Internal Revenue Bulletin 1997-4 (PDF rendition): IRS Revenue Rulings

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

INCOME TAX
Rev. Rul. 97–6, page 4.
LIFO; price indexes; department stores.The Novem-
ber 1996 Bureau of Labor Statistics price indexes are
accepted for use by department stores employing the
retail inventory and last-in, first-out inventory methods
for valuing inventories for tax years ended on, or with
reference to, November 30, 1996.
Rev. Rul. 97–5, page 5.
Insurance companies; premium stabilization re-
serves.A non-life-insurance company’s surplus does not
include amounts held on behalf of a group of insureds in
a premium stabilization reserve. Rev. Rul. 70–480,
revoked.
T.D. 8695, page 5.
Final regulations under section 6103 of the Code relate
to the disclosure of returns and return information in
connection with the procurement of property and ser-
vices for tax administration purposes.
REG–209834–96, page 9.
Proposed regulations under section 1396 of the Code
relate to the period employers may use in computing the
empowerment zone employment credit.
EMPLOYEE PLANS
Notice 97–8, page 7.
Weighted average interest rate update.Guidelines are
set forth for determining for January 1997 the weighted
average interest rate and the resulting permissible range
of interest rates used to calculate current liability for
purposes of the full funding limitation of section
412(c)(7) of the Code as amended by the Omnibus
Budget Reconciliation Act of 1987 and by the Uruguay
Round Agreements Act (GATT).
EXEMPT ORGANIZATIONS
Rev. Proc. 97–12, page 7.
Unrelated business taxable income.This procedure
provides guidance to tax-exempt organizations regarding
when associate member dues payments will be treated
as gross income of an unrelated trade or business
under section 512 of the Code. Rev. Proc. 95–21
modified and amplified.
ADMINISTRATIVE
Announcement 97–6, page 11.
A list is given of organizations now classified as private
foundations.
Announcement 97–7, page 12.
A list is provided of organizations that no longer qualify
as organizations to which contributions are deductible
under section 170 of the Code.
Announcement 97–8, page 12.
T.D. 8687, 1996–52, I.R.B. 4, relating to the source of
income from sales of natural resources or other inven-
tory produced in one jurisdiction and sold in another
jurisdiction, is corrected.
Finding Lists begin on page 16.
Announcement of Disbarments and Suspensions begins on page 14.
Bulletin No. 1997–4
January 27, 1997
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be relied
upon as authoritative interpretations.

Mission of the Service
The purpose of the Internal Revenue Service is to
collect the proper amount of tax revenue at the least
cost; serve the public by continually improving the
quality of our products and services; and perform in a
manner warranting the highest degree of public
confidence in our integrity, efficiency and fairness.
Statement of Principles
of Internal Revenue
Tax Administration
The function of the Internal Revenue Service is to
administer the Internal Revenue Code. Tax policy
for raising revenue is determined by Congress.
With this in mind, it is the duty of the Service to
carry out that policy by correctly applying the laws
enacted by Congress; to determine the reasonable
meaning of various Code provisions in light of the
Congressional purpose in enacting them; and to
perform this work in a fair and impartial manner,
with neither a government nor a taxpayer point of view.
At the heart of administration is interpretation of the
Code. It is the responsibility of each person in the
Service, charged with the duty of interpreting the
law, to try to find the true meaning of the statutory
provision and not to adopt a strained construction in
the belief that he or she is ‘‘protecting the revenue.’’
The revenue is properly protected only when we as-
certain and apply the true meaning of the statute.
The Service also has the responsibility of applying
and administering the law in a reasonable,
practical manner. Issues should only be raised by
examining officers when they have merit, never
arbitrarily or for trading purposes. At the same
time, the examining officer should never hesitate
to raise a meritorious issue. It is also important
that care be exercised not to raise an issue or to
ask a court to adopt a position inconsistent with
an established Service position.
Administration should be both reasonable and
vigorous. It should be conducted with as little
delay as possible and with great courtesy and
considerateness. It should never try to overreach,
and should be reasonable within the bounds of law
and sound administration. It should, however, be
vigorous in requiring compliance with law and it
should be relentless in its attack on unreal tax
devices and fraud.
2

Introduction
The Internal Revenue Bulletin is the authoritative instru-
ment of the Commissioner of Internal Revenue for
announcing official rulings and procedures of the Inter-
nal Revenue Service and for publishing Treasury Deci-
sions, Executive Orders, Tax Conventions, legislation,
court decisions, and other items of general interest. It is
published weekly and may be obtained from the Superin-
tendent of Documents on a subscription basis. Bulletin
contents of a permanent nature are consolidated semi-
annually into Cumulative Bulletins, which are sold on a
single-copy basis.
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 otherwise indicated. Proce-
dures relating solely to matters of internal management
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 Ser-
vice 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 unwar-
ranted 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 proce-
dures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be consid-
ered, 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 Subpart B, Legislation
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 Rulings. Bank Secrecy Act Administra-
tive Rulings are issued by the Department of the
Treasury’s Office of the Assistant Secretary (Enforce-
ment).
Part IV.—Items of General Interest.
With the exception of the Notice of Proposed Rulemak-
ing and the disbarment and suspension list included in
this part, none of these announcements are consoli-
dated in the Cumulative Bulletins.
The first Bulletin for each month includes an index for
the matters published during the preceding month.
These monthly indexes are cumulated on a quarterly and
semiannual basis, and are published in the first Bulletin
of the succeeding quarterly and semi-annual period,
respectively.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents U.S. Government Printing Office, Washington, D.C. 20402.
3

