadline.
121
While the Departments continue to
consider improvements to the Federal
IDR process, including policies surround-
ing batching and low-dollar claims, the
No Surprises Act requires that the admin-
istrative fee be estimated to cover the
expenditures estimated to be made by the
Departments in carrying out the Federal
IDR process in the year, and the Depart-
ments estimate that $115 per party per
dispute is the appropriate administrative
fee amount to meet this requirement for
disputes initiated on or after the effective
date of these rules.
B. Certified IDR Entity Fee Ranges
Under current regulations at 26 CFR
54.9816-8T(e)(2)(vii), 29 CFR 2590.716-
8(e)(2)(vii), and 45 CFR 149.510(e)(2)
(vii), the certified IDR entity fees for sin-
gle and batched determinations are set by
the certified IDR entities within the upper
and lower limits of ranges for each as set
forth in guidance issued annually by the
Departments.
In the IDR Fees proposed rules, the
Departments proposed to amend the pro-
visions of the regulations establishing the
ranges for certified IDR entity fees for sin-
gle and batched disputes to establish the
ranges in notice and comment rulemak-
ing, rather than in guidance, at 26 CFR
117
88 FR 75744.
118
88 FR 75744.
119
On November 28, 2023, the Departments released FAQs pertaining to batching that will be effective until the IDR Operations proposed rules are finalized and take effect. These FAQs
discuss how, in light of the TMA IV and TMA III opinions and orders, the batching requirements of the No Surprises Act apply to qualified IDR items and services for disputes eligible for
initiation of the Federal IDR process on or after August 3, 2023, until the Departments engage in future notice and comment rulemaking. See U.S. Department of Health and Human Services,
U.S. Department of Labor, U.S. Department of Treasury, Office of Personnel Management (November 28, 2023), FAQs about Consolidated Appropriations Act, 2021 Implementation Part
63, available at https://www.cms.gov/files/document/faqs-part-63.pdf.
120
Id.
121
As discussed earlier in this preamble section, the Departments were unable to propose these operational policies in the IDR Fees proposed rules because they are more comprehensive than
the fee-related policies proposed in the IDR Fees proposed rules and require more time to develop and implement if finalized. There is an urgency to publish these final rules due to the need
to sufficiently fund the Federal IDR process in 2024.

January 29, 2024 592 Bulletin No. 2024–5
54.9816-8(e)(2)(vii), 29 CFR 2590.716-
8(e)(2)(vii), and 45 CFR 149.510(e)(2)
(vii). Further, the IDR Fees proposed rules
provided that, consistent with current
rules, certified IDR entities must annually
provide a fixed fee for single determina-
tions and separate fixed fees for batched
determinations within the upper and lower
limits for each as set in notice and com-
ment rulemaking. Additionally, the IDR
Fees proposed rules provided that the cer-
tified IDR entity fee ranges established
by the Departments in rulemaking would
remain in effect until new certified IDR
entity fee ranges are established by subse-
quent notice and comment rulemaking,
122

allowing the Departments to update the
certified IDR entity fee ranges more or
less frequently than annually. Finally, the
Departments proposed that the certified
IDR entity or IDR entity seeking certifi-
cation may seek advance written approval
from the Departments to update its fees
more often than once annually.
The Departments proposed that for
disputes initiated on or after the later of
the effective date of these rules or Janu-
ary 1, 2024, certified IDR entities would
be permitted to charge a fixed certified
IDR entity fee for single determinations
within the range of $200 to $840, unless
a fee not within that range is approved by
the Departments pursuant to paragraphs
26 CFR 54.9816-8(e)(2)(vii)(A) and (B),
29 CFR 2590.716-8(e)(2)(vii)(A) and
(B), and 45 CFR 149.510(e)(2)(vii)(A)
and (B). The Departments also proposed
that for disputes initiated on or after the
later of the effective date of these rules
or January 1, 2024, certified IDR entities
would be permitted to charge a fixed cer-
tified IDR entity fee for batched deter-
minations within the range of $268 to
$1,173, unless a fee outside this range is
approved by the Departments pursuant to
paragraphs 26 CFR 54.9816-8(e)(2)(vii)
(A) and (B), 29 CFR 2590.716-8(e)(2)
(vii)(A) and (B), and 45 CFR 149.510(e)
(2)(vii)(A) and (B). The Departments
proposed to continue to use a tiered fee
structure based on the number of line
items within the batch.
123
Under the
IDR Fees proposed rules, certified IDR
entities would be permitted to charge a
fixed tiered fee within the range of $75
to $250 for every additional 25 line items
within a batched dispute beginning with
the 26th line item.
124
The IDR Fees pro-
posed rules explained the Departments’
considerations for proposing the certified
IDR entity fee ranges, which included the
anticipated time and resources needed for
certified IDR entities to make payment
determinations meeting the requirements
of the statute, rules, and guidance; the
anticipated time and resources needed
for data reporting; the anticipated time
and resources needed to comply with
audit requirements; the anticipated vol-
ume of Federal IDR initiations and pay-
ment determination quality assessments;
the anticipated volume of Federal IDR
initiations ineligible for the Federal IDR
process; and the level of complexity in
determining the eligibility of items and
services for the Federal IDR process.
125

These fee ranges would apply until
another set of fee ranges is proposed and
finalized through subsequent notice and
comment rulemaking.
If a certified IDR entity wishes to
charge a fee outside either of these fee
ranges, it would continue to follow the
existing process for requesting written
approval from the Departments outlined
in 26 CFR 54.9816-8(e)(2)(vii)(A) and
(B), 29 CFR 2590.716-8(e)(2)(vii)(A) and
(B), and 45 CFR 149.510(e)(2)(vii)(A)
and (B).
Since the publication of the IDR Fees
proposed rules, the Departments have
analyzed updated data and assumptions
as applied to the factors considered in the
IDR Fees proposed rules’ preamble to set
the fee ranges, and the Departments found
that the results of the analysis remain the
same. The Departments received com-
ments on these proposals.
The Departments are finalizing as pro-
posed the policy to establish the certified
IDR entity fee ranges through notice and
comment rulemaking, rather than guid-
ance. The Departments are also finaliz-
ing the certified IDR entity fee ranges for
single and batched disputes as proposed.
Finally, the Departments are finalizing
the fixed tier fee structure for batched dis-
putes, as well as the range for this struc-
ture, as proposed.
However, after considering the pub-
lic comments, the Departments are not
finalizing the proposal which would have
allowed the Departments to set the certi-
fied IDR entity fee ranges more frequently
than annually but are instead finalizing the
proposal with modifications to reflect that
the certified IDR entity fee ranges may be
established by the Departments no more
frequently than annually through notice
and comment rulemaking. Further, the
Departments are finalizing the proposal
that the certified IDR entity or IDR entity
seeking certification may seek advance
written approval from the Departments
to update its fees more often than once
annually, with modifications to reflect
that in addition to setting their initial fee
for the calendar year, certified IDR enti-
ties may only request approval from the
Departments to update their fees one
additional time per year, and with addi-
tional non-substantive modifications for
readability. Finalizing this policy would
result in a process where the certified
IDR entity or IDR entity seeking certifi-
cation sets their fixed fees for single and
batched determinations for the year, and
then is allowed one opportunity at any
point during the calendar year to update
their fixed fees, provided that their request
is approved by the Departments.
Many commenters supported the pro-
posal to establish the certified IDR entity
fee ranges through notice and comment
rulemaking. Several commenters noted
that establishing the certified IDR entity
fee ranges through notice and comment
122
88 FR 65888.
123
A tiered fee structure was first proposed in the Calendar Year 2023 Fee Guidance for the Federal Independent Dispute Resolution Process under the No Surprises Act and implemented
for all disputes initiated as of January 1, 2023. See Centers for Medicare & Medicaid Services (October 31, 2022). Calendar Year 2023 Fee Guidance for the Federal Independent Dispute
Resolution Process under the No Surprises Act. https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/cy2023-fee-guidance-federal-independent-dispute-resolution-pro-
cess-nsa.pdf.
124
88 FR 65888.
125
88 FR 65888 at 65895 through 65896.

Bulletin No. 2024–5 593 January 29, 2024
rulemaking would increase transparency
and allow interested parties to provide
feedback that would help the Departments
appropriately adjust the fee ranges. Many
commenters expressed opposition to the
Departments’ proposal to establish the
certified IDR entity fee ranges more or
less frequently than annually. The major-
ity of these commenters encouraged the
Departments to update the certified IDR
entity fee ranges only once annually
to create a more predictable and stable
Federal IDR process. Several comment-
ers expressed concern that changing the
certified IDR entity fee ranges more fre-
quently than once annually would prevent
providers from effectively budgeting for
participation in the Federal IDR process,
which would create a barrier to access.
A few commenters noted that unpredict-
able changes to the certified IDR entity
fee ranges could impact plans’ and issu-
ers’ abilities to budget for the Federal IDR
process and could lead plans and issuers
to budget more conservatively and pass on
the cost increase to consumers.
A few commenters generally sup-
ported the flexibility to update the certi-
fied IDR entity fee ranges more or less
frequently than annually. However, one
commenter supported the proposed flexi-
bility only if the Departments adjusted the
fee ranges less frequently than annually,
while another commenter supported the
proposed flexibility if the Departments
provided adequate notice, such as 90
days, before implementing the changed
fee ranges. Further, several commenters
opposed the proposal to allow certified
IDR entities or IDR entities seeking certi-
fication to seek advance written approval
from the Departments to set their certified
IDR entity fees more often than annually.
Similar to the proposal to establish the
certified IDR entity fees through notice
and comment rulemaking more or less
frequently than annually, some comment-
ers expressed concerns that the proposed
policy would cause unpredictability for
the parties, which would impact their
ability to effectively budget for the Fed-
eral IDR process. One commenter mis-
interpreted the proposed policy as pro-
posing to require certified IDR entities to
adjust their fees whenever operational or
technological efficiencies could justify a
decrease in cost, and expressed concern
that the proposed policy may discourage
certified IDR entities from participating in
the Federal IDR process. One commenter
opposed multiple fee adjustments within
a given year but supported allowing certi-
fied IDR entities a limit of one additional
fee adjustment per year following a com-
pelling request and formal approval.
The Departments agree with comment-
ers that the proposal to establish the certi-
fied IDR entity fee ranges through notice
and comment rulemaking will improve
transparency and provide opportunity for
greater engagement by interested parties
in the establishment of the ranges. The
Departments recognize commenters’ con-
cerns that the proposed flexibility to set
the certified IDR entity fee ranges through
notice and comment rulemaking more
or less frequently than annually would
enable multiple changes to the certified
IDR entity fee ranges over the course of
a year. In general, the Departments rec-
ognize that frequent changes to the estab-
lished certified IDR entity fee ranges
could increase unpredictability in the Fed-
eral IDR process and potentially burden
parties, but note that they did not propose
this policy with the intention of pursuing
such frequent changes. The Departments
contemplated establishing this proposed
flexibility so that the certified IDR entity
fee ranges could remain effective for mul-
tiple years. Further, updating the certified
IDR entity fee ranges does not guarantee
that certified IDR entities will set new
fixed fee amounts. Each certified IDR
entity determines their fee amounts inde-
pendently, and there is no requirement to
make a corresponding adjustment each
time the certified IDR entity fee ranges
established by the Departments change,
provided the certified IDR entity’s fee
stays within the new range.
While it would be unlikely that the
Departments would pursue multiple
notice and comment rulemakings in a sin-
gle year to adjust the certified IDR entity
fee ranges, the Departments acknowledge
the potential for the proposed policy to
increase uncertainty within the Federal
IDR process. Therefore, to be responsive
to commenters’ concerns, the Depart-
ments are finalizing this proposal with
modifications to reflect that the certified
IDR entity fee ranges may be established
no more frequently than once per calendar
year. This allows the certified IDR entity
fee ranges to remain effective over mul-
tiple years until they are updated in sub-
sequent notice and comment rulemaking,
while addressing commenters’ concerns
by preventing multiple adjustments of the
certified IDR entity fee ranges in a single
year.
The Departments acknowledge that
frequent increases to certified IDR entity
fees could lead to unpredictability and
complicate the ability of the parties to
effectively budget for the Federal IDR
process. The Departments are of the view
that the proposed mechanism for cer-
tified IDR entities to request to set their
fees more than once annually includes
sufficient guardrails to ensure that any
changes to the certified IDR entities’ fees
would not prevent parties from accessing
the Federal IDR process. Specifically, the
Departments proposed to require certi-
fied IDR entities to submit the following
information to the Departments in their
requests: (1) the fixed fee that the certi-
fied IDR entity is seeking to charge; (2)
a description that reasonably explains the
circumstances that require a change to
its fee; and (3) a detailed description that
reasonably explains how the change to its
fee will be used to mitigate the effects of
these circumstances. The Departments
would use their discretion to determine if
the explanations included in the request
demonstrate that the change would ensure
the certified IDR entity’s financial via-
bility and would not impose on parties
an undue barrier to accessing the Federal
IDR process.
The Departments seek to strike a bal-
ance between predictable fees for parties
participating in the Federal IDR process
and certified IDR entities’ need for flex-
ibility to respond to circumstances that
require fee adjustments to maintain pro-
gram operations. For example, the Depart-
ments acknowledge that certified IDR
entities consider various factors, including
operational costs, in setting fees for the
Federal IDR process. However, certified
IDR entities have needed to increase staff
resources, implement system updates,
and adjust operations to respond to unex-
pectedly frequent changes to guidance or
regulations governing the Federal IDR
process or the volume of disputes initiated
and closed under the Federal IDR process.

January 29, 2024 594 Bulletin No. 2024–5
To ensure that certified IDR entities have
sufficient funding to respond to such cir-
cumstances, providing certified IDR enti-
ties with the ability to request an update
to their fees one additional time during a
calendar year is appropriate.
To address some of the concerns
expressed by commenters, the Depart-
ments are finalizing this proposal with
modifications to reflect that certified IDR
entities may only request approval from the
Departments to set their fee one additional
time for a calendar year. In other words, if
a certified IDR entity wishes to update its
fees an additional time after already setting
fees for the calendar year, the certified IDR
entity must seek approval from the Depart-
ments to do so. A certified IDR entity may
set its fees at most two times for a calendar
year, once at the initial setting of the fees,
and once after receiving approval from the
Departments to update the fees, regard-
less of whether the Departments have
established new certified IDR fee ranges
in notice and comment rulemaking. If the
Departments reject a certified IDR entity’s
request to update its fees during the calen-
dar year, the certified IDR entity may con-
tinue to seek approval by submitting sub-
sequent requests as long as these requests
comply with the requirements finalized in
this rule.
If a certified IDR entity requests to
update its fees after initially setting its fee
for the calendar year, and the request is
approved by the Departments, the change
to its fees will be made public before those
fees are effective, in a form and manner
specified by the Secretary, to allow the
parties time to consider the fee change in
their decision making. Updated fees will
apply to disputes initiated on or after the
effective date of the fee amount. The mod-
ified policy will provide an appropriate
amount of flexibility to certified IDR enti-
ties to make a fee adjustment to account
for efficiencies and fluctuations in the
conditions of the Federal IDR process in
future years, while also capping the num-
ber of fee adjustments in a given calendar
year and limiting cost volatility for parties
participating in the Federal IDR process.
The Departments solicited comment on
whether they should apply an inflationary
adjustment, such as the CPI-U, to the con-
siderations used to develop the certified
IDR entity fee ranges in future years. One
commenter supported the use of an infla-
tionary adjustment and suggested updat-
ing the certified IDR entity fee ranges
annually based on inflation rather than
through notice and comment rulemak-
ing. A few commenters opposed updating
the certified IDR entity fee ranges using
an inflationary adjustment such as the
CPI-U. Specifically, one commenter pos-
ited that since the CPI-U is updated on
a monthly basis, the Departments might
pursue monthly adjustments to the certi-
fied IDR entity fee ranges, which would
severely complicate the Federal IDR pro-
cess. Another commenter expressed con-
cern that applying an inflationary adjust-
ment would only drive costs up over time,
prompting plans and issuers to pass any
additional costs on to consumers. One
commenter neither explicitly supported
nor opposed the general use of an infla-
tionary adjustment to set the certified IDR
entity fee ranges but noted that setting the
certified IDR entity fee ranges through
notice and comment rulemaking could be
an opportunity to adjust based on infla-
tion. This commenter cautioned that if the
Departments pursued the use of an infla-
tionary adjustment, such an adjustment
should be the only consideration used to
update the certified IDR entity ranges.
The Departments appreciate the com-
ments on the use of an inflationary adjust-
ment to update the certified IDR entity fee
in future years. The Department share the
commenters’ desire to maintain predict-
able and accessible costs for participating
in the Federal IDR process and agree that
additional adjustments to the fee ranges
more frequently than annually would
complicate the Federal IDR process for
all parties. As stated earlier in this pre-
amble, based on the comments received,
the Departments are finalizing the pro-
posal to establish the certified IDR entity
fee ranges through notice and comment
rulemaking, which will allow for greater
transparency and feedback related to the
establishment of the ranges. Further, the
Departments are of the view that the con-
siderations being finalized in this rulemak-
ing are necessary to develop reasonable
certified IDR entity fee ranges, and that
the addition of inflationary adjustment to
the considerations, or the exclusive use of
an inflationary adjustment to develop the
ranges, is not practical or necessary at this
time. The Departments will continue to
carefully consider whether such a policy
may be appropriate in future rulemaking.
Several commenters expressed concerns
with the proposed certified IDR entity fee
ranges’ increased upper limits. Some of
these commenters stated that the proposed
certified IDR entity fee ranges may be
cost-prohibitive and limit access to the Fed-
eral IDR process, particularly for small pro-
viders. A few of the commenters opposed to
the proposed increase in the upper limits of
the certified IDR entity fee ranges asserted
that any increase in the certified IDR entity
fee ranges would limit participation in the
Federal IDR process. Specifically, one of
these commenters asserted that the proposed
ranges would result in costs passed on to
patients in the form of increased premiums
and cost-sharing amounts.
Some commenters, however, sup-
ported the proposed certified IDR entity
fee ranges. Some of these commenters
asserted that the increase to the upper limit
of the certified IDR fee ranges is reason-
able and will encourage greater plan and
issuer participation prior to the Federal
IDR process, such as during open negoti-
ation, and will reduce the time needed for
certified IDR entities to render payment
determinations.
The Departments maintain the view
that the proposed certified IDR entity fee
ranges will keep costs reasonable such
that participating in the Federal IDR pro-
cess will not be cost-prohibitive, includ-
ing for smaller providers, while also
ensuring that certified IDR entities are
able to cover their operating costs and
continue participating in the Federal IDR
process. The Departments acknowledge
that broadening the certified IDR entity
fee ranges could have an impact on the
cost to parties to engage in the Federal
IDR process. However, the current range
of fees charged by certified IDR entities
reflects that, since the opening of the Fed-
eral IDR process, certified IDR entities do
not all charge the same fees, nor do they
all charge the maximum fee amount in
the ranges set by the Departments.
126
To
126
See https://www.cms.gov/nosurprises/help-resolve-payment-disputes/certified-idre-list.

Bulletin No. 2024–5 595 January 29, 2024
remain competitive, the certified IDR enti-
ties have an incentive to charge fees on
the lower end of the established range. As
a result, the Departments do not believe
that an increase to the upper limits of the
certified IDR entity fee ranges will result
in drastic increases to the fees charged by
certified IDR entities. Further, the Depart-
ments have not seen any data suggesting
that the proposed increases to the certi-
fied IDR entity fee ranges will result in
a substantial enough increase in costs to
plans and issuers that they will impact
patients in the form of increased premi-
ums and cost-sharing amounts. However,
the Departments will continue to monitor
this dynamic.
The Departments agree with comment-
ers asserting that the increases to the cer-
tified IDR entity fee ranges will encour-
age greater plan and issuer participation
prior to the Federal IDR process, such as
during open negotiation. The Departments
believe that the increases to the certified
IDR entity fee ranges will encourage par-
ties to actively participate in open negoti-
ation to preclude the need for the Federal
IDR process, thereby eliminating the need
for parties to pay the certified IDR entity
fee.
The Departments emphasize that while
they establish ranges for the certified IDR
entity fees, certified IDR entities choose
the fixed fees they charge for single and
batched determinations based on a num-
ber of factors. As noted earlier in this
preamble, certified IDR entities have
needed to make numerous adjustments
in response to high volumes of disputes,
complex determinations, and litigation
resulting in changes to guidance and reg-
ulations governing the Federal IDR pro-
cess. The proposed ranges for the single
and batched determination fees, including
the proposed range for the tiered fee for
batched determinations, allow for appro-
priate compensation corresponding to
the complexity and effort associated with
making eligibility and payment determi-
nations. The Departments remain of the
view that the proposed ranges would keep
costs for participating in the Federal IDR
process reasonable and reduce the poten-
tial for increased costs to be passed on to
patients.
Several commenters opposed the pro-
posed tiered fee structure for batched
determinations. Commenters were con-
cerned that the proposed tiered fee struc-
ture would be cost-prohibitive, partic-
ularly due to the absence of a limitation
on the number of line items considered in
the price tiers (that is, no line item cap to
the application of the tiered fee, as cur-
rently exists). Further, some commenters
asserted that the proposed tiered fee struc-
ture and range would disincentivize the
submission of batched disputes.
A few commenters supported an
increased fee for larger batched determi-
nations but recommended that the tier-
ing structure reflect intervals of 50 line
items rather than 25. Further, one com-
menter supported a fixed-dollar tiered
fee, as opposed to a range, suggesting that
a fixed-dollar fee would provide more
consistency across the fees charged by
different certified IDR entities and avoid
potential issues such as certified IDR enti-
ties being overwhelmed with disputes and
resulting delays in the Federal IDR pro-
cess.
The proposed tiered fee structure and
range reflect the Departments’ intent to
keep the costs of participating in the Fed-
eral IDR process affordable while ensuring
that certified IDR entities are compensated
for their work in rendering payment deter-
minations on complex batched disputes.
Certified IDR entities have indicated to
the Departments that making determina-
tions on large batches of dissimilar items
and services is particularly complex and
burdensome and that they generally do
not realize economies of scale as the num-
ber of batched line items increases. The
Departments considered the impact of the
TMA IV opinion and order as discussed in
section I.C of this preamble on the antic-
ipated complexity and volume of batched
disputes while determining the certified
IDR entity fee ranges. The Departments
acknowledge the efficiencies gained by
batching and believe that the proposed
tiered fee structure would maintain those
efficiencies while allowing certified IDR
entities to charge a reasonable fee for the
level of work involved in batched deter-
minations.
Several commenters stated that the pro-
posed tiered fee structure might increase
the costs to disputing parties submitting
batched disputes with many line items
because there is no cap to the number of
line items within a batched dispute after
which the tiered fee would no longer
apply.
A tiered fee selected by each certified
IDR entity from a dollar range established
by the Departments allows for greater
flexibility, as opposed to applying a stan-
dard fixed dollar amount or applying a
percentage of the certified IDR entity’s
batched determination fee as is currently
used.
127
The tiered fee range reflects the
costs associated with increasing line items
in a batched dispute and provides certified
IDR entities the appropriate flexibility to
set fees commensurate with their costs.
Additionally, the Departments believe
that a dollar range based on the number
of line items in a batched dispute would
provide transparent and consistent pricing
for both parties and certified IDR entities.
The Departments agree that instances of
batched disputes with exceedingly high
numbers of line items occur infrequently
but remain a possible occurrence. In addi-
tion, as mentioned previously, certified
IDR entities have indicated that they gen-
erally do not realize economies of scale
for batched disputes with high numbers
of line items. For instance, certified IDR
entities often need to verify the acuity of
every patient in a batch, even when the
service is the same. Given the anticipated
infrequency of batched disputes with
exceedingly high numbers of line items
and in recognition of the need for the cer-
tified IDR entity to cover its costs for such
batched disputes, the Departments believe
the tiered fee structure is a reasonable
approach.
The Departments also considered
whether certified IDR entities should be
permitted to charge only an additional
fixed dollar amount (for example, $125,
$150, $200, etc.) per every additional 25
line items but determined that the pro-
127
See Centers for Medicare & Medicaid Services (December 23, 2022). Amendment to the Calendar Year 2023 Fee Guidance for the Federal Independent Dispute Resolution Process under
the No Surprises Act: Change in Administrative Fee. https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/amended-cy2023-fee-guidance-federal-independent-dis-
pute-resolution-process-nsa.pdf.

January 29, 2024 596 Bulletin No. 2024–5
posed range for a tiered fee would provide
the appropriate operational flexibility for
certified IDR entities. Providing this flex-
ibility is important to maintain participa-
tion of certified IDR entities in the Federal
IDR process. The operational costs for the
Federal IDR process incurred by each cer-
tified IDR entity may vary, requiring cer-
tified IDR entities to consider their unique
circumstances in determining their fixed
fee amounts to maintain financial viability.
Therefore, allowing certified IDR entities
to select a tiered fee within a dollar range
established by the Departments will allow
the certified IDR entities the flexibility to
tailor their pricing to fit their company’s
needs, while ensuring reasonable costs for
parties participating in the Federal IDR
process.
For the purposes of the batched tiered
fee range intervals, the Departments con-
sidered whether a grouping of 50 line
items would be a more appropriate inter-
val than the proposed interval of 25 line
items. A few commenters suggested that
50 line items would be a more appropri-
ate interval than the proposed 25-line-
item increment. In determining the inter-
val appropriate for the tiered fee range for
batched determinations, the Departments
considered historical trends in the num-
ber of line items submitted in batched
disputes in addition to the anticipated
changes in batching behaviors due to the
TMA IV vacatur of certain batching pro-
visions. The Departments remain of the
view that a 25-line-item increment is the
most reasonable increment to balance the
affordability to parties and the amount of
resources expended by the certified IDR
entities to review those line items. As a
result, the Departments are finalizing this
policy as proposed.
III. Severability
In the event that any portion of these
final rules is declared invalid, the Depart-
ments intend that the various aspects of
the finalized administrative fee provi-
sions and certified IDR entity fee pro-
visions be severable. The Departments
proposed at 26 CFR 54.9816-8(d)(3)
(i), 29 CFR 2590.716-8(d)(3)(i), and 45
CFR 149.510(d)(3)(i) that any provision
of paragraph (d) or paragraphs (e)(2)
(vii) through (e)(2)(ix) held to be invalid
or unenforceable as applied to any per-
son or circumstance would be construed
so as to continue to give the maximum
effect to the provision permitted by law,
including as applied to persons not sim-
ilarly situated or to dissimilar circum-
stances, unless such holding is that the
provision of these paragraphs is invalid
and unenforceable in all circumstances, in
which event the provision would be sev-
erable from the remainder of these para-
graphs and would not affect the remain-
der thereof. The Departments further
proposed at new 26 CFR 54.9816-8(d)(3)
(ii), 29 CFR 2590.716-8(d)(3)(ii), and 45
CFR 149.510(d)(3)(ii) that the provisions
in paragraphs (d) and (e)(2)(vii) through
(ix) are intended to be severable from each
other. Additionally, the Departments fur-
ther proposed that if a court were to find
unlawful the administrative fee policies,
the certified IDR entity fee policies should
stand. In the alternative, if a court were to
find unlawful the certified IDR entity fee
policies, the administrative fee policies
should stand.
A few commenters supported the pro-
posed severability provisions. These com-
menters stated that the provisions would
help mitigate uncertainty that may result
from future court decisions if a lawsuit
occurs.
The Departments agree that the sev-
erability clause will help mitigate uncer-
tainty. After considering the comments,
the Departments are finalizing these pol-
icies as proposed, with a technical mod-
ification that the provisions in 26 CFR
54.9816-8(d) and (e)(2)(vii) and (viii), 29
CFR 2590.716-8(d) and (e)(2)(vii) and
(viii), and 45 CFR 149.510(d) and (e)(2)
(vii) and (viii) are intended to be sever-
able, rather than 26 CFR 54.9816-8(d) and
(e)(2)(vii) through (ix), 29 CFR 2590.716-
8(d) and (e)(2)(vii) through (ix), and 45
CFR 149.510(d) and (e)(2)(vii) through
(ix). This technical modification is due
to the restructuring of the regulatory text
in these final rules pertaining to certified
IDR entity fees at 26 CFR 54.9816-8(e)
(2)(vii) and (viii), 29 CFR 2590.716-8(e)
(2)(vii) and (viii), and 45 CFR 149.510(e)
(2)(vii) and (viii) compared to what was
proposed, as discussed further in section
II.B of this preamble.
The Departments further clarify their
intent that the methodology being adopted
here to set the administrative fee amount
and the considerations the Departments
used in developing the certified IDR
entity fee ranges are also intended to
be severable. Should any aspect of the
methodology or considerations be deter-
mined to be unlawful, the Departments
intend for the administrative fee amount
or certified IDR entity fee ranges to be
adjusted by applying the methodology
in accordance with the remaining ele-
ments of the methodology or consider-
ations. For instance, if it is determined
that certain expenditures should not have
been included in calculating the admin-
istrative fee amount, then the Depart-
ments would implement these rules by
eliminating those expenditures from the
total expenditures estimated to be made
by the Departments in carrying out the
Federal IDR process, and dividing the
new expenditures amount by the same
estimated number of administrative fees
paid to calculate the new administrative
fee amount. The resulting administrative
fee amount would be immediately effec-
tive, without requiring additional notice
and comment rulemaking.
IV. Economic Impact and Paperwork
Burden
A. Summary – Departments of Health and
Human Services and Labor
These final rules establish the admin-
istrative fee amount and the certified IDR
entity fee ranges in notice and comment
rulemaking, and the preamble sets forth
the methodology for setting the adminis-
trative fee amount and the considerations
used to develop the certified IDR entity
fee. The Departments have examined the
effects of these final rules as required
by Executive Order 13563 (76 FR 3821,
January 21, 2011, Improving Regula-
tion and Regulatory Review); Executive
Order 12866 (58 FR 51735, October 4,
1993, Regulatory Planning and Review);
Executive Order 14094 (88 FR 21879,
April 11, 2023, Modernizing Regulatory
Review); the Regulatory Flexibility Act
(Pub. L. 96–354, September 19, 1980);
section 1102(b) of the Social Security Act
(42 U.S.C. 1102(b)); section 202 of the
Unfunded Mandates Reform Act of 1995
(Pub. L. 104–4, March 22, 1995); and

Bulletin No. 2024–5 597 January 29, 2024
Executive Order 13132 (64 FR 43255,
August 10, 1999, Federalism).
B. Executive Orders 12866, 13563, and
14094 – Departments of Health and
Human Services and Labor
Executive Orders 12866, 13563, and
14094 direct Federal agencies to assess all
costs and benefits of available regulatory
alternatives and if regulation is necessary,
to select regulatory approaches that maxi-
mize net benefits (including potential eco-
nomic, environmental, public health and
safety effects, distributive impacts, and
equity). Under Executive Order 12866,
“significant” regulatory actions are subject
to review by the Office of Management and
Budget (OMB). Executive Order 14094,
entitled “Modernizing Regulatory Review”
(hereinafter, the Modernizing E.O.),
amends section 3(f) of Executive Order
12866 (Regulatory Planning and Review).
The amended section 3(f) of Executive
Order 12866 defines a “significant regu-
latory action” as an action that is likely to
result in a rule: (1) having an annual effect
on the economy of $200 million or more in
any 1 year (adjusted every 3 years by the
Administrator of OMB’s Office of Infor-
mation and Regulatory Affairs (OIRA)
for changes in gross domestic product), or
adversely affect in a material way the econ-
omy, a sector of the economy, productivity,
competition, jobs, the environment, public
health or safety, or State, local, territorial,
or tribal governments or communities; (2)
creating a serious inconsistency or oth-
erwise interfering with an action taken or
planned by another agency; (3) materially
altering the budgetary impacts of entitle-
ment grants, user fees, or loan programs
or the rights and obligations of recipients
thereof; or (4) raising legal or policy issues
for which centralized review would mean-
ingfully further the President’s priorities
or the principles set forth in this Executive
order, as specifically authorized in a timely
manner by the Administrator of OIRA in
each case.
A regulatory impact analysis (RIA) must
be prepared for rules deemed significant.
OMB’s OIRA has deemed this rule signif-
icant. The Departments have prepared an
RIA that to the best of their ability presents
the costs and benefits of these rules. OMB
has reviewed these final regulations, and
the Departments have provided the follow-
ing assessment of their impact.
C. Need for Regulatory Action –
Departments of Health and Human
Services and Labor
The Departments are amending the
certified IDR entity and administrative
fee provisions of the rules for the Federal
IDR process to set the administrative fee
amount and the certified IDR entity fee
ranges in notice and comment rulemak-
ing, and set forth the methodology for set-
ting the administrative fee amount and the
considerations for developing the certified
IDR entity fee ranges. These policies will
ensure that all interested parties are suf-
ficiently notified and provided an oppor-
tunity to comment on the fees associated
with the Federal IDR process.
D. Summary of Impacts and Accounting
Table – Departments of Health and
Human Services and Labor
The expected benefits and costs of these
final rules are summarized in Table 1 and
discussed in this section of the preamble.
In accordance with OMB Circular A–4,
Table 1 depicts an accounting statement
summarizing the Departments’ assess-
ment of the benefits, costs, and transfers
associated with this regulatory action. The
Departments are unable to quantify all ben-
efits and costs of these final rules but have
sought, where possible, to describe these
non-quantified impacts. The effects in
Table 1 reflect non-quantified impacts and
estimated direct monetary costs resulting
from the provisions of these final rules.
TABLE 1: Accounting Table
Accounting Statement
Benefits:
Non-Quantified:
• Increased interested party transparency as a result of the policies to establish the administrative fee amount and certified IDR
entity fee ranges in notice and comment rulemaking, as well as setting forth the methodology for calculating the administrative
fee amount and the considerations for developing the certified IDR entity fee ranges.
Costs:EstimateYear DollarDiscount RatePeriod Covered
Annualized Monetized ($/Year)$0.14 million20237 percent2023-2027
$0.13 million20233 percent2023-2027
Quantified:
• Costs to interested parties of $638,631 to review and interpret these rules in 2023.
Transfers:EstimateYear DollarDiscount RatePeriod Covered
Annualized Monetized ($/year)$31.65 million20237 percent2023-2027
$32.31 million20233 percent2023-2027
Quantified:
• Transfers from the parties to the Federal Government of approximately $32 million annually beginning in 2024 as a result of
the policy to set the administrative fee amount at $115 per party per dispute for disputes initiated on or after the effective date
of these rules.
• Transfers from the parties to certified IDR entities of approximately $9 million annually beginning in 2024 as a result of the
policy to set the certified IDR entity fee ranges at $200-$840 for single determinations, $268-$1,173 for batched determina-
tions, and an additional $75-$250 for every 25 line items in excess of the first 25 line items.

