Internal Revenue Bulletin 2009-42 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 200
9-42
October 19, 2009
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
REG–127270–06, page 534.
Proposed regulations under section 104 of the Code update
the regulations to reflect statutory amendments limiting the
section 104(a)(2) exclusion to damages for personal physical
injuries or physical sickness and delete the “tort or tort-type
rights” test.
EXCISE TAX
Rev. Rul. 2009–34, page 502.
Section 4221(e) reciprocal privileges.The list of countries
that allow reciprocal privileges for purposes of the exemption
for supplies for civil aircraft of foreign registry is updated and
restated. Rev. Ruls. 74-346, 75-190, 75-398, and 75-526
superseded.
T.D. 9462, page 504.
REG–116614–08, page 536.
Final, temporary, and proposed regulations under section 7701
of the Code clarify that a single-owner eligible entity that is gen-
erally disregarded as an entity separate from its owner for any
purpose, but regarded as a separate entity for certain excise
tax purposes, is treated as a corporation for those excise tax
purposes. The regulations also make conforming changes to
the tax liability rule for disregarded entities and the treatment of
entity rule for disregarded entities with respect to employment
taxes. The regulations affect disregarded entities in general
and, in particular, disregarded entities that pay or pay over cer-
tain federal excise taxes or that are required to be registered
by the IRS.
ADMINISTRATIVE
T.D. 9462, page 504.
REG–116614–08, page 536.
Final, temporary, and proposed regulations under section 7701
of the Code clarify that a single-owner eligible entity that is gen-
erally disregarded as an entity separate from its owner for any
purpose, but regarded as a separate entity for certain excise
tax purposes, is treated as a corporation for those excise tax
purposes. The regulations also make conforming changes to
the tax liability rule for disregarded entities and the treatment of
entity rule for disregarded entities with respect to employment
taxes. The regulations affect disregarded entities in general
and, in particular, disregarded entities that pay or pay over cer-
tain federal excise taxes or that are required to be registered
by the IRS.
Rev. Proc. 2009–46, page 507.
This procedure contains revisions to Publication 1239,Speci-
fications for Filing Form 8027, Employer’s Annual Information
Return of Tip Income and Allocated Tips,Electronically (revised
10–2009). Rev. Proc. 2008–34 superseded.
Rev. Proc. 2009–47, page 524.
Per diem allowances.This procedure provides optional rules
for deeming substantiated the amount of certain business ex-
penses of traveling away from home reimbursed to an em-
ployee or deductible by an employee or self-employed individ-
ual. Rev. Proc. 2008–59 superseded.
Announcement 2009–74, page 537.
This document contains corrections to both the August AFR
(Rev. Rul. 2009–22) and the September AFR (Rev. Rul.
2009–29) which contained an inaccurate date in the Note in
Table 4.
Announcements of Disbarments and Suspensions begin on page 537.
Finding Lists begin on page ii.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d meet their tax responsibilities and by applying
the tax law with
integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
October 19, 20092009–42 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 62.—A
djusted
Gross Income Defined
26 CFR 1.62–2: Reimbursements and other expense
allowance arrangements.
Rules are provided under which a reimbursement
or other expense allowance arrangement for the cost
of lodging, meal, and incidental expenses, or of
meal and incidental expenses only, incurred by an
employee while traveling away from home, satisfies
the requirements of § 62(c) of the Code for substan-
tiation of the amount of the expenses. See Rev. Proc.
2009-47, page 524.
Section 162.—Trade or
Business Expenses
26 CFR 1.162–17: Reporting and substantiation of
certain business expenses of employees.
Rules are provided for substantiating the amount
of a deduction for an expense for meal and incidental
expenses, or for incidentalexpenses only, incurred
while traveling away from home. See Rev. Proc.
2009-47, page 524.
Section 40
41.—Imposition
of Tax
The list of countries that allow reciprocal privi-
leges for purposes of the exemption for supplies for
civil aircraft of foreign registry is updated and re-
stated. See Rev. Rul. 2009-34, page 502.
Section 4081.—Imposition
of Tax
The list of countries that allow reciprocal privi-
leges for purposes of the exemption for supplies for
civil aircraft of foreign registry is updated and re-
stated. See Rev. Rul. 2009-34, page 502.
Sectio
n 4082.—Exemption
for Diesel Fuel and
Kerosene
The list of countries that allow reciprocal privi-
leges for purposes of the exemption for supplies for
civil aircraft of foreign registry is updated and re-
stated. See Rev. Rul. 2009-34, page 502.
Section 4421.
—Certain
Tax-Free Sale
s
26 CFR 48.4221–4: Tax-free sales of articles for use
by the purchaser as supplies for vessels or aircraft.
(Also: 4041, 4081(a)(1), 4082(e), 6427(l)(4).)
Section 4221(e) reciprocal privileges.
The list of countries that allow reciprocal
privileges for purposes of the exemption
for supplies for civil aircraft of foreign reg-
istry is updated and restated. Rev. Ruls.
74-346, 75-190, 75-398, and 75-526 su-
perseded.
Rev. Rul. 2009–34
PURPOSE
This revenue ruling updates the list of
countries that allow substantially recip-
rocal privileges for purposes of section
4221(e)(1) of the Internal Revenue Code
(Code).
LAW
Section 4081 imposes a tax on certain
removals, entries, and sales of taxable
fuel, including kerosene. Section 4082(e)
generally exempts from the § 4081 tax
kerosene that is removed from any refinery
or terminal directly into the fuel tank of
an aircraft if such aircraft is employed in
foreign trade or trade between the United
States and any of its possessions. A sim-
ilar exemption from the tax imposed by
§ 4041(c) on other liquids used in aviation
is allowed by §§ 4041(d)(5) and (g)(1).
The exemptions described above are de-
rived from § 4221(d)(3).
Section 6427(l) sets forth the payment
provisions that apply if previously taxed
kerosene is used in an aircraft engaged in
foreign trade or trade between the United
States and any of its possessions.
Section 4221(d)(3) of the Code pro-
vides that the term “supplies for vessels
or aircraft” means fuel supplies, ships’
stores, sea stores, or legitimate equipment
on vessels act
ually engaged in foreign
trade or trade
between the Atlantic and
Pacific ports
of the United States or be-
tween the Uni
ted States and any of its
possessions
. For purposes of the preced-
ing sentence
, the term “vessels” includes
civil aircra
ft employed in foreign trade or
trade betwe
en the United States and any
of its posse
ssions.
Section 422
1(e)(1) of the Code pro-
vides that,
in the case of articles sold for
use as suppl
ies for aircraft, the privileges
granted und
er § 4221(a)(3) in respect of
civil airc
raft employed in foreign trade or
trade betw
een the United States and any of
its posses
sions, in respect of aircraft regis-
tered in a f
oreign country, shall be allowed
only if the
Secretary of the Treasury has
been advi
sed by the Secretary of Com-
merce tha
t he has found that such foreign
country a
llows, or will allow, substantially
reciproc
al privileges in respect of aircraft
register
ed in the United States. If the Sec-
retary o
f the Treasury is advised by the
Secreta
ry of Commerce that he has found
that a fo
reign country has discontinued
or will d
iscontinue the allowance of such
privil
eges, the privileges granted under
§4221(
a)(3) shall not apply thereafter in
respec
t of civil aircraft registered in that
foreig
n country and employed in foreign
trade o
r trade between the United States
and an
y of its possessions.
NOTIFI
CATION
The Sec
retary of Commerce has ad-
vised
the Secretary of Treasury that the
curre
nt list of foreign countries that al-
low su
bstantially reciprocal privileges in
respe
ct of aircraft registered in the United
State
sisasfollows:
2009–42 I.R.B.502October 19, 2009

AfghanistanLebanon
AlbaniaLiberia
Antigua and Bar
buda
Luxembourg
ArgentinaMacau
ArubaMadagascar
AustraliaMalaysia
AustriaMaldives
The BahamasMali
BahrainMalta
BarbadosMarshall Islands
BelarusMexico
BelgiumFederated S
tates of Micronesia
BelizeMoldova
BeninMontenegro
BermudaMorocco
Bosnia and HerzegovinaNamibia
BrazilNetherlands
Brunei Da
russalam
Netherla
nds Antilles
Burkina FasoNew Zealand
BurmaNicaragua
CameroonNigeria
CanadaNorway
Cape VerdeOman
ChadPakista
n
ChilePalau
People’s Republic of ChinaPanama
Colomb
ia
Parag
uay
Democratic Republic of the Congo (only aircraft fuel and
lubricants)
Peru
Cook IslandsRepublic of the Philippines
Costa RicaPoland
Cote d’IvoirePortugal
CubaQatar
Czech RepublicRomania
DenmarkRussia
DominicaRwanda
EcuadorSt. Kitts and Nevis
Egypt (only aircraft fuel and lubricants)St. Lucia
El SalvadorSt. Vincent and the Grenadines
EthiopiaSamoa
FijiSaudi Arabia
FinlandSerbia
FranceSingapore
GabonSlovak Republic
The GambiaSouth Africa
Federal Republic of GermanySpain
GhanaSri Lanka
GreeceSuriname
GrenadaSweden
GuatemalaSwitzerland
GuyanaTaiwan
HaitiTajikistan
HondurasTanzania
Hong KongThailand
HungaryTonga
IcelandTrinidad and Tobago
IndiaTunisia
IndonesiaTurkey
IranTurkmenistan
IrelandTuvalu
IsraelUganda
ItalyUkraine
October 19, 20095032009–42 I.R.B.

JamaicaUnited Arab Emirates
JapanUnited Kingdom
JordanUruguay
KazakhstanUzbekistan
Kenya (only aircraft fueland lubricants)Venezuela
KiribatiVietnam
Republic of KoreaZambia
KuwaitZimbabwe
Kyrgyzstan
EFFECT ON OTHER REVENUE
RULINGS
Rev. Rul. 74–346, 1974–2 C.B. 361,
Rev. Rul. 75–190, 1975–1 C.B. 348, Rev.
Rul. 75–398, 1975–2 C.B. 434, and Rev.
Rul. 75–526, 1975–2 C.B. 435, are super-
seded.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Celia Gabrysh of the Office of
Associate Chief Counsel (Passthroughs &
Special Industries). For further informa-
tion regarding this revenue ruling, contact
Celia Gabrysh at (202) 622–3130 (not a
toll-free call).
Section 6427.—Fuels Not
Used for Taxable Purposes
The list of countries that allow reciprocal privi-
leges for purposes of the exemption for supplies for
civil aircraft of foreign registry is updated and re-
stated. See Rev. Rul. 2009-34, page 502.
Section 7701.—Definitions
26 CFR 301.7701–2: Business entities; definitions.
T.D. 9462
Department of the Treasury
Internal Revenue Service
26 CFR Part 301
Disregarded Entities and
Excise Taxes
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regula-
tions.
SUMMARY: This document contains final
and temporary regulations clarifying that
a single-owner eligible entity that is disre-
garded as an entity separate from its owner
for any purpose, but regarded as a sepa-
rate entity for certain excise tax purposes,
is treated as a corporation for tax admin-
istration purposes related to those excise
taxes. These regulations also make con-
forming changes to the tax liability rule for
disregarded entities and the treatment of
entity rule for disregarded entities with re-
spect to employment taxes. These regula-
tions affect disregarded entities in general
and, in particular, disregarded entities that
pay or pay over certain federal excise taxes
orthatarerequiredtoberegisteredbythe
IRS. The text of these temporary regula-
tions serves as the text of proposed regula-
tions (REG–116614–08) published in this
issue of the Bulletin.
DATES:Effective Date:These regulations
are effective on September 14, 2009.
Applicability Date:For dates of appli-
cability, see §301.7701–2T(e)(2), (e)(5),
and (e)(6).
FOR FURTHER INFORMATION
CONTACT: Michael H. Beker, (202)
622–3070 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
This document contains amendments to
the Procedure and Administration Regula-
tions (26 CFR part 301) under section 7701
of the Internal Revenue Code (Code).
Under existing §301.7701–2(c)(2)(iv),
a single-owner eligible entity that is disre-
garded as an entity separate from its owner
for Federal tax purposes is treated as a sep-
arate entity for purposes of employment
taxes imposed under Subtitle C of the Code
and related reporting requirements. The
regulations treat these disregarded eligible
entities as corporations for purposes of em-
ployment taxes imposed under Subtitle C
of the Code and related reporting require-
ments.
Under existing §301.7701–2(c)(2)(v), a
single-owner eligible entity that is disre-
garded as an entity separate from its owner
for Federal tax purposes is treated as a
separate entity for purposes of certain ex-
cise taxes reported on Form 720, “Quar-
terly Federal Excise Tax Return;” Form
730, “Monthly Tax Return for Wagers;”
Form 2290, “Heavy Highway Vehicle Use
Tax Return;” and Form 11–C, “Occupa-
tion Tax and Registration Return for Wa-
gering;” excise tax refunds or payments
claimed on Form 8849, “Claim for Refund
of Excise Taxes;” and excise tax registra-
tions on Form 637, “Application for Reg-
istration (For Certain Excise Tax Activi-
ties).” Although liability for excise taxes
is not dependent upon an entity’s classi-
fication, an entity’s classification is rel-
evant for certain tax administration pur-
poses, such as determining the proper lo-
cation for filing a notice of federal tax lien
and the place for hand-carrying a return
under section 6091. Therefore, these tem-
porary regulations clarify that these disre-
garded eligible entities are treated as cor-
porations for tax administration purposes.
These temporary regulations also
make conforming changes to the tax li-
ability rule for disregarded entities in
§301.7701–2(c)(2)(iii) and the treatment
of entity rule for disregarded entities
with respect to employment taxes in
§301.7701–2(c)(2)(iv)(B).
Effective/Applicability Date
These regulations apply on and after
September 14, 2009.
2009–42 I.R.B.504October 19, 2009

Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866. Therefore, a regulatory assessment
is not required. It has also been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations. For appli-
cability of the Regulatory Flexibility Act
(5 U.S.C. chapter 6), please refer to the
Special Analyses section of the preamble
to the cross-reference notice of proposed
rulemaking published elsewhere in this is-
sue of the Bulletin. Pursuant to section
7805(f) of the Code, this regulation has
been submitted to the Chief Counsel for
Advocacy of the Small Business Adminis-
tration for comment on its impact on small
business.
Drafting Information
The principal author of these regula-
tions is Michael H. Beker, Office of the
Associate Chief Counsel (Passthroughs
and Special Industries). However, other
personnel from the IRS and the Treasury
Department participated in their develop-
ment.
*****
Amendments to the Regulations
Accordingly, 26 CFR part 301 is
amended as follows:
PART 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1. The authority citation for
part 301 continues to read in part as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 301.7701–2 is amended
by:
1. Revising paragraphs (c)(2)(iii) and
(c)(2)(iv)(B).
2.Redesignating paragraph
(c)(2)(v)(B) as paragraph (c)(2)(v)(C) and
added new paragraph (c)(2)(v)(B).
3. In newly-designated paragraph
(c)(2)(v)(C),Example(iv) is added.
4. Revising paragraph (e)(2).
The additions and revisions read as fol-
lows:
§301.7701–2 Business entities;
definitions.
*****
(c) * * *
(2) * * *
(iii) [Reserved]. For further guidance,
see §301.7701–2T(c)(2)(iii).
(iv) * * *
(B) [Reserved]. For further guidance,
see §301.7701–2T(c)(2)(iv)(B).
*****
(v) * * *
(B) [Reserved]. For further guidance,
see §301.7701–2T(c)(2)(v)(B).
(C)***
(iv) [Reserved]. For further guidance,
see §301.7701–2T(c)(2)(v)(C)Example
(iv).
*****
(e) * * *
(2) [Reserved]. For further guidance,
see §301.7701–2T(e)(2).
*****
Par. 3. Section 301.7701–2T is added
to read as follows:
§301.7701–2T Business entities;
definitions (temporary).
(a) through (c)(2)(ii) [Reserved]. For
further guidance, see §301.7701–2(a)
through (c)(2)(ii).
(iii)Tax liabilities of certain disre-
garded entities—(A)In general. An entity
that is disregarded as separate from its
owner for any purpose under §301.7701–2
is treated as an entity separate from its
owner for purposes of—
(1) Federal tax liabilities of the entity
with respect to any taxable period for
which the entity was not disregarded;
(2) Federal tax liabilities of any other
entity for which the entity is liable; and
(3) Refunds or credits of Federal tax.
(B)Examples. The following exam-
ples illustrate the application of paragraph
(c)(2)(iii)(A) of this section:
Example 1. In 2006, X, a domestic corporation
that reports its taxes on a calendar year basis, merges
into Z, a domestic LLC wholly owned by Y that is
disregarded as an entity separate from Y, in a state
law merger. X was not a member of a consolidated
group at any time during its taxable year ending in
December 2005. Under the applicable state law, Z is
the successor to X and is liable for all of X’s debts.
In 2009, the Internal Revenue Service (IRS) seeks to
extend the period of limitations on assessment for X’s
2005 taxable year. Because Z is the successor to X
and is liable for X’s 2005 taxes that remain unpaid, Z
is the proper party to sign the consent to extend the
period of limitations.
Example 2.ThefactsarethesameasinExample
1, except that in 2007, the IRS determines that X mis-
calculated and underreported its income tax liability
for 2005. Because Z is the successor to X and is liable
for X’s 2005 taxes that remain unpaid, the deficiency
may be assessed against Z and, in the event that Z fails
to pay the liability after notice and demand, a general
tax lien will arise against all of Z’s property and rights
to property.
(c)(2)(iv)(A) [Reserved]. For further
guidance, see §301.7701–2(c)(2)(iv)(A).
(B)Treatment of entity. Anentitythat
is disregarded as an entity separate from its
owner for any purpose under §301.7701–2
is treated as a corporation with respect to
taxes imposed under Subtitle C—Employ-
ment Taxes and Collection of Income Tax
(Chapters 21, 22, 23, 23A, 24, and 25 of
the Internal Revenue Code).
(C) through (c)(2)(v)(A) [Re-
served]. For further guidance, see
§301.7701–2(c)(2)(iv)(C)through
(c)(2)(v)(A).
(B)Treatment of entity. An entity
that is disregarded as an entity separate
from its owner for any purpose under
§301.7701–2 is treated as a corpora-
tion with respect to items described in
§301.7701–2(c)(2)(v)(A).
(C)Example. (i) through (iii) [Re-
served]. For further guidance, see
§301.7701–2(c)(2)(v)(C)Example (i)
through(iii).
(iv) Assume the same facts as in
§301.7701–2(c)(2)(v)(C)Example (i)and
(ii). If LLCB does not pay the tax on its
sale of coal under chapter 32 of the In-
ternal Revenue Code, any notice of lien
the Internal Revenue Service files will be
filed as if LLCB were a corporation.
(d) through (e)(1) [Reserved]. For
further guidance, see §301.7701–2(d)
through (e)(1).
(e)(2) Paragraph (c)(2)(iii) of this sec-
tion applies on and after September 14,
2009. For rules that apply before Septem-
ber 14, 2009, see 26 CFR part 301 revised
as of April 1, 2009.
(e)(3) through (e)(4) [Reserved]. For
further guidance, see §301.7701–2(e)(3)
through (e)(4).
(e)(5) Paragraph (c)(2)(iv)(B) of this
section applies with respect to wages paid
on or after September 14, 2009. For rules
that apply before September 14, 2009, see
October 19, 20095052009–42 I.R.B.

