us-irs-revenue-procedures-irb-2010-41-pdf•Internal Revenue Bulletin 2010-41 (PDF rendition): IRS Revenue Procedures
Internal Revenue Bulletin 2010-41 (PDF rendition): IRS Revenue Procedures
us-irs-revenue-procedures-irb-2010-41-pdfInternal Revenue Bulletin 2010-41 (PDF rendition): IRS Revenue ProceduresGuidance
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Bulletin No. 201 0-41 October 12, 2010 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 Notice 2010–64, page 421. Extension of replacement period for livestock sold on account of drought.This notice explains the circum- stances under which the 4–year replacement period under section 1033(e)(2) of the Code is extended for livestock sold on account of drought. This notice also contains a list of the counties that experienced exceptional, extreme, or severe drought during the preceding 12–month period ending August 31, 2010. Taxpayers may use this list to determine if an extension is available. Notice 2010–65, page 424. The notice announces that the Treasury Department and the IRS intend to exercise regulatory authority under section 901(l)(3) of the Code not to apply the credit disallowance rules of section 901(l) to foreign withholding taxes on (1) royalties received in “ordinary course” back-to-back licenses of intel- lectual property and articles embodying intellectual property and (2) direct sales from the U.S. of copies of copyrighted articles. The notice solicits comments on the exception as well as on related issues under section 901(l). Notice 2005–90 supplemented. Announcement 2010–75, page 428. This document is part of a series of announcements relating to the Service’s announcement that it was developing a schedule requiring certain business taxpayers to report uncertain tax positions on their tax returns. This announcement explains the actions being taken by the IRS in response to the comments received on the proposed schedule and instructions. Announcement 2010–76, page 432. This document announces that the Service is expanding its pol- icy of restraint in connection with its decision to require certain corporations to file Schedule UTP,Uncertain Tax Position State- ment, and will forgo seeking particular documents that relate to uncertain tax positions and the workpapers that document the completion of Schedule UTP. EMPLOYEE PLANS Notice 2010–63, page 420. This notice solicits comments on the requirements under sec- tion 9815 of the Code (and 2716 of the Public Health Service Act) that insured group health plans not discriminate in favor of highly compensated individuals. EXCISE TAX Notice 2010–63, page 420. This notice solicits comments on the requirements under sec- tion 9815 of the Code (and 2716 of the Public Health Service Act) that insured group health plans not discriminate in favor of highly compensated individuals. (Continued on the next page) Announcements of Disbarments and Suspensions begin on page 433. Finding Lists begin on page ii. ADMINISTRATIVE Rev. Proc. 2010–34, page 426. Nonshareholder contribution to capital under section 118(a).This procedure provides a safe harbor under section 118(a) of the Code for the treatment of certain grants to corporations from the Rural Utilities Service of the Depart- ment of Agriculture under the Broadband Initiatives Program and from the National Telecommunications and Information Administration of the Department of Commerce under the Broadband Technology Opportunities Program, as authorized by the American Recovery and Reinvestment Act of 2009. Announcement 2010–77, page 433. This document contains a correction to Announcement 2010–59, which corrected Announcement 2010–47, 2010–30 I.R.B. 173, regarding “Deletions From Cumulative List of Organizations Contributions to Which are Deductible Under Section 170 of the Code”. October 12, 20102010–41 I.R.B. The IRS Mission Provide Americ a’s taxpayers top-quality service by helping them understa nd and meet their tax responsibilities and en- force the law wi th integrity and fairness to all. Introduction The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conven- tions, legislation, court decisions, and other items of general interest. It is published weekly and may be obtained from the Superintendent of Documents on a subscription basis. Bulletin contents are compiled semiannually into Cumulative Bulletins, which are sold on a single-copy basis. It is the policy of the Service to publish in the Bulletin all sub- stantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, mod- ify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indi- cated. Procedures relating solely to matters of internal man- agement are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published. Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same. The Bulletin is divided into four parts as follows: Part I.—19 86 Code. This part i ncludes rulings and decisions based on provisions of the Intern al Revenue Code of 1986. Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Leg- islation and Related Committee Reports. Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rul- ings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secre- tary (Enforcement). Part IV .—Items of General Interest. This par t includes notices of proposed rulemakings, disbar- ment an d suspension lists, and announcements. The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period. The c ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate. For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402. 2010–41 I.R.B.October 12, 2010 October 12, 20102010–41 I.R.B. Place missing child here. Part III. Administrative, Procedural, and Miscellaneous Request for Comments on Requirements Prohibiting Discrimination in Favor of Highly Compensated Individuals in Insured Group Health Plans Notice 2010–63 PURPOSE This notice invites public comments concerning the application of rules pro- hibiting insured group health plans from discriminating in favor of highly compen- sated individuals. Representatives from the United States Department of Labor and from the United States Department of Health and Human Services have re- viewed this notice and have advised the Department of the Treasury and the Inter- nal Revenue Service that they agree with it. I. BACKGROUND The Patient Protection and Afford- able Care Act (the Affordable Care Act), Pub. L. 111–148, was enacted on March 23, 2010; the Health Care and Education Reconciliation Act (the Reconciliation Act), Pub.L. 111–152, was enacted on March 30, 2010. The Affordable Care Act and the Reconciliation Act reorganize, amend, and add to the provisions of part A of title XXVII of the Public Health Service Act (PHS Act) relating to group health plans and health insurance issuers in the group and individual markets. The Affordable Care Act adds section 9815(a)(1) to the Internal Revenue Code and section 715(a)(1) to the Employee Retirement Income Security Act (ERISA) to incorporate the provisions of part A of title XXVII of the PHS Act into theCodeandERISA,andmakethem applicable to group health plans, and health insurance issuers providing health insurance coverage in connection with group health plans. Section 10101(d) of the Affordable Care Act adds section 2716 to the PHS Act. Section 2716 of the PHS Act pro- vides that a group health plan (other than a self-insured plan) must satisfy the require- ments of section 105(h)(2) of the Code; that rules similar to the rules of section 105 in paragraphs (h)(3) (nondiscrimi- natory eligibility classification), (h)(4) (nondiscriminatory benefits), and (h)(8) (certain controlled groups) apply; and that the term “highly compensated individ- ual” has the meaning given by section 105(h)(5). These requirements for insured group health plans are effective for plan years beginning on or after September 23, 2010. New section 9815 of the Code in- corporates by reference the requirements of section 2716 of the PHS Act into chap- ter 100 of the Code. Section 4980D of the Code provides that group health plans that fail to satisfy the requirements of chapter 100 are subject to an excise tax. Section 105(h)(1) of the Code provides that the exclusion in section 105(b), which generally excludes from gross income amounts paid through employer-spon- sored health care coverage, does not apply to amounts paid to a highly compensated individual under a self-insured medical reimbursement plan that does not satisfy the requirements of section 105(h)(2) for a plan year, to the extent the amounts constitute an excess reimbursement of the highly compensated individual. Sec- tion 105(h)(2) provides that a self-insured medical reimbursement plan satisfies the requirements of that section only if (1) the plan does not discriminate in favor of highly compensated individuals as to eli- gibility to participate and (2) the benefits provided under the plan do not discrimi- nate in favor of participants who are highly compensated individuals. Treasury Regu- lation §1.105–11 provides guidance on the application of section 105(h). II. APPLICATION OF THE NONDISCRIMINATION RULES IN CODE SECTION 105(h)(2) TO INSURED GROUP HEALTH PLANS PHS Act section 2716 incorporates the substantive nondiscrimination require- ments of Code section 105(h) (but not the taxes on highly compensated individuals in section 105(h)(1)) and applies them to insured group health plans. An insured group health plan failing to comply with the nondiscrimination requirements of Code section 105(h) is subject to the taxes, remedies, and penalties that generally ap- ply for a plan failing to comply with the requirements of chapter 100 of the Code (generally, an excise tax of $100 per day per individual discriminated against for each day the plan does not comply with the requirement), part 7 of ERISA (a civil action to enjoin a noncompliant act or practice or for appropriate equitable re- lief), or title XXVII of the PHS Act (civil money penalties of $100 per day per indi- vidual discriminated against for each day the plan does not comply with the require- ment). Thus, if a self-insured plan fails to comply with Code section 105(h), highly compensated individuals lose a tax ben- efit; if an insured group health plan fails to comply with Code section 105(h), the plan is subject to a civil action to compel it to provide nondiscriminatory benefits and the plan or plan sponsor is subject to an excise tax or civil money penalty of $100 per day per individual discriminated against. For determining the application of PHS Act section 2716 to grandfathered health plans, see §54.9815–1251T, 29 CFR 2590.715–1251, and 45 CFR 147.140 (providing that the rules prohibiting discrimination in favor of highly compensated individuals by insured group health plans do not apply to grandfathered health plans). The rules of section 105(h) of the Code continue to apply to any self-insured medical reimbursement plan regardless of whether the plan is a grandfathered health plan. III. REQUEST FOR COMMENTS The final regulations under section 105(h) of the Code, 1 prohibiting discrim- ination in favor of highly compensated individuals under self-insured medical ex- pense reimbursement plans, were issued in 1981. The Treasury Department and the IRS are considering issuing guidance on the extension, through section 2716 of the PHSA and new section 9815 of 1 26 CFR 1.105–11. 