Internal Revenue Bulletin 2014-4 (PDF rendition): IRS Notices

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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
T.D. 9651, page 441.
These final regulations provide guidance on the interpretation
and application of section 833(c)(5). They guide certain health
care organizations in computing and applying the medical loss
ratio added to the Code by the Patient Protection and Afford-
able Care Act.
Notice 2014–7, page 445.
This notice advises taxpayers that certain payments received
by an individual care provider under a state Medicaid Home and
Community-Based Services Waiver program are difficulty of
care payments excludable from gross income under § 131 of
the Code. The exclusion may apply whether the care provider
is related or unrelated to the individual receiving care.
Announcement 2014–2, page 448.
This announcement contains one correction to I.R.B. 2014–2,
which lacked certain information on the Highlights page.
ADMINISTRATIVE
Notice 2014–7, page 445.
This notice advises taxpayers that certain payments received
by an individual care provider under a state Medicaid Home and
Community-Based Services Waiver program are difficulty of
care payments excludable from gross income under § 131 of
the Code. The exclusion may apply whether the care provider
is related or unrelated to the individual receiving care.
Announcement 2014–2, page 448.
This announcement contains one correction to I.R.B. 2014–2,
which lacked certain information on the Highlights page.
Finding Lists begin on page ii.
Index for July through January begins on page iv.
Bulletin No. 2014–4
January 21, 2014

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all
substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal practices and procedures that affect the rights and duties
of taxpayers are published.
Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the
revenue ruling. In those based on positions taken in rulings to
taxpayers or technical advice to Service field offices, identify-
ing details and information of a confidential nature are deleted
to prevent unwarranted invasions of privacy and to comply with
statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A, Tax
Conventions and Other Related Items, and Subpart B, Legisla-
tion and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Sec-
retary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index for
the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
January 21, 2014Bulletin No. 2014–4

Part I. Rulings and Decisions Under the Internal Revenue Code
of 1986
Computation of, and Rules
Relating to, Medical Loss
Ratio
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
TD 9651
AGENCY:Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
SUMMARY: This document contains fi-
nal regulations that provide guidance to
Blue Cross and Blue Shield organizations,
and certain other qualifying health care
organizations, on computing and applying
the medical loss ratio added to the Internal
Revenue Code by the Patient Protection
and Affordable Care Act.
DATES:Effective Date: These regula-
tions are effective on January 7, 2014.
Applicability Date: These regulations
apply to taxable years beginning after De-
cember 31, 2013.
FOR FURTHER INFORMATION
CONTACT: Graham R. Green, (202)
317-6995 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Section 833 of the Internal Revenue
Code (Code) provides that Blue Cross and
Blue Shield organizations, and certain
other qualifying health care organizations,
are entitled to: (1) treatment as stock in-
surance companies; (2) a special deduc-
tion under section 833(b); and (3) compu-
tation of unearned premium reserves
under section 832(b)(4) based on 100 per-
cent, and not 80 percent, of unearned pre-
miums. This document contains final
amendments to 26 CFR part 1 (Income
Tax Regulations) under section 833(c)(5).
Section 833(c)(5) was added to the Code
by section 9016 of the Patient Protection
and Affordable Care Act (Affordable Care
Act), Public Law 111–148 (124 Stat. 119
(2010)), effective for taxable years begin-
ning after December 31, 2009. Section
833(c)(5) provides that section 833 does
not apply to an organization unless the
organization’s medical loss ratio (MLR)
for a taxable year is at least 85 percent.
For purposes of section 833, an organiza-
tion’s MLR is its percentage of total pre-
mium revenue expended on reimburse-
ment for clinical services provided to
enrollees under its policies during such
taxable year (as reported under section
2718 of the Public Health Service Act
(PHSA)).
The Treasury Department and the IRS
issued proposed regulations under section
833(c)(5) on May 13, 2013 (78 FR
27873). The Treasury Department and the
IRS received four written comments in
response to the notice of proposed rule-
making and notice of public hearing. After
consideration of all comments, these final
regulations adopt the provisions of the
proposed regulations with certain modifi-
cations, the most significant of which are
highlighted in the Summary of Comments
and Explanation of Revisions. All com-
ments are available atwww.regulations.
govor upon request.
Summary of Comments and
Explanation of Revisions
1.Determining the MLR
The proposed regulations generally
provided that an organization’s MLR with
respect to a taxable year is the ratio, ex-
pressed as a percentage, of the MLR nu-
merator to the MLR denominator. The
MLR numerator was defined as the orga-
nization’s total premium revenue ex-
pended on reimbursement for clinical ser-
vices provided to enrollees under its
policies for the taxable year. The MLR
denominator was defined as the organiza-
tion’s total premium revenue for the tax-
able year, after excluding Federal and
State taxes and licensing or regulatory
fees and after accounting for payments or
receipts for risk adjustment, risk corridors,
and reinsurance. The final regulations re-
tain these definitions.
a.MLR numerator
The proposed regulations provided that
the MLR numerator does not include
amounts expended for “activities that im-
prove health care quality.” Two comment-
ers requested that the MLR numerator in-
clude amounts expended for “activities
that improve health care quality” as re-
ported under section 2718 of the PHSA,
arguing that Congress intended to include
amounts expended for “activities that im-
prove health care quality” in the MLR
numerator. Two other commenters agreed
with the proposed rule that amounts ex-
pended for “activities that improve health
care quality” should not be included in the
MLR numerator.
The final regulations retain the rule in
the proposed regulations because the al-
ternative is not supported by the statute.
Section 2718 of the PHSA provides that
the MLR numerator is based on both “re-
imbursement for clinical services pro-
vided to enrollees” and “activities that im-
prove health care quality.” By contrast,
the express language of section 833(c)(5)
provides that the MLR numerator is based
on “reimbursement for clinical services
provided to enrollees” without any refer-
ence to “activities that improve health
care quality.” Accordingly, the final reg-
ulations provide that the MLR numerator
in section 833(c)(5) does not include costs
for “activities that improve health care
quality.”
b.Computation of MLR
The proposed regulations provided that
amounts used for purposes of section
833(c)(5) (that is, total premium revenue
and total premium revenue expended on
reimbursement for clinical services pro-
vided to enrollees) for each taxable year
should be determined based on amounts
reported under section 2718 of the PHSA
for that taxable year and the two preced-
ing taxable years, subject to the same ad-
justments that apply for purposes of sec-
tion 2718 of the PHSA. In the preamble to
the proposed regulations, the Treasury
Department and the IRS requested com-
Bulletin No. 2014–4January 21, 2014
441