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 472.—Last-in, First-out
Inventories
26 CFR 1.472–1: Last-in, first-out inventories.
LIFO; price indexes; department
stores.The November 1996 Bureau of
Labor Statistics price indexes are ac-
cepted for use by department stores
employing the retail inventory and last-
in, first-out inventory methods for valu-
ing inventories for tax years ended on,
or with reference to, November 30,
1996.
Rev. Rul. 97–6
The following Department Store In-
ventory Price Indexes for November
1996 were issued by the Bureau of
Labor Statistics on December 12, 1996.
The indexes are accepted by the Internal
Revenue Service, under § 1.472–1(k) of
the Income Tax Regulations and Rev.
Proc. 86–46, 1986–2 C.B. 739, for ap-
propriate application to inventories of
department stores employing the retail
inventory and last-in, first-out inventory
methods for tax years ended on, or with
reference to, November 30, 1996.
The Department Store Inventory Price
Indexes are prepared on a national basis
and include (a) 23 major groups of
departments, (b) three special combina-
tions of the major groups - soft goods,
durable goods, and miscellaneous goods,
and (c) a store total, which covers all
departments, including some not listed
separately, except for the following:
candy, foods, liquor, tobacco, and con-
tract departments.
BUREAU OF LABOR STATISTICS, DEPARTMENT STORE
INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS
(January 1941 = 100, unless otherwise noted)
Groups
Nov.
1995
Nov.
1996
Percent Change
from Nov. 1995
to Nov. 1996
1
1. Piece Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .509.3555.99.1
2. Domestics and Draperies . . . . . . . . . . . . . . . . . . . . . . . . . . .632.0634.70.4
3. Women’s and Children’s Shoes. . . . . . . . . . . . . . . . . . . . . .637.8656.12.9
4. Men’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .921.8903.722.0
5. Infants’ Wear. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .636.8614.823.5
6. Women’s Underwear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .527.8535.41.4
7. Women’s Hosiery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .288.2287.420.3
8. Women’s and Girls’ Accessories . . . . . . . . . . . . . . . . . . . . .559.8562.50.5
9. Women’s Outerwear and Girls’ Wear . . . . . . . . . . . . . . . . .419.3415.920.8
10. Men’s Clothing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .623.7633.01.5
11. Men’s Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .572.7591.53.3
12. Boys’ Clothing and Furnishings . . . . . . . . . . . . . . . . . . . . .485.5495.12.0
13. Jewelry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1001.11020.61.9
14. Notions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .776.6740.724.6
15. Toilet Articles and Drugs. . . . . . . . . . . . . . . . . . . . . . . . . . .875.3903.43.2
16. Furniture and Bedding . . . . . . . . . . . . . . . . . . . . . . . . . . . . .661.2667.81.0
17. Floor Coverings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .555.4585.65.4
18. Housewares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .790.5804.51.8
19. Major Appliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .248.7244.221.8
20. Radio and Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79.978.122.3
21. Recreation and Education
2
. . . . . . . . . . . . . . . . . . . . . . . . . .113.4111.321.9
22. Home Improvements
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .121.9130.67.1
23. Auto Accessories
2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .107.0107.10.1
Groups 1 - 15: Soft Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . .595.2602.11.2
Groups 16 - 20: Durable Goods . . . . . . . . . . . . . . . . . . . . . . . . .465.0466.50.3
Groups 21 - 23: Misc. Goods
2
. . . . . . . . . . . . . . . . . . . . . . . . . .113.5113.020.4
Store Total
3
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .550.7555.10.8
1
Absence of a minus sign before percentage change in this column signifies price increase.
2
Indexes on a January 1986=100 base.
3
The store total index covers all departments, including some not listed separately, except for the following: candy, foods,
liquor, tobacco, and contract departments.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Stan Michaels of the Office of
Assistant Chief Counsel (Income Tax
and Accounting). For further information
regarding this revenue ruling, contact
Mr. Michaels on (202) 622–4970 (not a
toll-free call).
Section 501.—Exemption From Tax
on Corporations, Certain Trusts,
etc.
26 CFR 1.501(c)(5)-1: Labor, agricultural, and
horticultural organizations.
Rev. Proc. 95–21, 1995–1 C.B. 686, which
applies to organizations described in section
501(c)(5) that receive associate member dues
payments, is modified to take into account newly
enacted section 512(d). See Rev. Proc. 97–12,
page 7.
4

26 CFR 1.501(c)(6)–1: Business leagues, cham-
bers of commerce, real estate boards, and boards
of trade.
The principles contained in Rev. Proc. 95–21,
1995–1 C.B. 686, which apply to organizations
described in section 501(c)(5) that receive associ-
ate member dues payments, also apply to organi-
zations described in section 501(c)(6). See Rev.
Proc. 97–12, page 7.
Section 512.—Unrelated Business
Taxable Income
26 CFR 1.512(a)–1: Definition.
The principles contained in Rev. Proc. 95–21,
1995–1 C.B. 686, which apply to organizations
described in section 501(c)(5) that receive associ-
ate member dues payments, are extended to orga-
nizations described in section 501(c)(6). Also, Rev.
Proc. 95–21 is modified to take into account
newly enacted section 512(d). See Rev. Proc.
97–12, page 7.
Section 832.—Insurance Company
Taxable Income
26 CFR 1.832–4: Gross Income.
Insurance companies; premium sta-
bilization reserves.A non-life-insurance
company’s surplus does not include
amounts held on behalf of a group of
insureds in a premium stabilization re-
serve. Rev. Rul. 70–480, revoked.
Rev. Rul. 97–5
Rev. Rul. 70–480, 1970–2 C.B. 142,
provides that amounts held by a nonlife
insurance company in a ‘‘stabilization
reserve’’ funded with credits on retro-
spectively rated term insurance contracts
are not taken into account in determin-
ing the company’s unearned premiums
under § 832(b)(4) of the Internal Rev-
enue Code. Rev. Rul. 70–480 concludes
that stabilization reserves are not un-
earned premiums because the credits
retained by the insurance company to
fund the stabilization reserves came into
being after the relevant risk period ex-
pired and thus were part of the compa-
ny’s earned premiums. Rev. Rul. 70–480
further states that the company’s earned
premiums less its costs and expenses
constitute part of its surplus, which is
available to pay policyholder dividends.
Rev. Rul. 70–480 thus treats the stabili-
zation reserves as part of the company’s
surplus.
Rev. Rul. 70–480’s conclusion that
the stabilization reserves are part of the
insurance company’s surplus is errone-
ous. The stabilization reserves are avail-
able to the policyholders upon cancella-
tion of the term accident and health
insurance contracts. The nonlife insur-
ance company at all times had a legal
obligation to return the stabilization re-
serves to its policyholders to the extent
that the stabilization reserves were not
used to purchase future coverage. Thus,
stabilization reserves are not part of the
nonlife company’s surplus.
HOLDING
A non-life insurance company’s sur-
plus does not include amounts held in a
stabilization reserve of the type de-
scribed above.
EFFECT ON OTHER DOCUMENTS
Rev. Rul. 70–480 is revoked.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Gary Geisler of the Office of
the Assistant Chief Counsel (Financial
Institutions and Products). For further
information regarding this revenue rul-
ing contact Mr. Geisler on (202) 622–
3970 (not a toll-free call).
Section 6103.—Confidentiality and
Disclosure of Returns and Return
Information
26 CFR 301.6103(n)–1: Disclosure of returns and
return information in connection with procurement
of property and services for tax administration
purposes.
T.D. 8695
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
Disclosure of Returns and Return
Information to Procure Property or
Services for Tax Administration
Purposes
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains fi-
nal regulations relating to the disclosure
of returns and return information in
connection with the procurement of
property and services for tax administra-
tion purposes. The regulations authorize
the Department of Justice, including
offices of United States Attorneys, to
make such disclosures. Prior to these
amendments, disclosure authority within
the Department of Justice rested only
with the Tax Division. The amendments
also reflect a change to the law made by
the Omnibus Budget Reconciliation Act
of 1990 regarding the type of services
about which disclosures may be made.
EFFECTIVE DATE: These regulations
are effective on December 17, 1996.
FOR FURTHER INFORMATION
CONTACT: Donald Squires, 202–622–
4570 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On December 15, 1995, a notice of
proposed rulemaking (DL–40–95 [1996–
1 C.B. 731]) relating to the disclosure of
returns and return information in con-
nection with the procurement of prop-
erty and services for tax administration
purposes was published in the Federal
Register (60 FR 64402). No public
hearing was requested or held nor were
any comments submitted by the public
in response to this notice.
The regulations proposed by DL–
40–95 are adopted by this Treasury
decision without revision and are dis-
cussed below.
Explanation of provisions
As previously written, 26 CFR
301.6103(n)–1 authorized the Tax Divi-
sion of the Department of Justice,
among other entities and individuals, to
disclose returns and return information
pursuant to section 6103(n) of the Inter-
nal Revenue Code. This authority al-
lowed the Tax Division to disclose tax
information incident to its contracts to
private parties for, among other pur-
poses, automated litigation support ser-
vices.
The Department of Justice indicated
its intention to establish an expanded
automated tracking system for all mon-
etary judgments in favor of the United
States, which will be operated by a
private company under contract with the
Department. Although the majority of
tax cases are handled by the Tax Divi-
sion, there are several United States
Attorneys’ offices that also have litiga-
tion responsibility in the civil tax area.
In addition, the Tax Division refers
some judgments in tax cases to the
United States Attorneys for collection.
The previously existing regulations ar-
guably would not have permitted these
offices, which are technically not part of
the Tax Division, to disclose tax infor-
5

