Internal Revenue Bulletin 2011-39 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 201
1-39
September 26, 20
11
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
Rev. Rul. 2011–18, page 428.
Interest rates; underpayments and overpayments.The
rates for interest determined under section 6621 of the Code
for the calendar quarter beginning October 1, 2011, will
be 3 percent for overpayments (2 percent in the case of a
corporation), 3 percent for underpayments, and 5 percent for
large corporate underpayments. The rate of interest paid on
the portion of a corporate overpayment exceeding $10,000
will be 0.5 percent.
T.D. 9535, page 415.
Final regulations under section 901 of the Code provide guid-
ance relating to the determination of the amount of taxes paid
for purposes of the foreign tax credit that involves structural
passive investment arrangements.
T.D. 9536, page 426.
REG–126519–11, page 452.
Final, temporary, and proposed regulations under section 901
of the Code provide guidance relating to the determination of
the amount of taxes paid for purposes of the foreign tax credit.
The regulations affect taxpayers that claim direct and indirect
foreign tax credit.
T.D. 9542, page 411.
Final regulations under sections 195, 248, and 709 of the
Code provide guidance for making elections to amortize ex-
penses.
Rev. Proc. 2011–45, page 449.
This procedure provides domestic asset/liability percentages
and domestic investment yields needed by foreign life insur-
ance companies and foreign property and liability insurance
companies to compute their minimum effectively connected
net investment income under section 842(b) of the Code for
taxable years beginning after December 31, 2009.
EMPLOYEE PLANS
T.D. 9541, page 438.
REG–120391–10, page 451.
Interim final and proposed regulations under section 9815 of
the Code implement the rules for group health plans and health
insurance coverage in the group and individual markets un-
der provisions of the Affordable Care Act regarding preventive
health services.
Rev. Proc. 2011–44, page 446.
This procedure supplements the procedures for requesting a
letter ruling under section 414(e) of the Code relating to church
plans. This procedure requires that plan participants and other
interested persons receive a notice in connection with a letter
ruling request under section 414(e) for a qualified plan, requires
that a copy of the notice be submitted to the IRS as part of the
ruling request, and provides procedures for the IRS to receive
and consider comments relating to the ruling request from in-
terested persons. Rev. Proc. 2011–4 (and any applicable
predecessor revenue procedure) modified.
(Continued on the next page)
Announcements of Disbarments and Suspensions begin on page 453.
Fi
nding Lists begin on page ii.
Index for July through September begins on page iv.

EXCISE TAX
T.D. 9541, page 438.
REG–120391–10, page 451.
Interim final and proposed regulations under section 9815 of
the Code implement the rules for group health plans and health
insurance coverage in the group and individual markets un-
der provisions of the Affordable Care Act regarding preventive
health services.
Notice 2011–69, page 445.
This notice describes the relief the IRS will provide in connection
with the retroactive extension of certain aviation related excise
taxes by the Airport and Airway Extension Act of 2011, Part IV.
September 26, 20112011–39 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.
2011–39 I.R.B.September 26, 2011

September 26, 20112011–39 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 195.—
Start-Up
Expenditures
26 CFR 1.195–1: Election to amortize start-up ex-
penditures.
T.D. 9542
Elections Regarding
Start-up Expenditures,
Corporation Organizational
Expenditures, and Partnership
Organizational Expenses
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations and removal
of temporary regulations.
SUMMARY: This document contains fi-
nal regulations relating to elections to
deduct start-up expenditures, organiza-
tional expenditures of corporations, and
organizational expenses of partnerships.
The American Jobs Creation Act of 2004
amended the Internal Revenue Code to
permit the optional deduction of a lim-
ited amount of these types of expenses
that are paid or incurred after October 22,
2004. The regulations affect taxpayers
that pay or incur these expenses and pro-
vide guidance on how to elect to deduct
the expenses in accordance with the new
rules.
DATES:Effective Date:These regulations
are effective on August 16, 2011.
Applicability Dates:For dates of appli-
cability, see §§1.195–1(d), 1.248–1(f), and
1.709–1(b)(5).
FOR FURTHER INFORMATION
CONTACT: R. Matthew Kelley, (202)
622–7900 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains final amend-
ments to the Income Tax Regulations
(26 CFR Part 1) under sections 195, 248,
and 709 of the Internal Revenue Code to
reflect amendments made by section 902
of the American Jobs Creation Act of 2004
(Public Law 10
8–357, 118 Stat. 1418) (the
Act). The amen
dments made by section
902 of the Act a
re effective for amounts
paid or incur
red after October 22, 2004,
thedateofth
e enactment of the Act.
As amended by
section902(a)ofthe
Act, section
195(b) allows anelecting tax-
payer to dedu
ct, in the taxable year in
which the tax
payer begins an active trade
or business
, an amount equal to the lesser
of (1) the am
ount of the start-up expen-
ditures tha
t relate to the active trade or
business, o
r (2) $5,000, reduced (but not
below zero
) by the amount by which the
start-up e
xpenditures exceed $50,000. The
remainder
of the start-up expenditures is
deductibl
e ratably over the 180-month pe-
riod begin
ning with the month in which the
active tr
ade or business begins.
As amende
dbysection902(b)ofthe
Act, sect
ion 248(a) allows an electing
corporat
ion to deduct, in the taxable year
in which t
he corporation begins business,
an amount
equal to the lesser of (1) the
amount of
the organizational expenditures
of the co
rporation, or (2) $5,000, reduced
(but not
below zero) by the amount by
which th
e organizational expenditures
exceed $
50,000. The remainder of the
organi
zational expenditures is deductible
ratabl
y over the 180-month period begin-
ning wi
th the month in which the corpora-
tion be
gins business.
As amen
dedbysection902(c)ofthe
Act, se
ction 709(b) allows an electing
partne
rship to deduct, in the taxable year
in whi
ch the partnership begins business,
an amo
unt equal to the lesser of (1) the
amoun
t of the organizational expenses of
the pa
rtnership, or (2) $5,000, reduced
(but n
ot below zero) by the amount by
whic
h the organizational expenses exceed
$50,
000. The remainder of the organiza-
tion
al expenses is deductible ratably over
the 1
80-month period beginning with the
mont
h in which the partnership begins
busi
ness.
On Ju
ly 8, 2008, temporary regulations
(T.D
. 9411, 2008–34 I.R.B. 398) regarding
ele
ctions to deduct start-up and organi-
zat
ional expenditures under sections 195,
248
, and 709 were published in theFed-
era
lRegister(73 FR 38910). A notice of
pro
posed rulemaking (REG–164965–04,
2008–34 I.R.B
. 450) cross-referencing
the temporary
regulations was published
in theFederal
Register(73 FR 38940)
onthesameda
y. One written comment
responding t
o the notice of proposed rule-
making was re
ceived. No public hearing
was requeste
d or held. After considera-
tion of the c
omment, the regulations are
adopted as a
mendedbythisTreasurydeci-
sion. The co
mment is discussed elsewhere
in this prea
mble.
These regul
ations apply to expenditures
paid or incu
rred after August 16, 2011.
However, t
axpayers may apply all the pro-
visions of
these regulations to expendi-
tures paid
or incurred under sections 195,
248, and 70
9 after October 22, 2004, pro-
vided the p
eriod of limitations on assess-
ment of ta
x has not expired for the year
the elect
ion under section 195, 248, or 709
is deemed
made. Expenditures paid or in-
curred on
or before October 22, 2004, may
be amorti
zed over a period of not less than
60 month
s as provided for under prior law.
Summary of Comment
The commentator recommended that
the final regulations clarify what is meant
in the proposed regulations by “clearly
electing to capitalize” start-up and or-
ganizational costs. The commentator
noted that it is unclear whether a tax-
payer that unintentionally does not deduct
or amortize start-up and organizational
costs could be considered to have “clearly
elected to capitalize” them. The IRS and
the Treasury Department agree with the
recommendation to clarify the election
requirements, and the final regulations
provide that a taxpayer wishing to make
an election to capitalize start-up and orga-
nizational costs must “affirmatively elect
to capitalize” the costs on a timely filed
Federal income tax return.
Special Analyses
It has been determined that this Trea-
sury decision is not asignificant regula-
tory action as defined in Executive Order
12866 as supplemented by Executive Or-
der 13563. Therefore, a regulatory assess-
ment is not required. It also has been de-
termined that section 553(b) of the Admin-
2011–39 I.R.B.411September 26, 2011

istrative Procedure Act (5 U.S.C. chapter
5) does not apply to these regulations. Be-
cause the regulations do not impose a col-
lection of information on small entities, the
Regulatory Flexibility Act (5 U.S.C. chap-
ter 6) does not apply. Pursuant to section
7805(f) of the Code, the notice of proposed
rulemaking preceding these final regula-
tions was submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on its impact on
small business.
Drafting Information
The principal author of these regula-
tions is R. Matthew Kelley of the Office of
the Associate Chief Counsel (Income Tax
& Accounting). However, other person-
nel from the IRS and Treasury Department
participated in their development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.195–1 is revised to
read as follows:
§1.195–1 Election to amortize start-up
expenditures.
(a)In general. Under section 195(b), a
taxpayer may elect to amortize start-up ex-
penditures as defined in section 195(c)(1).
In the taxable year in which a taxpayer
begins an active trade or business, an
electing taxpayer may deduct an amount
equal to the lesser of the amount of the
start-up expenditures that relate to the ac-
tive trade or business, or $5,000 (reduced
(but not below zero) by the amount by
which the start-up expenditures exceed
$50,000). The remainder of the start-up
expenditures is deductible ratably over
the 180-month period beginning with the
month in which the active trade or busi-
ness begins. All start-up expenditures that
relate to the active trade or business are
considered in determining whether the
start-up expenditures exceed $50,000, in-
cluding expenditures incurred on or before
October 22, 2004.
(b)Time and manner of making elec-
tion. A taxpayer is deemed to have made
an election under section 195(b) to amor-
tize start-up expenditures as defined in sec-
tion 195(c)(1) for the taxable year in which
the active trade or business to which the
expenditures relate begins. A taxpayer
may choose to forgo the deemed election
by affirmatively electing to capitalize its
start-up expenditures on a timely filed Fed-
eral income tax return (including exten-
sions) for the taxable year in which the
active trade or business to which the ex-
penditures relate begins. The election ei-
ther to amortize start-up expenditures un-
der section 195(b) or to capitalize start-up
expenditures is irrevocable and applies to
all start-up expenditures that are related to
the active trade or business. A change in
the characterization ofanitemasastart-up
expenditure is a change in method of ac-
counting to which sections 446 and 481(a)
apply if the taxpayer treated the item con-
sistently for two or more taxable years.
A change in the determination of the tax-
able year in which the active trade or busi-
ness begins also is treated as a change in
method of accounting if the taxpayer amor-
tized start-up expenditures for two or more
taxable years.
(c)Examples. The following examples
illustrate the application of this section:
Example 1.Expenditures of $5,000 or less.Cor-
poration X, a calendar year taxpayer, incurs $3,000
of start-up expenditures after October 22, 2004, that
relate to an active trade or business that begins on
July 1, 2011. Under paragraph (b) of this section,
Corporation X is deemed to have elected to amortize
start-up expenditures under section 195(b) in 2011.
Therefore, CorporationXmaydeducttheentire
amount of the start-up expenditures in 2011, the
taxable year in which the active trade or business
begins.
Example 2.Expenditures of more than $5,000
but less than or equal to $50,000. The facts are the
same as inExample 1except that Corporation X in-
curs start-up expenditures of $41,000. Under para-
graph (b) of this section, Corporation X is deemed
to have elected to amortize start-up expenditures un-
der section 195(b) in 2011. Therefore, Corporation X
may deduct $5,000 and the portion of the remaining
$36,000 that is allocableto July through December
of 2011 ($36,000/180 x 6 = $1,200) in 2011, the tax-
able year in which the active trade or business begins.
Corporation X may amortize the remaining $34,800
($36,000 - $1,200 = $34,800) ratably over the remain-
ing 174 months.
Example 3.Subsequent change in the charac-
terization of an item. Thefactsarethesameasin
Example 2except that Corporation X determines in
2013 that Corporation X incurred $10,000 for an ad-
ditional start-up expenditure erroneously deducted in
2011 under section 162 as a business expense. Un-
der paragraph (b) of this section, Corporation X is
deemed to have elected to amortize start-up expendi-
tures under section 195(b) in 2011, including the ad-
ditional $10,000 of start-up expenditures. Corpora-
tion X is using an impermissible method of account-
ing for the additional $10,000 of start-up expenditures
and must change its method under §1.446–1(e) and
the applicable general administrative procedures in
effect in 2013.
Example 4.Subsequent redetermination of year
in which business begins. The facts are the same
as inExample 2except that, in 2012, Corporation
X deducted the start-up expenditures allocable to
January through December of 2012 ($36,000/180 x
12 = $2,400). In addition, in 2013 it is determined
that Corporation X actually began business in 2012.
Under paragraph (b) of this section, Corporation
X is deemed to have elected to amortize start-up
expenditures under section 195(b) in 2012. Corpora-
tion X impermissibly deducted start-up expenditures
in 2011, and incorrectly determined the amount of
start-up expenditures deducted in 2012. Therefore,
CorporationXisusinganimpermissiblemethodof
accounting for the start-up expenditures and must
change its method under §1.446–1(e) and the appli-
cable general administrative procedures in effect in
2013.
Example 5.Expenditures of more than $50,000
but less than or equal to $55,000. The facts are the
same as inExample 1except that Corporation X
incurs start-up expenditures of $54,500. Under para-
graph (b) of this section, Corporation X is deemed
to have elected to amortize start-up expenditures
under section 195(b) in 2011. Therefore, Corpora-
tion X may deduct $500 ($5,000 - $4,500) and the
portion of the remaining $54,000 that is allocable
to July through December of 2011 ($54,000/180 x
6 = $1,800) in 2011, the taxable year in which the
active trade or business begins. Corporation X may
amortize the remaining $52,200 ($54,000 - $1,800 =
$52,200) ratably over the remaining 174 months.
Example 6.Expenditures of more than $55,000.
The facts are the same as inExample 1except
that Corporation X incurs start-up expenditures of
$450,000. Under paragraph (b) of this section,
Corporation X is deemed to have elected to amor-
tize start-up expenditures under section 195(b) in
2011. Therefore, Corporation X may deduct the
amounts allocable to July through December of 2011
($450,000/180x6=$15,000)in2011,thetaxable
year in which the active trade or business begins.
Corporation X may amortize the remaining $435,000
($450,000 - $15,000 = $435,000) ratably over the
remaining 174 months.
(d)Effective/applicability date.This
section applies to start-up expendi-
tures paid or incurred after August 16,
2011. However, taxpayers may ap-
ply all the provisions of this section to
start-up expenditures paid or incurred af-
ter October 22, 2004, provided that the
period of limitations on assessment of tax
for the year the election under paragraph
September 26, 20114122011–39 I.R.B.

(b) of this section is deemed made has not
expired. For start-up expenditures paid or
incurred on or before September 8, 2008,
taxpayers may instead apply §1.195–1, as
in effect prior to that date (§1.195–1 as
contained in 26 CFR part 1 edition revised
as of April 1, 2008).
§1.195–1T [Removed]
Par. 3. Section 1.195–1T is removed.
Par. 4. Section 1.248–1 is amended by
revising paragraphs (a) and (c), and adding
paragraphs (d), (e), and (f) to read as fol-
lows:
§1.248–1 Election to amortize
organizational expenditures.
(a)In general. Under section 248(a),
a corporation may elect to amortize or-
ganizational expenditures as defined in
section 248(b) and §1.248–1(b). In the
taxable year in which a corporation be-
gins business, an electing corporation may
deduct an amount equal to the lesser of the
amount of the organizational expenditures
of the corporation, or $5,000 (reduced (but
not below zero) by the amount by which
the organizational expenditures exceed
$50,000). The remainder of the organi-
zational expenditures is deducted ratably
over the 180-month period beginning with
the month in which the corporation begins
business. All organizational expendi-
tures of the corporation are considered in
determining whether the organizational
expenditures exceed$50,000, including
expenditures incurred on or before Octo-
ber 22, 2004.
*****
(c)Time and manner of making elec-
tion. A corporation is deemed to have
made an election under section 248(a) to
amortize organizational expenditures as
defined in section 248(b) and §1.248–1(b)
for the taxable year in which the corpora-
tion begins business. A corporation may
choose to forgo the deemed election by
affirmatively electing to capitalize its or-
ganizational expenditures on a timely filed
Federal income tax return (including ex-
tensions) for the taxable year in which the
corporation begins business. The election
either to amortize organizational expendi-
tures under section 248(a) or to capitalize
organizational expenditures is irrevocable
and applies to all organizational expendi-
tures of the corporation. A change in the
characterization of an item as an organiza-
tional expenditure is a change in method
of accounting to which sections 446 and
481(a) apply if the corporation treated the
item consistently for two or more taxable
years. A change in the determination of
the taxable year in which the corporation
begins business also is treated as a change
in method of accounting if the corporation
amortized organizational expenditures for
two or more taxable years.
(d)Determination of when corporation
begins business. The deduction allowed
under section 248 must be spread over a
period beginning with the month in which
the corporation begins business. The de-
termination of the date the corporation be-
gins business presents a question of fact
which must be determined in each case in
light of all the circumstances of the partic-
ular case. The words “begins business,”
however, do not have the same meaning
as “in existence.” Ordinarily, a corpora-
tion begins business when it starts the busi-
ness operations for which it was organized;
a corporation comes into existence on the
date of its incorporation. Mere organiza-
tional activities, such as the obtaining of
the corporate charter, are not alone suffi-
cient to show the beginning of business. If
the activities of the corporation have ad-
vanced to the extent necessary to establish
the nature of its business operations, how-
ever, it will be deemed to have begun busi-
ness. For example, the acquisition of op-
erating assets which are necessary to the
type of business contemplated may consti-
tute the beginning of business.
(e)Examples. The following examples
illustrate the application of this section:
Example 1.Expenditures of $5,000 or less.Cor-
poration X, a calendar year taxpayer, incurs $3,000 of
organizational expenditures after October 22, 2004,
and begins business on July 1, 2011. Under para-
graph (c) of this section, Corporation X is deemed to
have elected to amortize organizational expenditures
under section 248(a) in 2011. Therefore, Corporation
X may deduct the entire amount of the organizational
expenditures in 2011, the taxable year in which Cor-
poration X begins business.
Example 2.Expenditures of more than $5,000 but
less than or equal to $50,000. The facts are the same
as inExample 1except that Corporation X incurs or-
ganizational expenditures of $41,000. Under para-
graph (c) of this section, Corporation X is deemed to
have elected to amortize organizational expenditures
under section 248(a) in 2011. Therefore, Corporation
X may deduct $5,000 and the portion of the remain-
ing $36,000 that is allocable to July through Decem-
berof2011($36,000/180x6=$1,200)in2011,the
taxable year in which Corporation X begins business.
Corporation X may amortize the remaining $34,800
($36,000 - $1,200 = $34,800) ratably over the remain-
ing 174 months.
Example 3.Subsequent change in the charac-
terization of an item. The facts are the same as in
Example 2except that Corporation X determines in
2013 that Corporation X incurred $10,000 for an ad-
ditional organizational expenditure erroneously de-
ducted in 2011 under section 162 as a business ex-
pense. Under paragraph (c) of this section, Corpo-
ration X is deemed to have elected to amortize orga-
nizational expenditures under section 248(a) in 2011,
including the additional $10,000 of organizational ex-
penditures. Corporation X is using an impermissi-
ble method of accounting for the additional $10,000
of organizational expenditures and must change its
method under §1.446–1(e) and the applicable general
administrative procedures in effect in 2013.
Example 4.Subsequent redetermination of year
in which business begins. The facts are the same as
inExample 2except that, in 2012, Corporation X
deducted the organizational expenditures allocable
to January through December of 2012 ($36,000/180
x 12 = $2,400). In addition, in 2013 it is determined
that Corporation X actually began business in 2012.
Under paragraph (c) of this section, Corporation X
is deemed to have elected to amortize organizational
expenditures under section 248(a) in 2012. Cor-
poration X impermissibly deducted organizational
expenditures in 2011, and incorrectly determined the
amount of organizational expenditures deducted in
2012. Therefore, Corporation X is using an imper-
missible method of accounting for the organizational
expenditures and must change its method under
§1.446–1(e) and the applicable general administra-
tive procedures in effect in 2013.
Example 5.Expenditures of more than $50,000
but less than or equal to $55,000.Thefactsare
thesameasinExample 1except that Corporation
X incurs organizational expenditures of $54,500.
Under paragraph (c) of this section, Corporation
X is deemed to have elected to amortize organiza-
tional expenditures under section 248(a) in 2011.
Therefore, Corporation Xmay deduct $500 ($5,000
- $4,500) and the portion of the remaining $54,000
that is allocable to July through December of 2011
($54,000/180 x 6 = $1,800) in 2011, the taxable year
in which Corporation X begins business. Corpora-
tion X may amortize the remaining $52,200 ($54,000
- $1,800 = $52,200) ratably over the remaining 174
months.
Example 6.Expenditures of more than $55,000.
ThefactsarethesameasinExample 1except that
Corporation X incurs organizational expenditures
of $450,000. Under paragraph (c) of this section,
Corporation X is deemed tohave elected to amortize
organizational expenditures under section 248(a)
in 2011. Therefore, Corporation X may deduct the
amounts allocable to July through December of 2011
($450,000/180x6=$15,000)in2011,thetaxable
year in which Corporation X begins business. Cor-
poration X may amortize the remaining $435,000
($450,000 - $15,000 = $435,000) ratably over the
remaining 174 months.
(f)Effective/applicability date.
This section applies to organizational
expenditures paid or incurred after
2011–39 I.R.B.413September 26, 2011

August 16, 2011. However, taxpayers
may apply all the provisions of this section
to organizational expenditures paid or
incurred after October 22, 2004, provided
that the period of limitations on assessment
of tax for the year the election under
paragraph (c) of this section is deemed
made has not expired. For organizational
expenditures paid or incurred on or before
September 8, 2008, taxpayers may instead
apply §1.248–1, as in effect prior to that
date (§1.248–1 as contained in 26 CFR
part 1 edition revised as of April 1, 2008).
§1.248–1T [Removed]
Par. 5. Section 1.248–1T is removed.
Par. 6. Section 1.709–1 is amended by
revising paragraph (b) to read as follows:
§1.709–1 Treatment of organization and
syndication costs.
*****
(b)Election to amortize organizational
expenses—(1)In general. Under section
709(b), a partnership may elect to amor-
tize organizational expenses as defined in
section 709(b)(3) and §1.709–2(a). In the
taxable year in which a partnership be-
gins business, an electing partnership may
deduct an amount equal to the lesser of
the amount of the organizational expenses
of the partnership, or $5,000 (reduced
(but not below zero) by the amount by
which the organizational expenses exceed
$50,000). The remainder of the organiza-
tional expenses is deductible ratably over
the 180-month period beginning with the
month in which the partnership begins
business. All organizational expenses of
the partnership are consideredindetermin-
ing whether the organizational expenses
exceed $50,000, including expenses in-
curred on or before October 22, 2004.
(2)Time and manner of making elec-
tion. A partnership is deemed to have
made an election under section 709(b) to
amortize organizational expenses as de-
fined in section 709(b)(3) and §1.709–2(a)
for the taxable year in which the partner-
ship begins business. A partnership may
choose to forgo the deemed election by af-
firmatively electing to capitalize its orga-
nizational expenses on a timely filed Fed-
eral income tax return (including exten-
sions) for the taxable year in which the
partnership begins business. The election
either to amortize organizational expenses
under section 709(b) or to capitalize orga-
nizational expenses is irrevocable and ap-
plies to all organizational expenses of the
partnership. A change in the characteri-
zation of an item as an organizational ex-
pense is a change in method of account-
ing to which sections 446 and 481(a) ap-
ply if the partnership treated the item con-
sistently for two or more taxable years. A
change in the determination of the taxable
year in which the partnership begins busi-
ness also is treated as a change in method
of accounting if the partnership amortized
organizational expenses for two or more
taxable years.
(3)Liquidation of partnership.Ifthere
is a winding up and complete liquidation of
the partnership prior to the end of the amor-
tization period, the unamortized amount
of organizational expenses is a partnership
deduction in its final taxable year to the ex-
tent provided under section 165 (relating
to losses). However, there is no partner-
ship deduction with respect to its capital-
ized syndication expenses.
(4)Examples. The following examples
illustrate the application of this section:
Example 1.Expenditures of $5,000 or less.Part-
nership X, a calendar year taxpayer, incurs $3,000
of organizational expenses after October 22, 2004,
and begins business on July 1, 2011. Under para-
graph (b)(2) of this section, Partnership X is deemed
to have elected to amortize organizational expenses
under section 709(b) in 2011. Therefore, Partnership
X may deduct the entire amount of the organizational
expenses in 2011, the taxable year in which Partner-
ship X begins business.
Example 2.Expenditures of more than $5,000
but less than or equal to $50,000. The facts are the
same as inExample 1except that Partnership X in-
curs organizational expenses of $41,000. Under para-
graph (b)(2) of this section, Partnership X is deemed
to have elected to amortize organizational expenses
under section 709(b) in 2011. Therefore, Partnership
X may deduct $5,000 and the portion of the remaining
$36,000 that is allocable to July through December of
2011 ($36,000/180 x 6 = $1,200) in 2011, the taxable
year in which Partnership X begins business. Partner-
ship X may amortize the remaining $34,800 ($36,000
- $1,200 = $34,800) ratably over the remaining 174
months.
Example 3.Subsequent change in the character-
ization of an item. The facts are the same as inEx-
ample 2except that Partnership X realizes in 2013
that Partnership X incurred $10,000 for an additional
organizational expense erroneously deducted in 2011
under section 162 as a business expense. Under para-
graph (b)(2) of this section, Partnership X is deemed
to have elected to amortize organizational expenses
under section 709(b) in 2011, including the additional
$10,000 of organizational expenses. Partnership X
is using an impermissible method of accounting for
the additional $10,000 of organizational expenses and
must change its method under §1.446–1(e) and the
applicable general administrative procedures in effect
in 2013.
Example 4.Subsequent redetermination of year
in which business begins. The facts are the same as
inExample 2except that, in 2012, Partnership X de-
ducted the organizational expenses allocable to Jan-
uary through December of 2012 ($36,000/180 x 12
= $2,400). In addition, in 2013 it is determined that
Partnership X actually began business in 2012. Un-
der paragraph (b)(2) of this section, Partnership X
is deemed to have elected to amortize organizational
expenses under section 709(b) in 2012. Partnership
X impermissibly deducted organizational expenses in
2011, and incorrectly determined the amount of or-
ganizational expenses deducted in 2012. Therefore,
Partnership X is using an impermissible method of
accounting for the organizational expenses and must
change its method under §1.446–1(e) and the appli-
cable general administrative procedures in effect in
2013.
Example 5.Expenditures of more than $50,000
but less than or equal to $55,000. The facts are the
same as inExample 1except that Partnership X in-
curs organizational expenses of $54,500. Under para-
graph (b)(2) of this section, Partnership X is deemed
to have elected to amortize organizational expenses
under section 709(b) in 2011. Therefore, Partner-
ship X may deduct $500 ($5,000 - $4,500) and the
portion of the remaining $54,000 that is allocable to
July through December of 2011 ($54,000/180 x 6 =
$1,800) in 2011, the taxable year in which Partner-
ship X begins business. Partnership X may amortize
the remaining $52,200 ($54,000 - $1,800 = $52,200)
ratably over the remaining 174 months.
Example 6.Expenditures of more than $55,000.
ThefactsarethesameasinExample 1except that
Partnership X incurs organizational expenses of
$450,000. Under paragraph (b)(2) of this section,
Partnership X is deemed to have elected to amor-
tize organizational expenses under section 709(b)
in 2011. Therefore, Partnership X may deduct the
amounts allocable to July through December of 2011
($450,000/180x6=$15,000)in2011,thetaxable
year in which Partnership X begins business. Part-
nership X may amortize the remaining $435,000
($450,000 - $15,000 = $435,000) ratably over the
remaining 174 months.
(5)Effective/applicability date.This
section applies to organizational expenses
paid or incurred after August 16, 2011.
However, taxpayers may apply all the pro-
visions of this section to organizational ex-
penses paid or incurred after October 22,
2004, provided that the period of limita-
tions on assessment of tax for the year the
election under paragraph (b)(2) of this sec-
tion is deemed made has not expired. For
organizational expenses paid or incurred
on or before September 8, 2008, taxpay-
ers may instead apply §1.709–1, as in ef-
fect prior to that date (§1.709–1 as con-
tained in 26 CFR part 1 edition revised as
of April 1, 2008).
September 26, 20114142011–39 I.R.B.