2010–41 I.R.B.420October 12, 2010 the Code, of the requirements of section 105(h)(2) to insured group health plans. The Department of the Treasury and the IRS request comments on what additional guidance relating to the application of section 105(h) (2) would be helpful with respect to insured group health plans. Date: Comments must be submitted by November 4, 2010. Addresses: Comments, identified by “No- tice 2010–63”, may be sent by one of the following methods: •Electronic: Sendtothefollowing e-mail address: Notice.Comments@irscounsel.treas.gov. Include “Notice 2010–63” in the subject line. •Mail:CC:PA:LPD:PR (Notice 2010–63), Room 5205, Internal Rev- enue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. •Hand or courier delivery: Monday through Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (Notice 2010–63), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington DC 20224. All submissions will be open to pub- lic inspection and copying in room 1621, 1111 Constitution Avenue, NW, Washing- ton, DC from 9 a.m. to 4 p.m. IV. DRAFTING INFORMATION The principal author of this notice is Karen Levin of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). For further information regarding this notice, contact Ms. Levin at (202) 622–6080 (not a toll-free call). Extension of Replacement Period for Livestock Sold on Account of Drought in Specified Counties Notice 2010–64 SECTION 1. PURPOSE This notice provides guidance regard- ing an extension of the replacement pe- riod under § 1033(e) of the Internal Rev- enue Code for livestock sold on account of drought in specified counties. SECTION 2. BACKGROUND .01Nonrecognition of Gain on Invol- untary Conversion of Livestock. Section 1033(a) generally provides for nonrecog- nition of gain when property is involuntar- ily converted and replaced with property that is similar or related in service or use. Section 1033(e)(1) provides that a sale or exchange of livestock(other than poultry) held by a taxpayer for draft, breeding, or dairy purposes in excess of the number that would be sold following the taxpayer’s usual business practices is treated as an involuntary conversion if the livestock is sold or exchanged solely on account of drought, flood, or other weather-related conditions. .02Replacement Period. Section 1033(a)(2)(A) generally provides that gain from an involuntary conversion is rec- ognized only to the extent the amount realized on the conversion exceeds the cost of replacement property purchased during the replacement period. If a sale or exchange of livestock is treated as an involuntary conversion under § 1033(e)(1) and is solely on account of drought, flood, or other weather-related conditions that re- sult in the area being designated as eligible for assistance by the federal government, § 1033(e)(2)(A) provides that the replace- ment period ends four years after the close of the first taxable year in which any part of the gain from the conversion is realized. Section 1033(e)(2)(B) provides that the Secretary may extend this replacement pe- riod on a regional basis for such additional time as the Secretary determines appro- priate if the weather-related conditions that resulted in the area being designated as eligible for assistance by the federal government continue for more than three years. Section 1033(e)(2) is effective for any taxable year withrespect to which the due date (without regard to extensions) for a taxpayer’s return is after December 31, 2002. SECTION 3. EXTENSION OF REPLACEMENT PERIOD UNDER § 1033(e)(2)(B) Notice 2006–82, 2006–2 C.B. 529, pro- vides for extensions of the replacement pe- riod under § 1033(e)(2)(B). If a sale or ex- change of livestock is treated as an invol- untary conversion on account of drought and the taxpayer’s replacement period is determined under § 1033(e)(2)(A), the re- placement period will be extended under § 1033(e)(2)(B) and Notice 2006–82 until the end of the taxpayer’s first taxable year ending after the first drought-free year for the applicable region. For this purpose, the first drought-free year for the applicable region is the first 12-month period that (1) ends August 31; (2) ends in or after the last year of the taxpayer’s 4-year replacement period determined under § 1033(e)(2)(A); and (3) does not include any weekly period for which exceptional, extreme, or severe drought is reported for any location in the applicable region. The applicable region is the county that experienced the drought conditions on account of which the live- stock was sold or exchanged and all coun- ties that are contiguous to that county. A taxpayer may determine whether exceptional, extreme,or severe drought isreportedforanylocationintheap- plicable region by reference to U.S. Drought Monitor maps that are pro- duced on a weekly basis by the Na- tional Drought Mitigation Center. U.S. Drought Monitor maps are archived at www.drought.unl.edu/dm/archive.html. In addition, Notice 2006–82 provides that the Internal Revenue Service will publish in September of each year a list of counties, districts, cities, or parishes (hereinafter “counties”) for which excep- tional, extreme, or severe drought was reported during the preceding 12 months. Taxpayers may use this list instead of U.S. Drought Monitor maps to determine whether exceptional, extreme, or severe drought has been reported for any location in the applicable region. The Appendix to this notice contains the list of counties for which exceptional, October 12, 20104212010–41 I.R.B. extreme, or severe drought was reported during the 12-month period ending Au- gust 31, 2010. Under Notice 2006–82, the 12-month period ending on August 31, 2010, is not a drought-free year for an ap- plicable region that includes any county on this list. Accordingly, for a taxpayer who qualified for a four-year replacement pe- riod for livestock sold or exchanged on ac- count of drought and whose replacement period is scheduled to expire at the end of 2010 (or, in the case of a fiscal year tax- payer, at the end of the taxable year that in- cludes August 31, 2010), the replacement period will be extended under § 1033(e)(2) and Notice 2006–82 if the applicable re- gion includes any county on this list. This extension will continue until the end of the taxpayer’s first taxable year ending after a drought-free year for the applicable region. SECTION 4. DRAFTING INFORMATION The principal author of this notice is Sue-Jean Kim of the Office of Associate Chief Counsel (Income Tax & Account- ing). For further information regarding this notice, contact Ms. Kim at (202) 622–4960 (not a toll-free call). APPENDIX Arizona Counties of Apache, Cochise, Coconino, Gila, Graham, Greenlee, La Paz, Maricopa, Mohave, Navajo, Pima, Pinal, Santa Cruz, Yavapai, Yuma. Arkansas Counties of Arkansas, Ashley, Chicot, Clay, Columbia, Desha, Drew, Greene, Lafayette, Ouachita, Phillips, Union. California Counties of Alameda, Amador, Butte, Calaveras, Colusa, ContraCosta, El Dorado, Fresno, Glenn, Humboldt, Imperial, Inyo, Kern, Kings, Lake, Lassen, Los Angeles, Madera, Marin, Mariposa, Mendocino, Merced, Modoc, Monterey, Napa, Nevada, Orange, Placer, Plumas, Riverside, Sacramento, San Benito, San Bernardino, San Diego, San Joaquin, San Luis Obispo, Santa Barbara, Santa Clara, Shasta, Siskiyou, Solano, Sonoma, Stanislaus, Sutter, Tehama, Trinity, Tulare, Tuolumne, Ventura, Yolo, Yuba. Colorado Counties of La Plata, Montezuma. Delaware County of Sussex. Hawaii Counties of Hawaii, Honolulu, Kalawao, Kauai, Maui. Idaho Counties of Bear Lake, Benewah, Bonner, Bonneville, Caribou, Clearwater, Fremont, Idaho,Kootenai, Latah, Madison, Shoshone, Teton. Kentucky Counties of Carlisle, Fulton, Hickman. Louisiana Parishes of Avoyelles, Beauregard, Bienville, Bossier, Caddo, Caldwell, Catahoula, Claiborne, Concordia, De Soto, East Carroll, Franklin, Grant, Jackson, La Salle, Lincoln, Madison, Morehouse, Natchitoches, Ouachita, Rapides, Red River, Richland, Sabine, Tensas, Union, Vernon, Webster, West Carroll, Winn. Maryland Counties of Allegany, Anne Arundel, Calvert, Charles, Dorchester, Frederick, Garrett, Prince George’s, Saint Mary’s, Somerset, Washington, Wicomico, Worcester. Michigan Counties of Alger, Baraga, Charlevoix, Chippewa, Delta, Dickinson, Gogebic, Houghton, Iron, Keweenaw, Luce, Mackinac, Marquette, Menominee, Ontonagon, Schoolcraft. Minnesota Counties of Aitkin, Anoka, Beltrami, Cass, Chisago, Cook, Crow Wing, Dakota, Hennepin, Hubbard,Isanti, Itasca, Koochiching, Lake, Pine, Ramsey, Saint Louis, Sherburne, Washington, Wright. 2010–41 I.R.B.422October 12, 2010 Mississippi Counties of Bolivar, Coahoma, Humphreys,Issaquena, Leflore, Quitman, Sharkey, Sunflower, Tallahatchie, Tunica, Warren, Washington, Yazoo. Missouri Counties of Butler, Carter, Dunklin, Mississippi, New Madrid, Pemiscot, Ripley, Stoddard, Wayne. Montana Counties of Big Horn, Carbon, Flathead, Gallatin, Glacier, Granite, Lake, Lincoln, Mineral, Missoula, Park, Pondera, Ravalli, Sanders, Stillwater. Nevada Counties of Churchill, Clark, Esmeralda, Humboldt, Lincoln, Nye, Pershing, Washoe. New Jersey Counties of Atlantic, Burlington, Hunterdon, Mercer, Middlesex, Monmouth, Ocean, Somerset. New Mexico Counties of Hidalgo, McKinley, San Juan. North Carolina Counties of Franklin, Gates, Halifax, Hertford, Nash, Northampton, Union, Warren. Oklahoma Counties of Atoka, Bryan, Choctaw, Ellis, Harper, McCurtain, Pushmataha, Woods, Woodward. Oregon Counties of Harney, Jackson, Klamath, Lake. Pennsylvania Counties of Bedford, Bucks, Fayette, Franklin, Fulton, Somerset. South Carolina Counties of Chester, Chesterfield, Clarendon, Darlington, Dillon, Fairfield, Florence, Georgetown, Horry, Kershaw, Lancaster, Lee, Marion, Marlboro, Sumter, Williamsburg. Tennessee Counties of Dyer, Lake, Obion. Texas Counties of Aransas, Atascosa, Austin, Bandera, Bastrop, Bee,Bell, Bexar, Blanco, Bosque, Brazoria, Brazos, Brooks, Brown, Burleson, Burnet, Caldwell, Calhoun, Callahan, Cameron, Collin, Colorado, Comal, Comanche, Coryell, Dallas, Delta, Denton, DeWitt, Dimmit, Duval, Edwards, Ellis, Erath, Falls, Fannin, Fayette, Fort Bend, Freestone, Frio,Galveston, Gillespie, Goliad, Gonzales, Grayson, Grimes, Guadalupe, Hamilton, Harris, Harrison, Haskell, Hays, Hidalgo, Hill, Hood, Hopkins, Houston, Hunt, Jackson, Jasper, Jim Hogg, Jim Wells, Johnson, Jones, Karnes, Kaufman, Kendall, Kenedy, Kerr, Kimble, Kinney, Kleberg, Lamar, Lampasas, La Salle, Lavaca, Lee, Leon, Limestone, Live Oak, Llano, McLennan, McMullen, Madison, Marion, Matagorda, Maverick, Medina, Milam, Mills, Montgomery, Nacogdoches, Newton, Nueces, Panola, Rains, Real, Refugio, Robertson, Rockwall, Rusk, Sabine, San Augustine, San Patricio, San Saba, Shackelford, Shelby, Somervell, Starr, Stephens, Throckmorton, Travis, Trinity, Uvalde, Val Verde, Van Zandt, Victoria, Walker, Waller, Washington, Webb, Wharton, Willacy, Williamson, Wilson, Zapata, Zavala. Utah Counties of Kane, Rich, San Juan, Washington. October 12, 20104232010–41 I.R.B. Virginia Cities of Charlottesville, Colonial Heights, Emporia, Franklin, Hopewell, Newport News, Petersburg, Poquoson, Richmond, Suffolk, Williamsburg, Winchester. Counties of Accomack, Albemarle, Amelia, Brunswick, Buckingham, Caroline, Charles City, Chesterfield, Clarke, Culpeper, Cumberland, Dinwiddie, Essex,Fauquier, Fluvanna, Frederick, Gloucester, Goochland, Greene, Greensville, Hanover, Henrico, Isle of Wight, James City, King and Queen, King George, King William, Lancaster, Loudoun, Louisa, Lunenburg, Madison, Mathews, Mecklenburg, Middlesex, New Kent, Northampton, Northumberland, Nottoway, Orange, Page, Powhatan, Prince George, Rappahannock, Richmond, Rockingham, Shenandoah, Southampton, Spotsylvania, Surry, Sussex, Warren, Westmoreland, York. Washington Counties of Chelan, Clallam, Douglas, Grant, GraysHarbor, Jefferson, Kittitas, Mason, Okanogan. West Virginia Counties of Berkeley, Grant, Hampshire, Hardy, Jefferson, Mineral, Morgan, Preston, Tucker. Wisconsin Counties of Ashland, Barron, Bayfield, Burnett, Chippewa, Clark, Door, Douglas, Dunn, Eau Claire, Florence, Forest, Iron, Langlade, Lincoln, Marathon, Marinette, Menominee, Oconto, Oneida, Polk, Price, Rusk, Saint Croix, Sawyer, Shawano, Taylor, Vilas, Washburn. Wyoming Counties of Big Horn, Fremont, Lincoln, Park, Sublette, Sweetwater, Teton. Credit for Certain Foreign Gross-Basis Withholding Taxes Notice 2010–65 PURPOSE On November 30, 2005, the Treasury Department and the Internal Revenue Ser- vice (IRS) issued Notice 2005–90, 2005–2 C.B. 1163. Notice 2005–90 sets forth an exception to the application of section 901(l)(1)(B) of the Internal Revenue Code with respect to certain back-to-back com- puter program licensing arrangements. This notice provides additional guidance regarding the application of section 901(l) to other back-to-back licensing arrange- ments and certain arrangements for the retail distribution of copyrighted articles. BACKGROUND Section 901(l) generally disallows a credit for foreign gross-basis withholding tax on any item of income (other than div- idends) or gain with respect to property if (a) the recipient of the item has not held the property for more than 15 days (within a 31-day testing period), exclusive of peri- ods during which the recipient is protected from risk of loss (section 901(l)(1)(A)), or (b) the recipient is under an obligation (whether pursuant to a short sale or oth- erwise) to make related payments with respect to positions in substantially similar or related property (section 901(l)(1)(B)). Section 901(l)(3) provides that the Secre- tary may by regulation provide that section 901(l)(1) does not apply to property where such application is not necessary to carry out the purposes of section 901(l). Notice 2005–90 states that the Trea- sury Department and the IRS expect to is- sue regulations setting forth an exception to the application of section 901(l)(1)(B) to foreign gross-basis withholding taxes imposed on payments in a back-to-back computer program licensing arrangement in the ordinary course of the licensor’s and licensee’s respective trades or busi- nesses. Notice 2005–90 also requested comments concerning any additional is- sues that should be addressed by regu- lations, including whether the exception should apply to other circumstances and to other types of property. DISCUSSION Following the issuance of Notice 2005–90, the Treasury Department and the IRS received comments regarding busi- ness arrangements involving the ordinary course licensing and other transfers of certain intellectual property with respect to which the disallowance of a credit is not necessary to carry out the purposes of section 901(l). One such business arrangement is generally similar to the back-to-back licensing arrangements de- scribed in Notice 2005–90, except that the intellectual property involved is property other than rights in, or copies of, computer programs. Another ordinary course of business arrangement identified by a com- mentator involves the retail distribution of certain copyrighted articles that does not meet the holding period requirement in section 901(l)(1)(A). Consistent with Notice 2005–90 and in response to comments received since the issuance of that notice, the Treasury DepartmentandtheIRSintendtoissue regulations, pursuant to section 901(l)(3), providing relief from the application of section 901(l)(1)(A) or (B) in the circum- stances described below. Specifically, the regulations will provide that (1) section 901(l)(1)(B) will not apply to disallow a credit for foreign gross-basis withhold- ing taxes (which otherwise meet the legal requirements to be treated as creditable taxes) imposed on income or gain with respect to back-to-back licensing arrange- ments involving certain intellectual prop- erty or copyrighted articles entered into in the ordinary course of business; and (2) section 901(l)(1)(A) will not apply to disallow a credit for foreign gross-ba- sis withholding taxes (which otherwise meet the legal requirements to be treated as creditable taxes) imposed on income 2010–41 I.R.B.424October 12, 2010 or gain with respect to retail distribution arrangements for certain copyrighted arti- cles entered into in the ordinary course of business. 1. Relief from application of section 901(l)(1)(B) for certain back-to-back licensing arrangements made in the ordinary course of business Under a typical business arrangement involving back-to-back licensing, a do- mestic corporation or a U.S. citizen or resident alien individual (Master Licen- sor) licenses (or otherwise transfers) rights to certain intellectual property pursuant to a master license agreement or similar arrangement to either an affiliate (foreign or domestic) or an unrelated domestic corporation (or its controlled foreign cor- poration) (Head Licensee) for the purpose of development, production, exploitation, distribution, or marketing of the intel- lectual property. Head Licensee (or its affiliates) is in the business of develop- ing, producing, exploiting, distributing or marketing intellectual property. As part of the arrangement, Head Licensee subli- censes rights to the intellectual property to its affiliates or to unrelated corporations (Sublicensees), as permitted under the terms and conditions of the master license agreement. Pursuant to the sublicense agreements, Sublicensees make payments to Head Licensee, which may be subject to foreign gross-basis withholding tax. There are a variety of business reasons independent of U.S. tax considerations for parties to structure a back-to-back licensing arrangement with respect to in- tellectual property. For example, Master Licensor may contract with an unrelated Head Licensee as part of a distribution arrangement in which Licensee distributes an article embodying Master Licensor’s intellectual property through its affiliated Sublicensees around the world. In such a case, Master Licensor may be unwilling for business or practical reasons to enter into a contractual relationship with each Sublicensee in each foreign jurisdiction and may therefore require that its only contractual relationshipbewithHeadLi- censee. Alternatively, Master Licensor may license the intellectual property to an affiliated domestic or foreign Head Licensee that distributes articles embody- ing the intellectual property by means of contractual relationships with unrelated Sublicensees in foreign jurisdictions. A back-to-back licensing arrangement may be part of the manner by which an unrelated Head Licensee conducts its busi- ness. For example, where Head Licensee has expertise in exploiting the intellectual property, it may be ordinary and customary for Head Licensee to acquire rights to the intellectual property from Master Licen- sor as part of a production or development process before the article embodying the intellectual property is distributed through sublicensing arrangements with Head Li- censee’s foreign or domestic affiliates. a. Covered intellectual property and copyrighted articles Pursuant to the authority granted under section 901(l)(3), the Treasury Depart- ment and the IRS have determined that the application of section 901(l)(1)(B) to foreign gross-basis withholding taxes imposed on payments in a back-to-back licensing arrangement with respect to cov- ered intellectual property or a covered copyrighted article entered into in the or- dinary course of business, as that term is definedinsection1(b)ofthisnotice,is not necessary to carry out the purposes of section 901(l). For purposes of this notice, “covered intellectual property” means intellectual property rights in any film, television program orrecording; literary, musical or artistic composition; computer program; right to publicity (e.g.,name and likeness); or other similar property, and a “covered copyrighted article” means a copy of any film, television program or recording; literary, musical or artistic composition; computer program; or other similar property. b. Back-to-back licensing arrangement For purposes of this notice, a “back-to- back licensing arrangement with respect to covered intellectual property or a covered copyrighted article” is a transaction or se- ries of transactions in which: (1) a domes- tic corporation or individual who is a citi- zen or resident of the United States owns a right or rights in covered intellectual prop- erty or a covered copyrighted article (mas- ter licensor) and transfers a right or rights in the covered intellectual property or the covered copyrighted article to a domestic corporation or a controlled foreign corpo- rationwithinthemeaningofsection957 (head licensee) pursuant to an agreement (a master license agreement or similar ar- rangement) that is confined to the devel- opment, production, exploitation, distribu- tion, or marketing of the intellectual prop- erty or the copyrightedarticle; (2) the head licensee transfers a right or rights in the covered intellectual property or the cov- ered copyrighted article to one or more cor- porations (sublicensees), as permitted by the terms and conditions of the master li- cense agreement, for the purpose of devel- opment, production, exploitation, distribu- tion or marketing of the intellectual prop- erty or the copyrighted article or for the sublicensee’s own use; and (3) the head li- censee is a member of the worldwide affil- iated group that includes either the master licensor or the sublicensee. For purposes of this notice, a worldwide affiliated group is as defined in section 864(f)(1)(C), de- termined without regard to the exception in section 1504(a)(4) treating certain pre- ferred stock as not stock. The relief described in section 1 of this notice applies without regard to the form of the transaction or the treatment of the transaction under foreign law, and includes the transfer of rights in the intellectual property or the copyrighted article through a license, sale, lease or exchange for U.S. tax purposes. c. Ordinary course of business For purposes of this notice, a back-to- back licensing arrangement with respect to covered intellectual property or a cov- ered copyrighted article is in the “ordinary course of business” if: (A) the arrange- ment is consistent with the normal busi- ness practices of the master licensor with respect to licensing of intellectual prop- erty or a copyrighted article of the type that is the subject of the back-to-back li- censing arrangement (as defined in sec- tion 1(a) of this notice) independent of U.S. federal tax considerations; (B) the head licensee and each sublicensee (other than a sublicensee that licenses the intel- lectual property or copyrighted article ex- clusively for its own use) are regularly en- gaged in a trade or business, within the meaning of § 1.367(a)–2T(b)(2), of devel- oping, producing, exploiting, distributing or marketing the intellectual property or October 12, 20104252010–41 I.R.B. the copyrighted article that is the subject of the back-to-back licensing arrangement; and (C) for each payment made by a sub- licensee under the sublicense agreement with respect to which foreign gross-ba- sis withholding tax is imposed, the sub- licensee uses the right to the intellectual property or the copyrighted article that is the subject of the sublicense agreement in a trade or business within the meaning of § 1.367(a)–2T(b)(2). For purposes of clause (B), the head licensee or the sub- licensee shall be considered to be regu- larly engaged in the business of develop- ing, producing, exploiting, distributing or marketing the intellectual property or the copyrighted article that is the subject of the back-to-back licensing arrangement if any member of its worldwide affiliated group is so engaged with respect to that specific intangible. 