mation incident to their inclusion of tax
judgments in the automated tracking
system.
The amendments adopted by this
Treasury decision authorize the Depart-
ment of Justice, including offices of
United States Attorneys, to make disclo-
sures to procure property and services
for tax administration purposes. Any
such disclosures will be made under the
same conditions and restrictions already
set forth in the previously existing regu-
lations. By definition, any office within
the Department of Justice without tax
administration duties will not have occa-
sion or authority pursuant to these regu-
lations to make such disclosures.
The amendments also authorize dis-
closures in connection with ‘‘the provid-
ing of other services,’’ i.e., services not
related to the strict mechanical process-
ing or manipulation of tax returns or
return information. This conforms the
regulations to the language of the stat-
ute, as amended by the Omnibus Budget
Reconciliation Act of 1990 (Public Law
101–508, 104 Stat. 1388–353).
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in EO 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, and be-
cause the notice of proposed rulemaking
preceding the regulations was issued
prior to March 29, 1996, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does
not apply. Pursuant to section 7805(f) of
the Internal Revenue Code, the notice of
proposed rulemaking preceding these
regulations was submitted to the Small
Business Administration for comment on
its impact on small business.
Drafting Information
The principal author of these regula-
tions is Donald Squires, Office of the
Assistant Chief Counsel (Disclosure
Litigation), IRS. However, other person-
nel from the IRS, Department of Justice
and Treasury Department participated in
their development.
* * * * *
Adopted Amendments to the Regula-
tions
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
follows;
Authority: 26 U.S.C. 7805 * * *
Paragraph 2. Section 301.6103(n)–1 is
amended as follows:
1. The first sentence of paragraph (a)
introductory text is amended by remov-
ing the language ‘‘Tax Division,’’.
2. Paragraph (a)(2) is amended by
removing the language ‘‘or to’’.
3. Paragraph (a)(2) is further
amended by adding the language ‘‘or
the providing of other services,’’ imme-
diately following the text ‘‘other prop-
erty,’’.
4. The concluding text of paragraph
(a) is amended by removing the lan-
guage ‘‘Tax Division,’’.
5. The second sentence of paragraph
(d) introductory text is amended by
removing the language ‘‘Tax Division,’’.
6. Paragraph (d)(2) is amended by
removing the language ‘‘Tax Division,’’.
7. Paragraph (e)(1) is amended by
removing the language ‘‘, and’’ at the
end of the paragraph and adding a
semicolon in its place.
8. Paragraph (e)(2) is amended by
removing the period at the end of the
paragraph and adding ‘‘; and’’ in its
place.
9. Paragraph (e)(3) is added.
10. The authority citation immedi-
ately following § 301.6103(n)–1 is re-
moved.
The addition reads as follows:
§ 301.6103(n)–1 Disclosure of returns
and return information in connection
with procurement of property and ser-
vices for tax administration purposes.
* * * * *
(e) * * *
(3) The termDepartment of Justice
includes offices of the United States
Attorneys.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved June 26, 1996.
Donald C. Lubick,
Acting Assistant Secretary of the
Treasury.
(Filed by the Office of the Federal Register on
December 16, 1996, and published in the issue of
the Federal Register for December 17, 1996, 61
F.R. 66217)
6

Part III. Administrative, Procedural, and Miscellaneous
Weighted Average Interest Rate
Update
Notice 97–8
Notice 88–73 provides guidelines for
determining the weighted average inter-
est rate and the resulting permissible
range of interest rates used to calculate
current liability for the purpose of the
full funding limitation of § 412(c)(7) of
the Internal Revenue Code as amended
by the Omnibus Budget Reconciliation
Act of 1987 and as further amended by
the Uruguay Round Agreements Act,
P. L. 103–465 (GATT).
The average yield on the 30-year
Treasury Constant Maturities for De-
cember 1996 is 6.55 percent.
The following rates were determined
for the plan years beginning in the
month shown below.
MonthYear
Weighted
Average
90% to 107%
Permissible
Range
90% to 110%
Permissible
Range
January19976.886.19 to 7.366.19 to 7.57
Drafting Information
The principal author of this notice is
Donna Prestia of the Employee Plans
Division. For further information regard-
ing this notice, call (202) 622–6076
between 2:30 and 4:00 p.m. Eastern
time (not a toll-free number). Ms.
Prestia’s number is (202) 622–7377
(also not a toll-free number).
26 CFR 601.201: Rulings and determinations
letters. (Also Part I, Sections 501(c)(5), 501(c)(6),
512(a)(1); 1.501(c)(5)–1, 1.501(c)(6)–1, 1.512(a)–
1.)
Rev. Proc. 97–12
SECTION 1. PURPOSE
This revenue procedure amplifies, in
part, and modifies, in part, Rev. Proc.
95–21, 1995–1 C.B. 686, which estab-
lishes when associate member dues pay-
ments received by organizations de-
scribed in section 501(c)(5) of the
Internal Revenue Code will be treated as
gross income from the conduct of an
unrelated trade or business under section
512.
SECTION 2. BACKGROUND
As noted in Rev. Proc. 95–21, section
2, organizations described in section
501(c)(5) often receive dues payments
not only from members that are ac-
corded full privileges in voting for the
directors of the organization, but also
from associate members that are ac-
corded less than full or no voting privi-
leges. Rev. Proc. 95–21, section 3, states
that the Service will not treat dues
payments from associate members as
gross income from the conduct of an
unrelated trade or business unless, for
the relevant period, the associate mem-
ber category has been formed or availed
of for the principal purpose of produc-
ing unrelated business income. The rev-
enue procedure also states that the Ser-
vice will treat dues payments from
associate members as not included in
gross income from an unrelated trade or
business if the associate member cat-
egory has been formed or availed of for
the principal purpose of furthering the
organization’s exempt purposes. The
revenue procedure further notes that in
applying these principles, the Service
will look to the purposes and activities
of the organization rather than of its
members.
Section 1115 of the Small Business
Job Protection Act of 1996, Pub.L. No.
104–188, amends section 512 as it ap-
plies to the treatment of dues paid to
agricultural or horticultural organizations
described in section 501(c)(5).
Under newly enacted section 512(d),
if an agricultural or horticultural organi-
zation described in section 501(c)(5)
requires annual dues to be paid in order
to be a member of such organization,
and the amount of such required annual
dues does not exceed $100, no portion
of such dues will be treated as derived
from an unrelated trade or business by
reason of any benefits or privileges to
which members of the organization are
entitled. The $100 dues amount is in-
dexed according to a cost-of-living ad-
justment for taxable years beginning in
a calendar year after 1995. The term
‘‘dues’’ is defined as any payment
(whether or not designated as dues),
which is required to be made in order to
be recognized by the organization as a
member. This provision applies to tax-
able years beginning after December 31,
1986, and contains a transitional rule for
periods prior to that date.
SECTION 3. PROCEDURE
01. Rev. Proc. 95–21 is modified to
take into account newly enacted section
512(d). Thus, Rev. Proc. 95–21 will not
apply to agricultural and horticultural
organizations described in section
501(c)(5) if annual dues payments from
members do not exceed $100 for taxable
years beginning after December 31,
1986. The $100 dues amount is indexed
according to a cost-of-living adjustment
for taxable years beginning in a calendar
year after 1995.
02. Rev. Proc. 95–21 will continue to
apply to agricultural and horticultural
organizations described in section
501(c)(5) for purposes of determining
whether member dues payments will be
treated as gross income from an unre-
lated trade or business under section 512
where required annual dues amounts
paid by members exceed $100. If re-
quired annual dues exceed $100 per
member, the entire dues payment will be
subject to the principles of Rev. Proc.
95–21.
03. Rev. Proc. 95–21 will also con-
tinue to apply to labor organizations
described in section 501(c)(5) for pur-
poses of determining whether associate
member dues payments will be treated
as gross income from an unrelated trade
or business under section 512.
04. Rev. Proc. 95–21 is amplified to
the extent that the principles contained
therein are also applicable to organiza-
tions described in section 501(c)(6).
Thus, Rev. Proc. 95–21 will also be
applied to section 501(c)(6) organiza-
tions for purposes of determining
whether associate member dues pay-
ments will be treated as gross income
from an unrelated trade or business
under section 512.
7

