Internal Revenue Bulletin 1997-41 (PDF rendition): IRS Revenue Rulings

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INCOME TAX
Rev. Rul. 97–42, page 4.
Last-in, first-out inventories, automobile dealers. A
franchised automobile dealer that elected the LIFO inventory
method violates the LIFO conformity requirement of section
472 of the Code by providing to the credit subsidiary of its
franchisor an income statement that fails to reflect the LIFO
inventory method in the computation of net income.
EMPLOYEE PLANS
Del. Order 97 (Rev. 34), page 14.
The authority delegated by the Commissioner of Internal
Revenue to the Assistant Commissioner (Employee Plans
and Exempt Organizations), to enter into and approve certain
closing agreements, may be redelegated to special assis-
tants and division directors reporting directly to the Assistant
Commissioner. Del. Order 97 (Rev. 33) superseded.
Announcement 97–102, page 15.
This announcement provides revised instructions for spon-
sors and adopters of regional prototype and volume submit-
ter retirement plans. Additionally, practitioner comments are
solicited regarding the future direction of these programs.
EXEMPT ORGANIZATIONS
Announcement 97–101, page 13.
A list is given of organizations now classified as private foun-
dations.
ADMINISTRATIVE
Notice 97–54, page 7.
The Work Opportunity Tax Credit (WOTC) under section 51 of
the Code has been revised and expanded, effective October
1, 1997, and the Welfare-to-Work Tax Credit goes into effect
on January 1, 1998.
Rev. Proc. 97–44, page 8.
Last-in, first-out inventories, automobile dealers. Relief
is provided for automobile dealers that violate the LIFO inven-
tory requirement of section 472 of the Code by providing,
for credit purposes, an income statement prepared in a for-
mat required by, or on a preprinted form supplied by, their
franchisor, covering any taxable year ended before October
14, 1997, that fails to reflect the LIFO inventory method.
Rev. Proc. 97–45, page 10.
Optional rules are provided under which an employee of a
federal government agency who is reimbursed for ord i n a ry
and necessary business expenses relating to travel, enter-
tainment, gifts, or listed pro p e rty (such as an employee’s
automobile) may make an adequate accounting to the
employer to substantiate those expenses by submitting only
an account book, diary, log, etc., without submitting docu-
m e n t a ry evidence such as re c e i p t s .
Announcement 98–103, page 16.
Public comments are requested on the optional pro c e d u re s ,
p rovided in Rev. Proc. 97–45, for substantiating the re i m-
bursement of employee expenses.
Internal Revenue
bulletin
Bulletin No. 1997–41
October 14, 1997
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.
Department of the Tr e a s u r y
Internal Revenue Service
Finding Lists begin on page 21.
Announcement of Disbarments and Suspensions begins on page 17.
Announcement of Declaratory Judgement Proceedings Under Section 7428 begins on page 16.

Mission of the Service
The purpose of the Internal Revenue Service is to collect
the proper amount of tax revenue at the least cost; serv e
the public by continually improving the quality of our prod-
ucts and services; and perf o rm in a manner warr a n t i n g
the highest degree of public confidence in our integrity, eff i-
c i e n c y, and fairn e s s .
2
Statement of Principles
of Internal Revenue
Tax Administration
The function of the Internal Revenue Service is to adm i n i s-
ter the Internal Revenue Code. Tax policy for raising re v e n u e
is determined by Congre s s .
With this in mind, it is the duty of the Service to carry out that
policy by correctly applying the laws enacted by Congress;
to determine the reasonable meaning of various Code provi-
sions in light of the Congressional purpose in enacting them;
and to perform this work in a fair and impartial manner, with
neither a government nor a taxpayer point of view.
At the heart of administration is interpretation of the Code. It
is the responsibility of each person in the Service, charged
with the duty of interpreting the law, to try to find the true
meaning of the statutory provision and not to adopt a
strained construction in the belief that he or she is “protect-
ing the revenue.” The revenue is properly protected only
when we ascertain and apply the true meaning of the statute.
The Service also has the responsibility of applying and
administering the law in a reasonable, practical manner.
Issues should only be raised by examining officers when
they have merit, never arbitrarily or for trading purposes.
At the same time, the examining officer should never hesi-
tate to raise a meritorious issue. It is also important that
c a re be exercised not to raise an issue or to ask a court to
adopt a position inconsistent with an established Serv i c e
p o s i t i o n .
Administration should be both reasonable and vigorous. It
should be conducted with as little delay as possible and
with great courtesy and considerateness. It should never
t ry to overreach, and should be reasonable within the
bounds of law and sound administration. It should, howev-
e r, be vigorous in requiring compliance with law and it
should be relentless in its attack on unreal tax devices and
f r a u d .

The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly and may be obtained
f rom the Superintendent of Documents on a subscription
basis. Bulletin contents of a permanent nature are consoli-
dated semiannually into Cumulative Bulletins, which are sold
on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
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 in-
ternal management are not published; however, statements
of internal practices and pro c e d u res 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 off i c e s ,
identifying details and information of a confidential nature
are deleted to prevent unwarranted invasions of privacy and
to comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have
the force and effect of Tre a s u ry Department Regulations,
but they may be used as precedents. Unpublished ru l i n g s
will not be relied on, used, or cited as precedents by Service
personnel in the disposition of other cases. In applying pub-
lished rulings and procedures, the effect of subsequent leg-
islation, regulations, court decisions, rulings, and pro c e-
dures must be considered, and Service personnel and oth-
ers concerned are cautioned against reaching the same con-
clusions 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 Subpart B, Legislation and Related
Committee Reports.
P a rt III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross re f e rences to
these subjects are contained in the other Parts and Sub-
parts. Also included in this part are Bank Secrecy Act Admin-
istrative Rulings. Bank Secrecy Act Administrative Rulings
are issued by the Department of the Treasury’s Office of the
Assistant Secretary (Enforcement).
Part IV.—Items of General Interest.
With the exception of the Notice of Proposed Rulemaking
and the disbarment and suspension list included in this part,
none of these announcements are consolidated in the Cumu-
lative Bulletins.
The first Bulletin for each month includes a cumulative index
for the matters published during the preceding months.
These monthly indexes are cumulated on a quarterly and
semiannual basis, and are published in the first Bulletin of the
succeeding quarterly and semiannual period, re s p e c t i v e l y.
3
Introduction
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.
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

October 14, 199741997–41 I.R.B.
Section 62.—Adjusted Gross
Income Defined
26 CFR 1.62–2: Reimbursements and other expense
allowance arrangements.
Optional rules are provided under which an em-
ployee of a federal government agency who is reim-
bursed for ordinary and necessary business expenses
relating to travel, entertainment, gifts, listed prop-
erty (such as an employee’s automobile) may make
an adequate accounting to the employer to substanti-
ate those expenses by submitting an account book,
diary, log, etc., alone, without submitting documen-
tary evidence such as receipts. See Rev. Proc. 97–45
page 10.
Section 162.—Trade or
Business Expenses
26 CFR 1.162–17: Reporting and substantiation of
certain business expenses of employees.
Optional rules are provided under which an em-
ployee of a federal government agency who is reim-
bursed for ordinary and necessary business expenses
relating to travel, entertainment, gifts, listed prop-
erty (such as an employee’s automobile) may make
an adequate accounting to the employer to substanti-
ate those expenses by submitting an account book,
diary, log, etc., alone, without submitting documen-
tary evidence such as receipts. See Rev. Proc. 97–45
page 10.
Section 274.—Disallowance of
Certain Entertainment, Etc.,
Expenses
26 CFR 1.274–5T: Substantiation requirements
(temporary).
Optional rules are provided under which an em-
ployee of a federal government agency who is reim-
bursed for ordinary and necessary business expenses
relating to travel, entertainment, gifts, listed prop-
erty (such as an employee’s automobile) may make
an adequate accounting to the employer to substanti-
ate those expenses by submitting an account book,
diary, log, etc., alone, without submitting documen-
tary evidence such as receipts. See Rev. Proc. 97–45
page 10.
26 CFR 1.274(d)–1: Substantiation requirements.
Optional rules are provided under which an em-
ployee of a federal government agency who is reim-
bursed for ordinary and necessary business expenses
relating to travel, entertainment, gifts, listed prop-
erty (such as an employee’s automobile) may make
an adequate accounting to the employer to substanti-
ate those expenses by submitting an account book,
diary, log, etc., alone, without submitting documen-
tary evidence such as receipts. See Rev. Proc. 97–45
page 10.
Section 472.—Last-in, First-out
Inventories
26 CFR 1.472-2(e): LIFO conformity requirement.
Last-in, first-out inventories, auto-
mobile dealers. Afranchised automobile
dealer that elected the LIFO inventory
method violates the LIFO conformity re-
quirement of Code section 472 by provid-
ing to the credit subsidiary of its fran-
chisor an income statement that fails to
reflect the LIFO inventory method in the
computation of net income.
Rev. Rul. 97–42
ISSUE
W h e th e r a fr a n c h is e d a u t o m o b i l e
dealer that elected the last-in, first-out
(LIFO) inventory method for federal in-
come tax purposes violates the LIFO con-
formity requirement of § 472(c) or (e)(2)
of the Internal Revenue Code by provid-
ing certain monthly income statements to
the credit subsidiary of its franchisor (an
automobile manufacturer).
FACTS
A,B, and Care franchised automobile
dealers engaged in the purchase, sale, and
service of automobiles manufactured by
X. A, B, and C regularly finance their pur-
chases of new automobiles through Y, a
subsidiary of X.
For federal income tax purposes, A, B,
and Cuse the accrual method of account-
ing and a calendar taxable year. Each
dealer elected to use the LIFO inventory
method to account for its automobile in-
ventory beginning with its taxable year
ended December 31, 1970.
Pursuant to the terms of the franchise
agree ment s wi th Xan d the fi nancing
agreements with Y, Xand Ymust receive
bala nce sheets and income statements
from A, B, and Cwithin 10 days after the
end of each month. The income state-
ments are prepared in a format required
by Xor on pre-printed forms supplied by
Xand present the dealers’ operating re-
sults for both the month and the calendar
year-to-date.
During 1996, A, B,andC’s monthly fi-
nancial statements were received by X
and Y. In the January through November
income statements,A, B, and Ccalculated
their Cost of Goods Sold using the spe-
cific identification inventory method in-
ste ad of the LIFO i nventory me thod.
Under the specific identification method,
the cost of the dealers’beginning and end-
ing inventories is determined by reference
toX’s actual invoice price for the automo-
biles on hand.
Situation 1 — LIFO Reflected in Gross
Profit. Aprovided the following income
statement to Xand Yfor the month of De-
cember:
Acalculated its Cost of Goods Sold for
the year and the month as follows. First,
Aused the specific identification inven-
tory method to calculate a tentative cost
of goods sold for the year ($2,340x) and
the month ($195x). Then, Amade an ad-
justment of $60x (representing a $60x in-
crease in A’s LIFO reserve for 1996) to
the tentative cost of goods sold to arrive at
Cost of Goods Sold for the year ($2,400x)
and the month ($255x), respectively.
Situation 2 — LIFO Reflected in Net
Income. Bprovided the following income
statement to Xand Yfor the month of De-
cember:
Bused the specific identification inven-
tory method to calculate its Cost of Goods
Sold and Gross Profit for both the year
and month without adjusting for a $60x
increase in B’s LIFO reserve for 1996. On
P a rt I. Rulings and Decisions Under the Internal Revenue Code of 1986
INCOME STATEMENT
December 1996
MonthYear-to-Date
Sales of Automobiles$ 300x$ 3,600x
Cost of Goods Sold(255x) (2,400x)
Gross Profit$ 45x$ 1,200x
Variable Expenses( 12x)( 144x)
Fixed Expenses( 18x) ( 216x)
Net Income$ 15x $ 840x