January 29, 2024 598 Bulletin No. 2024–5
1. Benefits
The primary benefit of these final
rules is to allow the Federal IDR pro-
cess to function through establishing the
administrative fee amount and certified
IDR entity fee ranges in rulemaking and
establishing the amounts of these fees for
disputes initiated on or after the effec-
tive date of these rules. In response to
the opinion and order in TMA IV, these
final rules are necessary in order to set
the administrative fee amount as close to
January 1, 2024 as possible, because the
current $50 administrative fee amount
is insufficient to satisfy the statutory
requirement that the total amount of
fees paid for the year be estimated to
be equal to the amount of expenditures
estimated to be made by the Departments
in carrying out the Federal IDR process.
The primary non-quantifiable benefit of
these final rules is the continuation of a
functioning Federal IDR process, which
helps to protect consumers from certain
surprise medical bills and helps providers
to receive compensation for certain out-
of-network services. Additional benefits
specific to each Federal IDR process fee
type appear in the following sections.
a. Administrative Fee Amount and
Methodology
The Departments are finalizing the pro-
posal to establish the administrative fee
amount in notice and comment rulemak-
ing for disputes initiated on or after the
effective date of these rules, and the
Departments are setting forth the method-
ology for determining the administrative
fee amount. Utilizing notice and comment
rulemaking will increase transparency
of the administrative fee-setting process
and allow interested parties to provide
feedback to the Departments prior to the
Departments setting the administrative fee
amount.
The Departments sought comment on
these benefits. The Departments received
comments on these benefits and respond
to these comments in section II.A of this
preamble. The Departments are finalizing
these benefits as proposed.
b. Certified IDR Entity Fee Ranges
The Departments proposed to estab-
lish the certified IDR entity fee ranges for
single and batched determinations, which
include a tiered fee range for batched
determinations that exceed 25 line items,
in notice and comment rulemaking for
disputes initiated on or after the effective
date of these rules. Utilizing notice and
comment rulemaking to set the appropri-
ate ranges for certified IDR entity fees will
increase transparency for parties interested
in the certified IDR entity fee ranges and
allow these parties to identify in advance
the impacts of changing the certified IDR
entity fee ranges.
The Departments sought comment on
these benefits. The Departments received
comments on these benefits and respond
to these comments in section II.B of this
preamble. The Departments are finalizing
these benefits as proposed.
2. Costs
a. Administrative Fee Amount and
Methodology
The Departments are finalizing the pro-
posal to establish the administrative fee
amount in notice and comment rulemak-
ing for disputes initiated on or after the
effective date of these rules, and set forth
the methodology for setting the admin-
istrative fee amount with modifications
described in section II.A of this preamble
to ensure that disputing and other parties
are sufficiently notified and provided an
opportunity to comment on the admin-
istrative fee amount. The Departments
are also finalizing the administrative fee
amount for disputes initiated on or after
the effective date of these rules at $115 per
party per dispute.
The current administrative fee is $50
per party per dispute.
128
In the IDR Fees
proposed rules, the Departments estimated
that approximately 225,000 disputes are
closed per year.
129
Therefore, if the current
administrative fee were to remain appli-
cable, the Departments estimated in the
IDR Fees proposed rules that the parties
would pay approximately $22.5 million
in administrative fees annually (225,000
disputes x 2 parties per dispute x $50 per
party). In the IDR Fees proposed rules,
the Departments also estimated that if
they were to finalize an administrative fee
amount of $150 per party per dispute for
disputes initiated on or after the effective
date of these rules, the parties would pay
approximately $67.5 million in adminis-
trative fees annually beginning in 2024
(225,000 disputes x 2 parties per dispute
x $150 per party), assuming the number
of disputes remains stable year over year
and the administrative fee amount is not
subsequently changed through notice
and comment rulemaking. Therefore, in
the IDR Fees proposed rules, the Depart-
ments estimated that the costs associated
with this proposal, if finalized, would be
approximately $45 million ($67.5 million
if this proposal is finalized minus $22.5
million if the status quo were to continue).
The Departments sought comment
on these costs and assumptions. The
Departments received comments on these
assumptions.
Several commenters suggested that the
Departments’ estimate of 225,000 closed
disputes is too low. A few comment-
ers suggested that the Departments are
underestimating utilization of the Federal
IDR process and recommended that the
Departments analyze the available data
from States implementing similar policies
before the No Surprises Act. Several com-
menters disagreed with the assumption
used to calculate the 225,000 closed dis-
putes, which assumed that TMA IV’s vaca-
tur of batching regulations and guidance
would reduce the volume of disputes by
25 percent.
128
As a result of the opinion and order in TMA IV, which vacated the portion of the December 2022 guidance that increased the administrative fee amount to $350 per party per dispute for
disputes initiated during calendar year 2023, the administrative fee amount reverted to the amount established in the October 2022 guidance. See Centers for Medicare & Medicaid Services
(August 11, 2023). Federal Independent Dispute Resolution (IDR) Process Administrative Fee FAQs. https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/no-surpris-
es-act-independent-dispute-resolution-administrative-fee-frequently-asked-questions.pdf. Also see Centers for Medicare & Medicaid Services (October 31, 2022). Calendar Year 2023 Fee
Guidance for the Federal Independent Dispute Resolution Process under the No Surprises Act. https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/cy2023-fee-guid-
ance-federal-independent-dispute-resolution-process-nsa.pdf.
129
The details of the calculation of the number of disputes are provided at 88 FR 65893.

Bulletin No. 2024–5 599 January 29, 2024
As discussed in section II.A of this pre-
amble, after consideration of comments,
the Departments are finalizing the admin-
istrative fee using the estimated total num-
ber of administrative fees paid to certified
IDR entities, rather than the projected total
number of closed disputes, to estimate the
number of administrative fees to be paid
under the administrative fee methodol-
ogy. Federal IDR process data show that
the monthly average number of adminis-
trative fees paid to certified IDR entities
between February 2023 and July 2023
was 41,000. The Departments project this
monthly average forward by 12 months to
estimate 492,000 administrative fees paid
in a year.
After consideration of public com-
ments, the Departments are modifying the
proposed assumptions and cost estimates
as follows. If the current administrative
fee were to remain applicable, the parties
would pay approximately $24.6 million
in administrative fees annually (492,000
administrative fees paid x $50 per party
per dispute). As stated in section II.A of
this preamble, the estimated $24.6 mil-
lion in administrative fee collections if
the Departments were to retain the current
$50 administrative fee would be inade-
quate for the Departments to carry out
the Federal IDR process in 2024, as they
estimate the expenditures to be made in
2024 to be approximately $56.6 million.
As the Departments are now finalizing
an administrative fee amount of $115 per
party per dispute for disputes initiated on
or after the effective date of these rules,
the Departments estimate that the parties
will pay approximately $56.6 million in
administrative fees annually beginning in
2024 (492,000 administrative fees paid x
$115 per party per dispute), which is suffi-
cient to cover the estimated annual expen-
ditures of approximately $56.6 million,
assuming the number of administrative
fees paid remains stable year over year
and the administrative fee amount is not
subsequently changed through notice and
comment rulemaking. Therefore, the costs
associated with this policy are approxi-
mately $32.0 million ($56.6 million minus
$24.6 million if the status quo were to
continue).
b. Certified IDR Entity Fee Ranges
The Departments are finalizing the
proposal to set the certified IDR entity fee
ranges for single and batched determina-
tions, with a tiered fee range for batched
determinations that exceed 25 line items,
in notice and comment rulemaking for
disputes initiated on or after the effective
date of these rules in response to the opin-
ion and order in TMA IV to ensure that
interested parties are sufficiently notified
and provided an opportunity to comment
on the certified IDR entity fee ranges. The
certified IDR entity fee range for single
determinations for disputes initiated on
or after the effective date of these rules
is $200 to $840. The certified IDR entity
fee range for batched disputes initiated on
or after the effective date of these rules
is $268 to $1,173. Further, the tiered fee
range for batched determination for dis-
putes initiated on or after the effective
date of these rules is $75 to $250.
While the certified IDR entities are
responsible for setting their fees for single
and batched determinations, the Depart-
ments acknowledge that the changes to the
certified IDR entity fee ranges may impact
the cost to the parties to participate in the
Federal IDR process. The Departments
anticipate that the vacatur of batching
standards by the District Court’s opinion
and order in TMA IV could result in initiat-
ing parties submitting single and batched
disputes in proportions similar to those
prior to the issuance of the August 2022
guidance, which interpreted the now-va-
cated standards for batching qualified IDR
items or services. Based on internal data
relating to disputes initiated prior to the
establishment of the now vacated batch-
ing criteria that were released in August
2022, approximately 70 percent of dis-
putes at the time were single disputes and
approximately 30 percent were batched
disputes.
130
The Departments anticipate
that, as a result of TMA IV, initiating par-
ties will return to the batching practices
they engaged in prior to issuance of the
August 2022 guidance, such as initiating a
higher proportion of batched disputes and
including more items or services within
those batched disputes.
Based on internal Federal IDR pro-
cess data, the Departments estimate that
certified IDR entities collect a certified
IDR entity fee for approximately 135,000
disputes annually.
131
Therefore, for the
purposes of this analysis, the Depart-
ments estimate that certified IDR entities
will collect certified IDR entity fees for
approximately 94,500 single disputes and
40,500 batched disputes annually (135,000
x 0.70 and 135,000 x 0.30, respectively).
The Departments acknowledge that each
party must pay a certified IDR entity fee
to the certified IDR entity no later than
the time that party submits its offer. How-
ever, because the non-prevailing party is
ultimately responsible for the full certified
IDR entity fee, which is retained by the
certified IDR entity for the IDR services it
performed, it is the Departments’ position
that providing a per-dispute calculation
reasonably captures the overall cost of the
dispute with respect to the certified IDR
entity fee without implicating false preci-
sion on the amount of certified IDR entity
fee costs that initiating and non-initiating
parties ultimately may incur.
To develop a reasonable estimate for
the certified IDR entity fee amount for
both single and batched disputes, the
Departments assume that the certified IDR
entities will set single determination fixed
fees that approximate the median value of
the finalized fee range and will set batched
determination fixed fees that approximate
the 3rd quartile of the finalized fee range.
132

Therefore, for the purposes of this analy-
sis, the Departments estimate that the typ-
ical single determination fixed fee (range
$200–$840) will be approximately $520,
and that the typical batched determina-
130
The Departments estimate that currently approximately 80 percent of disputes are single disputes and 20 percent of disputes are batched disputes, and the Departments anticipate that this
ratio will return to 70 percent of disputes being single disputes and 30 percent of disputes being batched disputes beginning in calendar year 2024.
131
While the administrative fee must be paid by the disputing party for any dispute for which a certified IDR entity is selected, the certified IDR entity fee is only assessed for disputes that
are determined eligible for the Federal IDR process.
132
The Departments anticipate that, due to the uncertainty around batching practices as a result of the TMA IV opinion and order, certified IDR entities will likely choose to increase their
batched determination fee. Therefore, using the 75
th
percentile of the proposed fee range to calculate the cost of batched determinations provides a reasonable approximation of the expected
increase.

January 29, 2024 600 Bulletin No. 2024–5
tion fixed fee (range $268–$1,173) will
be approximately $947. At an estimated
cost of $520 per single determination for
approximately 94,500 single determina-
tions annually, the Departments estimate
that single determinations will cost dis-
puting parties approximately $49,140,000
annually ($520 x 94,500). At an estimated
cost of $947 per batched determination for
approximately 40,500 batched determina-
tions annually, the Departments estimate
that batched determinations will cost dis-
puting parties approximately $38,353,500
annually ($947 x 40,500).
Further, the Departments estimate
that using the finalized tiered fee range
for batched determinations, certified IDR
entities will set and apply a fixed fee that
approximates the average of the proposed
range ($75–$250) for batched determina-
tions based on the number of line items. The
Departments estimate that certified IDR
entities will typically set their tiered fee
at approximately $163. The Departments
acknowledge the uncertainty surrounding
the number of line items that may be sub-
mitted in batched disputes due to the TMA
IV opinion and order. However, to produce
an estimate, and for the purposes of this
analysis, the Departments estimate that
of the total estimated 40,500 batched dis-
putes, approximately 4,455 batched deter-
minations will potentially be subject to at
least 2 applications of the tiered fee ($163
x 2 = $326).
133
The Departments therefore
estimate that this subset of approximately
4,455 batched determinations exceeding
25 line items will cost disputing parties
approximately $1,452,330 annually ($326
x 4,455). In total, assuming the number
of disputes remains stable year over year,
the Departments estimate the parties will
pay approximately $89 million in certified
IDR entity fees annually in accordance
with the finalized policies ($49,140,000
for single determinations + $38,353,500
for batched determinations + $1,452,330
for the subset of batched determinations
subject to the tiered fee).
The calendar year 2023 certified IDR
entity fee ranges for single determina-
tions and batched determinations are
$200–$700 and $268–$938, respectively.
Certified IDR entities currently charge a
median fixed fee of $549 for single deter-
minations and $770 for batched determi-
nations in 2023. Therefore, for approx-
imately 108,000 single determinations
and 24,840 batched determinations (not
subject to the batched percentage fee
amount) annually,
134
if current certified
IDR entity fixed fees remained applicable,
the Departments estimate that the parties
would pay approximately $59,292,000 for
single determinations ($549 x 108,000)
and $19,126,800 for batched determina-
tions ($770 x 24,840). Current guidance
permits certified IDR entities to charge
a batching percentage on batched deter-
minations based on the number of line
items.
135
For the purposes of this analy-
sis, the Departments assume that a subset
of approximately 8 percent of batched
determinations, or 2,160 determinations,
potentially subject to the batched percent-
ages would receive at least a 120 percent
increase from the median batched deter-
mination fixed fee ($770 x 1.20 = $924).
As such, the Departments estimate that
the parties would pay approximately
$1,995,840 for this subset of batched deter-
minations potentially subject to a batching
percentage (2,160 x $924), resulting in a
total cost of approximately $80 million
under the current calendar year 2023 certi-
fied IDR entity fee structure ($59,292,000
for single determinations + $19,126,800
for batched determinations + $1,995,840
for the subset of batched determinations
subject to the tiered fee). Therefore, tak-
ing into account the current costs to the
parties associated with the current certi-
fied IDR entity fee structure, the total cost
to the parties associated with this policy
is approximately $9 million ($89 million
as finalized minus $80 million if the status
quo fee ranges were to continue).
The Departments sought comment on
these costs and assumptions. The Depart-
ments did not receive comments on these
costs or assumptions and are finalizing
them as proposed.
3. Uncertainties
It is unclear whether the Federal IDR
process will experience the same oper-
ating conditions when these rules are
effective compared to the current state,
such as the number of disputes initiated,
future policy changes finalized after
future notice and comment rulemaking,
or increased or decreased costs by the
Departments to carry out the Federal IDR
process. Due to the need to take point-
in-time estimates of volume and expen-
ditures for the purposes of developing
the analyses in the preamble to these
rules, there is inherent uncertainty in the
estimates in these analyses as the data
are constantly changing. It is difficult to
project the impact on the administrative
fee amount charged to the parties if the
Federal IDR process landscape changes.
Although the Departments have analyzed
the Federal IDR process data available
to inform their projections, it is uncer-
tain whether the trends in these data will
remain applicable in the future. At the
same time, the Departments do not know
what impact the changes to the Federal
IDR process as a result of the District
Court’s opinions and orders in TMA IV
and TMA III will have on the number of
disputes initiated and the time it will take
certified IDR entities to close those dis-
putes. The Departments continue to mon-
itor trends in the Federal IDR process and
133
Based on internal data the Departments estimate that approximately 11 percent of batched disputes submitted prior to the establishment of the batching criteria released in August 2022
exceeded 25 line items. For this reason, we project that a similar number of batched disputes with number of line items exceeding 25 line items will be submitted due to TMA IV.
134
The Departments estimate that 80 percent of disputes are single disputes and 20 percent are batched disputes (135,000 x 0.80 and 135,000 x 0.20, respectively). For the purposes of this
analysis, the Departments estimate that a subset of approximately 8 percent, or 2,160 batched disputes would be subject to a batching percentage (27,000 x 0.08).
135
Without the need to seek further approval, to account for the differential in the workload of batched determinations, a certified IDR entity may charge the following percentages of its
approved certified IDR entity batched determination fee (“batching percentage”) for batched determinations, which are based on the number of line items initially submitted in the batch:

• 2-20 line items: 100 percent of the approved batched determination fee;

• 21-50 line items: 110 percent of the approved batched determination fee;

• 51-80 line items: 120 percent of the approved batched determination fee; and

• 81 line items or more: 130 percent of the approved batched determination fee.

See Centers for Medicare & Medicaid Services (October 31, 2022). Calendar Year 2023 Fee Guidance for the Federal Independent Dispute Resolution Process under the No Surprises Act.
https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/cy2023-fee-guidance-federal-independent-dispute-resolution-process-nsa.pdf.

Bulletin No. 2024–5 601 January 29, 2024
will make any necessary changes through
future notice and comment rulemaking.
4. Regulatory Review Cost Estimation
If regulations impose administrative
costs on entities, such as the time needed
to read and interpret rules, regulatory
agencies should estimate the total cost
associated with regulatory review. Based
on comments received for the July 2021
interim final rules and October 2021
interim final rules, the Departments esti-
mate that more than 2,100 entities will
review these final rules, including 1,500
issuers, 205 third party administrators
(TPAs), and at least 395 other interested
parties (for example, State insurance
departments, State legislatures, industry
associations, advocacy organizations, and
providers and provider organizations).
The Departments acknowledge that this
assumption may understate or overstate
the number of entities that will review
these final rules.
Using the median hourly wage rate
from the Bureau of Labor Statistics for
a Lawyer (Code 23-1011) to account for
average labor costs (including a 100 per-
cent increase for the cost of fringe benefits
and other indirect costs), the Departments
estimate that the cost of reviewing these
final rules will be $130.52 per hour.
136
The
Departments estimate, based on an esti-
mated rule length of approximately 35,000
words and an average reading speed of
200 to 250 words per minute, that it will
take each reviewing entity approximately
2.33 hours to review these final rules,
with an associated cost of approximately
$304.11 (2.33 hours x $130.52 per hour).
Therefore, the Departments estimate that
the total burden to review these final rules
will be approximately 4,893 hours (2,100
reviewers x 2.33 hours per reviewer),
with an associated cost of approximately
$638,631 (2,100 reviewers x $304.11 per
reviewer).
The Departments sought comments
in the IDR Fees proposed rules on this
approach to estimating the total burden
and cost for interested parties to read and
interpret the IDR Fees proposed rules,
which is the same approach used to esti-
mate the total burden and cost for inter-
ested parties to read and interpret these
final rules. The Departments did not
receive comments on this approach and
cost. The Departments are finalizing these
estimates as proposed.
E. Regulatory Alternatives – Departments
of Health and Human Services and Labor
In developing these final rules, the
Departments considered various alterna-
tive approaches.
1. Administrative Fee Amount and
Methodology (26 CFR 54.9816-8(d)(2),
29 CFR 2590.716-8(d)(2), and 45 CFR
149.510(d)(2))
In its TMA IV opinion and order, the
District Court indicated that notice and
comment rulemaking is necessary to set the
administrative fee, and the Departments
are of the view that alternative approaches
would lead to unnecessary uncertainty. In
addition, providing a description of the
methodology used to calculate the fee
amount and proposing the administrative
fee amount in the IDR Fees proposed
rules would increase transparency for
the parties and provide interested parties
the opportunity to be included in the fee
setting process. The Departments consid-
ered that guidance has historically been
used to set the administrative fee amount
based on concerns that the requirement to
collect fees sufficient to fund the Federal
IDR process. The lead time required to
set the fee amount in notice and comment
rulemaking could constrain the Depart-
ments’ responsiveness to program needs
and artificially inflate the administrative
fee amount due to the need to ensure ade-
quate funding of the process. However, in
light of TMA IV, the increased transpar-
ency and opportunity for interested parties
to provide feedback on the administrative
fee methodology and amount outweighed
the potential concern that the administra-
tive fee might be artificially inflated by the
need to make conservative estimates to
set the administrative fee amount further
in advance through notice and comment
rulemaking.
The Departments considered propos-
ing other administrative fee policies in the
IDR Fees proposed rules, such as those
proposed in the IDR Operations proposed
rules.
137
However, as discussed in section
II.A of this preamble, the Departments
were unable to propose those policies in
the IDR Fees proposed rules because they
are much more comprehensive than the
fee-related policies proposed in the IDR
Fees proposed rules and would require
more time to develop and implement if
finalized. There is an urgency to publish
these final rules to be effective as close
to January 1, 2024 as possible due to the
need to sufficiently fund the Federal IDR
process in 2024. As discussed in sections
I.E and II.A of these final rules, the current
$50 administrative amount is insufficient
to satisfy the statutory requirement that
the total amount of fees paid for a year
be estimated to be equal to the amount of
expenditures estimated to be made by the
Departments for the year in carrying out
the Federal IDR process. Therefore, the
Departments deferred those substantial
changes to the Federal IDR process and
administrative fee structure and collection
procedures to the IDR Operations pro-
posed rules, which are aimed at improving
Federal IDR process operations and mak-
ing the process more accessible.
2. Certified IDR Entity Fee Ranges (26
CFR 54.9816-8(e)(2), 29 CFR 2590.716-
8(e)(2), and 45 CFR 149.510(e)(2))
The Departments considered main-
taining the current policy that the allow-
able ranges for certified IDR entity fees
would be set in guidance yearly instead of
through notice and comment rulemaking.
The Departments considered whether con-
tinuing to set the certified IDR entity fee
ranges in guidance would preserve neces-
sary flexibility for the certified IDR enti-
ties to choose their fixed fees within the
allowable ranges and submit those fees for
approval to the Departments, and would
allow the Departments time to review and
approve each certified IDR entity’s fees
136
U.S. Bureau of Labor Statistics (May 1, 2022). May 2022 National Occupational Employment and Wage Estimates. https://www.bls.gov/oes/current/oes_nat.htm.
137
88 FR 75744.

January 29, 2024 602 Bulletin No. 2024–5
and publish them in advance of the year
to which the fees apply. The Departments
concluded that publishing the fee ranges
in guidance could be a more expedient
process compared to rulemaking because
of the lack of required comment period;
however, establishing the fee ranges
through notice and comment rulemaking
would not prevent the Departments from
reviewing and approving each certified
IDR entity’s fixed fee amounts in a timely
manner. The Departments are of the view
that there would be no impact to the ability
of the certified IDR entities to select their
fees from the established ranges if those
ranges were published through notice and
comment rulemaking. Further, setting the
certified IDR entity fee ranges through
guidance does not allow interested parties
to engage through the submission of pub-
lic comments, while the notice and com-
ment rulemaking process increases trans-
parency and will afford an opportunity
for the Departments to consider feedback
from interested parties on the appropriate-
ness of proposed fee ranges.
F. Paperwork Reduction Act
These final rules are not subject to the
requirements of the Paperwork Reduc-
tion Act of 1995,
138
because the Depart-
ments anticipate that fewer than 10 cer-
tified IDR entities will submit requests
to update their certified IDR entity fees
an additional time during the calendar
year based on current experience operat-
ing the Federal IDR process, and they do
not contain any other collection of infor-
mation as defined in 44 U.S.C. 3502(3).
Therefore, clearance by OMB under the
Paperwork Reduction Act of 1995 is not
required.
G. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
(5 U.S.C. 601, et seq.) requires agencies
to analyze options for regulatory relief of
small entities and to prepare a final reg-
ulatory flexibility analysis to describe
the impact of these final rules on small
entities, unless the head of the agency
can certify that the rule would not have
a significant economic impact on a sub-
stantial number of small entities. The
RFA generally defines a “small entity”
as (1) a proprietary firm meeting the size
standards of the Small Business Adminis-
tration (SBA), (2) a not-for-profit organi-
zation that is not dominant in its field, or
(3) a small government jurisdiction with a
population of less than 50,000. States and
individuals are not included in the defini-
tion of “small entity.” The Departments
use a change in revenues of more than 3
to 5 percent as their measure of significant
economic impact on a substantial number
of small entities. For purposes of the RFA,
small entities include small businesses,
nonprofit organizations, and small gov-
ernmental jurisdictions. The Secretaries
of Labor, the Treasury, and Health and
Human Services certify that these final
rules will not have a significant economic
impact on a substantial number of small
entities, as presented in the analysis in the
following subsections of this preamble.
1. Small Entities Regulated
The provisions in these final rules
will affect plans (or their TPAs),
139
health
insurance issuers offering group or indi-
vidual health insurance coverage, and
providers, facilities, and providers of air
ambulance services.
For purposes of analysis under the
RFA,
140
the Departments consider an
employee benefit plan with fewer than
100 participants to be a small entity.
141

The basis of this definition is found in
section 104(a)(2) of ERISA,
142
which per-
mits the Secretary of Labor to prescribe
simplified annual reports for plans that
cover fewer than 100 participants. Under
section 104(a)(3),
143
the Secretary may
also provide for exemptions or simpli-
fied annual reporting and disclosure for
welfare benefit plans. Under the authority
of section 104(a)(3),
144
the Department
of Labor has previously issued simpli-
fied reporting provisions and limited
exemptions from reporting and disclosure
requirements for small plans, including
unfunded or insured welfare plans, which
cover fewer than 100 participants and sat-
isfy certain requirements.
145
While some
large employers have small plans, small
plans are generally maintained by small
employers. Thus, the Departments are of
the view that assessing the impact of these
final rules on small plans is an appropri-
ate substitute for evaluating the effect on
small entities. The definition of a small
entity considered appropriate for this pur-
pose differs, however, from a definition of
a small business based on size standards
issued by the SBA
146
in accordance with
the Small Business Act.
147
In 2021, there were 1,500 issuers in the
U.S. health insurance market
148
and 205
TPAs.
149
Health insurance issuers are gen-
erally classified under the North American
Industry Classification System (NAICS)
code 524114 (Direct Health and Medical
Insurance Carriers). According to SBA
size standards,
150
entities with average
annual receipts of $47 million or less are
considered small entities for this NAICS
138
44 U.S.C. 3501 et seq.
139
The Departments expect that most self-insured group health plans will work with a TPA to meet the requirements.
140
5 U.S.C. 601, et seq.
141
The Department of Labor consulted with the Small Business Administration Office of Advocacy in making this determination, as required by 5 U.S.C. 603(c) and 13 CFR 121.903(c) in
a memo dated June 4, 2020.
142
29 U.S.C. 1024(a)(2).
143
29 U.S.C. 1024(a)(3).
144
Id.
145
29 CFR 2520.104-20, 2520.104-21, 2520.104-41, 2520.104-46, and 2520.104b-10.
146
13 CFR 121.201 (2011).
147
15 U.S.C. 631 et seq. (2011).
148
Centers for Medicare & Medicaid Services (2022). Medical Loss Ratio Data and System Resources. https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.
149
Non-issuer TPAs based on data derived from the 2016 benefit year reinsurance program contributions.
150
United States Small Business Administration (March 17, 2023). Table of Size Standards. https://www.sba.gov/document/support—table-size-standards.

Bulletin No. 2024–5 603 January 29, 2024
code. The Departments expect that few,
if any, insurance companies underwrit-
ing health insurance policies fall below
these size thresholds. Based on data from
Medical Loss Ratio (MLR) annual report
submissions for the 2021 MLR reporting
year, approximately 87 out of 483 issuers
of health insurance coverage nationwide
had total premium revenue of $47 million
or less.
151
However, it should be noted that
also based on MLR data, over 77 percent
of these small companies belong to larger
holding groups, and many, if not all, of
these small companies, are likely to have
non-health lines of business that would
result in their revenues exceeding $47
million. The Departments are of the view
that the same assumptions also apply to
TPAs that would be affected by these pro-
posed rules.
152
To produce a conservative
estimate, for the purposes of this analysis,
the Departments assume 4.1 percent, or 62
issuers and 8 TPAs, of the total of 1,500
health insurance issuers and 205 TPAs
across the country, are considered small
entities.
153
These final rules also affect health
care providers and facilities due to the
proposed requirements related to the cer-
tified IDR entity and administrative fees.
The Departments estimate that 140,270
physicians,

on average, bill on an out-of-
network basis annually.
154
The number
of small physician providers is estimated
based on the SBA’s size standards. The size
standard applied for providers is NAICS
62111 (Offices of Physicians), for which
a business with less than $16 million in
receipts is considered to be small. By this
standard, the Departments estimate that
47.2 percent or 66,207 physicians are con-
sidered small under the SBA’s size stan-
dards.
155
The size standard for facilities is
NAICS 62211 (General Medical and Sur-
gical Hospitals), for which a business with
less than $47 million in receipts is con-
sidered to be small. By this standard, the
Departments estimate that 43.5 percent or
1,113 facilities are considered small under
the SBA’s size standards.
156
These final
rules are also expected to affect non-phy-
sician providers who bill on an out-of-net-
work basis. The Departments lack data on
the number of non-physician providers
who will be impacted by these final rules.
The Departments do not have the same
level of data for the air ambulance subsec-
tor. In 2020, the total revenue of providers
of air ambulance services was estimated
to be $4.2 billion, with 1,114 air ambu-
lance bases.
157
This results in an industry
average of $3.8 million per air ambulance
base. Based on a 2020 USC-Brookings
Schaeffer report on air ambulance ser-
vices,
158
by 2017, large private equity
firms controlled roughly two-thirds of the
air ambulance market.
Although based on the Departments’
experience operating the Federal IDR pro-
cess, significantly fewer than 67,320 small
providers and facilities have accessed the
process to date,
159
the Departments lack
adequate data to better inform the number
of small providers impacted by these final
rules. Therefore, although the estimate
of 67,320 small providers and facilities
is likely a significant overestimate of the
number of small providers and facilities
impacted by these final rules, the Depart-
ments use this number of small providers
and facilities in this analysis to be conser-
vative.
160
Additionally, as discussed in the Par-
tial Report on the Federal Independent
Dispute Resolution (IDR) Process, Octo-
ber 1 – December 31, 2022, the top 10
initiating parties (or entities acting on
behalf of initiating parties) are large com-
panies that initiate approximately 85 per-
cent of disputes, and the top 10 non-ini-
tiating parties are large companies that
are initiated against in approximately 95
percent of disputes.
161
Therefore, for pur-
poses of this analysis, the Departments
assume that only 15 percent of all disputes
involve small providers. The 5 percent of
all disputes that do not involve the top 10
non-initiating parties could involve any of
the 1,695 issuers and TPAs that are not the
top 10 non-initiating parties (1,500 issuers
and 205 TPAs total – 10 top non-initiat-
ing parties = 1,695 remaining issuers and
TPAs). The Departments assume that the
proportion of small issuers and TPAs to
non-top 10 issuers and TPAs is the same
as the proportion of disputes involving
small issuers and TPAs to disputes involv-
ing non-top 10 issuers and TPAs, as the
volume of disputes issuers and TPAs are
involved in should be proportional to the
size of their enrollment. Taking into con-
sideration these estimates of the small
entities, the policies in these rules that
result in an increased burden to small enti-
ties are described below.
2. Compliance Costs
The Departments are finalizing the
policy to establish the administrative fee
151
Centers for Medicare & Medicaid Services (2022). Medical Loss Ratio Data and System Resources. https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.
152
The Departments are of the view that most TPAs are also issuers.
153
These numbers are calculated as follows: 77 percent of small companies belong to larger holding groups, so 23 percent do not and would be small entities. 87 issuers x 0.23 = 20. 20 / 483
= 4.1 percent. Applying the 4.1 percent to 1,500 issuers and 205 TPAs total = 62 small issuers and 8 small TPAs.
154
See 86 FR 56051 for more information on this estimate.
155
Based on data from the NAICS Association for NAICS code 62111, the Departments estimate the percent of businesses within the industry of Offices of Physicians with less than $16 mil-
lion in annual sales. United States Census Bureau (May 2021). 2017 SUSB Annual Data Tables by Establishment Industry. https://www.census.gov/data/tables/2017/econ/susb/2017-susb-an-
nual.html.
156
Based on data from the NAICS Association for NAICS code 62211, the Departments estimate the percent of businesses within the industry of General Medical and Surgical Hospitals with
less than $47 million in annual sales. United States Census Bureau (May 2021). 2017 SUSB Annual Data Tables by Establishment Industry. https://www.census.gov/data/tables/2017/econ/
susb/2017-susb-annual.html.
157
ASPE Office of Health Policy (September 10, 2021). Air Ambulance Use and Surprise Billing. https://aspe.hhs.gov/sites/default/files/2021-09/aspe-air-ambulance-ib-09-10-2021.pdf.
158
Adler, L., Hannick, K., and Lee, S. “High Air Ambulance Charges Concentrated in Private Equity-Owned Carriers.” USC-Brookings Schaffer Initiative for Health Policy. October 13, 2020.
https://www.brookings.edu/articles/high-air-ambulance-charges-concentrated-in-private-equity-owned-carriers/.
159
See U.S. Department of Health and Human Services, U.S. Department of Labor, and U.S. Department of the Treasury, Partial Report on the Federal Independent Dispute Resolution (IDR)
Process, October 1 – December 31, 2022. (n.d.). https://www.cms.gov/files/document/partial-report-idr-process-octoberdecember-2022.pdf.
160
Based on the Departments’ experience operating the Federal IDR process, the estimate of 67,320 small providers and facilities is likely a significant overestimate, and therefore the Depart-
ments assume that this estimate accounts for any non-physician providers who may be impacted by these rules for whom the Departments lack data to estimate.
161
Top initiating parties represent hundreds of individual providers across multiple states. Top non-initiating parties operate across multiple states and market segments. See U.S. Department
of Health and Human Services, U.S. Department of Labor, and U.S. Department of the Treasury, Partial Report on the Federal Independent Dispute Resolution (IDR) Process, October 1 –
December 31, 2022. (n.d.). https://www.cms.gov/files/document/partial-report-idr-process-octoberdecember-2022.pdf.

January 29, 2024 604 Bulletin No. 2024–5
amount in notice and comment rulemak-
ing and are finalizing that the administra-
tive fee amount for disputes initiated on
or after the effective date of these rules
is $115 per party per dispute. The annual
burden per small provider or facility asso-
ciated with this policy is $115,
162
and the
annual burden per small issuer/TPA is
$805.
163
For more details, please refer to
the Regulatory Impact Analysis in these
final rules.
The Departments are finalizing the pol-
icy to establish the certified IDR entity fee
ranges in notice and comment rulemak-
ing and are finalizing that the ranges are
$200–$840 for single determinations and
$268–$1,173 for batched determinations,
with a $75–$250 tiered fee range for dis-
putes that contain more than 25 line items.
The annual burden per small provider
or facility associated with this policy is
$657,
164
and the annual burden per small
issuer/TPA is $1,971.
165
For more details,
please refer to the Regulatory Impact
Analysis in these final rules.
Thus, the per-entity annual cost for
small providers and facilities is $772, and
the per-entity annual cost for small issuers
and TPAs is $2,776. The total estimated
annual cost for small providers and facili-
ties is $51,971,040, and the total estimated
annual cost for small issuers and TPA is
$194,320. See Tables 2 and 3.
TABLE 2: Detailed Annual Costs for Small Entities
Description of Cost
Annual Cost per Small Provider or Facility
Annual Cost per Small Issuer/TPA
Administrative Fee$115$805
Certified IDR Entity Fee$657$1,971
Total$772$2,776
TABLE 3: Aggregate Annual Costs for Small Entities
Affected EntityAffected Small EntitiesAnnual Cost per EntityAggregate Annual Cost for Small Entities
Provider or Facility67,320$772$51,971,040
Issuer/TPA70$2,776$194,320
3. Analysis and Certification Statement
The annual cost per small provider
or facility of $772 is approximately 0.07
percent of the average annual receipts per
small provider and approximately 0.04
percent of the average annual receipts per
small facility. The Departments anticipate
that small providers and facilities would
be unlikely to initiate disputes and thereby
incur these costs unless they anticipate
prevailing in the dispute and receiving
payment from plans or issuers that exceed
the costs incurred to initiate the dispute.
Additionally, data from the public reports
on the Federal IDR process released to
date by the Departments show that provid-
ers and facilities prevail in approximately
70 percent of disputes.
166
Therefore, small
providers and facilities are likely to expe-
rience an increase in receipts commensu-
rate or larger than the increase in costs.
The annual cost per small issuer/TPA
of $2,776 is approximately 0.15 percent
162
492,000 administrative fees paid / 2 types of parties = 246,000 administrative fees paid by providers. 246,000 administrative fees paid by providers – 85 percent (209,100) administrative
fees paid for disputes initiated by the top 10 initiating parties = 36,900 administrative fees paid for disputes initiated by other initiating parties. 36,900 disputes / 67,320 small providers and
facilities = approximately 0.5 disputes initiated per small provider or facility annually. For simplicity and to be conservative, the Departments assume 1 dispute per provider or facility. 1
dispute x $115 per dispute = $115 per small provider or facility.
163
492,000 administrative fees paid / 2 types of parties = 246,000 administrative fees paid by issuers/TPAs. 246,000 administrative fees paid by issuers/TPAs – 95 percent (233,700) admin-
istrative fees paid for disputes initiated against the top 10 non-initiating parties = 12,300 administrative fees paid for disputes initiated against other non-initiating parties. 12,300 disputes /
1,695 issuers/TPAs = approximately 7 disputes per small issuer/TPA annually. 7 disputes x $115 per dispute = $805.
164
Data from the first full year of Federal IDR process operations show that initiating parties prevail in approximately 70 percent of disputes. See Centers for Medicare & Medicaid Services
(April 27, 2023). Federal Independent Dispute Resolution Process – Status Update. Therefore, as the prevailing party’s certified IDR entity fee is refunded per 26 CFR 54.9816-8T(d)(1)(ii),
29 CFR 2590.716-8(d)(1)(ii), and 45 CFR 149.510(d)(1)(ii), initiating parties only pay the certified IDR entity fee for 30 percent of disputes, while non-initiating parties pay for the other
70 percent. https://www.cms.gov/files/document/federal-idr-processstatus-update-april-2023.pdf. The Departments estimate based on internal data that certified IDR entity fees are paid for
approximately 135,000 disputes annually. Of those 135,000 disputes, the Departments estimate that 30 percent (or 40,500) have their certified IDR entity fees paid by providers/facilities,
and 70 percent (or 94,500) have their certified IDR entity fees paid by issuers/TPAs. Of the 40,500 disputes for which the certified IDR entity fee is paid by providers or facilities, 85 percent
(or 34,425) are paid by the top 10 initiating parties. The remaining 15 percent (or 6,075) are paid by other initiating parties. 6,075 disputes / 67,320 small providers and facilities = less than
1 certified IDR entity fee paid per small provider or facility. For simplicity and to be conservative, the Departments assume 1 certified IDR entity fee paid per small provider or facility. The
average certified IDR entity fee across both single and batched disputes, including the tiered batched fee, in 2024 is $657 as calculated in accordance with these final rules.
165
Of the 94,500 disputes that have their certified IDR entity fees paid by issuers, 95 percent (or 89,775) are paid by the top 10 non-initiating parties. The remaining 5 percent (or 4,725) are
paid by other non-initiating parties. 4,725 disputes / 1,695 issuers/TPAs = approximately 3 certified IDR entity fees paid per small issuer/TPA. The average certified IDR entity fee across both
single and batched disputes, including the tiered batched fee, in 2024 is $657 as calculated in accordance with these final rules. 3 disputes x $657 per dispute = $1,971 per small issuer/TPA.
166
See U.S. Department of Health and Human Services, U.S. Department of Labor, and U.S. Department of the Treasury, Partial Report on the Federal Independent Dispute Resolution (IDR)
Process, October 1 – December 31, 2022. (n.d.). https://www.cms.gov/files/document/partial-report-idr-process-octoberdecember-2022.pdf.

