us-irs-notices-irb-2013-52-pdf•Internal Revenue Bulletin 2013-52 (PDF rendition): IRS Notices
Internal Revenue Bulletin 2013-52 (PDF rendition): IRS Notices
us-irs-notices-irb-2013-52-pdfInternal Revenue Bulletin 2013-52 (PDF rendition): IRS NoticesGuidance
Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.
Bulletin No. 2013-52
December 23, 2013
# Internal Revenue bulletin
## HIGHLIGHTS OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
## INCOME TAX
### Rev. Rul. 2013-25, page 802.
Interest rates: underpayment and overpayments. The rates for
interest determined under section 6621 of the code for the
calendar quarter beginning January 1, 2014, will be 3 percent
for overpayments (2 percent in the case of a corporation), 3
percent for the underpayments, and 5 percent for large cor-
poration underpayments. The rate of interest paid on the por-
tion of a corporation overpayment exceeding $10,000 will be
0.5 percent.
### T.D. 9648, page 798.
These final regulations provide a definition of the term "speci-
fied notional principal contract" with respect to a payment of a
dividend equivalent made prior to January 1, 2016. These final
regulations also amend other provisions of the Code to ad-
dress the treatment of dividend equivalents, such as withhold-
ing rules.
### REG-120282-10, page 837.
These proposed regulations describe payments that are divi-
dend equivalents for purposes of section 871(m) and explain
how to calculate the amount of a dividend equivalent. These
proposed regulations also provide guidance regarding when
payments will constitute dividend equivalents and U.S. source
income. Comments are requested by March 5, 2014. A public
hearing is scheduled for April 11, 2014.
### REG-126285-12, page 853.
These proposed regulations concern the deductibility of
start-up expenditures and organizational expenses for partner-
ships. The proposed regulations provide guidance regarding
the deductibility of start-up expenditures and organizational
expenses for partnerships following a technical termination of
a partnership. Comments are requested by March 10, 2014.
## EMPLOYEE PLANS
### Notice 2013-74, page 819.
This notice provides guidance under § 402A(c)(4)(E) of the
Code relating to the expansion of rollovers from § 401(k) plans,
§ 403(b) plans and governmental § 457(b) plans to designated
Roth accounts in the same plan ("in-plan Roth rollovers"). This
notice also provides guidance that applies to all in-plan Roth
rollovers under § 402A(c)(4). Section 402A(c)(4)(E) was added
by § 902 of the American Taxpayer Relief Act of 2012
("ATRA"), P.L. 112-240. Notice 2010-84 and Rev. Rul.
2004-12 are modified.
### Notice 2013-84, page 822.
This notice contains the 2013 Cumulative List of Changes in
Plan Qualification Requirements (2013 Cumulative List) de-
scribed in section 4 of Rev. Proc. 2007-44, 2007-2 C.B. 54.
The 2013 Cumulative List is to be used by plan sponsors and
practitioners submitting determination, opinion, or advisory
letter applications for plans during the period beginning Febru-
ary 1, 2014 and ending January 31, 2015.
### Notice 2013-85, page 827.
This notice contains updates for the corporate bond weighted
average interest rate for plan years beginning in December
2013; the 24-month average segment rates; the funding seg-
ment rates applicable for December 2013; and the minimum
present value rates for November 2013. The rates in this
notice reflect certain changes implemented by the Moving
Ahead for Progress in the 21st Century Act, Public Law 112-
141 (MAP-21).
(Continued on the next page)
Finding Lists begin on page ii.
Index for July through December begins on page iv.
Department of the Treasury
Internal Revenue Service
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## EXEMPT ORGANIZATIONS
### REG-134417-13, page 856.
These proposed regulations provide guidance to tax-exempt
social welfare organizations on political activities related to
candidates that will not be considered to promote social wel-
fare. These regulations will affect tax-exempt social welfare
organizations and organizations seeking such status. Com-
ments are requested by February 27, 2014.
## EMPLOYMENT TAX
Rev. Proc. 2013-39, page 830.
This revenue procedure describes and updates the procedure
for requesting the IRS authorize a person to act as agent under
section 3504 of the Code for purposes of income tax withhold-
ing, the Federal Insurance Contributions Act (FICA), and Rail-
road Retirement Tax Act (RRTA). Special instructions are also
set forth for agents authorized to perform acts for purposes
of the Federal Unemployment Tax Act (FUTA). Notice 95-18,
Rev. Proc. 70-6, Rev. Proc. 80-4, and Notice 2003-70 are
affected.
## ADMINISTRATIVE
### T.D. 9647, page 816.
These final regulations amend the regulations that provide user
fees for installment agreements and offers in compromise. The
amendments affect taxpayers who wish to pay their liabilities
through installment agreements and offers in compromise.
Notice 2013-80, page 821.
Optional standard mileage rates. This notice announces 56
cents as the optional standard mileage rate for substantiating
the amount of the deduction for the business use of an auto-
mobile, 14 cents as the optional rate for use of an automobile
as a charitable contribution, and 23.5 cents as the optional
rate for use of an automobile as a medical or moving expense
for 2014. The notice also provides the amount a taxpayer must
use in calculating reductions to basis for depreciation taken
under the business standard mileage rate and the maximum
standard automobile cost for automobiles under a FAVR allow-
ance. Notice 2012-72 superseded.
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## The IRS Mission
Provide America's taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force 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 official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all
substantive 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 internal
management are not published; however, statements of inter-
nal practices and procedures that affect the rights and duties
of taxpayers are published.
Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the
revenue ruling. In those based on positions taken in rulings to
taxpayers or technical advice to Service field offices, identify-
ing 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, Legisla-
tion and Related Committee Reports.
Part III .- Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury's Office of the Assistant Sec-
retary (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.
<!-- PageFooter="December 23, 2013" -->
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## Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
### Section 871 .- Tax on Nonresident Alien Individuals
TD 9648
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
### Dividend Equivalents from Sources within the United States
AGENCY: Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations and removal
of temporary regulations.
SUMMARY: This document contains final
regulations relating to certain dividend
equivalents for purposes of section 871(m)
of the Internal Revenue Code (Code). The
regulations provide guidance to nonresident
alien individuals and foreign corporations
that hold specified notional principal con-
tracts providing for payments that are con-
tingent upon or determined by reference to
U.S. source dividend payments and to with-
holding agents.
DATES: Effective Date: These regula-
tions are effective on December 5, 2013.
Applicability Date: For dates of appli-
cability, see §§1.863-7(a)(2), 1.871-
15(0), 1.881-2(e), 1.892-3(c), 1.894-
1(e), 1.1441-2(f), 1.1441-3(h)(2),
1.1441-4(g)(1), 1.1441-6(i)(1), 1.1441-
7(a)(4) and (g), and 1.1461-1(c)(2)(iii).
FOR FURTHER INFORMATION
CONTACT: D. Peter Merkel or Karen
Walny at (202) 317-6938 (not a toll-free
number).
SUPPLEMENTARY INFORMATION:
#### Background
Congress enacted section 871(m)
(originally designated as section 871(l))
on March 18, 2010, in section 541 of the
Hiring Incentives to Restore Employment
Act (HIRE Act), Public Law 111-147
(124 Stat. 71).
Section 871(m) applies to any substi-
tute dividend made pursuant to a securi-
ties lending or a sale-repurchase transac-
tion (repo) that is contingent upon, or
determined by reference to, the payment
of a U.S. source dividend, any payment
made pursuant to a notional principal con-
tract (NPC) that is a specified notional
principal contract (specified NPC) when
the payment is contingent upon, or deter-
mined by reference to, the payment of a
U.S. source dividend, and any other pay-
ment determined by the Secretary to be
substantially similar (dividend equiva-
lent). Section 871(m) treats a dividend
equivalent as a dividend from sources
within the United States for purposes of
sections 871(a), 881, and 4948(a), and
chapters 3 and 4 of subtitle A of the Code.
Section 871(m) generally applies to any
dividend equivalent payment made on or
after September 14, 2010. With respect to
payments made on or after September 14,
2010, and on or before March 18, 2012,
section 871(m)(3)(A) provides a factor-
based test for determining whether an
NPC is a specified NPC. With respect to
payments made after March 18, 2012, sec-
tion 871(m)(3)(B) provides that any NPC
is a specified NPC unless the Secretary
determines that the contract is of a type
which does not have the potential for tax
avoidance.
On January 23, 2012, the Federal Reg-
ister published temporary regulations (TD
9572) at 77 FR 3108 (2012 temporary
regulations), and a notice of proposed
rulemaking by cross-reference to tempo-
rary regulations and notice of public hear-
ing at 77 FR 3202 (2012 proposed regu-
lations, and together with the 2012
temporary regulations, 2012 section
871(m) regulations) under section 871(m)
of the Code. The 2012 section 871(m)
regulations related to dividend equivalents
from sources within the United States paid
to nonresident alien individuals and for-
eign corporations. Corrections to the 2012
temporary regulations were published on
February 6, 2012, and March 8, 2012, in
the Federal Register at 77 FR 5700 and
77 FR 13969, respectively. A correcting
amendment to the 2012 temporary regu-
lations was also published on August 31,
2012, in the Federal Register at 77 FR
53141.
The Treasury Department and the IRS
received written comments on the 2012
section 871(m) regulations, which are
available at www.regulations.gov. A pub-
lic hearing was held on April 27, 2012.
The majority of the comments related to
the 2012 proposed regulations. Comments
received regarding the provisions being
finalized in this document are described in
the Explanation of Provisions part of the
preamble. An explanation of the other
comments on the 2012 section 871(m)
regulations is provided in the withdrawal
of notice of proposed rulemaking, notice
of proposed rulemaking and notice of
public hearing in this issue of the Bulletin.
### Explanation of Provisions
Section 1.871-15(d)(1) of these final
regulations adopts with minimal changes
§1.871-16T(b) of the 2012 temporary reg-
ulations, which incorporates the definition
of a specified NPC provided in section
871(m)(3)(A). The four-factor specified
NPC definition provided in §1.871-
16T(b) applies to payments made after
March 18, 2012, and before January 1,
2014. These final regulations extend the
applicability of the four-factor definition
to payments made before January 1, 2016.
Proposed regulations set forth in this issue
of the Bulletin (the 2013 proposed regu-
lations) contain the proposed definition of
a specified NPC for payments made on or
after January 1, 2016. The 2013 proposed
regulations replace the 2012 proposed
regulations, which provided a seven-
factor approach to defining a specified
NPC. Comments indicated that financial
services providers would have difficulty
modifying their systems to implement the
2012 proposed regulations under the time-
line provided in the 2012 proposed regu-
lations. The Treasury Department and the
IRS believe that an extension of the stat-
utory definition of the term specified NPC
is necessary because the 2013 proposed
regulations adopt a different approach
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from the 2012 proposed regulations for
determining whether an NPC is a speci-
fied NPC. In addition, this extension will
allow the financial services industry ade-
quate time to establish necessary systems
and other operating procedures to comply
with the rules described in the 2013 pro-
posed regulations.
The 2012 temporary regulations
amended several regulations to clarify the
application of section 871(m). For exam-
ple, the 2012 temporary regulations mod-
ified §1.863-7 to provide that the general
source rule for NPCs did not apply to a
dividend equivalent under section 871(m).
The 2012 temporary regulations also pro-
vided that section 871(m) and §1.871-
16T applied to dividend equivalents re-
ceived by foreign corporations. These
final regulations adopt those temporary
rules without change.
These final regulations also amend cer-
tain regulations under section 1441 to re-
quire a withholding agent to withhold tax
owed with respect to a dividend equiva-
lent. Generally, these amendments are
consistent with the amendments made in
the 2012 temporary regulations. In addi-
tion, these final regulations reinstate to
§1.1441-7(a)(3) examples relating to the
definition of a withholding agent, which
were inadvertently deleted by the 2012
temporary regulations.
One comment suggested that the regu-
lations clarify that financial intermediaries
and custodians are not parties to a section
871(m) transaction and should not be
withholding agents with respect to a div-
idend equivalent payment. The Treasury
Department and the IRS disagree and be-
lieve that a financial intermediary or cus-
todian that satisfies the definition of a
withholding agent provided in §1.1441-
7(a) should be considered a withholding
agent for purposes of section 871(m).
Another comment stated that §1.1441-
3T(i), which permitted a withholding
agent to use the distributing corporation's
estimates to determine the amount of a
dividend equivalent, was unduly harsh be-
cause the withholding agent remained li-
able for tax, interest, and penalties when
the actual dividend exceeded the estimate.
Section 1.1441-3T(i) is withdrawn and is
not adopted in these final regulations. The
Treasury Department and the IRS believe
that withholding agents should comply
with §1.1441-3(d)(1) in the event that the
amount of a dividend equivalent is uncer-
tain.
Other comments relating to the with-
holding provisions described the difficul-
ties that withholding agents would en-
counter when administering the 2012
proposed regulations. The Treasury De-
partment and the IRS believe that with-
drawing the 2012 proposed regulations
and publishing the 2013 proposed regula-
tions addresses these comments.
In addition, these regulations finalize
portions of the 2012 proposed regulations
relating to the treatment of dividend
equivalent payments for purposes of sec-
tions 892 and 894. Comments to the 2012
proposed regulations generally supported
the proposed regulations under sections
892 and 894. These portions of the pro-
posed regulations are finalized without
change.
The Treasury Department and the IRS
will continue to closely scrutinize other
transactions that are not covered by sec-
tion 871(m) and that may be used to avoid
U.S. taxation and U.S. withholding. In
addition, the IRS may challenge the U.S.
tax results claimed in connection with
transactions that are designed to avoid the
application of section 871(m) using all
available statutory provisions and judicial
doctrines (including the substance over
form doctrine, the economic substance
doctrine under section 7701(o), the step
transaction doctrine, and tax ownership
principles) as appropriate. For example,
nothing in section 871(m) precludes the
IRS from asserting that a contract labeled
as an NPC is in fact an ownership interest
in the equity referenced in the contract.
## Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866, as supplemented by Executive Or-
der 13563. Therefore, a regulatory assess-
ment is not required. It also has been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regula-
tions. It is hereby certified that these reg-
ulations will not have a significant eco-
nomic impact on a substantial number of
small entities. This certification is based
on the fact that these regulations will pri-
marily affect multinational financial insti-
tutions, which tend to be larger busi-
nesses, and foreign entities. Moreover, the
number of taxpayers affected and the av-
erage burden are minimal. Therefore, a
Regulatory Flexibility Analysis is not re-
quired. Pursuant to section 7805(f) of the
Code, the notice of proposed rulemaking
preceding this regulation was submitted to
the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on its impact on small business.
## Drafting Information
The principal authors of these regula-
tions are D. Peter Merkel and Karen
Walny of the Office of Associate Chief
Counsel (International). Other personnel
from the Treasury Department and the
IRS also participated in their develop-
ment.
* * * * *
## Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 1 is
amended as follows:
PART 1-INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by revising the entry for
§1.863-7 and adding an entry for §1.871-
15 to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
§1.863-7 also issued under 26 U.S.C.
863(a) and 871(m). *
§1.871-15 also issued under 26 U.S.C.
871(m). * * *
Par. 2. Section 1.863-7 is amended by:
1\. Revising paragraph (a)(1).
2\. In paragraph (a)(2), revising the head-
ing and adding a sentence at the end.
The revisions and addition read as fol-
lows:
§1.863-7 Allocation of income
attributable to certain notional principal
contracts under section 863(a).
(a) Scope-(1) Introduction. This sec-
tion provides rules relating to the source
and, in certain cases, the character of no-
tional principal contract income. How-
ever, this section does not apply to income
from a section 988 transaction within the
meaning of section 988 and the regula-
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tions thereunder, relating to the treatment
of certain nonfunctional currency transac-
tions. Further, this section does not apply
to a dividend equivalent described in sec-
tion 871(m) and the regulations thereun-
der. Notional principal contract income is
income attributable to a notional principal
contract as defined in §1.446-3(c). An
agreement between a taxpayer and a qual-
ified business unit (as defined in section
989(a)) of the taxpayer, or among quali-
fied business units of the same taxpayer, is
not a notional principal contract, because
a taxpayer cannot enter into a contract
with itself.
(2) Effective/applicability date.
With respect to a dividend equivalent de-
scribed in section 871(m) and the regula-
tions thereunder, this section applies to
payments made on or after January 23,
2012.
* * * * *
## §1.863-7T [Removed].
Par. 3. Section 1.863-7T is removed.
Par. 4. Section 1.871-15 is added as
follows:
§1.871-15 Treatment of dividend
equivalents.
(a) through (c) [Reserved].
(d) Specified NPCs-(1) Specified
NPCs before January 1, 2016. For pay-
ments made after March 18, 2012, and
before January 1, 2016, a specified NPC is
any NPC if-
(i) In connection with entering into the
contract, any long party to the contract
transfers the underlying security to any
short party to the contract;
(ii) In connection with the termination
of the contract, any short party to the
contract transfers the underlying security
to any long party to the contract;
(iii) The underlying security is not
readily tradable on an established securi-
ties market; or
(iv) In connection with entering into
the contract, the underlying security is
posted as collateral by any short party to
the contract with any long party to the
contract.
(d)(2) through (n) [Reserved].
(o) Effective/applicability date. This
section applies to payments made on or
after January 23, 2012.
§1.871-15T [Removed].
Par. 5. Section 1.871-15T is removed.
§1.871-16T [Removed].
Par. 6. Section 1.871-16T is removed.
Par. 7. Section 1.881-2 is amended by:
1\. Revising paragraph (b)(3).
2\. In paragraph (e), revising the heading
and adding a sentence at the end.
The revisions and addition read as fol-
lows:
§1.881-2 Taxation of foreign
corporations not engaged in U.S.
business.
* * * * *
(b) * * *
(3) Dividend Equivalents. For rules ap-
plicable to a foreign corporation's receipt
of a dividend equivalent, see section
871(m) and the regulations thereunder.
* * * * *
(e) Effective/applicability date.
Paragraph (b)(3) of this section applies to
payments made on or after January 23,
2012. * * *
### §1.881-2T [Removed].
Par. 8. Section 1.881-2T is removed.
Par. 9. Section 1.892-3 is added to read
as follows:
§1.892-3 Income of foreign
governments.
(a)(1) through (a)(5) [Reserved]. For
further information, see §1.892-
3T(a)(1) through (a)(5).
(6) Dividend equivalents. Income from
investments in stocks includes the pay-
ment of a dividend equivalent described in
section 871(m) and the regulations there-
under.
(b) [Reserved]. For further informa-
tion, see §1.892-3T(b).
(c) Effective/applicability date. Para-
graph (a)(6) of this section applies to pay-
ments made on or after December 5, 2013.
Par.10. Section 1.894-1 is amended
by:
1\. Redesignating paragraph (c) as (c)(1)
and adding paragraph (c)(2).
2\. In paragraph (e):
a. Revising the heading,
b. Revising the third sentence, and
c. Adding a new fourth sentence.
The addition and revisions read as fol-
lows:
§1.894-1 Income affected by treaty.
* * * * *
(c) * * *
(2) Dividend equivalents. The provi-
sions of an income tax convention relating
to dividends paid to or derived by a for-
eign person apply to the payment of a
dividend equivalent described in section
871(m) and the regulations thereunder.
* * * * *
(e) Effective/applicability date.
Paragraph (c)(1) of this section applies to
payments made after November 13, 1997.
Paragraph (c)(2) of this section applies to
payments made on or after December 5,
2013. * * *
Par. 11. Section 1.1441-2 is amended
by:
1\. Revising paragraph (b)(6).
2\.
Adding a sentence to the end of para-
graph (f).
The revision and addition read as fol-
lows:
§1.1441-2 Amounts subject to
withholding.
* * * * *
(b) * * *
(6) Dividend equivalents. Amounts
subject to withholding include a dividend
equivalent described in section 871(m)
and the regulations thereunder. For this
purpose, the amount of a dividend equiv-
alent includes any gross amount that is
used in computing any net amount that is
transferred to or from the taxpayer under
the terms of the transaction or any other
payment described in section 871(m) and
the regulations thereunder.
* * * * *
(f) Effective/applicability date.
Paragraph (b)(6) of this section applies to
payments made on or after January 23,
2012.
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### §1.1441-2T [Removed].
Par. 12. Section 1.1441-2T is re-
moved.
Par. 13. Section 1.1441-3 is amended
by:
1\. Revising paragraph (h).
2\. Removing paragraph (i).
3\. Redesignating paragraph (j) as
newly-designated paragraph (i) and re-
moving the language "paragraph (g)"
from newly-redesignated paragraph (i)
and adding "paragraphs (g) and (h)" in its
place.
The revisions read as follows:
§1.1441-3 Determination of amounts to
be withheld.
** * * *
(h) Dividend equivalents-(1) With-
holding on gross amount. The gross
amount of a dividend equivalent described
in section 871(m) and the regulations
thereunder is subject to withholding in an
amount equal to the gross amount of the
dividend equivalent used in computing
any net amount that is transferred to or
from the taxpayer.
(2) Effective/applicability date. This
paragraph (h) applies to payments made
on or after January 23, 2012.
* * * * *
## §1.1441-3T [Removed].
Par. 14. Section 1.1441-3T is re-
moved.
Par. 15. Section 1.1441-4 is amended
by:
1\. Revising paragraphs (a)(3)(i) and (iii).
2\. Revising the heading to paragraph (g).
3\. Removing the language "2000." in
paragraph (g)(1) and adding "2000, except
that paragraph (a)(3)(iii) of this section ap-
plies to payments made on or after January
23, 2013." in its place.
The revisions read as follows:
§1.1441-4 Exemptions from withholding
for certain effectively connected income
and other amounts.
(a) * * *
(3) Income on notional principal con-
tracts-(i) General rule. Except as other-
wise provided in paragraph (a)(3)(iii) of
this section, a withholding agent that pays
amounts attributable to a notional princi-
pal contract described in §1.863-7(a) or
§1.988-2(e) shall have no obligation to
withhold on the amounts paid under the
terms of the notional principal contract
regardless of whether a withholding cer-
tificate is provided. However, a withhold-
ing agent must file returns under §1.1461-
1(b) and (c) reporting the income that it
must treat as effectively connected with
the conduct of a trade or business in the
United States under the provisions of this
paragraph (a)(3). Except as otherwise pro-
vided in paragraph (a)(3)(ii) of this sec-
tion, a withholding agent must treat the
income as effectively connected with the
conduct of a U.S. trade or business if the
income is paid to, or to the account of, a
qualified business unit of a foreign person
located in the United States or, if the pay-
ment is paid to, or to the account of, a
qualified business unit of a foreign person
located outside the United States, the
withholding agent knows, or has reason to
know, the payment is effectively con-
nected with the conduct of a trade or busi-
ness within the United States. Income on a
notional principal contract does not in-
clude the amount characterized as interest
under the provisions of §1.446-3(g)(4).
* * * * *
(iii) Exception for specified notional
principal contracts. A withholding agent
that makes a payment attributable to a
specified notional principal contract de-
scribed in section 871(m) and the regula-
tions thereunder that is not treated as ef-
fectively connected with the conduct of a
trade or business within the United States
is obligated to withhold on the amount of
the payment that is a dividend equivalent.
* * * * *
(g) Effective/applicability date -*
* * * * *
## §1.1441-4T [Removed].
Par. 16. Section 1.1441-4T is re-
moved.
Par. 17. Section 1.1441-6 is amended
by:
1\. Revising paragraph (c)(2).
2\. Redesignating paragraph (h) as para-
graph (i) and revising newly-redesignated
paragraph (i)(1).
3\. Adding a new paragraph (h).
The revisions and addition read as fol-
lows:
§1.1441-6 Claim of reduced
withholding under an income tax treaty.
* * * * *
(c) * * *
(2) Income to which special rules ap-
ply. The income to which paragraph (c)(1)
of this section applies is dividends and
interest from stocks and debt obligations
that are actively traded, dividends from
any redeemable security issued by an in-
vestment company registered under the
Investment Company Act of 1940 (15
U.S.C. 80a-1), dividends, interest, or roy-
alties from units of beneficial interest in a
unit investment trust that are (or were
upon issuance) publicly offered and are
registered with the Securities and Ex-
change Commission under the Securities
Act of 1933 (15 U.S.C. 77a), and amounts
paid with respect to loans of securities
described in this paragraph (c)(2). With
respect to a dividend equivalent described
in section 871(m) and the regulations
thereunder, this paragraph (c)(2) applies
to the extent that the underlying security
described in section 871(m) and the reg-
ulations thereunder satisfies the require-
ments of this paragraph (c)(2). For pur-
poses of this paragraph (c)(2), a stock or
debt obligation is actively traded if it is
actively traded within the meaning of sec-
tion 1092(d) and §1.1092(d)-1 when doc-
umentation is provided.
* * * * *
(h) Dividend equivalents. The rate of
withholding on a dividend equivalent may
be reduced to the extent provided under an
income tax treaty in effect between the
United States and a foreign country. For
this purpose, a dividend equivalent as de-
scribed in section 871(m) and the regula-
tions thereunder is treated as a dividend
from sources within the United States. To
receive a reduced rate of withholding with
respect to a dividend equivalent, a foreign
person must satisfy the other requirements
described in this section.
(i) Effective/applicability dates-(1)
General rule. This section applies to pay-
ments made after December 31, 2000, ex-
cept that-
(i) Paragraph (g) of this section applies
to payments made after December 31,
2001, and
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<!-- PageBreak -->
(ii) Paragraph (h) of this section ap-
plies to payments made on or after De-
cember 5, 2013.
* * * * *
Par. 18. Section 1.1441-7 is amended
by:
1\. Removing paragraph (a)(3).
2\. Redesignating paragraph (a)(2) as
paragraph (a)(3) and revising newly-
redesignated paragraph (a)(3).
3\. Adding a new paragraph (a)(2).
4\. Adding a new paragraph (a)(4).
5\. Revising paragraph (g).
The revisions and additions read as fol-
lows:
§1.1441-7 General provisions relating
to withholding agents.
(a) * * *
(2) Withholding agent with respect to
dividend equivalents. Each person that is a
party to any contract or arrangement that
provides for the payment of a dividend
equivalent, as described in section 871(m)
and the regulations thereunder, is treated
as having control and custody of the pay-
ment.
(3) Examples. The following examples
illustrate the rules of paragraphs (a)(1)
and (a)(2) of this section:
Example 1. USB is a broker organized in the
United States. USB pays U.S. source dividends and
interest, which are amounts subject to withholding
under § 1.1441-2(a), to FC, a foreign corporation
that has an investment account with USB. USB is a
withholding agent as defined in paragraph (a)(1) of
this section.
Example 2. USB is a bank organized in the
United States. FB is a bank organized in country X.
FB has an omnibus account with USB through which
FB invests in debt and equity instruments that pay
amounts subject to withholding as defined in
§ 1.1441-2(a). FB is a nonqualified intermediary, as
defined in § 1.1441-1(c)(14). Both USB and FB are
withholding agents as defined in paragraph (a)(1) of
this section.
Example 3. The facts are the same as in Example
2, except that FB is a qualified intermediary. Both
USB and FB are withholding agents as defined in
paragraph (a)(1) of this section.
Example 4. FB is a bank organized in country X.
FB has a branch in the United States. FB's branch
has customers that are foreign persons who receive
amounts subject to withholding, as defined in
§1.1441-2(a). FB is a withholding agent under para-
graph (a)(1) of this section and is required to with-
hold and report payments of amounts subject to
withholding in accordance with chapter 3 of the
Internal Revenue Code.
Example 5. X is a foreign corporation. X pays
dividends to shareholders who are foreign persons.
Under section 861(a)(2)(B), a portion of the divi-
dends are from sources within the United States and
constitute amounts subject to withholding within the
meaning of §1.1441-2(a). The dividends are not
subject to tax under section 884(a). See section
884(e)(3). X is a withholding agent under paragraph
(a)(1) of this section.
Example 6. FC, a foreign corporation, enters into
a notional principal contract (NPC) with Bank X, a
bank organized in the United States. The NPC is a
specified NPC for purposes of section 871(m) and
the regulations thereunder. FC is the long party to the
contract and Bank X is the short party. The NPC
references a specified number of shares of dividend-
paying common stock issued by a domestic corpo-
ration. As the long party, FC receives payments from
Bank X based on any appreciation in the value of the
common stock and dividends paid with respect to the
common stock. As the short party, Bank X receives
payment from FC based on any depreciation in the
value of the common stock and a payment based on
LIBOR. Bank X is a withholding agent because
Bank X is deemed to have control and custody of a
dividend equivalent as a party to the NPC. If FC's
tax liability under section 881 has not been satisfied
in full by Bank X as withholding agent, FC is re-
quired to file a return on Form 1120-F (U.S. Income
Tax Return of a Foreign Corporation).
(4) Effective/applicability date. Para-
graph (a)(2) of this section and Example 6
apply on or after January 23, 2012.
* * * * *
(g) Effective/applicability date. Except
as otherwise provided in paragraphs (a)(4)
and (f)(3) of this section, this section ap-
plies to payments made after December
31, 2000.
§1.1441-7T [Removed].
Par. 19. Section 1.1441-7T is re-
moved.
Par. 20. Section 1.1461-1 is amended
by:
1\. Revising paragraph (c)(2)(i)(L).
2\. Adding paragraph (c)(2)(iii).
The revision and addition read as fol-
lows:
§1.1461-1 Payment and returns of tax
withheld.
* * * * *
(c) * * *
(2) * * *
(i) * * *
(L) Dividend equivalents as described
in section 871(m) and the regulations
thereunder;
* * * * *
(iii) Effective/applicability date. Para-
graph (c)(2)(i)(L) of this section applies
on or after January 23, 2012.
* * * * *
§1.1461-1T [Removed].
Par. 21. Section 1.1461-1T is re-
moved.
John Dalrymple,
Deputy Commissioner for
Services and Enforcement.
Approved November 26, 2013
Mark J. Mazur,
Assistant Secretary of the Treasury
(Tax Policy).
(Filed by the Office of the Federal Register on December 4,
2013, 8:45 a.m., and published in the issue of the Federal
Register for December 5, 2013, 78 F.R. 73079)
Section 6621 .-
Determination of Rate of
Interest
26 CFR 301.6621-1: Interest rate.
Rev. Rul. 2013-25
Section 6621 of the Internal Revenue
Code establishes the interest rates on
overpayments and underpayments of tax.
Under section 6621(a)(1), the overpay-
ment rate is the sum of the federal short-
term rate plus 3 percentage points (2 per-
centage points in the case of a
corporation), except the rate for the por-
tion of a corporate overpayment of tax
exceeding $10,000 for a taxable period is
the sum of the federal short-term rate plus
0.5 of a percentage point. Under section
6621(a)(2), the underpayment rate is the
sum of the federal short-term rate plus 3
percentage points.
Section 6621(c) provides that for pur-
poses of interest payable under section
6601 on any large corporate underpay-
ment, the underpayment rate under section
6621(a)(2) is determined by substituting
"5 percentage points" for "3 percentage
points." See section 6621(c) and section
301.6621-3 of the Regulations on Proce-
dure and Administration for the definition
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of a large corporate underpayment and for
the rules for determining the applicable
date. Section 6621(c) and section
301.6621-3 are generally effective for pe-
riods after December 31, 1990.
Section 6621(b)(1) provides that the
Secretary will determine the federal short-
term rate for the first month in each cal-
endar quarter. Section 6621(b)(2)(A) pro-
vides that the federal short-term rate
determined under section 6621(b)(1) for
any month applies during the first calen-
dar quarter beginning after that month.
Section 6621(b)(2)(B) provides that in de-
termining the addition to tax under section
6654 for failure to pay estimated tax for
any taxable year, the federal short-term
rate that applies during the third month
following the taxable year also applies
during the first 15 days of the fourth
month following the taxable year. Section
6621(b)(3) provides that the federal short-
term rate for any month is the federal
short-term rate determined during that
month by the Secretary in accordance
with section 1274(d), rounded to the near-
est full percent (or, if a multiple of 1/2 of
1 percent, the rate is increased to the next
highest full percent).
Notice 88-59, 1988-1 C.B. 546, an-
nounced that in determining the quarterly
interest rates to be used for overpayments
and underpayments of tax under section
6621, the Internal Revenue Service will
use the federal short-term rate based on
daily compounding because that rate is
most consistent with section 6621 which,
pursuant to section 6622, is subject to
daily compounding.
The federal short-term rate determined
in accordance with section 1274(d) during
October 2013 is the rate published in Rev-
enue Ruling 2013-22, 2013-46 I.R.B.
496 to take effect beginning November 1,
2013. The federal short-term rate, rounded
to the nearest full percent, based on daily
compounding determined during the
month of October 2013 is 0 percent. Ac-
cordingly, an overpayment rate of 3 per-
cent (2 percent in the case of a corpora-
tion) and an underpayment rate of 3
percent are established for the calendar
quarter beginning January 1, 2014. The
overpayment rate for the portion of a cor-
porate overpayment exceeding $10,000
for the calendar quarter beginning January
1, 2014, is 0.5 percent. The underpayment
rate for large corporate underpayments for
the calendar quarter beginning January 1,
2014, is 5 percent. These rates apply to
amounts bearing interest during that cal-
endar quarter.
The 3 percent rate also applies to esti-
mated tax underpayments for the first cal-
endar quarter in 2014.
Interest factors for daily compound in-
terest for annual rates of 0.5 percent are
published in Appendix A of this Revenue
Ruling. Interest factors for daily com-
pound interest for annual rates of 2 per-
cent, 3 percent and 5 percent are published
in Tables 9, 11, and 15 of Rev. Proc.
95-17, 1995-1 C.B. 563, 565, and 569.
Annual interest rates to be com-
pounded daily pursuant to section 6622
that apply for prior periods are set forth in
the tables accompanying this revenue rul-
ing.
## DRAFTING INFORMATION
The principal author of this revenue
ruling is Deborah Colbert-James of the
Office of Associate Chief Counsel (Proce-
dure & Administration). For further infor-
mation regarding this revenue ruling, con-
tact Ms. Colbert-James at (202) 317-3400
(not a toll-free call).