26 CFR part 301 revised as of April 1,
2009.
(e)(6) Paragraphs (c)(2)(v)(B) and
(c)(2)(v)(C)Example (iv)of this section
apply on and after September 14, 2009.
(7) [Reserved]. For further guidance,
see §301.7701–2(e)(7).
(8)Expiration Date. The applicabil-
ity of paragraphs (c)(2)(iii), (c)(2)(iv)(B),
(c)(2)(v)(B), (c)(2)(v)(C)Example (iv),
(e)(2), (e)(5) and (e)(6) of this section
expires on or before September 11, 2012.
L. E. Stiff,
Deputy Commissioner for
Services and Enforcement.
Approved August 31, 2009.
Michael F. Mundace,
Acting Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on September 10,
2009, 11:15 a.m., and published in the issue of the Federal
Register for September 14, 2009, 74 F.R. 46903)
2009–42 I.R.B.506October 19, 2009

Part III. Administrative, Procedural, and Miscellaneous
IMPORTANT NOTES:
Electronic filing will be the ONLY acceptable method forfiling Form 8027 at IRS/ECC-MTB. IRS/ECC-MTB offers an
Internet connection athttp://fire.irs.govfor electronic filing. The Filing Information Returns Electronically (FIRE) System
will be down the week of December 22, 2009 through January 4,2010 for upgrading. It is not operational during this time
for submissions.In addition, the FIRE System may be down every Wednesday 3:00 a.m. to 5:00 a.m. EST for maintenance.
The Form 4419 is subject to review before the approval to transmit electronically is granted and may require additional
documentation at the request of the IRS.If a determination is made concerning the validity of the documents transmitted
electronically, IRS has the authority torevoketheTransmitterControlCode(TCC)andterminatethereleaseofthefiles.
26 CFR 601.206: Tax forms and instructions.
Rev. Proc.
2009–46
TABLE OF CONTENTS
Part A. Ge
neral
SEC. 1. PURPOSE................................................................................................. 508
SEC. 2. NATURE OF CHANGES..................................................................................... 508
SEC
. 3. WHERE TO FILE AND HOW TO CONTACT THE IRS, ENTERPRISE COMPUTING CENTER —
MAR
TINSBURG
.....................................................................
.................. 508
SEC. 4. FILING REQUIREMENTS AND DUE DATES.................................................................. 509
SEC. 5. FORM 8508, REQUEST FOR WAIVERFROM FILING INFORMATION RETURNS
ELECTRONICALLY
................................................................................... 509
SEC. 6. FORM 4419, APPLICATION FOR FILING INFORMATION RETURNS ELECTRONICALLY........................ 510
SEC. 7. STATE ABBREVIATIONS................................................................................... 510
SEC. 8. EXTENSION OF TIME...................................................................................... 511
SEC. 9. PENALTIES............................................................................................... 512
SEC. 10. CORRECTED RETURNS, PAPER FORMS, AND COMPUTER-GENERATED FORMS............................. 513
SEC. 11. VALIDATION OF FORM 8027 AT IRS/ECC-MTB............................................................. 513
SEC. 12. DEFINITION OF TERMS.................................................................................. 514
Part B. Electronic Filing Specifications
SEC. 1. GENERAL................................................................................................. 514
SEC. 2. ELECTRONIC FILING APPROVAL PROCEDURE............................................................. 515
SEC. 3. TEST FILES............................................................................................... 515
SEC. 4. ELECTRONIC SUBMISSIONS............................................................................... 515
SEC. 5. PIN REQUIREMENTS...................................................................................... 516
SEC. 6. ELECTRONIC FILING SPECIFICATIONS.................................................................... 516
SEC. 7. CONNECTING TO THE FIRE SYSTEM....................................................................... 516
October 19, 20095072009–42 I.R.B.

SEC. 8. COMMON PROBLEMS AND QUESTIONS ASSOCIATED WITH ELECTRONIC FILING........................... 518
Part C. Filing Specifications and Record Layout
SEC. 1. RECORD FORMAT AND LAYOUT........................................................................... 519
Part A. General
Sec. 1. Purpose
.01Form 8027 is used by large food or beverage establishments when the employer is required to make annual reports to the IRS
on receipts from food or beverage operations and tips reported by employees.
Note: All employees receiving $20.00 or more a month in tips must report 100% of their tips to their employer.
.02The Internal Revenue Service Enterprise Computing Center — Martinsburg (IRS/ECC-MTB) has the responsibility of processing
Forms 8027 submitted electronically. The purpose of this revenueprocedure is to provide the specifications for filing Form 8027,
Employer’s Annual Information Return of Tip Income and AllocatedTips, electronically. This revenue procedure is updated when
legislative changes occur or reporting procedures are modified.
.03This revenue procedure supersedes the following: Rev. Proc. 2008–34 published in Internal Revenue Bulletin 2008–27, dated
July 7, 2008, Specifications for Filing Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, Elec-
tronically. This revenue procedure is effective for Forms 8027 due the last day of February 2010 and any returns filed thereafter.
Sec. 2. Nature of Changes
There are no major changes to filing specifications for tax year 2009.
Please read the publication carefully and in its entirety before attempting to prepare your electronic file for submission.
Sec.3.WheretoFileandHowtoContacttheIRS, Enterprise Computing Center — Martinsburg
.01All correspondence concerning Forms 8027 processed at IRS/ECC-MTB should be sent to the following address:
IRS-Enterprise Computing Center — Martinsburg
Information Reporting Program
240 Murall Drive
Kearneysville WV 25430
.02Requests for paper forms and publications should be requested by calling the “Forms Only Number” toll-free number
1–800–TAX–FORM (1–800–829–3676).
.03Questions pertaining to electronic filing of Forms W-2mustbe directed to the Social Security Administration (SSA). Filers
can call 1–800–SSA–6270 to obtain the telephone number of the SSA Employer Services Liaison Officers for their area.
.04A taxpayer or authorized representative may request a copy of a tax return or a Form W-2 filed with a return by submitting
Form 4506, Request for Copy of Tax Return, to IRS. This form may be obtained by calling1–800–TAX–FORM (1–800–829–3676).
.05Electronic Products and Services Support,Information Reporting Branch, CustomerService Section (IRB/CSS), located at
IRS/ECC-MTB, answers electronic, paper filing, and tax law questions from the payer community relating to thecorrect preparation
and filing of business information returns (Forms 1096, 1098, 1099, 5498, 8027, and W-2G). IRB/CSS also answers questions relating
to the electronic filing of Forms 1042-S and to the tax law criteria and paper filing instructions for Forms W-2 and W–3. Inquiries
dealing with backup withholding and reasonable cause requirements due to missing and incorrect taxpayer identification numbers are
also addressed by IRB/CSS. Assistance is available year-round to payers, transmitters,and employers nationwide, Monday through
Friday, 8:30 a.m. to 4:30 p.m. Eastern Time, by calling toll-free1–866–455–7438or via e-mail atmccirp@irs.gov.Donotinclude
SSNs or EINs in e-mails or attachments since this is not a secure line.The Telecommunications Device for the Deaf (TDD) toll
number is304–579–4827.Call as soon as questions arise to avoid the busy filingseasons at the end of January and February. Recipi-
ents of information returns (payees) should continue to contact 1–800–829–1040 with any questions on how to report the information
returns data on their tax returns.
.06The telephone numbers and web addresses for questionsabout specifications for electronic submissions are:
2009–42 I.R.B.508October 19, 2009

Information Reporting Program Customer Service Section
TOLL-FREE 1–866–455–7438 or outside the U.S. 1–304–263–8700
e-mail atmccirp@irs.gov
304–579–4827 — TDD
(Telecommunication Device for the Deaf)
Fax Machine
Toll-free within the U.S. — 877–477–0572
Outside the U.S. — 304–579–4105
Electronic Filing — FIRE System
http://fire.irs.gov
TO OBTAIN FORMS:
1–800–TAX–FORM (1–800–829–3676)
w
ww.irs.gov—IRS website access to forms
Sec. 4. Filing Requirements and Due Dates
.01Section 6011(e)(2)(A) of the Internal Revenue Code requires that any person, including corporations, partnerships, individuals,
estates, and trusts, required to file 250 or more information returns must file suchreturns electronically.
.02The filing requirements apply separately to both original and corrected returns.
.03The above requirements do not apply if you establish undue hardship (see Part A, Sec. 5).
.04 DO NOT SUBMIT THE SAME INFORMATION ON PAPER FORMS THAT YOU SUBMIT ELECTRONICALLY,
SINCE THIS WOULD RESULT IN DUPLICATE FILING.This does not mean that corrected documents are not to be filed. If a
return has been prepared and submitted improperly, you must file a corrected return as soon as possible. Refer to Part A, Sec. 10 for
requirements and instructionsfor filing corrected returns.
.05If an allocation of tips is based on a good faith agreement, a copy of this agreement must be submitted within 3 business days
after receiving acknowledgement that IRS has accepted the electronically filed Form 8027. Fax to 859–669–5372 or mail a copy of
this agreement to Internal Revenue Service, Attn: ICO ERS Stop 36101, 201 West Rivercenter Blvd., Covington, KY 41011. In your
fax transmittal or cover letter, include the words “Form 8027 attachment(s)” and the following information: name of establishment,
EIN (Employer Identification Number), establishment number, TCC and the tax year of the Form 8027.
.06Employers can request a lower rate (but not lower than 2%) for tip allocation purposes by submitting an application to the
IRS. See Sec. 31.6053–3(h)(4) of Employment Tax Regulations. Detailed instruction for requesting a lower rate can be found in the
Instructions for Form 8027. The IRS will issue a determination letter to notify the employer when and for how long a reduced rate is
effective. If a lower rate is used on the Form 8027 based on the IRS determination letter, a copy of this letter must be submitted within
3 business days after receiving acknowledgement that IRS has accepted the electronically filed Form 8027. Mail a copy of this letter
to Internal Revenue Service, Attn: ICO ERS Stop 36101, 201 West Rivercenter Blvd., Covington, KY 41011. In your transmittal
(e.g,. fax transmittal or cover letter to 859–669–5372), include thewords “Form 8027 attachment(s)”and the following information:
name of establishment, establishment number, TCC and the tax year of the Form 8027.
.07Electronic reporting to IRS for Form 8027 must be on a calendar year basis. The due date for paper reported Forms 8027 is the
last day of February. However, Forms 8027 filedelectronicallyare due March 31.
.08If the due date falls on a Saturday, Sunday, or legal holiday, filing Form 8027 on the next day that is not a Saturday, Sunday, or
legal holiday will be considered timely.
Sec. 5. Form 8508, Request for Waiver From Filing Information Returns Electronically
.01If an employer is required to file electronically but fails to do so and does not have an approved waiver on record, the employer
will be subject to a penalty of $50 per return in excess of 250.
.02If employers are required to file original or corrected returns electronically, but such filing would create a hardship, they may
request a waiver from these filing requirements by submitting Form 8508, Request for Waiver From Filing Information Returns Elec-
tronically, to IRS/ECC-MTB. Form 8508 can be obtained on the IRS website atw
ww.irs.govor by calling toll-free 1–800–829–3676.
.03Even though an employer may submit as many as 249 corrections on paper, IRS encourages electronic filing of corrections.
Once the 250 threshold has been met, filers are required to submit any additional returns electronically. However, if a waiver for an
original filing is approved, any corrections for the same type of returns will be covered under that waiver.
October 19, 20095092009–42 I.R.B.

.04Generally, only the employer may sign the Form 8508. A transmitter may sign if given power of attorney; however, a letter
signed by the employer stating this fact must be attached to the Form 8508.
.05A transmitter must submit a separate Form 8508 for each employer. Do not submit a list of employers.
.06All information requested on the Form 8508 must be provided to IRS for the request to be processed.
.07The waiver, if approved, will provide exemption from electronic filing for the current tax year only. Employers may not apply
for a waiver for more than one tax year.
.08Form 8508 may be photocopied or computer-generated as long as itcontains all the information requested on the original form.
.09Filers are encouraged to submit Form 8508 to IRS/ECC-MTB at least 45 days before the due date of the returns.
.10All requests for a waiver should be sent using the following address:
IRS-Enterprise Computing Center — Martinsburg
Information Reporting Program
Attn: Extension of Time Coordinator
240 Murall Drive
Kearneysville, WV 25430
.11 File Form 8508 for Forms W-2 with IRS/ECC-MTB, not SSA.
.12Waivers are evaluated on a case-by-case basis and are approved or denied based on criteria set forth under section 6011(e) of
the Internal Revenue Code. The transmitter must allow a minimum of 30 days for IRS/ECC-MTB to respond to a waiver request.
.13If a waiver request is approved, the transmitter should keep the approval letter on file.
.14An approved waiver from filing Forms 8027 electronically does not provide exemption from all filing. The employer must
timely file Form 8027 on acceptable paper forms with the Cincinnati Service Center.The transmitter should also send a copy of
the approved waiver to the Cincinnati Service Center where the paper returns are filed.
Sec. 6. Form 4419, Application for FilingInformation Returns Electronically
.01For the purposes of this revenue procedure, the EMPLOYER is the organization supplying the information and the TRANS-
MITTER is the organization preparing the electronic file and/or sending the file to IRS/ECC-MTB. The employer and the transmitter
may be the same entity. Employers or their transmitters are required to complete Form 4419, Application for Filing Information Re-
turns Electronically. The Form 4419 is subject to review before the approval to transmitelectronically is granted and may require
additional documentation at the request of the IRS. If a determination is made concerning the validity of the documents transmitted
electronically, IRS has the authority to revoke the Transmitter Control Code (TCC) and terminate the release of files.
.02Form 4419 can be submitted at any time during the year; however, it should be submitted to IRS/ECC-MTB at least 30 days
before the due date of the return(s). IRS willact on an application and notify the applicant, in writing, of authorization to file. A
five-character alpha/numeric Transmitter Control Code (TCC) will be assigned and included in an acknowledgment letter within 15
to 45 days of receipt of the application. Electronic returns may not be filed with IRS until the application has been approved and a
TCC assigned. Include your TCC in any correspondence with IRS/ECC-MTB.
.03If you file information returns other than Form 8027 electronically, you must obtain a separate TCC for those types of returns.
The TCC assigned for Forms 8027 is to be used for the processing of these forms only.
.04After you have received approval to file electronically, you do not need to reapply each year; however, notify IRS in writing if:
(a)You change your name or the name of your organization, sothat your files may be updated to reflect the proper name;
(b)You discontinue filing for two years (your TCC may have been reassigned).
.05IRS/ECC-MTB encourages filers who plan to submit for multiple employers to submit one application and to use one TCC for
all employers.
.06Approval to file does not imply endorsementby IRS/ECC-MTB of any computer software or of the quality of tax preparation
services provided by a service bureau or software vendor.
Sec. 7. State Abbreviations
.01The following state and U.S. possession abbreviations are to be used when developing the state code portion of address fields.
2009–42 I.R.B.510October 19, 2009

StateCodeStateCodeStateCode
AlabamaALKentuckyKYNo. Mariana IslandsMP
AlaskaAKLouisianaLAOhioOH
American SamoaASMaineMEOklahomaOK
ArizonaAZMarshall IslandsMHOregonOR
ArkansasARMarylandMDPennsylvaniaPA
CaliforniaCAMassachusettsMAPuerto RicoPR
ColoradoCOMichiganMIRhode IslandRI
ConnecticutCTMinnesotaMNSouth Caroli
na
SC
DelawareDEMississippiMSSouth DakotaSD
District of ColumbiaDCMissouriMOTennesseeTN
Federated States of Micronesia FMMontanaMTTexasTX
FloridaFLNebraskaNEUtahUT
GeorgiaGANevadaNVVermontVT
GuamGUNew Hampsh
ire
NHVirginiaVA
HawaiiHINew JerseyNJU.S. Virgin IslandsVI
IdahoIDNew MexicoNMWashingtonWA
IllinoisILNew YorkNYWest VirginiaWV
IndianaINNorth CarolinaNCWisconsinWI
IowaIANorth DakotaNDWyomingWY
KansasKS
.02Filers must adhere to the city, state, and ZIP Code format for U.S. addresses. This also includes American Samoa, Federated
States of Micronesia, Guam, Marshall Islands, Commonwealth of the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin
Islands.
Note: A Form 8027 is required only for establishments in the 50 states and the District of Columbia.
Sec. 8. Extension of Time
.01An extension of time to file may be requested for Form 8027.
Note: IRS encourages the payer/transmitter community to utilize the online fill-in form in lieu of the paper Form 8809. No
TCC required.
.02A paper Form 8809, Request for Extension of Time To File Information Returns, should be submitted to IRS/ECC-MTB. This
formmaybeusedtorequestanextensionoftimetofileinformation returns submitted on paper or electronically. All requests for an
extension of time filed on Form 8809 should be sent using the following address:
IRS-Enterprise Computing Center — Martinsburg
Information Reporting Program
Attn: Extension of Time Coordinator
240 Murall Drive
Kearneysville, WV 25430
Note: Due to the large volume of mail received by IRS/ECC-MTB and the time factor involved in processing Extension of
Time (EOT) requests, it is imperative that the attention line be present on all envelopes or packages containing Form 8809.
.03The fill-in Form 8809 may be completed online via the FIRE System. (See Part B, Sec. 7, for instructions on connecting to the
FIRE System.) At the Main Menu, click “Extension of Time Request” and then click “Fill-in Extension Form”. This option is only
used to request an automatic 30-day extension. Extension requestscompleted online via the FIRE System receive an instant response.
If you are requesting an additional extension, you must submit a paper Form 8809. Requests for an additional extension of time to
file information returns are not automatically granted. Requestsfor additional time are granted only in cases of extreme hardship or
catastrophic event. The IRS will only send a letter of explanation approving or denying your additional extension request. (Refer to
.06 of this Section.)
October 19, 20095112009–42 I.R.B.