1997–41 I.R.B.5October 14, 1997
the Other Income and Expenses line, B re-
duced Operating Profit in the Ye a r- t o - D a t e
column by $60x (representing the $60x in-
crease in B’s LIFO reserve for 1996) and
in the Month column by $60x to arrive at
B’s Net Income for the year ($840x) and
the month ($15x), respectively.
Situation 3 — LIFO Not Reflected on
the Income Statement. Cprovided the
following income statement to Xand Yfor
the month of December:
Cused the specific identification in-
ventory method to calculate its Cost of
Goods Sold, Gross Profit, and Net Income
for the year and month without adjusting
for a $60x increase in C’s LIFO reserve
for 1996. Thus, the December 1996 in-
come statement does not reflect C’s use of
the LIFO inventory method.
LAW AND ANALYSIS
Section 472(a) authorizes a taxpayer to
use the LIFO inventory method in accor-
dance with regulations prescribed by the
Secretary.
Section 472(c) provides that a taxpayer
may not elect to use the LIFO inventory
method unless it establishes to the satis-
faction of the Commissioner that it used
no method other than the LIFO method in
inventorying goods to ascertain the in-
come, profit, or loss of the first taxable
year for which the LIFO method is to be
used, for the purpose of a report or state-
ment covering that taxable year to share-
holders, partners, other proprietors, or
beneficiaries, or for credit purposes.
Section 472(e) provides that a taxpayer
e l e ct i n g t o u s e t h e L I F O in v e n t o ry
method must continue to use the LIFO in-
ventory method unless the taxpayer: (1)
obtains the consent of the Commissioner
to change to a different method; or (2) is
required by the Commissioner to change
to a different meth od because the tax-
payer has used some inventory method
other than LIFO to ascertain the income,
profit, or loss of any subsequent taxable
year in a report or statement covering that
taxable year (a) to shareholders, partners,
other proprietors, or beneficiaries, or (b)
for credit purposes.
Section 1.472–2(e)(1) of the Income
Tax Regulations provides that a taxpayer
e l e ct i n g t o u s e th e LI F O i n v e n t o r y
method must establish to the satisfaction
of the Commissioner that the taxpayer, in
ascertaining the income, profit, or loss of
the taxable year for which the LIFO in-
ventory method is first used, or for any
subsequent taxable year, for credit pur-
poses or for purposes of reports to share-
holders, partners, other proprietors, or
beneficiaries, has not used any inventory
method other than LIFO.
Section 1.472–2(e)(1) generally pro-
vides exceptions to the LIFO conformity
requirement. Under § 1.472–2(e)(1)(iv),
a ta xpayer is not at va rianc e with the
LIFO conformity requirement if it uses an
inventory method other than LIFO in a re-
port or statement covering a period of less
than an entire taxable year.
However, § 1.472–2(e)(6) provides that
a series of credit statements or financial
reports is considered a single statement or
report covering an entire taxable year if
the statements or reports in the series are
prepared using a single inventory method
and can be combined to disclose the in-
come, profit, or loss for the entire taxable
year. For this purpose a taxable year in-
cludes any one-year period that both be-
gins and ends in a taxable year for which
the taxpaye r used the LIFO inventory
method. § 1.472–2(e)(2). Thus, income
statements prepared on the basis of a cal-
endar year may be subject to the LIFO
conformity requirement even though the
taxpayer employs a fiscal year for federal
income tax purposes.
Under § 1.472–2(e)(2)(vi), a taxpayer is
not at variance with the LIFO conformity
requirement if it uses costing methods or
accounting methods to ascertain income,
profit, or loss in financial statements for
credit purposes if such methods are not in-
c o n s is t en t w i t h t he L I FO i n v en t o ry
method. The use of cost estimates is an
example of a costing method that is not in-
c on s is t en t w i t h t he L I FO in v e n t o ry
method. § 1.472–2(e)(8)(ix).
The financial statements received by Y
a re “f or c red i t pu r p o se s ” w ith i n t he
meaning of §§ 472(c) and (e)(2) because
they were issued to a creditor with whom
A, B, and C maintain continuing credit re-
l at i on sh ip s . Th us , u n de r §§ 4 72 (c ),
472(e)(2), and § 1.472–2(e)(1), A, B, a n d
C violated the LIFO conformity require-
ment if they used a method other than
LIFO in inventorying goods to ascertain
the income, profit, or loss for the taxable
year covered by the financial statements
provided to Y.
In Situations 1 and 2, Aand B did not
violate the LIFO conformity requirement
in the ir statements to Y because they
used the LIFO method in inventorying
goods to ascertain their net income in the
INCOME STATEMENT
December 1996
MonthYear-to-Date
Sales of Automobiles$ 300x$ 3,600x
Cost of Goods Sold (195x) (2,340x)
Gross Profit$ 105x$ 1,260x
Variable Expenses( 12x)( 144x)
Fixed Expenses ( 18x) ( 216x)
Operating Profit $ 75x$ 900x
Other Income & Expenses( 60x) ( 60x)
Net Income$ 15x $ 840x

INCOME STATEMENT
December 1996
MonthYear-to-Date
Sales of Automobiles$ 300x$ 3,600x
Cost of Goods Sold (195x) (2,340x)
Gross Profit$ 105x$ 1,260x
Variable Expenses( 12x)( 144x)
Fixed Expenses( 18x) ( 216x)
Operating Profit $ 75x$ 900x
Other Income & Expenses –0– –0–
Net Income $ 75x $ 900x

Month and Ye a r-to-Date columns of the
December income statement. The results
in Situations 1 and 2 would be the same
if the $60x LIFO adjustment reflected in
the Month and Ye a r-to-Date columns of
the December 1996 income statement
had been a reasonable estimate of the
change in LIFO reser ve for the yea r.
F u r t h e r, if Aor B had employed a fiscal
taxable year, the results in Situations 1
and 2 would be the same if Aor B m a d e
either an adjustment for the change in
the LIFO reserve that occurred during
the calendar year in the Month and Ye a r-
to-Date column of the December income
s t a t e m e n t o r a n a d j u s t m e n t f o r t h e
change in the LIFO reserve that occurred
during the fiscal year in the Month and
Ye a r- t o-D ate co lum ns of t he i nco me
statements provided for the last month of
the fiscal year.
In Situation 3, Cviolated the LIFO
conformity requirement in its statements
to Ybecause Cused a method other than
LIFO in inventorying goods to ascertain
its net income in the Year-to-Date column
of the December income statement. Fur-
ther,Cviolated the LIFO conformity re-
quirement because the January through
Nov ember in come s ta t ement s c an be
combined with the Decembe r income
statement to ascertain C’s net income for
the year using a single inventory method
other than LIFO. The result in Situation 3
would be the same even if C’s December
31, 1996 Balance Sheet had reflected a
1996 adjustment to C’s LIFO reserve.
HOLDING
A franchised automobile dea ler that
elected the LIFO inventory method for
federal income tax purposes violates the
LIFO conformity requirement of § 472(c)
or (e)(2) by providing to the credit sub-
sidiary of its franchisor (an automobile
manufacturer) an income statement for
the taxable year that fails to reflect the
LIFO inventory method in the computa-
tion of net income.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Jeffery G. Mitchell of the Office
of Assistant Chief Counsel (Income Ta x
and Accounting). For further information
regarding this revenue ruling, contact Mr.
Mitchell on (202) 622-4970 (not a toll
free call).
October 14, 199761997–41 I.R.B.