APPENDIX A
365 Day Year 0.5% Compound Rate 184 Days Days Factor Days Factor Days Factor
1
0.000013699
63
0.000863380
125
0.001713784
2
0.000027397
64
0.000877091
126
0.001727506
3
0.000041096
65
0.000890801
127
0.001741228
4
0.000054796
66
0.000904512
128
0.001754951
5
0.000068495
67
0.000918223
129
0.001768673
6
0.000082195
68
0.000931934
130
0.001782396
7
0.000095894
69
0.000945646
131
0.001796119
8
0.000109594
70
0.000959357
132
0.001809843
9
0.000123294
71
0.000973069
133
0.001823566
10
0.000136995
72
0.000986781
134
0.001837290
11
0.000150695
73
0.001000493
135
0.001851013
12
0.000164396
74
0.001014206
136
0.001864737
13
0.000178097
75
0.001027918
137
0.001878462
14
0.000191798
76
0.001041631
138
0.001892186
15
0.000205499
77
0.001055344
139
0.001905910
16
0.000219201
78
0.001069057
140
0.001919635
17
0.000232902
79
0.001082770
141
0.001933360
18
0.000246604
80
0.001096484
142
0.001947085
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365 Day Year
0.5% Compound Rate 184 Days
Days
Factor
Days
Factor
Days
Factor
19
0.000260306
81
0.001110197
143
0.001960811
20
0.000274008
82
0.001123911
144
0.001974536
21
0.000287711
83
0.001137625
145
0.001988262
22
0.000301413
84
0.001151339
146
0.002001988
23
0.000315116
85
0.001165054
147
0.002015714
24
0.000328819
86
0.001178768
148
0.002029440
25
0.000342522
87
0.001192483
149
0.002043166
26
0.000356225
88
0.001206198
150
0.002056893
27
0.000369929
89
0.001219913
151
0.002070620
28
0.000383633
90
0.001233629
152
0.002084347
29
0.000397336
91
0.001247344
153
0.002098074
30
0.000411041
92
0.001261060
154
0.002111801
31
0.000424745
93
0.001274776
155
0.002125529
32
0.000438449
94
0.001288492
156
0.002139257
33
0.000452154
95
0.001302208
157
0.002152985
34
0.000465859
96
0.001315925
158
0.002166713
35
0.000479564
97
0.001329641
159
0.002180441
36
0.000493269
98
0.001343358
160
0.002194169
37
0.000506974
99
0.001357075
161
0.002207898
38
0.000520680
100
0.001370792
162
0.002221627
39
0.000534386
101
0.001384510
163
0.002235356
40
0.000548092
102
0.001398227
164
0.002249085
41
0.000561798
103
0.001411945
165
0.002262815
42
0.000575504
104
0.001425663
166
0.002276544
43
0.000589211
105
0.001439381
167
0.002290274
44
0.000602917
106
0.001453100
168
0.002304004
45
0.000616624
107
0.001466818
169
0.002317734
46
0.000630331
108
0.001480537
170
0.002331465
47
0.000644039
109
0.001494256
171
0.002345195
48
0.000657746
110
0.001507975
172
0.002358926
49
0.000671454
111
0.001521694
173
0.002372657
50
0.000685161
112
0.001535414
174
0.002386388
51
0.000698869
113
0.001549133
175
0.002400120
52
0.000712578
114
0.001562853
176
0.002413851
53
0.000726286
115
0.001576573
177
0.002427583
54
0.000739995
116
0.001590293
178
0.002441315
55
0.000753703
117
0.001604014
179
0.002455047
56
0.000767412
118
0.001617734
180
0.002468779
57
0.000781121
119
0.001631455
181
0.002482511
58
0.000794831
120
0.001645176
182
0.002496244
59
0.000808540
121
0.001658897
183
0.002509977
60
0.000822250
122
0.001672619
184
0.002523710
61
0.000835960
123
0.001686340
62
0.000849670
124
0.001700062
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### 366 Day Year 0.5% Compound Rate 184 Days
Days
Factor
Days
Factor
Days
Factor
1
0.000013661
63
0.000861020
125
0.001709097
2
0.000027323
64
0.000874693
126
0.001722782
3
0.000040984
65
0.000888366
127
0.001736467
4
0.000054646
66
0.000902040
128
0.001750152
5
0.000068308
67
0.000915713
129
0.001763837
6
0.000081970
68
0.000929387
130
0.001777522
7
0.000095632
69
0.000943061
131
0.001791208
8
0.000109295
70
0.000956735
132
0.001804893
9
0.000122958
71
0.000970409
133
0.001818579
10
0.000136620
72
0.000984084
134
0.001832265
11
0.000150283
73
0.000997758
135
0.001845951
12
0.000163947
74
0.001011433
136
0.001859638
13
0.000177610
75
0.001025108
137
0.001873324
14
0.000191274
76
0.001038783
138
0.001887011
15
0.000204938
77
0.001052459
139
0.001900698
16
0.000218602
78
0.001066134
140
0.001914385
17
0.000232266
79
0.001079810
141
0.001928073
18
0.000245930
80
0.001093486
142
0.001941760
19
0.000259595
81
0.001107162
143
0.001955448
20
0.000273260
82
0.001120839
144
0.001969136
21
0.000286924
83
0.001134515
145
0.001982824
22
0.000300590
84
0.001148192
146
0.001996512
23
0.000314255
85
0.001161869
147
0.002010201
24
0.000327920
86
0.001175546
148
0.002023889
25
0.000341586
87
0.001189223
149
0.002037578
26
0.000355252
88
0.001202900
150
0.002051267
27
0.000368918
89
0.001216578
151
0.002064957
28
0.000382584
90
0.001230256
152
0.002078646
29
0.000396251
91
0.001243934
153
0.002092336
30
0.000409917
92
0.001257612
154
0.002106025
31
0.000423584
93
0.001271291
155
0.002119715
32
0.000437251
94
0.001284969
156
0.002133405
33
0.000450918
95
0.001298648
157
0.002147096
34
0.000464586
96
0.001312327
158
0.002160786
35
0.000478253
97
0.001326006
159
0.002174477
36
0.000491921
98
0.001339685
160
0.002188168
37
0.000505589
99
0.001353365
161
0.002201859
38
0.000519257
100
0.001367044
162
0.002215550
39
0.000532925
101
0.001380724
163
0.002229242
40
0.000546594
102
0.001394404
164
0.002242933
41
0.000560262
103
0.001408085
165
0.002256625
42
0.000573931
104
0.001421765
166
0.002270317
43
0.000587600
105
0.001435446
167
0.002284010
44
0.000601269
106
0.001449127
168
0.002297702
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366 Day Year 0.5% Compound Rate 184 Days
Days
Factor
Days
Factor
Days
Factor
45
0.000614939
107
0.001462808
169
0.002311395
46
0.000628608
108
0.001476489
170
0.002325087
47
0.000642278
109
0.001490170
171
0.002338780
48
0.000655948
110
0.001503852
172
0.002352473
49
0.000669618
111
0.001517533
173
0.002366167
50
0.000683289
112
0.001531215
174
0.002379860
51
0.000696959
113
0.001544897
175
0.002393554
52
0.000710630
114
0.001558580
176
0.002407248
53
0.000724301
115
0.001572262
177
0.002420942
54
0.000737972
116
0.001585945
178
0.002434636
55
0.000751643
117
0.001599628
179
0.002448331
56
0.000765315
118
0.001613311
180
0.002462025
57
0.000778986
119
0.001626994
181
0.002475720
58
0.000792658
120
0.001640678
182
0.002489415
59
0.000806330
121
0.001654361
183
0.002503110
60
0.000820003
122
0.001668045
184
0.002516806
61
0.000833675
123
0.001681729
62
0.000847348
124
0.001695413
TABLE OF INTEREST RATES PERIODS BEFORE JUL. 1, 1975 - PERIODS ENDING DEC. 31, 1986 OVERPAYMENTS AND UNDERPAYMENTS
PERIOD
RATE
In 1995-1 C.B. DAILY RATE TABLE
Before Jul. 1, 1975
6%
Table 2, pg. 557
Jul. 1, 1975-Jan. 31, 1976
9%
Table 4, pg. 559
Feb. 1, 1976-Jan. 31, 1978
7%
Table 3, pg. 558
Feb. 1, 1978-Jan. 31, 1980
6%
Table 2, pg. 557
Feb. 1, 1980-Jan. 31, 1982
12%
Table 5, pg. 560
Feb. 1, 1982-Dec. 31, 1982
20%
Table 6, pg. 560
Jan. 1, 1983-Jun. 30, 1983
16%
Table 37, pg. 591
Jul. 1, 1983-Dec. 31, 1983
11%
Table 27, pg. 581
Jan. 1, 1984-Jun. 30, 1984
11%
Table 75, pg. 629
Jul. 1, 1984-Dec. 31, 1984
11%
Table 75, pg. 629
Jan. 1, 1985-Jun. 30, 1985
13%
Table 31, pg. 585
Jul. 1, 1985-Dec. 31, 1985
11%
Table 27, pg. 581
Jan. 1, 1986-Jun. 30, 1986
10%
Table 25, pg. 579
Jul. 1, 1986-Dec. 31, 1986
9%
Table 23, pg. 577
<!-- PageFooter="December 23, 2013" -->
<!-- PageFooter="Bulletin No. 2013-52" -->
<!-- PageBreak -->
TABLE OF INTEREST RATES FROM JAN. 1, 1987 - DEC. 31, 1998 OVERPAYMENTS UNDERPAYMENTS
RATE
1995-1 C.B. TABLE
PG
RATE
1995-1 C.B. TABLE
PG
Jan. 1, 1987-Mar. 31, 1987
8%
21
575
9%
23
577
Apr. 1, 1987-Jun. 30, 1987
8%
21
575
9%
23
577
Jul. 1, 1987-Sep. 30, 1987
8%
21
575
9%
23
577
Oct. 1, 1987-Dec. 31, 1987
9%
23
577
10%
25
579
Jan. 1, 1988-Mar. 31, 1988
10%
73
627
11%
75
629
Apr. 1, 1988-Jun. 30, 1988
9%
71
625
10%
73
627
Jul. 1, 1988-Sep. 30, 1988
9%
71
625
10%
73
627
Oct. 1, 1988-Dec. 31, 1988
10%
73
627
11%
75
629
Jan. 1, 1989-Mar. 31, 1989
10%
25
579
11%
27
581
Apr. 1, 1989-Jun. 30, 1989
11%
27
581
12%
29
583
Jul. 1, 1989-Sep. 30, 1989
11%
27
581
12%
29
583
Oct. 1, 1989-Dec. 31, 1989
10%
25
579
11%
27
581
Jan. 1, 1990-Mar. 31, 1990
10%
25
579
11%
27
581
Apr. 1, 1990-Jun. 30, 1990
10%
25
579
11%
27
581
Jul. 1, 1990-Sep. 30, 1990
10%
25
579
11%
27
581
Oct. 1, 1990-Dec. 31, 1990
10%
25
579
11%
27
581
Jan. 1, 1991-Mar. 31, 1991
10%
25
579
11%
27
581
Apr. 1, 1991-Jun. 30, 1991
9%
23
577
10%
25
579
Jul. 1, 1991-Sep. 30, 1991
9%
23
577
10%
25
579
Oct. 1, 1991-Dec. 31, 1991
9%
23
577
10%
25
579
Jan. 1, 1992-Mar. 31, 1992
8%
69
623
9%
71
625
Apr. 1, 1992-Jun. 30, 1992
7%
67
621
8%
69
623
Jul. 1, 1992-Sep. 30, 1992
7%
67
621
8%
69
623
Oct. 1, 1992-Dec. 31, 1992
6%
65
619
7%
67
621
Jan. 1, 1993-Mar. 31, 1993
6%
17
571
7%
19
573
Apr. 1, 1993-Jun. 30, 1993
6%
17
571
7%
19
573
Jul. 1, 1993-Sep. 30, 1993
6%
17
571
7%
19
573
Oct. 1, 1993-Dec. 31, 1993
6%
17
571
7%
19
573
Jan. 1, 1994-Mar. 31, 1994
6%
17
571
7%
19
573
Apr. 1, 1994-Jun. 30, 1994
6%
17
571
7%
19
573
Jul. 1, 1994-Sep. 30, 1994
7%
19
573
8%
21
575
Oct. 1, 1994-Dec. 31, 1994
8%
21
575
9%
23
577
Jan. 1, 1995-Mar. 31, 1995
8%
21
575
9%
23
577
Apr. 1, 1995-Jun. 30, 1995
9%
23
577
10%
25
579
Jul. 1, 1995-Sep. 30, 1995
8%
21
575
9%
23
577
Oct. 1, 1995-Dec. 31, 1995
8%
21
575
9%
23
577
Jan. 1, 1996-Mar. 31, 1996
8%
69
623
9%
71
625
Apr. 1, 1996-Jun. 30, 1996
7%
67
621
8%
69
623
Jul. 1, 1996-Sep. 30, 1996
8%
69
623
9%
71
625
Oct. 1, 1996-Dec. 31, 1996
8%
69
623
9%
71
625
Jan. 1, 1997-Mar. 31, 1997
8%
21
575
9%
23
577
Apr. 1, 1997-Jun. 30, 1997
8%
21
575
9%
23
577
<!-- PageFooter="Bulletin No. 2013-52" -->
<!-- PageFooter="December 23, 2013" -->
<!-- PageBreak -->
TABLE OF INTEREST RATES FROM JANUARY 1, 1999 - PRESENT NONCORPORATE OVERPAYMENTS AND UNDERPAYMENTS
TABLE OF INTEREST RATES FROM JAN. 1, 1987 - DEC. 31, 1998 OVERPAYMENTS UNDERPAYMENTS 1995-1 C.B. 1995-1 C.B. RATE TABLE PG RATE TABLE PG
Jul. 1, 1997-Sep. 30, 1997
8%
21
575
9%
23
577
Oct. 1, 1997-Dec. 31, 1997
8%
21
575
9%
23
577
Jan. 1, 1998-Mar. 31, 1998
8%
21
575
9%
23
577
Apr. 1, 1998-Jun. 30, 1998
7%
19
573
8%
21
575
Jul. 1, 1998-Sep. 30, 1998
7%
19
573
8%
21
575
Oct. 1, 1998-Dec. 31, 1998
7%
19
573
8%
21
575
RATE
1995-1 C.B. TABLE
PAGE
Jan. 1, 1999-Mar. 31, 1999
7%
19
573
Apr. 1, 1999-Jun. 30, 1999
8%
21
575
Jul. 1, 1999-Sep. 30, 1999
8%
21
575
Oct. 1, 1999-Dec. 31, 1999
8%
21
575
Jan. 1, 2000-Mar. 31, 2000
8%
69
623
Apr. 1, 2000-Jun. 30, 2000
9%
71
625
Jul. 1, 2000-Sep. 30, 2000
9%
71
625
Oct. 1, 2000-Dec. 31, 2000
9%
71
625
Jan. 1, 2001-Mar. 31, 2001
9%
23
577
Apr. 1, 2001-Jun. 30, 2001
8%
21
575
Jul. 1, 2001-Sep. 30, 2001
7%
19
573
Oct. 1, 2001-Dec. 31, 2001
7%
19
573
Jan. 1, 2002-Mar. 31, 2002
6%
17
571
Apr. 1, 2002-Jun. 30, 2002
6%
17
571
Jul. 1, 2002-Sep. 30, 2002
6%
17
571
Oct. 1, 2002-Dec. 31, 2002
6%
17
571
Jan. 1, 2003-Mar. 31, 2003
5%
15
569
Apr. 1, 2003-Jun. 30, 2003
5%
15
569
Jul. 1, 2003-Sep. 30, 2003
5%
15
569
Oct. 1, 2003-Dec. 31, 2003
4%
13
567
Jan. 1, 2004-Mar. 31, 2004
4%
61
615
Apr. 1, 2004-Jun. 30, 2004
5%
63
617
Jul. 1, 2004-Sep. 30, 2004
4%
61
615
Oct. 1, 2004-Dec. 31, 2004
5%
63
617
Jan. 1, 2005-Mar. 31, 2005
5%
15
569
Apr. 1, 2005-Jun. 30, 2005
6%
17
571
Jul. 1, 2005-Sep. 30, 2005
6%
17
571
Oct. 1, 2005-Dec. 31, 2005
7%
19
573
Jan. 1, 2006-Mar. 31, 2006
7%
19
573
<!-- PageFooter="December 23, 2013" -->
<!-- PageFooter="Bulletin No. 2013-52" -->
<!-- PageBreak -->
# TABLE OF INTEREST RATES FROM JANUARY 1, 1999 - PRESENT NONCORPORATE OVERPAYMENTS AND UNDERPAYMENTS
RATE
1995-1 C.B. TABLE
PAGE
Apr. 1, 2006-Jun. 30, 2006
7%
19
573
Jul. 1, 2006-Sep. 30, 2006
8%
21
575
Oct. 1, 2006-Dec. 31, 2006
8%
21
575
Jan. 1, 2007-Mar. 31, 2007
8%
21
575
Apr. 1, 2007-Jun. 30, 2007
8%
21
575
Jul. 1, 2007-Sep. 30, 2007
8%
21
575
Oct. 1, 2007-Dec. 31, 2007
8%
21
575
Jan. 1, 2008-Mar. 31, 2008
7%
67
621
Apr. 1, 2008-Jun. 30, 2008
6%
65
619
Jul. 1, 2008-Sep. 30, 2008
5%
63
617
Oct. 1, 2008-Dec. 31, 2008
6%
65
619
Jan. 1, 2009-Mar. 31, 2009
5%
15
569
Apr. 1, 2009-Jun. 30, 2009
4%
13
567
Jul. 1, 2009-Sep. 30, 2009
4%
13
567
Oct. 1, 2009-Dec. 31, 2009
4%
13
567
Jan. 1, 2010-Mar. 31, 2010
4%
13
567
Apr. 1, 2010-Jun. 30, 2010
4%
13
567
Jul. 1, 2010-Sep. 30, 2010
4%
13
567
Oct. 1, 2010-Dec. 31, 2010
4%
13
567
Jan. 1, 2011-Mar. 31, 2011
3%
11
565
Apr. 1, 2011-Jun. 30, 2011
4%
13
567
Jul. 1, 2011-Sep. 30, 2011
4%
13
567
Oct. 1, 2011-Dec. 31, 2011
3%
11
565
Jan. 1, 2012-Mar. 31, 2012
3%
59
613
Apr. 1, 2012-Jun. 30, 2012
3%
59
613
Jul. 1, 2012-Sep. 30, 2012
3%
59
613
Oct. 1, 2012-Dec. 31, 2012
3%
59
613
Jan. 1, 2013-Mar. 31, 2013
3%
11
565
Apr. 1, 2013-Jun. 30, 2013
3%
11
565
Jul. 1, 2013-Sep. 30, 2013
3%
11
565
Oct. 1, 2013-Dec. 31, 2013
3%
11
565
Jan. 1, 2014-Mar. 31, 2014
3%
11
565
TABLE OF INTEREST RATES FROM JANUARY 1, 1999 - PRESENT CORPORATE OVERPAYMENTS AND UNDERPAYMENTS
OVERPAYMENTS
UNDERPAYMENTS
RATE
1995-1 C.B. TABLE
PG
RATE
1995-1 C.B. TABLE
PG
Jan. 1, 1999-Mar. 31, 1999
6%
17
571
7%
19
573
Apr. 1, 1999-Jun. 30, 1999
7%
19
573
8%
21
575
<!-- PageFooter="Bulletin No. 2013-52" -->
<!-- PageFooter="December 23, 2013" -->
<!-- PageBreak -->
## TABLE OF INTEREST RATES FROM JANUARY 1, 1999 - PRESENT CORPORATE OVERPAYMENTS AND UNDERPAYMENTS
OVERPAYMENTS
UNDERPAYMENTS
RATE
1995-1 C.B. TABLE
PG
RATE
1995-1 C.B. TABLE
PG
Jul. 1, 1999-Sep. 30, 1999
7%
19
573
8%
21
575
Oct. 1, 1999-Dec. 31, 1999
7%
19
573
8%
21
575
Jan. 1, 2000-Mar. 31, 2000
7%
67
621
8%
69
623
Apr. 1, 2000-Jun. 30, 2000
8%
69
623
9%
71
625
Jul. 1, 2000-Sep. 30, 2000
8%
69
623
9%
71
625
Oct. 1, 2000-Dec. 31, 2000
8%
69
623
9%
71
625
Jan. 1, 2001-Mar. 31, 2001
8%
21
575
9%
23
577
Apr. 1, 2001-Jun. 30, 2001
7%
19
573
8%
21
575
Jul. 1, 2001-Sep. 30, 2001
6%
17
571
7%
19
573
Oct. 1, 2001-Dec. 31, 2001
6%
17
571
7%
19
573
Jan. 1, 2002-Mar. 31, 2002
5%
15
569
6%
17
571
Apr. 1, 2002-Jun. 30, 2002
5%
15
569
6%
17
571
Jul. 1, 2002-Sep. 30, 2002
5%
15
569
6%
17
571
Oct. 1, 2002-Dec. 31, 2002
5%
15
569
6%
17
571
Jan. 1, 2003-Mar. 31, 2003
4%
13
567
5%
15
569
Apr. 1, 2003-Jun. 30, 2003
4%
13
567
5%
15
569
Jul. 1, 2003-Sep. 30, 2003
4%
13
567
5%
15
569
Oct. 1, 2003-Dec. 31, 2003
3%
11
565
4%
13
567
Jan. 1, 2004-Mar. 31, 2004
3%
59
613
4%
61
615
Apr. 1, 2004-Jun. 30, 2004
4%
61
615
5%
63
617
Jul. 1, 2004-Sep. 30, 2004
3%
59
613
4%
61
615
Oct. 1, 2004-Dec. 31, 2004
4%
61
615
5%
63
617
Jan. 1, 2005-Mar. 31, 2005
4%
13
567
5%
15
569
Apr. 1, 2005-Jun. 30, 2005
5%
15
569
6%
17
571
Jul. 1, 2005-Sep. 30, 2005
5%
15
569
6%
17
571
Oct. 1, 2005-Dec. 31, 2005
6%
17
571
7%
19
573
Jan. 1, 2006-Mar. 31, 2006
6%
17
571
7%
19
573
Apr. 1, 2006-Jun. 30, 2006
6%
17
571
7%
19
573
Jul. 1, 2006-Sep. 30, 2006
7%
19
573
8%
21
575
Oct. 1, 2006-Dec. 31, 2006
7%
19
573
8%
21
575
Jan. 1, 2007-Mar. 31, 2007
7%
19
573
8%
21
575
Apr. 1, 2007-Jun. 30, 2007
7%
19
573
8%
21
575
Jul. 1, 2007-Sep. 30, 2007
7%
19
573
8%
21
575
Oct. 1, 2007-Dec. 31, 2007
7%
19
573
8%
21
575
Jan. 1, 2008-Mar. 31, 2008
6%
65
619
7%
67
621
Apr. 1, 2008-Jun. 30, 2008
5%
63
617
6%
65
619
Jul. 1, 2008-Sep. 30, 2008
4%
61
615
5%
63
617
Oct. 1, 2008-Dec. 31, 2008
5%
63
617
6%
65
619
Jan. 1, 2009-Mar. 31, 2009
4%
13
567
5%
15
569
Apr. 1, 2009-Jun. 30, 2009
3%
11
565
4%
13
567
Jul. 1, 2009-Sep. 30, 2009
3%
11
565
4%
13
567
<!-- PageFooter="December 23, 2013" -->
<!-- PageFooter="Bulletin No. 2013-52" -->
<!-- PageBreak -->
### TABLE OF INTEREST RATES FROM JANUARY 1, 1999 - PRESENT CORPORATE OVERPAYMENTS AND UNDERPAYMENTS
OVERPAYMENTS
UNDERPAYMENTS
RATE
1995-1 C.B. TABLE
PG
RATE
1995-1 C.B. TABLE
PG
Oct. 1, 2009-Dec. 31, 2009
3%
11
565
4%
13
567
Jan. 1, 2010-Mar. 31, 2010
3%
11
565
4%
13
567
Apr. 1, 2010-Jun. 30, 2010
3%
11
565
4%
13
567
Jul. 1, 2010-Sep. 30, 2010
3%
11
565
4%
13
567
Oct. 1, 2010-Dec. 31, 2010
3%
11
565
4%
13
567
Jan. 1, 2011-Mar. 31, 2011
2%
9
563
3%
11
565
Apr. 1, 2011-Jun. 30, 2011
3%
11
565
4%
13
567
Jul. 1, 2011-Sep. 30, 2011
3%
11
565
4%
13
567
Oct. 1, 2011-Dec. 31, 2011
2%
9
563
3%
11
565
Jan. 1, 2012-Mar. 31, 2012
2%
57
611
3%
59
613
Apr. 1, 2012-Jun. 30, 2012
2%
57
611
3%
59
613
Jul. 1, 2012-Sep. 30, 2012
2%
57
611
3%
59
613
Oct. 1, 2012-Dec. 31, 2012
2%
57
611
3%
59
613
Jan. 1, 2013-Mar. 31, 2013
2%
9
563
3%
11
565
Apr. 1, 2013-Jun. 30, 2013
2%
9
563
3%
11
565
Jul. 1, 2013-Sep. 30, 2013
2%
9
563
3%
11
565
Oct. 1, 2013-Dec. 31, 2013
2%
9
563
3%
11
565
Jan. 1, 2014-Mar. 31, 2014
2%
9
563
3%
11
565
TABLE OF INTEREST RATES FOR LARGE CORPORATE UNDERPAYMENTS FROM JANUARY 1, 1991 - PRESENT
RATE
1995-1 C.B. TABLE
PG
Jan. 1, 1991-Mar. 31, 1991
13%
31
585
Apr. 1, 1991-Jun. 30, 1991
12%
29
583
Jul. 1, 1991-Sep. 30, 1991
12%
29
583
Oct. 1, 1991-Dec. 31, 1991
12%
29
583
Jan. 1, 1992-Mar. 31, 1992
11%
75
629
Apr. 1, 1992-Jun. 30, 1992
10%
73
627
Jul. 1, 1992-Sep. 30, 1992
10%
73
627
Oct. 1, 1992-Dec. 31, 1992
9%
71
625
Jan. 1, 1993-Mar. 31, 1993
9%
23
577
Apr. 1, 1993-Jun. 30, 1993
9%
23
577
Jul. 1, 1993-Sep. 30, 1993
9%
23
577
Oct. 1, 1993-Dec. 31, 1993
9%
23
577
Jan. 1, 1994-Mar. 31, 1994
9%
23
577
Apr. 1, 1994-Jun. 30, 1994
9%
23
577
Jul. 1, 1994-Sep. 30, 1994
10%
25
579
Oct. 1, 1994-Dec. 31, 1994
11%
27
581
<!-- PageFooter="Bulletin No. 2013-52" -->
<!-- PageFooter="December 23, 2013" -->
<!-- PageBreak -->
### TABLE OF INTEREST RATES FOR LARGE CORPORATE UNDERPAYMENTS FROM JANUARY 1, 1991 - PRESENT
RATE
1995-1 C.B. TABLE
PG
Jan. 1, 1995-Mar. 31, 1995
11%
27
581
Apr. 1, 1995-Jun. 30, 1995
12%
29
583
Jul. 1, 1995-Sep. 30, 1995
11%
27
581
Oct. 1, 1995-Dec. 31, 1995
11%
27
581
Jan. 1, 1996-Mar. 31, 1996
11%
75
629
Apr. 1, 1996-Jun. 30, 1996
10%
73
627
Jul. 1, 1996-Sep. 30, 1996
11%
75
629
Oct. 1, 1996-Dec. 31, 1996
11%
75
629
Jan. 1, 1997-Mar. 31, 1997
11%
27
581
Apr. 1, 1997-Jun. 30, 1997
11%
27
581
Jul. 1, 1997-Sep. 30, 1997
11%
27
581
Oct. 1, 1997-Dec. 31, 1997
11%
27
581
Jan. 1, 1998-Mar. 31, 1998
11%
27
581
Apr. 1, 1998-Jun. 30, 1998
10%
25
579
Jul. 1, 1998-Sep. 30, 1998
10%
25
579
Oct. 1, 1998-Dec. 31, 1998
10%
25
579
Jan. 1, 1999-Mar. 31, 1999
9%
23
577
Apr. 1, 1999-Jun. 30, 1999
10%
25
579
Jul. 1, 1999-Sep. 30, 1999
10%
25
579
Oct. 1, 1999-Dec. 31, 1999
10%
25
579
Jan. 1, 2000-Mar. 31, 2000
10%
73
627
Apr. 1, 2000-Jun. 30, 2000
11%
75
629
Jul. 1, 2000-Sep. 30, 2000
11%
75
629
Oct. 1, 2000-Dec. 31, 2000
11%
75
629
Jan. 1, 2001-Mar. 31, 2001
11%
27
581
Apr. 1, 2001-Jun. 30, 2001
10%
25
579
Jul. 1, 2001-Sep. 30, 2001
9%
23
577
Oct. 1, 2001-Dec. 31, 2001
9%
23
577
Jan. 1, 2002-Mar. 31, 2002
8%
21
575
Apr. 1, 2002-Jun. 30, 2002
8%
21
575
Jul. 1, 2002-Sep. 30, 2002
8%
21
575
Oct. 1, 2002-Dec. 31, 2002
8%
21
575
Jan. 1, 2003-Mar. 31, 2003
7%
19
573
Apr. 1, 2003-Jun. 30, 2003
7%
19
573
Jul. 1, 2003-Sep. 30, 2003
7%
19
573
Oct. 1, 2003-Dec. 31, 2003
6%
17
571
Jan. 1, 2004-Mar. 31, 2004
6%
65
619
Apr. 1, 2004-Jun. 30, 2004
7%
67
621
Jul. 1, 2004-Sep. 30, 2004
6%
65
619
Oct. 1, 2004-Dec. 31, 2004
7%
67
621
Jan. 1, 2005-Mar. 31, 2005
7%
19
573
Apr. 1, 2005-Jun. 30, 2005
8%
21
575
Jul. 1, 2005-Sep. 30, 2005
8%
21
575
<!-- PageFooter="December 23, 2013" -->
<!-- PageFooter="Bulletin No. 2013-52" -->
<!-- PageBreak -->
## TABLE OF INTEREST RATES FOR LARGE CORPORATE UNDERPAYMENTS FROM JANUARY 1, 1991 - PRESENT
RATE
1995-1 C.B. TABLE
PG
Oct. 1, 2005-Dec. 31, 2005
9%
23
577
Jan. 1, 2006-Mar. 31, 2006
9%
23
577
Apr. 1, 2006-Jun. 30, 2006
9%
23
577
Jul. 1, 2006-Sep. 30, 2006
10%
25
579
Oct. 1, 2006-Dec. 31, 2006
10%
25
579
Jan. 1, 2007-Mar. 31, 2007
10%
25
579
Apr. 1, 2007-Jun. 30, 2007
10%
25
579
Jul. 1, 2007-Sep. 30, 2007
10%
25
579
Oct. 1, 2007-Dec. 31, 2007
10%
25
579
Jan. 1, 2008-Mar. 31, 2008
9%
71
625
Apr. 1, 2008-Jun. 30, 2008
8%
69
623
Jul. 1, 2008-Sep. 30, 2008
7%
67
621
Oct. 1, 2008-Dec. 31, 2008
8%
69
623
Jan. 1, 2009-Mar. 31, 2009
7%
19
573
Apr. 1, 2009-Jun. 30, 2009
6%
17
571
Jul. 1, 2009-Sep. 30, 2009
6%
17
571
Oct. 1, 2009-Dec. 31, 2009
6%
17
571
Jan. 1, 2010-Mar. 31, 2010
6%
17
571
Apr. 1, 2010-Jun. 30, 2010
6%
17
571
Jul. 1, 2010-Sep. 30, 2010
6%
17
571
Oct. 1, 2010-Dec. 31, 2010
6%
17
571
Jan. 1, 2011-Mar. 31, 2011
5%
15
569
Apr. 1, 2011-Jun. 30, 2011
6%
17
571
Jul. 1, 2011-Sep. 30, 2011
6%
17
571
Oct. 1, 2011-Dec. 31, 2011
5%
15
569
Jan. 1, 2012-Mar. 31, 2012
5%
63
617
Apr. 1, 2012-Jun. 30, 2012
5%
63
617
Jul. 1, 2012-Sep. 30, 2012
5%
63
617
Oct. 1, 2012-Dec. 31, 2012
5%
63
617
Jan. 1, 2013-Mar. 31, 2013
5%
15
569
Apr. 1, 2013-Jun. 30, 2013
5%
15
569
Jul. 1, 2013-Sep. 30, 2013
5%
15
569
Oct. 1, 2013-Dec. 31, 2013
5%
15
569
Jan. 1, 2014-Mar. 31, 2014
5%
15
569
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## TABLE OF INTEREST RATES FOR CORPORATE OVERPAYMENTS EXCEEDING $10,000 FROM JANUARY 1, 1995 - PRESENT
RATE
1995-1 C.B. TABLE
PG
Jan. 1, 1995-Mar. 31, 1995
6.5%
18
572
Apr. 1, 1995-Jun. 30, 1995
7.5%
20
574
Jul. 1, 1995-Sep. 30, 1995
6.5%
18
572
Oct. 1, 1995-Dec. 31, 1995
6.5%
18
572
Jan. 1, 1996-Mar. 31, 1996
6.5%
66
620
Apr. 1, 1996-Jun. 30, 1996
5.5%
64
618
Jul. 1, 1996-Sep. 30, 1996
6.5%
66
620
Oct. 1, 1996-Dec. 31, 1996
6.5%
66
620
Jan. 1, 1997-Mar. 31, 1997
6.5%
18
572
Apr. 1, 1997-Jun. 30, 1997
6.5%
18
572
Jul. 1, 1997-Sep. 30, 1997
6.5%
18
572
Oct. 1, 1997-Dec. 31, 1997
6.5%
18
572
Jan. 1, 1998-Mar. 31, 1998
6.5%
18
572
Apr. 1, 1998-Jun. 30, 1998
5.5%
16
570
Jul. 1. 1998-Sep. 30, 1998
5.5%
16
570
Oct. 1, 1998-Dec. 31, 1998
5.5%
16
570
Jan. 1, 1999-Mar. 31, 1999
4.5%
14
568
Apr. 1, 1999-Jun. 30, 1999
5.5%
16
570
Jul. 1, 1999-Sep. 30, 1999
5.5%
16
570
Oct. 1, 1999-Dec. 31, 1999
5.5%
16
570
Jan. 1, 2000-Mar. 31, 2000
5.5%
64
618
Apr. 1, 2000-Jun. 30, 2000
6.5%
66
620
Jul. 1, 2000-Sep. 30, 2000
6.5%
66
620
Oct. 1, 2000-Dec. 31, 2000
6.5%
66
620
Jan. 1, 2001-Mar. 31, 2001
6.5%
18
572
Apr. 1, 2001-Jun. 30, 2001
5.5%
16
570
Jul. 1, 2001-Sep. 30, 2001
4.5%
14
568
Oct. 1, 2001-Dec. 31, 2001
4.5%
14
568
Jan. 1, 2002-Mar. 31, 2002
3.5%
12
566
Apr. 1, 2002-Jun. 30, 2002
3.5%
12
566
Jul. 1, 2002-Sep. 30, 2002
3.5%
12
566
Oct. 1, 2002-Dec. 31, 2002
3.5%
12
566
Jan. 1, 2003-Mar. 31, 2003
2.5%
10
564
Apr. 1, 2003-Jun. 30, 2003
2.5%
10
564
Jul. 1, 2003-Sep. 30, 2003
2.5%
10
564
Oct. 1, 2003-Dec. 31, 2003
1.5%
8
562
Jan. 1, 2004-Mar. 31, 2004
1.5%
56
610
Apr. 1, 2004-Jun. 30, 2004
2.5%
58
612
Jul. 1, 2004-Sep. 30, 2004
1.5%
56
610
Oct. 1, 2004-Dec. 31, 2004
2.5%
58
612
Jan. 1, 2005-Mar. 31, 2005
2.5%
10
564
Apr. 1, 2005-Jun. 30, 2005
3.5%
12
566
Jul. 1, 2005-Sep. 30, 2005
3.5%
12
566
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## TABLE OF INTEREST RATES FOR CORPORATE OVERPAYMENTS EXCEEDING $10,000 FROM JANUARY 1, 1995 - PRESENT
RATE
1995-1 C.B.
TABLE
PG
Oct. 1, 2005-Dec. 31, 2005
4.5%
14
568
Jan. 1, 2006-Mar. 31, 2006
4.5%
14
568
Apr. 1, 2006-Jun. 30, 2006
4.5%
14
568
Jul. 1, 2006-Sep. 30, 2006
5.5%
16
570
Oct. 1, 2006-Dec. 31, 2006
5.5%
16
570
Jan. 1, 2007-Mar. 31, 2007
5.5%
16
570
Apr. 1, 2007-Jun. 30, 2007
5.5%
16
570
Jul. 1, 2007-Sep. 30, 2007
5.5%
16
570
Oct. 1, 2007-Dec. 31, 2007
5.5%
16
570
Jan. 1, 2008-Mar. 31, 2008
4.5%
62
616
Apr. 1, 2008-Jun. 30, 2008
3.5%
60
614
Jul. 1, 2008-Sep. 30, 2008
2.5%
58
612
Oct. 1, 2008-Dec. 31, 2008
3.5%
60
614
Jan. 1, 2009-Mar. 31, 2009
2.5%
10
564
Apr. 1, 2009-Jun. 30, 2009
1.5%
8
562
Jul. 1, 2009-Sep. 30, 2009
1.5%
8
562
Oct. 1, 2009-Dec. 31, 2009
1.5%
8
562
Jan. 1, 2010-Mar. 31, 2010
1.5%
8
562
Apr. 1, 2010-Jun. 30, 2010
1.5%
8
562
Jul. 1, 2010-Sep. 30, 2010
1.5%
8
562
Oct. 1, 2010-Dec. 31, 2010
1.5%
8
562
Jan. 1, 2011-Mar. 31, 2011
0.5%*
Apr. 1, 2011-Jun. 30, 2011
1.5%
8
562
Jul. 1, 2011-Sep. 30, 2011
1.5%
8
562
Oct. 1, 2011-Dec. 31, 2011
0.5%*
Jan. 1, 2012-Mar. 31, 2012
0.5%*
Apr. 1, 2012-Jun. 30, 2012
0.5%*
Jul. 1, 2012-Sep. 30, 2012
0.5%*
Oct. 1, 2012-Dec. 31, 2012
0.5%*
Jan. 1, 2013-Mar. 31, 2013
0.5%*
Apr. 1, 2013-Jun. 30, 2013
0.5%*
Jul. 1, 2013-Sep. 30, 2013
0.5%*
Oct. 1, 2013-Dec. 31, 2013
0.5%*
Jan. 1, 2014-Mar. 31, 2014
0.5%*
* The asterisk reflects the interest factors for daily compound interest for annual rates of 0.5 percent are published in Ap- pendix A of this Revenue Ruling.
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### Section 7122 .- Compromises. T.D. 9647
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 300
#### User Fees for Processing Installment Agreements and Offers in Compromise
AGENCY: Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
SUMMARY: This document contains fi-
nal regulations that provide user fees
charged for processing installment agree-
ments and offers in compromise. The final
regulations affect taxpayers who wish to
pay their federal tax liabilities through
installment agreements and offers in
compromise.
DATES: Effective date: These regulations
are effective on December 2, 2013.
Applicability Date: These regulations
apply to installment agreements entered
into, restructured, or reinstated and offers
in compromise processed on or after Jan-
uary 1, 2014.
##### FOR FURTHER INFORMATION
CONTACT: Concerning cost methodol-
ogy, Eva Williams, at (202) 803-9728;
concerning the regulations, Girish Prasad,
at (202) 317-5429 (not toll-free numbers).
###### SUPPLEMENTARY INFORMATION: Background and Explanation of Provisions
This document contains amendments
to 26 CFR part 300. On August 30, 2013,
a notice of proposed rulemaking (REG-
144990-12) relating to the user fees
charged for processing installment agree-
ments and offers in compromise was pub-
lished in the Federal Register (78 FR
53702). The charging of user fees for ser-
vices provided by agencies is authorized
by the Independent Offices Appropria-
tions Act (IOAA), which is codified at 31
U.S.C. 9701. Under the IOAA and OMB
Circular A-25, 58 FR 38142 (July 15,
1993) (the OMB Circular), the charges
must be fair and must be based on the
costs to the government, the value of the
service to the recipient, the public policy
or interest served, and other relevant facts.
In general, the amount of a user fee should
recover the cost of providing the service,
unless the Office of Management and
Budget (OMB) grants an exception under
the OMB Circular.
The notice of proposed rulemaking pro-
posed to increase the fee under § 300.1 for
entering into an installment agreement from
$105 to $120 and to increase the fee under
§ 300.2 for restructuring or reinstating an
installment agreement from $45 to $50. Un-
der the notice of proposed rulemaking, the
fee for a direct debit installment agreement
remained $52, and low-income taxpayers,
as defined in § 300.1(b)(2), would continue
to pay $43 for any new installment agree-
ment, including a direct debit installment
agreement. The notice of proposed rulemak-
ing also proposed to increase the fee under
§ 300.3 for processing an offer in compro-
mise from $150 to $186. Offers based on
doubt as to liability and offers from low-
income taxpayers continue to be excepted
from a user fee. The new fee rates for both
installment agreements and offers in com-
promise will be effective January 1, 2014.
As explained in the notice of proposed rule-
making, the fees proposed (even after the
increase) were substantially less than the full
costs to the Government of providing the
services and OMB has granted a waiver of
the full-cost requirement.
No public hearing on the notice of pro-
posed rulemaking was held because no
one requested to speak. One comment was
received. After consideration of the com-
ment, this Treasury decision adopts the
proposed regulations without change.
###### Summary of Comment
Under the proposed regulations, the re-
duced fee of $43 for low-income taxpayers
that request a new installment agreement
would remain unchanged. This fee is sub-
stantially less than the full cost to the IRS of
processing a request ($282) and the fee
charged to other taxpayers ($120). The com-
menter commended the IRS for not increas-
ing the user fee for low-income taxpayers,
but maintained that any user fee discourages
low-income taxpayers from entering into in-
stallment agreements. The commenter rec-
ommended that the fee be reduced to zero.
The commenter stated that many low-
income taxpayers do not have the means to
pay the user fee, even at the reduced rate.
The commenter stated that low-income tax-
payers often enter into installment agree-
ments to pay as little as $20-30 per month
based on their available net income, and
believed that an upfront $43 fee makes it
difficult for such taxpayers to enter into the
agreement.
The effect of the fee on low-income
taxpayers was considered in 2006 when
the installment agreement fee was last up-
dated. The IRS determined that the fee
should remain $43 for low-income tax-
payers because requiring the full rate
would be burdensome and many low-
income taxpayers do not have bank ac-
counts and cannot take advantage of the
reduced fee for direct-debit installment
agreements.
The user fee is only charged if the
taxpayer enters into the agreement and the
fee is collected directly from the amounts
paid under the terms of the installment
agreement. When the IRS grants an in-
stallment agreement, the IRS asks that the
taxpayer's first payment be at least the
amount of the fee for the agreement. In
cases where the installment payments are
more than the amount of the fee, a portion
of the first payment satisfies the fee and
the balance of the first payment is applied
toward the liability. In cases where the
installment payments are less than the
amount of the fee, the full amount of the
fee is sought and, in the case of direct-
debit installment agreements, automati-
cally deducted from the taxpayer's bank
account. The IRS, however, does not de-
fault an agreement or otherwise penalize a
taxpayer whose first payment is less than
the fee but otherwise in the amount of the
agreed installments. Rather, the IRS ap-
plies the first payment and successive in-
stallments against the fee until the fee is
paid, and thereafter credits the balance of
the payments against the liability. In all
cases, the taxpayer does not have to pay
both the fee and the installment agreement
amount in the first month and the taxpayer
does not have to pay the fee in full before
the IRS respects the installment agree-
ment. The reduced fee is, therefore, not a
barrier to an installment agreement. Nev-
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ertheless, the IRS will be reviewing its
procedures in light of the comment and
will consider clarifying its communica-
tions with taxpayers in accordance with
that review.
The commenter also questioned why
the fee was waived entirely for low-
income taxpayers making offers in com-
promise but only reduced for low-income
taxpayers entering into installment agree-
ments. The Treasury Department and the
IRS believe it is appropriate to charge a
reduced fee for a low-income taxpayer to
enter into an installment agreement but
not to charge a fee to low-income taxpay-
ers for the consideration of an offer in
compromise for two reasons. First, unlike
the fee for an installment agreement,
which is charged only when the taxpayer
enters into an installment agreement, the
fee for an offer in compromise is charged
for the mere consideration of the offer and
is not refunded if the offer is not accepted.
Therefore, the fee for an offer in compro-
mise could dissuade a low-income tax-
payer from making an offer because the
taxpayer cannot be assured of reaching an
agreement.
Second, a low-income taxpayer mak-
ing an offer in compromise ostensibly
does not have the ability to pay the tax
liability in full. Section 7122(d)(3)(A)
specifically provides that the IRS should
not reject an offer from a low-income
taxpayer based solely on the amount of
the offer, and requiring a fee from low-
income taxpayers could result in a similar
hardship in cases where the taxpayer does
not have the ability to pay the fee. In
contrast, the vast majority of installment
agreements contemplate full payment of
the tax liability because the taxpayer has
the ability to do so over time. While there
are partial-payment installment agree-
ments - those that do not provide for full
payment of the liability - they are rarely
used.
The commenter also expressed concern
that, in order to avoid the fee associated
with an installment agreement, a low-
income taxpayer might request to be put
into currently-not-collectible (CNC) sta-
tus rather than enter into an installment
agreement. The commenter was con-
cerned, moreover, that without an install-
ment agreement the taxpayer would not
pay the tax and would instead incur sub-
stantial penalties and interest. Generally, a
taxpayer who has the ability to pay his tax
liability over time (and thus is eligible for
an installment agreement) will not qualify
for CNC status. The IRS places a taxpayer
in CNC status on the basis of hardship
when it determines that the taxpayer can-
not pay the tax debts after paying reason-
able living expenses. Even a taxpayer in
CNC status may, without an installment
agreement, pay the tax over time to help
limit the accrual of penalties and interest.
To the extent a low-income taxpayer has
the ability to pay his tax liability over
time, entering into an installment agree-
ment would be in his interest because it
will most likely reduce the overall amount
required to be paid on his tax liability.
Under section 6651(h), the penalty rate on
the balance owed is reduced while an in-
stallment agreement is in effect. Addition-
ally, interest and penalties accruing on an
account will be minimized if regular pay-
ments are being applied to reduce the tax
liability against which penalties and inter-
est are calculated.
Finally, the commenter voiced concern
that the reduced fee of $43 may prove to
be too large in proportion to relatively
smaller balances owed. The purpose of a
fee, however, is to recover the cost to the
Government for a particular service to the
recipient, and the cost to the Government
does not vary based on the amount of the
balance due. The reduced fee for low-
income taxpayers is therefore appropriate,
regardless of the amount of taxes owed.
The commenter made two additional
recommendations. The commenter rec-
ommended that the IRS implement proce-
dures to require IRS employees to inves-
tigate whether a taxpayer making an
installment agreement is eligible for the
reduced fee for low-income taxpayers.
The commenter also recommended that
the IRS enhance internal training and es-
tablish procedures to better promote via-
ble payment plans and avoid unrealistic
installment agreements for low-income
taxpayers. These comments do not affect
the content of these final regulations, but
the IRS will, nevertheless, consider them
when updating the procedures for entering
into installment agreements. The IRS
notes, however, that as of January of
2008, taxpayers meeting the low-income
criteria are identified systemically based
on the taxpayer's last return and the ac-
count is identified as being eligible for the
reduced user fee.
###### Special Analyses
It has been determined that these final
regulations are not a significant regulatory
action as defined in Executive Order
12866, as supplemented by Executive Or-
der 13563. Therefore, a regulatory assess-
ment is not required. It is hereby certified
that these regulations will not have a sig-
nificant economic impact on a substantial
number of small entities. Accordingly, a
regulatory flexibility analysis is not re-
quired. This certification is based on the
information that follows. The economic
impact of these regulations on any small
entity would result from the entity being
required to pay a fee prescribed by these
regulations to obtain a particular service.
The dollar amount of the fee is not, how-
ever, substantial enough to have a signif-
icant economic impact on any entity sub-
ject to the fee. Pursuant to section 7805(f)
of the Code, the notice of proposed rule-
making preceding this regulation was sub-
mitted to the Chief Counsel for Advocacy
of the Small Business Administration for
comment on its impact on small business
and no comments were received.
###### Drafting Information
The principal author of these regula-
tions is Girish Prasad of the Office of
Associate Chief Counsel (Procedure and
Administration).
*****
###### Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 300 is
amended as follows:
PART 300-USER FEES
Paragraph 1. The authority citation for
part 300 continues to read as follows:
Authority: 31 U.S.C. 9701.
Par. 2. In § 300.1, paragraphs (b) in-
troductory text and (d) are revised to read
as follows:
§ 300.1 Installment agreement fee.
* * * * *
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(b) Fee. The fee for entering into an
installment agreement before January 1,
2014, is $105. The fee for entering into an
installment agreement on or after January
1, 2014, is $120. A reduced fee applies in
the following situations:
* * * * *
(d) Effective/applicability date. This
section is applicable beginning January 1,
2014.
Par. 3. In § 300.2, paragraphs (b) and
(d) are revised to read as follows:
§ 300.2 Restructuring or reinstatement
of installment agreement fee.
* * * * *
(b) Fee. The fee for restructuring or
reinstating an installment agreement be-
fore January 1, 2014, is $45. The fee for
restructuring or reinstating an installment
agreement on or after January 1, 2014, is
$50.
Par. 4. In § 300.3, paragraphs (b)(1)
introductory text and (d) are revised to
read as follows:
§ 300.3 Offer to compromise fee.
(b) Fee. (1) The fee for processing an
offer to compromise before January 1,
2014, is $150. The fee for processing an
offer to compromise on or after January 1,
2014, is $186. No fee will be charged if an
offer is-
* * * * *
(d) Effective/applicability date. This
section is applicable beginning January 1,
2014.
* * * * *
(d) Effective/applicability date. This
section is applicable beginning January 1,
2014.
John Dalrymple,
Deputy Commissioner for Services and
Enforcement.
Approved November 22, 2013
* * * * *
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
(Filed by the Office of the Federal Register on November
29, 2013, 8:45a.m., and published in the issue of the Federal
Register for December 2, 2013, 78 F.R. 72016)
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# Part III. Administrative, Procedural, and Miscellaneous
## In-Plan Rollovers to Designated Roth Accounts in Retirement Plans
Notice 2013-74
### I. PURPOSE
This notice provides guidance on roll-
overs within a retirement plan to designated
Roth accounts in the same plan ("in-plan
Roth rollovers"). The guidance relates to the
expansion of these rollovers under new
§ 402A(c)(4)(E) of the Internal Revenue
Code (the Code), as added by § 902 of the
American Taxpayer Relief Act of 2012
("ATRA"), P.L. 112-240. This notice also
provides guidance that applies to all in-plan
Roth rollovers described in § 402A(c)(4).
### II. BACKGROUND
Section 402A of the Code sets forth the
rules for designated Roth contributions. A
designated Roth contribution is an elective
deferral that would otherwise be excludable
from gross income but which has been des-
ignated by the employee as not being so
excludable. An employee's designated Roth
contributions and attributable earnings must
be maintained by the plan in a separate
account (a designated Roth account). A
qualified distribution, as defined in
§ 402A(d)(2), from an employee's desig-
nated Roth account is excludable from gross
income. A distribution from an employee's
designated Roth account that is not a qual-
ified distribution is includible in gross in-
come in proportion to the employee's in-
vestment in the contract (basis) and earnings
on the contract, pursuant to § 72.
Section 2112 of the Small Business Jobs
Act of 2010 ("SBJA"), P.L. 111-240, added
§ 402A(c)(4) to the Code, effective for dis-
tributions made after September 27, 2010, to
permit a plan that includes a qualified Roth
contribution program to allow employees to
roll over amounts from their accounts other
than designated Roth accounts to their des-
ignated Roth accounts in the plan. To be
eligible for an in-plan Roth rollover under
SBJA § 2112, the amount had to satisfy the
rules for distribution under the Code (an
"otherwise distributable amount"") and had
to be an eligible rollover distribution as de-
fined in § 402(c)(4). (See Revenue Ruling
2004-12, 2004-1 C.B. 478, for a discus-
sion of the various distribution-timing re-
strictions applicable to amounts held in a
plan.) SBJA also expanded the types of
plans that could include a qualified Roth
contribution program. Previously, only
§ 401(k) plans and § 403(b) plans were
permitted to include qualified Roth contri-
bution programs, but for taxable years be-
ginning after 2010, § 2111 of SBJA permit-
ted governmental § 457(b) plans to include
a qualified Roth contribution program.
Section 902 of ATRA added
§ 402A(c)(4)(E) to the Code to expand the
type of amounts eligible for an in-plan Roth
rollover. Section 402A(c)(4)(E) provides
that the in-plan Roth rollover of these addi-
tional amounts ("otherwise nondistributable
amounts") will not be treated as violating
the statutory distribution restrictions appli-
cable to elective deferrals (or to annual de-
ferrals in the case of governmental § 457(b)
plans). Section 402A(c)(4)(E) is effective
for in-plan Roth rollovers made after De-
cember 31, 2012.
Revenue Ruling 2004-12 provides that
where an eligible retirement plan sepa-
rately accounts for amounts attributable to
an employee's rollover contributions, the
plan may permit distributions from that
account to be made at any time pursuant
to the employee's request.
Notice 2010-84, 2010-51 I.R.B. 872,
provides guidance on in-plan Roth roll-
overs under SBJA § 2112, including the
provisions of SBJA that permitted an em-
ployee who made an in-plan Roth rollover
in 2010 to include in gross income half of
the taxable amount of the rollover in 2011
and half in 2012.
# III. GUIDANCE
This Section III provides guidance on
in-plan Roth rollovers. This guidance is in
addition to the guidance provided in No-
tice 2010-84. Part A addresses the appli-
cability of Notice 2010-84 to in-plan
Roth rollovers of otherwise nondistribut-
able amounts. Part B provides additional
guidance relating to in-plan Roth rollovers
of otherwise nondistributable amounts.
Part C provides guidance relating to all
in-plan Roth rollovers.
Part A - Application of Notice 2010-84
to In-Plan Roth Rollovers of Otherwise
Nondistributable Amounts
Q-1. How does Notice 2010-84 apply
after ATRA?
A-1. Generally, the rules in Notice
2010-84 apply to all in-plan Roth rollovers,
including rollovers of otherwise nondistribut-
able amounts, as permitted under ATRA. For
example, in accordance with Q&A-2 of No-
tice 2010-84, to be eligible for an in-plan
Roth rollover, an amount must be vested.
However, as a result of the expansion of
eligibility for in-plan Roth rollovers made by
ATRA, the part of Q&A-2 of Notice
2010-84 that provides that an amount is not
eligible for an in-plan Roth rollover unless it
satisfies the rules for distribution under the
Code no longer applies. In addition, the fol-
lowing parts of Notice 2010-84 apply only to
an in-plan Roth rollover of an otherwise dis-
tributable amount and do not apply to an in-
plan Roth rollover of an otherwise nondistrib-
utable amount: (i) the part of Q&A-1 that
provides that an in-plan Roth rollover may be
accomplished by an in-plan Roth 60-day roll-
over; and (ii) Q&A-5, relating to the require-
ment for a revised § 402(f) notice. Thus, a
§ 402(f) notice is not required for a participant
making an in-plan Roth rollover of an other-
wise nondistributable amount.
Part B - Additional Rules Applicable to
In-Plan Roth Rollovers of Otherwise
Nondistributable Amounts
Q-2. What amounts are eligible for an
in-plan Roth rollover under § 402A(c)(4)(E)
in addition to the amounts eligible under
SBJA § 2112?