2. Relief from application of section 901(l)(1)(A) for certain retail distribution arrangements made in the ordinary course of business Under a typical business arrangement involving retail distribution of certain copyrighted articles, a domestic corpora- tion owns a copyright which is used to pro- duce copyrighted articles. In the ordinary course of its trade or business, the corpora- tion, which may or may not hold the copy- righted articles for the minimum holding period described in section 901(l)(1)(A), transfers such copyrighted articles directly or indirectly through U.S. affiliates to re- tail customers in foreign jurisdictions. The transactions with retail customers would generally be treated as sales in determining whether for U.S. tax purposes the income is from sources within the United States. See,e.g., § 1.861–18. Retail customers in foreign jurisdictions make payments to the domestic corporation or its U.S. affil- iate that, nevertheless, may be subject to foreign gross-basis withholding taxes. a. Covered copyrighted articles Pursuant to the authority granted under section 901(l)(3), the Treasury Department and the IRS have determined that the ap- plication of section 901(l)(1)(A) to foreign gross-basis withholding taxes imposed on payments in a retail distribution arrange- ment for covered copyrighted articles (as thattermisdefinedinsection1(a)ofthis notice) entered into in the ordinary course of business (as that term is defined in sec- tion 2(c) of this notice) is not necessary to carry out the purposes of section 901(l). b. Retail distribution arrangement For purposes of this notice, a “re- tail distribution arrangement for covered copyrighted articles” is a transaction in which: (1) a domestic corporation owns a copyright which is used to produce a cov- ered copyrighted article; (2) the domestic corporation transfers directly or indirectly through one or more U.S. affiliates the covered copyrighted article to foreign re- tail customers; and (3) such arrangement is in the ordinary course of business of the domestic corporation and, if appropriate, its U.S. affiliate(s). For purposes of this notice, a U.S. affiliate is any member of the domestic corporation’s affiliated group as defined in section 1504(a). c. Ordinary course of business For purposes of this notice, a retail dis- tribution arrangement for covered copy- righted articles is in the “ordinary course of business” if: (A) the arrangement is con- sistent with the normal business practices of the domestic corporation with respect to sales of copyrighted articles of the type that is the subject of the retail distribution arrangement (as defined in section 2(a) of this notice) independent of U.S. federal tax considerations; and (B) the domestic cor- poration, or the U.S. affiliate in the case of a domestic corporation that transfers the covered copyrighted articles indirectly through such affiliate, is regularly engaged in a trade or business, within the meaning of § 1.367(a)–2T(b)(2), of selling the cov- ered copyrighted articles that are the sub- ject of the retail distribution arrangement. EFFECT ON OTHER DOCUMENTS This notice supplements but does not modify or affect the application of the ex- ception described in Notice 2005–90. EFFECTIVE DATE The regulations described in this no- tice will apply to amounts that are paid or accrued after September 23, 2010. Until regulations incorporating the guidance set forth in this notice are issued, taxpayers may rely on the guidance contained in this notice. REQUEST FOR COMMENTS AND CONTACT INFORMATION The Treasury Department and the IRS request comments concerning the excep- tions to section 901(l)(1) described in this notice, the scope of the active dealer exception in section 901(l)(2) to persons for whom intangible property or copy- righted articles are described in section 1221(a)(1), as well as the exception de- scribed in Notice 2005–90 and other issues with respect to which the Treasury Depart- ment and the IRS requested comments in Notice 2005–90. Written comments may be submitted to the Office of Associate Chief Counsel (International), Attention: Suzanne Walsh, Internal Revenue Service, 1111 Constitution Avenue, NW, Washing- ton, DC 20224. Alternatively, taxpayers may submit comments electronically to Notice.comments@irscounsel.treas.gov. Comments will be available for public inspection and copying. For further information regarding this notice, contact Ms. Walsh of the Office of Associate Chief Counsel (International) at (202)–622–3850 (not a toll-free call). 26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement; determination of correct tax liability. (AlsoPartI,§§118,362.) Rev. Proc. 2010–34 SECTION 1. PURPOSE This revenue procedure provides a safe harbor under section 118(a) of the Inter- nal Revenue Code for the treatment of cer- tain grants to corporations from the Rural Utilities Service (RUS) of the Department of Agriculture under the Broadband Initia- tives Program (BIP) and from the National Telecommunications and Information Ad- ministration (NTIA) of the Department of Commerce under the Broadband Technol- ogy Opportunities Program (BTOP) as au- thorized by the American Recovery and Reinvestment Act of 2009 (ARRA). 2010–41 I.R.B.426October 12, 2010 SECTION 2. BACKGROUND Section 118(a) of the Code provides that in the case of a corporation, gross in- come does not include a contribution to the capital of the taxpayer. Section 1.118–1 of the Income Tax Regulations provides that section 118 ap- plies to contributions to capital made by a person other than a shareholder, for exam- ple, property contributed to a corporation by a governmental unit for the purpose of enabling the corporation to expand its operating facilities. Section 362(c)(2) of the Code requires a basis reduction in a corporation’s property when the corporation receives money from a nonshareholder as a contribution to its capital. ARRA appropriated money for the expansion of broadband capabilities in the United States. Title I, Division A of ARRA appropriated $2.5 billion to RUS for BIP. Title II, Division A of ARRA ap- propriated $4.7 billion to NTIA for BTOP. BIP provides grants for six purposes: (1) Last Mile Remote Projects (LMRP); (2) Last Mile Projects (LMP); (3) Mid- dle Mile Projects (MMP); (4) Satellite Projects (SP); (5) Technical Assistance (TA); and (6) Rural Library Broadband (RLB). BTOP provides grants for four purposes: (1) Broadband Infrastructure (BI); (2) Comprehensive Community In- frastructure (CCI); (3) Public Computer Centers (PCC); and (4) Sustainable Broad- band Adoption (SBA). See Notices of Funds Availability, 74 FR 33104 (BIP and BTOP), 75 FR 3792 (BTOP), and 75 FR 3820 (BIP). SECTION 3. SCOPE This revenue procedure generally ap- plies to corporate taxpayers that receive a grant from RUS under BIP for LMRP, LMP, MMP, or RLB or from NTIA under BTOPforBIorCCI. This revenue procedure does not ap- ply to the portion of any grant paid to re- imburse pre-application expenses. This revenue procedure also does not apply to grants from RUS under BIP for SP or TA. In addition, this revenue procedure does not apply to: (1) noncorporate taxpay- ers; (2) loans from RUS under BIP; (3) grants from NTIA under BTOP for PCC or SBA; or (4) the National Broadband Plan or the Universal Service Fund of the Fed- eral Communications Commission. SECTION 4. PROCEDURE The Internal Revenue Service will not challenge a corporation’s treatment of a grant to the corporation from RUS under BIP for LMRP, LMP, MMP, or RLB or from NTIA under BTOP for BI or CCI within the scope of section 3 of this rev- enue procedure as a nonshareholder con- tribution to the capital of the corporation under section 118(a) of the Code if the cor- poration properly reduces the basis of its property under section 362(c)(2) and the regulations thereunder. SECTION 5. EFFECTIVE DATE This revenue procedure is effective September 23, 2010. SECTION 6. DRAFTING INFORMATION The principal author of this rev- enue procedure is David McDonnell of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this revenue procedure, contact Mr. McDonnell at (202) 622–3040 (not a toll-free call). October 12, 20104272010–41 I.R.B. Part IV. Items o fGeneralInterest Reporting of Uncertain Tax Positions Announcement 2010–75 In a series of announcements the Inter- nal Revenue Service announced that it was developing a schedule requiring certain business taxpayers to report uncertain tax positions on their tax returns and requested comments both on the proposal and on a draft schedule and instructions. An- nouncement 2010–9, 2010–7 I.R.B. 408; Announcement 2010–17, 2010–13 I.R.B. 515; Announcement 2010–30, 2010–19 I.R.B. 668. The Service also stated in An- nouncement 2010–9 that it would issue a Notice of Proposed Rulemaking (NPRM) to provide that corporations would be required to file a schedule disclosing un- certain tax positions. The NPRM was published on September 9, 2010, and sets out a proposed rule explicitly authoriz- ing the Service to require the filing of Schedule UTP. Requirement of a State- ment Disclosing Uncertain Tax Positions, 75 Fed. Reg. 54802 (proposed Sept. 9, 2010). The Service expects a final rule will be promulgated by the end of the year. The Service received a large number of comments on the overall proposal, includ- ing whether and how the Service should implement the requirement to file a sched- ule reporting uncertain tax positions, as well as the draft schedule and instructions released for comment on April 19, 2010. Many of the comments expressed concerns regarding how the Service would use the reported information, the interaction of the new reporting requirement with the exist- ing policy of restraint, the additional bur- den the reporting requirement would place on affected corporations, and the impact the reporting requirement would have on the relationship between the corporation and the Service or the corporation and its advisors or independent auditors. Some commentators questioned the Service’s au- thority to require reporting of uncertain tax positions with the corporation’s tax return. All of these comments have been care- fully considered in developing the final schedule and instructions, which require certain corporations with audited financial statements to file Schedule UTP,Uncer- tain Tax Position Statement,beginning with the 2010 tax year. A final schedule and instructions are being released con- temporaneously withthis announcement. In addition, a Directive regarding imple- mentation of Schedule UTP and related matters, and a separate announcement re- garding modifications that will be made to the existing Policy of Restraint in con- junction with implementation of Schedule UTP, are being released contemporane- ously with this announcement. Overview of major changes to the draft schedule and instructions The fi nal schedule and instructions make a number of significant changes to the Ap ril draft in order to address burden and o ther concerns expressed by commen- tato rs. Some of the major changes include: •a five-year phase-in of the reporting requirement based on a corporation’s asset size; •no reporting of a maximum tax adjust- ment; •no reporting of the rationale and nature of uncertainty in the concise descrip- tion of the position; and •no reporting of administrative practice tax positions. Fiv e-year phase-in period In Announcement 2010–9, the Service proposed that the reporting requirement apply to business taxpayers with total as- sets of at least $10 million. The Service requested comments on whether transition rules should be used or criteria modified to either include or exclude certain busi- ness taxpayers, and the type of uncertain tax positions that should be reported by pass-through entities and tax-exempt enti- ties. In Announcement 2010–30, the Service announced that the types of corporations required to file the schedule initially would be limited to corporations that issue au- dited financial statements (or that have tax positions for which a related party records a reserve in an audited financial statement) and file Form 1120, U.S. Corporation Income Tax Return;Form 1120-F,U.S. Income Tax Return of a Foreign Corpo- ration;Form 1120-L,U.S. Life Insurance Company Income Tax Return;orForm 1120-PC,U.S. Property and Casualty In- surance Company Income Tax Return. A number of commentators recom- mended that the Service either increase the $10 million total asset threshold per- manently or during a transition period to allow many organizations additional time to implement the reporting require- ment. Some commentators recommended that taxpayers in the Compliance Assur- ance Program (CAP) and taxpayers under continuous audit (CIC taxpayers) be ex- cluded from the reporting requirement. Although a few comments recommended that the reporting requirement also apply to pass-through entities and tax-exempt entities, many suggested that the reporting requirements should be delayed or elimi- nated for these entities. The final schedule and instructions gen- erally retain the previously announced fil- ing requirements regarding types of cor- porations required to complete the sched- ule for 2010 tax years. Accordingly, pub- lic or privately held corporations that issue or are included in audited financial state- ments and that file a Form 1120, Form 1120-F, Form 1120-L, or Form 1120-PC must report their uncertain tax positions on Schedule UTP if they satisfy the total as- set threshold. In response to comments, however, the Service has implemented a five-year phase-in of the Schedule UTP for corporations with total assets under $100 million. Corporations that have total as- sets equal to or exceeding $100 million must file Schedule UTP starting with 2010 tax years. The total asset threshold will be reduced to $50 million starting with 2012 tax years and to $10 million start- ing with 2014 tax years. The Service will consider whether to extend all or a portion of Schedule UTP reporting to other tax- payers for 2011 or later tax years, such as pass-through entities and tax-exempt enti- ties. The final instructions do not exclude CAP or CIC taxpayers from the reporting requirement. With respect to CAP, the Ser- vice will address Schedule UTP compli- ance in upcoming CAP permanence guid- ance that is expected to be released shortly. 