§1.709–1T [Removed]
Par. 7. Section 1.709–1T is removed.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved August 9, 2011.
Emily S. McMahon,
Acting Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on August 16,
2011, 8:45 a.m., and published in the issue of the Federal
Register for August 17, 2011, 76 F.R. 50887)
Section 901.—Taxes
of Foreign Countries
and of Possessions of
United States
26 CFR 1.901–1: Allowance of credit for taxes.
T.D. 9535
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Determining the Amount of
Taxes Paid for Purposes of the
Foreign Tax Credit
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations and removal
of temporary regulations.
SUMMARY: This document contains final
regulations providing guidance relating to
the determination of the amount of taxes
paid for purposes of the foreign tax credit.
These regulations address certain highly
structured transactions that produce inap-
propriate foreign tax credit results. The
regulations affect individuals and corpora-
tions that claim directand indirect foreign
tax credits.
DATES:Effective Date:These regulations
are effective on July 18, 2011.
Applicability Date:For dates of
applicability, see §1.901–1(j) and
§1.901–2(h)(2).
FOR FURTHER INFORMATION
CONTACT: Jeffrey P. Cowan, at (202)
622–3850.
SUPPLEMENTARY INFORMATION:
Background
On March 30, 2007, theFederal
Registerpublished proposed regulations
(REG–156779–06, 2007–2 C.B. 1015
[72 FR 15081]) under section 901 of
the Internal Revenue Code (“Code”) re-
lating to the amount of taxes paid for
purposes of the foreign tax credit (the
“2007 proposed regulations”). The IRS
and the Treasury Department received
written comments on the 2007 proposed
regulations and a public hearing was
held on July 30, 2007. In response to
written comments, the IRS and the Trea-
sury Department issued Notice 2007–95,
2007–2 C.B. 1091 (December 3, 2007)
(see §601.601(d)(2)(ii)(b)) providing that
the proposed rule for U.S.-owned foreign
groups would be severed from the portion
of the 2007 proposed regulations address-
ing the treatment of foreign payments at-
tributable to certain structured passive in-
vestment arrangements. On July 16, 2008,
a notice of proposed rulemaking by
cross-reference to temporary regulations
and temporary regulations (T.D. 9416,
2008–46 I.R.B. 1142) (the “2008
temporary regulations”) were published
in theFederal Registerat 73 FR
40792 and 73 FR 40727, respectively.
Corrections to those temporary regulations
were published on November 14,
2008, in theFederal Register(73
FR 67387).The 2008 temporary
regulations address the treatment of
foreign payments attributable to structured
passive investment arrangements and do
not address the treatment of U.S.-owned
foreign groups.
The IRS and the Treasury Department
received written comments on the 2008
temporary regulations, which are dis-
cussed in this preamble. All comments
are available atwww.regulations.govor
upon request. A public hearing was not re-
quested and none was held. This Treasury
decision adopts the proposed regulation
with the changes discussed in this pream-
ble.
Summary of Comments and Explanation
of Revisions
A.Treatment of Amounts Attributable
to a Structured Passive Investment
Arrangement
These final regulations retain the basic
approach and structure of the 2008 tem-
porary regulations. Thus, the final reg-
ulations provide that amounts paid to a
foreign taxing authority that are attribut-
able to a structured passive investment ar-
rangement are not treated as an amount of
tax paid for purposes of the foreign tax
credit. An arrangement that satisfies six
conditions, as described in this preamble,
is treated as a structured passive invest-
ment arrangement.
A comment presented several proposals
that collectively would have required fur-
ther differentiation both among the various
investors in structured passive investment
arrangements based upon their business
practices and relationships to other parties,
as well as among the particular transac-
tions undertaken by a special purpose vehi-
cle involved in the arrangement. Because
the IRS and the Treasury Department be-
lieve these proposals would introduce sev-
eral subjective and factually-intensive el-
ements into the regulations that would in-
crease administrative burdens for taxpay-
ers and the IRS, including a rule providing
for only partial disallowance of foreign tax
credits, the final regulations retain the ap-
proach of the 2008 temporary regulations,
relying on objective, generally applicable
standards to the extent possible. The IRS
and the Treasury Department believe that
this approach will appropriately disallow
any foreign tax credits arising from artifi-
cial structures that are utilized to generate
foreign tax credits and material duplicative
foreign tax benefits.
B.Structured Passive Investment
Arrangements
A comment recommended adding a re-
quirement that the 2008 temporary regula-
tions’ six conditions be fulfilled as part of
a plan or series of related transactions. The
IRS and the Treasury Department did not
adopt this comment. The standard in the
regulations is designed to depend upon key
objective aspects of an arrangement that
indicate an abusive arrangement. The IRS
2011–39 I.R.B.415September 26, 2011

and the Treasury Department believe that
the introduction of a plan requirement or
similar rule would introduce a subjective
inquiry that is difficult to apply and unnec-
essary to achieve the purpose of the regu-
lations.
C.Section 1.901–2(e)(5)(iv)(B)(1):
Special Purpose Vehicle
The first condition provided in
§1.901–2T(e)(5)(iv)(B)(1) of the 2008
temporary regulations is that the arrange-
ment utilizes an entity that meets two
requirements (the “SPV condition”). The
first requirement is that substantially all of
the entity’s gross income, as determined
under U.S. tax principles, is attributable
to passive investment income and sub-
stantially all of the entity’s assets are
held to produce such passive investment
income. The term entity, as defined in
§1.901–2T(e)(5)(iv)(C)(3) of the 2008
temporary regulations, includes a corpo-
ration, trust, partnership, or disregarded
entity. For purposes of the first require-
ment, §1.901–2T(e)(5)(iv)(C)(5)ofthe
2008 temporary regulations defines pas-
sive investment income as income defined
in section 954(c) with certain modifica-
tions. Passive investment income gener-
ally includes the income of an upper-tier
entity attributable to its equity interest in
a lower-tier entity, but such income may
be excluded from passive investment in-
come where it is attributable to a qualified
equity interest in certain lower-tier enti-
ties that are engaged in an active trade
or business and other conditions apply
(the “holding company exception”). See
§1.901–2T(e)(5)(iv)(c)(5)(ii).
One comment recommended that the
definition of passive investment income
be modified to exclude personal service
contract income as described in section
954(c)(1)(H) because such income is not
derived from passive assets and would not
ordinarily be used in a structured passive
investment arrangement. The IRS and the
Treasury Department agree with the com-
ment, and accordingly these final regula-
tions provide that passive investment in-
come does not include personal service
contract income as described in section
954(c)(1)(H).
The IRS and the Treasury Department
also received several comments regard-
ing the holding company exception. One
comment recommended that the defini-
tion of passive investment income exclude
income attributable to equity interests in
pass-through entities except to the extent
that the income of the lower-tier entity sat-
isfies the definition of passive investment
income. The IRS and the Treasury Depart-
ment did not adopt this proposal because
the IRS and the Treasury Department be-
lieve that the rule in the 2008 temporary
regulations is necessary to prevent tax-
payers from using pass-through entities
to avoid the limitations on the holding
company exception,such as the holding
of qualified equity interests and the shar-
ing of investment risk. The interests in a
pass-through entity can be substantially
indistinguishable from interests in a cor-
porate subsidiary, and, therefore, these
final regulations treat such interests the
same for purposes of the definition of
passive investment income. The final reg-
ulations clarify that income attributable
to equity interests in pass-through entities
(including a partner’s distributive share
of partnership income and the income at-
tributable to an entity disregarded for U.S.
tax purposes) is treated as passive invest-
ment income unless the holding company
exception applies.
The IRS and the Treasury Depart-
ment have deleted the last two sentences
in the 2008 temporary regulations in
§1.901–2T(e)(5)(iv)(B)(1)(i). These sen-
tences described rules set out in more
detail in the definition of passive invest-
ment income. The IRS and the Treasury
Department believe that these sentences
did not provide additional clarity to the
definition of passive investment income.
One comment recommended expand-
ing the holding company exception to treat
income attributable to certain portfolio
interests as active income if the income
earned by the lower-tier entity was active
income. As a condition to the application
of the holding company exception, the po-
tential holding company’s equity interest
in the lower-tier entity must be a qualified
equity interest. The holding company ex-
ception focuses on whether a joint venture
arrangement conducted through a holding
company structureeconomically repli-
cates the interests of the joint venturers in
the active business of the lower-tier en-
tity. It is not intended to insulate portfolio
investments in lower-tier entities even if
they operate active businesses. Therefore,
the IRS and the Treasury Department do
not believe that it is appropriate to broaden
the holding company exception to apply
to portfolio investments notwithstanding
that in certain cases the lower-tier entity
may have active operations.
Another comment recommended that
the holding company exception be re-
placed with a rule that generally attributes
all activities of lower-tier entities to their
owners, subject to an anti-abuse excep-
tion. Under the suggested anti-abuse rule,
the attribution rule would not apply if,
with a view to avoiding the SPV con-
dition, a holding company holds assets
other than stock in subsidiaries, and, based
on all the facts and circumstances, the
ownership of those assets is expected to
achieve substantially the same effect as
holding those assets in a separate entity. A
similar comment was considered and not
adopted during the promulgation of the
2008 temporary regulations. The IRS and
the Treasury Department believe that the
commentator’s recommendation would be
difficult to administer because it would
require factually intensive and subjective
determinations. Therefore, this comment
was not adopted.
Additionally, comments recommended
clarifying the requirement in the holding
company exception that substantially all of
a potential holding company’s opportunity
for gain and risk of loss with respect to
its qualified equity interest in a lower-tier
entity be shared by the U.S. party or par-
ties (or persons that are related to a U.S.
party) and a counterparty or counterparties
(or persons that are related to a counter-
party). According to the comments, there
are common situations where it is not clear
that gain and risk of loss are shared, includ-
ing preferred stock and stock-based com-
pensation. The IRS and the Treasury De-
partment believe that existing legal prin-
ciples should apply to determine if an in-
terest holder possesses the opportunity for
gain and risk of loss and that additional
guidance is generally unnecessary. The
IRS and the Treasury Department further
believe that the sharing of gain and risk
of loss is dependent on facts and circum-
stances and therefore the final regulations
provide that the assessment of opportunity
for gain and risk of loss is based on all facts
and circumstances.
Finally, comments requested clarifica-
tion regarding the application of the hold-
September 26, 20114162011–39 I.R.B.

ing company exception to fact patterns in-
volving multiple counterparties or multi-
ple U.S. parties. In response to the com-
ments, these final regulations clarify that in
cases involving more than one U.S. party
or more than one counterparty or both, the
requirement that the parties must share in
substantially all of the upper-tier entity’s
opportunity for gain and risk of loss with
respect to its interest in a lower-tier en-
tity is applied by examining whether there
is sufficient risk sharing by each of the
groups comprising all U.S. parties (or per-
son related to such U.S. parties) and all
counterparties (or persons related to such
counterparties). The IRS and the Trea-
sury Department believe that the risk shar-
ing requirement, as so modified, will con-
tinue to ensure that onlybona fidejoint
ventures are eligible for the holding com-
pany exception. If there is more than one
U.S. party or more than one counterparty,
the final regulations do not require that
each member of the U.S. party and coun-
terparty groups share in the underlying in-
vestment risk. Finally, the holding com-
pany exception has been modified to pro-
vide that where a U.S. party owns an inter-
est in an entity indirectly through a chain of
entities, the exception is applied beginning
with the lowest-tier entity in the chain be-
fore proceeding upward and the opportu-
nity for gain and risk of loss borne by any
upper-tier entity in the chain that is a coun-
terparty is disregarded to the extent borne
indirectly by a U.S. party.
The second of the two requirements of
the SPV condition in the 2008 temporary
regulations is that there is a foreign pay-
ment attributable to income of the entity.
See §1.901–2T(e)(5)(iv)(B)(1)(ii). The
foreignpaymentmaybepaidbytheentity
itself or by the owner(s) of the entity. The
2007 proposed regulations and the 2008
temporary regulations both provide an
exception that a foreign payment does not
include a withholding tax imposed on dis-
tributions or payments made by an entity
to a U.S. party. However, the IRS and the
Treasury Department have become aware
that taxpayers can enter into arrangements
that generate duplicative benefits involv-
ing foreign withholding taxes imposed on
distributions made by an entity to a U.S.
party. For example, if the parties under-
take a transaction in which interests in
an SPV are transferred by the U.S. party
to a counterparty subject to a repurchase
obligation, withholding taxes imposed
on distributions from the SPV may be
claimed as creditable in both jurisdictions.
Accordingly, the exception for with-
holding taxes imposed on distributions
or payments to U.S. parties is eliminated
from §1.901–2(e)(5)(iv)(B)(1)(ii)ofthefi-
nal regulations. The IRS and the Treasury
Department will promulgate additional
guidance to clarify that a foreign payment
attributable to incomeof an entity includes
a withholding tax imposed on a dividend
or other distribution (including distribu-
tions made by a pass-through entity or an
entity that is disregarded as an entity sepa-
rate from its owner for U.S. tax purposes)
with respect to the equity of the entity.
The 2008 temporary regulations at-
tribute to income of an entity foreign
payments attributable to the entity’s share
of income of a lower-tier entity that is a
branch or pass-through entity under either
foreign or U.S. law. One comment rec-
ommended that the foreign payment rule
be modified by eliminating the attribution
of foreign payments made by a lower-tier
entity that is a branch or pass-through
entity under only U.S. law to the income
of its owner because such attribution
would not occur if the lower-tier entity
were regarded as a corporation for U.S.
tax purposes. The IRS and the Treasury
Department agree with the comment that
foreign payments by a lower-tier entity
should not be attributed to the income of
its owner. In cases where a lower-tier
entity is liable for foreign payments under
foreign law, the disallowance of foreign
tax credits with respect to such taxes
should turn on whether that entity, and
not the owner of such entity, satisfies the
SPV condition. Accordingly, the appli-
cable sentence has been eliminated from
§1.901–2(e)(5)(iv)(B)(1)(ii)ofthefinal
regulations.
D.Section 1.901–2(e)(5)(iv)(B)(2): U.S.
Party
Section 1.901–2(e)(5)(iv)(B)(2)ofthe
final regulations adopts without change the
second condition of the 2008 temporary
regulations that a U.S. party is a person
who is eligible to claim a credit under sec-
tion 901(a), including a credit for taxes
deemed paid under section 902 or 960, for
alloraportionoftheforeignpaymentif
the foreign payment were an amount of tax
paid (the “U.S. party condition”). Com-
ments recommended that the U.S. party
condition be supplemented with ade min-
imisexception, including an exclusion for
U.S. citizens and residents. The IRS and
the Treasury Department do not believe
that such a modification is consistent with
the purposes of these regulations. There-
fore, the IRS and the Treasury Department
have not adopted this comment.
Another comment recommended that if
a U.S. party is a member of an affiliated
group of corporations that files a consol-
idated federal income tax return, then all
members of the affiliated group should be
treated as a single U.S. party for purposes
of applying the final regulations. The IRS
and the Treasury Department did not adopt
this comment because the final regulations
provide aggregation rules that address the
comment.
E.Section 1.901–2(e)(5)(iv)(B)(3): Direct
Investment
Section 1.901–2(e)(5)(iv)(B)(3)ofthe
final regulations adopts without change
the third condition of the 2008 tempo-
rary regulations (the “direct investment
condition”). The direct investment con-
dition requires that the U.S. party’s share
of the foreign payment or payments is (or
is expected to be) substantially greater
than the amount of credits, if any, that the
U.S. party reasonably would expect to be
eligible to claim under section 901(a) for
foreign taxes attributable to income gen-
erated by the U.S. party’s proportionate
share of the assets owned by the SPV if
the U.S. party directly owned such assets.
Comments suggested that this condi-
tion in the 2008 temporary regulations will
always be satisfied because it assumes the
assets would not be held through a branch
operation subject to net basis taxation
and excludes assets that produce income
subject to gross basis withholding tax.
One comment recommended that the final
regulations limit the condition to cases
in which the arrangement increases the
foreign payments attributable to the U.S.
party relative to what would have been
paid in the absence of a duplicative tax
benefit. In contrast, the 2008 temporary
regulations compare the amount of the
U.S. party’s foreign payment with the
amount of taxes that would be expected to
2011–39 I.R.B.417September 26, 2011

be paid if the U.S. party directly owned
the assets in question.
The IRS and the Treasury Department
disagree with this recommendation. The
introduction of a standard that compares
the foreign payments arising from a struc-
tured passive investment arrangement to
alternative transactions that might have
been undertaken under different incen-
tives would add administrative complexity
and uncertainty in the application of these
regulations. Accordingly, the IRS and
the Treasury Department have retained
the condition unchanged from the 2008
temporary regulations both because it de-
scribes one of the abusive aspects of these
arrangements and because it ensures that
the regulations cannot be avoided through
the use of foreign securities that produce
income subject to withholding taxes.
F.Section 1.901–2(e)(5)(iv)(B)(4):
Foreign Tax Benefit
Section 1.901–2(e)(5)(iv)(B)(4)of
the final regulations adopts with minor
changes the fourth condition of the 2008
temporary regulations (the “foreign tax
benefit condition”). The foreign tax bene-
fit condition requires that the arrangement
is reasonably expected to result in a tax
benefit to a counterparty (or a related per-
son) under the laws of a foreign country.
If the foreign tax benefit available to the
counterparty is a credit, then such credit
must correspond to 10 percent or more of
the U.S. party’s share (for U.S. tax pur-
poses) of the foreign payment. Other types
of foreign tax benefits, such as exemp-
tions, deductions, exclusions or losses,
must correspond to 10 percent or more of
the foreign base with respect to which the
U.S. party’s share (for U.S. tax purposes)
of the foreign payment is imposed.
The IRS and the Treasury Department
received several comments with respect
to the foreign tax benefit condition. The
comments asserted that the rule in the 2008
temporary regulations requiring at least 10
percent correspondence between the for-
eign tax benefit and the U.S. party’s share
of the foreign payment (“the 10 percent
correspondence requirement”) is vague
and more difficult to apply than a simi-
lar rule in the 2007 proposed regulations.
Under the 2007 proposed regulations, any
foreign tax benefit satisfied the condition,
but the counterparty condition, described
below, included minimum ownership re-
quirements. One comment favored the
clarity of the 2007 proposed rule. In ad-
dition, the comments questioned whether
certain types of foreign tax benefits, such
as exemptions or reduced tax rates on
certain types of income, should be treated
as foreign tax benefits for these purposes.
Finally, comments sought clarification re-
garding how the percentage of correspon-
dence is determined in cases involving
more than two persons owning an interest
in an SPV.
The 10 percent correspondence require-
ment is intended to limit any potential dis-
allowance of foreign tax credits to cases in
which there is a material duplication of the
tax benefits. Accordingly, the final reg-
ulations retain this requirement. In addi-
tion, the final regulations do not exclude
any particular tax benefit from the foreign
tax benefit condition because duplication
of tax benefits can assume a wide variety
of forms. The IRS and the Treasury De-
partment also believe that whether foreign
tax benefits duplicate or correspond to the
U.S. party’s share of the foreign tax bene-
fits will generally be clear and no further
elaboration of the rules is required.
Another comment noted that the foreign
tax benefit condition may be difficult to ap-
ply in cases where the foreign tax benefit
is claimed by a party related to the coun-
terparty. The IRS and the Treasury Depart-
ment concluded that it was necessary to in-
clude related parties because of the variety
of duplication techniques otherwise avail-
able to taxpayers, including the use of ben-
efits arising to members of a related group
of entities, and accordingly the comment
was not adopted.
Comments sought clarification that in
arrangements involving two or more un-
related counterparties, the 10 percent cor-
respondence requirement cannot be satis-
fied by aggregating the value of duplica-
tive tax benefits received by the unrelated
counterparties. The comments assert that
the inclusion of benefits received by par-
ties related to a counterparty in the foreign
tax benefit condition in the 2008 tempo-
rary regulations suggested, by negative im-
plication, that any benefits claimed by un-
related counterparties should not be aggre-
gated. The IRS and the Treasury Depart-
ment did not adopt this comment. The 10
percent correspondence requirement is in-
tended to ensure that the disallowance of
credits applies only where the duplication
of tax benefits in the arrangement is ma-
terial relative to the value of the otherwise
creditable foreign payment, irrespective of
whether the arrangement involves multi-
ple U.S. parties, multiple counterparties, or
both. Thus, in the final regulations the 10
percent correspondence requirement com-
pares the aggregate amount of foreign tax
benefits available to all counterparties and
persons related to such counterparties to
the aggregate amount of the U.S. parties’
share of the foreign payment or the foreign
base, as the case may be.
Comments also objected to the lan-
guage in the foreign tax benefit condition
providing that the arrangement is “reason-
ably expected” to result in a foreign tax
benefit. According to the comments, a
U.S. party may be unable to assess whether
a counterparty is reasonably expected to
receive a foreign tax benefit and it would
be inappropriate to disallow a foreign tax
credit where a U.S. party cannot make such
an assessment. The IRS and the Treasury
Department believe the reasonableness
standard in the 2008 temporary regulations
affords sufficient protection against un-
knowable or unexpected outcomes in the
majority of cases. Further, the IRS and the
Treasury Department are concerned that
an actual knowledge requirement would
be difficult to administer. Accordingly,
the IRS and the Treasury Department have
not adopted this comment.
G.Section 1.901–2(e)(5)(iv)(B)(5):
Counterparty
The fifth condition provided in
§1.901–2T(e)(5)(iv)(B)(5) of the 2008
temporary regulations is that the arrange-
ment include a person that, under the tax
laws of a foreign country in which the per-
sonissubjecttotaxonthebasisofplace
of management, place of incorporation or
similar criterion or otherwise subject to a
net basis tax, directly or indirectly owns
or acquires equity interests in, or assets of,
the SPV (the “counterparty condition”).
The 2008 temporary regulations provide
that a counterparty does not include the
SPV or a person with respect to which
the same domestic corporation, U.S. cit-
izen or resident alien individual directly
or indirectly owns more than 80 percent
of the total value of the stock (or equity
interests) of each of the U.S. party and
September 26, 20114182011–39 I.R.B.

such person. Also, a counterparty does
not include a person with respect to which
the U.S. party directly or indirectly owns
more than 80 percent of the total value of
the stock (or equity interests), but only if
the U.S. party is a domestic corporation, a
U.S. citizen or a resident alien individual.
The IRS and the Treasury Department
received several comments with respect
to the counterparty condition. Comments
noted that in certain tiered structures the
rule could treat as a counterparty an up-
per-tier entity in which a U.S. investor and
a foreign investor each hold interests, and
that to the extent that the foreign tax ben-
efits resulting from such structures are not
duplicative, the counterparty condition is
overly broad. For example, if a U.S. in-
vestor and foreign investor each own 50
percent of an upper-tier entity which in
turn owns an SPV, the comments argue that
the exempt treatment of distributions from
the SPV to its upper-tier owner is not prob-
lematic so long as each of the investors
in the upper-tier entity ultimately receives
only those tax benefits associated with its
50 percent interest in the upper-tier entity.
Comments suggested revising the counter-
party condition to exclude such intermedi-
ary entities.
The IRS and the Treasury Department
agree that foreign tax benefits claimed by a
jointly-held upper-tier entity are not prob-
lematic so long as none of the indirect
U.S. or foreign owners of the SPV claims
duplicative tax benefits attributable to the
arrangement. However, the IRS and the
Treasury Department are concerned that
revising the counterparty condition to ex-
clude jointly-held entities could create op-
portunities for avoidance of the regula-
tions. Accordingly, in lieu of revising the
counterparty condition, the final regula-
tions revise the foreign tax benefit con-
dition to provide that certain tax benefits
claimed by upper-tier entities do not cor-
respond to the U.S. party’s share of the
foreign payment. Specifically, where a
U.S. party indirectly owns a non-hybrid
equity interest in an SPV, a foreign tax
benefit available to a foreign entity in the
chain of ownership which begins with the
SPV and ends with the first-tier entity in
such chain does not correspond to the U.S.
party’s share of the foreign payment at-
tributable to the SPV to the extent that
such benefit relates to earnings of the SPV
that are distributed with respect to non-hy-
brid equity interests in the SPV that are
owned indirectly by the U.S. party for pur-
poses of both U.S. and foreign tax law.
See §1.901–2(e)(5)(iv)(B)(4). This revi-
sion is intended to ensure that the for-
eign tax benefit condition is not satisfied
in cases where the U.S. and foreign in-
vestors claim only those tax benefits that
are consistent with their respective invest-
ments in the arrangement and their inter-
ests are treated as equity and owned by the
same persons in both jurisdictions.
One comment also recommended that
dual citizens or U.S. residents, who are
generallysubjecttoU.S.taxontheir
worldwide income, should not be treated
as counterparties because any reduction
in foreign tax liability will result in a cor-
responding increase in U.S. tax. The IRS
and the Treasury Department agree with
this comment and have modified the final
regulations to reflect this change.
One comment also recommended that
individuals who are family members of a
U.S. party not be treated as counterpar-
ties. The IRS and the Treasury Department
disagree with the comment. The excep-
tion from the counterparty condition for
certain U.S.-controlled foreign counterpar-
ties is based on the premise that the for-
eign tax benefit available to such a counter-
party confers only a timing benefit that will
reverse when the counterparty repatriates
its earnings to the United States. Because
such timing benefits are not the focus of
these regulations, the 2007 proposed regu-
lations and 2008 temporary regulations ex-
cluded certain foreign persons owned by
the U.S. party or by certain United States
persons who also own the U.S. party. In
contrast, where an individual is related to
a U.S. party but is not a United States per-
son for U.S. tax purposes, the reduction in
foreign tax liability obtained by such indi-
vidual does not result in a corresponding
increase in U.S. tax. Accordingly, the final
regulations do not include an exclusion for
such individuals.
One comment recommended that indi-
viduals receiving stock in connection with
the performance of services should not be
treated as counterparties. The tax policy
concerns of the IRS and the Treasury De-
partment regarding structured transactions
addressed by these regulations exist re-
gardless of the means by which a person
acquires its interest in an SPV. The pres-
ence of a duplicative tax benefit is no less
problematic because its recipient acquired
its interest in an SPVin return for services
instead of capital. Accordingly, this rec-
ommendation was not adopted.
One comment recommended that in
cases where one U.S. party owns more
than 80 percent of a counterparty but an-
other U.S. party does not, the regulations
should treat a foreign payment as noncom-
pulsory only to the extent of the unrelated
U.S. party’s share of the foreign payment.
This comment was not adopted. These
regulations are intended to disallow for-
eign tax credits claimed in connection with
structured passive investment arrange-
ments. The tax policy concerns of the IRS
and the Treasury Department regarding
such abusive transactions remain the same
regardless of whether the arrangement sat-
isfies the six conditions of the regulations
with respect to one U.S. party or multiple
U.S. parties.
One comment recommended that the fi-
nal regulations adopt thede minimisrule
set forth in the 2007 proposed regulations
that requires a counterparty to own a cer-
tain percentage of the equity or assets of
the SPV. In contrast, as explained in the
preamble to the 2008 temporary regula-
tions, the 2008 temporary regulations fo-
cus on whether there is a duplicative for-
eign tax benefit. The IRS and the Trea-
sury Department continue to believe that
focusing on a threshold amount of duplica-
tive tax benefits is more consistent with the
concerns underlying the regulations. Ac-
cordingly, this comment is not adopted.
Another comment recommended that
the percentage of U.S. ownership required
to exclude a person from being treated as
a counterparty be reduced from the 2008
temporary regulations’ threshold of more
than 80 percent. The comment recom-
mended that the threshold be reduced to
either 80 percent or more, or 75 percent
or more. The IRS and the Treasury De-
partment do not believe that the proposal
is consistent with the policy concerns ad-
dressed by these final regulations. Accord-
ingly, this comment is not adopted.
H.Section 1.901–2(e)(5)(iv)(B)(6):
Inconsistent Treatment
The IRS and the Treasury Department
also received several comments with re-
spect to the sixth condition of the 2008
temporary regulations (the “inconsistent
2011–39 I.R.B.419September 26, 2011

treatment condition”). The inconsis-
tent treatment condition requires that the
United States and an applicable foreign
country treat the arrangement inconsis-
tently under their respective tax systems
and that the U.S. treatment results in ei-
ther materially less income or a materially
greater amount of foreign tax credits than
would be available if the foreign law
controlled the U.S. tax treatment. This
condition is intended to limit the disal-
lowance of credits to those arrangements
that exploit inconsistencies in U.S. and
foreign law to secure a foreign tax credit
benefit.
A comment recommended that the fi-
nal regulations adopt an additional require-
ment that the foreign tax benefit obtained
by the counterparty be materially less if
the U.S. tax treatment controlled for for-
eign tax purposes as well. The recommen-
dation is intended to require that both the
U.S. party’s share of the foreign payments
and the foreign tax benefit arise from the
inconsistent treatment. The IRS and the
Treasury Department believe that the for-
eign tax benefit condition of the 2008 tem-
porary regulations is sufficient to ensure
that the foreign tax benefit corresponds to
or duplicates the U.S. party’s share of the
foreign payments or the foreign base and
that such duplication is sufficiently indica-
tive of inconsistency. Therefore, the IRS
and the Treasury Department believe that
any additional requirement under the in-
consistent treatment condition is unneces-
sary, and the comment was not adopted.
These final regulations clarify the ap-
plication of the inconsistent treatment
condition in cases where multiple U.S. par-
ties exist. Where an arrangement involves
multiple U.S. parties, the inconsistent
treatment condition is satisfied only if the
amount of income attributable to the SPV
that is recognized for U.S. tax purposes
bytheSPVandalltheU.S.parties(and
persons related to the U.S. party or par-
ties) is materially less than the amount of
income that would be recognized if the
foreign tax treatment controlled for U.S.
tax purposes or if the amount of foreign
taxcreditsclaimedbyallU.S.partiesis
materially greater than it would be if the
foreign tax treatment controlled for U.S.
tax purposes.
I.Examples
These final regulations provide two
new examples to illustrate changes that
were adopted in the final regulations. Ex-
ample 8 illustrates the application of the
holding company exception when there is
more than one U.S. party or more than one
counterparty. Example 12 illustrates the
application of the revised foreign tax ben-
efit condition to a tiered holding company
structure. Modifications to examples in
the 2008 temporary regulations were also
made to reflect comments received and
other changes to the regulations.
J.Miscellaneous Amendments
These final regulations adopt with mi-
nor changes amendments made by the
2008 temporary regulations to §1.901–1(a)
and (b) to reflect statutory changes made
by the Foreign Investors Tax Act of 1966
(Public Law 89–809 (80 Stat. 1539),
section 106(b)), the Tax Reform Act of
1976 (Public Law 94–455 (90 Stat. 1520),
section 1901(a)(114)), and the American
Jobs Creation Act of 2004 (Public Law
108–357 (118 Stat. 1418–20), section
405(b)).
K.Effective Date
These final regulations generally apply
to payments that, if such payments were an
amount of tax paid, would be considered
paid or accrued on or after July 13, 2011.
The IRS and the Treasury Department
will continue to closely scrutinize other ar-
rangements that are not covered by the reg-
ulations but produce inappropriate foreign
tax credit results. Such arrangements may
include arrangements that are similar to ar-
rangements described in the final regula-
tions, but that do not meet all of the condi-
tions included in the final regulations. The
IRS will continue to challenge the claimed
U.S. tax results in appropriate cases, in-
cluding under judicial doctrines. The IRS
and the Treasury Department may also is-
sue additional regulations in the future to
address such other arrangements.
Special Analyses
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Or-
der 12866. Therefore, a regulatory assess-
ment is not required. It is hereby certified
that these regulations will not have a sig-
nificant economic impact on a substantial
number of small entities. This certification
is based on the fact that these regulations
will primarily affect affiliated groups of
corporations that have foreign operations
whichtendtobelargerbusinesses.More-
over the number of taxpayers affected and
the average burden are minimal. There-
fore, a Regulatory Flexibility Analysis is
not required. Pursuant to section 7805(f)
of the Code, the notice of proposed rule-
making preceding this regulation was sub-
mitted to the Chief Counsel for Advocacy
of the Small Business Administration for
comment on its impact on small business.
Drafting Information
The principal author of these regula-
tions is Jeffrey P. Cowan, Office of Asso-
ciate Chief Counsel (International). How-
ever, other personnel from the IRS and the
Treasury Department participated in their
development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.901–1 is amended by
revising paragraphs (a) and (b), and adding
a second sentence in paragraph (j) to read
as follows:
§1.901–1 Allowance of credit for taxes.
(a)In general. Citizens of the United
States, domestic corporations, and cer-
tain aliens resident in the United States or
Puerto Rico may choose to claim a credit,
as provided in section 901, against the
tax imposed by chapter 1 of the Internal
Revenue Code (Code) for taxes paid or
accrued to foreign countries and posses-
sions of the United States, subject to the
conditions prescribed in paragraphs (a)(1)
through (a)(3) and paragraph (b) of this
section.
September 26, 20114202011–39 I.R.B.