Bulletin No. 2024–5 605 January 29, 2024
of the average annual receipts per small
issuer/TPA. While small issuers/TPAs
could pass on these increased costs to
consumers in the form of higher premi-
ums (or for TPAs, higher administration
fees), resulting in an increase in receipts
commensurate with the increase in costs,
the actual increase in costs and subsequent
impact on revenue would be de minimis
as the annual cost per small issuer/TPA is
so small. Additionally, the Departments
anticipate that by batching qualified IDR
items and services, there may be a reduc-
tion in the per-service cost of the Federal
IDR process to providers of certain ser-
vices and specialties, and potentially the
aggregate administrative costs, because
the Federal IDR process is likely to exhibit
at least some economies of scale.
167
As its measure of significant economic
impact on a substantial number of small
entities, HHS uses a change in revenue of
more than 3 to 5 percent. The Departments
are of the view that this threshold will not
be reached by the requirements in these
final rules, given that the annual per-entity
cost of $2,776 per small issuer/TPA rep-
resents 0.15 percent of the average annual
receipts for a small issuer/TPA and the
annual per-entity cost of $772 per small
provider/facility represents 0.07 percent
and 0.04 percent of the average annual
receipts for a small provider or facility,
respectively.
168
Therefore, the Secretaries
of Labor, the Treasury, and Health and
Human Services hereby certify that these
final rules will not have a significant eco-
nomic impact on a substantial number of
small entities.
The Departments sought comment on
this analysis and sought information on
the number of small plans (or TPAs), issu-
ers, providers, and facilities that may be
affected by the provisions in the IDR Fees
proposed rules. The Departments did not
receive comments on this analysis. The
Departments received comments on the
impact of the provisions in the IDR Fees
proposed rules on small providers and
respond to those comments in section II of
this preamble.
In addition, section 1102(b) of the
Social Security Act requires the Depart-
ments to prepare a regulatory impact anal-
ysis if a rule may have a significant impact
on the operations of a substantial number
of small rural hospitals. This analysis
must conform to the provisions of section
603 of the RFA.
169
For purposes of sec-
tion 1102(b) of the Act, the Departments
define a small rural hospital as a hospital
that is located outside of a metropolitan
statistical area and has fewer than 100
beds. These final rules are not subject to
section 1102 of the Act because the IDR
Fees proposed rules were not proposed
under title XVIII, title XIX, or part B of
title XI of the Act, and therefore section
1102(b) of the Act does not apply.
H. Special Analyses – Department of the
Treasury
Pursuant to the Memorandum of
Agreement, Review of Treasury Regula-
tions under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required. Pursuant to
section 7805(f) of the Code,
170
these reg-
ulations have been submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on their
impact on small business.
I. Unfunded Mandates Reform Act
Section 202 of the Unfunded Man-
dates Reform Act of 1995 (UMRA)
171

requires that agencies assess anticipated
costs and benefits and take certain other
actions before issuing a proposed rule or
any final rule for which a general notice of
proposed rulemaking was published that
includes any Federal mandate that may
result in expenditures in any 1 year by
State, local, or tribal governments, in the
aggregate, or by the private sector, of $100
million in 1995 dollars, updated annually
for inflation. That threshold is approxi-
mately $177 million in 2023. As discussed
earlier in the RIA, plans, issuers, TPAs,
and providers, facilities, and providers of
air ambulance services will incur costs to
comply with the provisions of these final
rules. The Departments estimate the com-
bined impact on State, local, or tribal gov-
ernments and the private sector will not be
above the threshold.
J. Federalism
Executive Order 13132 outlines the
fundamental principles of federalism.
It requires adherence to specific criteria
by Federal agencies in formulating and
implementing policies that have “substan-
tial direct effects” on the States, the rela-
tionship between the National Govern-
ment and States, or on the distribution of
power and responsibilities among the var-
ious levels of government. Federal agen-
cies issuing regulations that have these
federalism implications must consult with
State and local officials and describe the
extent of their consultation and the nature
of the concerns of State and local officials
in the preamble to the IDR Fees proposed
rules.
The Departments do not anticipate
that these final rules will have federalism
implications or limit the policy-making
discretion of the States in compliance
with the requirement of Executive Order
13132.
State and local government health
plans may be subject to the Federal IDR
process where a specified State law or All-
Payer Model Agreement does not apply.
The No Surprises Act authorizes States to
enforce the new requirements, including
those related to balance billing, for issu-
ers, providers, facilities, and providers of
air ambulance services, with HHS enforc-
ing only in cases where the State has noti-
167
Fielder, M., Adler, L., Ippolito, B. (March 16, 2021). Recommendations for Implementing the No Surprises Act. U.S.C.-Brookings Schaeffer on Health Policy. https://www.brookings.edu/
blog/ usc-brookings-schaeffer-on-health-policy/ 2021/ 03/ 16/ recommendations-for-implementing-the-no-surprises-act/.
168
United States Census Bureau (March 2020). 2017 SUSB Annual Data Tables by Establishment Industry, Data by Enterprise Receipt Size. https://www.census.gov/data/tables/2020/econ/
susb/2020-susb-annual.html.
169
5 U.S.C. 603.
170
26 U.S.C. 7805(f).
171
2 U.S.C. 1511.

January 29, 2024 606 Bulletin No. 2024–5
fied HHS that the State does not have the
authority to enforce or is otherwise not
enforcing, or HHS has made a determi-
nation that a State has failed to substan-
tially enforce the requirements. However,
in the Departments’ view, the federalism
implications of these final rules are sub-
stantially mitigated because some States
have their own process for determining
the total amount payable under a plan or
coverage for out-of-network emergency
services and to out-of-network providers
for patient visits to in-network facilities
for non-emergency services. Where a
State has a specified State law, the State
law, rather than the Federal IDR process,
will apply.
In compliance with the requirement
of Executive Order 13132 that agencies
examine closely any policies that may
have federalism implications or limit the
policy making discretion of the States, the
Departments have engaged in efforts to
consult with and work cooperatively with
affected States, including participating in
conference calls with and attending con-
ferences of the National Association of
Insurance Commissioners and consulting
with State insurance officials on an indi-
vidual basis.
While developing these rules, the
Departments attempted to balance the
States’ interests in regulating health insur-
ance issuers with the need to ensure mar-
ket stability. By doing so, the Departments
complied with the requirements of Execu-
tive Order 13132.
In accordance with Federal law, a
summary of these rules may be found
at https://www.regulations.gov/.
List of Subjects
26 CFR Part 54
Excise taxes, Pensions, Reporting and
recordkeeping requirements.
29 CFR Part 2590
Continuation coverage, Disclosure,
Employee benefit plans, Group health
plans, Health care, Health insurance,
Medical child support, Reporting and
recordkeeping requirements.
45 CFR Part 149
Balance billing, Health care, Health
insurance, Reporting, and recordkeeping
requirements, Surprise billing.
Douglas W. O’Donnell,
Deputy Commissioner for Services and
Enforcement,
Internal Revenue Service.
Lily L. Batchelder,
Assistant Secretary of the Treasury (Tax
Policy), Department of the Treasury.
Lisa M. Gomez
Assistant Secretary,
Employee Benefits Security Administra-
tion,
Department of Labor.
Xavier Becerra,
Secretary,
Department of Health and
Human Services.
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
For the reasons stated in the preamble,
the Department of the Treasury and the
IRS amend 26 CFR part 54 as set forth
below:
PART 54—PENSION EXCISE
TAXES
1. The authority citation for part
54 is amended by adding an entry for
§ 54.9816–8 in numerical order to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Section 54.9816–8 also issued under
26 U.S.C. 9816.
* * * * *
2. Section 54.9816–8 is amended by
revising paragraphs (a), (b), (c) introduc-
tory text, (d), and (e) and adding headings
for paragraphs (f) and (g) to read as fol-
lows:
§ 54.9816–8 Independent dispute
resolution process.
(a) Scope and definitions. For further
guidance, see § 54.9816–8T(a).
(b) Determination of payment amount
through open negotiation and initiation of
the Federal IDR process. For further guid-
ance, see § 54.9816–8T(b).
(c) Federal IDR process follow-
ing initiation. For further guidance, see
§ 54.9816–8T(c) introductory text through
(c)(3).
* * * * *
(d) Costs of IDR process—(1) Certified
IDR entity fee. For further guidance, see
§ 54.9816–8T(d)(1).
(2) Administrative fee. (i) For further
guidance, see § 54.9816–8T(d)(2)(i).
(ii) The administrative fee amount will
be established through notice and com-
ment rulemaking no more frequently than
once per calendar year in a manner such
that the total administrative fees paid for
a year are estimated to be equal to the
amount of expenditures estimated to be
made by the Secretaries of the Treasury,
Labor, and Health and Human Services for
the year in carrying out the Federal IDR
process. The administrative fee amount
will remain in effect until changed by
notice and comment rulemaking. For dis-
putes initiated on or after [INSERT DATE
30 DAYS AFTER DATE OF PUBLICA-
TION IN THE FEDERAL REGISTER],
the administrative fee amount is $115 per
party per dispute.
(3) Severability. (i) Any provision of
this paragraph (d) or paragraphs (e)(2)(vii)
and (viii) of this section held to be invalid
or unenforceable as applied to any person
or circumstance shall be construed so as
to continue to give the maximum effect to
the provision permitted by law, including
as applied to persons not similarly situ-
ated or to dissimilar circumstances, unless
such holding is that the provision of this
paragraph (d) or paragraphs (e)(2)(vii)
and (viii) is invalid and unenforceable in
all circumstances, in which event the pro-
vision shall be severable from the remain-
der of this paragraph (d) or paragraphs (e)
(2)(vii) and (viii) and shall not affect the
remainder thereof.

Bulletin No. 2024–5 607 January 29, 2024
(ii) The provisions in this paragraph (d)
and paragraphs (e)(2)(vii) and (viii) of this
section are intended to be severable from
each other.
(e) Certification of IDR entity—(1)
In general. For further guidance see
§ 54.9816–8T(e)(1).
(2) Requirements. (i) For further guid-
ance, see § 54.8616–8T(e)(2)(i) through
(vi).
(ii) through (vi) [Reserved]
(vii) Provide, no more frequently
than once per calendar year, a fixed fee
for single determinations and a separate
fixed fee for batched determinations, as
well as additional fixed tiered fees for
batched determinations, if applicable,
within the upper and lower limits for each,
as established by the Secretary in notice
and comment rulemaking. The certified
IDR entity fee ranges established by the
Secretary in rulemaking will remain in
effect until changed by notice and com-
ment rulemaking. The certified IDR entity
may not charge a fee outside the limits set
forth in rulemaking unless the certified
IDR entity or IDR entity seeking certifi-
cation receives advance written approval
from the Secretary to charge a fixed fee
beyond the upper or lower limits by fol-
lowing the process described in paragraph
(e)(2)(vii)(A) of this section. A certified
IDR entity may also seek advance written
approval from the Secretary to update its
fees one additional time per calendar year
by meeting the requirements described in
paragraph (e)(2)(vii)(A). The Secretary
will approve a request to charge a fixed
fee beyond the upper or lower limits for
fees as set forth in rulemaking or to update
the fixed fee during the calendar year if,
in their discretion, they determine the
information submitted by a certified IDR
entity or IDR entity seeking certification
demonstrates that the proposed change to
the certified IDR entity fee would ensure
the financial viability of the certified IDR
entity or IDR entity seeking certification
and would not impose on parties an undue
barrier to accessing the Federal IDR pro-
cess.
(A) In order for the certified IDR
entity or IDR entity seeking certifica-
tion to receive the Secretary’s written
approval to charge a fixed fee beyond
the upper or lower limits for fees as set
forth in rulemaking or to update the fixed
fee during the calendar year, the certified
IDR entity or IDR entity seeking certi-
fication must submit to the Secretary,
in the form and manner specified by the
Secretary:
(1) The fixed fee the certified IDR
entity or IDR entity seeking certification
believes is appropriate for the certified
IDR entity or IDR entity seeking certifi-
cation to charge;
(2) A description of the circumstances
that require the alternative fixed fee, or that
require a change to the fixed fee during the
calendar year, as applicable; and
(3) A detailed description that reason-
ably explains how the alternative fixed fee
or the change to the fixed fee during the
calendar year, as applicable, will be used
to mitigate the effects of those circum-
stances.
(B) [Reserved]
(viii) For disputes initiated on or after
[INSERT DATE 30 DAYS AFTER DATE
OF PUBLICATION IN THE FEDERAL
REGISTER], certified IDR entities
are permitted to charge a fixed certified
IDR entity fee for single determinations
within the range of $200 to $840, and a
fixed certified IDR entity fee for batched
determinations within the range of $268 to
$1,173, unless a fee outside such ranges
is approved by the Secretary, pursuant to
paragraph (e)(2)(vii)(A) of this section.
As part of the batched determination
fee, certified IDR entities are permitted
to charge an additional fixed tiered fee
within the range of $75 to $250 for every
additional 25 line items within a batched
dispute, beginning with the 26th line item.
The ranges for the certified IDR entity fees
for single and batched determinations will
remain in effect until changed by notice
and comment rulemaking.
(ix) For further guidance, see
§ 54.9816–8T(e)(2)(ix) through (xii).
(x) through (xii) [Reserved]
(f) Reporting of information relating to
the Federal IDR process. * * *
* * * * *
(g) Extension of time periods for exten-
uating circumstances. * * *
* * * * *
3. Section 54.9816–8T is amended by:
a. Revising paragraph (d)(2)(ii);
b. Adding paragraph (d)(3);
c. Removing the semicolon at the end
of paragraphs (e)(2)(iii) and (vi) and add-
ing a period in its place;
d. Revising paragraph (e)(2)(vii);
e. Redesignating paragraphs (e)(2)
(viii) through (xi) as paragraphs (e)(2)(ix)
through (xii);
f. Adding new paragraph (e)(2)(viii);
g. Removing the semicolon at the end
of newly redesignated paragraphs (e)(2)
(ix) and (x) and adding a period in its
place; and
h. Removing “; and” at the end of
newly redesignated paragraph (e)(2)(xii)
and adding a period in its place.
The revisions and additions read as fol-
lows:
§ 54.9816–8T Independent dispute
resolution process (temporary).
* * * * *
(d) * * *
(2) * * *
(ii) For further guidance, see
§ 54.9816–8(d)(2)(ii).
(3) Severability. For further guidance,
see § 54.9816–8(d)(3).
(e) * * *
(2) * * *
(vii) For further guidance, see
§ 54.9816–8(e)(2)(vii).
(viii) For further guidance, see
§ 54.9816-8(e)(2)(viii).
* * * * *
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Chapter XXV
For the reasons stated in the preamble,
the Department of Labor amends 29 CFR
part 2590 as set forth below:
PART 2590—RULES AND
REGULATIONS FOR GROUP
HEALTH PLANS
4. The authority citation for part 2590
continues to read as follows:

January 29, 2024 608 Bulletin No. 2024–5
Authority: 29 U.S.C. 1027, 1059,
1135, 1161-1168, 1169, 1181-1183, 1181
note, 1185, 1185a-n, 1191, 1191a, 1191b,
and 1191c; sec. 101(g), Pub. L. 104-191,
110 Stat. 1936; sec. 401(b), Pub. L. 105-
200, 112 Stat. 645 (42 U.S.C. 651 note);
sec. 512(d), Pub. L. 110-343, 122 Stat.
3881; sec. 1001, 1201, and 1562(e), Pub.
L. 111-148, 124 Stat. 119, as amended by
Pub. L. 111-152, 124 Stat. 1029; Division
M, Pub. L. 113-235, 128 Stat. 2130; Pub.
L. 116–260 134 Stat. 1182; Secretary of
Labor’s Order 1-2011, 77 FR 1088 (Jan.
9, 2012).
5. Section 2590.716-8 is amended by:
a. Revising paragraph (d)(2)(ii);
b. Adding paragraph (d)(3);
c. Removing the semicolon at the end
of paragraphs (e)(2)(iii) and (vi) and add-
ing a period in its place;
d. Revising paragraph (e)(2)(vii);
e. Redesignating paragraphs (e)(2)
(viii) through (xi) as paragraphs (e)(2)(ix)
through (xii);
f. Adding new paragraph (e)(2)(viii);
g. Removing the semicolon at the end
of newly redesignated paragraphs (e)(2)
(ix) and (x) and adding a period in its
place; and
h. Removing “; and” at the end of
newly redesignated paragraph (e)(2)(xii)
and adding a period in its place.
The revisions and additions read as fol-
lows:
§ 2590.716-8 Independent dispute
resolution process.
* * * * *
(d) * * *
(2) * * *
(ii) The administrative fee amount will
be established through notice and com-
ment rulemaking no more frequently than
once per calendar year in a manner such
that the total administrative fees paid for
a year are estimated to be equal to the
amount of expenditures estimated to be
made by the Secretaries of the Treasury,
Labor, and Health and Human Services for
the year in carrying out the Federal IDR
process. The administrative fee amount
will remain in effect until changed by
notice and comment rulemaking. For dis-
putes initiated on or after [INSERT DATE
30 DAYS AFTER THE DATE OF PUB-
LICATION IN THE FEDERAL REGIS-
TER], the administrative fee amount is
$115 per party per dispute.
(3) Severability. (i) Any provision of
this paragraph (d) or paragraphs (e)(2)(vii)
and (viii) of this section held to be invalid
or unenforceable as applied to any person
or circumstance shall be construed so as
to continue to give the maximum effect to
the provision permitted by law, including
as applied to persons not similarly situ-
ated or to dissimilar circumstances, unless
such holding is that the provision of this
paragraph (d) or paragraphs (e)(2)(vii)
and (viii) is invalid and unenforceable in
all circumstances, in which event the pro-
vision shall be severable from the remain-
der of this paragraph (d) or paragraphs (e)
(2)(vii) and (viii) and shall not affect the
remainder thereof.
(ii) The provisions in this paragraph (d)
and paragraphs (e)(2)(vii) and (viii) of this
section are intended to be severable from
each other.
(e) * * *
(2) * * *
(vii) Provide, no more frequently
than once per calendar year, a fixed fee
for single determinations and a separate
fixed fee for batched determinations, as
well as an additional fixed tiered fee for
batched determinations, if applicable,
within the upper and lower limits for each,
as established by the Secretary in notice
and comment rulemaking. The certified
IDR entity fee ranges established by the
Secretary in rulemaking will remain in
effect until changed by notice and com-
ment rulemaking. The certified IDR entity
may not charge a fee outside the limits set
forth in rulemaking unless the certified
IDR entity or IDR entity seeking certifi-
cation receives advance written approval
from the Secretary to charge a fixed fee
beyond the upper or lower limits by fol-
lowing the process described in paragraph
(e)(2)(vii)(A) of this section. A certified
IDR entity may also seek advance written
approval from the Secretary to update its
fees one additional time per calendar year
by meeting the requirements described in
paragraph (e)(2)(vii)(A). The Secretary
will approve a request to charge a fixed fee
beyond the upper or lower limits for fees
as set forth in rulemaking, or to update
the fixed fee during the calendar year if,
in their discretion, they determine the
information submitted by a certified IDR
entity or IDR entity seeking certification
demonstrates that the proposed change to
the certified IDR entity fee would ensure
the financial viability of the certified IDR
entity or IDR entity seeking certification
and would not impose on parties an undue
barrier to accessing the Federal IDR pro-
cess.
(A) In order for the certified IDR
entity or IDR entity seeking certifica-
tion to receive the Secretary’s written
approval to charge a fixed fee beyond the
upper or lower limits for fees as set forth
in rulemaking or to update the fixed fee
during the calendar year, the certified IDR
entity or IDR entity seeking certification
must submit to the Secretary, in the form
and manner specified by the Secretary:
(1) The fixed fee the certified IDR
entity or IDR entity seeking certification
believes is appropriate for the certified
IDR entity or IDR entity seeking certifi-
cation to charge;
(2) A description of the circumstances
that require the alternative fixed fee, or that
require a change to the fixed fee during the
calendar year, as applicable; and
(3) A detailed description that reason-
ably explains how the alternative fixed fee
or the change to the fixed fee during the
calendar year, as applicable, will be used
to mitigate the effects of those circum-
stances.
(B) [Reserved]
(viii) For disputes initiated on or after
[INSERT DATE 30 DAYS AFTER DATE
OF PUBLICATION IN THE FEDERAL
REGISTER], certified IDR entities
are permitted to charge a fixed certified
IDR entity fee for single determinations
within the range of $200 to $840, and a
fixed certified IDR entity fee for batched
determinations within the range of $268 to
$1,173, unless a fee outside such ranges
is approved by the Secretary pursuant to
paragraph (e)(2)(vii)(A) of this section.
As part of the batched determination
fee, certified IDR entities are permitted
to charge an additional fixed tiered fee
within the range of $75 to $250 for every
additional 25 line items within a batched
dispute, beginning with the 26th line item.
The ranges for the certified IDR entity fees
for single and batched determinations will

Bulletin No. 2024–5 609 January 29, 2024
remain in effect until changed by notice
and comment rulemaking.
* * * * *
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
49 CFR Subtitle A
For the reasons stated in the preamble,
the Department of Health and Human Ser-
vices amends 45 CFR part 149 as set forth
below:
PART 149—SURPRISE BILLING
AND TRANSPARENCY
REQUIREMENTS
6. The authority citation for part 149
continues to read as follows:
Authority: 42 U.S.C. 300gg-92
and 300gg-111 through 300gg-139, as
amended.
7. Section 149.510 is amended by:
a. Revising paragraph (d)(2)(ii);
b. Adding paragraph (d)(3);
c. Removing the semicolon at the end
of paragraphs (e)(2)(iii) and (vi) and add-
ing a period in its place;
d. Revising paragraph (e)(2)(vii);
e. Redesignating paragraphs (e)(2)
(viii) through (xi) as paragraphs (e)(2)(ix)
through (xii);
f. Adding new paragraph (e)(2)(viii);
g. Removing the semicolon at the end
of newly redesignated paragraphs (e)(2)
(ix) and (x) and adding a period in its
place; and
h. Removing “; and” at the end of
newly redesignated paragraph (e)(2)(xii)
and adding a period in its place.
The revisions and additions read as fol-
lows:
§ 149.510 Independent dispute
resolution process.
* * * * *
(d) * * *
(2) * * *
(ii) The administrative fee amount will
be established through notice and com-
ment rulemaking no more frequently than
once per calendar year in a manner such
that the total administrative fees paid for
a year are estimated to be equal to the
amount of expenditures estimated to be
made by the Secretaries of the Treasury,
Labor, and Health and Human Services
for the year in carrying out the Federal
IDR process. For disputes initiated on or
after [INSERT DATE 30 DAYS AFTER
DATE OF PUBLICATION IN THE FED-
ERAL REGISTER], the administrative
fee amount is $115 per party per dispute.
(3) Severability. (i) Any provision of
this paragraph (d) or paragraphs (e)(2)(vii)
and (viii) of this section held to be invalid
or unenforceable as applied to any person
or circumstance shall be construed so as
to continue to give the maximum effect to
the provision permitted by law, including
as applied to persons not similarly situ-
ated or to dissimilar circumstances, unless
such holding is that the provision of this
paragraph (d) or paragraphs (e)(2)(vii)
and (viii) is invalid and unenforceable in
all circumstances, in which event the pro-
vision shall be severable from the remain-
der of this paragraph (d) or paragraphs (e)
(2)(vii) and (viii) and shall not affect the
remainder thereof.
(ii) The provisions in this paragraph (d)
and paragraphs (e)(2)(vii) and (viii) of this
section are intended to be severable from
each other.
(e) * * *
(2) * * *
(vii) Provide, no more frequently than
once per calendar year, a fixed fee for sin-
gle determinations and a separate fixed
fee for batched determinations, as well as
an additional fixed tiered fee for batched
determinations, if applicable, within the
upper and lower limits for each, as estab-
lished by the Secretary in notice and com-
ment rulemaking. The certified IDR entity
fee ranges established by the Secretary
in rulemaking will remain in effect until
changed by notice and comment rulemak-
ing. The certified IDR entity may not
charge a fee outside the limits set forth in
rulemaking unless the certified IDR entity
or IDR entity seeking certification receives
advance written approval from the Secre-
tary to charge a fixed fee beyond the upper
or lower limits by following the process
described in paragraph (e)(2)(vii)(A) of
this section. A certified IDR entity may
also seek advance written approval from
the Secretary to update its fees one addi-
tional time per calendar year by meeting
the requirements described in paragraph
(e)(2)(vii)(A). The Secretary will approve
a request to charge a fixed fee beyond the
upper or lower limits for fees as set forth in
rulemaking or to update the fixed fee during
the calendar year if, in their discretion, they
determine the information submitted by a
certified IDR entity or IDR entity seeking
certification demonstrates that the pro-
posed change to the certified IDR entity fee
would ensure the financial viability of the
certified IDR entity or IDR entity seeking
certification and would not impose on par-
ties an undue barrier to accessing the Fed-
eral IDR process.
(A) In order for the certified IDR
entity or IDR entity seeking certifica-
tion to receive the Secretary’s written
approval to charge a fixed fee beyond the
upper or lower limits for fees as set forth
in rulemaking or to update the fixed fee
during the calendar year, the certified IDR
entity or IDR entity seeking certification
must submit to the Secretary, in the form
and manner specified by the Secretary:
(1) The fixed fee the certified IDR
entity or IDR entity seeking certification
believes is appropriate for the certified
IDR entity or IDR entity seeking certifi-
cation to charge;
(2) A description of the circumstances
that require the alternative fixed fee, or that
require a change to the fixed fee during the
calendar year, as applicable; and
(3) A detailed description that reason-
ably explains how the alternative fixed fee
or the change to the fixed fee during the
calendar year, as applicable, will be used
to mitigate the effects of those circum-
stances.
(B) [Reserved]
(viii) For disputes initiated on or after
[INSERT DATE 30 DAYS AFTER DATE
OF PUBLICATION IN THE FEDERAL
REGISTER], certified IDR entities
are permitted to charge a fixed certified
IDR entity fee for single determinations
within the range of $200 to $840, and a
fixed certified IDR entity fee for batched
determinations within the range of $268 to
$1,173, unless a fee outside such ranges
is approved by the Secretary, pursuant to
paragraph (e)(2)(vii)(A) of this section.
As part of the batched determination
fee, certified IDR entities are permitted
to charge an additional fixed tiered fee

January 29, 2024 610 Bulletin No. 2024–5
within the range of $75 to $250 for every
additional 25 line items within a batched
dispute, beginning with the 26th line item.
The ranges for the certified IDR entity fees
for single and batched determinations will
remain in effect until changed by notice
and comment rulemaking.
* * * * *
(Filed by the Office of the Federal Register on
December 18, 2023, 4:15 p.m., and published in the
issue of the Federal Register for December 21, 2023,
88 F.R. 88494)
26 CFR 1.430(h)(2)-1
T.D. 9986
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Corporate Bond Yield
Curve for Determining
Present Value
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document sets forth
final regulations specifying the method-
ology for constructing the corporate bond
yield curve that is used to derive the inter-
est rates used in calculating present value
and making other calculations under a
defined benefit plan, as well as for dis-
counting unpaid losses and estimated sal-
vage recoverable of insurance companies.
These regulations affect participants in,
beneficiaries of, employers maintaining,
and administrators of certain retirement
plans, as well as insurance companies.
DATES: Effective date: These regulations
are effective January 12, 2024.
Applicability date: These regulations
apply for purposes of determining the
corporate bond yield curve under section
430(h)(2)(D) of the Internal Revenue
Code for months that begin on or after
February 1, 2024.
FOR FURTHER INFORMATION
CONTACT: Arslan Malik or Linda S. F.
Marshall, Office of Associate Chief Coun-
sel (Employee Benefits, Exempt Organi-
zations, and Employment Taxes) at (202)
317-6700 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Section 412 of the Internal Revenue
Code (Code) prescribes minimum funding
requirements for defined benefit pension
plans. Section 430 specifies the minimum
funding requirements that apply gener-
ally to defined benefit plans that are not
multiemployer plans.
1
For a plan subject
to section 430, section 430(a) defines the
minimum required contribution for a plan
year by reference to the plan’s funding tar-
get for the plan year. Under section 430(d)
(1), a plan’s funding target for a plan year
generally is the present value of all bene-
fits accrued or earned under the plan as of
the first day of that plan year.
Section 430(h)(2) provides rules
regarding the interest rates to be used
under section 430. Section 430(h)(2)
(B) provides that a plan’s funding target
and target normal cost for a plan year are
determined using three interest rates: (1)
the first segment rate, which applies to
benefits reasonably determined to be pay-
able during the 5-year period beginning
on the valuation date; (2) the second seg-
ment rate, which applies to benefits rea-
sonably determined to be payable during
the next 15-year period; and (3) the third
segment rate, which applies to benefits
reasonably determined to be paid after
that 15-year period. Under sections 430(h)
(2)(C)(i) through (iii), each of these seg-
ment rates is determined for a month on
the basis of the corporate bond yield curve
for the month, taking into account only
that portion of the yield curve that is based
on bonds maturing during the period for
which the segment rate is used.
Section 430(h)(2)(C)(iv), which was
added to the Code in 2012 by section
40211 of the Moving Ahead for Progress
in the 21
st
Century Act, Public Law112-
141, 126 Stat. 405, and has been modified
several times since then (most recently in
2021 by section 80602 of the Infrastruc-
ture Investment and Jobs Act, Public Law
117-58, 135 Stat. 429), provides interest
rate stabilization rules under which the
segment rates are constrained by ref-
erence to the 25-year average segment
rates. Under section 430(h)(2)(C)(iv), if a
segment rate for a month is less than the
applicable minimum percentage, or more
than the applicable maximum percentage,
of the average of the corresponding seg-
ment rates for years in the 25-year period
ending with September 30 of the calendar
year preceding the calendar year in which
the plan year begins, then the segment rate
for that month is equal to the applicable
minimum percentage or the applicable
maximum percentage of the correspond-
ing 25-year average segment rate, which-
ever is closest. The last sentence of sec-
tion 430(h)(2)(C)(iv)(I) provides that any
25-year average segment rate that is less
than 5 percent is deemed to be 5 percent.
Under section 430(h)(2)(D)(i), the term
“corporate bond yield curve” means, with
respect to any month, a yield curve pre-
scribed by the Secretary for the month
that reflects the average, for the 24-month
period ending with the month preceding
such month, of monthly yields on invest-
ment grade corporate bonds with varying
maturities and that are in the top three
quality levels available. Section 430(h)(2)
(D)(ii) permits a plan sponsor to elect to
use the corporate bond yield curve, rather
than the segment rates, to determine the
plan’s minimum required contribution.
The yield curve that applies pursuant to
this election is determined without regard
to 24-month averaging. This election,
1
Section 302 of the Employee Retirement Income Security Act of 1974, Public Law 93-406, 88 Stat. 829 (1974), as amended (ERISA), sets forth funding rules that are parallel to those in
section 412 of the Code, and section 303 of ERISA sets forth minimum funding requirements that apply generally for defined benefit plans (other than multiemployer plans) that are parallel
to those in section 430 of the Code. Pursuant to section 101 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App., as amended, the Secretary of the Treasury has interpretive jurisdiction over
the subject matter addressed in these regulations for purposes of ERISA, as well as the Code. Thus, these Treasury regulations issued under section 430 of the Code also apply for purposes
of section 303 of ERISA.

