Internal Revenue Bulletin 2018-49 (PDF rendition): IRS Notices

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# INTERNAL REVENUE BULLETIN

A

IRS

## HIGHLIGHTS OF THIS ISSUE

These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.

### Administrative

#### REV. PROC. 2018-57, page 827.

This procedure provides the 2019 cost-of-living adjustments to
certain items due to inflation as required by various provisions
of the Code and Service guidance.

### Employee Plans

#### NOTICE 2018-88, page 817.

This notice is intended to initiate and inform the process of
developing guidance under sections 4980H and 105(h) that
would address issues raised in the NPRM (REG-135724-17)
that was issued on October 29, 2018 (83 FR 54420), and
requests comments on potential approaches developed by the
Treasury Department and the IRS, so employers understand
how to structure HRAs integrated with individual health insur-
ance coverage to avoid assessable payments (section 4980H)
and potential loss of the exclusion from income for employer-
provided health benefits (section 105(h)).

#### REG-107813-18, page 841.

These proposed regulations would amend the current regula-
tions under § 401(k) relating to hardship distributions. Section
41113 of the Bipartisan Budget Act of 2018 (BBA) directs the
Secretary to remove the requirement in the current regulations
that an employee's plan contributions be suspended for at least
6 months following a hardship distribution from the plan. The
proposed amendments would conform the regulations with
section 41113 and would update the regulations to reflect BBA
§ 41114 and certain other statutory changes to 401(k) plans.

Bulletin No. 2018-49
December 3, 2018

### Estate Tax

#### REV. PROC. 2018-57, page 827.

This procedure provides the 2019 cost-of-living adjustments to
certain items due to inflation as required by various provisions
of the Code and Service guidance.

## Excise Tax

### NOTICE 2018-88, page 817.

This notice is intended to initiate and inform the process of
developing guidance under sections 4980H and 105(h) that
would address issues raised in the NPRM (REG-135724-17)
that was issued on October 29, 2018 (83 FR 54420), and
requests comments on potential approaches developed by the
Treasury Department and the IRS, so employers understand
how to structure HRAs integrated with individual health insur-
ance coverage to avoid assessable payments (section 4980H)
and potential loss of the exclusion from income for employer-
provided health benefits (section 105(h).

### REG-107163-18, page 839.

These proposed regulations prescribe filing Form 4720 to
report excise tax under sections 4960, 4966, 4967, and 4968
by the 15th day of the fifth month after the end of the taxable
year of the person or governmental entity reporting the tax,
and update the abatement rules under section 4963 for sec-
tion 4966 and 4967 taxes, consistent with a statutory change.

### REV. PROC. 2018-57, page 827.

This procedure provides the 2019 cost-of-living adjustments to
certain items due to inflation as required by various provisions
of the Code and Service guidance.

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## Exempt Organizations

### REG-107163-18, page 839.

These proposed regulations prescribe filing Form 4720 to
report excise tax under sections 4960, 4966, 4967, and 4968
by the 15th day of the fifth month after the end of the taxable
year of the person or governmental entity reporting the tax,
and update the abatement rules under section 4963 for sec-
tion 4966 and 4967 taxes, consistent with a statutory change.

### REV. PROC. 2018-57, page 827.

This procedure provides the 2019 cost-of-living adjustments to
certain items due to inflation as required by various provisions
of the Code and Service guidance.

### REV. RUL. 2018-30, page 815.

Federal rates; adjusted federal rates; adjusted federal long-
term rate, the long-term exempt rate, and the blended annual
rate. For purposes of sections 382, 1274, 1288, 7872 and
other sections of the Code, tables set forth the rates for
December 2018.

## Gift Tax

### REV. PROC. 2018-57, page 827.

This procedure provides the 2019 cost-of-living adjustments to
certain items due to inflation as required by various provisions
of the Code and Service guidance.

## Income Tax

### NOTICE 2018-88, page 817.

This notice is intended to initiate and inform the process of
developing guidance under sections 4980H and 105(h) that
would address issues raised in the NPRM (REG-135724-17)
that was issued on October 29, 2018 (83 FR 54420), and
requests comments on potential approaches developed by the
Treasury Department and the IRS, so employers understand
how to structure HRAs integrated with individual health insur-
ance coverage to avoid assessable payments (section 4980H)
and potential loss of the exclusion from income for employer-
provided health benefits (section 105(h)).

### NOTICE 2018-89, page 826.

This notice provides that the IRS will not assert that cash
payments an employer makes to § 170(c) organizations (in
exchange for vacation, sick or personal leave that its employ-
ees elect to forgo) constitute gross income or wages of the
employees under certain circumstances.

### NOTICE 2018-90, page 826.

The notice provides that transition relief in Rev. Rul. 2018-17
(Withholding and Reporting With Respect to Payments from IRAs
to State Unclaimed Property Funds) is extended so that a person
will not be treated as failing to comply with the withholding and
reporting requirements described in Rev. Rul. 2018-17 with
respect to payments made before the earlier of January 1, 2020,
or the date it becomes reasonably practicable for the person to
comply with those requirements.

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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.

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## Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

### Section 1274 .- Determina- tion of Issue Price in the Case of Certain Debt Instruments Issued for Property

(Also Sections 42, 280G, 382, 467, 468, 482, 483,
1288, 7520, 7872.)

#### Rev. Rul. 2018-30

This revenue ruling provides various
prescribed rates for federal income tax

purposes for December 2018 (the current
month). Table 1 contains the short-term,
mid-term, and long-term applicable fed-
eral rates (AFR) for the current month for
purposes of section 1274(d) of the Internal
Revenue Code. Table 2 contains the short-
term, mid-term, and long-term adjusted
applicable federal rates (adjusted AFR)
for the current month for purposes of sec-
tion 1288(b). Table 3 sets forth the ad-
justed federal long-term rate and the long-
term tax-exempt rate described in section
382(f). Table 4 contains the appropriate

percentages for determining the low-
income housing credit described in sec-
tion 42(b)(1) for buildings placed in ser-
vice during the current month. However,
under section 42(b)(2), the applicable per-
centage for non-federally subsidized new
buildings placed in service after July 30,
2008, shall not be less than 9%. Finally,
Table 5 contains the federal rate for de-
termining the present value of an annuity,
an interest for life or for a term of years, or
a remainder or a reversionary interest for
purposes of section 7520.

REV. RUL. 2018-30 TABLE 1 Applicable Federal Rates (AFR) for December 2018 Period for Compounding

Annual

Semiannual Short-term

Quarterly

Monthly

AFR

2.76%

2.74%

2.73%

2.72%

110% AFR

3.03%

3.01%

3.00%

2.99%

120% AFR

3.32%

3.29%

3.28%

3.27%

130% AFR

3.59%

3.56%

3.54%

3.53%

Mid-term

AFR

3.07%

3.05%

3.04%

3.03%

110% AFR

3.39%

3.36%

3.35%

3.34%

120% AFR

3.69%

3.66%

3.64%

3.63%

130% AFR

4.01%

3.97%

3.95%

3.94%

150% AFR

4.63%

4.58%

4.55%

4.54%

175% AFR

5.41%

5.34%

5.30%

5.28%

AFR

Long-term

3.31%

3.28%

3.27%

3.26%

110% AFR

3.64%

3.61%

3.59%

3.58%

120% AFR

3.98%

3.94%

3.92%

3.91%

130% AFR

4.31%

4.26%

4.24%

4.22%

REV. RUL. 2018-30 TABLE 2 Adjusted AFR for December 2018 Period for Compounding Annual Semiannual Quarterly Monthly

Short-term adjusted AFR

2.09%

2.08%

2.07%

2.07%

Mid-term adjusted AFR

2.33%

2.32%

2.31%

2.31%

Long-term adjusted AFR

2.51%

2.49%

2.48%

2.48%

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# REV. RUL. 2018-30 TABLE 3 Rates Under Section 382 for December 2018

## Adjusted federal long-term rate for the current month

2.51%

Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal
long-term rates for the current month and the prior two months.)

2.51%

# REV. RUL. 2018-30 TABLE 4 Appropriate Percentages Under Section 42(b)(1) for December 2018

Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed
in service after July 30, 2008, shall not be less than 9%.

Appropriate percentage for the 70% present value low-income housing credit
7.74%

Appropriate percentage for the 30% present value low-income housing credit

3.32%

# REV. RUL. 2018-30 TABLE 5

Rate Under Section 7520 for December 2018
Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,
or a remainder or reversionary interest

3.6%

## Section 42 .- Low-Income Housing Credit

The applicable federal short-term, mid-term, and
long-term rates are set forth for the month of De-
cember 2018. See Rev. Rul. 2018-30, page 815.

## Section 280G .- Golden Parachute Payments

The applicable federal short-term, mid-term, and
long-term rates are set forth for the month of De-
cember 2018. See Rev. Rul. 2018-30, page 815.

## Section 382 .- Limitation on Net Operating Loss Carryforwards and Certain Built-In Losses Following Ownership Change

The adjusted applicable federal long-term rate is
set forth for the month of December 2018. See Rev.
Rul. 2018-30 , page 815.

# Section 467 .- Certain Payments for the Use of Property or Services

The applicable federal short-term, mid-term, and
long-term rates are set forth for the month of De-
cember 2018. See Rev. Rul. 2018-30, page 815.

# Section 468 .- Special Rules for Mining and Solid Waste Reclamation and Closing Costs

The applicable federal short-term, mid-term, and
long-term rates are set forth for the month of De-
cember 2018. See Rev. Rul. 2018-30, page 815.

## Section 482 .- Allocation of Income and Deductions Among Taxpayers

The applicable federal short-term, mid-term, and
long-term rates are set forth for the month of De-
cember 2018. See Rev. Rul. 2018-30, page 815.

# Section 483 .- Interest on Certain Deferred Payments

The applicable federal short-term, mid-term, and
long-term rates are set forth for the month of De-
cember 2018. See Rev. Rul. 2018-30, page 815.

# Section 1288 .- Treatment of Original Issue Discount on Tax-Exempt Obligations

The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month of
December 2018. See Rev. Rul. 2018-30, page 815.

# Section 7520 .- Valuation Tables

The applicable federal short-term, mid-term, and
long-term rates are set forth for the month of De-
cember 2018. See Rev. Rul. 2018-30, page 815.

# Section 7872 .- Treatment of Loans With Below- Market Interest Rates

The applicable federal short-term, mid-term, and
long-term rates are set forth for the month of De-
cember 2018. See Rev. Rul. 2018-30, page 815.

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# Part III. Administrative, Procedural, and Miscellaneous

Section 4980H-Shared
Responsibility for
Employers Regarding
Health Coverage

Section 105-Amounts
Received Under Accident
and Health Plans

Notice 2018-88

## I. PURPOSE AND OVERVIEW

On October 23, 2018, the Department
of the Treasury (Treasury Department)
and the Internal Revenue Service (IRS),
the Department of Labor (DOL), and the
Department of Health and Human Ser-
vices (HHS) (collectively, the Depart-
ments) issued proposed regulations1 un-
der section 2711 of the Public Health
Service Act (PHS Act)2 and the health
nondiscrimination provisions of the
Health Insurance Portability and Ac-
countability Act of 1996 (HIPAA), Pub-
lic Law 104-191, and the Patient Pro-
tection and Affordable Care Act, Public
Law 111-148, as amended by the Health
Care Education Reconciliation Act of
2010, Public Law 111-152, (collec-
tively PPACA) (HIPAA/PPACA non-
discrimination provisions).3 The pro-
posed regulations are intended to
expand the usability of health reim-
bursement arrangements and other
account-based group health plans (col-
lectively referred to in this notice as

HRAs).4 In general, the proposed regu-
lations would expand the usability of
HRAs by eliminating the current prohi-
bition on integrating HRAs with indi-
vidual health insurance coverage (as
defined in Treas. Reg. § 54.9801-2)5,
thereby permitting employers to offer
HRAs to employees enrolled in individ-
ual health insurance coverage. There-
fore, under the proposed regulations em-
ployees would be permitted to use
amounts in an HRA integrated with in-
dividual health insurance coverage (re-
ferred to in this notice as an individual
coverage HRA) to pay expenses for
medical care (as defined in section
213(d), including premiums for individ-
ual health insurance coverage), subject
to certain requirements (the proposed
integration regulations). In addition, the
Treasury Department and the IRS issued
proposed regulations under section 36B
regarding premium tax credit (PTC) el-
igibility for individuals offered cover-
age under an individual coverage HRA
(the proposed PTC regulations).6

The proposed integration regulations
and the proposed PTC regulations raise
issues under the Code, in particular con-
cerning the application of section 4980H
(the employer shared responsibility pro-
visions) and section 105(h) (addressing
discriminatory self-insured group health
plans). This notice is intended to initiate
and inform the process of developing
guidance that addresses these issues,
and requests comments on potential ap-

proaches developed by the Treasury De-
partment and the IRS.

## II. BACKGROUND

### A. The Proposed Integration Regulations

On October 12, 2017, President Trump
issued Executive Order 13813,7 "Promot-
ing Healthcare Choice and Competition
Across the United States," stating, in part,
that the "Administration will prioritize
three areas for improvement in the near
term: association health plans (AHPs),
short-term, limited-duration insurance,
and health reimbursement arrangements
(HRAs)." With regard to HRAs, the Ex-
ecutive Order directs the Secretaries of the
Treasury, Labor, and Health and Human
Services to "consider proposing regula-
tions or revising guidance, to the extent
permitted by law and supported by sound
policy, to increase the usability of HRAs,
to expand employers' ability to offer
HRAs to their employees, and to allow
HRAs to be used in conjunction with non-
group coverage." The Executive Order
further provides that expanding "the flex-
ibility and use of HRAs would provide
many Americans, including employees
who work at small businesses, with more
options for financing their healthcare."

In response to the Executive Order, on
October 23, 2018, the Departments issued
the proposed integration regulations8 un-
der PHS Act section 2711 and the
HIPAA/PPACA nondiscrimination provi-
sions. The proposed integration regula-

1 See 83 FR 54420 (Oct. 29, 2018).

2The proposed regulations under section 2711 of the PHS Act also apply for purposes of section 2713 of the PHS Act.

3See Internal Revenue Code (Code) sections 9802 and 9815, Employee Retirement Income Security Act (ERISA) sections 702 and 715 and PHS Act section 2705. Although section 9802
of the Code and section 702 of ERISA were not amended by PPACA, the requirements of section 2705 of the PHS Act were also incorporated by reference into section 9815 of the Code
and section 715 of ERISA. PPACA section 1201 moved the PHS Act nondiscrimination provisions from section 2702 to section 2705, with some modifications.

4See Prop. Treas. Reg. § 54.9815-2711(d)(6)(i) for the proposed definition of an account-based group health plan. This term does not include qualified small employer health reimbursement
arrangements (QSEHRAs) (as defined under section 9831(d)), medical savings accounts (see section 220), or health savings accounts (see section 223). In addition, for purposes of the
proposed rules, the proposed definition would not include an employer arrangement that reimburses the cost of individual health insurance coverage in a cafeteria plan under section 125.

5Under § 54.9801-2 the term "individual health insurance coverage" means health insurance coverage offered to individuals in the individual market, but does not include short-term,
limited-duration insurance. Individual health insurance coverage can include dependent coverage and therefore can be self-only coverage or other-than-self-only coverage.

6See 83 FR 54420. In addition to the proposed integration regulations and the proposed PTC regulations: (1) the Departments proposed regulations setting forth conditions under which certain
HRAs would be recognized as limited excepted benefits; (2) HHS proposed regulations that would provide a special enrollment period in the individual market for individuals who gain
access to and enroll in an individual coverage HRA or who are provided a QSEHRA; and (3) DOL proposed a clarification to provide plan sponsors with assurance that the individual health
insurance coverage the premiums of which are reimbursed by an HRA or a QSEHRA does not become part of an ERISA plan, if certain conditions are met (and the Departments provided
a related clarification of the definition of the term "group health insurance coverage"). All of these regulations (the proposed regulations), including the proposed integration regulations and
the proposed PTC regulations, are set forth in one notice of proposed rulemaking, at 83 FR 54420.

7 See 82 FR 48385 (Oct. 17, 2017).

8See 83 FR 54420.

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tions, if finalized in substantially the same
form as proposed,9 would expand the po-
tential use of HRAs by eliminating the
prohibition under the current regulations
on an HRA being integrated with individ-
ual health insurance coverage10 so long as
the individual coverage HRA complies
with certain requirements.11 As proposed,
those requirements generally include the
following terms and conditions:

· A plan sponsor that offers an individ-
ual coverage HRA to a class of em-
ployees12 must offer the individual
coverage HRA on the same terms (that
is, both in the same amount and oth-
erwise on the same terms and condi-
tions) to all employees in the class
(subject to certain exceptions dis-
cussed later in this notice);

· The participant, and any of his or her
dependent(s) whose medical care ex-
penses are reimbursable under the in-
dividual coverage HRA, must be en-
rolled in individual health insurance
coverage that is subject to and com-
plies with PHS Act sections 2711 and
2713, and the regulations thereunder,
for each month that the individual(s)
are covered by the individual coverage
HRA;13

· A plan sponsor that offers any class of
employees an individual coverage
HRA may not also offer a traditional
group health plan to the same class of
employees;14

· A participant must be permitted to opt
out of and waive future reimburse-
ments from the individual coverage

HRA at least annually, and, upon the
participant's termination of employ-
ment, either the remaining amounts in
the individual coverage HRA are for-
feited or the participant is permitted to
permanently opt out of and waive fu-
ture reimbursements from the individ-
ual coverage HRA;

· The individual coverage HRA must
implement reasonable procedures
to ensure that individuals whose
medical care expenses are reim-
bursable by the individual cover-
age HRA are, or will be, enrolled in
individual health insurance cover-
age for the plan year;15 and

· The individual coverage HRA must
provide a written notice to each partic-
ipant, in general, at least 90 days be-
fore the beginning of each plan year,
that explains the consequence of ac-
cepting the individual coverage HRA
for PTC eligibility and provides infor-
mation that the plan sponsor has and
that the participant will need to deter-
mine the effect of being offered the
individual coverage HRA on PTC el-
igibility.16

The proposed integration regulations
are proposed to apply for plan years be-
ginning on or after January 1, 2020.

### B. Section 36B and the Proposed PTC Regulations

Section 36B allows the PTC to certain
taxpayers to help with the cost of individ-
ual health insurance coverage enrolled in
through an Exchange.17 Under section

36B(a) and (b)(1) and § 1.36B-3(d), a
taxpayer's PTC is the sum of the premium
assistance amounts for all coverage
months during the taxable year for indi-
viduals in the taxpayer's family.

An individual is eligible for the PTC
for a month if the individual meets various
requirements for the month (a coverage
month). Among other requirements, under
section 36B(c)(2), a month is not a cov-
erage month for an individual if either: (1)
the individual is eligible for coverage un-
der an eligible employer-sponsored plan
and the coverage is affordable and pro-
vides minimum value (MV); or (2) the
individual enrolls in an eligible employer-
sponsored plan, even if the coverage is not
affordable or does not provide MV.18 See
section III.B of this notice for a descrip-
tion of when an eligible employer-
sponsored plan is affordable and provides
MV.

An eligible employer-sponsored plan
includes coverage under a self-insured
group health plan19 and is minimum es-
sential coverage unless it consists solely
of excepted benefits.2º An HRA is a self-
insured group health plan and, therefore,
is an eligible employer-sponsored plan.2
Accordingly, an individual is ineligible
for the PTC for a month if the individual
is covered by an HRA or is eligible for an
HRA that is affordable and provides MV
for the month.

The Treasury Department and the IRS
previously issued guidance that provides
that individuals covered by an HRA are

9This notice sets out potential approaches that could apply if the proposed regulations are finalized in substantially the same form as proposed; thus, the potential safe harbors and the examples
illustrating the safe harbors described in this notice use the framework from the proposed regulations. The proposed regulations are subject to notice and comment, and the Departments
will consider all comments in the development of any final regulations. To the extent the final regulations differ from the proposed regulations, the Treasury Department and the IRS will
consider necessary modifications to the potential approaches outlined in this notice.

10See § 54.9815-2711(d)(4).

11 See Prop. Treas. Reg. § 54.9802-4(c).

12See Prop. Treas. Reg. § 54.9802-4(d) for the definition of "class of employees" that applies under the proposed integration regulations and for purposes of this notice.

13For this purpose, the proposed integration regulations would consider all individual health insurance coverage (other than coverage that consists solely of excepted benefits) to be subject
to and comply with PHS Act sections 2711 and 2713. See Prop. Treas. Reg. § 54.9802-4(c)(1).

14See Prop. Treas. Reg. § 54.9802-4(c)(2) for the definition of traditional group health plan.

15This requirement would also include an ongoing substantiation obligation. See Prop. Treas. Reg. § 54.9802-4(c)(5).

16See Prop. Treas. Reg. § 54.9802-4(c)(6) for the rule as to when the notice would be required to be furnished to a participant who is not eligible to participate either at the beginning of
the plan year or at the time the notice is provided before the beginning of the plan year.