(1)Citizen of the United States. A citi-
zen of the United States, whether resident
or nonresident, may claim a credit for—
(i) The amount of any income, war prof-
its, and excess profits taxes paid or ac-
crued during the taxable year to any for-
eign country or to any possession of the
United States; and
(ii) His share of any such taxes of a part-
nership of which he is a member, or of an
estate or trust of which he is a beneficiary.
(2)Domestic corporation. A domestic
corporation may claim a credit for—
(i) The amount of any income, war prof-
its, and excess profits taxes paid or ac-
crued during the taxable year to any for-
eign country or to any possession of the
United States;
(ii) Its share of any such taxes of a part-
nership of which it is a member, or of an
estate or trust of which it is a beneficiary;
and
(iii) The taxes deemed to have been paid
under section 902 or 960.
(3)Alien resident of the United States
or Puerto Rico. Except as provided in
a Presidential proclamation described in
section 901(c), an alien resident of the
United States, or an alien individual who is
abona fideresident of Puerto Rico during
the entire taxable year, may claim a credit
for—
(i) The amount of any income, war prof-
its, and excess profits taxes paid or ac-
crued during the taxable year to any for-
eign country or to any possession of the
United States; and
(ii) His distributive share of any such
taxes of a partnership of which he is a
member,orofanestateortrustofwhich
he is a beneficiary.
(b)Limitations. Certain Code sections,
including sections 814, 901(e) through
(m), 904, 906, 907, 908, 909, 911, 999,
and 6038, limit the credit against the tax
imposed by chapter 1 of the Code for cer-
tain foreign taxes.
*****
(j)Effective/applicability date.***
Paragraphs (a) and (b) of this section apply
to taxable years ending after July 13, 2011.
§1.901–1T [Removed].
Par. 3. Section 1.901–1T is removed.
Par. 4. Section 1.901–2 is amended
by removing and reserving paragraph
(e)(5)(iii), revising paragraph (e)(5)(iv),
and revising paragraph (h)(2) to read as
follows:
§1.901–2 Income, war profits, or excess
profits tax paid or accrued.
*****
(e) * * *
(5) * * *
(iii) [Reserved].
(iv)Structured passive investment ar-
rangements—(A)In general. Notwith-
standing paragraph (e)(5)(i) of this section,
an amount paid to a foreign country (a
“foreign payment”) is not a compulsory
payment, and thus is not an amount of
tax paid, if the foreign payment is attrib-
utable (within the meaning of paragraph
(e)(5)(iv)(B)(1)(ii)ofthissection)toa
structured passive investment arrangement
(as described in paragraph (e)(5)(iv)(B) of
this section).
(B)Conditions. An arrangement is a
structured passive investment arrangement
if all of the following conditions are satis-
fied:
(1)Special purpose vehicle (SPV).An
entity that is part of the arrangement meets
the following requirements:
(i) Substantially all of the gross income
(for U.S. tax purposes) of the entity, if any,
is passive investment income, and substan-
tially all of the assets of the entity are as-
sets held to produce such passive invest-
ment income.
(ii) There is a foreign payment attribut-
able to income of the entity (as determined
under the laws of the foreign country to
which such foreign payment is made), in-
cluding the entity’s share of income of a
lower-tier entity that is a branch or pass-
through entity under the laws of such for-
eign country, that, if the foreign payment
were an amount of tax paid, would be paid
or accrued in a U.S. taxable year in which
the entity meets the requirements of para-
graph (e)(5)(iv)(B)(1)(i)ofthissection.A
foreign payment attributable to income of
an entity includes a foreign payment at-
tributable to income that is required to be
taken into account by an owner of the en-
tity, if the entity is a branch or pass-through
entity under the laws of such foreign coun-
try.
(2)U.S. party. A person would be
eligible to claim a credit under section
901(a) (including a credit for foreign taxes
deemed paid under section 902 or 960) for
all or a portion of the foreign payment de-
scribed in paragraph (e)(5)(iv)(B)(1)(ii)of
this section if the foreign payment were an
amount of tax paid.
(3)Direct investment. The U.S. party’s
proportionate share of the foreign pay-
ment or payments described in paragraph
(e)(5)(iv)(B)(1)(ii)ofthissectionis(or
is expected to be) substantially greater
than the amount of credits, if any, that the
U.S. party reasonably would expect to be
eligible to claim under section 901(a) for
foreign taxes attributable to income gen-
erated by the U.S. party’s proportionate
share of the assets owned by the SPV if
the U.S. party directly owned such assets.
For this purpose, direct ownership shall
not include ownership through a branch,
a permanent establishment or any other
arrangement (such as an agency arrange-
ment or dual resident status) that would
result in the income generated by the U.S.
party’s proportionate share of the assets
beingsubjecttotaxonanetbasisinthe
foreign country to which the payment is
made. A U.S. party’s proportionate share
of the assets of the SPV shall be deter-
mined by reference to such U.S. party’s
proportionate share of the total value of all
of the outstanding interests in the SPV that
are held by its equity owners and credi-
tors. A U.S. party’s proportionate share of
the assets of the SPV, however, shall not
include any assets that produce income
subject to gross basis withholding tax.
(4)Foreign tax benefit. The arrange-
ment is reasonably expected to result in a
credit, deduction, loss, exemption, exclu-
sion or other tax benefit under the laws
of a foreign country that is available to a
counterparty or to a person that is related
to the counterparty (determined under the
principles of paragraph (e)(5)(iv)(C)(7)
of this section by applying the tax laws
of a foreign country in which the coun-
terparty is subject to tax on a net basis).
However, a foreign tax benefit in the form
of a credit is described in this paragraph
(e)(5)(iv)(B)(4) only if the amount of
any such credit corresponds to 10 per-
cent or more of the amount of the U.S.
party’s share (for U.S. tax purposes) of
the foreign payment referred to in para-
graph (e)(5)(iv)(B)(1)(ii) of this section.
In addition, a foreign tax benefit in the
form of a deduction, loss, exemption, ex-
clusion or other tax benefit is described
in this paragraph (e)(5)(iv)(B)(4) only if
2011–39 I.R.B.421September 26, 2011

such amount corresponds to 10 percent
or more of the foreign base with respect
to which the U.S. party’s share (for U.S.
tax purposes) of the foreign payment is
imposed. For purposes of the preceding
two sentences, if an arrangement involves
more than one U.S. party or more than
one counterparty or both, the aggregate
amount of foreign tax benefits available
to all of the counterparties and persons
related to such counterparties is compared
to the aggregate amount of all of the U.S.
parties’ shares of the foreign payment or
foreign base, as the case may be. Where
a U.S. party indirectly owns interests in
an SPV that are treated as equity interests
for both U.S. and foreign tax purposes, a
foreign tax benefit available to a foreign
entity in the chain of ownership that begins
with the SPV and ends with the first-tier
entity in the chain does not correspond
to the U.S. party’s share of the foreign
payment attributable to income of the SPV
to the extent that such benefit relates to
earnings of the SPV that are distributed
with respect to equity interests in the SPV
that are owned directly or indirectly by the
U.S. party for purposes of both U.S. and
foreign tax law.
(5)Counterparty. The arrangement in-
volves a counterparty. A counterparty is a
person that, under the tax laws of a foreign
country in which the person is subject to
tax on the basis of place of management,
place of incorporation or similar criterion
or otherwise subject to a net basis tax, di-
rectly or indirectly owns or acquires equity
interests in, or assets of, the SPV. However,
a counterparty does not include the SPV or
a person with respect to which for U.S. tax
purposes the same domestic corporation,
U.S. citizen or resident alien individual di-
rectly or indirectly owns more than 80 per-
cent of the total value of the stock (or eq-
uity interests) of each of the U.S. party and
such person. A counterparty also does not
include a person with respect to which for
U.S. tax purposes the U.S. party directly
or indirectly owns more than 80 percent of
the total value of the stock (or equity inter-
ests), but only if the U.S. party is a domes-
tic corporation, a U.S. citizen or a resident
alien individual. In addition, a counter-
party does not include an individual who
is a U.S. citizen or resident alien.
(6)Inconsistent treatment.The
United States and an applicable for-
eign country treat one or more of the
aspects of the arrangement listed in
paragraph (e)(5)(iv)(B)(6)(i) through
(e)(5)(iv)(B)(6)(iv) of this section differ-
ently under their respective tax systems,
and for one or more tax years when the
arrangement is in effect one or both of the
following two conditions applies; either
the amount of income attributable to the
SPV that is recognized for U.S. tax pur-
poses by the SPV, the U.S. party or parties,
andpersonsrelatedtoaU.S.partyorpar-
ties is materially less than the amount of
income that would be recognized if the
foreign tax treatment controlled for U.S.
tax purposes; or the amount of credits
claimed by the U.S. party or parties (if the
foreign payment described in paragraph
(e)(5)(iv)(B)(1)(ii)ofthissectionwerean
amount of tax paid) is materially greater
than it would be if the foreign tax treat-
ment controlled for U.S. tax purposes:
(i) The classification of the SPV (or an
entity that has a direct or indirect owner-
ship interest in the SPV) as a corporation or
other entity subject toan entity-level tax,
a partnership or other flow-through entity
or an entity that is disregarded for tax pur-
poses.
(ii) The characterization as debt, equity
or an instrument that is disregarded for tax
purposes of an instrument issued by the
SPV (or an entity that has a direct or in-
direct ownership interest in the SPV) to a
U.S. party, a counterparty or a person re-
latedtoaU.S.partyoracounterparty.
(iii) The proportion of the equity of the
SPV (or an entity that directly or indirectly
owns the SPV) that is considered to be
owned directly or indirectly by a U.S. party
and a counterparty.
(iv) The amount of taxable income that
is attributable to the SPV for one or more
tax years during which the arrangement is
in effect.
(C)Definitions. The following defi-
nitions apply for purposes of paragraph
(e)(5)(iv) of this section.
(1)Applicable foreign country.Anap-
plicable foreign countrymeans each for-
eign country to which a foreign payment
described in paragraph (e)(5)(iv)(B)(1)(ii)
of this section is made or which confers a
foreign tax benefit described in paragraph
(e)(5)(iv)(B)(4)ofthissection.
(2)Counterparty.Thetermcounter-
partymeans a person described in para-
graph (e)(5)(iv)(B)(5) of this section.
(3)Entity.Thetermentityin-
cludes a corporation, trust, partner-
ship or disregarded entity described in
§301.7701–2(c)(2)(i).
(4)Indirect ownership. Indirect own-
ership of stock or another equity interest
(such as an interest in a partnership) shall
be determined in accordance with the prin-
ciples of section 958(a)(2), regardless of
whether the interest is owned by a U.S. or
foreign entity.
(5)
Passive investment income—(i)
In general.Thetermpassive invest-
ment incomemeans income described in
section 954(c), as modified by this para-
graph (e)(5)(iv)(C)(5)(i) and paragraph
(e)(5)(iv)(C)(5)(ii) of this section. In de-
termining whether income is described
in section 954(c), paragraphs (c)(1)(H),
(c)(3), and (c)(6) of that section shall be
disregarded. Sections 954(c), 954(h), and
954(i) shall be applied at the entity level
as if the entity (as defined in paragraph
(e)(5)(iv)(C)(3)ofthissection)werea
controlled foreign corporation (as de-
fined in section 957(a)). For purposes
of determining if sections 954(h) and
954(i) apply for purposes of this para-
graph (e)(5)(iv)(C)(5)(i) and paragraph
(e)(5)(iv)(C)(5)(ii)ofthissection,any
income of an entity attributable to trans-
actions that, assuming the entity is an
SPV, are with a person that is a coun-
terparty, or with persons that are related
to a counterparty within the meaning of
paragraph (e)(5)(iv)(B)(4) of this section,
shall not be treated as qualified banking
or financing income or as qualified in-
surance income, and shall not be taken
into account in applying sections 954(h)
and 954(i) for purposes of determining
whether other income of the entity is
excluded from section 954(c)(1) under
section 954(h) or 954(i), but only if any
such person (or a person that is related
to such person within the meaning of
paragraph (e)(5)(iv)(B)(4)ofthissec-
tion) is eligible for a foreign tax benefit
described in paragraph (e)(5)(iv)(B)(4)
of this section. In addition, in applying
section 954(h) for purposes of this para-
graph (e)(5)(iv)(C)(5)(i) and paragraph
(e)(5)(iv)(C)(5)(ii) of this section, sec-
tion 954(h)(3)(E) shall not apply, section
954(h)(2)(A)(ii) shall be satisfied only
if the entity conducts substantial activity
with respect to its business through its
own employees, and the term “any foreign
September 26, 20114222011–39 I.R.B.

country” shall be substituted for “home
country” wherever it appears in section
954(h).
(ii)Income attributable to lower-tier
entities; holding company exception.In-
come of an upper-tier entity that is attrib-
utable to an equity interest in a lower-tier
entity, including dividends, an allocable
share of partnership income, and income
attributable to the ownership of an inter-
est in an entity that is disregarded as an
entity separate from its owner is passive
investment income unless substantially all
of the upper-tier entity’s assets consist of
qualified equity interests in one or more
lower-tier entities, each of which is en-
gaged in the active conduct of a trade or
business and derives more than 50 per-
cent of its gross income from such trade
or business, and substantially all of the up-
per-tier entity’s opportunity for gain and
risk of loss with respect to each such in-
terest in a lower-tier entity is shared by the
U.S. party (or persons that are related to
a U.S. party) and, assuming the entity is
an SPV, a counterparty (or persons that are
related to a counterparty) (“holding com-
pany exception”). If an arrangement in-
volves more than one U.S. party or more
than one counterparty or both, then sub-
stantially all of the upper-tier entity’s op-
portunity for gain and risk of loss with re-
spect to its interest in any lower-tier en-
tity must be shared (directly or indirectly)
by one or more U.S. parties (or persons
relatedtosuchU.S.parties)and,assum-
ing the upper-tier entity is an SPV, one or
more counterparties (or persons related to
such counterparties). Substantially all of
the upper-tier entity’s opportunity for gain
and risk of loss with respect to its inter-
est in any lower-tier entity is not shared
if the opportunity for gain and risk of loss
is borne (directly or indirectly) by one or
more U.S. parties (or persons related to
such U.S. party or parties) or, assuming the
upper-tierentityisanSPV,byoneormore
counterparties (or persons related to such
counterparty or counterparties). Whether
and the extent to which a person is consid-
ered to share in an upper-tier entity’s op-
portunity for gain and risk of loss is deter-
mined based on all the facts and circum-
stances, provided, however, that a person
does not share in an upper-tier entity’s op-
portunity for gain and risk of loss if its eq-
uity interest in the upper-tier entity was ac-
quired in a sale-repurchase transaction or
if its interest is treated as debt for U.S. tax
purposes. If a U.S. party owns an inter-
est in an entity indirectly through a chain
of entities, the application of the holding
company exception begins with the low-
est-tier entity in the chain that may satisfy
the holding company exception and pro-
ceeds upward; provided, however, that the
opportunity for gain and risk of loss borne
by any upper-tier entityinthechainthat
is a counterparty shall be disregarded to
the extent borne indirectly by a U.S. party.
An upper-tier entity that satisfies the hold-
ing company exception is itself considered
to be engaged in the active conduct of a
trade or business and to derive more than
50 percent of its gross income from such
trade or business for purposes of apply-
ing the holding company exception to the
owners of such entity. A lower-tier en-
tity that is engaged in a banking, financ-
ing, or similar business shall not be con-
sidered to be engaged in the active con-
duct of a trade or business unless the in-
comederivedbysuchentitywouldbeex-
cluded from section 954(c)(1) under sec-
tion 954(h) or 954(i) as modified by para-
graph (e)(5)(iv)(C)(5)(i) of this section.
(6)Qualified equity interest.Withre-
spect to an interest in a corporation, the
termqualified equity interestmeans stock
representing 10 percent or more of the to-
tal combined voting power of all classes
of stock entitled to vote and 10 percent or
more of the total value of the stock of the
corporation or disregarded entity, but does
not include any preferred stock (as defined
in section 351(g)(3)). Similar rules shall
apply to determine whether an interest in
an entity other than a corporation is a qual-
ified equity interest.
(7)Related person. Two persons are
related if—
(i) One person directly or indirectly
owns stock (or an equity interest) possess-
ing more than 50 percent of the total value
of the other person; or
(ii) The same person directly or indi-
rectly owns stock (or an equity interest)
possessingmorethan50percentoftheto-
tal value of both persons.
(8)Special purpose vehicle (SPV).The
termSPVmeans the entity described in
paragraph (e)(5)(iv)(B)(1) of this section.
(9)U.S. party.ThetermU.S. party
means a person described in paragraph
(e)(5)(iv)(B)(2)ofthissection.
(D)Examples. The following examples
illustrate the rules of paragraph (e)(5)(iv)
of this section. No inference is intended as
to whether a taxpayer would be eligible to
claim a credit under section 901(a) if a for-
eign payment were an amount of tax paid.
The examples set forth below do not limit
the application of otherprinciples of exist-
ing law to determine the proper tax con-
sequences of the structures or transactions
addressed in the regulations.
Example 1.U.S. borrower transaction.(i)Facts.
A domestic corporation (USP) forms a country M
corporation (Newco), contributing $1.5 billion in ex-
change for 100% of the stock of Newco. Newco, in
turn, loans the $1.5 billion to a second country M
corporation (FSub) wholly owned by USP. USP then
sells its entire interest in Newco to a country M corpo-
ration (FP) for the original purchase price of $1.5 bil-
lion, subject to an obligation to repurchase the interest
in five years for $1.5 billion. The sale has the effect
of transferring ownership of the Newco stock to FP
for country M tax purposes. Assume the sale-repur-
chase transaction is structured in a way that qualifies
as a collateralized loan for U.S. tax purposes. There-
fore, USP remains the owner of the Newco stock for
U.S. tax purposes. In year 1, FSub pays Newco $120
million of interest. Newco pays $36 million to coun-
try M with respect to such interest income and dis-
tributes the remaining $84 million to FP. Under coun-
try M law, the $84 million distribution is excluded
from FP’s income. None of FP’s stock is owned, di-
rectly or indirectly, by USP or any shareholders of
USP that are domestic corporations, U.S. citizens, or
resident alien individuals. Under an income tax treaty
between country M and the United States, country M
does not impose country M tax on interest received
by U.S. residents from sources in country M.
(ii)Result. The $36 million payment by Newco
to country M is not a compulsory payment, and thus
is not an amount of tax paid because the foreign pay-
ment is attributable to a structured passive investment
arrangement. First, Newco is an SPV because all of
Newco’s income is passive investment income de-
scribed in paragraph (e)(5)(iv)(C)(5)ofthissection;
Newco’s only asset, a note, is held to produce such
income; the payment to country M is attributable to
such income; and if the payment were an amount of
tax paid it would be paid or accrued in a U.S. tax-
able year in which Newco meets the requirements of
paragraph (e)(5)(iv)(B)(1)(i) of this section. Second,
if the foreign payment were treated as an amount of
tax paid, USP would be deemed to pay the foreign
payment under section 902(a) and, therefore, would
be eligible to claim a credit for such payment under
section 901(a). Third, USP would not pay any coun-
try M tax if it directly owned Newco’s loan receiv-
able. Fourth, the distribution from Newco to FP is ex-
empt from tax under country M law, and the exempt
amount corresponds to more than 10% of the for-
eign base with respect to which USP’s share (which
is 100% under U.S. tax law) of the foreign payment
was imposed. Fifth, FP is a counterparty because FP
owns stock of Newco under country M law and none
of FP’s stock is owned by USP or shareholders of
USP that are domestic corporations, U.S. citizens, or
resident alien individuals. Sixth, FP is the owner of
2011–39 I.R.B.423September 26, 2011

100% of Newco’s stock for country M tax purposes,
while USP is the owner of 100% of Newco’s stock for
U.S. tax purposes, and the amount of credits claimed
by USP if the payment to country M were an amount
of tax paid is materially greater than it would be if
country M tax treatment controlled for U.S. tax pur-
poses such that FP, rather than USP, owned 100% of
Newco’s stock. Because the payment to country M
is not an amount of tax paid, USP is not deemed to
pay any country M tax under section 902(a). USP
has dividend income of $84 million and also has inter-
est expense of $84 million. FSub’s post–1986 undis-
tributed earnings are reduced by $120 million of in-
terest expense.
Example 2.U.S. borrower transaction.(i)Facts.
ThefactsarethesameasinExample 1, except that
FSub is a wholly-owned subsidiary of Newco. In
addition, assume FSub is engaged in the active con-
duct of manufacturing and selling widgets and de-
rives more than 50% of its gross income from such
business.
(ii)Result. The results are the same as inExam-
ple 1. Although Newco wholly owns FSub, which is
engaged in the active conduct of manufacturing and
selling widgets and derives more than 50% of its in-
come from such business, Newco’s income that is at-
tributable to Newco’s equity interest in FSub is pas-
sive investment income because the sale-repurchase
transaction limits FP’s interest in Newco and its as-
sets to that of a creditor, so that substantially all of
Newco’s opportunity for gain and risk of loss with
respect to its stock in FSub is borne by USP. See
paragraph (e)(5)(iv)(C)(5)(ii) of this section. Accord-
ingly, Newco’s stock in FSub is held to produce pas-
sive investment income. Thus, Newco is an SPV be-
cause all of Newco’s income is passive investment in-
come described in paragraph (e)(5)(iv)(C)(5)ofthis
section, Newco’s assets are held to produce such in-
come, the payment to country M is attributable to
such income, and if the payment were an amount of
tax paid it would be paid or accrued in a U.S. taxable
year in which Newco meets the requirements of para-
graph (e)(5)(iv)(B)(1)(i) of this section.
Example 3.U.S. borrower transaction.(i)Facts.
(A) A domestic corporation (USP) loans $750 mil-
lion to its wholly-owned domestic subsidiary (Sub).
USP and Sub form a country M partnership (Partner-
ship) to which each contributes $750 million. Part-
nership loans all of its $1.5 billion of capital to Issuer,
a wholly-owned country M affiliate of USP, in ex-
change for a note and coupons providing for the pay-
ment of interest at a fixed rate over a five-year term.
Partnership sells all of the coupons to Coupon Pur-
chaser, a country N partnership owned by a country
M corporation (Foreign Bank) and a wholly-owned
country M subsidiary of Foreign Bank, for $300 mil-
lion. At the time of the coupon sale, the fair market
value of the coupons sold is $290 million and, pur-
suant to section 1286(b)(3), Partnership’s basis allo-
cated to the coupons sold is $290 million. Several
months later and prior to any interest payments on the
note, Foreign Bank and its subsidiary sell all of their
interests in Coupon Purchaser to an unrelated coun-
try O corporation for $280 million. None of Foreign
Bank’s stock or its subsidiary’s stock is owned, di-
rectly or indirectly, by USP or Sub or by any share-
holders of USP or Sub that are domestic corporations,
U.S. citizens, or resident alien individuals.
(B) Assume that both the United States and coun-
try M respect the sale of the coupons for tax law pur-
poses. In the year of the coupon sale, for country
M tax purposes USP’s and Sub’s shares of Partner-
ship’s profits total $300 million, a payment of $60
million to country M is made with respect to those
profits, and Foreign Bank and its subsidiary, as part-
ners of Coupon Purchaser, are entitled to deduct the
$300 million purchase price of the coupons from their
taxable income. For U.S. tax purposes, USP and Sub
recognize their distributive shares of the $10 million
premium income and claim a direct foreign tax credit
for their shares of the $60 million payment to coun-
try M. Country M imposes no additional tax when
Foreign Bank and its subsidiary sell their interests in
Coupon Purchaser. Country M also does not impose
country M tax on interest received by U.S. residents
from sources in country M.
(ii)Result. The payment to country M is not a
compulsory payment, and thus is not an amount of
tax paid, because the foreign payment is attributable
to a structured passive investment arrangement. First,
Partnership is an SPV because all of Partnership’s in-
come is passive investment income described in para-
graph (e)(5)(iv)(C)(5) of this section; Partnership’s
only asset, Issuer’s note, is held to produce such in-
come; the payment to country M is attributable to
such income; and if the payment were an amount of
tax paid, it would be paid or accrued in a U.S. taxable
year in which Partnership meets the requirements of
paragraph (e)(5)(iv)(B)(
1)(i) of this section. Second,
if the foreign payment were an amount of tax paid,
USP and Sub would be eligible to claim a credit for
such payment under section 901(a). Third, USP and
Sub would not pay any country M tax if they directly
owned Issuer’s note. Fourth, for country M tax pur-
poses, Foreign Bank and its subsidiary deduct the
$300 million purchase price of the coupons and are
exempt from country M tax on the $280 million re-
ceived upon the sale of Coupon Purchaser, and the de-
duction and exemption correspond to more than 10%
of the $300 million base with respect to which USP’s
and Sub’s 100% share of the foreign payments was
imposed. Fifth, Foreign Bank and its subsidiary are
counterparties because they indirectly acquired assets
of Partnership, the interest coupons on Issuer’s note,
and are not directly or indirectly owned by USP or
Sub or shareholders of USP or Sub that are domestic
corporations, U.S. citizens, or resident alien individ-
uals. Sixth, the amount of taxable income of Part-
nership for one or more years is different for U.S.
and country M tax purposes, and the amount of in-
come attributable to USP and Sub for U.S. tax pur-
poses is materially less than the amount of income
they would recognize if the country M tax treatment
of the coupon sale controlled for U.S. tax purposes.
Because the payment to country M is not an amount
of tax paid, USP and Sub are not considered to pay
tax under section 901. USP and Sub have income of
$10 million in the year of the coupon sale.
Example 4.Active business; no SPV.(i)Facts.
A, a domestic corporation, wholly owns B, a country
X corporation engaged in the manufacture and sale
of widgets. On January 1, year 1, C, also a country
X corporation, loans $400 million to B in exchange
for an instrument that is debt for U.S. tax purposes
and equity in B for country X tax purposes. As a re-
sult, C is considered to own stock of B for country
X tax purposes. B loans $55 million to D, a country
YcorporationwhollyownedbyA.Inyear1,Bhas
$166 million of net income attributable to its sales of
widgets and $3.3 million of interest income attribut-
able to the loan to D. Substantially all of B’s assets
are used in its widget business. Country Y does not
impose tax on interest paid to nonresidents. B makes
a payment of $50.8 million to country X with respect
to B’s net income. Country X does not impose tax on
dividend payments between country X corporations.
None of C’s stock is owned, directly or indirectly, by
A or by any shareholders of A that are domestic cor-
porations, U.S. citizens, or resident alien individuals.
(ii)Result. B is not an SPV within the meaning of
paragraph (e)(5)(iv)(B)(1) of this section because the
amount of interest income received from D does not
constitute substantially all of B’s income and the $55
million note from D does not constitute substantially
all of B’s assets. Accordingly, the $50.8 million pay-
ment to country X is not attributable to a structured
passive investment arrangement.
Example 5.U.S. lender transaction.(i)Facts.
(A) A country X corporation (Foreign Bank) con-
tributes $2 billion to a newly-formed country X com-
pany (Newco) in exchange for 90% of the common
stock of Newco and securities that are treated as debt
of Newco for U.S. tax purposes and preferred stock
of Newco for country X tax purposes. A domestic
corporation (USP) contributes $1 billion to Newco in
exchange for 10% of Newco’s common stock and se-
curities that are treated aspreferred stock of Newco
for U.S. tax purposes and debt of Newco for coun-
try X tax purposes. Newco loans the $3 billion to a
wholly-owned, country X subsidiary of Foreign Bank
(FSub) in return for a $3 billion, seven-year note pay-
ing interest currently. The Newco securities held by
USP entitle the holder to fixed distributions of $4 mil-
lion per year, and the Newco securities held by For-
eign Bank entitle the holder to receive $82 million per
year, payable only on maturity of the $3 billion FSub
note in year 7. At the end of year 5, pursuant to a pre-
arranged plan, Foreign Bank acquires USP’s Newco
stock and securities for a prearranged price of $1 bil-
lion. Country X does not impose tax on dividends
received by one country X corporation from a second
country X corporation. Under an income tax treaty
between country X and the United States, country X
does not impose country X tax on interest received
by U.S. residents from sources in country X. None of
Foreign Bank’s stock is owned, directly or indirectly,
by USP or any shareholders of USP that are domestic
corporations, U.S. citizens, or resident alien individ-
uals.
(B) In each of years 1 through 7, FSub pays
Newco $124 million of interest on the $3 billion
note. Newco distributes $4 million to USP in each of
years 1 through 5. The distributions are deductible
for country X tax purposes, and Newco pays country
X $36 million with respect to $120 million of tax-
able income from the FSub note in each year. For
U.S. tax purposes, in each year Newco’s post–1986
undistributed earnings are increased by $124 million
of interest income and reduced by accrued interest
expense with respect to the Newco securities held by
Foreign Bank.
(ii)Result. The $36 million payment to coun-
try X is not a compulsory payment, and thus is not
an amount of tax paid, because the foreign payment
is attributable to a structured passive investment ar-
rangement. First, Newco is an SPV because all of
September 26, 20114242011–39 I.R.B.