Bulletin No. 2024–5 611 January 29, 2024
once made, may be revoked only with the
consent of the Secretary.
Under section 430(h)(2)(F), the Sec-
retary is instructed to publish for each
month the corporate bond yield curve
(without regard to the 24-month averaging
specification), the segment rates described
in section 430(h)(2)(C), and the 25-year
averages of segment rates used under
section 430(h)(4)(C)(iv). The Secretary
is also instructed to publish a description
of the methodology used to determine
the yield curve and segment rates which
is sufficiently detailed to enable plans to
make reasonable projections regarding the
yield curve and segment rates for future
months based on the plan’s projection of
future interest rates.
Section 1.430(h)(2)-1 was issued in
2009 to provide rules regarding the inter-
est rates to be used under section 430. T.D.
9467, 74 FR 53004. Section 1.430(h)(2)-
1(d) provides that the methodology for
determining the yield curve is provided in
guidance that is published in the Internal
Revenue Bulletin. Notice 2007-81, 2007-2
CB 899, describes the methodology used
by the Department of the Treasury (Trea-
sury Department) to develop the corporate
bond yield curve. Section 1.430(h)(2)-
1(d) also provides that the yield curve for
each month will be set forth in guidance
published in the Internal Revenue Bul-
letin. Monthly IRS notices set forth the
corporate bond yield curve for the month
(without regard to the 24-month averaging
specification), the section 430 segment
interest rates (before and after adjustment
pursuant to section 430(h)(3)(C)(iv)), and
the 25-year average segment rates (which
are updated annually).
Section 417(e)(3) provides assump-
tions for determining minimum present
value for certain purposes, including the
determination of a lump-sum that is the
present value of an annuity, and prescribes
an applicable interest rate for this pur-
pose. Section 417(e)(3)(C) provides that
the term “applicable interest rate” means
the adjusted first, second, and third seg-
ment rates applied under rules similar to
the rules of section 430(h)(2)(C) for the
month before the date of a distribution or
such other time as the Secretary may pre-
scribe by regulations. However, for pur-
poses of section 417(e)(3), these rates are
determined without regard to the segment
rate stabilization rules of section 430(h)(2)
(C)(iv). In addition, under section 417(e)
(3)(D), these rates are determined using
the average yields for a month, rather than
the 24-month average used under section
430(h)(2)(D).
Under section 846(c), the Secretary
determines the applicable interest rate to
be used by insurance companies to dis-
count unpaid losses on the basis of the
corporate bond yield curve (as defined in
section 430(h)(2)(D)(i), determined by
substituting “60-month period” for “24-
month period”). Under § 1.832-4(c), the
applicable interest rate determined under
section 846(c) is also used by insurance
companies to discount estimated salvage
recoverable, unless the Commissioner
publishes applicable discount factors to be
used for that purpose.
A notice of proposed rulemaking and
notice of public hearing (REG-124123-
22) that would revise the methodology
for determining the corporate bond yield
curve was published in the Federal Regis-
ter (88 FR 41047) on June 23, 2023. Two
commenters submitted comments on the
proposed regulations. A public hearing on
the proposed regulations was scheduled
for August 30, 2023, but was cancelled
because no one requested to speak. After
consideration of these comments, these
final regulations are adopted with minor
changes to the language from the pro-
posed regulations to provide more detail
on the methodology for determining the
corporate bond yield curve.
Summary of Comments and
Explanation of Revisions
These regulations specify the method-
ology used to develop the corporate bond
yield curve. This methodology is gener-
ally the same as the methodology set forth
in Notice 2007-81 but includes two refine-
ments to take into account changes in the
bond market since 2007. The regulations
also amend the existing regulations under
section 430(h)(2) to reflect the addition
of the interest rate stabilization rules of
section 430(h)(2)(C)(iv) and to eliminate
transition rules that applied to plan years
beginning before January 1, 2010.
One commenter expressed support for
the rules set forth in the proposed regula-
tions. The other commenter raised various
concerns regarding the corporate bond
yield curve.
2
Those concerns are discussed
in this Summary of Comments and Expla-
nation of Revisions.
Under these regulations, as under
Notice 2007-81, the monthly corpo-
rate bond yield curve for a month is
defined as the set of spot rates at spec-
ified durations. The specified durations
are at 6-month intervals ranging from
6 months through 100 years, and the
spot rate at a duration is the yield (when
compounded semiannually) for a bond
that matures at that duration with a sin-
gle payment at maturity. Each spot rate
at a specified duration on the monthly
corporate bond yield curve for a month
is equal to the arithmetic average for
each business day of that month of the
spot rates at that duration on the daily
corporate bond yield curves.
Under these regulations, as under
Notice 2007-81, each spot rate on the
daily corporate bond yield curve is
derived from a forward interest rate func-
tion (that is, the projected instantaneous
interest rate at each point in time) that
is defined by the selection of five coef-
ficients of B-splines determined using
the bond data, taking into account certain
adjustment factors.
Two of those adjustment factors, which
are included in the methodology set forth
in Notice 2007-81, take into account the
ratings of the bonds used to develop the
daily corporate bond yield curve. The third
adjustment factor, which was not included
in the methodology set forth in that notice,
is a hump adjustment variable that peaks
2
This commenter suggested that multiple yield curves be published for different segments of the corporate bond market, such as by industry, sector, or region. This suggestion is inconsistent
with the requirements of section 430(h)(2)(D) and (F), under which the Secretary must publish a single corporate bond yield curve for each month. In addition, this commenter expressed
concern about the impact of the proposed regulations on the determination of the applicable federal rate and any resulting impact on the tax-exempt bond market. However, pursuant to section
1274(d), the applicable federal rates are determined with reference to the yields on Treasury securities, not corporate bonds; thus, these regulations have no effect on the determination of the
applicable federal rates.

January 29, 2024 612 Bulletin No. 2024–5
at 20 years maturity
3
and serves to capture
the effects of the hump in spot rates that is
often seen around 20 years maturity.
Under the methodology used in Notice
2007-81, the spot rate at a duration t could
be calculated directly as the discount rate
at that duration derived from the forward
interest rate function. However, the addi-
tion of the hump adjustment variable
under the proposed regulations means
that the calculation of the spot rates
from the discount function and the hump
adjustment variable requires an interme-
diate step. This intermediate step, which
was implicit in the proposed regulations,
involves the determination of a par yield
curve (that is, the curve in which the rate
at maturity t on the curve is equal to the
yield for a bond with maturity of t for
which the price is the same as the prin-
cipal amount) that is calculated from the
discount function and the hump adjust-
ment variable. In response to a comment-
er’s request that the regulations specify
clear standards for the determination of
the corporate bond yield curve, these reg-
ulations describe this intermediate step.
Accordingly, these regulations clarify
that the spot rates are determined by first
setting the spot rate at duration of ½ year
on the daily corporate bond yield curve
as the yield at maturity of ½ year from
the daily par yield curve, and then deter-
mining the spot rate for any later duration
by applying an iterative process based on
the spot rates at earlier durations and the
daily par yield curve.
One commenter asked how the IRS
handles the situation in which the rating
of a bond is upgraded or downgraded
during a month, or a bond is rated differ-
ently by different rating organizations for
a single day. Because the monthly corpo-
rate bond yield curve is developed from a
set of daily corporate bond yield curves,
changes in ratings during the month are
automatically taken into account. In the
case of a bond that is rated differently by
different ratings organizations on a single
day, the bond is treated as having the aver-
age of the ratings for that day.
These regulations generally adopt the
specification for the bond data set for a
month under Notice 2007-81 but mod-
ify an exclusion from that bond data set.
Under Notice 2007-81 and these regu-
lations, subject to certain exclusions,
the bonds that are used to construct the
daily corporate bond yield curve for a
business day are bonds with the follow-
ing characteristics: (1) maturities longer
than ½ year,
4
(2) at least two payment
dates, (3) designated as corporate, (4)
high quality ratings (that is, AAA, AA,
or A) as of that business day from the
nationally recognized statistical rating
organizations,
5
(5) at least $250 million
in par amount outstanding on at least
one day during the month, (6) payment
of fixed nominal semiannual coupons
and the principal amount at maturity,
and (7) maturity not later than 30 years
after that day.
Under Notice 2007-81 and these regu-
lations, the following categories of bonds
are excluded from the bond data set: (1)
bonds not denominated in U.S. dollars,
(2) bonds not issued by U.S. corpora-
tions, (3) bonds that are capital securities
(sometimes referred to as hybrid pre-
ferred stock), (4) bonds having variable
coupon rates, (5) convertible bonds, (6)
bonds issued by a government-sponsored
enterprise (such as the Federal National
Mortgage Association), (7) asset-backed
bonds, (8) putable bonds, (9) bonds with
sinking funds, and (10) bonds with a par
amount outstanding below $250 million
for the day for which the daily yield curve
is constructed.
Notice 2007-81 also excluded callable
bonds (unless the call feature is make-
whole) from the bond data set used to
construct the daily corporate bond yield
curve. The regulations generally retain
this exclusion but narrow it. Under the
proposed regulations, this exclusion does
not apply if the call feature is exercisable
only during the last year before matu-
rity. This type of call feature has recently
become more widely used, and the inclu-
sion of bonds with this feature in the data
set will result in a significantly larger pool
of bonds that more accurately reflects the
market for high quality corporate bonds.
One commenter asked how the calcu-
lation of the yield of a corporate bond is
affected by any options embedded in that
bond. The complexity of the calculations
involved in quantifying this effect is the
reason that corporate bonds with embed-
ded put and call options have been gener-
ally excluded from the set of bonds used
to determine the corporate bond yield
curve in the past. However, as noted in
the preceding paragraph, including bonds
with a call feature that is exercisable
only during the last year before maturity
significantly increases the pool of bonds
that are taken into account in developing
the corporate bond yield curve, and the
Treasury Department and the IRS have
determined that this feature does not sig-
nificantly affect the yields of these bonds.
Accordingly, no adjustment will be made
to reflect the effect of this feature on bond
yields.
Applicability Date
These regulations apply for purposes
of determining the corporate bond yield
curve under section 430(h)(2)(D) for
months that begin on or after February 1,
2024.
Statement of Availability of IRS
Documents
IRS Revenue Rulings, Revenue Proce-
dures, and Notices cited in this document
are published in the Internal Revenue
Bulletin (or Cumulative Bulletin) and are
available from the Superintendent of Doc-
uments, U.S. Government Printing Office,
Washington, DC 20402, or by visiting the
IRS website at www.irs.gov.
3
The hump adjustment variable is a mathematical function that is a cubic spline in the interval from 10 years maturity through 30 years maturity made up of two polynomials with a smooth
junction at 20 years maturity.
4
Under Notice 2007-81 and the regulations, the data for durations equal to or below ½ year that is used to construct the daily corporate bond yield curve consists of AA financial and AA
nonfinancial commercial paper rates, as reported by the Federal Reserve Board.
5
Although section 939A(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376, generally prohibits federal agencies from issuing
regulations that apply a standard that is based on credit ratings from statistical rating organizations, this prohibition does not apply to the construction of the daily corporate bond yield curve
because the use of those credit ratings is required by section 430(h)(2)(D) of the Code.

Bulletin No. 2024–5 613 January 29, 2024
Special Analyses
Regulatory Planning and Review
(Executive Orders 12866 and 13563)
Pursuant to the Memorandum of
Agreement, Review of Treasury Regula-
tions under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
Regulatory Flexibility Act
It is hereby certified that this rule will
not have a significant economic impact
on a substantial number of small enti-
ties. The vast majority of plan sponsors
of defined benefit plans that are subject
to section 430 choose to use the segment
rates under section 430(h)(2)(C), rather
than the corporate bond yield curve under
section 430(h)(2)(D), to determine mini-
mum required contributions. Furthermore,
most of the plan sponsors who choose to
use the corporate bond yield curve for this
purpose are not small employers. There-
fore, the methodology set forth in these
regulations for constructing the corporate
bond yield curve will not have a signifi-
cant effect on minimum required contri-
butions for small employers. In addition,
the insurance companies that are required
to use a modified version of the corpo-
rate bond yield curve to discount unpaid
losses are typically not small employers.
Accordingly, a regulatory flexibility anal-
ysis under the Regulatory Flexibility Act
is not required.
Pursuant to section 7805(f) of the
Code, the proposed regulations that pre-
ceded these regulations were submitted
to the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on their impact on small business,
and no comments were received.
Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 requires that agencies
assess anticipated costs and benefits and
take certain other actions before issuing a
final rule that includes any Federal man-
date that may result in expenditures in any
one year by a State, local, or Tribal gov-
ernment, in the aggregate, or by the pri-
vate sector, of $100 million in 1995 dol-
lars, updated annually for inflation. These
regulations do not include any Federal
mandate that may result in expenditures
by State, local, or Tribal governments,
or by the private sector in excess of that
threshold.
Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of the Executive
order. These regulations do not have fed-
eralism implications, impose substantial
direct compliance costs on State and local
governments, or preempt State law within
the meaning of the Executive order.
Congressional Review Act
Pursuant to the Congressional Review
Act (5 U.S.C. 801 et seq.), the Office of
Information and Regulatory Affairs des-
ignated this rule as not a major rule, as
defined by 5 U.S.C. 804(2).
Drafting Information
The principal authors of these regu-
lations are Arslan Malik and Linda S. F.
Marshall of the Office of Associate Chief
Counsel (Employee Benefits, Exempt
Organizations, and Employment Taxes).
However, other personnel from the Trea-
sury Department and the IRS participated
in the development of these regulations.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS amend 26 CFR part 1 as fol-
lows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.430(h)(2)-1 is
amended by:
1. Removing the phrase “and transition
rules” in the last sentence of paragraph (a)
(1);
2. Revising paragraph (b)(2);
3. Removing the last sentence in para-
graph (c)(1);
4. In paragraphs (c)(2)(i) through (iii),
removing the phrase “under the transition
rule of paragraph (h)(4) of this section”
and adding the phrase “under the interest
rate stabilization rules in section 430(h)(2)
(C)(iv)” in its place;
5. Revising paragraph (d);
6. Removing paragraph (e)(3) and
redesignating paragraph (e)(4) as para-
graph (e)(3);
7. In newly redesignated paragraph (e)
(3)(ii), removing the phrase “this para-
graph (e)(4)” and adding the phrase “this
paragraph (e)(3)” in its place;
8. Redesignating paragraph (e)(5) as
paragraph (e)(4); and
9. Revising paragraph (h).
The revisions read as follows:
§ 1.430(h)(2)-1 Interest rates used to
determine present value.
* * * * *
(b) * * *
(2) Benefits payable within 5 years.
In the case of benefits expected to be
payable during the 5-year period begin-
ning on the valuation date for the plan
year, the interest rate used in determining
the present value of the benefits that are
included in the target normal cost and
the funding target for the plan is the first
segment rate with respect to the applica-
ble month, as described in paragraph (c)
(2)(i) of this section.
* * * * *
(d) Monthly corporate bond yield
curve—(1) In general—(i) Construction
of monthly corporate bond yield curve.
For purposes of this section, the monthly
corporate bond yield curve for a month is
defined as the set of spot rates at specified
durations. The specified durations are at

January 29, 2024 614 Bulletin No. 2024–5
6-month intervals ranging from 6 months
through 100 years and the spot rate at a
duration is the yield (when compounded
semiannually) for a bond that matures
at that duration with a single payment at
maturity. The monthly corporate bond
yield curve is constructed as the average
of the spot rates from the set of daily cor-
porate bond yield curves as specified in
paragraph (d)(1)(ii) of this section. Each
daily corporate bond yield curve is con-
structed using the methodology set forth
in paragraph (d)(2) of this section based
on the data described in paragraph (d)(3)
of this section. The yield curve for each
month will be published in the Internal
Revenue Bulletin. See § 601.601(d) of
this chapter.
(ii) Monthly corporate bond yield curve
constructed through averaging. Each spot
rate at a specified duration on the monthly
corporate bond yield curve for a month is
equal to the arithmetic average, for each
business day of that month, of the spot
rates at that duration on the daily corpo-
rate bond yield curves.
(2) Construction of the daily corporate
bond yield curve—(i) In general—(A)
Calculation of spot rates. The spot rate at
duration of ½ year on the daily corporate
bond yield curve is set equal to the yield
at maturity of ½ year from the daily par
yield curve described in paragraph (d)(2)
(i)(B) of this section. The spot rate for any
later duration on the daily corporate bond
yield curve is determined by applying an
iterative process based on the spot rates at
earlier durations and the daily par yield
curve.
(B) Calculation of par yield
curve. The daily par yield curve (that
is, the curve in which the rate at matu-
rity t on the curve is equal to the yield
for a bond with maturity of t for which
the price is the same as the principal
amount) is calculated from the discount
function described in paragraph (d)(2)(i)
(C) of this section and the hump adjust-
ment variable described in paragraph (d)
(2)(iii)(D) of this section.
(C) Derivation of discount function.
The discount function for a day at duration
t (denoted d(t)) is derived from the forward
interest rate function as described in para-
graph (d)(2)(ii) of this section (denoted
f(z)) using the following equation:
Equation 1 to Paragraph (d)(2)(i)(C)
dtfzdz
t
()()=−












∫
exp
0
(ii) Determination of forward interest
rates—(A) In general. The forward inter-
est rate function used to derive the dis-
count function is determined as a series of
cubic polynomials (referred to as a cubic
spline) that have a smooth junction at
specified knot points (maturities of 0, 1.5,
3, 7, 15, and 30 years). The requirement
that the polynomials have a smooth junc-
tion at a knot point is satisfied if the two
polynomials that are meeting at the knot
have the same value, the same derivative,
and the same second derivative at that
knot point.
(B) Constraints on the forward interest
function. The following three constraints
are placed on the forward interest rate
function—
(1) The second derivative of the func-
tion is set to 0 at maturity 0.
(2) The value of the forward interest
rate function at and after 30 years is con-
strained to equal its average value from 15
to 30 years.
(3) The derivative of the forward inter-
est rate function is set to 0 at maturity 30
years.
(iii) Parameters for daily bond price
model—(A) B-spline coefficients. The
assumed cubic spline for the forward
interest rate function can be described as
a linear combination of B-splines, with
five parameters, which are determined
taking into account the two coefficients
for the bond-quality adjustment variables
described in paragraphs (d)(2)(iii)(B) and
(C) of this section and the coefficient for
the hump adjustment variable described
in paragraph (d)(2)(iii)(D) of this section.
The five parameters and three coeffi-
cients are determined using the bond data
weighted as described in paragraph (d)(2)
(iv) of this section. After this weighting
of the bond data, the five parameters and
three coefficients are chosen to minimize
the sum of the squared differences between
the bid price for each of the bonds (or ask
price for commercial paper) and the price
estimated for each of those bonds deter-
mined using the specified parameters and
coefficients, and taking into account the
bond’s coupon rate, number of years until
maturity, and rating.
(B) Adjustment factor for share of
bonds that are AA-rated. The first adjust-
ment variable is based on the proportion
of bonds that are rated AA within the
universe of bonds in the data set that
are rated AA or AAA, weighted by par
value. In the case of an AAA-rated bond
the adjustment variable described in this
paragraph (d)(2)(iii)(B) is equal to the
product of the proportion described in
the preceding sentence and the number of
years until maturity for the bond. In the
case of an AA-rated bond the adjustment
variable described in this paragraph (d)
(2)(iii)(B) is equal to the product of (1-
that proportion) and the number of years
until maturity for the bond. In the case of
an A-rated bond, the adjustment variable
described in this paragraph (d)(2)(iii)(B)
is 0.
(C) Adjustment factor for share of
bonds that are A-rated. The second
adjustment variable is based on the pro-
portion of bonds rated A within the uni-
verse of bonds in the data set, weighted
by par value. In the case of an AAA-rated
bond or an AA-rated bond, the adjust-
ment variable described in this paragraph
(d)(2)(iii)(C) is equal to the product of
the proportion described in the preceding
sentence and the number of years until
maturity for the bond. In the case of an
A-rated bond, the adjustment variable
described in this paragraph (d)(2)(iii)(C)
is equal to the product of (1- that propor-
tion) and the number of years until matu-
rity for the bond.
(D) Hump adjustment variable. The
hump adjustment variable is a mathemat-
ical function that is a cubic spline in the
interval from 10 years maturity through
30 years maturity made up of two polyno-
mials with a smooth junction (as described
in paragraph (d)(2)(ii)(A) of this section)
at 20 years maturity. The spline rises from
0 at 10 years maturity to 1.0 at 20 years
maturity, then falls back down to 0 at 30
years maturity. The hump adjustment vari-
able is 0 for maturities less than 10 years
and maturities greater than 30 years.
(iv) Weighting of bond data. The bond
data are weighted in three steps. In the
first step, equal weights are assigned to the

Bulletin No. 2024–5 615 January 29, 2024
commercial paper rates at the short end of
the curve, and the par amounts outstand-
ing of all the bonds are rescaled so that
their sum equals the sum of the weights
for commercial paper. In the second step,
the squared price difference for each com-
mercial paper rate is multiplied by the
commercial paper weight, and the squared
price difference for each bond is multi-
plied by the bond’s rescaled par amount
outstanding. In the third step, applicable
for bonds with duration greater than 1,
the weighted squared price difference for
each bond from the second step is divided
by the bond’s duration.
(3) Data used—(i) In general. Except
as otherwise provided in this paragraph
(d)(3), the bonds that are used to construct
the daily corporate bond yield curve for
a business day are bonds with maturities
longer than ½ year, with at least two pay-
ment dates, and that:
(A) Are designated as corporate;
(B) Have high quality ratings (AAA,
AA, or A) as of that business day from
the nationally recognized statistical rating
organizations;
(C) Have at least $250 million in par
amount outstanding on at least one day
during the month;
(D) Pay fixed nominal semiannual cou-
pons and the principal amount at maturity;
and
(E) Mature not later than 30 years after
that business day.
(ii) Excluded bonds. The following
types of bonds are not used to construct
the daily corporate bond yield curve for a
date:
(A) Bonds not denominated in U.S.
dollars;
(B) Bonds not issued by U.S. corpora-
tions;
(C) Bonds that are capital securities
(sometimes referred to as hybrid preferred
stock);
(D) Bonds with variable coupon rates;
(E) Convertible bonds;
(F) Bonds issued by a govern-
ment-sponsored enterprise (such as the
Federal National Mortgage Association);
(G) Asset-backed bonds;
(H) Callable bonds, unless the call
feature is make-whole or the call feature
is exercisable only during the last year
before maturity;
(I) Putable bonds;
(J) Bonds with sinking funds; and
(K) Bonds with an outstanding par
amount below $250 million for the day for
which the daily yield curve is constructed.
(iii) Durations equal to or below ½
year. The data for durations equal to or
below ½ year that is used to construct the
daily corporate bond yield curve consists
of AA financial and AA nonfinancial com-
mercial paper rates, as reported by the
Federal Reserve Board.
* * * * *
(h) Applicability date. This section
applies for months that begin on or after
February 1, 2024. For rules that apply for
earlier periods, see 26 CFR 1.430(h)(2)-1
revised as of April 1, 2023.
Douglas W. O’Donnell,
Deputy Commissioner for Services and
Enforcement.
Approved: December 27, 2023.
Lily Batchelder,
Assistant Secretary of the Treasury
(Tax Policy).
(Filed by the Office of the Federal Register on Jan-
uary 11, 2024, 8:45 a.m., and published in the issue
of the Federal Register for January 12, 2024, 89 F.R.
2127)

January 29, 2024 616 Bulletin No. 2024–5
Part III
Clarifications and
Modification to Initial
Interim Guidance on
Amortization of Specified
Research or Experimental
Expenditures under
Section 174
Notice 2024-12
SECTION 1. OVERVIEW
This notice clarifies and modifies
Notice 2023-63, 2023-39 I.R.B. 919,
which announced that the Department of
the Treasury (Treasury Department) and
the Internal Revenue Service (IRS) intend
to issue proposed regulations (forthcom-
ing proposed regulations) addressing (1)
the capitalization and amortization of
specified research or experimental (SRE)
expenditures under § 174 of the Internal
Revenue Code (Code),
1
as amended by
Public Law 115-97, 131 Stat. 2054 (Dec.
22, 2017), commonly referred to as the
Tax Cuts and Jobs Act (TCJA), (2) the
treatment of SRE expenditures under
§ 460, and (3) the application of § 482
to cost sharing arrangements involving
SRE expenditures, and provided interim
guidance that taxpayers may rely on until
the forthcoming proposed regulations are
published in the Federal Register. Spe-
cifically, this notice clarifies and mod-
ifies Notice 2023-63 regarding (1) the
treatment of costs paid or incurred by a
research provider for research performed
under contract, (2) the requirement that a
taxpayer that chooses to rely on any of the
rules described in Notice 2023-63 must
rely on all the rules described in sections 3
through 9 of the notice, and (3) the obso-
letion of section 5 of Rev. Proc. 2000-50,
2000-2 C.B. 601.
The guidance in this notice does
not apply for purposes of determining
whether an expenditure paid or incurred
for taxable years beginning before Janu-
ary 1, 2022, is a research or experimental
expenditure under § 174 as in effect for
taxable years beginning before January
1, 2022 (former § 174). Unless otherwise
provided, the definitions in Notice 2023-
63 apply for purposes of this notice.
SECTION 2. BACKGROUND
.01 Treatment of research and experi-
mental expenditures under former § 174.
Former § 174 allowed taxpayers to
deduct research or experimental expendi-
tures paid or incurred in connection with
a trade or business as current expenses, to
capitalize and amortize such expenditures
over a period of not less than 60 months,
or to charge such expenditures to capital
account.
.02 Treatment of SRE expenditures
under § 174.
Section 13206(a) of the TCJA amended
former § 174 for amounts paid or incurred
in taxable years beginning after Decem-
ber 31, 2021. Section 174(a)(1) disal-
lows deductions for amounts that meet
the definition of SRE expenditures under
§ 174(b), except as provided in § 174(a)
(2). Section 174(a)(2) requires taxpayers
to charge SRE expenditures to capital
account and allows amortization deduc-
tions of such capitalized expenditures rat-
ably over a 5-year period in the case of
SRE expenditures attributable to domestic
research, or a 15-year period in the case
of SRE expenditures attributable to for-
eign research, beginning with the mid-
point of the taxable year in which such
expenditures are paid or incurred. Sec-
tion 13206(a) of the TCJA made other
amendments to former § 174, including
amendments to treat any amount paid or
incurred in connection with the develop-
ment of any software as an SRE expendi-
ture and to prevent the accelerated recov-
ery of unamortized SRE expenditures on
account of the disposition, retirement, or
abandonment of property with respect
to which such expenditures were paid or
incurred. For additional background on
former § 174 and the TCJA amendments
to former § 174, see section 2 of Notice
2023-63. Section 6001 and the regulations
thereunder require taxpayers to maintain
such books and records as are sufficient
to establish the amount of gross income,
deductions, credits, or other matters
required to be shown in any return, includ-
ing for research or experimental expendi-
tures that a taxpayer deducts under former
§ 174, or capitalizes and amortizes under
former § 174 or § 174 as in effect for
amounts paid or incurred in taxable years
beginning after December 31, 2021.
.03 Interim Guidance under Notice
2023-63. Notice 2023-63 was issued on
September 8, 2023, and announced that the
Treasury Department and the IRS intend
to issue forthcoming proposed regula-
tions addressing (1) the capitalization and
amortization of SRE expenditures under
§ 174, (2) the treatment of SRE expendi-
tures under § 460, and (3) the application
of § 482 to cost sharing arrangements
involving SRE expenditures. Notice
2023-63 provided interim guidance under
such sections upon which taxpayers may
rely until the forthcoming proposed regu-
lations are published in the Federal Reg-
ister, including a rule that would provide
that SRE expenditures must be treated
consistently for purposes of all provisions
under subtitle A of the Code and therefore
may not, for example, be treated as ordi-
nary and necessary expenses under § 162.
The Treasury Department and the IRS
anticipate that the forthcoming proposed
regulations will provide rules consistent
with the rules described in Notice 2023-63
and will consider further clarifications or
modifications to the rules described in the
interim guidance based on submitted writ-
ten comments for purposes of the forth-
coming proposed regulations. The aspects
of Notice 2023-63 that are relevant to this
notice are discussed in sections 2.04, 2.05,
and 2.06 of this notice.
.04 Research performed under con-
tract.
(1) Section 6 of Notice 2023-63 pro-
vides interim guidance regarding whether
costs paid or incurred for research per-
formed under contract are SRE expendi-
1
Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).

Bulletin No. 2024–5 617 January 29, 2024
tures. Section 6.02 includes definitions of
the terms “research provider,” “research
recipient,” “financial risk,” and “SRE
product.” Section 6.03 explains that the
treatment of costs paid or incurred by the
research recipient is governed by the prin-
ciples set forth in § 1.174-2(a)(10) and (b)
(3).
(2) Section 6.04 of Notice 2023-63 pro-
vides rules for the treatment of costs paid
or incurred by a research provider. Section
6.04 provides that if the research provider
bears financial risk under the terms of the
contract with the research recipient, then
costs paid or incurred by the research pro-
vider that are incident to the SRE activi-
ties (as described in section 4.03 of Notice
2023-63) performed by the research pro-
vider under the contract are SRE expen-
ditures. Section 6.04 also provides that
even if the research provider does not
bear financial risk under the terms of the
contract with the research recipient, if the
research provider has an “SRE product
right” (that is, a right to use any resulting
SRE product in a trade or business of the
research provider or otherwise exploit any
resulting SRE product through sale, lease,
or license), then costs paid or incurred
by the research provider that are incident
to the SRE activities performed by the
research provider under the contract are
SRE expenditures of the research provider
for which no deduction is allowed except
as provided in § 174(a)(2). This is the case
regardless of whether the research recip-
ient’s costs are required to be treated as
SRE expenditures under section 6.03 of
Notice 2023-63. Lastly, section 6.04 pro-
vides that a research provider will not be
treated as having an SRE product right if
such right is available to the research pro-
vider only upon obtaining approval from
another party to the research arrangement
that is not related to the research provider
within the meaning of § 267 or § 707.
(3) The Treasury Department and the
IRS are aware that section 6.04 of Notice
2023-63 could be interpreted to require a
research provider that does not bear finan-
cial risk under the terms of the contract
with the research recipient to improperly
treat as SRE expenditures the costs paid
or incurred by the research provider to
perform SRE activities on behalf of the
research recipient under such contract
if the research provider obtains an SRE
product right that (1) is separately bar-
gained for (that is, an SRE product right
that arose from consideration other than
the cost paid or incurred by the research
provider to perform SRE activities under
that contract) or (2) was acquired for the
limited purpose of performing SRE activi-
ties under that contract or another contract
with the research recipient.
(4) Consistent with the intent of section
6.04 of Notice 2023-63, section 3 of this
notice clarifies that if a research provider
that does not bear financial risk under the
terms of the contract with the research
recipient obtains an “excluded SRE prod-
uct right” (that is, an SRE product right
described in section 2.04(3) of this notice)
but does not obtain any other SRE product
right under the terms of such contract, then
the costs paid or incurred by the research
provider to perform SRE activities on
behalf of the research recipient under such
contract are not SRE expenditures.
.05 Applicability date of Notice 2023-
63. Section 10.01 of Notice 2023-63 pro-
vides that taxpayers may rely on the rules
described in sections 3 through 9 of Notice
2023-63 prior to the publication date of
the forthcoming proposed regulations in
the Federal Register for expenditures paid
or incurred in taxable years beginning
after December 31, 2021, provided the
taxpayer relies on all the rules described
in sections 3 through 9 of Notice 2023-63
and applies them in a consistent manner.
Section 10.01 also provides that taxpay-
ers may not rely on the rules described
in section 7 of Notice 2023-63 regarding
the treatment of SRE expenditures paid or
incurred with respect to property that is
contributed to, distributed from, or trans-
ferred from a partnership.
The Treasury Department and the IRS
are aware of situations in which a taxpayer
that intends to consistently rely on all the
rules described in sections 3 through 9 of
the notice for expenditures paid or incurred
in taxable years beginning after December
31, 2021, may be required to amend a tax
return that was filed before or shortly after
Notice 2023-63 was issued to do so. This
is because the taxpayer may not be able
to change, through a change in method
of accounting, certain positions taken on
such return that were inconsistent with
certain sections of Notice 2023-63. To
facilitate reliance on the rules described
in Notice 2023-63 in a more administra-
ble manner, section 4 of this notice mod-
ifies section 10.01 of Notice 2023-63 to
remove the requirement that a taxpayer
must rely on all the rules described in sec-
tions 3 through 9 of the notice if it chooses
to rely on any of the rules described in sec-
tions 3 through 9 of the notice.
.06 Obsoletion of Rev. Proc. 2000-
50, section 5.01. Section 12 of Notice
2023-63 provides that as a result of the
TCJA amendments to § 174 and the rules
described in sections 3 through 5 of Notice
2023-63, section 5 of Rev. Proc. 2000-50
is obsolete. Section 5 of this notice clari-
fies section 12 of Notice 2023-63 to reflect
that section 5 of Rev. Proc. 2000-50 is
obsoleted only for expenditures paid or
incurred in taxable years beginning after
December 31, 2021, and not for expen-
ditures paid or incurred for taxable years
beginning on or before December 31,
2021.
.07 Procedural guidance under Rev.
Proc. 2024-9. On December 22, 2023,
the Treasury Department and the IRS
released Rev. Proc. 2024-9, this Bulletin,
modifying sections 7 and 19 of Rev. Proc.
2023-24, 2023-28 I.R.B. 1207, to provide
procedures under § 446 and § 1.446-1(e)
for obtaining automatic consent of the
Commissioner of Internal Revenue (Com-
missioner) to change methods of account-
ing for expenditures paid or incurred in
taxable years beginning after December
31, 2021, in reliance on interim guidance
under §§ 174 and 460 provided in Notice
2023-63. Rev. Proc. 2024-9 also clarified
section 9 of Rev. Proc. 2023-24 to pro-
vide that section 5 of Rev. Proc. 2000-50
is obsoleted for costs of developing com-
puter software paid or incurred in any
taxable year beginning after December
31, 2021, and continues to apply to costs
of developing computer software paid or
incurred in any taxable year beginning on
or before December 31, 2021.
SECTION 3. CLARIFICATION
OF SECTION 6.04 OF NOTICE
2023-63 REGARDING RESEARCH
PERFORMED UNDER CONTRACT
For purposes of applying section 6.04
of Notice 2023-63, if a research provider
that does not bear financial risk under the
terms of the contract with the research

January 29, 2024 618 Bulletin No. 2024–5
recipient obtains an excluded SRE prod-
uct right (that is, an SRE product right
described in section 2.04(3) of this notice)
and does not obtain any other SRE prod-
uct right under the terms of such contract,
then the costs paid or incurred by the
research provider to perform SRE activ-
ities on behalf of the research recipient
under such contract are not SRE expendi-
tures.
SECTION 4. MODIFICATION
OF SECTION 10.01 OF NOTICE
2023-63 REGARDING RELIANCE
REQUIREMENT
Section 10.01 of Notice 2023-63 is
modified to read as follows:
.01 In general. It is anticipated that
the forthcoming proposed regulations
will provide that rules consistent with
the rules described in sections 3 through
9 of this notice would apply for taxable
years ending after September 8, 2023.
Except as otherwise provided in this sec-
tion 10.01, prior to the publication date
of the forthcoming proposed regulations
in the Federal Register, a taxpayer may
choose to rely on the rules described in
sections 3 through 9 of Notice 2023-63
for expenditures paid or incurred in tax-
able years beginning after December 31,
2021, provided the taxpayer relies on
them in a consistent manner. Taxpayers
are not required, however, to rely on all
the rules described in sections 3 through
9 of Notice 2023-63. Taxpayers may not
rely on the rules described in section 7
of Notice 2023-63 for SRE expenditures
paid or incurred with respect to property
that is contributed to, distributed from, or
transferred from a partnership.
SECTION 5. CLARIFICATION OF
SECTION 12 OF NOTICE 2023-63
REGARDING OBSOLETION OF
SECTION 5 OF REV. PROC. 2000-50
For amounts paid or incurred in taxable
years beginning after December 31, 2021,
section 5 of Rev. Proc. 2000-50 is removed
as obsolete. Section 5 of Rev. Proc. 2000-
50 continues to apply to amounts paid or
incurred in taxable years beginning on or
before December 31, 2021.
SECTION 6. EFFECTIVE DATE
This notice clarifies and modifies
Notice 2023-63 and is effective as of Sep-
tember 8, 2023. Until the forthcoming
proposed regulations are published in the
Federal Register, taxpayers may rely on
sections 3 and 4 of this notice for expen-
ditures paid or incurred in taxable years
beginning after December 31, 2021.
SECTION 7. EFFECT ON OTHER
DOCUMENTS
Sections 6.04 and 12 of Notice 2023-
63 are clarified. Section 10.01 of Notice
2023-63 is modified.
SECTION 8. DRAFTING AND
CONTACT INFORMATION
The principal author of this notice is
Bruce Chang of the Office of the Associate
Chief Counsel (Income Tax and Account-
ing). Other personnel from the Treasury
Department and the IRS participated in
its development. For further information
regarding this notice, please contact Mr.
Chang at (202) 317-7005 (not a toll-free
number).
Comments on Product
Identification Numbers and
the Energy Efficient Home
Improvement Credit under
Section 25C
Notice 2024-13
SECTION 1. PURPOSE
This notice announces that the Depart-
ment of the Treasury (Treasury Depart-
ment) and the Internal Revenue Service
(IRS) intend to propose regulations to
implement the product identification
number (PIN) requirement with respect
to the energy efficient home improve-
ment credit under § 25C of the Internal
Revenue Code (Code),
1
as amended by
§ 13301 of Public Law 117-169, 136.
Stat. 1818 (August 16, 2022), com-
monly known as the Inflation Reduction
Act of 2022 (IRA). This notice requests
comments on the PIN requirement under
§ 25C(h) (PIN requirement). Section 2
of this notice provides a background
description of § 25C, including the PIN
requirement. Section 3 of this notice
contains general requests for comments.
Section 4 of this notice describes a pos-
sible PIN assignment system and con-
tains a specific request for comments
on the system. Section 5 of this notice
requests comments on providing PIN
information to consumers and the IRS.
Section 6 of this notice provides the
method for submitting comments. Com-
ments received in response to this notice
will help inform the development of the
proposed regulations implementing the
PIN requirement.
SECTION 2. BACKGROUND
.01 Energy Efficient Home Improve-
ment Credit Generally.
(1) Section 25C was originally enacted
by § 1333(a) of the Energy Policy Act of
2005, Public Law 109-58, 119 Stat. 594,
1026 (August 8, 2005), to provide the
nonbusiness energy property credit for the
purchase and installation of certain energy
efficient improvements in taxpayers’ prin-
cipal residences. Section 25C has been
amended several times, most recently
by § 13301 of the IRA, which renamed
this provision the “energy efficient home
improvement credit” (§ 25C credit).
(2) Before the enactment of the IRA,
§ 25C had expired on December 31, 2021.
Section 13301(a) of the IRA amended
§ 25C(g) to make the § 25C credit avail-
able from January 1, 2022, through
December 31, 2032.
(3) Section 13301(b) of the IRA
amended § 25C(a) to allow a credit for
30 percent of amounts paid or incurred
by individual taxpayers during the tax-
1
Unless otherwise specified, all “section” or “§” references are to sections of the Code.