.04Filers requesting an extension of time for multiple employers may submit one Form 8809 and attach a list of the employer
names and their Employer Identification Numbers (EINs).The listing must be attached to ensure the extension is recorded for all
employers.Form 8809 may be computer-generated or photocopied. Besure that all the pertinent information is included.
.05Requests for extensions of time for multiple employers will be responded to with oneapproval letter, accompanied by a list of
employers covered under that approval.
.06 As soon as it is apparentthat an extension of time to file is needed, Form 8809 may be submitted. When granted, the extension
will be for 30 days. It will take a minimum of 30 days for IRS/ECC-MTB to respond to an extension request. Under certain circum-
stances, a request for an extension of time could be denied. When adenial letter is received, any additional or necessary information
may be resubmitted within 20 days. When requesting an extension of time,do nothold your files waiting for a response.
.07While very difficult to obtain, if an additional extension of time is needed, a second Form 8809 must be submitted before the
end of the initial extension period. Line 7 on the form should be checked to indicate that an additional extension is being requested.
A second 30-day extension will be approved only in cases of extreme hardship or catastrophic events.
.08Form 8809 must be postmarked no later than the due date of the return for which an extension is requested. If requesting an
extension of time to file several types of forms, use one Form 8809, but the Form 8809 must be postmarked no later than the earliest
due date. For example, if requesting an extension of time to file both Forms 8027 and 5498, submit Form 8809 postmarked on or
before the last day of February.
.09If an extension request is approved, the approval letter should be kept on file. The approval letter or copy of the approval letter
for extension of time shouldnotbe sent to IRS/ECC-MTB with the electronic file. When submitting Form 8027 onpaper onlyto the
Cincinnati Service Center, attach a copy of the approval letter.If an approval letter has not been received, send a copy of the timely
filed Form 8809.
.10Request an extension for only one tax year.
.11The extension request must be signed by the employer or a person who is duly authorized to signa return, statement or other
document for the employer.
.12Failure to properly complete and sign the Form 8809 may cause delays in processing the request or result in a denial. Carefully
read and follow the instructions on the back of the Form 8809.
.13Form 8809 may be obtained by calling1–800–TAX–FORM (1–800–829–3676) or downloading fromw
ww.irs.gov.
Note: An extension of time to file is not an extension to furnish Form W-2 to the employee.
.14Request an extension of time to furnish the statements to recipients of Forms W-2 by submitting a letter to IRS/ECC-MTB
(See Part A, Sec. 3) containingthe following information:
(a)Employer name
(b)EIN
(c)Address
(d)Type of return (W-2)
(e)Specify that the extension request is to provide W-2 statements to recipients.
(f)Reason for delay
(g)Signature of employer or person duly authorized.
Requests for an extension of time to furnish the statements for Forms W-2 to recipients are not automatically approved; however,
if approved, generally an extension will allow a maximum of 30 additional days from the due date to furnish the statements to the
recipients. The request must be postmarked no later than the date on which the statements are due to the recipients.
Sec. 9. Penalties
.01The Revenue Reconciliation Act of 19
89 changed the penalty provisions for any documents, including corrections, which are
filed after the original filing date fo
r the return. The penalty for failure to file correctinformation returns is “time sensitive,” in that
prompt correction of failures to file,
or prompt correction of errors on returns that were filed, can lead to reduced penalties.
- The penalty generally is $50 for each information return that is notfiled, or is not filed correctly, by the prescribed filing date,
with a maximum penalty of $250,000 per year ($100,000 for certain small businesses withaverage annual gross receipts, over the
most recent 3-year period, not in excess of $5,000,000). The penalty generally is reduced to:
- $30 for each failure to comply if the failureis corrected more than 30 days after the return was due, but on or before August 1 of
the calendar year in which the return was due, with a maximum penalty of $150,000 per year ($50,000 for certain small businesses
with average annual gross receipts, over the most recent 3-year period, not in excess of $5,000,000).
- $15 for each failure to comply if the failure is corrected within 30days after the date the return was due, with a maximum penalty
of $75,000 per year ($25,000 for certain small businesses with average annual gross receipts, over the most recent 3-year period,
not in excess of $5,000,000).
2009–42 I.R.B.512October 19, 2009

.02Penalties can be waived if failures were due to reasonable causeand not to willful neglect. In addition, section 6721(c) of the
Code provides ade minimisrule that if:
(a)information returns have been filed but were filed with incomplete or incorrect information, and
(b)the failures are corrected on or before August 1 of the calendar year in which the returns were due, then the penalty for
filing incorrect returns (but not the penalty for filing late) will not apply to the greater of 10 returns or one-half of 1 percent
of the total number of information returns you are required to file for the calendar year.
.03 Intentional Disregard of Filing Requirements —If any failure to file a correct information return is due to intentional disre-
gard of the filing and correct information requirements, the penalty is at least $100 per information return with no maximum penalty.
Sec. 10. Corrected Returns, Paper Forms,andComputer-GeneratedForms
.01If returns must be corrected, approved electronic filers must provide such corrections electronically for 250 or more forms. If
your information is filed electronically, corrected returns are identified by using the “Corrected 8027 Indicator” in field position 370
of the employer record.
.02A correction file must be identified by entering the correction indicator “G” in position 370.
.03When replacing a correction file that was bad, you must submit a replacement file. Since you are replacing a correction file
you must enter the correction indicator “G” in position 370.
.04If corrections are not submitted electronically, employers mustsubmit them on official Forms 8027. Substitute forms that have
been previously approved by IRS,or computer-generated forms that are exact facsimiles of the official form (except for minor page
size or print style deviations), may be submitted without obtaining IRS approval before using the form.
.05Employers/establishments may send corrected paper Forms 8027 to IRS at the address shown in Part A, Sec. 10.06. Corrected
paper returns are identified by marking the “AMENDED” check box on Form 8027.
.06If you are filing more than one paper Form 8027, you must attacha completed Form 8027-T, Transmittal of Employer’s Annual
Information Return of Tip Income and Allocated Tips, to the Forms 8027 and send to:
Department of the Treasury
Internal Revenue Service Center
Cincinnati, OH 45999
IRS/ECC-MTB processes Forms 8027 submitted electronically only. Do not send paper Forms 8027 to IRS/ECC-MTB.
.07If part of a submission is filed electronically and the rest of the submission is filed on paper Forms 8027, send the paper forms to
the Cincinnati Service Center. For example, you filed your Forms 8027 electronically with IRS/ECC-MTB, and later you found that
some of the forms you filed needcorrecting. Because of the low volume of corrections, you submit the corrections on paper Forms
8027. You must send these corrected Forms 8027 along with Form 8027-T to the Cincinnati Service Center.
Sec. 11. Validation of Form 8027 at IRS/ECC-MTB
.01The accuracy of data reported on Form 8027 will be validated at the IRS Service Center. All fields indicated as “Required” in
the record layout must contain valid information. If the IRS identifies an error, you will be notified and required to provide correct
information.
.02The address for the establishment must agree with the state and ZIP Code. If there are inconsistencies or if the ZIP Code does
not agree with the address, the record will error out.
.03All alpha characters must be in upper case.
.04The following is clarification of monetary amount requirements:
(a)Charged Receipts (positions 260–271) mustexceed Charged Tips (positions 248–259).
(b)Total Tips Reported (positions 308–319) must equal the combined amount of the Indirect Tips (positions 284–295) and
Direct Tips (positions 296–307).
(c)Gross Receipts (positions 320–331) must exceed all other monetary amounts with the exception of Charged Receipts. It is
possible to equal Charged Receipts if all transactions were conducted on charge cards.
(d)The Tip Percentage Rate Times Gross Receipts (332–343) must equal the Gross Receipts times the Tip Rate. Normally, the
Tip Rate is 8%. The Tip Rate must be entered as 0800 in positions 344–347 unless you have been granted a lower rate by
the IRS.
(e)Generally, you would have allocated tips if the Total Tips Reported (positions 308–319) is less than the Tip Percentage Rate
Times Gross Receipts (positions 332–343). The difference must be entered as Allocated Tips (positions 348–359).
October 19, 20095132009–42 I.R.B.

Sec. 12. Definition of Terms
ELEMENT
DESCRIPTION
CorrectionA correction is an information return submitted by the employer/transmitter to correct
an information return that was previouslysubmitted to and successfully processed by
IRS, but contained erroneous information.
EINA nine-digit Employer Identification Number which has been assigned by IRS to the
reporting entity.
Employees hours workedThe average number of employee hours worked per business day during a month is figured
by dividing the total hours worked during the month by all your employees who are
employed in a food or beverage operation by the average number of days in the month that
each food or beverage operation at which these employees worked was open for business.
EmployerThe organization supplying their information. Use the same name and EIN you used on
your Forms W-2 and Forms 941.
EstablishmentA large food or beverage establishment that provides food or beverage for consumption on
the premises; where tipping is a customarypractice; and where there are normally more
than 10 employees who work more than 80 hours on a typical business day during the
preceding calendar year.
FileFor the purpose of this revenue procedure,a file is the Form 8027 information submitted
electronically by an Employer or Transmitter.
More than 10 employeesAn employer is considered to have more than 10 employees on a typical business day
during the calendar year if half the sum of: the average number of employee hours worked
per business day in the calendar month in which the aggregate gross receipts from food
and beverage operations were greatest,plusthe average number of employee hours
worked per business day in the calendar monthin which the total aggregate gross receipts
from food and beverage operations were the least,equalsmore than 80 hours.
ReplacementA replacement is an information return file sent by the employer/transmitterat the
requestof IRS/ECC-MTB because of errors encountered while processing the filer’s
original file or correction file.
TransmitterPerson or organization preparing electronic file(s). May be employer or agent of employer.
Transmitter Control Code (TCC)A five-character alpha/numeric code assigned byIRS to the transmitter prior to actual
filing electronically. This number is inserted in the record and must be present. An
application (Form 4419)must be filed with IRS to receive this number.
Part B. Electronic Filing Specifications
Note: The FIRE System DOES NOT provide fill-in forms, except for Form 8809, Application for Extension of Time to File
Information Returns. Filers must program files according to the RecordLayout Specifications contained in this publication.
Sec. 1. General
.01Electronic filing of Forms 8027 information returns, originalsand replacements, is a reporting method for filers submitting 250
or more Forms 8027. Payers who are under the filing thresholdrequirement, are encouraged to file electronically.
.02All electronic filing of information returns are received at IRS/ECC-MTB via the FIRE (Filing Information Returns Elec-
tronically) System. To connect to the FIRE System, point your browser tohttp://fire.irs.gov. The system is designed to support the
electronic filing of information returns only.
.03The electronic filing of information returns is not affiliated with any other IRS electronic filing programs. Filers must obtain
separate approval to participate in each program. Only inquiries concerning electronic filing of information returns should be directed
to IRS/ECC-MTB.
.04Files submitted to IRS/ECC-MTB electronically must be in standard ASCII code. Do not submit paper forms with the same
information as electronically submittedfiles. This would create duplicate reporting resulting in penalty notices.
.05Form 8809, Application for Extension of Time to File Information Returns, is available as a fill-in form via the FIRE System.
If you do not already have a User ID and password refer to Section 7. At the Main Menu, click “Extension of Time Request” and
2009–42 I.R.B.514October 19, 2009

then click “Fill-in Extension Form”. This option is only used to request an automatic 30-day extension and must be completed by the
due date of the return for each payer requesting an extension. Print the approval page for your records. Refer to Part A, Sec. 8 for
additional details.
Sec. 2. Electronic Filing Approval Procedure
.01Filers must obtain a Transmitter Control Code (TCC) prior to submitting files electronically. Filers who previously had a TCC
for magnetic media filing of Form 8027 may use their assigned TCC for electronic filing. Refer to Part A, Sec. 6, for information on
how to obtain a TCC.
.02Once a TCC is obtained, electronic filers assign their own userID, password and PIN (Personal Identification Number) and do
not need prior or special approval. See Part B, Sec. 5, for more information on the PIN.
.03If a filer is submitting files for more than one TCC, it is notnecessary to create a separate logon and password for each TCC.
.04For all passwords, it is the user’s responsibility to rememberthe password and not allow the password to be compromised.
Passwords are user assigned at first logon and must be 8 alpha/numeric characters containing at least 1 uppercase, 1 lowercase, and
1 numeric. However, filers who forget their password or PIN, can calltoll-free 1–866–455–7438for assistance. Users can change
their passwords at any time from the main menu. The FIRE System will require users to change their passwords periodically.
Sec. 3. Test Files
.01Filers are not required to submit a test file; however, the submission of a test file is encouraged for all new electronic filers to
test hardware and software. If filers wish to submit an electronic test file for Tax Year2009(returns to be filed in2010), itmustbe
submitted to IRS/ECC-MTBno earlier thanNovember 1, 2009, andno later thanFebruary 15, 2010.
.02Filers who encounter problems while transmitting the electronic test file can contact IRS/ECC-MTBtoll-free 1–866–455–7438
for assistance.
.03Within 5 days, the results of the electronic transmission will be e-mailed to you providing you provide an accurate e-mail
address on the “Verify Your Filing Information” screen. If you are using e-mail filtering software, configure your software to accept
e-mail fromfire@irs.govandirs.e-helpmail@irs.gov. If after receiving the e-mail it indicates that your file is bad, you must log into
the FIRE System and go to the CHECK FILE STATUS area of the FIRE System to determine what the errors are in your file. If you
do not receive an e-mail in 5 business days, log back into the FIRE System and click on CHECK FILE STATUS to view the results
of your file.
Sec. 4. Electronic Submissions
.01Electronically filed information may be submitted to IRS/ECC-MTB 24 hours a day, 7 days a week. Technical assistance will
be available Monday through Friday between 8:30 a.m. and 4:30 p.m. Eastern time by callingtoll-free 1–866–455–7438.
.02 The FIRE System will be down from the last week of December through the first week of January.This allows
IRS/ECC-MTB to update its systemto reflect current year changes.
.03If you are sending files larger than 10,000 records electronically, data compression is encouraged. If you are considering
sending files larger than 5 million records, please contact IRS/ECC-MTB for specifics. WinZip and PKZip are the only acceptable
compression packages. IRS/ECC-MTB cannot accept self-extracting zip files or compressed files containing multiple files. The time
required to transmit information returns electronically will vary depending upon the type of connection to the Internet and if data
compression is used.The time required to transmit a file can be reduced by as much as 95 percent by using compression.
.04Transmitters may create files using self assigned files name(s). Files submitted electronically will be assigned a new unique
file name by the FIRE System. The file name assigned by the FIRE System will consist of submission type (ORIG [original], TEST
[test], CORR [correction], and REPL [replacement]), the filer’s TCC and a four-digit number sequence. The sequence number will
be incremented for every file sent. For example, if it is your first original filefor the calendar year and your TCC is 21000, the
IRS assigned file name would be ORIG.21000.0001.Record the file name.This information will be needed by IRS/ECC-MTB to
identify the file, if assistance is required.
.05If a file was submitted timely and is bad, the filer will have up to60 days from the date the file was sent to transmit an acceptable
file. If an acceptable file is not received within 60 days,then the payer could be subject to late filing penalties.
.06The following definitions have been provided to help distinguish between a correction and a replacement:
•Acorrectionis an information return submitted by the transmitter to correct an information return that was previously submitted
to and successfully processed by IRS/ECC-MTB, but contained erroneous information.(See Note.)
Note:Corrections should only be made to forms that have been submitted incorrectly, not the entire file.
•Areplacementis an information return file sent by the filer because the CHECK FILE STATUS option on the FIRE System
indicated the original/correction file was bad. After the necessary changes have been made, the file must be transmitted through
the FIRE System. (See Note.)
October 19, 20095152009–42 I.R.B.

Note: Filers should never transmit anything to IRS/ECC-MTB as a “Replacement” file unless the CHECK FILE STATUS
option on the FIRE System indicates the file is bad.
.07Prior year data may be submitted, however, each tax yearmust be submitted in a separate file transmission.
Sec. 5. PIN Requirements
.01Filers will be prompted to create a PIN consisting of 10 numericcharacters when establishing their initial logon name and
password.
.02The PIN is required each time an ORIGINAL, CORRECTION, or REPLACEMENT file is sent electronically and is permission
to release the file. It is not needed for a TEST file. An authorized agent may enter their PIN, however, the payer is responsible for the
accuracy of the returns. The payer will be liable for penalties for failure to comply with filing requirements. If you forget your PIN,
please calltoll-free 1–866–455–7438for assistance.
Sec. 6. Electronic Filing Specifications
.01The FIRE System is designed exclusively for the filing of Forms 8027, 1098, 1099, 3921, 3922, 5498, 8935, W-2G, and 1042-S.
.02A transmitter must have a TCC (see Part A,Sec. 6) before a file can be transmitted.
.03Within 5 days, the results of the electronic transmission will be e-mailed to you providing you provide an accurate e-mail
address on the “Verify Your Filing Information” screen. If you are using e-mail filtering software, configure your software to accept
e-mail fromfire@irs.govandirs.e-helpmail@irs.gov. If after receiving the e-mail it indicates that your file is bad, you must log into
the FIRE System and go to the CHECK FILE STATUS area of the FIRE System to determine what the errors are in your file. If you
do not receive an e-mail in 5 business days, log back into the FIRE System and click on CHECK FILE STATUS to view the results
of your file.
Sec. 7. Connecting to the FIRE System
.01Point your browser tohttp://fire.irs.govto connect to the FIRE System.
.02Before connecting, have your TCC and TIN available.
.03Your browser must support SSL 128-bit encryption.
.04FIRE Internet Security Technical Standards are:
HTTP 1.1 Specification (http://www.w3.org/Protocols/rfc2616/rfc2616.txt)
SSL 3.0 or TLS 1.0. SSL and TLS are implemented using SHA and RSA 1024 bits during the asymmetric handshake.
SSL 3.0 Specifications (http://wp/netscape.com/eng/ssl3)
TLS 1.0 Specifications (http://www.ief.org/rfc/rfc2246.txt)
The filer can use one of the following encryption algorithms, listed in order of priority, using SSL or TLS:
*AES 256-bit (FIPS–197)
*AES 128-bit (FIPS–197)
TDES 168-bit (FIPS–46–3)
**RC4 128-bit
*IRS intends to start offering this sometime during the period of this publication. If you plan to use it, please
contact us to see if it is available.
** IRS intends to drop this non-FIPS algorithm during the period of this publication after the Service starts
offering AES.
F
irsttimeconnectiontotheFIRESystem(If you have logged on previously, skip to Subsequent Connections to the FIRE
System.)
Click“Create New Account”.
Fill out the registration form and click“Submit”.
Enter yourUser ID(most users logon with their first and last name).
Enter and verify yourpassword(the password is user assigned and must be 8 alpha/numerics,
containing at least 1 uppercase, 1 lowercase and1numeric).FIREmayrequireyoutochange
the password once a year.
Click“Create”.
If you receive the message“Account Created”,click“OK”.
2009–42 I.R.B.516October 19, 2009

Enter and verify your 10-digit self-assigned PIN (Personal Identification Number).
Click“Submit”
.
If you receive the message“Your PIN has been successfully created!”,click“OK”.
Read the bulle
tin(s) and/or click “Click here to continue”.
S
ubsequentconnectionstotheFIRESystem
Click“Log On”.
Enter yourUser ID(most users logon with their first and last name).
Enter yourpassword(the password is user assigned and is case sensitive).
Read the bulletins and/or click“Click here to continue”.
U
ploadingyourfiletotheFIRESystem
At Menu Options:
Click“Send Information Returns”
Enter yourT
CC:
Enter yourTIN:
Click“Submit”.
The system will then display the company name, address, city, state, ZIP Code, phone number,
contact and e-mail address. This information will be used to e-mail the transmitter regarding this
transmission. Update as appropriate and/or Click“Accept”.
Note: Ple
ase ensure that the e-mail is accurate so that the correct person receives the e-mail
and it doe
s not return to us undeliverable. If you areusing SPAM filtering software, please
configur
e it to allow an e-mail fromfire@irs.govandirs.e-helpmail@irs.gov.
Click one
of the following:
Original File
Correction File
Te s t Fi l
e(This option will only be available November through
mid-Feb
ruary.)
Replacement File(Click on the file to be replaced.)
•Electronic Replacement(file was originally transmitted on this system)
Click the file to be replaced.
When the upload is complete, the screen will display thetotal bytes received and tell you the name of the file you
just uploaded.
If you have more files to upload for that TCC:
Click
“File Another?”;otherwise,
Click“Main Menu”.
If you do not receive an e-mail in 5 business days or your e-mail indicates the file is bad, log back into the FIRE System
and click on CHECK FILE STATUS to view the results of your file.
October 19, 20095172009–42 I.R.B.