SECTION 4. EFFECTIVE DATE
This revenue procedure is effective
for all open years.
SECTION 5. EFFECT ON OTHER
REVENUE PROCEDURES
Rev. Proc. 95–21 is amplified, in part,
and modified, in part.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Charles Barrett of the Ex-
empt Organizations Division of the Of-
fice of the Assistant Commissioner (Em-
ployee Plans and Exempt Organi-
zations). For further information regard-
ing this revenue procedure contact Mr.
Barrett at (202) 622–8152 (not a toll-
free number).
8

Part IV. Items of General Interest
Notice of Proposed Rulemaking
and Notice of Public Hearing
Empowerment Zone Employment
Credit
REG–209834–96
AGENCY: Internal Revenue Service
(IRS), Treasury
ACTION: Notice of proposed rulemak-
ing and notice of public hearing.
SUMMARY: This document contains
proposed regulations relating to the pe-
riod employers may use in computing
the empowerment zone employment
credit under section 1396 of the Internal
Revenue Code. These proposed regula-
tions reflect and implement certain
changes made by the Omnibus Budget
Reconciliation Act of 1993 (OBRA ’93).
They affect employers of employees
who live and work in an empowerment
zone designated under the statute. These
proposed regulations provide employers
with the guidance necessary to claim the
credit. This document also provides a
notice of public hearing on these pro-
posed regulations.
DATES: Written comments are due on
March 17, 1997. Outlines of oral com-
ments to be presented at the public
hearing scheduled for 10:00 a.m. on
Wednesday, May 7, 1997, must be re-
ceived by Wednesday, April 16, 1997.
ADDRESSES: Send submissions to:
CC:DOM:CORP:R (REG–209834–96),
room 5226, Internal Revenue Service,
POB 7604, Ben Franklin Station, Wash-
ington, D.C. 20044. Submissions may
be hand delivered between the hours of
8 a.m. and 5 p.m. to: CC:DOM:CORP:R
(REG–209834–96), Courier’s Desk, In-
ternal Revenue Service, 1111 Constitu-
tion Avenue NW, Washington, DC. Al-
ternatively, taxpayers may submit
comments electronically via the Internet
by selecting the ‘‘Tax Regs’’ option on
the IRS Home Page, or by submitting
comments directly to the IRS Internet
site at http://www.irs.ustreas.gov/prod/
tax_regs/comments.html. The public
hearing will be held in room 2615,
Internal Revenue Building, 1111 Consti-
tution Avenue, NW, Washington, DC.
FOR FURTHER INFORMATION CON-
TACT: Concerning the proposed regula-
tions, Robert G. Wheeler, (202) 622–
6060; concerning submissions and the
hearing, Michael Slaughter, (202) 622–
7190 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Income Tax Regula-
tions (26 CFR part 1) relating to the
empowerment zone employment credit
under section 1396. Sections 1391
through 1397D (relating to empower-
ment zones and enterprise communities)
were added to the Internal Revenue
Code by the Omnibus Budget Reconcili-
ation Act of 1993 (OBRA’93). Section
1397D of the Code authorizes the Secre-
tary of the Treasury to prescribe regula-
tions that may be necessary or appropri-
ate to carry out the purposes of section
1394 through 1397C.
The amount of the empowerment
zone employment credit under section
1396 is equal to a specified percentage
of qualified zone wages, which are
certain wages paid or incurred by an
employer for services performed by a
qualified zone employee. Questions have
arisen about the definition of a ‘‘quali-
fied zone employee’’ in section 1396(d).
In particular, questions have been raised
about the appropriate period under sec-
tion 1396(d)(1)(A) during which sub-
stantially all of the services performed
by an employee for his or her employer
must be performed within an empower-
ment zone in a trade or business of the
employer.
In Notice 96–1, 1996–3 I.R.B. 30, the
IRS announced its intention to publish a
notice of proposed rulemaking that
would clarify the relevant period for this
purpose. Notice 96–1 described a rule
under which employers would have a
choice about what period to use, and
invited comments on this and any other
related issues for which guidance would
be helpful to employers. No comments
were received. These proposed regula-
tions set forth the rule described in
Notice 96–1.
Explanation of Provisions
Under the proposed regulations, an
employer may use either each pay pe-
riod or the entire calendar year as the
relevant period in determining whether a
particular employee performed substan-
tially all of his or her services within an
empowerment zone (the ‘‘location-of-
services’’ requirement). For each taxable
year the employer must use the same
method for all its employees, but the
employer may change methods from one
year to the next.
In addition to comments on the rel-
evant period for applying the location-
of-services requirement, Treasury and
IRS request comments on other issues
relating to the empowerment zone em-
ployment credit with respect to which
guidance may be helpful to employers.
In particular, comments are requested on
whether the final regulations should in-
clude guidance on (1) the meaning of
‘‘substantially all’’ in the location-of-
services requirement, or (2) a provision
authorizing employers to rely on em-
ployee certifications to demonstrate
compliance with the requirement that a
qualified zone employee’s principal
place of abode be in an empowerment
zone. In this regard, commentators may
wish to consider analogous provisions in
the final regulations under § 1.1394–1
on enterprise zone facility bonds (T.D.
8673, 61 FR 27258, May 31, 1996).
Some taxpayers and their representa-
tives have asked whether there is any
requirement that an employee’s status as
a qualified zone employee be certified
by a third party in a fashion similar to
the eligibility certifications required un-
der the targeted jobs tax credit (prior to
its expiration on December 31, 1994).
There is no such requirement.
Proposed Effective Date
These proposed regulations are pro-
posed to be effective December 21,
1994, the date on which the nine em-
powerment zones authorized by
OBRA’93 were designated by the Secre-
taries of Housing and Urban Develop-
ment and Agriculture.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a signifi-
cant regulatory action as defined in EO
12866. Therefore, a regulatory assess-
ment is not required. It also has been
determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these
regulations, and because the regulation
does not impose a collection of informa-
tion on small entities, the Regulatory
Flexibility 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 submit-
ted to the Chief Counsel for Advocacy
91997–4 I.R.B.