Bulletin No. 2024–5 619 January 29, 2024
able year for qualified energy efficiency
improvements and residential energy
property expenditures. As amended by
§ 13301(c) of the IRA, the § 25C credit
is generally limited to an annual cap of
$1,200. Within this $1,200 limitation,
§ 25C(b) sets forth further annual caps for
certain categories of improvements. As
relevant to this notice, the caps and cat-
egories of improvements under these lim-
itations are as follows:
(A) $600 for any item of qualified
en ergy property, as defined in § 25C(d)(2);
(B) $600 for exterior windows and sky-
lights;
(C) $250 for any single exterior door;
and
(D) $500 in the aggregate for all exte-
rior doors.
(4) Notwithstanding the $1,200 annual
limitation (and its internal limitations),
amounts paid or incurred for heat pumps,
heat pump water heaters, biomass stoves,
and biomass boilers are allowed a sepa-
rate and aggregate annual credit of up to
$2,000.
(5) Section 13301(i) of the IRA pro-
vides the effective dates for the IRA
amendments to § 25C. In general, except
as provided in § 13301(i)(2) and (3), the
IRA amendments apply to property placed
in service after December 31, 2022. Sec-
tion 13301(i)(2) of the IRA provides that
amendments made by § 13301(a) of the
IRA relating to the extension of the credit
apply to property placed in service after
December 31, 2021. Section 13301(i)
(3) of the IRA provides that amendments
made by § 13301(g) of the IRA relating
to the PIN requirement apply to property
placed in service after December 31, 2024.
.02 PIN Requirement for Specified
Property.
(1) Section 13301(g) of the IRA adds
new § 25C(h), which imposes the PIN
requirement. Section 25C(h)(1) provides
that no § 25C credit is allowed for any
item of specified property placed in ser-
vice after December 31, 2024, unless--
(A) such item is produced by a quali-
fied manufacturer, and
(B) the taxpayer includes the qualified
PIN of such item on the return of tax for
the taxable year.
(2) Section 25C(h)(2) defines “qual-
ified product identification number”
as, with respect to any item of specified
property, the product identification num-
ber assigned to such item by the qualified
manufacturer pursuant to the methodol-
ogy referred to in § 25C(h)(3).
(3) Section 25C(h)(3) defines “quali-
fied manufacturer” as any manufacturer
of specified property that enters into an
agreement with the Secretary of the Trea-
sury or her delegate (Secretary) that pro-
vides that such manufacturer will--
(A) assign a PIN to each item of spec-
ified property produced by such manu-
facturer utilizing a methodology that will
ensure that such number (including any
alphanumeric) is unique to each such item
(by utilizing numbers or letters that are
unique to such manufacturer or by such
other method as the Secretary may pro-
vide),
(B) label such item with such number
in such manner as the Secretary may pro-
vide, and
(C) make periodic written reports to the
Secretary (at such times and in such man-
ner as the Secretary may provide) of the
PINs so assigned and including such infor-
mation as the Secretary may require with
respect to the item of specified property to
which such number was so assigned.
(4) Section 25C(h)(4) defines “spec-
ified property” as any “qualified energy
property” and any property described in
§ 25C(c)(3)(B) or (C) (exterior windows,
including skylights, and exterior doors).
(5) Section 25C(d)(2) defines “quali-
fied energy property” as:
(A) Any of the following that meets
or exceeds the highest efficiency tier (not
including any advanced tier) established
by the Consortium for Energy Efficiency
that is in effect as of the beginning of the
calendar year in which the property is
placed in service:
(i) an electric or natural gas heat pump
water heater,
(ii) an electric or natural gas heat pump,
(iii) a central air conditioner,
(iv) a natural gas, propane, or oil water
heater, or
(v) a natural gas, propane, or oil fur-
nace or hot water boiler;
(B) A biomass stove or boiler that
(i) uses the burning of biomass fuel to
heat a dwelling unit located in the United
States and used as a residence by the tax-
payer, or to heat water for use in such a
dwelling unit, and
(ii) has a thermal efficiency rating of at
least 75 percent (measured by the higher
heating value of the fuel);
(C) Any oil furnace or hot water boiler
that--
(i) is placed in service after Decem-
ber 31, 2022, and before January 1, 2027,
meets or exceeds 2021 Energy Star effi-
ciency criteria, and is rated by the manu-
facturer for use with fuel blends at least 20
percent of the volume of which consists of
an eligible fuel, as defined in § 25C(d)(3)
(eligible fuel), or
(ii) is placed in service after December
31, 2026, achieves an annual fuel utiliza-
tion efficiency rate of not less than 90, and
is rated by the manufacturer for use with
fuel blends at least 50 percent of the vol-
ume of which consists of an eligible fuel
; and
(D) Any improvement to, or replace-
ment of, a panelboard, sub-panelboard,
branch circuits, or feeders that
(i) is installed in a manner consistent
with the National Electric Code,
(ii) has a load capacity of not less than
200 amps,
(iii) is installed in conjunction with
(I) any qualified energy efficiency
improvements, or
(II) any qualified energy property
described in § 25C(d)(2)(A) through (C)
for which a §25C credit is allowed for
expenditures with respect to such prop-
erty, and
(iv) enables the installation and use of
any qualified energy efficiency improve-
ments or any qualified energy property
described in § 25C(d)(2)(A) through (C)).
(6) Property described in § 25C(c)(3)
(B) or (C) includes:
(A) exterior windows, including sky-
lights, and
(B) exterior doors.
.03 Math Error Authority
Section 6213(b)(1) authorizes the IRS
to make certain assessments of mathemat-
ical or clerical errors without first issu-
ing a notice of deficiency under section
6213(a). In lieu of a notice of deficiency
giving the taxpayer 90 days to file a peti-
tion in the Tax Court, section 6213(b)(1)
requires the IRS to provide the taxpayer
notice that an assessment has been or will
be made based on a mathematical or cler-
ical error. Section 6213(b)(2)(A) provides
that the taxpayer has 60 days to request an

January 29, 2024 620 Bulletin No. 2024–5
abatement of such assessment. If the tax-
payer timely requests abatement, then the
IRS must abate the assessment.
Section 13301(g)(2) of the IRA
amended § 6213(g)(2) to expand the
definition of a “mathematical or clerical
error,” over which the IRS has math error
authority, to include an “an omission of
a correct product identification number
required under section 25C(h) (relating
to credit for nonbusiness energy property)
to be included on a return.” Accordingly,
the IRS will not issue a claimed credit if it
appears that there is a PIN error.
.04 Notice 2022-48 and Comments
Received
(1) In Notice 2022-48, 2022-43 I.R.B.
305, the Treasury Department and the IRS
requested comments on various questions
arising from the IRA’s energy efficiency
provisions, including §§ 25C, 25D, 45L
and 179D.
(2) Specific to § 25C(h), Notice 2022-
48 requested comments on what the
Treasury Department and the IRS should
consider (1) in determining the manner of
agreements between the IRS and a qual-
ified manufacturer, (2) in developing a
methodology to ensure that each PIN is
unique to each item of specified property,
(3) in prescribing the manner by which
specified property must be labeled with
a unique PIN, and (4) in developing the
requirements for qualified manufacturers’
periodic written reports.
(3) In response, some commenters sug-
gested the use of existing numbering sys-
tems to satisfy the PIN requirement. For
example, commenters suggested using
product serial numbers or stock-keeping
unit numbers (SKUs) to satisfy the PIN
requirement. Generally, manufacturers
routinely assign serial numbers to specific
items, which achieves the specificity sug-
gested by the statutory text. The Treasury
Department and the IRS, however, are
concerned that the systems that manufac-
turers employ to assign serial numbers are
not uniform by product or manufacturer.
For example, a manufacturer of a par-
ticular product may use an 8-digit serial
number consisting of numbers for each
item of product line while a different man-
ufacturer of a similar product may use a
14-digit serial number consisting of both
numbers and letters. Additionally, some
manufacturers change their serial num-
bers for products over time. For example,
a manufacturer may use a 9-digit serial
number consisting partly of letters for
certain years and an 8-digit serial num-
ber consisting only of numbers for other
years. Similarly, SKUs are specific to
each merchant or manufacturer. This lack
of uniformity in serial numbers and SKUs
would create processing challenges for
the IRS and could also cause confusion
for consumers claiming the § 25C credit.
Additionally, certain categories of prod-
ucts, like exterior windows, doors, and
skylights, do not currently have unique
serial numbers for each window, door,
or skylight manufactured but instead are
assigned numbers that identify multiple
windows, doors, or skylights as belonging
to a specific product line of such items.
(4) Other commenters suggested using
product line numbers or universal product
codes (UPCs) to satisfy the PIN require-
ment. Regarding product line numbers,
some commenters pointed to the National
Fenestration Rating Council’s (NFRC)
Certified Product Directory for exterior
windows, doors, and skylights. However,
because the NFRC system assigns the
same product line number to multiple (or
all) items in a specific product line, these
numbers will not provide the specific-
ity needed to satisfy the requirement of
§ 25C(h), which ensures that duplicate or
fraudulent claims for the § 25C credit are
not made for the same item. UPCs are a
multi-digit code assigned to products by
manufacturers. Manufacturers and oth-
ers employ UPCs for tracking and sell-
ing inventory. Like the NFRC numbers,
however, UPCs are generally assigned
per product type, and not per specific
item. Therefore, while UPCs can vary
based on product differences, they also do
not satisfy the specificity requirement of
§ 25C(h).
(5) To permit the IRS to adhere to and
to sufficiently enforce the statutory PIN
requirement, to use its math error author-
ity in § 6213(g)(2), and to provide cer-
tainty to consumers who want to claim the
§ 25C credit, the Treasury Department and
the IRS have determined that it is neces-
sary to develop a system that assigns PINs
to each unique item of specified property.
The Treasury Department and the IRS
seek to balance the administrative benefits
and taxpayer clarity provided by a unique
PIN system against the burden that this
requirement would impose on manufac-
turers and retailers.
SECTION 3. GENERAL COMMENT
REQUEST
The Treasury Department and the IRS
request comments on the following ques-
tions that will inform the development of a
system to assign unique PINs to each item
of specified property, as required under
§ 25C(h):
.01 For manufacturers, how many dif-
ferent products do you manufacture and/
or sell that would qualify as specified
property under § 25C(h)(4)? Comment-
ers are encouraged to list their different
product types, product lines, as well as
the approximate annual number of unique
items manufactured and/or sold for each
product line that could constitute “speci-
fied property.”
.02 Is there a system by which all man-
ufacturers of “specified property” assign
unique identification numbers to each item
of a manufactured product? If so, please
identify the system and how each manu-
facturer assigns a unique identification
number to each item of a manufactured
product. Please also explain any devia-
tions that exist in each manufacturer’s sys-
tem for assigning numbers (for example,
some using all numbers or a combination
of numbers and letters).
.03 If there is not a system described
in section 3.02 of this notice, but there is
a system that applies unique identification
numbers to each item within a particular
product type industry-wide, please iden-
tify the system, describe what products
it applies to and products of similar func-
tions that it does not apply to, and explain
how each manufacturer assigns a number
to each item of manufactured product
using the system. Please also explain any
deviations that exist in each manufactur-
er’s system for assigning numbers.
SECTION 4. POSSIBLE PIN
ASSIGNMENT SYSTEM AND
SPECIFIC REQUEST FOR
COMMENTS
The Treasury Department and the
IRS are considering implementing a PIN
assignment system, the process for which

Bulletin No. 2024–5 621 January 29, 2024
is described generally in section 4.01 of
this notice. The system would use 17-digit
PINs that are assigned to each item of
specified property that qualifies for the
§ 25C credit. The PIN for each item of
specified property would be made up of
three parts. The first part of the PIN would
be a “QM Number” specific to the qual-
ified manufacturer. The second part of
the PIN would be a “Product Number”
specific to the specified property product
line that qualifies for the § 25C credit. The
third part of the PIN would reflect the year
of manufacture. The fourth part of the PIN
would be an “Item number” that is unique
to each item of specified property. The sys-
tem would require manufacturers to reg-
ister to be a qualified manufacturer with
the IRS. Only if registration is successful
would any PINs be assigned to the manu-
facturer’s items of specified property. The
Treasury Department and the IRS request
comments on the proposed system.
.01 Possible PIN Assignment System
Process.
(A) The manufacturer would register
with the IRS to be a qualified manufac-
turer (QM) in accordance with § 25C(h)
(3).
(B) If the registration is successful, the
manufacturer would become a qualified
manufacturer, and the IRS would issue to
the qualified manufacturer a QM Number
and a list of Product Numbers that corre-
spond to specified products that qualify for
the § 25C credit. QM Numbers and Prod-
uct Numbers would only include alpha-
numeric characters. For purposes of this
notice, “alphanumeric characters” refers
only to 24 letters of the English alphabet
(A through Z, but not I or O to avoid con-
fusion with 1 and 0) and the numerals 0, 1,
2, 3, 4, 5, 6, 7, 8, and 9.
(C) The qualified manufacturer would
then assign Item numbers to each unique
item of specified property in any fashion
it chooses (for example, sequentially, par-
tially incorporating the year and/or month
of manufacture, or incorporating a part or
all of the serial number that the manufac-
turer has assigned to the item), provided
that the Item numbers only include alpha-
numeric characters, and provided that
the PIN is unique for each item and is 17
alphanumeric characters in overall length
(including the QM Number, the Product
Number, and the character(s) identifying
the year of manufacture).
(D) Throughout the calendar year, the
qualified manufacturer would file a list of
PINs representing each item of specified
property manufactured by the manufac-
turer to the IRS through an online portal
2

before, or potentially shortly after, the
end of the calendar year. The qualified
manufacturer would stamp or label its
products with their PINs, and would also,
potentially through a retailer, distributor,
or contractor, furnish the PINs to each
consumer for the consumers to report on
their tax returns when the § 25C credit is
claimed. See section 5 of this notice for
comment requests on providing PINs to
customers and the IRS.
.02 Example. Manufacturer X man-
ufactures exterior windows. On June 1,
2024, Manufacturer X successfully regis-
ters with the IRS to be a qualified manu-
facturer and the IRS assigns a QM Number
of 1234 to Manufacturer X. The IRS also
provides Manufacturer X a Product Num-
bers list, in which exterior windows that
qualify for the § 25C credit are assigned
number 01. Manufacturer X anticipates
that, in calendar year 2025, it will manu-
facture 50,000 exterior windows that will
qualify for the § 25C credit and decides
to assign numbers to each exterior win-
dow sequentially based on the time of
manufacture. Accordingly, Manufacturer
X assigns PINs of 12340125000000001
through 12340125000050000 to the exte-
rior windows it produces in calendar year
2025. Also in calendar year 2025, Con-
sumer Y purchases and places in service
the exterior window bearing the PIN
12340125000000001. Before or poten-
tially shortly after January 1, 2026, Man-
ufacturer X notifies the IRS of this PIN
through a report filed through the IRS
Energy Credits Online portal. Addition-
ally, Consumer Y has been made aware
of the PIN unique to the exterior window
purchased by Consumer Y to report on
their return.
.03 The Treasury Department and the
IRS request comments on the PIN assign-
ment system described in section 4.01
of this notice. Specifically, the Treasury
Department and the IRS request com-
ments on the following:
(A) What challenges would manu-
facturers and/or retailers have in imple-
menting and complying with the PIN
assignment system described in section
4.01 of this notice? What would be the
costs and timeline for manufacturers and
retailers of implementing and complying
with the proposed system? Are there cases
where manufacturers or other stakehold-
ers would decline to employ the system
because compliance would be overly bur-
densome? Commenters are encouraged to
specifically identify types and amounts
of costs that manufacturers and retailers
would need to incur in implementing and
complying with the proposed system, as
well as specific aspects of the proposal
that would require set amounts of time to
develop and implement.
(B) If the Treasury Department and the
IRS were to implement the PIN assign-
ment system described in section 4.01 of
this notice, what changes or exceptions,
if any, should be made? For example, is
guidance regarding a transition period
needed for specified property that may be
placed in service after December 31, 2024,
but is no longer in possession of the man-
ufacturer or trackable by the manufacturer
on the date they successfully register with
the IRS, because the specified property
has already been sold to a distributor or
retailer? Do some categories of specified
property, or components of specified prop-
erty, have a low retail cost or profit mar-
gin such that assigning a PIN to each item
would be cost-prohibitive? Please also
provide recommendations on any possible
demarcation between items or categories
of specified property that would need a
PIN, or for which a PIN would be imprac-
tical, and those that would not need a PIN
and the basis for such demarcation con-
sistent with the purposes of the statutory
PIN requirement to prevent duplicative or
fraudulent credit claims.
(C) If the Treasury Department and the
IRS were to implement the PIN assign-
ment system described in section 4.01 of
this notice for some items of specified
property, but not others, would there be
2
Similar to the IRS Clean Vehicle Credit portal.

January 29, 2024 622 Bulletin No. 2024–5
additional costs incurred for manufactur-
ers and/ or retailers? What would those
additional costs be?
(D) What challenges, if any, exist due
to customizable products? What limita-
tions, if any, does specified property that
is sold in one or more parts to form an
eligible system (for example, an eligible
heat pump system that is comprised of an
indoor unit, outdoor unit and air mover)
pose in assigning unique PINs?
(E) If the Treasury Department and the
IRS were to implement the PIN assign-
ment system described in section 4.01 of
this notice, with what frequency (daily,
monthly, quarterly, annually) could man-
ufacturers provide information to the IRS,
retailers, and/or consumers on available
specified property?
(F) What modifications could be made
to the PIN assignment system described in
section 4.01 of this notice to accommodate
limitations while still achieving adherence
to the specificity requirement?
SECTION 5. SPECIFIC REQUEST FOR
COMMENTS ON PROVIDING PINs
TO CONSUMERS AND THE IRS
If a PIN assignment system substan-
tially similar to the one described in
section 4 of this notice is developed, the
Treasury Department and the IRS request
comments on how manufacturers (and/or
other parties) would provide each unique
PIN to consumers and to the IRS to ensure
appropriate matching to avoid duplicate or
fraudulent credit claims. Specifically, the
Treasury Department and the IRS request
comments on:
.01 What processes or systems could
manufacturers, retailers, distributors,
contractors, and/or trade organizations
put in place to ensure that consumers
can confirm whether a particular item of
specified property qualifies for a § 25C
credit? For example, could manufacturers,
retailers, distributors, contractors, and/
or trade organizations provide a certifi-
cation to consumers listing which of the
manufacturers’ products qualify for the
§ 25C credit? How could manufacturers,
retailers, distributors, contractors, and/or
trade organizations make eligible property
easily identifiable for consumers? Would
manufacturers and/or retailers prefer to
provide PIN information to consumers on
receipts at the time of sale or after instal-
lation of the product (if different in time)?
Would a system where the PIN is provided
on or inside the product’s packaging and
not on the product itself suffice in certain
situations? Could manufacturers and/or
retailers provide information on the credit
limitations to customers (for example, that
the § 25C credit for any eligible single
exterior door cannot exceed $250 for any
taxable year under § 25C(b)(4)(A))? How
does the use of contractors or subcontrac-
tors (such as installers) help or limit the
ability of manufacturers and/or retailers
to put into place any processes or systems
relating to the PIN requirement, and if so,
please describe?
.02 What processes or systems could
manufacturers and/or retailers put into
place that would both comply with the
labeling requirement under § 25C(h)(3)
(B) and adhere to § 25C(h)’s aim to pre-
vent duplicate or fraudulent claims for the
§ 25C credit for the same unique item of
specified property? Could manufacturers
and/or retailers employ their own labeling
system(s) to provide both the relevant PIN
and other relevant information relating to
the § 25C credit? Would a receipt be suf-
ficient to meet the labeling requirement?
How burdensome would it be to place a
physical label on each unique item of
specified property containing the rele-
vant PIN and other relevant information
relating to the § 25C credit, and would it
be less burdensome for manufacturers to
place this type of label on certain catego-
ries of property than for other categories
of property? Would manufacturers and/or
retailers provide an information sheet to
consumers with each product purchased
by the consumer and listing the PIN that
applies to each product? What systems
and processes could manufacturers and/
or retailers and contractors employ that
would help ensure that the PIN is only
made available to the consumer who pur-
chases that item?
.03 What processes or systems could
manufacturers put into place to ensure that
the IRS has the appropriate list of PINs for
each unique item of specified property that
have been placed in service beginning in
2025? Are there any limitations to manu-
facturers uploading PIN information to an
online portal, such as IRS Energy Credits
Online?
SECTION 6. SUBMISSION OF
COMMENTS
.01 Written comments should be sub-
mitted by February 27, 2024. Consider-
ation will be given, however, to any writ-
ten comment received after February 27,
2024, if such consideration will not delay
the issuance of guidance. The subject line
for the comments should include a refer-
ence to Notice 2024-XX. Comments may
be submitted in one of two ways:
(1) Electronically via the Federal
eRulemaking Portal at https://www.reg-
ulations.gov (type IRS-2024-0003 in the
search field on the regulations.gov home-
page to find this notice and submit com-
ments).
(2) Alternatively, by mail to: Inter-
nal Revenue Service, CC:PA:LPD:PR
(Notice 2024-13), Room 5203, P.O. Box
7604, Ben Franklin Station, Washington,
DC 20044.
.02 All commenters are strongly
encouraged to submit comments electron-
ically. The Treasury Department and the
IRS will publish for public availability
any comment submitted electronically,
or on paper, to the IRS’s public docket on
regulations.gov.
SECTION 6. CONTACT
INFORMATION
The principal author of this notice is
Kevin I. Babitz, Office of Associate Chief
Counsel (Passthroughs & Special Indus-
tries). For further information regarding
this notice, contact Mr. Babitz at (202)
317-6853 (not a toll-free number).
Guidance Related to
Section 961 and Certain
Inbound Nonrecognition
Transactions
Notice 2024-16
SECTION 1. PURPOSE
This notice announces that the Depart-
ment of the Treasury (the “Treasury
Department”) and the Internal Revenue

Bulletin No. 2024–5 623 January 29, 2024
Service (the “IRS”) intend to issue pro-
posed regulations addressing the treat-
ment of basis provided under section
961(c) in certain transactions in which a
domestic corporation acquires stock of a
controlled foreign corporation (as defined
in section 957(a), a “CFC”) in a liquida-
tion described in section 332 or an asset
reorganization described in section 368(a)
(1).
1
Section 2 of this notice provides
background on section 961 and other rel-
evant Code provisions. Section 3 of this
notice describes the regulations that the
Treasury Department and the IRS intend
to issue. Section 4 of this notice permits
taxpayers to rely on the rules described in
section 3 of this notice. Section 5 of this
notice requests comments and provides
contact information.
SECTION 2. BACKGROUND
Section 961(a) provides that, under reg-
ulations prescribed by the Secretary, the
basis that a United States shareholder (as
defined in section 951(b)) has in stock of a
CFC, and the basis of property of a United
States shareholder by reason of which the
shareholder is considered under section
958(a)(2) as owning stock of a CFC, is
increased by the amount required to be
included in its gross income under section
951(a) with respect to such stock or with
respect to such property, as the case may
be, but only to the extent to which such
amount was included in the gross income
of such United States shareholder. Section
951A(f)(1) and §1.951A-5(b)(1) provide
that an amount included in a United States
shareholder’s gross income as a GILTI
inclusion amount is treated in the same
manner as an amount included under sec-
tion 951(a) for purposes of applying sec-
tion 961.
Section 961(b) provides that, under
regulations prescribed by the Secretary,
the basis of stock or other property with
respect to which a United States share-
holder or a United States person receives
an amount that is excluded from gross
income under section 959(a) is reduced
by the amount so excluded. Section
961(b)(1). To the extent that an amount
excluded from gross income under sec-
tion 959(a) exceeds the basis of the stock
or other property with respect to which it
is received, the amount is treated as gain
from the sale or exchange of property.
Section 961(b)(2).
Section 961(c) provides that, under
regulations prescribed by the Secretary,
if a United States shareholder is treated
under section 958(a)(2) as owning stock
in a CFC that is owned by another CFC,
then adjustments similar to the adjust-
ments provided by section 961(a) and (b)
are made to the basis of such stock, and the
basis of stock in any other CFC by reason
of which the United States shareholder is
considered under section 958(a)(2) as
owning the stock of the first mentioned
CFC, but only for the purpose of deter-
mining the amount included under section
951 in the gross income of such United
States shareholder. Section 961(c) further
provides that the adjustments described in
section 961(c) do not apply with respect
to any stock to which a basis adjustment
applies under section 961(a) or (b).
Sections 1.961-1 and 1.961-2 imple-
ment sections 961(a) and (b), respec-
tively. Those regulations were issued in
1965, before section 961(c) was enacted
in 1997, and have not been modified since
their issuance.
2
In a transaction in which a domestic
corporation (“domestic acquiring cor-
poration”) acquires all of the stock of
a CFC (“acquired CFC”) from another
CFC (“transferor CFC”) in a liquida-
tion described in section 332 or an asset
reorganization described in section
368(a)(1) (“inbound nonrecognition
transaction”), the domestic acquiring
corporation generally obtains a basis
of the stock of the acquired CFC that
is determined by reference to the basis
of the stock in the hands of the trans-
feror CFC pursuant to section 334(b)
or 362(b), as applicable. Before such
an inbound nonrecognition transaction,
the transferor CFC may have increased
the basis of the stock of the acquired
CFC under section 961(c) (such basis,
“section 961(c) basis”), but the section
961(c) basis in the stock of the acquired
CFC would apply only for the purpose
of determining an amount included
under section 951 in the gross income
of a United States shareholder.
A domestic acquiring corporation may
recognize gain on a subsequent distribu-
tion of previously taxed earnings and prof-
its (“PTEP”) from the acquired CFC under
section 961(b)(2) or recognize gain attrib
-
utable to PTEP on a disposition of stock in
the acquired CFC if the domestic acquir-
ing corporation’s adjusted basis
3
in the
stock of the acquired CFC does not reflect
the section 961(c) basis that the transferor
CFC had in the stock of the acquired CFC
before the inbound nonrecognition trans-
action. The Treasury Department and the
IRS are of the view that, in certain cases,
this result may prevent taxpayers from
engaging in such transactions and would
be inconsistent with one of the purposes
of section 961, which is to prevent dou-
ble taxation of the same CFC earnings.
4

Accordingly, pursuant to the grant of reg-
ulatory authority under section 961, the
Treasury Department and the IRS intend
to issue regulations described in section 3
of this notice.
SECTION 3. REGULATIONS TO BE
ISSUED
.01 Treatment of section 961(c) basis in
covered inbound transactions
As announced in Notice 2019-1
(2019-2 I.R.B. 275), the Treasury Depart-
ment and the IRS expect to issue pro-
posed regulations providing substantially
comprehensive rules under sections 959
and 961. This notice announces that the
Treasury Department and the IRS expect
to issue additional proposed regulations
(the “forthcoming regulations”) that will
provide that, in the case of a covered
1
Unless otherwise specified, all “section” or “§” references are to sections of the Internal Revenue Code (the “Code”) or the Income Tax Regulations (26 CFR part 1).
2
See TD 6850, 30 Fed. Reg. 11854 (1965). Section 961(c) was added to the Code by the Taxpayer Relief Act of 1997, Pub. L. No. 105-34 § 1112(b), 111 Stat. 788, 969 (1997).
3
For purposes of this notice, the term “adjusted basis” does not include section 961(c) basis.
4
See H.R. Rep. No. 87-1447 at A106 (1962) (“To prevent doubling up of tax where stock in a controlled foreign corporation is sold at a gain which reflects the retained earnings already taxed
to United States persons, the basis of stock would be adjusted.”).

January 29, 2024 624 Bulletin No. 2024–5
inbound transaction, a domestic acquiring
corporation’s adjusted basis of the stock
of an acquired CFC determined under sec-
tion 334(b) or 362(b) is determined as if
the transferor CFC’s section 961(c) basis
were adjusted basis. The transferor CFC’s
section 961(c) basis is taken into account
for purposes of the preceding sentence,
however, only to the extent the section
961(c) basis is with respect to a domestic
corporation described in section 3.02(1)
or (2) of this notice, as applicable (that
is, the section 961(c) basis resulted from
inclusions in gross income of the domestic
corporation under section 951(a) or sec-
tion 951A(a), or the section 961(c) basis
was inherited by the domestic corporation
under section 961(c)’s successor rules in
an acquisition by the domestic corpora-
tion of stock of the transferor CFC from
another person).
.02 General definition of covered
inbound transaction
Under the forthcoming regulations,
except as provided in section 3.03 or 3.04
of this notice, a covered inbound trans-
action would be defined, with respect to
an acquired CFC, to mean the following
transactions in which a domestic acquir-
ing corporation acquires all of the stock
of the acquired CFC from a transferor
CFC that, immediately before the trans-
action and any related transactions, owns
(directly or indirectly under section 958(a)
(2)) all of the stock of the acquired CFC.
(1) Section 332 liquidation or upstream
asset reorganization. A liquidation
described in section 332, a reorganization
described in section 368(a)(1)(A) (but
not section 368(a)(2)(D) or 368(a)(2)(E))
(“nontriangular A reorganization”), or a
reorganization described in section 368(a)
(1)(C) (determined without regard to the
parenthetical) (“nontriangular C reorgani-
zation”), in which all of the stock of the
transferor CFC is owned directly by the
domestic acquiring corporation immedi-
ately before the transaction.
(2) Other asset reorganization. A
nontriangular A reorganization, a non-
triangular C reorganization, a reorga-
nization described in section 368(a)(1)
(D) (that satisfies the requirements of
section 354(b)(1)(A) and (B)), or a reor-
ganization described in section 368(a)(1)
(F), in which all of the stock of the trans-
feror CFC is owned directly by a single
domestic corporation (or by members of
the same consolidated group) immedi-
ately before the transaction, and that same
domestic corporation (or members of the
same consolidated group) directly owns
all of the stock of the domestic acquiring
corporation immediately after the transac-
tion and any related transactions.
.03 De minimis rules for stock owner-
ship
A transaction otherwise described in
section 3.02(1) or (2) of this notice would
not fail to be a covered inbound transac-
tion solely because, immediately before
the transaction, one or more persons other
than the domestic corporation (or mem-
bers of a consolidated group, as applica-
ble) described in section 3.02(1) or (2) of
this notice own (in the aggregate) one per-
cent or less of the total fair market value
of the stock of the transferor CFC. Solely
for purposes of determining whether a
transaction is a covered inbound transac-
tion, stock of the acquired CFC owned by
one or more persons other than the trans-
feror CFC immediately before the trans-
action and any related transactions that
represents (in the aggregate) one percent
or less of the total fair market value of the
stock of the acquired CFC is disregarded,
provided that any such person must con-
tinue to own its stock of the acquired CFC
after the transaction and any related trans-
actions if the person is not related (within
the meaning of section 267(b) or 707(b)
(1)) to a domestic corporation described in
section 3.02(1) or (2) of this notice.
.04 Limitations on the scope of covered
inbound transactions
(1) De minimis boot. In general, a
reorganization would not be a covered
inbound transaction if money or other
property is received as described under
section 356(a). However, a reorganization
would not fail to be a covered inbound
transaction if the amount of money or
other property received as described under
section 356(a) represents no more than
one percent of the total fair market value
of the stock of the transferor CFC.
(2) Loss in stock of acquired CFC.
A transaction would not be a covered
inbound transaction if, immediately
before the covered inbound transaction,
the total amount of the transferor CFC’s
basis in the stock of the acquired CFC
(that is, the aggregate amount of adjusted
basis and section 961(c) basis) exceeds
the total fair market value of such stock of
the acquired CFC.
(3) Transfers described in section
368(a)(2)(C) or §1.368-2(k)(1). A trans-
action would not be a covered inbound
transaction if stock of the acquired CFC
is transferred pursuant to section 368(a)
(2)(C) or §1.368-2(k)(1), unless the trans-
feree is (i) a member of the same consol-
idated group that includes the domestic
acquiring corporation and wholly owned
by one or more members of that same con-
solidated group, or (ii) the common parent
of that consolidated group.
(4) Other subsequent transfers. A trans-
action would not be a covered inbound
transaction if, pursuant to a plan (or
series of related transactions), stock of the
acquired CFC is transferred to a partner-
ship or foreign corporation in connection
with a covered inbound transaction. A plan
to transfer the stock of the acquired CFC
would be deemed to exist if stock of the
acquired CFC is subsequently transferred
to a partnership or a foreign corporation
within the two-year period beginning at
the time the covered inbound transaction
is completed.
(5) Certain types of domestic acquiring
corporations. A transaction would not be a
covered inbound transaction if the domes-
tic acquiring corporation is a regulated
investment company as defined in sec-
tion 851, a real estate investment trust as
defined in section 856, or an S corporation
as defined in section 1361.
If the stock of multiple acquired CFCs
is transferred by a single transferor CFC
in a transaction described in section 3.02
of this notice, the limitations in sections
3.04(2), 3.04(3), and 3.04(4) of this notice
apply separately with respect to each
acquired CFC.
SECTION 4. RELIANCE ON RULES
DESCRIBED IN THIS NOTICE
A taxpayer may rely on the rules
described in section 3 of this notice for
transactions completed on or before the
date proposed regulations governing the
basis consequences of covered inbound
transactions are published in the Federal
Register, provided the taxpayer and its
related parties (within the meaning of
sections 267(b) and 707(b)(1)) follow the

Bulletin No. 2024–5 625 January 29, 2024
rules in their entirety and in a consistent
manner.
No inference is intended with regard
to the treatment of section 961(c) basis
as a result of transactions other than cov-
ered inbound transactions. The Treasury
Department and the IRS will consider in
future guidance the extent to which basis
provided under section 961(c) in stock
of a CFC may be taken into account as
adjusted basis by a domestic corporation
that acquires stock of the CFC in a trans-
action other than a covered inbound trans-
action.
A taxpayer relying on this notice that
has maintained section 961(c) basis in a
currency that is not the U.S. dollar must,
before applying the rules described in
section 3 of this notice, translate section
961(c) basis into U.S. dollars, under a rea-
sonable method consistently applied to all
acquired CFCs in any covered inbound
transaction undertaken by one or more
domestic acquiring corporations. For this
purpose, a reasonable method must use
an exchange rate that reflects the origi-
nal U.S. dollar inclusion amounts of the
United States shareholder that gave rise to
the section 961(c) basis, reduced as appro-
priate, including to take into account dis-
tributions of PTEP on such stock. More-
over, distributions of PTEP are treated as
reducing the section 961(c) basis as so
translated by the U.S. dollar basis of the
PTEP.
SECTION 5. REQUEST FOR
COMMENTS AND CONTACT
INFORMATION
The Treasury Department and the
IRS request comments on all aspects of
this notice, including whether the rules
described in section 3 of this notice should
apply to transactions other than covered
inbound transactions and whether addi-
tional limitations should apply in those
cases.
Comments should be submitted by
February 26, 2024. Comments may be
submitted electronically via the Federal
eRulemaking Portal at www.regulations.
gov (type IRS-2024-16 in the search field
on the regulations.gov homepage to find
this notice and submit comments). Alter-
natively, comments may be submitted
by mail to: Internal Revenue Service,
CC:PA:LPD:PR (Notice 2024-16), Room
5203, P.O. Box 7604, Ben Franklin Sta-
tion, Washington, DC 20044. The Trea-
sury Department and the IRS will pub-
lish for public availability any comment
submitted electronically or on paper to its
public docket.
The principal authors of this notice are
Karen Li and Brady Plastaras of the Office
of Associate Chief Counsel (Interna-
tional). For further information regarding
this notice, contact Ms. Li or Mr. Plastaras
at (202) 317-6937 (not a toll-free number).
Electronic Filing
Administrative Exemptions,
Waivers, And Rejections;
Obsoleting Notice 2010-
13 and Modifying Notice
2023-60
Notice 2024-18
I. PURPOSE
This notice addresses the availabil-
ity of administrative exemptions from
the requirement to file certain returns
and other documents in electronic form.
This notice also addresses the avail-
ability of information about the proce-
dure to request a waiver of the require-
ment to file electronically Forms 1120,
1120-S, 1120-F, and 1065. In addition,
this notice provides information about
resources pertaining to failed attempts
to electronically file Forms 1120, 1120-
S, and 1120-F using Internal Revenue
Service (IRS) filing systems. Lastly, this
notice obsoletes Notice 2010-13, 2010-4
I.R.B. 327 (January 25, 2010), Form
1120, Form 1120-F, Form 1120S, Form
990, and Form 990-PF Electronic Filing
Waiver Request Procedures, and modifies
Notice 2023-60, as released on August
11, 2023, but not published in the Inter-
nal Revenue Bulletin.
II. BACKGROUND
Section 2301 of the Taxpayer First Act
(TFA), Public Law 116-25, 133 Stat. 981
(2019), amended § 6011(e) of the Inter-
nal Revenue Code (Code)
1
by amending
§ 6011(e)(2) and adding § 6011(e)(5) to
the Code to authorize the Secretary of
the Treasury or her delegate (Secretary)
to prescribe regulations that decrease,
in accordance with the TFA, the number
of returns a filer may file without being
required to file returns and other docu-
ments electronically. Under this author-
ity, the Secretary may require any person
who must file at least 10 returns during a
calendar year to file the returns electroni-
cally (electronic filing requirement). Prior
to the TFA, the Secretary was authorized
to apply the electronic filing requirement
only for persons required to file at least
250 returns during the calendar year. In
addition, § 3101 of the TFA amended
§§ 6011 and 6033 with respect to certain
returns required to be filed by tax-exempt
organizations by requiring that all such
returns be filed in electronic form.
On February 23, 2023, the Department
of the Treasury and the IRS published T.D.
9972, Electronic-Filing Requirements for
Specified Returns and Other Documents,
which contained final regulations provid-
ing updated electronic filing requirements
generally applicable beginning January
1, 2024 (Updated Electronic Filing Reg-
ulations). In addition, as stated in section
III of this notice, the Updated Electronic
Filing Regulations allow certain waivers
of and administrative exemptions from the
electronic filing requirement.
Notice 2010-13, which this notice obso-
letes, provided the procedure for corpora-
tions, S corporations (as defined in section
1361(a)(1)), and tax-exempt organiza-
tions that are required to file returns under
§ 6033, to request a waiver of the require-
ment to file electronically Form 1120,
U.S. Corporation Income Tax Return;
Form 1120-F, U.S. Income Tax Return of a
Foreign Corporation; Form 1120-S, U.S.
Income Tax Return for an S Corporation;
Form 990, Return of Organization Exempt
From Income Tax; Form 990-PF, Return
of Private Foundation or Section 4947(a)
1
Unless otherwise specified, all “section” or “§” references are to sections of the Code or to the Procedure and Administration Regulations (26 CFR part 301).