CheckingyourFILESTATUS
At the Main Menu:
Click“Check File Status”.
Enter yourTCC:
Enter yourTIN:
Click“Searc
h”.
If “Results” indicate:
“Good Not Released”— If you agree with the record count, you are finished
with this file. The file will automatically be released after 10 calendar days
unless you contact us within this time frame.
“Good, Released”—File has been released to our mainline processing.
“Bad”—Correct the errors and timely resubmit the file as a “replacement”.
“Not yet processed”—File has been received, but we do not have results
available yet. Please check back in a few days.
Click on the desired file for a detailed report of your transmission.
When you are finished, click onMain Menu.
Click“Log Out”
Close yo
ur Web Browser.
Sec. 8. Common Problems and Questions Associated with Electronic Filing
.01The following are the major errors associated with electronic filing:
N
ON-FORMATERRORS
1. SPAM filters are not set to receive e-mail fromfire@irs.govandirs.e-helpmail@irs.gov.
If you w
ant to receive e-mails concerning your files, processing results, reminders andnotices, set your SPAM filter to receive
e-mail
fromfire@irs.govandirs.e-helpmail@irs.gov.
2. Incorrect e-mail provided.
When the “Verify Your Filing Information” screen is displayed, make sure your correct e-mail is displayed. If not, please
update with the correct e-mail.
3. Transmitter does not check the FIRE System to determine file acceptability.
The results of your file transfer are posted to the FIRE System within 3 business days. If the correct e-mail address was provided
on the “Verify Your Filing Information” screen when the file was sent, an e-mail will be sent regarding your FILE STATUS. If the
results in the e-mail indicate “Good, Released” and you agree with the “Record Count”, then you are finished with this file. If you
have any other results, please follow the instructions in the Check File Status option. If the file contains errors, you can get an
online listing of the errors. Date received and number of payee records is also displayed. If the file is good, but you do not want
the file processed, you must contact IRS/ECC-MTB within 10calendar days from the date of transmission of your file.
4. Replacement file is not submitted timely.
If your file is bad, correct the file and timely resubmit as a replacement.
5. Transmitter compresses several files into one.
Only compress one file at a time. For example, if you have 10 uncompressed files to send, compress each file separately and
send 10 separate compressed files.
2009–42 I.R.B.518October 19, 2009

6. Transmitter sends an original file that is good, and then sends a correction file for the entire file even though there are
only a few changes.
The correction file, containing the proper coding, should only contain the records requiring correction, not the entire file.
7. File is formatted as EBCDIC.
All files submitted electronically must be in standard ASCII code. All alpha characters must be uppercase.
8. Transmitter has one TCC number, but is filing for multiple companies, which TIN should be used when logging
into the system to send the file?
When sending the file electronically, youwill need to enter the TIN of the company assigned to the TCC. When you upload the
file, it will contain the TINs for the other companies that you are filing for. This is the information that will be passed forward.
9. Transmitter
sent the wrong file, what should be done?
Call us as soon as possibletoll-free 1–866–455–7438.We may be able to stop the file before it has been processed.Please do not
send a replacement for a file that is marked as a good file.
Part C. Filing Specifications and Record Layout
.01If the file does not meet these specifications, IRS/ECC-MTB will request a replacement file. Filers are encouraged to submit a
test prior to submitting the actual file. Contact IRS/ECC-MTBtoll-free 1–866–455–7438for further information.
Note: The only allowable characters in name and address fields are alphas, numeric characters, and blanks. Punctuation such
as periods, hyphens, ampersands, slashes and commas are not allowed and will cause your file to be rejected. For example,
O’Hurley’s Bar & Grill, 210 N. QueenSt., Suite #300 must be entered as OHurleys Bar Grill 210 N Queen St Suite 300.
Sec. 1. Record Format and Layout
FORM 8027 RECORD FORMAT
Field
PositionField TitleLength Description and Remarks
1Establishment Type1
Required.This number identifies the kind of establishment. Enter the number
which describes the type of establishment, as shown below:
1. for an establishment that serves evening meals only (with or without alcoholic
beverages).
2. for an establishment that servesevening meals and other meals (with or
without alcoholic beverages).
3. for an establishment that serves only meals other than evening meals (with or
without alcoholic beverages).
4. for an establishment that serves food, ifat all, only as an incidental part of the
business of serving alcoholic beverages.
2–6Establishment Serial
Numbers
5Required.These five-digit Serial Numbers are for identifying individual
establishments of an employer reporting under the same EIN. The employer
shall assign each establishment a unique number.Numeric characters only.
7–46Establishment Name40
Required.Enter the name of the establishment. Left-justify and fill unused
positions with blanks.Allowable characters are alphas, numeric, and blanks.
47–86Establishment Street
Address
40
Required.Enter the mailing address of the establishment. Street address
should include number, street, apartment or suite number (use P O Box only if
mail is not delivered to street address). Left-justify and blank fill.Allowable
characters are alphas,numeric, and blanks.
87–111Establishment City
25Required.Enter the city, town, or post office. Left-justify and blank fill.
Allowable characters are alphas, numeric, and blanks.
October 19, 20095192009–42 I.R.B.

FORM 8027 RECORD FORMAT
Field
PositionField TitleLength Description and Remarks
112–113Establishment State2
Required.Enter the state code from the state abbreviations table in Part A,
Sec. 7.
114–122Establishment ZIP
Code
9
Required.Enter the complete nine-digit ZIP Code of the establishment. If using
a five-digit ZIP Code, left-justify the five-digit ZIP Code and fill the remaining
four positions with blanks.
Note: Must be nine numeric characters or 5 numeric characters and four blanks. Do not enter the dash.
123–131Employer
Identification
Number
9
Required.Enter the nine-digit number assigned to the employer by IRS.Do not
enter hyphens, alphas, all 9s or all zeros.
132–171Employer Name40
Required.Enter the name of the employer as it appears on your tax forms (e.g.,
Form 941). Any extraneous information must be deleted. Left-justify and blank
fill.Allowable characters are alphas, numeric, and blanks.
172–211Employer Street
Address
40
Required.Enter mailing address of employer. Street address should include
number, street, apartment or suite number (use P O Box only if mail is not
delivered to street address). Left-justify and blank fill.Allowable characters
are alphas, numeric, and blanks.
212–236Employer City
25Required.Enter the city, town, or post office. Left-justify and blank fill.
Allowable characters are alphas, numeric, and blanks.
237–238Employer State2
Required.Enter the state code from the state abbreviations table in Part A,
Sec. 7.
239–247Employer ZIP Code9
Required.Enter the complete nine-digit ZIP Code of the establishment. If using
a five-digit ZIP Code, left-justify the five-digit ZIP Code and fill the remaining
four positions with blanks.
Note: Must be nine numeric characters or 5 numeric characters and four blanks. Do not enter the dash.
248–259
Charged Tips12
Required.Enter the total amount of tips that are shown on charge receipts
for the calendar year. Amount must be entered in U.S. dollars and cents. The
right-most two positions represent cents. Right-justify and zero fill.If no entry,
zero fill. Numeric characters only. Do not enter decimal points, dollars
signs, or commas.
260–271Charged Receipts12
Required.Enter the total sales for the calendar year other than carry-out
sales or sales with an added service charge of 10 percent or more, that are on
charge receipts with a charged tip shown. This includes credit card charges,
other credit arrangements, and charges to a hotel room unless the employer’s
normal accounting practice consistently excludes charges to a hotel room. Do
not include any state or local taxes in the amount reported. Amount must be
entered in U.S. dollars and cents. The right-most two positions represent cents.
Right-justify and zero fill.If no entry, zero fill. Numeric characters only. Do
not enter decimal points,dollars signs, or commas.
272–283Service Charge Less
Than 10 Percent
12
Required.Enter the total amount of servicecharges less than 10 percent added
to customer’s bills and were distributed to your employees for the calendar
year. In general, service charges addedto the bill are not tips since the customer
does not have a choice. These servicecharges are treated as wages and are
included on Form W-2. Amount must be entered in U.S. dollars and cents.
The right-most two positions represent cents. Right-justify and zero fill.If
no entry, zero fill.Numeric characters only. Do not enter decimal points,
dollars signs, or commas.
2009–42 I.R.B.520October 19, 2009

FORM 8027 RECORD FORMAT
Field
PositionField TitleLength Description and Remarks
284–295
Indirect Tips
Reported
12
Required.Enter the total amount of tips reported by indirectly tipped employees
(e.g., bussers, service bartenders, cooks) for the calendar year. Do not include
tips received by employees in December of the prior tax year but not reported
until January. Include tips received by employees in December of the tax year
being reported, but not reported until January of the subsequent year. Amount
must be entered in U.S. dollars and cents. The right-most two positions represent
cents. Right-justify and zero fill.If no entry, zero fill. Numeric characters
only. Do not enter decimal points, dollars signs, or commas.
296–307Direct Tips Reported12
Required.Enter the total amount of tips reported by directly tipped employees
(e.g., servers, bartenders) for the calendar year. Do not include tips received by
employees in December of the prior tax year but not reported until January.
Include tips received by employees in December of the tax year being reported,
but not reported until January of the subsequent year. Amount must be entered
in U.S. dollars and cents. The right-most two positions represent cents.
Right-justify and zero fill.If no entry, zero fill. Numeric characters only. Do
not enter decimal points,dollars signs, or commas.
308–319Total Tips Reported12
Required.Enter the total amount of tips reported by all employees (both
indirectly tipped and directly tipped) for the calendar year. Do not include tips
received in December of the prior tax year but not reported until January. Include
tips received in December of the tax year being reported, but not reported until
January of the subsequent year. Amount must be entered in U.S. dollars and
cents. The right-most two positions represent cents. Right-justify and zero fill.
If no entry, zero fill. Numeric characters only. Do not enter decimal points,
dollars signs, or commas.
320–331Gross Receipts12
Required.Enter the total gross receipts from the provision of food and/or
beverages for this establishment for the calendar year. Do not include receipts
for carry-out sales or sales with an added service charge of 10 percent or more.
Do not include in gross receipts chargedtips (field positions 248–259) shown
on charge receipts unless you have reduced the cash sales amount because you
have paid cash to tipped employees for tips they earned that were charged. Do
not include state or local taxes in gross receipts. If you do not charge separately
for food or beverages along with other services (such as a package deal for
food and lodging), make a good faith estimate of the gross receipts attributable
to the food or beverages. This estimate must reflect the cost of providing the
food or beverages plus a reasonable profit factor. Include the retail value of
complimentary food or beverages served to customers if tipping for them is
customary and they are provided in connection with an activity engaged in for
profit whose receipts would not be included as gross receipts from the provision
of food or beverages (e.g., complimentary drinks served to customers at a
gambling casino). Amount must be entered in U.S. dollars and cents. The
right-most two positions represent cents. Right-justify and zero fill.If no entry,
zero fill. Numeric characters only. Do not enter decimal points, dollars
signs, or commas.
October 19, 20095212009–42 I.R.B.

FORM 8027 RECORD FORMAT
Field
PositionField TitleLength Description and Remarks
332–343Tip Percentage Rate
Times Gross Receipts
12
Required.Enter the amount determined bymultiplying Gross Receipts for
the year (field positions 320–331) by the Tip Percentage Rate (field positions
344–347). For example, if the valueof Gross Receipts is “000045678900” and
Tip Percentage Rate is “0800”, multiply $456,789.00 by .0800 to get $36,543.12
and enter “000003654312”. If tips are allocated using other than the calendar
year, enter zeros; this may occur if you allocated tips based on the time period
for which wages were paid or allocated on a quarterly basis. Amount must be
entered in U.S. dollars and cents. The right-most two positions represent cents.
Right-justify and zero fill.If no entry, zero fill. Numeric characters only. Do
not enter decimal points,dollars signs, or commas.
344–347Tip Percentage Rate4
Required.Enter 8 percent (0800) unless a lower rate has been granted by the
IRS. The determination letter must follow the electronic submission. See Part
A, Sec. 4, .06 for details.Numeric characters only. Do not enter decimal
points, dollars signs, or commas.
348–359
Allocated Tips12
Required.If Tip Percentage Rate times Gross Receipts (field positions 332–343)
is greater than Total Tips Reported (field positions 308–319), then the difference
becomes Allocated Tips. Otherwise, enterall zeros. If tips are allocated using
other than the calendar year, enter the amount of allocated tips from your records.
Amount must be entered in U.S. dollarsand cents. The right-most two positions
represent cents. Right-justify and zero fill.If no entry, zero fill. Numeric
characters only. Do not enter decimal points, dollars signs, or commas.
360Allocation Method1
Required.Enter the allocation method used if Allocated Tips (field positions
348–359) are greater than zero as follows:
0) if allocated tips are equal to zero.
1) for allocation based on hours worked.
2) for allocation based on gross receipts.
3) for allocation based on a good faithagreement. The good faith agreement
must follow the electronic submission. See Part A, Sec. 4, .05 for details.
Note: The method of allocation of tips based on the number of hours worked as described in Section 31.6053–3(f)(1)(iv)
may be utilized only by an employer that employs less than the equivalent of 25 full-time employees at the establishment
during the payroll period. Section 31.6053–3(j)(19) provides that an employer is considered to employ less than the
equivalent of 25 full-time employees at anestablishment during a payroll period ifthe average number of employee hours
worked per business day during the payroll period is less than 200 hours.
361–364Number of Directly
Tipped Employees
4
Required.Enter the total number (must be greater than zero) of directly tipped
employees employed by the establishment for the calendar year. Right-justify
and zero fill.Numeric characters only.
365–369
Transmitter Control
Code (TCC)
5Required.Enter the 5-digit Transmitter Control Code assigned by the IRS.
370Corrected 8027
Indicator
1
Required.Enter blank for original return. Enter “G” for corrected return. A
corrected return must be a complete newreturn replacing the original return.
371Final Return Indicator1
Required.Enter the appropriate code:
F) if this is the last time you will file Form 8027
N) if this isnotthe last time you will file Form 8027
Do not enter a blank.
372Charge Card Indicator1
Required.Enter the appropriate code:
1) if your establishment accepts credit cards, debit cards or other charges.
2) if your establishment does not accept credit cards, debit cards or other charges.
373ATIP Indicator1
Required.Enter “T” if you are participating in the Attributed Tip Income
Program; otherwise, enter a blank.
2009–42 I.R.B.522October 19, 2009

FORM 8027 RECORD FORMAT
Field
PositionField TitleLength Description and Remarks
374Liable/Not Liable
Indicator
1
Required.Enter the appropriate code:
N) if you are not liable to file Form 8027
Y) if you are liable to file Form 8027
Do not enter a blank.
375–378
Tax Year4
Required.Enter the 4-digit tax year.
379Prior Year Indicator1
Required.Enter a “P”onlyif reporting prior year data; otherwise, enter a blank.
380Test File Indicator1
Required for test files only.Enter “T” if this is a test file; otherwise, enter
a blank.
381–410Reserved30Enter blanks.
411–418Record Sequence
Number
8
Required.Enter the number of the record as it appears within your file. The first
record in your file will be “1” and each record, thereafter, must be incremented
by one in ascending numerical sequence,i.e.2, 3, 4, etc. Right-justify numbers
with leading zeros in the field. For example the first record in the file would
appear as “00000001”, followed by “00000002”, “00000003” and so on until
you reach the final record of the file.
419–420Blank2Enter blanks or CR/LF characters.
FORM 8027 RECORD LAYOUT
Establishment
Type
Establishment
Serial Numbers
Establishment
Name
Establishment
Street Address
12–67–4647–86
Establishment
City
Establishment
State
Establishment
ZIP Code
Employer
Identification Number
87–111112–113114–122123–131
Employer NameEmployer Street AddressEmployer CityEmployer State
132–171172–211212–236237–238
Employer Zip CodeCharged TipsCharged ReceiptsService Charge
Less Than 10
Percent
239–247
248–259
260–271272–283
Indirect Tips ReportedDirect Tips ReportedTotal Tips ReportedGross Receipts
284–295
296–307308–319320–331
October 19, 20095232009–42 I.R.B.

Tip Percentage Rate Times
Gross Receipts
Tip Percentage RateAllocated TipsAllocation Method
332–343344–347
348–359
360
Number of Directly
Tipped Employees
Transmitter Control
Code (TCC)
Corrected 8027 IndicatorFinal Return Indicator
361–364
365–369
370371
Charge Card IndicatorATIP IndicatorLiable/Not Liable
Indicator
Tax YearPrior Year Indicator
372373374
375–378
379
Test File IndicatorReservedRecord Sequence NumberBlank or CR/LF
380381–410411–418419–420
26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also: Part I, §§ 62, 162, 267, 274; 1.62–2, 1.162–17,
1.267(a)–1, 1.274–5.)
Rev. Proc. 2009–47
SECTION 1. PURPOSE
This revenue procedure updates Rev.
Proc. 2008–59, 2008–41 I.R.B. 857, and
provides rules under which the amount of
ordinary and necessary business expenses
of an employee for lodging, meal, and in-
cidental expenses, or for meal and inci-
dental expenses, incurred while traveling
away from home are deemed substantiated
under § 1.274–5 of the Income Tax Reg-
ulations when a payor (the employer, its
agent, or a third party) provides aper diem
allowance under a reimbursement or other
expense allowance arrangement to pay for
the expenses. In addition, this revenue
procedure provides an optional method for
employees and self-employed individuals
who are not reimbursed to use in comput-
ing the amounts paid or incurred for busi-
ness meal and incidental expenses, or for
incidental expenses only if no meal ex-
penses are paid or incurred, while travel-
ingawayfromhome. Useofamethod
described in this revenue procedure is not
mandatory, and a taxpayer may use actual
allowable expenses if the taxpayer main-
tains adequate records or other sufficient
evidence for proper substantiation. This
revenue procedure does not provide rules
under which the amount of an employee’s
lodging expenses are deemed substanti-
ated to a payor when a payor provides an
allowance to pay for lodging expenses but
not meal and incidental expenses.
SEC
TION 2. BACKGROUND AND
CHA
NGES
.01 Section 162(a) of the Internal Rev-
enue Code allows a deduction for all the or-
dinary and necessary expenses paid or in-
curred during the taxable year in carrying
on any trade or business. Under that pro-
vision, an employee or self-employed in-
dividual may deduct expenses paid or in-
curred while traveling away from home in
pursuit of a trade or business. However,
under § 262, no portion of travel expenses
attributable to personal, living, or family
expenses is deductible.
.02 Section 274(n) generally limits the
amount allowable as a deduction under
§ 162 for any expense for food, bever-
ages, or entertainment to 50 percent of
the amount of the expense that otherwise
would be allowable as a deduction. In the
case of any expenses for food or beverages
consumed while away from home (within
themeaningof§162(a)(2))byanindi-
vidual during, or incident to, the period of
duty subject to the hours of service lim-
itations of the Department of Transporta-
tion, § 274(n)(3) provides that, for taxable
years beginning in 2009 or thereafter, the
deductible percentage for these expenses is
80 percent.
.03 Section 274(d) provides, in part,
that no deduction is allowed under § 162
for any travel expense (including meals
and lodging while away from home) un-
less a taxpayer complies with certain sub-
stantiation requirements. Section 274(d)
further provides that regulations may pre-
scribe that some or all of the substantiation
requirements do not apply to an expense
that does not exceed an amount prescribed
by the regulations.
.04 Section 1.274–5(g), in part, grants
the Commissioner the authority to pre-
scribe rules relating to reimbursement
arrangements orper diemallowances for
ordinary and necessary expenses paid or
incurred while traveling away from home.
Under this grant of authority, the Commis-
sioner may prescribe rules under which
these arrangements or allowances, if in
accordance with reasonable business prac-
tice, are regarded (1) as equivalent to sub-
stantiation, by adequate records or other
sufficient evidence, of the amount of travel
expenses for purposes of § 1.274–5(c),
and (2) as satisfying the requirements of
an adequate accounting to the employer of
the amount of travel expenses for purposes
of § 1.274–5(f).
.05 For purposes of determining ad-
justed gross income, § 62(a)(2)(A) allows
an employee a deduction for expenses al-
lowedbyPartVI(§161andfollowing),
2009–42 I.R.B.524October 19, 2009