1997–41 I.R.B.7October 14, 1997
Work Opportunity Tax Credit
and Welfare-to-Work Tax Credit
Notice 97–54
The Taxpayer Relief Act of 1997, Pub.
L. No. 105–34, (the Act) was enacted on
August 5, 1997. The Act extended and
a m en d e d th e Wor k Op p o r tu n i t y Ta x
Credit (WOTC) under section 51 of the
Internal Revenue Code and created the
We l f a r e - t o - Work tax credit under new
section 51Aof the Code. This notice de-
scribes the principal statutory changes. It
also announces the release of a new Form
8850 (issued September 1997) for use in
pre-screening job applicants and request-
ing certifications in connection with both
credits and a transition period for using
the earlier version of Form 8850 (issued
September 1996), which does not reflect
the changes contained in the Act.
WOTC Overview
The WOTC is a tax credit for employ-
ers who hire individuals belonging to one
of the targeted groups listed in section 51
of the Code. For purposes of the credit,
an individual is not a member of a tar-
geted group unless the individual is certi-
fied as such by the State employment se-
c u ri t y a g e n c y ( SE S A ) . S ee s e c t i o n
51(d)(11) of the Code and Notice 96-52,
1996-2 C.B. 218.
• Extension and Amendment of WOTC
Prior to amendment, (1) the W O T C
was scheduled to expire on September 30,
1 9 9 7 , ( 2) t h er e w er e s ev e n t arg e t e d
groups, (3) the credit was 35 percent of
first-year wages up to $6,000 (for a maxi-
mum credit of $2,100 per individual), and
(4) the minimum employment period was
generally 400 hours or 180 days. Act sec-
tion 603 made s everal cha nges to the
WOTC. First, it extended the credit to
cover individuals w ho begin wor k by
June 30, 1998. The Act modified the def-
initions of two targeted groups: (i) quali-
fied recipients of benefits under Aid to
F a m i l i e s w i t h D e p e n d e n t C h i l d r e n
(AFDC) or a successor program and (ii)
qualified veterans. It added a new tar-
geted group consisting of certain individ-
uals who receive supplemental security
income (SSI) benefits under the Social
Security Act. It increased the credit per-
centage to 40 percent for certified work-
ers who work at least 400 hours (for a
maximum credit of $2,400 per individ-
ual). Finally, the Act amended the mini-
mum employment period so that employ-
e r s m a y a l so c l a i m t h e W OT C f o r
certified workers who work at least 120
hours but less than 400 hours. Wo r k e r s
who meet this minimum work require-
ment will entitle the employer to a credit
of 25 percent of qualified wages. No
credit is available for workers who work
less than 120 hours.
• Certification Process
There are two ways an employer can
satisfy the requirement to obtain a certifi-
cation that a worker is a member of a tar-
geted group. First, the employer can ob-
tain a certification from the SESA, on or
before the day the individual begins work,
stating that the individual belongs to a tar-
geted group. Section 51(d)(11)(A)(i) of
the Code.
A l t e r n a t i v e l y, the employer can com-
plete a “pre-screening notice” with re-
spect to the prospective employee on or
before the day the individual is off e r e d
employment. Then, within 21 days after
the individual begins work, the employer
submits that notice to the SESAas part of
a re q u e st f o r c e r t i f i c at i o n . Se c t i o n
5 1 ( d ) ( 11)(A)(ii). For this purpose, em-
ployers have been using Form 8850, Work
O p p o rtunity Tax Credit Pre - S c re e n i n g
Notice and Certification Request ( i s s u e d
September 1996). (See Revised Form
8850 discussion on page 8.)
Welfare-to-Work Tax Credit Overview
The new We l f a r e - t o - Work tax credit,
added by section 801 of the Act, is a tax
credit for employers who hire individuals
certified by the SESAas long-term family
assistance recipients. The credit is effec-
tive for wages paid to such individuals
who begin work after December 31, 1997,
and before May 1, 1999. Long-term fam-
ily assistance recipients are (1) members
of a family that has received family assis-
tance (AFDC or a successor program) for
at least 18 consecutive months ending on
the hiring date; (2) members of a family
that has received family assistance for a
total of at least 18 months (whether or not
consecutive) after August 5, 1997; and (3)
members of a family that ceases after Au-
gust 5, 1997, to be eligible for family as-
sistance because of either federal or state
time limits.
The We l f a r e - t o - Work tax credit is 35
percent of qualifying first-year wages and
50 percent of q ual ifying sec ond-ye ar
wages. For this purpose (although not for
the WOTC), wages include certain tax-
exempt amounts relating to accident and
health coverage, educational assistance
programs, and dependent care assistance
programs. For each employment year, up
to $10,000 of wages (in contrast with the
$6,000 maximum for the WOTC) may be
considered in determining the amount of
the Welfare-to-Work tax credit.
Although the substantive requirements
are different for the WOTC and the Wel-
f a r e - t o - Work tax credit, the certification
process is the same. Thus, the employer
must either receive a certification from
the SESA on or before the day the indi-
vidual begins work, stating that the indi-
vidual is a long-term family assistance re-
cipient, or the employer must complete a
“pre-screening notice” on or before the
day the individual is offered employment.
In t he l att er cas e the employer must,
within 21 days after the individual begins
work, submit that notice to the SESAas
part of a request for certification.
Coordination of WOTC and Welfare-to-
Work Tax Credit
The Welfare-to-Work tax credit is coor-
dinated with the WOTC so that in any one
taxable year an employer cannot claim
both credits with respect to the same indi-
vidual. For example, assume that an indi-
vidual begins work on March 1, 1998, and
works at least 400 hours for an employer
whose taxable year is the calendar year.
The employer pays “first-yea r w ages”
from March 1998 through February 1999,
an d pa ys “s e co nd - y ea r wa ge s” f r o m
March 1999 through February 2000. If
the individual is certified as both a mem-
ber of one of the WOTC targeted groups
and a long-term family assistance recipi-
ent and the requirements for both credits
are otherwise satisfied, the employer will
have the following choices. For 1998, the
employer may claim either the W O T C
(40 percent of wages up to $6,000) or the
Part III. Administrative, Procedural, and Miscellaneous

October 14, 199781997–41 I.R.B.
Welfare-to-Work tax credit (35 percent of
wages as defined in section 51A(b)(5) of
the Code up to $10,000). For 1999, the
employer may choose again which credit
to claim. The WOTC would be based
solely on the amount of first-year wages
(up to the $6,000 limit) paid in 1999, dur-
ing the balance of the first employment
year (i.e., January and February 1999).
The We l f a r e - t o - Work tax credit would
have two components: 35 percent of the
amo unt of first-ye ar wages (up to the
$10,000 limit) paid in January and Febru-
ary 1999, and 50 percent of the amount of
the second-year wages (up to a separate
$10,000 limit) paid in March through De-
cember 1999. For 2000, the taxpayer
could claim only the Welfare-to-Work tax
credit, based on the amount of second-
year wages (up to the second $10,000
limit) paid in January and February 2000.
Revised Form 8850
On September 20, 1997, the IRS issued
a revised and renamed Form 8850, P re -
S c reening Notice and Certification Re -
quest for the Work Opportunity and Wel-
fare-to-Work Credits.The changes to the
WOTC and the enactment of the Welfare-
to-Work tax credit are reflected on a sin-
gle form to simpl ify the cer tific ation
process for prospective employees, em-
ployers, and SESAs.
How to Get the Revised Form 8850
The new form is available to computer
users through the IRS home page on the
Worl d Wi de Web, ht tp :/ / www. i r s . u s-
treas.gov, and by modem directly at 703-
321-8020 (not a toll-free number). Em-
ployers may also request Form 8850 by
calling 1-800-TAX-FORM (1-800-829-
3676).
Transition Relief
Employers should begin using the new
Form 8850 for employees whose first day of
work is on or after October 1, 1997 (for the
WOTC), or on or after January 1, 1998 (for
the We l f a r e - t o - Work tax credit). Employers
may continue to use the old Form 8850,
h o w e v e r, for individuals who are in one of
the original seven WOTC targeted groups
and begin work before January 1, 1998.
Employers that submit Forms 8850 to
SESAs are not entitled to the applicable
credits unless the employers receive the
required certifications. Before claiming
the WOTC or the We l f a r e - t o - Work tax
credit with respect to an individual, the
employer must receive a certific ation
from the SESA that the individual is, in
fact, a member of a targeted group or a
long-term family assistance recipient, as
the case may be.
The principal author of this notice is
Robert Wheeler of the Office of Associate
Chief Counsel (Employee Benefits and
Exempt Organizations). For further infor-
mation regarding this notice contact Mr.
Wheeler on (202) 622-6060 (not a toll-
free call).
26 CFR 1.472–2: Requirements incident to adop-
tion and use of LIFO inventory method.
(Also Part I, § 472; § 1.472-1.)
Rev. Proc. 97–44
SECTION 1. PURPOSE
This revenue procedure provides relief
for automobile dealers that elected the
last-in, first-out (LIFO) inventory method
and violated the LIFO conformity re-
quirement of § 472(c) or (e)(2) of the In-
ternal Revenue Code by providing, for
credit purposes, an income statement pre-
pared in a format required by the fran-
chisor or on a pre-printed form supplied
by the franchisor (an automobile manu-
facturer), covering any taxable year ended
on or before October 14, 1997, that fails
to reflect the LIFO inventory method.
S ee , e. g. , R e v. R ul . 9 7– 4 2, 19 97 –4 1
I.R.B. (Situation 3). Automobile dealers
that comply with this revenue procedure
will not be required to change from the
LIFO inventory method to another inven-
tory method as a result of such LIFO con-
formity violation.
SECTION 2. BACKGROUND
.01 Section 472(a) authorizes a tax-
payer to use the LIFO inventory method
in accordance with regulations prescribed
by the Secretary.
.02 Section 472(c) provides that a tax-
payer may not elect to use the LIFO in-
ventory method unless it establishes to the
satisfaction of the Commissioner that it
us ed no metho d oth er t han th e L I FO
method in inventorying goods to ascertain
the income, profit, or loss of the first tax-
able year for which the LIFO method is to
be used, for the purpose of a report or
statement covering that taxable year to
shareholders, partners, other proprietors,
or beneficiaries, or for credit purposes.
.03 Section 472(e) provides that a tax-
payer electing to use the LIFO inventory
method must continue to use the LIFO in-
ventory method unless the taxpayer: (1)
obtains the consent of the Commissioner
to change to a different method; or (2) is
required by the Commissioner to change
to a different method because the tax-
payer has used some inventory method
other than LIFO to ascertain the income,
profit, or loss of any subsequent taxable
year in a report or statement covering that
taxable year (a) to shareholders, partners,
other proprietors, or beneficiaries, or (b)
for credit purposes.
.04 Section 1.472–2(e)(1) of the In-
come Tax Regulations provides that a tax-
payer electing to use the LIFO inventory
method must establish to the satisfaction
of the Commissioner that the taxpayer, in
ascertaining the income, profit, or loss of
the taxable year for which the LIFO in-
ventory method is first used, or for any
subsequent taxable year, for credit pur-
poses or for purposes of reports to share-
holders, partners, other proprietors, or
beneficiaries, has not used any inventory
method other than LIFO.
.05 Rev. Rul. 97–42 holds that a fran-
chised automobile dealer that elected the
L IF O in ve nto r y me th o d v i ol at e s t he
LIFO conformity requirement by provid-
ing to a credit subsidiary of its franchisor
(an automobile manufacturer) an income
statement covering a taxable year that
f a i l s t o re f l e c t t h e L I F O i n v e n t o r y
method in the computation of net income.
.06 R ev. Proc . 79–23, 1979–1 C.B.
564, provides that a violation of the LIFO
conformity requirement warrants termina-
tion of a taxpayer’s LIFO election.
SECTION 3. SCOPE
This revenue procedure applies to any
taxpayer engaged in the purchase, sale,
and service of automobiles or light-duty
trucks that violated the LIFO conformity
requirement by providing, for credit pur-
poses, an income statement prepared in a
format required by the franchisor or on a
pre-printed form supplied by the fran-
chisor (an automobile manufacturer), cov-
ering any taxable year ended on or before
October 14, 1997, that fails to reflect the