ments as to whether organizations should,
instead of using the three-year period used
for purposes of section 2718(b)(1)(B)(ii)
of the PHSA, compute their expenses and
total premium revenue only for the tax-
able year for which the computation is
being made under section 833(c)(5), and
whether adoption of the three-year ap-
proach would create difficulties with re-
spect to the computation of the MLR for
the 2014 taxable year.
Two commenters suggested that each
organization described in section 833(c)
be permitted a one-time, permanent elec-
tion to compute its MLR over either the
three-year period provided in the pro-
posed regulations or over a one-year pe-
riod based on the taxable year. The com-
menters further suggested that if a three-
year period is used, transition relief should
be provided to phase in the three-year
period.
In describing the MLR computation un-
der section 833(c)(5), the statute provides
that the elements in the computation are to
be “as reported under section 2718 of the
Public Service Health Act.” The Treasury
Department and the IRS have concluded
that this cross reference indicates that Con-
gress intended that, to the extent consistent
with the express language of section
833(c)(5), the meaning of terms and the
methodology used in the MLR computation
under section 833(c)(5) should be consistent
with the definition of those same terms and
the methodology under section 2718 of the
PHSA. Section 2718(b)(1)(B)(ii) of the
PHSA and the associated regulations issued
by the Department of Health and Human
Services use a three-year period to compute
the medical loss ratio, allowing certain lim-
ited adjustments after the end of the year to
determine expenses and premium revenue.
(See 45 CFR 158.220(b) and 158.140.) Ac-
cordingly, the Treasury Department and the
IRS have concluded that amounts used for
purposes of section 833(c)(5) for each tax-
able year should be determined based on
amounts reported under section 2718 of the
PHSA for that taxable year and the two
preceding taxable years, subject to the same
adjustments that apply for purposes of sec-
tion 2718 of the PHSA.
In light of the comments received, the
Treasury Department and the IRS have
concluded that transition rules to phase in
the three-year period provided in these
final regulations are appropriate. Accord-
ingly, the final regulations provide that for
the first taxable year beginning after De-
cember 31, 2013, an organization’s MLR
will be computed on a one-year basis.
Thus, for the first taxable year beginning
after December 31, 2013, an organiza-
tion’s MLR is computed based on its total
premium revenue expended on reimburse-
ment for clinical services provided to en-
rollees for its first taxable year beginning
after December 31, 2013, and its total
premium revenue for its first taxable year
beginning after December 31, 2013.
For the first taxable year beginning af-
ter December 31, 2014, an organization’s
MLR will be computed on a two-year
basis. Thus, for the first taxable year be-
ginning after December 31, 2014, an or-
ganization’s MLR is computed based on
the sum of its total premium revenue ex-
pended on reimbursement for clinical ser-
vices provided to enrollees for its first
taxable year beginning after December 31,
2013, and for its first taxable year begin-
ning after December 31, 2014, and the
sum of its total premium revenue for its
first taxable year beginning after Decem-
ber 31, 2013, and for its first taxable year
beginning after December 31, 2014.
For the first taxable year beginning af-
ter December 31, 2015, and for all suc-
ceeding taxable years, the final regulations
provide that the MLR is determined based
on amounts reported under section 2718
of the PHSA for that taxable year and the
two preceding taxable years, subject to the
same adjustments that apply for purposes
of section 2718 of the PHSA.
The final regulations do not adopt the
commenters’ suggestion to allow organi-
zations to make an election between the
three-year period provided in the pro-
posed regulations or the one-year period
based on the taxable year. The statutory
framework does not contemplate an elec-
tion or provide for more than one method
for computing the MLR. Further, any
election would be administratively bur-
densome for the IRS.
2.Nonapplication of Section 833 in
Case of an Insufficient MLR
The proposed regulations provided that
the consequences of having an MLR of
less than 85 percent (an insufficient MLR)
are as follows: (1) the organization is not
taxable as a stock insurance company by
reason of section 833(a)(1), but may be
taxable as an insurance company if it oth-
erwise meets the requirements of section
831(c); (2) the organization is not allowed
the special deduction set forth in section
833(b); and (3) if the organization quali-
fies as an insurance company under sec-
tion 831(c), it must take into account 80
percent, rather than 100 percent, of its
unearned premiums under section
832(b)(4) as it applies to other non-life
insurance companies.
In response to the proposed regula-
tions, two commenters requested that the
consequences of having an insufficient
MLR under section 833(c)(5) be limited
to the loss of only some of the benefits of
section 833. Specifically, commenters
posited that an organization that fails the
MLR requirement under section 833(c)(5)
should not lose its status as an insurance
company under section 833(a)(1). Rather,
the commenters argued that the organiza-
tion should only suffer the loss of eligi-
bility for the special deduction in section
833(b) and be subject to the less favorable
computation of unearned premium re-
serves based on 80 percent, rather than
100 percent, of its unearned premiums
under section 832(b)(4). Another com-
menter agreed with the proposed rule that
the consequences of having an insufficient
MLR under section 833(c)(5) include the
loss of automatic stock insurance com-
pany status under section 833(a)(1).
Section 833(c)(5) provides that “this
section [833]” shall not apply to any or-
ganization unless the organization satis-
fies the MLR requirement in section
833(c)(5). This language does not contem-
plate disallowance of some, but not all, of
the benefits associated with treatment un-
der section 833. Because the benefit of
automatic stock insurance company status
is provided to section 833(c) organiza-
tions in section 833(a)(1), this benefit is
lost upon a failure to satisfy the MLR
under section 833(c)(5). Accordingly, the
Treasury Department and the IRS have
concluded that for an organization de-
scribed in section 833(c) that fails to sat-
isfy the MLR requirement under section
833(c)(5): (1) the organization is not tax-
able as a stock insurance company by
reason of section 833(a)(1), but may be
January 21, 2014Bulletin No. 2014–4
442