subchapter B, chapter 1 of the Code, the
employee pays or incurs in performing ser-
vices as an employee under a reimburse-
ment or other expense allowance arrange-
ment with a payor.
.06 Section 62(c) provides that an ar-
rangement is not treated as a reimburse-
ment or other expense allowance arrange-
ment for purposes of § 62(a)(2)(A) if it—
(1) Does not require the employee to
substantiate the expenses covered by the
arrangement to the payor, or
(2) Provides the employee with the right
to retain any amount in excess of the sub-
stantiated expenses covered under the ar-
rangement.
Section 62(c) further provides that these
substantiation requirements do not apply
to any expense to the extent that, under the
grant of regulatory authority in § 274(d),
the Commissioner provides that substanti-
ation is not required for the expense.
.07 Under § 1.62–2(c), a reimburse-
ment or other expense allowance arrange-
ment satisfies the requirements of § 62(c)
if it meets the requirements of business
connection, substantiation, and returning
amounts in excess of expenses as specified
in the regulations. If an arrangement meets
these requirements, all amounts paid under
the arrangement are treated as paid under
an accountable plan and are excluded from
income and wages. If an arrangement does
not meet these requirements, all amounts
paid under the arrangement are treated as
paid under a nonaccountable plan and are
included in an employee’s gross income,
must be reported as wages or compensa-
tion on the employee’s Form W–2, and are
subject to the withholding and payment of
employment taxes. Section 1.62–2(e)(2)
specifically provides that substantiation of
certain business expenses in accordance
with rules prescribed under the authority
of § 1.274–5(g) is treated as substantia-
tion of the amount of the expenses for pur-
poses of § 1.62–2. Under § 1.62–2(f)(2),
the Commissioner may prescribe rules un-
der which an arrangement providingper
diemallowances is treated as satisfying the
requirement of returning amounts in ex-
cess of expenses, even though the arrange-
ment does not require the employee to re-
turn the portion of the allowance that re-
lates to days of travel substantiated and
that exceeds the amount of the employee’s
expenses deemed substantiated under rules
prescribed under § 274(d), provided the
allowance is reasonably calculated not to
exceed the amount of the employee’s ex-
penses or anticipated expenses and the em-
ployee is required to return within a rea-
sonable period of time any portion of the
allowance that relates to days of travel not
substantiated.
.08 Section 1.62–2(h)(2)(i)(B) pro-
vides that, if a payor pays aper diem
allowance that meets the requirements
of § 1.62–2(c)(1), the portion, if any,
of the allowance that relates to days of
travel substantiated in accordance with
§ 1.62–2(e), that exceeds the amount of
an employee’s expenses deemed substan-
tiated for the travel under rules prescribed
under § 274(d) and § 1.274–5(g), and that
the employee is not required to return, is
subject to withholding and payment of
employment taxes. See §§ 31.3121(a)–3,
31.3231(e)–1(a)(5), 31.3306(b)–2, and
31.3401(a)–4 of the Employment Tax
Regulations. Because the employee is not
required to return this excess portion, the
reasonable period of time provisions of
§ 1.62–2(g) (relating to the return of ex-
cess amounts) do not apply to this portion.
.09 Under § 1.62–2(h)(2)(i)(B)(4), the
Commissioner has the discretion to pre-
scribe special rules regarding the timing of
withholding and payment of employment
taxes onper diemallowances.
.10 Section 1.274–5(j)(1) grants the
Commissioner the authority to establish
a method under which a taxpayer may
elect to treat a specific amount as paid or
incurred for meals while traveling away
from home in lieu of substantiating the
actual cost of meals.
.11 Section 1.274–5(j)(3) grants the
Commissioner the authority to establish
a method under which a taxpayer may
elect to treat a specific amount as paid
or incurred for incidental expenses while
travelingawayfromhomeinlieuofsub-
stantiating the actual cost of incidental
expenses.
.12 This revenue procedure includes
modifications to Rev. Proc. 2008–59 as
follows:
(1) Sections 3.02(1)(a), 4.04(6), and
5.06 provide transition rules for the last 3
months of calendar year 2009.
(2) Section 5.02 contains revisions to
theper diemrates for high-cost localities
and for other localities for purposes of sec-
tion 5.
(3) Section 5.03 contains the list of
high-cost localities, and section 5.04 de-
scribes changes to the list of high-cost
localities for purposes of section 5.
(4)Thereferenceinsection6.04tosec-
tion 4.04 is deleted. Section 6.04 refer-
ences taxpayers that use section 4.02 or
4.03 to determine the amount of travel ex-
penses deemed substantiated. Taxpayers
described in section 4.04 use section 4.02
or 4.03. Therefore, the reference to section
4.04 in section 6.04 is unnecessary and po-
tentially confusing.
SECTION 3. DEFINITIONS
.01Per diem allowance.Theterm“per
diemallowance” means a payment under a
reimbursement or other expense allowance
arrangement that is:
(1) Paid for ordinary and necessary
business expenses incurred, or that the
payor reasonably anticipates will be in-
curred, by an employee for lodging, meal,
and incidental expenses, or for meal and
incidental expenses, for travel away from
home performing services as an employee
of the employer,
(2) Reasonably calculated not to exceed
the amount of the expenses or the antici-
pated expenses, and
(3) Paid at or below the applicable fed-
eralper diemrate, a flat rate or stated
schedule, or in accordance with any other
Service-specified rate or schedule.
.02Federal per diem rate and federal
M&IE rate.
(1)In general. The federalper diem
rate is equal to the sum of the applicable
federal lodging expense rate and the appli-
cable federal meal and incidental expense
(M&IE) rate for the day and locality of
travel.
(a)CONUS rates. The rates for lo-
calities in the continental United States
(“CONUS”) are set forth in Appendix A
to 41 C.F.R. ch. 301. However, in apply-
ing section 4.01, 4.02, or 4.03 of this rev-
enue procedure, taxpayers may continue
to use the CONUS rates in effect for the
first 9 months of 2009 for expenses of all
CONUS travel away from home that are
paid or incurred during calendar year 2009
in lieu of the updated GSA rates. A tax-
payer must consistently use either these
rates or the updated rates for the period Oc-
tober 1, 2009, through December 31, 2009.
October 19, 20095252009–42 I.R.B.

(b)OCONUS rates. The rates for local-
ities outside the continental United States
(“OCONUS”) are established by the Sec-
retary of Defense (rates for non-foreign lo-
calities, including Alaska, Hawaii, Puerto
Rico, the Northern Mariana Islands, and
the possessions of the United States) and
by the Secretary of State (rates for for-
eign localities), and are published in the
Per DiemSupplement to the Standardized
Regulations (Government Civilians, For-
eign Areas) (updated on a monthly basis).
(c)Internet access to the rates.The
CONUS and OCONUS rates may be found
on the Internet atwww.gsa.gov.
(2)Locality of travel. The term “local-
ity of travel” means the locality where an
employee traveling away from home per-
forming services as an employee of an em-
ployer stops for sleep or rest.
(3)Incidental expenses. The term “in-
cidental expenses” has the same mean-
ing as in the Federal Travel Regulations,
41 C.F.R. 300–3.1 (2009). The Federal
Travel Regulations currently include as in-
cidental expenses fees and tips given to
porters, baggage carriers, bellhops, hotel
maids, stewards or stewardesses and oth-
ers on ships, and hotel servants in foreign
countries; transportation between places
of lodging or business and places where
meals are taken, if suitable meals can be
obtained at the temporary duty site; and the
mailing cost associated with filing travel
vouchers and payment of employer-spon-
sored charge card billings.
.03Flat rate or stated schedule.
(1)In general. Except as provided in
section 3.03(2) of this revenue procedure,
an allowance is paid at a flat rate or stated
schedule if it is provided on a uniform and
objective basis for the expenses described
in section 3.01 of this revenue procedure.
The allowance may be paid for the number
of days away from home performing ser-
vices as an employee or on any other basis
that is consistently applied and in accor-
dance with reasonable business practice.
Thus, for example, an hourly payment to
cover meal and incidental expenses paid
to a pilot or flight attendant who is travel-
ing away from home performing services
as an employee is an allowance paid at
a flat rate or stated schedule. Likewise,
a payment based on the number of miles
traveled (such as cents per mile) to cover
meal and incidental expenses paid to an
over-the-road truck driver who is traveling
away from home performing services as an
employee is an allowance paid at a flat rate
or stated schedule.
(2)Limitation. An allowance that is
computed on a basis similar to that used
in computing an employee’s wages or
other compensation (such as the number
of hours worked, miles traveled, or pieces
produced) does not meet the business con-
nection requirement of § 1.62–2(d), is not
aper diemallowance, and is not paid at a
flat rate or stated schedule, unless, as of
December 12, 1989, (a) the allowance was
identified by the payor either by making a
separate payment or by specifically iden-
tifying the amount of the allowance, or (b)
an allowance computed on that basis was
commonly used in the industry in which
the employee performed services. See
§ 1.62–2(d)(3)(ii).
SECTION 4. PER DIEM
SUBSTANTIATION METHOD
.01Per diem allowance. If a payor pays
aper diemallowance in lieu of reimburs-
ing actual lodging, meal, and incidental ex-
penses incurred or to be incurred by an
employee for travel away from home, the
amount of the expenses that is deemed sub-
stantiated for each calendar day is equal to
thelesseroftheper diemallowance for
that day or the amount computed at the
federalper diemrate (see section 3.02 of
this revenue procedure) for the locality of
travel for that day (or partial day, see sec-
tion 6.04 of this revenue procedure).
.02Meal and incidental expenses only
per diem allowance. If a payor pays a
per diemallowance only for meal and in-
cidental expenses in lieu of reimbursing
actual meal and incidental expenses in-
curred or to be incurred by an employee
for travel away from home, the amount of
the expenses that is deemed substantiated
for each calendar day is equal to the lesser
of theper diemallowance for that day or
the amount computed at the federal M&IE
rate for the locality of travel for that day
(or partial day). Aper diemallowance
is treated as paid only for meal and inci-
dental expenses if (1) the payor pays the
employee for actual expenses for lodging
based on receipts submitted to the payor,
(2) the payor provides the lodging in kind,
(3) the payor pays the actual expenses for
lodging directly to the provider of the lodg-
ing, (4) the payor does not have a reason-
able belief that lodging expenses were or
will be incurred by the employee, or (5) the
allowance is computed on a basis similar
to that used in computing an employee’s
wages or other compensation (such as the
number of hours worked, miles traveled,
or pieces produced).
.03Optional method for meal and in-
cidental expenses only deduction.Inlieu
of using actual expenses in computing the
amount allowable as a deduction for or-
dinary and necessary meal and inciden-
tal expenses paid or incurred for travel
away from home, employees and self-em-
ployed individuals who pay or incur meal
expenses may use an amount computed
at the federal M&IE rate for the locality
of travel for each calendar day (or partial
day) the employee or self-employed indi-
vidual is away from home. This amount is
deemed substantiated for purposes of para-
graphs (b)(2) and (c) of § 1.274–5, pro-
vided the employee or self-employed indi-
vidual substantiates the elements of time,
place, and business purpose of the travel
for that day (or partial day) in accordance
with those regulations. See section 6.05(1)
of this revenue procedure for rules related
to the application of the limitation under
§ 274(n) to amounts determined under this
section 4.03. See section 4.05 of this rev-
enue procedure for a method for substanti-
ating incidental expenses that may be used
by employees or self-employed individu-
als who do not pay or incur meal expenses.
.04Special rules for transportation in-
dustry.
(1)In general. Thissection4.04ap-
plies to (a) a payor that pays aper diem
allowance only for meal and incidental
expenses for travel away from home to
an employee in the transportation indus-
try and computes the amount under sec-
tion 4.02 of this revenue procedure, or (b)
an employee or self-employed individual
in the transportation industry who com-
putes the amount allowable as a deduction
for meal and incidental expenses for travel
away from home under section 4.03 of this
revenue procedure.
(2)Transportation industry defined.
For purposes of this section 4.04, an em-
ployee or self-employed individual is in
the transportation industry only if the
employee’s or self-employed individ-
ual’s work (a) is of the type that directly
involves moving people or goods by air-
plane, barge, bus, ship, train, or truck, and
2009–42 I.R.B.526October 19, 2009

(b) regularly requires travel away from
home which, during any single trip away
from home, usually involves travel to lo-
calities with differing federal M&IE rates.
For purposes of the preceding sentence,
a payor must determine that an employee
or a group of employees is in the trans-
portation industry by using a method that
is consistently applied and in accordance
with reasonable business practice.
(3)Rates. A taxpayer described in sec-
tion 4.04(1) of this revenue procedure may
treat $59 as the federal M&IE rate for any
CONUS locality of travel, and $65 as the
federal M&IE rate for any OCONUS lo-
cality of travel. A payor that uses ei-
ther (or both) of these special rates for
an employee must use the special rate(s)
for all amounts deemed substantiated un-
der section 4.02 of this revenue procedure
paid to that employee for travel away from
home within CONUS and/or OCONUS,
as the case may be, during the calendar
year. Similarly, an employee or self-em-
ployed individual thatuses either (or both)
of these special rates must use the special
rate(s) for all amounts deemed substanti-
ated under section 4.03 of this revenue pro-
cedure for travel away from home within
CONUS and/or OCONUS, as the case may
be, during the calendar year. See section
4.04(6) of this revenue procedure for tran-
sition rules.
(4)Periodic rule. A payor described in
section 4.04(1) of this revenue procedure
may compute the amount of the em-
ployee’s expenses that is deemed substan-
tiated under section 4.02 of this revenue
procedure periodically (not less frequently
than monthly), rather than daily, by com-
paring the totalper diemallowance paid
for the period to the sum of the amounts
computed either atthe federal M&IE
rate(s) for the localities of travel, or at the
special rate described in section 4.04(3),
for the days (or partial days) the employee
is away from home during the period.
(5)Examples.
(a)Example 1. Taxpayer, an employee in the
transportation industry, travels away from home on
business within CONUS on 16 days (including par-
tial days) during a calendar month. A payor pays
Taxpayer aper diemallowance only for meal and in-
cidental expenses that the payor computes using sec-
tion 4.04(3) of this revenue procedure and the method
of proration described in section 6.04(2) of this rev-
enue procedure. The amount deemed substantiated
under section 4.02 of this revenue procedure is equal
to the lesser of the totalper diemallowance paid for
the month or $944 (16 days at $59 per day).
(b)Example 2. Taxpayer, a truck driver employee
in the transportation industry, is paid a “cents-per-
mile” allowance that qualifies as an allowance paid
under a flat rate or stated schedule as defined in sec-
tion 3.03 of this revenue procedure. Taxpayer travels
away from home on business for 10 days. Based on
the number of miles driven by Taxpayer, Taxpayer’s
employer pays an allowance of $500 for the 10 days
of business travel. Taxpayer actually drives for 8
days, and does not drive for the other 2 days Taxpayer
is away from home. Taxpayer is paid under the peri-
odic rule used for transportation industry employers
and employees in accordance with section 4.04(4) of
this revenue procedure. The amount deemed substan-
tiated is the full $500 because that amount does not
exceed $590 (ten days away from home at $59 per
day).
(6)Transition rules. Under the calen-
dar-year convention provided in section
4.04(3), a taxpayer who used the federal
M&IE rates during the first 9 months of
calendar year 2009 to substantiate the
amount of an individual’s travel expenses
under sections 4.02 or 4.03 of Rev. Proc.
2008–59 may not use, for that individual,
the special transportation industry rates
provided in this section 4.04 until January
1, 2010. Similarly, a taxpayer who used
the special transportation industry rates
during the first 9 months of calendar year
2009 to substantiate the amount of an in-
dividual’s travel expenses may not use,
for that individual, the federal M&IE rates
until January 1, 2010.
.05Optional method for incidental ex-
penses only deduction.Inlieuofusing
actual expenses in computing the amount
allowable as a deduction for ordinary
and necessary incidental expenses paid
or incurred for travel away from home,
employees and self-employed individuals
who pay or incur incidental expenses but
do not pay or incur meal expenses for
a calendar day (or partial day) of travel
away from home may use, for each cal-
endar day (or partialday) the employee
or self-employed individual is away from
home, an amount computed at the rate of
$5 per day for any CONUS or OCONUS
locality of travel. This amount is deemed
substantiated for purposes of paragraphs
(b)(2) and (c) of § 1.274–5, provided the
employee or self-employed individual
substantiates the elements of time, place,
and business purpose of the travel for that
day (or partial day) in accordance with
those regulations. See section 4.03 of this
revenue procedure for a method that may
be used by employees or self-employed
individuals who pay or incur meal ex-
penses. The method authorized by this
section 4.05 may not be used by payors
that use section 4.01, 4.02, or 5.01 of this
revenue procedure, or by employees or
self-employed individuals who use the
methoddescribedinsection4.03ofthis
revenue procedure. See section 6.05(5)
of this revenue procedure for rules related
to the application of the limitation under
§ 274(n) to amounts determined under this
section 4.05.
SECTION 5. HIGH-LOW
SUBSTANTIATION METHOD
.01In general. If a payor pays aper
diemallowance in lieu of reimbursing ac-
tual lodging, meal, and incidental expenses
incurred or to be incurred by an employee
for travel away from home and the payor
uses the high-low substantiation method
described in this section 5 for travel within
CONUS, the amount of the expenses that
is deemed substantiated for each calendar
day is equal to the lesser of theper diem
allowance for that day or the amount com-
puted at the rate provided in section 5.02 of
this revenue procedure for the locality of
travel for that day (or partial day, see sec-
tion 6.04 of this revenue procedure). Ex-
cept as provided in section 5.06 of this rev-
enue procedure, this high-low substantia-
tionmethodmaybeusedinlieuofthe
per diemsubstantiation method provided
in section 4.01 of this revenue procedure,
but may not be used in lieu of the meal and
incidental expenses onlyper diemsubstan-
tiation method provided in section 4.02 of
this revenue procedure.
.02Specific high-low rates. Except as
provided in section 5.06 of this revenue
procedure, theper diemrate set forth in this
section 5.02 is $258 for travel to any “high-
cost locality” specified in section 5.03 of
this revenue procedure, or $163 for travel
to any other locality within CONUS. The
high or low rate, as appropriate, applies
as if it were the federalper diemrate for
the locality of travel. For purposes of ap-
plying the high-low substantiation method
and the § 274(n) limitation on meal ex-
penses (see section 6.05(3) of this revenue
procedure), the amount of the high and low
rates that is treated as paid for meals is
$65 for a high-cost locality and $52 for any
other locality within CONUS.
.03High-cost localities. The following
localities have a federalper diemrate of
October 19, 20095272009–42 I.R.B.