1997–41 I.R.B.9October 14, 1997
LIFO inventory method in the computa-
tion of net income, regardless of whether
the taxpayer is currently under examina-
tion, before an appeals office, or before a
federal court. For this purpose, the term
“taxpayer” has the same meaning as the
term “person” defined in § 7701(a)(1)
(rather than the meaning of the term “tax-
payer” defined in § 7701(a)(14)). T h e
term “taxpayer” includes a corporation
that is included in an affiliated group of
corporations as defined in § 1504.
SECTION 4. RELIEF
.01 Ataxpayer within the scope of this
revenue procedure that satisfies all the re-
quirements for relief set forth herein is
hereby granted the following relief: the
district director will not terminate the
LIFO election of the taxpayer because of
a LIFO conformity violation described in
section 3 of this revenue procedure.
.02 The relief granted under this rev-
enue procedure extends only to LIFO
conformity violations described in section
3 of this revenue procedure that occurred
on or before October 14, 1997. Accord-
i n g l y, the district director may, upon ex-
amination, terminate a taxpayer’s LIFO
election for:
(1) other LIFO conformity viola-
tions, including those described in section
3 of this revenue procedure that occur
after October 14, 1997; or
(2) any other action that may war-
rant termination of a taxpayer ’s LIFO
election.
.03 The district director may, upon ex-
amination, verify the accuracy of the tax-
payer’s settlement amount calculation and
otherwise determine whether the taxpayer
has fully satisfied the requirements of this
revenue procedure. The district director
may terminate a taxpayer’s LIFO election
for any violation year ended within the
look-back period if the taxpayer failed to
fully satisfy the requirements of this rev-
enue procedure.
.04 Nothing in this revenue procedure
will prohibit the district director from
making adjustments to a taxpayer’s LIFO
inventory method of accounting.
SECTION 5. REQUIREMENTS FOR
RELIEF
.01 Ataxpayer within the scope of this
revenue procedure for which any viola-
tion year ended within the look-back pe-
riod is entitled to relief only if the tax-
payer: (1) pays the settlement amount at
the time and in the manner set forth in
section 5.03 of this revenue procedure;
(2) submits the accompanying memoran-
dum at the time and in the manner set
forth in sections 5.03 and 5.04 of this rev-
enue procedure; and (3) satisfies the addi-
tional requirements set forth in section 7
of this revenue procedure. At a x p a y e r
within the scope of this revenue proce-
dure that does not have a violation year
that ends in the look-back period is auto-
matica lly grante d relief and is not re-
quired to satisfy any of the requirements
of this revenue procedure.
.02 Settlement Amount. (1) In general.
Ataxpayer applying for relief under this
revenue procedure must pay a “settlement
amount,” which is intended to approxi-
mate the after-tax, time value of money
benefit that the taxpayer will derive from
continuing to use the LIFO inventory
method for a period of years. The settle-
ment amount is not treated as interest
under § 163(a) and may not be capitalized
or deducted under any provision of the
Code. Moreover, the settlement amount
is not refundable or creditable against any
federal tax liability of the taxpayer.
( 2 ) C a l c u l a t i n g t h e s e tt l em e n t
a m o u n t .The settlement amount equals
4.7% of the difference between the LIFO
carrying value and the non-LIFO carrying
value (for example, the value using the
actual invoice cost or the first-in, first-out
method) of the taxpayer’s inventory (the
“LIFO reserve”) on the last day of the tax-
payer’s last taxable year ended on or be-
fore October 14, 1997. For this purpose,
the taxpayer’s inventory includes only in-
ventory related to the purchase, sale, and
service of automobiles and light-duty
trucks. Ataxpayer determines the LIFO
reserve on the last day of its last taxable
year ended on or before October 14, 1997,
using the method of accounting that it
used on its original federal income tax re-
turn for that taxable year.
.03 Time and Manner of Payment.( 1 )
In general. The settlement amount must
be paid in three equal installments. Except
as provided in section 5.03(2) or (3) of this
revenue procedure, the first installment
and the memorandum described in section
5.04 of this revenue procedure, are due on
or before May 31, 1998. The remaining
installments and memoranda are due on or
before January 31 of the two succeeding
calendar years. Payments, together with
the original memorandum, must be sent to
the Internal Revenue Service, Cincinnati
Service Center, 201 W. River Center Blvd.,
Stop 31, Unit 21, Covington, KY4 1 0 1 9 .
A copy of each memorandum must be sent
to the national office addressed to the
Commissioner of Internal Revenue, A t t e n-
tion: CC:DOM:IT&A, P.O. Box 7604,
Benjamin Franklin Station, Wa s h i n g t o n ,
DC 20044 (or, in the case of a private de-
livery service: Commissioner of Internal
Revenue, Attenti on: CC:DOM: IT&A,
1111 Constitution Avenue, NW, Wa s h i n g-
ton, DC 20224).
(2) Taxpayers under examination,
b e f o re appeals, or before a federal court .
If any federal income tax return of a tax-
payer is under examination, before an ap-
peals office, or before a federal court on
October 14, 1997, the first installment of
the settlement amount and the memoran-
dum described in section 5.04 of this rev-
enue procedure are due on or before De-
cember 1, 1997. For this purpose, the
terms “under examination,” “before an ap-
peals office,” and “before a federal court”
have the same meaning as provided in Rev.
Proc. 97–27, 1997–21 I.R.B. 10. The tax-
payer must notify the examining agent(s),
appeals off i c e r, or the counsel for the gov-
ernment, whichever is applicable, in writ-
ing on or before December 15, 1997, that it
has applied for relief under this revenue
procedure. Evidence that the first install-
ment has been paid and a copy of the mem-
orandum described in section 5.04 of this
revenue procedure must be provided as
part of this written notification.
( 3 ) O p t i o n t o p a y s e t t l em e n t
amount in one installment. At a x p a y e r
may elect to pay the entire settlement
amount in one installment. If a taxpayer
makes this election, the entire settlement
amount and the original memorandum de-
scribed in section 5.04 of this revenue
procedure are due on or before May 31,
1998, or, if any federal income tax return
of the taxpayer is under examination, be-
fore an appeals office, or before a federal
court, on or before December 1, 1997. In
addition, if applicable, the written notifi-
cation required in section 5.03(2) of this
revenue procedure must be satisfied. A
copy of the memorandum must be sent to
the national office as required by section
5.03(1) of this revenue procedure.

. 0 4 A c co m p a n y in g M e m o ra n d u m .
Each installment payment must be ac-
companied by a memorandum providing
the following information:
(1) the taxpayer ’s name, address,
and EIN number;
(2) the amount of the taxpayer ’s
LIFO rese rve calculated under section
5.02(2) of this revenue procedure;
(3) the total settlement amount cal-
culated under section 5.02(2) of this rev-
enue procedure;
(4) the amount of the installment
being paid;
(5) a statement identifying the pay-
ment as the first, second, or third install-
ment (or a statement that the taxpayer
elects to pay the entire settlement amount
in a single installment); and
(6) a statement that the taxpayer
agrees to all of the terms of this revenue
procedure.
Each memorandum must be signed under
penalties of perjury by an individual with
authority to bind the taxpayer in such mat-
ters. The following language must be ei-
ther typed or legibly printed at the top of
t he f ir st pag e of e ac h m emo r and um :
“ PAY M E N TO F S ET TL EM E N T
A M O U N TUNDER REV. PROC. 97–44.”
SECTION 6. DEFINITIONS
.01 Violation year.Aviolation year is
any taxable year for which a taxpayer vio-
lated the LIFO conformity requirement
under the facts described in section 3 of
this revenue procedure. However, solely
for purposes of this revenue procedure, a
taxable year will not be treated as a viola-
tion year if it ended on or before October
14, 1997, and the taxpayer replaced the
twelfth monthly income statement for that
year with a “thirte enth period in come
statement” that:
(1) covered the same period as the
twelfth monthly income statement;
(2) reflected the LIFO inventory
method; and
(3) was provided, before the first
monthly income statement of the follow-
ing year, to each creditor that received the
twelfth monthly income statement.
.02 Look-back period. For purposes of
this revenue procedure, the “look-back
period” consis ts of the taxpayer ’s six
most recent taxable years ended on or be-
fore October 14, 1997.
SECTION 7. ADDITIONAL TERMS OF
RELIEF
.01 A taxpayer that fails to pay each
ins tall ment of the settl em ent a m ount
t i m e l y, or to submit the memorandum
t i m e l y, has n ot satisf ied the req uir e-
ments of this revenue procedure. A c-
c o r d i n g l y, the relief provided under sec-
tion 4 of this revenue procedure is not
a v a i l a b l e .
.02 A taxpayer that ceases to engage in
the trade or business of purchase, sale,
and service of automobiles or light-duty
trucks or terminates its existence must
pay the remaining balance of the settle-
ment amount within 45 days of the ces-
sati on o r ter min a tio n. A tax payer is
treated as ceasing to engage in a trade or
business if the operations of the trade or
business cease, or substantially all the
assets of the trade or business are trans-
ferred to another taxpayer in a taxable or
non-taxable transfer. For this purpose,
“substantially all” has the same meaning
as in section 3.01 of Rev. Proc. 77–37,
1977–2 C.B. 568. No acceleration of the
settlement amount is required under this
section 7.02 when a C corporation elects
to be treated as an S corporation, or an S
corporation terminates its S election and
is then treated as a C corporation. How-
e v e r, ac c e l e r a t i o n o f t h e s e t t l e m e n t
amount is required if a sole proprietor in-
corporates and immediately elects to be
treated as an S corporation.
. 0 3 A t a x p a y e r t h a t m a k e s o ne o r
more payments under this revenue pro-
cedure may not change from the LIFO
inventory method pursuant to Rev. Proc.
97–37, 1997–33 I.R.B. 18, for a taxable
year beginning before the date that the
entire settlement amount is paid in ac-
cordance with this revenue procedure.
A taxpaye r requesting to change from
the LIFO method for a taxable year be-
ginning before the date that the entire
settlement amount is paid, must file a
Fo r m 3 11 5 in ac c o rd a nc e w i th Re v.
Proc. 97–27. The Commissioner will
not gra nt conse nt to c hange from the
LIFO method unless the taxpayer agrees
to accelerate any remaining payments of
the settlement amount.
SECTION 8. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 97–37 is modified.
SECTION 9. PAPERWORK
REDUCTION ACT
The collections of information contained
in this revenue procedure have been re-
viewed and approved by the Office of Man-
agement and Budget in accordance with the
Paperwork Reduction Act (44 U.S.C. 3507)
under control number 1545–1559.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless the col-
lection of information displays a valid
OMB control number.
The collection of information in this rev-
enue procedure is in section 5 of this revenue
procedure. This information is required to
ensure that the settlement amount required to
be paid under this revenue procedure is ac-
curately computed and timely paid. T h e
likely respondents are businesses engaged in
the retail sale of new automobiles.
The estimated total annual reporting
burden is 100,000 hours.
The estimated annual burden per re-
spondent will vary from 10 hours to 30
hours, depending on individual circum-
stances, with an estimated average of 20
hours. The estimated number of respon-
dents is 5,000.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mater-
ial in the administration of any internal
revenue law. Generally, tax returns and
return information are confidential, as re-
quired by 26 U.S.C. 6103.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Jeffery G. Mitchell of the Of-
fice of Assistant Chief Counsel (Income
Tax & Accounting). For further informa-
tion regarding this revenue procedure,
contact Mr. Mitchell on (202) 622-4970
(not a toll-free call).
26 CFR 601.105: Examination of returns and
claims for refund, credit, or abatement; determina-
tion of correct tax liability.
(Also Part I, §§ 62, 162, 274; 1.62-2, 1.162–17,
1.274–5T, 1.274(d)–1.)
Rev. Proc. 97–45
SECTION 1. PURPOSE
This revenue procedure provides op-
tional rules under which an employee of a
October 14, 1997101997–41 I.R.B.