of the Small Business Administration for
comment on its impact on small busi-
ness.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consider-
ation will be given to any written com-
ments (preferably a signed original and
eight (8) copies) that are timely submit-
ted to the IRS. All comments will be
available for public inspection and copy-
ing.
A public hearing has been scheduled
for Wednesday, May 7, 1997 in room
2615, Internal Revenue Building, 1111
Constitution Avenue NW, Washington,
DC. Because of access restrictions, visi-
tors will not be admitted beyond the
building lobby more than 15 minutes
before the hearing starts.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing. Persons that wish
to present oral comments at the hearing
must submit written comments and an
outline of topics to be discussed and the
time to be devoted to each topic (signed
original and eight (8) copies by Wednes-
day, April 16, 1997).
A period of 10 minutes will be allot-
ted to each person for making com-
ments.
An agenda showing the scheduling of
the speakers will be prepared after the
deadline for receiving outlines has
passed. Copies of the agenda will be
available free of charge at the hearing.
Drafting Information
The principal author of these regula-
tions is Robert G. Wheeler, Office of
Associate Chief Counsel, Employee
Benefits and Exempt Organizations.
However, other personnel from the IRS
and Treasury Department participated in
their development.
* * * * *
Proposed Amendments to the Regula-
tions
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
PART 1 — INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding an entry in
numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.1396–1 also issued under 26
U.S.C. 1397D.
Par. 2. A new undesignated center
heading and § 1.1396–1 are added to
read as follows:
Empowerment Zone Employment Credit
§ 1.1396–1 Qualified zone employees.
(a)In general.A qualified zone em-
ployee of an employer is an employee
who satisfies the location-of-services re-
quirement and the abode requirement
with respect to the same empowerment
zone and is not otherwise excluded by
section 1396(d).
(1)Location-of-services requirement.
The location-of- services requirement is
satisfied if substantially all of the ser-
vices performed by the employee for the
employer are performed in the empow-
erment zone in a trade or business of
the employer.
(2)Abode requirement.The abode re-
quirement is satisfied if the employee’s
principal place of abode while perform-
ing those services is in the empower-
ment zone.
(b)Period for applying location-of-
services requirement.In applying the
location-of-services requirement, an em-
ployer may use either the pay period
method described in paragraph (b)(1) of
this section or the calendar year method
described in paragraph (b)(2) of this
section. For each taxable year of an
employer, the employer must either use
the pay period method with respect to
all of its employees or use the calendar
year method with respect to all of its
employees. The employer may change
the method applied to all of its employ-
ees from one taxable year to the next.
(1)Pay period method—(i)Relevant
period.Under the pay period method,
the relevant period for applying the
location- of-services requirement is each
pay period in which an employee pro-
vides services to the employer. If an
employer has one pay period for certain
employees and a different pay period for
other employees (e.g., a weekly pay
period for hourly wage employees and a
bi-weekly pay period for salaried em-
ployees), the pay period actually appli-
cable to a particular employee is the
relevant pay period for that employee
under this method.
(ii)Application of method.Under this
method, an employee does not satisfy
the location-of-services requirement dur-
ing a pay period unless substantially all
of the services performed by the em-
ployee for the employer during that pay
period are performed within the empow-
erment zone in a trade or business of
the employer.
(2)Calendar year method—(i)Rel-
evant period.Under the calendar year
method, the relevant period for an em-
ployee is the entire calendar year with
respect to which the credit is being
claimed. However, for any employee
who is employed by the employer for
less than the entire calendar year, the
relevant period is the portion of that
calendar year during which the em-
ployee is employed by the employer.
(ii)Application of method.Under this
method, an employee does not satisfy
the location-of-services requirement dur-
ing any part of a calendar year unless
substantially all of the services per-
formed by the employee for the em-
ployer during that calendar year (or, if
the employee is employed by the em-
ployer for less than the entire calendar
year, the portion of that calendar year
during which the employee is employed
by the employer) are performed within
the empowerment zone in a trade or
business of the employer.
(3)Examples.This paragraph (b) may
be illustrated by the following examples.
In each example, the employees satisfy
the abode requirement at all relevant
times and all services performed by the
employees for their employer are per-
formed in a trade or business of the
employer. The employees are not pre-
cluded from being qualified zone em-
ployees by section 1396(d)(2) (certain
employees ineligible). No portion of the
employees’ wages is precluded from
being qualified zone wages by section
1396(c)(2) (only first $15,000 of wages
taken into account) or section 1396(c)(3)
(coordination with targeted jobs credit
and work opportunity credit). The ex-
amples are as follows:
Example 1.(i) Employer X has a weekly pay
period for all its employees. Employee A works
for X throughout 1997. During each of the first 20
weekly pay periods in 1997, substantially all of
A’s work for X is performed within the empower-
ment zone in which A resides. A also works in the
zone at various times during the rest of the year,
but there is no other pay period in which substan-
tially all of A’s work for X is performed within the
empowerment zone.
(ii) Employer X uses the pay period method.
For each of the first 20 pay periods of 1997, A is
a qualified zone employee, all of A’s wages from
X are qualified zone wages, and X may claim the
empowerment zone employment credit with re-
spect to those wages. X cannot claim the credit
with respect to any of A’s wages for the rest of
1997.
Example 2.(i) Employer Y has a weekly pay
period for its factory workers and a bi-weekly pay
period for its office workers. Employee B works
for Y in various factories and Employee C works
for Y in various offices.
(ii) Employer Y uses the pay period method. Y
must use B’s weekly pay periods to determine the
periods (if any) in which B is a qualified zone
employee. Y may claim the empowerment zone
employment credit with respect to B’s wages only
101997–4 I.R.B.