January 29, 2024 626 Bulletin No. 2024–5
(1) Trust Treated as a Private Foundation;
and returns, amended returns, and super-
seding returns in the Form 1120 series and
Form 990 series as required by regulations
and IRS publications.
III. ADMINISTRATIVE EXEMPTIONS
FROM AND WAIVERS OF THE
REQUIREMENTS TO FILE IN
ELECTRONIC FORM MAY BE
AVAILABLE
The Updated Electronic Filing Reg-
ulations provide for certain adminis-
trative exemptions from the electronic
filing requirement. Sections 301.6011-2
(general electronic filing requirement),
301.6011-3 (for partnership returns),
301.6011-5 (for corporate income tax
returns), and 301.6037-2 (for S corpora-
tion returns), as amended by the Updated
Electronic Filing Regulations, provide
for an administrative exemption from the
electronic filing requirement for filers of
the returns or other documents described
in those regulations for whom using the
technology required to file electronically
conflicts with their religious beliefs (reli-
gious exemption).
Most filers claiming the religious
exemption who file information returns
subject to the general electronic filing
requirements prescribed by § 301.6011-2
(for example, Forms 1099 and Forms
W-2) have the option to notify the IRS
that they qualify for a religious exemption
in advance of filing returns and other doc-
uments. Filers are encouraged to notify
the IRS in advance that they are claiming
a religious exemption by filing a Form
8508, Application for Waiver from Elec-
tronic Filing of Information Returns, in
accordance with the form’s instructions.
Filers of Forms 1120 and 1120-F under
§ 301.6011-5 (for corporate income tax
returns), Form 1120-S under § 301.6037-2
(for S corporation returns), and Form
1065 under § 301.6011-3 (for partnership
returns), claiming the religious exemption
must not file Form 8508. Instead, those
filers must file returns and other docu-
ments in paper form following the paper
filing requirements provided by applica-
ble IRS revenue procedures, publications,
forms, instructions, or other guidance.
Filers of Forms 1120, 1120-S, 1120-F, and
1065, who qualify for a religious exemp-
tion must print in bold letters “Religious
Exemption” at the top of page 1 of the
return they file in paper form. Filers who
qualify for the religious exemption for the
Forms 1120, 1120-S, 1120-F, and 1065,
are not subject to the electronic filing
waiver procedure that is available to other
filers, which requires advance application
and approval from the IRS before filing in
paper form.
In addition, certain provisions of cur-
rently applicable regulations and the
Updated Electronic Filing Regulations
authorize the Commissioner of Internal
Revenue (Commissioner) to grant cer-
tain waivers of the requirement to file
electronically certain returns and other
documents in cases of undue hardship
(hardship waiver). The procedures for
seeking a hardship waiver (if applicable)
of the electronic filing requirement may
be found in applicable IRS revenue proce-
dures, publications, forms, instructions, or
other guidance, including postings to the
IRS.gov website.
Finally, certain provisions of the
Updated Electronic Filing Regulations
authorize the Commissioner to provide
other administrative exemptions from the
electronic filing requirement to promote
effective and efficient tax administra-
tion. If the Commissioner provides other
administrative exemptions, a submission
claiming the administrative exemption
must be made in accordance with applica-
ble IRS revenue procedures, publications,
forms, instructions, or other guidance,
including postings to the IRS.gov website.
IV. NOTICE 2010-13 IS OBSOLETE
This notice obsoletes Notice 2010-13.
The procedure to request a waiver of the
requirement to file electronically Forms
1120, 1120-S, and 1120-F described in
Notice 2010-13 now is available in appli-
cable IRS revenue procedures, publica-
tions, forms, instructions, or other guid-
ance, including postings to the IRS.gov
website. Any updates to the procedure to
request a waiver will be made available
in the same way. Additionally, because
§ 6033, as amended by § 3101 of the TFA,
requires any organization with an obliga-
tion to file a return under § 6033 to file
the return in electronic form, the proce-
dure to request a waiver of the electronic
filing requirement as described in Notice
2010-13 no longer applies to Form 990
and Form 990-PF series returns. Finally,
Notice 2010-13 provided instructions
regarding timely filing of Forms 1120,
1120-S, 1120-F, 990, and 990-PF on the
IRS’s Modernized e-File (MeF) system
after attempts to file electronically on
the MeF system are rejected. In place of
Notice 2010-13, instructions regarding
timely filing and for correcting returns
that are rejected during attempts to file
electronically using the IRS electronic fil-
ing systems may be found in IRS publica-
tions specific to each IRS electronic filing
system; for example, Publication 4164,
Modernized e-File (MeF) Guide for Soft-
ware Developers and Transmitters (cur-
rently available at: https://www.irs.gov/
pub/irs-pdf/p4164.pdf), and Publication
5717, Information Returns Intake System
(IRIS) Taxpayer Portal User Guide (cur-
rently available at: https://www.irs.gov/
pub/irs-pdf/p5717.pdf). For the foregoing
reasons, Notice 2010-13 is no longer nec-
essary and is obsoleted.
V. EFFECT ON OTHER DOCUMENTS
Notice 2010-13 is obsoleted.
Notice 2023-60, which was released on
August 11, 2023, but was not published in
the Internal Revenue Bulletin, is modified
by this notice to update the correct pro-
cedure for filers of Forms 1120, 1120-S,
1120-F, and 1065 to use to notify the IRS
that they claim a religious exemption.
VI. CONTACT INFORMATION
The principal author of this notice
is Carolyn M. Lee of the Office of the
Associate Chief Counsel (Procedure and
Administration). For further informa-
tion regarding this notice, you may call
(202) 317-6845 (not a toll-free call). For
questions concerning electronically filing
returns, contact the IRS e-Help Desk at
(866) 255-0654 (toll-free) or (512) 416-
7750 (not toll-free).

Bulletin No. 2024–5 627 January 29, 2024
Additional Time for
Partnerships to Provide
Complete Forms 8308 for
Section 751(a) Exchanges
Occurring in Calendar Year
2023
Notice 2024-19
I. PURPOSE
This notice provides relief from penal-
ties under § 6722 of the Internal Revenue
Code
1
for failures to furnish correct payee
statements solely for failure of a partner-
ship with unrealized receivables or inven-
tory items described in § 751(a) (§ 751
property) to furnish Part IV of Form 8308,
Report of a Sale or Exchange of Certain
Partnership Interests, to the transferor
and transferee in a § 751(a) exchange
(described in section II of this notice) that
occurred in calendar year 2023 by the due
date specified in § 1.6050K-1(c)(1). This
relief applies only if the partnership fur-
nishes to the transferor and transferee by
the due dates specified in section III of
this notice (1) a correct copy of Parts I,
II, and III of Form 8308, or a statement
that includes the same information, and
(2) a correct copy of the complete Form
8308, including Part IV, or a statement
that includes the same information and
any additional information required under
§ 1.6050K-1(c).
II. BACKGROUND
Generally, § 6050K and § 1.6050K-1
require a partnership with § 751 property
to provide information to each transferor
and transferee that are parties to a sale or
exchange of an interest in the partnership
(or portion thereof) in which any money
or other property received by a transferor
from a transferee in exchange for all or
part of the transferor’s interest in the part-
nership is attributable to § 751 property
(§ 751(a) exchange). Section 1.6050K-
1(a)(2) provides that partnerships are
required to report each § 751(a) exchange
on Form 8308. Generally, § 1.6050K-1(f)
(1) provides that a partnership is required
to file Form 8308 as an attachment to its
Form 1065, U.S. Return of Partnership
Income, for the taxable year of the partner-
ship that includes the last day of the calen-
dar year in which the § 751(a) exchange
took place. Form 8308 is due at the time
for filing the partnership return, including
extensions.
In addition, § 1.6050K-1(c)(1) provides
that each partnership that is required to file
a Form 8308 must furnish a statement to
the transferor and transferee by the later
of (a) January 31 of the year following
the calendar year in which the § 751(a)
exchange occurred, or (b) 30 days after
the partnership has received notice of the
exchange as specified under § 6050K and
§ 1.6050K-1. A partnership must use a
copy of the completed Form 8308 as the
required statement unless the Form 8308
contains information for more than one
§ 751(a) exchange. Section 1.6050K-1(c)
(1) provides that if the partnership does
not use the Form 8308 as the required
statement, the partnership must furnish
a statement that includes the information
required to be shown on the Form 8308
with respect to the § 751(a) exchange to
which the person to whom the statement
is furnished is a party.
Section 6722 imposes a penalty for
failure to furnish correct payee statements
on or before the required date, and for any
failure to include all of the information
required to be shown on the statement or
the inclusion of incorrect information. For
these purposes, payee statements include
statements required to be furnished to
transferors and transferees under § 6050K.
See § 6724(d)(2)(P). Section 6724 pro-
vides an exception to the imposition of a
penalty under § 6722 if it is shown that the
failure is due to reasonable cause and not
to willful neglect.
On November 30, 2020, the Depart-
ment of the Treasury (Treasury Depart-
ment) and the Internal Revenue Service
(IRS) published T.D. 9926, 85 FR 76910,
which amended § 1.6050K-1(c)(2) to
require a partnership to furnish to a trans-
feror partner the information necessary for
the transferor to make the transferor part-
ner’s required statement in § 1.751-1(a)
(3). Among other items, § 1.751-1(a)(3)
requires a transferor partner in a § 751(a)
exchange to submit with the transferor
partner’s income tax return a statement
setting forth the amount of gain or loss
attributable to § 751 property. In October
2023, the IRS released a revised version of
Form 8308. Consistent with the require-
ments in § 1.6050K-1(c)(2), new Part IV
of the 2023 Form 8308 requires a part-
nership to report, among other items, the
partnership’s and the transferor partner’s
share of § 751 gain and loss, collectibles
gain under § 1(h)(5), and unrecaptured
§ 1250 gain under § 1(h)(6).
Since the issuance of the revised Form
8308, concerns have been expressed to
the Treasury Department and the IRS
that many partnerships will be unable to
furnish the information required in Part
IV of the 2023 Form 8308 to transferors
and transferees by the January 31, 2024
due date, because, in many cases, part-
nerships will not have all of the informa-
tion required by Part IV of the 2023 Form
8308 by January 31, 2024.
III. GRANT OF RELIEF
With respect to § 751(a) exchanges
during calendar year 2023, the IRS will
not impose penalties under § 6722 solely
for failure to furnish Form 8308 with a
completed Part IV by the due date spec-
ified in § 1.6050K-1(c)(1) for a partner-
ship that (1) timely and correctly furnishes
to the transferor and transferee a copy of
Parts I, II, and III of Form 8308, or a state-
ment that includes the same information,
by the later of (a) January 31, 2024, or (b)
30 days after the partnership is notified of
the § 751(a) exchange, and (2) furnishes
to the transferor and transferee a copy of
the complete Form 8308, including Part
IV, or a statement that includes the same
information and any additional informa-
tion required under § 1.6050K-1(c), by
the later of (a) the due date of the partner-
ship’s Form 1065 (including extensions),
or (b) 30 days after the partnership is noti-
fied of the § 751(a) exchange.
The relief provided in this notice
applies only with respect to furnishing
1
Unless otherwise specified, all “section” or “§” references are to sections of the Internal Revenue Code or to the Income Tax Regulations (26 CFR part 1).

January 29, 2024 628 Bulletin No. 2024–5
Form 8308 to the transferor and trans-
feree. This notice does not provide relief
with respect to filing Form 8308 as an
attachment to a partnership’s Form 1065;
as such, this notice does not provide relief
from penalties under § 6721 for failure to
file correct information returns.
IV. DRAFTING INFORMATION
The principal authors of this notice
are Jeremy M. Brown and Benjamin H.
Weaver of the Office of Associate Chief
Counsel (Partnerships and Special Indus-
tries). Other personnel from the Treasury
Department and IRS participated in its
development. For further information
please call (202) 317- 5279 (not a toll-free
number).
26 CFR 601.204: Changes in accounting periods
and in methods of accounting.
(Also, Part 1, §§ 174, 446, 460, 1.446-1.)
Rev. Proc. 2024-9
SECTION 1. PURPOSE
This revenue procedure modifies sec-
tions 7 and 19 of Rev. Proc. 2023-24,
2023-28 I.R.B. 1207, to provide proce-
dures under § 446 of the Internal Reve-
nue Code (Code)
1
and § 1.446-1(e) for
obtaining automatic consent of the Com-
missioner of Internal Revenue (Commis-
sioner) to change methods of accounting
for expenditures paid or incurred in tax-
able years beginning after December 31,
2021, in reliance on interim guidance
under §§ 174 and 460 provided in Notice
2023-63, 2023-39 I.R.B. 919, as modified
by Notice 2024-12, this Bulletin. This
revenue procedure also clarifies section
9 of Rev. Proc. 2023-24 to provide that
section 5 of Rev. Proc. 2000-50 is obso-
leted for costs of developing computer
software paid or incurred in any taxable
year beginning after December 31, 2021,
and continues to apply to costs of devel-
oping computer software paid or incurred
in any taxable year beginning on or before
December 31, 2021. References in this
revenue procedure to “former § 174” refer
to that section as in effect for research
or experimental expenditures paid or
incurred in taxable years beginning before
January 1, 2022, that is, prior to the effec-
tive date of the amendments made to § 174
by § 13206(a) of Public Law 115-97, 131
Stat. 2054 (Dec. 22, 2017), commonly
referred to as the Tax Cuts and Jobs Act
(TCJA). References to “§ 174” in this rev-
enue procedure refer to § 174 as amended
by the TCJA.
SECTION 2. BACKGROUND
.01 Treatment of research and experi-
mental expenditures under former § 174.
Former § 174 allowed taxpayers to
elect to deduct research or experimental
expenditures paid or incurred in connec-
tion with a trade or business as current
expenses, to capitalize and amortize such
expenditures over a period of not less than
60 months, or to charge such expenditures
to capital account.
.02 Treatment of SRE expenditures
under § 174.
(1) Section 13206(a) of the TCJA
amended former § 174 for amounts paid
or incurred in taxable years beginning
after December 31, 2021. For amounts
paid or incurred in taxable years begin-
ning after December 31, 2021, that meet
the definition of specified research or
experimental (SRE) expenditures under
§ 174(b), § 174(a)(1) disallows deduc-
tions for such amounts, except as provided
in § 174(a)(2). Section 174(a)(2) requires
taxpayers to charge SRE expenditures to
capital account and allows amortization
deductions of such capitalized expendi-
tures ratably over the applicable § 174
amortization period, beginning with the
midpoint of the taxable year in which
such expenditures are paid or incurred. As
used in this revenue procedure, the term
“applicable § 174 amortization period”
refers to a 5-year period in the case of
SRE expenditures attributable to domes-
tic research, or a 15-year period in the
case of SRE expenditures attributable to
foreign research. Section 13206(a) of the
TCJA also made other amendments to for-
mer § 174, including amendments to treat
any cost to develop computer software as
an SRE expenditure and to prevent the
accelerated recovery of unamortized SRE
expenditures on account of the disposi-
tion, retirement, or abandonment of prop-
erty with respect to which such expendi-
tures were paid or incurred. For additional
background on former § 174 and the TCJA
amendments to former § 174, see section
2 of Notice 2023-63.
(2) Section 13206(b) of the TCJA
requires taxpayers to treat the amend-
ments made by section 13206(a) of the
TCJA as a change in method of account-
ing for purposes of § 481 that is (i) ini-
tiated by the taxpayer, (ii) made with the
consent of the Secretary of the Treasury
or her delegate, and (iii) applied on a cut-
off basis to SRE expenditures paid or
incurred in taxable years beginning after
December 31, 2021. Thus, no adjustments
under § 481(a) are required or permitted
with respect to research or experimental
expenditures paid or incurred in taxable
years beginning before January 1, 2022.
.03 Treatment of SRE expenditures
under § 460. Section 460(a) generally
requires use of the percentage-of-comple-
tion method (PCM) to account for taxable
income from a long-term contract. Section
1.460-4(b)(2)(i) provides that under the
PCM, the portion of the contract price a
taxpayer must report in a taxable year cor-
responds to the ratio of incurred allocable
contract costs to total estimated allocable
contract costs. This ratio represents the
portion of a contract considered completed
for purposes of the PCM. Under the PCM,
a taxpayer generally deducts allocable
contract costs as they are incurred. Thus,
under § 1.460-4(b)(2)(iv), an increase in
the percentage of the contract price to be
reported is generally matched by deduc-
tion of the incurred costs that cause the
increase. Under the current § 460 regu-
lations in § 1.460-5(b)(2)(vi), allocable
contract costs include research or exper-
imental expenses, other than indepen-
dent research and development expenses.
Thus, when these expenses are incurred,
they increase the portion of a contract con-
sidered completed and the percentage of
the contract price required to be reported.
The current § 460 regulations were drafted
1
Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).

Bulletin No. 2024–5 629 January 29, 2024
with respect to taxable years in which a
taxpayer could currently deduct research
or experimental expenses under former
§ 174. Section 174(a) requires that SRE
expenditures be charged to capital account
and deducted over the applicable § 174
amortization period. As a result, under the
current § 460 regulations, incurred SRE
expenditures increase the percentage of
the contract price required to be reported,
although § 174(a) prevents a correspond-
ing current deduction of those incurred
SRE expenditures.
.04 Procedural guidance under Rev.
Proc. 2023-11.
(1) On December 29, 2022, the Depart-
ment of the Treasury (Treasury Depart-
ment) and the Internal Revenue Service
(IRS) issued Rev. Proc. 2023-11, 2023-3
I.R.B. 417, modifying and superseding
Rev. Proc. 2023-8, 2023-3 I.R.B. 407, to
provide procedures to obtain automatic
consent to change methods of account-
ing for SRE expenditures to comply with
§ 174. The change in method of account-
ing provided by Rev. Proc. 2023-11 was
subsequently included in section 7.02 of
Rev. Proc. 2023-24.
(2) Section 7.02(4)(a) of Rev. Proc.
2023-24 implements the requirement
imposed by § 13206(b) of the TCJA that a
taxpayer must make a change in method of
accounting to comply with § 174 on a cut-
off basis if the change is made for the tax-
payer’s first taxable year beginning after
December 31, 2021. Section 7.02(4)(a)
of Rev. Proc. 2023-24 also provides that
the requirement of § 1.446-1(e)(3)(i) to
file a Form 3115, Application for Change
in Accounting Method, is waived, and a
statement in lieu of a Form 3115 is autho-
rized for the change in method of account-
ing for which the year of change is the first
taxable year beginning after December 31,
2021. However, section 7.02(4)(b) of Rev.
Proc. 2023-24 provides that a taxpayer
making the change for a taxable year sub-
sequent to the taxpayer’s first taxable year
beginning after December 31, 2021, is
required to make that change with a mod-
ified § 481(a) adjustment that takes into
account only SRE expenditures paid or
incurred in taxable years beginning after
December 31, 2021, and is required to file
a Form 3115.
(3) Section 7.02(6) of Rev. Proc. 2023-
24 waives the eligibility rule in section
5.01(1)(f) of Rev. Proc. 2015-13 (regard-
ing changes made in the previous 5 years
for the same item) for changes to comply
with § 174 for the taxpayer’s first taxable
year beginning after December 31, 2021.
(4) Section 7.02(7) of Rev. Proc. 2023-
24 provides that a taxpayer that changes
its method of accounting for SRE expen-
ditures under Rev. Proc. 2023-24 will
receive limited audit protection. Specifi-
cally, audit protection will not apply for
expenditures paid or incurred in taxable
years beginning on or before December
31, 2021. Audit protection also will not
apply for expenditures paid or incurred
in taxable years beginning after Decem-
ber 31, 2021, if a change in method of
accounting is made for the taxable year
immediately subsequent to the first tax-
able year beginning after December 31,
2021.
.05 Interim guidance under Notice
2023-63.
(1) Notice 2023-63 was issued on
September 8, 2023, to announce that the
Treasury Department and the IRS intend
to issue proposed regulations addressing
(1) the capitalization and amortization
of SRE expenditures under § 174, (2)
the treatment of SRE expenditures under
§ 460, and (3) the application of § 482 to
cost sharing arrangements involving SRE
expenditures. Sections 3 through 9 of
Notice 2023-63 provide interim guidance
regarding issues intended to be addressed
by forthcoming proposed regulations. Sec-
tion 3 of Notice 2023-63 provides interim
guidance regarding the requirement to
capitalize and amortize SRE expenditures,
SRE expenditures attributable to foreign
research, and the determination of the mid-
point of a taxable year (including a short
taxable year). Section 4 of Notice 2023-63
provides interim guidance regarding the
definition of SRE expenditures and SRE
activities, the types of expenditures that
are SRE expenditures, the allocation of
such expenditures to SRE activities, and
the consistent treatment of SRE expendi-
tures under other provisions of the Code.
Section 5 of Notice 2023-63 provides
interim guidance regarding activities that
constitute software development, expen-
ditures in connection with which are SRE
expenditures. Section 6 of Notice 2023-
63 provides interim guidance regarding
the treatment of expenditures for research
performed under a contract. Section 7 of
Notice 2023-63 provides interim guidance
regarding the treatment of unamortized
SRE expenditures if the property with
respect to which such expenditures were
paid or incurred is disposed of, retired,
or abandoned. Section 8 of Notice 2023-
63 provides interim guidance regarding
the application of the PCM under § 460
if allocable contract costs include SRE
expenditures and allows taxpayers to
treat only the amortization of incurred
SRE expenditures as increasing the per-
centage of the contract price required to
be reported. Section 9 of Notice 2023-63
provides interim guidance regarding the
treatment under §1.482-7 of cost sharing
transaction payments in certain cost shar-
ing arrangements that involve SRE activ-
ities.
(2) Section 10.01 of Notice 2023-63, as
modified by Notice 2024-12, provides that
taxpayers may rely on the rules in sections
3 through 9 of Notice 2023-63 prior to the
publication date of the forthcoming pro-
posed regulations in the Federal Register
for expenditures paid or incurred in tax-
able years beginning after December 31,
2021. However, taxpayers may not rely on
the rules in section 7 of the notice regard-
ing the treatment of SRE expenditures
paid or incurred with respect to property
that is contributed to, distributed from, or
transferred from a partnership.
(3) Section 10.02 of Notice 2023-63
provides that the Treasury Department
and the IRS intend to issue guidance to
provide procedures for taxpayers to obtain
automatic consent to change methods of
accounting to rely on the notice. Notice
2023-63 provides that taxpayers may rely
on section 7.02 of Rev. Proc. 2023-24 to
change their methods of accounting under
§ 174 to rely on Notice 2023-63 until the
issuance of such procedural guidance.
This revenue procedure provides such
procedural guidance.
(4) Section 12 of Notice 2023-63, as
clarified by Notice 2024-12, provides that
for amounts paid or incurred in taxable
years beginning after December 31, 2021,
section 5 of Rev. Proc. 2000-50 is removed
as obsolete. Section 5 of Rev. Proc. 2000-
50 continues to apply to amounts paid or
incurred in taxable years beginning on or
before December 31, 2021. Section 3 of
this revenue procedure clarifies section

January 29, 2024 630 Bulletin No. 2024–5
9.01 of Rev. Proc. 2023-24 to provide
that section 5 of Rev. Proc. 2000-50 is
obsolete for costs of developing computer
software paid or incurred in any taxable
year beginning after December 31, 2021,
and continues to apply to costs of devel-
oping computer software paid or incurred
in any taxable year beginning on or before
December 31, 2021.
.06 Changing methods of accounting
under section 446(e).
(1) Except as otherwise expressly
provided in the Code and the regulations
thereunder, § 446(e) and § 1.446-1(e)(2)
require a taxpayer to secure the consent
of the Commissioner before changing a
method of accounting for Federal income
tax purposes. Section 1.446-1(e)(3)(i)
states, in part, that except as otherwise
provided under the authority of § 1.446-
1(e)(3)(ii), to secure the Commissioner’s
consent to a taxpayer’s change in method
of accounting the taxpayer generally must
file a Form 3115, Application for Change
in Accounting Method, with the Commis-
sioner during the taxable year in which
the taxpayer desires to make the change
in method of accounting. Section 1.446-
1(e)(3)(ii) authorizes the Commissioner
to prescribe administrative procedures
under which taxpayers will be permitted
to change their method of accounting. The
administrative procedures will prescribe
those terms and conditions necessary to
obtain the Commissioner’s consent to
effect the change and to prevent amounts
from being duplicated or omitted.
(2) Rev. Proc. 2015-13, 2015-5 I.R.B.
419, as clarified and modified by Rev.
Proc. 2015-33, 2015-24 I.R.B. 1067, and
as modified by Rev. Proc. 2021-34, 2021-
35 I.R.B. 337, Rev. Proc. 2021-26, 2021-
22 I.R.B. 1163, Rev. Proc. 2017-59, 2017-
48 I.R.B. 543, and section 17.02(b) and (c)
of Rev. Proc. 2016-1, 2016-1 I.R.B. 1, sets
forth the general administrative proce-
dures by which a taxpayer may obtain the
automatic consent of the Commissioner to
change a method of accounting described
in the List of Automatic Changes. Rev.
Proc. 2023-24 contains the current List of
Automatic Changes.
(3) A change in a taxpayer’s treatment
of expenditures paid or incurred in tax-
able years beginning after December 31,
2021, to rely on the interim guidance in
sections 3 through 7 of Notice 2023-63 is
generally a change in method of account-
ing to which §§ 446(e) and 481, and the
corresponding regulations, apply. Further,
a change to rely on the interim guidance
in section 8 of Notice 2023-63 in deter-
mining income from a long-term contract
under the PCM is generally a change in
method of accounting to which §§ 446(e)
and 481, and the corresponding regu-
lations, apply. A taxpayer that changes
its method of accounting to rely on the
interim guidance in sections 3 through 8
of Notice 2023-63 must use the account-
ing method change procedures in Rev.
Proc. 2015-13 or its successor. Section 3
of this revenue procedure modifies Rev.
Proc. 2023-24 to, among other things,
allow taxpayers to obtain automatic con-
sent to change their method of accounting
to rely on the interim guidance provided
in sections 3 through 8 of Notice 2023-63
for taxable years beginning after Decem-
ber 31, 2021.
(4) Pursuant to section 2.07 of Rev.
Proc. 2015-13, if a change in method of
accounting is made without a § 481(a)
adjustment (for example, on a cut-off
basis), in general, only the items subject to
the method change arising on or after the
beginning of the year of change, or other
operative date, are accounted for under the
method of accounting for which consent is
granted. Any items arising before the year
of change, or other operative date, con-
tinue to be accounted for under the tax-
payer’s former method of accounting. If a
change in method of accounting is made
on a cut-off basis, no amounts are dupli-
cated or omitted, and therefore, a § 481(a)
adjustment is not necessary or permitted.
(5) In accordance with § 13206(b)
of the TCJA, a change in a taxpayer’s
method of accounting to comply with
§ 174, including a change to rely on the
interim guidance in sections 3 through
7 of Notice 2023-63, for the first tax-
able year that the amendments made by
§ 13206(a) of the TCJA are effective,
must be made on a cut-off basis. The pro-
cedures in section 3 of this revenue pro-
cedure provide that an automatic change
in method of accounting to comply with
§ 174, including a change in method of
accounting to rely on the interim guidance
in sections 3 through 7 of Notice 2023-63,
may be made by filing a statement with
the taxpayer’s original Federal income tax
return for the first taxable year in which
§ 174 becomes effective, in lieu of a Form
3115. If a change in method of accounting
to comply with § 174, including a change
in method of accounting to rely on the
interim gudiance in sections 3 through 7
of Notice 2023-63, is made for a taxable
year subsequent to the taxable year of the
taxpayer in which § 174 becomes effec-
tive, the change is made by filing a Form
3115, with a modified § 481(a) adjustment
that takes into account only expenditures
paid or incurred in taxable years begin-
ning after December 31, 2021.
(6) Under § 1.460-5(g), a change in a
taxpayer’s method of allocating costs to
its long-term contracts must be made on
a cut-off basis, with the change applying
only to contracts entered into on or after
the year of change. The Treasury Depart-
ment and the IRS, however, intend to
amend the regulation to permit changes
made to rely on section 8 of Notice 2023-
63 to be made on the same cut-off basis
or modified cut-off basis, as applicable, as
changes made to rely on sections 3 through
7 of the notice (that is, changes applicable
to allocable contract costs paid or incurred
in taxable years beginning after December
31, 2021).
(7) A taxpayer that changes its method
of accounting under section 7.02 of Rev.
Proc. 2023-24, as modified by section 3
of this revenue procedure, will receive
limited audit protection under section
8.01 of Rev. Proc. 2015-13. Consistent
with current section 7.02(7) of Rev.
Proc. 2023-24, audit protection will not
apply for expenditures paid or incurred
in taxable years beginning on or before
December 31, 2021. Audit protection
also will not apply for expenditures paid
or incurred in the taxpayer’s first taxable
year beginning after December 31, 2021,
if a change in method of accounting to
comply with § 174, including a change
in method of accounting to rely on the
interim gudiance in sections 3 through 7
of Notice 2023-63, is made for the tax-
payer’s taxable year immediately subse-
quent to such taxable year and the tax-
payer did not make a change in method
of accounting for such expenditures
for its first taxable year beginning after
December 31, 2021.
(8) A taxpayer that changes its method
of accounting under section 19.02 of

Bulletin No. 2024–5 631 January 29, 2024
Rev. Proc. 2023-24, as added by section
3 of this revenue procedure, to change its
method of accounting under § 460 to rely
on the interim guidance provided in sec-
tion 8 of Notice 2023-63 will receive lim-
ited audit protection under section 8.01 of
Rev. Proc. 2015-13. Consistent with sec-
tion 7.02(7) of Rev. Proc. 2023-24, audit
protection will not apply for expenditures
paid or incurred in taxable years begin-
ning on or before December 31, 2021.
SECTION 3. MODIFICATIONS TO
REV. PROC. 2023-24
.01 Modification of section 7 of Rev.
Proc. 2023-24. Section 7.02 of Rev. Proc.
2023-24, is modified to read as follows:
.02 Change in Method of Accounting
for SRE Expenditures.
(1) Description of change.
(a) In general. This change applies to a
taxpayer that wants to change its method
of accounting for expenditures paid or
incurred in taxable years beginning after
December 31, 2021, to:
(i) comply with § 174, as amended by
§ 13206(a) of the TCJA; or
(ii) rely on interim guidance provided
in sections 3, 4, 5, 6, or 7 of Notice 2023-
63, 2023-39 I.R.B. 919, as modified by
Notice 2024-12, 2024-5 I.R.B. 616.
(b) References to § 174. Unless other-
wise stated, references to “§ 174” in this
section 7.02 refer to § 174 as amended by
§ 13206(a) of the TCJA. Section 13206(e)
of the TCJA provides that the amendments
made by § 13206 of the TCJA apply to
amounts paid or incurred in taxable years
beginning after December 31, 2021.
(c) Changes included in section 7.02(1)
(a) of this revenue procedure. The changes
described in section 7.02(1)(a) of this
revenue procedure include, among other
changes, a change:
(i) from capitalizing specified research
or experimental (SRE) expenditures, as
defined in § 174(b) and section 4.02(2) of
Notice 2023-63, as applicable, to inven-
toriable property or depreciable property
and recovering such expenditures through
cost of goods sold or depreciation, respec-
tively, to capitalizing and amortizing such
expenditures under § 174(a) or section
3.02 of Notice 2023-63, as applicable; and
(ii) from treating an expenditure that
does not meet the definition of an SRE
expenditure as an SRE expenditure sub-
ject to capitalization and amortization
under § 174(a) or section 3.02 of Notice
2023-63, as applicable, to treating that
expenditure under the appropriate provi-
sion of the Code.
(2) Inapplicability. The change
described in section 7.02(1)(a) of this rev-
enue procedure does not apply to:
(a) a change in the treatment of
acquired, leased, or licensed computer
software under Rev. Proc. 2000-50,
2000-2 C.B. 601, as modified by Rev.
Proc. 2007-16, 2007-1 C.B. 358 (see sec-
tion 9.01 of this revenue procedure);
(b) a change in the treatment of research
or experimental expenditures under for-
mer § 174 (that is, § 174 as in effect prior
to the amendments made by § 13206(a)
of the TCJA), or software development
expenditures, paid or incurred in taxable
years beginning before January 1, 2022
(see sections 7.01 and 9.01 of this revenue
procedure, respectively); or
(c) a change from treating SRE expen-
ditures paid or incurred by a taxpayer that
transfers related property (that is, property
with respect to which such SRE expen-
ditures were paid or incurred) in a § 351
exchange as amortizable by the transferee
corporation following such exchange to
treating such SRE expenditures as amor-
tizable by the transferor following such
exchange (as such a change is not a change
in method of accounting).
(3) Manner of making change.
(a) Year of change is the first taxable
year beginning after December 31, 2021.
(i) Cut-off basis. A change under sec-
tion 7.02(1)(a) of this revenue procedure
for the taxpayer’s first taxable year begin-
ning after December 31, 2021, is imple-
mented on a cut-off basis.
(ii) Statement in lieu of a Form 3115 for
first taxable year beginning after Decem-
ber 31, 2021. The requirement of § 1.446-
1(e)(3)(i) to file a Form 3115, Applica-
tion for Change in Accounting Method,
is waived, and a statement in lieu of a
Form 3115 is authorized for the change
in method of accounting under section
7.02(1)(a) of this revenue procedure for
which the year of change is the taxpayer’s
first taxable year beginning after Decem-
ber 31, 2021. Notwithstanding the defini-
tion of Form 3115 in section 3.07 of Rev.
Proc. 2015-13, 2015-5 I.R.B. 419, the
statement in lieu of a Form 3115 that is
permitted under this section 7.02(3)(a)(ii)
is considered a Form 3115 for purposes of
the automatic change procedures of Rev.
Proc. 2015-13. The requirement to file the
duplicate copy, under section 6.03(1)(a) of
Rev. Proc. 2015-13, is waived. The state-
ment must include the following informa-
tion for each applicant:
(A) the name and employer identifica-
tion number or social security number, as
applicable, of the applicant that has paid
or incurred expenditures after December
31, 2021;
(B) the beginning and ending dates of
the first taxable year in which the change
described in section 7.02(1)(a) takes effect
for the applicant (year of change);
(C) the designated automatic account-
ing method change number for this change
(see section 7.02(7) of this revenue proce-
dure);
(D) a general description of the type
of expenditures included as SRE expen-
ditures;
(E) the amount of SRE expenditures
paid or incurred by the applicant during
the year of change; and
(F) a declaration that the applicant is
changing its method of accounting to cap-
italize SRE expenditures to a SRE capi-
tal account, and amortize the capitalized
amount over either a 5-year period for
domestic research or a 15-year period for
foreign research (as applicable), begin-
ning with the mid-point of the taxable
year in which such expenditures are paid
or incurred in accordance with § 174 or
sections 3 through 7 of Notice 2023-63,
as applicable. Also, the declaration must
state that the applicant is making the
change on a cut-off basis.
(b) Year of change later than the first
taxable year beginning after December
31, 2021.
(i) Modified § 481(a) adjustment and
cut-off.
(A) In general. Except as provided
in section 7.02(3)(b)(i)(B) of this reve-
nue procedure, the change under section
7.02(1)(a) of this revenue procedure for a
year of change later than the first taxable
year beginning after December 31, 2021,
is made with a modified § 481(a) adjust-
ment that takes into account only expen-
ditures paid or incurred in taxable years
beginning after December 31, 2021.