$211 or more, and are high-cost localities
for all of the calendar year or the portion of
the calendar year specified in parentheses
under the key city name:
Key CityCounty or other defined location
Arizona
Phoenix/ScottsdaleMaricopa
(January 1-May 31)
SedonaCity limits of
Sedona
(March 1-April 30)
California
MontereyMonterey
NapaNapa
(October 1-
November 30 and April 1-September 30)
San DiegoSan Diego
San FranciscoSan Francisco
Santa BarbaraSanta Barbara
Santa MonicaCity limits of Santa Monica
South Lake TahoeEl Dorado
(Decemb
er 1-March 31)
Colorado
AspenPitkin
(December 1-April 30)
Denver/AuroraDenver, Adams, Arapahoe, and Jefferson
Steam
boat Springs
Rout
t
(December 1-March 31)
TellurideSan Miguel
(December 1-March 31 and June 1-September 30)
VailEagle
(December 1-March 31)
District of Columbia
Washington D.C. (also the cities of Alexandria, Falls Church,and Fairfax, and the counties of Arlington and Fairfax, in
Virginia; and the counties of Montgomery and Prince George’s in Maryland) (See also Maryland and Virginia)
F
lorida
Fort LauderdaleBroward
(October 1-April 30)
Fort Walton Beach/De Funiak SpringsOkaloosa and Walton
(June 1-July 31)
Key WestMonroe
MiamiMiami-Dade
(January 1-March 31)
NaplesCollier
(January 1-April 30)
Illinois
ChicagoCook and Lake
2009–42 I.R.B.528October 19, 2009

Key CityCounty or other defined location
Maine
Bar HarborHancock
(July 1-August 31)
Maryland
Baltimore Cit
y
Baltimore Cit
y
(October 1-November 30 and March 1-September 30)
Cambridge/St. MichaelsDorchester and Talbot
(June 1-August 31)
Ocean CityWorcester
(June 1-August 31)
Washingto
n, DC Metro Area
Montgomer
y and Prince George’s
Massachusetts
Boston/CambridgeSuffolk, City of Cambridge
Martha’s VineyardDukes
(June 1-August 31)
Nantuck
et
Nantuck
et
(June 1-September 30)
New Hampshire
ConwayCarroll
(July 1-August 31)
New York
Floral Park/Garden City/Great NeckNassau
Glens FallsWarren
(July 1-August 31)
Lake PlacidEssex
(J
uly 1-August 31)
Manhattan (includes the boroughs of Manhattan, Brooklyn, the Bronx, Queens
andStatenIsland)
Bronx, Kings, New York, Queens,
Richmond
Saratoga Springs/SchenectadySaratoga and Schenectady
(July 1-August 31)
T
arrytown/White Plains/New Rochelle
W
estchester
Pennsylvania
HersheyCity of Hershey
(June 1-August 31)
PhiladelphiaPhiladelphia
Rhode Island
Jamestown/Middletown/NewportNewport
(October 1-October 31 and May 1-September 30)
Utah
Park CitySummit
(January 1-March 31)
Virginia
Washington, DC Metro AreaCities of Alexandria, Fairfax, and Falls
Church; counties of Arlington and Fairfax
Washington
SeattleKing
October 19, 20095292009–42 I.R.B.

Key CityCounty or other defined location
WyomingTeton and Sublette
Jackson/Pinedale
(July 1-August 31)
.04Changes in high-cost localities.
The list of high-cost localities in section
5.03 of this revenue procedure differs from
the list of high-cost localities in section
5.03 of Rev. Proc. 2008–59 (changes
listed by key cities).
(1) The following localities have been
added to the list of high-cost localities:
Monterey, California; Denver/Aurora,
Colorado; Bar Harbor, Maine; Conway,
New Hampshire; Glens Falls, New York;
Lake Placid, New York; and Hershey,
Pennsylvania.
(2) The portion of the year for which the
following are high-cost localities has been
changed: Phoenix/Scottsdale, Arizona;
Napa, California; San Diego, California;
Telluride, Colorado; Vail, Colorado; Mi-
ami, Florida; Naples, Florida; Baltimore
City, Maryland; Cambridge/St. Michaels,
Maryland; Ocean City, Maryland; and
Jamestown/Middletown/Newport, Rhode
Island.
(3) The following localities have been
removed from the list of high-cost local-
ities: Crested Butte/Gunnison, Colorado;
Silverthorne/Breckenridge, Colorado; and
Palm Beach, Florida.
(4) The following localities have been
redefined: Floral Park/Garden City/Great
Neck, New York no longer includes
Glen Gove and Roslyn; Tarrytown/White
Plains/New Rochelle, New York no longer
includes Yonkers.
.05Specific limitation.
(1) Except as provided in section
5.05(2) of this revenue procedure, a payor
that uses the high-low substantiation
method for an employee must use that
method for all amounts paid to that em-
ployee for travel away from home within
CONUS during the calendar year. See
section 5.06 of this revenue procedure for
transition rules.
(2) For an employee described in sec-
tion 5.05(1) of this revenue procedure, the
payor may reimburse actual expenses or
use the meal and incidental expenses only
per diemsubstantiation method described
in section 4.02 of this revenue procedure
for any travel away from home, and may
use theper diemsubstantiation method de-
scribedinsection4.01ofthisrevenuepro-
cedure for any OCONUS travel away from
home.
.06Transition rules. A payor who used
the substantiation method of section 4.01
of Rev. Proc. 2008–59 for an employee
during the first 9 months of calendar year
2009 may not use the high-low substanti-
ation method in section 5 of this revenue
procedure for that employee until January
1, 2010. A payor who used the high-low
substantiation method of section 5 of Rev.
Proc. 2008–59 for an employee during the
first 9 months of calendar year 2009 must
continue to use the high-low substantiation
method for the remainder of calendar year
2009 for that employee. A payor described
in the previous sentence may use the rates
and high-cost localities published in sec-
tion 5 of Rev. Proc. 2008–59, in lieu of
the updated rates and high-cost localities
provided in section 5 of this revenue proce-
dure, for travel on or after October 1, 2009,
and before January 1, 2010, if those rates
and localities are used consistently during
this period for all employees reimbursed
under this method.
SECTION 6. LIMITATIONS AND
SPECIAL RULES
.01In general. The federalper diem
rate and the federal M&IE rate described
in section 3.02 of this revenue procedure
for the locality of travel apply in the same
manner as they apply under the Federal
Travel Regulations, 41 C.F.R. Part 301–11
(2009), except as provided in sections 6.02
through 6.04 of this revenue procedure.
.02Federal per diem rate. A receipt
for lodging expenses is not required in de-
termining the amount of expenses deemed
substantiated under section 4.01 or 5.01 of
this revenue procedure. See section 7.01
of this revenue procedure for the require-
ment that the employee substantiate the
time, place, and business purpose of the
expense.
.03Federal per diem or M&IE rate.A
payor is not required to reduce the federal
per diemrate or the federal M&IE rate for
the locality of travel for meals provided in
kind, provided the payor has a reasonable
belief that the employee incurred or will
incur meal and incidental expenses during
each day of travel.
.04Proration of the federal per diem
or M&IE rate. Under the Federal Travel
Regulations, in determining the federalper
diemrate or the federal M&IE rate for the
locality of travel, the full applicable fed-
eral M&IE rate is available for a full day of
travel from 12:01 a.m. to 12:00 midnight.
The method described in section 6.04(1)
of this revenue procedure must be used
for purposes of determining the amount
deemed substantiated under section 4.03 or
4.05 of this revenue procedure for partial
days of travel away from home. For pur-
poses of determining the amount deemed
substantiated under section 4.01, 4.02, or
5 of this revenue procedure for partial days
of travel away from home, either of the fol-
lowing methods may be used to prorate the
federal M&IE rate to determine the federal
per diemrate or the federal M&IE rate for
the partial days of travel:
(1) The rate may be prorated using the
method prescribed by the Federal Travel
Regulations. Currently the Federal Travel
Regulations allow three-fourths of the ap-
plicable federal M&IE rate for each partial
day during which an employee or self-em-
ployed individual is traveling away from
home performing services as an employee
or self-employed individual. The same ra-
tio may be applied to prorate the allowance
for incidental expenses described in sec-
tion 4.05 of this revenue procedure; or
(2) The rate may be prorated using any
method that is consistently applied and in
accordance with reasonable business prac-
tice. For example, if an employee travels
away from home from 9 a.m. one day to
5 p.m. the next day, a method of proration
that results in an amount equal to two times
the federal M&IE rate is treated as being in
accordance with reasonable business prac-
tice (even though the Federal Travel Reg-
ulations would allow only one and a half
times the federal M&IE rate).
.05Application of the appropriate
§ 274(n) limitation on meal expenses.Ex-
cept as provided in section 6.05(5), all or
2009–42 I.R.B.530October 19, 2009

part of the amount of an expense deemed
substantiated under this revenue procedure
is subject to the appropriate limitation
under § 274(n) (see section 2.02 of this
revenue procedure) on the deductibility of
food and beverage expenses.
(1) If an amount for meal and incidental
expenses is computed under section 4.03
of this revenue procedure, a taxpayer must
treat that amount as an expense for food
and beverages.
(2)Ifaper diemallowance is paid only
for meal and incidental expenses, a payor
must treat an amount equal to the lesser of
the allowance or the federal M&IE rate for
the locality of travel for each day (or partial
day, see section 6.04 of this revenue pro-
cedure) as an expense for food and bever-
ages.
(3)Ifaper diemallowance is paid for
lodging, meal, and incidental expenses for
each calendar day (or partial day) an em-
ployee is away from home at a rate equal
to or in excess of the federalper diemrate
for the locality of travel, a payor must treat
an amount equal to the federal M&IE rate
for the locality of travel for each calendar
day (or partial day) as an expense for food
or beverages.
(4)Ifaper diemallowance is paid for
lodging, meal, and incidental expenses for
each calendar day (or partial day) an em-
ployee is away from home at a rate less
than the federalper diemrate for the lo-
cality of travel, a payor must:
(a) Treat an amount equal to the federal
M&IE rate for the locality of travel for
each calendar day (or partial day) or, if
less, the amount of the allowance, as an
expense for food or beverages; or
(b) Treat an amount equal to 40 percent
of the allowance as an expense for food or
beverages.
(5) If an amount for incidental expenses
is computed under section 4.05 of this rev-
enue procedure, none of the amount is sub-
ject to limitation under § 274(n).
.06No double reimbursement or deduc-
tion.Ifapayorpaysaper diemallowance
in lieu of reimbursing actual lodging,
meal, and incidental expenses, or meal and
incidental expenses, in accordance with
section 4 or 5 of this revenue procedure,
and the amount is treated as paid under an
accountable plan, anyadditional payment
for those expenses is treated as paid un-
der a nonaccountable plan, is included in
an employee’s gross income, is reported
as wages or other compensation on the
employee’s Form W–2, and is subject
to withholding and payment of employ-
ment taxes. Similarly, if an employee or
self-employed individual computes the
amount allowable as a deduction for meal
and incidental expenses for travel away
from home in accordance with section
4.03 or 4.04 of this revenue procedure,
no other deduction is allowed to the em-
ployee or self-employed individual for
those expenses. For example, assume an
employee receives aper diemallowance
from a payor for lodging, meal, and inci-
dental expenses, or for meal and incidental
expenses, incurred while traveling away
from home and the amount is treated as
paid under an accountable plan. During
that trip, the employee pays for dinner for
the employee and two business associates.
The payor reimburses as a business enter-
tainment meal expense the meal expense
for the employee and the two business
associates. Because the payor also pays a
per diemallowance to cover the cost of the
employee’s meals, the amount paid for the
employee’s portion of the business enter-
tainment meal expense is treated as paid
under a nonaccountable plan, is reported
as wages or other compensation on the
employee’s Form W–2, and is subject to
withholding and payment of employment
taxes.
.07Related parties. Sections 4.01 and
5 of this revenue procedure do not apply if
a payor and an employee are related within
the meaning of § 267(b), but for this pur-
pose the percentage of ownership interest
referred to in § 267(b)(2) is 10 percent.
SECTION 7. APPLICATION
.01 An employee satisfies the adequate
accounting and substantiation require-
ments of § 1.274–5(c) and (f)(4) and
§ 1.274–5T(c) if—
(1) The employee uses this revenue
procedure to substantiate to a payor the
amount of the employee’s travel expenses,
and
(2) Within a reasonable period of
time, the employee also substantiates to
the payor the elements of time, place,
and business purpose of the travel
in accordance with § 1.274–5T(b)(2)
and (c) and § 1.274–5(c) (other than
§ 1.274–5(c)(2)(iii)(A)).
.02 An arrangement providingper diem
allowances is treated as satisfying the
requirement of § 1.62–2(f)(2) of return-
ing amounts in excess of expenses if an
employee is required to return within a
reasonable period of time (as defined in
§ 1.62–2(g)) any portion of the allowance
that relates to days of travel not substan-
tiated, even though the arrangement does
not require the employee to return the por-
tion of the allowance that relates to days
of travel substantiated and that exceeds
the amount of the employee’s expenses
deemed substantiated. For example, as-
sume a payor provides an employee an
advanceper diemallowance for meal and
incidental expenses of $250, based on an
anticipated 5 days of business travel at $50
per day to a locality for which the federal
M&IE rate is $46, and the employee sub-
stantiates 3 full days of business travel.
The requirement to return excess amounts
is treated as satisfied if the employee is
required to return within a reasonable pe-
riod of time (as defined in § 1.62–2(g)) the
portion of the allowance that is attribut-
able to the 2 unsubstantiated days of travel
($100), even though the employee is not
required to return the portion of the al-
lowance ($12) that exceeds the amount of
the employee’s expenses deemed substan-
tiated under section 4.02 of this revenue
procedure ($138) for the 3 substantiated
days of travel. However, the $12 excess
portion of the allowance is treated as paid
under a nonaccountable plan as discussed
in section 7.04 of this revenue procedure.
.03 An employee is not required to in-
clude in gross income the portion of a
per diemallowance received from a payor
that is less than or equal to the amount
deemed substantiated under the rules pro-
vided in section 4 or 5 of this revenue pro-
cedure if the employee substantiates the
business travel expenses covered by the
per diemallowance in accordance with
section 7.01 of this revenue procedure. See
§ 1.274–5T(f)(2)(i). If the remaining re-
quirements for anaccountable plan pro-
vided in § 1.62–2 are satisfied, that por-
tion of the allowanceis treated as paid un-
der an accountable plan, is not reported as
wages or other compensation on the em-
ployee’s Form W–2, and is exempt from
the withholding and payment of employ-
ment taxes. See § 1.62–2(c)(2) and (c)(4).
.04Anemployeeisrequiredtoinclude
in gross income only the portion of theper
October 19, 20095312009–42 I.R.B.

diemallowance received from a payor that
exceeds the amount deemed substantiated
under the rules provided in section 4 or 5
of this revenue procedure if the employee
substantiates the business travel expenses
coveredbytheper diemallowance in
accordance with section 7.01 of this rev-
enue procedure. See § 1.274–5T(f)(2)(ii).
In addition, the excess portion of the
allowance is treated as paid under a nonac-
countable plan, is reported as wages or
other compensation on the employee’s
Form W–2, and is subject to withholding
and payment of employment taxes. See
§ 1.62–2(c)(3)(ii), (c)(5), and (h)(2)(i)(B).
.05 If the amount of the expenses that is
deemed substantiated under the rules pro-
vided in section 4.01, 4.02, or 5 of this rev-
enue procedure is less than the amount of
an employee’s business expenses for travel
away from home, an employee may claim
an itemized deduction for the amount by
which the business travel expenses exceed
the amount that is deemed substantiated,
provided the employee substantiates all the
business travel expenses (not just the ex-
cess over the federalper diemrate), in-
cludes on Form 2106, “Employee Business
Expenses,” the deemed substantiated por-
tion of theper diemallowance received
from the payor, and includes in gross in-
cometheportion(ifany)oftheper diem
allowance received from the payor that ex-
ceeds the amount deemed substantiated.
See § 1.274–5T(f)(2)(iii). However, for
purposes of claiming this itemized deduc-
tion for meal and incidental expenses, sub-
stantiation of the amount of the expenses
is not required if the employee is claim-
ing a deduction that is equal to or less than
the amount computed under section 4.03 of
this revenue procedure minus the amount
deemed substantiated under sections 4.02
and 7.01 of this revenue procedure. The
itemized deduction is subject to the appro-
priate limitation (see section 2.02 of this
revenue procedure) on meal and entertain-
ment expenses in § 274(n) and the 2-per-
cent floor on miscellaneous itemized de-
ductions in § 67.
.06 An employee who pays or incurs
meal expenses and does not receive aper
diemallowance for meal and incidental ex-
penses may deduct an amount computed
under section 4.03 of this revenue proce-
dure only as an itemized deduction. This
itemized deduction is subject to the ap-
propriate limitation on meal and entertain-
ment expenses in § 274(n) and the 2-per-
cent floor on miscellaneous itemized de-
ductionsin§67. Seesection7.07of
this revenue procedure for the treatment of
an employee who does not pay or incur
amounts for meal expenses and does not
receive aper diemallowance for inciden-
tal expenses.
.07 An employee who does not pay or
incur amounts for meal expenses and does
not receive aper diemallowance for in-
cidental expenses may deduct an amount
computed under section4.05ofthisrev-
enue procedure only as an itemized deduc-
tion. This itemized deduction is subject to
the 2-percent floor on miscellaneous item-
ized deductions in § 67. See section 7.06 of
this revenue procedure for the treatment of
an employee who pays or incurs amounts
for meal expenses and does not receive a
per diemallowance for meal and inciden-
tal expenses.
.08 A self-employed individual who
pays or incurs meal expenses for a calen-
dar day (or partial day) of travel away from
home may deduct an amount computed
under section 4.03 of this revenue proce-
dure in determining adjusted gross income
under § 62(a)(1). This deduction is subject
to the appropriate limitation on meal and
entertainment expenses in § 274(n).
.09 A self-employed individual who
does not pay or incur meal expenses for
a calendar day (or partial day) of travel
away from home may deduct an amount
computed under section4.05ofthisrev-
enue procedure in determining adjusted
gross income under § 62(a)(1).
SECTION 8. WITHHOLDING AND
PAYMENT OF EMPLOYMENT TAXES
.01 The portion of aper diemal-
lowance, if any, that relates to the days
of business travel substantiated and that
exceeds the amount deemed substantiated
for those days under section 4.01, 4.02, or
5 of this revenue procedure is treated as
paid under a nonaccountable plan and is
subject to withholding and payment of em-
ployment taxes. See § 1.62–2(h)(2)(i)(B).
.02 In the case of aper diemallowance
paid as a reimbursement, the excess de-
scribedinsection8.01ofthisrevenuepro-
cedure is subject to withholding and pay-
ment of employment taxes in the payroll
period in which a payor reimburses the ex-
penses for the days of travel substantiated.
See § 1.62–2(h)(2)(i)(B)(2).
.03 In the case of aper diemallowance
paid as an advance, the excess described
in section 8.01 of this revenue procedure
is subject to withholding and payment of
employment taxes no later than the first
payroll period following the payroll period
in which the days of travel for which the
advance was paid are substantiated. See
§ 1.62–2(h)(2)(i)(B)(3). If an employee
does not substantiate some or all of the
days of travel for which the advance was
paid within a reasonable period of time
or does not return the portion of the al-
lowance that relates to those days within
a reasonable period of time, the portion of
the allowance that relates to those days is
subject to withholding and payment of em-
ployment taxes no later than the first pay-
roll period following the end of the reason-
able period. See § 1.62–2(h)(2)(i)(A).
.04 In the case of aper diemallowance
only for meal and incidental expenses for
travel away from home paid to an em-
ployee in the transportation industry by a
payor that uses the rule in section 4.04(4)
of this revenue procedure, the excess of
theper diemallowance paid for the pe-
riod over the amount deemed substanti-
ated for the period under section 4.02 of
this revenue procedure (after applying sec-
tion 4.04(4) of this revenue procedure),
is subject to withholding and payment of
employment taxes no later than the first
payroll period following the payroll pe-
riod in which the excess is computed. See
§ 1.62–2(h)(2)(i)(B)(4).
.05 For example, assume that an em-
ployer pays an employee aper diem
allowance under an arrangement that
otherwise meets the requirements of an
accountable plan to cover business ex-
penses for meals and lodging for travel
away from home at a rate of 120 percent
of the federalper diemrate for the local-
ities to which the employee travels. The
employer does not require the employee
to return the 20 percent by which the re-
imbursement for those expenses exceeds
the federalper diemrate. The employee
substantiates 6 days of travel away from
home: 2 days in a locality in which the
federalper diemrate is $160 and 4 days
in a locality in which the federalper diem
rate is $120. The employer reimburses
the employee $960 for the 6 days of travel
away from home (2 x (120% x $160) + 4
2009–42 I.R.B.532October 19, 2009