A-2. Section 402A(c)(4)(E) provides
that a plan with a designated Roth account
can permit an in-plan Roth rollover of an
amount not otherwise distributable under
the plan. Thus, the following contributions
(and earnings thereon) may now be rolled
over to a designated Roth account in the
same plan, without regard to whether the
amounts satisfy the conditions for distri-
bution: elective deferrals in § 401(k) plans
and § 403(b) plans; matching contribu-
tions and nonelective contributions, in-
cluding qualified matching contributions
and qualified nonelective contributions
described in § 1.401(k)-6; and annual de-
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ferrals made to governmental § 457(b)
plans. (The federal government's Thrift
Savings Plan is treated as a § 401(k) plan
for this purpose.)
Q-3. Is an amount rolled over to an em-
ployee's designated Roth account pursuant to
§ 402A(c)(4)(E) subject to any distribution
restrictions after the in-plan Roth rollover?
A-3. Yes. If an amount is rolled over to
a designated Roth account pursuant to
§ 402A(c)(4)(E), then, notwithstanding
Revenue Ruling 2004-12, the amount
rolled over and applicable earnings remain
subject to the distribution restrictions that
were applicable to the amount before the
in-plan Roth rollover. Thus, for example, if
a § 401(k) plan participant who has not had
a severance from employment makes an
in-plan Roth rollover of an amount from the
participant's pre-tax elective deferral ac-
count prior to age 591/2, that amount and
applicable earnings may not be distributed
from the plan prior to attainment of age 591/2
or the occurrence of another event described
in § 401(k)(2)(B).
Q-4. Does withholding under § 3405 or
3402(p) apply to an in-plan Roth rollover of
an otherwise nondistributable amount?
A-4. No. An in-plan Roth rollover of an
otherwise nondistributable amount is treated
as an eligible rollover distribution for pur-
poses of § 3405, and because an in-plan
Roth rollover of an otherwise nondistribut-
able amount must be made by a direct roll-
over, no withholding under § 3405 applies.
See § 3405(c)(1)(A) and (c)(2). Also, be-
cause this amount is not distributable (other
than for purposes of making an in-plan Roth
rollover), no part of the rollover may be
withheld for voluntary withholding under
§ 3402(p). An employee making an in-plan
Roth rollover may need to increase his or
her withholding or make estimated tax pay-
ments to avoid an underpayment penalty.
Q-5. When is a plan amendment providing
for in-plan Roth rollovers of otherwise nondis-
tributable amounts required to be adopted in
order to be effective for a plan year?
A-5. (a) Section 401(k) plans generally.
Under section 5.02 of Rev. Proc. 2007-44,
2007-2 C.B. 54, which sets forth certain
deadlines for adopting amendments to qual-
ified plans, a plan amendment that provides
for in-plan Roth rollovers of otherwise non-
distributable amounts is a discretionary
amendment that is not permitted to be ad-
opted later than the last day of the first plan
year in which the amendment is effective.
However, to give plan sponsors sufficient
time to adopt such an amendment and
thereby enable plan participants to make
in-plan Roth rollovers of otherwise nondis-
tributable amounts before the end of the
2013 plan year, the Internal Revenue Ser-
vice (IRS) is extending the deadline for
adopting a plan amendment described in
paragraph (e) of this Q&A-5 to the later of
the last day of the first plan year in which
the amendment is effective or December 31,
2014, provided the amendment is effective
as of the date the plan first operates in ac-
cordance with the amendment. Thus, in the
case of a § 401(k) plan that has a calendar-year
plan year, in order for the plan to permit an
in-plan Roth rollover of an otherwise nondis-
tributable amount during 2013, a plan amend-
ment providing for that option must be ad-
opted no later than December 31, 2014.
(b) Section 401 (k) safe harbor plans. Un-
der § 1.401(k)-3(e)(1), sponsors of § 401(k)
safe harbor plans described in § 401(k)(12)
or (13) are prohibited from making mid-
year changes to plan provisions that satisfy
§ 1.401(k)-3 except as provided in
§ 1.401(k)-3(g) (relating to certain reduc-
tions or suspensions of safe harbor contri-
butions) or in guidance of general applica-
bility published in the Internal Revenue
Bulletin. For purposes of the preceding sen-
tence, a "mid-year change" is a change
made after the beginning of a plan year that
is effective during that plan year.
In accordance with § 1.401(k)-3(e)(1), this
notice provides a temporary period during
which sponsors of safe harbor plans are per-
mitted to make a mid-year change to provide
for in-plan Roth rollovers of otherwise nondis-
tributable amounts. The period ends Decem-
ber 31, 2014. Thus, in the case of a § 401(k)
safe harbor plan that has a calendar-year plan
year, in order for the plan to permit an in-plan
Roth rollover of an otherwise nondistributable
amount during 2013 or 2014, a plan amend-
ment providing for that option must be ad-
opted by December 31, 2014.
(c) Section 403(b) plans. Rev. Proc.
2013-22, 2013-18 I.R.B. 985, provides
that if an employer adopts, on or before
December 31, 2009 (or, if later, the date
the plan is established), a written § 403(b)
plan intended to satisfy the requirements
of § 403(b) and the regulations thereun-
der, the employer has a remedial amend-
ment period in which to amend the plan to
correct any form defects retroactive to
January 1, 2010 (or the date the plan is
established). The IRS will announce the
end date of this remedial amendment pe-
riod around the time the IRS issues opin-
ion and advisory letters for pre-approved
§ 403(b) plans under Rev. Proc. 2013-22.
The end date of the remedial amendment
period is expected to be more than a year
after the date of that announcement. In the
case of a § 403(b) plan that has a remedial
amendment period pursuant to Rev. Proc.
2013-22, a plan amendment permitting in-
plan Roth rollovers of otherwise nondistrib-
utable amounts is permitted to be adopted
on or before the last day of that remedial
amendment period or, if later, the last day of
the first plan year in which the amendment
is effective, provided the amendment is ef-
fective as of the date the plan first operates
in accordance with the amendment. See
Rev. Proc. 2013-22, Section 21.
(d) Governmental § 457(b) plans. A
governmental § 457(b) plan must reflect
any optional provisions to ensure that the
plan is operated in accordance with its
plan terms. In the case of a governmental
§ 457(b) plan, an amendment permitting
in-plan Roth rollovers of otherwise non-
distributable amounts during 2013 or
2014 must be adopted by the later of the
last day of the first plan year in which the
amendment is effective or December 31,
2014, provided the amendment is effec-
tive as of the date the plan first operates in
accordance with the amendment.
(e) Covered amendments. The ex-
tended amendment deadlines in this
Q&A-5 apply not only to a plan amend-
ment that permits in-plan Roth rollovers
of otherwise nondistributable amounts but
also to the following related amendments:
(i) a plan amendment that permits elective
deferrals under the plan to be designated
as Roth contributions; (ii) a plan amend-
ment that provides for the acceptance of
rollover contributions by designated Roth
accounts; and (iii) a plan amendment that
permits in-plan Roth rollovers of some or
all otherwise distributable amounts.
Part C - Additional Rules Applicable to
All In-Plan Roth Rollovers
Q-6. Is a plan permitted to restrict the
type of contributions eligible for an in-
plan Roth rollover and the frequency of
in-plan Roth rollovers?
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A-6. Yes. Subject to the nondiscrimi-
nation requirements normally applicable
to plan benefits, rights, and features (such
as the right to make a rollover), a plan
may limit the type of contributions eligi-
ble for an in-plan Roth rollover and the
frequency of in-plan Roth rollovers. For
example, to simplify recordkeeping in a
designated Roth account, a plan could
provide that only otherwise distributable
amounts are eligible for an in-plan Roth
rollover. Under this approach, the desig-
nated Roth account would include only
rollover amounts that could be distributed
at any time upon the employee's request.
Because the account would not accept
rollovers of amounts that are subject to the
distribution restrictions described in
Q&A-3, the plan would not need to sep-
arately account for different types of in-
plan Roth rollover amounts
Q-7. Would a plan with an ongoing
qualified Roth contribution program vio-
late § 411(d)(6) if it discontinued in-plan
Roth rollovers?
A-7. No. An employee's ability to
make an in-plan Roth rollover is not a
section 411(d)(6) protected benefit. How-
ever, an amendment to eliminate in-plan
Roth rollovers is subject to the rules in
§ 1.401(a)(4)-5, relating to whether the
timing of a plan amendment or a series of
plan amendments has the effect of dis-
criminating significantly in favor of
highly compensated employees or former
highly compensated employees.
Q-8. If an in-plan Roth rollover is the
first contribution made to an employee's
designated Roth account, when does the
5-taxable-year period of participation that
is required under § 402A(d)(2) for a qual-
ified distribution from an employee's des-
ignated Roth account begin?
A-8. If an in-plan Roth rollover is the
first contribution made to an employee's
designated Roth account, the 5-taxable-
year period of participation that is re-
quired under § 402A(d)(2) for a qualified
distribution begins on the first day of the
first taxable year in which the employee
makes the in-plan Roth rollover.
Q-9. Is an in-plan Roth rollover treated
as a distribution for purposes of determining
eligibility for the special tax rules on net
unrealized appreciation ("NUA") in em-
ployer securities paid in the form of a lump
sum distribution under § 402(e)(4)(B)?
A-9. Yes. An in-plan Roth rollover is
treated as a distribution for purposes of
determining eligibility for the special tax
rules on NUA, whether the rollover is
made by an in-plan Roth direct rollover or
by an in-plan Roth 60-day rollover. See
also Q&A-7 of Notice 2010-84.
Q-10. How is an in-plan Roth rollover
treated for purposes of determining top-
heavy status under § 416?
A-10. An in-plan Roth rollover is a
"related rollover" within the meaning of
§ 1.416-1, Q&A T-32. Accordingly, the
accepting plan (which, in the case of an
in-plan Roth rollover, is also the distrib-
uting plan) must count the rollover in de-
termining the present value of accrued
benefits for purposes of determining top-
heavy status under § 416.
Q-11. If an employee rolls over into a
designated Roth account all of his or her
funds from other accounts in the same
plan, what is the proper treatment of an
amount rolled over that is later determined
to be an excess amount?
A-11. If an employee rolls over into a
designated Roth account all of his or her
funds from other accounts in the same
plan and all or a portion of the rollover is
later determined to be an excess deferral
described in § 402(g)(2)(A), an excess
contribution described in § 401(k)(8)(B),
or an excess aggregate contribution de-
scribed in § 401(m)(6)(B), and the excess
amount (plus applicable earnings) is to be
distributed from the plan, then the excess
amount (plus applicable earnings) must be
distributed from the designated Roth ac-
count, even if the amount was an other-
wise nondistributable amount at the time
of the in-plan Roth rollover.
# IV. EFFECT ON OTHER DOCUMENTS
Notice 2010-84 and Revenue Ruling
2004-12 are modified.
# DRAFTING INFORMATION
The principal author of this notice is Roger
Kuehnle of the Employee Plans, Tax Exempt
and Government Entities Division. Questions
regarding this notice may be sent via e-mail to
RetirementPlanQuestions@irs.gov.
# 2014 Standard Mileage Rates
Notice 2013-80
SECTION 1. PURPOSE
This notice provides the optional 2014
standard mileage rates for taxpayers to use
in computing the deductible costs of oper-
ating an automobile for business, charitable,
medical, or moving expense purposes. This
notice also provides the amount taxpayers
must use in calculating reductions to basis
for depreciation taken under the business
standard mileage rate, and the maximum
standard automobile cost that may be used
in computing the allowance under a fixed
and variable rate (FAVR) plan.
## SECTION 2. BACKGROUND
Rev. Proc. 2010-51, 2010-51 I.R.B.
883, provides rules for computing the de-
ductible costs of operating an automobile
for business, charitable, medical, or moving
expense purposes, and for substantiating,
under § 274(d) of the Internal Revenue
Code and § 1.274-5 of the Income Tax
Regulations, the amount of ordinary and
necessary business expenses of local trans-
portation or travel away from home. Tax-
payers using the standard mileage rates must
comply with Rev. Proc. 2010-51. However,
a taxpayer is not required to use the substan-
tiation methods described in Rev. Proc.
2010-51, but instead may substantiate using
actual allowable expense amounts if the tax-
payer maintains adequate records or other
sufficient evidence.
An independent contractor conducts an
annual study for the Internal Revenue Ser-
vice of the fixed and variable costs of
operating an automobile to determine the
standard mileage rates for business, med-
ical, and moving use reflected in this no-
tice. The standard mileage rate for chari-
table use is set by § 170(i).
## SECTION 3. STANDARD MILEAGE RATES
The standard mileage rate for transpor-
tation or travel expenses is 56 cents per
mile for all miles of business use (busi-
ness standard mileage rate). See section 4
of Rev. Proc. 2010-51.
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The standard mileage rate is 14 cents
per mile for use of an automobile in ren-
dering gratuitous services to a charitable
organization under § 170. See section 5 of
Rev. Proc. 2010-51.
The standard mileage rate is 23.5 cents
per mile for use of an automobile (1) for
medical care described in § 213, or (2) as
part of a move for which the expenses are
deductible under § 217. See section 5 of
Rev. Proc. 2010-51.
## SECTION 4. BASIS REDUCTION AMOUNT
For automobiles a taxpayer uses for
business purposes, the portion of the busi-
ness standard mileage rate treated as de-
preciation is 23 cents per mile for 2010,
22 cents per mile for 2011, 23 cents per
mile for 2012, 23 cents per mile for 2013,
and 22 cents per mile for 2014. See sec-
tion 4.04 of Rev. Proc. 2010-51.
## SECTION 5. MAXIMUM STANDARD AUTOMOBILE COST
For purposes of computing the allow-
ance under a FAVR plan, the standard
automobile cost may not exceed $28,200
for automobiles (excluding trucks and
vans) or $30,400 for trucks and vans. See
section 6.02(6) of Rev. Proc. 2010-51.
## SECTION 6. EFFECTIVE DATE
This notice is effective for (1) deduct-
ible transportation expenses paid or in-
curred on or after January 1, 2014, and (2)
mileage allowances or reimbursements
paid to an employee or to a charitable
volunteer (a) on or after January 1, 2014,
and (b) for transportation expenses the
employee or charitable volunteer pays or
incurs on or after January 1, 2014.
## SECTION 7. EFFECT ON OTHER DOCUMENTS
Notice 2012-72 is superseded.
DRAFTING INFORMATION
The principal author of this notice is
Bernard P. Harvey of the Office of Asso-
ciate Chief Counsel (Income Tax and Ac-
counting). For further information on this
notice contact Bernard P. Harvey on (202)
317-7005 (not a toll-free call).
## 2013 Cumulative List of Changes in Plan Qualification Requirements Notice 2013-84
### I. PURPOSE
This notice contains the 2013 Cumula-
tive List of Changes in Plan Qualification
Requirements (2013 Cumulative List) de-
scribed in section 4 of Rev. Proc. 2007-
44, 2007-2 C.B. 54. The 2013 Cumulative
List is to be used by plan sponsors and
practitioners submitting determination let-
ter applications for plans during the period
beginning February 1, 2014 and ending
January 31, 2015.
Plans using this Cumulative List will
primarily be single employer individually
designed defined contribution plans and
single employer individually designed de-
fined benefit plans that are in Cycle D and
multiemployer plans as described in
§ 414(f). Generally an individually de-
signed plan is in Cycle D if the last digit
of the employer identification number of
the plan sponsor is 4 or 9.
The list of changes in section IV of this
notice does not extend the deadline by
which a plan must be amended to comply
with any statutory, regulatory, or guidance
changes. The general deadline for timely
adoption of an interim or discretionary
amendment can be found in section 5.05
of Rev. Proc. 2007-44.
### II. BACKGROUND
Rev. Proc. 2007-44 sets forth proce-
dures for issuing opinion, advisory, and
determination letters and describes the
five-year remedial amendment cycle for
individually designed plans and the six-
year remedial amendment cycle for pre-
approved plans. In addition, section 5.05
of Rev. Proc. 2007-44 provides the dead-
line for timely adoption of an interim
amendment or discretionary amendment.
Under section 4 of Rev. Proc. 2007-
44, the Internal Revenue Service (the Ser-
vice) announced its intention to annually
publish a Cumulative List to identify stat-
utory, regulatory, and guidance changes
that must be taken into account in submis-
sions by plan sponsors to the Service re-
questing opinion, advisory, and determi-
nation letters whose submission period
begins on February 1st following issuance
of the Cumulative List.
In Notice 2012-76, 2012-52 I.R.B. 775,
the Service published the 2012 Cumulative
List of Changes in Plan Qualification Re-
quirements (2012 Cumulative List).1
### III. APPLICATION OF 2013 CUMULATIVE LIST
This notice is being issued in conjunc-
tion with the determination letter program
for individually designed plans eligible
for Cycle D. In accordance with Rev.
Proc. 2007-44, the Service will start ac-
cepting determination letter applications
for Cycle D individually designed plans
beginning on February 1, 2014. The 12-
month submission period for Cycle D
plans will end on January 31, 2015.
The 2013 Cumulative List, set forth in
section IV of this notice, informs plan
sponsors of issues the Service has specif-
ically identified for review in determining
whether a plan filing in Cycle D has been
properly updated. Specifically, the 2013
Cumulative List reflects law changes un-
der the Pension Protection Act of 2006
(PPA '06), Pub. L. 109-280; the U.S.
Troop Readiness, Veterans' Care, Katrina
Recovery and Iraq Accountability Appro-
priations Act, 2007, Pub. L. 110-28; the
Heroes Earnings Assistance and Relief
Tax Act of 2008 (HEART Act), Pub. L.
110-245; the Worker, Retiree, and Em-
ployer Recovery Act of 2008 (WRERA),
Pub. L. 110-458; the Small Business Jobs
Act of 2010 (SBJA), Pub. L. 111-240; the
Preservation of Access to Care for Medi-
care Beneficiaries and Pension Relief Act
of 2010 (PRA 2010), Pub. L. No. 111-
192; the Moving Ahead for Progress in
the 21st Century Act (MAP-21), Pub. L.
112-141; and the American Taxpayer Re-
lief Act of 2012 (ATRA), P.L. 112-240.
1For previous cumulative lists, see Notice 2011-97, 2011-52 I.R.B. 923; Notice 2010-90, 2010-52 I.R.B. 909; Notice 2009-98, 2009-52 I.R.B. 974; Notice 2008-108, 2008-2 C.B. 1275;
Notice 2007-94, 2007-2 C.B. 1179; Notice 2007-3, 2007-1 C.B. 255; Notice 2005-101, 2005-2 C.B. 1219; and Notice 2004-84, 2004-2 C.B. 1030 for the 2011, 2010, 2009, 2008, 2007,
2006, 2005, and 2004 Cumulative Lists, respectively.
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Except as provided below, the Service will
not consider in its review of any determination
letter application for the submission period
that begins February 1, 2014, any:
(1) guidance issued after October 1, 2013;
(2) statutes enacted after October 1, 2013;
(3) qualification requirements first ef-
fective in 2015 or later; or
(4) statutory provisions that are first
effective in 2014, for which there is no
guidance identified in this notice.
However, in order to be qualified, a
plan must comply with all relevant quali-
fication requirements, not just those on the
2013 Cumulative List.
The Service's review of a determination
letter application filed in the Cycle D sub-
mission period will not consider the 2010
final hybrid plan regulations (other than
with respect to § 411(a)(13)(A)) unless the
plan has been amended to satisfy those reg-
ulations. For this purpose, the Service will
only consider those provisions of the regu-
lations that are effective for plan years be-
ginning on or after January 1, 2011.
The 2013 Cumulative List includes the
following guidance issued after October 1,
2013:
Final regulations under § 401(k) and
§ 401(m) provide guidance on permitted
mid-year reductions or suspensions of safe
harbor nonelective contributions in certain
circumstances for amendments adopted af-
ter May 18, 2009 and revise the require-
ments for permitted mid-year reductions or
suspensions of safe harbor matching contri-
butions for plan years beginning on or after
January 1, 2015. (78 Fed. Reg. 68735).
Notice 2013-74, 2013-52 I.R.B. 819, pro-
vides guidance under new § 402A(c)(4)(E) of
the Internal Revenue Code (the Code), as
added by § 902 of ATRA, relating to the
expansion of rollovers from § 401(k) plans,
§ 403(b) plans, and governmental § 457(b)
plans to designated Roth accounts in the
same plan ("in-plan Roth rollovers"). Sec-
tion 402A(c)(4)(E) provides for in-plan
Roth rollovers of otherwise nondistributable
amounts. This notice also provides guidance
that applies to all in-plan Roth rollovers
under § 402A(c)(4).
With respect to matters addressed by
proposed regulations identified in the
footnotes of section IV of this notice, the
Service's review of the plan will be based
on a reasonable interpretation of the stat-
ute, existing final regulations, or other
published guidance. For this purpose,
compliance with proposed regulations
will be treated as meeting that standard.
However, a determination letter cannot be
relied on with respect to whether the plan
complies with the proposed regulations.
Terminating plans must include all law
changes in effect at the time of termina-
tion. See section 8 of Rev. Proc. 2007-44
regarding plan termination.
### IV. 2013 CUMULATIVE LIST OF CHANGES IN PLAN QUALIFICATION REQUIREMENTS
The following list consists of statutory
provisions and associated guidance which
reflect changes to plan qualification re-
quirements. Miscellaneous guidance is
also provided. The Service has identified
below plan qualification requirements that
differ from those that were on the 2012 or
earlier Cumulative Lists as "(New)."
Items from the 2008 Cumulative List
have been deleted from the 2013 Cumula-
tive List. Thus, the 2013 Cumulative List
contains the plan qualification requirements
in the 2009, 2010, 2011 and 2012 Cumula-
tive Lists, as well as additional 2013 plan
qualification requirements. The deletions
have been made to enhance the utility of the
cumulative list, by removing items that
would have been previously reviewed in the
case of a plan that was submitted during the
initial Cycle D submission period (February
1, 2009 - January 31, 2010). However, if a
plan has not been previously reviewed for
items on earlier cumulative lists, the items
from the earlier cumulative lists must be taken
into account. These items can be found in
Notice 2008-108, 2008-2 C.B. 1275.
1\. 401(a):
· Notice 2008-98, 2008-2 C.B. 1080,
provides that the Service and Trea-
sury intend to amend the normal re-
tirement age regulations to change
the effective date for governmental
plans to plan years beginning on or
after January 1, 2011. (2009 C. L.)
· Notice 2009-86, 2009-46 I.R.B.
629, provides that the Service and
Treasury intend to amend the normal
retirement age regulations to change
the effective date for governmental
plans to plan years beginning on or
after January 1, 2013. (2010 C. L.)
· Rev. Rul. 2011-1, 2011-2 I.R.B. 251,
revises the generally applicable rules for
group trusts and, if certain requirements
are met, permits the participation in
group trusts of custodial accounts under
§ 403(b)(7), retirement income accounts
under § 403(b)(9), and governmental re-
tiree benefit plans under § 401(a)(24).
This revenue ruling also modifies the
transition relief provided in Rev. Rul.
2008-40. (2011 C. L.)
· Notice 2012-6, 2012-3 I.R.B. 293,
extends and expands the transition re-
lief provided under Rev. Rul. 2011-1
for certain group trusts, certain retire-
ment trusts that qualify under the
Puerto Rico Internal Revenue Code
that participate in group trusts, and cer-
tain qualified retirement plans that
benefit Puerto Rico residents. The no-
tice also provides additional time for
governmental retiree benefit plans de-
scribed in § 401(a)(24) to be amended
to satisfy the applicable requirements
of Rev. Rul. 2011-1. (2012 C. L.)
· Notice 2012-29, 2012-18 I.R.B. 872,
provides that the Service and Treasury
intend to modify the normal retirement
age regulations to clarify that govern-
mental plans that do not provide for
in-service distributions before age 62
do not need to have a definition of
normal retirement age and to modify
the age-50 safe harbor rule for quali-
fied public safety employees. The no-
tice also provides that the Service and
Treasury intend to amend the normal
retirement age regulations to extend
the effective date for governmental
plans to annuity starting dates that oc-
cur in plan years beginning on or after
the later of (1) January 1, 2015 or (2)
the close of the first regular legislative
session of the legislative body with the
authority to amend the plan that begins
on or after the date that is 3 months
after the final regulations are published
in the Federal Register. (2012 C. L.)
· United States v. Windsor, 570 U.S.
133 S. Ct. 2675 (2013). The Su-
preme Court found that Section 3 of
the Defense of Marriage Act
(DOMA), which provides that in de-
termining the meaning of any Act of
Congress, or of any ruling, regulation,
or interpretation of the various admin-
istrative bureaus and agencies of the
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United States, the word 'marriage'
means only a legal union between one
man and one woman as husband and
wife, and the word 'spouse' refers only
to a person of the opposite sex who is
a husband or a wife, is unconstitutional
because it violates the principles of
equal protection. (New)
· Revenue Ruling 2013-17, 2013-38
I.R.B. 201, provides that for Federal
tax purposes, the terms "spouse,"
"husband and wife," "husband," and
"wife" include an individual married
to a person of the same sex if the
individuals are lawfully married under
state law, and the term "marriage" in-
cludes such a marriage between indi-
viduals of the same sex and the Ser-
vice adopts a general rule recognizing
a marriage of same-sex individuals
that was validly entered into in a state
whose laws authorize the marriage of
two individuals of the same sex even if
the married couple is domiciled in a
state that does not recognize the valid-
ity of same-sex marriages. (New)
#### 2. 401 (a)(9):
· Pursuant to PPA '06 § 823, final reg-
ulations under § 401(a)(9) were pub-
lished on September 8, 2009, which
permit a governmental plan to comply
with the required minimum distribu-
tion rules of § 401(a)(9) by using a
reasonable and good faith interpreta-
tion of the statute. (2009 C. L.)
· WRERA § 201(a) added § 401(a)(9)(H)
which provides a suspension of the re-
quired minimum distribution rules for
2009 applicable to defined contribution
plans. (2010 C. L.)
· Notice 2009-82, 2009-41 I.R.B.
491, provides guidance relating to
the suspension of the required min-
imum distribution rules for 2009 ap-
plicable to defined contribution
plans. (2010 C. L.)
#### 3. 401(a)(22):
· Notice 2011-19, 2011-11 I.R.B. 550,
provides that the terms "readily tradable
on an established securities market"
and "readily tradable on an established
market" mean employer securities that
are readily tradable on an established
securities market within the meaning
of § 1.401(a)(35)-1(f)(5) for purposes
of § 401(a)(22). Notice 2011-19 is
effective for plan years that begin on
or after January 1, 2012, except for
certain plans that have a delayed effec-
tive date. (2011 C. L.)
4\. 401(a)(28)(C):
· Notice 2011-19 provides that the terms
"readily tradable on an established secu-
rities market" and "readily tradable on
an established market" mean employer
securities that are readily tradable on an
established securities market within the
meaning of § 1.401(a)(35)-1(f)(5) for
purposes of § 401(a)(28)(C). Notice
2011-19 is effective for plan years that
begin on or after January 1, 2012, except
for certain plans that have a delayed ef-
fective date. (2011 C. L.)
5\. 401(a)(35):
· WRERA § 109(a) amended the defini-
tion of one-participant retirement plan
under § 401(a)(35)(E)(iv). (2009 C. L.)
· Notice 2009-97, 2009-52 I.R.B. 972,
extends the deadline to amend for
§ 401(a)(35) to the last day of the first
plan year that begins on or after January
1, 2010. (2010 C. L.)
· Final regulations under § 401(a)(35)
were published on May 19, 2010. (2010
C. L.)
· Notice 2013-17, 2013-20 I.R.B.
1082, provides relief from anti-
cutback rules for an amendment to
an ESOP to eliminate all in-service
distribution options previously used
to satisfy the diversification require-
ments of § 401(a)(28)(B)(i). (New)
6\. 401(a)(37):
· HEART Act § 104(a) added
§ 401(a)(37) with respect to benefits
payable on the death of a plan partic-
ipant while performing qualified mili-
tary service. (2010 C. L.)
· Notice 2010-15, 2010-6 I.R.B.
390, provides guidance regarding
HEART Act § 104(a). (2010 C. L.)
7\. 401(k) & 401(m):2
· HEART Act § 107(a) extends the
applicability of the qualified reserv-
ist distribution to individuals ordered
or called to active duty after Decem-
ber 31, 2007. (2009 C. L.)
· Notice 2010-15 provides guid-
ance regarding HEART Act
§ 107. (2010 C. L.)
· Final regulations under § 401(k) with
respect to qualified automatic contri-
bution arrangements were published
on February 24, 2009. (2009 C. L.)
· Rev. Rul. 2009-30, 2009-39 I.R.B.
391, provides information with re-
spect to automatic contribution in-
creases under automatic contribution
arrangements. (2009 C. L.)
· Notice 2009-65, 2009-39 I.R.B. 413,
provides sample amendments that
plan sponsors can use to add auto-
matic contribution features to their
plans. (2009 C. L.)
· Final regulations under § 401(m) with
respect to qualified automatic contri-
bution arrangements were published
on February 24, 2009. (2009 C. L.)
· Final regulations provide guidance on
permitted mid-year reductions or sus-
pensions of safe harbor nonelective
contributions in certain circumstances
for amendments adopted after May 18,
2009, and revise the requirements for
permitted mid-year reductions or sus-
pensions of safe harbor matching con-
tributions for plan years beginning on
or after January 1, 2015, were pub-
lished on November 15, 2013. (New)
8\. 402(c)(11):
· WRERA § 108(f) requires that plans
provide for nonspouse beneficiary
rollovers under § 402(c)(11), effec-
tive for plan years beginning after
December 31, 2009. (2009 C. L.)
9\. 402(f):
· Notice 2009-68, 2009-39 I.R.B.
423, provides two safe harbor expla-
nations that may be provided to re-
cipients of eligible rollover distribu-
tions from an employer to satisfy
§ 402(f). (2009 C. L.)
2Proposed amendments to the regulations under 401(k) and 401(m) were published on May 18, 2009 (74 Fed. Reg. 23134) and may be relied upon for periods prior to the issuance of final
regulations.
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· WRERA § 108(f)(2) amended
§ 402(f)(2)(A) with respect to the
definition of eligible rollover distri-
bution. (2009 C. L.)
10\. 402(g)(2):
· WRERA § 109(b)(3) amended
§ 402(g)(2)(A)(ii) to eliminate the
distribution of gap period earnings
with excess deferrals. (2009 C. L.)
11\. 402A:
· SBJA § 2112 added § 402A(c)(4)
which permits rollovers of otherwise
distributable amounts from a plan
account other than a designated Roth
account to the plan's designated
Roth account. (2010 C. L.)
· Notice 2010-84, 2010-51 I.R.B.
872, provides guidance regarding
§ 402A(c)(4). (2010 C. L.)
· Notice 2013-74 provides guidance
under new § 402A(c)(4)(E) relating to
the expansion of rollovers from
§ 401(k) plans, § 403(b) plans, and
governmental § 457(b) plans to desig-
nated Roth accounts in the same plan
("in-plan Roth rollovers"). Section
402A(c)(4)(E) provides for in-plan
Roth rollovers of otherwise nondis-
tributable amounts. This notice also
provides guidance that applies to all in-
plan Roth rollovers under § 402A(c)(4).
(New)
12\. 409:
· Notice 2011-19 provides that the
terms "readily tradable on an estab-
lished securities market" and "read-
ily tradable on an established mar-
ket" mean employer securities that
are readily tradable on an established
securities market within the meaning
of § 1.401(a)(35)-1(f)(5) for pur-
poses of § 409(h)(1)(B) and § 409(l).
Notice 2011-19 is effective for plan
years that begin on or after January
1, 2012, except for certain plans that
have a delayed effective date. (2011
C. L.)
13\. 411(a):
· Rev. Rul. 2012-4, 2012-8 I.R.B. 386,
describes whether a qualified defined
benefit pension plan that accepts a di-
rect rollover of an eligible rollover dis-
tribution from a qualified defined con-
tribution plan maintained by the same
employer satisfies §§ 411 and 415 in a
case in which the defined benefit plan
provides an annuity resulting from the
direct rollover. (2012 C. L.).
14\. 411(a)(13):
· WRERA § 107(b)(2) amended
§ 411(a)(13)(A). (2009 C. L.)
· Notice 2009-97 extends the deadline for
amending cash balance and other appli-
cable defined benefit plans, within the
meaning of § 411(a)(13)(C), to meet the
requirements of § 411(a)(13) (other than
§ 411(a)(13)(A)) to the last day of the
first plan year that begins on or after
January 1, 2010. (2010 C. L.)
· Final Regulations under § 411(a)(13)
were published on October 19,
2010.3 (2010 C. L.)
· Notice 2010-77, 2010-51 I.R.B.
851, extends the deadline for amend-
ing cash balance and other applica-
ble defined benefit plans, within the
meaning of § 411(a)(13)(C), to meet
the requirements of § 411(a)(13)
(other than § 411(a)(13)(A)) to the
last day of the first plan year that
begins on or after January 1, 2011.
(2010 C. L.)
· Notice 2011-85, 2011-44 I.R.B. 605,
extends the deadline for adopting an
interim or discretionary amendment
under § 411(a)(13) (other than
§ 411(a)(13)(A)). (2011 C. L.)
· Notice 2012-61, 2012-42 I.R.B. 479,
provides that certain provisions in the
2010 final hybrid plan regulations will
not be effective for plan years beginning
before January 1, 2014. (2012 C. L.)
15\. 411(b)(1):4
· Proposed regulations under § 411(b)(1)
were published on October 19, 2010 (75
Fed. Reg. 64197) with respect to a vari-
able interest crediting rate that poten-
tially can be negative in any given year.
(2010 C. L.)
16\. 411(b)(5):
· WRERA § 107(b)(1) amended
§ 411(b)(5). (2009 C. L.)
· Notice 2009-97 extends the deadline for
amending cash balance and other appli-
cable defined benefit plans, within the
meaning of § 411(a)(13)(C), to meet the
requirements of § 411(b)(5) to the last
day of the first plan year that begins on
or after January 1, 2010. (2010 C. L.)
· Final Regulations under § 411(b)(5)
were published on October 19,
2010.5 (2010 C. L.)
· Notice 2010-77 extends the deadline for
amending cash balance and other appli-
cable defined benefit plans, within the
meaning of § 411(a)(13)(C), to meet the
requirements of § 411(b)(5) to the last
day of the first plan year that begins on
or after January 1, 2011. (2010 C. L.)
· Notice 2011-85 announces that the
Treasury Department and the Service
intend to amend the 2010 final hybrid
plan regulations to postpone the effec-
tive/applicability date of
§ 1.411(b)(5)-1(d)(1)(iii), (d)(1)(vi),
and (d)(6)(i) to plan years that begin
on or after a date to be specified in
those regulations that is not earlier
than January 1, 2013. This notice also
extends the deadline for adopting an
interim or discretionary amendment
under § 411(b)(5). (2011 C. L.)
· Notice 2012-61 provides that cer-
tain provisions in the 2010 final hy-
brid plan regulations will not be ef-
fective for plan years beginning
before January 1, 2014. (2012 C. L.)
17\. 411(d)(6):
· Final Regulations under § 411(d)(6),
which provide an additional limited
exception to the anti-cutback rules to
a plan sponsor who is a debtor in a
bankruptcy proceeding, were pub-
lished on November 8, 2012 (77 Fed.
Reg. 66915). (2012 C. L.)
3Proposed regulations under 411(a)(13) were published on October 19, 2010 (75 Fed. Reg. 64197) and may be relied upon until final regulations are issued.
4Proposed regulations under 411(b)(1) were published on June 18, 2008 (73 Fed. Reg. 34665) with respect to the application of the accrual rule where plan benefits are determined on the
basis of the greater of two or more separate formulas.
5Proposed regulations under 411(b)(5) also were published on October 19, 2010 (75 Fed. Reg. 64197) and may be relied upon until final regulations are issued.
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· Notice 2013-17 provides relief from
anti-cutback rules for an amendment
to an ESOP to eliminate all in-service
distribution options previously used to
satisfy the diversification requirements
of § 401(a)(28)(B)(i). (New)
18\. 414(u):
· HEART Act § 104(b) amended § 414(u)
by adding § 414(u)(9) regarding how a
plan may provide benefit accruals for a
person who dies or becomes disabled
while performing qualified military ser-
vice. (2010 C. L.)
· Notice 2010-15 provides guid-
ance regarding HEART Act
§ 104(b). (2010 C. L.)
· HEART Act § 105(b)(1) added
§ 414(u)(12) with respect to the treat-
ment of differential wage payments
during the period a person, while on
active duty, is performing service in
the uniformed services. (2010 C. L.)
· Notice 2010-15 provides guid-
ance regarding HEART Act
§ 105(b)(1). (2010 C. L.)
19\. 414(w):
· WRERA § 109(b)(4), (5), and (6)
amended § 414(w)(3), (5), and (6),
respectively. (2009 C. L.)
· Final regulations under § 414(w) with
respect to eligible automatic contribu-
tion arrangements were published on
February 24, 2009. (2009 C. L.)
· Rev. Rul. 2009-30 provides informa-
tion with respect to automatic contri-
bution increases under automatic con-
tribution arrangements. (2009 C. L.)
· Notice 2009-65 provides sample
amendments that plan sponsors can
use to add automatic contribution
features to their plans. (2009 C. L.)
20\. 414(x):
· PPA '06 § 903(a) added § 414(x) with
respect to special rules for eligible
combined plans that consist of a de-
fined benefit plan and a qualified cash
or deferred arrangement. (2010 C. L.)
##### 21. 415:
· WRERA § 103(a) changed the dead-
line to adopt PFEA amendments
from the end of the 2008 plan year to
the end of the 2009 plan year. (2009
C. L.)
· WRERA § 103(b)(2)(B)(i) amended
§ 415(b)(2)(E)(v) to change the mor-
tality table to the applicable mortality
table within the meaning of
§ 417(e)(3)(B). (2009 C. L.)
· Rev. Rul. 2012-4 describes whether
a qualified defined benefit pension
plan that accepts a direct rollover of
an eligible rollover distribution from
a qualified defined contribution plan
maintained by the same employer
satisfies §§ 411 and 415 in a case in
which the defined benefit plan pro-
vides an annuity resulting from the
direct rollover. (2012 C. L.)
22\. 417:
· Rev. Rul. 2012-3, 2012-6 I.R.B.
383, describes how the qualified
joint and survivor annuity ("QJSA)")
and the qualified preretirement sur-
vivor annuity ("QPSA") rules, de-
scribed in §§ 401(a)(11) and 417,
apply when a deferred annuity con-
tract is purchased under a profit shar-
ing plan. (2012 C. L.)
23\. 420:
· MAP-21 §§ 40241 and 40242 amend
§ 420 to extend the provisions relat-
ing to transfers of excess pension
assets to retiree health accounts and
to expand those provisions to allow
transfers to retiree group term life
insurance accounts. (2012 C. L.)
24\. 431(b)(8):
· PRA 2010 § 211(a)(2) added
§ 431(b)(8), which provides two special
funding rules available to multiemployer
plans. (2011 C. L.)
· Notice 2010-83, 2010-51 I.R.B.
862, provides guidance with re-
spect to the special funding rules
under § 431(b)(8). (2011 C. L.)
25\. 432:
· WRERA § 204 provides a temporary
delay of designation of multiem-
ployer plans in endangered or critical
status. (2009 C. L.)
· Notice 2009-31, 2009-16 I.R.B.
856, as modified by Notice 2009-
42, 2009-20 I.R.B. 1011, provides
election and notice procedures for
multiemployer plans under
WRERA § 204. (2009 C. L.)
· Rev. Proc. 2009-43, 2009-40
I.R.B. 460, provides procedures
with respect to the revocation of
elections by multiemployer plans
to freeze funded status under
WRERA § 204. (2009 C. L.)
· WRERA § 205 provides a temporary
extension of the funding improvement
or rehabilitation periods for multiem-
ployer plans in endangered or critical
status for 2008 or 2009. (2009 C. L.)
· Notice 2009-31, as modified by
Notice 2009-42, provides elec-
tion and notice procedures for
multiemployer plans under
WRERA § 205. (2009 C. L.)
26\. 436:
· Section 1.436-1 provides guidance
on the application of § 436, which
provides a series of limitations on
the accrual and payment of benefits
under underfunded single employer
defined benefit plans. (2012 C. L.)
· Notice 2011-3, 2011-2 I.R.B. 263,
provides guidance on the special
rules relating to the relaxation of
§ 436 rules that were included in the
funding relief for single employer
defined benefit pension plans under
PRA 2010. (2012 C. L.)
· Notice 2011-96, 2011-52 I.R.B. 915,
provides a sample plan amendment
that plan sponsors may adopt to satisfy
§ 436 regarding limitations on the ac-
crual and payment of benefits. The no-
tice also extends both the deadline to
amend a plan to satisfy § 436 and the
period during which such an amend-
ment is eligible for relief from the anti-
cutback requirements of § 411(d)(6).
(2012 C. L.)
· Notice 2012-70, 2012-51 I.R.B.
712, extends the deadline, as set
forth in Notice 2011-96, to amend a
defined benefit plan to satisfy the
requirements of § 436 and provides
associated relief from the require-
ments of § 411(d)(6). (2011 C. L.)
· Notice 2013-11, 2013-11 I.R.B. 610,
provides guidance on the 25-year aver-
age segment rates that are applied to
adjust the otherwise applicable 24-
month average segment rates that are
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used to compute the minimum contribu-
tion requirements for single-employer
defined benefit plans under § 430 of the
Code and § 303 of the Employee Retire-
ment Income Security Act of 1974
(ERISA), as amended by MAP-21, for
plan years beginning in 2013. (New)
27\. Miscellaneous:
· Rev. Rul. 2009-31, 2009-39 I.R.B.
395, provides guidance with respect to
annual paid time-off contributions.
(2009 C. L.)
· Rev. Rul. 2009-32, 2009-39 I.R.B.
398, provides guidance with respect to
paid time-off contributions at termina-
tion of employment. (2009 C. L.)
The following guidance contains sample
or model amendments: Notice 2009-65
(automatic contribution features); Notice
2009-82 (suspension of the minimum dis-
tribution requirement for 2009); Rev. Rul.
2011-1 (group trusts); and Notice 2011-96
(limitations on the accrual and payment of
benefits under underfunded single employer
defined benefit plans).
### DRAFTING INFORMATION
The principal author of this notice is
Kathleen Herrmann of the Employee
Plans, Tax Exempt and Government En-
tities Division. For further information re-
garding this notice, please contact the Em-
ployee Plans taxpayer assistance
answering service at 1-877-829-5500 (a
toll free number) or e-mail Ms. Herrmann
at RetirementPlanQuestions@irs.gov.
## Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates
Notice 2013-85
This notice provides guidance on the cor-
porate bond monthly yield curve (and the
corresponding spot segment rates), and the
24-month average segment rates under
§ 430(h)(2) of the Internal Revenue Code.
In addition, this notice provides guidance as
to the interest rate on 30-year Treasury se-
curities under § 417(e)(3)(A)(ii)(II) as in
effect for plan years beginning before 2008,
the 30-year Treasury weighted average rate
under § 431(c)(6)(E)(ii)(I), and the mini-
mum present value segment rates under
§ 417(e)(3)(D) as in effect for plan years
beginning after 2007. These rates reflect
certain changes implemented by the Moving
Ahead for Progress in the 21st Century Act,
Public Law 112-141 (MAP-21). MAP-21
provides that for purposes of § 430(h)(2),
the segment rates are limited by the appli-
cable maximum percentage or the applica-
ble minimum percentage based on the aver-
age of segment rates over a 25-year period.
### YIELD CURVE AND SEGMENT RATES
Generally, except for certain plans under
sections 104 and 105 of the Pension Protec-
tion Act of 2006, § 430 of the Code specifies
the minimum funding requirements that ap-
ply to single employer plans pursuant to
§ 412. Section 430(h)(2) specifies the inter-
est rates that must be used to determine a
plan's target normal cost and funding target.
Under this provision, present value is gen-
erally determined using three 24-month av-
erage interest rates ("segment rates"), each
of which applies to cash flows during spec-
ified periods. To the extent provided under
§ 430(h)(2)(C)(iv), these segment rates are
adjusted by the applicable percentage of the
25-year average segment rates for the period
ending September 30 of the year preceding
the calendar year in which the plan year
begins. However, an election may be made
under § 430(h)(2)(D)(ii) to use the monthly
yield curve in place of the segment rates.
Notice 2007-81, 2007-44 I.R.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, and the
24-month average corporate bond segment
rates used to compute the target normal cost
and the funding target. Pursuant to Notice
2007-81, the monthly corporate bond yield
curve derived from November 2013 data is
in Table I at the end of this notice. The spot
first, second, and third segment rates for the
month of November 2013 are, respectively,
1.19, 4.53, and 5.66. For plan years begin-
ning on or after January 1, 2012, the 24-
month average segment rates determined
under § 430(h)(2)(C)(iv) must be adjusted
by the applicable percentage of the corre-
sponding 25-year average segment rates.