January 29, 2024 632 Bulletin No. 2024–5
(B) Exception for negative modified
§ 481(a) adjustment. If a change described
in section 7.02(3)(b)(i)(A) of this revenue
procedure results in a modified § 481(a)
adjustment that is negative, the taxpayer
may instead choose to implement the
change on a cut-off basis.
(ii) Form 3115 and required statement.
In completing a Form 3115, Application
for Change in Accounting Method, to
make the change in method of account-
ing under section 7.02(1)(a) of this reve-
nue procedure for a year of change later
than the first taxable year beginning after
December 31, 2021, a taxpayer must
include on an attachment to the Form
3115:
(A) a general description of the type
of expenditures included as SRE expen-
ditures;
(B) the taxable year(s) in which the
expenditures subject to the change were
paid or incurred by the applicant; and
(C) a declaration that provides the rea-
son for which the applicant is changing
its method of accounting under section
7.02(1)(a) of this revenue procedure.
The declaration must also state whether
the applicant is making the change on a
cut-off basis under section 7.02(3)(b)(i)
(B) of this revenue procedure or with a
modified § 481(a) adjustment that takes
into account only expenditures paid
or incurred in taxable years beginning
after December 31, 2021, under section
7.02(3)(b)(i)(A) of this revenue proce-
dure.
(4) Transition rule. A taxpayer who
filed a Federal tax return on or before Jan-
uary 17, 2023, for a taxable year begin-
ning after December 31, 2021, is deemed
to have complied with the § 446 method
change procedures and section 7.02 of this
revenue procedure to change its method
of accounting for expenditures paid or
incurred in the first taxable year beginning
after December 31, 2021, to comply with
§ 174 if the taxpayer:
(a) reported the amount of SRE expen-
ditures paid or incurred for such taxable
year on Part VI of Form 4562, Deprecia-
tion and Amortization, filed with the Fed-
eral tax return, and
(b) properly capitalized and amortized
such SRE expenditures in accordance
with § 174 for such taxable year.
(5) Certain eligibility rule inapplica-
ble.
(a) In general. The eligibility rule in
section 5.01(1)(f) of Rev. Proc. 2015-13,
2015-5 I.R.B. 419, does not apply to a
change described in section 7.02(1)(a) of
this revenue procedure for the taxpayer’s
first or second taxable year beginning
after December 31, 2021.
(b) Changes made in successive tax-
able years. A taxpayer may make a change
described in section 7.02(1)(a) of this
revenue procedure for its second taxable
year beginning after December 31, 2021,
regardless of whether the taxpayer made,
or purported to make, a change for the
same item for its first taxable year begin-
ning after December 31, 2021.
(6) Limited audit protection. A tax-
payer does not receive audit protection
under section 8.01 of Rev. Proc. 2015-13
for a change under section 7.02(1)(a) of
this revenue procedure with respect to
expenditures paid or incurred in taxable
years beginning on or before December
31, 2021. Additionally, a taxpayer does
not receive audit protection under section
8.01 of Rev. Proc. 2015-13 for a change
under section 7.02(1)(a) of this revenue
procedure in the second taxable year
beginning after December 31, 2021, with
respect to expenditures paid or incurred
in the first taxable year beginning after
December 31, 2021, if the taxpayer did
not make, or attempt to make, a change
described in section 7.02(1)(a) for the
first taxable year beginning after Decem-
ber 31, 2021. See section 8.02(2) of Rev.
Proc. 2015-13.
(7) Designated automatic account-
ing method change number. The des-
ignated automatic accounting method
change number for a change under sec-
tion 7.02(1)(a)(i) of this revenue proce-
dure is “265.” The designated automatic
accounting method change number for
a change under section 7.02(1)(a)(ii) of
this revenue procedure is “270.”
(8) No inference relating to expendi-
tures paid or incurred in taxable years
prior to the first taxable year in which
§ 174 becomes effective. No inference
may be drawn from section 7.02 of this
revenue procedure regarding the treat-
ment of expenditures paid or incurred in,
and changes in methods of accounting for,
taxable years in which former § 174 was
in effect, including issues relating to the
application of §§ 1.174-1, 1.174-2, 1.174-
3, and 1.174-4 for taxable years in which
former § 174 was in effect.
(9) No ruling on method used. The con-
sent granted under section 9 of Rev. Proc.
2015-13 for a change made under section
7.02(1)(a)(i) of this revenue procedure is
not a determination by the Commissioner
that the new method of accounting is a
permissible method of accounting, nor
does it create any presumption that the
new method of accounting is a permis-
sible method of accounting. The director
will ascertain whether the new method
of accounting is a permissible method of
accounting.
(10) Contact information. For further
information regarding a change under
this section, contact Bruce Chang at (202)
317-7005 (not a toll-free number).
.02 Clarification of section 9 of Rev.
Proc. 2023-24. Section 9.01 of Rev. Proc.
2023-24 is clarified to provide that section
5 of Rev. Proc. 2000-50 (costs of devel-
oping computer software) applies to costs
of developing computer software paid or
incurred in any taxable year beginning on
or before December 31, 2021.
(1) Section 9.01(1) of Rev. Proc. 2023-
24 is clarified to read as follows:
(1) Description of change. This
change applies to a taxpayer that wants
to change its method of accounting
for the costs of computer software to a
method described in Rev. Proc. 2000-50,
2000-2 C.B. 601, as modified by Rev.
Proc. 2007-16, 2007-1 C.B. 358. Section
5 of Rev. Proc. 2000-50 describes the
methods applicable to the costs of devel-
oping computer software. Section 6 of
Rev. Proc. 2000-50 describes the method
applicable to the costs of acquired com-
puter software. Section 7 of Rev. Proc.
2000-50 describes the method applicable
to leased or licensed computer software.
Section 13206 of Public Law 115-97, 131
Stat. 2054 (Dec. 22, 2017), commonly
referred to as the Tax Cuts and Jobs Act
(TCJA), amended § 174 to treat the costs
of software development as research or
experimental expenditures, effective for
amounts paid or incurred in taxable years
beginning after December 31, 2021. Sec-
tion 12 of Notice 2023-63, 2023-39 I.R.B.

Bulletin No. 2024–5 633 January 29, 2024
919, as modified by Notice 2024-12, pro-
vides that, as a result of the TCJA amend-
ments to § 174 and the rules in sections 3
through 5 of Notice 2023-63, section 5 of
Rev. Proc. 2000-50 is obsolete for costs
of developing software paid or incurred
in taxable years beginning after Decem-
ber 31, 2021. Accordingly, section 5 of
Rev. Proc. 2000-50 (costs of developing
computer software) applies only to costs
of developing computer software paid or
incurred in any taxable year beginning on
or before December 31, 2021.
(2) Section 9.01(3) of Rev. Proc. 2023-
24 is clarified to read as follows:
(3) Inapplicability. This change does
not apply to costs of developing computer
software that are paid or incurred in tax-
able years beginning after December 31,
2021.
.03 Modification of section 19 of Rev.
Proc. 2023-24. Section 19 of Rev. Proc.
2023-24 is modified to add new section
19.02 to read as follows:
.02 Change to rely on the interim guid-
ance provided in section 8 of Notice 2023-
63, 2023-39 I.R.B. 919.
(1) Description of change. This
change applies to a taxpayer that wants
to change its method of accounting
under § 460 to rely on the interim guid-
ance provided in section 8 of Notice
2023-63, 2023-39 I.R.B. 919, so that the
costs allocable to a long-term contract
accounted for using the PCM include
amortization deductions of speci-
fied research or experimental (SRE)
expenditures, as defined in § 174(b)
and section 4.02(2) of Notice 2023-63,
as applicable, under § 174(a)(2)(B),
rather than the capitalized amount of
such expenditures, and the amortiza-
tion deductions of such expenditures
is treated as incurred for purposes of
determining the percentage of con-
tract completion in the taxable year the
amortization is deducted. For purposes
of determining the percentage of con-
tract completion, estimated total alloca-
ble contract costs include either (1) all
amortization of SRE expenditures that
directly benefit or are incurred by rea-
son of the performance of the long-term
contract, or (2) only that portion of such
amortization expected to be incurred
and deducted during the term of the
contract. A taxpayer using the first
alternative is required to report any por-
tion of the contract price not previously
reported by the taxable year following
the taxable year in which the contract is
completed, notwithstanding that some
portion of the SRE expenditures remain
unamortized. See § 460(b)(1).
(2) Inapplicability. This change does
not apply to:
(a) A change in method of account-
ing under § 460 with respect to expendi-
tures capitalized under § 59(e)(2)(B), or
under § 174(b) prior to its amendment by
§ 13206(a) of the TCJA.
(b) A change in method of accounting
for independent research and development
expenditures, as defined in § 460(c)(5),
which are not allocable contract costs.
(c) Any contract not accounted for
under the PCM, as described in § 460(b)
(1) and § 1.460-4(b)(2), as of the begin-
ning of the year of change.
(3) Manner of making change.
(a) Cut-off basis. A change under sec-
tion 19.02(1) of this revenue procedure for
the taxpayer’s first taxable year beginning
after December 31, 2021, applies to the
§ 460 treatment of SRE expenditures paid
or incurred in taxable years beginning
after December 31, 2021. Accordingly,
such change is made on a cut-off basis,
and applies to all long-term contracts for
which an SRE expenditure is an allocable
contract cost, including long-term con-
tracts entered into before the beginning
of the year of change. A taxpayer making
this change does not recompute its taxable
income under § 1.460-4(b) for any taxable
year beginning on or before December 31,
2021.
(b) Modified § 481(a) adjustment or
cut-off basis.
(i) In general. Except as provided
in section 19.02(3)(b)(ii) of this reve-
nue procedure, a change under section
19.02(1) of this revenue procedure for a
year of change later than the first taxable
year beginning after December 31, 2021,
is made with a modified § 481(a) adjust-
ment that takes into account the § 460
treatment of SRE expenditures paid or
incurred in taxable years beginning after
December 31, 2021. Such change applies
to all long-term contracts for which an
SRE expenditure is an allocable con-
tract cost, including long-term contracts
entered into before the beginning of the
year of change.
(ii) Exception for negative modified
§ 481(a) adjustment. If a change described
in section 19.02(3)(b)(i) of this revenue
procedure results in a modified § 481(a)
adjustment that is negative, the taxpayer
may instead choose to implement the
change on a cut-off basis.
(4) Certain eligibility rule inapplica-
ble. The eligibility rule in section 5.01(1)
(f) of Rev. Proc. 2015-13, 2015-5 I.R.B.
419, does not apply to a change described
in section 19.02(1) of this revenue proce-
dure for the taxpayer’s first or second tax-
able year beginning after December 31,
2021.
(5) Limited audit protection. A tax-
payer does not receive audit protection
under section 8.01 of Rev. Proc. 2015-13
for a change under section 19.02(1) of
this revenue procedure with respect to the
§ 460 treatment of expenditures paid or
incurred in taxable years beginning on or
before December 31, 2021.
(6) Designated automatic accounting
method change number. The designated
automatic accounting method change
number for a change under section 19.02
of this revenue procedure is “271.”
(7) Contact information. For further
information regarding a change under
section 19.02 of this revenue procedure,
contact John Aramburu at (202) 317-7006
(not a toll-free number).
SECTION 4. EFFECT ON OTHER
DOCUMENTS
This revenue procedure modifies sec-
tions 7 and 19, and clarifies section 9, of
Rev. Proc. 2023-24.
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective for
Forms 3115 filed on or after December 22,
2023.
SECTION 6. PAPERWORK
REDUCTION ACT
The collection of information con-
tained in this revenue procedure has been
reviewed and approved by the Office of

January 29, 2024 634 Bulletin No. 2024–5
Management and Budget under OMB
control numbers 1545-0074 for individ-
ual filers and 1545-0123 for business
filers, in accordance with the Paperwork
Reduction Act (44 U.S.C. § 3507(d)). An
agency may not conduct or sponsor, and
a person is not required to respond to, a
collection of information unless the col-
lection of information displays a valid
OMB control number. The collection of
information in this revenue procedure is
in section 3, which adds section 7.02(3)(a)
(ii) and (3)(b)(ii) to Rev. Proc. 2023-24.
This information is necessary and will be
used to determine whether the taxpayer
properly changed to a permitted method
of accounting. The collections of informa-
tion are required for a taxpayer to obtain
consent to change its method of account-
ing.
SECTION 7. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Bruce Chang of the Office
of Associate Chief Counsel (Income Tax
& Accounting). For further information
regarding this revenue procedure, please
contact Mr. Chang at (202) 317-7005 (not
a toll-free number).

Bulletin No. 2024–5 635 January 29, 2024
Part IV
Announcement Regarding
the Effective Date of
Termination of the United
States-Hungary Tax Treaty
Announcement 2024-5
The Government of the United States
provided a diplomatic notification, dated
July 8, 2022, to the Government of the
Republic of Hungary of its termination
of the Convention between the Govern-
ment of the United States of America
and the Government of the Hungarian
People’s Republic for the Avoidance of
Double Taxation and the Prevention of
Fiscal Evasion with Respect to Taxes on
Income, in force since 1979 (Conven-
tion). See Press Release, U.S. Depart-
ment of the Treasury, United States’
Notification of Termination of 1979
Tax Convention with Hungary (July 15,
2022), https://home.treasury.gov/news/
press-releases/jy0872.
In accordance with Article 26 of the
Convention, termination was effective on
January 8, 2023 (Termination Date). In
respect of tax withheld at source, Article
26 states that the Convention shall cease
to have effect with respect to amounts paid
or credited on or after the first day of the
next January following the Termination
Date. In respect of other taxes, Article 26
states that the Convention shall cease to
have effect with respect to taxable periods
beginning on or after the first day of the
next January following the Termination
Date. Accordingly, in respect of tax with-
held at source, the Convention ceases to
have effect with respect to amounts paid
or credited on or after January 1, 2024.
In respect of other taxes, the Convention
ceases to have effect with respect to tax-
able periods beginning on or after January
1, 2024.
For further information regarding this
announcement contact the Office of Asso-
ciate Chief Counsel (International) at
(202) 317-3800 (not a toll-free number).
Deletions From Cumulative
List of Organizations,
Contributions to Which are
Deductible Under Section
170 of the Code
Announcement: 2024-6
The Internal Revenue Service has
revoked 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 IRS will not disallow
deductions for contributions made to a
listed organization on or before the date
of announcement in the Internal Revenue
Bulletin that an organization no longer
qualifies. However, the IRS is not pre-
cluded from disallowing a deduction for
any contributions made after an organi-
zation ceases to qualify under section
170(c)(2) if the organization has not
timely filed a suit for declaratory judg-
ment under section 7428 and if the con-
tributor (1) had knowledge of the revoca-
tion of the ruling or determination letter,
(2) was aware that such revocation was
imminent, or (3) was in part responsible
for or was aware of the activities or omis-
sions of the organization that brought
about this revocation.
If on the other hand a suit for declar-
atory judgment has been timely filed,
contributions from individuals and orga-
nizations described in section 170(c)(2)
that are otherwise allowable will con-
tinue to be deductible. Protection under
section 7428(c) would begin on January
11, 2024, and would end on the date the
court first determines the organization is
not described in section 170(c)(2) as more
particularly set for 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 indi-
vidual, in whole or in part, for the acts or
omissions of the organization that were
the basis for revocation.
Name Of OrganizationEffective Date of RevocationLocation
Feeding Our FutureOctober 1, 2018Minneapolis, MN
TRUST U/W OF VICTORINE E FOSTER FOR CHR...January 1, 2020Wilmington, DE
Eunice Best Wright Charitable TrustJanuary 20, 2020Amarillo, TX

January 29, 2024 636 Bulletin No. 2024–5
Notice of Proposed
Rulemaking
Bad Debt Deductions
for Regulated Financial
Companies and Members
of Regulated Financial
Groups
REG-121010-17
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing.
SUMMARY: This document contains
proposed regulations that would provide
guidance regarding whether a debt instru-
ment is worthless for Federal income tax
purposes. The proposed regulations are
necessary to update the standard for deter-
mining when a debt instrument held by a
regulated financial company or a mem-
ber of a regulated financial group will be
conclusively presumed to be worthless.
The proposed regulations will affect regu-
lated financial companies and members of
regulated financial groups that hold debt
instruments.
DATES: Written or electronic comments
and requests for a public hearing must be
received by February 26, 2024.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically via the Federal eRulemak-
ing Portal at https://www.regulations.gov
(indicate IRS and REG–121010–17) by
following the online instructions for sub-
mitting comments. Requests for a public
hearing must be submitted as prescribed
in the “Comments and Requests for a
Public Hearing” section. Once submitted
to the Federal eRulemaking Portal, com-
ments cannot be edited or withdrawn. The
Department of the Treasury (Treasury
Department) and the IRS will publish for
public availability any comments submit-
ted to the IRS’s public docket. Send paper
submissions to: CC:PA:01:PR (REG–
121010–17), Room 5203, Internal Reve-
nue Service, P.O. Box 7604, Ben Franklin
Station, Washington, DC 20044.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Stephanie D. Floyd at (202)
317-7053; concerning submissions of
comments and requesting a hearing, Viv-
ian Hayes at (202) 317-6901 (not toll-free
numbers) or by email to publichearings@
irs.gov (preferred).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Income Tax Regula-
tions (26 CFR part 1) under section 166 of
the Internal Revenue Code (Code). These
proposed amendments (proposed regu-
lations) would update the standard in the
current regulations under §1.166-2 (exist-
ing regulations) for determining when a
debt instrument held by a regulated finan-
cial company or a member of a regulated
financial group will be conclusively pre-
sumed to be worthless.
1. Existing Rules
Section 166(a)(1) provides that a deduc-
tion is allowed for any debt that becomes
worthless within the taxable year. Sec-
tion 166(a)(2) permits the Secretary of
the Treasury or her delegate (Secretary) to
allow a taxpayer to deduct a portion of a
partially worthless debt that does not exceed
the amount charged-off within the taxable
year. The existing regulations do not define
“worthless.” In determining whether a debt
is worthless in whole or in part, the IRS
considers all pertinent evidence, including
the value of any collateral securing the debt
and the financial condition of the debtor.
See §1.166-2(a). The existing regulations
provide further that, when the surrounding
circumstances indicate that a debt is worth-
less and uncollectible and that legal action
to enforce payment would in all probability
not result in the satisfaction of execution on
a judgment, legal action is not required in
order to determine that the debt is worth-
less. See §1.166-2(b).
The existing regulations provide two
alternative conclusive presumptions of
worthlessness for bad debt. First, §1.166-
2(d)(1) generally provides that if a bank
or other corporation subject to supervision
by Federal authorities, or by State author-
ities maintaining substantially equivalent
standards, charges off a debt in whole or in
part, either (1) in obedience to the specific
orders of such authorities, or (2) in accor-
dance with the established policies of such
authorities, and such authorities at the first
audit subsequent to the charge-off confirm
in writing that the charge-off would have
been subject to specific orders, then the debt
is conclusively presumed to have become
worthless, in whole or in part, to the extent
charged off during the taxable year.
Second, §1.166-2(d)(3) generally pro-
vides that a bank (but not other corpora-
tions) subject to supervision by Federal
authorities, or by State authorities main-
taining substantially equivalent standards,
may elect to use a method of accounting
that establishes a conclusive presumption
of worthlessness for debts, provided the
bank’s supervisory authority has made
an express determination that the bank
maintains and applies loan loss classifica-
tion standards that are consistent with the
regulatory standards of that supervisory
authority. Section 1.166-2(d)(1) and (3)
are collectively referred to as the “Con-
clusive Presumption Regulations.”
2. Generally Accepted Accounting
Principles Prior to the Current Expected
Credit Loss Revisions
For financial reporting purposes, finan-
cial institutions in the United States follow
the U.S. Generally Accepted Accounting
Principles (GAAP) issued by the Finan-
cial Accounting Standards Board (FASB).
The long-standing GAAP model for rec-
ognizing credit losses is referred to as the
“incurred loss model” because it delays
recognition of credit losses until it is prob-
able that a loss has been incurred. Under
the incurred loss model, an entity consid-
ers only past events and current condi-
tions in measuring the incurred credit loss.
This method does not require or allow
the incorporation of economic forecasts,
or consideration of industry cycles. The
incurred loss model permits institutions
to use various methods to estimate credit
losses, including historical loss methods,
roll-rate methods, and discounted cash
flow methods. The GAAP accounting for

Bulletin No. 2024–5 637 January 29, 2024
credit losses has been revised with the
introduction of the current expected credit
loss methodology for estimating allow-
ance for credit losses, as further described
in section 3 of this Background.
Under the GAAP incurred loss model,
an institution must first assess whether
a decline in fair value of a debt security
below the amortized cost of the security
is a temporary impairment or other than
temporary impairment (OTTI). If an
entity intends to sell the security or more
likely than not will be required to sell the
security before recovery of its amortized
cost basis less any current-period credit
loss, OTTI will be recognized in earn-
ings equal to the difference between the
investment’s amortized cost basis and its
fair value at the balance sheet date. In
assessing whether the entity more likely
than not will be required to sell the secu-
rity before recovery of its amortized cost
basis less any current period credit losses,
an entity considers various factors such as
the payment structure of the debt security,
adverse conditions related to the security,
or the length of time and the extent to
which the fair value has been less than the
amortized cost basis.
By contrast, if an entity determines
OTTI exists but does not intend to sell the
debt security or it is more likely than not
that the entity will not be required to sell
the debt security prior to its anticipated
recovery, the impairment is separated into
two parts: the portion of OTTI related to
credit loss on a debt security (Credit-Only
OTTI) and the portion of OTTI related to
other factors but not credit (Non-Credit
OTTI). Credit-Only OTTI will be recog-
nized in earnings on the income statement,
but Non-Credit OTTI will be reported on
the balance sheet as Other Comprehensive
Income. FASB Staff Positions, FSP FAS
115-2 and 124-2, Recognition and Presen-
tation of Other-Than-Temporary Impair-
ments (later codified as part of ASC 320).
3. The Current Expected Credit Loss
Standard
On June 16, 2016, FASB introduced a
new standard, the Accounting Standards
Update (ASU) No. 2016-13, Financial
Instruments—Credit Losses (Topic 326):
Measurement of Credit Losses on Finan-
cial Instruments (Update). The Update,
which replaces the incurred loss model in
GAAP, became effective for many entities
for fiscal years beginning after December
15, 2019, and became generally effective
for all entities for fiscal years beginning
after December 15, 2022.
The Update was in response to con-
cerns by regulators that the incurred loss
model under GAAP restricted the ability
to record credit losses that are expected
but that do not yet meet the probable
threshold. The Update is based on a cur-
rent expected credit loss model (CECL
Model), which generally requires the rec-
ognition of expected credit loss (ECL) in
the allowance for credit losses upon initial
recognition of a financial asset, with the
addition to the allowance recorded as an
offset to current earnings. Subsequently,
the ECL must be assessed each reporting
period, and both negative and positive
changes to the ECL must be recognized
through an adjustment to the allowance
and to earnings. ASC 326-20-30-1; ASC
326-20-35-1. In estimating the ECL under
the CECL Model, institutions must con-
sider information about past events, cur-
rent conditions, and reasonable and sup-
portable forecasts relevant to assessing the
collectability of the cash flow of financial
assets. The CECL Model does not pre-
scribe the use of specific estimation meth-
ods for measuring the ECL. However, an
entity will need to make adjustments to
provide an estimate of the ECL over the
remaining contractual life of an asset and
to incorporate reasonable and supportable
forecasts about future economic condi-
tions in the calculations. A charge-off of a
financial asset, which may be full or par-
tial, is taken out of the allowance in the
period in which a financial asset is deemed
uncollectible. ASC 326-20-35-8. At that
time the carrying value of the financial
asset is also written down. See ASC 326-
20-55-52. The ECL recognized under the
CECL Model cannot be used to determine
bad debt deductions under section 166
because the ECL recognized under the
CECL Model would be a current deduc-
tion for estimated future losses.
4. Insurance Company Financial
Accounting
Publicly traded insurance companies
report their financial transactions and
losses to the Securities and Exchange
Commission in accordance with GAAP.
Privately held insurance companies may
also report their financial transactions
and losses in accordance with GAAP.
However, in the United States, all insur-
ance companies, whether publicly traded
or privately held, are regulated by State
governments in the States in which
they are licensed to do business and are
required by State law to prepare finan-
cial statements in accordance with statu-
tory accounting principles (Statements of
Statutory Accounting Principles, known
as SSAPs or SAPs). SSAPs serve as a
basis for preparing financial statements
for insurance companies in accordance
with statutes or regulations promulgated
by various States. SSAPs establish guide-
lines that must be followed when an asset
is impaired. SSAPs are detailed in the
National Association of Insurance Com-
missioner’s (NAIC’s) Accounting Prac-
tices and Procedures Manual. Generally,
the NAIC’s guidelines require the carry-
ing value of an asset to be written down
if the loss of principal is OTTI. The OTTI
standard is found in several different stat-
utory accounting provisions, including
SSAP 43R (loan-backed and structured
securities) and SSAP 26 (bonds, exclud-
ing loan-backed and structured securities).
5. IRS Directives
In 2012, in response to comments
regarding the significant burden on both
insurance companies and the IRS’s Large
Business and International Division
(LB&I) in dealing with audits relating
to the accounting of loss assets, the IRS
issued an insurance industry directive to
its LB&I examiners. See I.R.C. §166:
LB&I Directive Related to Partial Worth-
lessness Deduction for Eligible Securities
Reported by Insurance Companies, LB&I
04-0712-009 (July 30, 2012) (Insurance
Directive). The Insurance Directive states
that LB&I examiners would not challenge
an insurance company’s partial worthless-
ness deduction under section 166(a)(2) for
the amount of the SSAP 43R – Revised
Loan-Backed and Structured Securi-
ties (September 14, 2009) credit-related
impairment charge-offs of “eligible secu-
rities” as reported according to SSAP 43R
on its annual statement if the company

January 29, 2024 638 Bulletin No. 2024–5
follows the procedure set forth in that
directive. The definition of “eligible secu-
rities” in the Insurance Directive covers
investments in loan-backed and structured
securities within the scope of SSAP 43R,
subject to section 166 and not subject to
section 165(g)(2)(C) of the Code, includ-
ing real estate mortgage investment con-
duit regular interests. Thus, the Insurance
Directive allowed insurance companies
to use the financial accounting standard
for tax purposes in limited circumstances
regardless of whether the regulatory stan-
dard is precisely the same as the tax stan-
dard for worthlessness under section 166.
In 2014, the IRS issued another indus-
try directive to LB&I examiners regarding
bad debt deductions claimed under sec-
tion 166 by a bank or bank subsidiary. See
LB&I Directive Related to § 166 Deduc-
tions for Eligible Debt and Eligible Debt
Securities, LB&I-04-1014-008 (Octo-
ber 24, 2014) (Bank Directive). Unlike
insurance companies, banks generally
determine loss deductions for partial and
wholly worthless debts in the same man-
ner for GAAP and regulatory purposes.
The Bank Directive generally allowed
for loss deductions for partial and wholly
worthless debts to follow those reported
for GAAP and regulatory purposes.
6. Summary of Comments Received in
Response to Notice 2013-35
In 2013, the IRS issued Notice 2013-
35, 2013-24 I.R.B. 1240, requesting com-
ments on the Conclusive Presumption
Regulations. The Treasury Department
and the IRS noted that since the adoption
of the Conclusive Presumption Regula-
tions, there have been significant changes
made to the regulatory standards relevant
for loan charge-offs. In light of those
changes, Notice 2013-35 sought com-
ments on whether (1) changes that have
occurred in bank regulatory standards
and processes since adoption of the Con-
clusive Presumption Regulations require
amendment of those regulations, and (2)
application of the Conclusive Presump-
tion Regulations continues to be consis-
tent with the principles of section 166.
Comments were also sought on the types
of entities that are permitted, or should be
permitted, to apply a conclusive presump-
tion of worthlessness.
Commenters responded that the Con-
clusive Presumption Regulations are out-
dated and contain requirements for a bad
debt deduction that taxpayers can no lon-
ger satisfy. For example, one commenter
noted that §1.166-2(d)(1) is unusable by
community banks because banking reg-
ulators will not issue written correspon-
dence confirming that a charge-off is being
made for either of the reasons set forth in
§1.166-2(d)(1). A commenter similarly
noted that regulators generally no longer
provide specific orders on a loan-by-loan
basis and may never confirm the appropri-
ateness of a charge-off in writing. Another
commenter noted that for certain banks
the election under §1.166-2(d)(3) was
automatically revoked under §1.166-2(d)
(3)(iv)(C) during the 2008 financial crisis
because bank examiners ordered greater
charge-offs than those initially taken by
the banks, and then could not provide the
required express determination letter stat-
ing that the banks maintained and applied
loan loss classification standards consis-
tent with the regulatory standards of the
supervisory authority.
Commenters noted the advantages of
retaining a conclusive presumption of
worthlessness. One commenter stated that
a conclusive presumption helps to avoid
costly factual disputes between the IRS
and taxpayers. Another commenter stated
that it is in the best interests of all stake-
holders to ensure that duplicative efforts
by Federal and State bank regulators and
the IRS do not occur. A commenter sug-
gested that the IRS follow determina-
tions made by regulators that routinely
and thoroughly examine the financial and
accounting records and processes of finan-
cial institutions such as banks, bank hold-
ing companies, and their non-bank sub-
sidiaries. Another commenter noted that
for decades virtually all community banks
have conformed their losses on loans for
income tax purposes to losses recorded
for regulatory reporting purposes. Several
commenters recommended that §1.166-
2(d)(1) and (3) should be replaced with a
single conclusive presumption rule.
Commenters requested that the Conclu-
sive Presumption Regulations be revised
to apply to any institution that is subject to
consolidated supervision by the Board of
Governors of the Federal Reserve System
(Federal Reserve), including systemically
important financial institutions (SIFIs)
and subsidiaries and affiliates of SIFIs,
because these institutions are required to
follow a strict process for determining
the amounts of the allowance for credit
losses under GAAP for financial report-
ing purposes and the Federal Reserve’s
examination will focus on the consistent
application and adherence to this process.
Another commenter suggested that the
election under §1.166-2(d)(3) should be
extended to bank holding companies and
their nonbank subsidiaries, and potentially
to other regulated financial institutions
that are examined by the same primary
supervisory authority or regulator.
Commenters stated that the GAAP loss
standard and the accounting standards
used by insurance companies for deter-
mining whether a debt is worthless are
sufficiently similar to the tax standards
for worthlessness under section 166 and,
therefore, should be used in formulating
a revised conclusive presumption rule.
Commenters argued that in most cases,
any divergence between the various stan-
dards will not be significant enough to
result in a material acceleration of loss
recognition for Federal income tax pur-
poses. Commenters specifically requested
that the Conclusive Presumption Regula-
tions be revised to include all insurance
company debts, not just the eligible secu-
rities covered in the Insurance Directive.
Commenters noted that, in applying the
OTTI standard set forth in the SSAPs,
insurers consider similar factors to the
ones examined under the tax rules such
as the adequacy of the collateral or the
income stream in determining whether a
debt is worthless for purposes of section
166. Commenters stated that a critical
condition for coverage under the existing
regulations is whether Federal or State
regulators have the authority to compel the
charge-off on the financial statements of
the company. Commenters said that State
insurance regulators have this authority
since they can mandate a charge-off if an
insurance company has not complied with
the State law accounting requirement that
requires the charge-off.
Commenters varied in their recommen-
dations of what process the IRS should
require in revised conclusive presump-
tion regulations to verify that the regu-
lated entity applied appropriate regulatory

Bulletin No. 2024–5 639 January 29, 2024
standards in taking a charge-off. Some
commenters recommended that the IRS
require an attestation from the taxpayer
that the taxpayer has reported worthless
debts consistently for tax and regulatory
reporting purposes similar to the taxpayer
self-certification statement required under
the Insurance Directive. Commenters
stated that a new self-certification require-
ment adopted by the IRS could replace the
requirement in the existing regulations to
obtain written confirmation from regula-
tors. Another commenter suggested that a
taxpayer claiming the benefit of the con-
clusive presumption should file a signed
statement with its tax return listing the tax-
payer’s Federal and State regulators and
stating that, for each bad debt deducted
under section 166 on the tax return, the
taxpayer has charged off the same amount
on its financial statements.
Explanation of Provisions
1. Rationale for the Proposed
Amendments to §1.166-2(d)
Regulated financial companies and
members of regulated financial groups
are generally subject to capital require-
ments, leverage requirements, or both. A
tension exists between the incentives of
regulated entities and the incentives of
their regulators. An entity that is subject
to regulatory capital requirements has an
incentive not to charge-off debt assets pre-
maturely, in order to preserve the amount
of its capital. Conversely, a regulator that
relies on capital or leverage requirements
is concerned with ensuring that capital is
not overstated, and therefore has an incen-
tive to ensure that regulated entities do
not defer charge-offs of losses on loans
and other debt instruments. Regulators
have provided guidance to those financial
companies to ensure they charge off debt
losses appropriately.
1
This tension results
in a balance with respect to the timing of
charge-offs.
The Treasury Department and the IRS
believe that regulated financial companies
and members of regulated financial groups
described in the proposed regulations
are subject to regulatory and accounting
standards for charge-offs that are suffi-
ciently similar to the Federal income tax
standards for determining worthlessness
under section 166. Both GAAP and the
SSAPs use a facts and circumstance anal-
ysis that takes into account all available
information related to the collectability of
the debt. The analysis considers the value
of any collateral securing the debt and the
financial condition of the debtor, which
are factors that are also evaluated under
the tax rules for determining worthless-
ness under section 166.
As described in part 5 of the Back-
ground, the IRS previously has recognized
the significant administrative burden for
taxpayers and the IRS to independently
determine worthlessness amounts under
section 166(a)(2) and has accepted charge-
off amounts reported for the incurred loss
model previously used by GAAP and for
regulatory purposes, as well as in accor-
dance with the SSAPs, as evidence of
worthlessness. In the Bank Directive, the
IRS accepted charge-off amounts reported
by banks and bank subsidiaries for the
incurred loss model previously used by
GAAP and for regulatory purposes as suf-
ficient evidence of worthlessness. Simi-
larly, in the Insurance Directive, the IRS
permitted the use of the insurance compa-
ny’s SSAP 43R credit-related impairment
charge-offs for the same securities as
reported on its annual statement regard-
less of whether the regulatory standard
is precisely the same as the definition of
worthlessness under section 166. Thus,
the IRS previously has recognized that
the present values of timing differences
in taxable income that arise from apply-
ing the regulatory standards instead of the
tax standards to determine worthlessness
are likely to be minor and therefore do not
outweigh the costs of having two different
standards for book and tax purposes.
Based on the foregoing, the Treasury
Department and the IRS believe it is
appropriate to provide conclusive pre-
sumption rules for regulated financial
companies and members of regulated
financial groups.
Recently, Congress has directed insur-
ance companies to follow their financial
statements prepared in accordance with
GAAP in certain circumstances. See sec-
tions 451(b)(3) and 56A(b) of the Code.
Section 451 provides the general rule
for the taxable year of inclusion of gross
income. Section 451(b) and (c) were
amended by section 13221 of Public
Law 115–97 (131 Stat. 2054), commonly
referred to as the Tax Cuts and Jobs Act.
For taxpayers using an accrual method of
accounting, section 451(b) requires the
recognition of income at the earliest of
when the all events test is met or when
any item of income is taken into account
as revenue in the taxpayer’s applica-
ble financial statement (AFS). Section
451(b)(3) defines AFS. Section 451(b)
(3) and §1.451-3(a)(5) list in descending
priority the financial statements that can
be considered an AFS for purposes of
income inclusion under section 451(b)
and §1.451-1(a). Highest priority is given
to a financial statement that is certified
as being prepared in accordance with
GAAP, and lowest priority is assigned to,
among other things, non-GAAP financial
statements filed with a State government
or State agency or a self-regulatory orga-
nization including, for example, a finan-
cial statement filed with a State agency
that regulates insurance companies or the
Financial Industry Regulatory Authority.
Section 10101 of Public Law 117-169,
136 Stat. 1818, 1818-1828 (August 16,
2022), commonly referred to as the Infla-
tion Reduction Act of 2022, amended sec-
tion 55 of the Code to impose a new cor-
porate alternative minimum tax (CAMT)
based on the “adjusted financial statement
income” (AFSI) of an applicable corpo-
ration for taxable years beginning after
December 31, 2022. For purposes of sec-
tions 55 through 59 of the Code, the term
AFSI means, with respect to any corpora-
tion for any taxable year, the net income
or loss of the taxpayer set forth on the tax-
1
See, for example, Interagency Policy Statement on Allowances for Credit Losses, 85 FR 32991 (June 1, 2020) (providing guidance to financial institutions from the Office of the Comptroller
of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the National Credit Union Administration on allowances for credit
losses in response to changes to GAAP); Regulatory Capital Rule: Implementation and Transition of the Current Expected Credit Losses Methodology for Allowances and Related Adjust-
ments to the Regulatory Capital Rule and Conforming Amendments to Other Regulations, 84 FR 4222 (2019) (adopting final rule to address changes to credit loss accounting under GAAP,
including banking organizations’ implementation of the CECL Model).