taxable as an insurance company if it other-
wise meets the requirements of section
831(c); (2) the organization is not allowed
the special deduction set forth in section
833(b); and (3) if the organization qualifies
as an insurance company under section
831(c), it must take into account 80 percent,
rather than 100 percent, of its unearned pre-
miums under section 832(b)(4) as it applies
to other non-life insurance companies.
In the proposed regulations, the Trea-
sury Department and the IRS declined to
adopt a proposal to allow an organization
that would have otherwise failed to satisfy
theMLRbyade minimisamount to pay
an amount to the IRS to retain eligibility
for the benefits of section 833 because the
statutory framework does not contemplate
a penalty or other payment to the IRS. The
Treasury Department and the IRS re-
quested comments on whether there are
other possible means consistent with the
statute of mitigating the consequences of
having an insufficient MLR.
In response to the proposed regula-
tions, two commenters requested that, in
limited circumstances, an organization
with an insufficient MLR be permitted to
rebate premiums to one of the following
to satisfy the section 833(c)(5) MLR re-
quirement: (1) the Secretary of Health and
Human Services; (2) policyholders; (3) a
State Comprehensive Health Insurance
Plan or other health related program,
foundation, or guarantee fund association;
or (4) a risk adjustment, reinsurance, or
risk corridor program under the Afford-
able Care Act. Another commenter sug-
gested that allowing any rebating of pre-
miums to comply with section 833(c)(5)
would fail to address consumers’ needs
for affordable coverage at the time of pur-
chase. The Treasury Department and the
IRS continue to consider whether, and, if
so, how to permit organizations to address
de minimisfailures to satisfy the MLR
under section 833(c)(5).
3.No Material Change
Commenters requested clarification
that an organization’s loss of eligibility
for treatment under section 833 by reason
of section 833(c)(5) will not be treated as
a material change in the operations of
such organization or in its structure for
purposes of section 833(c)(2)(C). Section
833(c) restricts the application of section
833 to any existing Blue Cross or Blue
Shield organization, and any other quali-
fying organization meeting the require-
ments of section 833(c)(3). Section
833(c)(2)(C) defines the term “existing
Blue Cross or Blue Shield organization”
to mean any Blue Cross or Blue Shield
organization if such organization was in
existence on August 16, 1986, such orga-
nization was determined to be exempt
from tax for its last taxable year beginning
before January 1, 1987, and no material
change has occurred in the operations of
such organization or in its structure after
August 16, 1986, and before the close of
its current taxable year.
The final regulations adopt this sugges-
tion. Consistent with the annual determi-
nation of whether an organization’s MLR
under section 833(c)(5) is at least 85 per-
cent, which allows eligibility for treatment
under section 833 to be recovered if lost by
reason of section 833(c)(5), the Treasury
Department and the IRS have concluded
that a change in an organization’s eligibility
for treatment under section 833 solely by
reason of section 833(c)(5) will not be
treated as a material change in the opera-
tions of such organization or in its structure
for purposes of section 833(c)(2)(C).
4.Accounting for Unearned Premiums
In Notice 2011–4 (2011–2 I.R.B. 282
(December 29, 2010)) and Rev. Proc.
2011–14 (2011–4 I.R.B. 330 (January 11,
2011)) (both of which are available at
www.irs.gov), the Treasury Department and
the IRS provided procedures for an organi-
zation to obtain automatic consent to change
its method of accounting for unearned pre-
miums because of the application of section
833(c)(5). Two commenters raised ques-
tions about the continued application of
Notice 2011–4. The guidance provided in
Notice 2011–4 and Rev. Proc. 2011–14
continues to apply in its current form and is
not superseded by these final regulations.
See § 601.601(d)(2)(ii)(b).
Applicability Date
These regulations apply to taxable
years beginning after December 31, 2013.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Order
12866, as supplemented by Executive Or-
der 13563. Therefore, a regulatory assess-
ment is not required. It also has been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regula-
tions and because the regulations do not
impose an information collection on small
entities, the Regulatory Flexibility Act (5
U.S.C. chapter 6) does not apply. Pursuant
to section 7805(f) of the Code, the pro-
posed regulations preceding these regula-
tions were submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comments on its impact
on small business. No comments were
received.
Drafting Information
The principal author of these regulations
is Graham R. Green, Office of Associate
Chief Counsel (Financial Institutions &
Products). However, other personnel from
the Treasury Department and the IRS par-
ticipated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805***
Par. 2. Section 1.833–1 is added to read
as follows:
§ 1.833–1 Medical Loss Ratio Under
Section 833(c)(5).
(a)In general. Section 833 does not
apply to an organization unless the orga-
nization’s medical loss ratio (MLR) for a
taxable year is at least 85 percent. Para-
graph (b) of this section provides defini-
Bulletin No. 2014–4January 21, 2014
443