2010–41 I.R.B.428October 12, 2010 No reporting of maximum tax adjustment The draft schedule and instructions pro- posed that the corporation report a maxi- mum tax adjustment for each tax position listed on the schedule, other than trans- fer pricing and other valuation positions. The maximum tax adjustment was defined in the draft instructions as the maximum United States federal income tax liability for the tax position if the position were not sustained upon examination by the Ser- vice. The draft instructions also provided the corporation a choice of ranking transfer pricing and other valuation positions based on the federal income tax reserve or an es- timate of the adjustment to federal income tax that would result if the position were not sustained. Many of the comments recommended eliminating entirely or modifying the pro- posed requirement to report the maximum tax adjustment for each tax position. Many comments expressed concern that this amount would be unduly burdensome to compute, would provide the Service with misleading information about the riski- ness of the position and its magnitude, and would not be a meaningful basis upon which to determine the issues or returns to examine. Some commentators recom- mended that no information be provided on the schedule regarding the materiality of the tax position. Some commentators expressed a preference for a measure that relied on information already available to the corporation to minimize the burden associated with completing the schedule. Many commentators suggested various al- ternative measures of magnitude including the following: •ranges or baskets based on the maxi- mum tax adjustment, a reasonable esti- mate of the federal income tax benefit, or the reserve for the tax positions; •ranges or baskets based on a per- centage of gross income, revenue, expenses, or reserves; •ranking of all issues as proposed in the draft instructions for transfer pricing and other valuation issues; •ranking of all issues based on magni- tude, such as reserves for uncertain tax positions; •disclosure of only those tax positions for which the tax reserve exceeds a per- centage of the tabular roll-forward in the annual financial statement footnote disclosures; 1 •disclosure of the maximum tax adjust- ment only if it exceeds $500,000; and •disclosure of the aggregate reserve for uncertain tax positions. After considering the comments and the suggested alternatives, the Service has re- moved the proposed requirement to report the maximum tax adjustment. Instead, the final schedule and instructions require a corporation to rank all of the reported tax positions (including transfer pricing and other valuation positions) based on the United States federal income tax reserve (including interest and penalties) recorded for the position taken in the return, and to designate those tax positions for which the reserve exceeds 10 percent of the ag- gregate amount of the reserves for all of the tax positions reported on the schedule. This ranking method is expected to allow the Service to more accurately evaluate the materiality of the issues reported on the schedule and to impose less burden on corporations than would have been the case under the maximum tax adjust- ment proposal. This method relies on the reserve computations that corporations perform for audited financial statement purposes, but does not require disclosure of the actual amounts of the tax reserves. In addition, commentators noted the difficulty of computing the maximum tax adjustment for tax positions for which no reserve was created based on an ex- pectation to litigate the position. The instructions address this concern by pro- viding that no size needs to be determined with respect to these tax positions and that these positions can be assigned any rank by the corporation. Removal of requirement to include rationale and nature of uncertainty in concise description of the position A number of commentators expressed concern about the requirement that the rationale for an uncertain tax position, as well the nature of the uncertainty, be dis- closed as part of the concise description. Commentators stated that these disclo- sures are not required by FIN 48 and asserted that they conflict with both the Service’s policy of restraint and the Ser- vice’s stated objective not to require that taxpayers disclose their assessment of the strength or weakness of their positions. Other commentators pointed out that the examples in the draft instructions did not provide this information. As an alterna- tive, several commentators suggested that the requirements for a concise description be similar to the information required to be disclosed in conjunction with the filing of a Form 8275,Disclosure Statement. In response to these comments, the pro- posed requirement to include the rationale and nature of the uncertainty in the con- cise description has been eliminated. The instructions now require a concise descrip- tion of the tax position, including a de- scription of the relevant facts affecting the tax treatment of the position and informa- tion that reasonably can be expected to ap- prise the Service of the identity of the tax position and the nature of the issue. This is based upon and consistent with the in- formationrequiredtobereportedonForm 8275. In addition, the final instructions ex- pressly state that a corporation is not re- quired to include an assessment of the haz- ards of a tax position or an analysis of the support for or against the tax position. No reporting of administrative practice tax positions The proposal required that a corpora- tion report on Schedule UTP tax positions for which no reserve was recorded because the corporation determined it was the Ser- vice’s administrative practice not to raise the issue during an examination. Many commentators recommended elimination of this requirement because it would be un- duly burdensome for corporations to iden- tify, describe, and quantify these positions, and would provide the Service very little useful information. After reviewing the comments, the Ser- vice determined that the concerns about the administrability of this requirement outweighed the value of the information that may be included. Therefore, the Service has eliminated the proposed re- quirement to report tax positions for which 1 Public companies are required to disclose a tabular reconciliation of unrecognized tax benefits at the beginningandendofthereportingperiodintheir annual financial statements. FASB ASC Topic 740–10 Income Taxes. Income Taxes, Accounting Standards Codification Subtopic 740–10–5015A (Fin. Accounting Standards Bd. 2010). October 12, 20104292010–41 I.R.B. no reserve was created due to a widely-un- derstood administrative practice, but will continue to explore ways to assess the im- pact of these tax positions on overall tax compliance. Consistency between Schedule UTP reporting and financial statement reserve decisions Some commentators opposed the pro- posal because of their understanding that it required a corporation to report tax posi- tions for which no reserve was recorded in the corporation’s financial statements (in- cluding expectation-to-litigate positions) either because the position was highly certain or was immaterial in the context of the audited financial statements. Other commentators recommended that the in- structions clearly state that highly certain and immaterial tax positions not be re- quired to be reported on the schedule. The final instructions address these comments by clarifying that the schedule seeks the reporting of tax positions consis- tent with the reserve decisions made by the corporation for audited financial statement purposes. The instructions clarify that corporations are not required to report tax positions that are either immaterial under applicable financial accounting standards or are sufficiently certain so that no re- serve is required under those standards. A tax position that a corporation would litigate, if challenged, but that is clear and unambiguous or is immaterial is therefore notrequiredtobereportedonSchedule UTP. The instructions require reporting of tax positions taken in a return for which reserves were createdunder applicable fi- nancial accounting standards or for which no reserve was created because of an ex- pectation to litigate. A number of commentators requested that the instructions regarding unit of ac- count be clarified to more closely align the term with its meaning in FIN 48. The final instructions add an example to emphasize that the definition of unit account should be applied consistently with the guidance in FIN 48. Some commentators stated that the draft instructions provided inadequate guidance regarding the treatment of a unit of account for reporting tax positions by corporations using IFRS. The final instruc- tions continue to provide that a corporation that uses its entire tax year as a unit of ac- count under IFRS or another method of ac- counting may not do so for Schedule UTP reporting, but must identify a unit of ac- count based on FIN 48 principles or by us- ing any other level of detail that is consis- tently applied if that identification is rea- sonably expected to apprise the Service of the identity and nature of the issue under- lying a tax position taken in the tax return. Additional areas of clarification Many of the commentators provided specific comments on the language in the draft instructions, either asking for clar- ification of the language or suggesting changes to the language. In response, the following changes were made to the in- structions: •The instructions clarify that Schedule UTP requires the reporting of U.S. federal income tax positions but not foreign or state tax positions. Un- der the general reporting instructions, however, a corporation is required to report a United States federal income tax position taken in a return that arises out of uncertainty with regard to a foreign tax position (e.g., foreign tax credits) if a reserve for United States federal income tax was recorded to reflect that uncertainty. •The instructions clarify