17Exchanges are entities established under sections 1311 or 1321 of PPACA through which qualified individuals and qualified employers can purchase health insurance coverage.

18See section 36B(c)(2)(C)(iii) and § 1.36B-2(c)(3)(vii)(A). See also §§ 1.36B-2(c)(3) and 1.36B-3(c).

19 See § 1.5000A-2(c).

20See section 5000A(f)(3) and § 1.5000A-2(g).

21 See Notice 2013-54, 2013-40 I.R.B. 287, Q&A 10.

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ineligible for the PTC.22 However, prior
to the proposed PTC regulations, the Trea-
sury Department and the IRS did not pro-
vide guidance as to the circumstances in
which an HRA is considered to be afford-
able or to provide MV.23

On October 23, 2018, the Treasury De-
partment and the IRS issued the proposed
PTC regulations, which propose rules for
the circumstances in which an individual
coverage HRA would be considered to be
affordable and to provide MV.24 The pro-
posed PTC regulations are discussed in
more detail in section III.B. of this notice.
The proposed PTC regulations are pro-
posed to apply for individuals' taxable
years beginning on or after January 1,
2020.

### C. Section 4980H

The employer shared responsibility
provisions under section 4980H only ap-
ply to an employer that is an applicable
large employer (ALE). In general, an em-
ployer is an ALE for a year if it had an
average of 50 or more full-time employ-
ees (including full-time equivalent em-
ployees) during the preceding calendar
year.25

There are two circumstances in which
an ALE may owe an employer shared
responsibility payment to the IRS. For any
month, an ALE may owe a payment under
either section 4980H(a) or 4980H(b), or
neither, but an ALE will not owe a pay-
ment under both section 4980H(a) and
4980H(b). An ALE will owe a payment
under section 4980H(a) for a month if it

fails to offer coverage under an eligible
employer-sponsored plan to at least 95
percent of its full-time employees (and their
dependents) and at least one full-time em-
ployee is allowed the PTC for purchasing
individual health insurance coverage from
an Exchange.26 An ALE will owe a pay-
ment under section 4980H(b) for a month if
it offers coverage under an eligible
employer-sponsored plan to at least 95 per-
cent of its full-time employees (and their
dependents) but at least one full-time em-
ployee is allowed the PTC for purchasing
individual health insurance coverage from
an Exchange, which may occur because the
ALE did not offer coverage to that particular
full-time employee or because the coverage
the employer offered was unaffordable or
did not provide MV.27

Whether an employee may claim the
PTC depends on the rules under section
36B, including the rules for whether an
offer of coverage is affordable and pro-
vides MV.28 However, the regulations un-
der section 4980H provide safe harbors
for determining whether an ALE is treated
as making an offer of coverage that
is affordable29 under section 4980H.30
These section 4980H affordability safe
harbors are described in more detail in
section III.B of this notice.

### D. Section 105(h)

In general, section 105(b) excludes
from gross income amounts received by
an employee through employer-provided
accident or health insurance if those
amounts are paid to reimburse medical

care expenses incurred by the employee
(for the employee, the employee's spouse,
or the employee's dependents, as well as
children of the employee who are not de-
pendents but have not attained age 27 by
the end of the taxable year) for personal
injuries and sickness.

Section 105(h) provides, however, that
excess reimbursements (as defined in sec-
tion 105(h)(7)) paid to a highly compen-
sated individual (as defined in section
105(h)(5) and § 1.105-11(d)) (HCI)31 un-
der a self-insured medical reimbursement
plan are includible in the gross income of
the HCI if either (a) the plan discriminates
in favor of HCIs as to eligibility to partic-
ipate in the plan, or (b) the benefits pro-
vided under the plan discriminate in favor
of HCIs.32 Section 105(h)(4) provides that
a self-insured medical reimbursement
plan does not satisfy the nondiscrimina-
tory benefits rule unless all benefits pro-
vided to HCIs are also provided to all
other participants.

The regulations under section 105(h)
provide that, in order to satisfy the non-
discriminatory benefits rule under section
105(h)(4), all benefits made available un-
der a self-insured medical reimbursement
plan to an HCI (and the HCI's depen-
dents) must also be made available to all
other participants (and their depen-
dents).33 In addition, the regulations pro-
vide that "any maximum limit attributable
to employer contributions must be uni-
form for all participants and for all depen-
dents of employees who are participants
and may not be modified by reason of a

22 Id.

23The Treasury Department and the IRS have provided guidance regarding when amounts newly made available under an HRA count toward the affordability or MV of another group health
plan offered by the same employer. See §§ 1.36B-2(c)(3)(v)(A)(5) and 1.36B-6(c)(4). See also Notice 2015-87, 2015-52 I.R.B. 889, Q&A 7. The proposed PTC regulations and the guidance
in this notice would not make substantive revisions to those rules.

24See 83 FR 54420.

25 See section 4980H(c)(2) and § 54.4980H-2. See also § 54.4980H-1(a) for definitions of the terms used in this background section and in section III of this notice.

26 See § 54.4980H-4. Also note that if an ALE offers coverage to all but five of its full-time employees (and their dependents), and five is greater than five percent of the employer's full-time
employees, the employer will not owe a payment under section 4980H(a).

27 See § 54.4980H-5.

28 See section 4980H(c)(3). See also §§ 54.4980H-1(a)(28) and 54.4980H-5(e)(1).

29 See § 54.4980H-5(e)(2).

30Whether or not an employee has been offered affordable coverage for purposes of eligibility for the PTC is determined under section 36B(c)(2)(C)(i) and regulations thereunder (as opposed
to the section 4980H safe harbors).

31Generally, HCIs include the highest paid 25 percent of all employees (including the five highest paid officers, but not including employees excludible under § 1.105-11(c)(2)(iii) who are
not participants in any self-insured medical reimbursement plan of the employer), without regard to the HCI's level of compensation.

32See sections 105(h)(1) and (2).

33See § 1.105-11(c)(3)(i).

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participant's age or years of service."34
The consequence of a plan failing to sat-
isfy this nondiscriminatory benefits re-
quirement is that any excess reimburse-
ments paid under the plan to an HCI are
includible in the gross income of the HCI.

## III. APPLICATION OF SECTION 4980H TO AN ALE THAT OFFERS AN INDIVIDUAL COVERAGE HRA, POTENTIAL SAFE HARBORS AND REQUEST FOR COMMENTS

Although the proposed regulations do
not include proposed regulations under
section 4980H, as part of implementing
the objectives of Executive Order 13813,
the Treasury Department and the IRS con-
sidered how section 4980H would apply
to an ALE that offers an individual cov-
erage HRA. In order to provide clarity to
stakeholders, section III.A. of this notice
explains how section 4980H(a) would ap-
ply to an ALE that offers an individual
coverage HRA. In addition, section III.B
of this notice explains how section
4980H(b) (including the current afford-
ability safe harbors) would apply to an
ALE that offers an individual coverage
HRA, describes potential additional af-
fordability safe harbors, requests com-
ments, and provides examples.

### A. Application of Section 4980H(a) to an ALE that Offers an Individual Coverage HRA

As described earlier in this notice, an
ALE will owe a payment under section
4980H(a) for a month if it fails to offer an
eligible employer-sponsored plan to at
least 95 percent of its full-time employees
(and their dependents) and at least one
full-time employee is allowed the PTC for
the month for purchasing individual
health insurance coverage from an Ex-
change. An HRA, including an individual
coverage HRA, is an eligible employer-
sponsored plan. Therefore, if an ALE
were to offer an eligible employer-
sponsored plan (including an individual
coverage HRA) to at least 95 percent of its

full-time employees (and their depen-
dents), the ALE would not be liable for a
payment under section 4980H(a) for the
month, regardless of whether any full-
time employee is allowed the PTC for
purchasing individual health insurance
coverage from an Exchange.

### B. Application of Section 4980H(b) to an ALE That Offers an Individual Coverage HRA

An ALE that offers an eligible
employer-sponsored plan to at least 95
percent of its full-time employees (and
their dependents), and therefore is not
liable for a payment under section
4980H(a), will be liable for a payment
under section 4980H(b) if at least one
full-time employee is allowed the PTC
for purchasing individual health insur-
ance coverage from an Exchange. As
described earlier in this notice, an em-
ployee is not eligible for the PTC if the
employee has an offer of coverage under
an eligible employer-sponsored plan
that is affordable and that provides MV,
as set forth under section 36B and the
regulations thereunder.

Whether an offer of an individual cov-
erage HRA would be considered to be
affordable and provide MV would be
based on the application of the proposed
PTC regulations that are described in the
following parts of this section III.B.

# 1. Affordability

In general, under section 36B, an eli-
gible employer-sponsored plan is afford-
able for an employee if the amount the
employee must pay for self-only coverage
whether by salary reduction or otherwise
(the employee's required contribution)
does not exceed a percentage (the required
contribution percentage35) of the employ-
ee's household income.36

For traditional group health plan cov-
erage, the employee's required contribu-
tion is the amount the employee must pay
for self-only coverage under the lowest

cost MV plan the employer offers to the
employee. Because the proposed integra-
tion regulations would not permit an em-
ployer that offers an individual coverage
HRA to offer the employee a traditional
group health plan, the proposed PTC reg-
ulations propose a method for identifying
the plan to be used to determine afford-
ability (generally, the affordability plan)
and explain how the amounts made avail-
able under the individual coverage HRA
would factor into the determination of the
employee's required contribution.

More specifically, under the proposed
PTC regulations, an individual coverage
HRA would be affordable for an em-
ployee for a month if the required HRA
contribution (as defined in Prop. Treas.
Reg. § 1.36B-2(c)(5)(ii)) does not exceed
1/12 of the product of the employee's
household income and the required con-
tribution percentage. The required HRA
contribution under the proposed PTC reg-
ulations would be the excess of: (1) the
monthly premium for the lowest cost silver
plan for the employee for self-only coverage
offered by the Exchange for the rating area,
as defined in 45 CFR 147.102(b), in which
the employee resides (the HRA affordability
plan); over (2) in general, the self-only
amount the employer makes available to the
employee under the individual coverage
HRA for the month.37

## a. Potential Section 4980H Safe Har- bors and Request for Comments

i. Potential Section 4980H Safe Har-
bor Regarding the Location Used to
Identify the Affordability Plan and Re-
quest for Comments on Age-Based Is-
sues

Under the proposed PTC regulations,
the HRA affordability plan would be de-
termined on an employee-by-employee
basis. That is, the HRA affordability plan
for each employee would be based on that
particular employee's age and that partic-
ular employee's place of residence. How-
ever, the Treasury Department and the
IRS are concerned that requiring ALEs to
determine the HRA affordability plan for

34Id.

35See § 1.36B-2(c)(3)(v)(C).

36See section 36B(c)(2)(C) and § 1.36B-2(c)(3)(v)(A)(1) and (2). See § 1.36B-2(c)(3)(v)(A)(3) for a safe harbor that, in certain circumstances, allows an employee to claim the PTC even
if the offer of coverage ultimately is affordable.

37 See Prop. Treas. Reg. § 1.36B-2(c)(5) for more information on how this amount would be determined, including how the amount would be determined if the employer makes the same
amount available for all employees regardless of the number of individuals covered.

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each full-time employee to assess whether
an offer of an individual coverage HRA is
affordable for purposes of section 4980H
could raise significant administrative is-
sues for employers and may be prohibi-
tively burdensome. This, in turn, could
undermine the goal of expanding the use
of HRAs set forth in Executive Order
13813.

The Treasury Department and the IRS
anticipate issuing guidance that would pro-
vide a safe harbor under which, for purposes
of section 4980H, an ALE may use as the
affordability plan for an employee the low-
est cost silver plan for the employee for
self-only coverage offered by the Exchange
in the rating area in which the employee's
primary site of employment is located (the
location safe harbor).38 Under this safe har-
bor, an ALE would be allowed to determine
the affordability plan for each employee
based on the employee's worksite location,
rather than the employee's place of resi-
dence, the latter of which the Treasury De-
partment and the IRS understand is infor-
mation that might change over time and can
be difficult for employers to keep up to date.
The Treasury Department and the IRS re-
quest comments on the location safe harbor
and whether an alternative safe harbor
would be preferable and, if so, why.

This notice does not set out an antici-
pated section 4980H safe harbor related to
the fact that the cost of the affordability
plan for an employee is based on that
employee's age. However, the Treasury
Department and the IRS request com-
ments on any administrative burdens that
may arise due to the need to separately
determine the employee's required contri-
bution for each individual employee based
on the employee's age. In particular, the
Treasury Department and the IRS antici-
pate that some employers may wish to
contribute an identical amount to an indi-
vidual coverage HRA for each employee
(or for each employee in a class of em-
ployees), in which case, under the pro-
posed PTC regulations, each employee's
required contribution likely would vary
based on age, because the cost of the
affordability plan used to determine the
employee's required contribution likely

would vary based on age. On the other
hand, some employers may wish to con-
tribute to an individual coverage HRA for
each employee (or each employee in a
class of employees) an amount sufficient
to allow each employee to contribute the
same amount to purchase individual
health insurance coverage, in which case,
because coverage for older employees
will likely cost more, the amount made
available under the HRA would likely
need to increase with age. In each case,
the employer may wish to predict or elim-
inate the potential for liability under sec-
tion 4980H by ensuring that, for purposes
of section 4980H, the offer of the individ-
ual coverage HRA is treated as affordable
and as providing MV. The Treasury De-
partment and the IRS request comments
on the administrative issues and burdens
that would arise for employers in deter-
mining the employee's required contribu-
tion, for section 4980H purposes, due to
each employee's age being relevant to this
determination. To the extent these burdens
exist, the Treasury Department and the
IRS request suggestions as to any safe
harbors or other alternatives that would
ease the burdens, that are also consistent
with the purposes and policies underlying
section 4980H. For example, the Treasury
Department and the IRS request com-
ments on whether the ability to use age
bands or other assumptions concerning
employee ages for this purpose would
lower an employer's administrative bur-
den without unduly undercutting the ap-
plication of section 4980H and/or being
subject to abuse, and if so, the extent to
which such a safe harbor allowing the use
of age bands or other assumptions about
an employee's age should be required to
apply to each employee (or each em-
ployee in a class of employees) regardless
of the employee's actual age.

ii. Potential Section 4980H Safe Har-
bor Regarding Use of Prior Year Cost
for Calendar Year Individual Coverage
HRAs

Under the proposed PTC regulations,
an employee's required contribution for a
month is determined based, in part, on the
cost of the HRA affordability plan for that

month. For example, an employee's re-
quired contribution for January 2020 for
an individual coverage HRA would be
based on the cost of the HRA affordability
plan for January 2020. Exchange plan pre-
mium information for a calendar year gen-
erally is not available until shortly before
the beginning of the open enrollment pe-
riod for that calendar year, which begins
on November 1 of the prior calendar
year.39 Accordingly, the cost of the HRA
affordability plan (and the cost of the plan
determined under the location safe harbor,
if applicable) that will apply for a calendar
year, which is necessary to determine
whether an offer of an individual coverage
HRA will be affordable, will not be avail-
able until mid-to-late fall of the prior cal-
endar year.

While this time frame is sufficient for
individuals and Exchanges to determine
PTC eligibility for the upcoming calendar
year, the Treasury Department and the
IRS are aware that employers generally
determine the health benefits they will of-
fer for an upcoming plan year well in
advance of the start of the plan year.
Therefore, for a plan with a calendar year
plan year, employers generally would de-
termine the benefits to offer, including the
amount to make available in an HRA for
the year, well before mid-to-late fall of the
prior calendar year. Further, under section
4980H, ALEs are intended to be able to
decide whether to offer coverage suffi-
cient to avoid an employer shared respon-
sibility payment or to decline to do so.
ALEs are only able to make that choice if
they have timely access to the information
necessary to do so. Accordingly, the Trea-
sury Department and the IRS anticipate
issuing guidance that would provide a safe
harbor under which, for purposes of sec-
tion 4980H, an ALE may determine the
affordability of an offer of an individual
coverage HRA that has a calendar year
plan year based on the cost of the appli-
cable affordability plan (that is, either the
HRA affordability plan or the affordabil-
ity plan determined under the location
safe harbor, if applicable) for the prior
calendar year (the calendar year safe har-
bor). The Treasury Department and the

38Note that one of the classes of employees that would apply for purposes of the proposed integration regulations is "employees whose primary site of employment is in the same rating
area as defined in 45 CFR 147.102(b)." See Prop. Treas. Reg. § 54.9802-4(d)(1)(viii).

39 See 45 CFR 155.410(e)(3).

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IRS intend to work with HHS to ensure
that this information is readily available
for use under this rule.

The Treasury Department and the IRS
considered whether to apply an adjust-
ment to the cost of the prior year's afford-
ability plan for purposes of this safe harbor,
but do not anticipate proposing such an ad-
justment, to avoid complexity and due to
uncertainty regarding defining an adjust-
ment that would be appropriate in all cir-
cumstances and for all years. The Treasury
Department and the IRS request comments
on whether such an adjustment should be
included in future guidance and, if so, how
the adjustment should be calculated.

It is anticipated that the calendar year
safe harbor could be used by an ALE in
addition to the location safe harbor or
could be applied to the HRA affordability
plan. The Treasury Department and the
IRS also note that in the event the cost of
the affordability plan that applies under
the calendar year safe harbor exceeds the
cost of the HRA affordability plan that
applies for purposes of section 36B (that
is, the premium for the applicable plan
decreases from one year to the next), and,
as a result, the offer is considered afford-
able under section 36B but unaffordable
under the calendar year safe harbor, the
ALE will not owe a payment under sec-
tion 4980H(b) with respect to the applica-
ble full-time employee(s) because, regard-
less of the calendar year safe harbor, an
ALE is only liable for a payment under
section 4980H(b) with respect to a full-time
employee who is allowed the PTC. The
Treasury Department and the IRS also reit-
erate that this safe harbor would not apply
for purposes of section 36B and therefore,
an individual with an offer of an individual
coverage HRA that is affordable under the
section 36B rules is ineligible for the PTC,
without regard to whether that offer would
be considered unaffordable under the calen-
dar year safe harbor.

The Treasury Department and the IRS
request comments on whether a similar

safe harbor would be needed for employ-
ers that offer individual coverage HRAs
with non-calendar year plan years, and, if
so, the range of plan year start dates to
which such a safe harbor should apply.

iii. Potential Section 4980H Safe
Harbor Regarding Cost of Affordabil-
ity Plan for Individual Coverage HRA
with a Plan Year That Spans Two Tax-
able Years

Consistent with the rules for traditional
group health plan coverage,40 the pro-
posed PTC regulations require that afford-
ability be determined separately for the
portions of the plan year of an individual
coverage HRA that span different taxable
years of the employee.41 Thus, under the
proposed PTC regulations, assuming an
employee's taxable year is the calendar
year, if the plan year of an individual
coverage HRA spans two calendar years,
the cost of the applicable affordability
plan could change during the HRA plan
year. For example, assume an employee
with a taxable year that is a calendar year
is offered an individual coverage HRA
with a plan year starting July 1, 2020 and
ending June 30, 2021. For purposes of the
PTC generally, the cost of the HRA af-
fordability plan in 2020 will apply for July
1, 2020 through December 31, 2020 and
the cost of the HRA affordability plan in
2021 will apply for January 1, 2021
through June 30, 2021.42

In this circumstance, it is unlikely that
the cost of the affordability plan (either
the HRA affordability plan or the plan
determined under the location safe harbor,
if applicable) for the months in the plan
year that fall in the second calendar year
will be available at the time an ALE must
determine the amount that will be made
available under the HRA for the plan year.
As a result, the Treasury Department and
the IRS are concerned that application of
this aspect of the proposed PTC regula-
tions to section 4980H would be inconsis-
tent with the intent of section 4980H be-
cause ALEs would be unable to plan, and

to know whether they were offering suf-
ficient coverage, to avoid an employer
shared responsibility payment. In addi-
tion, in the context of a traditional group
health plan, the cost of coverage that ap-
plies for affordability purposes is deter-
minable before and consistent throughout
the plan year.

Accordingly, the Treasury Department
and the IRS anticipate providing that, for
purposes of section 4980H, an ALE that
offers an individual coverage HRA may
assume that the cost of the affordability
plan for the first month of the plan year
will be the cost of the affordability plan
for all the months in the plan year (non-
calendar year safe harbor).43 It is antici-
pated that the non-calendar year safe har-
bor could be used by an ALE in addition
to the location safe harbor. The Treasury
Department and the IRS request com-
ments on this approach, including whether
additional guidance is needed.

### iv. Consistency Requirement

ALEs would not be required to use any
of the anticipated section 4980H safe har-
bors described in this notice. The Treasury
Department and the IRS anticipate that
some level of consistency will be required in
the application of the anticipated safe har-
bors by an employer to its employees, and
request comments on the scope of such a
requirement. In particular, the Treasury De-
partment and the IRS request comments on
whether employers should be allowed to
choose to apply the safe harbors to reason-
able categories of employees, such as some
or all of the categories identified in
§ 54.4980H-5(e)(2)(i), including whether
the application of such a standard in this
context would permit arrangements incon-
sistent with the purpose and policies under-
lying section 4980H and, if so, how that
issue should be addressed.