tions that apply for purposes of section
833(c)(5) and this section. Paragraph (c)
of this section provides rules for comput-
ing an organization’s MLR under section
833(c)(5). Paragraph (d) of this section
addresses the treatment under section 833
of an organization that has an MLR of less
than 85 percent. Paragraph (e) of this sec-
tion provides the effective/applicability
date.
(b)Definitions. The following defini-
tions apply for purposes of section
833(c)(5) and this section.
(1)Reimbursement for clinical services
provided to enrollees. The termreim-
bursement for clinical services provided
to enrolleeshas the same meaning as that
term has in section 300gg-18 of title 42,
United States Code and the regulations
issued under that section (see 45 CFR
158.140).
(2)Total premium revenue. The term
total premium revenuemeans the total
amount of premium revenue (excluding
Federal and State taxes and licensing or
regulatory fees and after accounting for
payments or receipts for risk adjustment,
risk corridors, and reinsurance under sec-
tions 1341, 1342, and 1343 of the Patient
Protection and Affordable Care Act, Pub-
lic Law 111–148 (124 Stat. 119 (2010))
(42 U.S.C. sections 18061, 18062, and
18063)) as those terms are used for pur-
poses of section 300gg-18(b) of title 42,
United States Code and the regulations
issued under that section (see 45 CFR Part
158).
(c)Computation of MLR under section
833(c)(5)—(1)In general. Starting with
the first taxable year beginning after De-
cember 31, 2015, and for all succeeding
taxable years, an organization’s MLR
with respect to a taxable year is the ratio,
expressed as a percentage, of the MLR
numerator, as described in paragraph
(c)(1)(i) of this section, to the MLR de-
nominator, as described in paragraph
(c)(1)(ii) of this section.
(i)MLR numerator. The numerator of
an organization’s MLR is the total pre-
mium revenue expended on reimburse-
ment for clinical services provided to en-
rollees under its policies for the taxable
year, computed using a three-year period
in the same manner as those expenses are
computed for the plan year for purposes of
section 300gg-18(b) of title 42, United
States Code and regulations issued under
that section (see 45 CFR Part 158).
(ii)MLR denominator. The denomina-
tor of an organization’s MLR is the orga-
nization’s total premium revenue for the
taxable year, computed using a three-year
period in the same manner as the total
premium revenue is computed for the plan
year for purposes of section 300gg-18(b)
of title 42, United States Code and regu-
lations issued under that section (see 45
CFR Part 158).
(2)Transition rules. The transition
rules in paragraphs (c)(2)(i) and (c)(2)(ii)
of this section apply solely for the first
taxable year beginning after December 31,
2013, and the first taxable year beginning
after December 31, 2014.
(i)First taxable year beginning after
December 31, 2013. For the first taxable
year beginning after December 31, 2013,
the numerator of an organization’s MLR
is the total premium revenue expended on
reimbursement for clinical services pro-
vided to enrollees under its policies for the
first taxable year beginning after Decem-
ber 31, 2013, and the denominator of an
organization’s MLR is the organization’s
total premium revenue for the first taxable
year beginning after December 31, 2013.
(ii)First taxable year beginning after
December 31, 2014. For the first taxable
year beginning after December 31, 2014,
the numerator of an organization’s MLR
is the sum of the total premium revenue
expended on reimbursement for clinical
services provided to enrollees under its
policies for the first taxable year begin-
ning after December 31, 2013, and for the
first taxable year beginning after Decem-
ber 31, 2014, and the denominator of an
organization’s MLR is the sum of the or-
ganization’s total premium revenue for
the first taxable year beginning after De-
cember 31, 2013, and for the first taxable
year beginning after December 31, 2014.
(d)Failure to qualify under section
833(c)(5)—(1)In general. If, for any tax-
able year, an organization’s MLR is less
than 85 percent, then beginning in that
taxable year and for each subsequent tax-
able year for which the organization’s
MLR remains less than 85 percent, para-
graphs (d)(1)(i) through (d)(1)(iii) of this
section apply.
(i)Automatic stock insurance company
status. The organization is not taxable as a
stock insurance company by reason of
section 833(a)(1), but may be taxable as
an insurance company if it otherwise
meets the requirements of section 831(c);
(ii)Special deduction. The organiza-
tion is not allowed the special deduction
set forth in section 833(b); and
(iii)Premiums earned. The organiza-
tion must take into account 80 percent,
rather than 100 percent, of its unearned
premiums under section 832(b)(4) as it
applies to other non-life insurance compa-
nies, provided the organization qualifies
as an insurance company by meeting the
requirements of section 831(c).
(2)No material change. An organiza-
tion’s loss of eligibility for treatment un-
der section 833 solely by reason of section
833(c)(5) will not be treated as a material
change in the operations of such organi-
zation or in its structure for purposes of
section 833(c)(2)(C).
(e)Effective/applicability date. This
section applies to taxable years beginning
after December 31, 2013.
John Dalrymple,
Deputy Commissioner for
Services and Enforcement.
Approved January 2, 2014
Mark J.Mazur,
Assistant Secretary of the Treasury
(Tax Policy).
(Filed in the Office of the Federal Register on January 6,
2014, 8:45 A.M., and published in the issue of the Federal
Register for January 7, 2014, 79 F.R. 755)
January 21, 2014Bulletin No. 2014–4
444