that a tax po- sition is reported on Schedule UTP once (1) a reserve for a tax position is recorded and (2) a tax position is taken on a return regardless of the order in which those two events occur. •The instructions clarify that corpora- tions report their own tax positions on Schedule UTP and do not report the tax positions of a related party. •The instructions clarify that tax posi- tions taken in years before 2010 need not be reported in 2010 or a later year even if a reserve is recorded in audited financial statements issued in 2010 or later. •The instructions clarify the reporting of recurring tax positions taken in mul- tiple years. •The instructions were revised to reflect the fact that Schedule UTP need not be filed for short tax years ending in 2010. •The instructions clarify that worldwide assets are used to determine whether a corporation that files a Form 1120-F (including a protective return) must file Schedule UTP. •The definition of audited financial statement was revised to clarify that an audited financial statement is one on which an independent auditor ex- presses an opinion and that compiled or reviewed financial statements are excluded from the definition of audited financial statement. •The definition of record a reserve was revised to clarify that it includes the recording of a reserve for United States federal income tax, interest, or penal- ties and to reinforcethat temporary dif- ferences must be reported on Schedule UTP. •The instructions clarify for corpora- tions included in multiple audited fi- nancial statements that the recording of a reserve in any audited financial state- ment in which the corporation is in- cluded triggers reporting of the tax po- sition if the tax position is taken on a return filed by the reporting corpora- tion. Privilege, work product doctrine, subject matter waiver, and policy of restraint comments A number of commentators asked that the proposal be withdrawn on the basis that the requirement to identify tax posi- tions along with the taxpayer’s views and assessments of those positions is inconsis- tent with the attorney-client privilege, the work product doctrine, and the tax prac- titioner privilege, because it may require disclosure of information that is based upon the advice of counsel and tax return preparers and may require the sharing of the mental impressions of these advisers. Many of these commentators were also concerned that disclosure of tax positions on Schedule UTP could enable adversaries to raise questions about subject-matter waiver with respect to confidential com- munications related to the disclosed tax positions. Other commentators asked that the Service confirm that claims of priv- ilege may continue to be asserted to the same extent permitted under current law. As set out above, the instructions no longer require the rationale and nature of the uncertainty to be included in the sched- ule’s concise description and further ex- plain that the concise description should 2010–41 I.R.B.430October 12, 2010 not include information related to the cor- poration’s assessment of the hazards of a tax position or an analysis of the support for or against the tax position. Many commentators raised issues about the effect of Schedule UTP’s reporting re- quirements on the Service’s policy of re- straint. Some saw Schedule UTP as incon- sistent with the policy of restraint, while others asked that the policy of restraint be expanded to cover documents used to prepare Schedule UTP. The Service is re- leasing, contemporaneously with the re- lease of this announcement, Announce- ment 2010–76, which modifies the policy of restraint in response to these concerns. Other comments — exclude certain tax positions and expectation to litigate Various commentators suggested ex- cluding certain types of tax positions from Schedule UTP reporting, including: •all transfer pricing positions; •temporary differences; •correlative effects of foreign tax posi- tions (e.g., effect of foreign tax posi- tions on U.S. earnings and profits or foreign tax credits); and •specified transactions or issues, such as permanent establishment, debt-eq- uity, tax-free combinations, or issues the Service has conceded in an audit of the reporting corporation during the prior five years, which should be in- cluded in an “angel list.” The final schedule and instructions do not incorporate any of the recommended exclusions. The Service believes that ex- cluding these types of tax positions from Schedule UTP reporting would be incon- sistent with the purpose and objectives underlying the new reporting requirement and that it is important to obtain reporting of all types of uncertain tax positions. The proposal required a corporation to report a tax position taken in a return for which no reserve was recorded based on the corporation’s expectation to litigate the position. A number of commentators suggested eliminating this requirement, either because it would be unduly burden- some to identify, describe, and quantify these positions, or because requiring re- porting of these positions on Schedule UTP departs from the Service’s stated objective of consistency with financial accounting standards. Many commenta- tors recommended clarifying the scope of tax positions required to be reported as expectation-to-litigate positions. Some commentators expressed concern that this requirement would require corporations to reassess at the time of preparing Sched- ule UTP all tax positions taken in the current-year return for which no reserve was previously recorded and report on the schedule each tax position the corporation might litigate if it had to do so in order to sustain the issue. A few commentators requested guidance on how the corpora- tion documents an expectation-to-litigate position. The final schedule and instructions re- tain the requirement to report tax positions taken in a return for which no reserve was recorded because of an expectation to lit- igate the position and incorporate revised instructions to clarify the meaning of ex- pectation to litigate. The final instruc- tions clarify that a corporation may rely on the reserve decisions it made for financial statement purposes to complete Schedule UTP and thus is not expected to reassess at the time the schedule is completed those reserve decisions previously made for fi- nancial statement purposes. The final in- structions do not provide guidance on how a corporation documents an expectation to litigate position. The Service expects that a corporation would continue to document its decision in the same way as it substan- tiates any decision not to record a reserve in its financial statements. Internal Directive and related changes The Service is issuing contemporane- ously with this Announcement a Directive concerning the use of Schedule UTP by the Service and its examination and research personnel. The Directive outlines the var- ious uses for the information reported on the schedule and indicates that initial pro- cessing of Schedule UTP information will be centralized to ensureappropriate review to identify trends and areas requiring fur- ther guidance to address uncertainty in the law. In addition, the Service will create a working group to study and revise the Schedule M–3,Net Income (Loss) Rec- onciliation for Corporations with Total Assets of $10 Million or More,toreduce duplicate reporting.The Service believes that the implementation of Schedule UTP is likely to reduce the need for some of the information currently reported on the Schedule M–3. The working group will beginitsworkin2011andwillworkwith external stakeholders to develop appropri- ate revisions to the Schedule M–3. The Service also will be expanding the Compliance Assurance Program (CAP) and making it permanent. The Service intends that the permanent CAP will con- sist of three phases: pre-CAP, which will allow a taxpayer to become current on the audit cycle while demonstrating the requisite transparency needed to be eligi- ble for CAP; CAP, which will resemble the existing CAP pilot program; and CAP maintenance, which will call for the re- duction of resourcesand taxpayer contact for those taxpayers in this phase as ap- propriate. Details will be contained in the upcoming CAP permanence guidance that is expected to be released shortly. Exchange of information with foreign governments Concerns have been raised that the Ser- vice will automatically disclose informa- tion reported on the Schedule UTP to for- eign governments. The Service intends to generally refrain from providing Schedule UTP information to other governments ex- cept in those circumstances in which there is a reciprocal arrangement with the for- eign government regarding uncertain-tax- position information, such as where the foreign government collects similar infor- mation for its own tax administration pur- poses and agrees to make this informa- tion available to the Service in a similar manner. In addition, even if reciprocity did exist, the Service would consider other factors in determining whether to disclose the information, including the relevance of the information to the foreign government, which in many cases would not be present. Future guidance and changes While the instructions provide initial guidance concerning filing of Schedule UTP, the Service recognizes that they do not address every issue raised by com- mentators. For example, the instructions do not address issues related to the report- ing of tax positions in the year in which October 12, 20104312010–41 I.R.B. a corporation is acquired or disposed of. As another example, a number of com- mentators recommended the instructions address the level or type of due diligence required to obtain reserve information from a related party or information from a pass-through entity relating to a corpo- ration’s uncertain tax position involving the pass-through entity. Other issues will arise as the Service and corporations gain experience with the schedule. The Service will continue to consider these issues and how best to provide further guidance. In addition, the Service will review the completeness and utility of Schedule UTPs filed by corporations, beginning with 2010 tax years, and modify the schedule and in- structions as appropriate. For example, the Service will review the reporting of trans- fer pricing positions on Schedule UTP and consider whether additional information, such as the specific country, character of income, or other facts are necessary to pro- vide sufficient information regarding the identity and nature of those tax positions. Penalties A number of commentators recom- mended that the Service expressly state that penalties will not be imposed, either permanently or during a transition period, for reporting failures regarding Schedule UTP. The final instructions do not provide specific instructions regarding penalties. The Service intends to review compliance regarding how the schedule is completed by corporations and to take appropriate en- forcement action, including the possibility of opening an examination or making an- other type of taxpayer contact, in those instances in which there appears to be a failure to complete the schedule or a fail- ure to report whether the corporation is required to complete the schedule. Coordination with Forms 8275 and 8886 Some commentators suggested the Service provide that in certain circum- stances a corporation need not file Form 8886,Reportable Transaction Disclosure Statement, if a reportable transaction is disclosed on Schedule UTP. A number of commentators recommended that the Service expressly provide that disclosure of a tax position on Schedule UTP con- stitutes disclosure of the position to avoid penalties under sections 6662(b)(6) and 6662(i) involving an underpayment due to a claimed tax benefit because of a transac- tion lacking economic substance. The final Schedule UTP instructions