### v. Reporting under Section 6056

Under section 6056 and Form 1095-C,
Employer-Provided Health Insurance Of-
fer and Coverage, which ALEs file and
furnish in order to satisfy the reporting

40See § 1.36B-2(c)(3)(v)(B).

41 See Prop. Treas. Reg. § 1.36B-2(c)(5)(vi).

42However, consistent with the rules for traditional employer coverage in § 1.36B-2(c)(3)(v)(A)(3), if an Exchange determines that the HRA is not affordable for the employee for the plan
year, that determination will apply for purposes of the PTC for the entire plan year. See Prop. Treas. Reg. § 1.36B-2(c)(3)(v)(A)(3) and (c)(5)(iv).

43The Treasury Department and the IRS anticipate that the primary circumstance in which an individual coverage HRA plan year would span two taxable years of an individual is when
the individual has a calendar year taxable year and the HRA has a non-calendar year plan year. Therefore, the discussion in this notice focuses on that set of facts. However, the safe harbor
is not limited to individual coverage HRAs with non-calendar year plan years because there could be other circumstances in which the HRA plan year covers two taxable years, for example,
if an HRA has a calendar year plan year and an individual has a non-calendar year taxable year.

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requirements under section 6056, ALEs
must report each full-time employee's re-
quired contribution. Because of the issues
previously described in this notice, the
Treasury Department and the IRS antici-
pate providing multiple safe harbors that
relate to the determination of the employ-
ee's required contribution for purposes of
section 4980H. Also, as a result of the
concerns about burden previously noted,
the Treasury Department and the IRS an-
ticipate that ALEs would not be required
to report the employee's required contri-
bution that is calculated under the pro-
posed PTC regulations and would instead
be required to report the employee's re-
quired contribution determined under the
safe harbors set forth in this notice, if
applicable. However, the Treasury De-
partment and the IRS continue to consider
the application of section 6056 to ALEs
that offer individual coverage HRAs and
anticipate providing additional guidance
on these issues in the future.

b. Application of Current Section
4980H Affordability Safe Harbors to
Individual Coverage HRAs

As described earlier in this notice,
whether an offer of coverage under an
eligible employer-sponsored plan is af-
fordable is based on whether the employ-
ee's required contribution exceeds a certain
percentage of the employee's household in-
come. Because an ALE generally will not
know an employee's household income, the
current section 4980H regulations set forth
three safe harbors under which an employer
may compare the employee's required con-
tribution to information that is readily avail-
able to the employer, rather than to actual
household income. These three safe harbors
are the Form W-2 wages safe harbor, the
rate of pay safe harbor, and the federal pov-
erty line safe harbor (referred to in this no-
tice as the HHI safe harbors (but referred to
in the regulations under section 4980H as
the affordability safe harbors)).44

The HHI safe harbors are optional and
apply only for purposes of section 4980H.
An ALE may choose to use one or more
of the HHI safe harbors for all of its
employees or for any reasonable category
of employees, provided it does so on a
uniform and consistent basis for all em-

ployees in a category. In addition, an ALE
may use an HHI safe harbor only if the ALE
offers its full-time employees and their de-
pendents eligible employer-sponsored cov-
erage that provides MV with respect to the
self-only coverage offered to the employee.

The Treasury Department and the IRS
anticipate providing guidance clarifying
that an ALE that offers an individual cov-
erage HRA would be permitted to use the
HHI safe harbors, subject to the applicable
requirements, for purposes of section
4980H. The HHI safe harbors assume that
the employee's required contribution will
be based on the lowest cost self-only cov-
erage that provides MV that the employer
offers to the employee. The Treasury De-
partment and the IRS anticipate issuing
guidance to clarify that in applying the
HHI safe harbors to an offer of an indi-
vidual coverage HRA, the plan that would
be used to determine the employee's re-
quired contribution would be the HRA af-
fordability plan or the affordability plan that
would apply under the potential safe harbors
outlined in this notice, as applicable.

In addition, because of the way that
MV would be determined for an individ-
ual coverage HRA, which is described in
the next section of this notice, the Trea-
sury Department and the IRS anticipate
issuing guidance to clarify that the condi-
tion in § 54.4980H-5(e)(2)(i) (that an em-
ployer may only use the HHI safe harbor
if the self-only coverage offered to the
employee provides MV) would be met for
an employer that offers an individual cov-
erage HRA that is affordable, taking into
account the HHI safe harbor and any of
the safe harbors outlined in this notice, if
applicable.

# 2. Minimum Value

In general, under section 36B, an eli-
gible employer-sponsored plan provides
MV if the plan's share of the total allowed
costs of benefits provided under the plan
is at least 60 percent of the costs and if the
plan provides substantial coverage of in-
patient hospitalization and physician ser-
vices.45 Because of differences between
HRAs and traditional group health plans,
the proposed PTC regulations provide

guidance regarding the circumstances in
which an individual coverage HRA would
be considered to provide MV.

Under the proposed PTC regulations,
an individual coverage HRA that is af-
fordable would be treated as providing
MV. The MV definition under the pro-
posed PTC regulations would apply for
purposes of determining whether an ALE
that offers an individual coverage HRA
has made an offer that provides MV for
purposes of section 4980H. Therefore, an
individual coverage HRA that is afford-
able (taking into account the HHI safe
harbors and any of the safe harbors out-
lined in this notice, if applicable) would
be treated as providing MV for purposes
of section 4980H.

# 3. Examples

The following examples illustrate is-
sues addressed in this section III. For pur-
poses of these examples, assume that the
required contribution percentage for 2020
is 9.86%.

Example 1 (Section 4980H(a)). Facts: For 2020,
Employer X is an ALE. It offers all of its full-time
employees and their dependents an individual cov-
erage HRA for each month in 2020.

Conclusion: Employer X would not owe a pay-
ment under section 4980H(a) for any month in 2020
regardless of whether any full-time employee is al-
lowed the premium tax credit.

Example 2 (Section 4980H(b) - Location Safe
Harbor and Calendar Year Safe Harbor). Facts:
For 2020, Employer Y is an ALE. It offers all of its
full-time employees and their dependents an individ-
ual coverage HRA and makes $6,000 available in the
HRA for the calendar year plan year. All of Em-
ployer Y's employees have a primary site of employ-
ment in rating area 1. Employer Y chooses to use the
location safe harbor and the calendar year safe har-
bor. Employee A is 40 years old. The lowest cost
silver plan for self-only coverage for a 40 year old
offered by the Exchange for rating area 1 in the prior
year (that is, 2019) was $7,000. Employer Y also
chooses to use the Form W-2 HHI safe harbor for its
full-time employees. Employee A's Form W-2
wages for 2020 are $15,000. Employee A's required
contribution under section 4980H is $1,000 ($7,000
(cost of affordability plan determined under the lo-
cation safe harbor and calendar year safe harbor)
minus $6,000 (HRA amount)).

Conclusion: Employer Y has made an offer of
affordable MV coverage to Employee A because the
employee's required contribution ($1,000) is less
than the amount equal to the required contribution
percentage multiplied by Employee A's Form W-2
wages (9.86% of $15,000 = $1,479). Employer Y

44See § 54.4980H-5(e)(2).

45 See section 36B(c)(2)(C)(ii); see also 80 FR 52678 (Sept. 1, 2015).

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would not owe a payment under section 4980H(b)
with respect to Employee A for any month in 2020.
(Also, Employer Y would not owe a payment under
section 4980H(a) for any month in 2020 because it
offered an individual coverage HRA to all of its
full-time employees and their dependents for each
month in 2020.)

Example 3. (Non-Calendar Year Safe Harbor).
Facts: Employer Z is an ALE. Employer Z offers an
individual coverage HRA to all of its full-time em-
ployees and their dependents for a plan year begin-
ning on July 1, 2020 and ending on June 30, 2021.
Employee B is 30 years old. For 2020, the cost of the
affordability plan that applies for Employee B is
$6,000. In late October 2020, it is announced that the
cost of the affordability plan that will apply for
Employee B in 2021 will be $7,000.

Conclusion: Employer Z may apply the cost of
the affordability plan for the first month of the plan
year (that is, $6,000/12 = $500) to determine the
employee's required contribution for each month of
the plan year, including the months in 2021 (January
2021 through June 2021) when the cost of the HRA
affordability plan ($7,000) will apply under section
36B.

# IV. APPLICATION OF SECTION 105(h) TO THE PROPOSED INTEGRATION REGULATIONS AND POTENTIAL SAFE HARBORS

HRAs generally are subject to the rules
under section 105(h) and its related regu-
lations because they are self-insured
medical reimbursement plans.46 However,
HRAs that reimburse employees only for
premiums paid to purchase health insur-
ance policies, including individual health
insurance policies, are not subject to the
rules under section 105(h) and its related
regulations.47 The proposed guidance de-
scribed in this section IV addresses certain
individual coverage HRAs that (1) would
be subject to the rules under section
105(h) and the regulations thereunder, and
(2) are offered to one or more HCIs. For
purposes of section IV of this notice, these
individual coverage HRAs are referred to
as covered HRAs.

As described earlier in this notice, the
proposed integration regulations would
expand the potential use of HRAs by per-
mitting employers to offer individual cov-
erage HRAs to their employees, as long as
certain requirements are satisfied. Among
other requirements, the proposed integra-
tion regulations would allow the plan
sponsor to limit the offer of the individual
coverage HRA to members of certain
classes of employees and to vary the
amounts, terms, and conditions of individ-
ual coverage HRAs between the different
classes of employees.48 However, the pro-
posed integration regulations would re-
quire that within each class of employees
offered an individual coverage HRA, the
plan sponsor would be required to offer
the individual coverage HRA on the same
terms and conditions (including, gener-
ally, in the same amount) to all employees
who are members of that class of employ-
ees.49

Varying the maximum HRA amounts
for different classes of employees would
conflict with the requirement in the sec-
tion 105 regulations that any maximum
limit attributable to employer contribu-
tions must be uniform for all participants
(later in this section of the notice the Trea-
sury Department and the IRS address the
permissibility of varying the maximum
HRA amounts within a class of employees).
The IRS interprets this rule to require that,
while certain employees in certain classes
may be excluded from a plan for discrimi-
nation testing purposes, if an employee in an
excludible class is provided benefits, the
benefits must be provided on a nondiscrim-
inatory basis to all covered employees. Un-
der the proposed integration regulations,
employees in different classes may receive
different HRA amounts, with the result that
the maximum limit attributable to employer
contributions, while generally uniform for

all participants in a class (subject to certain
exceptions set forth in Prop. Treas. Reg.
§ 54.9802-4(c)(3), as described later in this
notice), would not be uniform for all HRA
participants.

In order to facilitate the offering of cov-
ered HRAs as anticipated by the proposed
integration regulations, the Treasury Depart-
ment and the IRS anticipate that future guid-
ance will provide that a covered HRA
would be treated as not failing to meet the
requirement in § 1.105-11(c)(3)(i) that any
maximum limit attributable to employer
contributions must be uniform for all partic-
ipants, if the covered HRA provides the
same maximum dollar amount to all em-
ployees who are members of a particular
class of employees, limited to the
classes specified under the proposed in-
tegration regulations (which includes
combinations of specified classes) and
subject to the exceptions set forth in
Prop. Treas. Reg. § 54.9802-4(c)(3), as
described later in this notice.

Further, as previously noted, while the
proposed integration regulations would al-
low different HRA amounts for employ-
ees in different classes, the employer gen-
erally would be required to offer the HRA
on the same terms to all employees who
are members of the same class of employ-
ees. However, the proposed integration
regulations include two exceptions to this
rule.

The exception to this same-terms re-
quirement that is relevant to the applica-
tion of section 105(h) to the proposed
integration regulations is that the covered
HRA would be permitted to provide that
the maximum dollar amount made avail-
able to an employee for any plan year
increases as the age of the employee in-
creases.50 Under this exception, the same
maximum dollar amount attributable to
the increase in an employee's age would

46See § 1.105-11(b)(1); see also Notice 2002-45, 2002-02 C.B. 93.

47 See § 1.105-11(b)(2). HRAs that provide for the reimbursement of premiums to purchase health insurance policies in addition to other medical care expenses are subject to the rules under
section 105(h) and the regulations thereunder because the HRA amounts may be used to reimburse medical care expenses other than premiums for health insurance policies. In addition,
although HRAs are self-insured group health plans and PHS Act section 2716, as incorporated into the Code by section 9815, applies nondiscrimination rules similar to section 105(h) to
insured coverage, PHS Act section 2716 may apply to HRAs that only provide for the reimbursement of premiums for the same reasons these HRAs are not subject to the rules under section
105(h). However, under Notice 2011-1, 2011-2 I.R.B. 259, the Departments determined that compliance with PHS Act section 2716 should not be required (and thus, any sanctions for failure
to comply do not apply) until after regulations or other administrative guidance of general applicability has been issued under PHS Act section 2716.

48 See Prop. Treas. Reg. § 54.9802-4(c)(2).

49 See Prop. Treas. Reg. § 54.9802-4(c)(3).

50See Prop. Treas. Reg. § 54.9802-4(c)(3)(i). The other exception to the same terms requirement is that the individual coverage HRA would be permitted to provide that the maximum dollar
amount made available to an employee who is a member of a class of employees to reimburse medical care expenses for any plan year may increase as the number of the employee's
dependent(s) who are covered by the individual coverage HRA increases. However, the same maximum dollar amount attributable to the increase in family size must be made available to
all employees who are members of the same class of employees with the same number of dependent(s) covered by the individual coverage HRA. See Prop. Treas. Reg. § 54.9802-4(c)(3)(ii).

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be required to be made available to all
employees who are members of the same
class of employees who are the same
age.51

Without further guidance, under sec-
tion 105(h) and the regulations thereun-
der, however, certain amounts paid to an
HCI under a covered HRA that imple-
ments such an age-based increase would
be includible in the income of the HCI
because the covered HRA would fail
to meet the requirement in § 1.105-
11(c)(3)(i) that prohibits the maximum
limit attributable to employer contribu-
tions to the covered HRA from being
modified by reason of a participant's age.
The Treasury Department and the IRS
recognize that some employers may wish
to offer a covered HRA to their employees
without causing HCIs to include in their
income certain payments from the ar-
rangement, as a result of the arrangement
failing to meet that requirement in the
section 105(h) regulations.

To facilitate the offering of this type of
covered HRA, the Treasury Department
and the IRS anticipate that future guid-
ance would provide that a covered HRA
would be treated as not failing to meet the
requirement in § 1.105-11(c)(3)(i) that
any maximum limit attributable to em-
ployer contributions be uniform for all
participants and that prohibits the maxi-
mum limit attributable to employer con-
tributions from being modified by reason
of a participant's age, if the covered HRA
meets certain conditions. Specifically, the
covered HRA would have to provide that
the maximum dollar amount made avail-
able to employees who are members of a
particular class of employees increases in
accordance with the increases in the price
of an individual health insurance coverage
policy in the relevant individual insurance
market based on the ages of the employ-
ees who are members of that class of
employees, provided that the same maxi-
mum dollar amount attributable to the in-
crease in age is made available to all em-
ployees who are members of that class of
employees who are the same age. For
purposes of this notice, the "relevant in-
dividual insurance market" is an individ-
ual insurance market in which at least one
employee who is a member of the class of

employees is able to purchase individual
health insurance coverage.

The following examples illustrate the
potential safe harbors described in section
IV of this notice that the Treasury Depart-
ment and the IRS anticipate would be
included in future guidance under section
105(h).

Example 1 (Covered HRA does not Fail to Sat-
isfy Section 105(h) - Age Variation). Facts: In
2020, Employer A offers all full-time employees,
including HCIs, an individual coverage HRA that
reimburses all medical care expenses (including pre-
miums for individual health insurance coverage).
The maximum dollar amount available under the
individual coverage HRA increases in accordance
with the increases in the price of an individual health
insurance policy in County X, based on the ages of
all full-time employees. At least one full-time em-
ployee of Employer A is a resident of County X. The
same maximum dollar amount attributable to the
increase in age is made available to all full-time
employees who are the same age.

Conclusion: The individual coverage HRA
would be a covered HRA that would be treated as
not failing to meet the requirement in § 1.105-
11(c)(3)(i) that prohibits the maximum limit attrib-
utable to employer contributions from being modi-
fied by reason of a participant's age.

Example 2 (Covered HRA does not Fail to Sat-
isfy Section 105(h) - Class by Class Variation).
Facts: In 2020, Employer B offers all full-time and
part-time employees, including HCIs, an individual
coverage HRA that reimburses all medical care ex-
penses (including premiums for individual health
insurance coverage). The maximum dollar amount
available under the individual coverage HRA for
each full-time employee is $5,000 per plan year. The
maximum dollar amount available under the individ-
ual coverage HRA for each part-time employee is
$2,000 per plan year.

Conclusion: The individual coverage HRA
would be a covered HRA that would be treated as
not failing to meet the requirement in § 1.105-
11(c)(3)(i) that any maximum limit attributable to
employer contributions must be uniform for all par-
ticipants.

Example 3 (Individual Coverage HRA is not
Subject to Section 105(h) - Only Reimburses Pre-
miums). Facts: In 2020, Employer C offers all full-
time employees, including HCIs, an individual cov-
erage HRA that only reimburses premiums for
individual health insurance coverage.

Conclusion: The individual coverage HRA
would not be a covered HRA because it would only
reimburse premiums for individual health insurance
coverage. Therefore, it would not be subject to the
nondiscrimination requirements in section 105(h)
and the regulations thereunder.

Example 4 (Individual Coverage HRA is not
Subject to Section 105(h) - No HCIs). Facts: In
2020, Employer D offers all employees included in a
unit of employees covered by a particular collective
bargaining agreement in which Employer D partici-

pates (collectively bargained employees) an individ-
ual coverage HRA that reimburses all medical care
expenses (including premiums for individual health
insurance coverage). No collectively bargained em-
ployee is an HCI.

Conclusion: The individual coverage HRA
would not be a covered HRA because it would not be
offered to any HCIs. Therefore, it would not be
subject to the nondiscrimination requirements in sec-
tion 105(h) and the regulations thereunder.

## V. REQUEST FOR COMMENTS

The Treasury Department and the IRS
invite comments on the issues addressed
in this notice, and on any other tax issues
related to individual coverage HRAs as
described in the proposed integration and
PTC regulations. Also see section III.B of
this notice for specific comment solicita-
tions regarding section 4980H. The Trea-
sury Department and the IRS intend to
issue further guidance on the issues ad-
dressed in this notice in conjunction with
the issuance of any final integration and
PTC regulations. The Treasury Depart-
ment and the IRS further intend to pro-
pose regulations to codify, and seek addi-
tional comment on, the safe harbors, if
any, provided in the additional guidance
anticipated to be released in conjunction
with any final integration and PTC regu-
lations.

Public comments should be submitted
no later than December 28, 2018. Com-
ments should include a reference to Notice
2018-88. Comments may be submitted
electronically via the Federal eRulemaking
Portal at www.regulations.gov (type IRS-
2018-0032 in the search field on the
regulations.gov homepage to find this no-
tice and submit comments). Alternatively,
submissions may be sent to CC:PA:LPD:PR
(Notice 2018-88), Room 5203, Internal
Revenue Service, P.O. Box 7604, Ben
Franklin Station, Washington, DC 20044.
Submissions also may be hand delivered
Monday through Friday between the hours
of 8 a.m. and 4 p.m. to CC:PA:LPD:PR
(Notice 2018-88), Courier's Desk, Internal
Revenue Service, 1111 Constitution Ave-
nue, NW, Washington, DC 20044. All rec-
ommendations for guidance submitted by
the public in response to this notice will be
available for public inspection and copying
in their entirety.

51 See Prop. Treas. Reg. § 54.9802-4(c)(3)(i).

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# VI. RELIANCE

This notice does not provide guidance
under section 4980H or section 105(h)
upon which taxpayers may rely.

# VII. NO INFERENCE

No inference should be drawn from
any provision of this notice concerning
any provision of section 4980H or section
105(h) or any other section of the Code, or
PPACA, except those provisions specifi-
cally addressed in this notice.

# VIII. DRAFTING INFORMATION

The principal author of this notice is
Ronald Rutherford-Triche of the Office of
Associate Chief Counsel (Tax Exempt
and Government Entities), although other
Treasury Department and IRS officials
participated in its development. For fur-
ther information regarding this notice,
contact Christopher Dellana or Kevin
Knopf at (202) 317-5500 (not a toll-free
number).

# Notice 2018-89

# Treatment of Amounts Paid to Section 170(c) Organizations under Employer Leave-Based Donation Programs to Aid Victims of Hurricane Michael

This notice provides guidance on the
treatment of leave-based donation programs
to aid victims of Hurricane Michael.