for the weekly pay periods for which B is a
qualified zone employee, because those are B’s
only wages that are qualified zone wages. Y must
use C’s bi-weekly pay periods to determine the
periods (if any) in which C is a qualified zone
employee. Y may claim the credit with respect to
C’s wages only for the bi-weekly pay periods for
which C is a qualified zone employee, because
those are C’s only wages that are qualified zone
wages.
Example 3.(i) Employees D and E work for
Employer Z throughout 1997. Although some of
D’s work for Z in 1997 is performed outside the
empowerment zone in which D resides, substan-
tially all of it is performed within the empower-
ment zone. E’s work for Z is performed within the
empowerment zone in which E resides for several
weeks of 1997 but outside the zone for the rest of
the year so that, viewed on an annual basis, E’s
work is not substantially all performed within the
empowerment zone.
(ii) Employer Z uses the calendar year method.
D is a qualified zone employee for the entire year,
all of D’s 1997 wages from Z are qualified zone
wages, and Z may claim the empowerment zone
employment credit with respect to all of those
wages, including the portion attributable to work
outside the zone. Under the calendar year method,
E is not a qualified zone employee for any part of
1997, none of E’s 1997 wages are qualified zone
wages, and Z cannot claim any empowerment
zone employment credit with respect to E’s wages
for 1997. Z cannot use the calendar year method
for D and the pay period method for E because Z
must use the same method for all employees. For
1998, however, Z can switch to the pay period
method for E if Z also switches to the pay period
method for D and all Z’s other employees.
(c)Effective date.This section ap-
plies with respect to wages paid or
incurred on or after December 21, 1994.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
(Filed by the Office of the Federal Register on
December 13, 1996, 8:45 a.m., and published in
the issue of the Federal Register for December 16,
1996, 61 F.R. 66000)
Foundations Status of Certain
Organizations
Announcement 97–6
The following organizations have
failed to establish or have been unable
to maintain their status as public chari-
ties or as operating foundations. Accord-
ingly, grantors and contributors may not,
after this date, rely on previous rulings
or designations in the Cumulative List
of Organizations (Publication 78), or on
the presumption arising from the filing
of notices under section 508(b) of the
Code. This listing doesnotindicate that
the organizations have lost their status
as organizations described in section
501(c)(3), eligible to receive deductible
contributions.
Former Public Charities. The follow-
ing organizations (which have been
treated as organizations that are not
private foundations described in section
509(a) of the Code) are now classified
as private foundations:
Action for Youth Christian Council
Incorporated, Greenville, GA
Albemarle Fire Safety Committee,
Elizabeth City, NC
All Races Coalition With Native
American People, Chapel Hill, NC
Bellevue Schools Music Boosters,
Bellevue, OH
BHIA A New Jersey Non-Profit
Corporation, Bay Head, NJ
Bone Cabin Quarry Inc., Orem, UT
Center for Hearing Impaired Persons
Services, Downers Grove, IL
Center for Science Technology & Media
Inc., Chevy Chase, MD
Chevra Chesed Leysroel, Brooklyn, NY
Childrens at Heart Inc., Bridgewater, VA
Chinese Seniors Association of Houston,
Inc., Houston, TX
C Incorporated Support for Visions in
Action, Hopewell, NJ
CNCA Foundation, Grand Island, NE
Committee to Restore Pop Lloyd Field,
Inc., Atlantic City, NJ
Community United for Progress Inc.,
Southfield, MI
Concerned Grandparents Organization,
Inc., Clearwater, FL
Dade County Khoury League Inc.,
Naranja, FL
Dexter Intergenerational Center Inc.,
Dexter, MI
Eartheart Foundation Inc., Crozet, VA
Epoch Industries Inc., Bronx, NY
Family Learning Center Inc., Egg
Harbor Township, NJ
Financial Women International of
Illinois Charitable FDTN, Des
Plaines, IL
Forest City Hospital Scholarship
Foundation Inc., Cleveland, OH
Foundation for Quality Service Inc.,
Butte, MT
Four Bishop Inc., Boston, MA
Friends of the Burgdorff Cultural Center
Inc., Maplewood, NJ
Friends of VA Research, Inc.,
Manchester, NH
Georgetown County Environmental
Protection Society, Pawley Island, SC
Grand Strand Aviation Park Inc., Myrtle
Beach, NC
Grand Traverse-Mtskheta Association,
Traverse City, MI
Grand Traverse Poseicon Swim Club,
Traverse City, MI
Greater Cincinnati Employee Benefit
Council Inc., Ft. Mitchell, KY
Great Lakes Aquarium and Research
Center, Inc., Muskegon, MI
Helping Hands Recycling Centers Inc.,
Chesterfield, MO
High Desert Nurse Education Council
Inc., Lancaster, CA
High Risk Child Foundation, Golden,
CO
High Voltage Transient Research
Laboratory Inc., Lexington, KY
Historical EastField Foundation, East
Nassau, NY
Houston Social Service Coalition NE,
Houston, TX
In Focus Productions Inc., Evanston, IL
Jethro Institute for Biblical Leadership,
Inc., Chester, MD
Kansas City Science and Mathematics
Alliance, Kansas City, MO
Kids Voting Tennessee Inc., Knoxville,
TN
Klamath-Modoc Yahooskin Band of
Snake Indians Development Inc.,
Chiloquin, OR
Lawrence County Hunger Coalition Inc.,
Lawrenceburg, TN
Lexington School District Four
Education Fund, Swansea, SC
Lonesome Pine Community Concert
Association, Big Stone Gap, VA
Lukas Foss Cultural Centre Inc.,
Milwaukee, WI
M E C C A Rights of Passage, Inc.,
Gary, IN
Michigan CFIDS Organization,
Wyoming, MI
Michigan Citizens for America’s
Children, Ann Arbor, MI
National Association for
Underprivileged Blach Athletic
Students Inc., Oklahoma City, OK
Neighborhood Network Development
Corporation, Cincinnati, OH
New Attitude Drill Team, Centerville,
OH
New Hope Youth Homes Inc., Sarasota,
FL
New Horizons Child Birth Incorporated,
Fletcher, OH
Operation New World Ltd, New York,
NY
Peoples View Enterprises, Minneapolis,
MN
Philipsburg Business Incubator Inc.,
Philipsburg, MT
Phillipine Charities Foundation Inc.,
Miami, FL
PMHCC Managed Care Corporation,
Philadelphia, PA
Ragged Mountain Foundation, Inc.,
Prospect, CT
Rodney Howard-Browne Evangelistic
Association, Inc., Tampa, FL
111997–4 I.R.B.