Part III. Administrative, Procedural, and Miscellaneous
Foster care payment,
Medicaid waivers
Notice 2014–7
PURPOSE
This notice provides that certain pay-
ments received by an individual care
provider under a state Medicaid Home
and Community-Based Services Waiver
(Medicaid waiver) program, described
in this notice, are difficulty of care pay-
ments excludable under § 131 of the
Internal Revenue Code.
BACKGROUND
Qualified foster care payments
Section 131(a) excludes qualified fos-
ter care payments from the gross income
of a foster care provider.
Section 131(b)(1) defines a qualified
foster care payment, in part, as any pay-
ment under a foster care program of a
state or a political subdivision that is ei-
ther (1) paid to the foster care provider for
caring for a qualified foster individual in
the foster care provider’s home, or (2) a
difficulty of care payment.
Section 131(b)(2) defines a qualified
foster individual as any individual who is
living in a foster family home in which the
individual was placed by an agency of a
state or political subdivision or by a qual-
ified foster care placement agency.
Section 131(b)(3) defines a qualified
foster care placement agency, in part, as a
placement agency that is licensed or cer-
tified for the foster care program of a state
or political subdivision of a state.
Section 131(c) defines a difficulty of
care payment as compensation to a foster
care provider for the additional care re-
quired because the qualified foster indi-
vidual has a physical, mental, or emo-
tional handicap. The provider must
provide the care in the provider’s foster
family home, a state must determine the
need for this compensation, and the payor
must designate the compensation for this
purpose. In the case of any foster home,
difficulty of care payments are not exclud-
able to the extent that the payments are for
more than 10 qualified foster individuals
who have not attained age 19 or 5 quali-
fied foster individuals who have attained
age 19. See § 131(c)(2).
State Medicaid waiver programs
Under § 1915(c) of the Social Security
Act (42 U.S.C. § 1396n(c)), a state may
obtain a Medicaid waiver that allows the
state to include in the state’s Medicaid
program the cost of home or community-
based services (other than room and
board) provided to individuals who other-
wise would require care in a hospital,
nursing facility, or intermediate care facil-
ity (eligible individuals). Home or
community-based services include per-
sonal care services, habilitation services,
and other services that are “cost effective
and necessary to avoid institutionaliza-
tion.” See 42 C.F.R. § 440.180. Personal
care services are defined under rules of the
Centers for Medicare and Medicaid Ser-
vices to include assistance with eating,
bathing, dressing, toileting, transferring,
maintaining continence, personal hygiene,
light housework, laundry, meal prepara-
tion, transportation, grocery shopping, us-
ing the telephone, medication manage-
ment, and money management. Skilled
services that only a health professional
may perform are not personal care ser-
vices. Habilitation services, defined in 42
U.S.C. § 1396n(c)(5)(A), assist individu-
als in acquiring, retaining, and improving
the self-help, socialization, and adaptive
skills necessary to reside successfully in
home and community-based settings.
Medicaid waiver programs generally
do not compensate a family member for
providing personal care services to an el-
igible individual if the family member is
legally responsible for the individual (for
example, a minor child). See 42 C.F.R.
§ 440.167(a)(2) and (b). Some states com-
pensate family members, as well as unre-
lated individual care providers, for resi-
dential habilitation, foster/companion
care, or transportation services provided
as a part of an eligible individual’s plan of
care. A plan of care is a term defined by
the state, but generally means an individ-
ualized plan of treatment, services, and/or
providers.
A state, directly or indirectly through
an agency under contract with the state,
certifies individuals and entities as Med-
icaid providers to provide services to eli-
gible individuals. An entity that is a cer-
tified Medicaid provider may contract
with an individual care provider to care
for an eligible individual in the care pro-
vider’s home. A state or an agency under
contract with the state approves the plan
of care for the eligible individual in the
provider’s home and monitors the eligible
individual’s care.
State agencies, certified Medicaid pro-
vider entities, and individual care provid-
ers have asked whether Medicaid waiver
payments for the care of eligible individ-
uals, who are related or unrelated to the
individual care provider, in the individual
care provider’s home may be treated as
difficulty of care payments excludable un-
der § 131.
Current treatment of government-funded
payments for home care
The Service historically has challenged
the excludability of payments to individ-
ual care providers caring for related indi-
viduals in the provider’s home. SeeAlex-
ander v. Commissioner, T.C. Summary
Opinion 2011–48, filed April 12, 2011
(Medicaid waiver payments to taxpayers
caring for a taxpayer’s parents residing in
the taxpayers’ home are not excludable
under § 131 because the taxpayers did not
show that they operated a ”foster family
home” under state law and the parents
were not “placed” in the taxpayers’ home
by the state). See alsoBannon v. Commis-
sioner, 99 T.C. 59 (1992) (payments re-
ceived by the taxpayer for caring for her
adult disabled daughter residing in the
taxpayer’s home under a state program for
in-home supportive services are not ex-
cludable under the general welfare exclu-
sion) andHarper v. Commissioner, T.C.
Summary Opinion 2011–56, filed May 2,
2011 (followingBannon). Similarly, Pro-
gram Manager Technical Advice (PMTA
2010–007) concludes that a biological
parent of a disabled child may not exclude
payments under § 131 because the ordi-
nary meaning of foster care excludes care
by a biological parent.
Bulletin No. 2014–4January 21, 2014
445