The 25-year average segment rates for plan
years beginning in 2012, 2013, and 2014
were published in Notice 2012-55, 2012-36
I.R.B. 332, Notice 2013-11, 2013-11 I.R.B.
610, and Notice 2013-58, 2013-40 I.R.B.
294, respectively. The three 24-month aver-
age corporate bond segment rates applicable
for December 2013 without adjustment, and
the adjusted 24-month average segment
rates taking into account the applicable per-
centages of the corresponding 25-year aver-
age segment rates, are as follows:
For Plan Years Beginning In
24-Month Average Segment Rates Not Adjusted
Adjusted 24-Month Average Segment Rates, Based on Applicable Percentage of 25-Year Average Rates
Applicable Month
First Segment
Second Segment
Third Segment
First Segment
Second Segment
Third Segment
2012
December
2013
1.28
4.05
5.07
5.54
6.85
7.52
2013
December
2013
1.28
4.05
5.07
4.94
6.15
6.76
2014
December
2013
1.28
4.05
5.07
4.43
5.62
6.22
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### 30-YEAR TREASURY SECURITIES INTEREST RATES
Generally for plan years beginning af-
ter 2007, § 431 specifies the minimum
funding requirements that apply to mul-
tiemployer plans pursuant to § 412. Sec-
tion 431(c)(6)(B) specifies a minimum
amount for the full-funding limitation de-
scribed in section 431(c)(6)(A), based on
the plan's current liability. Section
431(c)(6)(E)(ii)(I) provides that the inter-
est rate used to calculate current liability
for this purpose must be no more than 5
percent above and no more than 10 per-
cent below the weighted average of the
rates of interest on 30-year Treasury se-
curities during the four-year period ending
on the last day before the beginning of the
plan year. Notice 88-73, 1988-2 C.B.
383, provides guidelines for determining
the weighted average interest rate. The
rate of interest on 30-year Treasury secu-
rities for November 2013 is 3.80 percent.
The Service has determined this rate as
the average of the daily determinations of
yield on the 30-year Treasury bond ma-
turing in August 2043 determined each
day through November 13, 2013, and the
yield on the 30-year Treasury bond ma-
turing in November 2043 determined each
day for the balance of the month. The
following rates were determined for plan
years beginning in the month shown be-
low.
For Plan Years Beginning in Month
Year
30-Year Treasury Weighted Average
90%
Permissible Range to
105%
December
2013
3.46
3.11
3.63
### MINIMUM PRESENT VALUE SEGMENT RATES
In general, the applicable interest rates
under § 417(e)(3)(D) are segment rates
computed without regard to a 24-month
average. Notice 2007-81 provides guide-
lines for determining the minimum pres-
ent value segment rates. Pursuant to that
notice, the minimum present value seg-
ment rates determined for November 2013
are as follows:
First Segment
Second Segment
Third Segment
1.19
4.53
5.66
### DRAFTING INFORMATION
The principal author of this notice is
Tony Montanaro of the Employee Plans,
Tax Exempt and Government Entities Di-
vision. Mr. Montanaro may be e-mailed at
RetirementPlanQuestions@irs.gov.
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Table I Monthly Yield Curve for September 2013 Derived from September 2013 Data
Maturity
Yield
Maturity
Yield
Maturity
Yield
Maturity
Yield
Maturity
Yield
0.5
0.32
20.5
5.40
40.5
5.69
60.5
5.80
80.5
5.85
1.0
0.45
21.0
5.42
41.0
5.69
61.0
5.80
81.0
5.85
1.5
0.60
21.5
5.43
41.5
5.70
61.5
5.80
81.5
5.85
2.0
0.78
22.0
5.44
42.0
5.70
62.0
5.80
82.0
5.86
2.5
1.00
22.5
5.45
42.5
5.71
62.5
5.80
82.5
5.86
3.0
1.23
23.0
5.46
43.0
5.71
63.0
5.81
83.0
5.86
3.5
1.48
23.5
5.47
43.5
5.71
63.5
5.81
83.5
5.86
4.0
1.74
24.0
5.48
44.0
5.72
64.0
5.81
84.0
5.86
4.5
2.00
24.5
5.49
44.5
5.72
64.5
5.81
84.5
5.86
5.0
2.25
25.0
5.50
45.0
5.72
65.0
5.81
85.0
5.86
5.5
2.50
25.5
5.50
45.5
5.73
65.5
5.81
85.5
5.86
6.0
2.74
26.0
5.51
46.0
5.73
66.0
5.82
86.0
5.86
6.5
2.98
26.5
5.52
46.5
5.73
66.5
5.82
86.5
5.86
7.0
3.20
27.0
5.53
47.0
5.74
67.0
5.82
87.0
5.86
7.5
3.42
27.5
5.54
47.5
5.74
67.5
5.82
87.5
5.87
8.0
3.61
28.0
5.55
48.0
5.74
68.0
5.82
88.0
5.87
8.5
3.80
28.5
5.55
48.5
5.74
68.5
5.82
88.5
5.87
9.0
3.97
29.0
5.56
49.0
5.75
69.0
5.82
89.0
5.87
9.5
4.13
29.5
5.57
49.5
5.75
69.5
5.83
89.5
5.87
10.0
4.28
30.0
5.58
50.0
5.75
70.0
5.83
90.0
5.87
10.5
4.41
30.5
5.58
50.5
5.75
70.5
5.83
90.5
5.87
11.0
4.54
31.0
5.59
51.0
5.76
71.0
5.83
91.0
5.87
11.5
4.65
31.5
5.60
51.5
5.76
71.5
5.83
91.5
5.87
12.0
4.74
32.0
5.60
52.0
5.76
72.0
5.83
92.0
5.87
12.5
4.83
32.5
5.61
52.5
5.76
72.5
5.83
92.5
5.87
13.0
4.91
33.0
5.62
53.0
5.77
73.0
5.84
93.0
5.87
13.5
4.98
33.5
5.62
53.5
5.77
73.5
5.84
93.5
5.87
14.0
5.04
34.0
5.63
54.0
5.77
74.0
5.84
94.0
5.88
14.5
5.09
34.5
5.63
54.5
5.77
74.5
5.84
94.5
5.88
15.0
5.14
35.0
5.64
55.0
5.78
75.0
5.84
95.0
5.88
15.5
5.18
35.5
5.64
55.5
5.78
75.5
5.84
95.5
5.88
16.0
5.22
36.0
5.65
56.0
5.78
76.0
5.84
96.0
5.88
16.5
5.25
36.5
5.65
56.5
5.78
76.5
5.84
96.5
5.88
17.0
5.27
37.0
5.66
57.0
5.78
77.0
5.84
97.0
5.88
17.5
5.30
37.5
5.66
57.5
5.79
77.5
5.85
97.5
5.88
18.0
5.32
38.0
5.67
58.0
5.79
78.0
5.85
98.0
5.88
18.5
5.34
38.5
5.67
58.5
5.79
78.5
5.85
98.5
5.88
19.0
5.36
39.0
5.68
59.0
5.79
79.0
5.85
99.0
5.88
19.5
5.38
39.5
5.68
59.5
5.79
79.5
5.85
99.5
5.88
20.0
5.39
40.0
5.69
60.0
5.80
80.0
5.85
100.0
5.88
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Rev. Proc. 2013-39
26 CFR 31.3504-1: Designation of Agent by
Application
SECTION 1. PURPOSE
This Revenue Procedure describes and
updates the procedure for requesting the
IRS authorize a person to act as agent
under section 3504 of the Internal Reve-
nue Code (Code) and §31.3504-1 of the
Employment Tax Regulations for pur-
poses of Chapters 21, 22, 24, and 25 of the
Code. Special instructions are also set
forth for agents authorized to perform acts
for purposes of Chapter 23 of the Code.
### SECTION 2. BACKGROUND
.01 Chapters 21, 22, 23, 24, and 25 of
the Code impose obligations on employ-
ers with regard to employment taxes. Spe-
cifically, Chapter 21 imposes Federal In-
surance Contributions Act (FICA) tax,
Chapter 22 imposes Railroad Retirement
Tax Act (RRTA) tax, Chapter 23 imposes
Federal Unemployment Tax Act (FUTA)
tax, Chapter 24 imposes Collection of In-
come Tax at Source on Wages (income
tax withholding), and Chapter 25 provides
general provisions relating to employment
taxes.
.02 Section 3504 of the Code autho-
rizes the Secretary to promulgate regula-
tions to authorize a fiduciary, agent, or
other person ("agent") who has the control
of, receives, has custody of, disposes of,
or pays the wages of an employee or
group of employees, employed by one or
more employers, to perform certain spec-
ified acts required of employers. Under
section 3504, all provisions of law (in-
cluding penalties) applicable with respect
to an employer are applicable to the agent
and remain applicable to the employer.
Accordingly, both the agent and employer
are liable for the employment taxes and
penalties associated with the employer's
employment tax obligations undertaken
by the agent.
.03 Section 31.3504-1(a) as amended
by T.D. 9649, effective December 12,
2013, provides that the Internal Revenue
Service (IRS) may authorize a person who
pays, controls, receives, has custody of, or
disposes of (collectively "paid") wages or
compensation of an employee or group of
employees employed by one or more em-
ployers as an agent. The regulation pro-
vides that applications for authorization to
act as agent shall be signed by the agent
and employer and made on the form pre-
scribed by the IRS, and shall be filed with
the IRS as prescribed in the instructions to
the form and other applicable guidance.
Generally this authorization is applicable
to FICA tax, RRTA tax, and income tax
withholding and relevant general employ-
ment tax provisions under the Code.
.04 Section 31.3504-1(b) as amended
by T.D. 9649, effective December 12,
2013, permits an agent authorized for pur-
poses of FICA tax and income tax with-
holding to perform acts required of an
employer who is a home care service re-
cipient to also be authorized for purposes
of FUTA tax. Section 31.3504-1(b)(2)
defines "home care services" to include
health care and personal attendant care
services rendered to the home care service
recipient. Section 31.3504-1(b)(3) de-
fines a "home care service recipient" as an
individual who receives home care ser-
vices while enrolled, and for the remain-
der of the calendar year after ceasing to be
enrolled, in a program administered by a
Federal, state, or local government agency
that provides Federal, state, or local gov-
ernment funds to pay, in whole or in part,
for home care services for that individual.
.05 Rev. Proc. 70-6, 1970-1 C.B.
420, sets forth procedures to be followed
in requesting authorization to act as agent
under section 3504 for purposes of FICA
tax, RRTA tax, income tax withholding,
and general provisions relating to employ-
ment tax. It provides that application for
authorization should be made in writing
by the agent, accompanied by Form 2678,
Employer Appointment of Agent, executed
by each employer for whom the agent is to
act. The agent must file one return for
each tax-return period, and maintain re-
cords that will disclose the full wages paid
to each employee on behalf of, and iden-
tified by, each employer for whom the
agent acts.
.06 Rev. Proc. 80-4, 1980-1 C.B.
581, sets forth the procedures to be fol-
lowed by state and local health and wel-
fare agencies wishing to act as agents un-
der section 3504 for welfare recipients
who become the employers of individuals
furnished by the agencies to provide in-
home domestic service for the welfare re-
cipients. It provides that the state or local
agency does not need to receive a Form
2678 from each welfare recipient/em-
ployer, so long as its application to the
IRS references the document that the wel-
fare recipient/employer filed with the
agency appointing the agency as agent.
The guidance also provides that when a
welfare recipient/employer is liable for
FUTA tax, the IRS will interpose no ob-
jection if the state or local agency acting
as an agent for FICA tax and income tax
withholding, also acts as an agent for
FUTA tax. However, Rev. Proc. 80-4
does not apply to state and local welfare
agencies that contract with outside orga-
nizations to provide the in-home domestic
services.
.07 Notice 95-18, 1995-1 C.B. 300,
provides guidance to household employ-
ers on rules regarding federal employment
taxes and income tax withholding under
section 2 of the Social Security Domestic
Employment Reform Act of 1994 (the
Act), Pub. L. 103-387. The Act added
section 3510 to the Code to provide that
returns with respect to domestic service
employment taxes be made on a calendar
year basis, and amended the FICA provi-
sions of the Code to establish an annual
threshold for cash remuneration paid by
an employer to an employee for domestic
service in a private home of the employer
in order to be subject to FICA tax. The
notice explains the major changes made
by the Act and has a series of questions
and answers related to household employ-
ers.
Specifically, the notice provides that
state and local government health and
welfare agencies that act as agents pursu-
ant to Rev. Proc. 80-4 should obtain a
separate employer identification number
(EIN) for use in reporting taxes with re-
spect to individuals furnished by the agen-
cies to provide household services for re-
cipients of public assistance. It also
provides that the IRS will waive penalties
for these state and local government
health and welfare agencies for failure to
deposit the FICA and FUTA taxes and
withheld income taxes on wages paid to
household employees during 1995, pro-
vided all taxes are deposited on or before
the due date of the applicable return.
.08 Notice 2003-70, 2003-2 C.B. 916,
proposes a revenue procedure giving up-
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dated guidance to state and local govern-
ment agencies on how they can serve as
agents ("state agents") under section 3504
for disabled individuals and other welfare
recipients ("service recipients") who em-
ploy home-care service providers to assist
them in their homes. The notice provides
that until a final version of the proposed
revenue procedure is issued, the IRS will
not challenge the way a state meets the
employment tax obligations with respect
to home-care service providers employed
in its in-home domestic services program
if the employment taxes are being timely
withheld, reported, and paid, and the pro-
cedures for reporting and paying the taxes
are based on a reasonable, good faith in-
terpretation of existing guidance, includ-
ing on positions set forth in the proposed
revenue procedure.
Notice 2003-70 proposes to modify
Rev. Proc. 80-4 to apply not only to state
and local agencies that furnish individuals
to provide in-home domestic services, but
also to state and local agencies that do not
furnish the individuals who provide in-
home domestic services. The notice al-
lows the state agent to remit taxes with a
timely filed return rather than make de-
posits according to the schedule that
would otherwise be applicable under
§31.6302-1. It also allows the service
recipient to designate the state agent with-
out having to obtain an EIN as he or she
would otherwise be required to do in order
to execute a Form 2678.
Notice 2003-70 also provides guid-
ance on withholding and reporting rules
for third parties acting either as a "report-
ing agent" of the state agent or as a "sub-
agent" of the state agent. The notice ex-
plains that a reporting agent is an
accounting service, franchiser, bank, ser-
vice bureau or other entity authorized to
perform one or more acts on behalf of an
employer, including sign and file Forms
940, Employer's Annual Federal Unem-
ployment Tax Act (FUTA) Return, and
941, Employer's QUARTERLY Federal
Tax Return, and make federal tax deposits
for the taxes reported on these forms. The
notice defines a subagent as an individual
or entity designated as an agent by a state
agent in accordance with Rev. Proc. 70-6
and the notice. Notice 2003-70 provides
that both a reporting agent and subagent
of a state agent should use the special EIN
of the state agent, and file one Form 940
using the name and special EIN of the
state agent on behalf of all service recip-
ients for whom it acts. The notice allows
the reporting agent of the state agent to
remit taxes with a timely filed return. The
subagent of the state agent must follow
the deposit schedule in §31.6302-1 that is
otherwise applicable.
.09 The purpose of this revenue proce-
dure is to update and consolidate the pre-
viously issued guidance discussed in this
section and incorporate recently finalized
rules related to home care service recipi-
ents (HCSRs). The updates to the prior
guidance principally reflect changes al-
ready implemented in IRS administrative
processes. For example, the IRS no longer
requires an application for authorization
to act as agent to accompany Form 2678.
Also, Form 941-X, Adjusted Employer's
QUARTERLY Federal Tax Return or
Claim for Refund, has replaced Form
941c, Supporting Statement To Correct
Information, for correcting wages, and
since 2010, agents have been required to
attach allocation schedules to their aggre-
gate returns. Other changes that modify
current procedures are noted.
.10 The term "wages" as used in this
revenue procedure shall be construed to
include compensation under the RRTA
unless the context indicates otherwise.
### SECTION 3. GENERAL RULES TO REQUEST AUTHORIZATION TO ACT AS AGENT
.01 To request that the IRS authorize
an agent under §31.3504-1 to perform
acts required of an employer, the parties
must use Form 2678, Employer/Payer Ap-
pointment of Agent.
.02 The employer submits a properly
executed Form 2678 to the person it
wishes to appoint as agent, indicating on
Form 2678 the acts for which it seeks to
appoint the agent and whether the agent
will be appointed with regard to some or
all of the employer's employees. If the
employer anticipates paying any wages
(such as taxable noncash fringe benefits or
bonuses) to any of its employees, the em-
ployer must indicate on Form 2678 that
the appointment of the agent is only for
some of its employees. To accept the ap-
pointment, the agent files Form 2678 with
the IRS as provided in the form instruc-
tions. If either the employer or the person
the employer wishes to appoint as agent
has not obtained an EIN prior to the filing
of the Form 2678, the agent must include
a properly executed Form SS-4, Applica-
tion for Employer Identification Number,
with the Form 2678 to request an EIN for
the employer or agent as necessary.
.03 If the IRS approves the request, the
IRS sends a letter of approval to the agent
and employer, except as provided in sec-
tion 10.03 of this revenue procedure. The
authorization to act as agent is effective
on the date indicated in the letter of ap-
proval mailed by the IRS.
.04 If the IRS approves the request and
the authorization is with respect to all the
employer's employees, the employer may
need to file a final return for any form the
agent is authorized to file. Specifically, the
employer enters its name and EIN in the
spaces provided for the employer and in-
dicates that it is a final return in the man-
ner provided in the form instructions. If
the agent was authorized for some em-
ployees only (including because the em-
ployer was expecting to pay some wages
in accordance with section 3.02 of this
revenue procedure), the employer does
not file a final return, but must continue
filing a return with regard to the other
employees (or wages). The employer does
not file a final return if the employer was
not required to file a return prior to the
agent's authorization, for example, be-
cause the employer had not previously
paid wages to any employees.
.05 The provisions of law (including
penalties) applicable with respect to an
employer that are made applicable to the
agent under section 3504 remain applica-
ble to the employer and agent.
SECTION 4. FILING OF RETURNS
BY AGENT WITH APPROVED FORM
2678
.01 The agent with an approved Form
2678 is required to file one return for each
tax-return period reporting the wages and
employment taxes on the wages paid to
its employees, and the wages and em-
ployment taxes on the wages paid by the
agent to the employees of each em-
ployer for whom the agent is authorized
to act ("aggregate return").
.02 The agent's name and EIN are en-
tered in the spaces provided for the em-
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ployer on the returns, and the returns are
to be executed in accordance with the
form instructions.
.03 The agent must complete an allo-
cation schedule and attach it to each ag-
gregate return as described in the form
instructions. On the allocation schedule,
the agent lists the name and EIN of each
employer for whom the agent is autho-
rized to act and allocates the wages, taxes,
and payments reported on the aggregate
return to each employer. For example, the
IRS has designated Schedule R (Form
941), Allocation Schedule for Aggregate
Return Filers, as the allocation schedule
to attach to an aggregate Form 941. The
agent is responsible for maintaining re-
cords that show the wages paid by the
agent to each employee on behalf of, and
identified by, each employer for whom the
agent is authorized to act. The employer is
responsible for maintaining records that
show the wages paid by the agent to its
employees. See §§31.6001-1 through
31.6001-5.
.04 The wages paid to an employee are
considered with respect to each employer
separately, and not in conjunction with the
wages paid to the employee by the agent as
employer or by the agent on behalf of any
other employer, for purposes of any dollar
threshold or wage base applicable in deter-
mining the employment tax liability.
.05 Generally, the agent furnishes and
files one Form W-2, Wage and Tax State-
ment, for each employee. The agent's EIN
is entered in the spaces provided for the
employer. The name of the agent, fol-
lowed by "Agent for (name of em-
ployer)," is entered in the space provided
for the employer. If the agent (a) is acting
as an agent for two or more employers or
is an employer and is acting as an agent
for another employer, (b) pays social se-
curity wages to an individual on behalf of
more than one employer, and (c) the total
of the individual's social security wages
from these employers is greater than the
social security wage base, the agent fur-
nishes and files separate Forms W-2 for
the affected employee reflecting the
wages paid by each employer.
SECTION 5. DEPOSITS BY AGENT
WITH APPROVED FORM 2678
Except as provided in section 10.05 of
this revenue procedure, the deposit rules
apply to the agent with an approved Form
2678 based on the total employment taxes
accumulated by the agent for its own em-
ployees and on behalf of all employers for
whom the agent is authorized to act. The
deposit rules that would have applied to
any employer for whom the agent acts,
had the agent not been authorized, do not
apply to the agent.
### SECTION 6. CORRECTIONS OF WAGES BY AGENT WITH APPROVED FORM 2678
Wages erroneously reported by the
agent must be corrected by the agent on
behalf of the employer using the form that
corresponds to the return being corrected.
For example, the IRS has designated Form
941-X as the form to correct errors on a
previously filed Form 941. The agent at-
taches an allocation schedule as pre-
scribed in the instructions for the form
being filed. The name and EIN of the
agent are entered in the spaces provided
for the employer as it appeared on the
return being corrected. Generally, the
agent's obligation to make the correction
is not affected by a subsequent revocation
of the authorization as discussed in sec-
tion 9 of this revenue procedure. How-
ever, an agent may not make corrections
after its authorization to act as agent is
revoked by the IRS under section 9.02 of
this revenue procedure.
### SECTION 7. USE OF REPORTING AGENT BY AGENT WITH APPROVED FORM 2678
.01 A reporting agent is an accounting
service, franchiser, bank, service bureau,
or other entity authorized to perform one
or more acts on behalf of a taxpayer. See
Rev. Proc. 2012-32, 2012-35 I.R.B. 1, for
rules related to reporting agent authoriza-
tions and a description of the acts that may
be performed by reporting agents. An
agent with an approved Form 2678 may
designate a reporting agent to sign and file
certain employment tax returns and make
tax deposits on behalf of the agent.
.02 The reporting agent files only one
return on behalf of the agent for each tax-
return period. The agent's name and EIN,
not the reporting agent's name and EIN,
are entered in the spaces provided for the
employer on the returns. If the return in-
structions prescribe an allocation sched-
ule, the reporting agent is required to enter
the name and EIN of the agent as shown
on the return, and list the name and EIN of
each employer for whom the agent is au-
thorized to act in the spaces provided for
clients.
.03 The deposit rules that apply to the
agent continue to apply with regard to
deposits made by the reporting agent.
.04 The agent is responsible for main-
taining records that show the wages paid
by the agent to each employee on behalf
of, and identified by, each employer for
whom the agent is authorized to act. The
employer is responsible for maintaining
records that show the wages paid by the
agent to its employees. See §§31.6001-
1 through 31.6001-5.
.05 The provisions of law (including
penalties) applicable with respect to an
employer that are made applicable to the
agent under section 3504 remain applica-
ble to the employer and agent.
SECTION 8. USE OF SUBAGENT BY
AGENT WITH APPROVED FORM
2678
.01 An agent with an approved Form
2678 ("first agent" for purposes of this
section) may want to appoint an agent
under section 3504 ("subagent") using the
procedures described in section 3 of this
revenue procedure.
.02 If the subagent is authorized by the
IRS, the rules described in section 4 re-
lated to filing of returns apply to the sub-
agent as an agent. For example, the sub-
agent is required to attach Schedule R
(Form 941) with its own name and EIN
entered as shown on the return, and list the
name and EIN of each employer who ap-
pointed the first agent, and for whom the
subagent is authorized to act, in the spaces
provided for clients. Unless the subagent
is appointed to deposit, pay, and file on
behalf of the first agent in the agent's
capacity as employer, the first agent is not
listed as a client on Schedule R (Form
941).
.03 The rules described in section 5 of
this revenue procedure related to deposits
and section 6 of this revenue procedure
related to corrections of wages apply to
the subagent as an agent.
.04 The subagent and agent are respon-
sible for maintaining records that show
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the wages paid by the subagent to each
employee on behalf of, and identified by,
each employer for whom the subagent is
authorized to act. The employer is respon-
sible for maintaining records that show
the wages paid by the agent and subagent
to its employees. See §§31.6001-
1 through 31.6001-5.
.05 The provisions of law (including
penalties) applicable with respect to an
employer that are made applicable to the
subagent and the first agent under section
3504 remain applicable to the employer,
first agent, and subagent.
SECTION 9. REVOCATION OF
AUTHORIZATION OF AGENT WITH
APPROVED FORM 2678
.01 The employer or agent with an ap-
proved Form 2678 may request the IRS
revoke an existing authorization using
Form 2678, executed by the party seeking
to revoke the appointment. Except as pro-
vided in section 10.07 of this revenue
procedure, the IRS confirms the revoca-
tion by letter to the agent and employer,
and the revocation is effective on the date
indicated in the letter mailed by the IRS.
.02 The IRS may independently revoke
an existing authorization if the facts and
circumstances indicate such revocation is
warranted. Except as provided in section
10.07 of this revenue procedure, the revo-
cation is by notice to the agent and em-
ployer. The revocation of the authoriza-
tion is effective when the IRS mails the
notice.
.03 An agent files Form 2678 to revoke
an authorization if there is no longer an
agency relationship, for example, because
the employer or agent goes out of busi-
ness, the employer no longer exists due to
a merger or acquisition, the employer is
deceased, or the employer appoints an-
other person on Form 2678 to act as agent
for the same acts the agent is authorized to
perform.
.04 If the agency relationship is being
terminated because the employer appoints
another person to act as agent, the agent
whose authorization is being revoked is
liable to report, deposit, and pay taxes on
behalf of the employer with regard to
wages it paid during periods for which it
was authorized to act as agent of the em-
ployer. It remains liable for such employ-
ment taxes even after the authorization is
revoked as provided in this section.
SECTION 10. SPECIAL RULES FOR
AGENTS OF HOME CARE SERVICE
RECIPIENTS, INCLUDING FOR
STATE AGENTS
.01 Except as otherwise provided in
this section, the rules generally applicable
to agents and employers described in sec-
tions 3, 4, 5, 6, 7, 8, and 9 of this revenue
procedure shall apply to a person autho-
rized to act as agent for an employer who
is a home care service recipient (HCSR)
as defined in §31.3504-1(b)(3). This sec-
tion also sets forth special rules that apply
to state agents. For purposes of this reve-
nue procedure, a state agent is a state or
local government agency administering a
program to provide home care services, as
defined in §31.3504-1(b)(2), which has
been authorized by the IRS as agent for a
HCSR. Only government agencies can be
state agents. Third parties, whether non-
profit or for-profit, that are engaged by a
government agency to administer all or
some aspects of a home care services pro-
gram are not state agents for purposes of
this revenue procedure.
.02 Section 31.3504-1(b) provides
that the IRS may authorize a person to
act as agent on behalf of an employer
who is a HCSR with respect to FUTA
taxes imposed on wages paid for home
care services, as defined in §31.3504-
1(b)(2), provided that the person has
been authorized to act as agent for the
HCSR for income tax withholding and
FICA tax purposes under §31.3504-1(a).
.03 The general rules to request autho-
rization to act as agent set forth in section
3 of this revenue procedure apply to re-
quest authorization to act as agent for a
HCSR, including for FUTA tax purposes,
except that the letter mailed by the IRS
approving the request will only be sent to
the agent. Sections 10.03(1) through
10.03(3), below, provide special rules for
state agents when requesting authorization
to act as agent of HCSRs.
(1) A state agent may request authori-
zation from the IRS without filing Form
2678 on behalf of each HCSR for whom
the state agent seeks to act. In lieu of Form
2678, the state agent may solicit appoint-
ment by each HCSR on the forms the
individuals must complete in order to en-
roll in the program administered by the
state agent. The state agent submits a let-
ter to the IRS address to which it would
have been required to submit the Forms
2678. The letter must reference the forms
appointing the state agent and identify
each HCSR for whom the state agent
wishes to be authorized by either (a) in-
cluding each HCSR's name and EIN on a
list, or (b) including a properly executed
Form SS-4 for the HCSR if the HCSR has
not previously obtained an EIN, with its
letter to the IRS. State agents were not
previously required to notify the IRS of
the HCSRs for whom they acted; how-
ever, notification is now necessary to en-
sure the IRS' records properly reflect the
parties' filing requirements and to ensure
the correct taxes are reported and paid by
the agent on behalf of each HCSR. The
notification procedures apply with respect
to each HCSR who enrolls in the program
and wishes to appoint the state agent. The
state agent must also notify the IRS of
each HCSR for whom its authority to act
as agent is revoked.
(2) Because Rev. Proc. 80-4 allowed
HCSRs to appoint state agents without
filing Form 2678, Notice 2003-70, Q&A
10, provided that HCSRs who appoint
state agents do not need to obtain an EIN
if an EIN is not required for any other
purpose. The IRS now requires all agents
to file allocation schedules which show
information for each employer, identified
by the employer's EIN. Therefore, all HC-
SRs, including those whose agents were
authorized before the effective date of this
revenue procedure, must now obtain an
EIN so the state agent may fulfill its re-
porting obligations to the IRS. See also
section 6109 and §31.6011(b)-1. As in-
dicated in section 10.03(1) of this revenue
procedure, if the HCSR has not previously
obtained an EIN, the state agent may as-
sist a HCSR in applying for an EIN by
including a properly executed Form SS-4
on behalf of the HCSR with the state
agent's request for authorization to act as
agent. HCSRs whose agents were autho-
rized before the effective date of this rev-
enue procedure who do not have an EIN
must apply for an EIN within a reasonable
period of time after the effective date of
this revenue procedure.
(3) All state agents should use Form
SS-4 to request a special EIN for the state
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agent to report and pay taxes on behalf of
the HCSRs for whom the state agent acts.
The application for the special EIN should
indicate the state agent is a government
entity. The state agent may not use its
special EIN to report or pay employment
taxes for wages paid for services other
than home care services, or for an em-
ployer who is not a HCSR.
.04 The filing of return procedures set
forth in section 4 of this revenue proce-
dure apply to agents authorized to act on
behalf of a HCSR for any returns the
agent is authorized to file. For example,
the agent with an approved Form 2678 for
FUTA tax purposes files one aggregate
Form 940 for each tax-return period re-
porting the FUTA tax liability related to
wages it pays to its employees and to
wages it pays for home care services to
employees of each HCSR for whom the
agent is authorized to act. The IRS has
designated Schedule R (Form 940), Allo-
cation Schedule for Aggregate Form 940
Filers, as the allocation schedule to attach
to an aggregate Form 940. Sections
10.04(1) through 10.04(3), below, provide
special rules for state agents filing returns
on behalf of HCSRs.
(1) As indicated in section 10.03(3) of
this revenue procedure, state agents
should obtain a separate EIN to report and
pay employment taxes on behalf of HC-
SRs. The state agent enters its own name
and special EIN in the spaces provided for
the employer.
(2) If the state agent designates a re-
porting agent, the reporting agent must
use the state agent's name and special EIN
to report and pay employment taxes on
behalf of the HCSRs for whom the state
agent is authorized to act.
(3) If the state agent appoints a sub-
agent, the subagent must use its own name
and EIN to report and pay employment
taxes on behalf of the HCSRs for whom
the state agent is authorized to act. Notice
2003-70, Q&A 27 permitted the subagent
to use a state agent's special EIN in order
to be able to report and pay FUTA taxes
on behalf of HCSRs. However, now that
§31.3504-1(b) provides that any person,
not just a state agent, may be authorized as
agent of a HCSR with respect to FUTA
taxes owed for home care services, it is no
longer necessary for the subagent to use
the state agent's special EIN in order to
act as an agent for FUTA tax purposes.
Furthermore, because the subagent is sub-
ject to normal deposit rules, and the de-
posit rules that apply to the state agent
discussed in section 10.06 of this revenue
procedure do not apply to the subagent,
the use of the state agent's special EIN by
the subagent is not appropriate.
.05 An agent authorized to act on be-
half of a HCSR furnishes and files a Form
W-2 for each employee on behalf of each
HCSR, unless the compensation is ex-
cepted from both income tax withholding
and FICA tax.
.06 The deposit procedures set forth in
section 5 of this revenue procedure apply
to an agent authorized to act on behalf of
a HCSR for any deposits the agent is
required to make. Sections 10.06(1)
through 10.06(3), below, provide special
rules for state agents when making depos-
its.
(1) A state agent may remit FICA tax,
FUTA tax, and income tax withholding on
behalf of a HCSR with a timely filed
return, and the IRS will not assess any
penalties for failure to deposit timely.
Other penalties may apply, for example, if
taxes are not paid or if a correct return is
not timely filed.
(2) If the state agent uses a reporting
agent, the reporting agent may deposit
taxes with a timely filed return.
(3) If the state agent uses a subagent,
the deposit rules apply to the subagent
based on the total taxes accumulated by
the subagent for its employees and on
behalf of all employers, including HCSRs,
for whom it is authorized to act. The de-
posit rules that would have applied to any
employer, or to the state agent, had the
subagent not been appointed, do not apply
to the subagent.
.07 The revocation procedures set forth
in section 9 of this revenue procedure are
generally followed to revoke an appoint-
ment of an agent authorized to act on
behalf of a HCSR, except that the letter
confirming the revocation will only be
sent to the agent. Sections 10.07(1)
through 10.07(4), below, provide special
rules related to revocations for FUTA tax
purposes.
(1) Under §31.3504-1(b), the agent
may only act for FUTA tax purposes for a
HCSR while the HCSR is enrolled, and
for the remainder of the calendar year in
which he or she ceases to be enrolled, in a
government program. If a HCSR ceases to
be enrolled in a government program dur-
ing the year, an agent may report and pay
FUTA taxes on behalf of that HCSR ei-
ther for the entire calendar year, or for a
portion of the calendar year, as described
in sections 10.07(2) and 10.07(3) below.
(2) The agent may report and pay
FUTA taxes on wages it paid for home
care services for the HCSR for the entire
calendar year in which the HCSR ceases
to be enrolled, but not after such year. The
agent files a Form 2678 to request the IRS
to revoke the authorization with respect to
FUTA taxes by the end of the calendar
year in which the individual ceases to be a
HCSR.
(3) The agent may report and pay
FUTA taxes only for the portion of the
year it paid wages for home care services
for the HCSR. If the agent stops paying
wages for home care services for the
HCSR before the end of the calendar year,
the agent must file a Form 2678 to request
the IRS to revoke the authorization for
FUTA taxes when the agent stops paying
wages or otherwise stops acting as agent
with respect to the HCSR's FUTA taxes.
(4) Under either sections 10.07(2) or
10.07(3), above, the agent may still act as
agent with respect to the individual's
FICA tax and income tax withholding re-
sponsibilities.
SECTION 11. EXAMPLES
The rules provided in this revenue pro-
cedure are illustrated by the following ex-
amples.
Example 1. Final return. Employer B
and Agent W complete and file Form
2678 to request the IRS authorize Agent
W to file Form 941 with respect to all of
Employer B's employees. The IRS ap-
proves the authorization effective April 1,
2014. Employer B files a Form 941 for the
first quarter of 2014, indicating that it is a
final return by checking the appropriate
box and entering that it stopped paying
wages as of March 31, 2014. For periods
beginning on and after April 1, 2014,
Agent W pays wages to all of Employer
B's employees, makes related employ-
ment tax deposits and payments, and re-
ports the wages and taxes on an aggregate
Form 941. Agent W attaches Schedule R
(Form 941) listing Employer B as a client.
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Example 2. No final return. Same facts
as Example 1, except that Employer B is a
new business that has not paid wages to
any employees prior to the effective date
of the authorization. Therefore, Employer
B does not file a final Form 941.
Example 3. Authorization for some em-
ployees. Employer C and Agent V com-
plete and file Form 2678 to request the
IRS authorize Agent V to file Form 941
with respect to some of Employer C's
employees. The IRS approves the autho-
rization effective April 1, 2014. For peri-
ods beginning on and after April 1, 2014,
Agent V pays wages to some of Employer
C's employees, makes related employ-
ment tax deposits and payments, and re-
ports the wages and taxes on an aggregate
Form 941. Agent V attaches Schedule R
(Form 941) listing Employer C as a client.
Employer C continues to pay wages for
some employees, make related employ-
ment tax deposits, and report the wages
and taxes on its Form 941.
Example 4. HCSR and other employer.
Agent Y is authorized to file Form 941 for
Employer S and for Employer T, who is a
home care service recipient (HCSR) as
defined in §31.3504-1(b)(3). Agent Y is
also authorized to file Form 940 for Em-
ployer T.
Agent Y pays wages to all of Employer
S's and Employer T's employees, makes
related employment tax deposits and pay-
ments, and reports the wages and taxes on
an aggregate Form 941. Agent Y attaches
Schedule R (Form 941) listing Employer
S and Employer T as clients. Agent Y also
reports wages and taxes with respect to
home care services provided to Employer
T on an aggregate Form 940. Agent Y
attaches Schedule R (Form 940) listing
Employer T as a client. Employer S files
Form 940 with respect to wages paid to its
employees.
Example 5. State agent. State K funds
a program to provide home care services
to eligible individuals. Department H ad-
ministers the home care services program,
including disbursing the funds to pay for
the services. Each of the individuals en-
rolled in the program is a HCSR, as de-
fined in § 31.3504-1(b)(3).
As part of the enrollment process, each
HCSR completes a form to appoint De-
partment H as agent under section 3504 of
the Code to file Form 940 and Form 941
for the HCSRs. Department H sends a
letter to the IRS stating it is a government
agency that wishes to become a state
agent. Department H attaches to the letter
a sample copy of the form it uses to be
appointed by a HCSR, a list of the names
and EINs of each HCSR that has ap-
pointed Department H as agent, and a
Form SS-4 with respect to each HCSR
named in its letter that does not have an
EIN. Department H also attaches a Form
SS-4 to apply for a special EIN for it to
use as state agent of the HCSRs enrolled
in its home care services program that
have appointed Department H as agent.
Department H receives a letter from the
IRS authorizing it as agent for each
HCSR.
Department H pays wages to the HC-
SR's employees and reports the wages
and taxes on an aggregate Form 941, with
its name and special EIN entered in the
space provided for the employer. Depart-
ment H attaches Schedule R (Form 941),
listing each HCSR as a client. Because
Department H is a state agent, it remits
payment with its timely filed aggregate
Form 941.
Department H also reports wages and
taxes with respect to the HCSRs on an
aggregate Form 940 with its name and
special EIN entered in the space provided
for the employer. Department H attaches
Schedule R (Form 940), listing each
HCSR as a client. Because Department H
is a state agent, it remits payment with its
timely filed aggregate Form 940.
Example 6. State agent designates re-
porting agent. Same facts as Example 5.
The following year (Year 2) Department
H designates reporting agent R with re-
spect to HCSRs for whom Department H
is authorized as state agent, by following
the procedures described in Rev. Proc.
2012-32. Reporting agent R enters De-
partment H's name and special EIN in the
space provided for the employer on the
aggregate employment tax returns and on
the attached allocation schedules. Report-
ing agent R lists each HCSR as a client on
each allocation schedule. Reporting agent
R also remits payment for employment
taxes with the timely filed employment
tax returns.
Example 7. State agent appoints sub-
agent. Same facts as Example 5, except in
Year 2, Department H appoints S as its
subagent on Form 2678 with respect to the
HCSRs for whom Department H is autho-
rized as state agent. The IRS approves the
authorization.
Subagent S pays wages to the HCSRs'
employees, makes related employment
tax deposits and payments, and reports the
wages and taxes on an aggregate Form
941, with its name and EIN entered in the
space provided for the employer. Sub-
agent S attaches Schedule R (Form 941),
listing each HCSR as a client. Subagent S
also reports wages and taxes with respect
to the HCSRs on an aggregate Form 940
with its name and EIN entered in the
space provided for the employer. Sub-
agent S attaches Schedule R (Form 940),
listing each HCSR as a client.
Example 8. Form 940 revocation - end
of year. Individual A, a HCSR as defined
in §31.3504-1(b)(3), has only home care
service employees. Individual A and
Agent X complete and file Form 2678 to
request the IRS to authorize Agent X to
file Form 941 and Form 940 with respect
to the employees providing home care ser-
vices to Individual A. The IRS approves
the authorization effective January 1,
2014.
On July 31, 2014, Individual A ceases
to be enrolled in the government program
but continues to receive home care ser-
vices which Agent X pays for with private
funds provided by Individual A. Under
§31.3504-1(b)(3), Individual A continues
to be a HCSR for the remainder of the
calendar year after ceasing to be enrolled
in the government program.
Agent X reports the wages and taxes
with respect to Individual A for the entire
year on an aggregate Form 940. Agent X
attaches Schedule R (Form 940) listing
Individual A as a client.
The IRS approves Agent X's request,
filed on Form 2678, to revoke its authori-
zation to file Form 940 for Individual A,
effective December 31, 2014. Agent X
remains authorized to file Form 941 for
Individual A.
Example 9. Form 940 revocation - be-
fore end of year. Same facts as Example 8,
except that the IRS approves Agent X's
request, filed on Form 2678, to revoke its
authorization to file Form 940 for Individ-
ual A, effective August, 1, 2014.
Agent X reports the wages and taxes
accrued with respect to Individual A on or
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before July 31, 2014, on an aggregate
Form 940. Agent X attaches Schedule R
(Form 940), listing Individual A as a cli-
ent. Individual A is responsible for report-
ing wages and taxes accrued with respect
to wages paid for home care services on or
after August 1, 2014.
### SECTION 12. EFFECT ON OTHER DOCUMENTS
Notice 95-18, 1995-1 C.B. 300, is
modified in part. Rev. Proc. 70-6,
1970-1 C.B. 420, Rev. Proc. 80-4,
1980-1 C.B. 581, and Notice 2003-70,
2003-2 C.B. 916, are modified and super-
seded. This document does not affect au-
thorizations in effect under Rev. Proc.
70-6, Rev. Proc. 80-4, or by reasonable
reliance on Notice 2003-70, as of the ef-
fective date of this revenue procedure.
However, agents must follow the rules of
this revenue procedure after its effective
date to make requests for authorization to
act as agent and, with regard to all autho-
rizations, to make employment tax pay-
ments and deposits, and to file and correct
employment tax returns.
### SECTION 13. EFFECTIVE DATE
This revenue procedure is effective
December 12, 2013.
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### SECTION 14. DRAFTING INFORMATION
The principal author of this revenue
procedure is Michelle R. Weigelt of the
Office of Division Counsel/Associate
Chief Counsel (Tax Exempt and Govern-
ment Entities). For further information re-
garding this revenue procedure contact
Michelle R. Weigelt at 202-317-6798 (not
a toll-free call).
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### Part IV. Items of General Interest
Notice of Proposed
Rulemaking and Notice of
Public Hearing
#### Dividend Equivalents from Sources within the United States
##### REG-120282-10
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Withdrawal of notice of pro-
posed rulemaking, notice of proposed
rulemaking and notice of public hearing.
SUMMARY: This document provides
guidance to nonresident alien individuals
and foreign corporations that hold certain
financial products providing for payments
that are contingent upon or determined by
reference to U.S. source dividend payments
and to withholding agents. It withdraws pro-
posed regulations under section 871(m) that
were published in the Federal Register on
January 23, 2012 (77 FR 3202). This docu-
ment also provides a notice of a public hear-
ing on these proposed regulations.
DATES: Written or electronic comments
must be received by March 5, 2014. Re-
quests to speak and outlines of topics to be
discussed at the public hearing scheduled
for April 11, 2014, at 10 a.m., must be
received by March 5, 2014.
ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG-120282-10), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand-
delivered Monday through Friday between
the hours of 8 a.m. and 4 p.m. to CC:PA:
LPD:PR (REG-120282-10), Courier's
Desk, Internal Revenue Service, 1111 Con-
stitution Avenue, NW, Washington, DC, or
sent electronically, via the Federal eRule-
making Portal at http://www.regulations.
gov (IRS REG-120282-10). The public
hearing will be held in the auditorium, be-
ginning at 10 a.m., at the Internal Revenue
Service Building, 1111 Constitution Ave-
nue, NW, Washington, DC.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, D. Peter Merkel or Karen
Walny at (202) 317-6938 (not a toll-free
number); concerning submission of com-
ments, the hearing, or to be placed on the
building access list to attend the hearing,
Oluwafunmilayo (Funmi) Taylor, Publi-
cations and Regulations Branch Special-
ist, at (202) 317-6901 (not a toll-free
number).
### SUPPLEMENTARY INFORMATION:
#### Paperwork Reduction Act
The collections of information con-
tained in this notice of proposed rulemak-
ing have been submitted to the Office of
Management and Budget for review in
accordance with the Paperwork Reduction
Act of 1995 (44 U.S.C. 3507(d)). Com-
ments on the collections of information
should be sent to the Office of Manage-
ment and Budget, Attn: Desk Office for
the Department of the Treasury, Office of
Information and Regulatory Affairs,
Washington, DC 20503, with copies to the
Internal Revenue Service, Attn: IRS Re-
ports Clearance Officer, SE:W:CAR:MP:
T:T:SP, Washington, DC 20224. Com-
ments on the collection of information
should be received by February 3, 2014.