state that a complete and accurate disclo- sure of a tax position on the appropriate year’s Schedule UTP will be treated as if the corporation filed a Form 8275 or Form 8275-R regarding the tax position and that a separate Form 8275 or 8275-R need not be filed to avoid certain accuracy-related penalties with respect to that tax posi- tion. Consistent with Notice 2010–62, issued September 13, 2010, in the case of a transaction that is not a reportable trans- action, the Service will treat a complete and accurate disclosure of a tax position on Schedule UTP as satisfying the disclo- sure requirements of section 6662(i). The Service is studying other ways to reduce duplicate reporting and is considering whether complete and accurate disclosure on Schedule UTP would also, in appropri- ate circumstances, provide the information necessary to satisfy the reportable transac- tion disclosure requirements. The principal author of this announce- ment is Kathryn Zuba of the Office of the Associate Chief Counsel (Procedure and Administration). For further infor- mation regarding this announcement, con- tact Kathryn Zuba at (202) 622–3400 (not a toll-free call). Forquestions relating to Schedule UTP and instructions, contact Deborah Palacheck at (202) 283–8710 (not a toll-free call). Requests for Documents Provided to Independent Auditors, Policy of Restraint and Uncertain Tax Positions Announcement 2010–76 The Internal Revenue Service is ex- panding its policy of restraint in connec- tion with its decision to require certain corporations to file Schedule UTP,Uncer- tain Tax Position Statement, and will forgo seeking particular documents that relate to uncertain tax positions and the workpapers that document the completion of Schedule UTP. BACKGROUND Schedule UTP requires a specified class of corporations to provide a concise de- scription of each uncertain tax position for which the corporation or a related en- tity has recorded a reserve in its finan- cial statements, or for which no reserve has been recorded because of an expecta- tion of litigation. These uncertain tax po- sitions are identifiedby corporations dur- ing the process of preparing financial state- ments under applicable accounting stan- dards, such as FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109(FIN 48). 1 In reviewing and ver- ifying financial statements for compliance with FIN 48, independent auditors may ask for copies of legal opinions and other doc- uments in order to understand transactions, to understand the legal bases for the treat- ment of transactions, and to determine the adequacy of reserves for contingent tax li- abilities. POLICY OF RESTRAINT (1) If a document is otherwise privi- leged under the attorney-client privilege, the tax advice privilege in section 7525 of the Code, or the work product doctrine and the document was provided to an indepen- dent auditor as part of an audit of the tax- payer’s financial statements, the Service will not assert during an examination that privilege has been waived by such disclo- sure. (2) Paragraph (1) does not apply if (a) the taxpayer has engaged in any activity or taken any action, other than those described in that paragraph, that would waive the attorney-client privilege, the tax advice privilege in section 7525 of the Code, or the work product doctrine; or (b) a request for tax accrual work- papers is made under IRM 4.10.20.3 be- cause unusual circumstances exist or the taxpayer has claimed the benefits of one or more listed transactions. (3) Under current procedures, examin- ers request tax reconciliation workpapers as a matter of course. IRM 4.10.20.3. The taxpayer may redact the following infor- mation from any copies of tax reconcilia- tion workpapers relating to the preparation 1 Under the codification of accounting standards, the relevant portions of FIN 48 are now contained in Accounting Standards Codification subtopic 740–10,Income Taxes. FASB ASC 740–10. 2010–41 I.R.B.432October 12, 2010 of Schedule UTP it is asked to produce dur- ing an examination: (a) working drafts, revisions, or comments concerning the concise descrip- tion of tax positions reported on Schedule UTP; (b) the amount of any reserve re- lated to a tax position reported on Schedule UTP; and (c) computations determining the ranking of tax positions to be reported on Schedule UTP or the designation of a tax position as a Major Tax Position. (4) Other than requiring the disclosure of the information on the schedule, the re- quirement to file Schedule UTP does not affect the policy of restraint. (5) This announcement describes the policy of the Service for seeking the docu- ments described in paragraph 1 and 3 from taxpayers and third parties during an ex- amination. It does not create or imply the application of the attorney-client privilege, the tax advice privilege under section 7525 of the Code, or the work product doctrine to any document of any taxpayer or third party. (6) These modifications to the policy of restraint will be incorporated into IRM 4.10.20. DRAFTING INFORMATION The principal author of this announce- ment is Kathryn Zuba of the office of Associate Chief Counsel (Procedure and Administration). For further informa- tion regarding this announcement, contact Kathryn Zuba at (202) 622–3400 (not a toll-free call). Deletions From Cumulative List of Organizations Contributions to Which are Deductible Under Section 170 of the Code; Correction Announcement 2010–77 This document contains a corrected Announcement 2010–59. Announcement 2010–59 should have read: This document contains a correction to Announcement 2010–47, 2010–30 I.R.B. 173, which contained an incorrect taxpayer name. The taxpayer name incor- rectly read: “Thorek Hospital & Medical Center of Chicago, IL”. The taxpayer name should have read: “Thorek Hospital & Medical Center Self Insurance Trust Fund of Chicago, IL”. FOR FURTHER INFORMATION CONTACT: Flora McClain 1100 Commerce Street MS 4920DAL Dallas, TX 75242 214–413–5462 Announcement of Disciplinary Sanctions From the Office of Professional Responsibility Announcement 2010-78 TheOfficeofProfessionalResponsi- bility (OPR) announcesrecent disciplinary sanctions involving attorneys, certified public accountants, enrolled agents, en- rolled actuaries, enrolled retirement plan agents, and appraisers. These individuals are subject to the regulations governing practice before the Internal Revenue Ser- vice (IRS), which are set out in Title 31, Code of Federal Regulations, Part 10, and which are published in pamphlet form as Treasury Department Circular No. 230. The regulations prescribe the duties and restrictions relating to such practice and prescribe the disciplinary sanctions for violating the regulations. The disciplinary sanctions to be im- posed for violation of the regulations are: Disbarred from practice before the IRS—An individual who is disbarred is not eligible to represent taxpayers before the IRS. Suspended from practice before the IRS—An individual who is suspended is not eligible to represent taxpayers before the IRS during the term of the suspension. Censured in practice before the IRS—Censure is a public reprimand. Un- like disbarment or suspension, censure does not affect an individual’s eligibility to represent taxpayers before the IRS, but OPR may subject the individual’s future representations to conditions designed to promote high standards of conduct. Monetary penalty—A monetary penalty may be imposed on an individual who engages in conduct subject to sanc- tion or on an employer, firm, or entity if the individual was acting on its behalf and if it knew, or reasonably should have known, of the individual’s conduct. Disqualification of appraiser—An appraiser who is disqualified is barred from presenting evidence or testimony in any administrative proceeding before the Department of the Treasury or the IRS. Under the regulations, attorneys, cer- tified public accountants, enrolled agents, enrolled actuaries, and enrolled retirement plan agents may not assist, or accept assis- tance from, individuals who are suspended or disbarred with respect to matters consti- tuting practice (i.e., representation) before theIRS,andtheymaynotaidorabetsus- pended or disbarred individuals to practice before the IRS. Disciplinary sanctions are described in these terms: Disbarred by decision after hearing, Suspended by decision after hearing, Censured by decision after hearing, Monetary penalty imposed after hear- ing, and Disqualified after hearing—An administrative law judge (ALJ) conducted an evidentiary hearing upon OPR’s com- plaint alleging violation of the regulations and issued a decision imposing one of October 12, 20104332010–41 I.R.B. these sanctions. After 30 days from the issuance of the decision, in the absence of an appeal, the ALJ’s decision became the final agency decision. Disbarred by default decision, Sus- pended by default decision, Censured by default decision, Monetary penalty im- posed by default decision, and Disqual- ified by default decision—An ALJ, after findingthatnoanswertoOPR’scomplaint had been filed, granted OPR’s motion for a default judgment and issued a decision im- posing one of these sanctions. Disbarment by decision on appeal, Suspended by decision on appeal, Cen- sured by decision on appeal, Monetary penalty imposed by decision on ap- peal, and Disqualified by decision on appeal—The decision of the ALJ was appealed to the agency appeal authority, acting as the delegate of the Secretary of the Treasury, and the appeal authority issued a decision imposing one of these sanctions. Disbarred by consent, Suspended by consent, Censured by consent, Mone- tary penalty imposed by consent, and Disqualified by consent—In lieu of a disciplinary proceeding being instituted or continued, an individual offered a con- sent to one of these sanctions and OPR accepted the offer. Typically, an offer of consent will provide for: suspension for an indefinite term; conditions that the individual must observe during the sus- pension; and the individual’s opportunity, after a stated number of months, to file with OPR a petition for reinstatement af- firming compliance with the terms of the consent and affirming current eligibility to practice (i.e., an active professional license or active enrollment status). An enrolled agent or an enrolled retirement plan agent may also offer to resign in order to avoid a disciplinary proceeding. Suspended by decision in expedited proceeding, Suspended by default de- cision in expedited proceeding, Sus- pended by consent in expedited pro- ceeding—OPR instituted an expedited proceeding for suspension (based on cer- tain limited grounds, including loss of a professional licenseand criminal convic- tions). OPR has authority to disclose the grounds for disciplinary sanctions in these situations: (1) an ALJ or the Secretary’s delegate on appeal has issued a decision on or after September 26, 2007, which was theeffectivedateofamendmentstothe regulations that permit making such deci- sions publicly available; (2) the individual has settled a disciplinary case by signing OPR’s “consent to sanction” form, which requires consenting individuals to admit to one or more violations of the regulations and to consent to the disclosure of the in- dividual’s own return information related to the admitted violations (for example, failure to file Federal income tax returns); or (3) OPR has issued a decision in an expedited proceeding for suspension. Announcements of disciplinary sanc- tions appear in the Internal Revenue Bul- letin at the earliest practicable date. The sanctions announced below are alphabet- ized first by the names of states and sec- ond by the last names of individuals. Un- less otherwise indicated, section numbers (e.g., § 10.51) refer to the regulations. City & StateNameProfessionalDisciplinary SanctionEffective Date(s) Designation California West HollywoodKrane, Matthew