Section 131 does not explicitly address
whether payments under Medicaid waiver
programs are qualified foster care pay-
ments. Medicaid waiver programs and
state foster care programs, however, share
similar oversight and purposes. The pur-
pose of Medicaid waiver programs and
the legislative history of § 131 reflect the
fact that home care programs prevent the
institutionalization of individuals with
physical, mental, or emotional handicaps.
See 128 Cong. Rec. 26905 (1982) (stating
that “[difficulty of care payments] are not
income to the [foster] parents, regardless
of whether they, dollar for dollar only
cover expenses. [These] parents are sav-
ing the taxpayers’ money by preventing
institutionalization of these children.”); S.
Rep. No. 97–139 at 481 (1981) (describ-
ing the purpose of the amendment to 42
U.S.C. section 1396n, allowing Medicaid
waivers for home and community-based
services, as “[permitting] the Secretary to
waive the current definition of covered
[M]edicaid services to include certain
nonmedical support services, other than
room and board, which are provided pur-
suant to a plan of care to an individual
otherwise at risk of being institutionalized
and who would, in the absence of such
services be institutionalized”). Both pro-
grams require state approval and oversight
of the care of the individual in the provid-
er’s home. The programs share the objec-
tive of enabling individuals who other-
wise would be institutionalized to live in a
family home setting rather than in an in-
stitution, and both difficulty of care pay-
ments and Medicaid waiver payments
compensate for the additional care re-
quired.
GUIDANCE
Treatment of qualified Medicaid waiver
payments under § 131
To achieve consistent federal tax treat-
ment of Medicaid waiver payments
among the states and individual care pro-
viders, this notice provides that as of Jan-
uary 3, 2014, the Service will treat quali-
fied Medicaid waiver payments as
difficulty of care payments under § 131(c)
that are excludable under § 131, and this
treatment will apply whether the care pro-
vider is related or unrelated to the eligible
individual. Accordingly, as of January 3,
2014, the Service will no longer assert the
position in PMTA 2010-007, or applyAl-
exander,Bannon,orHarper, to conclude
that a caregiver of a biological relative
receiving qualified Medicaid waiver pay-
ments may not qualify as a foster care
provider under § 131. For purposes of this
notice, qualified Medicaid waiver pay-
ments are payments made by a state or
political subdivision thereof, or an entity
that is a certified Medicaid provider, under
a Medicaid waiver program to an individ-
ual care provider for nonmedical support
services provided under a plan of care to
an eligible individual (whether related or
unrelated) living in the individual care
provider’s home.
Section 131(c) defines a difficulty of
care payment as compensation to a foster
care provider for the additional care re-
quired because the qualified foster indi-
vidual has a physical, mental, or emo-
tional handicap. Qualified Medicaid
waiver payments compensate a care pro-
vider for providing the additional care re-
quired because of an eligible individual’s
physical, mental, or emotional handicap
for which a state has determined that there
is a need for additional compensation.
Thus, the treatment of qualified Medicaid
waiver payments as “difficulty of care
payments” is consistent with the definition
under § 131(c).
Under § 131, payments are excludable
as difficulty of care payments only if the
care is provided to a “qualified foster in-
dividual,” meaning any individual who is
living in a “foster family home” in which
the individual was “placed” by an agency
of a state or a political subdivision thereof,
or a qualified foster care placement
agency. Section 131(b)(2). The term “fos-
ter family home” is not defined under
§ 131. However, the Tax Court has con-
cluded that, for purposes of § 131, “a
person’s ‘home’ is where he resides.” See
Stromme v. Commissioner, 138 T.C. 213,
218 (2012), citingDobra v. Commis-
sioner, 111 T.C. 339 (1998). Therefore, an
eligible individual receiving care under a
Medicaid waiver program lives in a “fos-
ter family home” because the eligible in-
dividual is a qualified “foster” individual
who receives care in a “family home”
setting, as opposed to an institution, where
the individual care provider also resides.
Medicaid waiver payments made to a pro-
vider for care outside of the home where
the provider resides are not qualified Med-
icaid waiver payments and are not exclud-
able under § 131.
Similarly, the term “placed” is not de-
fined in § 131. Under state foster care
programs, a state or political subdivision
thereof, or a qualified foster care place-
ment agency, may assist in locating a
home that meets the qualified foster indi-
vidual’s needs, negotiate or approve the
foster care payment rates, and contract
with the foster care providers for the pro-
vision of foster care. The Tax Court has
determined that these activities constitute
“placement” for purposes of § 131(b)(2).
Micorescu v. Commissioner, T.C. Memo
1998–398. States perform similar activi-
ties with respect to individuals participat-
ing in Medicaid waiver programs. Under a
Medicaid waiver program, a state, an
agency of a state or political subdivision
thereof, or a certified Medicaid provider
may assist in locating a home for an eli-
gible individual or approve the eligible
individual’s choice to reside in the indi-
vidual care provider’s home, approve an
eligible individual’s plan of care, assess
the suitability of the home for fulfilling
the eligible individual’s plan of care, and
enter into a contract or other arrangement
with the individual care provider for ser-
vices provided to the eligible individual.
Thus, an eligible individual receiving care
in the home of the individual care pro-
vider under the Medicaid waiver program
will be treated as “placed” by an agency
of a state or political subdivision thereof,
or a qualified foster care placement
agency, for purposes of § 131. Accord-
ingly, an eligible individual receiving care
in the individual care provider’s home un-
der a Medicaid waiver program is a “qual-
ified foster individual” under § 131(b)(2).
Section 131(d)(2) provides that a pro-
vider may not exclude payments for the
care of more than 10 eligible individuals
under age 19 or more than five eligible
individuals who are age 19 or over. Be-
cause qualified Medicaid waiver pay-
ments are difficulty of care payments, they
are subject to these limits.
This notice does not address whether
qualified Medicaid waiver payments ex-
cluded from income under this notice may
be subject to tax under the Federal Insur-
ance Contributions Act (FICA) or the
January 21, 2014Bulletin No. 2014–4
446