x (120% x $120)), and does not require
the employee to return the excess payment
of $160 (2 days x $32 ($192-$160) + 4
days x $24 ($144-$120)). For the payroll
period in which the employer reimburses
the expenses, the employer must withhold
and pay employment taxes on $160. See
section 8.02 of this revenue procedure.
.06 All payments to an employee under
aper diemallowance arrangement are
treated as paid under a nonaccountable
plan if the reimbursement arrangement
evidences a pattern of abuse. An arrange-
ment evidences a pattern of abuse if, for
example, it has no process to determine
when an allowance exceeds the amount
that may be deemed substantiated and the
arrangement routinely pays allowances in
excess of the amount that may be deemed
substantiated without requiring actual sub-
stantiation or repayment of the excess
amount or treating the excess allowances
as wages for employment tax purposes.
See § 62(c), § 1.62–2(k), and Rev. Rul.
2006–56, 2006–2 C.B. 874. Thus, these
payments are included in the employee’s
gross income, are reported as wages or
other compensation on the employee’s
Form W–2, and are subject to withholding
and payment of employment taxes. See
§§ 1.62–2(c)(3), (c)(5), and (h)(2).
SECTION 9. EFFECTIVE DATE
This revenue procedure is effective for
per diemallowances for lodging, meal and
incidental expenses, or for meal and inci-
dental expenses only that are paid to an
employee on or after October 1, 2009, for
travel away from home on or after October
1, 2009. For purposes of computing the
amount allowable as a deduction for travel
away from home, this revenue procedure is
effective for meal and incidental expenses
or for incidental expenses only paid or in-
curred on or after October 1, 2009.
SECTION 10. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2008–59 is superseded.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Karla M. Meola of the Office
of Associate Chief Counsel (Income Tax
and Accounting). For further information
regarding this revenue procedure, con-
tact Ms. Meola at (202) 622–4930 (not a
toll-free call).
October 19, 20095332009–42 I.R.B.

Part IV. Items o
fGeneralInterest
Notice of Proposed
Rulemaking
Damages Received on
Account of Personal Physical
Injuries or Physical Sickness
REG–127270–06
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains pro-
posed regulations relating to the exclusion
from gross income for amounts received
on account of personal physical injuries or
physical sickness. The proposed regula-
tions reflect amendments under the Small
Business Job Protection Act of 1996. The
proposed regulations also delete the re-
quirement that to qualify for exclusion
from gross income, damages received
from a legal suit, action, or settlement
agreement must be based upon “tort or
tort type rights.” The proposed regulations
affect taxpayers receiving damages on
account of personal physical injuries or
physical sickness and taxpayers paying
these damages.
DATES: Written (paper or electronic)
comments must be received by December
14, 2009.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–127270–06), room
5203, Internal Revenue Service, Post
Office Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may
be hand delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to: CC:PA:LPD:PR (REG–127270–06),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue, NW,
Washington, DC, or sent electronically
viatheFederaleRulemaking
Portal atwww.regulations.gov(IRS
REG–127270–06).
FOR FURTHER INFORMATION
CONTACT: Concerning the pro-
posed regulations, Sheldon A. Iskow,
(202) 622–4920 (not a toll-free num-
ber);concerning the submission
of comments and/or requests for
a public hearing, Richard Hurst at
Richard.A.Hurst@irscounsel.treas.gov.
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
This document contains proposed
amendments to the Income Tax Regula-
tions (26 CFR part 1) to reflect amend-
ments made to section 104(a)(2) of the
Internal Revenue Code (Code) by section
1605(a) and (b) of the Small Business
Job Protection Act of 1996, Public Law
104–188, (110 Stat. 1838 (the 1996 Act)),
and to delete the “tort or tort type rights”
test under §1.104–1(c) of the Income Tax
Regulations.
As amended, section 104(a)(2) ex-
cludes from gross income the amount of
any damages (other than punitive dam-
ages) received (whether by suit or agree-
ment and whether as lump sums or as
periodic payments) on account of personal
physical injuries or physical sickness.
These proposed regulations conform the
regulations to these statutory amendments
and clarify the changes for taxpayers and
practitioners.
1.The 1996 Act Amendments
Section 1605(a) of the 1996 Act
amended section 104(a)(2) to provide
expressly that punitive damages do not
qualify for the income exclusion. The
amendment was a response to divergent
court opinions, some holding that punitive
damages are received “on account of” a
personal injury. See H.R. Conf. Rept.
104–737 (1996) at 301. The amendment is
consistent withO’Gilvie v. United States,
519 U.S. 79 (1996), holding that punitive
damages are not compensation for per-
sonal injuries and do not satisfy the “on
account of” test under section 104(a)(2).
Section 1605(a) also amended section
104(a)(2) to provide that the income ex-
clusion generally is limited to amounts
received on account of personal “physical”
injuries or “physical” sickness. Section
1605(b) of the 1996 Act further amended
section 104(a) to provide that, for purposes
of section 104(a)(2), even though emo-
tional distress is not considered a physical
injury or a physical sickness, damages not
in excess of the amount paid for “medical
care” (described in section 213(d)(1)(A)
or (B)) for emotional distress are excluded
from income.
The proposed regulations reflect these
statutory amendments. The proposed reg-
ulations also provide that a taxpayer may
exclude damages received for emotional
distress “attributable” to a physical injury
or physical sickness. See H.R. Conf. Rept.
104–737 (1996) at 301.
2.TheTortTypeRightsTest
The proposed regulations also eliminate
the requirement that “personal injuries or
sickness” be “based upon tort or tort type
rights.” That requirement in §1.104–1(c)
was intended to ensure that only dam-
ages compensating for torts and similar
personal injuries qualify for exclusion un-
der section 104(a)(2). InUnited States v.
Burke, 504 U.S. 229 (1992), the Supreme
Court interpreted the tort type rights test
as limiting the section 104(a)(2) exclu-
sion to damages for personal injuries for
which the full range of tort-type remedies
is available. The Court held that section
104(a)(2) did not apply to an award of
back pay under the pre-1991 version of
Title VII of the 1964 Civil Rights Act
because the damages awarded under the
statute provided only a narrow remedy
and thus did not compensate for a tort type
injury. The Burke interpretation precluded
section 104(a)(2) treatment for similar
personal injuries redressed by “no-fault”
statutes that do not provide traditional
tort-type remedies. Many critics thought
the Burke remedies test was too restrictive.
Later legislative and judicial devel-
opments eliminated the need to base the
section 104(a)(2) exclusion on tort and
remedies concepts. First,Commissioner v.
Schleier, 515 U.S. 323 (1995), interpreted
the statutory “on account of” test as ex-
cluding only damages directly linked to
“personal” injuries or sickness. Second,
the 1996 Act restricts the exclusion to
damages for “personal physical” injuries
or “physical sickness.”
Accordingly, under the proposed regu-
lations, damages for physical injuries may
qualify for the section 104(a)(2) exclusion
even though the injury giving rise to the
2009–42 I.R.B.534October 19, 2009

damages is not defined as a tort under state
or common law. Nor does the section
104(a)(2) exclusion depend on the scope
of remedies available under state or com-
mon law. In effect, the regulations reverse
the result in Burke by allowing the exclu-
sion for damages awarded under no-fault
statutes.
Proposed Effective/Applicability Date
These regulations are proposed to ap-
ply to damages paid pursuant to a written
binding agreement, court decree, or me-
diation award entered into or issued af-
ter September 13, 1995, and received af-
ter the date these regulations are published
as final regulations in theFederal Regis-
ter. However, taxpayers may apply these
proposed regulations to amounts paid pur-
suant to a written binding agreement, court
decree, or mediation award entered into or
issued after September 13, 1995, and re-
ceived after August 20, 1996. If apply-
ing the proposed regulations to damages
received after August 20, 1996, results in
an overpayment of tax, the taxpayer may
file a claim for refund within the period of
limitations under section 6511.
Notwithstanding the date these regu-
lations are proposed to become effective,
the 1996 Act amendments to section
104(a)(2), including the amendment re-
stricting the exclusion to amounts received
on account of personal physical injuries
or physical sickness, are effective for
amounts received after August 20, 1996,
except for any amount received under a
written binding agreement, court decree,
or mediation award in effect on (or is-
sued on or before) September 13, 1995.
Since the 1996 Act amendments, courts
have applied the statutory effective date in
holding that amounts received on account
of nonphysical injuriesare not excludable.
Hennessey v. Commissioner, T.C. Memo
2009–132;Green v. Commissioner,T.C.
Memo 2007–39. These regulations pro-
pose to conform existing regulations to
amended section 104(a)(2). To the ex-
tent that existing regulations conflict with
amended section 104(a)(2), the statute
controls. SeeMurphy v. Internal Revenue
Service, 493 F.3d 170, 176 n* (D.C. Cir.
2007).
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory
assessment is not required. It also has
been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these reg-
ulations, and because the regulations do
not impose a collection of information
on small entities, the Regulatory Flexi-
bility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the
Internal Revenue Code, this notice of
proposed rulemaking will be submitted
to the Chief Counsel for Advocacy of
the Small BusinessAdministration for
comment on its impact on small business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, considera-
tion will be given to any written (either a
signed paper original with eight (8) copies)
or electronic comments that are submit-
tedtimelytotheIRS.TheIRSandthe
Treasury Department specifically request
comments on the clarity of the proposed
rules and how they can be made easier to
understand. All comments will be avail-
able for public inspection and copying.
A public hearing will be scheduled if
requested in writing by any person that
timely submits written comments. If a
public hearing is scheduled, notice of the
date, time and place for the hearing will be
published in theFederal Register.
Drafting Information
The principal author of these regula
-
tions is Sheldon A. Iskow of the Offic
e
of Associate Chief Counsel (Income T
ax
and Accounting). However, other per
son-
nel from the IRS and Treasury Depart
ment
participated in their development
.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. In §1.104–1, paragraph (c) is
revised to read as follows:
§1.104–1 Compensation for injuries or
sickness.
*****
(c)Damages received on account
of personal physical injuries or physi-
cal sickness—(1)In general. Section
104(a)(2) excludes from gross income
the amount of any damages (other than
punitive damages) received (whether by
suit or agreement and whether as lump
sums or as periodic payments) on account
of personal physical injuries or physical
sickness. Emotional distress is not consid-
ered a physical injury or physical sickness.
However, damages for emotional distress
attributable to a physical injury or physical
sickness are excluded from income under
section 104(a)(2). Section 104(a)(2) also
excludes damages not in excess of the
amount paid for medical care (described in
section 213(d)(1)(A) or (B)) for emotional
distress. For purposes of this paragraph
(c), the termdamagesmeans an amount
received (other than workers’ compensa-
tion) through prosecution of a legal suit or
action, or through a settlement agreement
enteredintoinlieuofprosecution.
(2)Cause of action and remedies.The
section 104(a)(2) exclusion may apply to
damages recovered for a physical personal
injury or sickness under a statute, even if
that statute does not provide for a broad
range of remedies. The injury need not
be defined as a tort under state or common
law.
(3)Effective/applicability date.This
paragraph (c) applies to damages paid pur-
suant to a written binding agreement, court
decree, or mediation award entered into or
issued after September 13, 1995, and re-
ceived after the date these regulations are
published as final regulations in theFed-
eral Register. Taxpayers also may ap-
ply these proposed regulations to damages
paid pursuant to a written binding agree-
ment, court decree, or mediation award en-
tered into or issued after September 13,
1995, and received after August 20, 1996.
If applying these proposed regulations to
October 19, 20095352009–42 I.R.B.

damages received after August 20, 1996,
results in an overpayment of tax, the tax-
payer may file a claim for refund before the
period of limitations under section 6511
expires. Notwithstanding the date these
regulations are proposed to become effec-
tive, the statutory amendments to section
104(a) under section 1605 of the Small
Business Job Protection Act of 1996, Pub-
lic Law 104–188, (110 Stat. 1838), are ef-
fective for amounts received after August
20, 1996, except for any amount received
under a written binding agreement, court
decree, or mediation award in effect on (or
issued on or before) September 13, 1995.
*****
Linda E. Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on September
14, 2009, 8:45 a.m., and published in the issue of the Federal
Register for September 15, 2009, 74 F.R. 47152)
Notice of Proposed
Rulemaking by
Cross-Reference to
Temporary Regulations
Disregarded Entities and
Excise Taxes
REG–116614–08
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
by cross-reference to temporary regula-
tions.
SUMMARY:InthethisissueoftheBul-
letin, the IRS is issuing temporary regula-
tions (T.D. 9462) clarifying that a single-
owner eligible entity that is disregarded as
an entity separate from its owner for any
purpose, but regarded as a separate entity
for certain excise tax purposes, is treated
as a corporation for tax administration pur-
poses related to those excise taxes. Those
regulations also make conforming changes
to the tax liability rule for disregarded enti-
ties and the treatment of entity rule for dis-
regarded entities with respect to employ-
ment taxes. The regulations affect disre-
garded entities in general and, in particular,
disregarded entities that pay or pay over
certain federal excise taxes or that are re-
quired to be registered by the IRS. The text
of those temporary regulations also serves
as the text of these proposed regulations.
DATES: Written or electronic comments
and requests for a public hearing must be
received by December 14, 2009.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–116614–08), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand-delivered Monday through Friday
betweenthehoursof8a.m. and4p.m.
to: CC:PA:LPD:PR (REG–116614–08),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC, or sent electroni-
cally via the Federal eRulemaking Por-
tal athttp://www.regulations.gov(IRS
REG–116614–08).
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Michael H. Beker, (202)
622–3070; concerning the submis-
sions of comments and requests for a
public hearing, Richard Hurst, (202)
622–2949 (TDD telephone) (not toll-free
numbers) and his e-mail address is
Richard.A.Hurst@irscounsel.treas.gov.
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
Temporary regulations in this issue
of the Bulletin amend 26 CFR part 301.
The temporary regulations clarify that a
single-owner eligible entity that is dis-
regarded as an entity separate from its
owner for any purpose, but regarded as a
separate entity for certain excise tax pur-
poses, is treated as a corporation for tax
administrative purposes related to those
excise taxes (that is, excise taxes reported
on Form 720, “Quarterly Federal Excise
Tax Return;” Form 730, “Monthly Tax
Return for Wagers;” Form 2290, “Heavy
HighwayVehicleUseTaxReturn;” and
Form 11–C, “Occupation Tax and Regis-
tration Return for Wagering;” excise tax
refunds or payments claimed on Form
8849, “Claim for Refund of Excise Taxes;”
and excise tax registrations on Form 637,
“Application for Registration (For Certain
Excise Tax Activities).” The temporary
regulations also make conforming changes
to the tax liability rule for disregarded
entities in §301.7701–2(c)(2)(iii) and the
treatment of entity rule for disregarded
entities with respect to employment taxes
in §301.7701–2(c)(2)(iv)(B). The text of
those temporary regulations also serves
as the text of these proposed regulations.
The preamble to the temporary regulations
explains the temporary regulations and
these proposed regulations.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory
assessment is not required. It has also
been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regu-
lations, and because these regulations do
not impose a collection of information
on small entities, the Regulatory Flexi-
bility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the
Internal Revenue Code, this regulation
has been submitted to the Chief Counsel
for Advocacy of the Small Business
Administration for comment on its impact
on small business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written comments
(a signed original and eight (8) copies)
or electronic comments that are submitted
timelytotheIRS.TheIRSandtheTrea-
sury Department specifically request com-
ments on the clarity of the proposed rules
and how they may be made easier to un-
derstand. All comments will be available
for public inspection and copying. A pub-
lic hearing may be scheduled if requested
by any person who timely submits com-
ments. If a public hearing is scheduled, no-
tice of the date, time,and place for the pub-
lic hearing will be published in theFederal
Register.
Drafting Information
The principal author of these regula-
tions is Michael H. Beker, Office of the
2009–42 I.R.B.536October 19, 2009