Comments are specifically requested con-
cerning:
Whether the proposed collection of in-
formation is necessary for the proper per-
formance of the functions of the Internal
Revenue Service, including whether the
information will have practical utility;
The accuracy of the estimated burden
associated with the proposed collection of
information;
How the quality, utility, and clarity of
the information to be collected may be
enhanced;
How the burden of complying with the
proposed collections of information may
be minimized, including through the ap-
plication of automated collection tech-
niques or other forms of information tech-
nology; and
Estimates of capital or start-up costs
and costs of operation, maintenance, and
purchase of services to provide informa-
tion.
The collections of information in this
notice of proposed rulemaking are in
§§1.871-15(j) and (o), and are an increase
in the total annual burden in the current
regulations under §§1.1441-1 through
1.1441-9, 1.1461-1 and 1.1474-1. Under
§1.871-15(0), a broker, dealer, or short
party is required to provide information
relating to a potential section 871(m)
transaction in a commercially reasonable
fashion. The information may include
whether the transaction is a section
871(m) transaction, the delta of the trans-
action, estimates of dividends, and the
amount of the dividend equivalents. This
information is required to establish
whether a payment is treated as a U.S.
source dividend for purposes of section
871(m). This information will be used for
audit and examination purposes. The
likely respondents are businesses and
other for-profit institutions.
Estimated total annual reporting bur-
den is 240,000 hours.
Estimated average annual burden per
respondent is 8 hours.
Estimated average burden per response
is 4 minutes.
Estimated number of respondents is
30,000.
Estimated total annual frequency of re-
sponses is 4,000,000.
An agency may not conduct or spon-
sor, and a person is not required to re-
spond to, a collection of information un-
less it displays a valid control number
assigned by the Office of Management
and Budget.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mate-
rial in the administration of any internal
revenue law. Generally, tax returns and
return information are confidential, as re-
quired by 26 U.S.C. 6103.
#### Background
On January 23, 2012, the Federal Reg-
ister published temporary regulations (TD
9572) at 77 FR 3108 (2012 temporary
regulations) and a notice of proposed rule-
making by cross-reference to temporary
regulations and notice of public hearing at
77 FR 3202 (2012 proposed regulations,
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and together with the 2012 temporary reg-
ulations, 2012 section 871(m) regulations)
under section 871(m) of the Internal Rev-
enue Code (Code). The 2012 section
871(m) regulations related to dividend
equivalents from sources within the
United States paid to nonresident alien
individuals and foreign corporations. Cor-
rections to the 2012 temporary regulations
were published on February 6, 2012, and
March 8, 2012, in the Federal Register at
77 FR 5700 and 77 FR 13969, respec-
tively. A correcting amendment to the
2012 temporary regulations was also pub-
lished on August 31, 2012, in the Federal
Register at 77 FR 53141. The Treasury
Department and the IRS received written
comments on the 2012 proposed regula-
tions, which are available at www.regula-
tions.gov. A public hearing was held on
April 27, 2012.
This document withdraws the 2012
proposed regulations and provides new
proposed regulations (2013 proposed reg-
ulations). Based on comments received on
the 2012 proposed regulations, the Trea-
sury Department and the IRS believe that
the 2013 proposed regulations better iden-
tify (1) when a notional principal contract
(NPC) "is of a type which does not have
the potential for tax avoidance" and (2)
other payments that are dividend equiva-
lents because they are substantially simi-
lar to specified NPC payments and substi-
tute dividend payments.
This preamble discusses section
871(m), describes the 2012 section
871(m) regulations, summarizes the com-
ments received on the 2012 section
871(m) regulations, and explains the 2013
proposed regulations.
### 1. Section 871(m)
Congress enacted section 871(m)
(originally designated as section 871(l))
on March 18, 2010, in section 541 of the
Hiring Incentives to Restore Employment
Act (HIRE Act), Public Law 111-147
(124 Stat. 71). Section 871(m) treats a
dividend equivalent as a dividend from
sources within the United States for pur-
poses of sections 871(a), 881, and
4948(a), and chapters 3 and 4 of subtitle A
of the Code. Section 871(m) applies to
any dividend equivalent paid on or after
September 14, 2010. Section 871(m)(5)
provides that the term payment includes
any gross amount that is used in comput-
ing any net payment that is transferred to
or from the taxpayer.
Section 871(m)(2) defines a dividend
equivalent as (1) any substitute dividend
made pursuant to a securities lending or a
sale-repurchase transaction that (directly
or indirectly) is contingent upon or deter-
mined by reference to the payment of a
dividend from sources within the United
States, (2) any payment made pursuant to
a specified NPC that (directly or indi-
rectly) is contingent upon or determined
by reference to the payment of a dividend
from sources within the United States, or
(3) any other payment that the Secretary
determines is "substantially similar" to a
specified NPC payment or substitute div-
idend payment.
Section 871(m)(3) defines the term spec-
ified NPC. For payments made on or after
September 14, 2010, and on or before
March 18, 2012, section 871(m)(3)(A) de-
fines a specified NPC as any NPC if (1) the
long party transferred the underlying secu-
rity to the short party in connection with
entering into the NPC, (2) the short party
transferred the underlying security to the
long party in connection with the termina-
tion of the NPC, (3) the underlying security
is not readily tradable on an established se-
curities market, (4) the short party posted
the underlying security as collateral with the
long party, or (5) the NPC is identified by
the Secretary as a specified NPC. For pay-
ments made after March 18, 2012, section
871(m)(3)(B) provides that any NPC is a
specified NPC unless the Secretary deter-
mines that the NPC is of a type that does not
have the potential for tax avoidance.
### 2. 2012 Section 871(m) Regulations
The 2012 section 871(m) regulations
provided guidance regarding dividend
equivalents under section 871(m). Gener-
ally, the 2012 section 871(m) regulations
defined the terms specified NPC and sub-
stantially similar payment, addressed cer-
tain issues regarding withholding of tax
with respect to the payment of a dividend
equivalent, and provided other rules relat-
ing to dividend equivalents.
Section 1.871-15(c) of the 2012 pro-
posed regulations provided that a dividend
equivalent included any gross amount
used to compute any net amount trans-
ferred to or from the taxpayer, even if the
taxpayer made a net payment or no pay-
ment was made because the net amount
was zero. A dividend equivalent, how-
ever, did not include any amount deter-
mined by reference to an estimate of an
expected (but not yet announced) divi-
dend. This exception did not apply if the
estimate adjusted to reflect the amount of
the actual dividend.
Section 1.871-16 of the 2012 section
871(m) regulations defined the term spec-
ified NPC with respect to payments made
after March 18, 2012. For payments made
prior to January 1, 2014, the 2012 tempo-
rary regulations (as amended by the cor-
recting amendment published at 77 FR
53141) defined a specified NPC using
substantially the same definition as pro-
vided in section 871(m)(3)(A). For pay-
ments made on or after January 1, 2014,
the 2012 proposed regulations defined a
specified NPC as an NPC that meets one
or more of the following factors: (1) the
long party is "in the market" on the same
day that the parties priced or terminated
the NPC; (2) the underlying security is not
regularly traded on a qualified exchange;
(3) the short party posts the underlying
security as collateral and the underlying
security represents more than ten percent
of the collateral posted by the short party;
(4) the actual term of the NPC is fewer
than 90 days; (5) the long party controls
the short party's hedge; (6) the notional
principal amount is greater than five per-
cent of the total public float of the under-
lying security or greater than 20 percent of
the 30-day daily average trading volume;
or (7) the NPC is entered into on or after
the announcement of a special dividend
and prior to the ex-dividend date.
Section 1.871-15(d) of the 2012 pro-
posed regulations described payments that
are substantially similar to substitute div-
idends made pursuant to securities lending
and sale-repurchase transactions and to
payments made pursuant to specified
NPCs. A substantially similar payment
was any (1) gross-up amount paid by a
short party in satisfaction of the long par-
ty's tax liability with respect to a dividend
equivalent, or (2) payment made pursuant
to an equity-linked instrument (ELI) that
was calculated by reference to a dividend
from sources within the United States if
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the ELI satisfied one or more of the spec-
ified NPC factors.
The 2012 proposed regulations pro-
vided that certain indices referenced by an
NPC or ELI would not be underlying se-
curities, and therefore, would not be sub-
ject to section 871(m). Section 1.871-
16(f)(1) of the 2012 proposed regulations
provided that each component security of
a customized index would be treated as an
underlying security in a separate NPC.
Section 1.871-16(f)(3) of the 2012 pro-
posed regulations defined a customized
index as (1) a "narrow-based index,"
which was generally defined based on the
Securities Exchange Act of 1934, section
3(a)(55)(B); or (2) any other index unless
futures contracts or options contracts ref-
erencing the index trade on a qualified
board or exchange.
The 2012 section 871(m) regulations
provided rules under section 1441 to re-
quire a withholding agent to withhold tax
owed with respect to a dividend equiva-
lent. Many of these amendments and pro-
posals simply coordinated the rules in
§1.871-16T of the 2012 temporary regu-
lations and §§1.871-15 and 1.871-16 of
the 2012 proposed regulations with the
withholding rules in chapter 3 of the
Code. Section 1.1441-3(h)(2) of the 2012
proposed regulations explained the proce-
dures for withholding when an NPC be-
came a specified NPC after the date that
the parties entered into the NPC. The pro-
posed regulations provided that the term
dividend equivalent included any payment
that was made prior to the date the NPC
became a specified NPC and that was (di-
rectly or indirectly) contingent upon or
determined by reference to the payment of
a dividend from sources within the United
States.
### 3. Summary of Comments on the 2012 Section 871(m) Regulations
The Treasury Department and the IRS
received numerous comments regarding
the 2012 section 871(m) regulations. The
major concerns raised in the comments
related to (1) the definition of a specified
NPC, (2) the definition of an ELI, (3)
withholding issues that arise regarding the
payment of a dividend equivalent, (4) the
potential for over-withholding in a chain
of transactions, (5) the treatment of indi-
ces, and (6) the effective date of the 2012
proposed regulations.
#### A. Definition of Specified NPC
Several comments on the 2012 pro-
posed regulations stated that the seven-
factor approach to defining a specified
NPC would not accurately identify tax
avoidance transactions. These comments
asserted that the factors could treat a con-
tract as a specified NPC even when the
contract was not entered into primarily to
avoid withholding. Similarly, comments
noted that some tax-motivated transac-
tions would not be subject to tax under
section 871(m) because the transaction
would not meet any of the seven factors.
These comments generally recom-
mended substantial modification to the
factors used in the 2012 proposed regu-
lations.
Comments stated that the term of a
contract does not indicate the potential for
tax avoidance. Comments noted that the
term rule could result in retroactive with-
holding obligations and that it would be
difficult for withholding agents to design
systems to monitor withholding obliga-
tions that may arise after a payment has
been made. Other comments asserted that
90 days was not the appropriate threshold
for a minimum term and suggested elim-
inating the 90-day term factor or reducing
the minimum term. Another comment ac-
knowledged that the length of the term
may indicate that a contract has a tax
avoidance motive; however, this comment
recommended adding an exception for ter-
mination events that are beyond the con-
trol of the parties to the transaction.
Comments asserted that withholding
agents and taxpayers would have difficulty
applying the "in the market" factor. Those
comments recommended that a long party
should be treated as being "in the market"
only when the long party sold or purchased
the underlying security "in connection with"
entering into or terminating an NPC. In ad-
dition, several comments indicated that
withholding agents would have difficulty
determining whether a long party was “in
the market" and would have to rely on rep-
resentations from the long party to the with-
holding agent.
#### B. Definition of ELI
Comments stated that the definition of a
specified ELI in the 2012 proposed regula-
tions was overly broad because numerous
types of ELIs do not give rise to the policy
concerns underlying section 871(m). The
comments requested that the final regula-
tions limit the scope of the term ELI to
contracts that provide delta-one or near-
delta-one exposure to the underlying equity.
One comment explained that the delta of an
instrument reflects the change in the value
of the instrument relative to a change in the
value of the underlying security. These
comments asserted that non-delta-one deriv-
atives do not provide investors with a sub-
stitute for physical ownership of the under-
lying security. One comment, however,
disagreed that a delta-based standard is the
appropriate criteria for ELIs. This comment
stated that a delta-based standard would pro-
vide non-delta-one financial instruments
with a competitive advantage over delta-one
products because non-delta-one financial in-
struments would be subject to more favor-
able tax treatment.
Another comment suggested that the
term ELI should not include single stock
futures contracts (SSFs) unless the SSF is
an "exchange future for physical" (EFP).
That comment described an EFP as a
transaction in which an investor (1) sold
stock and purchased an SSF for future
delivery of the same stock or (2) pur-
chased stock and sold an SSF to deliver
the same stock in the future. The comment
maintained that an SSF, other than an
EFP, should not be treated as an ELI be-
cause SSFs trade on a regulated exchange,
unlike bilateral over-the-counter con-
tracts. The comment also asserted that an
adjustment to the settlement price of an
SSF is not a payment upon which with-
holding may be applied.
Similarly, several comments recom-
mended that the final regulations provide an
exception to the term ELI for exchange-
traded options because many of these op-
tions do not provide close economic substi-
tutes for owning stock. These comments
explained that two of the seven specified
NPC factors will apply to many standard
exchange-traded options. First, the majority
of exchange-traded options have an initial
term of less than 90 days. Second, when an
investor exercises an exchange-traded call
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option, the investor acquires the underlying
securities because the terms of the transac-
tion require physical settlement. If
exchange-traded options continue to be
treated as ELIs, these comments recom-
mended that the final regulations account for
the differences between over-the-counter
and exchange-traded options.
### C. Withholding issues
Comments requested clarification on
how the 2012 proposed regulations would
interact with the withholding rules of chap-
ter 3. Comments asserted that the 2012 pro-
posed regulations did not clearly address
whether intermediaries, custodians, clearing
organizations, and members of clearing or-
ganizations are withholding agents. Due to
the large volume of transactions cleared by
exchanges on a daily basis, one comment
noted that it would be impractical to treat an
exchange as a withholding agent. Other
comments stated that the 2012 proposed
regulations would impose an undue burden
on broker-dealers with non-U.S. customers
because the broker-dealers would have to
develop complicated systems to determine
whether an instrument is an ELI and the
amount of any dividend equivalent.
Other comments suggested limiting a
withholding agent's liability for withhold-
ing tax with respect to dividend equiva-
lents. Comments stated that a withholding
agent should not be liable for U.S. tax
when the withholding agent lacks the in-
formation necessary to determine whether
a transaction constitutes a specified NPC.
For instance, comments noted that a with-
holding agent may not know whether a
long party is selling or purchasing under-
lying securities on the same day that a
specified NPC or ELI is entered into or
terminated. A comment asserted that with-
holding for U.S. tax would be complicated
and impractical if the final regulations do
not limit a withholding agent's knowledge
to the information available to the with-
holding agent at the trading unit level.
Comments also questioned the rule in
§1.1441-3(h)(2) of the 2012 proposed
regulations treating all payments as divi-
dend equivalents if a contract became a
specified NPC only as a result of the long
party acquiring physical shares upon ter-
mination ("crossing out"). Comments
stated that the 2012 proposed regulations
unfairly would have required a withhold-
ing agent to withhold for U.S. tax on all
payments made pursuant to a contract that
would be treated as dividend equivalents
when the contract only became a specified
NPC because of a "cross out" at the end of
the contract. Other comments recom-
mended that this rule prescribing retroac-
tive treatment of a payment as a dividend
equivalent should apply only to NPCs that
are specified NPCs because they meet the
"in the market" or the 90-day factor.
### D. Chain of transactions
Several comments stated that a chain
of equity derivatives could result in the
collection of cascading U.S. tax, for ex-
ample, when each transaction in a chain of
back-to-back equity derivatives referenc-
ing the same underlying security is subject
to U.S. withholding tax. Some comments
recommended that the final regulations in-
corporate specified NPCs into the quali-
fied securities lender and credit forward
regimes described in Notice 2010-46,
2010-24 I.R.B. 757, which outlines a
framework for limiting the amount of U.S.
tax withheld in a chain of securities lend-
ing or sale-repurchase transactions. See
§601.601(d)(2)(ii)(b). Other comments
recommended that certain transactions be
exempt from section 871(m), such as
transactions entered into by a non-U.S.
dealer as a long party in the ordinary
course of business with customers. Com-
ments explained that these transactions
should be exempt from section 871(m)
because the non-U.S. dealer does not enter
into the transaction to avoid U.S. tax and
U.S. tax would be paid on any dividend
equivalent paid to the customers of the
non-U.S. dealer.
### E. Indices
Comments recommended several changes
to the definition of the terms "narrow-
based index" and "customized index."
One comment questioned the definition of
narrow-based index and suggested that the
final regulations incorporate the excep-
tions to that term provided in section
3(a)(55) of the Securities Exchange Act of
1934.
Several comments suggested changes
that would narrow the scope of the term
customized index. For example, com-
ments suggested that the term customized
index be revised to apply only to a
narrow-based index or any index offered
by a publisher that is not a "recognized
independent index publisher." Another
comment recommended that the definition
of a customized index exclude an index if
an exchange-traded fund, exchanged-
traded note, or other exchange-traded de-
rivative tracked that index. One comment
suggested that the final regulations pro-
vide that a customized index does not
include any index with respect to which
U.S. equity securities comprise less than
20 percent of the notional value.
Other comments suggested that the fi-
nal regulations broaden the definition of
customized index because the definition in
the 2012 proposed regulation may have
permitted certain transactions designed to
avoid U.S. tax. For example, one com-
ment suggested that a customized index
should include any index that uses divi-
dend yield as the primary criteria for in-
clusion in the index. Another comment
noted that a partnership may function in
the same manner as a customized index if
the partnership was formed to hold a small
basket of U.S. securities.
### F. Effective dates
The 2012 proposed regulations pro-
vided that the rules would apply to pay-
ments made on or after the date of publi-
cation of the Treasury decision adopting
those rules as final regulations. Comments
expressed concern about the potentially
retroactive effect of the regulations. With
respect to ELIs, comments recommended
that the final regulations should apply
only to those transactions entered into af-
ter the effective date (rather than pay-
ments made after the effective date) be-
cause taxpayers and withholding agents
did not foresee that these contracts would
be subject to U.S. tax. Comments also
recommended that the effective date of
the final regulations be delayed because
market participants will be required to
make systems modifications and opera-
tional adjustments to comply with the fi-
nal regulations.
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#### 4. Explanation of Provisions
After consideration of the comments,
the Treasury Department and the IRS
agree that the proposed seven-factor ap-
proach to identify a specified NPC does
not provide the best framework for eval-
uating whether an NPC "is of a type
which does not have the potential for tax
avoidance" and that the seven-factor ap-
proach would be difficult to administer,
both for the IRS and withholding agents.
Accordingly, the Treasury Department
and the IRS are withdrawing the 2012
proposed regulations and proposing new
regulations based on the objective mea-
surement of a derivative's delta to deter-
mine whether a contract is subject to tax
under section 871(m). The delta of an
NPC or ELI is the ratio of the change in
the fair market value of the contract to the
change in the fair market value of the
property referenced by the contract. This
approach is consistent with comments
suggesting that the delta of an option be
used to determine whether the option is a
specified ELI.
The Treasury Department and the IRS
believe that this delta-based standard will
prevent taxpayers from avoiding with-
holding tax by electing derivative expo-
sure to U.S. equities rather than physical
ownership.
A transaction has the "potential for tax
avoidance" if it approximates the econom-
ics of owning an underlying security with-
out incurring the tax liability associated
with owning that security. In many cases,
a long party is indifferent as to whether to
invest in a derivative or a physical posi-
tion because the derivative and the phys-
ical position provide comparable eco-
nomic returns. Furthermore, the short
party will often hedge an NPC or ELI by
acquiring physical securities in proportion
to the delta of the derivative to which it is
exposed. When dividends paid on physi-
cal securities are subject to tax while div-
idend equivalents with respect to econom-
ically comparable derivatives are not,
those derivatives have a potential for tax
avoidance regardless of whether a long
party is using the derivative in a particular
case to avoid tax. Accordingly, the Trea-
sury Department and the IRS favor a delta
approach that objectively identifies trans-
actions in which the long party is able to
sufficiently approximate the economic re-
turns associated with an underlying secu-
rity.
In addition, the Treasury Department
and the IRS believe that the delta-based
standard of the 2013 proposed regulations
provides a simpler and more administra-
ble framework than the seven-factor test
of the 2012 proposed regulations. Using
the delta of an NPC or ELI to determine
the application of section 871(m) employs
a single standard for NPCs and ELIs, al-
though the regulations have different ap-
plicability dates for specified NPCs and
specified ELIs. Therefore, for both equity
swaps and other equity derivatives, the
determination of whether a transaction
may give rise to a dividend equivalent will
generally depend only on the determina-
tion of a single objective measurement at
the time the transaction is acquired.
This notice of proposed rulemaking
should not be construed as providing
guidance with respect to any other section
of the Code. For example, this notice
should not be used as a basis for applying
the delta standard to interpret other Code
sections.
### A. In General
Section 1.871-15(b) of the 2013 pro-
posed regulations treats a dividend equiva-
lent as a dividend from sources within the
United States for purposes of sections
871(a), 881, 892, 894, and 4948(a), and
chapters 3 and 4 of subtitle A of the Code.
Section 1.871-15(c) provides that a divi-
dend equivalent is (1) any payment of a
substitute dividend made pursuant to a se-
curities lending or sale-repurchase transac-
tion that references a U.S. source dividend
payment, (2) any payment made pursuant to
a specified NPC that references a U.S.
source dividend payment, (3) any payment
made pursuant to a specified ELI that refer-
ences a U.S. source dividend payment, or
(4) any other substantially similar payment.
A payment references a U.S. source divi-
dend payment if the payment is directly or
indirectly contingent upon or determined by
reference to the payment of a dividend from
sources within the United States.
Certain transactions typically provide
for dividend equivalents to be paid at the
time a dividend is paid, and in an amount
equal to that dividend payment, on a ref-
erenced stock. Stock loans, equity sale-
repurchase transactions, and total return
swaps referencing stock are the most com-
mon types of equity-linked transactions
that provide the long party with either a
dividend or a dividend equivalent equal to
the dividend paid on the referenced stock.
Other transactions that are linked to
U.S. equities may also provide for div-
idend equivalents. The Treasury Depart-
ment and the IRS believe that an ELI
that has economic terms that are substan-
tially similar to a payment made pursuant
to a securities lending or sale-repurchase
transaction, or a specified NPC, creates
the same potential for avoidance of U.S.
withholding tax as those transactions. Sec-
tion 1.871-15(a)(4) of the 2013 proposed
regulations defines an ELI as any financial
transaction (other than a securities lending
or sale-repurchase transaction or an NPC)
that references the value of one or more
underlying securities. The term ELI in-
cludes instruments such as forward con-
tracts, futures contracts, options, debt in-
struments convertible into underlying
securities, and debt instruments with pay-
ments linked to underlying securities. The
long party with respect to an ELI is the
counterparty that holds a long position
with respect to an underlying security,
such as the purchaser of a call option or
the writer of a put option.
Section 1.871-15(f) of the 2013 pro-
posed regulations provides that another
substantially similar payment is a
gross-up amount paid by a short party in
satisfaction of the long party's tax liability
with respect to a dividend equivalent. The
Treasury Department and the IRS request
comments regarding whether other pay-
ments should be treated as substantially
similar payments, such as a payment made
by a seller of stock to the purchaser of the
stock pursuant to an agreement to deliver
a pending U.S. source dividend after the
record date (for example, a due bill).
The definition of an underlying secu-
rity has also been revised. The 2013 pro-
posed regulations define an underlying se-
curity as any interest in an entity taxable
as a corporation for Federal tax purposes
if a payment with respect to that interest
may give rise to a U.S. source dividend. If
a transaction references more than one
such entity (including a reference to an
index that is not a qualified index), each
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interest is treated as a separate underlying
security. If a transaction references a qual-
ified index, the qualified index is treated
as a single security that is not an underly-
ing security.
The 2013 proposed regulations also re-
vise the rules pertaining to indices. In
general, a qualified index is any index that
(1) references 25 or more underlying se-
curities; (2) references only long positions
in underlying securities; (3) contains no
underlying security that represents more
than 10 percent of the index's weighting;
(4) rebalances based on objective rules at
set intervals; (5) does not provide for a
high dividend yield; and (6) is referenced
by futures or option contracts that trade on
a national securities exchange or a domes-
tic board of trade.
### B. Section 871(m) Transactions and Delta
The 2013 proposed regulations define a
section 871(m) transaction as any securi-
ties lending or sale-repurchase transac-
tion, specified NPC, or specified ELI. Sec-
tion 1.871-15(a)(10) of the 2013 proposed
regulations defines a securities lending
transaction and sale-repurchase transac-
tion by reference to §1.861-3(a)(6) and
includes substantially similar transactions.
As noted above, to determine whether
a transaction is a specified NPC or speci-
fied ELI, the 2013 proposed regulations
replace the seven-factor test in the 2012
proposed regulations with a single-factor
test. Section 1.871-15(d)(2) provides that,
with respect to payments made on or after
January 1, 2016, a specified NPC is any
NPC that has a delta of 0.70 or greater
when the long party acquires the transac-
tion. Similarly, §1.871-15(e) provides
that a specified ELI is any ELI that has a
delta of 0.70 or greater when the long
party acquires the transaction. If a trans-
action references more than one underly-
ing security, the taxpayer must determine
whether the transaction is a section
871(m) transaction with respect to each
underlying security. A transaction, there-
fore, may be a section 871(m) transaction
with respect to one or more underlying
securities referenced in the transaction,
but may not be treated as a section 871(m)
transaction with respect to other underly-
ing securities referenced by that same
transaction.
Section 1.871-15(g)(1) of the 2013
proposed regulations provides that the
delta of an NPC or an ELI is the ratio of
the change in the fair market value of the
NPC or ELI to the change in the fair
market value of the property referenced
by the NPC or ELI. For purposes of the
2013 proposed regulations, the delta of a
transaction must be determined in a com-
mercially reasonable manner. If a tax-
payer calculates delta for non-tax business
purposes, that delta ordinarily is treated as
the delta for purposes of this section. For
example, to determine whether an option
is a specified ELI, a dealer may use the
delta that it calculates to determine the
number of shares needed to balance its
position on the option (even though that
number of shares may not correspond to
the dealer's actual hedge). If an NPC or
ELI contains more than one reference to a
single underlying security, all references
to that underlying security are taken into
account in determining the delta. If an
NPC or an ELI references more than one
underlying security or other property or
liability, a separate delta must be deter-
mined with respect to each underlying se-
curity without taking into account any
other underlying security or other prop-
erty or liability referenced in the transac-
tion. Section 1.871-15(g)(2) provides that
if the delta of an NPC or ELI is not
reasonably expected to vary during the
term of the transaction, the NPC or ELI
has a constant delta and the delta is treated
as 1.0. If a transaction would not have a
delta of 1.0 but for the rule in §1.871-
15(g)(2), the number of shares of the un-
derlying security is adjusted to reflect the
constant delta of 1.0. This rule is intended
to prevent taxpayers from avoiding the
application of the 2013 proposed regula-
tions by using transactions that reduce
delta while retaining the economics of
owning a set amount of shares. For exam-
ple, a transaction that provides 50 percent
of the appreciation, dividends, and depre-
ciation on 200 shares of stock X through-
out the term of the transaction (and there-
fore has a delta of 0.5) will be treated as a
contract that provides 100 percent of the
same exposure on 100 shares of stock X
(and therefore has a delta of 1.0). The
Treasury Department and the IRS request
comments regarding whether taxpayers
could avoid the constant delta rule by
structuring transactions with the potential
for de minimis delta variability and
whether such transactions should be
deemed to have a constant delta.
The Treasury Department and the IRS
understand that a long party may enter
into multiple transactions referencing the
same underlying security to substantially
replicate the economics of owning the un-
derlying security. For example, a taxpayer
may purchase a call option and sell a put
option referencing the same underlying
security that individually have a delta be-
low 0.70 but together have a delta that
exceeds 0.70. If section 871(m) were to
apply to each transaction separately, nei-
ther transaction would be a section
871(m) transaction even though the eco-
nomics of the positions when considered
together are the same as another transac-
tion that would be a section 871(m) trans-
action. Therefore, §1.871-15(1) of the
2013 proposed regulations treats multiple
transactions as a single transaction for
purposes of determining if the transac-
tions are a section 871(m) transaction with
respect to an underlying security when a
long party (or a related person) enters into
two or more transactions that reference
the same underlying security and the
transactions were entered into in connec-
tion with each other. These rules apply
only to combine transactions in which the
taxpayer is the long party. Section 1.871-
15(l) does not combine transactions when
a taxpayer is the long party with respect to
an underlying security in one transaction
and the short party with respect to the
same underlying security in another trans-
action. Transactions that are combined for
purposes of determining whether there is a
section 871(m) transaction are treated as
separate transactions for all other pur-
poses of this section, including for pur-
poses of determining the amount of a div-
idend equivalent with respect to each
transaction. A withholding agent, how-
ever, is not required to withhold on a
dividend equivalent paid pursuant to a
transaction that has been combined with
one or more other transactions unless the
withholding agent knows that the long
party (or a related person) entered into the
potential section 871(m) transactions in
connection with each other.
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The Treasury Department and the IRS
request comments regarding whether
(and, if applicable, how) the rules for
combining separate transactions to deter-
mine whether the transactions are section
871(m) transactions should apply in other
situations, such as when a taxpayer holds
both long and short positions with respect
to the same underlying security. Com-
ments also are requested regarding
whether (and, if applicable, how) the re-
maining transaction (or transactions)
should be retested when a long party ter-
minates one or more, but not all, of the
transactions that make up a combined po-
sition.
### C. Amount of Dividend Equivalent
Section 1.871-15(h) of the 2013 pro-
posed regulations provides rules for iden-
tifying a payment of a dividend equiva-
lent. A payment includes any gross
amount that references a U.S. source div-
idend and that is used to compute any net
amount transferred to or from the long
party even if the long party makes a net
payment to the short party or the net pay-
ment is zero. For purposes of section
871(m), a payment is treated as made on
the date the amount of the dividend equiv-
alent is fixed even if it is paid or otherwise
taken into account on a later date.
The 2012 proposed regulations pro-
vided that estimates of expected dividends
were not dividend equivalents unless the
estimate was adjusted to reflect actual div-
idend payments. The 2013 proposed reg-
ulations eliminate this exception and ex-
plicitly treat estimated dividend payments
as dividend equivalents because the eco-
nomic benefit of a dividend is present in
contracts that use estimated dividends in
much the same way as a contract that
adjusts for actual dividends. Moreover,
the Treasury Department and the IRS are
concerned that taxpayers may inappropri-
ately avoid section 871(m) if estimated
dividends are not treated as dividend
equivalents.
In the 2013 proposed regulations, a
dividend equivalent includes any amount
that references the payment of a U.S.
source dividend. In addition to an actual
payment of dividends and an estimated
payment of dividends, a dividend equiva-
lent includes any other contractual term of
a potential section 871(m) transaction that
is calculated based on an actual or esti-
mated dividend. For example, when a
long party enters into an NPC that pro-
vides for payments based on the appreci-
ation in the value of an underlying secu-
rity but does not explicitly entitle the long
party to receive payments based on regu-
lar dividends (a price return swap), the
2013 proposed regulations treat the price
return swap as a transaction that provides
for the payment of a dividend equivalent
because the anticipated dividend pay-
ments are presumed to be taken into ac-
count in determining other terms of the
NPC, such as in the payments that the
long party is required to make to the short
party or in setting the price of the under-
lying securities referenced in the price re-
turn swap.
The 2013 proposed regulations also
provide rules for calculating the amount
of a dividend equivalent. For a securities
lending or sale-repurchase transaction,
§1.871-15(i) provides that the amount of
a dividend equivalent for each underlying
security equals the actual per share divi-
dend amount paid on the underlying secu-
rity multiplied by the number of shares of
the underlying security transferred pursu-
ant to the transaction. For a specified NPC
or specified ELI, the amount of a dividend
equivalent equals the per share dividend
amount with respect to the underlying se-
curity multiplied by the number of shares
of the underlying security referenced in
the transaction (subject to adjustment)
multiplied by the delta of the transaction
with respect to the underlying security at
the time that the amount of the dividend
equivalent is determined.
If a transaction provides for a payment
based on an estimated dividend (including
an implicit estimated dividend), §1.871-
15(h)(2)(i) and (iii) of the 2013 proposed
regulations require that the actual amount
of the dividend payment is used to calcu-
late the amount of the dividend equivalent
unless the short party identifies a reason-
able estimated dividend amount in writing
at the inception of the transaction. Prop.
Treas. Reg. §1.871-15(h)(2)(i) and (iii). If
a transaction that provides for payment
based on estimated dividends is supported
by the required documentation, the per
share dividend amount used to compute
the amount of a dividend equivalent is the
lesser of the amount of the estimated div-
idend and the amount of the actual divi-
dend paid.
The delta used to determine whether a
potential section 871(m) transaction is a
section 871(m) transaction may differ
from the delta used to determine the
amount of the dividend equivalent of a
section 871(m) transaction. Whereas the
delta of a transaction at the time the long
party acquires a potential section 871(m)
transaction is used to determine whether
the transaction is a section 871(m) trans-
action, the delta of the section 871(m)
transaction at the time that the amount of
the dividend equivalent is determined is
used to calculate the amount of the divi-
dend equivalent. Because the delta of a
transaction may vary over time, the delta
of the transaction at the time of acquisi-
tion may differ from the delta of the trans-
action at the time the amount of the divi-
dend equivalent is determined. Under
§1.871-15(i)(1)(ii)(C)(1) of the 2013 pro-
posed regulations, the delta used to calcu-
late the amount of a dividend equivalent is
not used to re-test whether a transaction is
a section 871(m) transaction; a long par-
ty's section 871(m) transaction continues
to be subject to tax even if the delta of the
section 871(m) transaction is below 0.70
at the time the amount of the dividend
equivalent is determined. Similarly, a long
party that acquires a potential section
871(m) transaction that has a delta below
0.70 at the time of acquisition will not
have a section 871(m) transaction even if
the delta increases to be above 0.70 during
the time the long party holds the transac-
tion.
Under the 2013 proposed regulations,
the amount of the dividend equivalent
generally is determined on the earlier of
the ex-dividend date or the record date for
the dividend. However, if a section
871(m) transaction has a term of one year
or less, the amount of the dividend equiv-
alent is determined when the long party
disposes of the transaction. Therefore, a
long party that acquires an option with a
term of one year or less that is a specified
ELI will not incur a withholding tax if the
option lapses.
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### D. Other rules
In response to comments, §1.871-
15(j) of the 2013 proposed regulations
provides exceptions to the definition of a
section 871(m) transaction for two types
of potential section 871(m) transactions
that have little potential for tax avoidance.
The first exception applies when a quali-
fied dealer enters into a transaction as the
long party in its capacity as a dealer. A
qualified dealer is any dealer in securities
within the meaning of section 475 that is
subject to regulatory supervision by a
governmental authority in the jurisdiction
in which it was created or organized. In
addition, the dealer must certify to the
short party that it is a qualified dealer
acting in its capacity as a dealer in secu-
rities and that it will withhold and deposit
any tax imposed by section 871(m) with
respect to a section 871(m) transaction
that it enters into as a short party in its
capacity as a dealer. The second exception
applies when a taxpayer enters into a
transaction as part of a plan pursuant to
which one or more persons (including the
taxpayer) are obligated to acquire 50 per-
cent or more of the entity issuing the
underlying securities.
A comment to the 2012 proposed reg-
ulations stated that an NPC may reference
a partnership interest and that the partner-
ship could be formed to hold a small bas-
ket of U.S. equity securities. Noting that a
partnership may function like a custom-
ized index, the comment recommended
that regulations treat an NPC that refer-
ences a partnership interest as a separate
NPC with respect to each underlying se-
curity held by the partnership. To address
the concern noted in the comment,
§1.871-15(m) of the 2013 proposed reg-
ulations treats a transaction that references
an interest in an entity that is not a C
corporation for Federal tax purposes as
referencing the allocable portion of any
underlying securities and potential section
871(m) contracts held directly or indi-
rectly by that entity. The 2013 proposed
regulations provide an exception for a
transaction that references an interest in
an entity that is not a C corporation if
underlying securities and potential section
871(m) transactions represent, in the ag-
gregate, 10 percent or less of the value of
the interest in the referenced entity at the
time the transaction is entered into.
Section 1.871-15(n) of the 2013 pro-
posed regulations provides that the Com-
missioner may treat any payment made
with respect to a transaction as a dividend
equivalent if the taxpayer acquires a trans-
action with a principal purpose of avoid-
ing the application of these rules. The
Treasury Department and the IRS will
continue to closely scrutinize other trans-
actions that are not covered by section
871(m) and that may be used to avoid
U.S. taxation and U.S. withholding. In
addition, the IRS may challenge the U.S.
tax results claimed in connection with
transactions that are designed to avoid the
application of section 871(m) using all
available statutory provisions and judicial
doctrines (including the substance over
form doctrine, the economic substance
doctrine under section 7701(o), the step
transaction doctrine, and tax ownership
principles) as appropriate. For example,
nothing in section 871(m) precludes the
IRS from asserting that a contract labeled
as an NPC or other equity derivative is in
fact an ownership interest in the equity
referenced in the contract.
The 2013 proposed regulations also
make a number of conforming changes to
reporting and withholding requirements.
Most equity-linked transactions involve a
financial institution acting as a broker,
dealer, or intermediary. A financial institu-
tion is usually in the best position to under-
take the responsibility to report the tax con-
sequences of a potential section 871(m)
transaction. Accordingly, §1.871-15(o) of
the 2013 proposed regulations provides that
when a broker or dealer is a party to a
potential section 871(m) transaction, the
broker or dealer is required to determine
whether the transaction is a section 871(m)
transaction, and if so, the amounts of the
dividend equivalents. If a broker or dealer is
not a party to the transaction or both parties
are brokers or dealers, the short party must
determine whether the transaction is a sec-
tion 871(m) transaction and the amounts of
the dividend equivalents. Determinations
made by the broker, dealer, or short party
are binding on the parties to the section
871(m) transaction unless the other person
knows or has reason to know that the infor-
mation is incorrect; the determinations are
not binding on the IRS. In addition, certain
persons described in §1.871-15(0)(3)(ii) of
the 2013 proposed regulations are permitted
to request information from certain parties
to a potential section 871(m) transaction
who are described in §1.871-15(0)(1) when
the information is necessary to satisfy their
withholding or information reporting obli-
gations, or to determine their tax liability. If
a withholding agent reasonably relies on
information received, it will not be liable for
underwithholding; however, the party to the
transaction who failed to properly determine
the amount will be liable for the underwith-
holding. The Treasury Department and the
IRS solicit comments with respect to these
reporting rules, including comments regard-
ing the parties that should be required to
report and the extent of information that is
appropriate.
The 2013 proposed regulations include
amendments to chapter 3 specifically ad-
dressing dividend equivalents. The 2013
proposed regulations describe how the ex-
ception to withholding where no money or
property is paid applies to a dividend
equivalent. Section 1.1441-2(d)(5) of the
2013 proposed regulations provides that a
withholding agent is not obligated to with-
hold on a dividend equivalent until the
later of: (1) the time that the amount of the
dividend equivalent is determined and (2)
the time at which any of the following has
occurred: (a) money or other property is
paid pursuant to a section 871(m) transac-
tion, (b) the withholding agent has cus-
tody or control of money or other property
of the long party at any time on or after
the amount of the dividend equivalent is
determined, or (c) there is an upfront pay-
ment or a prepayment of the purchase
price. Although §1.1441-2(d)(5) of the
2013 proposed regulations relieves a with-
holding agent of liability to withhold
when the withholding agent does not have
control of money or other property of the
long party, the long party remains liable
for U.S. tax on the dividend equivalent
pursuant to section 871(m) and Prop.
Treas. Reg. §1.871-15.
#### E. Certain Contingent Interest
Generally, section 871(h)(4) provides
that U.S. source portfolio interest received
by a nonresident alien individual is not sub-
ject to the 30-percent U.S. tax imposed un-
der section 871(a)(1). Certain contingent in-
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terest payments, however, are excluded
from the definition of portfolio interest. Sec-
tion 871(h)(4)(A)(ii) grants the Secretary
authority to impose tax on contingent inter-
est when necessary to prevent the avoidance
of Federal income tax. Most contingent debt
instruments are either referenced to a qual-
ified index, have an embedded option with a
delta below 0.70, or both. A debt obligation
that is a specified ELI and provides for a
contingent interest payment determined by
reference to a U.S. source dividend payment
has the potential to be used by a nonresident
alien individual or foreign corporation to
avoid section 871(m). Therefore, §1.871-
14(h) of the 2013 proposed regulations pro-
vide that any contingent interest will not
qualify for the portfolio interest exemption
to the extent that the contingent interest pay-
ment is a dividend equivalent.
### F. Effective/applicability Date
The 2013 proposed regulations gener-
ally will apply to payments made on or
after the date of publication of the Trea-
sury decision adopting these rules as final
regulations. Certain provisions in the
2013 proposed regulations, however, ap-
ply at different dates. For example, the
definition of a specified NPC in the 2013
proposed regulations will apply to pay-
ments made pursuant to a specified NPC
on or after January 1, 2016. For payments
made before January 1, 2016, the defini-
tion of a specified NPC is provided in
section 871(m)(3)(A), §1.871-16T(b) of
the 2012 temporary regulations, and
§1.871-15(d)(1) of the final regulations in
the Rules and Regulations section of this
issue of the Federal Register. For specified
ELIs, the rules of the 2013 proposed reg-
ulations will apply to payments made on
or after January 1, 2016, but only with
respect to an ELI that was acquired by the
long party on or after March 5, 2014.
## Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in Exec-
utive Order 12866, as supplemented by
Executive Order 13563. Therefore, a reg-
ulatory assessment is not required. It also
has been determined that section 553(b) of
the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these
regulations. It is hereby certified that these
regulations will not have a significant eco-
nomic impact on a substantial number of
small entities. This certification is based
on the fact that these regulations will pri-
marily affect multinational financial insti-
tutions, which tend to be larger busi-
nesses, and foreign entities. Moreover the
number of taxpayers affected and the av-
erage burden are minimal. Therefore, a
Regulatory Flexibility Analysis is not re-
quired. Pursuant to section 7805(f) of the
Code, these regulations have been submit-
ted to the Chief Counsel for Advocacy of
the Small Business Administration for
comment on its impact on small business.
## Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written comments (a
signed original and eight (8) copies) or
electronic comments that are submitted
timely to the IRS. The Treasury Depart-
ment and the IRS request comments on
the clarity of the proposed rules and how
they can be made easier to understand. All
comments will be available for public in-
spection and copying.
A public hearing has been scheduled
for April 11, 2014, beginning at 10 a.m. in
the auditorium of the Internal Revenue
Service Building, 1111 Constitution Ave-
nue, NW, Washington, DC. Due to build-
ing security procedures, visitors must en-
ter at the Constitution Avenue entrance.
All visitors must present photo identifica-
tion to enter the building. Because of ac-
cess restrictions, visitors will not be ad-
mitted beyond the immediate entrance
area more than 30 minutes before the
hearing starts. For information about hav-
ing your name placed on the building ac-
cess list to attend the hearing, see the
"FOR FURTHER INFORMATION
CONTACT" section of this preamble. The
rules of §601.601(a)(3) apply to the hear-
ing. Persons who wish to present oral
comments at the hearing must submit
electronic or written comments by March
5, 2014 and an outline of the topics to be
discussed and the time to be devoted to
each topic by March 5, 2014. A period of
10 minutes will be allotted to each person
for making comments. An agenda show-
ing the schedule of the speakers will be
prepared after the deadline for receiving
outlines has passed. Copies of the agenda
will be available free of charge at the
hearing.
## Drafting Information
The principal authors of these regula-
tions are D. Peter Merkel and Karen
Walny of the Office of Associate Chief
Counsel (International). Other personnel
from the Treasury Department and the
IRS also participated in the development
of these regulations.
* * * * *
## Withdrawal of Proposed Regulations
Accordingly, under the authority of 26
U.S.C. 7805, the notice of proposed rule-
making (REG-120282-10) that was pub-
lished in the Federal Register on Mon-
day, January 23, 2012, (77 FR 3202) is
withdrawn.
## Proposed Amendments to the Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
### PART 1- Income Taxes
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
1.871-14(h) also issued under 26
U.S.C. 871(h) and 871(m). * * *
1.871-15 also issued under 26 U.S.C.
871(m). * * *
Par. 2. Section 1.871-14 is amended
by:
1\. Redesignating paragraphs (h) and (i)
as paragraphs (i) and (j), respectively.
2\. Adding new paragraphs (h) and (j)(3).
The additions read as follows:
§1.871-14 Rules relating to repeal of
tax on interest of nonresident alien
individuals and foreign corporations
received from certain portfolio debt
investments.