Federal Unemployment Tax Act (FUTA)
in certain circumstances.
EFFECTIVE DATE
This notice is effective for payments
received on or after January 3, 2014. Tax-
payers may apply this notice in taxable
years for which the period of limitation on
claims for a credit or refund under § 6511
has not expired.
DRAFTING INFORMATION
The principal author of this notice is
Victoria J. Driscoll of the Office of Asso-
ciate Chief Counsel (Income Tax & Ac-
counting). For further information regard-
ing this notice, contact Ms. Driscoll at
(202) 317-4718 (not a toll-free number).
Bulletin No. 2014–4January 21, 2014
447

Part IV. Items of General Interest
Correction to the Highlights
and correction to Rev. Proc.
number in IRB 2014–2
Announcement 2014–2,
page 448.
This announcement contains one cor-
rection to I.R.B. 2014–2, which lacked
certain information on the Highlights
page.
On the Highlights page, the synopsis
paragraph for Rev. Proc. 2014–14 should
have appeared. The following is what
should have appeared.
Rev. Proc. 2014–14, page 295.
This revenue procedure provides issu-
ers of qualified mortgage bonds, as de-
fined in § 143(a) of the Code, and issuers
of mortgage credit certificates, as defined
in § 25(c), with a list of qualified census
tracts for each state and the District of
Columbia.
See §§ 25(c)(2)(A)(iii)(V) and
143(j)(1)(A). Rev. Proc. 2003–49 is mod-
ified and superseded.
The electronic copy of I.R.B. 2014–2
was corrected and reposted on the IRS’
website atwww.irs.gov.
January 21, 2014Bulletin No. 2014–4
448

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarifiedis used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
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
with amplified andclarified, 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
being stated in a new ruling.
Supersededdescribes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the new
ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
supersededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
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
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
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 following abbreviations in current
use and formerly used will appear in ma-
terial published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE
—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Bulletin No. 2014–4January 21, 2014
i

Numerical Finding List
1
Bulletins 2014–1 through 2014–4
Announcements
2014-1, 2014-2 I.R.B.393
2014-2, 2014-4 I.R.B.448
Notices
2014-1, 2014-2 I.R.B.270
2014-2, 2014-3 I.R.B.407
2014-3, 2014-3 I.R.B.408
2014-4, 2014-2 I.R.B.274
2014-5, 2014-2 I.R.B.276
2014-6, 2014-2 I.R.B.279
2014-7, 2014-4 I.R.B.445
Proposed Regulations
REG-159420-04, 2014-2 I.R.B.374
REG-140974-11, 2014-3 I.R.B.438
REG-136984-12, 2014-2 I.R.B.378
REG-113350-13, 2014-3 I.R.B.440
REG-143172-13, 2014-2 I.R.B.383
Revenue Procedures
2014-1, 2014-1 I.R.B.1
2014-2, 2014-1 I.R.B.90
2014-3, 2014-1 I.R.B.111
2014-4, 2014-1 I.R.B.125
2014-5, 2014-1 I.R.B.169
2014-6, 2014-1 I.R.B.198
2014-7, 2014-1 I.R.B.238
2014-8, 2014-1 I.R.B.242
2014-9, 2014-2 I.R.B.281
2014-10, 2014-2 I.R.B.293
2014-11, 2014-3 I.R.B.411
2014-12, 2014-3 I.R.B.415
2014-13, 2014-3 I.R.B.419
2014-14, 2014-2 I.R.B.295
Revenue Rulings
2014-1, 2014-2 I.R.B.263
2014-2, 2014-2 I.R.B.255
2014-3, 2014-2 I.R.B.259
Treasury Decisions
9649, 2014-2 I.R.B.265
9650, 2014-3 I.R.B.394
9651, 2014-4 I.R.B.441
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2013–27 through 2013–52 is in Internal Revenue Bulletin
2013–52, dated December 23, 2013.
January 21, 2014Bulletin No. 2014–4
ii

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2014–1 through 2014–4
Notices:
2006-109
Modified by
Notice 2014-4, 2014-2 I.R.B.274
2013-17
Amplified by
Notice 2014-1, 2014-2 I.R.B.270
Revenue Procedures:
2003-49
Modified and superseded by
Rev. Proc. 2014-14, 2014-2 I.R.B.295
2011-44
Modified and Superseded by
Rev. Proc. 2014-11, 2014-3 I.R.B.411
2011-49
Modified by
Rev. Proc. 2014-6, 2014-1 I.R.B.198
2013-1
Superseded by
Rev. Proc. 2014-1, 2014-1 I.R.B.1
2013-2
Superseded by
Rev. Proc. 2014-2, 2014-1 I.R.B.90
2013-3
Superseded by
Rev. Proc. 2014-3, 2014-1 I.R.B.111
2013-4
Superseded by
Rev. Proc. 2014-4, 2014-1 I.R.B.125
2013-5
Superseded by
Rev. Proc. 2014-5, 2014-1 I.R.B.169
2013-6
Superseded by
Rev. Proc. 2014-6, 2014-1 I.R.B.198
2013-7
Superseded by
Rev. Proc. 2014-7, 2014-1 I.R.B.238
2013-8
Superseded by
Rev. Proc. 2014-8, 2014-1 I.R.B.242
Revenue Procedures—Continued:
2013-9
Superseded by
Rev. Proc. 2014-9, 2014-2 I.R.B.281
2013-10
Superseded by
Rev. Proc. 2014-10, 2014-2 I.R.B.293
2013-32
Superseded in part by
Rev. Proc. 2014-1, 2014-1 I.R.B.1, and
Rev. Proc. 2014-3, 2014-1 I.R.B.111
Proposed Regulations:
209054-87
A portion withdrawn by
REG-113350-13 2014-3 I.R.B.440
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2013–27 through 2013–52 is in Internal Revenue Bulletin 2013–52, dated December 23,
2013.
Bulletin No. 2014–4January 21, 2014
iii