Newco’s income is passive investment income de-
scribed in paragraph (e)(5)(iv)(C)(5)ofthissection;
Newco’s only asset, a note of FSub, is held to produce
such income; the payment to country X is attributable
to such income; and if the payment were an amount
of tax paid it would be paid or accrued in a U.S. tax-
able year in which Newco meets the requirements of
paragraph (e)(5)(iv)(B)(1)(i) of this section. Second,
if the foreign payment were an amount of tax paid,
USP would be deemed to pay itspro ratashare of the
foreign payment under section 902(a) in each of years
1 through 5 and, therefore, would be eligible to claim
a credit under section 901(a). Third, USP would not
pay any country X tax if it directly owned its pro-
portionate share of Newco’s assets, a note of FSub.
Fourth, for country X tax purposes, Foreign Bank is
eligible to receive a tax-free distribution of $82 mil-
lion attributable to each of years 1 through 5, and that
amount corresponds to more than 10% of the foreign
base with respect to which USP’s share of the foreign
payment was imposed. Fifth, Foreign Bank is a coun-
terparty because it owns stock of Newco for country
X tax purposes and none of Foreign Bank’s stock is
owned, directly or indirectly, by USP or sharehold-
ers of USP that are domestic corporations, U.S. citi-
zens, or resident alien individuals. Sixth, the United
States and country X treat various aspects of the ar-
rangement differently, including whether the Newco
securities held by Foreign Bank and USP are debt or
equity. The amount of credits claimed by USP if the
payment to country X were an amount of tax paid is
materially greater than it would be if the country X
tax treatment controlled for U.S. tax purposes such
that the securities held by USP were treated as debt
or the securities held by Foreign Bank were treated
as equity, and the amount of income recognized by
Newco for U.S. tax purposes is materially less than
the amount of income recognized for country X tax
purposes. Because the payment to country X is not
an amount of tax paid, USP is not deemed to pay any
country X tax under section 902(a). USP has divi-
dend income of $4 million in each of years 1 through
5.
Example 6.Holding company; no SPV.(i)Facts.
A, a country X corporation, and B, a domestic corpo-
ration, each contribute $1 billion to a newly-formed
country X entity (C) in exchange for 50% of the com-
mon stock of C. C is treated as a corporation for coun-
try X purposes and a partnership for U.S. tax pur-
poses. C contributes $1.95 billion to a newly-formed
country X corporation (D) in exchange for 100% of
D’s common stock. C loans its remaining $50 million
to D. Accordingly, C’s sole assets are stock and debt
of D. D uses the entire $2 billion to engage in the busi-
ness of manufacturing and selling widgets. In year
1, D derives $300 million of income from its widget
business and derives $2 million of interest income.
Also in year 1, C has dividend income of $200 mil-
lion and interest income of $3.2 million with respect
to its investment in D. Country X does not impose tax
on dividends received by one country X corporation
from a second country X corporation. C makes a pay-
ment of $960,000 to country X with respect to C’s net
income.
(ii)Result. C qualifies for the holding company
exception described in paragraph (e)(5)(iv)(C)(5)(ii)
of this section because C holds a qualified equity in-
terest in D, D is engaged in an active trade or business
and derives more than 50% of its gross income from
such trade or business, C’s interest in D constitutes
substantially all of C’s assets, and A and B share in
substantially all of C’s opportunity for gain and risk
of loss with respect to D. As a result, C’s dividend
income from D is not passive investment income and
C’s stock in D is not held to produce such income.
Accordingly, C is not an SPV within the meaning
of paragraph (e)(5)(iv)(B)(1) of this section, and the
$960,000 payment to country X is not attributable to
a structured passive investment arrangement.
Example 7.Holding company; no SPV.(i)Facts.
ThefactsarethesameasinExample 6, except that
instead of loaning $50 million to D, C contributes the
$50 million to E in exchange for 10% of the stock of
E. E is a country Y corporation that is not engaged in
the active conduct of a trade or business. Also in year
1, D pays no dividends to C, E pays $3.2 million in
dividends to C, and C makes a payment of $960,000
to country X with respect to C’s net income.
(ii)Result. C qualifies for the holding company
exception described in paragraph (e)(5)(iv)(C)(
5)(ii)
of this section because C holds a qualified equity in-
terest in D, D is engaged in an active trade or business
and derives more than 50% of its gross income from
such trade or business, C’s interest in D constitutes
substantially all of C’s assets, and A and B share in
substantially all of C’s opportunity for gain and risk
of loss with respect to D. As a result, less than sub-
stantially all of C’s assets are held to produce passive
investment income. Accordingly, C is not an SPV be-
cause it does not meet the requirements of paragraph
(e)(5)(iv)(B)(1) of this section, and the $960,000 pay-
ment to country X is not attributable to a structured
passive investment arrangement.
Example 8.Holding company; no SPV.(i)Facts.
ThefactsarethesameasinExample 6, except that
B’s $1 billion investment in C consists of 30% of
C’s common stock and 100% of C’s preferred stock.
A’s $1 billion investment in C consists of 70% of C’s
common stock. B sells its preferred stock to F, a coun-
try X corporation, subject to a repurchase obligation.
Assume that under country X tax law, but not U.S. tax
law, F is treated as the owner of the preferred shares
and receives a distribution in year 1 of $50 million.
The remaining earnings are distributed 70% to A and
30% to B.
(ii)Result. C qualifies for the holding company
exception described in paragraph (e)(5)(iv)(C)(5)(ii)
of this section because C holds a qualified equity in-
terest in D, D is engaged in an active trade or busi-
ness and derives more than 50% of its gross income
from such trade or business, and C’s interest in D
constitutes substantially all of C’s assets. Addition-
ally, although F does not share in C’s opportunity for
gain and risk of loss with respect to C’s interest in
D because F acquired its interest in C in a sale-re-
purchase transaction, B (the U.S. party) and in the
aggregate A and F (who would be counterparties as-
suming C were an SPV) share in substantially all of
C’s opportunity for gain and risk of loss with respect
to D and such opportunity for gain and risk of loss is
not borne exclusively either by B or by A and F in
the aggregate. Accordingly, C’s shares in D are not
held to produce passive investment income and the
$200 million dividend from D is not passive invest-
ment income. C is not an SPV within the meaning
of paragraph (e)(5)(iv)(B)(1) of this section, and the
$960,000 payment to country X is not attributable to
a structured passive investment arrangement.
Example 9.Asset holding transaction.(i)Facts.
(A) A domestic corporation (USP) contributes $6 bil-
lion of country Z debt obligations to a country Z en-
tity (DE) in exchange for all of the class A and class
B stock of DE. DE is a disregarded entity for U.S.
tax purposes and a corporation for country Z tax pur-
poses. A corporation unrelated to USP and organized
in country Z (FC) contributes $1.5 billion to DE in
exchange for all of the class C stock of DE. DE uses
the $1.5 billion contributed by FC to redeem USP’s
class B stock. The terms of the class C stock entitle
its holder to all income from DE, but FC is obligated
immediately to contribute back to DE all distributions
on the class C stock. USP and FC enter into—
(1) A contract under which USP agrees to buy
after five years the class C stock for $1.5 billion; and
(2) An agreement under which USP agrees to pay
FC periodic payments on $1.5 billion.
(B) The transaction is structured in such a way
that, for U.S. tax purposes, there is a loan of $1.5 bil-
lion from FC to USP, and USP is the owner of the
class C stock and the class A stock. In year 1, DE
earns $400 million of interest income on the country
Z debt obligations. DE makes a payment to coun-
try Z of $100 million with respect to such income
and distributes the remaining $300 million to FC. FC
contributes the $300 million back to DE. None of
FC’s stock is owned, directly or indirectly, by USP or
shareholders of USP that are domestic corporations,
U.S. citizens, or resident alien individuals. Assume
that country Z imposes a withholding tax on interest
income derived by U.S. residents.
(C) Country Z treats FC as the owner of the class
C stock. Pursuant to country Z tax law, FC is required
to report the $400 million of income with respect to
the $300 million distribution from DE, but is allowed
to claim credits for DE’s $100 million payment to
country Z. For country Z tax purposes, FC is entitled
to current deductions equal to the $300 million con-
tributed back to DE.
(ii)Result. The payment to country Z is not a
compulsory payment, and thus is not an amount of tax
paid because the payment is attributable to a struc-
tured passive investment arrangement. First, DE is
an SPV because all of DE’s income is passive invest-
ment income described in paragraph (e)(5)(iv)(C)(5)
of this section; all of DE’s assets are held to produce
such income; the payment to country Z is attributable
to such income; and if the payment were an amount of
tax paid it would be paid or accrued in a U.S. taxable
year in which DE meets the requirements of para-
graph (e)(5)(iv)(B)(1)(i) of this section. Second, if
the payment were an amount of tax paid, USP would
be eligible to claim a credit for such amount under
section 901(a). Third, USP’s proportionate share of
DE’s foreign payment of $100 million is substan-
tially greater than the amount of credits USP would
be eligible to claim if it directly held its proportion-
ate share of DE’s assets, excluding any assets that
would produce income subject to gross basis with-
holding tax if directly held by USP. Fourth, FC is en-
titled to claim a credit under country Z tax law for
the payment and recognizes a deduction for the $300
million contributed to DE under country Z law. The
credit claimed by FC corresponds to more than 10%
of USP’s share (for U.S. tax purposes) of the foreign
payment and the deductions claimed by FC corre-
spond to more than 10% of the base with respect to
which USP’s share of the foreign payment was im-
2011–39 I.R.B.425September 26, 2011

posed. Fifth, FC is a counterparty because FC is con-
sidered to own equity of DE under country Z law and
none of FC’s stock is owned, directly or indirectly, by
USP or shareholders of USP that are domestic cor-
porations, U.S. citizens, or resident alien individu-
als. Sixth, the United States and country X treat cer-
tain aspects of the transaction differently, including
theproportionofequityownedinDEbyUSPand
FC, and the amount of credits claimed by USP if the
country Z payment were an amount of tax paid is ma-
terially greater than it would be if the country X tax
treatment controlled for U.S. tax purposes such that
FC,ratherthanUSP,ownedtheclassCstock. Be-
cause the payment to country Z is not an amount of
tax paid, USP is not considered to pay tax under sec-
tion 901. USP has $400 million of interest income.
Example 10.Loss surrender.(i)Facts. The facts
are the same as inExample 9, except that the deduc-
tions attributable to the arrangement contribute to a
loss recognized by FC for country Z tax purposes,
and pursuant to a group relief regime in country Z FC
elects to surrender the loss to its country Z subsidiary.
(ii)Result. The results are the same as inExample
9. The surrender of the loss to a related party is a
foreign tax benefit that corresponds to the base with
respect to which USP’s share of the foreign payment
was imposed.
Example 11.Joint venture; no foreign tax benefit.
(i)Facts. FC, a country X corporation, and USC, a
domestic corporation, each contribute $1 billion to a
newly-formed country X entity (C) in exchange for
stock of C. FC and USC are entitled to equal 50%
shares of all of C’s income, gain, expense and loss.
C is treated as a corporation for country X purposes
and a partnership for U.S. tax purposes. In year 1, C
earns $200 million of net passive investment income,
makes a payment to country X of $60 million with
respect to that income, and distributes $70 million to
each of FC and USC. Country X does not impose tax
on dividends received by one country X corporation
from a second country X corporation.
(ii)Result. FC’s tax-exempt receipt of $70
million, or its 50% share of C’s profits, is not a
foreign tax benefit within the meaning of paragraph
(e)(5)(iv)(B)(4) of this section because it does not
correspond to any part of the foreign base with re-
spect to which USC’s share of the foreign payment
was imposed. Accordingly, the $60 million payment
to country X is not attributable to a structured passive
investment arrangement.
Example 12.Joint venture; no foreign tax ben-
efit.(i)Facts. The facts are the same as inExam-
ple 11, except that C in turn contributes $2 billion to
a wholly-owned and newly-formed country X entity
(D) in exchange for stock of D. D is treated as a corpo-
ration for country X purposes and disregarded as an
entity separate from its owner for U.S. tax purposes.
C has no other assets and earns no other income. In
year 1, D earns $200 million of passive investment
income, makes a payment to country X of $60 mil-
lion with respect to that income, and distributes $140
million to C.
(ii)Result. C’s tax-exempt receipt of $140 million
is not a foreign tax benefit within the meaning of para-
graph (e)(5)(iv)(B)(4) of this section because it does
not correspond to any part of the foreign base with
respect to which USC’s share of the foreign payment
was imposed. Fifty percent of C’s foreign tax exemp-
tion is not a foreign tax benefit within the meaning of
paragraph (e)(5)(iv)(B)(4) because it relates to earn-
ings of D that are distributed with respect to an equity
interest in D that is owned indirectly by USC under
both U.S. and foreign tax law. The remaining 50% of
C’s foreign tax exemption, as well as FC’s tax-exempt
receipt of $70 million from C, is also not a foreign tax
benefit because it does not correspond to any part of
the foreign base with respect to which USC’s share of
the foreign payment was imposed. Accordingly, the
$60 million payment to country X is not attributable
to a structured passive investment arrangement.
*****
(h) * * *
(2) Paragraph (e)(5)(iv) of this section
applies to foreign payments that, if such
payments were an amount of tax paid,
would be considered paid or accrued un-
der §1.901–2(f) on or after July 13, 2011.
See 26 CFR 1.901–2T(e)(5)(iv) (revised
as of April 1, 2011), for rules applicable
to foreign payments that, if such payments
were an amount of tax paid, would be
considered paid or accrued before July 13,
2011.
§1.901–2T [Removed].
Par. 5. Section 1.901–2T is removed.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved July 11, 2011.
Emily S. McMahon,
Acting Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on July 13, 2011,
11:15 a.m., and published in the issue of the Federal Register
for July 18, 2011, 76 F.R. 42038)
26 CFR 1.901–2: Income, war profits, or excess prof-
its tax paid or accrued.
T.D. 9536
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Determining the Amount of
Taxes Paid for Purposes of the
Foreign Tax Credit
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final and temporary regula-
tions.
SUMMARY: This document contains fi-
nal and temporary regulations providing
guidance relating to the determination of
the amount of taxes paid for purposes of
the foreign tax credit. These regulations
address certain highly structured arrange-
ments that produce inappropriate foreign
tax credit results. The regulations affect
individuals and corporations that claim di-
rect and indirect foreign tax credits. The
text of these temporary regulations also
serves as the text of the proposed regula-
tions (REG–126519–11) published in this
issue of the Bulletin.
DATES:Effective Date:These regulations
are effective on July 18, 2011.
Applicability Date:For dates of appli-
cability, see §1.901–2T(h)(3).
FOR FURTHER INFORMATION
CONTACT: Jeffrey P. Cowan, at (202)
622–3850.
SUPPLEMENTARY INFORMATION:
Background
On March 30, 2007, theFederal
Registerpublished proposed regulations
(REG–156779–06, 2007–2 C.B. 1015
[72 FR 15081]) under section 901 of
the Internal Revenue Code relating to
the amount of taxes paid for purposes
of the foreign tax credit. The IRS and
the Treasury Department received written
comments on the 2007 proposed regula-
tions and a public hearing was held on
July 30, 2007. On July 16, 2008, a notice
of proposed rulemaking by cross-reference
to temporary regulations and temporary
regulations (T.D. 9416, 2008–35 I.R.B.
1142) (the “2008 temporary regulations”)
were published in theFederal Register
at 73 FR 40792 and 73 FR 40727,
respectively. Final regulations were
published in theFederal Registerin
July 2011, and adopted the proposed
regulations with the changes discussed in
the preamble to the final regulations.
Explanation of Provision
Section 1.901–2(e)(5)(iv) of the final
regulations provides that an amount paid to
September 26, 20114262011–39 I.R.B.

a foreign country is not a compulsory pay-
ment, and thus is not an amount of tax paid
for purposes of the foreign tax credit, if
such amount is attributable to a structured
passive investment arrangement. An ar-
rangement that satisfies the six conditions
described in §1.901–2(e)(5)(iv) is treated
as a structured passive investment arrange-
ment. One of the conditions is that the ar-
rangement utilizes anentity that meets two
requirements (the “SPV condition”). See
§1.901–2(e)(5)(iv)(B)(1).
The first requirement of the SPV condi-
tion is that substantially all of the entity’s
gross income, as determined under U.S.
tax principles, is attributable to passive in-
vestment income and substantially all of
the entity’s assets are held to produce such
passive investment income. The second
requirement is that there is a putative for-
eign tax payment (a “foreign payment”) at-
tributable to income of the entity, as deter-
mined under the laws of the foreign coun-
try to which such foreign payment is made.
The foreign payment may be paid by the
entity itself or by the owner(s) of the entity.
Under the 2008 temporary regulations, a
foreign payment attributable to income of
the entity does not include a withhold-
ing tax imposed on a distribution or pay-
ment from the entity to a U.S. party. See
§1.901–2T(e)(5)(iv)(B)(1)(ii) of the 2008
temporary regulations.
The IRS and the Treasury Depart-
ment have become aware that taxpayers
can enter into arrangements that gener-
ate duplicative benefits involving foreign
withholding taxes imposed on distribu-
tionsmadebyanentitytoaU.S.party.For
example, if the parties undertake a transac-
tion in which interests in an SPV are trans-
ferred by the U.S. party to a counterparty
subject to a repurchase obligation, with-
holding taxes imposed on distributions
from the SPV may be claimed as creditable
in both jurisdictions. Accordingly, the ex-
ception for withholding taxes imposed on
distributions or payments to U.S. parties
was eliminated in the 2011 final regula-
tions. These temporary regulations clarify
the provisions of §1.901–2(e)(5)(iv)(B)(1)
by providing in a new paragraph
§1.901–2T(e)(5)(iv)(B)(1)(iii)thatafor-
eign payment attributable to income of an
entity includes a withholding tax imposed
on a dividend or other distribution (includ-
ing distributions made by a pass-through
entity or an entity that is disregarded as an
entity separate from its owner for U.S. tax
purposes) with respect to the equity of the
entity.
Special Analysis
It has been determined that this Trea-
sury decision is not a significant regula-
tory action as defined in Executive Or-
der 12866. Therefore, a regulatory assess-
ment is not required. It is hereby certified
that these regulations will not have a sig-
nificant economic impact on a substantial
number of small entities. This certification
is based on the fact that these regulations
will primarily affect affiliated groups of
corporations that have foreign operations
whichtendtobelargerbusinesses.More-
over the number of taxpayers affected and
the average burden are minimal. There-
fore, a Regulatory Flexibility Analysis is
not required. Pursuant to section 7805(f)
of the Code, the notice of proposed rule-
making preceding this regulation has been
submitted to the Chief Counsel for Advo-
cacy of the Small Business Administration
for comment on its impact on small busi-
ness.
Drafting Information
The principal author of these regu-
lations is Jeffrey P. Cowan, Office of
Associate Chief Counsel (International).
However, other personnel from the IRS
and the Treasury Department participated
in their development.
*****
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.901–2 is amended by
revising paragraphs (e)(5)(iii) and (iv) and
adding paragraph (h)(3) to read as follows:
§1.901–2 Income, war profits, or excess
profits tax paid or accrued.
*****
(e) * * *
(5) * * *
(iv)***
(B) * * *
(1)***
(iii) [Reserved]. For further guidance,
see §1.901–2T(e)(5)(iv)(B)(1)(iii).
*****
(h) * * *
(3) [Reserved]. For further guidance,
see §1.901–2T(h)(3).
Par. 3. Section 1.901–2T is revised to
read as follows:
§1.901–2T Income, war profits, or excess
profits tax paid or accrued.
(a) through (e)(5)(iv)(B)(1)(ii)[Re-
served]. For further guidance, see
§1.901–2(a) through (e)(5)(iv)(B)(1)(ii).
(iii) A foreign payment attributable to
income of the entity, within the meaning of
§1.901–2(e)(5)(iv)(B)(1)(ii), also includes
a withholding tax (within the meaning of
section901(k)(1)(B))imposedonadivi-
dend or other distribution (including dis-
tributions made by a pass-through entity
or an entity that is disregarded as an entity
separate from its owner for U.S. tax pur-
poses) with respect to the equity of the en-
tity.
(e)(5)(iv)(B)(2) through (h)(2) [Re-
served]. For further guidance, see
§1.901–2(e)(5)(iv)(B)(2) through (h)(2).
(h)(3)Effective/applicability date.This
section applies to foreign payments that, if
such payments were an amount of tax paid,
would be considered paid or accrued under
§1.901–2(f) on or after July 14, 2011.
(h)(4)
Expiration date. The applicabil-
ity of this section expires on July 14, 2014.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Approved July 11, 2011.
Emily S. McMahon,
Acting Assistant Secretary
oftheTreasury(TaxPolicy).
(Filed by the Office of the Federal Register on July 14, 2011,
8:45 a.m., and published in the issue of the Federal Register
for July 18, 2011, 76 F.R. 42036)
2011–39 I.R.B.427September 26, 2011

Section 6621.—Determina-
tion of Rate of Interest
26 CFR 301.6621–1: Interest rate.
Interest rates; underpayments and
overpayments.The rates for inter-
est determined under section 6621 of
the Code for the calendar quarter be-
ginning October 1, 2011, will be 3
percent for overpayments (2 percent in
the case of a corporation), 3 percent for
underpayments, and 5 percent for large
corporate underpayments. The rate of
interest paid on the portion of a corporate
overpayment exceeding $10,000 will be
0.5 percent.
Rev. Rul. 2011–18
Section 6621 of the Internal Revenue
Code establishes the rates for interest
on tax overpayments and tax underpay-
ments. Under section 6621(a)(1), the
overpayment rate is the sum of the federal
short-term rate plus 3 percentage points
(2 percentage points in the case of a cor-
poration), except the rate for the portion
of a corporate overpayment of tax exceed-
ing $10,000 for a taxable period is the
sum of the federal short-term rate plus
0.5 of a percentage point. Under section
6621(a)(2), the underpayment rate is the
sum of the federal short-term rate plus 3
percentage points.
Section 6621(c) provides that for pur-
poses of interest payable under section
6601 on any large corporate underpay-
ment, the underpayment rate under section
6621(a)(2) is determined by substituting
“5 percentage points” for “3 percentage
points.” See section 6621(c) and section
301.6621–3 of the Regulations on Proce-
dure and Administration for the definition
of a large corporate underpayment and
for the rules for determining the appli-
cable date. Section 6621(c) and section
301.6621–3 are generally effective for
periods after December 31, 1990.
Section 6621(b)(1) provides that the
Secretary will determine the federal
short-term rate for the first month in each
calendar quarter. Section 6621(b)(2)(A)
provides that the federal short-term rate
determined under section 6621(b)(1) for
any month applies during the first calen-
dar quarter beginning after that month.
Section 6621(b)(3) provides that the fed-
eral short-term rate for any month is the
federal short-term rate determined during
that month by the Secretary in accordance
with section 1274(d), rounded to the near-
est full percent (or, if a multiple of
1
/2of
1 percent, the rate is increased to the next
highest full percent).
Notice 88–59, 1988–1 C.B. 546, an-
nounced that, in determining the quarterly
interest rates to be used for overpayments
and underpayments of tax under section
6621, the Internal Revenue Service will
use the federal short-term rate based on
daily compounding because that rate is
most consistent with section 6621 which,
pursuant to section 6622, is subject to daily
compounding.
The federal short-term rate determined
in accordance with section 1274(d) during
July 2011 is the rate published in Revenue
Ruling 2011–16, 2011–32 I.R.B. 93 to take
effect beginning August 1, 2011. The fed-
eral short-term rate, rounded to the nearest
full percent, based on daily compounding
determined during the month of July 2011
is 0 percent. Accordingly, an overpayment
rate of 3 percent (2 percent in the case of a
corporation) and an underpayment rate of
3 percent are established for the calendar
quarter beginning October 1, 2011. The
overpayment rate for the portion of a cor-
porate overpayment exceeding $10,000 for
the calendar quarter beginning October 1,
2011, is 0.5 percent. The underpayment
rate for large corporate underpayments for
the calendar quarter beginning October 1,
2011, is 5 percent. These rates apply to
amounts bearing interest during that calen-
dar quarter.
Interest factors for daily compound in-
terest for annual rates of 0.5 percent are
published in Appendix A of this Revenue
Ruling. Interest factors for daily com-
pound interest for annual rates of 2 percent,
3 percent and 5 percent are published in Ta-
bles 7, 9, 11, and 15 of Rev. Proc. 95–17,
1995–1 C.B. 561, 563, 565, and 569
Annual interest rates to be compounded
daily pursuant to section 6622 that apply
for prior periods are set forth in the tables
accompanying this revenue ruling.
DRAFTING INFORMATION
The principal author of this revenue rul-
ing is Deborah Colbert-James of the Of-
fice of Associate Chief Counsel (Proce-
dure & Administration). For further infor-
mation regarding this revenue ruling, con-
tact Ms. Colbert-James at (202) 622–8143
(not a toll-free call).
APPEND
IX A
365 Day Year
0.5% Compound Rate 184 Days
DaysFactorDaysFactorDaysFactor
10.000013699630.000863380
125
0.001713784
20.0000
27397
640.0008
77091
126
0.001727506
30.000041096
65
0.0008908011270.001741228
4
0.000
054796
66
0.000
904512
128
0.001
754951
50.000068495
670.000
918223
1290.001
768673
6
0.000082195
680.0009319341300.001782396
7
0.000
095894
69
0.000
945646
1310.001796119
September 26, 20114282011–39 I.R.B.

365 Day Year
0.5% Compound Rate 184 Days
DaysFactorDaysFactorDaysFactor
8
0.000109594
70
0.000959357
1320.001809843
90.000123294710.000973069133
0.001823566
10
0.000136995
720.0009867811340.001837290
11
0.000150695
730.001000493
1350.001851013
120.000164396740.0010142061360.001864737
130.000178097
75
0.0010279181370.001878462
140.000191798760.0010416311380.001892186
150.000205499
77
0.001055344
139
0.001905910
160.00021920178
0.001069057
140
0.001919635
170.000232902790.0010827701410.001933360
180.000246604800.001096484142
0.001947085
190.000260306810.0011101971430.001960811
200.000274008820.001123911144
0.001974536
210.00028771183
0.001137625145
0.001988262
220.00030141384
0.001151339
1460.002001988
23
0.000315116850.001165054
147
0.002015714
240.000328819860.0011787681480.002029440
250.000342522
870.0011924831490.002043166
26
0.000356225
880.001206198
1500.002056893
270.000369929890.001219913
151
0.002070620
280.000383633900.001233629
152
0.002084347
290.000397336910.001247344
153
0.002098074
300.000411041920.001261060
154
0.002111801
31
0.000424745
930.001274776
1550.002125529
320.000438449940.001288492
1560.002139257
33
0.00045215495
0.001302208
1570.002152985
34
0.000465859
96
0.001315925158
0.002166713
350.000479564
970.001329641
159
0.002180441
360.00049326998
0.001343358
1600.002194169
37
0.000506974
99
0.001357075
1610.002207898
38
0.000520680
1000.0013707921620.002221627
39
0.000534386
101
0.001384510
163
0.002235356
40
0.000548092
1020.001398227164
0.002249085
41
0.000561798
103
0.0014119451650.002262815
42
0.000575504
104
0.001425663
166
0.002276544
43
0.000589211105
0.0014393811670.002290274
440.000602917106
0.001453100
1680.002304004
45
0.0006166241070.0014668181690.002317734
460.000630331108
0.001480537
170
0.002331465
470.000644039109
0.001494256
171
0.002345195
48
0.000657746
110
0.001507975
172
0.002358926
49
0.000671454
111
0.001521694
173
0.002372657
500.000685161
112
0.001535414
1740.002386388
51
0.000698869113
0.001549133175
0.002400120
520.000712578
114
0.001562853
176
0.002413851
53
0.000726286
1150.001576573
177
0.002427583
540.000739995
116
0.001590293
178
0.002441315
550.000753703
1170.001604014179
0.002455047
56
0.0007674121180.0016177341800.002468779
57
0.000781121119
0.001631455
181
0.002482511
58
0.000794831120
0.001645176
1820.002496244
590.000808540
121
0.001658897
183
0.002509977
60
0.000822250
1220.001672619184
0.002523710
61
0.000835960
1230.001686340
620.0008496701240.001700062
2011–39 I.R.B.429September 26, 2011

366 Day Year
0.5% Compound Rate 184 Days
DaysFactorDaysFactorDaysFactor
10.000013661630.000861020
125
0.001709097
20.000027323640.0008746931260.001722782
30.000040984
65
0.0008883661270.001736467
4
0.000054646
660.000902040128
0.001750152
5
0.00006830867
0.000915713
1290.001763837
60.000081970680.000929387130
0.001777522
7
0.000095632
690.0009430611310.001791208
8
0.000109295
70
0.000956735
1320.001804893
9
0.000122958
710.000970409133
0.001818579
100.000136620720.000984084134
0.001832265
11
0.000150283
73
0.0009977581350.001845951
120.000163947740.001011433136
0.001859638
130.000177610
750.001025108
1370.001873324
140.000191274760.0010387831380.001887011
15
0.00020493877
0.001052459
1390.001900698
160.000218602780.001066134140
0.001914385
170.000232266790.0010798101410.001928073
18
0.000245930
800.0010934861420.001941760
19
0.000259595
810.001107162143
0.001955448
200.000273260820.0011208391440.001969136
210.00028692483
0.001134515145
0.001982824
22
0.000300590
840.001148192146
0.001996512
23
0.00031425585
0.0011618691470.002010201
240.00032792086
0.001175546
1480.002023889
250.000341586
870.001189223149
0.002037578
26
0.000355252
880.001202900
1500.002051267
270.00036891889
0.0012165781510.002064957
28
0.000382584
90
0.001230256152
0.002078646
29
0.000396251
910.001243934
153
0.002092336
300.00040991792
0.0012576121540.002106025
31
0.000423584
930.001271291
1550.002119715
32
0.000437251
940.001284969
1560.002133405
33
0.00045091895
0.001298648
157
0.002147096
34
0.000464586
960.001312327
158
0.002160786
350.000478253
970.001326006
159
0.002174477
360.00049192198
0.001339685
1600.002188168
37
0.000505589
99
0.001353365
161
0.002201859
38
0.000519257
1000.001367044162
0.002215550
39
0.000532925
1010.0013807241630.002229242
40
0.000546594
1020.0013944041640.002242933
41
0.000560262
103
0.0014080851650.002256625
42
0.000573931
104
0.001421765
1660.002270317
43
0.0005876001050.001435446
1670.002284010
440.0006012691060.0014491271680.002297702
45
0.0006149391070.001462808169
0.002311395
460.0006286081080.001476489170
0.002325087
470.0006422781090.0014901701710.002338780
48
0.000655948
110
0.001503852
172
0.002352473
490.000669618111
0.001517533
1730.002366167
50
0.000683289112
0.001531215
1740.002379860
510.000696959
113
0.0015448971750.002393554
52
0.000710630114
0.001558580
1760.002407248
53
0.000724301
1150.001572262
1770.002420942
54
0.000737972116
0.001585945
1780.002434636
550.000751643
117
0.001599628
1790.002448331
560.000765315
1180.001613311180
0.002462025
57
0.0007789861190.001626994181
0.002475720
580.000792658
1200.001640678182
0.002489415
September 26, 20114302011–39 I.R.B.