* * * * *
(h) Portfolio interest not to include
certain contingent interest-(1) Dividend
equivalents. Contingent interest does not
qualify as portfolio interest to the extent
that the interest is a dividend equivalent
within the meaning of section 871(m).
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(2) Amount of dividend equivalent that
is not portfolio interest. The amount that
does not qualify as portfolio interest be-
cause it is a dividend equivalent equals the
amount of the dividend equivalent deter-
mined pursuant to §1.871-15(i). Unless
otherwise excluded pursuant to section
871(h), any other interest paid on an ob-
ligation that is not a dividend equivalent
may qualify as portfolio interest.
* * * * *
(j) ***
(3) Effective/applicability date. The
rules of paragraph (h) of this section apply
to payments made on or after the date of
publication of the Treasury decision
adopting these rules as final regulations in
the Federal Register.
Par. 3. Section 1.871-15 is added to
read as follows:
#### §1.871-15 Treatment of dividend equivalents.
(a) Definitions. For purposes of this
section, the following terms have the
meanings described in this paragraph (a).
(1) Acquire. To acquire means to enter
into, purchase, accept by transfer, by ex-
change, or by conversion, or otherwise
acquire a potential section 871(m) trans-
action.
(2) Dealer. A dealer is a dealer in
securities within the meaning of section
475(c)(1).
(3) Dividend. A dividend means a div-
idend as described in section 316.
(4) Equity-linked instrument. An
equity-linked instrument (ELI) is a finan-
cial transaction, other than a securities
lending or sale-repurchase transaction or
an NPC, that references the value of one
or more underlying securities. For exam-
ple, a futures contract, forward contract,
option, debt instrument, or other contrac-
tual arrangement that references the value
of one or more underlying securities is an
ELI.
(5) Notional principal contract. A no-
tional principal contract (NPC) is a no-
tional principal contract as defined in
§1.446-3(c).
(6) Option. An option includes an op-
tion embedded in any debt instrument,
forward contract, NPC, or other potential
section 871(m) transaction.
(7) Parties to a transaction-(i) Long
party. A long party is the party to a po-
tential section 871(m) transaction with re-
spect to an underlying security that is en-
titled to a dividend equivalent described in
paragraph (c) of this section.
(ii) Short party. A short party is the
party to a potential section 871(m) trans-
action with respect to an underlying secu-
rity that is liable for a dividend equivalent
described in paragraph (c) of this section.
(iii) Party to a transaction. A party to
a transaction is any person that is a long
party or a short party to a potential section
871(m) transaction.
(iv) Party to a transaction that is both
a long party and a short party-(A) In
general. If a potential section 871(m)
transaction references more than one un-
derlying security, the long party and short
party are determined separately with re-
spect to each underlying security. A party
to a potential section 871(m) transaction is
both a long party and a short party when
the potential section 871(m) transaction
entitles the party to receive a payment that
references a dividend payment on an un-
derlying security and obligates the same
party to make a payment that references a
dividend payment on another underlying
security.
(B) Example. The following example
illustrates the definitions in paragraph
(a)(7) of this section:
Example. (i) Stock X and Stock Y are underlying
securities within the meaning of paragraph (a)(11) of
this section. Corporations A and B enter into an
NPC. The NPC entitles A to receive payments from
B based on any appreciation in the value of Stock X
and dividends paid on Stock X during the term of the
contract and obligates A to make payments to B
based on any depreciation in the value of Stock X
during the term of the contract. In return, the NPC
entitles B to receive payments from A based on any
appreciation in the value of Stock Y and dividends
paid on Stock Y during the term of the contract and
obligates B to make payments to A based on any
depreciation in the value of Stock Y during the term
of the contract.
(ii) A is the long party with respect to dividend
equivalents it receives based on Stock X. A is the
short party with respect to dividend equivalents it
makes based on Stock Y. B is the long party with
respect to divided equivalents it receives based on
Stock Y. B is the short party with respect to dividend
equivalents it makes based on Stock X.
(8) Reference. Reference means to be
contingent upon or determined by refer-
ence to, directly or indirectly, whether in
whole or in part.
(9) Section 871(m) transaction. A sec-
tion 871(m) transaction is any securities
lending or sale-repurchase transaction,
specified NPC, or specified ELI. A poten-
tial section 871(m) transaction is any se-
curities lending or sale-repurchase trans-
action, NPC, or ELI that references one or
more underlying securities.
(10) Securities lending or sale-
repurchase transaction. A securities lend-
ing or sale-repurchase transaction is any
securities lending transaction, sale-
repurchase transaction, or substantially
similar transaction. Securities lending
transaction and sale-repurchase transac-
tion have the same meaning as provided in
§1.861-3(a)(6).
(11) Underlying security. An underly-
ing security is any interest in an entity
taxable as a C corporation (within the
meaning of section 1361(a)(2)) if a pay-
ment with respect to that interest could
give rise to a U.S. source dividend pursu-
ant to §1.861-3. If a potential section
871(m) transaction references an interest
in more than one entity described in the
preceding sentence (including a reference
to an index that is not a qualified index
described in paragraph (k) of this section)
or different interests in the same entity,
each referenced interest is a separate un-
derlying security for purposes of applying
the rules of this section.
(b) Source of a dividend equivalent. A
dividend equivalent is treated as a divi-
dend from sources within the United
States for purposes of sections 871(a),
881, 892, 894, and 4948(a), and chapters 3
and 4 of subtitle A of the Code.
(c) Dividend equivalent-(1) In gen-
eral. Except as provided in paragraph (2),
dividend equivalent means-
(i) Any payment (as described in para-
graph (h) of this section) pursuant to a
securities lending or sale-repurchase
transaction that references the payment of
a dividend from an underlying security;
(ii) Any payment (as described in para-
graph (h) of this section) pursuant to a
specified NPC described in paragraph (d)
of this section (specified NPC) that refer-
ences the payment of a dividend from an
underlying security;
(iii) Any payment (as described in
paragraph (h) of this section) pursuant to a
specified ELI described in paragraph (e)
of this section (specified ELI) that refer-
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ences the payment of a dividend from an
underlying security; and
(iv) Any other substantially similar
payment as described in paragraph (f) of
this section.
(2) Exceptions-(i) Not a dividend. A
payment pursuant to a section 871(m)
transaction that references a distribution
with respect to an underlying security is
not a dividend equivalent to the extent that
the distribution would not be subject to
tax pursuant to section 871 or 881, or
withholding under chapter 3 or 4, if the
long party owned the underlying security
referenced by the section 871(m) transac-
tion. For example, if a specified NPC ref-
erences stock in a regulated investment
company that pays a capital gains divi-
dend described in section 852(b)(3)(C)
that would not be subject to withholding
tax if paid directly to the long party, then
an NPC payment determined by reference
to the capital gains dividend is not a div-
idend equivalent.
(ii) Section 305 coordination. A pay-
ment pursuant to a section 871(m) trans-
action is not a dividend equivalent to the
extent that the payment is treated as a
distribution taxable as a dividend pursuant
to section 305.
(d) Specified NPCs-(1) [Reserved].
(2) Specified NPC on or after January
1, 2016. With respect to payments made
on or after January 1, 2016, a specified
NPC is any NPC that has a delta of 0.70 or
greater with respect to an underlying se-
curity at the time that the long party ac-
quires the NPC. If an NPC references
more than one underlying security, the
NPC is a specified NPC only with respect
to underlying securities for which the
NPC has a delta of 0.70 or greater at the
time that the long party acquires the NPC.
For example, if an NPC references under-
lying security A and underlying security
B, and it has a delta of 1.0 with respect to
A and 1.0 with respect to B, the NPC is a
specified NPC with respect to A and B.
(e) Specified ELIs. With respect to pay-
ments made on or after January 1, 2016, a
specified ELI is any ELI acquired by the
long party on or after March 5, 2014, that
has a delta of 0.70 or greater with respect
to an underlying security at the time that
the long party acquires the ELI. If an ELI
references more than one underlying se-
curity, the ELI is a specified ELI only with
respect to underlying securities for which
the ELI has a delta of 0.70 or greater at the
time that the long party acquires the ELI.
For example, if an ELI references under-
lying security A and underlying security
B, and it has a delta of 0.90 with respect to
A and 0.30 with respect to B, the ELI is a
specified ELI with respect to A and is not
a specified ELI with respect to B.
(f) Other substantially similar pay-
ments. For purposes of this section, the
following payments are substantially sim-
ilar payments:
(1) Payment of a tax liability. Any pay-
ment (as described in paragraph (h) of this
section) in satisfaction of a tax liability
with respect to a dividend equivalent
made by a withholding agent is a dividend
equivalent received by the long party in an
amount determined under the gross-up
formula provided in §1.1441-3(f)(1); and
(2) Due bill. [Reserved].
(g) Delta-(1) Determination of delta.
Delta is the ratio of the change in the fair
market value of an NPC or ELI to the
change in the fair market value of the
property referenced by the NPC or ELI. If
an NPC or ELI contains more than one
reference to a single underlying security,
all references to that underlying security
are taken into account in determining the
delta with respect to that underlying secu-
rity. If an NPC or ELI references more
than one underlying security, a separate
delta must be determined with respect to
each underlying security without taking
into account any other underlying security
or other property or liability. For purposes
of this section, the delta of an NPC or ELI
must be determined in a commercially
reasonable manner. If a taxpayer calcu-
lates delta for non-tax business purposes,
that delta ordinarily is the delta used for
purposes of this section.
(2) Constant delta. An NPC or ELI is
treated as having a delta of one (1.0) with
respect to an underlying security when it
has a constant delta with respect to the
underlying security at the time it is ac-
quired by the long party. An NPC or ELI
has a constant delta with respect to an
underlying security if the NPC or ELI has
a delta that is not reasonably expected to
vary during the term of the transaction
with respect to that underlying security. If
a transaction would not have a delta of
one with respect to an underlying security
without this paragraph, the number of
shares of the underlying security of an
NPC or ELI that has a constant delta is
adjusted as described in paragraph
(i)(1)(ii)(B)(2) of this section.
(3) Examples. The following examples
illustrate the rules of paragraph (g) of this
section. For purposes of these examples,
Stock X and Stock Y are common stock of
domestic corporations X and Y. LP is the
long party to the transaction.
Example 1. The terms of an NPC require LP to
pay the short party an amount equal to all of the
depreciation in the value of 100 shares of Stock X
and an interest-rate based return. In return, the NPC
requires the short party to pay LP an amount equal to
all of the appreciation in the value of 100 shares of
Stock X and any dividends paid by X on those
shares. The value of the NPC will change by $1 for
each $0.01 change in the price of a share of Stock X.
The NPC therefore has a delta of 1.0 ($1.00 / ($0.01
× 100)).
Example 2. LP acquires a call option that refer-
ences 100 shares of Stock X. At the time LP pur-
chases the call option, the value of the option is
expected to change by $0.30 for a $0.01 change in
the price of a share of Stock X. The call option has
a delta of 0.3 ($0.30 / ($0.01 × 100)) when LP
acquired it.
Example 3. (i) LP acquires an NPC that entitles
LP to receive 50 percent of the appreciation and
dividends on 100 shares of Stock X in return for the
obligation to pay the short party 50 percent of the
depreciation on 100 shares of Stock X and an interest
based return. The value of the NPC is expected to
change by $0.50 for each $0.01 change in the price
of a share of Stock X. The delta is expected to
remain constant during the term of the transaction.
(ii) Pursuant to the terms of the NPC and the
amount of referenced underlying securities, the NPC
has a delta of 0.5 ($0.50 / ($0.01 × 100)) on the date
that LP acquired the transaction. The delta of the
NPC, however, is not expected to vary during the
term of the transaction. Therefore, the NPC has a
constant delta and is treated as having a delta equal
to 1.0 on 50 shares of Stock X after the adjustments
described in §1.871-15(i)(1)(ii)(B)(2).
(h) Payment of a dividend equivalent-
(1) Payments determined on gross basis.
For purposes of this section, a payment
includes any gross amount that references
the payment of a dividend and that is used
in computing any net amount transferred
to or from the long party even if the long
party makes a net payment to the short
party or no payment is made because the
net amount is zero.
(2) Actual and estimated dividends-
(i) In general. A payment includes any
amount that references an actual or esti-
mated payment of dividends, whether the
reference is explicit or implicit. If a po-
tential section 871(m) transaction pro-
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vides for a payment based on an estimated
dividend that adjusts to account for the
amount of an actual dividend paid, the
payment is treated as referencing the ac-
tual dividend amount and not an estimated
dividend amount.
(ii) Implicit dividends. A payment in-
cludes an actual or estimated dividend
payment that is implicitly taken into ac-
count in computing one or more of the
terms of a potential section 871(m) trans-
action, including interest rate, notional
amount, purchase price, premium, upfront
payment, strike price, or any other amount
paid or received pursuant to the potential
section 871(m) transaction.
(iii) Actual dividend presumption. A
section 871(m) transaction is treated as
paying a per share dividend amount equal
to the actual dividend amount unless the
short party to the section 871(m) transac-
tion identifies a reasonable estimated div-
idend amount in writing at the inception
of the transaction. For this purpose, a rea-
sonable estimated dividend amount stated
in an offering document or the documents
governing the terms of the transaction will
establish the estimated dividend amount
in writing at the inception of the transac-
tion. To qualify as an estimated dividend
amount, the written estimated dividend
amount must separately state the amount
estimated for each anticipated dividend or
state a formula that allows each dividend
to be determined. If a stock is not ex-
pected to pay a dividend, a reasonable
estimate of the dividend amount may be
zero.
(iv) Limitation on estimated payments.
When a section 871(m) transaction pro-
vides for one or more payments based on
estimated dividends supported by docu-
mentation described in paragraph
(h)(2)(iii) of this section, the per share
dividend amount used to calculate the
amount of the dividend equivalent is the
lesser of the estimated dividend amount
and the actual dividend amount paid on
the stock while the long party was a party
to the section 871(m) transaction. If a
section 871(m) transaction provides for
any payment determined by reference to a
dividend in addition to the estimated div-
idends (for example, a special dividend),
the actual dividend amount paid on the
stock is used for the additional dividend
payment.
(3) Deferred payments. A payment oc-
curs when the amount of a dividend
equivalent is fixed pursuant to the terms of
the transaction, even if paid or otherwise
taken into account on a later date. For
example, if a specified NPC provides for a
payment at settlement that takes into ac-
count an earlier dividend payment, the
dividend equivalent is treated as paid on
the date that the amount of the dividend
equivalent is fixed pursuant to the terms of
the contract.
(4) Examples. The following examples
illustrate the rules of paragraph (h) of this
section. For purposes of these examples,
Stock X is common stock of Corporation
X, a domestic corporation, that histori-
cally pays quarterly dividends on Stock X.
The parties anticipate that Corporation X
will continue to pay the quarterly divi-
dends.
Example 1. Forward contract to purchase do-
mestic stock. (i) When Stock X is trading at $50 per
share, Foreign Investor enters into a forward contract
to purchase 100 shares of Stock X in one year.
Reasonable estimates of the quarterly dividend are
specified in the transaction documents. The price in
the forward contract is determined by multiplying
the number of shares referenced in the contract by
the current price of the shares and an interest rate,
and subtracting the future value of any dividends
expected to be paid during the term of the contract.
Assuming that the forward contract is priced using
an interest rate of 4 percent and estimated dividends
with a future value of $1 per share during the term of
the forward contract, the purchase price set in the
forward contract is $5,100 (100 shares × $50 per
share × 1.04 -($1×100)).
(ii) Subject to paragraph (h)(2)(iv), the estimated
dividend amount is the per share dividend amount
because the estimate is reasonable and specified in
accordance with paragraph (h)(2)(iii) of this section.
Those estimated per share dividend amounts are
dividend equivalents for purposes of this section.
Example 2. Price return only swap contract. (i)
Foreign Investor enters into a price return swap
contract that entitles Foreign Investor to receive pay-
ments based on the appreciation in the value of 100
shares of Stock X and requires Foreign Investor to
pay an amount based on LIBOR plus any deprecia-
tion in the value of Stock X. The swap contract does
not explicitly entitle Foreign Investor to payments
based on dividends paid on Stock X during the term
of the contract and the swap contract does not con-
tain any reference to an estimated dividend amount.
The LIBOR rate on the swap contract, however, is
reduced to reflect expected annual dividends on
Stock X.
(ii) Because the LIBOR leg of the swap contract
is reduced to reflect estimated dividends and the
estimated dividend amount is not specified, Foreign
Investor is treated as receiving the actual dividend
amount in accordance with paragraph (h)(2) of this
section. Those actual per share dividend amounts are
dividend equivalents for purposes of this section.
(i) Amount of dividend equivalent-(1)
Calculation of the amount of a dividend
equivalent-(i) Securities lending or sale-
repurchase transactions. For a securities
lending or sale-repurchase transaction, the
amount of the dividend equivalent for each
underlying security equals the amount of the
actual per share dividend paid on the under-
lying security multiplied by the number of
shares of the underlying security transferred
pursuant to the securities lending or sale-
repurchase transaction.
(ii) Specified NPCs and specified
ELIs-(A) In general. For a specified
NPC or a specified ELI, the amount of the
dividend equivalent for each underlying
security equals:
(1) The amount of the per share divi-
dend (as determined under paragraph (h)
of this section) with respect to the under-
lying security multiplied by;
(2) The number of shares of the under-
lying security as calculated pursuant to
paragraph (i)(1)(ii)(B) of this section mul-
tiplied by;
(3) The delta of the section 871(m)
transaction with respect to the underlying
security at the time that the amount of the
dividend equivalent is determined.
(B) Calculation of the number of
shares-(1) In general. Except as pro-
vided in paragraph (i)(1)(ii)(B)(2) of this
section, the number of shares of an under-
lying security for purposes of this section
is the number of shares of the underlying
security referenced in the section 871(m)
transaction.
(2) Adjustments. When a section
871(m) transaction multiplies the number
of shares of an underlying security by a
factor or fraction, or otherwise alters the
amount of a payment, the number of
shares of a section 871(m) transaction is
adjusted to take into account the factor,
fraction, or other alteration provided by
the section 871(m) transaction. For exam-
ple, if a total return swap entitles a long
party to receive a payment based on the
appreciation and dividend amount on 100
shares of an underlying security multi-
plied by a factor of 1.50, the number of
shares of the underlying security is 150
shares.
(C) Delta at the time the amount of the
dividend equivalent is determined-(1) In
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general. The delta of a section 871(m)
transaction at the time that the amount of
the dividend equivalent is determined is
the delta of the section 871(m) transaction
determined at the time specified in para-
graph (i)(2) of this section. This delta is
used solely for purposes of determining
the amount of the dividend equivalent at
that time, and the transaction is not re-
tested to determine if it is a section
871(m) transaction. For example, if a
transaction had a delta of 0.80 when ac-
quired by the long party and was a section
871(m) transaction, the transaction re-
mains a section 871(m) transaction even if
the delta is below 0.70 at the time the
amount of the dividend equivalent is de-
termined.
(2) Delta of an option at lapse. The
delta of an option when it lapses is treated
as zero.
(3) Delta of an option at exercise. The
delta of an option when it is exercised is
treated as one (1.0).
(iii) Other substantially similar pay-
ments. In addition to any amount deter-
mined pursuant to paragraph (i)(1)(i) or
(ii), the amount of a dividend equivalent
includes the amount of any payment de-
scribed in paragraph (f) of this section.
(2) Time for determining the amount of
a dividend equivalent-(i) In general. Ex-
cept as provided in paragraph (i)(2)(ii) of
this section, the amount of a dividend
equivalent is determined on the earlier of
the date that the underlying security be-
comes ex-dividend with respect to the div-
idend and the record date of the dividend.
For example, if a specified NPC provides
for a payment at settlement that takes into
account an earlier dividend payment, the
amount of a dividend equivalent is deter-
mined on the earlier of the ex-dividend
date or the record date for that dividend.
(ii) Specified NPCs and specified ELIs
with a term of one year or less. For a
specified NPC or specified ELI with a
term of one year or less when acquired by
the long party, the amount of a dividend
equivalent is determined when the long
party disposes of the section 871(m) trans-
action. For purposes of this paragraph, to
dispose of means to sell, exercise, termi-
nate, allow to lapse or expire, transfer,
settle (whether in cash or otherwise), can-
cel, exchange, convert, surrender, forfeit,
or otherwise dispose of or allow to expire.
(iii) Term. For purposes of this section,
if a transaction does not specify a term,
the transaction is treated as having a term
of more than one year. If a transaction
permits extensions, the term of the trans-
action is the maximum term permitted by
the transaction.
(j) Limitation on the treatment of cer-
tain transactions as section 871(m) trans-
actions-(1) Dealers-(i) In general. A
potential section 871(m) transaction is not
a section 871(m) transaction if the poten-
tial section 871(m) transaction is entered
into by a qualified dealer in its capacity as
a dealer in securities and the dealer is the
long party with respect to the underlying
security. This paragraph does not apply
with respect to any proprietary position
held by a dealer in securities.
(ii) Qualified dealer. A qualified dealer
is any dealer that:
(A) Is subject to regulatory supervision
by a governmental authority in the juris-
diction in which it was created or orga-
nized; and
(B) furnishes a written certification to
the short party confirming that the dealer
is a qualified dealer acting in its capacity
as a dealer in securities and that the dealer
will withhold and deposit any tax imposed
by section 871(m) with respect to any
section 871(m) transactions that the dealer
enters into as a short party in its capacity
as a dealer in securities.
(2) Corporate acquisitions. A potential
section 871(m) transaction is not a section
871(m) transaction with respect to an un-
derlying security if the transaction obli-
gates the long party to acquire ownership
of the underlying security as part of a plan
pursuant to which one or more persons
(including the long party) are obligated to
acquire underlying securities representing
more than 50 percent of the value of the
entity issuing the underlying securities. To
qualify for the exception provided in this
paragraph, the long party must furnish a
written certification, provided under pen-
alties of perjury, to the short party that it
satisfies the requirements of this para-
graph (j)(2).
(k) Rules relating to indices-(1)
Qualified index not treated as an under-
lying security. For purposes of this sec-
tion, a qualified index is treated as a single
security that is not an underlying security.
The determination of whether an index is
a qualified index is made at the time that a
long party acquires a potential section
871(m) transaction and is determinative
only with respect to that transaction.
Therefore, an index can be a qualified
index with respect to a transaction entered
into on one day and not be a qualified
index with respect to a transaction entered
into on another day.
(2) Qualified index. A qualified index
means an index that:
(i) References 25 or more component
underlying securities;
(ii) References only long positions in
component underlying securities;
(iii) Contains no component underly-
ing security that represents more than 10
percent of the weighting of the underlying
securities in the index;
(iv) Is modified or rebalanced only ac-
cording to predefined objective rules at set
dates or intervals;
(v) Does not provide a dividend yield
from component underlying securities that
is greater than 1.5 times the current divi-
dend yield of the S&P 500 Index as re-
ported for the month immediately preced-
ing the date the long party acquires the
potential section 871(m) transaction; and
(vi) Futures contracts or option con-
tracts on the index (whether the contracts
provide price only or total return exposure
to the index) trade on a national securities
exchange that is registered with the Secu-
rities and Exchange Commission or a do-
mestic board of trade designated as a con-
tract market by the Commodity Futures
Trading Commission.
(3) Safe harbor for indices that primar-
ily reference assets other than underlying
securities. Notwithstanding paragraph
(k)(2) of this section, an index is a quali-
fied index if the index is comprised solely
of long positions in assets and the refer-
enced component underlying securities in
the aggregate comprise 10 percent or less
of the index's weighting.
(4) Weighting of component underlying
securities. For purposes of paragraph (k)
of this section, the weighting of a compo-
nent underlying security of an index is the
percentage of the index's value repre-
sented, or accounted for, by the compo-
nent underlying security.
(5) Indices with components other than
underlying securities. Any component of
an index that is not an underlying security
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is not taken into account for purposes of
determining whether an index is a quali-
fied index, except for purposes of para-
graph (k)(3) of this section.
(6) Transactions that reference a qual-
ified index and one or more underlying
securities or indices. If a potential section
871(m) transaction references a qualified
index and one or more underlying securi-
ties or indices, the qualified index will
remain a qualified index only if the poten-
tial section 871(m) transaction does not
reference a short position in any refer-
enced component underlying security of
the qualified index, other than a short po-
sition with respect to the entire qualified
index (for example, a cap or floor). If, in
connection with a potential section
871(m) transaction that references a qual-
ified index, a taxpayer (or a related person
within the meaning of section 267(b) or
707(b)) enters into one or more transac-
tions that reduce exposure to any refer-
enced component underlying security of
the index, other than transactions that re-
duce exposure to the entire index, then the
potential section 871(m) transaction is not
treated as referencing a qualified index.
(1) Combined transactions-(1) In gen-
eral. For purposes of determining whether
a potential section 871(m) transaction is a
section 871(m) transaction, two or more
potential section 871(m) transactions are
treated as a single transaction with respect
to an underlying security when:
(i) A person (or a related person within
the meaning of section 267(b) or 707(b))
is the long party with respect to the un-
derlying security for each potential sec-
tion 871(m) transaction;
(ii) The potential section 871(m) trans-
actions reference the same underlying se-
curity; and
(iii) The potential section 871(m)
transactions are entered into in connection
with each other (regardless of whether the
transactions are entered into simultane-
ously or with the same counterparty).
(2) Time and delta for testing. Com-
bined transactions are tested each time the
long party (or a related person) acquires a
potential section 871(m) transaction to
which paragraph (l)(1) of this section ap-
plies. The deltas used to determine
whether the combined transactions are
section 871(m) transactions pursuant to
paragraph (l)(1) of this section are the
deltas of each of the combined transac-
tions at that time. For example, if a tax-
payer buys a call option on day 1 and sells
a put option on day 10 on the same un-
derlying security and the two transactions
are entered into in connection with each
other, the call option is tested on day 1 to
determine whether it is a section 871(m)
transaction, and the combined single
transaction is tested on day 10 based on
the deltas of the call option and put option
at that time.
(3) Section 871(m) transactions. If a
potential section 871(m) transaction is a
section 871(m) transaction, either by itself
or as a result of a combination, it does not
cease to be a section 871(m) transaction as
a result of applying paragraph (l) of this
section.
(4) More than one underlying security
referenced. If potential section 871(m)
transactions reference more than one un-
derlying security, paragraph (l)(1) of this
section applies separately with respect to
each underlying security.
(5) Separate transactions for all other
purposes. Potential section 871(m) trans-
actions that are combined for purposes of
determining whether there is a section
871(m) transaction with respect to an un-
derlying security are treated as separate
transactions for all other purposes of this
section, including separately determining
the amount of a dividend equivalent with
respect to each transaction. For withhold-
ing obligations with respect to combined
transactions, see §1.1441-1(b)(4)(xxiii).
(6) Example. The following examples
illustrate the rules of paragraph (l) of this
section. For purposes of this paragraph
(l)(6), Foreign Investor (FI) is a nonresi-
dent alien individual and Stock X is com-
mon stock of Corporation X, a domestic
corporation.
Example 1. (i) FI purchases a call option with a
term of six months that references 100 shares of
Stock X, and simultaneously sells a six month put
option on 100 shares of Stock X. The delta of the call
option is 0.45 and the delta of the put option is 0.40
at the time FI acquired each option.
(ii) Because the purchased call option and the
sold put option are entered into simultaneously by FI
and reference the same underlying security, the facts
and circumstances indicate that the call option and
the put option are entered into in connection with
each other and are treated as a combined transaction
under paragraph (l)(1) of this section. Accordingly,
the call option and the put option are treated as a
combined transaction to compute delta for purposes
of paragraph (e) of this section. The delta of the
combined purchased call option and written put op-
tion is 0.85 (0.45 + 0.40). The combined transaction
is therefore a specified ELI.
Example 2. (i) FI purchases a call option with a
term of six months that references 100 shares of
Stock X. At the time, the delta of the call option is
0.45. Three months later, FI re-evaluates FI's posi-
tion in Stock X and writes a three month put option
on 100 shares of Stock X. At the time FI writes the
put option, the delta of the call option is 0.65 and the
delta of the put is 0.25.
(ii) FI's purchased call option and sold put option
reference the same underlying security. Because FI
wrote the put option referencing Stock X to adjust
FI's economic position associated with the call op-
tion referencing Stock X, these options are entered
into in connection with each other and treated as a
combined transaction under paragraph (l)(1) of this
section. Because the delta of the combined transac-
tion is tested on the date that FI entered into the
additional transaction, the delta of the combined
purchased call option and sold put option is 0.90
(0.65 + 0.25). The combined transaction is a spec-
ified ELI.
Example 3. (i) FI purchases a call option with a
term of one month that references 100 shares of
Stock X. At the time, the delta of the call option is
0.75. Two weeks later, FI re-evaluates FI's position
in Stock X and writes a two week put option on 100
shares of Stock X. At the time FI writes the put
option, the delta of the call option is 0.35 and the
delta of the put is 0.25.
(ii) FI's purchased call option has an initial delta
of 0.75 and therefore is a specified ELI and a section
871(m) transaction. FI's purchased call option and
sold put option reference the same underlying secu-
rity. Because FI sold the put option referencing
Stock X to adjust FI's economic position associated
with the call option referencing Stock X, these op-
tions are entered into in connection with each other
and treated as a combined transaction under para-
graph (l)(1) of this section. Because the delta of the
combined transaction is tested on the date that FI
entered into the additional transaction, the delta of
the combined purchased call option and sold put
option is 0.60 (0.35 + 0.25). The combined transac-
tion is not a specified ELI; however, the purchased
call option remains a specified ELI.
(m) Rules relating to interests in enti-
ties that are not taxable as corporations-
(1) In general. Except as provided in para-
graph (m)(2) of this section, if a
transaction references an interest in an
entity that is not a C corporation (within
the meaning of section 1361(a)(2)), the
transaction references the allocable por-
tion of any underlying security or poten-
tial section 871(m) transaction held, di-
rectly or indirectly (including through one
or more other entities that are not C cor-
porations), by the referenced entity. When
a transaction references any underlying
security as a result of the application of
this paragraph, the transaction also refer-
ences the payment of any dividends from
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those underlying securities and has a div-
idend equivalent equal to the allocable
portion of any dividend or dividend equiv-
alent received, directly or indirectly (in-
cluding through one or more other entities
that are not C corporations), by the refer-
enced entity.
(2) Exception. A transaction is not
treated as referencing underlying securi-
ties as a result of applying paragraph
(m)(1) of this section if the underlying
securities held directly or indirectly by the
referenced entity and the underlying secu-
rities referenced by any potential section
871(m) transaction held directly or indi-
rectly by the referenced entity represent,
in the aggregate, 10 percent or less of the
value of the referenced interest in the en-
tity at the time the long party acquires the
transaction and there is no plan or inten-
tion for acquisitions or dispositions
(within the meaning of paragraph (i)(2)(ii)
of this section) that would cause underly-
ing securities to represent more than 10
percent of the value of the referenced in-
terest. For example, if actively-traded
Partnership A owns a pro rata interest in
Partnership B that represents 10 percent of
the value of an interest in Partnership A,
and Partnership B owns an interest in Un-
derlying Security X that represents 20 per-
cent of the value of an interest in Partner-
ship B, then Underlying Security X
represents two percent of the value of a
pro rata interest in Partnership A. Accord-
ingly, a pro rata interest in Partnership A
qualifies for the exception in paragraph
(m)(2) of this section and Underlying Se-
curity X is not treated as referenced by a
transaction that references a pro rata in-
terest in Partnership A pursuant to para-
graph (m)(1) of this section.
(n) Anti-abuse rule. If a taxpayer (di-
rectly or through the use of a related per-
son) acquires a transaction or transactions
with a principal purpose of avoiding the
application of this section, the Commis-
sioner may treat any payment (as de-
scribed in paragraph (h) of this section)
made with respect to any transaction as a
dividend equivalent to the extent neces-
sary to prevent the avoidance of this sec-
tion. Therefore, notwithstanding any other
provision of this section, the Commis-
sioner may adjust the delta of a transac-
tion, change the number of shares, adjust
an estimated dividend amount, adjust the
timing of payments, combine, separate, or
disregard transactions, indices, or compo-
nents of indices to reflect the substance of
the transaction or transactions, or other-
wise depart from the rules of this section
as necessary to determine whether the
transaction includes a dividend equivalent
or the amount or timing of a dividend
equivalent.
(o) Information required to be reported
regarding a potential section 871(m)
transaction-(1) In general. If a broker or
dealer is a party to a potential section
871(m) transaction with a counterparty or
customer that is not a broker or dealer, the
broker or dealer is required to determine
whether the potential section 871(m)
transaction is a section 871(m) transac-
tion. If both parties to the potential section
871(m) transaction are brokers or dealers,
or neither party to the potential section
871(m) transaction is a broker or dealer,
the short party must determine whether
the potential section 871(m) transaction is
a section 871(m) transaction. The party to
the transaction that is required to deter-
mine whether a transaction is a section
871(m) transaction must also determine
and report to the counterparty or customer
the timing and amount of any dividend
equivalent (as described in paragraphs (h)
and (i) of this section). The party required
to make the determinations described in
this paragraph is required to exercise rea-
sonable diligence to determine whether a
transaction is a section 871(m) transac-
tion, any dividend equivalents, and any
other information necessary to apply the
rules of this section. The information must
be provided in the manner prescribed in
paragraphs (o)(2) and (o)(3) of this sec-
tion. The determinations required by para-
graph (o) of this section are binding on the
parties to the potential section 871(m)
transaction and on any person who is a
withholding agent with respect to the po-
tential section 871(m) transaction, unless
the person has actual knowledge or reason
to know that the information received is
incorrect, but are not binding on the IRS.
(2) Reporting requirements. For rules
regarding reporting requirements with re-
spect to dividend equivalents described in
this section, see §§1.1461-1(b) and (c),
and 1.1474-1(c) and (d).
(3) Additional information on potential
section 871(m) transactions-(i) In gen-
eral. Upon request by any person de-
scribed in paragraph (o)(3)(ii) of this sec-
tion, the party required to provide
information pursuant to paragraph (o)(1)
must provide the requester with informa-
tion regarding the amount of each divi-
dend equivalent, the delta of the potential
section 871(m) transaction, the amount of
any tax withheld and deposited, the esti-
mated dividend amount if specified in ac-
cordance with paragraph (h)(2)(iii), and
any other information necessary to apply
the rules of this section. With respect to
the delta, the party must provide the delta
when the transaction is acquired, at the
time the amount of each dividend equiv-
alent is determined, and at any other time
delta information is necessary to apply the
rules of this section. The information re-
quested must be provided within a reason-
able time, not to exceed 14 calendar days,
and communicated in one or more of the
following ways:
(A) By telephone, and confirmed in
writing;
(B) By written statement sent by first
class mail to the address provided by the
requesting party;
(C) By electronic publication available
to all persons entitled to request informa-
tion; or
(D) By any other method agreed to by
the parties, and confirmed in writing.
(ii) Persons entitled to request infor-
mation. The following persons may re-
quest the information specified in para-
graph (o) of this section with respect to a
potential section 871(m) transaction from
the party required by paragraph (o)(3)(i)
of this section to provide the informa-
tion-
(A) A broker who holds the potential
section 871(m) transaction as an agent or
nominee to any party to the transaction as
described in paragraph (a)(7) of this sec-
tion;
(B) A person who is required to make
an information return under §1.1461-
1(c) and paragraph (o)(2) of this section
and who acts as an agent or nominee to
any party to the transaction as described in
paragraph (a)(7) of this section; or
(C) Any party to the transaction as
described in paragraph (a)(7) of this sec-
tion.
(iii) Reliance on information received.
A person described in paragraph (o)(1) or
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(o)(3)(ii) of this section that receives in-
formation described in paragraph (o)(1) or
(o)(3)(i) of this section (first recipient)
may rely on that information to provide
information to any other person unless the
first recipient has actual knowledge or rea-
son to know that the information received
is incorrect. When the first recipient has
actual knowledge or reason to know that
the information received is incorrect, the
first recipient must make a reasonable ef-
fort to determine and provide the informa-
tion described in paragraph (o)(1) or
(o)(3)(i) of this section to any person de-
scribed in paragraph (o)(1) or (o)(3)(ii) of
this section that requests information from
the first recipient.
(4) Recordkeeping rules. For rules re-
garding recordkeeping requirements suffi-
cient to establish the amount of gross in-
come treated as a dividend equivalent, see
§1.6001-1.
(p) Effective/applicability date. This
section applies to payments made on or
after the date of publication of the Trea-
sury decision adopting these rules as final
regulations in the Federal Register, ex-
cept for paragraph (d)(1) of this section,
which applies to payments made on or
after January 23, 2012.
Par. 4. Section 1.1441-1 is amended
by :* * * *
1\. Adding paragraphs (b)(4)(xxii) and
(xxiii).
2\. Adding paragraph (f)(3).
The additions read as follows:
§1.1441-1 Requirement for the
deduction and withholding of tax on
payments to foreign persons.
* * * * *
(b) * * *
(4) * * *
(xxii) Amounts paid with respect to a
notional principal contract described in
§1.871-15(a)(5), an equity-linked instru-
ment described in §1.871-15(a)(4), or a se-
curities lending or sale-repurchase transac-
tion described in §1.871-15(a)(10) are
exempt from withholding under section
1441(a) as dividend equivalents under sec-
tion 871(m) if the transaction is not a section
871(m) transaction within the meaning of
§1.871-15(a)(9) or is subject to an excep-
tion described in §1.871-15(j). However,
the amounts may be subject to withholding
under section 1441(a) if they are subject to
tax under any section other than section
871(m). For purposes of this withholding
exemption, it is not necessary to provide
documentation establishing that a notional
principal contract or equity-linked instru-
ment has a delta that is less than 0.70 at the
time it was acquired by the long party. For
purposes of the withholding exemption for
qualified dealers described in this para-
graph, §1.871-15(j)(1) applies only if the
long party furnishes to the withholding
agent the documentation described in
§1.871-15(j)(1). For purposes of the with-
holding exemption regarding corporate ac-
quisitions described in this paragraph, the
exemption only applies if the long party
furnishes to the withholding agent the doc-
umentation described in §1.871-15(j)(2).
(xxiii) If a potential section 871(m)
transaction is only a section 871(m) trans-
action as a result of applying §1.871-
15(l) (combined transactions) and the
withholding agent did not know that the
long party (or a related person) entered
into the potential section 871(m) transac-
tion in connection with any other potential
section 871(m) transaction, the potential
section 871(m) transaction is exempt from
withholding under section 1441(a).
* * * * *
(f) * * *
(3) Effective/applicability date. Para-
graphs (b)(xxii) and (xxiii) of this section
apply to payments made on or after the
date of publication of the Treasury deci-
sion adopting these rules as final regula-
tions in the Federal Register.
Par. 5. Section 1.1441-2 is amended by
adding paragraph (d)(5) and adding a sen-
tence to the end of paragraph (f) to read as
follows:
§1.1441-2 Amounts subject to
withholding.
* * * * *
(d) * * *
(5) Payments of dividend equivalents.
A withholding agent is not obligated to
withhold until the later of-
(i) The time that the amount of a divi-
dend equivalent is determined as provided
in §1.871-15(i)(2), and
(ii) The time that the withholding agent
is deemed to have control over money or
other property of the long party because-
(A) Money or other property is paid to
or from the long party,
(B) The withholding agent has custody
or control over money or other property of
the long party at any time on or after the
amount of a dividend equivalent is deter-
mined as provided in §1.871-15(i)(2), or
(C) The section 871(m) transaction
provides for an upfront payment or pre-
payment of the purchase price even
though an actual payment has not been
made at the time the amount of a dividend
equivalent is determined as provided in
§1.871-15(i)(2).
* * * * *
(f) Effective/applicability date.
Paragraph (d)(5) of this section applies to
payments made on or after the date of
publication of the Treasury decision
adopting these rules as final regulations in
the Federal Register.
Par. 6. Section 1.1441-3 is amended
by:
1\. Adding a second sentence to para-
graph (h)(1).
2\. Redesignating paragraph (h)(2) as
(h)(3) and revising paragraph (h)(3).
3\. Adding new paragraph (h)(2).
The additions and revisions read as fol-
lows:
§1.1441-3 Determination of amounts to
be withheld.
* * * * *
(h) * * * (1) * * * Withholding is
required on the amount of the dividend
equivalent calculated under §1.871-
15(i).
(2) Reliance by withholding agent on
reasonable determinations. For purposes
of determining whether a payment is a
dividend equivalent and the amount of a
dividend equivalent described in §1.871-
15, a withholding agent may rely on the
information received from the party to the
transaction that is required to determine
whether a transaction is a section 871(m)
transaction as provided in §1.871-
15(o), unless the withholding agent has
actual knowledge or reason to know that
the information received is incorrect.
When a withholding agent fails to with-
hold the required amount because the
party described in §1.871-15(o) fails to
reasonably determine or timely provide
whether a transaction is a section 871(m)
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transaction, the amount of any dividend
equivalent, or any other information re-
quired to be provided pursuant to §1.871-
15(o) and the withholding agent reason-
ably relied on that party's determination,
then the failure to withhold is imputed to
the party required to make the determina-
tions described in §1.871-15(o). In that
case, the IRS may collect any underwith-
held amount from the party to the trans-
action that is required to make the deter-
minations described in §1.871-15(o) and
subject that party to applicable interest
and penalties as a withholding agent.
(3) Effective/applicability date. Except
for the first sentence of paragraph (h)(1),
this paragraph (h) applies to payments
made on or after the date of publication of
the Treasury decision adopting these rules
as final regulations in the Federal Regis-
ter. The first sentence of paragraph (h)(1)
applies to payments made on or after Jan-
uary 23, 2012.
* * * * *
Par. 7. Section 1.1441-7 is amended
by:
1\. Adding entry for Example 7 in para-
graph (a)(3).
2\.
. Adding a second sentence to paragraph
(a)(4).
The additions read as follows:
§1.1441-7 General provisions relating
to withholding agents.
(a) * * *
(3) * * *
Example 7. CO is a domestic clearing organiza-
tion. CO serves as a central counterparty clearing
and settlement service provider for derivatives ex-
changes in the U.S. CB is a broker organized in
Foreign Country X and a clearing member of CO.
CB is a nonqualified intermediary, as defined in
§1.1441-1(c)(14). FC is a foreign corporation that
has an investment account with CB. FC instructs CB
to purchase a call option that is a specified ELI (as
described in §1.871-15(e)). CB effects the trade for
FC. The exchange matches FC's order with an order
for a written call option with the same terms. The
exchange then sends the matched trade to CO, which
clears the trade. CB and the clearing member repre-
senting the call option seller settle the trade with CO.
Upon receiving the matched trade, the option con-
tracts are novated and CO becomes the counterparty
to CB and the counterparty to the clearing member
representing the call option seller. To the extent that
there is a dividend equivalent with respect to the call
option, both CO and CB are withholding agents as
described in paragraph (a)(1) of this section.
(4) Effective/applicability date. Exam-
ple 7 of paragraph (a)(3) of this section
applies to payments made on or after the
date of publication of the Treasury deci-
sion adopting these rules as final regula-
tions in the Federal Register.
* * * * *
John Dalrymple,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on December 4,
2013, 8:45 a.m., and published in the issue of the Federal
Register on December 5, 2013, 78 F.R. 73128)
### Notice of Proposed Rulemaking
### Partnerships; Start-up Expenditures; Organization and Syndication Fees
REG-126285-12
AGENCY: Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains
proposed regulations concerning the de-
ductibility of start-up expenditures and or-
ganizational expenses for partnerships.
The proposed regulations provide guid-
ance regarding the deductibility of
start-up expenditures and organizational
expenses for partnerships following a
technical termination of a partnership.
DATES: Written or electronic comments
must be received by March 10, 2014.
ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG-126285-12), Room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand-
delivered Monday through Friday between
the hours of 8 a.m. and 4 p.m. to CC:PA:
LPD:PR (REG-126285-12), Courier's
Desk, Internal Revenue Service, 1111 Con-
stitution Avenue, NW, Washington, DC, or
sent electronically, via the Federal eRule-
making portal at www.regulations.gov (IRS
REG-126285-12)
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, David H. Kirk or Rachel
Smith at (202) 317-6852; concerning sub-
missions of comments or to request a
hearing, Oluwafunmilayo Taylor, (202)
317-6901 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
#### Background
This document contains proposed
amendments to the Income Tax Regula-
tions (26 CFR part 1) under section 708(b)
of the Internal Revenue Code (Code).
##### 1. Section 708: Continuation of Partnership
Section 708(a) generally provides that,
for purposes of subchapter K of chapter 1
of subtitle A of Title 26, an existing part-
nership shall be considered as continuing
if it is not terminated.
Section 708(b)(1) provides that, for
purposes of section 708(a), a partnership
shall be considered as terminated only if
(A) no part of any business, financial op-
eration, or venture of the partnership con-
tinues to be carried on by any of its part-
ners in a partnership, or (B) within a 12-
month period there is a sale or exchange
of 50 percent or more of the total interest
in partnership capital and profits.