Ronceverte Food Pantry, Ronceverte,
WV
Rossano Clinic, Flint, MI
Second Chance for Racetrack Animals,
Athens, OH
Senior Scholastic Invitional, Zanesville,
OH
Shaar Zion, Brooklyn, NY
Shelbyville Bedford Foster Care
Association, Shelbyville, IN
Sign of Jonah Accupuncture Clinic, Inc.,
Washington, DC
Sisters Cities of Richmond, Indiana,
Inc., Richmond, IN
Skiles Test Baseball League, Inc.,
Indianapolis, IN
Son Rise Ministries International
Incorporated, Cleveland, OH
Sophia Youth Wrestling, Beckley, WV
Soul Survival Ministry Corporation,
Northfork, WV
Southlake Sportsmens Club, Lowell, IN
Southport Jaycees Foundation Inc.,
Southport, IN
Southside Foundation Inc., Alberta, VA
Southwest Michigan Underwater
Preserve Committee, Inc., South
Haven, MI
St. John Youth Baseball, Inc., St. John,
IN
Students Aiding Students Foundation,
McAlester, OK
Supporting Single Parents to Save Our
Youth, Oak Park, MI
Sutton Educational Foundation Inc.,
Sharon, MA
Tacoma Lesbian Concern, Tacoma, WA
Tague Hall, Inc., Columbus, OH
Task Unit One Incorporated, Versailles,
IN
Ted Nugent’s Kamp for Kids, Jackson,
MI
Tittabawassee Township Historical,
Freeland, MI
Toledo Olde Towne Community
Organization, Toledo, OH
Tri-State Tres Dias, Inc., Evansville, IN
Trotwood Circle Theater II, Clayton,
OH
Trout Creek Mill Pond & Dam
Restoration Project, Trout Creek, MI
University Students Against Cancer,
Ypsilanti, MI
Upper Peninsula Reading Association,
Marquette, MI
Upper Sandusky Soccer Association
Charitable Trust, Upper Sandusky,
OH
Veterans Community Foundation, Inc.,
Toledo, OH
Vigo County Child Abuse Prevention
Council, Inc., Terre Haute, IN
Walkathon Committee for Shrine
Hospitals, Milford, OH
Wasmver Development Corp, Newark,
OH
Wayne County Foster Parents Network,
West Salem, OH
West Michigan Health Care Foundation,
Grand Rapids, MI
Western Michigan Festival of Missions,
Grand Rapids, MI
Whitely Productions Inc., Mentor, OH
William McKay Chapman Living Center
Inc., Wakpala, SD
Woodstock Academy, Inc., Woodstock,
MD
Young Fundamentalists Association,
Inc., Cedar Lake, IN
Youth Resource Center, Cleveland, OH
If an organization listed above sub-
mits information that warrants the re-
newal of its classification as a public
charity or as a private operating founda-
tion, the Internal Revenue Service will
issue a ruling or determination letter
with the revised classification as to
foundation status. Grantors and contribu-
tors may thereafter rely upon such rul-
ing or determination letter as provided
in section 1.509(a)–7 of the Income Tax
Regulations. It is not the practice of the
Service to announce such revised classi-
fication of foundation status in the Inter-
nal Revenue Bulletin.
Deletions From Cumulative List of
Organizations Contributions to
Which Are Deductible Under
Section 170 of the Code
Announcement 97–7
The names of organizations that no
longer qualify as organizations described
in section 170(c)(2) of the Internal Rev-
enue Code of 1986 are listed below.
Generally, the Service will not disal-
low deductions for contributions made
to a listed organization on or before the
date of announcement in the Internal
Revenue Bulletin that an organization
no longer qualifies. However, the Ser-
vice is not precluded from disallowing a
deduction for any contributions made
after an organization ceases to qualify
under section 170(c)(2) if the organiza-
tion has not timely filed a suit for
declaratory judgment under section 7428
and if the contributor (1) had knowledge
of the revocation of the ruling or deter-
mination letter, (2) was aware that such
revocation was imminent, or (3) was in
part responsible for or was aware of the
activities or omissions of the organiza-
tion that brought about this revocation.
If on the other hand a suit for de-
claratory judgment has been timely
filed, contributions from individuals and
organizations described in section
170(c)(2) that are otherwise allowable
will continue to be deductible. Protec-
tion under section 7428(c) would begin
on January 27, 1997, and would end on
the date the court first determines that
the organization is not described in
section 170(c)(2) as more particularly
set forth in section 7428(c)(1). For indi-
vidual contributors, the maximum de-
duction protected is $1,000, with a hus-
band and wife treated as one contributor.
This benefit is not extended to any
individual who was responsible, in
whole or in part, for the acts or omis-
sions of the organization that were the
basis for revocation.
International University
Independence, MO
Owning the Realty, Inc.
Cincinnati, OH
Source of Income From Sales of
Inventory and Natural Resources
Produced in One Jurisdiction and
Sold in Another Jurisdiction;
Correction
Announcement 97–8
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Correction to final and tem-
porary regulations.
SUMMARY: This document contains
corrections to final and temporary regu-
lations (T.D. 8687 [1996–52 I.R.B. 4]),
which were published in the Federal
Register on Friday, November 29, 1996
(61 FR 60540) governing the source of
income from sales of natural resources
or other inventory produced in the
United States and sold outside the
United States or produced outside the
United States and sold in the United
States.
EFFECTIVE DATE: December 30,
1996.
FOR FURTHER INFORMATION CON-
TACT: Anne Shelburne (202) 622–3880,
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The final regulations that are the
subject of these corrections are under
section 863 of the Internal Revenue
Code.
121997–4 I.R.B.

Need for Correction
As published, the final regulations
contain errors which may prove to be
misleading and are in need of clarifica-
tion. Correction of Publication
Accordingly, the publication of the
final regulations (T.D. 8687), which are
the subject of FR Doc. 96–30617, is
corrected as follows:
1. On page 60540, column 3, in the
preamble, under the caption ‘‘DATES’’,
line 3, the language ‘‘Applicability: Tax-
payers may apply’’ is corrected to read
‘‘Applicability: These regulations apply
to taxable years beginning after Decem-
ber 30, 1996. However, taxpayers may
apply’’.
§ 1.863–1 [Corrected]
2. On page 60546, column 3,
§ 1.863–1 (e), is corrected to read as
follows:
§ 1.863–1 Allocation of gross income.
* * * * *
(e)Effective dates.The rules of para-
graphs (a), (b) and (c) of this section
will apply to taxable years beginning
after December 30, 1996. However, tax-
payers may apply the rules of this
section for taxable years beginning after
July 11, 1995, and on or before Decem-
ber 30, 1996. For years beginning be-
fore December 30, 1996, see § 1.863–1
(as contained in 26 CFR part 1 revised
as of April 1, 1996).
* * * * *
§ 1.863–2 [Corrected]
3. On page 60547, column 1,
§ 1.863–2 (c), line 2, the language
‘‘apply to taxable years beginning’’ is
corrected to read ‘‘apply to taxable
years beginning after’’.
4. On page 60547, column 2,
§ 1.863–2 (c), line 2 from the top of the
column, the language ‘‘1995, and before
December 30, 1996.’’ is corrected to
read ‘‘1995, and on or before December
30, 1996.’’.
§ 1.863–3 [Corrected]
5. On page 60550, column 3,
§ 1.863–3 (h), is corrected to read as
follows:
§ 1.863–3 Allocation and apportionment
of income from certain sales of inven-
tory.
* * * * *
(h)Effective dates.The rules of this
section apply to taxable years beginning
after December 30, 1996. However, tax-
payers may apply these regulations for
taxable years beginning after July 11,
1995, and on or before December 30,
1996. For years beginning before De-
cember 30, 1996, see §§ 1.863–3A and
1.863–3AT.
* * * * *
Cynthia E. Grigsby,
Chief, Regulations Unit,
Assistant Chief Counsel (Corporate).
(Filed by the Office of the Federal Register on
December 10, 1996, 2:21 p.m. and published in
the issue of the Federal Register for December 12,
1996, 61 F.R. 65323)
131997–4 I.R.B.