INDEX
Internal Revenue Bulletins 2014–1 through
2014–2
The abbreviation and number in parenthesis following the index
entry refer to the specific item; numbers in roman and italic type
following the parentheses refer to the Internal Revenue Bulletin in
which the item may be found and the page number on which it
appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
EMPLOYEE PLANS
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
Excepted benefits (REG–143172–13) 2,383
Letter rulings and general information letters (RP 4) 1,125
Letter rulings or determination letters (RP 1) 1,1
Qualification, determination letters (RP 6) 1,198
Qualified plans discrimination (Notice 5) 2,276
Qualified retirement plans covered compensation, permitted dis-
parity (RR 3) 2,259
Rulings and determination letters, user fees (RP 8) 1,242
Technical advice memorandum or TAM (RP 2) 1,90
Technical advice procedures (RP 5) 1,169
EMPLOYMENT TAX
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
Employment tax liability of agents authorized under section 3504
(TD 9649) 2,265
Letter rulings or determination letters (RP 1) 1,1
[Insert Prime Key]
Technical advice memorandum or TAM (RP 2) 1,90
[Insert Prime Key]
ESTATE TAX
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
Letter rulings or determination letters (RP 1) 1,1
[Insert Prime Key]
Technical advice memorandum or TAM (RP 2) 1,90
[Insert Prime Key]
EXCISE TAX
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
Interim guidance regarding supporting organizations (Notice 4)
2,274
Letter rulings or determination letters (RP 1) 1,1
[Insert Prime Key]
[Insert Prime Key]
Technical advice memorandum or TAM (RP 2) 1,90
[Insert Prime Key]
EXEMPT ORGANIZATIONS
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
Interim guidance regarding supporting organizations (Notice 4)
2,274
Letter rulings and general information letters, procedures (RP 4)
1,125
Letter rulings (RP 10) 2,293; (RP 9) 2,281
Letter rulings or determination letters (RP 1) 1,1
Proposed procedures for charitable hospitals to correct and dis-
close failures to meet section 501(r) (Notice 3) 3,408
Reliance on proposed regulations for tax-exempt hospitals
(Notice 2) 3,407
Rulings and determination letters, user fees (RP 8) 1,242
Technical advice memorandum or TAM (RP 2) 1,90
Technical advice procedures (RP 5) 1,169
INCOME TAX
Allocation of section 47 credits by a partnership to its partners
(RP 12) 3,415
Allocation of section 752 recourse liabilities among related par-
ties (REG–136984–12) 2,378
Areas in which rulings will not be issued; Associate Chief
Counsel (International) (RP 7) 1,238
Cafeteria plans, FSA reimbursements, and HSA contribution
limits for same-sex spouses (Notice 1) 2,270
Definitions applicable to U.S. persons owning interests in passive
foreign investment companies (REG–113350–13) 3,440
Determination of ownership in a passive foreign investment
company; annual filing requirements for shareholders of pas-
sive foreign investment companies; filing requirements for
constructive owners in certain foreign corporations (REG–
140974–11) 3438; (TD 9650) 3,394
Domestic areas in which the Service will not issue letter rulings
or determination letters (RP 3) 1,111
FATCA financial institution registration update (Ann 1) 2,393
Interest:
Investment:
Federal short-term, mid-term, and long-term rates for:
January 2014 (RR 1) 2,263
Final FFI agreement for participating FFI and reporting Model 2
FFI (RP 13) 3,419
Guidance regarding resinstatement following auto revocation of
tax-exempt status under section 6033(j) (RP 11) 3,411
January 21, 2014Bulletin No. 2014–4
iv

INCOME TAX—Cont.
Intra-group gross receipts (REG 159420–04) 2,374
Letter rulings or determination letters (RP 1) 1,1
Principal residence, treatment of National Mortgage Settlement
payments (RR 2) 2,255
Qualified census tracts (RP 14) 2,295
Technical advice memorandum or TAM (RP 2) 1,90
Transition relief for the tax credit for employee health insurance
expenses of certain small employers (Notice 6) 2,279
Bulletin No. 2014–4January 21, 2014
v

INTERNAL REVENUE BULLETIN
The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletins are available atwww.irs.gov/irb/.
CUMULATIVE BULLETINS
The contents of the weekly Bulletins were consolidated semiannually into permanent, indexed, Cumulative Bulletins through the
2008–2 edition.
INTERNAL REVENUE BULLETINS ON CD-ROM
Internal Revenue Bulletins are available annually as part of Publication 1796 (Tax Products CD-ROM). The CD-ROM can be
purchased from National Technical Information Service (NTIS) on the Internet atwww.irs.gov/cdorders(discount for online orders)
or by calling 1-877-233-6767. The first release is available in mid-December and the final release is available in late January.
We Welcome Comments About the Internal Revenue Bulletin
If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page
(www.irs.gov) or write to the IRS Bulletin Unit, SE:W:CAR:MP:P:SPA, Washington, DC 20224.
Internal Revenue Service
Washington, DC 20224
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