# TREATMENT OF LEAVE-BASED DONATION PAYMENTS

In response to the extreme need for
charitable relief for victims of Hurricane
Michael, employers may have adopted or
may be considering adopting leave-based
donation programs. Under leave-based
donation programs, employees can elect
to forgo vacation, sick, or personal leave
in exchange for cash payments that the
employer makes to charitable organiza-
tions described in § 170(c) of the Internal
Revenue Code (§ 170(c) organizations).
This notice provides guidance for income
and employment tax purposes on the treat-
ment of cash payments made by employ-

ers under leave-based donation programs
for the relief of victims of Hurricane Mi-
chael.

The Internal Revenue Service (the Ser-
vice) will not assert that cash payments an
employer makes to § 170(c) organizations
in exchange for vacation, sick, or personal
leave that its employees elect to forgo
constitute gross income or wages of the
employees if the payments are: (1) made
to the § 170(c) organizations for the relief
of victims of Hurricane Michael; and (2)
paid to the § 170(c) organizations before
January 1, 2020.

Similarly, the Service will not assert
that the opportunity to make such an elec-
tion results in constructive receipt of gross
income or wages for employees. Electing
employees may not claim a charitable
contribution deduction under § 170 with
respect to the value of forgone leave ex-
cluded from compensation and wages.

The Service will not assert that an em-
ployer is permitted to deduct these cash
payments exclusively under the rules of
§ 170 rather than the rules of § 162. Cash
payments to which this guidance applies
need not be included in Box 1, 3 (if ap-
plicable), or 5 of the Form W-2.

# DRAFTING INFORMATION

For further information, please contact
Suzanne R. Sinno of the Office of Asso-
ciate Chief Counsel (Income Tax and Ac-
counting) at (202) 317-4718 (not a toll-
free number).

Notice 2018-90

Extension of Transition Relief
Under Rev. Rul. 2018-17 on
Withholding and Reporting
With Respect to Payments
From IRAs to State Unclaimed
Property Funds

## I. PURPOSE

The purpose of this notice is to extend
the withholding and reporting transition
relief described in Rev. Rul. 2018-17,
2018-25 IRB 753, that applies with re-
spect to payments made before the earlier
of January 1, 2019, or the date it becomes
reasonably practicable to comply with

those requirements. Relief is extended to
payments made before the earlier of Jan-
uary 1, 2020, or the date it becomes rea-
sonably practicable to comply with the
withholding and reporting requirements
described in Rev. Rul. 2018-17.

# II. BACKGROUND

Rev. Rul. 2018-17 addressed federal
income tax withholding under § 3405 of
the Internal Revenue Code and reporting
under § 408(i) relating to payment of an
individual's interest in an IRA to a State
unclaimed property fund, as required by
State law. Under the facts presented in
Rev. Rul. 2018-17, payments from an
IRA to a State unclaimed property fund
are subject to federal income tax with-
holding and reporting.

However, Rev. Rul. 2018-17 included
the following transition relief: "A person
will not be treated as failing to comply
with the withholding and reporting re-
quirements described in this revenue rul-
ing with respect to payments made before
the earlier of January 1, 2019, or the date
it becomes reasonably practicable for the
person to comply with those require-
ments."

The Department of the Treasury and
the Internal Revenue Service have re-
ceived a number of requests for an
extension of the transition relief in
Rev. Rul. 2018-17.

# III. EXTENSION OF TRANSITION RELIEF UNDER REV. RUL. 2018-17

The transition relief in Rev. Rul. 2018-17
is extended so that a person will not be
treated as failing to comply with the with-
holding and reporting requirements de-
scribed in Rev. Rul. 2018-17 with respect
to payments made before the earlier of
January 1, 2020, or the date it becomes
reasonably practicable for the person to
comply with those requirements.

# IV. EFFECT ON OTHER DOCUMENTS

Rev. Rul. 2018-17 is modified.

# V. DRAFTING INFORMATION

The principal author of this notice is
Cynthia Van Bogaert of the Office of As-
sociate Chief Counsel (Tax Exempt and

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Government Entities). Ms. Van Bogaert
may be reached at (202) 317-4102 (not a
toll-free number).

26 CFR 601.602: Tax forms and instructions.
(Also Part I, §§ 1, 23, 24, 25A, 32, 36B, 42, 45R, 55,
59, 62, 63, 125, 132(f), 135, 137, 146, 147, 148, 152,
179, 199A, 213, 220, 221, 448, 461, 512, 513, 642,

831, 877, 877A, 911, 1274A, 2010, 2032A, 2503,
2523, 4161, 4261, 6033, 6039F, 6323, 6334, 6601,
6651, 6652, 6695, 6698, 6699, 6721, 6722, 7345,
7430, 7702B, 9831; 1.148-5.)

## Rev. Proc. 2018-57

Table of Contents

SECTION 1. PURPOSE

SECTION 2. CHANGES

SECTION 3. 2019 ADJUSTED ITEMS

.01 Tax Rate Tables

Code Section 1(j)(2) (A)-(D)

.02 Unearned Income of Minor Children Taxed as if Parent's

1(g)

Income ("Kiddie Tax")

.03 Maximum Capital Gains Rate

1(h)

.04 Adoption Credit

23

.05 Child Tax Credit

24

.06 Lifetime Learning Credit

25A

.07 Earned Income Credit

32

.08 Refundable Credit for Coverage Under a Qualified Health Plan

36B(f)(2)(B)

.09 Rehabilitation Expenditures Treated as Separate New Building

42(e)

.10 Low-Income Housing Credit

42(h)

.11 Employee Health Insurance Expense of Small Employers

45R

.12 Exemption Amounts for Alternative Minimum Tax

55

.13 Alternative Minimum Tax Exemption for a Child Subject to the

59(j)

"Kiddie Tax"

.14 Certain Expenses of Elementary and Secondary

62(a)(2)(D)

School Teachers

.15 Transportation Mainline Pipeline Construction Industry Optional

Expense Substantiation Rules for Payments to Employees Under

Accountable Plans

62(c)

.16 Standard Deduction

63

.17 Cafeteria Plans

125

.18 Qualified Transportation Fringe Benefit

132(f)

.19 Income from United States Savings Bonds for Taxpayers Who

Pay Qualified Higher Education Expenses

135

.20 Adoption Assistance Programs

137

.21 Private Activity Bonds Volume Cap

146(d)

.22 Loan Limits on Agricultural Bonds

147(c)(2)

.23 General Arbitrage Rebate Rules

148(f)

.24 Safe Harbor Rules for Broker Commissions on Guaranteed

Investment Contracts or Investments Purchased for a Yield

Restricted Defeasance Escrow

148

.25 Gross Income Limitation for a Qualifying Relative

152(d)(1)(B)

.26 Election to Expense Certain Depreciable Assets

179

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.27 Qualified Business Income

199A

.28 Eligible Long-Term Care Premiums

213(d)(10)

.29 Medical Savings Accounts

220

.30 Interest on Education Loans

221

.31 Limitation on Use of Cash Method of Accounting

448

.32 Threshold for Excess Business Loss

461(l)

.33 Treatment of Dues Paid to Agricultural or Horticultural

Organizations

512(d)

.34 Insubstantial Benefit Limitations for Contributions Associated

513(h)

With Charitable Fund-Raising Campaigns

.35 Special Rules for Credits and Deductions

642

.36 Tax on Insurance Companies Other than Life

831

Insurance Companies

.37 Expatriation to Avoid Tax

877

.38 Tax Responsibilities of Expatriation

877A

.39 Foreign Earned Income Exclusion

911

.40 Debt Instruments Arising Out of Sales or Exchanges

1274A

.41 Unified Credit Against Estate Tax

2010

.42 Valuation of Qualified Real Property in Decedent's Gross

Estate

2032A

.43 Annual Exclusion for Gifts

2503; 2523

.44 Tax on Arrow Shafts

4161

.45 Passenger Air Transportation Excise Tax

4261

.46 Reporting Exception for Certain Exempt Organizations with

6033(e)(3)

Nondeductible Lobbying Expenditures

.47 Notice of Large Gifts Received from Foreign Persons

6039F

.48 Persons Against Whom a Federal Tax Lien Is Not Valid

6323

.49 Property Exempt from Levy

6334(a)

.50 Exempt Amount of Wages, Salary, or Other Income

6334(d)

.51 Interest on a Certain Portion of the Estate Tax Payable in

6601(j)

Installments

.52 Failure to File Tax Return

6651

.53 Failure to File Certain Information Returns, Registration

6652

Statements, etc.

.54 Other Assessable Penalties With Respect to the 6695

Preparation of Tax Returns for Other Persons

.55 Failure to File Partnership Return

6698

.56 Failure to File S Corporation Return

6699

.57 Failure to File Correct Information Returns

6721

.58 Failure to Furnish Correct Payee Statements

6722

.59 Revocation or Denial of Passport in Case of Certain

7345

Tax Delinquencies

.60 Attorney Fee Awards

7430

.61 Periodic Payments Received Under Qualified Long-Term Care

7702B(d)

Insurance Contracts or Under Certain Life Insurance Contracts

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<!-- PageHeader=".62 Qualified Small Employer Health Reimbursement Arrangement SECTION 4. EFFECTIVE DATE" -->

### SECTION 5. DRAFTING INFORMATION

<!-- PageHeader="9831" -->

#### SECTION 1. PURPOSE

This revenue procedure sets forth
inflation-adjusted items for 2019 for var-
ious provisions of the Internal Revenue
Code of 1986 (Code) as amended as of
November 15, 2018. To the extent amend-
ments to the Code are enacted for 2019
after November 15, 2018, taxpayers
should consult additional guidance to de-
termine whether these adjustments remain
applicable for 2019.

#### SECTION 2. CHANGES

.01 Section 11001(a)(5) of An Act to
Provide for Reconciliation Pursuant to Ti-
tles II and V of the Concurrent Resolution
on the Budget for Fiscal Year 2018, Pub. L.
115-97, 131 Stat. 2504 (the Act), adds
§ 1(j)(5), which provides a temporary mod-
ification to the dollar amounts in § 1(h)(1)
(B) and (C) for taxable years beginning after
December 31, 2017, and before January 1,
2026. Section 1(j)(5)(B)(i) provides that un-
der § 1(h)(1)(B)(i) the maximum zero rate
amount is $77,200 for a joint return or sur-
viving spouse, $51,700 for a head of house-
hold, half of the amount for a joint return for
an individual, and $2,600 for an estate or
trust. Section 1(j)(5)(B)(ii) provides that un-
der § 1(h)(1)(C)(ii)(I) the maximum 15%
rate amount is $479,000 for a joint return or
surviving spouse (half of this amount for a
married individual filing a separate return),
$452,400 for a head of household, $425,800
in the case of any other individual (other
than an estate or trust), and $12,700 for an
estate or trust. These amounts are adjusted
for inflation for taxable years beginning af-
ter December 31, 2018.

.02 Section 11022(a) of the Act adds
§ 24(h), which provides special rules for
taxable years beginning after December
31, 2017, and before January 1, 2026.
Section 24(h) provides that the value used
in § 24(d)(1)(A) to determine the amount
of child tax credit under § 24 that may be
refundable is $1,400. The $1,400 amount
is adjusted for inflation for taxable years
beginning after December 31, 2018.

.03 Section 11041 of the Act amends
§ 151(d)(5) to provide a temporary set
dollar amount of zero for the personal
exemption deduction for taxable years be-
ginning after December 31, 2017, and be-
fore January 1, 2026. However, Notice
2018-70, 2018-38 I.R.B. 441, notifies
taxpayers that the Department of the Trea-
sury and the Internal Revenue Service in-
tend to issue proposed regulations to clar-
ify that the reduction of the exemption
amount to zero in § 151(d)(5)(A) for tax-
able years 2018 through 2025 does not
apply to the gross income limitation in the
definition of a qualifying relative in
§ 152(d)(1)(B). Thus, the § 151(d) exemp-
tion amount referenced in § 152(d)(1)(B)
will be treated as $4,150, as adjusted for
inflation, for taxable years in which the
§ 151(d)(5)(A) exemption amount is zero.

.04 Section 13101 of the Act amends
§ 179(b)(6) to provide that the $25,000
limitation of the cost of any sport utility
vehicle under § 179(b)(5)(A) is adjusted
for inflation for taxable years beginning
after December 31, 2018.

.05 Section 11011 of the Act adds
§ 199A, which provides in part that if for
a taxable year a taxpayer has income less
than the sum of the threshold amount plus
$50,000 ($100,000 for joint returns), then
any specified service trade or business of
the taxpayer shall not fail to be treated as
a qualified trade or business due to
§ 199A(d)(1)(A). Section 199A(e)(2)(A)
defines the threshold amount as $157,500.
This $157,500 amount is adjusted for in-
flation for taxable years beginning after
December 31, 2018.

.06 Section 13102 of the Act amends
§ 448(c) to provide that a corporation or
partnership meets the gross receipts tests
for any taxable year if the average annual
gross receipts of such entity for the
3-taxable-year period ending with the tax-
able year which precedes such taxable
year does not exceed $25,000,000. The
$25,000,000 amount is adjusted for infla-
tion for taxable years beginning after De-
cember 31, 2018.

.07 Section 11012 of the Act adds
§ 461(1) to provide that a taxpayer's ex-

cess business loss for the taxable year is
the excess, if any, of the taxpayer's aggre-
gate deductions attributable to trades or
businesses of the taxpayer (determined
without regard to the limitation of the
provision) over the sum of the taxpayer's
aggregate gross income or gain attribut-
able to such trades or businesses, plus
$250,000 (twice this amount for joint
returns). The $250,000 amount under
§ 461(l)(3)(A)(ii)(II) is adjusted for infla-
tion for taxable years beginning after De-
cember 31, 2018.

.08 Section 11041(b) of the Act adds
§ 642(b)(2)(C)(iii), which provides that in
years when the personal exemption amount
under § 151(d) is zero, § 642(b)(2)(C)(i)
shall be applied by substituting $4,150 for
the exemption amount under § 151(d). The
$4,150 amount is adjusted for inflation for
taxable years beginning after December 31,
2018.

.09 Section 11002(d)(10) of the Act
amended § 1274A(d)(2) to change the cal-
culation of the inflation-adjusted amounts
for qualified debt instruments and cash
method debt instruments for taxable years
beginning after December 31, 2017. In
prior years, the inflation-adjusted amounts
under § 1274A have been published in a
separate revenue ruling. Because of the
change to the calculation of the inflation-
adjusted amounts under § 1274A, these
amounts will be included in this revenue
procedure and will no longer be published
in a separate revenue ruling. For inflation-
adjusted amounts prior to January 1, 2019,
see Rev. Rul. 2018-11, 2018-18 I.R.B.
518.

.10 Section 11081 of the Act amends
§ 5000A to provide that the applicable
dollar amount used to determine the pen-
alty under § 5000A(c) for failure to main-
tain minimum essential coverage is $0 for
taxable years beginning after December
31, 2018. Accordingly, this amount is not
included in this revenue procedure.

.11 Section 11041(d) of the Act adds
§ 6334(d)(4), which provides that in tax-
able years in which the personal exemp-
tion amount under § 151(d) is zero, the
term "exempt amount" means an amount

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equal to (i) the sum of the amount deter-
mined under § 6334(d)(4)(B) and the stan-
dard deduction, divided by (ii) 52. The
amount determined under § 6334(d)(4)(B)
is $4,150 multiplied by the number of the
taxpayer's dependents for the taxable year
in which the levy occurs. The $4,150

amount is adjusted for inflation for taxable
years beginning after December 31, 2018.

# SECTION 3. 2019 ADJUSTED ITEMS

.01 Tax Rate Tables. For taxable years
beginning in 2019, the tax rate tables un-
der § 1 are as follows:

TABLE 1 - Section 1(j)(2)(A) - Married Individuals Filing Joint Returns and Surviving Spouses

If Taxable Income Is:

The Tax Is:

Not over $19,400

10% of the taxable income

Over $19,400 but not over $78,950

$1,940 plus 12% of the excess over $19,400

Over $78,950 but not over $168,400

$9,086 plus 22% of the excess over $78,950

Over $168,400 but not over $321,450

$28,765 plus 24% of the excess over $168,400

Over $321,450 but not over $408,200

$65,497 plus 32% of the excess over $321,450

Over $408,200 but not over $612,350

$93,257 plus 35% of the excess over $408,200

Over $612,350

$164,709.50 plus 37% of the excess over $612,350

TABLE 2 - Section 1(j)(2)(B) - Heads of Households

If Taxable Income Is:

The Tax Is:

Not over $13,850

10% of the taxable income

Over $13,850 but not over $52,850

$1,385 plus 12% of the excess over $13,850

Over $52,850 but not over $84,200

$6,065 plus 22% of the excess over $52,850

Over $84,200 but not over $160,700

$12,962 plus 24% of the excess over $84,200

Over $160,700 but not over $204,100

$31,322 plus 32% of the excess over $160,700

Over $204,100 but not over $510,300

$45,210 plus 35% of the excess over $204,100

Over $510,300

$152,380 plus 37% of the excess over $510,300

TABLE 3 - Section 1(j)(2)(C) - Unmarried Individuals (other than Surviving Spouses and Heads of Households)

If Taxable Income Is:

The Tax Is:

Not over $9,700

10% of the taxable income

Over $9,700 but not over $39,475

$970 plus 12% of the excess over $9,700

Over $39,475 but not over $84,200

$4,543 plus 22% of the excess over $39,475

Over $84,200 but not over $160,725

$14,382.50 plus 24% of the excess over $84,200

Over $160,725 but not over $204,100

$32,748.50 plus 32% of the excess over $160,725

Over $204,100 but not over $510,300

$46,628.50 plus 35% of the excess over $204,100

Over $510,300

$153,798.50 plus 37% of the excess over $510,300

TABLE 4 - Section 1(j)(2)(D) - Married Individuals Filing Separate Returns

If Taxable Income Is:

The Tax Is:

Not over $9,700

10% of the taxable income

Over $9,700 but not over $39,475

$970 plus 12% of the excess over $9,700

Over $39,475 but not over $84,200

$4,543 plus 22% of the excess over $39,475

Over $84,200 but not over $160,725

$14,382.50 plus 24% of the excess over $84,200

Over $160,725 but not over $204,100

$32,748.50 plus 32% of the excess over $160,725

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TABLE 5 - Section 1(j)(2)(E) - Estates and Trusts

If Taxable Income Is:

The Tax Is:

Over $204,100 but not over $306,175

$46,628.50 plus 35% of the excess over $204,100

Over $306,175

$82,354.75 plus 37% of the excess over $306,175

If Taxable Income Is:

The Tax Is:

Not over $2,600

10% of the taxable income

Over $2,600 but not over $9,300

$260 plus 24% of the excess over $2,600

Over $9,300 but not over $12,750

$1,868 plus 35% of the excess over $9,300

Over $12,750

$3,075.50 plus 37% of the excess over $12,750

.02 Unearned Income of Minor Chil-
dren Taxed as if Parent's Income (the
"Kiddie Tax"). For taxable years begin-
ning in 2019, the amount in § 1(g)(4)(A)
(ii)(I), which is used to reduce the net
unearned income reported on the child's
return that is subject to the "kiddie tax," is
$1,100. This $1,100 amount is the same as
the amount provided in § 63(c)(5)(A), as
adjusted for inflation. The same $1,100
amount is used for purposes of § 1(g)(7)
(that is, to determine whether a parent
may elect to include a child's gross in-
come in the parent's gross income and to
calculate the "kiddie tax"). For example,
one of the requirements for the parental
election is that a child's gross income is
more than the amount referenced in
§ 1(g)(4)(A)(ii)(I) but less than 10 times
that amount; thus, a child's gross income
for 2019 must be more than $1,100 but
less than $11,000.

.03 Maximum Capital Gains Rate. For
taxable years beginning in 2019, the Max-
imum Zero Rate Amount under § 1(h)(1)
(B)(i) is $78,750 in the case of a joint
return or surviving spouse, $52,750 in the
case of an individual who is a head of
household (§ 2(b)), $39,375 in the case of
any other individual (other than an estate
or trust), and $2,650 in the case of an
estate or trust. The Maximum 15-percent

Rate Amount under § 1(h)(C)(ii)(l) is
$488,850 in the case of a joint return or
surviving spouse (1/2 such amount in the
case of a married individual filing a sep-
arate return), $461,700 in the case of an
individual who is the head of a household
(§ 2(b)), $434,550 in the case of any other
individual (other than an estate or trust),
and $12,950 in the case of an estate or
trust.

.04 Adoption Credit. For taxable years
beginning in 2019, under § 23(a)(3) the
credit allowed for an adoption of a child
with special needs is $14,080. For taxable
years beginning in 2019, under § 23(b)(1)
the maximum credit allowed for other
adoptions is the amount of qualified adop-
tion expenses up to $14,080. The avail-
able adoption credit begins to phase out
under § 23(b)(2)(A) for taxpayers with
modified adjusted gross income in excess
of $211,160 and is completely phased out
for taxpayers with modified adjusted gross
income of $251,160 or more. (See section
3.20 for the adjusted items relating to
adoption assistance programs.)

.05 Child Tax Credit. For taxable years
beginning in 2019, the value used in
§ 24(d)(1)(A) to determine the amount of
credit under § 24 that may be refundable
is $1,400.