federal government agency who is reim-
bursed for ordinary and necessary busi-
ness expenses relating to travel, entertain-
ment, gifts, or listed property (such as an
employee’s automobile) may make an ad-
equate a ccounting to the employer to
s u b s t a n t i a t e t h o s e e x p e n s e s (u n d e r
§§ 1.274–5T(f)(2) and (4)(ii) of the tem-
porary Income Tax Regulations) by sub-
mitting an account book, diary, log, etc.,
alone, without submitting documentary
evidence such as receipts. These rules
generally apply to employees of the exec-
utive and judicial branches, and certain
employees of the legislative branch, of
the federal government.
SECTION 2. BACKGROUND
.01 Section 162(a) of the Internal Rev-
enue Code allows a deduction for all ordi-
nary and necessary expenses paid or in-
curred during the taxable year in carrying
on any trade or business, including travel-
ing expenses (including amounts expended
for meals and lodging) while away from
home in pursuit of a trade or business.
.02 Section 1.62–2(c)(2) provides that
reimbursements by an employer to an em-
ployee for business expenses paid or in-
curred by the employee are paid under an
“accountable plan” if the reimbursement
arrangement meets the requirements of
business purpose, substantiation, and re-
turning amounts in excess of expenses.
Amounts failing to meet these require-
ments are treated as paid under a nonac-
countable plan. Section 1.62–2(c)(3).
.03 Amounts treated as paid under an
accountable plan are excluded from the
e m p l o y e e ’s gross income , are not re -
ported as wages or other compensation on
the employee’s Form W–2, and are ex-
empt from the withholding and payment
o f e m p l o y m e n t t a x e s . S e c t i o n
1 . 6 2 – 2 ( c ) ( 4 ). C o n v e r s e l y, a m o u n t s
treated as paid under a nonaccountable
plan are included in the employee’s gross
income, must be reported as wages or
other compensation on the employee’s
Form W–2, and are subject to the with-
hol ding a n d payment of em ploym ent
taxes. Section 1.62–2(c)(5).
.04 An employee may satisfy the sub-
stantiation requirement of a § 1.62–2(c)(2)
accountable plan by substantiating the ex-
penses to the employer in accordance with
§ 274(d) and the regulations thereunder.
Section 1.62–2(e)(2).
.05 Section 274(d) disallows a deduction
under § 162 for any travel (including meals
and lodging), entertainment, gift, or listed
property expense, unless the taxpayer sub-
stantiates the elements of the expense by ad-
equate records or by sufficient evidence.
.06 Under § 1.274–5T(c)(2), a taxpayer
must maintain two types of records to sat-
isfy the “adequate records” requirement:
(1) a summary of expenses (account book,
d i a r y, log, statement of expe nse, tr ip
sheets, or similar record) made at or near
the time the expenses are incurred (as pro-
vided in § 1.274–5T(c)(2)(ii)), and (2)
documentary evidence (such as receipts,
paid bills, or similar evidence as provided
i n § 1. 2 7 4 –5 T ( c) (2 ) ( i ii ) ) . S e ct i o n
1.274–5T(c)(2)(iii) generally requires that
a taxpayer have documentary evidence to
substantiate (A) any expenditure for lodg-
ing, and (B) any other expenditure of $75
or more ($25 or more for expenses paid or
incurred before October 1, 1995). To-
g e t h e r, these records must establish the el-
ements of amount, time, place, and busi-
n es s pu r p o se ( a n d, f o r g i ft s an d
entertainment, business relationship of the
recipient or persons entertained) for each
expenditure or use. Section 1.274–5T(b).
.07 Section 1.274–5T(f)(4)(i) requires an
employee substantiating expenses (or mak-
ing an “adequate accounting” of expenses)
to the employer to submit to the employer
records that satisfy the “adequate records”
requirements of § 1.274–5T(c)(2). How-
e v e r, § 1.274–5T(f)(4)(ii) provides that the
Commissioner may prescribe rules under
which an employee may make an adequate
accounting to the employer by submitting
an account book, diary, log, etc., alone,
without submitting documentary evidence.
SECTION 3. SCOPE
This revenue procedure provides rules
pursuant to § 1.274–5T(f)(4)(ii) under
which an employee of a federal govern-
ment agency may make an adequate ac-
counting to the employer to substantiate the
e m p l o y e e ’s expenses for travel, entertain-
ment, gifts, or listed property, by submit-
ting an account book, diary, log, statement
of expense, trip sheet, or similar record,
without submitting documentary evidence.
SECTION 4. DEFINITIONS
.01 Documentary evidence.The term
“documentary evidence” means receipts,
paid bills, or similar evidence (whether on
paper or in e lectronic form) sufficient
to support an expenditure (as provided in
§ 1.274–5T(c)(2)(iii)).
.02 Employee.The term “employee”
has the same meaning as in 5 U.S.C. §
5701(2). The term “employee” also in-
cludes members of the uniformed services
(as defined in 37 U.S.C. § 101(3)) and
members of the Foreign Service (as de-
fined in 22 U.S.C. § 3903).
.03 E m p l o y e r. The term “employer”
m ea n s a f e d er a l go v er n m en t a ge n cy
(within the meaning of section 4.06 of
this revenue procedure) that reimburses
its e mplo yees unde r a re imbursement
arrangement for their expenses for travel,
entertainment, gifts, or listed property.
.04 Expenses or expenditures. T h e
terms “expenses” or “expenditures” mean
expenses under § 274(d) for travel (in-
cluding meals and lodging awa y from
home) , entertainm en t, gift s, o r lis ted
property, incurred by an employee in con-
nection with the performance of services
as an employee.
.05 Expense voucher. The term “ex-
pense voucher” means an account book,
d i a r y, log, s tatement of expense, tr ip
sheet, or similar record (within the mean-
ing of § 1.274–5T(c)(2)(ii), and whether
on paper or in electronic form).
.06 Federal government agency.The
term “federal government agency” has the
same meaning as “agency” in 5 U.S.C.
§ 5701(1).
.07 Reimbursement. The term “reim-
bursem en t” include s adva nces, reim -
bursements, or allowances for expenses.
SECTION 5. APPLICATION
.01 In general An employee of a fed-
eral government agency may make an ad-
equate accounting to the employer to sub-
stantiate the employee’s expenses (under
§§ 1.274–5T(f)(2) and (4)(ii)) without
submitting documentary evidence, pro-
vided the employer makes the reimburse-
ment pursuant to a written policy that in-
cludes all the proc edures set forth in
section 5.02 of this revenue procedure.
An adequate accounting made pursuant to
these procedures satisfies the substantia-
tion requirements applicable to account-
able plans under § 1.62–2(c)(2). How-
ever, an employer must comply with the
other requirements of § 1.62–2 in order to
treat reimbursements as paid under an ac-
countable plan.
1997–41 I.R.B.11October 14, 1997

.02 Required procedures
(1) The types and amounts of expenses
paid or incurred by the employee, or to be
paid or incurred by the employee, must be
approved by an appropriate official of the
employer (who is not the employee incur-
ring the expenses), either in advance of,
or after, the employee pays or incurs the
expenses.
(2) Within a reasonable time after pay-
ing or incurring the expenses, the em-
ployee must submit to the employer an
expense voucher sufficient to establish
the elements of amount, time, place, and
business purpose (and, for gifts and enter-
tainment, business relationship of the re-
cipient or persons entertained) for each
expenditure or use.
(3) Except as provided in Rev. Proc.
96–63, 1996–2 C.B. 420, or Rev. Proc.
96–64, 1996–2 C.B. 427, or any succes-
sors, the employee must obtain and retain
for a period of four years after submitting
the expense voucher, documentary evi-
dence for (a) expenditures of $75 or more,
and (b) all expenditures for lodging, and
produce the documentary evidence when
requested by the employer or the Service.
The employer must timely inform an em-
ployee receiving reimbursements of these
requirements.
(4) The employer must conduct peri-
odic audits of a representative sample of
the expense vouchers submitted (includ-
ing related documentary evidence), se-
le cted on a s tat ist ical ly s oun d b asis .
Compliance with the applicable require-
ments of the General Accounting Office is
sufficient.
(5) The employer must either (a) col-
lect from an employee any amount dis-
covered on audit or otherwise to have
been reimbursed in excess of the amount
supported by the documentary evidence
required under section 5.02(3) of this rev-
enue procedure, or (b) treat such excess as
paid under a nonaccountable plan.
(6) The employer’s policy and proce-
dures (including audit procedures) for re-
imbursing employees for expenses must
be subject to review by an independent
government authority (such as its Inspec-
tor General or the General A c c o u n t i n g
Office).
SECTION 6. EFFECTIVE DATE
This revenue procedure is effective Oc-
tober 1, 1997.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Donna M. Crisalli of the Of-
fice of Assistant Chief Counsel (Income
Tax and Accounting). For further infor-
mation regarding this revenue procedure,
contact Ms. Crisalli at (202) 622-4920
(not a toll-free call).
October 14, 1997121997–41 I.R.B.