366 Day Year
0.5% Compound Rate 184 Days
DaysFactorDaysFactorDaysFactor
59
0.000806330121
0.001654361
183
0.002503110
600.000820003122
0.001668045
184
0.002516806
61
0.000833675
1230.001681729
620.000847348124
0.001695413
TABLE OF INTEREST RATES
PERIODS BEFORE JUL. 1, 1975 — PERIODS ENDING DEC. 31, 1986
OVERPAYMENTS AND UNDERPAYMENTS
PERIODRATE
In 1995–1 C.B.
DAILY RATE TABLE
Before Jul. 1, 1975
6%
Table 2, pg. 557
Jul. 1, 1975—Jan. 31, 1976
9%
Table 4, pg. 559
Feb. 1, 1976—Jan. 31, 19787%
Table 3, pg. 558
Feb. 1, 1978—Jan. 31, 19806%
Table 2, pg. 557
Feb. 1, 1980—Jan. 31, 198212%
Table 5, pg. 560
Feb. 1, 1982—Dec. 31, 198220%
Table 6, pg. 560
Jan. 1, 1983—Jun. 30, 198316%
Table 37, pg. 591
Jul. 1, 1983—Dec. 31, 198311%
Table 27, pg. 581
Jan. 1, 1984—Jun. 30, 198411%
Table 75, pg. 629
Jul. 1, 1984—Dec. 31, 198411%
Table 75, pg. 629
Jan. 1, 1985—Jun. 30, 1985
13%
Table 31, pg. 585
Jul. 1, 1985—Dec. 31, 1985
11%
Table 27, pg. 581
Jan. 1, 1986—Jun. 30, 198610%
Table 25, pg. 579
Jul. 1, 1986—Dec. 31, 19869%
Table 23, pg. 577
TABLE OF INTEREST RATES
FROM JAN. 1, 1987 — DEC. 31, 1998
OVERPAYMENTSUNDERPAYMENTS
1995–1 C.B.1995–1 C.B.
RATE TABLEPGRATE TABLEPG
Jan. 1, 1987—Mar. 31, 19878%21
575
9%23
577
Apr. 1, 1987—Jun. 30, 19878%21
575
9%23
577
Jul. 1, 1987—Sep. 30, 19878%21
575
9%23
577
Oct. 1, 1987—Dec. 31, 19879%23
577
10%
25579
Jan. 1, 1988—Mar. 31, 198810%7362711%
75
629
Apr. 1, 1988—Jun. 30, 19889%71
625
10%73627
Jul. 1, 1988—Sep. 30, 19889%71
625
10%73627
Oct. 1, 1988—Dec. 31, 198810%7362711%
75
629
Jan. 1, 1989—Mar. 31, 198910%
25579
11%27
581
Apr. 1, 1989—Jun. 30, 198911%27
581
12%29
583
Jul. 1, 1989—Sep. 30, 198911%27
581
12%29
583
Oct. 1, 1989—Dec. 31, 198910%
25579
11%27
581
Jan. 1, 1990—Mar. 31, 199010%
25579
11%27
581
Apr. 1, 1990—Jun. 30, 199010%
25579
11%27
581
Jul. 1, 1990—Sep. 30, 199010%
25579
11%27
581
Oct. 1, 1990—Dec. 31, 199010%
25579
11%27
581
Jan. 1, 1991—Mar. 31, 199110%
25579
11%27
581
Apr. 1, 1991—Jun. 30, 19919%23
577
10%
25579
Jul. 1, 1991—Sep. 30, 19919%23
577
10%
25579
Oct. 1, 1991—Dec. 31, 19919%23
577
10%
25579
Jan. 1, 1992—Mar. 31, 19928%696239%71
625
2011–39 I.R.B.431September 26, 2011

TABLE OF INTEREST RATES
FROM JAN. 1, 1987 — DEC. 31, 1998
OVERPAYMENTSUNDERPAYMENTS
1995–1 C.B.1995–1 C.B.
RATE TABLEPGRATE TABLEPG
Apr. 1, 1992—Jun. 30, 19927%676218%69623
Jul. 1, 1992—Sep. 30, 19927%676218%69623
Oct. 1, 1992—De
c. 31, 1992
6%
65
6197%67621
Jan. 1, 1993—Mar. 31, 19936%17
571
7%19
573
Apr. 1, 1993—Jun. 30, 19936%17
571
7%19
573
Jul. 1, 1993—S
ep. 30, 1993
6%17
571
7%19
573
Oct. 1, 1993—Dec. 31, 19936%17
571
7%19
573
Jan. 1, 1994—Mar. 31, 19946%17
571
7%19
573
Apr. 1, 1994—
Jun. 30, 1994
6%17
571
7%19
573
Jul. 1, 1994—Sep. 30, 19947%19
573
8%21
575
Oct. 1, 1994—Dec. 31, 19948%21
575
9%23
577
Jan. 1, 1995—Mar. 31, 1995
8%21
575
9%23
577
Apr. 1, 1995—Jun. 30, 1995
9%23
577
10%
25579
Jul. 1, 1995
—Sep. 30, 1995
8%21
575
9%23
577
Oct. 1, 1995—Dec. 31, 1995
8%21
575
9%23
577
Jan. 1, 1996—Mar. 31, 19968%696239%71
625
Apr. 1, 1996—Jun. 30, 19967%676218%69623
Jul. 1, 19
96—Sep. 30, 1996
8%696239%71
625
Oct. 1, 1996—Dec. 31, 19968%696239%71
625
Jan. 1, 1997—Mar. 31, 19978%21
575
9%23
577
Apr. 1, 19
97—Jun. 30, 1997
8%21
575
9%23
577
Jul. 1, 1997—Sep. 30, 19978%21
575
9%23
577
Oct. 1, 1997—Dec. 31, 19978%21
575
9%23
577
Jan. 1, 1
998—Mar. 31, 1998
8%21
575
9%23
577
Apr. 1, 1998—Jun. 30, 19987%19
573
8%21
575
Jul. 1, 1998—Sep. 30, 19987%19
573
8%21
575
Oct. 1,
1998—Dec. 31, 1998
7%19
573
8%21
575
TABLE O
F INTEREST RATES
FROM JA
NUARY 1, 1999 — PRESENT
NONCOR
PORATE OVERPAYMENTS AND UNDERPAYMENTS
1995–1 C.B.
RATETABLEPG
Jan. 1, 1999—Mar. 31, 19997%19
573
Apr. 1, 1999—Jun. 30, 19998%21
575
Jul. 1,
1999—Sep. 30, 1999
8%21
575
Oct. 1, 1999—Dec. 31, 19998%21
575
Jan. 1, 2000—Mar. 31, 20008%69623
Apr. 1
, 2000—Jun. 30, 2000
9%71
625
Jul. 1, 2000—Sep. 30, 20009%71
625
Oct. 1, 2000—Dec. 31, 20009%71
625
Jan.
1, 2001—Mar. 31, 2001
9%23
577
Apr. 1, 2001—Jun. 30, 20018%21
575
Jul. 1, 2001—Sep. 30, 20017%19
573
Oct
. 1, 2001—Dec. 31, 2001
7%19
573
Jan. 1, 2002—Mar. 31, 20026%17
571
Apr. 1, 2002—Jun. 30, 20026%17
571
Jul
. 1, 2002—Sep. 30, 2002
6%17
571
Oct. 1, 2002—Dec. 31, 20026%17
571
Jan. 1, 2003—Mar. 31, 2003
5%1556
9
Ap
r. 1, 2003—Jun. 30, 2003
5%15569
Jul. 1, 2003—Sep. 30, 2003
5%15569
September 26, 20114322011–39 I.R.B.

TABLE OF INTEREST RATES
FROM JANUARY 1, 1999 — PRESENT
NONCORPORATE OVERPAYMENTS AND UNDERPAYMENTS
1995–1 C.B.
RATETABLEPG
Oct. 1, 2003—Dec. 31, 20034%13
567
Jan. 1, 2004—Mar. 31, 20044%61
615
Apr. 1, 2004—Jun. 30, 2004
5%
63617
Jul. 1, 2004—Sep. 30, 20044%61
615
Oct. 1, 2004—Dec. 31, 2004
5%
63617
Jan. 1, 2005—Mar. 31, 20055%15569
Apr. 1, 2005—Jun. 30, 2005
6%17
571
Jul. 1, 2005—Sep. 30, 2005
6%17
571
Oct. 1, 2005—Dec. 31, 2005
7%19
573
Jan. 1, 2006—Mar. 31, 20067%19
573
Apr. 1, 2006—Jun. 30, 20067%19
573
Jul. 1, 2006—Sep. 30, 20068%21
575
Oct. 1, 2006—Dec. 31, 20068%21
575
Jan. 1, 2007—Mar. 31, 20078%21
575
Apr. 1, 2007—Jun. 30, 20078%21
575
Jul. 1, 2007—Sep. 30, 20078%21
575
Oct. 1, 2007—Dec. 31, 20078%21
575
Jan. 1, 2008—Mar. 31, 20087%67621
Apr. 1, 2008—Jun. 30, 20086%
65
619
Jul. 1, 2008—Sep. 30, 2008
5%
63617
Oct. 1, 2008—Dec. 31, 20086%
65
619
Jan. 1, 2009—Mar. 31, 2009
5%15569
Apr. 1, 2009—Jun. 30, 20094%13
567
Jul. 1, 2009—Sep. 30, 20094%13
567
Oct. 1, 2009—Dec. 31, 20094%13
567
Jan. 1, 2010—Mar. 31, 20104%13
567
Apr. 1, 2010—Jun. 30, 20104%13
567
Jul. 1, 2010—Sep. 30, 20104%13
567
Oct. 1, 2010—Dec. 31, 20104%13
567
Jan. 1, 2011—Mar. 31, 20113%11
565
Apr. 1, 2011—Jun. 30, 20114%13
567
Jul. 1, 2011—Sep. 30, 20114%13
567
Oct. 1, 2011—Dec. 31, 20113%11
565
TABLE OF INTEREST RATES
FROM JANUARY 1, 1999 — PRESENT
CORPORATE OVERPAYMENTS AND UNDERPAYMENTS
OVERPAYMENTSUNDERPAYMENTS
1995–1 C.B.1995–1 C.B.
RATE TABLEPGRATE TABLEPG
Jan. 1, 1999—Mar. 31, 19996%17
571
7%19
573
Apr. 1, 1999—Jun. 30, 19997%19
573
8%21
575
Jul.
1, 1999—Sep. 30, 1999
7%19
573
8%21
575
Oct. 1, 1999—Dec. 31, 19997%19
573
8%21
575
Jan. 1, 2000—Mar. 31, 20007%676218%69623
Apr
. 1, 2000—Jun. 30, 2000
8%696239%71
625
Jul. 1, 2000—Sep. 30, 20008%696239%71
625
Oct. 1, 2000—Dec. 31, 20008%696239%71
625
Jan
. 1, 2001—Mar. 31, 2001
8%21
575
9%23
577
Apr. 1, 2001—Jun. 30, 20017%19
573
8%21
575
Jul. 1, 2001—Sep. 30, 20016%17
57
1
7%19
57
3
2011–39 I.R.B.433September 26, 2011

TABLE OF INTEREST RATES
FROM JANUARY 1, 1999 — PRESENT
CORPORATE OVERPAYMENTS AND UNDERPAYMENTS
OVERPAYMENTSUNDERPAYMENTS
1995–1 C.B.1995–1 C.B.
RATE TABLEPGRATE TABLEPG
Oct. 1, 2001—Dec. 31, 20016%17
571
7%19
573
Jan. 1, 2002—Mar. 31, 2002
5%15569
6%17
571
Apr. 1, 2002—Ju
n. 30, 2002
5%15569
6%17
571
Jul. 1, 2002—Sep. 30, 2002
5%15569
6%17
571
Oct. 1, 2002—Dec. 31, 2002
5%15569
6%17
571
Jan. 1, 2003—M
ar. 31, 2003
4%13
5675%15569
Apr. 1, 2003—Jun. 30, 20034%13
5675%15569
Jul. 1, 2003—Sep. 30, 20034%13
5675%15569
Oct. 1, 2003—
Dec. 31, 2003
3%11
565
4%13
567
Jan. 1, 2004—Mar. 31, 20043%
59
6134%61
615
Apr. 1, 2004—Jun. 30, 20044%61
6155%
63617
Jul. 1, 2004—
Sep. 30, 2004
3%
59
6134%61
615
Oct. 1, 2004—Dec. 31, 20044%61
6155%
63617
Jan. 1, 2005
—Mar. 31, 2005
4%13
5675%15569
Apr. 1, 2005—Jun. 30, 20055%15569
6%17
571
Jul. 1, 2005—Sep. 30, 20055%15569
6%17
571
Oct. 1, 200
5—Dec. 31, 2005
6%17
571
7%19
573
Jan. 1, 200
6—Mar. 31, 2006
6%17
571
7%19
573
Apr. 1, 2006—Jun. 30, 20066%17
571
7%19
573
Jul. 1, 2006—Sep. 30, 20067%19
573
8%21
575
Oct. 1, 20
06—Dec. 31, 2006
7%19
573
8%21
575
Jan. 1, 2007—Mar. 31, 20077%19
573
8%21
575
Apr. 1, 2007—Jun. 30, 20077%19
573
8%21
575
Jul. 1, 2
007—Sep. 30, 2007
7%19
573
8%21
575
Oct. 1, 2007—Dec. 31, 20077%19
573
8%21
575
Jan. 1, 2008—Mar. 31, 20086%
65
6197%67621
Apr. 1,
2008—Jun. 30, 2008
5%
636176%
65
619
Jul. 1, 2008—Sep. 30, 20084%61
6155%
63617
Oct. 1, 2008—Dec. 31, 2008
5%
636176%
65
619
Jan. 1
, 2009—Mar. 31, 2009
4%13
5675%15569
Apr. 1, 2009—Jun. 30, 20093%11
565
4%13
567
Jul. 1, 2009—Sep. 30, 20093%11
565
4%13
567
Oct.
1, 2009—Dec. 31, 2009
3%11
565
4%13
567
Jan. 1, 2010—Mar. 31, 20103%11
565
4%13
567
Apr. 1, 2010—Jun. 30, 20103%11
565
4%13
567
Jul.
1, 2010—Sep. 30, 2010
3%11
565
4%13
567
Oct. 1, 2010—Dec. 31, 20103%11
565
4%13
567
Jan. 1, 2011—Mar. 31, 20112%9
563
3%11
565
Apr
. 1, 2011—Jun. 30, 2011
3%11
565
4%13
567
Jul. 1, 2011—Sep. 30, 20113%11
565
4%13
567
Oct. 1, 2011—Dec. 31, 20112%9
56
3
3%11
56
5
TABLE OF INTEREST RATES FOR
LA
RGE CORPORATE UNDERPAYMENTS
FR
OM JANUARY 1, 1991 — PRESENT
1995–1 C.B.
RATETABLEPG
Jan. 1, 1991—Mar. 31, 199113%31
585
Apr. 1, 1991—Jun. 30, 199112%29
58
3
Ju
l. 1, 1991—Sep. 30, 1991
12%29
583
Oct. 1, 1991—Dec. 31, 199112%29
583
September 26, 20114342011–39 I.R.B.

TABLE OF INTEREST RATES FOR
LARGE CORPORATE UNDERPAYMENTS
FROM JANUARY 1, 1991 — PRESENT
1995–1 C.B.
RATETABLEPG
Jan. 1, 1992—Mar. 31, 199211%
75
629
Apr. 1, 1992—Jun. 30, 199210%73627
Jul. 1, 1992—Sep. 30, 199210%73627
Oct. 1, 1992—Dec. 31, 19929%71
625
Jan. 1, 1993—Mar. 31, 19939%23
577
Apr. 1, 1993—Jun. 30, 19939%23
577
Jul. 1, 1993—Sep. 30, 19939%23
577
Oct. 1, 1993—Dec. 31, 19939%23
577
Jan. 1, 1994—Mar. 31, 19949%23
577
Apr. 1, 1994—Jun. 30, 19949%23
577
Jul. 1, 1994—Sep. 30, 199410%
25579
Oct. 1, 1994—Dec. 31, 199411%27
581
Jan. 1, 1995—Mar. 31, 1995
11%27
581
Apr. 1, 1995—Jun. 30, 1995
12%29
583
Jul. 1, 1995—Sep. 30, 1995
11%27
581
Oct. 1, 1995—Dec. 31, 1995
11%27
581
Jan. 1, 1996—Mar. 31, 199611%
75
629
Apr. 1, 1996—Jun. 30, 199610%73627
Jul. 1, 1996—Sep. 30, 199611%
75
629
Oct. 1, 1996—Dec. 31, 199611%
75
629
Jan. 1, 1997—Mar. 31, 199711%27
581
Apr. 1, 1997—Jun. 30, 199711%27
581
Jul. 1, 1997—Sep. 30, 199711%27
581
Oct. 1, 1997—Dec. 31, 199711%27
581
Jan. 1, 1998—Mar. 31, 199811%27
581
Apr. 1, 1998—Jun. 30, 199810%
25579
Jul. 1, 1998—Sep. 30, 199810%
25579
Oct. 1, 1998—Dec. 31, 199810%
25579
Jan. 1, 1999—Mar. 31, 19999%23
577
Apr. 1, 1999—Jun. 30, 199910%
25579
Jul. 1, 1999—Sep. 30, 199910%
25579
Oct. 1, 1999—Dec. 31, 199910%
25579
Jan. 1, 2000—Mar. 31, 200010%73627
Apr. 1, 2000—Jun. 30, 200011%
75
629
Jul. 1, 2000—Sep. 30, 200011%
75
629
Oct. 1, 2000—Dec. 31, 200011%
75
629
Jan. 1, 2001—Mar. 31, 200111%27
581
Apr. 1, 2001—Jun. 30, 200110%
25579
Jul. 1, 2001—Sep. 30, 20019%23
577
Oct. 1, 2001—Dec. 31, 20019%23
577
Jan. 1, 2002—Mar. 31, 20028%21
575
Apr. 1, 2002—Jun. 30, 20028%21
575
Jul. 1, 2002—Sep. 30, 20028%21
575
Oct. 1, 2002—Dec. 30, 20028%21
575
Jan. 1, 2003—Mar. 31, 20037%19
573
Apr. 1, 2003—Jun. 30, 20037%19
573
Jul. 1, 2003—Sep. 30, 20037%19
573
Oct. 1, 2003—Dec. 31, 20036%17
571
Jan. 1, 2004—Mar. 31, 20046%
65
619
Apr. 1, 2004—Jun. 30, 20047%67621
Jul. 1, 2004—Sep. 30, 20046%
65
619
Oct. 1, 2004—Dec. 31, 20047%67621
Jan. 1, 2005—Mar. 31, 2005
7%19
573
Apr. 1, 2005—Jun. 30, 2005
8%21
575
Jul. 1, 2005—Sep. 30, 2005
8%21
575
Oct. 1, 2005—Dec. 31, 2005
9%23
577
Jan. 1, 2006—Mar. 31, 20069%23
577
2011–39 I.R.B.435September 26, 2011

TABLE OF INTEREST RATES FOR
LARGE CORPORATE UNDERPAYMENTS
FROM JANUARY 1, 1991 — PRESENT
1995–1 C.B.
RATETABLEPG
Apr. 1, 2006—Jun. 30, 20069%23
577
Jul. 1, 2006—Sep. 30, 200610%
25579
Oct. 1, 2006—Dec. 31, 200610%
25579
Jan. 1, 2007—Mar. 31, 200710%
25579
Apr. 1, 2007—Jun. 30, 200710%
25579
Jul. 1, 2007—Sep. 30, 200710%
25579
Oct. 1, 2007—Dec. 31, 200710%
25579
Jan. 1, 2008—Mar. 31, 20089%71
625
Apr. 1, 2008—Jun. 30, 20088%69623
Jul. 1, 2008—Sep. 30, 20087%67621
Oct. 1, 2008—Dec. 31, 20088%69623
Jan. 1, 2009—Mar. 31, 20097%19
573
Apr. 1, 2009—Jun. 30, 20096%17
571
Jul. 1, 2009—Sep. 30, 20096%17
571
Oct. 1, 2009—Dec. 31, 20096%17
571
Jan. 1, 2010—Mar. 31, 20106%17
571
Apr. 1, 2010—Jun. 30, 20106%17
571
Jul. 1, 2010—Sep. 30, 20106%17
571
Oct. 1, 2010—Dec. 31, 20106%17
571
Jan. 1, 2011—Mar. 31, 2011
5%15569
Apr. 1, 2011—Jun. 30, 20116%17
571
Jul. 1, 2011—Sep. 30, 20116%17
571
Oct. 1, 2011—Dec. 31, 2011
5%15569
TABLE OF INTEREST RATES FOR CORPORATE
OVERPAYMENTS EXCEEDING $10,000
FROM JANUARY 1, 1995 — PRESENT
1
995–1 C.B.
RATETABLE
P
G
Jan. 1, 1995—Mar. 31, 19956.5%
1
8
572
Apr. 1, 1995—Jun. 30, 19957.5%
20
574
Jul. 1, 1995—Sep. 30, 19956.5%
18
572
Oct. 1, 1995—Dec. 31, 19956.5%
18
572
Jan. 1, 1996—Mar. 31, 1996
6.5%
66620
Apr. 1, 1996—Jun. 30, 1996
5.5%
64618
Jul. 1, 1996—Sep. 30, 1996
6.5%
66620
Oct. 1, 1996—Dec. 31, 1996
6.5%
66620
Jan. 1, 1997—Mar. 31, 1997
6.5%
18
572
Apr. 1, 1997—Jun. 30, 1997
6.5%
18
572
Jul. 1, 1997—Sep. 30, 1997
6.5%
18
572
Oct. 1, 1997—Dec. 31, 1997
6.5%
18
572
Jan. 1, 1998—Mar. 31, 1998
6.5%
18
572
Apr. 1, 1998—Jun. 30, 1998
5.5%
16
570
Jul. 1, 1998—Sep. 30, 1998
5.5%
16
570
Oct. 1, 1998—Dec. 31, 1998
5.5%
16
570
Jan. 1, 1999—Mar. 31, 1999
4.5%
14
568
Apr. 1, 1999—Jun. 30, 1999
5.5%
16
570
Jul. 1, 1999—Sep. 30, 1999
5.5%
16
570
Oct. 1, 1999—Dec. 31, 1999
5.5%
16
570
Jan. 1, 2000—Mar. 31, 2000
5.5%
64618
Apr. 1, 2000—Jun. 30, 2000
6.5%
66620
Jul. 1, 2000—Sep. 30, 2000
6.5%
66620
Oct. 1, 2000—Dec. 31, 2000
6.5%
66620
September 26, 20114362011–39 I.R.B.

TABLE OF INTEREST RATES FOR CORPORATE
OVERPAYMENTS E
XCEEDING $10,000
FROM JANUARY 1, 1995 — PRESENT
1995–1 C.B.
RATETABLEPG
Jan. 1, 2001—Mar. 31, 2001
6.5%
18
572
Apr. 1, 2001—Jun. 30, 2001
5.5%
16
570
Jul. 1, 2001—Sep. 30, 2001
4.5%
14
568
Oct. 1, 2001—Dec. 31, 2001
4.5%
14
568
Jan. 1, 2002—Mar. 31, 2002
3.5%
12
566
Apr. 1, 2002—Jun. 30, 2002
3.5%
12
566
Jul. 1, 2002—Sep. 30, 2002
3.5%
12
566
Oct. 1, 2002—Dec. 31, 2002
3.5%
12
566
Jan. 1, 2003—Mar. 31, 2003
2.5%
10
564
Apr. 1, 2003—Jun. 30, 2003
2.5%
10
564
Jul. 1, 2003—Sep. 30, 2003
2.5%
10
564
Oct. 1, 2003—Dec. 31, 2003
1.5%
8
562
Jan. 1, 2004—Mar. 31, 2004
1.5%56
610
Apr. 1, 2004—Jun. 30, 2004
2.5%58
612
Jul. 1, 2004—Sep. 30, 2004
1.5%56
610
Oct. 1, 2004—Dec. 31, 2004
2.5%58
612
Jan. 1, 2005—Mar. 31, 20052.5%
10
564
Apr. 1, 2005—Jun. 30, 20053.5%
12
566
Jul. 1, 2005—Sep. 30, 20053.5%
12
566
Oct. 1, 2005—Dec. 31, 20054.5%
14
568
Jan. 1, 2006—Mar. 31, 2006
4.5%
14
568
Apr. 1, 2006—Jun. 30, 2006
4.5%
14
568
Jul. 1, 2006—Sep. 30, 2006
5.5%
16
570
Oct. 1, 2006—Dec. 31, 2006
5.5%
16
570
Jan. 1, 2007—Mar. 31, 2007
5.5%
16
570
Apr. 1, 2007—Jun. 30, 2007
5.5%
16
570
Jul. 1, 2007—Sep. 30, 2007
5.5%
16
570
Oct. 1, 2007—Dec. 31, 2007
5.5%
16
570
Jan. 1, 2008—Mar. 31, 2008
4.5%
62616
Apr. 1, 2008—Jun. 30, 2008
3.5%
60614
Jul. 1, 2008—Sep. 30, 2008
2.5%58
612
Oct. 1, 2008—Dec. 31, 2008
3.5%
60614
Jan. 1, 2009—Mar. 31, 2009
2.5%
10
564
Apr. 1, 2009—Jun. 30, 2009
1.5%
8
562
Jul. 1, 2009—Sep. 30, 2009
1.5%
8
562
Oct. 1, 2009—Dec. 31, 2009
1.5%
8
562
Jan. 1, 2010—Mar. 31, 2010
1.5%
8
562
Apr. 1, 2010—Jun. 30, 2010
1.5%
8
562
Jul. 1, 2010—Sep. 30, 2010
1.5%
8
562
Oct. 1, 2010—Dec. 31, 2010
1.5%
8
562
Jan. 1, 2011—Mar. 31, 2011
0.5%*
Apr. 1, 2011—Jun. 30, 2011
1.5%
8
562
Jul. 1, 2011—Sep. 30, 2011
1.5%
8
562
Oct. 1, 2011—Dec. 31, 2011
0.5%*
2011–39 I.R.B.437September 26, 2011

Section 9815.—Additional
Market Reforms
26 CFR 54.9815–2713T: Coverage of preventive
health services (temporary).
T.D. 9541
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 54
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Part 2590
DEPARTMENT OF HEALTH
AND HUMAN SERVICES
CMS–9992–IFC2
45 CFR Part 147
Group Health Plans and Health
Insurance Issuers Relating
to Coverage of Preventive
Services Under the Patient
Protection and Affordable
Care Act
AGENCIES:Internal Revenue Service,
Department of the Treasury; Employee
Benefits Security Administration, Depart-
ment of Labor; Centers for Medicare &
Medicaid Services, Department of Health
and Human Services.
ACTION:Interim final rules with request
for comments.
SUMMARY:This document contains
amendments to the interim final regula-
tions (REG–120391–10) implementing
the rules for group health plans and health
insurance coverage in the group and in-
dividual markets under provisions of the
Patient Protection and Affordable Care
Act regarding preventive health services.
DATES:Effective date. These interim fi-
nal regulations are effective on August 1,
2011.
Comment date. Comments are due on
or before September 30, 2011.
Applicability dates. These interim final
regulations generally apply to group health
plans and group health insurance issuers
on August 1, 2011.
ADDRESSES:Written comments may be
submitted to any of the addresses specified
below. Any comment that is submitted to
any Department will be shared with the
other Departments. Please do not submit
duplicates.
All comments will be made available
to the public.WARNING: Do not in-
clude any personally identifiable informa-
tion (such as name, address, or other con-
tact information) or confidential business
information that you do not want publicly
disclosed. All comments are posted on the
Internet exactly as received, and can be
retrieved by most Internet search engines.
No deletions, modifications, or redactions
will be made to the comments received, as
they are public records. Comments may be
submitted anonymously.
Department of Labor. Comments to the
Department of Labor, identified by RIN
1210–AB44, by one of the following meth-
ods:
•FederaleRulemakingPortal:
http://www.regulations.gov. Follow
the instructions for submitting com-
ments.
•Email:E-OHPSCA2713.EBSA@dol.gov.
•Mail or Hand Delivery:Officeof
Health Plan Standards and Compliance
Assistance, Employee Benefits Secu-
rity Administration, Room N–5653,
U.S. Department of Labor, 200 Con-
stitution Avenue NW, Washington, DC
20210,Attention: RIN 1210–AB44.
Comments received by the Depart-
ment of Labor will be posted without
change tohttp://www.regulations.govand
http://www.dol.gov/ebsa, and available for
public inspection at the Public Disclosure
Room, N–1513, Employee Benefits Se-
curity Administration, 200 Constitution
Avenue, NW, Washington, DC 20210.
Department of Health and Human Ser-
vices. In commenting, please refer to file
code CMS–9992–IFC2.Because of staff
and resource limitations, we cannot accept
comments by facsimile (FAX) transmis-
sion.
You may submit comments in one of
four ways (please choose only one of the
ways listed):
1.Electronically. You may submit
electronic comments on this regulation to
http://www.regulations.gov. Follow the
“Submit a comment” instructions.
2.By regular mail.Youmaymail
written comments to the following address
ONLY:
Centers for Medicare &
Medicaid Services,
Department of Health and
Human Services,
Attention: CMS–9992–IFC2,
P.O. Box 8010,
Baltimore, MD 21244–8010.
Please allow sufficient time for mailed
comments to be received before the close
of the comment period.
3.By express or overnight mail.You
may send written comments to the follow-
ing address ONLY:
Centers for Medicare &
Medicaid Services,
Department of Health and
Human Services,
Attention: CMS–9992–IFC2,
Mail Stop C4–26–05,
7500 Security Boulevard,
Baltimore, MD 21244–1850.
4.By hand or courier. Alternatively,
you may deliver (by hand or courier) your
written comments ONLY to the following
addresses prior to the close of the comment
period:
Centers for Medicare &
Medicaid Services,
Department of Health and
Human Services,
Room 445–G, Hubert H. Humphrey
Building,
200 Independence Avenue, SW,
Washington, DC 20201.
(Because access to the interior of the
Hubert H. Humphrey Building is not read-
ily available to persons without Federal
government identification, commenters
are encouraged to leave their comments
in the CMS drop slots located in the main
lobby of the building. A stamp-in clock is
available for persons wishing to retain a
proof of filing by stamping in and retain-
ing an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD—
September 26, 20114382011–39 I.R.B.