.06 Lifetime Learning Credit. For tax-
able years beginning in 2019, a taxpayer's
modified adjusted gross income in excess
of $58,000 ($116,000 for a joint return) is
used to determine the reduction under
§ 25A(d)(2) in the amount of the Lifetime
Learning Credit otherwise allowable un-
der § 25A(a)(2).

.07 Earned Income Credit.

(1) In general. For taxable years begin-
ning in 2019, the following amounts are
used to determine the earned income
credit under § 32(b). The "earned in-
come amount" is the amount of earned
income at or above which the maximum
amount of the earned income credit is
allowed. The "threshold phaseout
amount" is the amount of adjusted gross
income (or, if greater, earned income)
above which the maximum amount of the
credit begins to phase out. The "com-
pleted phaseout amount" is the amount of
adjusted gross income (or, if greater,
earned income) at or above which no
credit is allowed. The threshold phaseout
amounts and the completed phaseout
amounts shown in the table below for
married taxpayers filing a joint return in-
clude the increase provided in
§ 32(b)(3)(B)(i), as adjusted for inflation
for taxable years beginning in 2019.

Number of Qualifying Children

Item

One

Two

Three or More

None

Earned Income Amount

$10,370

$14,570

$14,570

$6,920

Maximum Amount of Credit

$3,526

$5,828

$6,557

$529

Threshold Phaseout Amount (Single, Surviving Spouse, or Head of Household)

$19,030

$19,030

$19,030

$8,650

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Number of Qualifying Children

Item

One

Two

Three or More

None

Completed Phaseout Amount (Single, Surviving Spouse, or Head of Household)

$41,094

$46,703

$50,162

$15,570

Threshold Phaseout Amount (Married Filing Jointly)

$24,820

$24,820

$24,820

$14,450

Completed Phaseout Amount (Married Filing Jointly)

$46,884

$52,493

$55,952

$21,370

The instructions for the Form 1040 se-
ries provide tables showing the amount of
the earned income credit for each type of
taxpayer.

(2) Excessive Investment Income. For
taxable years beginning in 2019, the

earned income tax credit is not allowed
under § 32(i)(1) if the aggregate amount
of certain investment income exceeds
$3,600.

.08 Refundable Credit for Coverage
Under a Qualified Health Plan. For tax-

able years beginning in 2019, the limita-
tion on tax imposed under § 36B(f)(2)(B)
for excess advance credit payments is de-
termined using the following table:

If the household income (expressed as a percent of poverty line) is:

The limitation amount for unmarried individuals (other than surviving spouses and heads of household) is:

The limitation amount for (expressed as a percent all other taxpayers is: of poverty line) is:

Less than 200%

$300

$600

At least 200% but less than 300%

$800

$1,600

At least 300% but less than 400%

$1,325

$2,650

.09 Rehabilitation Expenditures Treated
as Separate New Building. For calendar
year 2019, the per low-income unit qualified
basis amount under § 42(e)(3)(A)(ii)(II) is
$7,000.

.10 Low-Income Housing Credit. For
calendar year 2019, the amount used un-
der § 42(h)(3)(C)(ii) to calculate the State
housing credit ceiling for the low-income

housing credit is the greater of (1)
$2.75625 multiplied by the State popula-
tion, or (2) $3,166,875.

.11 Employee Health Insurance Ex-
pense of Small Employers. For taxable
years beginning in 2019, the dollar
amount in effect under § 45R(d)(3)(B) is
$27,100. This amount is used under
§ 45R(c) for limiting the small employer

health insurance credit and under
§ 45R(d)(1)(B) for determining who is an
eligible small employer for purposes of
the credit.

.12 Exemption Amounts for Alternative
Minimum Tax. For taxable years begin-
ning in 2019, the exemption amounts un-
der § 55(d)(1) are:

Joint Returns or Surviving Spouses

$111,700

Unmarried Individuals (other than Surviving Spouses)

$71,700

Married Individuals Filing Separate Returns

$55,850

Estates and Trusts

$25,000

For taxable years beginning in 2019, come above which the 28 percent tax rate under § 55(b)(1), the excess taxable in- applies is:

Married Individuals Filing Separate Returns

$97,400

Joint Returns, Unmarried Individuals (other than surviving spouses), and Estates and Trusts

$194,800

For taxable years beginning in 2019, termine the phaseout of the exemption the amounts used under § 55(d)(3) to de- amounts are:

Joint Returns or Surviving Spouses

$1,020,600

Unmarried Individuals (other than Surviving Spouses)

$510,300

Married Individuals Filing Separate Returns

$510,300

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$1,020,600
$83,500

.13 Alternative Minimum Tax Exemp-
tion for a Child Subject to the "Kiddie Tax."
For taxable years beginning in 2019, for a
child to whom the § 1(g) "kiddie tax" ap-
plies, the exemption amount under §§ 55
and 59(j) for purposes of the alternative
minimum tax under § 55 may not exceed
the sum of (1) the child's earned income for
the taxable year, plus (2) $7,750.

.14 Certain Expenses of Elementary
and Secondary School Teachers. For tax-
able years beginning in 2019, under
§ 62(a)(2)(D) the amount of the deduction
allowed under § 162 that consists of ex-

penses paid or incurred by an eligible ed-
ucator in connection with books, supplies
(other than nonathletic supplies for
courses of instruction in health or physical
education), computer equipment (includ-
ing related software and services) and
other equipment, and supplementary ma-
terials used by the eligible educator in the
classroom is $250.

.15 Transportation Mainline Pipeline
Construction Industry Optional Expense
Substantiation Rules for Payments to Em-
ployees Under Accountable Plans. For
calendar year 2019, an eligible employer

may pay certain welders and heavy equip-
ment mechanics an amount of up to $18
per hour for rig-related expenses that are
deemed substantiated under an account-
able plan if paid in accordance with Rev.
Proc. 2002-41, 2002-1 C.B. 1098. If the
employer provides fuel or otherwise reim-
burses fuel expenses, up to $11 per hour is
deemed substantiated if paid under Rev.
Proc. 2002-41.

.16 Standard Deduction.

(1) In general. For taxable years begin-
ning in 2019, the standard deduction
amounts under § 63(c)(2) are as follows:

Filing Status

Standard Deduction

Married Individuals Filing Joint Returns and Surviving Spouses (§ 1(j)(2)(A))

$24,400

Heads of Households (§ 1(j)(2)(B))

$18,350

Unmarried Individuals (other than Surviving Spouses and Heads of Households) (§ 1(j)(2)(C))

$12,200

Married Individuals Filing Separate Returns (§ 1(j)(2)(D))

$12,200

(2) Dependent. For taxable years be-
ginning in 2019, the standard deduction
amount under § 63(c)(5) for an individual
who may be claimed as a dependent by
another taxpayer cannot exceed the
greater of (1) $1,100, or (2) the sum of
$350 and the individual's earned income.

(3) Aged or blind. For taxable years
beginning in 2019, the additional standard
deduction amount under § 63(f) for the
aged or the blind is $1,300. The additional
standard deduction amount is increased to
$1,650 if the individual is also unmarried
and not a surviving spouse.

.17 Cafeteria Plans. For taxable years
beginning in 2019, the dollar limitation
under § 125(i) on voluntary employee sal-
ary reductions for contributions to health
flexible spending arrangements is $2,700.

.18 Qualified Transportation Fringe
Benefit. For taxable years beginning in
2019, the monthly limitation under § 132(f)
(2)(A) regarding the aggregate fringe benefit
exclusion amount for transportation in a
commuter highway vehicle and any transit
pass is $265. The monthly limitation under
§ 132(f)(2)(B) regarding the fringe benefit
exclusion amount for qualified parking is
$265.

.19 Income from United States Savings
Bonds for Taxpayers Who Pay Qualified
Higher Education Expenses. For taxable
years beginning in 2019, the exclusion un-
der § 135, regarding income from United
States savings bonds for taxpayers who pay
qualified higher education expenses, begins
to phase out for modified adjusted gross
income above $121,600 for joint returns and
$81,100 for all other returns. The exclusion
is completely phased out for modified ad-
justed gross income of $151,600 or more for
joint returns and $96,100 or more for all
other returns.

.20 Adoption Assistance Programs. For
taxable years beginning in 2019, under
§ 137(a)(2), the amount that can be ex-
cluded from an employee's gross income
for the adoption of a child with special
needs is $14,080. For taxable years begin-
ning in 2019, under § 137(b)(1) the max-
imum amount that can be excluded from
an employee's gross income for the
amounts paid or expenses incurred by an
employer for qualified adoption expenses
furnished pursuant to an adoption assis-
tance program for other adoptions by the
employee is $14,080. The amount exclud-
able from an employee's gross income
begins to phase out under § 137(b)(2)(A)

for taxpayers with modified adjusted gross
income in excess of $211,160 and is com-
pletely phased out for taxpayers with mod-
ified adjusted gross income of $251,160 or
more. (See section 3.04 of this revenue pro-
cedure for the adjusted items relating to the
adoption credit.)

.21 Private Activity Bonds Volume
Cap. For calendar year 2019, the amounts
used under § 146(d) to calculate the State
ceiling for the volume cap for private ac-
tivity bonds is the greater of (1) $105
multiplied by the State population, or (2)
$316,745,000.

.22 Loan Limits on Agricultural Bonds.
For calendar year 2019, the loan limit
amount on agricultural bonds under
§ 147(c)(2)(A) for first-time farmers is
$543,800.

.23 General Arbitrage Rebate Rules.
For bond years ending in 2019, the
amount of the computation credit deter-
mined under the permission to rely on
§ 1.148-3(d)(4) of the proposed Income
Tax Regulations is $1,730.

.24 Safe Harbor Rules for Broker Com-
missions on Guaranteed Investment Con-
tracts or Investments Purchased for a
Yield Restricted Defeasance Escrow. For
calendar year 2019, under § 1.148-

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5(e)(2)(iii)(B)(1), a broker's commission
or similar fee for the acquisition of a guar-
anteed investment contract or investments
purchased for a yield restricted defeasance
escrow is reasonable if (1) the amount of
the fee that the issuer treats as a qualified
administrative cost does not exceed the
lesser of (A) $41,000, and (B) 0.2 percent
of the computational base (as defined in
§ 1.148-5(e)(2)(iii)(B)(2)) or, if more,
$4,000; and (2) for any issue, the issuer
does not treat more than $115,000 in bro-
kers' commissions or similar fees as quali-
fied administrative costs for all guaranteed
investment contracts and investments for

yield restricted defeasance escrows pur-
chased with gross proceeds of the issue.

.25 Gross Income Limitation for a
Qualifying Relative. For taxable years be-
ginning in 2019, the exemption amount
referenced in § 152(d)(1)(B) is $4,200.

.26 Election to Expense Certain Depre-
ciable Assets. For taxable years beginning
in 2019, under § 179(b)(1), the aggregate
cost of any § 179 property that a taxpayer
elects to treat as an expense cannot exceed
$1,020,000 and under § 179(b)(5)(A), the
cost of any sport utility vehicle that may
be taken into account under § 179 cannot
exceed $25,500. Under § 179(b)(2), the
$2,550,000 limitation is reduced (but not

below zero) by the amount the cost of
§ 179 property placed in service during
the 2019 taxable year exceeds $2,550,000.

.27 Qualified Business Income. For
taxable years beginning in 2019, the
threshold amount under § 199A(e)(2) is
$321,400 for married filing joint returns,
$160,725 for married filing separate re-
turns, and $160,700 for single and head of
household returns.

.28 Eligible Long-Term Care Premi-
ums. For taxable years beginning in 2019,
the limitations under § 213(d)(10), regard-
ing eligible long-term care premiums in-
cludible in the term "medical care," are as
follows:

Attained Age Before the Close of the Taxable Year

Limitation on Premiums

40 or less

$420

More than 40 but not more than 50

$790

More than 50 but not more than 60

$1,580

More than 60 but not more than 70

$4,220

More than 70

$5,270

.29 Medical Savings Accounts.

(1) Self-only coverage. For taxable
years beginning in 2019, the term "high
deductible health plan" as defined in
§ 220(c)(2)(A) means, for self-only cover-
age, a health plan that has an annual deduct-
ible that is not less than $2,350 and not more
than $3,500, and under which the annual
out-of-pocket expenses required to be paid
(other than for premiums) for covered ben-
efits do not exceed $4,650.

(2) Family coverage. For taxable years
beginning in 2019, the term "high deduct-
ible health plan" means, for family cover-
age, a health plan that has an annual de-
ductible that is not less than $4,650 and not
more than $7,000, and under which the an-
nual out-of-pocket expenses required to be
paid (other than for premiums) for covered
benefits do not exceed $8,550.

.30 Interest on Education Loans. For
taxable years beginning in 2019, the
$2,500 maximum deduction for interest
paid on qualified education loans under
§ 221 begins to phase out under § 221(b)
(2)(B) for taxpayers with modified ad-
justed gross income in excess of $70,000
($140,000 for joint returns), and is com-
pletely phased out for taxpayers with
modified adjusted gross income of

$85,000 or more ($170,000 or more for
joint returns).

.31 Limitation on Use of Cash Method
of Accounting. For taxable years begin-
ning in 2019, a corporation or partnership
meets the gross receipts test of § 448(c)
for any taxable year if the average annual
gross receipts of such entity for the
3-taxable-year period ending with the tax-
able year which precedes such taxable
year does not exceed $26,000,000.

.32 Threshold for Excess Business Loss.
For taxable years beginning in 2019, in de-
termining a taxpayer's excess business loss,
the amount under § 461(l)(3)(A)(ii)(II) is
$255,000 ($510,000 for joint returns).

.33 Treatment of Dues Paid to Agricul-
tural or Horticultural Organizations. For
taxable years beginning in 2019, the lim-
itation under § 512(d)(1), regarding the
exemption of annual dues required to be
paid by a member to an agricultural or
horticultural organization, is $169.

.34 Insubstantial Benefit Limitations
for Contributions Associated with Chari-
table Fund-Raising Campaigns.

(1) Low cost article. For taxable years
beginning in 2019, for purposes of defin-
ing the term "unrelated trade or business"
for certain exempt organizations under

§ 513(h)(2), "low cost articles" are articles
costing $11.10 or less.

(2) Other insubstantial benefits. For
taxable years beginning in 2019, under
§ 170, the $5, $25, and $50 guidelines in
section 3 of Rev. Proc. 90-12, 1990-1
C.B. 471 (as amplified by Rev. Proc. 92-
49, 1992-1 C.B. 987, and modified by
Rev. Proc. 92-102, 1992-2 C.B. 579), for
the value of insubstantial benefits that
may be received by a donor in return for a
contribution, without causing the contri-
bution to fail to be fully deductible, are
$11.10, $55.50, and $111, respectively.

.35 Special Rules for Credits and De-
ductions. For taxable years beginning in
2019, the amount of the deduction under
§ 642(b)(2)(C)(i) is $4,200.

.36 Tax on Insurance Companies Other
than Life Insurance Companies. For taxable
years beginning in 2019, under § 831(b)(2)
(A)(i) the amount of the limit on net written
premiums or direct written premiums
(whichever is greater) is $2,300,000 to elect
the alternative tax for certain small compa-
nies under § 831(b)(1) to be taxed only on
taxable investment income.

.37 Expatriation to Avoid Tax. For cal-
endar year 2019, under § 877A(g)(1)(A),
unless an exception under § 877A(g)(1)(B)
applies, an individual is a covered expatriate

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if the individual's "average annual net in-
come tax" under § 877(a)(2)(A) for the five
taxable years ending before the expatriation
date is more than $168,000.

.38 Tax Responsibilities of Expatria-
tion. For taxable years beginning in 2019,
the amount that would be includible in the
gross income of a covered expatriate by
reason of § 877A(a)(1) is reduced (but not
below zero) by $725,000.

.39 Foreign Earned Income Exclusion.
For taxable years beginning in 2019, the
foreign earned income exclusion amount
under § 911(b)(2)(D)(i) is $105,900.

.40 Debt Instruments Arising Out of
Sales or Exchanges. For calendar year
2019, a qualified debt instrument under
§ 1274A(b) has stated principal that does
not exceed $5,944,600, and a cash method
debt instrument under § 1274A(c)(2) has
stated principal that does not exceed
$4,246,200.

.41 Unified Credit Against Estate Tax.
For an estate of any decedent dying in
calendar year 2019, the basic exclusion
amount is $11,400,000 for determining
the amount of the unified credit against
estate tax under § 2010.

.42 Valuation of Qualified Real Prop-
erty in Decedent's Gross Estate. For an
estate of a decedent dying in calendar year
2019, if the executor elects to use the
special use valuation method under
§ 2032A for qualified real property, the
aggregate decrease in the value of quali-
fied real property resulting from electing
to use § 2032A for purposes of the estate
tax cannot exceed $1,160,000.

.43 Annual Exclusion for Gifts.

(1) For calendar year 2019, the first
$15,000 of gifts to any person (other than
gifts of future interests in property) are not
included in the total amount of taxable
gifts under § 2503 made during that year.
(2) For calendar year 2019, the first
$155,000 of gifts to a spouse who is not a
citizen of the United States (other than
gifts of future interests in property) are not

included in the total amount of taxable
gifts under §§ 2503 and 2523(i)(2) made
during that year.

.44 Tax on Arrow Shafts. For calendar
year 2019, the tax imposed under
§ 4161(b)(2)(A) on the first sale by the
manufacturer, producer, or importer of
any shaft of a type used in the manufac-
ture of certain arrows is $0.52 per shaft.

.45 Passenger Air Transportation Ex-
cise Tax. For calendar year 2019, the tax
under § 4261(b)(1) on the amount paid for
each domestic segment of taxable air
transportation is $4.20. For calendar year
2019, the tax under § 4261(c)(1) on any
amount paid (whether within or without
the United States) for any international air
transportation, if the transportation begins
or ends in the United States, generally is
$18.60. Under § 4261(c)(3), however, a
lower amount applies under § 4261(c)(1)
to a domestic segment beginning or end-
ing in Alaska or Hawaii, and the tax ap-
plies only to departures. For calendar year
2019, the rate is $9.30.

.46 Reporting Exception for Certain
Exempt Organizations with Nondeduct-
ible Lobbying Expenditures. For taxable
years beginning in 2019, the annual per
person, family, or entity dues limitation to
qualify for the reporting exception under
§ 6033(e)(3) (and section 5.05 of Rev.
Proc. 98-19, 1998-1 C.B. 547), regard-
ing certain exempt organizations with
nondeductible lobbying expenditures, is
$117 or less.

.47 Notice of Large Gifts Received from
Foreign Persons. For taxable years begin-
ning in 2019, § 6039F authorizes the Trea-
sury Department and the Internal Revenue
Service to require recipients of gifts from
certain foreign persons to report these gifts
if the aggregate value of gifts received in the
taxable year exceeds $16,388.

.48 Persons Against Whom a Federal
Tax Lien Is Not Valid. For calendar year
2019, a federal tax lien is not valid against
(1) certain purchasers under § 6323(b)(4)

who purchased personal property in a ca-
sual sale for less than $1,590, or (2) a
mechanic's lienor under § 6323(b)(7) who
repaired or improved certain residential
property if the contract price with the
owner is not more than $7,970.

.49 Property Exempt from Levy. For
calendar year 2019, the value of property
exempt from levy under § 6334(a)(2) (fuel,
provisions, furniture, and other household
personal effects, as well as arms for personal
use, livestock, and poultry) cannot exceed
$9,540. The value of property exempt from
levy under § 6334(a)(3) (books and tools
necessary for the trade, business, or profes-
sion of the taxpayer) cannot exceed $4,770.

.50 Exempt Amount of Wages, Salary,
or Other Income. For taxable years begin-
ning in 2019, the dollar amount used to
calculate the amount determined under
§ 6334(d)(4)(B) is $4,200.

.51 Interest on a Certain Portion of the
Estate Tax Payable in Installments. For an
estate of a decedent dying in calendar year
2019, the dollar amount used to determine
the "2-percent portion" (for purposes of
calculating interest under § 6601(j)) of the
estate tax extended as provided in § 6166
is $1,550,000.

.52 Failure to File Tax Return. In the
case of any return required to be filed in
2020, the amount of the addition to tax
under § 6651(a) for failure to file a tax
return within 60 days of the due date of
such return (determined with regard to
any extensions of time for filing) shall not
be less than the lesser of $215 or 100
percent of the amount required to be
shown as tax on such returns.

.53 Failure to File Certain Information
Returns, Registration Statements, etc. For
returns required to be filed in 2020, the
penalty amounts under § 6652(c) are:

(1) for failure to file a return required
under § 6033(a)(1) (relating to returns by
exempt organization) or § 6012(a)(6) (relat-
ing to returns by political organizations):

Scenario

Daily Penalty

Maximum Penalty

Organization (§ 6652(c)(1)(A))

$20

Lessor of $10,500 or 5% of gross receipts of the organization for the year.