Foundations Status of Certain
Organizations
Announcement 97–101
Th e fo l lo w i n g or g an i z a ti o n s h av e
failed to establish or have been unable to
maintain their status as public charities or
as operating foundations. A c c o r d i n g l y,
grantors and contributors may not, after
this date, rely on previous rulings or des-
ignations in the Cumulative List of Orga-
nizations (Publication 78), or on the pre-
sumption arising from the filing of notices
under section 508(b) of the Code. T h i s
listing does notindicate that the organiza-
tions have lost their status as org a n i z a-
tions described in section 501(c)(3), eligi-
ble to receive deductible contributions.
Former Public Charities.The following
o rganizations (which have been treated as
o rganizations that are not private founda-
tions described in section 509(a) of the
Code) are now classified as private foun-
d a t i o n s :
Advisory Committee of the Burton E.
Stevenson Endowment Fund,
Chillicothe, OH
Albina Head Start, Inc., Portland, OR
Animal Rescue and Rehabilitation
Foundation LTD, Savona, NY
Brooklyn Gastroenterological
Association, Brooklyn, NY
Broome County Chapter American
Institute of Banking, Binghamton, NY
Circolo Culturale Jazz, Inc.,
Staten Island, NY
Evergreen Network, Inc., Southport, CT
Family Life Center, Inc., Aliquippa, PA
Firedrake Inc., New York, NY
Foundation for Research in Cardiac
Surgery and Cardiovascular
Biology, Inc., New York, NY
Friends of Families, Buena Park, CA
Hip Hoppin Corporation, Brooklyn, NY
Hope Alliance for Animals, Branford, CT
International Institute for Trade and
Education, Inc., Brookline, MA
International Womens Club of New
England, Cape Neddick, ME
Inwood Heights Housing Development
Fund Corporation, Bronx, NY
Iota Kappa Lambda Schola,
Syracuse, NY
Iscomp Technical Institute,
Los Angeles, CA
Jose Napoleon Duarte Foundation, Inc.,
Great Falls, VA
Kundalini Yoga Ashram of
New York, Inc., New York, NY
La Coalicion Deportiva Hispano
Americana, Inc., New York, NY
Lao International Community
Development Center of CT., Inc.,
Hartford, CT
La Paloma, Inc., Watertown, CT
Las Puertas Housing Corporation,
Bronx, NY
Latin American Womens Association of
Connecticut, Inc., Hamden, CT
Latino Community Volunteers
Corps., Inc., Middleborough, MA
Latino Peace Officers Association of
Massachusetts, Charlestown, MA
Lawrence D. Bell Aerospace Museum,
Williamsville, NY
Lechendor Arts Group, Inc.,
New York, NY
Lewis Foundation for Disadvantaged
Children, Inc., New York, NY
Ley, Staten Island, NY
Lift Up a Standard Ministries, Inc.,
Copiague, NY
Lights on Deaf Theater, Ltd.,
Rochester, NY
Lions Youth Hockey Association, Ltd.,
Glen Head, NY
Living Farms, Inc., Bronx, NY
Local Education Alternatives Resource
Network, Inc., New York, NY
Long Island Animal Advocates, Inc.,
Rockville Centre, NY
Long Island Society Prevention of
Cruelty Children County Nassau, Inc.,
Mineola, NY
Maat, Inc., Brooklyn, NY
Madonna of the Streets, Inc.,
Buffalo, NY
Mahasatipatthana Meditation Center,
Inc., Brooklyn, NY
Maine Respite Home, Portland, ME
Making Ends Meet Foundation, Inc.,
Marblehead, MA
Management Corps for the Emerging
East, Inc., Wellesley, MA
Mariners Harbor Improvement
Corporation, Staten Island, NY
Mark A. Kent Scholarship Fund, Inc.,
Hingham, MA
The Mayors Committee for a Better
Community, Las Vegas, NV
Mount Eve Land Trust, Inc., Goshen, NY
Naked Theatre, Inc., New Haven, CT
Nantucket Education Trust, Inc.,
Mamticlet, MA
Napa State Hospital Volunteer Community
Advisory Board, Napa, CA
National Aids Memorial, Jersey City, NJ
National Association for Orphans &
Abandoned Children, Glenn Dale, MD
National Business Council for Family
Daycare, Inc., Kensington, CT
National Educational Technologies
Research Institute, Inc., Groton, CT
National Incarcerated Aids Network,
Leominster, MA
National Infertility Network Exchange,
East Meadow, NY
National Youth Achievement Foundation,
Bronx, NY
Neighborhood Assistance Center
Corporation, Woodhaven, NY
Nelson Memorial Playground Assn., Inc.,
Plymouth, MA
Ner Sarah Childrens Fund, Inc.,
Lawrence, NY
New England Alliance of Multiracial
Families, Inc., Medford, MA
New England Environmental Law
S o c i e t y, Inc., Boston, MA
New Haven River Anglers, Inc., Bristol, V T
New Haven Womens Aids Coalition, Inc.,
New Haven, CT
New Hope, Lake Wood, CA
New Rochelle Opera Guild,
New Rochelle, NY
New Visions, Inc., Washington Mills, NY
Nightingale Research Foundation, Inc.,
Ogdensburg, NY
Non Hunters Rights Alliance,
Rockland, ME
Norman A. Fennell Memorial Scholarship
Foundation, Inc., Harwichport, MA
Northeast Bronx Redevelopment
Corporation, Bronx, NY
Nutmeg BMX, Inc., Bridgeport, CT
Ocean State Knitting Guild, Cranston, RI
Onteora Babe Ruth League, Inc.,
New York, NY
Optimum Professional Achievement
Foundation, Inc., Port Washington, NY
Organization for the Retirement of
People, Inc., Far Rockaway, NY
Our Daily Blessings, Albion, NY
Our Lady of Mt. Carmel Development
Corporation, New York, NY
Our Place Drop in Center,
Bellows Falls, VT
Paramus Affordable Housing
Corporation, Paramus, NJ
People Helping People with Christ, Inc.,
Wareham, MA
1997–41 I.R.B.13October 14, 1997
Part IV. Items of General Interest

Region 15 PTO Perpetual Fund,
Southbury, CT
Sepharadic Heritage Alliance, Inc.,
Great Neck, NY
Spokane Chamber Choir, Colville, WA
Zanesville Green Commission, Inc.,
Zanesville, OH
If an organization listed above submits
information that warrants the renewal of its
classification as a public charity or as a pri-
vate operating foundation, the Internal
Revenue Service will issue a ruling or de-
termination letter with the revised classifi-
cation as to foundation status. Grantors and
contributors may thereafter rely upon such
ruling or determination letter as provided
in section 1.509(a)–7 of the Income Ta x
Regulations. It is not the practice of the
Service to announce such revised classifi-
cation of foundation status in the Internal
Revenue Bulletin.
Delegation Order No. 97 (Rev. 34)
Delegation of Authority
A G E N C Y: I nterna l Revenue Service
(IRS), Treasury.
ACTION: Delegation of Authority
S U M M A RY: The authority delegated by
the Commissioner of Internal Revenue to
the Assistant Commissioner (Employee
Plans and Exempt Organizations), to enter
into and approve certain closing agree-
ments, may be redelegated to special as-
sistants and division directors reporting
directly to the Assistant Commissioner
(Employee Plans and Exempt Org a n i z a-
tions). The text of the delegation order
appears below.
EFFECTIVE DATE: August 18, 1997
FOR FURTHER INFORMATION CON-
TA C T: John H. Tu r n e r, CP:E:E P:P:2,
Room 6702, 1111 Constitution Av e n u e ,
NW, Washington, DC 20224, (202) 622-
6214 (not a toll-free number).
Effective: August 18, 1997
Closing Agreements Concerning Internal
Revenue Tax Liability (Supplemented by
Delegation Orders No. 236, 245, 247 and
248)
1. Authority: To enter into and approve
a written agreement with any person relat-
ing to the internal revenue tax liability of
such person (or of the person or estate for
whom he or she acts) in respect to any
prospective transactions or completed
transactions if the request to the Chief
Counsel for determination or ruling was
made before any affected returns have
been filed. This does not include the au-
thority to set aside any closing agreement.
Delegated to: The Chief Counsel in
cases under his/her jurisdiction.
Redelegation: This authority may be
redelegated no lower than the Deputy As-
sociate Chief Counsels for cases under
their respective jurisdictions and to the
Assistant Chief Counsels for cases under
their respective jurisdictions that do not
involve precedent issues.
2. Authority: To enter into and approve
a written agreement with any person relat-
ing to the internal revenue tax liability of
such person (or of the person or estate for
whom he or she acts) for a taxable period
or perio ds en ded pr ior t o the dat e of
agreement and related specific items af-
fecting other taxable periods. This does
not include the authority to set aside any
closing agreement.
De legated to: The A ssociate Chie f
Counsels and the Assistant Commission-
ers (Examination) and (International) for
matters under their respective jurisdic-
tions.
Redelegation: The authority delegated
to the Associate Chief Counsels may be
redelegated, by the Deputy Chief Counsel,
to the Deputy Associate Chief Counsels.
The authority delegated to the A s s i s t a n t
Commissioners (Examination) and (Inter-
national) may be redelegated, respectively,
to the Deputy Assistant Commissioners
(Examination) and (International).
3. Authority: To enter into and approve
a written agreement with any person relat-
ing to the internal revenue tax liability of
such person (or of the person or estate for
whom he or she acts) with respect to the
performance of his or her functions as the
competent authority under the tax con-
ventions of the United States. This does
not include the authority to set aside any
closing agreement.
Delegated to: The Assistant Commis-
sioner (International).
Redelegation: This authority may be
redelegated to the Deputy Assistant Com-
missioner (International).
4. Authority: To enter into and approve
a written agreement with any person relat-
ing to the internal revenue tax liability of
such person (or of the person or estate for
whom he or she acts). This does not in-
clude the authority to set aside any clos-
ing agreement.
Delegated to: The Assistant Commis-
sioner (Employee Plans and Exempt Or-
ganizations) in cases under his or her ju-
risdiction.
Redelegation: This authority may be
redelegated to special assistants and divi-
sion directors reporting directly to the as-
sistant commissioner.
5. Authority: To enter into and approve
a written agreement with any person relat-
ing to the internal revenue tax liability of
such person (or of the person or estate for
whom he or she acts), for a taxable period
or periods ended prior to the date of the
agreement and related specific items af-
fecting other taxable periods. This does
not include the authority to set aside any
closing agreement.
Delegated to: In cases under their ju-
risdiction (but excluding cases docketed
before the United States Tax Court), the
Assistant Commissioner (International);
regional commissioners; regional coun-
sel; regional chief compliance off i c e r s ;
service center directors; district directors;
regional directors of appeals; assistant re-
gional directors of appeals; chiefs and as-
sociate chiefs of appeals offices; and ap-
peals team chiefs with respect to their
team cases.
Redelegation: 1. Service center direc-
tors and the Director, Austin Compliance
C e n t e r, may redelegate this authority no
lower than the Chief, Examination Support
Unit, with respect to agreements concern-
ing the administrative disposition of cer-
tain tax shelter cases, and no lower than the
Chief, Windfall Profit Tax Staff, A u s t i n
Service Center or Austin Compliance Cen-
t e r, with respect to entering into and ap-
proving a written agreement with the Ta x
Matters Partner/Person (TMP) and one or
more partners or shareholders with respect
to whether the partnership or S corpora-
tion, acting through its T M P, is duly autho-
rized to act on behalf of the partners or
shareholders in the determination of part-
nership or S corporation items for purposes
of the tax imposed by Chapter 45, and for
purposes of assessment and collection of
the windfall profit tax for such partnership
or S corporation taxable year.
October 14, 1997141997–41 I.R.B.