G.AttorneySuspended by default decision in expedited proceeding under § 10.82 (suspension of attorney license) Indefinite from August 10, 2010 SacramentoMurray, William R.CPASuspended by default decision in expedited proceeding under § 10.82 (suspension of CPA license) Indefinite from August 10, 2010 CerritosTiongson, Anthony A. CPASuspended by decision in expedited proceeding under § 10.82 (conviction under 26 U.S.C. § 7207, filing false tax return) Indefinite from August 9, 2010 Florida Fort LauderdaleShepherd, Robert L.AttorneySuspended by default decision in expedited proceeding under § 10.82 (attorney disbarment in New York) Indefinite from August 10, 2010 2010–41 I.R.B.434October 12, 2010 City & StateNameProfessionalDisciplinary SanctionEffective Date(s) Designation Kentucky LouisvilleAtherton, Bruce D.AttorneySuspended by decision in expedited proceeding under § 10.82 (attorney disbarment) Indefinite from September 7, 2010 Nebraska KearneyHager, Janelle M.CPASuspended by default decision in expedited proceeding under § 10.82 (revocation of CPA license) Indefinite from August 10, 2010 New York GarrisonAzznara, Nat J.AttorneySuspended by default decision in expedited proceeding under § 10.82 (attorney disbarment) Indefinite from August 10, 2010 Shepherd, Robert L., See Florida WaccabucSimels, Robert M.AttorneySuspended by default decision in expedited proceeding under § 10.82 (conviction under 18 U.S.C. § 1512, conspiracy to obstruct justice, and attempt to obstruct justice; 18 U.S.C. § 201, bribery; and 18 U.S.C. § 2512, importation of eavesdropping equipment) Indefinite from August 10, 2010 North Carolina CharlotteRoss, Walter H.CPASuspended by decision in expedited proceeding under § 10.82 (suspension of CPA license) Indefinite from August 16, 2010 October 12, 20104352010–41 I.R.B. Definition of Terms Revenue rulings and revenue procedures (hereinafter referred to as “rulings”) that have an effect on previous rulings use the following defined terms to describe the ef- fect: Amplifieddescribes a situation where no change is being made in a prior pub- lished position, but the prior position is be- ingextendedtoapplytoavariationofthe fact situation set forth therein. Thus, if an earlier ruling held that a principle ap- plied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare withmodi- fied,below). Clarifiedis used in those instances where the language in a prior ruling is be- ing made clear because the language has caused, or may cause, some confusion. It is not used where a position in a prior ruling is being changed. Distinguisheddescribes a situation where a ruling mentions a previously pub- lished ruling and points out an essential difference between them. Modifiedis used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a published position. (Compare withamplifiedandclarified, above). Obsoleteddescribes a previously pub- lished ruling that is not considered deter- minative with respect to future transac- tions. This term is most commonly used in a ruling that lists previously published rul- ings that are obsoleted because of changes in laws or regulations. A ruling may also be obsoleted because the substance has been included in regulations subsequently adopted. Revokeddescribes situations where the position in the previously published ruling is not correct and the correct position is beingstatedinanewruling. Supersededdescribes a situation where the new ruling does nothing more than re- state the substance and situation of a previ- ously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same po- sition published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single rul- ing a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new rul- ing does more than restate the substance of a prior ruling, a combination of terms is used. For example,modifiedandsu- persededdescribes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously pub- lished ruling is first modified and then, as modified, is superseded. Supplementedis used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original rul- ing has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the ad- ditions, and supersedes all prior rulings in the series. Suspendedis used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study. Abbreviations The fol lowing abbreviations in current use and for merly used will appear in material publis hedintheBulletin. A—Individual. Acq.—A cquiescence. B—Individual. BE—Beneficiary. BK—Bank . B.T.A.—Board of Tax Appeals. C—Individual. C.B.—Cu mulative Bulletin. CFR—Code of Federal Regulations. CI—City. COOP—Coo perative. Ct.D.—Court Decision. CY—County. D—Decede nt. DC—Dummy Corporation. DE—Donee. Del. Order —Delegation Order. DISC—Domestic International Sales Corporation. DR—Donor. E—Estate. EE—Employee. E.O.—Executive Order. ER—Emp loyer. ERISA—Employee Retirement Income Security Act. EX—Executor. F—Fiduc iary. FC—Foreign Country. FICA—Federal Insurance Contributions Act. FISC—Fo reign International Sales Company. FPH—Foreign Personal Holding Company. F.R.—Federal Register. FUTA—Fed eral Unemployment Tax Act. FX—Foreign corporation. G.C.M.—Chief Counsel’s Memorandum. GE—Grante e. GP—General Partner. GR—Grantor. IC—Insura nce Company. I.R.B.—Internal Revenue Bulletin. LE—Lessee. LP—Limited Partner. LR—Lessor. M—Minor. Nonacq.—No nacquiescence. O—Organization. P—Parent Corporation. PHC—Persona l Holding Company. PO—Possession of the U.S. PR—Partner. PRS—Pa rtnership. PTE—Prohibited Transaction Exemption. Pub. L.—Public Law. REIT—Re al Estate Investment Trust. Rev. Proc.—Revenue Procedure. Rev. Rul.—Revenue Ruling. S—Subsi diary. S.P.R.—Statement of Procedural Rules. Stat.—Statutes at Large. T—Target Corporation. T.C.—Tax Court. T.D.—Treasury Decision. TFE—Trans feree. TFR—Transferor. T.I.R.—Technical Information Release. TP—Taxpay er. TR—Trust. TT—Trustee. U.S.C.—Uni ted States Code. X—Corporation. Y—Corporation. Z—Corporat ion. 2010–41 I.R.B.iOctober 12, 2010 Numerical Finding List 1 Bulletins 2010–27 through 2010–41 Announcements: 2010-43, 2010-27 I.R.B.42 2010-44, 2010-28 I.R.B.54 2010-45, 2010-29 I.R.B.87 2010-46, 2010-29 I.R.B.87 2010-47, 2010-30 I.R.B.173 2010-48, 2010-32 I.R.B.234 2010-49, 2010-34 I.R.B.272 2010-50, 2010-33 I.R.B.260 2010-51, 2010-33 I.R.B.261 2010-52, 2010-36 I.R.B.315 2010-53, 2010-36 I.R.B.323 2010-54, 2010-38 I.R.B.386 2010-55, 2010-37 I.R.B.346 2010-56, 2010-39 I.R.B.398 2010-57, 2010-38 I.R.B.386 2010-58, 2010-38 I.R.B.387 2010-59, 2010-39 I.R.B.399 2010-60, 2010-40 I.R.B.417 2010-61, 2010-40 I.R.B.417 2010-62, 2010-40 I.R.B.417 2010-63, 2010-40 I.R.B.417 2010-64, 2010-40 I.R.B.418 2010-65, 2010-40 I.R.B.418 2010-66, 2010-40 I.R.B.418 2010-67, 2010-40 I.R.B.418 2010-68, 2010-40 I.R.B.418 2010-69, 2010-40 I.R.B.418 2010-70, 2010-40 I.R.B.418 2010-71, 2010-40 I.R.B.418 2010-72, 2010-40 I.R.B.419 2010-73, 2010-40 I.R.B.419 2010-74, 2010-40 I.R.B.419 2010-75, 2010-41 I.R.B.428 2010-76, 2010-41 I.R.B.432 2010-77, 2010-41 I.R.B.433 2010-78, 2010-41 I.R.B.433 Notices: 2010-48, 2010-27 I.R.B.9 2010-49, 2010-27 I.R.B.10 2010-50, 2010-27 I.R.B.12 2010-51, 2010-29 I.R.B.83 2010-52, 2010-30 I.R.B.88 2010-53, 2010-31 I.R.B.182 2010-54, 2010-40 I.R.B.403 2010-55, 2010-33 I.R.B.253 2010-56, 2010-33 I.R.B.254 2010-57, 2010-34 I.R.B.267 2010-58, 2010-37 I.R.B.326 2010-59, 2010-39 I.R.B.396 2010-60, 2010-37 I.R.B.329 Notices— Continued: 2010-61, 2010-40 I.R.B.408 2010-62, 2010-40 I.R.B.411 2010-63, 2010-41 I.R.B.420 2010-64, 2010-41 I.R.B.421 2010-65, 2010-41 I.R.B.424 Proposed Regulations: REG-139343-08, 2010-33 I.R.B.256 REG-151605-09, 2010-31 I.R.B.184 REG-112841-10, 2010-27 I.R.B.41 REG-118412-10, 2010-29 I.R.B.85 REG-119046-10, 2010-40 I.R.B.415 REG-120391-10, 2010-35 I.R.B.310 REG-120399-10, 2010-32 I.R.B.239 Revenue Procedures: 2010-25, 2010-27 I.R.B.16 2010-26, 2010-30 I.R.B.91 2010-27, 2010-31 I.R.B.183 2010-28, 2010-34 I.R.B.270 2010-29, 2010-35 I.R.B.309 2010-30, 2010-36 I.R.B.316 2010-31, 2010-40 I.R.B.413 2010-32, 2010-36 I.R.B.320 2010-33, 2010-38 I.R.B.347 2010-34, 2010-41 I.R.B.426 Revenue Rulings: 2010-18, 2010-27 I.R.B.1 2010-19, 2010-31 I.R.B.174 2010-20, 2010-36 I.R.B.312 2010-21, 2010-39 I.R.B.388 2010-22, 2010-39 I.R.B.388 2010-23, 2010-39 I.R.B.388 2010-24, 2010-40 I.R.B.400 Tax Conventions: 2010-48, 2010-32 I.R.B.234 2010-52, 2010-36 I.R.B.315 Treasury Decisions: 9486, 2010-27 I.R.B.3 9487, 2010-28 I.R.B.48 9488, 2010-28 I.R.B.51 9489, 2010-29 I.R.B.55 9490, 2010-31 I.R.B.176 9491, 2010-32 I.R.B.186 9492, 2010-33 I.R.B.242 9493, 2010-35 I.R.B.273 1 A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2010–1 through 2010–26 is in Internal Revenue Bulletin 2010–26, dated June 28, 2010. October 12, 2010ii2010–41 I.R.B. Finding List of Current Actions on Previously Published Items 1 Bulletins 2010–27 through 2010–41 Notices: 96-53 Modified by Notice 2010-59, 2010-39 I.R.B.396 2003-19 Revoked by Notice 2010-53, 2010-31 I.R.B.182 2004-2 Modified by Notice 2010-59, 2010-39 I.R.B.396 2004-50 Modified by Notice 2010-59, 2010-39 I.R.B.396 2005-90 Supplemented by Notice 2010-65, 2010-41 I.R.B.424 2006-69 Amplified by Notice 2010-59, 2010-39 I.R.B.396 2008-51 Modified by Notice 2010-59, 2010-39 I.R.B.396 2008-52 Modified by Notice 2010-59, 2010-39 I.R.B.396 2009-47 Obsoleted by Rev. Proc. 2010-28, 2010-34 I.R.B.270 2009-80 Corrected by Ann. 2010-59, 2010-39 I.R.B.399 2009-90 Superseded by Notice 2010-54, 2010-40 I.R.B.403 Proposed Regulations: REG-115037-00 Withdrawn by Ann. 2010-60, 2010-40 I.R.B.417 REG-146893-02 Withdrawn by Ann. 2010-60, 2010-40 I.R.B.417 Revenue Procedures: 81-18 Obsoleted by Rev. Proc. 2010-27, 2010-31 I.R.B.183 Revenue Procedures— Continued: 2007-44 Modified by Notice 2010-48, 2010-27 I.R.B.9 2009-18 Obsoleted in part by Rev. Proc. 2010-25, 2010-27 I.R.B.16 2009-30 Superseded by Rev. Proc. 2010-26, 2010-30 I.R.B.91 2009-35 Superseded by Rev. Proc. 2010-33, 2010-38 I.R.B.347 2010-3 Modified by Notice 2010-62, 2010-40 I.R.B.411 Revenue Rulings: 2003-102 Obsoleted by Rev. Rul. 2010-23, 2010-39 I.R.B.388 Treasury Decisions: 9487 Corrected by Ann. 2010-50, 2010-33 I.R.B.260 1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2010–1 through 2010–26 is in Internal Revenue Bulletin 2010–26, dated June 28, 2010. 2010–41 I.R.B.iiiOctober 12, 2010 October 12, 20102010–41 I.R.B. 2010–41 I.R.B.October 12, 2010 October 12, 20102010–41 I.R.B. INTERNAL REVENUE BULLETIN The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superin- tendent of Documents when their subscriptions must be renewed. CUMULATIVE BULLETINS The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are sold on a single copy basis andare notincluded as part of the subscription to the Internal Revenue Bulletin. Subscribers to the weekly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the Superintendent of Documents. ACCESS THE INTERNAL REVENUE BULLETIN ON THE INTERNET You may view the Internal Revenue Bulletin on the Internet at www.irs.gov. Select Businesses. Under Businesses Topics, select More Topics. Then select Internal Revenue Bulletins. INTERNAL REVENUE BULLETINS ON CD-ROM Internal Revenue Bulletins are available annually as part ofPublication 1796 (Tax Products CD-ROM). The CD-ROM can be purchased from National Technical Information Service (NTIS) on the Internet at www.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. HOW TO ORDER Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance, detach entire page, and mail to the Superintendent of Documents, P.O. Box 371954, Pittsburgh PA, 15250–7954. Please allow two to six weeks, plus mailing time, for delivery. WE WELCOME COMMENTS ABOUT THE INTERNAL REVENUE BULLETIN If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can 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:T:T:SP, Washington, DC 20224. Internal Revenue Service W ashington,DC20224 Official Business Penalty for Private Use, $300
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