Organization with gross receipts exceeding $1,067,000 (§ 6652(c)(1)(A))

$105

$53,000

Managers (§ 6652(c)(1)(B))

$10

$5,000

Public inspection of annual returns and reports (§ 6652(c)(1)(C))

$20

$10,500

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Scenario

Public inspection of applications for exemption and notice of status
(§ 6652(c)(1)(D))

Daily Penalty
$20

Maximum Penalty
No Limits

(2) for failure to file a return required
under § 6034 (relating to returns by cer-

tain trust) or § 6043(b) (relating to termi-
nations, etc., of exempt organizations):

Scenario

Daily Penalty

Maximum Penalty

Organization or trust (§ 6652(c)(2)(A))

$10

$5,000

Managers (§ 6652(c)(2)(B))

$10

$5,000

Split-Interest Trust (§ 6652(c)(2)(C)(ii))

$20

$10,500

Any trust with gross income exceeding $266,500 (§ 6652(c)(2)(C)(ii))

$105

$53,000

(3) for failure to file a disclosure re-
quired under § 6033(a)(2):

Scenario

Daily Penalty

Maximum Penalty

Tax-exempt entity (§ 6652(c)(3)(A))

$105

$53,000

Failure to comply with written demand (§ 6652(c)(3)(B)(ii))

$105

$10,500

.54 Other Assessable Penalties With
for Other Persons. In the case of any
refund filed in 2020, the penalty amounts
under § 6695 are:

Respect to the Preparation of Tax Returns

failure relating to a return or claim for

Scenario

Per Return or Claim for Refund

Maximum Penalty

Failure to furnish copy to taxpayer (§ 6695(a))

$50

$26,500

Failure to sign return (§ 6695(b))

$50

$26,500

Failure to furnish identifying number (§ 6695(c))

$50

$26,500

Failure to retain copy or list (§ 6695(d))

$50

$26,500

Failure to file correct information returns (§ 6695(e))

$50 per return and item in return

$26,500

Negotiation of check (§ 6695(f))

$530 per check

No limit

Failure to be diligent in determining eligibility for head of household filing status, child tax credit, American opportunity tax credit, and earned income credit (§ 6695(g))

$530 per failure

No limit

.55 Failure to File Partnership Return.
In the case of any return required to be
filed in 2020, the dollar amount used to
determine the amount of the penalty under
§ 6698(b)(1) is $205.

.56 Failure to File S Corporation Re-
turn. In the case of any return required to

be filed in 2020, the dollar amount used to
determine the amount of the penalty under
§ 6699(b)(1) is $205.

.57 Failure to File Correct Information
Returns. In the case of any failure relating
to a return required to be filed in 2020, the
penalty amounts under § 6721 are:

(1) for persons with average annual
gross receipts for the most recent three
taxable years of more than $5,000,000, for
failure to file correct information returns:

Scenario

Penalty Per Return

Calendar Year Maximum

General Rule (§ 6721(a)(1))

$270

$3,339,000

Corrected on or before 30 days after required filing date (§ 6721(b)(1))

$50

$556,500

Corrected after 30th day but on or before August 1 (§ 6721(b)(2))

$110

$1,669,500

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(2) for persons with average annual
gross receipts for the most recent three

taxable years of $5,000,000 or less, for
failure to file correct information returns:

Scenario

Penalty Per Return

Calendar Year Maximum

General Rule (§ 6721(d)(1)(A))

$270

$1,113,000

Corrected on or before 30 days after required filing date (§ 6721(d)(1)(B))

$50

$194,500

Corrected after 30th day but on or before August 1 (§ 6721(d)(1)(C))

$110

$556,500

(3) for failure to file correct informa-
the filing requirement (or the correct in-
formation reporting requirement):

## tion returns due to intentional disregard of

Scenario

Penalty Per Return

Calendar Year Maximum

Return other than a return required to be filed under §§ 6045(a), 6041A(b), 6050H, 6050I, 6050J, 6050K, or 6050L (§ 6721(e)(2)(A))

Greater of (i) $550, or (ii) 10% of aggregate amount of items required to be reported correctly

No limit

Return required to be filed under §§ 6045(a), 6050K, or 6050L (§ 6721(e)(2)(B))

Greater of (i) $550, or (ii) 5% of aggregate amount of items required to be reported correctly

No limit

Return required to be filed under § 6050I(a) (§ 6721(e)(2)(C))

Greater of (i) $27,820, or (ii) amount of cash received up to $111,000

No limit

Return required to be filed under § 6050V (§ 6721(e)(2)(D))

Greater of (i) $550, or (ii) 10% of the value of the benefit of any contract with respect to which information is required to be included on the return

No limit

.58 Failure to Furnish Correct Payee
Statements. In the case of any failure re-
lating to a statement required to be fur-

nished in 2020, the penalty amounts under
§ 6722 are:

(1) for persons with average annual
gross receipts for the most recent three

taxable years of more than $5,000,000, for
failure to file correct information returns:

Scenario

Penalty Per Return

Calendar Year Maximum

General Rule (§ 6722(a)(1))

$270

$3,339,000

Corrected on or before 30 days after required filing date (§ 6722(b)(1))

$50

$556,500

Corrected after 30th day but on or before August 1 (§ 6722(b)(2))

$110

$1,669,500

(2) for persons with average annual
gross receipts for the most recent 3 tax-

able years of $5,000,000 or less, for fail-
ure to file correct information returns:

Scenario

Penalty Per Return

Calendar Year Maximum

General Rule (§ 6722(d)(1)(A))

$270

$1,113,000

Corrected on or before 30 days after required filing date (§ 6722(d)(1)(B))

$50

$194,500

Corrected after 30th day but on or before August 1 (§ 6722(d)(1)(C))

$110

$556,500

(3) for failure to file correct payee
statements due to intentional disregard of
the requirement to furnish a payee state-

ment (or the correct information reporting
requirement):

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### Scenario

Statement other than a statement required under
§§ 6045(b), 6041A(e) (in respect of a return required
under § 6041A(b)), 6050H(d), 6050J(e), 6050K(b),
or 6050L(c) (§ 6722(e)(2)(A))

Payee statement required under §§ 6045(b), 6050K(b),or
6050L(c) (§ 6722(e)(2)(B))

Penalty Per Return

Calendar Year Maximum

Greater of (i) $550, or (ii) 10% of aggregate amount of items required to be reported correctly

No limit

Greater of (i) $550, or (ii) 5% of aggregate amount of items required to

No limit

be reported correctly

.59 Revocation or Denial of Passport
in Case of Certain Tax Delinquencies. For
calendar year 2019, the amount of a seri-
ous delinquent tax debt under § 7345 is
$52,000.

.60 Attorney Fee Awards. For fees in-
curred in calendar year 2019, the attorney
fee award limitation under § 7430(c)(1)
(B)(iii) is $200 per hour.

.61 Periodic Payments Received Under
Qualified Long-Term Care Insurance
Contracts or Under Certain Life Insur-
ance Contracts. For calendar year 2019,
the stated dollar amount of the per diem
limitation under § 7702B(d)(4), regarding
periodic payments received under a qual-
ified long-term care insurance contract or
periodic payments received under a life
insurance contract that are treated as paid
by reason of the death of a chronically ill
individual, is $370.

.62 Qualified Small Employer Health
Reimbursement Arrangement. For taxable
years beginning in 2019, to qualify as a
qualified small employer health reim-
bursement arrangement under § 9831(d),
the arrangement must provide that the to-

tal amount of payments and reimburse-
ments for any year cannot exceed $5,150
($10,450 for family coverage).

## SECTION 4. EFFECTIVE DATE

.01 General Rule. Except as provided
in section 4.02, this revenue procedure
applies to taxable years beginning in
2019.

.02 Calendar Year Rule. This revenue
procedure applies to transactions or events
occurring in calendar year 2019 for pur-
poses of sections 3.09 (rehabilitation ex-
penditures treated as separate new build-
ing), 3.10 (low-income housing credit),
3.15 (transportation mainline pipeline
construction industry optional expense
substantiation rules for payments to em-
ployees under accountable plans), 3.21
(private activity bonds volume cap), 3.22
(loan limits on agricultural bonds), 3.23
(general arbitrage rebate rules), 3.24 (safe
harbor rules for broker commissions on
guaranteed investment contracts or invest-
ments purchased for a yield restricted de-
feasance escrow), 3.37 (expatriation to
avoid taxes), 3.40 (debt instruments aris-

ing out of sales or exchanges), 3.41 (uni-
fied credit against estate tax), 3.42 (valu-
ation of qualified real property in
decedent's gross estate), 3.43 (annual ex-
clusion for gifts), 3.44 (tax on arrow
shafts), 3.45 (passenger air transportation
excise tax), 3.48 (persons against whom a
federal tax lien is not valid), 3.49 (prop-
erty exempt from levy), 3.51 (interest on a
certain portion of the estate tax payable in
installments), 3.59 (revocation or denial
of passport in case of certain tax delin-
quencies), 3.60 (attorney fee awards), and
3.61 (periodic payments received under
qualified long-term care insurance con-
tracts or under certain life insurance con-
tracts).

## SECTION 5. DRAFTING INFORMATION

The principal author of this revenue
procedure is William Ruane of the Office
of Associate Chief Counsel (Income Tax
& Accounting). For further information
regarding this revenue procedure, contact
Mr. Ruane at (202) 317-4718 (not a toll-
free number).

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# Part IV. Items of General Interest

Notice of proposed
rulemaking
Regulations to Prescribe
Return and Time for Filing
for Payment of Section
4960, 4966, 4967, and
4968 Taxes and to Update
the Abatement Rules for
Section 4966 and 4967
Taxes

## REG-107163-18

AGENCY: Internal Revenue Service (IRS),
Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains
proposed regulations specifying which re-
turn to use to pay certain excise taxes
and the time for filing the return. The
regulations also implement the statutory
addition of two excise taxes to the first-tier
taxes subject to abatement. These regula-
tions affect applicable tax-exempt organiza-
tions and their related organizations, appli-
cable educational institutions, sponsoring
organizations that maintain certain donor
advised funds, fund managers of such spon-
soring organizations, and certain donors, do-
nor advisors and persons related to a donor
or donor advisor of a donor advised fund.

DATES: Written or electronic comments
and requests for a public hearing must be
received by December 7, 2018.

ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG-107163-18), Room
5203, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand-
delivered Monday through Friday be-
tween the hours of 8 a.m. and 4 p.m. to
CC:PA:LPD:PR (REG-107163-18), Cou-
rier's Desk, Internal Revenue Service,
1111 Constitution Avenue NW, Wash-
ington, DC, 20224 or sent electronically
via the Federal eRulemaking Portal
at http://www.regulations.gov (indicate
IRS REG-107163-18).

FOR FURTHER INFORMATION CON-
TACT: Concerning the proposed regula-
tions, Amber L. MacKenzie at (202)
317-4086 or Ward L. Thomas at (202) 317-
6173; concerning submission of comments
and request for hearing, Regina Johnson at
(202) 317-6901 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:
Background

This document contains proposed reg-
ulations amending regulations under sec-
tion 6011 of the Internal Revenue Code
(Code) to specify the return to accompany
payment of excise taxes under sections
4960, 4966, 4967, and 4968; amending
regulations under section 6071 to specify
the time for filing that return; and amend-
ing regulations under section 4963 that
define the first-tier taxes subject to abate-
ment under section 4962.

These regulations affect applicable tax-
exempt organizations described in section
4960(c)(1) and their related organizations
described in section 4960(c)(4)(B); appli-
cable educational institutions described in
section 4968(b)(1); sponsoring organiza-
tions described in section 4966(d)(1) that
maintain donor advised funds described in
section 4966(d)(2); fund managers of such
sponsoring organizations described in sec-
tions 4966(d)(3) ; and donors, donor ad-
visors and persons related to a donor or
donor advisor of a donor advised fund
described in section 4967(d).

These regulations implement section
1231 of the Pension Protection Act of
2006, Pub. L. 109-280, 120 Stat. 780,
1094 ("PPA"), as amended by section 3(h)
of the Tax Technical Corrections Act of
2007, Pub. L. 110-172, 121 Stat. 2473,
2475, and sections 13602 and 13701 of
the Tax Cuts and Jobs Act, Pub. L. 115-
97, 131 Stat. 2054, 2157, 2167 (2017)
("TCJA").

The PPA added sections 4966 and
4967 to the Code. These sections impose
excise taxes related to certain distributions
from donor advised funds (defined in sec-
tion 4966(d)(2)) maintained by organiza-
tions that are defined as sponsoring orga-
nizations in section 4966(d)(1).

Section 4966(a)(1) imposes a 20 per-
cent excise tax on each "taxable distribu-

tion" from a donor advised fund, payable
by the sponsoring organization of the do-
nor advised fund. Section 4966(a)(2) im-
poses a separate 5 percent excise tax on
the agreement of any fund manager (as
defined in section 4966(d)(3)) to the mak-
ing of the distribution, knowing that it is a
taxable distribution. Section 4966(b)(1)
states that if more than one fund manager is
liable for the tax, all such managers are
jointly and severally liable with respect to
the taxable distribution. Section 4966(b)(2)
provides that the maximum amount of tax
that may be imposed on all fund managers
for any one taxable distribution is $10,000.

Section 4966(c)(1) defines the term
"taxable distribution" as any distribution
from a donor advised fund: (A) To any
natural person; or (B) to any other person
if (i) the distribution is for any purpose
other than one specified in section
170(c)(2)(B), or (ii) the sponsoring orga-
nization does not exercise expenditure re-
sponsibility in accordance with section
4945(h) with respect to such distribution.
Section 4966(c)(2) excepts from the defi-
nition of taxable distribution: (A) Distri-
butions to any organization described in
section 170(b)(1)(A), other than a disqual-
ified supporting organization (as defined
in section 4966(d)(4)); (B) distributions to
the sponsoring organization of such donor
advised fund; and (C) distributions to any
other donor advised fund.

Section 4967(a)(1) imposes a tax on
the advice of a donor, donor advisor, or
related person, described in subsection
(d), if a distribution from a donor advised
fund results in such person (or any other
person described in subsection (d)) receiv-
ing, directly or indirectly, a more than
incidental benefit (a "prohibited benefit").
The tax, which is equal to 125 percent of
the amount of the prohibited benefit, is
paid by any person described in subsection
(d) who advises as to a distribution or who
receives a prohibited benefit as a result of
the distribution. Section 4967(c)(1) provides
that if more than one person is liable for the
tax under section 4967(a)(1), then all such
persons are jointly and severally liable for
the tax.

Section 4967(a)(2) imposes a tax on
a fund manager (defined in section
4966(d)(3)) who agrees to the making of

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a distribution described in section
4967(a)(1), knowing that it would con-
fer a more than incidental benefit on a
donor, donor advisor, or related person.
Section 4967(a)(2) states that the tax is
equal to 10 percent of the amount of the
prohibited benefit. Section 4967(c)(1)
provides that if more than one fund
manager is liable for the tax, all such
fund managers are jointly and severally
liable. Section 4967(c)(2) provides that
the maximum amount of tax under sec-
tion 4967(a)(2) on all fund managers for
any one prohibited benefit transaction is
$10,000. Section 4967(b) provides that
no tax is imposed under section 4967 if
a tax has been imposed with respect to
the distribution under section 4958 (tax-
ing excess benefit transactions).

In 2006, the PPA added section 4966
and section 4967 taxes to the definitions
of "first tier tax" in section 4963(a) and
"taxable event" in section 4963(c). In
2007, section 4962(b) was amended by
the Tax Technical Corrections Act of
2007, Pub. L. 110-172, sec. 3(h), 121
Stat. 2473, 2475, to add subchapter G of
chapter 42 (i.e., section 4966 and section
4967 taxes) to the definition of "qualified
first tier tax" for purposes of tax abate-
ment. Thus under the Code, section 4966
and section 4967 taxes are subject to
abatement under the generally applicable
rules. Treas. Reg. § 53.4963-1 sets forth
definitions with respect to abatement of
taxes.

The TCJA added sections 4960 and
4968 to the Code. Section 4960 imposes
an excise tax equal to the product of the
rate of tax under section 11 and the sum of
(1) so much of the remuneration paid
(other than any excess parachute pay-
ment) by an applicable tax-exempt orga-
nization for the taxable year with respect
to employment of any covered employee
in excess of $1,000,000, plus (2) any ex-
cess parachute payment paid by such an
organization to any covered employee.
Section 4960(c)(4)(A) provides that remu-
neration of a covered employee by an
applicable tax-exempt organization in-
cludes any remuneration paid with respect
to employment of such employee by any
related person or governmental entity.
Section 4960(c)(4)(C) provides that when
remuneration from more than one em-
ployer is taken into account in determin-

ing the tax imposed by subsection (a),
each such employer is liable for a pro rata
share of the tax imposed by subsection (a)
based on the ratio of the amount of remu-
neration paid by such employer with re-
spect to such employee to the amount of
remuneration paid by all such employers
to such employee. Separately, section
4968 imposes an excise tax on each ap-
plicable educational institution based on
the net investment income of such institu-
tion (including certain income of related
organizations) for the taxable year.

Section 6011(a) generally provides that
when required by regulations prescribed
by the Secretary, any person liable for any
tax imposed by the Code shall make a
return or statement according to the forms
and regulations prescribed by the Secre-
tary. Section 6071 generally provides that
when not otherwise provided for under the
Code, return filing dates are prescribed by
regulation. Treas. Reg. §§ 53.6011-1 and
53.6071-1 require persons subject to cer-
tain enumerated excise taxes under Chap-
ter 42 of the Code to file a Form 4720 to
accompany payment of those excise taxes
and provide the time for filing the return.
(Form 4720 is denominated "Return of
Certain Excise Taxes Under Chapters 41
and 42 of the Internal Revenue Code.")
Sections 4960, 4966, 4967, and 4968
were added to Chapter 42 of the Code,
but are not enumerated in Treas. Reg.
§§ 53.6011-1 and 53.6071-1.

## Explanation of Provisions

### 1. Section 4962 Abatement.

These proposed regulations add section
4966 and section 4967 taxes to the defi-
nitions of "first tier tax" and "taxable
event" in Treas. Reg. § 53.4963-1. Qual-
ified first tier taxes are subject to abate-
ment under section 4962.

### 2. Requirement to File a Form 4720.

These proposed regulations amend
Treas. Reg. § 53.6011-1(b) to provide that
persons (including governmental entities)
that are liable for section 4960, 4966,
4967, or 4968 excise taxes are required to
file a return on Form 4720.

3\. Deadline for Filing a Form 4720.

Under § 53.6071-1(i) of these pro-
posed regulations, a person required to file
a Form 4720 to report an excise tax under
section 4960, 4966, 4967, or 4968 must
file a Form 4720 by the 15th day of the
fifth month after the end of the person's
taxable year during which the excise tax
liability was incurred. Thus, for example,
an organization reporting on a calendar-
year basis that incurred excise tax during
the calendar year ending December 31,
2018, would be required to file a Form
4720 and pay the tax due by May 15,
2019.

### 4. Effective/Applicability Date

These regulations are proposed to ap-
ply as of the date of publication of the
final rule in the Federal Register.

## Special Analyses

This regulation is not subject to review
under section 6(b) of Executive Order
12866 pursuant to the Memorandum of
Agreement (April 11, 2018) between the
Department of the Treasury and the Office
of Management and Budget regarding re-
view of tax regulations. It is hereby certi-
fied that the collection of information in
these regulations will not have a signifi-
cant economic impact on a substantial
number of small entities. This rule merely
provides guidance as to the timing and
filing of Form 4720 for persons liable for
the specified excise taxes and who have a
statutory filing obligation. Completing the
applicable portion of the Form 4720 im-
poses little incremental burden in time or
expense as compared to any other filing
method. In addition, a person may already
be required to file the Form 4720 under the
existing final regulations in §§ 53.6011-1
and 53.6071-1 if it is liable for another
excise tax for which filing of the Form is
required. 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
regulation will be submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its im-
pact on small entities.

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## Comments and Requests for Public Hearing

Before these proposed regulations are
adopted as final regulations, consideration
will be given to any comments that are
timely submitted to the IRS as prescribed in
the preamble under the "ADDRESSES"
section. All comments submitted will be
made available at www.regulations.gov or
upon request.

A public hearing will be scheduled 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 hearing will
be published in the Federal Register.

## Drafting Information

The principal authors of these regula-
tions are Amber L. Mackenzie and Ward
L. Thomas, Office of Associate Chief
Counsel (Tax Exempt and Government
Entities). However, other personnel from
the IRS and Treasury Department partic-
ipated in their development.

## List of Subjects in 26 CFR Part 53

Excise taxes, Foundations, Invest-
ments, Lobbying, Reporting and record-
keeping requirements.

## Proposed Amendments to the Regulations

Accordingly, 26 CFR part 53 is pro-
posed to be amended as follows:

PART 53-FOUNDATION AND
SIMILAR EXCISE TAXES

Paragraph 1. The authority citation for
part 53 continues to read, in part, as fol-
lows:

Authority: 26 U.S.C. 7805 * * *

## § 53.4963-1 [Amended]

Par. 2. Section 53.4963-1 is amended
as follows:

1\. Paragraph (a) is amended by remov-
ing the language "4958, 4971" and adding
"4958, 4966, 4967, 4971" in its place.