January 29, 2024 640 Bulletin No. 2024–5
payer’s AFS of such taxable year, adjusted
as provided in section 56A. See section
56A(a). Section 56A(b) defines “applica-
ble financial statement” by reference to
section 451(b)(3) for purposes of deter-
mining the adjusted financial statement
income on which applicable corporations
base their tentative minimum tax under
section 55(b). For purposes of section
56A, the term AFS means, with respect
to any taxable year, an AFS as defined in
section 451(b)(3) or as specified by the
Secretary in regulations or other guidance
that covers such taxable year. See section
56A(b).
The Treasury Department and the IRS
believe that, consistent with recent leg-
islation enacted and regulations promul-
gated in other contexts, for purposes of
determining whether a debt instrument
is worthless for Federal income tax pur-
poses, insurance companies should first
rely on GAAP financial statements that
are prioritized in these proposed regula-
tions and then, in the absence of such a
GAAP financial statement, should rely on
their annual statement.
2. Description of Proposed Amendments
to §1.166-2(d)
These proposed regulations would
revise §1.166-2(d) to permit “regulated
financial companies,” as defined in pro-
posed §1.166-2(d)(4)(ii), and mem-
bers of “regulated financial groups,” as
defined in proposed §1.166-2(d)(4)(iii),
to use a method of accounting under
which amounts charged off from the
allowance for credit losses, or pursuant to
SSAP standards, would be conclusively
presumed to be worthless for Federal
income tax purposes (Allowance Charge-
off Method). Proposed §1.166-2(d)(1)
would allow these taxpayers to conclu-
sively presume that charge-offs from
the allowance for credit losses of debt
instruments subject to section 166 or, in
the case of insurance companies that do
not produce GAAP financial statements
for substantive non-tax purposes, charge-
offs pursuant to SSAP standards, satisfy
the requirements for a bad debt deduc-
tion under section 166. The proposed
regulations do not address when a debt
instrument qualifies as a security within
the meaning of section 165(g)(2)(C) and
therefore would not change the scope of
debt instruments to which section 166
applies.
The definition of a “regulated finan-
cial company” in proposed §1.166-2(d)
(4)(ii) includes entities that are regulated
by insurance regulators and various Fed-
eral regulators including the Federal
Housing Finance Agency (FHFA) and the
Farm Credit Administration (FCA). The
Housing and Economic Recovery Act of
2008 established the FHFA as an inde-
pendent agency responsible for regulating
the safety and soundness of the Federal
National Mortgage Association and the
Federal Home Loan Mortgage Corpo-
ration (Government-Sponsored Enter-
prises, or GSEs). The FHFA has a statu-
tory responsibility to ensure that the GSEs
operate in a safe and sound manner, which
the FHFA accomplishes through supervi-
sion and regulation, including the super-
vision and regulation of accounting and
disclosure and capital adequacy. Further,
the FHFA may order the GSEs to classify
and charge-off loans, with loan classifica-
tion generally following bank regulatory
standards.
The definition of a “regulated financial
company” in proposed §1.166-2(d)(4)(ii)
also includes Farm Credit System (FCS)
institutions subject to the provisions of
the Farm Credit Act of 1971. The FCA, an
independent Federal agency, is the Fed-
eral regulator that examines the safety and
soundness of all FCS institutions through
regulatory oversight. Including FCS insti-
tutions in the definition of regulated finan-
cial company is consistent with the exist-
ing regulations, which define “banks” to
include institutions that are subject to the
supervision of the FCA. See §1.166-2(d)
(4)(i).
The definition of a “regulated finan-
cial company” in proposed §1.166-2(d)
(4)(ii) does not include credit unions or
U.S. branches of foreign banks. The pro-
posed regulations do not address how
credit unions or U.S. branches of foreign
banks determine charge-offs since the
IRS did not receive any comments on
this topic in response to Notice 2013-35.
Moreover, many credit unions are not sub-
ject to Federal income tax. However, the
Treasury Department and the IRS request
comments regarding whether and, if so,
how the proposed regulations should be
modified to apply to credit unions or U.S.
branches of foreign banks.
The definition of a “regulated finan-
cial company” in proposed §1.166-2(d)
(4)(ii) also does not include non-bank
SIFIs. Treasury and the IRS would need
to understand the extent to which pruden-
tial or other regulators of non-bank SIFIs
apply regulatory standards for worth-
lessness that are sufficiently close to tax
standards before determining whether the
rules provided in the proposed regulations
should apply to those SIFIs.
The definition of “regulated insurance
company” in proposed §1.166-2(d)(4)
(vii) does not include corporations that,
although licensed, authorized, or regu-
lated by one or more States to sell insur-
ance, reinsurance, or annuity contracts to
persons other than related persons (within
the meaning of section 954(d)(3) of the
Code) in such States, are not engaged in
regular issuances of (or subject to ongo-
ing liability with respect to) insurance,
reinsurance, or annuity contracts with per-
sons that are not related persons (within
the meaning of section 954(d)(3)). The
Treasury Department and the IRS request
comments regarding whether and how the
proposed regulations should be modified
to include a reinsurance entity that regu-
larly issues reinsurance contracts only to
related persons, provided the risks rein-
sured are regularly those of persons other
than related persons.
The term “financial statement” is
defined in proposed §1.166-2(d)(4)(ix)
broadly to include a financial statement
provided to a bank regulator, along with
any amendments or supplements to that
financial statement. The Treasury Depart-
ment and the IRS note that many insur-
ance companies prepare GAAP financial
statements. Therefore, the term “financial
statement” includes a financial statement
based on GAAP that is prepared contem-
poraneously with a financial statement
prepared in accordance with the stan-
dards set out by the NAIC and given to
creditors for purposes of making lending
decisions. However, the Treasury Depart-
ment and the IRS also understand that
there are insurance companies that do not
prepare GAAP financial statements but,
for substantive non-tax purposes, use
the SSAP financial statements discussed
above, which may not have the functional

Bulletin No. 2024–5 641 January 29, 2024
equivalent of an allowance from which
charge-offs are made. In order to extend
conformity to insurance company tax-
payers that do not prepare GAAP finan-
cial statements for substantive non-tax
purposes, the Treasury Department and
the IRS propose to allow these taxpay-
ers to use their SSAP financial statements
for purposes of determining the amount
of bad debt deduction under, and in the
manner prescribed in, the proposed reg-
ulations. Thus, the proposed regulations
would direct insurance companies to first
rely on a financial statement certified as
prepared in accordance with GAAP that
is a Form 10-K or an annual statement to
shareholders. If no such financial state-
ment exists, the proposed regulations
would direct insurance companies to next
rely on a financial statement that is based
on GAAP that is (1) given to creditors for
purposes of making lending decisions,
(2) given to equity holders for purposes
of evaluating their investments in the
regulated financial company or member
of a regulated financial group, or (3) pro-
vided for other substantial non-tax pur-
poses that also meet certain criteria set
forth in these proposed regulations. If an
insurance company does not have either
of these two types of financial statements
based on GAAP, the insurance company
would then rely on a financial statement
prepared in accordance with the standards
set forth by the NAIC and filed with the
insurance regulatory authorities of a State
that is the principal insurance regulator
of the insurance company. Accordingly,
the term “financial statement” would be
defined in the insurance industry con-
text under proposed §1.166-2(d)(4)(ix)
(D) to include a financial statement that
is prepared in accordance with standards
set out by the NAIC and filed with State
insurance regulatory authorities. The
Treasury Department and the IRS request
comments regarding whether these finan-
cial statements should be assigned differ-
ent levels of priority and on this defini-
tion generally.
The term “charge-off” is defined in
proposed §1.166-2(d)(4)(i) to mean an
accounting entry or set of accounting
entries for a taxable year that reduces the
basis of the debt when the debt is recorded
in whole or in part as a loss asset on the
applicable financial statement of the reg-
ulated financial company or the member
of a regulated financial group for that
year. For a regulated financial company
that is a regulated insurance company
that has as its applicable financial state-
ment a financial statement described in
proposed §1.166-2(d)(4)(ix)(D), the term
charge-off is defined in the proposed
regulations to mean an accounting entry
or set of accounting entries that reduces
the debt’s carrying value and results in a
realized loss or a charge to the statement
of operations (as opposed to recognition
of unrealized loss) that is recorded on the
regulated insurance company’s annual
statement.
Certain of the commenters suggested
that the proposed regulations should extend
to GAAP post-impairment accounting for
recoveries. Extending tax conformity to
GAAP post-impairment accounting for
recoveries raises, among other issues,
questions about whether GAAP recov-
eries qualify as tax recoveries, both with
regard to amount and timing, and whether
GAAP’s treatment of recoveries is consis-
tent with the tax recovery payment order-
ing rules. See, for example, section 111,
§§1.111-1(a)(2), 1.446-2(e), 1.1275-2(a),
Rev. Rul. 2007-32, 2007-1 C.B. 1278, and
Hillsboro National Bank v. Commissioner,
460 U.S. 370 (1983). In view of the fore-
going, the Treasury Department and the
IRS, while welcoming comments on the
topic, do not propose extending tax con-
formity to GAAP post-impairment recov-
ery accounting at this time.
Under the proposed regulations, the
Allowance Charge-off Method would
be a method of accounting because it
would determine the timing of the bad
debt deduction. Accordingly, proposed
§1.166-2(d)(2) provides that a change to
the Allowance Charge-off Method is a
change in method of accounting requiring
consent of the Commissioner under sec-
tion 446(e).
When the proposed regulations are
finalized, those regulated financial com-
panies or members of regulated financial
groups that do not presently use or change
to the Allowance Charge-off Method
would not be entitled to a conclusive pre-
sumption of worthlessness and would in
most cases be required to use the specific
charge-off method for deducting bad debts
under section 166(a) and §1.166-1(a)(1).
3. Proposed Applicability Dates and
Reliance on the Proposed Regulations
A. Proposed applicability dates of the
final regulations
Under the proposed applicability date
in proposed §1.166-2(d)(5), the final reg-
ulations would apply to charge-offs made
by a regulated financial company or a
member of a regulated financial group
on its applicable financial statement that
occur in taxable years ending on or after
the date of publication of a Treasury deci-
sion adopting those rules as final regula-
tions in the Federal Register. However,
under proposed §1.166-2(d)(5), a regu-
lated financial company or a member of
a regulated financial group may choose to
apply the final regulations, once published
in the Federal Register, to charge-offs
made on its applicable financial statement
that occur in taxable years ending on or
after December 28, 2023, and before the
date of publication of a Treasury decision
adopting those rules as final regulations in
the Federal Register. See section 7805(b)
(7) of the Code.
B. Reliance on the proposed regulations
A regulated financial company or a
member of a regulated financial group
may rely on proposed §1.166-2(d) for
charge-offs made on its applicable finan-
cial statement that occur in taxable years
ending on or after December 28, 2023,
and before the date of publication of final
regulations in the Federal Register.
Special Analyses
I. Regulatory Planning and Review
Pursuant to the Memorandum of
Agreement, Review of Treasury Regula-
tions under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
II. Paperwork Reduction Act
These proposed regulations do not
impose any additional information collec-

January 29, 2024 642 Bulletin No. 2024–5
tion requirements in the form of reporting,
recordkeeping requirements, or third-
party disclosure statements. The Allow-
ance Charge-off Method is a method of
accounting under the proposed regula-
tions, and therefore taxpayers would be
required to request the consent of the
Commissioner for a change in method
of accounting under section 446(e) to
change to that method. The IRS expects
that these taxpayers would request this
consent by filing Form 3115, Application
for Change in Accounting Method. Filing
of Form 3115 and any statements attached
thereto is the sole collection of informa-
tion requirement imposed by the statute
and the proposed regulations.
For purposes of the Paperwork Reduc-
tion Act of 1995 (44 U.S.C. 3507(c))
(PRA), the reporting burden associated
with the collection of information for the
Form 3115 will be reflected in the PRA
submission associated with the income tax
returns under the OMB control number
1545-0123. To the extent there is a change
in burden because of these proposed reg-
ulations, the change in burden will be
reflected in the updated burden estimates
for Form 3115. The requirement to main-
tain records to substantiate information
on Form 3115 is already contained in the
burden associated with the control number
for the form and remains unchanged.
The proposed regulations also would
remove the requirement in §1.166-2(d)
(3)(iii)(B) for a new bank to attach a
statement to its income tax return, and
thereby reduce the burden estimates for
OMB control number 1545-0123. The
overall burden estimates associated with
the OMB control number are aggregate
amounts related to the entire package
of forms associated with the applicable
OMB control number and will include,
but not isolate, the estimated burden of
the tax forms that will be created, revised,
or reduced as a result of the information
collection in these proposed regulations.
These numbers are therefore not specific
to the burden imposed by these proposed
regulations. No burden estimates specific
to the forms affected by the proposed reg-
ulations are currently available. For the
OMB control number discussed in this
section, the Treasury Department and the
IRS estimate PRA burdens on a taxpay-
er-type basis rather than a provision-spe-
cific basis. Those estimates capture both
changes made by the proposed regula-
tions (when final) and other regulations
that affect the compliance burden for that
form.
The Treasury Department and IRS
request comment on all aspects of the
information collection burden related to
the proposed regulations, including esti-
mates for how much time it would take
to comply with the paperwork burden
described above for the relevant form and
ways for the IRS to minimize paperwork
burden. In addition, when available, drafts
of IRS forms are posted at https://www.
irs.gov/draft-tax-forms, and comments
may be submitted at https://www.irs.gov/
forms-pubs/comment-on-tax-forms-and-
publications. Final IRS forms are avail-
able at https://www.irs.gov/forms-instruc-
tions. Forms will not be finalized until
after they have been approved by OMB
under the PRA.
III. Regulatory Flexibility Act
It is hereby certified that these regu-
lations would not have a significant eco-
nomic impact on a substantial number of
small entities within the meaning of sec-
tion 601(6) of the Regulatory Flexibility
Act (5 U.S.C. chapter 6).
These proposed regulations would
affect only those business entities that
qualify as regulated financial compa-
nies and members of regulated financial
groups, as defined in the proposed reg-
ulations. These entities are expected to
consist of insurance companies and finan-
cial institutions with annual receipts in
excess of the amounts set forth in 13 CFR
§121.201, Sector 52 (finance and insur-
ance). Therefore, these proposed regula-
tions will not affect a substantial number
of small entities.
Although the burden falls primarily
on larger entities, some small entities
with annual receipts not in excess of the
amounts set forth in 13 CFR §121.201,
Sector 52 (finance and insurance), may
be affected. However, these proposed
regulations are unlikely to present a sig-
nificant economic burden on any small
entities affected. The costs to comply with
these proposed regulations are not signif-
icant. Taxpayers needing to make method
changes pursuant to the proposed regu-
lations would be required to file a Form
3115. For those entities that would make
a method change, the cost to determine
or track the information needed is mini-
mal. The insurance companies and finan-
cial institutions affected by the proposed
regulations prepare financial statements
in accordance with SSAPs or GAAP. The
Allowance Charge-off Method is a method
of accounting under which these entities
would be permitted to use these financial
statements to obtain a conclusive pre-
sumption of worthlessness for purposes of
claiming bad debt deductions under sec-
tion 166. Accordingly, the affected entities
already possess the information needed.
The cost in time to fill out a Form 3115
would be minimal.
Notwithstanding this certification, the
Treasury Department and IRS invite com-
ments from the public about the impact of
these proposed regulations on small enti-
ties.
Pursuant to section 7805(f), these reg-
ulations will be submitted to the Chief
Counsel for the Office of Advocacy of the
Small Business Administration for com-
ment on their impact on small business.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 requires that agencies
assess anticipated costs and benefits and
take certain other actions before issuing a
final rule that includes any Federal man-
date that may result in expenditures in
any one year by a State, local, or Tribal
government, in the aggregate, or by the
private sector, of $100 million in 1995
dollars, updated annually for inflation.
This proposed rule does not include any
Federal mandate that may result in expen-
ditures by State, local, or Tribal govern-
ments, or by the private sector, in excess
of that threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding

Bulletin No. 2024–5 643 January 29, 2024
requirements of section 6 of the Execu-
tive order. These proposed regulations do
not have federalism implications and do
not impose substantial direct compliance
costs on State and local governments or
preempt State law within the meaning of
the Executive order.
Comments and Requests for a Public
Hearing
Before these proposed amendments to
the final regulations are adopted as final
regulations, consideration will be given
to comments that are submitted timely
to the IRS as prescribed in this pream-
ble under the ADDRESSES heading.
The Treasury Department and the IRS
request comments on all aspects of the
proposed regulations, including how best
to transition from the existing regulations
to the proposed regulations. Any com-
ments submitted will be made available
at https://www.regulations.gov or upon
request.
A public hearing will be scheduled if
requested in writing by any person who
timely submits electronic or written com-
ments. Requests for a public hearing are
also encouraged to be made electroni-
cally. If a public hearing is scheduled,
notice of the date and time for the public
hearing will be published in the Federal
Register.
Drafting Information
The principal authors of these regula-
tions are Stephanie D. Floyd and Jason D.
Kristall of the Office of Associate Chief
Counsel (Financial Institutions and Prod-
ucts). However, other personnel from the
Treasury Department and the IRS partici-
pated in their development.
Statement of Availability of IRS
Documents
The IRS Notices, Revenue Procedures,
and Revenue Rulings cited in this pream-
ble are published in the Internal Revenue
Bulletin (or Cumulative Bulletin) and
are available from the Superintendent of
Documents, U.S. Government Publishing
Office, Washington, DC 20402, or by vis-
iting the IRS website at https://www.irs.
gov.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
part 1 as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.166-2 is amended by
revising paragraph (d) to read as follows:
§ 1.166-2 Evidence of worthlessness.
* * * * *
(d) Regulated financial companies and
members of regulated financial groups—
(1) Worthlessness presumed in year of
charge-off. Debt held by a regulated finan-
cial company (as defined in paragraph (d)
(4)(ii) of this section) or a member of a
regulated financial group (as defined in
paragraph (d)(4)(iii) of this section) that
uses the charge-off method described in
paragraph (d)(1) of this section (Allowance
Charge-off Method) is conclusively pre-
sumed to have become worthless, in whole
or in part, to the extent that the amount of
any charge-off (as defined in paragraph (d)
(4)(i) of this section) under paragraph (d)
(1)(i) or (ii) of this section is claimed as a
deduction under section 166 of the Inter-
nal Revenue Code (Code) by the regulated
financial company or the member of a reg-
ulated financial group on the relevant Fed-
eral income tax return for the taxable year
in which the charge-off takes place.
(i) Allowance Charge-off Method gen-
erally. The debt is charged off from the
allowance for credit losses in accordance
with the United States Generally Accepted
Accounting Principles and recorded in the
period in which the debt is deemed uncol-
lectible on the applicable financial state-
ment (as defined in paragraph (d)(4)(viii)
of this section) of the regulated financial
company or the member of a regulated
financial group.
(ii) Certain regulated insurance com-
panies. In the case of a regulated finan-
cial company that is a regulated insurance
company (as defined in paragraph (d)
(4)(vii) of this section) that prepares an
applicable financial statement pursuant
to paragraphs (d)(4)(viii) and (d)(4)(ix)
(D) of this section, the debt is charged off
pursuant to an accounting entry or set of
accounting entries that reduce the debt’s
carrying value and result in a realized loss
or a charge to the statement of operations
(as opposed to recognition of an unreal-
ized loss) that, in either case, is recorded
on the regulated insurance company’s
annual statement.
(2) Methods of accounting—(i) In gen-
eral. A taxpayer may change a method of
accounting only with the consent of the
Commissioner as required under section
446(e) of the Code and the correspond-
ing regulations. A change to the Allow-
ance Charge-off Method under this para-
graph (d) constitutes a change in method
of accounting. Accordingly, a regulated
financial company or member of a reg-
ulated financial group that changes its
method of accounting to the Allowance
Charge-Off Method is required to secure
consent of the Commissioner before
using this method for Federal income
tax purposes. A change to the Allowance
Charge-off Method must be made on an
entity-by-entity basis.
(ii) General rule for changes in method
of accounting. A taxpayer that makes a
change in method of accounting to the
Allowance Charge-Off Method is treated
as making a change in method initiated by
the taxpayer for purposes of section 481 of
the Code. A taxpayer obtains the consent
of the Commissioner to make a change
in method of accounting by using the
applicable administrative procedures that
govern changes in method of accounting
under section 446(e). See § 1.446-1(e)(3).
(3) Worthlessness in later taxable year.
If a regulated financial company or mem-
ber of a regulated financial group does not
claim a deduction under section 166 for
a totally or partially worthless debt on its
Federal income tax return for the taxable
year in which the charge-off takes place,
but claims the deduction for a later taxable
year, then the charge-off in the prior tax-
able year is deemed to have been involun-
tary and the deduction under section 166

January 29, 2024 644 Bulletin No. 2024–5
is allowed for the taxable year for which
claimed.
(4) Definitions. The following defini-
tions apply for purposes of paragraph (d)
of this section:
(i) Charge-off. The term charge-
off means an accounting entry or set of
accounting entries for a taxable year that
reduces the basis of the debt when the
debt is recorded in whole or in part as a
loss asset on the applicable financial state-
ment (as defined in paragraph (d)(4)(viii)
of this section) of the regulated financial
company or the member of a regulated
financial group for that year. For a reg-
ulated financial company that is a regu-
lated insurance company (as defined in
paragraph (d)(4)(vii) of this section) that
has as its applicable financial statement a
financial statement described in paragraph
(d)(4)(ix)(D) of this section, the term
charge-off means an accounting entry or
set of accounting entries that reduce the
debt’s carrying value and results in a real-
ized loss or a charge to the statement of
operations (as opposed to recognition of
unrealized loss) that is recorded on the
regulated insurance company’s annual
statement.
(ii) Regulated financial company.
The term regulated financial company
means—
(A) A bank holding company, as defined
in 12 U.S.C. 1841, that is a domestic cor-
poration;
(B) A covered savings and loan holding
company, as defined in 12 C.F.R. 217.2;
(C) A national bank;
(D) A bank that is a member of the Fed-
eral Reserve System and is incorporated
by special law of any State, or organized
under the general laws of any State, or of
the United States, or other incorporated
banking institution engaged in a similar
business;
(E) An insured depository institution,
as defined in 12 U.S.C. 1813(c)(2);
(F) A U.S. intermediate holding com-
pany formed by a foreign banking orga-
nization in compliance with 12 C.F.R.
252.153;
(G) An Edge Act corporation organized
under section 25A of the Federal Reserve
Act (12 U.S.C. 611-631);
(H) A corporation having an agreement
or undertaking with the Board of Gover-
nors of the Federal Reserve System under
section 25 of the Federal Reserve Act (12
U.S.C. 601-604a);
(I) A Federal Home Loan Bank, as
defined in 12 U.S.C. 1422(1)(A);
(J) A Farm Credit System Institution
chartered and subject to the provisions of
the Farm Credit Act of 1971 (12 U.S.C.
2001 et seq.);
(K) A regulated insurance company,
as defined in paragraph (d)(4)(vii) of this
section;
(L) The Federal National Mortgage
Association;
(M) The Federal Home Loan Mortgage
Corporation; and
(N) Any additional entities that may
be provided in guidance published
in the Internal Revenue Bulletin (see
§ 601.601(d)(2)(ii)(a) of this chapter).
(iii) Regulated financial group. The
term regulated financial group means one
or more chains of corporations connected
through stock ownership with a common
parent corporation that is not described
in section 1504(b)(4) of the Code and is
a regulated financial company described
in paragraphs (d)(4)(ii)(A) through (N)
of this section (regulated financial group
parent) that is not owned, directly or indi-
rectly (as set out in paragraph (d)(4)(v) of
this section), by another regulated finan-
cial company, but only if—
(A) The regulated financial group par-
ent owns directly or indirectly stock meet-
ing the requirements of section 1504(a)(2)
in at least one of the other corporations;
and
(B) Stock meeting the requirements
of section 1504(a)(2) in each of the other
corporations (except the regulated finan-
cial group parent) is owned directly or
indirectly by one or more of the other cor-
porations.
(iv) Stock. The term stock has the same
meaning as stock in section 1504 (with-
out regard to § 1.1504-4), and all shares
of stock within a single class are consid-
ered to have the same value. Thus, control
premiums and minority and blockage dis-
counts within a single class are not taken
into account.
(v) Indirect stock ownership. Indirect
stock ownership is determined by apply-
ing the constructive ownership rules of
section 318(a) of the Code.
(vi) Member of a regulated financial
group. A member of a regulated financial
group is any corporation in the chain of
corporations of a regulated financial group
described in paragraph (d)(4)(iii) of this
section. A corporation, however, is not
a member of a regulated financial group
if it is held by a regulated financial com-
pany pursuant to 12 U.S.C. 1843(k)(1)(B),
12 U.S.C. 1843(k)(4)(H), or 12 U.S.C.
1843(o), or if it is a Regulated Investment
Company under section 851 of the Code,
or a Real Estate Investment Trust under
section 856 of the Code.
(vii) Regulated insurance company.
The term regulated insurance company
means a corporation that is—
(A) Subject to tax under subchapter L
of chapter 1 of the Code;
(B) Domiciled or organized under the
laws of one of the 50 States or the District
of Columbia (State);
(C) Licensed, authorized, or regulated
by one or more States to sell insurance,
reinsurance, or annuity contracts to per-
sons other than related persons (within
the meaning of section 954(d)(3) of the
Code) in such States, but in no case will
a corporation satisfy the requirements of
this paragraph (d)(4)(vii)(C) if a principal
purpose for obtaining such license, autho-
rization, or regulation was to qualify the
issuer as a regulated insurance company;
and
(D) Engaged in regular issuances of (or
subject to ongoing liability with respect
to) insurance, reinsurance, or annuity
contracts with persons that are not related
persons (within the meaning of sec-
tion 954(d)(3)).
(viii) Applicable financial statement.
The term applicable financial state-
ment means a financial statement that is
described in paragraph (d)(4)(ix) of this
section of a regulated financial company
or any member of a regulated financial
group. The financial statement may be
a separate company financial statement
of any member of a regulated financial
group, if prepared in the ordinary course
of business; otherwise, it is the consoli-
dated financial statement that includes the
assets, portion of the assets, or annual total
revenue of any member of a regulated
financial group.
(ix) Financial statement. The term
financial statement means the taxpayer’s
financial statement listed in paragraphs
(d)(4)(ix)(A) through (D) of this section

Bulletin No. 2024–5 645 January 29, 2024
that has the highest priority. A financial
statement includes any supplement or
amendment to that financial statement.
The financial statements are, in order of
descending priority:
(A) A financial statement certified as
being prepared in accordance with Gener-
ally Accepted Accounting Principles that
is a Form 10–K (or successor form), or
annual statement to shareholders, required
to be filed with the United States Securi-
ties and Exchange Commission;
(B) A financial statement that is
required to be provided to a bank regula-
tor;
(C) In the case of an insurance com-
pany, a financial statement based on Gen-
erally Accepted Accounting Principles
that is given to creditors for purposes
of making lending decisions, given to
equity holders for purposes of evaluating
their investments in the regulated finan-
cial company or member of a regulated
financial group, or provided for other
substantial non-tax purposes, and that the
regulated financial company or member
of a regulated financial group reasonably
anticipates will be directly relied on for
the purposes for which it was given or
provided and that is prepared contempo-
raneously with a financial statement pre-
pared in accordance with the standards set
out by the National Association of Insur-
ance Commissioners and filed with the
insurance regulatory authorities of a State
that is the principal insurance regulator of
the insurance company; and
(D) In the case of an insurance com-
pany, a financial statement that is prepared
in accordance with the standards set out
by the National Association of Insurance
Commissioners and filed with the insur-
ance regulatory authorities of a State that
is the principal insurance regulator of the
insurance company.
(x) Bank regulator. The term bank
regulator means the Office of the Comp-
troller of the Currency, the Board of Gov-
ernors of the Federal Reserve System and
any Federal Reserve Bank, the Federal
Deposit Insurance Corporation, the Farm
Credit Administration, the Federal Hous-
ing Finance Authority, any successor to
any of the foregoing entities, or State
banking authorities maintaining substan-
tially equivalent standards as these Fed-
eral regulatory authorities. Additional
entities included in this paragraph (d)(4)
(x) may be provided in guidance pub-
lished in the Internal Revenue Bulletin
(see § 601.601(d)(2)(ii)(a) of this chap-
ter).
(5) Applicability date. Paragraph (d) of
this section applies to charge-offs made
by a regulated financial company or a
member of a regulated financial group
on its applicable financial statement that
occur in taxable years ending on or after
[DATE OF FINAL RULE]. A regulated
financial company or a member of a regu-
lated financial group may choose to apply
paragraph (d) of this section to charge-offs
on its applicable financial statement that
occur in taxable years ending on or after
December 28, 2023.
Douglas W. O’Donnell,
Deputy Commissioner for Services and
Enforcement.
(Filed by the Office of the Federal Register Decem-
ber 27, 2023, 8:45 a.m., and published in the issue
of the Federal Register for December 28, 2023, 88
FR 89636).

Bulletin No. 2024–5 i January 29, 2024
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations
to show that the previous published rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.
—Court Decision.
CY—County.
D—Decedent.
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—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

January 29, 2024 ii Bulletin No. 2024–5
Numerical Finding List
1
Bulletin 2024–5
Announcements:
2024-1, 2024-02 I.R.B. 363
2024-3, 2024-02 I.R.B. 364
2024-5, 2024-05 I.R.B. 635
2024-6, 2024-05 I.R.B. 635
Notices:
2024-1, 2024-02 I.R.B. 314
2024-2, 2024-02 I.R.B. 316
2024-3, 2024-02 I.R.B. 338
2024-4, 2024-02 I.R.B. 343
2024-5, 2024-02 I.R.B. 347
2024-6, 2024-02 I.R.B. 348
2024-7, 2024-02 I.R.B. 355
2024-8, 2024-02 I.R.B. 356
2024-9, 2024-02 I.R.B. 358
2024-11, 2024-02 I.R.B. 360
2024-10, 2024-03 I.R.B. 406
2024-12, 2024-05 I.R.B. 616
2024-13, 2024-05 I.R.B. 618
2024-16, 2024-05 I.R.B. 622
2024-18, 2024-05 I.R.B. 625
2024-19, 2024-05 I.R.B. 627
Proposed Regulations:
REG-118492-23, 2024-02 I.R.B. 366
REG-107423-23, 2024-03 I.R.B. 411
REG-121010-17, 2024-05 I.R.B. 636
Revenue Procedures:
2024-1, 2024-01 I.R.B. 1
2024-2, 2024-01 I.R.B. 119
2024-3, 2024-01 I.R.B. 143
2024-4, 2024-01 I.R.B. 160
2024-5, 2024-01 I.R.B. 262
2024-7, 2024-01 I.R.B. 303
2024-8, 2024-04 I.R.B. 479
2024-9, 2024-05 I.R.B. 628
Revenue Rulings:
2024-1, 2024-02 I.R.B. 307
2024-2, 2024-02 I.R.B. 311
Treasury Decisions:
9984, 2024-03 I.R.B. 386
9985, 2024-05 I.R.B. 573
9986, 2024-05 I.R.B. 610
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2023–27 through 2023–52 is in Internal Revenue Bulletin
2023–52, dated December 26, 2023.

Bulletin No. 2024–5 iii January 29, 2024
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2024–5
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2023–27 through 2023–52 is in Internal Revenue Bulletin
2023–52, dated December 26, 2023.

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