2. The Assistant Commissioner (Inter-
national) and district directors may redel-
egate this authority no lower than the
Chief, Quality Review Staff/Section with
respect to all matters, and not below the
Chief, Examination Support Staff / S e c-
tion, or Chief, Planning and Special Pro-
grams Branch/Section, with respect to
agreements concerning the administrative
disposition of certain tax shelter cases, or
Chief, Special Procedures function, with
respect to the waiver of right to claim re-
funds for those responsible officers who
pay the corporate liability in lieu of a trust
fund recovery penalty assessment under
IRC 6672.
6. Authority: In cases under their juris-
diction docketed in the United States Tax
Court and in other Tax Court cases upon
the request of Chief Counsel or his/her
delegate, to enter into and approve a writ-
ten agreement with any person relating to
the internal revenue tax liability of such
pers on (or of the person or es tate for
whom he or she acts), but only in respect
to related specific items affecting other
taxable periods. This does not include the
authority to set aside any closing agree-
ment.
D eleg ated t o: The asso ciate chi e f
counsels; the Assistant Commissioners
(Employee Plans and Exempt Org a n i z a-
tions) and (International); regional com-
missioners; regional counsel; regional di-
r ec tor s of a ppeals; a ssis tant r egio nal
directors of appeals; chiefs and associate
chiefs of appeals offices; and appeals team
chiefs with respect to their team cases.
Redelegation: This authority may not
be redelegated.
7. Authority: In cases under the juris-
diction of the Assistant Commissioner
(International), to enter into and approve
a written agreement with any person relat-
ing to the internal revenue tax liability of
such person (or of the person or estate for
whom he/she acts), and to provide for the
mitigation of economic double taxation
under section 3 of Revenue Procedure
64–54, 1964–2 C.B. 1008, under Revenue
Procedure 72–22, 1972–1 C.B. 747, and
under Revenue Procedure 69–13, 1969–1
C.B. 402, and to enter into and approve a
written agreement providing the treatment
a v a i l ab l e u n d e r R e v en u e P r o c e d u r e
65–17, 1965–1 C.B. 833. This does not
include the authority to set aside any clos-
ing agreement.
Delegated to: The Assistant Commis-
sioner (International).
Redelegation: This authority may not
be redelegated.
S o u rc e s o f A u t h o r it y : 2 6 C FR
3 0 1 . 7 1 2 1 – 1 ( a ) ; Tr e as u ry O r d e r N o .
150–07; Treasury Order No. 150–09; and
Treasury Order No. 150–17, subject to the
transfer of authority covered in Treasury
Order No. 120–01, as modified by Trea-
sury Order No. 150–27, as revised.
To the extent that the authority previ-
ously exercised consistent with this order
may require ratification, it is hereby af-
firmed and ratified.
Th i s o rd e r s u p er s e d e s D el e g a t i o n
Order No. 97 (Rev. 33), which was effec-
tive March 15, 1996.
Approved August 18, 1997.
Michael P. Dolan
Deputy Commissioner
Changes to Volume Submitter
and Regional Prototype
Programs
Announcement 97–102
A. Introduction
Because the Internal Revenue Service
(Service) is consolidating its determina-
tion letter processing program at the Ohio
Key District Office in Cincinnati, changes
in the Volume Submitter and Regional
Prototype Programs are necessary. Previ-
ously, each key district office managed its
own program.
H o w e v e r, effective with the date of
publication of this announcement, all re-
quests for Volume Submitter A d v i s o r y
letters and Regional Prototype Notifica-
tion letters may only be submitted to the
Ohio Key District Office in Cincinnati.
All existing Notification and A d v i s o r y
letters remain valid. In addition, requests
for determination letters by employers
who adopt a Regional Prototype or Vo l-
ume submitter plan may only be submit-
ted to the Ohio Key District Office.
This Announcement provides practi-
tioners with specific instructions for sub-
mitting requests for approval of Vo l u m e
Submitter and Regional Prototype plans
(both new or amended). In addition, the
Announcement provides instructions for
the submission of determination letter re-
quests for adopters of these types of plans.
B. Background
The Volume Submitter Program enables
the Service to expedite the issuance of de-
termination letters in response to applica-
tions for approval of certain individually
designed retirement plans. Under the pro-
gram, previously administered by each
key district office, a practitioner who
meets the standards in C below, may re-
quest the Service to issue an advisory let-
ter regarding the volume submitter speci-
men plan. A specimen plan is a sample
plan of a practitioner (rather than the ac-
tual plan of an employer) that contains
provisions that are identical or substan-
tially similar to the provisions in plans that
the practitioner’s clients have adopted or
are expected to adopt. Once the Service
approves the specimen plan, the practi-
tioner is able to file determination letter
requests on behalf of employers adopting
substantially similar plans. These deter-
mination letter requests ordinarily will be
processed more quickly than requests for
other individually designed plans. The re-
quirements for the Volume Submitter Pro-
gram are described more fully in Rev.
Proc. 97–6, 1997–1 I.R.B. 153.
A Regional Prototype Plan is a plan that
is made available by a regional sponsor
for adoption by employers. AR e g i o n a l
Prototype Plan consists of a basic plan
document, an adoption agreement, and
(with certain exceptions) a trust or custo-
dial account document. Once the Service
has approved the plan, an employer is able
to request a determination letter, if needed
for reliance. These determination letters
ordinarily will be processed more quickly
than requests pertaining to individually
designed plans. The requirements for the
Regional Prototype Program are described
more fully in Rev. Proc. 89–13, 1989–1
C.B. 801, as modified.
C. Approval of Volume Submitter Plans
Once a Volume Submitter practitioner’s
specimen plan is approved by the Ohio
Key District (whether as a new specimen
plan or as an amendment to a previously
approved specimen plan) the app roved
plan may be marketed throughout the
c o u n t r y.
See F. below for Where To File.
1997–41 I.R.B.15October 14, 1997

D. Approval of Regional Prototype Plans
Since the Regional Prototype Program
is a national program with uniform rules
a cr o s s t h e co u n t r y, t h e r e w i l l be n o
change in the requirements for this pro-
gram. Sponsors of Regional Prototype
Plans seeking a notificatio n le tter a nd
adopting employers seeking a determina-
tion letter should continue to follow the
i n st r u ct i o n s c o n t ai n e d i n Re v. p roc .
89–13, as modified.
As of the date of the publication of this
Announcement, Regional Prototype spon-
sors may market approved Regional Pro-
totype plans throughout the country.
See F. Below for Where to File.
E. Registration of Regional Prototype
Plans
Sponsors of Regional Prototype Plans
must continue to meet the registration re-
quirement of Section 14 of Rev. Proc.
89–13, as modified by Rev. Proc. 95–42
1995–2 C.B. 411.
F. Where to File
Arequest for approval of a volume sub-
mitter specimen plan should be submitted
to the Volume Submitter Coordinator in
the Ohio Key District Office at the fol-
lowing address:
Internal Revenue Service
P.O. Box 2508
Cincinnati, OH 45201
ATTN: VSC Coordinator
Room 4106
Practitioners who (1) sponsor Regional
Prototype Plans, (2) adopt the plans of
mass submitters approved by Headquar-
ters after the date of this Announcement,
or (3) amend plans previously approved
by the Service, must submit their applica-
tions for notification letters to the Ohio
Key District Office.
Adopters of previously approved Vo l-
ume Submitter and Regional Prototype
plans should address requests for determi-
nation letters to the Ohio Key District Of-
fice at the following address:
Internal Revenue Service
P.O. Box 192
Covington, KY 41012-0192
Applications shipped by Express Mail
or by a delivery service should be sent to:
Internal Revenue Service
201 West Rivercenter Boulevard
ATTN: Extracting Stop 312
Covington, KY 41011
G. Reliance
Practitioners who already have Service
approved Volume Submitter and/or Re-
gional Prototype plans may continue to
rely on their advisory/notification letters.
S i m i l a r l y, adopters of such plans who
have determination letters or are entitled
to rely on a notification letter, may con-
tinue to rely on them.
In c ertain instance s, most notable a
l a rge influx of applications, the applica-
tion review may take place in an off i c e
other than the Cincinnati office.
H. Comments
The Service is presently considering
the feasibility of maintaining three sepa-
rate volume type programs (Master and
Prototype, Regional Prototype and Vo l-
ume Submitter). The Service is seeking
input from practitioners as to what, if any,
changes should be made to the programs.
Any practitioner wishing to comment on
this matter should address comments to:
Internal Revenue Service
1111 Constitution Avenue, NW
Washington DC 20224
ATTN: CP:E:EP:FC
Room 2236
Comments will be accepted until sixty
(60) days after the publication of this An-
nouncement.
Optional Procedures for
Substantiating Certain Travel,
Etc., Expenses — Public
Comments Requested
Announcement 97–103
R e v. Proc. 97–45, page 10, provides
optional rules under which an employee
of a federal government agency who is re-
imbursed for ordinary and necessary busi-
ness expenses relating to travel, entertain-
ment, gifts, or listed property (such as an
employee’s automobile) may make an ad-
equate accounting to the employer to sub-
s t an t i at e t h o s e e x p en s e s (u n d e r § §
1.274–5T(f) (2) and (4) (ii) of the tempo-
rary Income Tax Regulations) by submit-
ting an a ccount book, diary, log, etc.,
alone, without submitting documentary
evidence such as receipts. These rules
generally apply to employees of the exec-
utive and judicial branches, and certain
employees of the legislative branch, of
the federal government. The Service re-
quests comments from federal govern-
ment agencies on the procedure in Rev.
Proc. 97–45.
In addition, the Service will continue to
accept public comments (originally re-
quested in connection with the publica-
tion of § 1.274–5T(f) (4) (ii)) regarding
whether there are circumstances or condi-
tions (including the use of internal con-
trols) under which the Service could ex-
tend procedures like those in Rev. Proc.
97–45 to employers that are not federal
government agencies.
Comments should be submitted by De-
cember 31, 1997 to: Internal Revenue Ser-
vice, P.O. Box 7604, Ben Franklin Station,
Was hi ng to n, DC 20 04 4, A t t n :
C C : D O M : C O R P : T:R (IT&A Branch 2),
Room 5228. All materials submitted will be
available for public inspection and copying.
Section 7428(c) Validation of
Certain Contributions Made
During Pendency of Declaratory
Judgment Proceedings
This announcement serves notice to po-
tential donors that the organizations listed
below have recently filed timely declaratory
judgment suits under section 7428 of the
Code, challenging revocation of their status
as eligible donees under section 170(c)(2).
Protection under section 7428(c) of the
Code begins on the date that the notice of
revocation is published in the Internal Rev-
enue Bulletin and ends on the date on
which a court first determines that an org a-
n iz at io n is n o t d es c r ib e d i n se c tio n
170(c)(2), as more particularly set forth in
section 7428(c)(1). In the case of individ-
ual contributors, maximum amount of con-
tributions protected during this period is
limited to $1,000, with a husband and wife
being treated as one contributor. This pro-
tection is not extended to any individual
who was responsible, in whole or in part,
for the acts or omissions of the org a n i z a-
tion that were the basis for the revocation.
This protection also applies (but without
limitation as to amount) to org a n i z a t i o n s
described in section 170(c)(2) which are
exempt from tax under section 501(a). If
the organization ultimately prevaisl in its
declaratory judgment suit, deductibility of
contributions would be subject to the nor-
mal limitations set forth under section 170.
Oriana House, Inc., Akron, Ohio
Don Stewart Association, Phoenix, AZ
October 14, 1997161997–41 I.R.B.