Associate Chief Counsel (Passthroughs
and Special Industries). However, other
personnel from the IRS and the Treasury
Department participated in their develop-
ment.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 301 is pro-
posedtobeamendedasfollows:
PART 301—PROCEDURE AND
ADMINISTRATION
Paragraph 1.
The authority citation for
part 301 cont
inues to read in part as fol-
lows:
Authority: 2
6U.S.C.7805***
Par. 2. Secti
on 301.7701–2 is amended
by:
1. Revising p
aragraphs (c)(2)(iii) and
(c)(2)(iv)(
B).
2.Redesigna
ting paragraph
(c)(2)(v)(B
) as paragraph (c)(2)(v)(C) and
adding new pa
ragraph (c)(2)(v)(B).
3. In newly-d
esignated paragraph
(c)(2)(v)(C
),Example (iv)is added.
4. Revising p
aragraphs (e)(2), (e)(5)
and (e)(6).
The addition
s and revisions read as fol-
lows:
§301.7701–2 Business entities;
definitions.
*****
(c) * * *
(2) * * *
(iii)[Thetextofthisproposedamend-
ment to §301.7701–2(c)(2)(iii) is the same
as the text of §301.7701–2T(c)(2)(iii) pub-
lished elsewhere in this issue of the Bul-
letin].
(iv) * * *
(B)[Thetextofthisproposed
amendment to §301.7701–2(c)(2)(iv)(B)
is the same as the text of
§301.7701–2T(c)(2)(iv)(B)published
elsewhere in this issue of the Bulletin].
*****
(v) * * *
(B)[Thetextofthisproposed
amendment to §301.7701–2(c)(2)(v)(B)
is the same as the text of
§301.7701–2T(c)(2)(v)(B)published
elsewhere in this issue of the Bulletin].
(C)***(iv)[Thetextofthisproposed
amendment to §301.7701–2(c)(2)(v)(C)
Example (iv)isthesameasthetextof
§301.7701–2T(c)(2)(v)(C)Example (iv)
published elsewhere in this issue of the
Bulletin].
*****
(e) * * *
(2) [The text of this proposed amend-
ment to §301.7701–2(e)(2) is the same as
the text of §301.7701–2T(e)(2) published
elsewhere in this issue of the Bulletin].
*****
(5) [The text of this proposed amend-
ment to §301.7701–2(e)(5) is the same as
the text of §301.7701–2T(e)(5) published
elsewhere in this issue of the Bulletin].
(6) [The text of this proposed amend-
ment to §301.7701–2(e)(6) is the same as
the text of §301.7701–2T(e)(6) published
elsewhere in this issue of the Bulletin].
*****
L. E. Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on September 10,
2009, 11:15 a.m., and published in the issue of the Federal
Register for September 14, 2009, 74 F.R. 46957)
Corrections to Rev. Rul.
2009–22 and Rev. Rul.
2009–29
Announcement 2009–74
This document contains corrections
to both the August AFR (Rev. Rul.
2009–22) and the September AFR (Rev.
Rul. 2009–29) which contained an inac-
curate date in the Note in Table 4.
TheNoteinTable4intheAugustAFR
(Rev. Rul. 2009–22) incorrectly read:
“Note: Under Section 42(b)(2), the ap-
plicable percentage for non-federally sub-
sidized new buildings placed in service af-
terAugust 30, 2008, and before December
31, 2013, shall not be less than 9%”.
The Note in Table 4 in the September
AFR (Rev. Rul. 2009–29) incorrectly
read:
“Note: Under Section 42(b)(2), the ap-
plicable percentage for non-federally sub-
sidized new buildings placed in service af-
terSeptember 30, 2008, and before De-
cember 31, 2013, shall not be less than
9%.”
The Note in Table 4 should have read
(in both revenue procedures):
“Note: Under Section 42(b)(2), the ap-
plicable percentage for non-federally sub-
sidized new buildings placed in service af-
terJuly 30, 2008and before December 31,
2013 shall not be less than 9%.”
Announcement of Disciplinary Sanctions From the Office
of Professional Responsibility
Announcement 2009-75
TheOfficeofProfessionalResponsi-
bility (OPR) announcesrecent disciplinary
sanctions involving attorneys, certified
public accountants, enrolled agents, en-
rolled actuaries, enrolled retirement plan
agents, and appraisers. These individuals
are subject to the regulations governing
practice before the Internal Revenue Ser-
vice (IRS), which are set out in Title 31,
Code of Federal Regulations, Part 10, and
which are published in pamphlet form as
Treasury Department Circular No. 230.
The regulations prescribe the duties and
restrictions relating to such practice and
prescribe the disciplinary sanctions for
violating the regulations.
The disciplinary sanctions to be im-
posed for violation of the regulations are:
Disbarred from practice before the
IRS—An individual who is disbarred is
not eligible to represent taxpayers before
the IRS.
Suspended from practice before the
IRS—An individual who is suspended is
October 19, 20095372009–42 I.R.B.

not eligible to represent taxpayers before
the IRS during the term of the suspension.
Censured in practice before the
IRS—Censure is a public reprimand. Un-
like disbarment or suspension, censure
does not affect an individual’s eligibility
to represent taxpayers before the IRS, but
OPR may subject the individual’s future
representations to conditions designed to
promote high standards of conduct.
Monetary penalty—A monetary
penalty may be imposed on an individual
who engages in conduct subject to sanc-
tion or on an employer, firm, or entity
if the individual was acting on its behalf
and if it knew, or reasonably should have
known, of the individual’s conduct.
Disqualification of appraiser—An
appraiser who is disqualified is barred
from presenting evidence or testimony in
any administrative proceeding before the
Department of the Treasury or the IRS.
Under the regulations, attorneys, cer-
tified public accountants, enrolled agents,
enrolled actuaries, and enrolled retirement
plan agents may not assist, or accept assis-
tance from, individuals who are suspended
or disbarred with respect to matters consti-
tuting practice (i.e., representation) before
the IRS, and they may not aid or abet sus-
pended or disbarred individuals to practice
before the IRS.
Disciplinary sanctions are described in
these terms:
Disbarred by decision after hearing,
Suspended by decision after hearing,
Censured by decision after hearing,
Monetary penalty imposed after hear-
ing, and Disqualified after hearing—An
administrative law judge (ALJ) conducted
an evidentiary hearing upon OPR’s com-
plaint alleging violation of the regulations
and issued a decision imposing one of
these sanctions. After 30 days from the
issuance of the decision, in the absence of
an appeal, the ALJ’s decision became the
final agency decision.
Disbarred by default decision, Sus-
pended by default decision, Censured by
default decision, Monetary penalty im-
posed by default decision, and Disqual-
ified by default decision—An ALJ, after
findingthatnoanswertoOPR’scomplaint
had been filed, granted OPR’s motion for a
default judgment and issued a decision im-
posing one of these sanctions.
Disbarment by decision on appeal,
Suspended by decision on appeal, Cen-
sured by decision on appeal, Monetary
penalty imposed by decision on ap-
peal, and Disqualified by decision on
appeal—The decision of the ALJ was
appealed to the agency appeal authority,
acting as the delegate of the Secretary
of the Treasury, and the appeal authority
issued a decision imposing one of these
sanctions.
Disbarred by consent, Suspended by
consent, Censured by consent, Mone-
tary penalty imposed by consent, and
Disqualified by consent—In lieu of a
disciplinary proceeding being instituted
or continued, an individual offered a con-
sent to one of these sanctions and OPR
accepted the offer. Typically, an offer
of consent will provide for: suspension
for an indefinite term; conditions that the
individual must observe during the sus-
pension; and the individual’s opportunity,
after a stated number of months, to file
with OPR a petition for reinstatement af-
firming compliance with the terms of the
consent and affirming current eligibility
to practice (i.e., an active professional
license or active enrollment status). An
enrolled agent or an enrolled retirement
plan agent may also offer to resign in order
to avoid a disciplinary proceeding.
Suspended by decision in expedited
proceeding, Suspended by default de-
cision in expedited proceeding, Sus-
pended by consent in expedited pro-
ceeding—OPR instituted an expedited
proceeding for suspension (based on cer-
tain limited grounds, including loss of a
professional license and criminal convic-
tions).
OPR has authority to disclose the
grounds for disciplinary sanctions in these
situations: (1) an ALJ or the Secretary’s
delegate on appeal has issued a decision
on or after September 26, 2007, which was
theeffectivedateofamendmentstothe
regulations that permit making such deci-
sions publicly available; (2) the individual
has settled a disciplinary case by signing
OPR’s “consent to sanction” form, which
requires consenting individuals to admit to
one or more violations of the regulations
and to consent to the disclosure of the in-
dividual’s own return information related
to the admitted violations (for example,
failure to file Federal income tax returns);
or (3) OPR has issued a decision in an
expedited proceeding for suspension.
Announcements of disciplinary sanc-
tions appear in the Internal Revenue Bul-
letin at the earliest practicable date. The
sanctions announced below are alphabet-
ized first by the names of states and sec-
ond by the last names of individuals. Un-
less otherwise indicated, section numbers
(e.g., § 10.51) refer to the regulations.
City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
California
Encinitas (erroneously
listed as San Francisco
in IRB 2009–38)
Miller, Gregory R.CPASuspended by consent
for admitted violations
of §§ 10.22 & 10.51
(improperly advised
a client regarding the
reporting of deferred
compensation)
Indefinite from
September 22,
2008
2009–42 I.R.B.538October 19, 2009

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Florida
MiamiBenito, Daniel A.AttorneySuspended by decision
in expedited proceeding
under § 10.82 (suspension
of attorney license)
Indefinite from
September 21,
2009
Highland BeachQuagliata, SalvatoreAttorneySuspended by default
decision in expedited
proceeding under § 10.82
(attorney disbarment in
New York)
Indefinite from
September 29,
2009
Iowa
Des MoinesPlumb, VanAttorneySuspended by default
decision in expedited
proceeding under § 10.82
(suspension of attorney
license)
Indefinite from
September 29,
2009
Kentucky
LouisvilleRadolovich,
Ferdinand R.
AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(attorney disbarment)
Indefinite from
September 29,
2009
Louisiana
KinderDemoruelle, John E.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(suspension of attorney
license)
Indefinite from
September 29,
2009
OberlinWillis, Michael S.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(revocation of attorney
license)
Indefinite from
September 29,
2009
Maryland
BaltimorePawlak, Thomas F.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(suspension of attorney
license)
Indefinite from
September 29,
2009
Massachusetts
WorcesterHolland, James K.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(attorney disbarment)
Indefinite from
September 29,
2009
October 19, 20095392009–42 I.R.B.

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
New Jersey
HobokenConnolly, Matthew G. AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(attorney disbarment)
Indefinite from
September 29,
2009
FranklinLynch, Jr., John G.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(attorney disbarment in
New York)
Indefinite from
September 29,
2009
New York
BrooklynDash, Jan A.AttorneySuspended by default
decision in expedited
proceeding under § 10.82
(suspension of attorney
license)
Indefinite from
September 29,
2009
Lynch, Jr., John G.,
See New Jersey
Quagliata, Salvatore,
See Florida
Huntington StationWhittlesey, JoAnn C.CPADisbarred by decision on
appeal for violation of
§ 10.51 (willful failure to
file several Federal tax
returns)
Indefinite from
July 18, 2009
North Carolina
CharlotteDaniel, Walter J.CPASuspended by default
decision in expedited
proceeding under § 10.82
(revocation of CPA
license)
Indefinite from
September 29,
2009
Pennsylvania
WilliamsportHurwitz, Harold L.Enrolled AgentDisbarred by decision
on appeal for violation
of § 10.51 (willfully
failingtotimelyfile,or
willfully failing to file
personal Federal income
tax returns)
Indefinite from
April 21, 2009
Tennessee
MemphisRafferty, Michael F.AttorneyDisbarred by ALJ default
decision for violation of
§ 10.51 (willful failure to
file, and willful failure to
timely file several Federal
income tax returns)
Indefinite from
June 17, 2009
2009–42 I.R.B.540October 19, 2009

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Vermont
ColchesterCarp, SusanEnrolled AgentSuspended by default
judgment for violation
of § 10.51 (failure to
promptly return tax
records of former clients
at their request)
Indefinite from
July 6, 2009
October 19, 20095412009–42 I.R.B.

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
2009–42 I.R.B.iOctober 19, 2009

Numerical Finding List
1
Bulletins 2009–27 through 2009–42
Announcements:
2009-56, 2009-28 I.R.B.145
2009-57, 2009-29 I.R.B.158
2009-58, 2009-29 I.R.B.158
2009-59, 2009-29 I.R.B.158
2009-60, 2009-30 I.R.B.166
2009-61, 2009-33 I.R.B.246
2009-62, 2009-33 I.R.B.247
2009-63, 2009-33 I.R.B.248
2009-64, 2009-36 I.R.B.319
2009-65, 2009-36 I.R.B.319
2009-66, 2009-37 I.R.B.364
2009-67, 2009-38 I.R.B.388
2009-68, 2009-38 I.R.B.388
2009-69, 2009-40 I.R.B.475
2009-70, 2009-41 I.R.B.499
2009-71, 2009-40 I.R.B.475
2009-72, 2009-41 I.R.B.500
2009-73, 2009-41 I.R.B.500
2009-74, 2009-42 I.R.B.537
2009-75, 2009-42 I.R.B.537
Notices:
2009-51, 2009-28 I.R.B.128
2009-55, 2009-31 I.R.B.170
2009-57, 2009-29 I.R.B.147
2009-58, 2009-30 I.R.B.163
2009-59, 2009-31 I.R.B.170
2009-60, 2009-32 I.R.B.181
2009-61, 2009-32 I.R.B.181
2009-62, 2009-35 I.R.B.260
2009-63, 2009-34 I.R.B.252
2009-64, 2009-36 I.R.B.307
2009-65, 2009-39 I.R.B.413
2009-66, 2009-39 I.R.B.418
2009-67, 2009-39 I.R.B.420
2009-68, 2009-39 I.R.B.423
2009-69, 2009-35 I.R.B.261
2009-70, 2009-34 I.R.B.255
2009-71, 2009-35 I.R.B.262
2009-72, 2009-37 I.R.B.325
2009-73, 2009-38 I.R.B.369
2009-74, 2009-38 I.R.B.370
2009-75, 2009-39 I.R.B.436
2009-77, 2009-40 I.R.B.449
2009-78, 2009-40 I.R.B.452
2009-79, 2009-40 I.R.B.454
2009-81, 2009-40 I.R.B.455
2009-82, 2009-41 I.R.B.491
Proposed Regulations:
REG-152166-05, 2009-32 I.R.B.183
Proposed Regulations— Continued:
REG-112994-06, 2009-28 I.R.B.144
REG-127270-06, 2009-42 I.R.B.534
REG-136563-07, 2009-41 I.R.B.497
REG-113289-08, 2009-33 I.R.B.244
REG-116614-08, 2009-42 I.R.B.536
REG-130200-08, 2009-31 I.R.B.174
Revenue Procedures:
2009-30, 2009-27 I.R.B.27
2009-31, 2009-27 I.R.B.107
2009-32, 2009-28 I.R.B.142
2009-33, 2009-29 I.R.B.150
2009-34, 2009-34 I.R.B.258
2009-35, 2009-35 I.R.B.265
2009-36, 2009-35 I.R.B.304
2009-37, 2009-36 I.R.B.309
2009-38, 2009-37 I.R.B.362
2009-39, 2009-38 I.R.B.371
2009-40, 2009-39 I.R.B.438
2009-41, 2009-39 I.R.B.439
2009-42, 2009-40 I.R.B.459
2009-43, 2009-40 I.R.B.460
2009-44, 2009-40 I.R.B.462
2009-45, 2009-40 I.R.B.471
2009-46, 2009-42 I.R.B.507
2009-47, 2009-42 I.R.B.524
Revenue Rulings:
2009-18, 2009-27 I.R.B.1
2009-19, 2009-28 I.R.B.111
2009-20, 2009-28 I.R.B.112
2009-21, 2009-30 I.R.B.162
2009-22, 2009-31 I.R.B.167
2009-23, 2009-32 I.R.B.177
2009-24, 2009-36 I.R.B.306
2009-25, 2009-38 I.R.B.365
2009-26, 2009-38 I.R.B.366
2009-27, 2009-39 I.R.B.404
2009-28, 2009-39 I.R.B.391
2009-29, 2009-37 I.R.B.322
2009-30, 2009-39 I.R.B.391
2009-31, 2009-39 I.R.B.395
2009-32, 2009-39 I.R.B.398
2009-33, 2009-40 I.R.B.447
2009-34, 2009-42 I.R.B.502
Treasury Decisions:
9452, 2009-27 I.R.B.1
9453, 2009-28 I.R.B.114
9454, 2009-32 I.R.B.178
9455, 2009-33 I.R.B.239
9456, 2009-33 I.R.B.188
9457, 2009-41 I.R.B.482
9459, 2009-41 I.R.B.480
9461, 2009-41 I.R.B.488
Treasury Decisions— Continued:
9462, 2009-42 I.R.B.504
9463, 2009-40 I.R.B.442
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2009–1 through 2009–26 is in Internal Revenue Bulletin
2009–26, dated June 29, 2009.
October 19, 2009ii2009–42 I.R.B.

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2009–27 through 2009–42
Announcements:
2006-93
Superseded by
Ann. 2009-62, 2009-33 I.R.B.247
Notices:
2002-3
Modified and superseded by
Notice 2009-68, 2009-39 I.R.B.423
2004-67
Supplemented and superseded by
Notice 2009-59, 2009-31 I.R.B.170
2006-70
Obsoleted by
T.D. 9453, 2009-28 I.R.B.114
2006-109
Superseded in part by
Rev. Proc. 2009-32, 2009-28 I.R.B.142
2007-7
Modified by
Notice 2009-82, 2009-41 I.R.B.491
2008-30
Amplified and clarified by
Notice 2009-75, 2009-39 I.R.B.436
2008-43
Obsoleted by
REG-113289-08, 2009-33 I.R.B.244
2009-28
Clarified by
Notice 2009-69, 2009-35 I.R.B.261
2009-31
Amplified by
Rev. Proc. 2009-43, 2009-40 I.R.B.460
2009-42
Amplified by
Rev. Proc. 2009-43, 2009-40 I.R.B.460
Revenue Procedures:
97-27
Clarified and modified by
Rev. Proc. 2009-39, 2009-38 I.R.B.371
97-49
Modified and superseded by
Rev. Proc. 2009-31, 2009-27 I.R.B.107
2002-44
Superseded by
Rev. Proc. 2009-44, 2009-40 I.R.B.462
Revenue Procedures— Continued:
2002-59
Superseded by
Rev. Proc. 2009-41, 2009-39 I.R.B.439
2005-63
Modified by
Rev. Proc. 2009-39, 2009-38 I.R.B.371
2007-44
Modified by
Rev. Proc. 2009-36, 2009-35 I.R.B.304
2007-65
Modified by
Ann. 2009-69, 2009-40 I.R.B.475
2008-34
Superseded by
Rev. Proc. 2009-46, 2009-42 I.R.B.507
2008-38
Superseded by
Rev. Proc. 2009-30, 2009-27 I.R.B.27
2008-44
Superseded by
Rev. Proc. 2009-35, 2009-35 I.R.B.265
2008-52
Amplified, clarified, and modified by
Rev. Proc. 2009-39, 2009-38 I.R.B.371
2008-59
Superseded by
Rev. Proc. 2009-47, 2009-42 I.R.B.524
2008-65
Modified by
Rev. Proc. 2009-33, 2009-29 I.R.B.150
2009-16
Modified by
Rev. Proc. 2009-33, 2009-29 I.R.B.150
2009-39
Modified by
Ann. 2009-67, 2009-38 I.R.B.388
Revenue Rulings:
74-346
Superseded by
Rev. Rul. 2009-34, 2009-42 I.R.B.502
75-190
Superseded by
Rev. Rul. 2009-34, 2009-42 I.R.B.502
75-398
Superseded by
Rev. Rul. 2009-34, 2009-42 I.R.B.502
75-526
Superseded by
Rev. Rul. 2009-34, 2009-42 I.R.B.502
Revenue Rulings— Continued:
2009-22
Corrected by
Ann. 2009-74, 2009-42 I.R.B.537
2009-29
Corrected by
Ann. 2009-74, 2009-42 I.R.B.537
Treasury Decisions:
9456
Corrected by
Ann. 2009-73, 2009-41 I.R.B.500
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2009–1 through 2009–26 is in Internal Revenue Bulletin 2009–26, dated June 29, 2009.
2009–42 I.R.B.iiiOctober 19, 2009

October 19, 20092009–42 I.R.B.

INTERNAL REVENUE BULLETIN
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