Section 1.708-1(b)(4) of the Income
Tax Regulations provides that if a partner-
ship is terminated by a sale or exchange of
an interest, the following is deemed to
occur: the partnership contributes all of its
assets and liabilities to a new partnership
in exchange for an interest in the new
partnership; immediately thereafter, the
terminated partnership distributes inter-
ests in the new partnership to the purchas-
ing partner and the other remaining part-
ners in proportion to their respective
interests in the terminated partnership in
liquidation of the terminated partnership,
either for the continuation of the business
by the new partnership or for its dissolu-
tion and winding up.
###### 2. Section 195 Start-up Expenditures
Section 195(a) provides that, except as
otherwise provided in section 195, no de-
duction shall be allowed for start-up expen-
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ditures (as defined in section 195(c)(1)).
Section 195(b)(1) provides that a taxpayer
may elect to deduct start-up expenditures as
provided in section 195(b)(1)(A) and (B).
Section 195(b)(1)(A) allows an elect-
ing taxpayer to deduct start-up expendi-
tures in the taxable year in which the
active trade or business begins. The
amount that may be deducted under sec-
tion 195(b)(1)(A) in that year is the lesser
of (i) the amount of start-up expenditures
with respect to the active trade or busi-
ness, or (ii) $5,000, reduced (but not be-
low zero) by the amount by which the
start-up expenditures exceed $50,000.
Section 195(b)(1)(B) provides that any
start-up expenditures that are not deduct-
ible under section 195(b)(1)(A) shall be
allowed as a deduction ratably over the
180-month period beginning with the
month in which the active trade or busi-
ness begins. All start-up expenditures that
relate to the active trade or business are
considered in determining whether the
start-up expenditures exceed $50,000, in-
cluding expenditures incurred on or be-
fore October 22, 2004. Section 902(a) of
the American Jobs Creation Act of 2004,
Pub. L. No. 108-357, 118 Stat. 1418
("AJCA"), amended section 195(b)(1) for
start-up expenditures paid or incurred af-
ter October 22, 2004. Prior to the AJCA
amendment, section 195(b)(1) (former
section 195(b)(1)) allowed taxpayers to
elect to treat such expenditures as deferred
expenses deductible ratably over a period
of at least 60 months.
Section 1.195-1(b) provides that, for
start-up expenditures paid or incurred af-
ter August 16, 2011(the effective date of
§1.195-1(b)), a taxpayer is deemed to
make an election under section 195(b) to
amortize start-up expenditures for the tax-
able year in which the active trade or
business to which the expenditures relate
begins. However, taxpayers may apply all
provisions of §1.195-1 to start-up expen-
ditures paid or incurred after October 22,
2004, provided that the period of limita-
tions on assessment of tax for the year the
election under §1.195-1(b) is deemed
made has not expired.
Section 195(b)(2) provides that in any
case in which a trade or business is com-
pletely disposed of by the taxpayer before
the end of the amortization period, any
deferred expenses attributable to such
trade or business that were not allowed as
a deduction by reason of section 195 may
be deducted to the extent allowable under
section 165.
###### 3. Section 709: Treatment of Organization and Syndication Fees
Section 709(a) provides that, except as
otherwise provided in section 709(b), no
deduction shall be allowed for any
amounts paid or incurred to organize a
partnership or to promote the sale of (or to
sell) an interest in the partnership. Section
709(b) provides that a partnership may
elect to deduct organizational expenses,
within the meaning of section 709(b)(3),
as provided in section 709(b)(1)(A) and
(B).
Section 709(b)(1)(A) allows an elect-
ing partnership to deduct organizational
expenses in the year in which the partner-
ship begins business. The amount that
may be deducted under section
709(b)(1)(A) in that year is the lesser of
(i) the amount of the organizational ex-
penses of the partnership, or (ii) $5,000,
reduced (but not below zero) by the
amount by which the organizational ex-
penses exceed $50,000.
Section 709(b)(1)(B) provides that any
organizational expenses that are not de-
ductible under section 709(b)(1)(A) shall
be allowed as a deduction ratably over the
180-month period beginning with the
month in which the partnership begins
business. All organizational expenses in-
curred by the partnership are considered
in determining whether the organizational
expenses exceed $50,000, including ex-
penses incurred on or before October 22,
2004. Prior to October 22, 2004, section
709(b) contained a rule similar to former
section 195(b)(1).
Section 1.709-1(b)(2) provides that,
for organizational expenses as defined in
section 709(b)(3) and §1.709-2(a) paid or
incurred after August 16, 2011 (the effec-
tive date of §1.709-1(b)(2)), a partnership
is deemed to make an election under sec-
tion 709(b) to amortize organizational ex-
penses for the taxable year in which the
partnership begins business. However,
taxpayers may apply all provisions of
§1.709-1 to organizational expenses paid
or incurred after October 22, 2004, pro-
vided that the period of limitations on
assessment of tax for the year the election
under §1.709-1(b)(2) is deemed made has
not expired.
Section 709(b)(2) provides that in any
case in which a partnership is liquidated
before the end of the amortization period,
any deferred expenses attributable to the
partnership that were not allowed as a de-
duction by reason of section 709 may be
deducted to the extent allowable under sec-
tion 165. See also §1.709-1(b)(3). How-
ever, there is no partnership deduction with
respect to its capitalized syndication ex-
penses. Id.
#### Explanation of Provisions
The Treasury Department and the IRS
are aware that some taxpayers are taking
the position that a technical termination
under section 708(b)(1)(B) entitles a part-
nership to deduct unamortized start-up ex-
penses and organizational expenses to the
extent provided under section 165. The
Treasury Department and the IRS believe
this result is contrary to the congressional
intent underlying sections 195, 708, and
709. Therefore, the proposed regulations
amend §1.708-1 to provide that a new
partnership formed due to a transaction, or
series of transactions, described in section
708(b)(1)(B) must continue amortizing
the section 195 and section 709 expenses
using the same amortization period ad-
opted by the terminating partnership.
The legislative purpose of sections 195
and 709 was to allow expenses incurred in
the formation of a partnership to be de-
ducted ratably over the period during
which the partnership benefits from those
initial expenses. Section 195 and 709 pro-
vide that this period begins with the com-
mencement of business (which must be an
active trade or business in the case of
section 195) and closes after 180 months,
or when the business ceases, if earlier.
The Treasury Department and the IRS be-
lieve that a technical termination under
section 708(b)(1)(B) should not constitute
a cessation of a trade or business to which
the section 195 or section 709 expenses
relate, nor does it otherwise constitute the
type of disposition or liquidation that
should trigger deduction of deferred sec-
tion 195 or section 709 expenses.
Moreover, the Conference Report issued
in conjunction with the enactment of AJCA
treated start-up expenditures under section
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195 and organizational expenditures under
section 709 as analogous to other intangible
business assets described in section 197, and
accordingly determined that the period for
the amortization of start-up expenditures
and organizational expenditures should be
consistent with the fifteen year amortization
period for section 197 intangibles. H. Rep.
No. 108-755, at 776-77 (October 07,
2004). Section 1.197-2(g)(2)(ii)(B) pro-
vides, generally, that in the case of a section
721 transaction in which an amortizable sec-
tion 197 intangible is transferred to a part-
nership, the transferee partnership will con-
tinue to amortize its adjusted basis, to the
extent it does not exceed the transferor's
adjusted basis, ratably over the remainder of
the transferor's 15-year amortization period.
Section 1.197-2(g)(2)(iv)(B) provides that
in applying §1.197-2(g)(2)(ii)(B) to a part-
nership that is terminated pursuant to sec-
tion 708(b)(1)(B), the terminated partner-
ship is treated as the transferor and the new
partnership is treated as the transferee with
respect to any section 197 intangible held by
the terminated partnership immediately pre-
ceding the termination. Consistent with
Congress' intent of aligning the amortiza-
tion of start-up and organizational expendi-
tures with the treatment of section 197 in-
tangibles, the new partnership resulting
from a technical termination under section
708(b)(1)(B) should similarly continue to
amortize the section 195 and section 709
expenses using the same amortization pe-
riod adopted by the terminated partnership.
Practitioners suggested guidance on this
issue to alleviate uncertainty regarding the
proper treatment of these items when a part-
nership undergoes a technical termination.
One alternative to the rule set forth above
would allow the terminating partnership to
immediately deduct any unamortized sec-
tion 195 or section 709 items to the extent
provided under section 165 on the effective
date of the termination (as defined in
§1.708-1(b)(3)(ii)). However, the Treasury
Department and the IRS decline to adopt
this alternative, which as noted above would
be inconsistent with Congress' intent to treat
section 195 and section 709 items consis-
tently with section 197 intangibles, and
which might provide incentives for taxpay-
ers to structure transactions in order to in-
appropriately accelerate the deduction of
section 195 or section 709 expenses shortly
after those expenses are incurred.
#### Proposed Effective/Applicability Date
These regulations, when published in
their final form in the Federal Register,
will apply to technical terminations that
occur on or after December 9, 2013.
#### Special Analyses
It has been determined that these pro-
posed regulations are not a significant reg-
ulatory action as defined in Executive Or-
der 12866, as supplemented by Executive
Order 13563. Therefore, a regulatory as-
sessment is not required. It also has been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regula-
tions, and because the regulation does not
impose a collection of information on
small entities, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) does not apply.
Pursuant to section 7805(f) of the Code,
these regulations have been submitted to
the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on its impact on small business.
##### Comments and Requests for a Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written (a signed
original and eight (8) copies) or electronic
comments that are submitted timely to the
IRS. The IRS and the Treasury Depart-
ment request comments on the clarity of
the proposed rules and how they can be
made easier to understand. All comments
will be available for public inspection and
copying. A public hearing may be sched-
uled if requested in writing by any person
that timely submits written comments. If a
public hearing is scheduled, notice of the
date, time, and place for the public hear-
ing will be published in the Federal Reg-
ister.
##### Drafting Information
The principal author of these proposed
regulations is David H. Kirk, IRS Office
of the Associate Chief Counsel (Pass-
throughs and Special Industries). How-
ever, other personnel from the IRS and the
Treasury Department participated in their
development.
## Proposed Amendments to the Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
PART 1 - INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.195-2 is added to read
as follows:
### §1.195-2 Technical termination of a partnership.
(a) In general. If a partnership that has
elected to amortize start-up expenditures
under section 195(b) and §1.195-1 termi-
nates in a transaction (or a series of trans-
actions) described in section 708(b)(1)(B)
or §1.708-1(b)(2), the termination shall
not be treated as resulting in a disposition
of the partnership's trade or business for
purposes of section 195(b)(2). See
§1.708-1(b)(6) for rules concerning the
treatment of these start-up expenditures
by the new partnership.
(b) Effective/applicability date. This sec-
tion applies to a technical termination of a
partnership under section 708(b)(1)(B) that
occurs on or after December 9, 2013.
Par. 3. Section 1.708-1 is amended by
adding paragraph (b)(6) to read as fol-
lows:
§1.708-1 Continuation of partnership.
* * * * *
(b) * * *
(6) Treatment of certain start-up or
organizational expenses following a tech-
nical termination-(i) In general. If a
partnership that has elected to amortize
start-up expenditures under section 195(b)
or organizational expenses under section
709(b)(1) terminates in a transaction (or a
series of transactions) described in section
708(b)(1)(B) or paragraph (b)(2) of this
section, the new partnership must con-
tinue to amortize those expenditures using
the same amortization period adopted by the
terminating partnership. See section 195 and
§1.195-1 for rules concerning the amortiza-
tion of start-up expenditures and section 709
and §1.709-1 for rules concerning the
amortization of organizational expenses.
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(ii) Effective/applicability date. This
paragraph (b)(6) applies to a technical ter-
mination of a partnership under section
708(b)(1)(B) that occurs on or after De-
cember 9, 2013.
* * * * *
Par. 4. Section 1.709-1 is amended by:
1\. Designating the text in paragraph (b)(3)
as paragraph (b)(3)(i) , adding a head-
ing to newly designated paragraph
(b)(3)(i) and adding paragraph
(b)(3)(ii);
2\.
Adding a sentence at the end of para-
graph (b)(5).
The additions read as follows:
§1.709-1 Treatment of organization and
syndication costs.
* * * * *
(b) * * *
(3) Liquidation of partnership-(i) In
general. * * *
(ii) Technical termination of a partner-
ship. If a partnership that has elected to
amortize organizational costs under sec-
tion 709(b) terminates in a transaction (or
a series of transactions) described in sec-
tion 708(b)(1)(B) or §1.708-1(b)(2), the
termination shall not be treated as result-
ing in a liquidation of the partnership for
purposes of section 709(b)(2). See
§1.708-1(b)(6) for rules concerning the
treatment of these organizational costs by
the new partnership.
(5) * * * Paragraph (b)(3)(ii) of this
section applies to a technical termination
of a partnership under section
708(b)(1)(B) that occurs on or after De-
cember 9, 2013.
Heather C. Maloy,
Deputy Commissioner for
Operations Support.
(Filed by the Office of the Federal Register on December 6,
2013, 8:45 a.m., and published in the issue of the Federal
Register for December 9, 2013, 78 F.R. 73753)
### Notice of Proposed Rulemaking
Guidance for Tax-Exempt
Social Welfare
Organizations on
Candidate-Related
Political Activities
REG-134417-13
AGENCY: Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains
proposed regulations that provide guid-
ance to tax-exempt social welfare organi-
zations on political activities related to
candidates that will not be considered to
promote social welfare. These regulations
will affect tax-exempt social welfare or-
ganizations and organizations seeking
such status. This document requests com-
ments from the public regarding these
proposed regulations. This document also
requests comments from the public re-
garding the standard under current regu-
lations that considers a tax-exempt social
welfare organization to be operated exclu-
sively for the promotion of social welfare
if it is "primarily" engaged in activities
that promote the common good and gen-
eral welfare of the people of the commu-
nity, including how this standard should
be measured and whether this standard
should be changed.
DATES: Written or electronic comments
and requests for a public hearing must be
received by February 27, 2014.
ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG-134417-13), Room
5205, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand-
delivered Monday through Friday between
the hours of 8 a.m. and 4 p.m. to CC:PA:
LPD:PR (REG-134417-13), Courier's Desk,
Internal Revenue Service, 1111 Constitu-
tion Avenue NW, Washington, DC, or
sent electronically via the Federal eRule-
making Portal at http://www.regulations.
gov (IRS REG-134417-13).
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Amy F. Giuliano at (202)
317-5800; concerning submission of com-
ments and requests for a public hearing,
Oluwafunmilayo Taylor at (202) 317-
6901 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
## Paperwork Reduction Act
The collection of information con-
tained in this notice of proposed rulemak-
ing has been submitted to the Office of
Management and Budget for review in
accordance with the Paperwork Reduction
Act of 1995 (44 U.S.C. 3507(d)). Com-
ments on the collection of information
should be sent to the Office of Manage-
ment and Budget, Attn: Desk Officer for
the Department of the Treasury, Office of
Information and Regulatory Affairs,
Washington, DC 20503, with copies to the
Internal Revenue Service, Attn: IRS Re-
ports Clearance Officer, SE:W:CAR:MP:
T:T:SP, Washington, DC 20224. Com-
ments on the collection of information
should be received by January 28, 2014.
Comments are specifically requested
concerning:
Whether the proposed collection of in-
formation is necessary for the proper per-
formance of the functions of the IRS, in-
cluding whether the information will have
practical utility;
The accuracy of the estimated burden
associated with the proposed collection of
information;
How the quality, utility, and clarity of
the information to be collected may be
enhanced; and
How the burden of complying with the
proposed collection of information may
be minimized, including through forms of
information technology.
The collection of information in these
proposed regulations is in §1.501(c)(4)-
1(a)(2)(iii)(D), which provides a special
rule for contributions by an organization
described in section 501(c)(4) of the In-
ternal Revenue Code (Code) to an organi-
zation described in section 501(c). Gener-
ally, a contribution by a section 501(c)(4)
organization to a section 501(c) organiza-
tion that engages in candidate-related polit-
ical activity will be considered candidate-
related political activity by the section
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501(c)(4) organization. The special rule in
§1.501(c)(4)-1(a)(2)(iii)(D) provides that a
contribution to a section 501(c) organization
will not be treated as a contribution to an
organization engaged in candidate-related
political activity if the contributor organiza-
tion obtains a written representation from an
authorized officer of the recipient organiza-
tion stating that the recipient organization
does not engage in any such activity and the
contribution is subject to a written restric-
tion that it not be used for candidate-related
political activity. This special provision
would not apply if the contributor organiza-
tion knows or has reason to know that the
representation is inaccurate or unreliable.
The expected recordkeepers are section
501(c)(4) organizations that choose to con-
tribute to, and to seek a written representa-
tion from, a section 501(c) organization.
Estimated number of recordkeepers:
2,000.
Estimated average annual burden hours
per recordkeeper: 2 hours.
Estimated total annual recordkeeping
burden: 4,000 hours.
A particular section 501(c)(4) organi-
zation may require more or less time, de-
pending on the number of contributions
for which a representation is sought.
An agency may not conduct or spon-
sor, and a person is not required to re-
spond to, a collection of information un-
less it displays a valid control number
assigned by the Office of Management
and Budget.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mate-
rial in the administration of any internal
revenue law. Generally, tax returns and
return information are confidential, as re-
quired by section 6103.
### Background
Section 501(c)(4) of the Code provides
a Federal income tax exemption, in part,
for "[c]ivic leagues or organizations not
organized for profit but operated exclu-
sively for the promotion of social wel-
fare." This exemption dates back to the
enactment of the federal income tax in
1913. See Tariff Act of 1913, 38 Stat. 114
(1913). The statutory provision was
largely unchanged until 1996, when sec-
tion 501(c)(4) was amended to prohibit
inurement of an organization's net earn-
ings to private shareholders or individuals.
Prior to 1924, the accompanying Trea-
sury regulations did not elaborate on the
meaning of "promotion of social welfare."
See Regulations 33 (Rev.), art. 67 (1918).
Treasury regulations promulgated in 1924
explained that civic leagues qualifying for
exemption under section 231(8) of the
Revenue Act of 1924, the predecessor to
section 501(c)(4) of the 1986 Code, are
"those not organized for profit but oper-
ated exclusively for purposes beneficial to
the community as a whole," and generally
include "organizations engaged in pro-
moting the welfare of mankind, other than
organizations comprehended within [sec-
tion 231(6) of the Revenue Act of 1924,
the predecessor to section 501(c)(3) of the
1986 Code]." See Regulations 65, art. 519
(1924). The regulations remained substan-
tially the same until 1959.
The current regulations under section
501(c)(4) were proposed and finalized in
1959. They provide that "[a]n organization
is operated exclusively for the promotion of
social welfare if it is primarily engaged in
promoting in some way the common good
and general welfare of the people of the
community." Treas. Reg. §1.501(c)(4)-
1(a)(2)(i). An organization "embraced"
within section 501(c)(4) is one that is "op-
erated primarily for the purpose of bringing
about civic betterments and social improve-
ments." Id. The regulations further provide
that " [t]he promotion of social welfare does
not include direct or indirect participation or
intervention in political campaigns on be-
half of or in opposition to any candidate for
public office." Treas. Reg. §1.501(c)(4)-
1(a)(2)(ii). This language is similar to lan-
guage that appears in section 501(c)(3) re-
quiring section 501(c)(3) organizations not
to "participate in, or intervene in (including
the publishing or distributing of statements),
any political campaign on behalf of (or in
opposition to) any candidate for public of-
fice" ("political campaign intervention").
However, unlike the absolute prohibition
that applies to charitable organizations de-
scribed in section 501(c)(3), an organization
that primarily engages in activities that pro-
mote social welfare will be considered un-
der the current regulations to be operating
exclusively for the promotion of social wel-
fare, and may qualify for tax-exempt status
under section 501(c)(4), even though it en-
gages in some political campaign interven-
tion.
The section 501(c)(4) regulations have
not been amended since 1959, although
Congress took steps in the intervening years
to address further the relationship of politi-
cal campaign activities to tax-exempt status.
In particular, section 527, which governs the
tax treatment of political organizations, was
enacted in 1975 and provides generally that
amounts received as contributions and other
funds raised for political purposes (section
527 exempt function income) are not sub-
ject to tax. Section 527(e)(1) defines a "po-
litical organization" as "a party, committee,
association, fund, or other organization
(whether or not incorporated) organized and
operated primarily for the purpose of di-
rectly or indirectly accepting contributions
or making expenditures, or both, for an ex-
empt function." Section 527(f) also imposes
a tax on exempt organizations described in
section 501(c), including section 501(c)(4)
social welfare organizations, that make an
expenditure furthering a section 527 exempt
function. The tax is imposed on the lesser of
the organization's net investment income or
section 527 exempt function expenditures.
Section 527(e)(2) defines "exempt function"
as "the function of influencing or attempting
to influence the selection, nomination, elec-
tion, or appointment of any individual to
any federal, state, or local public office or
office in a political organization, or the elec-
tion of Presidential or Vice-Presidential
electors" (referred to in this document as
"section 527 exempt function").1
Unlike the section 501(c)(3) standard
of political campaign intervention, and the
similar standard currently applied under
section 501(c)(4), both of which focus
solely on candidates for elective public
office, a section 527 exempt function en-
compasses activities related to a broader
range of officials, including those who are
appointed or nominated, such as executive
branch officials and certain judges. Thus,
while there is currently significant overlap
in the activities that constitute political
1 In 2000 and 2002, section 527 was amended to require political organizations (with some exceptions) to file a notice with the IRS when first organized and to periodically disclose publicly
certain information regarding their expenditures and contributions. See sections 527(i) and 527(j).
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campaign intervention under sections
501(c)(3) and 501(c)(4) and those that fur-
ther a section 527 exempt function, the
concepts are not synonymous.
Over the years, the IRS has stated that
whether an organization is engaged in po-
litical campaign intervention depends
upon all of the facts and circumstances of
each case. See Rev. Rul. 78-248 (1978-1
CB 154) (illustrating application of the
facts and circumstances analysis to voter
education activities conducted by section
501(c)(3) organizations); Rev. Rul. 80-
282 (1980-2 CB 178) (amplifying Rev.
Rul. 78-248 regarding the timing and dis-
tribution of voter education materials);
Rev. Rul. 86-95 (1986-2 CB 73) (hold-
ing a public forum for the purpose of
educating and informing the voters, which
provides fair and impartial treatment of
candidates, and which does not promote
or advance one candidate over another,
does not constitute political campaign in-
tervention under section 501(c)(3)). More
recently, the IRS released Rev. Rul.
2007-41 (2007-1 CB 1421), providing 21
examples illustrating facts and circum-
stances to be considered in determining
whether a section 501(c)(3) organization's
activities (including voter education, voter
registration, and get-out-the-vote drives;
individual activity by organization lead-
ers; candidate appearances; business ac-
tivities; and Web sites) result in political
campaign intervention. The IRS generally
applies the same facts and circumstances
analysis under section 501(c)(4). See Rev.
Rul. 81-95 (1981-1 CB 332) (citing rev-
enue rulings under section 501(c)(3) for
examples of what constitutes participation
or intervention in political campaigns for
purposes of section 501(c)(4)).
Similarly, Rev. Rul. 2004-6 (2004-1
CB 328) provides six examples illustrat-
ing facts and circumstances to be consid-
ered in determining whether a section
501(c) organization (such as a section
501(c)(4) social welfare organization) that
engages in public policy advocacy has
expended funds for a section 527 exempt
function. The analysis reflected in these
revenue rulings for determining whether
an organization has engaged in political
campaign intervention, or has expended
funds for a section 527 exempt function, is
fact-intensive.
Recently, increased attention has been
focused on potential political campaign
intervention by section 501(c)(4) organi-
zations. A recent IRS report relating to
IRS review of applications for tax-exempt
status states that "[o]ne of the significant
challenges with the 501(c)(4) [applica-
tion] review process has been the lack of a
clear and concise definition of 'political
campaign intervention."" Internal Reve-
nue Service, "Charting a Path Forward at
the IRS: Initial Assessment and Plan of
Action" at 20 (June 24, 2013). In addition,
"[t]he distinction between campaign inter-
vention and social welfare activity, and
the measurement of the organization's so-
cial welfare activities relative to its total
activities, have created considerable con-
fusion for both the public and the IRS in
making appropriate section 501(c)(4) de-
terminations." Id. at 28. The Treasury De-
partment and the IRS recognize that both
the public and the IRS would benefit from
clearer definitions of these concepts.
## Explanation of Provisions
### 1. Overview
The Treasury Department and the IRS
recognize that more definitive rules with
respect to political activities related to
candidates - rather than the existing, fact-
intensive analysis - would be helpful in
applying the rules regarding qualification
for tax-exempt status under section
501(c)(4). Although more definitive rules
might fail to capture (or might sweep in)
activities that would (or would not) be
captured under the IRS' traditional facts
and circumstances approach, adopting
rules with sharper distinctions in this area
would provide greater certainty and re-
duce the need for detailed factual analysis
in determining whether an organization is
described in section 501(c)(4). Accord-
ingly, the Treasury Department and the
IRS propose to amend Treas. Reg.
§1.501(c)(4)-1(a)(2) to identify specific
political activities that would be consid-
ered candidate-related political activities
that do not promote social welfare.
To distinguish the proposed rules under
section 501(c)(4) from the section 501(c)(3)
standard and the similar standard currently
applied under section 501(c)(4), the pro-
posed regulations would amend Treas. Reg.
§1.501(c)(4)-1(a)(2)(ii) to delete the cur-
rent reference to "direct or indirect partic-
ipation or intervention in political cam-
paigns on behalf of or in opposition to any
candidate for public office," which is sim-
ilar to language in the section 501(c)(3)
statute and regulations. Instead the pro-
posed regulations would revise Treas.
Reg. §1.501(c)(4)-1(a)(2)(ii) to state that
"[t]he promotion of social welfare does
not include direct or indirect candidate-
related political activity." As explained in
more detail in section 2 of this preamble,
the proposed rules draw upon existing
definitions of political campaign activity,
both in the Code and in federal election
law, to define candidate-related political
activity that would not be considered to
promote social welfare. The proposed
rules draw in particular from certain stat-
utory provisions of section 527, which
specifically deals with political organiza-
tions and taxes section 501(c) organiza-
tions, including section 501(c)(4) organi-
zations, on certain types of political
campaign activities. Recognizing that it
may be beneficial to have a more uniform
set of rules relating to political campaign
activity for tax-exempt organizations, the
Treasury Department and the IRS request
comments in subparagraphs a through c of
this section of the preamble regarding
whether the same or a similar approach
should be adopted in addressing political
campaign activities of other section
501(c) organizations, as well as whether
the regulations under section 527 should
be revised to adopt the same or a similar
approach in defining section 527 exempt
function activity.
### a. Interaction with section 501(c)(3)
These proposed regulations do not
address the definition of political campaign
intervention under section 501(c)(3). The
Treasury Department and the IRS recognize
that, because such intervention is absolutely
prohibited under section 501(c)(3), a more
nuanced consideration of the totality of facts
and circumstances may be appropriate in
that context. The Treasury Department and
the IRS request comments on the advisabil-
ity of adopting an approach to defining po-
litical campaign intervention under section
501(c)(3) similar to the approach set forth in
these regulations, either in lieu of the facts
and circumstances approach reflected in
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Rev. Rul. 2007-41 or in addition to that
approach (for example, by creating a clearly
defined presumption or safe harbor). The
Treasury Department and the IRS also re-
quest comments on whether any modifica-
tions or exceptions would be needed in the
section 501(c)(3) context and, if so, how to
ensure that any such modifications or excep-
tions are clearly defined and administrable.
Any such change would be introduced in the
form of proposed regulations to allow an
additional opportunity for public comment.
### b. Interaction with section 527
As noted in the "Background" section
of this preamble, a section 501(c)(4) or-
ganization is subject to tax under section
527(f) if it makes expenditures for a sec-
tion 527 exempt function. Consistent with
section 527, the proposed regulations pro-
vide that "candidate-related political ac-
tivity" for purposes of section 501(c)(4)
includes activities relating to selection,
nomination, election, or appointment of
individuals to serve as public officials,
officers in a political organization, or
Presidential or Vice Presidential electors.
These proposed regulations do not, how-
ever, address the definition of "exempt
function" activity under section 527 or the
application of section 527(f). The Trea-
sury Department and the IRS request
comments on the advisability of adopting
rules that are the same as or similar to
these proposed regulations for purposes of
defining section 527 exempt function ac-
tivity in lieu of the facts and circum-
stances approach reflected in Rev. Rul.
2004-6. Any such change would be in-
troduced in the form of proposed regula-
tions to allow an additional opportunity
for public comment.
c. Interaction with sections 501(c)(5)
and 501(c)(6)
The proposed regulations define candidate-
related political activity for social welfare
organizations described in section 501(c)(4).
The Treasury Department and the IRS are
considering whether to amend the current
regulations under sections 501(c)(5) and
501(c)(6) to provide that exempt purposes
under those regulations (which include “the
betterment of the conditions of those en-
gaged in [labor, agricultural, or horticul-
tural] pursuits" in the case of a section
501(c)(5) organization and promoting a
"common business interest" in the case of a
section 501(c)(6) organization) do not in-
clude candidate-related political activity as
defined in these proposed regulations. The
Treasury Department and the IRS request
comments on the advisability of adopting
this approach in defining activities that do
not further exempt purposes under sections
501(c)(5) and 501(c)(6). Any such change
would be introduced in the form of pro-
posed regulations to allow an additional op-
portunity for public comment.
d. Additional guidance on the meaning
of "operated exclusively for the
promotion of social welfare"
The Treasury Department and the IRS
have received requests for guidance on
the meaning of "primarily" as used in
the current regulations under section
501(c)(4). The current regulations pro-
vide, in part, that an organization is oper-
ated exclusively for the promotion of so-
cial welfare within the meaning of section
501(c)(4) if it is "primarily engaged" in
promoting in some way the common good
and general welfare of the people of the
community. Treas. Reg. §1.501(c)(4)-
1(a)(2)(i). As part of the same 1959 Trea-
sury decision promulgating the current
section 501(c)(4) regulations, regulations
under section 501(c)(3) were adopted con-
taining similar language: "[a]n organiza-
tion will be regarded as 'operated exclu-
sively' for one or more exempt purposes
only if it engages primarily in activities
which accomplish one or more of such
exempt purposes specified in section
501(c)(3)." Treas. Reg. §1.501(c)(3)-
1(c)(1). Unlike the section 501(c)(4) reg-
ulations, however, the section 501(c)(3)
regulations also provide that "[a]n organi-
zation will not be so regarded if more than
an insubstantial part of its activities is not
in furtherance of an exempt purpose." Id.
Some have questioned the use of the
"primarily" standard in the section
501(c)(4) regulations and suggested that
this standard should be changed. The
Treasury Department and the IRS are con-
sidering whether the current section
501(c)(4) regulations should be modified
in this regard and, if the "primarily" stan-
dard is retained, whether the standard
should be defined with more precision or
revised to mirror the standard under the
section 501(c)(3) regulations. Given the
potential impact on organizations cur-
rently recognized as described in section
501(c)(4) of any change in the "primarily"
standard, the Treasury Department and the
IRS wish to receive comments from a
broad range of organizations before decid-
ing how to proceed. Accordingly, the
Treasury Department and the IRS invite
comments from the public on what pro-
portion of an organization's activities
must promote social welfare for an orga-
nization to qualify under section 501(c)(4)
and whether additional limits should be
imposed on any or all activities that do not
further social welfare. The Treasury De-
partment and the IRS also request com-
ments on how to measure the activities of
organizations seeking to qualify as section
501(c)(4) social welfare organizations for
these purposes.
### 2. Definition of Candidate-Related Political Activity
These proposed regulations provide
guidance on which activities will be con-
sidered candidate-related political activity
for purposes of the regulations under sec-
tion 501(c)(4). These proposed regula-
tions would replace the language in the
existing final regulation under section
501(c)(4) - "participation or intervention
in political campaigns on behalf of or in
opposition to any candidate for public of-
fice" - with a new term - "candidate-
related political activity" - to differentiate
the proposed section 501(c)(4) rule from
the standard employed under section
501(c)(3) (and currently employed under
section 501(c)(4)). The proposed rule is
intended to help organizations and the IRS
more readily identify activities that con-
stitute candidate-related political activity
and, therefore, do not promote social wel-
fare within the meaning of section
501(c)(4). These proposed regulations do
not otherwise define the promotion of so-
cial welfare under section 501(c)(4). The
Treasury Department and the IRS note
that the fact that an activity is not
candidate-related political activity under
these proposed regulations does not mean
that the activity promotes social welfare.
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Whether such an activity promotes social
welfare is an independent determination.
In defining candidate-related political
activity for purposes of section 501(c)(4),
these proposed regulations draw key con-
cepts from the federal election campaign
laws, with appropriate modifications re-
flecting the purpose of these regulations to
define which organizations may receive
the benefits of section 501(c)(4) tax-
exempt status and to promote tax compli-
ance (as opposed to campaign finance reg-
ulation). In addition, the concepts drawn
from the federal election campaign laws
have been modified to reflect that section
501(c)(4) organizations may be involved
in activities related to local or state elections
(in addition to federal elections), as well as
the broader scope of the proposed definition
of candidate (which is not limited to candi-
dates for federal elective office).
The proposed regulations provide that
candidate-related political activity in-
cludes activities that the IRS has tradition-
ally considered to be political campaign
activity per se, such as contributions to
candidates and communications that ex-
pressly advocate for the election or defeat
of a candidate. The proposed regulations
also would treat as candidate-related po-
litical activity certain activities that, be-
cause they occur close in time to an elec-
tion or are election-related, have a greater
potential to affect the outcome of an elec-
tion. Currently, such activities are subject
to a facts and circumstances analysis be-
fore a determination can be made as to
whether the activity furthers social wel-
fare within the meaning of section
501(c)(4). Under the approach in these
proposed regulations, such activities in-
stead would be subject to a more defini-
tive rule. In addition, consistent with the
goal of providing greater clarity, the pro-
posed regulations would identify certain
specific activities as candidate-related po-
litical activity. The Treasury Department
and the IRS acknowledge that the ap-
proach taken in these proposed regula-
tions, while clearer, may be both more
restrictive and more permissive than the
current approach, but believe the proposed
approach is justified by the need to pro-
vide greater certainty to section 501(c)(4)
organizations regarding their activities
and reduce the need for fact-intensive de-
terminations.
The Treasury Department and the IRS
note that a particular activity may fit within
one or more categories of candidate-related
political activity described in subsections b
through e of this section 2 of the preamble;
the categories are not mutually exclusive.
For example, the category of express advo-
cacy communications may overlap with the
category of certain communications close in
time to an election.
a. Definition of "candidate"
These proposed regulations provide that,
consistent with the scope of section 527,
"candidate" means an individual who iden-
tifies himself or is proposed by another for
selection, nomination, election, or appoint-
ment to any public office or office in a
political organization, or to be a Presidential
or Vice-Presidential elector, whether or not
the individual is ultimately selected, nomi-
nated, elected, or appointed. In addition, the
proposed regulations clarify that for these
purposes the term "candidate" also includes
any officeholder who is the subject of a
recall election. The Treasury Department
and the IRS note that defining "candidate-
related political activity" in these proposed
regulations to include activities related to
candidates for a broader range of offices
(such as activities relating to the appoint-
ment or confirmation of executive branch
officials and judicial nominees) is a change
from the historical application in the section
501(c)(4) context of the section 501(c)(3)
standard of political campaign intervention,
which focuses on candidates for elective
public office only. See Treas. Reg.
§1.501(c)(3)-1(c)(3)(iii). These proposed
regulations instead would apply a definition
that reflects the broader scope of section 527
and that is already applied to a section
501(c)(4) organization engaged in section
527 exempt function activity through sec-
tion 527(f).
### b. Express advocacy communications
These proposed regulations provide
that candidate-related political activity
includes communications that expressly
advocate for or against a candidate.
These proposed regulations draw from
Federal Election Commission rules in
defining "expressly advocate," but ex-
pand the concept to include communi-
cations expressing a view on the selec-
tion, nomination, or appointment of
individuals, or on the election or defeat
of one or more candidates or of candi-
dates of a political party. These pro-
posed regulations make clear that all
communications - including written,
printed, electronic (including Internet),
video, and oral communications - that
express a view, whether for or against,
on a clearly identified candidate (or on
candidates of a political party) would
constitute candidate-related political ac-
tivity. A candidate can be "clearly iden-
tified" in a communication by name,
photograph, or reference (such as “the
incumbent" or a reference to a particular
issue or characteristic distinguishing the
candidate from others). The proposed
regulations also provide that candidate-
related political activity includes any
express advocacy communication the
expenditures for which an organization
reports to the Federal Election Commis-
sion under the Federal Election Cam-
paign Act as an independent expendi-
ture.
### c. Public communications close in time to an election
Under current guidance, the timing of a
communication about a candidate that is
made shortly before an election is a factor
tending to indicate a greater risk of polit-
ical campaign intervention or section 527
exempt function activity. In the interest of
greater clarity, these proposed regulations
would move away from the facts and cir-
cumstances approach that the IRS has tra-
ditionally applied in analyzing certain ac-
tivities conducted close in time to an
election. These proposed regulations draw
from provisions of federal election cam-
paign laws that treat certain communica-
tions that are close in time to an election
and that refer to a clearly identified can-
didate as electioneering communications,
but make certain modifications. The pro-
posed regulations expand the types of can-
didates and communications that are cov-
ered to reflect the types of activities an
organization might conduct related to lo-
cal and state, as well as federal, contests,
including any election or ballot measure
to recall an individual who holds state or
local elective public office. In addition,
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the expansion of the types of communica-
tions covered in the proposed regulations
reflects the fact that an organization's tax
exempt status is determined based on all
of its activities, even low cost and volun-
teer activities, not just its large expendi-
tures.
Under the proposed definition, any
public communication that is made within
60 days before a general election or 30
days before a primary election and that
clearly identifies a candidate for public
office (or, in the case of a general election,
refers to a political party represented in
that election) would be considered
candidate-related political activity. These
timeframes are the same as those appear-
ing in the Federal Election Campaign Act
definition of electioneering communica-
tions. The definition of "election," includ-
ing what would be treated as a primary or
a general election, is consistent with sec-
tion 527(j) and the federal election cam-
paign laws.
A communication is "public" if it is
made using certain mass media (specifi-
cally, by broadcast, in a newspaper, or on
the Internet), constitutes paid advertising, or
reaches or is intended to reach at least 500
people (including mass mailings or tele-
phone banks). The Treasury Department
and the IRS intend that content previously
posted by an organization on its Web site
that clearly identifies a candidate and re-
mains on the Web site during the specified
pre-election period would be treated as
candidate-related political activity.
The proposed regulations also provide
that candidate-related political activity in-
cludes any communication the expendi-
tures for which an organization reports to
the Federal Election Commission under
the Federal Election Campaign Act, in-
cluding electioneering communications.
The approach taken in the proposed
definition of candidate-related political
activity would avoid the need to consider
potential mitigating or aggravating cir-
cumstances in particular cases (such as
whether an issue-oriented communication
is "neutral" or "biased" with respect to a
candidate). Thus, this definition would ap-
ply without regard to whether a public
communication is intended to influence
the election or some other, non-electoral
action (such as a vote on pending legisla-
tion) and without regard to whether such
communication was part of a series of
similar communications. Moreover, a
public communication made outside the
60-day or 30-day period would not be
candidate-related political activity if it
does not fall within the ambit of express
advocacy communications or another spe-
cific provision of the definition. The Trea-
sury Department and the IRS request
comments on whether the length of the
period should be longer (or shorter) and
whether there are particular communica-
tions that (regardless of timing) should be
excluded from the definition because they
can be presumed to neither influence nor
constitute an attempt to influence the out-
come of an election. Any comments
should specifically address how the pro-
posed exclusion is consistent with the goal
of providing clear rules that avoid fact-
intensive determinations.
The Treasury Department and the IRS
also note that this rule regarding public
communications close in time to an election
would not apply to public communications
identifying a candidate for a state or federal
appointive office that are made within a
specified number of days before a scheduled
appointment, confirmation hearing or vote,
or other selection event. The Treasury De-
partment and the IRS request comments on
whether a similar rule should apply with
respect to communications within a speci-
fied period of time before such a scheduled
appointment, confirmation hearing or vote,
or other selection event.
d. Contributions to a candidate, political
organization, or any section 501(c)
entity engaged in candidate-related
political activity
The proposed definition of candidate-
related political activity would include
contributions of money or anything of
value to or the solicitation of contributions
on behalf of (1) any person if such con-
tribution is recognized under applicable
federal, state, or local campaign finance
law as a reportable contribution; (2) any
political party, political committee, or
other section 527 organization; or (3) any
organization described in section 501(c)
that engages in candidate-related political
activity within the meaning of this pro-
posed rule. This definition of contribution
is similar to the definition of contribution
that applies for purposes of section 527.
The Treasury Department and the IRS in-
tend that the term "anything of value"
would include both in-kind donations and
other support (for example, volunteer
hours and free or discounted rentals of
facilities or mailing lists). The Treasury
Department and the IRS request com-
ments on whether other transfers, such as
indirect contributions described in section
276 to political parties or political candi-
dates, should be treated as candidate-
related political activity.
The Treasury Department and the IRS
recognize that a section 501(c)(4) organiza-
tion making a contribution may not know
whether a recipient section 501(c) organiza-
tion engages in candidate-related political
activity. The proposed regulations provide
that, for purposes of this definition, a recip-
ient organization would not be treated as a
section 501(c) organization engaged in
candidate-related political activity if the
contributor organization obtains a written
representation from an authorized officer of
the recipient organization stating that the
recipient organization does not engage in
any such activity and the contribution is
subject to a written restriction that it not be
used for candidate-related political activity.
This special provision would apply only if
the contributor organization does not know
or have reason to know that the representa-
tion is inaccurate or unreliable.
### e. Election-related activities
The proposed definition of candidate-
related political activity would include
certain specified election-related activi-
ties, including the conduct of voter regis-
tration and get-out-the-vote drives, distri-
bution of material prepared by or on
behalf of a candidate or section 527 orga-
nization, and preparation or distribution of
a voter guide and accompanying material
that refers to a candidate or a political
party. In addition, an organization that
hosts an event on its premises or conducts
an event off-site within 30 days of a pri-
mary election or 60 days of a general
election at which one or more candidates
in such election appear as part of the pro-
gram (whether or not such appearance
was previously scheduled) would be en-
gaged in candidate-related political activ-
ity under the proposed definition.
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The Treasury Department and the IRS
acknowledge that under the facts and cir-
cumstances analysis currently used for
section 501(c)(4) organizations as well as
for section 501(c)(3) organizations, these
election-related activities may not be con-
sidered political campaign intervention if
conducted in a non-partisan and unbiased
manner. However, these determinations
are highly fact-intensive. The Treasury
Department and the IRS request com-
ments on whether any particular activities
conducted by section 501(c)(4) organiza-
tions should be excepted from the defini-
tion of candidate-related political activity
as voter education activity and, if so, a
description of how the proposed exception
will both ensure that excepted activities
are conducted in a non-partisan and unbi-
ased manner and avoid a fact-intensive
analysis.
#### f. Attribution to a section 501(c)(4) organization of certain activities and communications
These proposed regulations provide
that activities conducted by an organiza-
tion include, but are not limited to, (1)
activities paid for by the organization or
conducted by the organization's officers,
directors, or employees acting in that ca-
pacity, or by volunteers acting under the
organization's direction or supervision;
(2) communications made (whether or not
such communications were previously
scheduled) as part of the program at an
official function of the organization or in
an official publication of the organization;
and (3) other communications (such as
television advertisements) the creation or
distribution of which is paid for by the
organization. These proposed regulations
also provide that an organization's Web
site is an official publication of the orga-
nization, so that material posted by the
organization on its Web site may consti-
tute candidate-related political activity.
The proposed regulations do not specifi-
cally address material posted by third par-
ties on an organization's Web site. The
Treasury Department and the IRS request
comments on whether, and under what
circumstances, material posted by a third
party on an interactive part of the organi-
zation's Web site should be attributed to
the organization for purposes of this rule.
In addition, the Treasury Department and
the IRS have stated in guidance under
section 501(c)(3) regarding political cam-
paign intervention that when a charitable
organization chooses to establish a link to
another Web site, the organization is re-
sponsible for the consequences of estab-
lishing and maintaining that link, even if it
does not have control over the content of
the linked site. See Rev. Rul. 2007-41.
The Treasury Department and the IRS re-
quest comments on whether the conse-
quences of establishing and maintaining a
link to another Web site should be the
same or different for purposes of the pro-
posed definition of candidate-related po-
litical activity.
## Proposed Effective/Applicability Date
These regulations are proposed to be
effective the date of publication of the
Treasury decision adopting these rules as
final regulations in the Federal Register.
For proposed date of applicability, see
§1.501(c)(4)-1(c).
## Statement of Availability for IRS Documents
For copies of recently issued Revenue
Procedures, Revenue Rulings, Notices,
and other guidance published in the Inter-
nal Revenue Bulletin or Cumulative Bul-
letin, please visit the IRS Web site at
http://www.irs.gov or the Superintendent
of Documents, U.S. Government Printing
Office, Washington, DC 20402.
## Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in Exec-
utive Order 12866, as supplemented by
Executive Order 13563. Therefore, a reg-
ulatory assessment is not required. It also
has been determined that section 553(b) of
the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these
regulations. It is hereby certified that this
rule will not have a significant economic
impact on a substantial number of small
entities. This certification is based on the
fact that only a minimal burden would be
imposed by the rule, if adopted. Under the
proposal, if a section 501(c)(4) organiza-
tion chooses to contribute to a section
501(c) organization and wants assurance
that the contribution will not be treated as
candidate-related political activity, it may
seek a written representation that the re-
cipient does not engage in candidate-
related political activity within the mean-
ing of these regulations. Therefore, a
regulatory flexibility analysis under the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) is not required. Pursuant to
section 7805(f) of the Code, this notice of
proposed rulemaking has been submitted
to the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on its impact on small business.
## Comments and Requests for Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written comments (a
signed original and eight (8) copies) or elec-
tronic comments that are submitted timely
to the IRS. The Treasury Department and
the IRS generally request comments on all
aspects of the proposed rules. In particular,
the Treasury Department and the IRS re-
quest comments on whether there are other
specific activities that should be included in,
or excepted from, the definition of
candidate-related political activity for pur-
poses of section 501(c)(4). Such comments
should address how the proposed addition
or exception is consistent with the goals of
providing more definitive rules and reduc-
ing the need for fact-intensive analysis of
the activity. All comments submitted by the
public will be made available for public
inspection and copying at www.regulations.
gov or upon request.
A public hearing will be scheduled if
requested in writing by any person who
timely submits written comments. If a
public hearing is scheduled, notice of the
date, time, and place for the public hear-
ing will be published in the Federal Reg-
ister.
## Drafting Information
The principal author of these regula-
tions is Amy F. Giuliano, Office of Asso-
ciate Chief Counsel (Tax Exempt and
Government Entities). However, other
personnel from the IRS and Treasury De-
partment participated in their develop-
ment.
* * * * *
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## Proposed Amendments to the Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
### PART 1-INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.501(c)(4)-1 is pro-
posed to be amended by revising the first
sentence of paragraph (a)(2)(ii) and add-
ing paragraphs (a)(2)(iii) and (c) to read as
follows:
§1.501(c)(4)-1 Civic organizations and
local associations of employees.
(a) * * *
(2) * * *
(ii) * * * The promotion of social wel-
fare does not include direct or indirect
candidate-related political activity, as de-
fined in paragraph (a)(2)(iii) of this sec-
tion. * * *
(iii) Definition of candidate-related po-
litical activity-(A) In general. For pur-
poses of this section, candidate-related po-
litical activity means:
(1) Any communication (as defined in
paragraph (a)(2)(iii)(B)(3) of this section)
expressing a view on, whether for or
against, the selection, nomination, elec-
tion, or appointment of one or more
clearly identified candidates or of candi-
dates of a political party that-
(i) Contains words that expressly advo-
cate, such as "vote," "oppose," "support,"
"elect," "defeat," or "reject;" or
(ii) Is susceptible of no reasonable in-
terpretation other than a call for or against
the selection, nomination, election, or ap-
pointment of one or more candidates or of
candidates of a political party;
(2) Any public communication (de-
fined in paragraph (a)(2)(iii)(B)(5) of this
section) within 30 days of a primary elec-
tion or 60 days of a general election that
refers to one or more clearly identified
candidates in that election or, in the case
of a general election, refers to one or more
political parties represented in that elec-
tion;
(3) Any communication the expendi-
tures for which are reported to the Federal
Election Commission, including indepen-
dent expenditures and electioneering com-
munications;
(4) A contribution (including a gift,
grant, subscription, loan, advance, or de-
posit) of money or anything of value to or
the solicitation of contributions on behalf
of-
(i) Any person, if the transfer is recog-
nized under applicable federal, state, or
local campaign finance law as a reportable
contribution to a candidate for elective
office;
(ii) Any section 527 organization; or
(iii) Any organization described in sec-
tion 501(c) that engages in candidate-
related political activity within the mean-
ing of this paragraph (a)(2)(iii) (see
special rule in paragraph (a)(2)(iii)(D) of
this section);
(5) Conduct of a voter registration
drive or "get-out-the-vote" drive;
(6) Distribution of any material pre-
pared by or on behalf of a candidate or by
a section 527 organization including,
without limitation, written materials, and
audio and video recordings;
(7) Preparation or distribution of a
voter guide that refers to one or more
clearly identified candidates or, in the case
of a general election, to one or more po-
litical parties (including material accom-
panying the voter guide); or
(8) Hosting or conducting an event
within 30 days of a primary election or 60
days of a general election at which one or
more candidates in such election appear as
part of the program.
(B) Related definitions. The following
terms are defined for purposes of this
paragraph (a)(2)(iii) only:
(1) "Candidate" means an individual
who publicly offers himself, or is pro-
posed by another, for selection, nomina-
tion, election, or appointment to any fed-
eral, state, or local public office or office
in a political organization, or to be a Pres-
idential or Vice-Presidential elector,
whether or not such individual is ulti-
mately selected, nominated, elected, or
appointed. Any officeholder who is the
subject of a recall election shall be treated
as a candidate in the recall election.
(2) "Clearly identified" means the
name of the candidate involved appears, a
photograph or drawing of the candidate
appears, or the identity of the candidate is
apparent by reference, such as by use of
the candidate's recorded voice or of terms
such as "the Mayor," "your Congress-
man," "the incumbent," "the Democratic
nominee," or "the Republican candidate
for County Supervisor." In addition, a
candidate may be "clearly identified" by
reference to an issue or characteristic used
to distinguish the candidate from other
candidates.
(3) "Communication" means any com-
munication by whatever means, including
written, printed, electronic (including In-
ternet), video, or oral communications.
(4) "Election" means a general, spe-
cial, primary, or runoff election for fed-
eral, state, or local office; a convention or
caucus of a political party that has author-
ity to nominate a candidate for federal,
state or local office; a primary election
held for the selection of delegates to a
national nominating convention of a po-
litical party; or a primary election held for
the expression of a preference for the
nomination of individuals for election to
the office of President. A special election
or a runoff election is treated as a primary
election if held to nominate a candidate. A
convention or caucus of a political party
that has authority to nominate a candidate
is also treated as a primary election. A
special election or a runoff election is
treated as a general election if held to elect
a candidate. Any election or ballot mea-
sure to recall an individual who holds
state or local elective public office is also
treated as a general election.
(5) "Public communication" means
any communication (as defined in para-
graph (a)(2)(iii)(B)(3) of this section)-
(i) By broadcast, cable, or satellite;
(ii) On an Internet Web site;
(iii) In a newspaper, magazine, or other
periodical;
(iv) In the form of paid advertising; or
(v) That otherwise reaches, or is in-
tended to reach, more than 500 persons.
(6) "Section 527 organization" means
an organization described in section
527(e)(1) (including a separate segregated
fund described in section 527(f)(3)),
whether or not the organization has filed
notice under section 527(i).
(C) Attribution. For purposes of this
section, activities conducted by an orga-
nization include activities paid for by the
organization or conducted by an officer,
director, or employee acting in that capac-
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ity or by volunteers acting under the or-
ganization's direction or supervision.
Communications made by an organization
include communications the creation or
distribution of which is paid for by the
organization or that are made in an official
publication of the organization (including
statements or material posted by the orga-
nization on its Web site), as part of the
program at an official function of the or-
ganization, by an officer or director acting
in that capacity, or by an employee, vol-
unteer, or other representative authorized
to communicate on behalf of the organi-
zation and acting in that capacity.
(D) Special rule regarding contribu-
tions to section 501(c) organizations. For
purposes of paragraph (a)(2)(iii)(A)(4) of
this section, a contribution to an organi-
zation described in section 501(c) will not
be treated as a contribution to an organi-
zation engaged in candidate-related polit-
ical activity if-
(1) The contributor organization ob-
tains a written representation from an au-
thorized officer of the recipient organiza-
tion stating that the recipient organization
does not engage in such activity (and the
contributor organization does not know or
have reason to know that the representa-
tion is inaccurate or unreliable); and
(2) The contribution is subject to a
written restriction that it not be used for
candidate-related political activity within
the meaning of this paragraph (a)(2)(iii).
(c) Effective/applicability date. Para-
graphs (a)(2)(ii) and (iii) of this section
apply on and after the date of publication
of the Treasury decision adopting these
rules as final regulations in the Federal
Register.
John Dalrymple,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on November
26, 2013, 4:15 p.m., and published in the issue of the Federal
Register for November 29, 2013, 78 F.R. 71535)
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# Definition of Terms
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Revenue rulings and revenue proce-
dures (hereinafter referred to as “rul-
ings") 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 ap-
plied 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 transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
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 pe-
riod 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.
# Abbreviations
The following abbreviations in current
use and formerly used will appear in ma-
terial 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.
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.
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.
X-Corporation.
Y-Corporation.
Z-Corporation.
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## Numerical Finding List1
Bulletins 2013-27 through 2013-52
### Announcements
2013-35, 2013-27 I.R.B. 46
2013-36, 2013-33 I.R.B. 142
2013-37, 2013-34 I.R.B. 155
2013-38, 2013-36 I.R.B. 185
2013-39, 2013-35 I.R.B. 167
2013-40, 2013-38 I.R.B. 226
2013-41, 2013-40 I.R.B. 322
2013-42, 2013-44 I.R.B. 464
2013-43, 2013-46 I.R.B. 524
2013-44, 2013-47 I.R.B. 545
2013-45, 2013-47 I.R.B. 546
2013-46, 2013-48 I.R.B. 593
2013-47, 2013-49 I.R.B. 620
2013-48, 2013-49 I.R.B. 620
2013-49, 2013-49 I.R.B. 621
### Notices
2013-41, 2013-29 I.R.B. 60
2013-42, 2013-29 I.R.B. 61
2013-43, 2013-31 I.R.B. 113
2013-44, 2013-29 I.R.B. 62
2013-45, 2013-31 I.R.B. 116
2013-46, 2013-31 I.R.B. 117
2013-47, 2013-31 I.R.B. 120
2013-48, 2013-31 I.R.B. 120
2013-49, 2013-32 I.R.B. 127
2013-50, 2013-32 I.R.B. 133
2013-51, 2013-34 I.R.B. 153
2013-52, 2013-35 I.R.B. 159
2013-53, 2013-36 I.R.B. 173
2013-54, 2013-40 I.R.B. 287
2013-55, 2013-38 I.R.B. 207
2013-56, 2013-39 I.R.B. 262
2013-57, 2013-40 I.R.B. 293
2013-58, 2013-40 I.R.B. 294
2013-59, 2013-40 I.R.B. 297
2013-60, 2013-44 I.R.B. 431
2013-61, 2013-44 I.R.B. 432
2013-62, 2013-45 I.R.B. 466
2013-63, 2013-44 I.R.B. 436
2013-64, 2013-44 I.R.B. 438
2013-65, 2013-44 I.R.B. 440
2013-66, 2013-46 I.R.B. 498
2013-67, 2013-45 I.R.B. 470
2013-68, 2013-46 I.R.B. 501
2013-69, 2013-46 I.R.B. 503
2013-70, 2013-47 I.R.B. 528
2013-71, 2013-47 I.R.B. 532
2013-72, 2013-48 I.R.B. 592
2013-73, 2013-49 I.R.B. 598
2013-74, 2013-52 I.R.B. 819
2013-75, 2013-49 I.R.B. 599
2013-76, 2013-51 I.R.B. 769
2013-77, 2013-50 I.R.B. 632
Notices-Continued
Treasury Decisions
2013-78, 2013-50 I.R.B. 633
9620, 2013-27 I.R.B. 1
2013-79, 2013-50 I.R.B. 653
9621, 2013-28 I.R.B. 49
2013-80, 2013-52 I.R.B. 821
9622, 2013-30 I.R.B. 64
2013-84, 2013-52 I.R.B. 822
9623, 2013-30 I.R.B. 73
2013-85, 2013-52 I.R.B. 827
9624, 2013-31 I.R.B. 86
9625, 2013-34 I.R.B. 147
Proposed Regulations
9626, 2013-34 I.R.B. 149
REG-124148-05, 2013-44 I.R.B. 444
9627, 2013-35 I.R.B. 156
REG-161948-05, 2013-44 I.R.B. 449
9628, 2013-36 I.R.B. 169
REG-148659-07, 2013-45 I.R.B. 473
9629, 2013-37 I.R.B. 188
REG-120282-10, 2013-52 I.R.B. 837
9630, 2013-38 I.R.B. 199
REG-132251-11, 2013-37 I.R.B. 191
9631, 2013-38 I.R.B. 205
REG-148812-11, 2013-45 I.R.B. 484
9632, 2013-39 I.R.B. 241
REG-111753-12, 2013-40 I.R.B. 302
9633, 2013-39 I.R.B. 227
REG-112815-12, 2013-35 I.R.B. 162
9634, 2013-40 I.R.B. 272
REG-114122-12, 2013-35 I.R.B. 163
9635, 2013-40 I.R.B. 273
REG-126285-12, 2013-52 I.R.B. 853
9636, 2013-43 I.R.B. 331
REG-136630-12, 2013-40 I.R.B. 303
9637, 2013-44 I.R.B. 427
REG-140789-12, 2013-32 I.R.B. 136
9638, 2013-46 I.R.B. 487
REG-144990-12, 2013-39 I.R.B. 264
9639, 2013-48 I.R.B. 588
REG-110732-13, 2013-43 I.R.B. 405
9640, 2013-48 I.R.B. 548
REG-111837-13, 2013-39 I.R.B. 266
9641, 2013-50 I.R.B. 622
REG-113792-13, 2013-38 I.R.B. 211
9642, 2013-51 I.R.B. 747
REG-115300-13, 2013-37 I.R.B. 197
9643, 2013-51 I.R.B. 750
REG-120927-13, 2013-49 I.R.B. 618
9644, 2013-51 I.R.B. 676
REG-130843-13, 2013-51 I.R.B. 771
9645, 2013-51 I.R.B. 738
REG-134417-13, 2013-52 I.R.B. 856
9646, 2013-50 I.R.B. 630
REG-146620-13, 2013-50 I.R.B. 674
9647, 2013-52 I.R.B. 816 9648, 2013-52 I.R.B. 798
## Revenue Procedures
2013-28, 2013-27 I.R.B. 28
2013-29, 2013-33 I.R.B. 141
2013-30, 2013-36 I.R.B. 173
2013-31, 2013-38 I.R.B. 208
2013-32, 2013-28
I.R.B. 55
2013-33, 2013-38 I.R.B. 209
2013-34, 2013-43
I.R.B. 398
2013-35, 2013-47
I.R.B. 537
2013-36, 2013-49
I.R.B. 602
2013-37, 2013-49 I.R.B. 612
2013-39, 2013-52 I.R.B. 830
## Revenue Rulings
2013-13, 2013-32 I.R.B. 124
2013-15, 2013-28 I.R.B. 47
2013-16, 2013-40 I.R.B. 275
2013-17, 2013-38 I.R.B. 201
2013-18, 2013-37 I.R.B. 186
2013-19, 2013-39 I.R.B. 240
2013-20, 2013-40 I.R.B. 272
2013-21, 2013-43 I.R.B. 396
2013-22, 2013-46 I.R.B. 496
2013-23, 2013-48 I.R.B. 590
2013-24, 2013-49 I.R.B. 594
2013-25, 2013-52 I.R.B. 802
2013-26, 2013-50 I.R.B. 628
2013-27, 2013-51 I.R.B. 676
1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2013-1 through 2013-26 is in Internal Revenue Bulletin
2013-26, dated June 24, 2013.
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## Finding List of Current Actions on Previously Published Items1
Bulletins 2013-27 through 2013-52
Notices:
95-18
Modified in part by
Rev. Proc. 2013-39, 2013-52 I.R.B. 830
2003-70
Modified and superseded by
Rev. Proc. 2013-39, 2013-52 I.R.B. 830
2004-23
Clarified by
Notice 2013-57, 2013-40 I.R.B. 293
2004-50
Clarified by
Notice 2013-57, 2013-40 I.R.B. 293
2005-70
Obsoleted by
T.D. 9633 2013-39 I.R.B. 227
2006-09
Modified and superseded by
Notice 2013-79, 2013-50 I.R.B. 653
2006-40
Superseded by
Notice 2013-68, 2013-46 I.R.B. 501
2006-54
Proposed update and supersession by
Notice 2013-78, 2013-50 I.R.B. 633
2008-31
Modified and superseded by
Notice 2013-79, 2013-50 I.R.B. 653
2009-41
Clarified and amplified by
Notice 2013-70, 528
2009-53
Clarified and amplified by
Notice 2013-70, 528
2010-84
Modified by
Notice 2013-74, 2013-52 I.R.B. 819
2012-72
Superseded by
Notice 2013-80, 2013-52 I.R.B. 821
2012-74
Obsoleted by
Notice 2013-51, 2013-34 I.R.B. 153
2013-16
Superseded by
Notice 2013-55, 2013-38 I.R.B. 207
2013-29
Clarified by
Notice 2013-60, 2013-44 I.R.B. 431
Notices-Continued:
2013-36
Appendix updated by
Notice 2013-55, 2013-38 I.R.B. 207
Superseded by
Notice 2013-55, 2013-38 I.R.B. 207
2013-39
Amplified by
Notice 2013-47, 2013-31 I.R.B. 120
2013-40
Amplified by
Notice 2013-47, 2013-31 I.R.B. 120
Revenue Procedures:
70-6
Modified and superseded by
Rev. Proc. 2013-39, 2013-52 I.R.B. 830
80-4
Modified and superseded by
Rev. Proc. 2013-39, 2013-52 I.R.B. 830
81-60
Modified by
Rev. Proc. 2013-32, 2013-28 I.R.B. 55
83-59
Modified by
Rev. Proc. 2013-32, 2013-28 I.R.B. 55
86-42
Modified by
Rev. Proc. 2013-32, 2013-28 I.R.B. 55
90-52
Modified by
Rev. Proc. 2013-32, 2013-28 I.R.B. 55
95-18
Modified in part by
Rev. Proc. 2013-39, 2013-52 I.R.B. 830
96-30
Modified by
Rev. Proc. 2013-32, 2013-28 I.R.B. 55
97-48
Situation 1 superseded, Situation 2 obsoleted by
Rev. Proc. 2013-30, 2013-36 I.R.B. 173
2003-43
Modified and superseded by
Rev. Proc. 2013-30, 2013-36 I.R.B. 173
2003-48
Obsoleted in part and superseded in part by
Rev. Proc. 2013-32, 2013-28 I.R.B. 55
2003-61
Superseded by
Rev. Proc. 2013-34, 2013-43 I.R.B. 398
2003-70
Modified and superseded by
Rev. Proc. 2013-39, 2013-52 I.R.B. 830
2004-34
Modified and clarified by
Rev. Proc. 2013-29, 2013-33 I.R.B. 141
2004-48
Modified and superseded by
Rev. Proc. 2013-30, 2013-36 I.R.B. 173
Revenue Procedures-Continued:
2004-49
Sections 4.01 & 4.02 modified and superseded
Section 4.03 obsoleted by
Rev. Proc. 2013-30, 2013-36 I.R.B. 173
2007-44
Modified by
Ann. 2013-37, 2013-34 I.R.B. 155
2007-62
Modified and superseded by
Rev. Proc. 2013-30, 2013-36 I.R.B. 173
2009-25
Pilot program discontinued by
Rev. Proc. 2013-32, 2013-28 I.R.B. 55
2011-18
Modified and clarified by
Rev. Proc. 2013-29, 2013-33 I.R.B. 141
2011-49
Modified by
Ann. 2013-37, 2013-34 I.R.B. 155
2012-25
Obsoleted in part by
Rev. Proc. 2013-28, 2013-27 I.R.B. 28
2013-1
Amplified and modified by
Rev. Proc. 2013-32, 2013-28 I.R.B. 55
2013-3
Amplified and modified by
Rev. Proc. 2013-32, 2013-28 I.R.B. 55
Proposed Regulations:
112815-12
Corrected by
Ann. 2013-45, 2013-47 I.R.B. 546
### Revenue Rulings:
58-66
Amplified and clarified by
Rev. Rul. 2013-17, 2013-38 I.R.B. 201
2004-12
Modified by
Notice 2013-74, 2013-52 I.R.B. 819
2012-33
Supplemented and superseded by
Rev. Rul. 2013-23, 2013-48 I.R.B. 590
2013-17
Supplemented by
Notice 2013-61, 2013-44 I.R.B. 432
Treasury Decisions:
9610
Corrected by
Ann. 2013-41, 2013-40 I.R.B. 322
9612
Corrected by
Ann. 2013-35, 2013-27 I.R.B. 46
9622
Corrected by
Ann. 2013-39, 2013-35 I.R.B. 167
9627
Corrected by
Ann. 2013-44, 2013-37 I.R.B. 545
1A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2013-1 through 2013-26 is in Internal Revenue Bulletin 2013-26, dated June 24, 2013.
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# INDEX
## Internal Revenue Bulletins 27 through 52
The abbreviation and number in parenthesis following the index entry
refer to the specific item; numbers in roman and italic type following
the parentheses refer to the Internal Revenue Bulletin in which the item
may be found and the page number on which it appears.
Key to Abbreviations:
Ann
Announcement
CD
Court Decision
DO
Delegation Order
EO
Executive Order
PL
Public Law
PTE
Prohibited Transaction Exemption
RP
Revenue Procedure
RR
Revenue Ruling
SPR
Statement of Procedural Rules
TC
Tax Convention
TD
Treasury Decision
TDO
Treasury Department Order
# EMPLOYEE PLANS
Accommodations for nonprofit organizations with religious ob-
jections to providing contraceptive services (TD 9624) 31, 86
Credit for employee health insurance expenses of small employ-
ers (REG-113792-13) 38, 211
Employee retirement benefit plan returns required on magnetic
media (REG-111837-13) 39, 266
Exemption for religious employers from the requirement to pro-
vide coverage for contraceptive services (TD 9624) 31, 86
Limitations on benefits and contributions:
Cost-of-living adjustments (Notice 73) 49, 598
Proposed Regulations:
26 CFR 1.45R-1 through 1.45R-5 added (tax credit for em-
ployee health insurance expenses of small employers)
(REG-113792-13) 38, 211
26 CFR 1.415(c)-2(g)(9) and (h) added (treatment of income
from Indian fishing rights-related activity as compensation)
(REG-120927-13) 49, 618
26 CFR 301.6057-3 added; 301.6058-2 added; 301.6059-2
added (employee retirement benefit plan returns required
on magnetic media) (REG-111837-13) 39, 266
Qualifications (Notice 84) 52, 822
Qualified plans, determination letters (Ann 37) 34, 155
Qualified plans, in-plan Roth rollovers (Notice 74) 52, 819
Qualified plans, mortality tables (Notice 49) 32, 127
Reduction or suspension of safe harbor contributions (TD 9641)
50, 622
Regulations:
26 CFR 1.401(k)-0 amended; 1.401(k)-3 amended;
1.401(m)-0 amended; 1.401(m)-3 amended (reduction or
suspension of safe harbor contributions) (TD 9641) 50, 622
26 CFR 54.9815-2713 added (certain preventive services
under the ACA) (TD 9624) 31, 86
26 CFR 54.9815-2713A added (certain preventive services
under the ACA) (TD 9624) 31, 86
26 CFR 301.6103 amended (disclosure of return information)
(TD 9628) 36, 169
# EMPLOYEE PLANS-Cont.
Treatment of income from Indian fishing rights-related activity
as compensation (REG-120927-13) 49, 618
Update to Revenue Ruling 58-66 (RR 17) 38, 201
Weighted average interest rates:
Segment rates for:
July 2013 (Notice 46) 31, 117
August 2013 (Notice 52) 35, 159
September 2013 (Notice 58) 40, 294
October 2013 (Notice 66) 46, 498
November 2013 (Notice 75) 49, 599
December 2013 (Notice 85) 52, 827
Wellness regulations related to rewards, plan design, and alter-
natives to avoid prohibited discrimination (TD 9620) 27, 1
# EMPLOYMENT TAX
Authority for voluntary withholding on other payments under
section 3402(p)(3) (REG-144620-13) 50, 674 ; (TD 9646) 50,
630
Designation of agent (RP 39) 52, 830
Disclosure of return information (TD 9628) 36, 169
Disclosure of return information reflected on returns to officers
and employees of the Department of Commerce for certain
statistical purposes and related activities (TD 9631) 38, 205
Domestic employee coverage threshold amount for 2014 (Notice
72) 48, 592
New addition to tax under 3101 added by the ACA (TD 9645)
51, 738
Regulations:
26 CFR 1.1401-1 amended; 31.3101-2 revised; 31.3102-1
amended; 31.3102-4 added; 31.3202-1 amended;
31.6011(a)-1 amended; 31.6011(a)-2 amended; 31.6205-1
amended; 31. 6402(a)-2 amended; 31.6413(a)-1 amended;
31.6413(a)-2 amended (new addition to tax under 3101
added by the ACA) (TD 9645) 51, 738
26 CFR part 301 amended; section 301.6103(j)(1) amended;
section 301.6103(j)(1)1-T amended; revising paras.
(b)(3)(xxix), (b)(3)(xxx) and (e) (Bureau of the Census)
(TD 9631) 38, 205
26 CFR 31.3402(p)-1T, section (c) added (authority for volun-
tary withholding on other payments under section 3402(p)(3))
(REG-146620-13) 50, 674; (TD 9646) 50, 630
Social Security contribution and benefit base for 2014 (Notice
72) 48, 592
Special administrative procedures for claims for refund and
adjustments of overpayments of employment tax with respect
to same-sex spouse benefits (Notice 61) 44, 432
Update to Revenue Ruling 58-66 (RR 17) 38, 201
## ESTATE TAX
Disclosure of return information (TD 9628) 36, 169
Tax conventions, competent authority procedures (Notice 78) 50,
633
Update to Revenue Ruling 58-66 (RR 17) 38, 201
Valuation of certain farm, etc., real property (RR 19) 39, 240
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# EXCISE TAX
Accommodations for nonprofit organizations with religious ob-
jections to providing contraceptive services (TD 9624) 31, 86
Branded prescription drugs (Notice 51) 34, 153
Disclosure of return information (TD 9628) 36, 169
Disclosure of return information reflected on returns to officers
and employees of the Department of Commerce for certain
statistical purposes and related activities (TD 9631) 38, 205
Exemption for religious employers from the requirement to pro-
vide coverage for contraceptive services (TD 9624) 31, 86
Health insurance providers fee regulations (TD 9646) 50, 630
Indoor tanning services; excise taxes (TD 9621) 28, 49
Information reporting by applicable large employers on health
insurance coverage (REG-136630-12) 40, 303
Information reporting of mortgage insurance premiums (TD
9642) 51, 747
Notice for the health insurance providers fee (Notice 76) 51, 769
Regulations:
26 CFR 1.150-1 amended; 1.150-1T removed; 1.171-1 amended;
1.171-1T removed; 1.197-2 amended; 1.197-2T removed;
1.249-1 amended; 1.249-1T removed; 1.475(a)-4 amended;
1.475(a)-4T removed; 1.860G-2 amended; 1.860G-2T re-
moved; 1.1001-3 amended; 1.1001-3T removed; 48.4101-1
amended; 48.4101-1T removed (removal of regulatory refer-
ences to credit ratings pursuant to section 939A of the Dodd-
Frank Act (TD 9637) 44, 427
26 CFR 40.0-1 amended; 40.6302(c)-1 amended (indoor
tanning services) (TD 9621) 28, 49
26 CFR 54.9815-2713 added (certain preventive services
under the ACA) (TD 9624) 31, 86
26 CFR 54.9815-2713A added (certain preventive services
under the ACA) (TD 9624) 31, 86
26 CFR Part 57 added (health insurance providers fee regu-
lations) (TD 9646) 50, 630
26 CFR 1.6050H-3 added; 1.6050H-3T removed (information re-
porting of mortgage insurance premiums) (TD 9642) 51, 747
26 CFR 301.6103 amended (disclosure of return information)
(TD 9628) 36, 169
Removal of regulatory references to credit ratings pursuant to
section 939A of the Dodd-Frank Act (TD 9637) 44, 427
Transition relief for 2014 under sections 6055, 6056, and 4980H
(information reporting and employer shared responsibility pro-
visions) (Notice 45) 31, 116
Wellness regulations related to rewards, plan design, and alter-
natives to avoid prohibited discrimination (TD 9620) 27, 1
# EXEMPT ORGANIZATIONS
Guidance for tax-exempt social welfare organizations on candidate-
related political activities (REG-134417-13) 52, 856
Proposed Regulations:
26 CFR 1.501(c)(4)-1 amended (guidance for tax-exempt
social welfare organizations on candidate-related political
activities (REG-134417-13) 52, 856
53 CFR 6011-1 amended; 53.6011-1T added; 53.6071-1 amended;
53.6071-1T added (requirement of a section 4959 excise tax
return and time for filing the return) (REG-115300-13) 37, 197
# EXEMPT ORGANIZATIONS-Cont.
Requirement of a section 4959 excise tax return and time for
filing the return (REG-115300-13) 37, 197; (TD 9629) 37,
188
Revocations (Ann 42) 44, 464; (Ann 48) 49, 620
# GIFT TAX
Disclosure of return information (TD 9628) 36, 169
Tax conventions, competent authority procedures (Notice 78) 50,
633
Update to Revenue Ruling 58-66 (RR 17) 38, 201
# INCOME TAX
Action on Decision (AOD):
Media Space v. Commissioner 32
Wilson v. Commissioner 32
Advance payments, taxable year of inclusion (RP 29) 33, 141
Advance pricing agreements, section 482 - allocation of income
and deductions among taxpayers (Notice 79) 50, 653
Application of market reforms to certain healthcare arrangements
and guidance on EAPs and section 125(f)(3) (Notice 54) 40,
287
Application of section 108(i) to partnerships and S corporations
(TD 9623) 30, 73
Average area purchase price safe-harbor guidance for 2013 (RP 28)
27, 28
Capitalization of amounts paid to acquire, produce, or improve
tangible property (TD 9636) 43, 331
Certain transfers of property to Regulated Investment Companies
(RICs) and Real Estate Investment Trusts (REITs) (TD 9626)
34, 149
Clarification regarding 2013-2014 non-calendar year salary re-
duction elections under section 125 cafeteria plans (Notice 71)
47, 532
Consumer Price Index (CPI) adjustments, certain loans under
section 1274A, 2014 (RR 23) 48, 590
Cost of living adjustments for inflation for 2014 (RP 35) 47, 537
Credit for employee health insurance expenses of small employ-
ers (REG-113792-13) 38, 211
Croatian per se entity (Notice 44) 29, 62
Debt that is a position in personal property that is part of a
straddle (REG-111753-12) 40, 302; (TD 9635) 40, 273
Deduction for section 179 expense, qualified real property
(Notice 59) 40, 297
Deferred discharge of indebtedness income of corporations
(TD 9622) 30, 64
Deferred original issue discount deductions (TD 9622) 30, 64
Determining the amount of taxes paid for purposes of the foreign
tax credit (TD 9634) 40, 272
Disallowance of deductions, exception for reimbursed expenses
(TD 9625) 34, 147
Disciplinary actions involving attorneys, certified public accoun-
tants, enrolled agents, and enrolled actuaries (Ann 36) 33, 142
Disclosure of return information (TD 9628) 36, 169
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# INCOME TAX-Cont.
Dispositions of property subject to depreciation under section
168 (REG-110732-13) 43, 404
Dividend equivalents from sources within the United States
(REG-120282-10) 52, 837; (TD 9648) 52, 798
Energy investment tax credit (Notice 60) 44, 431
Energy production tax credit (Notice 60) 44, 431
FFI agreement for participating FFI and reporting Model 2 FFI
(Notice 69) 46, 503
Gift cards (RP 29) 33, 141
Gross income (RR 27) 51, 676
Guidance for seeking equitable relief under section 66(c) or
section 6015(f) (RP 34) 43, 397
Guidance regarding deferred discharge of indebtedness income
of corporations and deferred original issue discount deduc-
tions; correcting TD 9622 (Ann 39) 35, 167
Information reporting by foreign financial institutions and with-
holding on certain payments to foreign financial institutions
and other foreign entities; correcting TD 9610 (Ann 41) 40,
322
Installment agreements and offer in compromise user fees
(REG-144990-12) 39, 264; (TD 9647) 52, 816
Insurance, effectively connected income (RP 33) 38, 209
Interest:
Investment:
Federal short-term, mid-term, and long-term rates for:
July 2013 (RR 15) 28, 47
August 2013 (RR 13) 32, 124
September 2013 (RR 18) 37, 186
October 2013 (RR 21) 43, 394
November 2013 (RR 22) 46, 496
December 2013 (RR 26) 50, 628
Involuntary conversions, livestock sold of account of drought, ex-
tension of replacement period, list of affected counties (Notice 62)
45, 466
Letter rulings that address issues presented in transactions described
in sections 332, 351, 355, 368, and 1036 (RP 32) 28, 55
Limitations on duplication of net built-in losses (TD 9633) 39,
227
Limitations on importation of net built-in losses (REG-161948-
05) 44, 449
Low-income housing tax credit (Notice 47) 31, 120; (RP 31) 38,
208; (Notice 63) 44, 436; (Notice 64) 44, 438
Mixed straddles; straddle-by-straddle identification under section
1092(b)(2)(A)(i)(I) (REG-112815-12) 35, 162; Correction
(Ann 45) 47, 546; (TD 9627) 35, 156; Correction (Ann 44) 47,
545
Modification of certain derivative contracts (TD 9639) 48, 588
Modification of "use-or-lose" rule for health flexible spending
arrangements (health FSAs) (Notice 71) 47, 532
Net investment income tax (REG-130843-13) 51, 771; (TD
9644) 51, 676
Noncompensatory partnership options; correcting TD 9612 (Ann 35)
27, 46
Nuclear energy, tax credits (Notice 68) 46, 501
Organizational expenses of a partnership following a section
708(b)(1)(B) termination (REG-126285-12) 52, 853
# INCOME TAX-Cont.
Per capita payments from proceeds of settlements of Indian tribal
trust cases (Notice 55) 38, 207
Premium tax credit (REG-140789-12) 32, 136
Premium tax credit, minimum essential coverage (Notice 41) 29, 60
Proposed Regulations:
26 CFR 1.36B-0 amended (premium tax credit) (REG-
140789-12) 32, 136
26 CFR 1.36B-5 amended (premium tax credit) (REG-
140789-12) 32, 136
26 CFR 1.45R-1 through 1.45R-5 added (tax credit for em-
ployee health insurance expenses of small employers)
(REG-113792-13) 38, 211
26 CFR 1.148-0 revised; 1.148-1 revised; 1.148-2 revised;
1.148-4 revised; 1.148-5 revised; 1.148-6 revised;
1.148-10 revised; 1.148-11 revised; 1.148-15 revised;
1.150-1 revised (arbitrage restrictions on tax-exempt
bonds) (REG-148659-07) 45, 473
26 CFR 1.148-0 revised; 1.148-3 revised; 1.148-11 revised
(arbitrage rebate overpayment) (REG-148812-11) 45, 484
26 CFR 1.168(i)-0; 1.168(i)-1, 1.168(i)-7 amended (dispo-
sitions of property subject to depreciation under section
168) (REG-110732-13) 43, 404
26 CFR 1.195-2 (organizational expenses of a partnership
following a section 708(b)(1)(B) termination) (REG-
126285-12) 52, 853
26 CFR 1.332-6 amended; 1.332-7 amended; 1.334-1
amended; 1.337-1 added; 1.351-3 amended; 1.358-6
amended; 1.362-3 added; 1.362-4 amended; 1.368-3
amended (limitations on the importation of net built-in
losses) (REG-161948-05) 44, 449
26 CFR 1.708-1(b)(6) (organizational expenses of a partner-
ship following a section 708(b)(1)(B) termination) (REG-
126285-12) 52, 853
26 CFR 1.709-1(b)(3)(ii); 1.709-1(b)(5) (organizational ex-
penses of a partnership following a section 708(b)(1)(B)
termination) (REG-126285-12) 52, 853
26 CFR 1.851-5 amended (Regulated Investment Company con-
trolled group regulation examples) (REG-114122-12) 35, 163
26 CFR 1,871-14 amended; 1.871-15 amended; 26 CFR
1.1441-1 amended; 1.1441-2 amended; 1.1441-3 amend-
ed; 1.1441-7 amended (REG-120282-10) 52, 837
26 CFR 1.1092-1 revised (debt that is a position in personal
property that is part of a straddle) (REG-111753-12) 40, 302
26 CFR 1.1092(b)-6 added (mixed straddles; straddle-by-
straddle identification under section 1092(b)(2)(A)(i)(I))
(REG-112815-12) 35, 162
26 CFR 1.1411-3(d)(2)(ii) and (d)(3) added; 1.1411-
4(d)(4)(iii), (e)(3), and (g)(10)-(13) added; 1.411-7 added
(net investment income tax) (REG-130843-13) 51, 771
26 CFR 1.6015-5 amended (relief from joint and several
liability) (REG-132251-11) 37, 191
26 CFR 300.1 amended; 26 CFR 300.2 amended; 26 CFR
300.3 amended (installment agreements and offer in com-
promise user fees) (REG-144990-12) 39, 264
Qualified exempt facility bonds (Notice 47) 31, 120; (Notice 63)
44, 436
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## INCOME TAX-Cont.
Qualified residential rental projects (Notice 47) 31, 120; (Notice
63) 44, 436
Qualifying advanced coal project program, section 48A (Ann 43)
46, 524
Regulated Investment Company controlled group regulation ex-
amples (REG-114122-12) 35, 163
Regulations:
26 CFR 1.108(i)-0, 26 CFR 1.108(i)-1, and 26 CFR
1.108(i)-3 added (deferred discharge of indebtedness in-
come of corporations and deferred original issue discount
deductions) (TD 9622) 30, 64
26 CFR 1.108(i)-2 added; 1.108(i)-2T removed (application
of section 108(i) to partnerships and S corporations) (TD
9623) 30, 73
26 CFR 1.150-1 amended; 1.150-1T removed; 1.171-1 amended;
1.171-1T removed; 1.197-2 amended; 1.197-2T removed;
1.249-1 amended; 1.249-1T removed; 1.475(a)-4 amended;
1.475(a)-4T removed; 1.860G-2 amended; 1.860G-2T re-
moved; 1.1001-3 amended; 1.1001-3T removed; 48.4101-1
amended; 48.4101-1T removed (removal of regulatory refer-
ences to credit ratings pursuant to section 939A of the Dodd-
Frank Act) (TD 9637) 44, 427
26 CFR 1.168(i)-7, and 1.263(a)-6 added; 1.162-11, 1.165-2,
1.167(a)-7, 1.167(a)-8, 1.263(a)-0, 1.263A-0, 1.263A-1,
1.1016-3, and 602.101 amended; 1.162-3T, 1.162-4T, 1.162-
11T, 1.165-2T, 1.167(a)-4T, 1.167(a)-7T, 1.167(a)-8T,
1.168(i)-7T, 1.263(a)-0T, 1.263(a)-1T, 1.263(a)-2T, 1.263(a)-
3T, 1.263(a)-6T, 1.263A-1T, and 1.1016-3 removed; 1.162-3,
1.162-4, 1.167(a)-4, 1.263(a)-1, 1.263(a)-2, and 1.263(a)-3
revised (guidance regarding deduction and capitalization of ex-
penditures related to tangible property) (TD 9636) 43, 331
26 CFR 1.358-2 amended; 1.362-4 amended; 1.705-1 amend-
ed; 1.1367-1 amended; 602.101 amended (limitations on
duplication of net built-in losses) (TD 9633) 39, 227
26 CFR 1.382-3 amended (segregation rules for public groups
of shareholders) (TD 9638) 46, 487
26 CFR 1.469-11(b)(3)(iv) (net investment income tax) (TD
9644) 51, 676
26 CFR 1.482-7 amended; 1.482-7T removed (use of differ-
ential income stream as an application of the income
method) (TD 9630) 38, 199
26 CFR 1.863-7 amended; 1.863-7T removed; 26 CFR 1.871-15
added; 1.871-15T removed; 26 CFR 1.871-16T removed; 26
CFR 1.881-2 amended; 1.881-2T removed; 26 CFR 1.892-3
amended; 26 CFR 1.894-1 amended; 26 CFR 1.1441-2 amend-
ed; 1.1441-2T removed; 26 CFR 1.1441-3 amended;
1.1441-3T removed; 26 CFR 1.1441-4 amended; 1.1441-4T
removed; 26 CFR 1.1441-6 amended; 26 CFR 1.1441-7
amended; 1.1441-7T removed; 26 CFR 1.1461-1 amended;
1.1461-1T removed. (TD 9648) 52, 798
26 CFR 1.1001-4 added; 1.1001-4T removed (modifications
of certain derivative contracts) (TD 9639) 48, 588
26 CFR 1.901-2 amended; 1.901-2T removed (determining
the amount of taxes paid for purposes of the foreign tax
credit) (TD 9634) 40, 272
## INCOME TAX-Cont.
26 CFR 1.1092-1 revised (debt that is a position in personal
property that is part of a straddle) (TD 9635) 40, 273
26 CFR 1.1092(b)-6T added (mixed straddles; straddle-by-
straddle identification under section 1092(b)(2)(A)(i)(I))
(TD 9627) 35, 156
26 CFR 1.1411-0 through 1.1411-10 (net investment income
tax) (TD 9644) 51, 676
26 CFR 1.1471-1 (scope of chapter 4 and definitions) (Ann
41) 40, 322
26 CFR 1.5000A-0, 1.5000A-1, 1.5000A-2, 1.5000A-3,
1.5000A-4 added; 26 CFR 602.101 amended (shared re-
sponsibility payment for not maintaining minimum essen-
tial coverage) (TD 9632) 39, 241
26 CFR 54.9812-1 added (Mental Health Parity and Addic-
tion Equity Act of 2008) (TD 9640) 48, 548
26 CFR 300.1 amended; 26 CFR 300.2 amended; 26 CFR
300.3 amended (TD 9647) (user fees for processing install-
ment agreements and offers of compromise) 52, 816
26 CFR 301.6103 amended (disclosure of return information)
(TD 9628) 36, 169
Relief from joint and several liability (REG-132251-11) 37, 191
Removal of regulatory references to credit ratings pursuant to
section 939A of the Dodd-Frank Act (TD 9637) 44, 427
Research expenditures (REG-124148-05) 44, 444
S corporation elections (RP 30) 36, 173
Salvage discount factors for 2013 (RP 37) 49, 612
Section 5000A transition relief for employees eligible to enroll in
non-calendar year health plans (Notice 42) 29, 61
Segregation rules for public groups of shareholders (TD 9638)
46, 487
Shared responsibility payment for not maintaining minimum
essential coverage (TD 9632) 39, 241
Standard Industry Fare Level (SIFL) (RR 20) 40, 272
Standard mileage rates-2014 (Notice 80) 52, 821
Tax conventions, competent authority procedures (Notice 78) 50,
633
Tax credits, vehicles (Notice 67) 45, 470
Tax credits for sections 25C and 25D (Notice 70) 47, 528
Tax-exempt bonds, arbitrage, hedge, identification requirement
(REG-148659-07) 45, 473
Tax-exempt bonds, arbitrage, rebate, overpayment (REG-148812-
11) 45, 484
Timeline for implementation of the requirements under sections
1471-1474, commonly known as FATCA (Notice 43) 31, 113
Transitional penalty relief and schedule for notices of incorrect
name/TIN combinations for information returns relating to
payment card and third party network transactions (Notice 56)
39, 262
2013 base period T-bill rate (RR 24) 49, 594
2013 marginal production rates (Notice 53) 36, 173
2013 section 43 inflation adjustment (Notice 50) 32, 134
2013-2014 special per diem rates (Notice 65) 44, 440
Underpayments and overpayments, quarter beginning October 1,
2013 (RR 16) 40, 275
Underpayments and overpayments, quarter beginning January 1,
2014 (RR 25) 52, 802
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# INCOME TAX-Cont.
Unpaid losses discount factors for 2013 (RP 36) 49, 602
Update to Revenue Ruling 58-66 (RR 17) 38, 201
Use of differential income stream as an application of the income
method and as a consideration in assessing the best method
(TD 9630) 38, 199
Voluntary withholding for Alaska Native Corporations and
shareholders (Notice 77) 50, 632
Wash sales, money market fund shares (Notice 48) 31, 120
# SELF-EMPLOYMENT TAX
New addition to tax under 3101 added by the ACA (TD 9645)
51, 738
Update to Revenue Ruling 58-66 (RR 17) 38, 201
# TAX CONVENTION
U.S .- Belgium agreement regarding OECD report on the attribu-
tion of profits to permanent establishments (Ann 38) 36, 185
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Official Business
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# INTERNAL REVENUE BULLETIN
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or by calling 1-877-233-6767. The first release is available in mid-December and the final release is available in late January.
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