2\. Paragraph (c) is amended by remov-
ing the language "4958, 4971" and adding
"4958, 4966, 4967, 4971" in its place.

Par. 3. Section 53.6011-1 is amended
by:

1\. Revising the first sentence of para-
graph (b).

2\. Removing from the third sentence of
paragraph (b) the language "4958(a), or
4965(a)," and adding "4958(a), 4960(a),
4965(a), 4966(a), or 4967(a)," in its place.
The revision reads as follows:

### § 53.6011-1 General requirement of return, statement or list.

* * * * *

(b) Every person (including a govern-
mental entity) liable for tax imposed by
sections 4941(a), 4942(a), 4943(a),
4944(a), 4945(a), 4955(a), 4958(a), 4959,
4960(a), 4965(a), 4966(a), 4967(a), or
4968(a), and every private foundation and
every trust described in section 4947(a)(2)
which has engaged in an act of self-
dealing (as defined in section 4941(d))
(other than an act giving rise to no tax
under section 4941(a)) shall file an annual
return on Form 4720 and shall include
therein the information required by such
form and the instructions issued with re-
spect thereto. * * *
* * * * *

## § 53.6071-1 [Amended]

Par. 4. Section 53.6071-1 is amended
by:

1\. Redesignating paragraph (i) as para-
graph (j).

2\. Adding new paragraphs (i) and
(j)(3).
The additions read as follows:

§ 53.6071-1 Time for filing returns.

* * * * *

(i) Taxes under section 4960, 4966,
4967, or 4968. A person (including a gov-
ernmental entity) required by § 53.6011-
1(b) to file a return for a tax imposed by
section 4960(a), 4966(a), 4967(a), or
4968(a) in a taxable year must file the
Form 4720 on or before the 15th day of
the fifth month after the end of the per-
son's taxable year (or, if the person has
not established a taxable year for Federal
income tax purposes, the person's annual
accounting period).

(j) ***

(3) Paragraph (i) of this section applies
on and after the date of publication of the
Treasury decision adopting these rules as
final regulations in the Federal Register.

Kirsten Wielobob
Deputy Commissioner for Services and
Enforcement.

(Filed by the Office of the Federal Register on November 5,
2018, 4:15 p.m., and published in the issue of the Federal
Register for November 7, 2018, 83 F.R. 55653)

### Notice of Proposed Rulemaking

Hardship Distributions of
Elective Contributions,
Qualified Matching
Contributions, Qualified
Nonelective Contributions,
and Earnings

## REG-107813-18

AGENCY: Internal Revenue Service (IRS),
Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains
proposed amendments to the regulations
relating to hardship distributions from
section 401(k) plans. The amendments re-
flect statutory changes affecting section
401(k) plans, including recent changes
made by the Bipartisan Budget Act of
2018. These regulations would affect par-
ticipants in, beneficiaries of, employers
maintaining, and administrators of plans
that contain cash or deferred arrangements
or provide for employee or matching
contributions.

DATES: Comments and requests for a
public hearing must be received by Janu-
ary 14, 2019.

ADDRESSES: Send submissions to CC:
PA:LPD:PR (REG-107813-18) Room
5203, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand-
delivered Monday through Friday be-
tween the hours of 8 a.m. and 4 p.m. to
CC:PA:LPD:PR (REG-107813-18), Cou-
rier's Desk, Internal Revenue Service,

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1111 Constitution Avenue NW., Wash-
ington, DC 20224, or sent electronically
via the Federal eRulemaking Portal at
www.regulations.gov/ (indicate IRS and
REG-107813-18).

FOR FURTHER INFORMATION CON-
TACT: Concerning the proposed regula-
tions, Roger Kuehnle at (202) 317-6060 or;
concerning submissions of comments, the
hearing, or to be placed on the building
access list to attend the hearing, Regina L.
Johnson 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 will be submitted, under approval
number 1545-1669, to the Office of Man-
agement and Budget in accordance with
the Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)). Comments on the collec-
tion of information should be sent to the
Office of Management and Budget, Attn:
Desk Officer for the Department of the
Treasury, Office of Information and Reg-
ulatory Affairs, Washington, DC 20503,
with copies to the Internal Revenue Ser-
vice, Attn: IRS Reports Clearance Officer,
SE:W:CAR:MP:T:T:SP, Washington, DC
20224. Comments on the collection of
information should be received by Janu-
ary 14, 2019. 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;

How the burden of complying with the
proposed collection 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 collection of information in this
proposed regulation is in § 1.401(k)-
1(d)(3)(iii)(B). The collection of informa-
tion relates to the certification by partici-
pants in section 401(k) plans that they
have insufficient cash or other liquid as-
sets to cover expenses resulting from a
hardship and, thus, will need a distribution
from the plan to meet the expenses. The
collections of information are required to
obtain a benefit.

The likely recordkeepers are individu-
als.

Estimated total annual reporting bur-
den: 101,250 hours.

Estimated average annual burden per
respondent: 45 minutes.

Estimated number of respondents:
135,000.

Estimated frequency of responses: On
occasion.

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.

### Background

#### Section 401(k)

Section 401(k)(1) of the Internal Rev-
enue Code (Code) provides that a profit-
sharing, stock bonus, pre-ERISA money
purchase, or rural cooperative plan will
not fail to qualify under section 401(a)
merely because it contains a cash or de-
ferred arrangement (CODA) that is a qual-
ified CODA. Under section 401(k)(2), a
CODA (generally, an arrangement provid-
ing for an election by an employee be-
tween contributions to a plan or payments
directly in cash) constitutes a qualified
CODA only if it satisfies certain require-
ments. Section 401(k)(2)(B) provides that
contributions made pursuant to a qualified
CODA (referred to as “elective contribu-
tions") may be distributed only on or after
the occurrence of certain events, including
death, disability, severance from employ-
ment, termination of the plan, attainment
of age 59-1/2, hardship, or, in the case of
a qualified reservist distribution, the date a
reservist is called to active duty. Section
401(k)(2)(C) requires that elective contri-
butions be nonforfeitable at all times.

Section 401(k)(3)(A)(ii) requires that
elective contributions satisfy the actual
deferral percentage (ADP) test set forth in
section 401(k)(3). Sections 401(k)(11),
401(k)(12), and 401(k)(13) each provide
an alternative method of meeting the ADP
test. Under section 401(k)(3)(D), qualified
nonelective contributions (QNECs) and
qualified matching contributions (QMACs),
as described in sections 401(m)(4)(C) and
401(k)(3)(D)(ii)(I), respectively, are permit-
ted to be taken into account under the ADP
test. Among other requirements, QNECs
and QMACs must satisfy the distribution
limitations of section 401(k)(2)(B) and the
nonforfeitability requirements of section
401(k)(2)(C). Similarly, employer contribu-
tions that are made pursuant to the safe
harbor plan designs of section 401(k)(12) or
(13) must meet the distribution limitations
of section 401(k)(2)(B).

Section 401(m)(2)(A) requires that
matching contributions and employee
contributions satisfy the actual contribu-
tion percentage (ACP) test set forth in
section 401(m)(2). Sections 401(m)(10),
401(m)(11), and 401(m)(12) each provide
an alternative method of meeting the ACP
test with respect to matching contribu-
tions. As with contributions made to sec-
tion 401(k) plans pursuant to safe harbor
plan designs, employer contributions
made pursuant to the safe harbor plan
designs of section 401(m)(11) or (12)
must meet the distribution limitations of
section 401(k)(2)(B).

The Department of the Treasury (Trea-
sury Department) and the IRS issued com-
prehensive final regulations under sec-
tions 401(k) and 401(m) on December 29,
2004 (TD 9169, 69 FR 78143). Since that
time, the regulations have been updated to
reflect certain subsequent changes to the
applicable statute (see TD 9237, 71 FR 6,
and TD 9324, 72 FR 21103, providing
guidance on designated Roth contribu-
tions under section 402A; and TD 9447,
74 FR 8200, providing guidance on sec-
tion 401(k)(13)). However, the regula-
tions have not been updated to reflect
other statutory changes. The regulations
have been amended to address other spe-
cific issues (see TD 9319, 72 FR 16878,
relating to the definition of compensation;
TD 9641, 78 FR 68735, relating to mid-
year amendments to safe harbor plan de-
signs; and TD 9835, 83 FR 34469, relat-

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ing to whether QNECs and QMACs must
be nonforfeitable when contributed to the
plan).

Section 1.401(k)-1(d)(3) provides rules
for determining whether a distribution is
made on account of an employee's hard-
ship. Under those rules, a distribution is
made on account of hardship only if the
distribution is made on account of an imme-
diate and heavy financial need and the
amount of the distribution is not in excess of
the amount necessary to satisfy that need
(plus any amounts necessary to pay any
taxes or penalties reasonably anticipated to
result from the distribution). These determi-
nations must be made on the basis of all the
relevant facts and circumstances and in ac-
cordance with nondiscriminatory and objec-
tive standards set forth in the plan.

Section 1.401(k)-1(d)(3)(iv)(B) pro-
vides that a distribution is not treated as
necessary to satisfy an immediate and
heavy financial need of an employee to
the extent the need may be relieved from
other resources that are reasonably avail-
able to the employee. Under § 1.401(k)-
1(d)(3)(iv)(C), in determining whether the
need can be relieved from other resources
that are reasonably available to an em-
ployee, the employer may rely on the
employee's representation (unless the em-
ployer has actual knowledge to the con-
trary) that the need cannot reasonably be
relieved from resources specified in
§ 1.401(k)-1(d)(3)(iv)(C).

To simplify administration, the regula-
tions provide certain safe harbors that may
be used to determine whether a distribu-
tion is made on account of an employee's
hardship. Specifically, § 1.401(k)-1(d)(3)
(iii)(B) provides a safe harbor under
which distributions for six types of ex-
penses are deemed to be made on account
of an immediate and heavy financial need.
One of the six types is "expenses for the
repair of damage to the employee's prin-
cipal residence that would qualify for the
casualty deduction under section 165 (de-
termined without regard to whether the
loss exceeds 10% of adjusted gross in-
come)."

In addition, § 1.401(k)-1(d)(3)(iv)(E)
provides a safe harbor under which a dis-
tribution is deemed necessary to satisfy an
immediate and heavy financial need. Un-
der that safe harbor, an employee must
first obtain all currently available distribu-

tions (including distributions of employee
stock ownership plan (ESOP) dividends
under section 404(k), but not hardship dis-
tributions), and nontaxable plan loans
from the plan and any other plan main-
tained by the employer. Under the safe
harbor, an employee's ability to make
elective contributions and employee con-
tributions to the plan (and any other plan
maintained by the employer) must be sus-
pended for at least 6 months after receipt
of the hardship distribution. Pursuant to
§ 1.401(k)-3(c)(6)(v)(B), in the case of a
safe harbor plan described in section
401(k)(12) or (13), the suspension period
may not exceed 6 months.

Under § 1.401(k)-1(d)(3)(ii), the max-
imum amount that may be distributed on
account of hardship is the total of the
employee's elective contributions that
have not previously been distributed (plus
earnings, QNECs, and QMACs credited
before a specified grandfather date that
generally is before 1989). Thus, the max-
imum amount that may be distributed on
account of hardship does not include earn-
ings, QNECs, or QMACs that are not
grandfathered.

Section 403(b)

Section 403(b)(7)(A)(ii) provides dis-
tribution limitations on amounts contrib-
uted to a custodial account that is treated
as a section 403(b) annuity contract. Sec-
tion 403(b)(11) provides that contribu-
tions made pursuant to a salary reduction
agreement (within the meaning of section
402(g)(3)(C)) (generally referred to in the
regulations under section 403(b) as "sec-
tion 403(b) elective deferrals") may be
distributed only on or after the occurrence
of certain events, one of which is the
employee's hardship. Section 403(b)(11)
also provides that no income attributable
to these contributions may be distributed
on account of hardship.

Section 1.403(b)-6 provides rules for
applying these distribution limitations.
Section 1.403(b)-6(b) applies to distribu-
tions of amounts that are neither attribut-
able to section 403(b) elective deferrals nor
made from custodial accounts, § 1.403(b)-
6(c) applies to distributions from custodial
accounts that are not attributable to section
403(b) elective deferrals, and § 1.403(b)-
6(d) applies to distributions of amounts at-

tributable to section 403(b) elective defer-
rals. Section 1.403(b)-6(d)(2) provides that
a hardship distribution of section 403(b)
elective deferrals is subject to the rules and
restrictions set forth in § 1.401(k)-1(d)(3)
and is limited to the aggregate dollar amount
of a participant's section 403(b) elective de-
ferrals, without earnings thereon.

Statutory Changes Relating to Section
401(k)

Section 41113 of the Bipartisan Budget
Act of 2018, Pub. L. 115-123 (BBA
2018), directs the Secretary of the Trea-
sury to modify § 1.401(k)-1(d)(3)(iv)(E)
to (1) delete the 6-month prohibition on
contributions following a hardship distri-
bution, and (2) make any other modifica-
tions necessary to carry out the purposes of
section 401(k)(2)(B)(i)(IV). Section 41114
of BBA 2018 modifies the hardship distri-
bution rules under section 401(k)(2)(B) by
adding section 401(k)(14)(A) to the Code,
which states that the maximum amount
available for distribution upon hardship in-
cludes (i) contributions to a profit-sharing or
stock bonus plan to which section 402(e)(3)
applies, (ii) QNECs, (iii) QMACs, and (iv)
earnings on these contributions. Section
41114 of BBA 2018 also adds section
401(k)(14)(B) to the Code, which provides
that a distribution is not treated as failing to
be made upon the hardship of an employee
solely because the employee does not take
any available loan under the plan.

Section 11044 of the Tax Cuts and
Jobs Act, Pub. L. 115-97 (TCJA), added
section 165(h)(5) to the Code. Section
165(h)(5) provides that, for taxable years
2018 through 2025, the deduction for a
personal casualty loss generally is avail-
able only to the extent the loss is attribut-
able to a federally declared disaster (as
defined in section 165(i)(5)).

Section 826 of the Pension Protection
Act of 2006, Pub. L. 109-280 (PPA '06),
directs the Secretary of the Treasury to
modify the rules relating to hardship dis-
tributions to permit a section 401(k) plan
to treat a participant's beneficiary under
the plan the same as the participant's
spouse or dependent in determining
whether the participant has incurred a
hardship. Notice 2007-07, 2007-5 I.R.B.
395, provides guidance for applying this
provision.

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Section 827(a) of PPA '06 added to the
Code section 72(t)(2)(G), which exempts
certain distributions from the application
of the section 72(t) additional income tax
on early distributions. These distributions,
referred to as "qualified reservist distribu-
tions," include distributions attributable to
elective contributions that are made dur-
ing the period that a reservist has been
called to active duty. Section 827(b)(1) of
PPA '06 added section 401(k)(2)(B)(i)(V)
to the Code, which permits qualified re-
servist distributions to be made from a
section 401(k) plan.1

Section 105(b)(1)(A) of the Heroes
Earnings Assistance and Relief Tax Act of
2008, Pub. L. 110-245 (HEART Act),
added section 414(u)(12) to the Code.
Section 414(u)(12)(B)(ii) provides for a
6-month suspension of elective contribu-
tions and employee contributions after
certain distributions to individuals per-
forming service in the uniformed services.

### Explanation of Provisions

#### Overview

These proposed regulations update the
section 401(k) and (m) regulations to re-
flect: (1) the enactment of (a) sections
41113 and 41114 of BBA 2018, (b) sec-
tions 826 and 827 of PPA '06, and (c)
section 105(b)(1)(A) of the HEART Act;
and (2) the application of the hardship
distribution rules in light of the modifica-
tion to the casualty loss deduction rules
made by section 11044 of the TCJA.

#### Deemed Immediate and Heavy Financial Need

The proposed regulations modify the
safe harbor list of expenses in current
§ 1.401(k)-1(d)(3)(iii)(B) for which dis-
tributions are deemed to be made on ac-
count of an immediate and heavy financial
need by: (1) adding "primary beneficiary
under the plan" as an individual for whom
qualifying medical, educational, and fu-
neral expenses may be incurred; (2) mod-
ifying the expense listed in § 1.401(k)-
1(d)(3)(iii)(B)(6) (relating to damage to a
principal residence that would qualify for
a casualty deduction under section 165) to

provide that for this purpose the new lim-
itations in section 165(h)(5) (added by
section 11044 of the TCJA) do not apply;
and (3) adding a new type of expense to
the list, relating to expenses incurred as a
result of certain disasters. This new safe
harbor expense is similar to relief given
by the IRS after certain major federally
declared disasters, such as the relief relat-
ing to Hurricane Maria and California
wildfires provided in Announcement
2017-15, 2017-47 I.R.B. 534, and is in-
tended to eliminate any delay or uncer-
tainty concerning access to plan funds fol-
lowing a disaster that occurs in an area
designated by the Federal Emergency
Management Agency (FEMA) for indi-
vidual assistance.

#### Distribution Necessary to Satisfy Financial Need

Pursuant to BBA 2018 sections 41113
and 41114, the proposed regulations mod-
ify the rules for determining whether a
distribution is necessary to satisfy an im-
mediate and heavy financial need by elim-
inating (1) any requirement that an em-
ployee be prohibited from making elective
contributions and employee contributions
after receipt of a hardship distribution, and
(2) any requirement to take plan loans
prior to obtaining a hardship distribution.
In particular, the proposed regulations
eliminate the safe harbor in current
§ 1.401(k)-1(d)(3)(iv)(E), under which a
distribution is deemed necessary to satisfy
the financial need only if elective contri-
butions and employee contributions are
suspended for at least 6 months after a
hardship distribution is made and, if avail-
able, nontaxable plan loans are taken.

In addition, the proposed regulations
eliminate the rules in current § 1.401(k)-
1(d)(3)(iv)(B) (under which the determi-
nation of whether a distribution is neces-
sary to satisfy a financial need is based on
all the relevant facts and circumstances)
and provide one general standard for de-
termining whether a distribution is neces-
sary. Under this general standard, a hard-
ship distribution may not exceed the
amount of an employee's need (including
any amounts necessary to pay any federal,

state, or local income taxes or penalties
reasonably anticipated to result from the
distribution), the employee must have ob-
tained other available distributions under
the employer's plans, and the employee
must represent that he or she has insuffi-
cient cash or other liquid assets to satisfy
the financial need. A plan administrator
may rely on such a representation unless
the plan administrator has actual knowl-
edge to the contrary. In light of the timing
of the publication of these proposed reg-
ulations, the requirement to obtain this
representation would only apply for a dis-
tribution that is made on or after January
1, 2020.

The proposed regulations clarify that a
plan generally may provide for additional
conditions, such as those described in 26
CFR 1.401(k)-1(d)(3)(iv)(B) and (C) (re-
vised as of April 1, 2018) or, for distribu-
tions made before January 1, 2020, the
representation described in the preceding
paragraph, to demonstrate that a distribu-
tion is necessary to satisfy an immediate
and heavy financial need of an employee.
To implement Congress' purpose in en-
acting section 41113 of BBA 2018 (for
example, Congress' concern that a sus-
pension impedes an employee's ability to
replace distributed funds), the proposed
regulations do not permit a plan to provide
for a suspension of elective contributions
or employee contributions as a condition
of obtaining a hardship distribution. How-
ever, in light of the timing of the publica-
tion of these proposed regulations, this
prohibition would only apply for a distri-
bution that is made on or after January 1,
2020.

#### Expanded Sources for Hardship Distributions

Pursuant to section 41114 of BBA
2018, the proposed regulations modify
§ 1.401(k)-1(d)(3) to permit hardship dis-
tributions from section 401(k) plans of
elective contributions, QNECs, QMACs,
and earnings on these amounts, regardless
of when contributed or earned. However,
plans may limit the type of contributions
available for hardship distributions and
whether earnings on those contributions

1While section 827(b)(2) and (3) of PPA '06 amended sections 403(b)(7)(A)(ii) and 403(b)(11) to permit qualified reservist distributions to be made from a section 403(b) plan, the regulations
under section 403(b) have not yet been updated to reflect these statutory amendments.

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are included. Safe harbor contributions
made to a plan described in section
401(k)(13) may also be distributed on ac-
count of an employee's hardship (be-
cause these contributions are subject to
the same distribution limitations appli-
cable to QNECs and QMACs). See
§ 1.401(k)-3(k)(3)(i).

#### Section 403(b) Plans

Section 1.403(b)-6(d)(2) provides that
a hardship distribution of section 403(b)
elective deferrals is subject to the rules
and restrictions set forth in § 1.401(k)-
1(d)(3); thus, the proposed new rules re-
lating to a hardship distribution of elective
contributions from a section 401(k) plan
generally apply to section 403(b) plans.
However, Code section 403(b)(11) was
not amended by section 41114 of BBA
2018; therefore, income attributable to
section 403(b) elective deferrals continues
to be ineligible for distribution on account
of hardship.

Amounts attributable to QNECs and
QMACs may be distributed from a section
403(b) plan on account of hardship only to
the extent that, under § 1.403(b)-6(b) and
(c), hardship is a permitted distributable
event for amounts that are not attributable
to section 403(b) elective deferrals. Thus,
QNECs and QMACs in a section 403(b)
plan that are not in a custodial account
may be distributed on account of hardship,
but QNECs and QMACs in a section
403(b) plan that are in a custodial account
continue to be ineligible for distribution
on account of hardship.