Announcement of the Disbarment, Suspension, or Consent to Voluntary
Suspension of Attorneys, Certified Public Accountants, Enrolled Agents, and
Enrolled Actuaries From Practice Before the Internal Revenue Service
Under Section 330, Title 31 of the
United States Code, the Secretary of the
Treasury, after due notice and opportu-
nity for hearing, is authorized to sus-
pend or disbar from practice before the
Internal Revenue Service any person
who has violated the rules and regula-
tions governing the recognition of attor-
neys, certified public accountants, en-
rolled agents or enrolled actuaries to
practice before the Internal Revenue
Service.
Attorneys, certified public accoun-
tants, enrolled agents, and enrolled actu-
aries are prohibited in any Internal Rev-
enue Service matter from directly or
indirectly employing, accepting assis-
tance from, being employed by or shar-
ing fees with, any practitioner disbarred
or under suspension from practice be-
fore the Internal Revenue Service.
To enable attorneys, certified public
accountants, enrolled agents, and en-
rolled actuaries to identify such dis-
barred or suspended practitioners, the
Director of Practice will announce in the
Internal Revenue Bulletin the names and
addresses of practitioners who have
been suspended from such practice, their
designation as attorney, certified public
accountant, enrolled agent, or enrolled
actuary, and date of disbarment or pe-
riod of suspension. This announcement
will appear in the weekly Bulletin for
five successive weeks or as long as it is
practicable for each attorney, certified
public accountant, enrolled agent, or
enrolled actuary so suspended or dis-
barred and will be consolidated and
published in the Cumulative Bulletin.
After due notice and opportunity for
hearing before an administrative law
judge, the following individuals have
been disbarred from further practice be-
fore the Internal Revenue Service:
NameAddressDesignationEffective Date
Noske, Joan MarieBismarck, NDCPASeptember 7, 1996
Dalrymple, John K.Troy, MICPASeptember 26, 1996
14

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 de-
scribe the effect:
Amplifieddescribes a situation where
no change is being made in a prior
published 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 applied to A, and the new
ruling holds that the same principle also
applies to B, the earlier ruling is ampli-
fied. (Compare withmodified, 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
published ruling and points out an es-
sential 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 pub-
lished position. (Compare withamplified
andclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered de-
terminative with respect to future trans-
actions. This term is most commonly
used in a ruling that lists previously
published rulings that are obsoleted be-
cause of changes in law or regulations.
A ruling may also be obsoleted because
the substance has been included in regu-
lations subsequently adopted.
Revokeddescribes situations where
the position in the previously published
ruling is not correct and the correct
position is being stated in the 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 previ-
ously published over a period of time in
separate rulings. If the new ruling does
more than restate the substance of a
prior ruling, a combination of terms is
used. For example,modifiedandsuper-
sededdescribes a situation where the
substance of a previously published rul-
ing 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 su-
perseded.
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 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 following abbreviations in current use and
formerly used will appear in material published in
the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C.—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contribution Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign Corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statements of 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.
15

Numerical Finding List
1
Bulletin 1997–1 through 1997–3
Announcements:
97–1, 1997–2 I.R.B.63
97–2, 1997–2 I.R.B.63
97–3, 1997–2 I.R.B.63
97–4, 1997–3 I.R.B.14
97–5, 1997–3 I.R.B.15
Notices:
97–1, 1997–2 I.R.B.22
97–2, 1997–2 I.R.B.22
97–3, 1997–1 I.R.B.8
97–4, 1997–2 I.R.B.24
97–5, 1997–2 I.R.B.25
97–6, 1997–2 I.R.B.26
97–7, 1997–1 I.R.B.8
97–9, 1997–2 I.R.B.35
97–10, 1997–2 I.R.B.41
97–11, 1997–2 I.R.B.50
97–12, 1997–3 I.R.B.11
Proposed Regulations:
REG–209762–95, 1997–3 I.R.B.12
Revenue Procedures:
97–1, 1997–1 I.R.B.11
97–2, 1997–1 I.R.B.64
97–3, 1997–1 I.R.B.84
97–4, 1997–1 I.R.B.96
97–5, 1997–1 I.R.B.132
97–6, 1997–1 I.R.B.153
97–7, 1997–1 I.R.B.185
97–8, 1997–1 I.R.B.187
97–9, 1997–2 I.R.B.56
97–10, 1997–2 I.R.B.59
Revenue Rulings:
97–1, 1997–2 I.R.B.10
97–2, 1997–2 I.R.B.7
97–3, 1997–2 I.R.B.5
97–4, 1997–3 I.R.B.6
Treasury Decisions:
8697, 1997–2 I.R.B.11
8688, 1997–3 I.R.B.7
8689, 1997–3 I.R.B.9
8692, 1997–3 I.R.B.4
1
A cumulative list of all Revenue Rulings, Rev-
enue Procedures, Treasury Decisions, etc., pub-
lished in Internal Revenue Bulletins 1996–27
through 1996–53 will be found in Internal Rev-
enue Bulletin 1997–1, dated January 6, 1997.
16

Finding List of Current Action on
Previously Published Items
1
Bulletin 1997–1 through 1997–3
*Denotes entry since last publication
Revenue Procedures:
92–20
Modified by
97–1, 1997–1 I.R.B.11
92–20
Modified by
97–10, 1997–2 I.R.B.59
92–90
Superseded by
97–1, 1997–1 I.R.B.11
96–1
Superseded by
97–1, 1997–1 I.R.B.11
96–2
Superseded by
97–2, 1997–1 I.R.B.64
96–3
Superseded by
97–3, 1997–1 I.R.B.84
96–4
Superseded by
97–4, 1997–1 I.R.B.96
96–5
Superseded by
97–5, 1997–1 I.R.B.132
96–6
Superseded by
97–6, 1997–1 I.R.B.153
96–7
Superseded by
97–7, 1997–1 I.R.B.185
96–8
Superseded by
97–8, 1997–1 I.R.B.187
Revenue Rulings:
92–19
Supplemented in part by
97–2, 1997–2 I.R.B.7
96–12
Superseded by
97–3, 1997–1 I.R.B.84
96–13
Modified by
97–1, 1997–1 I.R.B.11
96–22
Superseded by
97–3, 1997–1 I.R.B.84
96–34
Superseded by
97–3, 1997–1 I.R.B.84
96–39
Superseded by
97–3, 1997–1 I.R.B.84
Revenue Rulings—Continued
96–43
Superseded by
97–3, 1997–1 I.R.B.84
96–56
Superseded by
97–3, 1997–1 I.R.B.84
1
A cumulative finding list for previously published
items mentioned in Internal Revenue Bulletins
1996–27 through 1996–53 will be found in Inter-
nal Revenue Bulletin 1997–1, dated January 6,
1997.
17