Centers for Medicare &
Medicaid Services,
Department of Health and
Human Services,
7500 Security Boulevard,
Baltimore, MD 21244–1850.
If you intend to deliver your comments
to the Baltimore address, call telephone
number (410) 786–4492 in advance to
schedule your arrival with one of our staff
members.
Comments mailed to the addresses in-
dicated as appropriate for hand or courier
delivery may be delayed and received after
the comment period.
Inspection of Public Comments:All
comments received before the close of
the comment period are available for
viewing by the public, including any
personally identifiable or confidential
business information that is included in
a comment. We post all comments re-
ceived before the close of the comment
period on the following website as soon
as possible after they have been received:
http://www.regulations.gov. Follow the
search instructions on that Web site to
view public comments.
Comments received timely will also
be available for public inspection as they
are received, generally beginning ap-
proximately three weeks after publication
of a document, at the headquarters of
the Centers for Medicare & Medicaid
Services, 7500 Security Boulevard, Balti-
more, Maryland 21244, Monday through
Friday of each week from 8:30 a.m. to
4p.m. EST.Toscheduleanappoint-
ment to view public comments, phone
1–800–743–3951.
Internal Revenue Service. Comments
to the IRS, identified by REG–120391–10,
by one of the following methods:
•FederaleRulemakingPortal:
http://www.regulations.gov.Follow
the instructions for submitting com-
ments.
•Mail:CC:PA:LPD:PR
(REG–120391–10), room 5205, Inter-
nal Revenue Service, P.O. Box 7604,
Ben Franklin Station, Washington, DC
20044.
•Hand or courier delivery: Monday
through Friday between the hours of
8a.m.and4p.m.to:CC:PA:LPD:PR
(REG–120391–10), Courier’s Desk,
Internal Revenue Service, 1111
Constitution Avenue, NW, Washington
DC 20224.
All submissions to the IRS will be open
to public inspection and copying in room
1621, 1111 Constitution Avenue, NW,
Washington, DC from 9 a.m. to 4 p.m.
FOR FURTHER INFORMATION
CONTACT:Amy Turner or Beth Baum,
Employee Benefits Security Adminis-
tration, Department of Labor, at (202)
693–8335; Karen Levin, Internal Revenue
Service, Department of the Treasury, at
(202) 622–6080; Robert Imes, Centers for
Medicare & Medicaid Services (CMS),
Department of Health and Human Ser-
vices, at (410) 786–1565.
Customer Service Information:Individ-
uals interested in obtaining information
from the Department of Labor concern-
ing employment-based health cover-
age laws may call the EBSA Toll-Free
Hotline at 1–866–444–EBSA (3272) or
visit the Department of Labor’s website
(http://www.dol.gov/ebsa). In addition, in-
formation from HHS on private health in-
surance for consumers can be found on the
Centers for Medicare & Medicaid Services
(CMS) website (http://cciio.cms.gov)and
information on health reform can be found
athttp://www.HealthCare.gov.
SUPPLEMENTARY INFORMATION:
I. Background
The Patient Protection and Affordable
Care Act, Pub. L. 111–148, was enacted on
March 23, 2010; the Health Care and Edu-
cation Reconciliation Act (the Reconcilia-
tion Act), Pub. L. 111–152, was enacted on
March 30, 2010 (collectively known as the
“Affordable Care Act”). The Affordable
Care Act reorganizes, amends, and adds 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 indi-
vidual markets. The term “group health
plan” includes both insured and self-in-
sured group health plans.
1
The Affordable
Care Act adds section 715(a)(1) to the Em-
ployee Retirement Income Security Act
(ERISA) and section 9815(a)(1) to the In-
ternal Revenue Code (the Code) to incor-
porate the provisions of part A of title
XXVII of the PHS Act into ERISA and
the Code, and make them applicable to
group health plans, and health insurance
issuers providing health insurance cover-
age in connection with group health plans.
The PHS Act sections incorporated by this
reference are sections 2701 through 2728.
PHS Act sections 2701 through 2719A are
substantially new, though they incorporate
some provisions of prior law. PHS Act
sections 2722 through 2728 are sections of
prior law renumbered, with some, mostly
minor, changes.
Subtitles A and C of title I of the Af-
fordable Care Act amend the requirements
of title XXVII of the PHS Act (changes
to which are incorporated into ERISA
section 715). The preemption provi-
sions of ERISA section 731 and PHS Act
section 2724
2
(implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a)) ap-
ply so that the requirements of part 7 of
ERISA and title XXVII of the PHS Act,
as amended by the Affordable Care Act,
are not to be “construed to supersede any
provision of State law which establishes,
implements, or continues in effect any
standard or requirement solely relating
to health insurance issuers in connection
with group or individual health insur-
ance coverage except to the extent that
such standard or requirement prevents
the application of a requirement” of the
Affordable Care Act.Accordingly, State
laws that impose requirements on health
insurance issuers that are stricter than the
requirements imposed by the Affordable
Care Act are not superseded by the Af-
fordable Care Act.
Section 2713 of the PHS Act, as added
by the Affordable Care Act and incorpo-
rated under section 715(a)(1) of ERISA
and section 9815(a)(1)of the Code, speci-
fies that a group health plan and a health
insurance issuer offering group or indi-
vidual health insurance coverage provide
1
The term “group health plan” is used in title XXVII of the PHS Act, part 7 of ERISA, and chapter 100 of the Code, and is distinct from the term “health plan,”as used in other provisions of
title I of the Affordable Care Act. The term “health plan” does not include self-insured group health plans.
2
Code section 9815 incorporates the preemption provisions of PHS Act section 2724. Prior to the Affordable Care Act, there were no express preemption provisions in chapter 100 of the
Code.
2011–39 I.R.B.439September 26, 2011

benefits for and prohibit the imposition of
cost-sharing with respect to:
•Evidence-based items or services that
have in effect a rating of A or B in
the current recommendations of the
United States Preventive Services Task
Force (Task Force) with respect to the
individual involved.
3
•Immunizations for routine use in chil-
dren, adolescents, and adults that have
in effect a recommendation from the
Advisory Committee on Immunization
Practices of the Centers for Disease
Control and Prevention (Advisory
Committee) with respect to the indi-
vidual involved. Arecommendation
of the Advisory Committee is consid-
ered to be “in effect” after it has been
adopted by the Director of the Centers
for Disease Control and Prevention. A
recommendation is considered to be
for routine use if it appears on the Im-
munization Schedules of the Centers
for Disease Control and Prevention.
•With respect to infants, children, and
adolescents, evidence-informed pre-
ventive care and screenings provided
for in the comprehensive guidelines
supported by the Health Resources and
Services Administration (HRSA).
•With respect to women, preventive
care and screening provided for in
comprehensive guidelines supported
by HRSA (not otherwise addressed
by the recommendations of the Task
Force), which will be commonly
known as HRSA’s Women’s Preven-
tive Services: Required Health Plan
Coverage Guidelines.
The requirements to cover recom-
mended preventive services without any
cost-sharing do not apply to grandfa-
thered health plans.
4
The Departments
previously issued interim final regula-
tions implementing PHS Act section 2713;
these interim final rules were published
in theFederal Registeron July 19, 2010
(75 FR 41726). For the reasons explained
below, the Departments are now issuing
an amendment to these interim final rules.
II. Overview of the Amendment to the
Interim Final Regulations
The interim final regulations provided
that a group health plan or health insur-
ance issuer must cover certain items and
services, without cost-sharing, as recom-
mended by the U.S. Preventive Services
Task Force, the Advisory Committee on
Immunization Practices of the Centers
for Disease Control and Prevention, and
the Health Resources and Services Ad-
ministration. Notably, to the extent not
described in the U.S. Preventive Services
Task Force recommendations, HRSA
was charged with developing comprehen-
sive guidelines for preventive care and
screenings with respect to women (i.e.,
the Women’s Preventive Services: Re-
quired Health Plan Coverage Guidelines
or “HRSA Guidelines”). The interim final
regulations also require that changes in
the required items and services be imple-
mented no later than plan years (in the
individual market, policy years) beginning
on or after the date that is one year from
when the new recommendation or guide-
line is issued.
In response to the request for comments
on the interim final regulations, the De-
partments received considerable feedback
regarding which preventive services for
women should be considered for cover-
age under PHS Act section 2713(a)(4).
Most commenters, including some reli-
gious organizations, recommended that
HRSA Guidelines include contraceptive
services for all women and that this re-
quirement be binding on all group health
plans and health insurance issuers with
no religious exemption. However, sev-
eral commenters asserted that requiring
group health plans sponsored by religious
employers to cover contraceptive services
that their faith deems contrary to its re-
ligious tenets would impinge upon their
religious freedom. One commenter noted
that some religious employers do not
currently cover such benefits under their
group health plan due to their religious
beliefs.
The Departments note that PHS Act
section 2713(a)(4) gives HRSA the author-
ity to develop comprehensive guidelines
for additional preventive care and screen-
ings for women “for purposes of this para-
graph.” In other words, the statute contem-
plated HRSA Guidelines that would be de-
veloped with the knowledge that certain
group health plans and health insurance is-
suers would be required to cover the ser-
vices recommended without cost-sharing,
unlike the other guidelines referenced in
section 2713(a), which pre-dated the Af-
fordable Care Act and were originally is-
sued for purposes of identifying the non-
binding recommended care that providers
should provide to patients. These HRSA
Guidelines exist solely to bind non-grand-
fathered group health plans and health in-
surance issuers with respect to the extent
of their coverage of certain preventive ser-
vices for women. In the Departments’
view, it is appropriate that HRSA, in is-
suing these Guidelines, takes into account
the effect on the religious beliefs of certain
religious employers if coverage of contra-
ceptive services were required in the group
health plans in which employees in cer-
tain religious positions participate. Specif-
ically, the Departments seek to provide for
a religious accommodation that respects
the unique relationship between a house of
worship and its employees in ministerial
positions. Such anaccommodation would
be consistent with the policies of States
that require contraceptive services cover-
age, the majority of which simultaneously
provide for a religious accommodation.
In light of the above, the Departments
are amending the interim final rules to
provide HRSA additional discretion to
exempt certain religious employers from
the Guidelines where contraceptive ser-
vices are concerned. The amendment to
the interim final rules provides HRSA
with the discretion to establish this ex-
emption. Consistent with most States that
have such exemptions, as described be-
low, the amended regulations specify that,
for purposes of this policy, a religious
employer is one that: (1) has the inculca-
tion of religious values as its purpose; (2)
3
Under PHS Act section 2713(a)(5), the Task Force recommendations regarding breast cancer screening, mammography, and prevention issued in or around November of 2009 are not to be
considered current recommendations on this subject for purposes of PHS Act section 2713(a)(1). Thus, the recommendations regarding breast cancer screening, mammography, and prevention
issued by the Task Force prior to those issued in or around November of 2009 (that is, those issued in 2002) will be considered current until new recommendations in this area are issued
by the Task Force or appear in comprehensive guidelines supported by HRSA concerning preventive care and screenings for women, which will be commonlyknown as HRSA’s Women’s
Preventive Services: Required Health Plan Coverage Guidelines.
4
See 26 CFR 54.9815–1251T, 29 CFR 2590.715–1251 and 45 CFR 147.140 (75 FR 34538, June 17, 2010).
September 26, 20114402011–39 I.R.B.

primarily employs persons who share its
religious tenets; (3) primarily serves per-
sons who share its religious tenets; and (4)
is a non-profit organization under section
6033(a)(1) and section 6033(a)(3)(A)(i) or
(iii) of the Code. Section 6033(a)(3)(A)(i)
and (iii) refer to churches, their inte-
grated auxiliaries, and conventions or
associations of churches, as well as to the
exclusively religious activities of any re-
ligious order. The definition of religious
employer, as set forth in the amended reg-
ulations, is based on existing definitions
used by most States that exempt certain
religious employers from having to com-
ply with State law requirements to cover
contraceptive services. We will be accept-
ingcommentsonthisdefinitionaswell
as alternative definitions, such as those
that have been developed under Title 26
of the United States Code. The definition
set forth here is intended to reasonably
balance the extension of any coverage of
contraceptive services under the HRSA
Guidelines to as many women as possible,
while respecting the unique relationship
between certain religious employers and
their employees in certain religious posi-
tions. The change in policy effected by
this amendment to these interim final rules
is intended solely for purposes of PHS Act
section 2713 and the companion provi-
sions of ERISA and the Internal Revenue
Code.
Because HRSA’s discretion to establish
an exemption applies only to group health
plans sponsored by certain religious em-
ployers and group health insurance offered
in connection with such plans, health in-
surance issuers in the individual health in-
surance market would not be covered un-
der any such exemption.
III. Interim Final Regulations and
Waiver of Delay of Effective Date
Section 9833 of the Code, section 734
of ERISA, and section 2792 of the PHS
Act authorize the Secretaries of the Trea-
sury, Labor, and HHS (collectively, the
Secretaries) to promulgate any interim fi-
nal rules that they determine are appro-
priate to carry out the provisions of chap-
ter 100 of the Code, part 7 of subtitle
B of title I of ERISA, and part A of ti-
tle XXVII of the PHS Act, which include
PHS Act sections 2701 through 2728 and
the incorporation of those sections into
ERISA section 715 and Code section 9815.
The amendments promulgated in this rule-
making carry out the provisions of these
statutes. Therefore, the foregoing interim
final rule authority applies to these amend-
ments.
Under the Administrative Procedure
Act (APA) (5 U.S.C. 551,et seq.), while
a general notice of proposed rulemaking
and an opportunity for public comment is
generally required before promulgation of
regulations, an exception is made when an
agency, for good cause, finds that notice
and public comment thereon are imprac-
ticable, unnecessary, or contrary to the
public interest. The provisions of the APA
that ordinarily require a notice of proposed
rulemaking do not apply here because of
the specific authority to issue interim final
rules granted by section 9833 of the Code,
section 734 of ERISA, and section 2792
of the PHS Act.
Even if the APA requirements for
notice and comment were applicable to
these regulations, they have been satis-
fied. This is because the Secretaries find
that providing for an additional opportu-
nity for public comment is unnecessary,
as the July 19, 2010 interim final rules
implementing section 2713 of the PHS Act
provided the public with an opportunity
to comment on the implementation of the
preventive services requirements in this
provision, and the amendments made in
these interim final rules in fact are based
on such public comments. Specifically,
commenters expressed concerns that
HRSA-supported guidelines issued under
section 2713(a)(4) that included coverage
of contraceptive services could impinge
upon the religious freedom of certain
religious employers. The flexibility that
is afforded under these amendments is
being provided to HRSA in order to allow
HRSA the discretion to accommodate, in
a balanced way, as discussed above, these
commenter concerns.
In addition, the Departments have de-
termined that an additional opportunity
for public comment would be impracti-
cal and contrary to the public interest.
The requirement in section 2713(a)(4)
that preventive services supported by
HRSA be provided without cost-sharing
took effect at the beginning of the first
plan or policy year beginning on or af-
ter September 23, 2010. At that time,
however, HRSA had not issued any such
guidelines. Under the July 19, 2010 in-
terim final rules, group health plans and
insurance issuers do not have to begin
covering preventive services supported
in HRSA guidelines until the first plan
or policy year that begins one year after
the guidelines are issued. Thus, while the
law requiring coverage of recommended
women’s preventive health services was
enacted on March 23, 2010, and has been
in effect since September 23, 2010, no
such guidelines have yet been issued, and
it will be at least a full year after they
are issued before group health plans and
issuers will be required to start covering
preventive services recommended in the
guidelines without cost sharing.
The July 19, 2010 interim final rules
indicated that HRSA expected to issue
guidelines by August 1, 2011. After con-
sidering public comments raising the issue
addressed in these amendments, however,
the Departments determined that HRSA
should be granted the discretion to ad-
dress the commenter concerns at issue
prior to issuing guidelines under section
2713(a)(4). Many college student policy
years begin in August and an estimated
1.5 million young adults are estimated
to be covered by such policies.
5
Provid-
ing an opportunity for public comment
as described above would mean that the
guidelines could not be issued until af-
ter August of 2011. This delay would
mean that many students could not benefit
from the new prevention coverage without
cost-sharing following from the issuance
of the guidelines until the 2013–14 school
year, as opposed to the 2012–13 school
year. Similarly, 2008 data from the De-
partment of Labor indicate that over 4
million Americans have ERISA group
health plan coverage that starts in August
or September; they too would experience
over a year’s delay in the receipt of the
new benefit if the public comment period
delayed the issuance of the guidance for
over a month. The Departments have
determined that such a delay in implemen-
tation of the statutory requirement that
women receive vital preventive services
without cost-sharing would be contrary to
5
Department of Health and Human Services, Notice of Proposed Rulemaking on Student Health Insurance Coverage (76 FR 7767, February 22, 2011).
2011–39 I.R.B.441September 26, 2011

the public interest because it could result
in adverse health consequences that may
not otherwise have occurred.
While the Departments have deter-
mined that, even if the APA were applica-
ble, issuing these regulations in proposed
form, so they would not become effective
until after public comment, would be con-
trary to the public interest in the case of
these amendments, the Departments are
issuing these amendments as interim final
rules so as to provide the public with an
opportunity for public comment on these
amendments.
The APA also generally requires that a
finalrulebeeffectivenosoonerthan30
days after the date of publication in the
Federal Register. This 30-day delay in
effective date can be waived, however, if
an agency finds good cause why the ef-
fective date should not be delayed, and
the agency incorporates a statement of the
findings and its reasons in the rule issued.
As indicated above, many college stu-
dent policy years begin in August. Delay-
ing the effective date of this amendment by
30 days would mean that the HRSA guide-
lines could not be issued until after August
of 2011. This delay would mean many stu-
dents could not benefit from the new pre-
vention coverage without cost-sharing fol-
lowing from the issuance of the guidelines
until the 2013–14 school year, as opposed
to the 2012–13 school year. As discussed
above, all other participants, beneficiaries
and enrollees in plans or policies with
a plan or a policy year beginning in the
months between August 1 and whenever
a final rule would be published should the
Departments provide a pre-promulgation
opportunity for public comment would
face a similar one-year delay in receiving
these important health benefits. The
Departments have determined that such a
delayinimplementationofthestatutory
requirement that women receive vital
preventive services without cost-sharing
would be impracticable and contrary to the
public interest because it could result in
adverse health consequences that may not
otherwise have occurred. Therefore, the
Departments are waiving the 30-day delay
in effective date of these amendments.
IV. Economic Impact and Paperwork
Burden
A. Executive Orders 13563 and
12866–Department of Labor and
Department of Health and Human
Services
Executive Orders 13563 and 12866
direct agencies to assess all costs and ben-
efits of available regulatory alternatives
and, if regulation is necessary, to select
regulatory approaches that maximize net
benefits (including potential economic,
environmental, public health and safety
effects, distributive impacts, and equity).
Executive Order 13563 emphasizes the
importance of quantifying both costs and
benefits, of reducing costs, of harmonizing
rules, and of promoting flexibility. This
rule has been designated a “significant
regulatory action,” although not econom-
ically significant, under section 3(f) of
Executive Order 12866. Accordingly, the
rule has been reviewed by the Office of
Management and Budget.
1. Need for Regulatory Action
As stated earlier in this preamble, the
Departments previously issued interim
final regulations implementing PHS Act
section 2713 that were published in the
Federal Registeron July 19, 2010 (75 FR
41726). Comments received in response
to the interim final regulations raised the
issue of imposing on certain religious em-
ployers through binding guidelines the re-
quirement to cover contraceptive services
that would be in conflict with the religious
tenets of the employer. The Departments
have determined that it is appropriate to
amend the interim final rules to provide
HRSA the discretion to exempt from its
guidelines group health plans maintained
by certain religious employers where con-
traceptive services are concerned.
2. Anticipated Effects
The Departments expect that this
amendment will not result in any addi-
tional significant burden or costs to the
affected entities.
B. Special Analyses—Department of the
Treasury
Notwithstanding the determinations of
the Department of Labor and Department
of Health and Human Services, for pur-
poses of the Department of the Treasury, it
has been determined that this Treasury de-
cision is not a significant regulatory action
for purposes of Executive Order 12866.
Therefore, a regulatory assessment is not
required. It has also been determined that
section 553(b) of the APA (5 U.S.C. chap-
ter 5) does not apply to these interim fi-
nal regulations. For the applicability of the
RFA, refer to the Special Analyses section
in the preamble to the cross-referencing
notice of proposed rulemaking published
elsewhere in this issue of the Bulletin. Pur-
suant to section 7805(f) of the Code, these
temporary regulations have been submit-
ted to the Chief Counsel for Advocacy
of the Small Business Administration for
comment on their impact on small busi-
nesses.
C. Paperwork Reduction Act
As stated in the previously issued in-
terim final regulations, this rule is not sub-
ject to the requirements of the Paperwork
Reduction Act of 1980 (44 U.S.C. 3501
et seq.) because it does not contain a
“collection of information” as defined in
44 U.S.C. 3502 (11).
V. Statutory Authority
The Department of the Treasury tem-
porary regulations are adopted pursuant to
the authority contained in sections 7805
and 9833 of the Code.
The Department of Labor interim final
regulations are adopted pursuant to the
authority contained in 29 U.S.C. 1027,
1059, 1135, 1161–1168, 1169, 1181–1183,
1181 note, 1185, 1185a, 1185b, 1185c,
1185d, 1191, 1191a, 1191b, and 1191c;
sec. 101(g), Pub. L. 104–191, 110 Stat.
1936; sec. 401(b), Pub. L. 105–200,
112 Stat. 645 (42 U.S.C. 651 note); sec.
512(d), Pub. L. 110–343, 122 Stat. 3881;
sec. 1001, 1201, and 1562(e), Pub. L.
111–148, 124 Stat. 119, as amended by
Pub. L. 111–152, 124 Stat. 1029; Sec-
retary of Labor’s Order 3–2010, 75 FR
55354 (September 10, 2010).
The Department of Health and Hu-
man Services interim final regulations are
adopted pursuant to the authority con-
tained in sections 2701 through 2763,
2791, and 2792 of the PHS Act (42 USC
300gg through 300gg–63, 300gg–91, and
300gg–92), as amended.
September 26, 20114422011–39 I.R.B.

*****
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Chapter 1
Accordingly, 26 CFR Part 54 is
amended as follows:
PART 54—PENSION EXCISE TAXES
Paragraph 1. The authority citation for
part 54 continues to read as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 2. Section 54.9815–2713T is
amended by revising paragraph (a)(1)(iv)
to read as follows:
§54.9815–2713T Coverage of preventive
health services (temporary).
(a) * * *
(1) * * *
(iv) With respect to women, to the ex-
tent not described in paragraph (a)(1)(i) of
this section, preventive care and screen-
ings provided for in binding comprehen-
sive health plan coverage guidelines sup-
ported by the Health Resources and Ser-
vices Administration and developed in ac-
cordance with 45 CFR 147.130(a)(1)(iv).
*****
DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR Chapter XXV
29 CFR Part 2590 is amended as fol-
lows:
PART 2590—RULES AND
REGULATIONS FOR GROUP
HEALTH PLANS
1. The authority citation for Part 2590
continues to read as follows:
Authority:
29 U.S.C. 1027, 1059, 1135,
1161–1168, 1169, 1181–1183, 1181 note,
1185, 1185a, 1185b, 1185c, 1185d, 1191,
1191a, 1191b, and 1191c; sec. 101(g),
Pub. L. 104–191, 110 Stat. 1936; sec.
401(b), Pub. L. 105–200, 112 Stat. 645
(42 U.S.C. 651 note); sec. 512(d), Pub. L.
110–343, 122 Stat. 3881; sec. 1001, 1201,
and 1562(e), Pub. L. 111–148, 124 Stat.
119, as amended by Pub. L. 111–152,
124 Stat. 1029; Secretary of Labor’s Or-
der 3–2010, 75 FR 55354 (September 10,
2010).
Subpart C-Other Requirements
2. Section 2590.715–2713 is amended
by revising paragraph (a)(1)(iv) to read as
follows:
§2590.715–2713 Coverage of preventive
health services.
(a)***
(1) * * *
(iv) With respect to women, to the ex-
tent not described in paragraph (a)(1)(i) of
this section, preventive care and screen-
ings provided for in binding comprehen-
sive health plan coverage guidelines sup-
ported by the Health Resources and Ser-
vices Administration and developed in ac-
cordance with 45 CFR 147.130(a)(1)(iv).
*****
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
For the reasons stated in the preamble,
the Department of Health and Human Ser-
vices amends 45 CFR part 147 as follows:
PART 147—HEALTH INSURANCE
REFORM REQUIREMENTS FOR
THE GROUP AND INDIVIDUAL
HEALTH INSURANCE MARKETS
1. The authority citation for part 147
continues to read as follows:
Authority:2701 through 2763, 2791,
and 2792 of the Public Health Service
Act (42 USC 300gg through 300gg–63,
300gg–91, and 300gg–92), as amended.
2. Section 147.130 is amended by re-
vising paragraph (a)(1)(iv) to read as fol-
lows:
§147.130 Coverage of preventive health
services.
(a)***
(1) * * *
(iv) With respect to women, to the ex-
tent not described in paragraph (a)(1)(i) of
this section, preventive care and screen-
ings provided for in binding comprehen-
sive health plan coverage guidelines sup-
ported by the Health Resources and Ser-
vices Administration.
(A) In developing the binding health
plan coverage guidelines specified in this
paragraph (a)(1)(iv), the Health Resources
and Services Administration shall be in-
formed by evidence and may establish
exemptions from such guidelines with
respect to group health plans established
or maintained by religious employers
and health insurance coverage provided
in connection with group health plans
established or maintained by religious em-
ployers with respect to any requirement to
cover contraceptive services under such
guidelines.
(B) For purposes of this subsection, a
“religious employer” is an organization
that meets all of the following criteria:
(1) The inculcation of religious values
is the purpose of the organization.
(2) The organization primarily employs
persons who share the religious tenets of
the organization.
(3) The organization serves primarily
persons who share the religious tenets of
the organization.
(4) The organization is a nonprofit
organization as described in section
6033(a)(1) and section 6033(a)(3)(A)(i) or
(iii) of the Internal Revenue Code of 1986,
as amended.
*****
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement
Internal Revenue Service.
Approved July 28, 2011.
Emily S. McMahon,
Acting Assistant Secretary of
theTreasury(TaxPolicy).
Signed this 29
th
day of July, 2011.
Phyllis C. Borz,
Assistant Secretary,
Employee Benefits Se-
curity Administration,
Department of Labor.
Dated July 28, 2011.
Donald M. Berwick,
Administrator,
Centers for Medicare
& Medicaid Services.
Approved July 28, 2011.
2011–39 I.R.B.443September 26, 2011

Kathleen Sebelius,
Secretary,
Department of Health
and Human Services.
(Filed by the Office of the Federal Register on August 1,
2011, 8:45 a.m., and published in the issue of the Federal
Register for August 3, 2011, 76 F.R. 46621)
September 26, 20114442011–39 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Air Transportation and
Aviation Fuels Excise Taxes
Notice 2011–69
SECTION 1. OVERVIEW
This notice describes the relief the
IRS will provide in connection with the
retroactive extension of certain aviation
related excise taxes by the Airport and
Airway Extension Act of 2011, Part IV
(Extension Act, Part IV) (Pub. L. 112–27).
SECTION 2. BACKGROUND
Before July 23, 2011, the Internal Rev-
enue Code (Code) imposed excise taxes
on amounts paid for taxable air trans-
portation of persons (§ 4261) and property
(§ 4271). In addition, the Code imposed
excise taxes on certain removals, entries,
and sales of aviation gasoline and aviation
fuel (§ 4081). On July 23, 2011, the taxes
imposedby§§4261and4271expired
under the terms of the Airport and Airway
Extension Act of 2011, Part III (Pub. L.
112–21) and did not apply to amounts paid
on and after that date. Air transportation
providers were not authorized to collect
these taxes for air transportation services
purchased on and after July 23, 2011. Also
under the Airport and Airway Extension
Act of 2011, Part III, the tax rates for avia-
tion gasoline and aviation fuel taxes were
reduced beginning on July 23, 2011.
On August 5, 2011, the President signed
the Extension Act, Part IV, into law, rein-
stating the taxes imposed by §§ 4261 and
4271, and the pre-July 23, 2011, tax rates
for aviation gasoline and aviation fuel as if
they had never expired.
In an August 5, 2011, statement made
pursuant to its authority under § 7805(a)
(relating to prescribing rules as may be
necessary by reason of any alteration of
internal revenue laws), the IRS announced
that it intends to provide relief for pas-
sengers and airlines with respect to ticket
taxes that were not paid or collected on
or after July 23, 2011, and before August
8, 2011. The IRS also announced that
persons who purchased airline tickets
before July 23, 2011, and traveled on
or after July 23, 2011, and before the
reinstatement of the taxes, are not entitled
to a refund of the air transportation taxes
imposed by § 4261.
SECTION 3. AIR TRANSPORTATION
TAXES
The air transportation excise taxes un-
der §§ 4261 and 4271 of the Code are im-
posed on the person making the payment
for the air transportation services and col-
lected and paid over to the government by
the person receiving that payment.
To relieve the administrative burden
that would be associated with payment
and collection of air transportation excise
taxes on purchases that have already oc-
curred, the IRS is providing the following
relief with respect to these taxes:
1. Purchasers of air transportation ser-
vices (including individuals who pur-
chase frequent flyer miles for their
ownuse)willnotberequiredtopay,
and air transportation providers and
other collectors of air transportation
excise taxes will not be required to
collect and pay over, taxes imposed
by §§ 4261 and 4271 on purchases of
air transportation services (or frequent
flyer miles) for which payment was
made after July 22, 2011, and before
August 8, 2011.
2. Persons required to make deposits
of tax in accordance with the rules
provided under §§ 40.6302(c)–1 and
40.6302(c)–3 of the Excise Tax Proce-
dural Regulations (Regulations) may
treat the taxes imposed by §§ 4261
and 4271 as being in effect after
July 22, 2011, and before August 8,
2011, for purposes of determining
whether the safe harbor rules provided
in § 40.6302(c)–1(b)(2) apply and in
determining the amount of the net tax
liability that is taken into account in
applying those rules.
The relief granted in paragraph 1 of
this section does not apply to any amount
paid (and the value of any other benefit
provided) to an air carrier (or any related
person) for the right to provide mileage
awards for (or other reductions in the cost
of) any transportation of persons by air un-
der § 4261(e)(3) (right to provide free or
reduced rate air transportation). Purchases
of the right to provide free or reduced rate
air transportation made after July 22, 2011,
and before August 8, 2011, are subject to
the taxes imposed by § 4261. Accordingly,
purchasers of the right to provide free or
reduced rate air transportation are required
to pay the taxes imposed by § 4261 on pur-
chases made after July 22, 2011, and be-
fore August 8, 2011.
The relief provided in paragraph 1 ap-
plies only to amounts paid after July 22,
2011, and before August 8, 2011. Accord-
ingly, purchasers of air transportation ser-
vices are required to pay, and air trans-
portation providers and other collectors of
air transportation excise taxes are required
to collect taxes on air transportation ser-
vices for which payment is made on or af-
ter 12:01 am, August 8, 2011. In addition,
persons who purchased air transportation
services (including purchasers of the right
to provide free or reduced rate air trans-
portation) before July 23, 2011, for travel
after that date are not entitled to refunds of
taxes paid on those purchases (other than
refunds allowable under the law in effect
after the enactment of the Extensions Act,
Part IV).
SECTION 4. DEPOSITS OF TAX
ON AVIATION GASOLINE AND
KEROSENE FOR USE IN AVIATION
Section 4081 of the Code imposes ex-
cise taxes on certain removals, entries,
and sales of aviationgasoline and aviation
kerosene. On July 23, 2011, the tax im-
posed by § 4081(a)(2)(A)(ii) on aviation
gasoline was reduced from 19.4 cents per
gallon to 4.4 cents per gallon, but was rein-
stated by the Extension Act, Part IV, at 19.4
cents per gallon effective July 23, 2011.
Also on July 23, 2011, the tax imposed by
§ 4081(a)(2)(C)(ii) on kerosene removed
from any refinery or terminal directly into
the fuel tank of an aircraft for use in non-
commercial aviation (aviation kerosene)
was reduced from 21.9 cents per gallon to
4.4 cents per gallon, but was reinstated by
the Extension Act, Part IV at 21.9 cents per
gallon tax effective July 23, 2011. Under
§ 40.6302(c)–1(b)(1) of the Regulations,
persons required to make semimonthly
deposits of tax on aviation gasoline and
aviation kerosene generally must deposit
at least 95 percent of the net tax liability
2011–39 I.R.B.445September 26, 2011