#### Relief for Victims of Hurricanes Florence and Michael

The Treasury Department and the IRS
realize that employees adversely affected
by Hurricane Florence or Hurricane Mi-
chael may need expedited access to plan
funds. Accordingly, the relief provided
under Announcement 2017-15 is ex-
tended to similarly situated victims of
Hurricanes Florence and Michael, except
that the "Incident Dates" (as defined in
that announcement) are as specified by
FEMA for these 2018 hurricanes, relief is
provided through March 15, 2019, and
any necessary amendments must be made
no later than the deadline for plan amend-

ments set forth in this preamble under
Plan Amendments.

#### Applicability Dates and Reliance

The changes to the hardship distribu-
tion rules made by BBA 2018 are effec-
tive for plan years beginning after Decem-
ber 31, 2018, and the proposed regulations
provide that they generally would apply to
distributions made in plan years beginning
after December 31, 2018. However, the
prohibition on suspending an employee's
elective contributions and employee con-
tributions as a condition of obtaining a
hardship distribution may be applied as of
the first day of the first plan year begin-
ning after December 31, 2018, even if the
distribution was made in the prior plan
year. Thus, for example, a calendar-year
plan that provides for hardship distribu-
tions under the pre-2019 safe harbor stan-
dards may be amended to provide that an
employee who receives a hardship distri-
bution in the second half of the 2018 plan
year will be prohibited from making con-
tributions only until January 1, 2019 (or
may continue to provide that contributions
will be suspended for the originally sched-
uled 6 months).

In addition, the revised list of safe har-
bor expenses may be applied to distribu-
tions made on or after a date that is as
early as January 1, 2018. Thus, for exam-
ple, a plan that made hardship distribu-
tions relating to casualty losses deductible
under section 165 without regard to the
changes made to section 165 by the TCJA
(which, effective in 2018, require that, to
be deductible, losses must result from a
federally declared disaster) may be
amended to apply the revised safe harbor
expense relating to casualty losses to dis-
tributions made in 2018 so that plan pro-
visions will conform to the plan's opera-
tion. Similarly, a plan may be amended to
apply the revised safe harbor expense re-
lating to losses (including loss of income)
incurred by an employee on account of a
disaster that occurs in 2018 (such as Hur-
ricane Florence or Hurricane Michael),
provided that the employee's principal
residence or principal place of employ-
ment at the time of the disaster was lo-
cated in an area designated by FEMA for
individual assistance with respect to the
disaster.

Plan Amendments

The Treasury Department and the IRS
expect that, if these regulations are final-
ized as they have been proposed, plan
sponsors will need to amend their plans'
hardship distribution provisions. The
deadline for amending a disqualifying
provision is set forth in Rev. Proc. 2016-
37, 2016-29 I.R.B. 136. For example,
with respect to an individually designed
plan that is not a governmental plan, the
deadline for amending the plan to reflect a
change in qualification requirements is the
end of the second calendar year that be-
gins after the issuance of the Required
Amendments List described in section 9
of Rev. Proc. 2016-37 that includes the
change. A plan provision that is not a
disqualifying provision, but is integrally
related to a plan provision that is a dis-
qualifying provision, may be amended by
the same deadline applicable to a disqual-
ifying provision.

A plan amendment that is related to the
final regulations, but does not correct a
disqualifying provision, including a plan
amendment reflecting (1) the change to
section 165 (relating to casualty losses) or
(2) the addition of the new safe harbor
expense (relating to expenses incurred as
a result of certain federally declared disas-
ters), will be treated as integrally related
to a disqualifying provision. Therefore all
amendments that relate to the final regu-
lations will have the same amendment
deadline. This deadline will also apply to
an amendment reflecting the extension of
the relief under Announcement 2017-15
to victims of Hurricanes Florence and Mi-
chael, as provided in this preamble.

## Special Analyses

The Administrator of the Office of In-
formation and Regulatory Affairs (OIRA),
Office of Management and Budget, has
waived review of this proposed rule in
accordance with section 6(a)(3)(A) of Ex-
ecutive Order 12866. OIRA will subse-
quently make a significance determination
of the final rule, pursuant to section 3(f) of
Executive Order (E.O.) 12866 and the
April 11, 2018, Memorandum of Agree-
ment between the Department of the Trea-
sury and the Office of Management and
Budget (OMB).

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Because these regulations do not im-
pose 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 reg-
ulations have been submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on their
impact on small business.

## Comments and Requests for Public Hearing

Before these proposed regulations are
adopted as final regulations, consideration
will be given to any comments that are
submitted timely to the IRS as prescribed
in this preamble under the ADDRESSES
heading. The Treasury Department and
the IRS request comments on all aspects
of the proposed rules. All comments will
be available at www.regulations.gov or
upon request. A public hearing will be
scheduled if requested in writing by any
person that timely submits written com-
ments. If a public hearing is scheduled,
notice of the date, time, and place for the
public hearing will be published in the
Federal Register.

## Drafting Information

The principal author of these regula-
tions is Roger Kuehnle of the Office of
Associate Chief Counsel (Tax Exempt
and Governmental Entities). However,
other personnel from the IRS and Trea-
sury Department participated in their de-
velopment.

## List of Subjects in 26 CFR Part 1

Income taxes, Reporting and record-
keeping requirements.

## 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. 401(m)(9) and 26
U.S.C. 7805 * **

Par. 2. Section 1.401(k)-1 is amended
by:

1\. Revising paragraphs (d)(1)(ii) and
(iii) and adding new paragraph (d)(1)(iv).

2\. Removing paragraph (d)(3)(ii) and
redesignating paragraphs (d)(3)(iii), (iv)
and (v) as paragraphs (d)(3)(ii), (iii) and
(iv).

3\. Revising newly redesignated para-
graph (d)(3)(ii)(B) and adding new para-
graph (d)(3)(ii)(C).

4\. Revising newly redesignated para-
graphs (d)(3)(iii) and (iv) and adding new
paragraph (d)(3)(v).

5\. In paragraph (d)(6), removing exam-
ples 3, 4, and 5 and redesignating example
6 as example 3.

The additions and revisions read as fol-
lows:

## § 1.401(k)-1 Certain cash or deferred arrangements.

* * * * *

(d) * * *

(1) * * *

(ii) In the case of a profit-sharing, stock
bonus or rural cooperative plan-

(A) The employee's attainment of age
59 1/2; or

(B) In accordance with section 401(k)
(14), the employee's hardship;

(iii) In accordance with section 401(k)
(10), the termination of the plan; or

(iv) In the case of a qualified reservist
distribution defined in section 72(t)(2)
(G)(iii), the date the reservist was ordered
or called to active duty.

* * * * *

(3) * * *

(ii) * * *

(B) Deemed immediate and heavy fi-
nancial need. A distribution is deemed to
be made on account of an immediate and
heavy financial need of the employee if
the distribution is for-

(1) Expenses for (or necessary to ob-
tain) medical care that would be deduct-
ible under section 213(d), determined
without regard to the limitations in section
213(a) (relating to the applicable percent-
age of adjusted gross income and the re-
cipients of the medical care) provided
that, if the recipient of the medical care is
not listed in section 213(a), the recipient is
a primary beneficiary under the plan;

(2) Costs directly related to the pur-
chase of a principal residence for the em-
ployee (excluding mortgage payments);

(3) Payment of tuition, related educa-
tional fees, and room and board expenses,
for up to the next 12 months of post-
secondary education for the employee, for
the employee's spouse, child or dependent
(as defined in section 152 without regard to
section 152(b)(1), (b)(2) and (d)(1)(B)), or
for a primary beneficiary under the plan;

(4) Payments necessary to prevent the
eviction of the employee from the em-
ployee's principal residence or foreclo-
sure on the mortgage on that residence;

(5) Payments for burial or funeral ex-
penses for the employee's deceased par-
ent, spouse, child or dependent (as defined
in section 152 without regard to section
152(d)(1)(B)) or for a deceased primary
beneficiary under the plan;

(6) Expenses for the repair of damage
to the employee's principal residence that
would qualify for the casualty deduction
under section 165 (determined without re-
gard to section 165(h)(5) and whether the
loss exceeds 10% of adjusted gross in-
come); or

(7) Expenses and losses (including loss
of income) incurred by the employee on
account of a disaster declared by the Fed-
eral Emergency Management Agency
(FEMA) under the Robert T. Stafford Di-
saster Relief and Emergency Assistance
Act, Pub. L. 100-707, provided that the
employee's principal residence or princi-
pal place of employment at the time of the
disaster was located in an area designated
by FEMA for individual assistance with
respect to the disaster.

(C) Primary beneficiary under the plan.
For purposes of paragraph (d)(3)(ii)(B) of
this section, a "primary beneficiary under
the plan" is an individual who is named as a
beneficiary under the plan and has an un-
conditional right, upon the death of the em-
ployee, to all or a portion of the employee's
account balance under the plan.

(iii) Distribution necessary to satisfy
financial need-(A) Distribution may not
exceed amount of need. A distribution is
treated as necessary to satisfy an immedi-
ate and heavy financial need of an em-
ployee only to the extent the amount of
the distribution is not in excess of the
amount required to satisfy the financial
need (including any amounts necessary to
pay any federal, state, or local income
taxes or penalties reasonably anticipated
to result from the distribution).

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(B) No alternative means reasonably
available. A distribution is not treated as
necessary to satisfy an immediate and
heavy financial need of an employee un-
less the employee has obtained all other
currently available distributions (includ-
ing distributions of ESOP dividends under
section 404(k), but not hardship distribu-
tions) under the plan and all other plans of
deferred compensation, whether qualified
or nonqualified, maintained by the em-
ployer. In addition, for a distribution that
is made on or after January 1, 2020, the
employee must represent (in writing, by
an electronic medium, or in such other
form as may be prescribed by the Com-
missioner) that he or she has insufficient
cash or other liquid assets to satisfy the
need. The plan administrator may rely on
the employee's representation unless the
plan administrator has actual knowledge
to the contrary.

(C) Additional conditions. A plan gen-
erally may provide for additional condi-
tions, such as those described in 26 CFR
1.401(k)-1(d)(3)(iv)(B) and (C) (revised
as of April 1, 2018) or, for distributions
made before January 1, 2020, the repre-
sentation described in paragraph (d)(3)
(iii)(B) of this section, to demonstrate that
a distribution is necessary to satisfy an
immediate and heavy financial need of an
employee. For example, a plan may pro-
vide that, before a hardship distribution
may be made, an employee must obtain all
nontaxable loans (determined at the time a
loan is made) available under the plan and
all other plans maintained by the em-
ployer. However, for a distribution that is
made on or after January 1, 2020, a plan
may not provide for a suspension of an
employee's elective contributions or em-
ployee contributions as a condition of ob-
taining a hardship distribution.

(iv) Commissioner may expand stan-
dards. The Commissioner may prescribe
additional guidance of general applicabil-
ity, published in the Internal Revenue Bul-
letin (see § 601.601(d)(2) of this chapter),
expanding the list of distributions deemed
to be made on account of immediate and
heavy financial needs and setting forth
additional methods to demonstrate that a
distribution is necessary to satisfy an im-
mediate and heavy financial need.

(v) Effective/applicability date-(A)
General rule. This paragraph (d)(3) ap-
plies to distributions made in plan years
beginning after December 31, 2018. Ex-
cept as otherwise provided in this para-
graph (d)(3)(v), the rules in 26 CFR
1.401(k)-1(d)(3) (revised as of April 1,
2018) apply to distributions made in plan
years beginning before January 1, 2019.

(B) Options for earlier application.
The last sentence of paragraph (d)(3)
(iii)(C) of this section (prohibiting the sus-
pension of contributions as a condition of
obtaining a hardship distribution) may be
applied as of the first day of the first plan
year beginning after December 31, 2018,
even if the distribution was made in the
prior plan year. Thus, for example, a
calendar-year plan that provides for hard-
ship distributions under the rules in 26
CFR 1.401(k)-1(d)(3)(iv)(E) (revised as
of April 1, 2018) may be amended to
provide that an employee who receives a
hardship distribution in the second half of
the 2018 plan year will be prohibited from
making contributions only until January 1,
2019 (or may continue to provide that
contributions will be suspended for the
originally scheduled 6 months). In addi-
tion, paragraph (d)(3)(ii)(B) of this section
may be applied to distributions made on
or after a date that is as early as January 1,
2018.

* * * * *

Par. 3. Section 1.401(k)-3 is amended
by:

1\. Revising paragraph (c)(6)(v).

2\. Removing the language ", and, in the
case of a hardship distribution, suspends
an employee's ability to make elective
contributions for 6 months in accordance
with § 1.401(k)-1(d)(3)(iv)(E)" in the
fifth sentence in paragraph (c)(7), Exam-
ple 1.

3\. Removing the second sentence in
paragraph (j)(2)(iv).

The revision reads as follows:

### § 1.401(k)-3 Safe harbor

requirements.

* * * * *

(c) * * *

(6) * * *

(v) Restrictions due to limitations un-
der the Internal Revenue Code. A plan
may limit the amount of elective contri-

butions made by an eligible employee un-
der a plan-

(A) Because of the limitations of sec-
tion 402(g) or 415;

(B) Due to a suspension under section
414(u)(12)(B)(ii); or

(C) Because, on account of a hardship
distribution made before January 1, 2020,
an employee's ability to make elective
contributions has been suspended for 6
months.

* * * * *

## § 1.401(k)-6 [Amended]

Par. 4. Section 1.401(k)-6 is amended
by:

1\. Removing the fourth sentence in
paragraph (2) of the definition of Eligible
employee.

2\. Removing the language ", except as
provided otherwise in § 1.401(k)-1(c) and
(d)," in the definitions of Qualified match-
ing contributions (QMACs) and Qualified
nonelective contributions (QNECs).

Par. 5. Section 1.401(m)-3 is amended
by revising paragraph (d)(6)(v) to read as
follows:

### § 1.401(m)-3 Safe harbor requirements.

* * * * *

(d) * * *

(6) * * *

(v) Restrictions due to limitations un-
der the Internal Revenue Code. A plan
may limit the amount of contributions
made by an eligible employee under a
plan-

(A) Because of the limitations of sec-
tion 402(g) or section 415;

(B) Due to a suspension under section
414(u)(12)(B)(ii); or

(C) Because, on account of a hardship
distribution made before January 1, 2020,
an employee's ability to make contribu-
tions has been suspended for 6 months.
* * * * *

Kirsten Wielobob,
Deputy Commissioner for Services and
Enforcement.

(Filed by the Office of the Federal Register on November 9,
2018, 4:15 p.m., and published in the issue of the Federal
Register for November 14, 2018, 83 F.R. 56763)

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# Definition of Terms

Revenue rulings and revenue procedures
(hereinafter referred to as "rulings") that
have an effect on previous rulings use the
following defined terms to describe the
effect:

Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle 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.

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.

# 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.

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.

COOP-Cooperative.

IC-Insurance Company.

Ct.D .- Court Decision.

I.R.B .- Internal Revenue Bulletin.

CY-County.

LE-Lessee.

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.

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.

BK-Bank.

B.T.A .- Board of Tax Appeals.

C-Individual.

C.B .- Cumulative Bulletin.

CFR-Code of Federal Regulations.

CI-City.

DC-Dummy Corporation.

X-Corporation.

Y-Corporation.

Z-Corporation.

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## Numerical Finding List1

Bulletin 2018-27 through 2018-49

### Announcements:

2018-09, 2018-28 I.R.B. 206
2018-12, 2018-30 I.R.B. 232
2018-13, 2018-43 I.R.B. 232
2018-14, 2018-46 I.R.B. 773

### Notices:

2018-48, 2018-28 I.R.B. 9
2018-56, 2018-27 I.R.B. 3

2018-58, 2018-33 I.R.B. 305
2018-59, 2018-28 I.R.B. 196
2018-60, 2018-31 I.R.B. 275
2018-61, 2018-31 I.R.B. 278
2018-62, 2018-34 I.R.B. 316
2018-63, 2018-34 I.R.B. 318
2018-64, 2018-35 I.R.B. 347
2018-65, 2018-35 I.R.B. 350
2018-67, 2018-36 I.R.B. 409
2018-68, 2018-36 I.R.B. 418
2018-69, 2018-37 I.R.B. 426
2018-70, 2018-38 I.R.B. 441
2018-71, 2018-41 I.R.B. 548
2018-72, 2018-40 I.R.B. 522
2018-73, 2018-40 I.R.B. 526
2018-74, 2018-40 I.R.B. 529
2018-75, 2018-41 I.R.B. 556
2018-76, 2018-42 I.R.B. 599
2018-77, 2018-42 I.R.B. 601
2018-78, 2018-42 I.R.B. 604
2018-79, 2018-42 I.R.B. 606
2018-80, 2018-42 I.R.B. 609
2018-81, 2018-43 I.R.B. 666
2018-82, 2018-44 I.R.B. 718
2018-83, 2018-47 I.R.B. 774
2018-84, 2018-45 I.R.B. 768
2018-85, 2018-48 I.R.B. 788
2018-88, 2018-49 I.R.B. 817
2018-89, 2018-49 I.R.B. 826
2018-90, 2018-49 I.R.B. 826

## Proposed Regulations:

REG-130244-17, 2018-41

I.R.B. 593

REG-103474-18, 2018-32

I.R.B. 284

REG-104390-18, 2018-43

I.R.B. 671

REG-104397-18, 2018-41

I.R.B. 560

REG-104872-18, 2018-44

I.R.B. 762

REG-106977-18, 2018-27 I.R.B. 6

REG-107163-18, 2018-49

I.R.B. 839

REG-107813-18, 2018-49 I.R.B. 841

REG-107892-18, 2018-35

I.R.B. 353

REG-112176-18, 2018-37

I.R.B. 430

REG-114540-18, 2018-47 I.R.B. 777

REG-118826-16, 2018-48 I.R.B. 789

## Revenue Procedures:

2018-35, 2018-28 I.R.B. 204

2018-36, 2018-38

I.R.B. 442

2018-37, 2018-29

I.R.B. 210

2018-38, 2018-31

I.R.B. 280

2018-39, 2018-34

I.R.B. 319

2018-40, 2018-34

I.R.B. 320

2018-42, 2018-36

I.R.B. 424

2018-43, 2018-36

I.R.B. 425

2018-44, 2018-37

I.R.B. 426

2018-45, 2018-37

I.R.B. 428

2018-46, 2018-39

I.R.B. 460

2018-47, 2018-39

I.R.B. 518

2018-48, 2018-40

I.R.B. 521

2018-49, 2018-41

I.R.B. 548

2018-50, 2018-42

I.R.B. 610

2018-51, 2018-44

I.R.B. 721

2018-52, 2018-42

I.R.B. 611

2018-53, 2018-43

I.R.B. 667

2018-54, 2018-45

I.R.B. 769

2018-55, 2018-47

I.R.B. 775

2018-57, 2018-49 I.R.B. 827

## Revenue Rulings:

2018-19, 2018-27 I.R.B. 1
2018-20, 2018-28 I.R.B. 8
2018-21, 2018-32 I.R.B. 282
2018-22, 2018-34 I.R.B. 308
2018-23, 2018-36 I.R.B. 405
2018-24, 2018-36 I.R.B. 407
2018-25, 2018-39 I.R.B. 445
2018-26, 2018-40 I.R.B. 520
2018-27, 2018-41 I.R.B. 546
2018-28, 2018-45 I.R.B. 764
2018-29, 2018-45 I.R.B. 765
2018-30, 2018-49 I.R.B. 815

Treasury Decisions:

9834, 2018-31 I.R.B. 233
9835, 2018-33 I.R.B. 288
9836, 2018-33 I.R.B. 291
9838, 2018-34 I.R.B. 309
9839, 2018-35 I.R.B. 325
9842, 2018-48 I.R.B. 783

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018-01 through 2018-26 is in Internal Revenue Bulletin
2018-26, dated June 27, 2018.

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## Finding List of Current Actions on Previously Published Items1

Bulletin 2018-27 through 2018-49

Notices:

2014-5
Modified by
Notice 2018-69, 2018-37 I.R.B. 426

2015-28
Modified by
Notice 2018-69, 2018-37 I.R.B. 426

2016-57
Modified by
Notice 2018-69, 2018-37 I.R.B. 426

2017-45
Modified by
Notice 2018-69, 2018-37 I.R.B. 426

### Revenue Procedures:

2015-27
Amplified by
Rev. Proc. 2018-39, 2018-34 I.R.B. 319

2017-24
Amplified by
Rev. Proc. 2018-39, 2018-34 I.R.B. 319

2018-31
Modified by
Rev. Proc. 2018-44, 2018-37 I.R.B. 426

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# Internal Revenue Service Washington, DC 20224

Official Business
Penalty for Private Use, $300

# INTERNAL REVENUE BULLETIN

The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletins are available at www.irs.gov/irb/.

# We Welcome Comments About the Internal Revenue Bulletin

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