1997–41 I.R.B.17October 14, 1997

October 14, 1997181997–41 I.R.B.

1997–41 I.R.B.19October 14, 1997

October 14, 1997201997–41 I.R.B.
Revenue rulings and revenue pro c e d u re s
( h e reinafter re f e rred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
e f f e c t :
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. T h u s ,
if an earlier ruling held that a principle
applied to A, and the new ruling holds
that the same principle also applies to B,
the earlier ruling is amplified. (Compare
with m o d i f i e d, below).
Clarified is use d in thos e 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.
D i s t i n g u i s h e dde scr ibes a situation
where a ruling mentions a previously
published ruling and points out an essen-
tial difference between them.
Modified is used where the substance
of a previo usly published po sition 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 ap-
plies to both A and B, the prior ruling is
modified because it corrects a published
position. (Compare with amplified a n d
c l a r i f i e d, 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 obs oleted bec ause of
changes in law or regulations. Ar u l i n g
may also be obsoleted because the sub-
stance has been included in regulations
subsequently adopted.
Revoked describes situations where the
position in the previously published rul-
ing is not correct and the correct position
is being stated in the 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
substance of a prior ruling, a combination
of terms is used. For example, m o d i f i e d
a nd su per se d ed des cribe s a s i tuati on
where the substance of a previously pub-
lished 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 super-
s e d e d .
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 pub-
lished that includes the list in the original
ruling and the additions, and supersedes
all prior rulings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
ac tion such as the issuance of new or
a me nded r egulations, the outc ome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current use and for-
merly used will appear in material published in the
Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C.—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contribution Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of Procedral Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Definition of Terms

1997–41 I.R.B.21October 14, 1997
Numerical Finding List
1
Bulletins 1997–27 through 1997–40
Announcements:
97–61, 1997–29 I.R.B. 13
97–67, 1997–27 I.R.B. 37
97–68, 1997–28 I.R.B. 13
97–69, 1997–28 I.R.B. 13
97–70, 1997–29 I.R.B. 14
97–71, 1997–29 I.R.B. 15
97–72, 1997–29 I.R.B. 15
97–73, 1997–30 I.R.B. 86
97–74, 1997–31 I.R.B.16
97–75, 1997–32 I.R.B. 28
97–76, 1997–32 I.R.B. 28
97–77, 1997–33 I.R.B. 58
97–78, 1997–34 I.R.B. 11
97–79, 1997–35 I.R.B. 8
97–80, 1997–34 I.R.B. 12
97–81, 1997–34 I.R.B. 12
97–82, 1997–34 I.R.B. 12
97–83, 1997–34 I.R.B. 13
97–84, 1997–34 I.R.B. 13
97–85, 1997–35 I.R.B. 8
97–86, 1997–35 I.R.B. 9
97–87, 1997–35 I.R.B. 9
97–88, 1997–35 I.R.B. 9
97–89, 1997–36 I.R.B. 10
97–90, 1997–36 I.R.B. 10
97–91, 1997–37 I.R.B. 25
97–92, 1997–37 I.R.B. 26
97–93, 1997–36 I.R.B. 11
97–94, 1997–36 I.R.B. 12
97–95, 1997–36 I.R.B. 12
97–96, 1997–39 I.R.B.15
97–97, 1997–38 I.R.B. 22
97–98, 1997–39 I.R.B. 15
97–99, 1997–40 I.R.B. 7
97–100, 1997–40 I.R.B. 8
Court Decisions:
2061, 1997–31 I.R.B. 5
2062, 1997–32 I.R.B. 8
Delegation Orders:
172 (Rev. 5), 1997–28 I.R.B. 6
Notices:
97–37, 1997–27 I.R.B. 4
97–38, 1997–27 I.R.B. 8
97–39, 1997–27 I.R.B. 8
97–40, 1997–28 I.R.B. 6
97–41, 1997–28 I.R.B. 6
97–42, 1997–29 I.R.B. 12
97–43, 1997–30 I.R.B. 9
97–44, 1997–31 I.R.B. 15
97–45, 1997–33 I.R.B. 7
97–46, 1997–34 I.R.B. 10
97–47, 1997–35 I.R.B. 5
97–48, 1997–35 I.R.B. 5
97–49, 1997–36 I.R.B. 8
97–50, 1997–37 I.R.B. 21
97–51, 1997–38 I.R.B. 20
97–52, 1997–38 I.R.B. 20
97–53, 1997–40 I.R.B. 6
97–55, 1997–40 I.R.B. 6
Railroad Retirement Quarterly Rate:
1997–28 I.R.B. 5
Proposed Regulations:
REG–104893–97, 1997–29 I.R.B. 13
REG–105160–97, 1997–37 I.R.B. 22
REG–106043–97, 1997–37 I.R.B. 24
REG–107644–97, 1997–32 I.R.B. 24
REG–208151–91, 1997–38 I.R.B. 21
Revenue Procedures:
97–32, 1997–27 I.R.B. 9
97–32A, 1997–34 I.R.B. 10
97–33, 1997–30 I.R.B. 10
97–34, 1997–30 I.R.B.14
97–35, 1997–33 I.R.B. 11
97–36, 1997–33 I.R.B. 14
97–37, 1997–33 I.R.B. 18
97–38, 1997–33 I.R.B. 43
97–39, 1997–33 I.R.B. 48
97–40, 1997–33 I.R.B. 50
97–41, 1997–33 I.R.B. 5
97–42, 1997–33 I.R.B. 57
97–43, 1997–39 I.R.B. 12
Revenue Rulings:
97–27, 1997–27 I.R.B. 4
97–28, 1997–28 I.R.B. 4
97–29, 1997–28 I.R.B. 4
97–30, 1997–31 I.R.B.12
97–31, 1997–32 I.R.B.4
97–32, 1997–33 I.R.B. 4
97–33, 1997–34 I.R.B. 4
97–34, 1997–34 I.R.B. 14
97–35, 1997–35 I.R.B. 4
97–36, 1997–36 I.R.B. 5
97–37, 1997–37 I.R.B.15
97–38, 1997–38 I.R.B.14
97–39, 1997–39 I.R.B. 4
97–40, 1997–39 I.R.B. 8
97–41, 1997–40 I.R.B. 4
Treasury Decisions:
8722, 1997–29 I.R.B. 4
8723, 1997–30 I.R.B. 4
8724, 1997–36 I.R.B. 4
8725, 1997–37 I.R.B. 16
8726, 1997–34 I.R.B. 7
8727, 1997–34 I.R.B. 5
8728, 1997–37 I.R.B. 4
8729, 1997–38 I.R.B. 4
8730, 1997–38 I.R.B. 16
1
Acumulative list of all revenue rulings, revenue
procedures, Treasury decisions, etc., published in
Internal Revenue Bulletins 1997–1 through 1997–26
will be found in Internal Revenue Bulletin 1997–27,
dated July 7, 1997.

October 14, 1997221997–41 I.R.B.
Finding List of Current Action on
Previously Published Items
1
Bulletins 1997–27 through 1997–40
*Denotes entry since last publication
Revenue Procedures:
96–36
Superseded by
97–34, 1997–30 I.R.B. 14
96–42
Superseded by
97–27, 1997–27 I.R.B. 9
97–32
Modified and amplified by
97–32A, 1997–34 I.R.B. 10
Revenue Rulings:
89–42
Supplemented by
97–31, 1997–32 I.R.B. 4
93–76
Clarified, modified, partially
obsoleted, and superceded by
97–39, 1997–39 I.R.B 4
94–7
Clarified, modified, partially
obsoleted, and superceded by
97–39, 1997–39 I.R.B 4
1
Acumulative finding list for previously published
items mentioned in Internal Revenue Bulletins
1997–1 through 1997–26 will be found in Internal
Revenue Bulletin 1997–27, dated July 7, 1997.

October 14, 1997261997–41 I.R.B.

INTERNAL REVENUE BULLETIN
The Introduction on page 3 describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold on
a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superintendent of Docu-
ments when their subscriptions must be renewed.
CUMULATIVE BULLETINS
The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are
sold on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the
weekly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of
print and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them
from the Superintendent of Documents.
HOW TO ORDER
Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance, de-
tach entire page, and mail to the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. Please
allow two to six weeks, plus mailing time, for delivery.
WE WELCOME COMMENTS ABOUT THE
INTERNAL REVENUE BULLETIN
If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page
(www.irs.ustreas.gov) or write to the IRS Bulletin Unit, T:FP:F:CD, Room 5560, 1111 Constitution Avenue NW, Washington, DC
20224. You can also leave a recorded message 24 hours a day, 7 days a week at 1–800–829–9043.
Superintendent of Documents
U.S. Government Printing Office
Washington, DC 20402
Official Business
Penalty for Private Use, $300
First Class Mail
Postage and Fees Paid
GPO
Permit No. G–26

INTERNAL REVENUE BULLETIN
The Introduction on page 3 describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold on
a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superintendent of Docu-
ments when their subscriptions must be renewed.
CUMULATIVE BULLETINS
The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are
sold on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the
weekly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of
print and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them
from the Superintendent of Documents.
HOW TO ORDER
Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance, de-
tach entire page, and mail to the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. Please
allow two to six weeks, plus mailing time, for delivery.
WE WELCOME COMMENTS ABOUT THE
INTERNAL REVENUE BULLETIN
If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page
(www.irs.ustreas.gov) or write to the IRS Bulletin Unit, T:FP:F:CD, Room 5560, 1111 Constitution Avenue NW, Washington, DC
20224. You can also leave a recorded message 24 hours a day, 7 days a week at 1–800–829–9043.
Internal Revenue Service
Washington, DC 20224
Official Business
Penalty for Private Use, $300
First Class Mail
Postage and Fees Paid
IRS
Permit No. G–48