incurred during the semimonthly period.
The IRS will not impose § 6656 penalties
with respect to semimonthly deposits
made in August 2011 if the taxpayer
made a timely deposit of at least 95
percent of the net tax liability for the
semimonthly period determined without
regard to the reinstated rates. The penalty
relief provided in this section does not
apply to taxpayers that deposit under the
safe harbor rules of § 40.6302(c)–1(b)(2)
(relating to depositing
1
/6of net tax liability
reported for a look-back quarter).
SECTION 5. DRAFTING
INFORMATION
The principal author of this notice
is Michael H. Beker of the Office of
Associate Chief Counsel (Passthroughs
& Special Industries).For further
information regarding this notice, contact
Michael H. Beker at (202) 622–3130 (not
a toll-free call).
26 CFR 601.201: Rulings and determination letters.
(Also, Part I, § 414.)
Rev. Proc. 2011–44
SECTION 1. PURPOSE
The purpose of this revenue procedure
is to supplement the procedures for re-
questing a letter ruling under § 414(e) of
the Internal Revenue Code (Code) relat-
ing to church plans. This revenue proce-
dure modifies Rev. Proc. 2011–4, 2011–1
I.R.B. 123, to require that plan participants
and other interested persons receive a no-
tice in connection with a letter ruling re-
quest under § 414(e) for a qualified plan, to
require that a copy of the notice be submit-
ted to the Internal Revenue Service (IRS)
as part of the ruling request, and to provide
procedures for the IRS to receive and con-
sider comments relating to the ruling re-
quest from interested persons.
SECTION 2. BACKGROUND
Section 414(e) generally defines a
church plan as a plan established and
maintained for its employees or their ben-
eficiaries by a church or by a convention
or association of churches which is exempt
from tax under § 501 (church plan). For
purposes of § 414(e), an employee of a
church or a convention or association of
churches includes an employee of an or-
ganization, whether a civil law corporation
or otherwise, which is exempt from tax
under § 501 and which is controlled by or
associated with a church or a convention
or association of churches.
Section 1.414(e)–1 of the Income Tax
Regulations provides that a church plan is
a plan established and at all times main-
tained for its employees by a church or
by a convention or association of churches
which is exempt from tax under § 501(a),
provided that the plan otherwise meets the
requirements of the regulations.
To qualify under § 401(a), a retire-
ment plan must meet certain requirements,
including the minimum participation re-
quirements under § 410(a), the minimum
coverage requirements under § 410(b),
and the minimum vesting requirements
under § 411. A church plan (for which
no special election described below has
been made (nonelecting church plan)) is
ordinarily not subject to various require-
ments that apply to tax-qualified plans
under § 401(a) and is not covered by the
Employee Retirement Income Security
Act of 1974 (ERISA).
Thus, Code provisions that do not ap-
ply to a nonelecting church plan include
§ 410 (relating to minimum participation
standards), § 411 (relating to minimum
vesting standards), § 412 (relating to
minimum funding standards for pension
plans), and § 4975 (relating to prohib-
ited transactions). In addition, the flush
language at the end of § 401(a) provides
that paragraphs (11), (12), (13), (14),
(15), (19), and (20) of § 401(a) do not
applytononelectingchurchplans. These
paragraphs relate to joint and survivor
annuities, mergers and consolidations, as-
signment or alienation of benefits, time of
benefit commencement, certain social se-
curity increases, withdrawals of employee
contributions, and distributions after plan
termination, respectively.
Under section 4(b)(2) of ERISA, a non-
electing church plan is excluded from cov-
erage under Title I of ERISA. Thus, for ex-
ample, it is not subject to ERISA’s rules
governing reporting, disclosure, and fidu-
ciary conduct. In the case of a defined ben-
efit pension plan, the plan is also not cov-
ered by the insurance provisions of Title
IV of ERISA, which provides for certain
benefit guarantees by the Pension Benefit
Guaranty Corporation (PBGC) in the event
of termination of an underfunded pension
plan. These results are not limited to a
church plan whose only participants are
employees of a church, but may also in
some cases include substantial numbers of
employees of certain affiliated entities who
are participants in a church plan as defined
in § 414(e).
A nonelecting church plan is instead
primarily subject to certain qualification
requirements that pre-date the enactment
of ERISA. The plan is treated as a tax-qual-
ified plan only if the plan satisfies the par-
ticipation, vesting, and funding require-
ments of the Code as in effect prior to
ERISA.
Section 514(a) of ERISA generally pro-
vides that ERISA supersedes state laws
that relate to an employee benefit plan de-
scribedinsection4(a)ofERISAandnot
exempt under section 4(b) of ERISA. A
nonelecting church plan is exempt under
section 4(b) of ERISA. Thus, state laws
that relate to an employee benefit plan
generally would apply to the nonelecting
church plan.
Section 410(d) permits an election to be
made under which a church plan would be
subject to the same requirements as apply
to other qualified plans (electing church
plan). Section 1.410(d)–1 of the Income
Tax Regulations provides that the election
is irrevocable and may be made only by the
plan administrator and only in the manner
provided in the regulations. If the elec-
tion is made, the plan must comply with
the applicable provisions of the Code. In
addition, an electing churchplanwouldbe
covered by and subject to Title I and, if a
defined benefit pension plan, Title IV of
ERISA.
Rev. Proc. 2011–4 contains procedures
for an applicant to submit a letter ruling re-
quest that a qualified plan is a church plan
under § 414(e). Although a church plan is
not required to have a favorable letter rul-
ing from the IRS, a letter ruling would or-
dinarily confirm a plan’s status for tax pur-
poses, as noted in Rev. Proc. 2011–4, sec-
tion 4. Additionally, other agencies may
require the applicant to have an IRS letter
ruling. Appendix B of Rev. Proc. 2011–4
contains a checklist to comply with the
general procedures for all such ruling re-
quests. Appendix E contains an additional
checklist applicable tochurch plan ruling
September 26, 20114462011–39 I.R.B.

requests. Rev. Proc. 2011–4 does not re-
quire any notice to interested persons prior
to issuing a letter ruling with respect to a
church plan under § 414(e).
Because a nonelecting church plan is
exempt from certain requirements under
the Code and is not subject to ERISA,
the IRS has determined that advance no-
tice should be given to interested persons,
with an opportunity for interested persons
to comment, before a letter ruling is issued
on a church plan under § 414(e). Accord-
ingly, in the case of a nonelecting church
plan, the IRS will not issue a letter ruling
that a qualified plan (which, for this pur-
pose, means a § 401(a) plan, a § 403(a) in-
surance annuity plan, and a § 403(b) plan)
is a church plan unless the notice require-
ments of section 3 of this revenue proce-
dure have been met.
SECTION 3. NOTICE TO
PARTICIPANTS, BENEFICIARIES,
ALTERNATE PAYEES, AND
EMPLOYEE ORGANIZATIONS
.01 General Requirements.The appli-
cant must give notice to interested persons
that a letter ruling under § 414(e) on behalf
of a church plan will be submitted to the
IRS. A copy of such notice must be sub-
mitted to the IRS as part of the ruling re-
quest.
.02 Information in the Notice. The no-
tice must include the information set forth
in the Model Notice attached as an appen-
dix to this revenue procedure. However,
information that is not applicable should
be deleted. For example, in the case of
a plan that is not a defined benefit plan,
the notice should omit any information re-
lating to the insurance protection provided
by the PBGC (see references to PBGC in
the notice). Similarly, the notice should
be modified appropriately in the case of
a § 403(b) plan (by deleting the reference
to “the Code relating to retirement plans
and with” in the paragraph under the head-
ing “What is the Effect of an Election to
be Subject to ERISA?”). In addition, if
the notice is posted under section 3.05 be-
low, it must provide that the interested per-
son may request and receive the applica-
ble notice on paper from the applicant at
no charge.
While the notice may include additional
information if that information is neces-
sary or helpful to interested persons to un-
derstanding the information in the Model
Notice, the notice should not have the ef-
fect of misleading or misinforming recip-
ients or of distracting recipients from the
information in the Model Notice.
.03 New Ruling Requests.Except as
provided in section 3.04, the applicant
must submit a copy of the notice to inter-
ested persons to the IRS containing the
information under section 3.02 along with
a statement that such notice was provided.
The statement must specify the date or
dates the notice was provided, and the date
must be within 30 days before the letter
ruling request is submitted to the IRS.
.04 Pending Ruling Requests.For a
ruling request pending with the IRS on
September 26, 2011, the applicant must
submit a copy of the notice to interested
persons to the IRS containing the informa-
tion under section 3.02 along with a state-
ment in a cover letter referencing the pend-
ing ruling request and stating the date or
dates on which such notice was provided.
This date must be within 60 days after
September 26, 2011. The notice to inter-
ested persons must be in substantially the
form set forth in the Model Notice attached
as an appendix to this revenue procedure,
but modified to specify that the letter rul-
ing request has already been submitted to
the IRS.
If an applicant for a pending letter rul-
ing request chooses not to provide the no-
tice to interested persons in connection
with the letter ruling request, the applicant
should notify the Service in writing within
60 days after September 26, 2011. The
Service will then decline to rule, and the
applicant’s user fee will be refunded. If an
applicant does not timely respond by noti-
fying the IRS in the manner set forth under
this section 3.04, the Service may consider
the ruling request withdrawn and the user
fee might not be refunded.
.05 Reasonable Effort.If the applicant
makes a reasonable effort to satisfy the no-
tice rules of this section 3, failure of one
or more interested persons to receive the
required notice will not cause the appli-
cant to fail the notice requirement. Mere
posting of the notice on a bulletin board is
not sufficient to constitute a reasonable ef-
fort to satisfy this notice requirement, un-
less (a) the notice is prominently displayed
on a bulletin board at a principal place of
employment, (b) the bulletin board is reg-
ularly and actively used for a wide vari-
ety of purposes by employees who are plan
participants, and (c) notice is given to all
other interested persons by other methods
that constitute a reasonable effort to satisfy
the notice requirement.
.06 Modification of Prior Revenue Pro-
cedures.This revenue procedure modi-
fies Rev. Proc. 2011–4 (and any appli-
cable predecessor revenue procedure) by
adding a notice requirement for ruling re-
quests under § 414(e) involving church
plans, and requiring that an applicant rep-
resent whether the plan is a nonelecting
church plan.
.07 Interested Person.For purposes of
this section 3, the terminterested person
means each plan participant, beneficiary,
or alternate payee (within the meaning of
§ 414(p)(8)), and any employee organiza-
tion representing employees who are plan
participants. In the case of a plan covering
more than one employer, the terminter-
ested personalso includes each contribut-
ing employer other than the applicant.
SECTION 4. EFFECTIVE DATE
This revenue procedure is effective for
all ruling requests received after Septem-
ber 26, 2011, and ruling requests pending
with the IRS as of September 26, 2011.
SECTION 5. EFFECT ON OTHER
REVENUE PROCEDURES
Rev. Proc. 2011–4 (and any applicable
predecessor revenue procedure) is modi-
fied.
SECTION 6. PAPERWORK
REDUCTION ACT
The collection of information con-
tained in this revenue procedure has been
reviewed and approved by the Office
of Management and Budget in accor-
dance with the Paperwork Reduction
Act (44 U.S.C. sec. 3507) under control
number 1545–1520.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
OMB control number.
The collection of information in this
revenue procedure is in section 3. This in-
formation is required to inform interested
persons of the significance of being a non-
electing church plan in order to evaluate
2011–39 I.R.B.447September 26, 2011

and process a request fora letter ruling that
a plan is a church plan under § 414(e). The
likely respondents are participants, benefi-
ciaries, alternate payees, and employee or-
ganizations.
The estimated total annual reporting
burden is 60 hours.
The estimated annual burden per re-
spondent/recordkeeper varies from 1 to 3
hours, depending on individual circum-
stances, with an estimated average burden
of 2 hours. The estimated number of re-
spondents and/or recordkeepers is 30.
The estimated annual frequency of re-
sponses is on occasion.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. sec. 6103.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Sherri M. Edelman of the
Employee Plans, Tax Exempt and Gov-
ernment Entities Division. For further
information regarding this revenue pro-
cedure, contact the Employee Plans tax-
payer assistance answering service at
1–877–829–5500 or email Ms. Edelman
atRetirementPlanQuestions@irs.gov.
APPENDIX
MODEL NOTICE TO INTERESTED PERSONS OF THE REQUEST FOR AN IRS RULING ON A RETIREMENT
PLAN’S STATUS AS A CHURCH PLAN
WHY ARE YOU RECEIVING THIS NOTICE?
You are receiving this notice because a letter ruling requestwill be submitted by [INSERT PLAN SPONSOR’S NAME AND EIN]
to the Internal Revenue Service (IRS) for the [INSERT PLAN NAME ] [INSERT PLAN NUMBER, IF APPLICABLE] for the plan
year beginning [INSERT DATE]. The applicant requests the IRS to determine that the plan is a church plan under § 414(e) of the
Internal Revenue Code (Code).
The applicant has represented that a special election (described below, relating to § 410(d) of the Code) has not been made. There-
fore, the IRS requires that this notice be provided to you.
This notice informs you that a church plan under § 414(e) of the Code is generally not required to comply with many rules that
apply to other retirement plans. Thus, those protections and rights under federal law arenot required to be provided to participants
and other interested persons. This notice also informs you that you may give the IRS comments.
WHYDOESCHURCHPLANSTATUSMATTER?
In general, a church plan is a plan established and at all timesmaintained for its employees by a church or by a convention or
association of churches which is exempt from tax under Code § 501(a). A church plan is generally not subject to various requirements
that generally apply to retirement plans under federal law. Instead, the plan is primarily subject to certain qualification requirements
that pre-date the enactment of the Employee Retirement Income Security Act of 1974 (ERISA).
The applicant is representing that this plan is a church plan that is exempt from ERISA. This means that the plan is not required
to provide certain protections and rights to plan participants. The protections applicable to ERISA-covered retirement plans that a
church plan is not required to provide include the following:
•A participant’s eligibility to join the plan cannot be delayed past a stated period of time
•A participant’s entitlement to fully vested benefits must be set forth in schedules depending on years of service, and cannot be
delayed past a stated period of time
•The plan may not generally be amended to reduce previously earned benefits
•Specific minimum funding requirements apply for pension plans
•A participant has the right to bring suit under federal law for payment of benefits, fiduciary violations (such as inappropriate
management of plan assets or impermissible self-dealing), and failure to receive a statement of benefits and other plan information
•A participant has the right to be notified about certain changes in the plan, and to obtain a copy of plan documents and certain
reports filed with the government
•The insurance protection provided by the Pension Benefit Guaranty Corporation (PBGC) that applies in the event of termination
of an underfunded defined benefit pension plan.
If a church plan is excluded from ERISA coverage, state laws could independently provide protections and rights to participants,
beneficiaries, and alternate payees. However, this would depend on the applicable state law.
Further, if a church plan is excluded from ERISA coverage, a sponsor of the plan may choose to provide similar protections to
those provided under ERISA and the Code (though PBGC insuranceprotection would not be available). However, the plan might be
able to cease providing those protections (forfuture benefits or previously earned benefits) at any time, to the extent applicable state
September 26, 20114482011–39 I.R.B.

law does not prohibit such action. Also, the plan administrator is not precluded from making an election under § 410(d) (as discussed
below) at a later time, in which case the plan would then become subject to ERISA and to the provisions of the Code that generally
apply to tax-qualified retirement plans (and any applicable state law protection would then cease to apply).
WHAT IS THE EFFECT OF AN ELECTION TO BE
SUBJECT TO ERISA?
The plan administrator of a church plan is permitted to make an irrevocable election under § 410(d) of the Code under which the
plan will be subject to all of the Code requirements that generally apply to tax-qualifiedretirement plans including the protections
and rights listed in the preceding section. Ifthe plan administrator of a church plan makes that election, the plan must comply with
applicable provisions of the Code relating toretirement plans and with ERISA. The applicant has represented that no such election
has been made with respect to this plan.
WHAT IS THE SCOPE OF A LETTER RULING?
Please be aware that, if the IRS issues a ruling stating that the[INSERT PLAN NAME] is a church plan under Code § 414(e), that
rulingisbasedontheinformationprovidedandislimitedtotheplan’s status as a church plan under § 414(e). The ruling will not
make any determination regarding other events or actions, for example, regarding whether the plan administrator actually has or has
not made an election under § 410(d) for this plan in the past. Also note that while a letter ruling from the IRS would confirm a plan’s
status as a church plan under § 414(e), a plan is not required to have a letter ruling from the IRS in order to be a church plan under
§ 414(e). However, other agencies may require the applicant to have an IRS letter ruling in order for the plan to be treated as a church
plan.
YOU HAVE AN OPPORTUNITY TO COMMENT
The IRS will consider any written information submitted by plan participants or other interestedpersons that is relevant to the
ruling request. Comments not relevant to this issue will be disregarded, but relevant information, such as whether the employer is
or is not controlled by or associated with a church and whether an election has or has not been made under § 410(d), will be taken
into account. The relevant information must besubmitted within 60 calendar days from the date this notice is provided to interested
persons and must include all identifying information relating to the plan and plan sponsor listed in the first paragraph of this notice
(which includes the name and identifying number of the plan sponsor, the plan name,and the plan number, if applicable). Information
may be sent to the following address:
Internal Revenue Service
Attention: EP Letter Rulings
P.O. Box 27063
McPherson Station
Washington, DC 20038
In addition to considering relevant written information from interested persons, the IRS may permit interested persons to participate
in the decision-making procedure by making oral presentations at meetings to which interested persons are invited. However, it is
solely within the discretion of the IRS as to whether or not there will be meetings to which interested persons are invited.
Due to the tax disclosure restrictions of § 6103 of the Code, the IRS is prohibited from providing any information with respect to
the letter ruling request.
WHERE TO OBTAIN FURTHER INFORMATION
For further information on rules that apply to plans that are subject to ERISA (such as to a churchplan that has made an election
under § 410(d) of the Code), see the information on retirement plans provided by the Department of Labor atwww.dol.gov/ebsaand
the Pension Benefit Guaranty Corporation atwww.pbgc.gov.
[NAME OF PLAN SPONSOR]
[NAME AND TITLE OF APPROPRIATE OFFICER]
26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of tax
liability.
(Also: §842(b).)
Rev. Proc. 2011–45
SECTION 1. PURPOSE
This revenue procedure provides the
domestic asset/liability percentages and
domestic investment yields needed by for-
eign life insurance companies and foreign
property and liability insurance compa-
nies to compute their minimum effectively
connected net investment income under
section 842(b) of the Internal Revenue
Code for taxable years beginning after
2011–39 I.R.B.449September 26, 2011

December 31, 2009. Instructions are pro-
vided for computing foreign insurance
companies’ liabilities for the estimated tax
and installment payments of estimated tax
for taxable years beginning after Decem-
ber 31, 2009. For more specific guidance
regarding the computation of the amount
of net investment income to be included by
a foreign insurance company on its U.S. in-
come tax return, see Notice 89–96, 1989–2
C.B. 417. For the domestic asset/liability
percentage and domestic investment yield,
as well as instructions for computing for-
eign insurance companies’ liabilities for
estimated tax and installment payments of
estimated tax for taxable years beginning
after December 31, 2008, see Rev. Proc.
2010–29, 2010–35 I.R.B. 309.
SECTION 2. CHANGES
DOMESTICASSET/LIABILITY
PERCENTAGES FOR 2010. The Secre-
tary determines the domestic asset/liability
percentage separately for life insurance
companies and property and liability in-
surance companies. For the first taxable
year beginning after December 31, 2009,
the relevant domestic asset/liability per-
centages are:
143.7 percent for foreign life insurance
companies, and
190.5 percent for foreign property and
liability insurance companies.
.02 DOMESTIC INVESTMENT
YIELDS FOR 2010. The Secretary is
required to prescribe separate domestic in-
vestment yields for foreign life insurance
companies and for foreign property and
liability insurance companies. For the first
taxable year beginning after December 31,
2009, the relevant domestic investment
yields are:
3.3 percent for foreign life insurance
companies, and
3.4 percent for foreign property and li-
ability insurance companies.
.03 SOURCE OF DATA FOR 2010.
The section 842(b) percentages to be used
for the 2010 tax year are based on tax re-
turn data following the same methodology
used for the 2009 year.
SECTION 3.
APPLICATION—ESTIMATED TAXES
To compute estimated tax and the in-
stallment payments of estimated tax due
for taxable years beginning after Decem-
ber 31, 2009, a foreign insurance com-
pany must compute its estimated tax pay-
ments by adding to its income other than
net investment income the greater of (i) its
net investment income as determined un-
der section 842(b)(5), that is actually ef-
fectively connected with the conduct of a
trade or business within the United States
for the relevant period, or (ii) the mini-
mum effectively connected net investment
income under section 842(b) that would re-
sult from using the most recently available
domestic asset/liability percentage and do-
mestic investment yield. Thus, for install-
ment payments due after the publication of
this revenue procedure, the domestic as-
set/liability percentages and the domestic
investment yields provided in this revenue
procedure must be used to compute the
minimum effectively connected net invest-
ment income. However, if the due date of
an installment is less than 20 days after the
date this revenue procedure is published
in the Internal Revenue Bulletin, the as-
set/liability percentages and domestic in-
vestment yields provided in Rev. Proc.
2010–29 may be used to compute the mini-
mum effectively connected net investment
income for such installment. For further
guidance in computing estimated tax, see
Notice 89–96.
SECTION 4. EFFECTIVE DATE
This revenue procedure is effec-
tive for taxable years beginning after
December 31, 2009.
SECTION 10. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Sheila Ramaswamy of
the Office of Associate Chief Counsel
(International). For further information
regarding this revenue procedure, contact
Sheila Ramaswamy at (202) 622–3870
(not a toll-free call).
September 26, 20114502011–39 I.R.B.

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking by
Cross-Refere
nce to
Temporary Re
gulations
Requirement
s for Group
Health Plans
and Health
Insurance I
ssuers Relating
to Coverage
of Preventive
Services U
nder the Patient
Protectio
nandAffordable
Care Act
REG–1203
91–10
AGENCY: I
nternal Revenue Service
(IRS), Tr
easury.
ACTION: N
otice of proposed rulemaking
by cross-
reference to temporary regula-
tions.
SUMMARY:
Elsewhereinthisissueof
the Bull
etin, the IRS is issuing an amend-
ment to t
emporary regulations (T.D. 9541)
publish
ed July 19, 2010 under the provi-
sions of
the Patient Protection and Afford-
able Car
e Act (the Affordable Care Act)
relati
ng to coverage of preventive services
withou
t any participant cost sharing. The
IRS is i
ssuing the temporary regulations
at the s
ame time that the Employee Ben-
efits S
ecurity Administration of the U.S.
Depar
tment of Labor and the Center for
Consu
mer Information & Insurance Over-
sight
of the U.S. Department of Health and
Human
Services are issuing a substantially
simil
ar amendment to interim final regula-
tion
s published July 19, 2010 with respect
to gr
oup health plans and health insur-
ance
coverage offered in connection with a
grou
p health plan under the Employee Re-
tire
ment Income Security Act of 1974 and
the
Public Health Service Act. The tempo-
rar
y regulations provide guidance to em-
plo
yers, group health plans, and health in-
sur
ance issuers providing group health in-
sur
ance coverage. The text of those tem-
por
ary regulations also serves as the text
of
these proposed regulations.
DA
TES: Written or electronic comments
an
d requests for a public hearing must be
re
ceived by October 3, 2011.
ADDRESSES: Se
nd submissions to:
CC:PA:LPD:PR
(REG–120391–10),
room 5205, Int
ernal Revenue Service,
P.O. Box 7604,
BenFranklinSta-
tion, Washing
ton, DC 20044. Sub-
missions may
be hand-delivered to:
CC:PA:LPD:P
R(REG–120391–10),
Courier’s De
sk, Internal Revenue Ser-
vice, 1111 Co
nstitution Avenue, NW,
Washington
DC 20224. Alternatively,
taxpayers m
ay submit comments elec-
tronically
via the Federal eRulemaking
Portal atht
tp://www.regulations.gov(IRS
REG–12039
1–10).
FOR FURTHE
R INFORMATION
CONTACT: C
oncerning the regulations,
Karen Levi
n at 202–622–6080; concern-
ing submis
sions of comments, Treena
Garrett a
t 202–622–7180 (not toll-free
numbers)
.
SUPPLEME
NTARY INFORMATION:
Backgrou
nd and Explanation of
Provisio
ns
The temp
orary regulations published
elsewhe
re in this issue of the Bulletin
amend §5
4.9815–2713T of the Miscel-
laneous
Excise Tax Regulations. The
propose
d and temporary regulations are
being p
ublished as part of a joint rulemak-
ing wit
h the Department of Labor and the
Depart
ment of Health and Human Ser-
vices (
the joint rulemaking). The text of
those t
emporary regulations also serves
as the
text of these proposed regulations.
The pr
eamble to the temporary regulations
expla
ins the temporary regulations and
these
proposed regulations.
Speci
al Analyses
It has
been determined that this notice
of pr
oposed rulemaking is not a signifi-
cant
regulatory action as defined in Exec-
utiv
e Order 12866. Therefore, a regula-
tory
assessment is not required. It has also
been
determined that section 553(b) of the
Adm
inistrative Procedure Act (5 U.S.C.
cha
pter 5) does not apply to these regu-
lat
ions, and because the regulation does
not
impose a collection of information re-
qui
rement on small entities, the Regula-
tor
y Flexibility Act (5 U.S.C. chapter 6)
does not apply
. Pursuant to section 7805(f)
of the Interna
l Revenue Code, this regula-
tion has been s
ubmitted to the Chief Coun-
sel for Advoca
cy of the Small Business
Administrati
on for comment on its impact
on small busi
ness.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written comments
(a signed original and eight (8) copies)
or electronic comments that are submitted
timely to the IRS. Comments are specifi-
cally requested on the clarity of the pro-
posed regulations and how they may be
made easier to understand. All comments
will be available for public inspection and
copying. A public hearing may be sched-
uled if requested in writing by a person
that timely submits written comments. If
a public hearing is scheduled, notice of the
date, time, and place for the hearing will
be published in theFederal Register.
Draftin
g Information
The principal author of these proposed
regulations is Karen Levin, Office of the
Division Counsel/Associate Chief Coun-
sel (Tax Exempt and Government Enti-
ties), IRS. The proposed regulations, as
well as the temporary regulations, have
been developed in coordination with per-
sonnel from the U.S. Department of Labor
and the U.S. Department of Health and Hu-
man Services.
*****
Prop
osed Amendments to the
Regu
lations
Accordingly, 26 CFR part 54 is pro-
posed to be amended as follows:
PART 54—PENSION EXCISE TAXES
Par
agraph 1. The authority citation for
par
t 54 continues to read in part as follows:
Aut
hority:26U.S.C.7805***
Par
. 2. Proposed section 54.9815–2713
as p
ublished on July 19, 2010, 75 FR
417
87, is amended by revising paragraph
(a)
(1)(iv) to read as follows:
2011–39 I.R.B.451September 26, 2011

§54.9815–2713 Coverage of preventive
health services.
(a) * * *
(1) * * *
(iv) [The text of proposed
§54.9815–2713(a)(1)(iv) is the same as
the text of §54.9815–2713T(a)(1)(iv)
published elsewhere in this issue of the
Bulletin].
*****
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on August 1,
2011, 8:45 a.m., and published in the issue of the Federal
Register for August 3, 2011, 76 F.R. 46677)
Notice of Proposed
Rulemaking by
Cross-Reference to
Temporary Regulations
Determining the Amount of
Taxes Paid for Purposes of the
Foreign Tax Credit
REG–126519–11
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
by cross-reference to temporary regula-
tions.
SUMMARY: In this issue of the Bulletin,
the IRS is issuing temporary regulations
that provide guidance relating to the deter-
mination of the amount of taxes paid for
purposes of the foreign tax credit. These
regulations address certain highly struc-
tured arrangements that produce inappro-
priate foreign tax credit results. The text
of those temporary regulations published
in this issue of the Bulletin also serves as
the text of these proposed regulations.
DATES: Written or electronic comments
and requests for a public hearing must be
received by October 17, 2011.
ADDRESSES: Send submissions to
CC:PA:LPD:PR (REG–126519–11), room
5205, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand delivered Monday through Friday
betweenthehoursof8a.m. and4p.m.
to CC:PA:LPD:PR (REG–126519–11),
Courier’s desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC 20044, or sent elec-
tronically, via the Federal eRulemak-
ing Portal atwww.regulations.gov(IRS
REG–126519–11).
FOR FURTHER INFORMATION
CONTACT:Concerning the regulations,
Jeffrey P. Cowan, (202) 622–3850; con-
cerning submissions of comments or a
request for a public hearing, Oluwafunmi-
layo Taylor at (202) 622–7180.
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
Temporary regulations in this issue of
the Bulletin contain amendments to the In-
come Tax Regulations (26 CFR Part 1)
which provide rules relating to the deter-
mination of the amount of taxes paid for
purposes of the foreign tax credit. The text
of those regulations also serves as the text
of these proposed regulations. The pream-
ble to the temporary regulations explains
the temporary regulations and these pro-
posed regulations. The regulations affect
individuals and corporations that claim di-
rect and indirect foreign tax credits.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory
assessment is not required. It has also
been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these reg-
ulations, and because the regulations do
not impose a collection of information
on small entities, the Regulatory Flexi-
bility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f), these
regulations have been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.
Comments and Requests for a Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any electronic or written
comments (a signed original and eight (8)
copies) that are submitted timely to the
IRS.Allcommentswillbeavailablefor
public inspection and copying. A public
hearing may be scheduled if requested in
writing by any person who timely submit-
ted written comments. If a public hearing
is scheduled, notice of the date, time, and
place of the hearing will be published in
theFederal Register.
Drafting Information
The principal author of these regula-
tions is Jeffrey P. Cowan of the Office of
Chief Counsel (International). However,
other personnel from the Treasury Depart-
ment and the IRS participated in their de-
velopment.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.901–2 is amended by
revising paragraphs (e)(5)(iii) and (iv) and
adding paragraph (h)(3) to read as follows:
§1.901–2 Income, war profits, or excess
profits tax paid or accrued.
*****
(e) * * *
(5) * * *
(iv)***
(B) * * *
(1)***
(iii) [The text of proposed
§1.901–2(e)(5)(iv)(B)(1)(iii)isthesameas
the text of §1.901–2T(e)(5)(iv)(B)(1)(iii)
published elsewhere in this issue of
the Bulletin.
*****
(h) * * *
September 26, 20114522011–39 I.R.B.

(3) [The text of proposed
§1.901–2(h)(3) is the same as the text of
§1.901–2T(h)(3) published elsewhere in
this issue of the Bulletin.]
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on July 14, 2011,
8:45 a.m., and published in the issue of the Federal Register
for July 18, 2011, 76 F.R. 42076)
Announcement of Disciplinary Sanctions From the Office
of Professional Responsibility
Announcement 2011-61
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
the IRS, and they may not aid or abet sus-
pended or disbarred individuals to practice
before the IRS.
Disciplinary sanctions are described in
these terms:
Disbarred by decision after hearing,
Suspended by decision after hearing,
Censured by decision after hearing,
Monetary penalty imposed after hear-
ing, and Disqualified after hearing—An
administrative law judge (ALJ) conducted
an evidentiary hearing upon OPR’s com-
plaint alleging violation of the regulations
and issued a decision imposing one of
these sanctions. After 30 days from the
issuance of the decision, in the absence of
an appeal, the ALJ’s decision became the
final agency decision.
Disbarred by default decision, Sus-
pended by default decision, Censured by
default decision, Monetary penalty im-
posed by default decision, and Disqual-
ified by default decision—An ALJ, after
findingthatnoanswertoOPR’scomplaint
had been filed, granted OPR’s motion for a
default judgment and issued a decision im-
posing one of these sanctions.
Disbarment by decision on appeal,
Suspended by decision on appeal, Cen-
sured by decision on appeal, Monetary
penalty imposed by decision on ap-
peal, and Disqualified by decision on
appeal—The decision of the ALJ was
appealed to the agency appeal authority,
acting as the delegate of the Secretary
of the Treasury, and the appeal authority
issued a decision imposing one of these
sanctions.
Disbarred by consent, Suspended by
consent, Censured by consent, Mone-
tary penalty imposed by consent, and
Disqualified by consent—Inlieuofa
disciplinary proceeding being instituted
or continued, an individual offered a con-
sent to one of these sanctions and OPR
accepted the offer. Typically, an offer
of consent will provide for: suspension
for an indefinite term; conditions that the
individual must observe during the sus-
pension; and the individual’s opportunity,
after a stated number of months, to file
with OPR a petition for reinstatement af-
firming compliance with the terms of the
consent and affirming current eligibility
to practice (i.e., an active professional
license or active enrollment status). An
enrolled agent or an enrolled retirement
plan agent may also offer to resign in order
to avoid a disciplinary proceeding.
Suspended by decision in expedited
proceeding, Suspended by default de-
cision in expedited proceeding, Sus-
pended by consent in expedited pro-
ceeding—OPR instituted an expedited
proceeding for suspension (based on cer-
tain limited grounds, including loss of a
professional license and criminal convic-
tions).
OPR has authority to disclose the
grounds for disciplinary sanctions in these
situations: (1) an ALJ or the Secretary’s
delegate on appeal has issued a decision
on or after September 26, 2007, which was
theeffectivedateofamendmentstothe
regulations that permit making such deci-
sions publicly available; (2) the individual
has settled a disciplinary case by signing
OPR’s “consent to sanction” form, which
requires consenting individuals to admit to
one or more violations of the regulations
and to consent to the disclosure of the in-
dividual’s own return information related
to the admitted violations (for example,
failure to file Federal income tax returns);
2011–39 I.R.B.453September 26, 2011

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
Arizona
TucsonParra, Oscar C.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment in
California)
Indefinite from
July 14, 2011
California
Newport BeachBurton, Thomas W.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment
and conviction under
18 U.S.C. §1956,
international money
laundering conspiracy
and aiding and abetting)
Indefinite from
July 5, 2011
AlamedaGilpin, Scott E.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
July 5, 2011
San JoseKidwell, Thomas B.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
July 5, 2011
El CajonLuebkeman,
Theodore C.
AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
July 5, 2011
SacramentoO’Neal, Michael E.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment
and conviction under
26 U.S.C. §7206, aiding
and assisting the filing of
a false income tax return)
Indefinite from
July 5, 2011
Parra, Oscar C.,
See Arizona
Posin, Mitchell L.,
See Nevada
September 26, 20114542011–39 I.R.B.

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
California (Continued)
San DiegoProzinski, Deidre J.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(attorney disbarment)
Indefinite from
July 5, 2011
Colorado
LakewoodCabral, Alfonso S.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
July 22, 2011
ArvadaDuggan, Daniel S.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
July 22, 2011
Iowa
DubuqueNetti Jr., John E.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license)
Indefinite from
July 14, 2011
Louisiana
Octave, Shantel C.,
See Texas
Massachusetts
QuincyKirby, Gerald M.AttorneySuspended by decision
in expedited proceeding
under §10.82 (suspension
of attorney license)
Indefinite from
July 18, 2011
North AdamsMcDonough,
Matthew J.
AttorneySuspended by decision
in expedited proceeding
under §10.82 (suspension
of attorney license)
Indefinite from
July 18, 2011
Michigan
LivoniaMatusz, Mark M.CPASuspended by consent
for admitted violation of
§10.22 (failure to exercise
due diligence in preparing
own Federal individual
income tax returns for tax
years 2003–2005)
Indefinite from
July, 8 2011, but
at least 6 months
2011–39 I.R.B.455September 26, 2011

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Mississippi
PascagoulaMcElroy, John S.CPASuspended by default
decision in expedited
proceeding under §10.82
(revocation of CPA
license)
Indefinite from
July 14, 2011
Nevada
Las VegasPosin, Mitchell L.AttorneySuspended by default
decision in expedited
proceeding under §10.82
(suspension of attorney
license in California)
Indefinite from
July 14, 2011
New Jersey
NewarkFrohling, John B.AttorneySuspended by decision
in expedited proceeding
under §10.82 (attorney
disbarment)
Indefinite from
July 18, 2011
NeptuneMartz, Edward J.AttorneySuspended by decision
in expedited proceeding
under §10.82 (suspension
of attorney license in New
York)
Indefinite from
July 18, 2011
New York
SpencerGugino, Mark C.AttorneySuspended by decision
in expedited proceeding
under §10.82 (suspension
of attorney license)
Indefinite from
July 18, 2011
Martz, Edward J.,
See New Jersey
East MeadowShah, HemangCPASuspended by decision
in expedited proceeding
under §10.82 (conviction
under 26 U.S.C. §7206,
making and subscribing
to a false U.S. tax return)
Indefinite from
July 18, 2011
Ohio
ColumbusSmith, Patrick E.CPASuspended by default
decision in expedited
proceeding under §10.82
(revocation of CPA
license)
Indefinite from
July 6, 2011
September 26, 20114562011–39 I.R.B.

City & StateNameProfessionalDisciplinary SanctionEffective Date(s)
Designation
Texas
HoustonMiller, ClydeAttorneySuspended by decision
in expedited proceeding
under §10.82 (suspension
of attorney license)
Indefinite from
January 25, 2011
PearlandOctave, Shantel C.AttorneySuspended by decision
in expedited proceeding
under §10.82 (suspension
of attorney license in
Louisiana)
Indefinite from
July 18, 2011
2011–39 I.R.B.457September 26, 2011

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.
September 26, 2011i2011–39 I.R.B.

Numerical Finding List
1
Bulletins 2011–27 through 2011–39
Announcements:
2011-37, 2011-27 I.R.B.37
2011-38, 2011-28 I.R.B.45
2011-39, 2011-28 I.R.B.46
2011-40, 2011-29 I.R.B.56
2011-41, 2011-28 I.R.B.47
2011-42, 2011-32 I.R.B.138
2011-43, 2011-35 I.R.B.198
2011-44, 2011-33 I.R.B.164
2011-45, 2011-34 I.R.B.178
2011-46, 2011-34 I.R.B.178
2011-47, 2011-34 I.R.B.178
2011-48, 2011-36 I.R.B.227
2011-49, 2011-36 I.R.B.228
2011-50, 2011-38 I.R.B.409
2011-51, 2011-38 I.R.B.409
2011-52, 2011-38 I.R.B.409
2011-53, 2011-38 I.R.B.409
2011-54, 2011-38 I.R.B.409
2011-55, 2011-38 I.R.B.409
2011-56, 2011-38 I.R.B.409
2011-57, 2011-38 I.R.B.409
2011-58, 2011-38 I.R.B.410
2011-59, 2011-37 I.R.B.335
2011-61, 2011-39 I.R.B.453
Notices:
2011-47, 2011-27 I.R.B.34
2011-50, 2011-27 I.R.B.35
2011-51, 2011-27 I.R.B.36
2011-52, 2011-30 I.R.B.60
2011-53, 2011-32 I.R.B.124
2011-54, 2011-29 I.R.B.53
2011-55, 2011-29 I.R.B.53
2011-56, 2011-29 I.R.B.54
2011-57, 2011-31 I.R.B.84
2011-58, 2011-31 I.R.B.85
2011-59, 2011-31 I.R.B.86
2011-60, 2011-31 I.R.B.90
2011-61, 2011-31 I.R.B.91
2011-62, 2011-32 I.R.B.126
2011-63, 2011-34 I.R.B.172
2011-64, 2011-37 I.R.B.231
2011-65, 2011-34 I.R.B.173
2011-66, 2011-35 I.R.B.184
2011-67, 2011-34 I.R.B.174
2011-68, 2011-36 I.R.B.205
2011-69, 2011-39 I.R.B.445
2011-70, 2011-32 I.R.B.135
2011-71, 2011-37 I.R.B.233
2011-72, 2011-38 I.R.B.407
Proposed Regulations:
REG-137128-08, 2011-28 I.R.B.43
REG-120391-10, 2011-39 I.R.B.451
REG-125592-10, 2011-32 I.R.B.137
REG-131491-10, 2011-36 I.R.B.208
REG-101352-11, 2011-30 I.R.B.75
REG-109006-11, 2011-37 I.R.B.334
REG-118809-11, 2011-33 I.R.B.162
REG-122813-11, 2011-35 I.R.B.197
REG-126519-11, 2011-39 I.R.B.452
Revenue Procedures:
2011-38, 2011-30 I.R.B.66
2011-39, 2011-30 I.R.B.68
2011-40, 2011-37 I.R.B.235
2011-41, 2011-35 I.R.B.188
2011-42, 2011-37 I.R.B.318
2011-43, 2011-37 I.R.B.326
2011-44, 2011-39 I.R.B.446
2011-45, 2011-39 I.R.B.449
Revenue Rulings:
2011-14, 2011-27 I.R.B.31
2011-15, 2011-30 I.R.B.57
2011-16, 2011-32 I.R.B.93
2011-17, 2011-33 I.R.B.160
2011-18, 2011-39 I.R.B.428
2011-19, 2011-36 I.R.B.199
2011-20, 2011-36 I.R.B.202
Treasury Decisions:
9527, 2011-27 I.R.B.1
9528, 2011-28 I.R.B.38
9529, 2011-30 I.R.B.57
9530, 2011-31 I.R.B.77
9531, 2011-31 I.R.B.79
9532, 2011-32 I.R.B.95
9533, 2011-33 I.R.B.139
9534, 2011-33 I.R.B.144
9535, 2011-39 I.R.B.415
9536, 2011-39 I.R.B.426
9537, 2011-35 I.R.B.181
9538, 2011-37 I.R.B.229
9539, 2011-35 I.R.B.179
9540, 2011-38 I.R.B.341
9541, 2011-39 I.R.B.438
9542, 2011-39 I.R.B.411
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2011–1 through 2011–26 is in Internal Revenue Bulletin
2011–26, dated June 27, 2011.
2011–39 I.R.B.iiSeptember 26, 2011

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2011–27 through 2011–39
Announcements:
2007-47
Updated and superseded by
Ann. 2011-59, 2011-37 I.R.B.335
Notices:
2006-101
Amplified and superseded by
Notice 2011-64, 2011-37 I.R.B.231
2010-23
Modified and supplemented by
Notice 2011-54, 2011-29 I.R.B.53
2010-81
Amended and supplemented by
Notice 2011-63, 2011-34 I.R.B.172
2010-88
Modified by
Ann. 2011-40, 2011-29 I.R.B.56
Proposed Regulations:
REG-118761-09
Hearing scheduled by
Ann. 2011-38, 2011-28 I.R.B.45
REG-151687-10
Hearing scheduled by
Ann. 2011-48, 2011-36 I.R.B.227
Revenue Procedures:
72-36
Amplified and modified by
Rev. Proc. 2011-42, 2011-37 I.R.B.318
2004-29
Amplified and modified by
Rev. Proc. 2011-42, 2011-37 I.R.B.318
2007-35
Amplified and modified by
Rev. Proc. 2011-42, 2011-37 I.R.B.318
2008-24
Modified and superseded by
Rev. Proc. 2011-38, 2011-30 I.R.B.66
2008-32
Superseded by
Rev. Proc. 2011-39, 2011-30 I.R.B.68
2011-4
Modified by
Rev. Proc. 2011-44, 2011-39 I.R.B.446
2011-14
Modified by
Rev. Proc. 2011-43, 2011-37 I.R.B.326
Revenue Procedures— Continued:
2011-35
Amplified and modified by
Rev. Proc. 2011-42, 2011-37 I.R.B.318
Revenue Rulings:
58-225
Obsoleted by
Rev. Rul. 2011-15, 2011-30 I.R.B.57
Treasury Decisions:
9527
Corrected by
Ann. 2011-49, 2011-36 I.R.B.228
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2011–1 through 2011–26 is in Internal Revenue Bulletin 2011–26, dated June 27, 2011.
September 26, 2011iii2011–39 I.R.B.

INDEX
Internal Revenue Bulletins 2011–27 through
2011–39
The abbreviation and number in parenthesis following the index entry
refer to the specific item; numbers in roman and italic type following
the parentheses refer to the Internal Revenue Bulletin in which the item
may be found and the page number on which it appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
EMPLOYEE PLANS
Amendment to rules relating to internal claims and ap-
peals and external review processes (TD 9532) 32,95;
(REG–125592–10) 32,137
Coverage of preventive services by group health plans and health
insurance issuers (TD 9541) 39,438; (REG–120391–10) 39,
451
Full funding limitations, weighted average interest rates, seg-
ment rates for:
July 2011 (Notice 59) 31,86
August 2011 (Notice 67) 34,174
Letter rulings, church plans (RP 44) 39,446
Nonbank trustees and custodians (Ann 59) 37,335
Proposed Regulations:
26 CFR 54.9815–2713, amended; group health plans and
health insurance issuers relating to coverage of preventive
services (REG–120391–10) 39,451
26 CFR 54.9815–2719, amended; rules relating to inter-
nal claims and appeals and external review processes
(REG–125592–10) 32,137
Regulations:
26 CFR 54.9815–2713T, amended; group health plans and
health insurance issuers relating to coverage of preventive
services (TD 9541) 39,438
26 CFR 54.9815–2719T, amended; rules relating to inter-
nal claims and appeals and external review processes (TD
9532) 32,95
EMPLOYMENT TAX
Proposed Regulations:
26 CFR 301.6402–2 thru –4, amended; claims for credit or
refund (REG–137128–08) 28,43
Publication:
4436, General Rules and Specifications for Substitute Form
941, Schedule B (Form 941) and Schedule R (Form 941),
revised (RP 39) 30,68
Section 6402 claims for credit or refund (REG–137128–08) 28,
43
Substitute Form 941, Schedule B (Form 941), and Schedule R
(Form 941), general rules and specifications (RP 39) 30,68
Withholding on payments by government entities to persons pro-
viding property or services, hearing for REG–151687–10 (Ann
48) 36,227
ESTATE TAX
Automatic five-month extensions for certain pass-through enti-
ties (TD 9531) 31,79
Election to apply the rules under section 1022 of the Code (Notice
66) 35,184
Regulations:
26 CFR 1.170A–12, amended; 1.170A–12T, removed;
1.642(c)–6, amended; 1.642(c)–6T, removed; 1.664–1,
–2, –4, –4A, amended; 1.664–4T, removed; 1.7520–1,
amended; 1.7520–1T, removed; 20.2031–7, –7A, amended;
20.2031–7T, removed; 20.2055–2, amended; 20.2055–2T,
removed; 20.2056A–4, amended; 20.2056A–4T, removed;
20.7520–1, amended; 20.7520–1T, removed; 25.2512–5,
–5A, amended; 25.2512–5T, removed; 25.2522(c)–3,
amended; 25.2522(c)–3T, removed; 25.7520–1, –3,
amended; 25.7520–1T, –3T, removed; use of actuarial
tables in valuing annuities, interests for life or terms of
years, and remainder or reversionary interest (TD 9540)
38,341
26 CFR 1.6081–2, –6, added; 1.6081–2T, –6T, added;
54.6081–1, removed; automatic five-month extensions for
certain pass-through entities (TD 9531) 31,79
Safe harbor guidance with respect to section 1022 of the Code
(RP 41) 35,188
Use of actuarial tables in valuing annuities, interests for life or
terms of years, and remainder or reversionary interests (TD
9540) 38,341
Valuation of certain farm, etc.,real property under section 2032A
(RR 17) 33,160
EXCISE TAX
Air transportation, aviation fuels (Notice 69) 39,445
Amendment to rules relating to internal claims and ap-
peals and external review processes (TD 9532) 32,95;
(REG–125592–10) 32,137
Coverage of preventive servicesby group health plans and health
insurance issuers (TD 9541) 39,438; (REG–120391–10) 39,
451
2011–39 I.R.B.ivSeptember 26, 2011

EXCISE TAX—Cont.
Highway use tax, filing and payment (TD 9537) 35,181;
(REG–122813–11) 35,197
Proposed Regulations:
26 CFR 1.150–1, amended; 1.171–1, amended; 1.197–2,
amended; 1.249–1, amended; 1.475(a)–4, amended;
1.860G–2, amended; 1.1001–3, amended; 48.4101–1,
amended; removal of regulatory references to credit rat-
ings pursuant to section 939A of the Dodd-Frank Act
(REG–118809–11) 33,162
26 CFR 41.6001–2, amended; 41.6071(a)–1, amended;
41.6151(a)–1, amended; highway use tax, filing and pay-
ment (REG–122813–11) 35,197
26 CFR 54.9815–2713, amended; group health plans and
health insurance issuers relating to coverage of preventive
services (REG–120391–10) 39,451
26 CFR 54.9815–2719, amended; rules relating to inter-
nal claims and appeals and external review processes
(REG–125592–10) 32,137
Regulations:
26 CFR 1.150–1, amended; 1.150–1T, added; 1.171–1,
amended; 1.171–1T, added; 1.197–2, amended; 1.197–2T,
added; 1.249–1, amended; 1.249–1T, added; 1.475(a)–4,
amended; 1.475(a)–4T, added; 1.860G–2, amended;
1.860G–2T, added; 1.1001–3, amended; 1.1001–3T, added;
48.4101–1, –1T, amended; removal of regulatory refer-
ences to credit ratings pursuant to section 939A of the
Dodd-Frank Act (TD 9533) 33,139
26 CFR 41.6001–2, amended; 41.6001–2T, added;
41.6071(a)–1, amended;41.6071(a)–1T, added;
41.6151(a)–1, amended; 41.6151(a)–1T, added; highway
use tax, filing and payment (TD 9537) 35,181
26 CFR 54.9815–2713T, amended; group health plans and
health insurance issuers relating to coverage of preventive
services (TD 9541) 39,438
26 CFR 54.9815–2719T, amended; rules relating to inter-
nal claims and appeals and external review processes (TD
9532) 32,95
Removal of regulatory references to credit ratings pursuant to
section 939A of the Dodd-Frank Act (TD 9533) 33,139;
(REG–118809–11) 33,162
Rules relating to internal claims and appeals and external review
processes (REG–125592–10) 32,137
EXEMPT ORGANIZATIONS
Community health needs assessment requirements for tax-ex-
empt hospitals, request for comments (Notice 52) 30,60
Form 990, Schedule H, Part V, Section B, optional for 2010 tax
year (Ann 37) 27,37
Revocations (Ann 39) 28,46; (Ann 45) 34,178
GIFT TAX
Regulations:
26 CFR 1.170A–12, amended; 1.170A–12T, removed;
1.642(c)–6, amended; 1.642(c)–6T, removed; 1.664–1,
–2, –4, –4A, amended; 1.664–4T, removed; 1.7520–1,
amended; 1.7520–1T, removed; 20.2031–7, –7A, amended;
20.2031–7T, removed; 20.2055–2, amended; 20.2055–2T,
removed; 20.2056A–4, amended; 20.2056A–4T, removed;
20.7520–1, amended; 20.7520–1T, removed; 25.2512–5,
–5A, amended; 25.2512–5T, removed; 25.2522(c)–3,
amended; 25.2522(c)–3T, removed; 25.7520–1, –3,
amended; 25.7520–1T, –3T, removed; use of actuarial
tables in valuing annuities, interests for life or terms of
years, and remainder or reversionary interest (TD 9540)
38,341
Use of actuarial tables in valuing annuities, interests for life or
terms of years, and remainder or reversionary interests (TD
9540) 38,341
INCOME TAX
Automatic five-month extensions for certain pass-through enti-
ties (TD 9531) 31,79
Basis of stock (Notice 56) 29,54
Capitalization of electric utility transmission and distribution
property, safe-harbor method (RP 43) 37,326
Chapter 4 implementation (Notice 53) 32,124
Continuing education providers, request for comments (Notice
61) 31,91
Corporate reorganizations, distributions under sections
368(a)(1)(D) and 354(b)(1)(B), correction to TD 9475 (Ann
43) 35,198
Creditability of foreign levy (RR 19) 36,199
Credits:
Carbon dioxide sequestration, 2011 inflation adjustment (No-
tice 50) 27,35
Credit for increasing research activities:
Changes (TD 9528) 28,38
Election to claim the reduced research credit (TD 9539) 35,
179
Enhanced oil recovery credit, 2011 inflation adjustment (No-
tice 57) 31,84
Health insurance premium tax credit (REG–131491–10) 36,
208
Low-income housing credit:
Relief for Alabama (Notice 65) 34,173
Relief for Missouri disasters (Notice 47) 27,34
Relief for North Dakota (Notice 60) 31,90
Declaratory judgement suits (Ann 46) 34,178; (Ann 47) 34,178;
(Ann 50) 38,409; (Ann 51) 38,409; (Ann 52) 38,409;(Ann
53) 38,409; (Ann 54) 38,409; (Ann 55) 38,409; (Ann 56) 38,
409; (Ann 57) 38,409;(Ann58)38,410
Deferred losses on property between members of a controlled
group, hearing (Ann 38) 28,45
September 26, 2011v2011–39 I.R.B.

INCOME TAX—Cont.
Determination of basis in specified U.S. property acquired by a
controlled foreign corporation in certain nonrecognition trans-
actions (TD 9530) 31,77
Determining the amount of taxes paid for purposes of section 901
(TD 9536) 39,426; (REG–126519–11) 39,452
Determining the amount of taxes paid for purposes of the foreign
tax credit (TD 9535) 39,415
Disciplinary actions involving attorneys, certified public accoun-
tants, enrolled agents, and enrolled actuaries (Ann 41) 28,47;
(Ann 44) 33,164; (Ann 61) 39,453
Documentation requirements under section 6050W for U.S. pay-
ors making payment outside the U.S. to an offshore account
(Notice 71) 37,233
Election to apply the rules under section 1022 of the Code (Notice
66) 35,184
Elections regarding start-up expenditures, corporation organiza-
tional expenditures, and partnership organizational expenses
(TD 9542) 39,411
Equitable relief under section 6015(f), time limits (Notice 70) 32,
135
Examination of returns and claims for refund, credit and abate-
ment, determination of correct tax liability (RP 42) 37,318
Ex parte communication between appeals and other Internal Rev-
enue Service employees (Notice 62) 32,126
FBAR, additional administrative relief for individuals whose fil-
ing deadline was extended under Notice 2010–23 (Notice 54)
29,53
Forms:
1097, 1098, 1099, 3921, 3922, 5498, 8935, and W–2G, re-
quirements for filing electronically (RP 40) 37,235
5472, filing requirements (TD 9529) 30,57;
(REG–101352–11) 30,75
Insurance Companies:
Annunity and life insurance contracts with a long-term care
insurancefeature(Notice68)36,205
Effectively connected income (RP 45) 39,449
Life insurance gross income, prepaid interest on policyholder
loans (RR 15) 30,57
Partial exchange or partial annuitization (RP 38) 30,66
Treatment of Blue Cross/Blue Shield organizations and cer-
tain other health organizations (Notice 51) 27,36
Interest:
Investment:
Federal short-term, mid-term, and long-term rates for:
July 2011 (RR 14) 27,31
August 2011 (RR 16) 32,93
September 2011 (RR 20) 36,202
Rates:
Underpayments and overpayments, quarter beginning Oc-
tober 1, 2011 (RR 18) 39,428
Optional standard mileage rates (Ann 40) 29,56
Marginal production rates for 2011 (Notice 58) 31,85
Modifications of certain derivative contracts (TD 9538) 37,229;
(REG–109006–11) 37,334
Per diem substantiation method (Ann 42) 32,138
INCOME TAX—Cont.
Proposed Regulations:
26 CFR 1.36B–0 thru –5, added; 1.6011–8, added;
1.6012–1, revised; health insurance premium tax credit
(REG–131491–10) 36,208
26 CFR 1.150–1, amended; 1.171–1, amended; 1.197–2,
amended; 1.249–1, amended; 1.475(a)–4, amended;
1.860G–2, amended; 1.1001–3, amended; 48.4101–1,
amended; removal of regulatory references to credit rat-
ings pursuant to section 939A of the Dodd-Frank Act
(REG–118809–11) 33,162
26 CFR 1.901–2, amended; determining the amount of taxes
paid for purposes of section 901 (REG–126519–11) 39,452
26 CFR 1.1001–4, revised; modifications of certain derivative
contracts (REG–109006–11) 37,334
26 CFR 1.6038A–1, –2, amended; requirements for taxpayers
filing Form 5472 (REG–101352–11) 30,75
26 CFR 301.6402–2 thru –4, amended; claims for credit or
refund (REG–137128–08) 28,43
Publications:
1220, Specifications for Filing Forms 1097, 1098, 1099, 3921,
3922, 5498, 8935, and W-2G Electronically, 2011 revision
(RP 40) 37,235
4436, General Rules and Specifications for Substitute Form
941, Schedule B (Form 941) and Schedule R (Form 941),
revised (RP 39) 30,68
Regulations:
26 CFR 1.41–0, –6, –8, amended; 1.41–0T, –6T, –8T, –9T, re-
moved; alternative simplified credit under section 41(c)(5)
(TD 9528) 28,38
26 CFR 1.150-1, amended; 1.150–1T, added; 1.171–1,
amended; 1.171–1T, added; 1.197–2, amended; 1.197–2T,
added; 1.249-1, amended; 1.249–1T, added; 1.475(a)–4,
amended; 1.475(a)–4T, added; 1.860G–2, amended;
1.860G–2T, added; 1.1001–3, amended; 1.1001–3T, added;
48.4101–1, –1T, amended; removal of regulatory refer-
ences to credit ratings pursuant to section 939A of the
Dodd-Frank Act (TD 9533) 33,139
26 CFR 1.170A–12, amended; 1.170A–12T, removed;
1.642(c)–6, amended; 1.642(c)–6T, removed; 1.664–1,
–2, –4, –4A, amended; 1.664–4T, removed; 1.7520–1,
amended; 1.7520–1T, removed; 20.2031–7, –7A, amended;
20.2031–7T, removed; 20.2055–2, amended; 20.2055–2T,
removed; 20.2056A–4, amended; 20.2056A–4T, removed;
20.7520–1, amended; 20.7520–1T, removed; 25.2512–5,
–5A, amended; 25.2512–5T, removed; 25.2522(c)–3,
amended; 25.2522(c)–3T, removed; 25.7520–1, –3,
amended; 25.7520–1T, –3T, removed; use of actuarial
tables in valuing annuities, interests for life or terms of
years, and remainder or reversionary interest (TD 9540)
38,341
26 CFR 1.195–1, revised; 1.195–1T, removed; 1.248–1,
amended; 1.248–1T, removed; 1.709–1, amended;
1.709–1, removed; elections regarding start-up expen-
ditures, corporation organizational expenditures, and
partnership organizational expenses (TD 9542) 39,411
2011–39 I.R.B.viSeptember 26, 2011

INCOME TAX—Cont.
26 CFR 1.280C–4, revised; election of reduced research credit
(TD 9539) 35,179
26 CFR 1.1001–4, revised; 1.1001–4T, added; modifications
of certain derivative contracts (TD 9538) 37,229
26 CFR 1.1502–13, amended; corporate reorganizations; dis-
tributions under sections 368(a)(1)(D) and 354(b)(1)(B);
correctiontoTD9475(Ann43)35,198
26 CFR 1.901–1, –2, amended; 1.901–1T, –2T, removed; de-
termining the amount of taxes paid for purposes of section
901 (TD 9535) 39,415
26 CFR 1.901–2, amended; 1.901–2T, revised; determining
the amount of taxes paid for purposes of the foreign tax
credit (TD 9536) 39,426
26 CFR 1.956–1, amended; 1.956–1T, amended; determina-
tion of basis in specified U.S. property acquired by a con-
trolled foreign corporation in certain nonrecognition trans-
actions (TD 9530) 31,77
26 CFR 1.6038A–1, –2, amended; 1.6038A–1T, –2T, added;
requirements for taxpayers filing Form 5472 (TD 9529) 30,
57
26 CFR 1.6081–2, –6, added; 1.6081–2T, –6T, removed;
54.6081–1, added; automatic five-month extensions for
certain pass-through entities (TD 9531) 31,79
31 CFR 10.0 thru 10.8, 10.9, added; 10.20, 10.25, 10.30,
10.34, 10.36, 10.38, 10.50, 10.51, 10.53, revised; 10.60 thru
10.66, revised; 10.69, 10.72, revised; 10.76 thru 10.82, re-
vised; 10.90, revised; regulations governing practice before
the Internal Revenue Service (TD 9527) 27,1; corrections
(Ann 49) 36,228
Regulations governing practice before the Internal Revenue Ser-
vice (TD 9527) 27,1; corrections (Ann 49) 36,228
Removal of regulatory references to credit ratings pursuant to
section 939A of the Dodd-Frank Act (TD 9533) 33,139;
(REG–118809–11) 33,162
Revocations, exempt organizations (Ann 39) 28,46;(Ann45)
34,178
Safe harbor guidance with respect to section 1022 of the Code
(RP 41) 35,188
Section 6402 claims for credit or refund (REG–137128–08) 28,
43
State and local bonds; volume cap and timing of issuing bonds
(Notice 63) 34,172
Substitute Form 941, Schedule B (Form 941), and Schedule R
(Form 941), general rules and specifications (RP 39) 30,68
Suspension of information reporting with respect to foreign fi-
nancial assets and certain interests in a PFIC (Notice 55) 29,
53
Tax treatment of employer-provided cell phones (Notice 72) 38,
407
U.S. income tax treaties that meet the requirements of section
1(h)(11)(C)(i)(II) (Notice 64) 37,231
Use of actuarial tables in valuing annuities, interests for life or
terms of years, and remainder or reversionary interests (TD
9540) 38,341
September 26, 2011vii2011–39 I.R.B.

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